Category: Economics

The-Cdecker-Theft-modOver the last couple of years there has been a lot of criticism over the crypto-currency Bitcoin—some of which I’ve made myself (I think it is doomed as a currency but would be a great “alternative to Western Union”). But Neil Stevens at RedState recently made one of the most intriguing criticism’s I’ve heard so far: Bitcoin, if adopted widely, would be a grave threat to property rights.

There may be another cryptocurrency that isn’t hostile to our liberties, but Bitcoin is incompatible with freedom under the rule of law.

If our nation’s founders are to be believed, our government exists to protect life, liberty, and property. The reason it exists, and the way it has legitimacy, is that it serves the people to protect our fundamental rights. That’s how the rule of law is better than anarchy, because we can have laws against murder, slavery, and theft.

Recently in Virginia, a man was caught after stealing $2 million worth of gold. One of the jobs of police in this matter is to recover the stolen property, including through a pawn shop where the thief ran $340,000 worth of the precious metals.
If the man had stolen Bitcoin instead of gold, that would be out of the question. Money in the form of cash or a bank account, or tangible goods like gold or silver, can always have unlawful transactions reversed. Money can be sent back to the person it was stolen from. Property can be taken and returned to its rightful owner. But Bitcoin? Bitcoin advocates brag about how Bitcoin payments are irreversible. Anything the thief spent is gone forever, and anything the thief didn’t yet spend is meant to be gone forever.

Perhaps I’m missing something but I think there is a key flaw in Stevens’ argument: being foolish with one’s property is not a violation of property rights.

income-inequalityIncome inequality and poverty are separate issues. For many people this is obvious. But there are numerous Christians who believe that income inequality is an important issue because they assume it is a proxy for poverty. If this were true, Christians would indeed need to be concerned about income inequality because concern about poverty is a foundational principle of any Christian view of economics.

Fortunately, there is neither a necessary connection nor correlation. A country could have absolutely no poverty at all and have extremely high-income inequality. The reason is because income inequality (measured by the Gini coefficient), measures relative, not absolute, income.

But you don’t have to take my word for it. Harry Frankfurt, a philosopher who has written a book on inequality, has a guest post at Forbes in which he makes the same point: income inequality and poverty aren’t the same thing.


trade21Many conservatives exhibit a peculiar tendency to be pro-liberty when it comes to business, trade, and wages, but protectionist when it comes to the economic effects of immigration.

It’s an odd disconnect, and yet, as we’ve begun to see with figures like Donald Trump and Rick Santorum, one side is bound to eventually give way. They’ll gush about the glories of competition, but the second immigration gets brought up, they seem to defer to labor-union talking points from ages past.

When pressed on this in a recent podcast, immigration protectionist Mark Krikorian argued that the difference is that immigrants are people not products, and thus they make things a bit more problematic. It’s more complicated and disruptive, he argues, when you’re dealing with actual people who have diverse and ever-shifting dreams. (more…)

In an interview with Reason TV, Whole Foods co-founder John Mackey answers a range of questions about why so many intellectuals are opposed to the free market, whether throughout history and to this today.

“Is it a misunderstanding of what business does?” asks Nick Gillespie. “Is it envy? Is it a lack of capacity to understand that what entrepreneurs do or what innovators do?”

Here’s a sample:

Intellectuals have always disdained commerce. That is something that tradesmen did; people that were in a lower class. And so you had minorities, oftentimes did it, like you had the Jews in the West. And when they became wealthy and successful and rose, then they were envied, then they were persecuted and their wealth confiscated, and many times they were run out of country after country. Same thing happened with the Chinese in the East. They were great businesspeople as well. So the intellectuals have always sided kind of with the aristocrats to maintain a society where the businesspeople were kind of kept down. You might say that capitalism was the first time that businesspeople kinda caught a break, because of Adam Smith and the philosophy that came along with that, and the industrial revolution began this huge upwards surge of prosperity.

Mackey does a nice job summarizing the historical and practical forces, but another dynamic worth noting is Thomas Sowell’s notion of the “unconstrained vision” (or the “vision of the anointed”), which one finds among many intellectuals. When Sowell talks about “visions” he’s speaking less to our particular position (vocationally or otherwise) and more to how we perceive the basic nature and destiny of man —“not simply his existing practices,” Sowell writes, “but his ultimate potential and ultimate limitations.” (more…)

Seattle Minimum WageLast year when Seattle announced it was raising the minimum wage to $15 per hour, I made four predictions about how the policy would affect the city over the next three years. One of the predictions was that,

Unemployment will increase for low-wage workers — It’s true that economists disagree about the effects of the minimum wage on employment and the living standards of minimum wage earners. But almost all of the disagreement is about relatively small increases—less than 20 percent. Seattle is about to increase the minimum wage by 61 percent — over three times the detrimental rate. Almost all economists agree that significant increases to the minimum wage or attempts to bring it in line with a “living wage” (e.g., $12-15 an hour) would lead to significant increases in unemployment.

The full effect of the wage increase won’t take effect for two more years. But there is already evidence that this prediction is coming true.

In January the state of Washington increased its minimum wage to $9.47 an hour, the highest in the country. Then on April 1, Seattle’s first increase kicked in, raising the city’s minimum wage to $11 an hour. The result: Seattle lost 1,300 restaurant jobs from January to June. As Mark Perry explains,

yuanSeveral years ago economist Bryan Caplan provided the most succinct and helpful statement about how we should think about free trade: “We’d be better off if other countries gave us stuff for free. Isn’t ‘really cheap’ the next-best thing?”

As with any simplification, critics could find many reasons to grumble about what that leaves unstated (e.g., trade leads to offshoring of jobs). But it highlights an important point about why free trade matters. Free trade is about as close to a “free stuff” economy as you can get in the real world.

Well, almost. China has actually found a way that is even closer: currency devaluation.

A simplified explanation of is that China is implementing policies to make it’s currency (the Yuan) 1.9 percent weaker versus the U.S. dollar. This makes Chinese goods now less expensive. The effect is like adding a “2 percent off everything” sale on goods America buys from China, a boon to millions of U.S. consumers, especially those in low-income groups.

As Mark Perry explains, by devaluing their currency China is essentially giving “foreign aid” to America:

dollarbillcryingActon’s director of research, Samuel Gregg, is looking ahead to a post-Obama economy. He notes that every presidency has problems it leaves behind upon exiting the White House, but we have some major economic and moral obstacles to overcome.

Gregg outlines the challenges: mounting debt, entitlement programs that keep growing, crony capitalism, unemployment. What to do?

Doing nothing isn’t an option for American conservatives. I’d suggest, however, that the incremental approach generally followed by conservatives—which often amounts to trying to adjust, rather than override or completely dispense with, policies enacted by progressives—isn’t going to be enough either. Conservatives are instinctively wary of major upheavals. Yet if they really believe that progressive economic policies are seriously damaging the common good, they should perhaps do what progressives do: implement fundamental changes.


priceAn article in the Journal of Clinical Oncology on the just price of cancer drugs in the United States contains an odd reference to a nonexistent book by Aristotle, notes John B. Shannon. Unraveling the origins of this error reveals an almost farcical series of misinterpretations.

Arguments from authority are generally a good thing. If claims come from people with a few letters after their names, it’s often safe to bet that those claims are backed up by years of invested study and expertise, especially when they’re published in peer-reviewed journals. Scholars want to protect the integrity and reputation of their discipline, which in theory should filter out any faulty arguments or unfounded claims long before they reach the public eye. But when scholars speak outside their sphere of proper authority, that system can fail spectacularly—hilariously, even.

Read more . . .

Blog author: jcarter
Tuesday, August 4, 2015

Many people believe that market economies create a dog-eat-dog environment full of human conflict and struggle. But as Prof. Aeon Skoble explains, the competition in markets encourages people to cooperate with one another for mutual benefit.

(Via: Cafe Hayek)

dan-price-gravityThey say the road to hell is paved with good intentions. What they don’t often mention is that, like a parade route, both sides of that road are crowded with well-wishers cheering you on.

In a country where we give children “participation trophies” for merely showing up and “doing their best,” it’s not surprising that we applaud business leaders simply for “trying to make a difference.” As long as their intentions are good, why should we criticism their efforts?

I was reminded of that pervasive attitude after writing about Dan Price and Gravity Payments. My article in April on “Why the $70,000 Minimum Wage is Doomed to Fail” was the most criticized piece I’ve ever written for this blog. As one commenter wrote, “We just witnessed a CEO become a humanitarian and I’ve never seen so many people wish for his failure.”

This was a typical reaction to the article, and an all-too-common response to any criticism of good intentions, especially in the business world. Merely pointing out that a policy is likely to conflict with the norms of economics and human behavior is enough to get you labeled a cold-hearted pessimistic scrooge. Why focus on the negatives, people say, when someone is merely trying to do good?

The reason, as the old proverb implies, is that when divorced from prudence good intentions can lead us to be worse off than we were before. That was the reason I was critical of Price’s decision to pay every one of his 120 employees a minimum of $70,000 a year. I thought then—and believe still—that is could lead to unemployment for the company’s workers.

However, in my article there was one thing I was clarly wrong about. I assumed the policy would lead to the company’s bankruptcy within 5 years. A new article in the New York Times shows that the company many not last even that long.