Category: Economics

Alessandro Manzoni

Alessandro Manzoni

Alessandro Manzoni, an Italian poet and novelist, is best known for his book The Betrothed.  Rev. Robert Sirico, president and co-founder of the Acton Institute, recently wrote an article for Crisis Magazine praising Manzoni and discussing some of the economic themes found in The Betrothed.  Pope Francis is also a fan of the Italian writer.  In his article, Rev. Sirico draws a connection between a sensible tradition of Catholic thought on economics and a work of literature that Pope Francis deems credible.

Sirico starts out by offering an introduction to The Betrothed:

The Betrothed is, as its title implies, an epic love story that traces the circumlocutions of the engagement of Lorenzo Tramaglino to Lucia Mondella across the magnificently described countryside of Italian Lake District and Milan. Though written in the early nineteenth century, the action of the novel takes place in the midst of the seventeenth century and depicts historical events and personages. It is no spoiler to say, and you will be relieved to know, that the boy gets the girl in the end and eventually marry. But it is what happens along that way that makes The Betrothed so engaging and instructive.

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trade-flow-international2In their defenses of free trade, advocates routinely focus only on the long-term, economic benefits, and understandably so. The overall expansion of trade in recent years has led to greater economic growth, innovation, and prosperity for all, including America.

Protectionist policies may offer immediate relief and security, including a host of short-term political and economic solutions and benefits for particular industries or corporations. But on the whole and in the long run, politically directed tariffs and taxes are more likely to spur crony capitalism, harm consumers, cramp innovation, and delay the necessary re-tooling to remain a strong and dynamic nation in a globalized world.

Given our newfound national appetite for protectionist policies, free market advocates have plenty of work to do in better communicating those concerns, as Samuel Gregg recently pointed out. Yet in addition to more carefully making the economic arguments, we should also be mindful that free trade presents an opportunity for something else: namely, the expansion of creative collaboration and connection.

Part of that lesson was famously illustrated in “I, Pencil,” the popular essay by Leonard Read which urges us to have “a practical faith” in the economic and material good that might happen if we simply “leave all creative energies uninhibited.” Yet even here, readers tend to focus too heavily on the material ends and outcomes, rather than reflecting on the social, cultural, and spiritual benefits of the exchanges themselves. (more…)

venezula-crisisEconomists disagree about the effects of raising the minimum wage—but not as much as you might imagine. Almost all of the serious debate is whether an increase of 20 percent or less will have a detrimental or negligible effect on workers and the economy.

Some economists, especially those who think the minimum wage should be $0, content that any increase is harmful. Others think the current federal minimum wage could be bumped up by 20 percent before it would lead to increased unemployment. That’s a change from $7.25 an hour to $8.70 an hour.

In a more economically literate world, that would be where the debate remained. Instead, we have advocates in America (including the entire Democratic Party) who want to raise increase the federal minimum wage by 107 percent. The ‘Fight for $15’ continues even as many prominent left-of-center economists are warning that such an increase would be incredibly risky.

“At the $15 wage level, even liberal economists acknowledge the law of unintended consequences,” said Michael Saltsman, research director at the Employment Policies Institute. “If Democratic candidates are interested in helping the poor, they could start by listening to their own economists…”

But while some liberals in the U.S. choose to ignore economic reality, socialists in Venezuela refuse to admit that any such reality exist. Yesterday, Venezuela’s socialist President Nicolas Maduro announced a 50 percent hike in the minimum wage and pensions.
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Donald-Trump-Americas-Debt-900If President-elect Donald Trump wants to make America great again, he needs to find a way to reduce the federal debt.  Samuel Gregg, in a new article at the Stream,  explains why this is so important. There’s much at stake if no action is taken to reduce the federal debt:

On December 30, 2016, the United States’ official public debt was $19.97 trillion. It’s almost doubled since 2008. It also exceeds the size of America’s economy in nominal GDP in 2016 ($18.56 trillion).

Put another way, America’s public debt is approximately 107% of nominal GDP. To make matters worse, these numbers don’t include state and local government debt or the unfunded liabilities of entitlement programs like Social Security.

The reasons for this rise in public debt aren’t hard to grasp. At its most basic level, it reflects a failure of Congress and the Executive Branch to match spending and revenue since 2000. The gap has narrowed over the past 5 years. Nonetheless, spending continues to exceed revenue. In terms of what’s driving federal expenditures, it is social programs such as healthcare, income security, education, and housing. Spending on activities such as national defense has remained static.

So why should we care? What’s another trillion here or there?

Americans should worry because there’s plenty of evidence that this level of public debt can have grave effects on economic growth.

Once a country’s debt/GDP ratio reaches a particular threshold, one consequence appears to be slower economic growth. Economists argue about the exact threshold at which debt starts to impact growth. Some cite the figure of 85% of GDP. Others say 90%. Economists also debate how fast high debt negatively impacts growth. Yet there’s considerable consensus that, at some point, high debt-to-GDP ratios do have this impact.

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Globalization is routinely decried for its disruptive effects, particularly as it relates to local culture and community enterprises and institutions. Even as it’s proven to drive significant economic growth, questions remain about its steamrolling influence on the culture.

“Even if we grant that global competitive markets create prosperity, is it worth the fast food chains and the big box chains we see everywhere we go?” asks Michael Miller in an excerpt from PovertyCure. “What about a sense of vulgarity and bringing things to the lowest common denominator? And perhaps most important, does globalization destroy local culture?”

The threats to culture are real and pronounced. It is undeniable that globalization can and has and will diminish or destroy certain cultures, traditions, and enterprises. Yet as Miller and others remind us in, we are not powerless in our response, whether as creators or consumers. (more…)

trump-tweet-1417When running for president, candidates often makes outlandish promises about how we’ll benefit once they have power.

For instance, vice-presidential candidate John Edwards said in 2004 that, “when John Kerry is president people like [quadriplegic actor] Christopher Reeve will get up out of that wheelchair and walk again.” And in 2008, then-candidate Barak Obama said we’ll look back on his winning the Democratic nomination as the moment “when the rise of the oceans began to slow and the planet began to heal.”

The most absurd claims, though, are often about matters of economics. A prime example—and one of the silliest ever—was made the day after Christmas when president-elect Donald Trump tweeted, “The world was gloomy before I won – there was no hope. Now the market is up nearly 10% and Christmas spending is over a trillion dollars!”

Only someone with an ego the size of Trump could truly believe he was having such a massive positive effect on the economy even before he took office. And only someone with Trump’s profound ignorance of economics could believe he possessed such abilities. Unfortunately, such illogical thinking is not unusual. Noah Smith calls this idea that the President of the United States controls economic outcomes the “Fundamental Fallacy of Pop Economics.”
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Blog author: abradley
Thursday, December 29, 2016
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On December 27, 2016, at the age of 86, Thomas Sowell published his last column. After publishing dozens of books and hundreds of columns, Dr. Sowell’s retirement may mark the beginning of the end of an era of black intellectuals who were champions of political and economic liberty. Other black scholars like Walter Williams, W.B. Allen, and Shelby Steele are all in the 70s or 80s and there does not seem to be a cadre of like-minded black scholars in their wake.
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