Category: Economics

Thomas-Piketty-014Thomas Piketty’s new book, Capital in the Twenty-First Century, has created quite the stir, and with its overwhelming size (700 pages) and corresponding array of commentaries and critiques, it’s tough to know where to start.

Cutting through such noise, Russ Roberts provides his usual service on EconTalk, chatting one-on-one with Piketty about the key themes, strengths, and weaknesses of the book. The interview is just over an hour, and I encourage you to listen to the whole thing.

Piketty lays out his argument quite concisely in the beginning, followed by a fruitful back-and-forth led by Roberts. For those who aren’t aware, the book chronicles a recent rise in economic inequality, wherein, by Piketty’s account, wealthy elites sit on their stashes while those at the bottom increasingly struggle to keep pace. His solution: Tax, baby, tax.

In response to such an approach, there are many areas to poke and prod, but Roberts zeroes in on one of the more fundamental and overarching questions: What about those who accumulate their wealth by helping those at “the bottom”?  (more…)

Blog author: jcarter
Thursday, September 25, 2014
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marriageeconomyFor the past three decades, there has been an attempt by the political class to divide conservatism into two main branches: social and economic. The two are often pitted against each other despite the fact that most conservatives in America would identify with both sides. Mainstream conservatives realize what the elite class does not: economic and social factors are inextricably linked together.

Consider, for example, the connection between the economy and marriage. According to a new report by the Pew Research Center, the share of American adults who have never been married is at an historic high. In 2012, one-in-five adults ages 25 and older (about 42 million people) had never been married; in 1960, only about one-in-ten adults (9 percent) in that age range had never been married.

About half of all never-married adults (53 percent) say they would like to marry eventually. Out of that group, three-in-ten say the main reason they are not married is that they have not found someone who has what they are looking for in a spouse. So what’s holding them back? For women, the reason seems to be primarily economic. More than two-thirds (78 percent) of never-married women say finding someone who has a steady job would be very important to them in choosing a spouse or partner.
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doctor_clipartIn helping developing countries to increase their economic prosperity, says Acton’s Jordan Ballor, we must remember that human welfare cannot be reduced to material realities.

If a nation were to pursue GDP growth as its highest goal, it would probably institute policies and incentives to induce women to work outside the home and professionalize child care. GDP incentivizes specialization and the division of labor, since such transactions are the only things taken into account. As Ritenour concludes, “We ought not give into the temptation that all of human welfare is encapsulated in GDP.” Or in other words, man does not live on GDP per capita alone.

In a subtle way, measuring GDP can give the illusion that human flourishing is identical to economic growth and that economic growth is reducible to GDP. GDP is a useful, if limited, measure. But it should never be seen as a direct proxy for economic development, much less human flourishing.

Read more . . .

Blog author: jcarter
Thursday, September 18, 2014
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bible-studyMost Christians recognize that the Bible has lot to say about economic topics, such as money and poverty. Yet there is a paradoxical assumption, whether stated or unspoken, that these passages don’t speak to larger economic issues. Occasionally this is true, but more often than not, we can find principles from Scripture that can help us discern how we should think about matters related to economics.

Consider, for example, the issue of economic systems. The Bible doesn’t claim to favor any particular nation-based economic system, such as American-style capitalism or the old Soviet-style communism. But Scripture does seem to have a clear preference for the economic activities that underpin the free market. As David Kotter explains,
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poverty_20130311One of the most underreported stories of the last decade is about good news: we’re winning the struggle against chronic hunger around the globe.

A new U.N. report estimates that the number of chronically undernourished people in the world has decreased by more than 100 million over the last decade, and 209 million lower than in 1990–92. Those figures are even more remarkable when we consider the global population has increased by almost 2 billion since 1990.

According to the report, since 1990-92, 63 countries have reached the hunger target of halving the proportion of undernourished people and 25 countries have achieved the goal of halving the number of undernourished people. Of the 63 developing countries, 11 already had undernourishment levels below 5 percent (the methodological limit that can assure significance of the results different from zero) in 1990-1992 and have been able to keep it in that interval, and are therefore not the prime focus of the 2014 report.

In the same period, the prevalence of undernourishment has fallen from 18.7 to 11.3 percent globally and from 23.4 to 13.5 percent for developing countries. There has likely never been a time in modern human history when such a large percentage of the population has been freed from chronic hunger.

Unfortunately, about 805 million people — mostly in Africa and South-Eastern Asia still remain without adequate food resources, due largely to conflicts and natural disasters. But we’re making remarkable progress. In fact, as Steve Davies of LearnLiberty explains, in the near future we may be able to eradicate extreme poverty and global hunger altogether.

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Vatican Radio reports that the Organization for Cooperation and Economic Development is adjusting its economic forecast for major developed economies downward, with growth in the Eurozone projected to be only 0.8% in the coming year. Along with this forecast, the OCED is encouraging the European Central Bank to engage in a program of stimulus to offset the negative effects of such weak levels of growth.

For analysis on this story, Vatican Radio turned to Kishore Jayabalan, Director of Istituto Acton in Rome, who explained that adjusting monetary policy would only mask the fundamental problems that cause slow growth in European markets, such as high taxes, burdensome regulatory schemes, and strict employment rules that make it difficult for employers to have any flexibility in hiring and firing.

You can listen to the full report and interview using the audio player below.

In the United States, we’ve only begun to see how impediments to religious liberty can harm and hinder certain businesses and entrepreneurial efforts. Elsewhere, however, particularly in the developing world, religious restrictions and hostilities have long been a barrier to economic growth.

To identify these realities, Brian Grim of Georgetown University and Greg Clark and Robert Edward Snyder of Brigham Young University conducted an extensive study, “Is Religious Freedom Good for Business?,” which concludes that “religious freedom contributes to better economic and business outcomes.”

Katrina Lantos Swett and Daniel Mark summarize the key findings at Investor’s Business Daily:

Reviewing the GDP growth of 173 countries while controlling for 23 financial, social and regulatory factors, [Clark and Snyder] found that religious freedom not only is associated with global economic growth, but also is one of only three factors carrying that association.

As the study found, 20% of countries with low levels of religious hostilities and 20% nations with low levels of government restrictions on religion were economic innovators, while the figures for nations with high levels of hostilities and restrictions were only 8% and 7%, respectively.

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Blog author: dpahman
Wednesday, September 10, 2014
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I have spoken in the past in favor of net neutrality, writing,

Whoever is responsible for and best at enforcing it, net neutrality had this going for it: it was a relatively stable, relatively open playing-field for competition…. [T]he fact that companies tried to get around it via copyright protection privileges shows that it was, in fact, doing something to enforce freedom of competition. Now, without it, there is an opportunity for concentration of power…. As [Walter] Eucken illustrated, concentration can lead to instability, and instability leads to popular calls for state regulation, which tend in practice toward cronyism. Certainly, such a trajectory is not inevitable, but it is now more likely, giving good reason for pause at the idea that we do not need net neutrality — or something like it — in the future.

This week, House minority leader Nancy Pelosi voiced her support for net neutrality as well. So why would I object? Because the measures that Pelosi proposes give much more power to the government, following the trajectory outlined above in the direction of over-regulation. (more…)

long-spoons“How can we explain this emporiophobia—a fear of markets—given the overwhelming evidence that such institutions provide the greatest wealth, health and happiness for humankind?” When economics professor Paul Rubin asked that question last December he answered by saying that we need to shift the metaphor of markets from “competition” to “cooperation.”

Cooperation isn’t just more important in the economic sphere—it’s also more common. We cooperate with everyone involved in making all the products we buy and sell, millions of people we’ll never know.

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This discussion may seem semantic, but words have meaning and power. People would feel much more favorably toward a “cooperative economy” than a “competitive economy.”

To emphasize the cooperative aspects of the market in order to provide a more accurate perspective requires that we apply new metaphors and symbols when explaining how markets work. A story I believe can be especially helpful is the “parable of the long spoons.” Caritas Internationalis created a video about the allegory that brilliantly emphasizes the utility of cooperation.
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Today at Ethika Politika, I caution against the sort of scapegoating that justifies ideologies at the expense of human effort:

Do you support capitalism? Socialism? Distributism? Something else? Wonderful. What does that look like among the mess of market forms that actually constitute the economy you participate in every day? Rather than criticizing those policies that fall short of your saintly ideal or align too closely with your Hitler, what ones constitute a first step in the right direction for you? And why? And what are the actual consequences, intended or otherwise, that may come about?

While there is a place for simply outlining one’s ideal, if we wish to actually do some good ourselves, we need to get our hands dirty in the mire of material reality. Gnostic scorn for the concrete and this-worldly boasts a broad road with a wide gate, but it is the narrow road of reality that leads to life; not only for ourselves, but for the common good; not just for this world, but for the kingdom of God.

In his recent book Get Your Hands Dirty: Essays on Christian Social Thought (and Action), Jordan Ballor begins with a similar call: (more…)