Category: Economics

Seattle-mystWhen I was growing up I had a buddy—let’s call him “Bob”—who was constantly asking, “What happens if we do . . . ?” Bob’s curiosity, however, only led him to wonder about foolish actions. He never pondered, for example, what would happen if we all volunteered at the senior citizens center. Instead, his thinking ran more along the lines of what would happen if we jumped off the senior citizens center.

The reaction of me and the rest of my friends was always, “Let’s find out!” But we were more prudent than Bob (or maybe just more cowardly) so we’d encourage him to try whatever reckless idea he had in mind so we could learn from his experience. We learned, for instance, that if jump off the 3-story senior citizens center, a stack of cardboard boxes will not be enough to sufficiently break your fall.

Bob’s shenanigans would daily provide for us what social scientists would call a “natural experiment.” A natural experiment is a study of the effect of an independent variable, which has not been planned or manipulated by the researchers, on a dependent variable. (The word ‘natural’ in the term natural experiment therefore refers to an event that is not planned by the researchers.)

The city of Seattle is about to pull a Bob, by foolishly raising the minimum wage to $15 per hour. The effect on the citizens of Seattle will be almost entirely harmful. But it will provide a natural experiment on the effect of raising the minimum wage laws that the rest of American can learn from. Anyone who isn’t already convinced that increasing the minimum wage has a detrimental impact on employment and harm minority workers will, in a few years, have solid proof. We will all be able to look to Seattle to see the difference between good, albeit naive, intentions and sound economic policy.

Here are some of the effects I predict the policy will have in the next three years:
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keep-calm-and-expect-the-unexpected-18Today at Bloomberg we find this unexpected news about unemployment:

Applications for U.S. unemployment benefits unexpectedly climbed to a nine-week high, underscoring the difficulty adjusting the data for seasonal variations such as the Easter holiday and spring recess at schools.

Jobless claims rose by 14,000 to 344,000 in the period ended April 26, the highest level since Feb. 22, Labor Department data showed today in Washington. The median forecast in a Bloomberg survey of economists called for 320,000.

There are two things the media never expects: (1) The Spanish Inquisition and (2) increases in jobless claims. Over the past five years, in 30 of the past 60 months,  the media has considered it “unexpected” when jobless claims increase:

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In a video selected as the winner of a contest sponsored by The High Calling, Dylan Weston, a ranch hand and wrangler from Pennsylvania, shares how his work glorifies God and adds value to others.

This is a great example of how we as Christians might begin to view our role in the bigger picture, particularly as it applies to the economies of creative service and wonder. Dylan does not view his service as a mere means to personal fulfillment or material ends, and neither does he view it in conflict with his efforts to make time and space to simply behold God’s creation. (more…)

VATICAN-POPE-AUDIENCE“Inequality is the root of social evil,” tweeted Pope Francis earlier this week, raising eyebrows across the globe. Like many conservative Christians I expressed my disagreement on social media. “Um, no it’s not. Hate and apathy are the roots of social evil,” I said on Twitter. I also wondered whether Francis had “traded the writings of Peter and Paul for Piketty”—the French Marxist economist whose latest book on the evils of inequality has become a worldwide bestseller.

Some Catholics, such as Grant Gallicho at Commonweal pointed out that Pope Francis used that exact phrase in his first major document, Evangelii Gaudium. To be honest, while I had read that document, I didn’t make the connection. Perhaps @Pontifex should have thrown in a #EvangeliiGaudium hashtag to make that point clear.

Noting that the quote is from Evangelii Gaudium is helpful, though the context still doesn’t change the fact the claim about inequality being the root of social evil is simply not true. I’m generally a fan of Catholic social teaching (as enthusiastic as a Protestant can be), but Pope Francis’s claims in Evangelii Gaudium show a misunderstanding of economic reality. Take this claim, for instance:
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babiesToday you’ll be hearing a lot about this latest bit of bad —really, really bad —economic news:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 0.1 percent in the first quarter (that is, from the fourth quarter of 2013 to the first quarter of 2014), according to the “advance” estimate released by the Bureau of Economic Analysis.

There are a lot of reasons why slow or negative economic growth is terrible, and I plan to write more about that soon. But many people don’t really understand why economic growth matters. While the issue is complex and requires some nuance to fully explain, the simplistic answer is that economic growth matters because of babies. If you love babies — and want more of them around — you should love economic growth.

I’ve written about this topic before, but today seems an ideal time to revisit the issue. Before we explain the baby-GDP connection, though,  let’s consider the consequences if there were to be a long period in the U.S. with no economic growth:
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On Saturday morning, Acton Institute President Rev. Robert A. Sirico joined host Larry Kudlow on the nationally syndicated Larry Kudlow Show for a wide-ranging Easter weekend discussion. Sirico and Kudlow talked about everything from the so-called “Gospel of Jesus’ Wife” to the collapse of poverty rates worldwide over the past few decades, and ended with a conversation about the upcoming canonizations of Pope John XXIII and Pope John Paul II, and a reflection on whether the march of secularism can be turned back in western society.

You can listen to the interview via the audio player below.

gerrit-van-honthorst-king-david-harpWe live amid unprecedented economic prosperity, and with the promise of globalization and the continued expansion of opportunity and exchange, such prosperity is bound to grow.

Yet if we’re to retain and share these blessings, such gifts need to be received and responded to with a heart of service, sacrifice, and obedience to God. “Man is not the owner,” write Lester DeKoster and Gerard Berghoef. “He is the overseer…Each of us is steward over those talents and those pounds allotted us by divine providence.”

I was reminded of this while reading King David’s powerful prayer at the end of 1 Chronicles. David had called on Israel to give generously for the construction of the template, and God’s people responded in turn. David gave his “personal treasures of gold and silver,” and the people “gave freely and wholeheartedly to the Lord.”

The story provides a basic lesson in generosity and obedience, but David’s subsequent prayer demonstrates something deeper about the heart of Christian stewardship, offering a fine portrait of how our overarching attitudes and allegiances ought to be aligned: (more…)

uncle-samIt’s tax day, and though I’m sure you’ve already begun your revelry, I suggest we all take a moment of silence to close our eyes and relish that warm, fuzzy feeling we get when pressured by the IRS to pay up or head to the Big House.

Indeed, with all of the euphemistic Circle-of-Protection talk bouncing around evangelicalism — reminding us of our “moral obligation” to treat political planners as economic masters and the “least of these” as political pawns — we should be jumping for joy at the opportunity. Nuclear warhead funding aside, progressive Christianity has elevated Caesar’s role to a degree that surely warrants some streamers.

Yet, if you’re anything like me, you did the exact opposite, writing off purchases, deducting charitable giving, and — gasp! — trying to get some of your money back. (more…)

bitcoin-wallBitcoin is dead, long live Bitcoin.

A few weeks ago the IRS killed off any chance that Bitcoin could become a mainstream currency. That’s probably for the best since it clears the way for it to become something much more important: the world’s first completely open financial network.

Timothy B. Lee has a superb article explaining why this could be transformative. Lee highlights one particularly helpful innovation:

One obvious application is international money transfers. Companies like Western Union and Moneygram can charge as much as 8 percent to transfer cash from one country to another, and transfers can take as long as 3 days to complete. In contrast, Bitcoin transactions only take about 30 minutes to clear, and Bitcoin transaction fees could be a lot less than 8 percent.

An “alternative to Western Union” doesn’t sound revolutionary, does it? Now look at this graphic produced by The Daily Mail which shows how much money is being sent by migrants to their families back home.
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Mike Mulligan and His Steam Shovel, Virginia Lee BurtonCreative destruction can be a painful thing, particularly when you’re the one being destroyed. I’ve been-there done-that, and when things hit, I can’t say that I cared too much about Joseph Schumpeter and his fancy ideas.

Alas, even when we have a firm understanding of the long-term social and economic benefits of such destruction — that whatever pain we’re experiencing is for the “greater good” of humanity — we can’t help but feel unappreciated, devalued, and cast aside. Our work is an expression of ourselves, something we offer to society and (hopefully) believe to be of considerable worth.

Thus, when we experience such rejection, it’s only natural to react bitterly and become cynical, resentful, or fatalistic, allowing our attitudes and behaviors to correspond in turn. We’re tempted to doubt ourselves or doubt others, to sit back or plod forward halfheartedly, to feel entitled, believing that our “service” deserves a place in the economic landscape, regardless of what the economic signals might say.

Yet amidst theese competing emotions, we mustn’t forget that, in addition to concerns about productivity, efficiency, and economic progress, for the Christian, our work is ultimately service to others, and thus, to God. If someone has discovered new and better ways to meet our neighbors’ needs, it should tell us that it’s time to tweak our game and find new ways to contribute, as hard and uncomfortable as that may be. Our work is not a mere means to a paycheck, and neither are we mindless, powerless cogs in some grand machine, manufactured and predestined to spin mindlessly along only to be bypassed by the Next Big Thing and consigned to the city dump.

In her 1939 children’s book, Mike Mulligan and His Steam Shovel, Virginia Lee Burton gets to the heart of all this, tapping into the deep and profound pain of creative destruction, while ultimately pointing the way forward — toward creativity, service, and authentic human flourishing. (more…)