Category: Economics

Nigerian school girls

Nigerian school girls

I don’t know any terrorists, but they seem to be very fearful people. They are afraid of new ideas, other religions, air strikes, and bathing. Nicholas Kristof, of The New York Times, says that what terrorists are really afraid of are educated women.

Kristof points out that the Boko Haram did not choose to bomb a church or go after politicians. They targeted a girls’ school. The biggest threat to a terrorist is a woman who can read, write, work, and raise educated children.

Why are fanatics so terrified of girls’ education? Because there’s no force more powerful to transform a society. The greatest threat to extremism isn’t drones firing missiles, but girls reading books.

In that sense, Boko Haram was behaving perfectly rationally — albeit barbarically — when it kidnapped some of the brightest, most ambitious girls in the region and announced plans to sell them as slaves. If you want to mire a nation in backwardness, manacle your daughters.

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America could have saved more jobs if, prior to the Industrial Revolution, politicians had banned the use of tractors. But that would have made everyone (especially those of us living in 2014) much worse off. Many Americans understand this point and yet still believe that when workers lose their jobs, we automatically become worse off.

Economist Bryan Caplan explains the problem with this ‘make-work’ bias, and why we are better off because of 19th century workers who lost their farm jobs.

800px-Hartmann_Maschinenhalle_1868_(01)In a marvelous speech on the origins of economic freedom (and its subsequent fruits), Deirdre McCloskey aptly crystallizes the deeper implications of her work on bourgeois virtues and bourgeois dignity.

For example, though many doubted that those in once-socialistic India would come to see markets favorably, eventually those attitudes changed, and with it came prosperity. As McCloskey explains:

The leading Bollywood films changed their heroes from the 1950s to the 1980s from bureaucrats to businesspeople, and their villains from factory owners to policemen, in parallel with a similar shift in the ratio of praise for market-tested improvement and supply in the editorial pages of The Times of India… Did the change from hatred to admiration of market-tested improvement and supply make possible the Singh Reforms after 1991? Without some change in ideology Singh would not in a democracy have been able to liberalize the Indian economy…

…After 1991 and Singh much of the culture didn’t change, and probably won’t change much in future. Economic growth does not need to make people European. Unlike the British, Indians in 2030 will probably still give offerings to Lakshmi and the  son of Gauri, as they did in 1947 and 1991. Unlike the Germans, they will still play cricket, rather well. So it’s not deep “culture.” It’s sociology, rhetoric, ethics, how people talk about each other. (more…)

mcdonalds“Clean up your own mess. Your mother doesn’t work here.”

That was a sign, printed on dot matrix printer paper, which hung in the breakroom of the McDonald’s where I worked. While that was nearly thirty years ago, I suspect that same sign is still there (though probably reprinted on a laser printer). But the idea behind it has changed. Your mother may not work at McDonalds, but the company—and others that hire low-skilled employees—are increasingly taking on the role of in loco parentis.

Lessons in basic life skills that were once taught by parents—such as punctuality, self-direction, basic personal hygiene—are increasingly being provided by the shift manager at the local fast food restaurant. That is why it’s absurd to claim that companies that are willing to hire people who are unqualified for the labor force are somehow getting over on the American taxpayer.

As Reihan Salam,
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On Exchange and Usury, Cajetan, ThomasChristian’s Library Press has released a new translation of two treatises on exchange and usury by Thomas Cajetan (1469-1534), a Dominican theologian, philosopher, and cardinal.

Although best known for his commentaries on the Summa of Thomas Aquinas, Cajetan also wrote dozens of other works, including short treatises on socioeconomic problems.

Published under the name On Exchange and Usury, these treatises reflect on the banking industry of the early modern era in the context of the Church’s usury doctrine, examining which transactions were licit, and which involved usury, among other things. The book is part of CLP’s growing series, Sources in Early Modern Economics, Ethics, and Law.

In the introduction, Raymond de Roover summarizes some of the historical context, as well as Cajetan’s contribution therein:

Because of the Church’s usury doctrine, bankers were not supposed to charge interest and, consequently, had to look for some other way of lending money at a profit, with the result that banking became tied to exchange: local banking to manual exchange (cambium minutum), and foreign banking to real exchange or exchange by bills (cambium per litteras). Since the discounting of commercial paper was ruled out by the usury prohibition, bankers bought bills of exchange at a price that was determined by the foreign exchange rates… (more…)

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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