Category: Economics

donald-trump-milton-friedmanIf it wasn’t for Bernie Sanders, Donald Trump would win the title of most economically illiterate presidential candidate in the short history of the twenty-first century.

A prime example of why he’d earn this ignoble title is Trump’s opposition to free trade — a position which, not surprisingly, he shares with Sanders. The only real difference between Sanders and Trump on this issue is that no one trust that Trump would actually carry out his proposed destructive policies (he’d flip-flop on the issue like he does on everything else), while Sanders would be devastatingly consistent.

The video below compares and contrasts Trump’s ignorance about free trade with the wisdom of Milton Friedman, one of the greatest economists in American history.

If judged on substance, it’s obvious Friedman wins this debate. But in the long run Trump and other anti-free market politicians are likely to continue to convince the public to support their terrible, anti-trade policies. When it comes to economics, Americans have a tendency to reject policies that make our country more prosperous in favor of ignorant demagoguery that gives the appearance of punishing foreign nations.

(Via: AEI Ideas)

Since the era of Adam Smith economists have been asking, “What creates wealth?” One key answer is specialization and trade. On a timeline of human history, the recent rise in standards of living resembles a hockey stick — flatlining for all of human history and then skyrocketing in just the last few centuries.

As economist Don Boudreaux explains, without specialization and trade, our ancient ancestors only consumed what they could make themselves. How can specialization and trade help explain the astonishing growth of productivity and output in such a short amount of time—after millennia of famine, low life expectancy, and incurable disease?

Western activists and foreign aid experts often pretend as though material redistribution is enough to elevate the world’s poor. All we must do is give people the “tools” to do their work, they’ll say, and developing nations will take it from there.

What these “tools” consist of is a bit more blurry. The more serious development experts and economists recognize the need for immediate relief, but point to deeper factors and obstacles that prevent or accelerate the path to long-term prosperity and flourishing — “intangible assets and hidden liabilities,” as Arnold Kling and Nick Schulz have put it.

One such overlooked asset is cultural capital and the ripple effect it yields on a society’s underlying attitudes and overarching philosophy of life. In an excerpt from the PovertyCure series, Michael Miller and Michael Fairbanks explain why it matters.

As Fairbanks explains:

The most important type of capital is cultural capital, and by cultural capital I don’t mean just food and music and fashion and language. These are very valuable things, but I mean, how does a group of people attach meaning in their lives? Are they tolerant of people unlike themselves? Are they optimistic about the future? Do they believe in competition?

It’s trustful relationships…loving new ideas, loving the idea of serving the client very, very well. This cultural capital tells you if the country has the conditions to be prosperous in the future.

For those living in countries with higher levels of such capital, it can be easy to take it for granted, assuming society rolls along simply on the momentum of self-seeking investment and blind consumerism.

If society grasps the proper meaning of work — “as service to others and thus to God” — cultural and economic transformation is a natural byproduct.

Having a healthy understanding of God’s design for work is important for our individual lives, but here we see its importance for flourishing across society. Here we see it’s importance for an enduring economic order that is both just and prosperous.

culture-trust“If a market is going to be sustainable in the long run, we need something very different from unconnected self-seeking individuals,” Miller concludes. “We need people who think of others, and who are rooted in their families and communities. We need a moral culture and a measure of trust that extends beyond family and clan.”

23-VIEW-master675Under the feudalistic societies of old, status was organized through state-enforced hierarchies, leaving little room for the levels of status anxiety we see today.

For us, however, status competition ranges wide and free, leading to multiple manifestations and a whole heap of status signaling.

Such signaling is as old as the free society itself, of course. Whether sending their children to fancy classes and fencing lessons, accumulating ever-expensive luxury goods, or boasting in the labels of their fair trade coffee and the nobility of non-profit activism, aristocrats have always found ways to signal their superiority.

Yet these preferences have shifted over time, the present form of which is carving out its own unique space. In a recent report from the Adam Smith Institute, Prof. Ryan Murphy explores the situation, noting that while past generations were more concerned with “conspicuous consumption” and “keeping up with the Joneses” – chasing faster cars and bigger diamonds – the current pursuit of status has adapted toward “conspicuous authenticity.”

We are now seeing a “new status signaling,” Murphy observes, where society has “moved beyond associating ostentatious displays of wealth with high status,” opting instead for behavior that signifies we are above and beyond such base behavior. (more…)

single-payerA plurality of Americans support “Medicare for All”, legislation endorsed by Bernie Sanders and other Democrats that would establish a universal single-payer health care system in the U.S. At least they do until they find out what “single-payer” really means.

A recent AP poll found that 39 percent support and 33 oppose replacing the current private health insurance system in the U.S. with a single government-run and taxpayer-funded plan like Medicare for all Americans that would cover medical, dental, vision, and long-term care services. (Another 26 percent neither support nor oppose the change.)

But the same percentage (39 percent) opposed single-payer when it was found that it would cause their own taxes to increase or they’d need to give up other coverage, like health insurance provided by their employers. In both cases, about 4 out of 10 flipped to opposition when they discovered that caveat.

Even higher numbers opposed the plan if it would lead to longer wait-times for non-emergency medical services (47 percent) or if it took longer for new drugs and treatments to become available (51 percent).

“People say they believe in a principle, but when you describe the policy, it often loses support because they don’t like that there are side effects,” said Robert Blendon, a professor who tracks public opinion on health care at the Harvard T.H. Chan School of Public Health.

So what exactly would an American version of single-payer plan look like?
(more…)

720x405-AP_846250441282Every election season politicians are asked how they will fix our ever-growing budget crisis. And every season at least one politician gives the same trite answer: By cutting “fraud, waste, and abuse.”

Politicians love the answer because it doesn’t offend any specific constituency. After all, there are no groups lobbying for more fraud, waste, and abuse (at least not directly). And voters love the answer because it fits with both the conservative perception that government is mostly wasteful and should be fixed and the liberal perception that government is mostly efficient and can be made even more so.
Neither the politicians nor the voters are completely wrong. Fraud, waste, and abuse is indeed a perennial problem, which is why the government has thousands of auditors, evaluators, and inspectors constantly trying to root it out. But would eliminating all fraud, waste, and abuse truly save the taxpayers that much money?

Donald Trump seems to think so. In the latest Republican presidential debate he claimed that he could fix the current budget deficit simply by cutting out the “waste, fraud, and abuse”:

BLITZER: Mr. Trump — Mr. Trump. If you eliminate completely the Department of Education, as you have proposed, that’s about $68 billion. If you eliminate the Environmental Protection Agency, that’s about $8 billion. That’s about $76 billion for those two agencies.

The current deficit this year is $544 billion. Where are you going to come up with the money?

TRUMP: Waste, fraud and abuse all over the place. Waste, fraud and abuse.

You look at what’s happening with Social Security, you look — look at what’s happening with every agency — waste, fraud and abuse. We will cut so much, your head will spin.

Let’s take Mr. Trump at his word and consider how much we’d need to cut to “make our head spin.”
(more…)

Blog author: jcarter
Friday, February 26, 2016
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Why are some countries rich and others poor?

The answer to that question is complex – and hotly debated. But economist Alex Tabbarok outlines several key ingredients to consistent economic growth -productivity, incentives, institutions – and explains how they are combined with factors such as a country’s history, ideas, culture, geography, and even a little luck.