Category: Economics

Blog author: jballor
posted by on Friday, August 23, 2013

I ran across this video yesterday (courtesy of ESA), which I thought presented some interesting challenges and issues:

The video was presented on Upworthy as an example of something “all white people could do to make the world a better place,” that is, use their white privilege to address injustices.

A number of economists, including Milton Friedman and Thomas Sowell, have written about the power of the market economy to overcome racism and discrimination, to put people into relationships on the basis of economic decision-making rather than skin color. As Friedman contended,

the preserves of discrimination in any society are the areas that are most monopolistic in character, whereas discrimination against groups of particular color or religion is least in those areas where there is the greatest freedom of competition.

But as a conversation I had with some others about the video also illustrates, there are times when (at least in the short run interests of the firm), something like profiling can seem to make some economic sense. The successful passing of one bad check can really hurt a store’s margins. Practically speaking the stores often take a complete loss.
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Blog author: jcarter
posted by on Thursday, August 22, 2013

Zombies-aheadEconomist Luigi Zingales provides a helpful explanation on the difference between being pro-market and pro-business:

A pro-market strategy rejects subsidies not only because they’re a waste of taxpayers’ money but also because they prop up inefficient firms, delaying the entry of new and more efficient competitors. For every “zombie” firm that survives because of government assistance, several innovative start-ups don’t get the chance to be born. Subsidies, then, hurt taxpayers twice. . . .

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Blog author: ehilton
posted by on Thursday, August 22, 2013

We need both of course. But do we Americans put too much emphasis on productivity? And is it hurting us?Creativity1

Jeff DeGraff, professor at the University of Michigan Ross School of Business, thinks this might just be the case. It seems that industrialized country like the U.S. and Germany put great value on productivity, but not so much on creativity, and it may be costing us. (more…)

St. Basil the Great

Today at Ethika Politika, I examine a few rules of prudent stewardship that follow from the teachings of the Cappadocian fathers on poverty, almsgiving, and fasting. One of the great challenges in this area today is how best to live out in our present context the statement of St. Basil the Great that “the money in your vaults belongs to the destitute.”

In particular, I highlight these three guidelines to help guide prudent practices:

[W]e must be wary of simplistic, one-sided policy proposals when life itself is, in reality, far more varied and complex.

[...]

It is not enough to have the right principles or the best intentions; we must also take the time to wade through the mess of conflicting studies and statistics, as well as the lessons of history, to discern what truly “works” — what makes compassion both effective and dignifying rather than mere moralizing sentiment, ineffective at best and counterproductive at worst.

[...]

The standard for determining what is “overabundance,” especially given a context where we enjoy great wealth but also face a high cost of living, is the conscience … and our sensitivity to it often depends upon our degree of spiritual formation.

The whole article can be found here.

Also, for a fuller treatment of the principles upon which these guidelines rely, be sure to read Fr. Philip LeMasters’ article “The Cappadocian Fathers on Almsgiving and Fasting” here.

Blog author: jcarter
posted by on Wednesday, August 21, 2013

welfareIn eleven states in the union, welfare pays more than the average pretax first-year wage for a teacher. In thirty-nines states, it pays more than the starting wage for a secretary. And, in the three most generous states a person on welfare can take home more money than an entry-level computer programmer.

Those are just some of the eye-opening and distressing findings in a new study by Michael Tanner and Charles Hughes of the Cato Institute on the “work versus welfare tradeoff.”

“Welfare benefits continue to outpace the income that most recipients can expect to earn from an entry-level job, and the balance between welfare and work may actually have grown worse in recent years,” say Tanner and Hughes. “The current welfare system provides such a high level of benefits that it acts as a disincentive for work. Welfare currently pays more than a minimum-wage job in 35 states, even after accounting for the Earned Income Tax Credit, and in 13 states it pays more than $15 per hour.”

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will-workNear the top of my long and ever-growing list of pet peeves is articles titled, “The Conservative Case for [Insert Proposal Usually Rejected by Conservatives Here].” It’s almost an iron-clad rule that before you even read the article you can be assured of that the case being made will use words that appeal to conservatives while being based on principles that are contrary to conservatism and/or reality.

Take, for example, a recent op-ed in the New Statesman by British Conservative Party politician Guy Opperman titled, “The Conservative case for a living wage.” In his opening paragraph he writes,

As a Conservative MP, I believe that lower taxes stimulate growth and jobs, that smaller government is invariably better government and that governments must “ensure that work always pays” by making sure those in work are better off than those on benefits. I also believe in hard work. Yet, for too many people in our society, a hard day’s work no longer means a fair day’s pay.

This sounds reasonable enough in theory. But when formulating public policy we have to have to use more precise terms. For instance, what do the phrases “hard work” and a “fair day’s pay” mean when it comes to determining a living wage? Does the difficulty of work automatically mean that the work is deserving of a set level of pay?

Opperman seems to believe that if a person is working a full-time job, that they are thereby entitled – regardless of the work they are doing – to receive a living wage:

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Did you wake up one morning and think, “I wish I had a phone that would not only allow me to text and call, but play games, get directions, read books, allow me access to all social media and take pictures?” Not likely. You wanted an iPhoneteens_working because Apple put it on the market.

Jim Clifton, CEO at Gallup, says this is no small point. Our economy isn’t waiting for consumers to want to start purchasing things again; it’s waiting for entrepreneurs to create demand.

Growth doesn’t just happen, and it’s not necessarily driven by demand. Growth comes from innovation and from entrepreneurs who create demand. Just look at the iPhone. Apple’s Steve Jobs didn’t create it because there was an insatiable demand for this world-changing device. People didn’t even know what an iPhone was until Apple put it on the market, and now they can’t buy enough of them — and Apple has a nearly $500 billion market capitalization. (more…)

At Forbes.com, Jerry Bowyer interviews George Gilder on his new book Knowledge and Power (HT: AOI Observer). The long Q&A, titled “George Gilder Has A Very Big, Economy Boosting Idea” is very much worth a read. Here’s a snip:

Jerry: “So the market system is the operating system at best, but it’s not the user. That the entrepreneur uses an operating system called the market economy: there’s hardware to it, there’re rails and canals and buildings and factories; there’s software to it, in the sense that there’s operating system software equivalent to DOS or Windows or Linux or whatever, but that thing just lies there dormant until a user sits down at the keyboard and starts changing things, and that user’s the entrepreneur.”

George: “That’s right. And those operating systems themselves in turn were generated by other inventors and entrepreneurs and programmers. Every logical scheme and every machine requires an oracle, as Turing put it. The only thing Turing could say about that oracle, and he italicized it, is that it cannot be a machine. A machine is an orderly system, and all information is disorder; it’s disruption; it’s surprise.” (more…)

I’ve been a Craigslist fan for years, using it for everything from snagging free goods to securing new jobs to buying baby strollers to selling baby strollers—you name it. Yet even as I’ve become somewhat of a Craigslist veteran, swapping this for that and that for this, each experience brings with it a new set of surprises and takeaways, particularly when it comes to the way I view trade and exchange.

craigslist screen

Alas, in today’s giant global economy, it can be all too easy to feel like robotic worker bees or petty consumer fleas in a big, blurry economic order. We shouldn’t need reminders that daily tools like pencils and smartphones don’t just appear out of thin air, but based on the protectionist ethos that dominates our discussions on trade, it appears that we do.

In a way it’s understandable, what with all the conglomerates conglomerating and such. The bulk of Western society is no longer confined to bartering at the village market, nor are we bound to spend our days planting seeds and reaping harvests in a badda-bing badda-boom sort of way. Value creation, even at its largest margins, is increasingly difficult to spot.

And it is precisely here, I would argue, that bottom-up trading tools like Craigslist serve a bigger purpose than ridding our attics of stinky old mattresses. There’s something special about hum-drum personal exchange that reacquaints our economic imaginations with basic beauty of it all, cutting through and tearing down whatever pessimistic zero-sum mythologies we may be constructing. (more…)

jobless-menRecent news reports on unemployment, underemployment, and the high level of dissatisfaction among those with full-time work are an opportunity for the church, says Michael Jahr. People are looking for meaning, fulfillment, opportunity – and the church has answers that no one else can provide.

At a 2013 Oikonomia Network seminary faulty retreat, Pastor Dan Scott, author of “The Emerging American Church,” said, “American workers are having an increasingly difficult time competing with their Polish, English, Spanish, Russian, Indian, Korean, and Brazilian counterparts in a globalized economy. … The solution is a spiritual one, although at present few of our churches are offering it because too many of them are focused on lesser things.”

A dualism that neglects to address the workplace – where most Christians spend the bulk of their waking hours – is at odds with the theology of vocation. As British theologian and author Lesslie Newbigin wrote, “The congregation has to be a place where its members are trained, supported, and nourished in the exercise of their parts of the priestly ministry in the world. The preaching and teaching of the local church has to be such that it enables members to think out the problems that face them in their secular work in light of their Christian faith.”

Read more . . .