Category: Economics

During a season such as Christmas, where hyper-consumerism and hyper-generosity converge in strange and mysterious ways, it’s a question worth asking: How much of our gift-giving is inefficient and wasteful?

For some, it’s a buzz-kill question worthy of Ebenezer Scrooge. For an economist, however, it’s a prod that pushes us to create more value and better align our hearts and hands with human needs.

In a new video at Marginal Revolution, economists Tyler Cowen and Alex Tabarrock explore this at length, asking how we might maximize the value of gift-giving:

For Cowen and Tabarrock, gift-giving typically suffers from knowledge and incentive problems. “When people buy something for themselves, value is created, because the buyer values the good more than it costs the seller to produce,” Tabarrock explains. “But when people give gifts that aren’t wanted, the recipient values the gifts at less than the cost. Gift-giving: it can be kind of a negative trade.” (more…)

Blog author: jcarter
Tuesday, December 6, 2016
By

consumption-foodConsumption is arguably the first (or maybe second) economic concept mentioned in the Bible. After creating Adam and Eve and giving them the cultural mandate (“Be fruitful and increase in number; fill the earth and subdue it.”), God says to them,

“I give you every seed-bearing plant on the face of the whole earth and every tree that has fruit with seed in it. They will be yours for food. And to all the beasts of the earth and all the birds in the sky and all the creatures that move along the ground—everything that has the breath of life in it—I give every green plant for food.” (Gen. 1:29)

Although we are all descended from these first consumers, we often take a dim view of the idea of consumption. Even the term itself has taken on ugly connotations. (Since the Middle Ages, the word “consumption” has referred to wasting diseases, such as tuberculosis, which “consume” the body.)

But consumption plays a vital role in our lives—a role that was largely unappreciated until the 19th century. In The Atlantic, Frank Trentmann has a superb short history of consumption and how the moral assessment changed, due largely to the influence of Christians:
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 Are you better off than someone who has a million dollars in the bank? Probably not—at least not compared to a millionaire today.

But chances are you consider yourself better off than someone who was a millionaire in an previous era—and you may even be better off than someone who had a million dollars in the bank in the 1970s or 1980s.

Don’t believe me? Then ask yourself this question: How much is [technological advance X] worth to me?

That’s not an easy question to answer since there’s no exact way to put a dollar figure on the subjective value of various technological improvements. But let’s think of it this way.
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profit“Money is often seen as intrinsically bad or perhaps a necessary evil in the world,” says Tom Nelson. “However, we must not forget the important role money plays in wealth creation and in facilitating the efficient exchange of goods and services.”

Money and the trade it makes possible further the common good and greatly enhance our ability to love our neighbors — both local and global. Christian philosopher Dallas Willard reminded us, “Business is an amazingly effective means of delivering God’s love to the world by loving, serving and providing for one another.”

The idea of profit can, at first blush, seem problematic, but upon closer reflection, we can see the importance of profit within an economic system.

When property rights are well-defined and contracts are consistently enforced, profits perform important functions within modern economies. Profits provide rewards for technological innovation and resource efficiency in delivering goods and services. In this sense, profits are important incentives for promoting research and development, enabling enterprises to discover superior products and better ways to meet the needs of people.

Read more . . .

In a new article at The Stream, Acton Director of Research Samuel Gregg offers good reasons why a move toward economic nationalism is not in the best interest of America.  He starts with this:

Whatever the motivations for such policies, their costs vastly outweigh their benefits. In the first place, protectionism discourages American businesses and workers from focusing on producing those goods and services where they enjoy a comparative advantage vis-à-vis other nations. Not only does this undermine productivity, efficiency, and international competitiveness of American businesses. It also encourages American workers to enter industries that, no matter how much protection they enjoy, won’t be able to compete in the long term.

Gregg continues to give reasons against economic nationalist policies throughout his article, but one reason that seems to be quite relevant at the time is crony capitalism.  Gregg says this:

Yet another problem with economic nationalism is that it encourages a growing problem in American economic life: crony capitalism.

Giving certain American businesses subsidies or lumbering foreign products with tariffs may seem like economic questions, but in practice they are ultimately political. Such policies encourage companies prefer to seek profits by lobbying legislators and bureaucrats rather than serving customers and creating value.

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While it may not seem like it when you’re at the supermarket checkout, Americans benefit tremendously from relatively low food prices.

Consider the typical Thanksgiving feast. According to an informal price survey conducted by the American Farm Bureau Federation (AFBF), the average cost of this year’s Thanksgiving meal for ten people is $49.87—less than $5 per person.

The AFBF survey shopping list includes turkey, bread stuffing, sweet potatoes, rolls with butter, peas, cranberries, a veggie tray, pumpkin pie with whipped cream, and coffee and milk—all in quantities sufficient to serve a family of 10 with plenty for leftovers.

That same meal a century ago would have been much more expensive. According to Business Insider, when adjusted for inflation the same meal for ten would have cost $167.77. One reason is that turkeys are considerably cheaper. A 16-pounder in 1911 prices would cost roughly $110 today (the AFBF says the average turkey today costs $22.74).

So when you sit down to Thanksgiving dinner on Thursday, be sure to include prayer of thank that you don’t have to spend as much of our income on food as your ancestors.

thanksgiving-assortmentFamilies across the country are about to celebrate Thanksgiving, expressing gratitude for God’s overwhelming grace and abundance. And yet even as we offer thanks to God for his provision — materially, socially, spiritually, or otherwise — how often do we pause and reflect on the freedoms and channels that God uses in the process?

Will we remember that the very foods we are sure to enjoy on Thanksgiving Day required a great deal of investment, cultivation, and risk-taking? Will we reflect with gratitude on the labor it took to grow and harvest, package and ship, market and sell these items? It’s but one small window into the innumerable hands working together each and every day in service of the common good.

And will we recognize that this mysterious, creative activity is not only due to human hands, but that such dominion and stewardship mirrors that of a Creator God who so loved that he gave?

Whether we talk about this phenomenon in terms of an “invisible hand” (Adam Smith), “spontaneous order” (Hayek) “the magic of the marketplace” (Reagan), or a “great and mysterious collaboration” (Grabill), we’d do well to remember that even as we pour gratitude and honor out to our neighbors, we should be careful that we orient things before and beyond the work of human hands. “The price system is indeed an amazing creation, but of the divine mind,” ” writes Joe Carter. “It’s one of God’s means of coordinating human activity for the purposes of human flourishing.”

At Carpe Diem, Mark Perry dusts of a Jeff Jacoby column that beautifully explains this very point, and does so in the particular context of Thanksgiving. “Isn’t there something wondrous — something almost inexplicable — in the way your Thanksgiving weekend is made possible by the skill and labor of vast numbers of total strangers?” Jacoby writes. (more…)