Category: Economics

Blog author: jcarter
Monday, November 9, 2015
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price-knowledgeI’m something of a cheapskate (or as I prefer to think of myself, prudentially frugal) and so I take special pleasure in finding a good deal. I’m also, by nature, rather grateful and so I frequently thank God for helping me to find goods and services at bargain prices.

But sometimes I remember to step back and be grateful for the larger system God has created that makes such exchanges possible: the price system. 

As I’ve said before, a “price is signal wrapped in an incentive to be coordinated by God.” Humans may set individual prices but it was God who designed the price system as a means of coordinating human activity for the purposes of human flourishing.

This isn’t an obvious concept, though, or necessarily easy to grasp. To better appreciate the benefits of the price system, it’s helpful to understand what would happen if it didn’t exist. What if there were no prices? How would you use available resources?

To appreciate why market prices are essential to human well-being, economist Howard Baetjer Jr. from Towson University explains market prices through the railroad thought experiment.
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paul ryanDue to a surprising series of events, Wisconsin congressman Paul Ryan is now Speaker of the House.

Given the range of interparty disruptions that preceded the event, many are wondering what, if anything, he might accomplish. Those questions won’t be answered anytime soon, but if Ann Coulter’s recent criticisms offer any clue, his views on poverty alleviation are a good appetizer to his broader vision for the country.

More recently, Ryan embarked on a series of on-site visits in poor neighborhoods, learning how local leaders, institutions, and enterprises are effectively fighting poverty. Bob Woodson, who hosted the visits, notes that the “focus was on the victories—the miraculous transformations witnessed and redemptions of people—being accomplished against all odds, not on the presence of state, local, or federal policy makers.” (more…)

In Cuba, taxi drivers earn far more than doctors, raking in more money in one day than a doctor will make in an entire month.

The reason? Unlike most of the Cuban economy, taxi licenses are privately held and wages are not set by the state.

Johnny Harris explains:

Although Cuba offers few opportunities for private enterprise — outside of its sprawling black market, that is — the number of self-employed workers has slowly grown in recent years. Seven years after Raul Castro took over, 20% of the economy is now private.  (more…)

frederic-bastiat-john-lImagine you receive an email from the Secretary of Education saying that you’ve been randomly selected for a test pilot program.

In an attempt to democratize the educational system, 20 citizens have been selected to develop a curriculum that will be added as a graduation requirement for every high school student in America. The only limitation is that the curriculum must pertain to a subject that is already covered in high school, must not be tied to religion or theology, and must take no longer than a total of 3 hours (half a school day) to implement.

For the typical student in America, the school year typically lasts for 180 days at 6-hour for 13 years (K-12). That’s roughly 14,040 hours of time they’ll spend in school. You now have three of those hours to change the course of their education. What would you do?
Here’s my proposed program:
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farmhouseThe global economy is ever-growing in its complexity and interconnectedness, leading to a range of positive and transformative effects. Yet even as this web of human relationships expands and intensifies, many of the latest innovations are prodding us back to the simple and personal.

Whether we look to the various offspring of the “sharing economy” (e.g. Uber, Airbnb) or the range of bottom-up trading tools and crowdfunding platforms (Craigslist, Kickstarter), we see an eager appetite for simple and direct exchange.

In some reflections on his neighborhood’s online community marketplace (“The Swap,” as it’s called), Chris Horst notices much of the same: (more…)

consumptionNote: This is the latest entry in the Acton blog series, “What Christians Should Know About Economics.” For other entries in the series see this post.

The Term: Consumption

What it means: Consumption is the use of goods and services by households.

Why it Matters: Consumption is an ugly word for a beautiful concept.

Since the Middle Ages, the word “consumption” has referred to wasting diseases, such as tuberculosis, which “consume” the body. More recently, consumption has often been confused with consumerism, a useful and related term that has regrettably taken on a wholly negative connotation.

But in its most basic economic sense, consumption is a purely neutral term that refers to the use of goods and services by households. If you arrange for a babysitter to watch your toddler so that you can eat a steak dinner with your spouse, you are “consuming” both goods (the steak) and services (the babysitter’s time and attention). While you pay for these goods and services it’s merely their use that marks them as “consumption.” (We’ll come back to that point in a moment.)

Consumption 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,
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During CNN’s Democratic debate, presidential candidate, senator from Vermont, and self-proclaimed socialist Bernie Sanders promised that if elected he would work to “raise the [federal] minimum wage to $15 an hour.”

From an economic point of view, this policy would run the risk of sparking a wage/price spiral, where wages are tied to a cost-of-living index and their increase, in turn, raises the cost of living, sending inflation out of control and ultimately working against the intended goal of helping low-wage workers.

The Neo-Calvinist theologian Abraham Kuyper, however, offers a challenge not just to the economic consequences of such a policy but to its consistency, in principle, with another of Senator Sanders’ positions: his support for unions. (more…)