Category: Economics

A simple example of hamburgers being made at home versus at a restaurant can help illuminate the explosion of prosperity since the Industrial Revolution, says Don Boudreaux in this Marginal Revolution University video.

The story of the division of labor and development of specialized tools is an old story (Adam Smith introduced the concept in his Wealth of Nations), but it still has tremendous explanatory power about how prosperity is created.

trade-globalization-exchange-collaborationIt’s become rather predictable to hear progressives promote protectionist rhetoric on trade and globalization. What’s surprising is when it spills from the lips of the leading Republican candidate.

Donald Trump has made opposition to free trade a hallmark of his campaign, a hole that his competitors have been slow to exploit. In the most recent CNN debate, Ted Cruz, Marco Rubio, and John Kasich each echoed their own agreement in varying degrees, voicing slight critiques on tariffs but mostly affirming Trump’s ambiguous platitudes about trade that is “free but fair.”

Why so much silence?

Unfortunately, as Tim Carney details at length, voters are biting and swallowing what Trump is peddling, and conservatives are struggling to find solutions that sell. “Conservatives may scoff at this Made in America mindset as economically illiterate,” he writes. “But politically, it seems to be a winner.” (more…)

missions-selfie

As many are beginning to realize, and as the new documentary, Poverty, Inc., details at length, the foreign aid movement has largely failed the global poor, promoting top-down solutions at the expense of bottom-up enterprises and institutions.

This is partly due to errors in economic thinking, but it also comes from a lack of understanding and appreciation for the intangible assets in individual communities, particularly as it relates to the social and the spiritual.

“There has got to be more than just a change in a wallet for significant change to happen,” says Peter Greer in an excerpt from the PovertyCure series. “And I think that is where certainly the church and the faith community has something materially different to offer than just another loan, just another job. When you have the opportunity to touch hearts, to touch meaning, to touch purpose, to touch identity, alongside helping an individual get out of physical poverty, that’s where you see incredible transformation.”

Unfortunately, in our efforts to assist with this sort of ground-level, whole-life transformation, Christians often give way to the same mistakes of detached economic planners. Such risks are detailed at length in PovertyCure, as well as in books such as Toxic Charity, When Helping Hurts, and The Spiritual Danger of Doing Good, each illuminating the temptations and dangers of misaligned charity and activism. (more…)

Working For Our Neighbor“If you are a manual laborer, you find that the Bible has been put into your workshop, into your hand, into your heart. It teaches and preaches how you should treat your neighbor.” –Martin Luther

Christian’s Library Press has now released Working for Our Neighbor, Gene Veith’s Lutheran primer on vocation, economics, and ordinary life. The book joins Acton’s growing series of tradition-specific, faith-work primers, which also includes Baptist, Wesleyan, Pentecostal, and Reformed perspectives.

Veith, who describes Martin Luther as “the great theologian of vocation,” believes Luther’s approach is distinct in approaching vocation as a manifestation of “the spiritual and the physical, transcendence and incarnation, ascent and descent, faith and love, love of God and love of neighbor.” Luther’s theology “shows the interconnections of faith, work, and economics not just theoretically, but practically,” Veith writes, “and discloses how the ordinary, seemingly secular activities of everyday life are essential dimensions of Christian spirituality.”

Beginning with a hearty critique of Max Weber’s classic work, The Protestant Ethic and the Spirit of Capitalism, Veith argues that the Reformation’s influence on capitalism has long been mischaracterized and misunderstood. Although Weber properly identified a variety of psychological and cultural factors, his analysis of the theological and spiritual connections fell remarkably short. (more…)

navy_shipsThe evening news reports there has been a complete blockade of the U.S. On the East Coast of the United States, Russian forces have instituted a naval and air blockade, similar to the one being imposed by China on our West Coast. A similar blockade has been set up on the borders of Canada and Mexico.

The blockade is somewhat porous. People are allowed to pass through freely (but only if they are not trying to enter the U.S. illegally). Exports from the U.S. also are unhindered. But all imported goods from every nation on earth are being kept out.

What would be your reaction? Well, naturally you’d cheer. This is great news! Someone has finally stopped the “invasion” of foreign products into our homeland. Without cheap imports flooding our market prices will have to rise, which means increased wages and better jobs. Factories will have to open since everything will need to be made in the good ol’ US of A. Unemployment will plummet since the demand for workers will spike. Our economy will soon be booming!

Wait, what’s that you say? You don’t think it’s a good idea? You say such provocation would be an act of war?

Okay, what if the blockade was limited. Instead of completely keeping out foreign goods, the blockading countriesmerely require importing countries to pay a “toll” of between 10 and 40 percent. And to keep the peace, the blockaders even give the money collected from the tolls to the U.S government. That would be almost as good, wouldn’t it? Maybe even better?

No? You still say the blockade would be an act of war? That it’d make us all worse off than before?

Of course, you’d be right. A naval blockade by foreign countries would hinder, not help, our economy. So why do we allow in peace what we oppose in war?

That was the question asked in the 19th century by the American economist Henry George. In his book Protection or Free Trade, George explained how voluntary governmental restrictions on trade are the same as blockades in a time of war by foreign nations:
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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?