Category: Economics

Blog author: jsunde
Wednesday, September 2, 2015

creativity-capitalism-money-crashCapitalism is routinely castigated as an enemy of the arts, with much of the finger-pointing bent toward monsters of profit and efficiency. Other critiques take aim at more systemic features, fearing that the type of industrialization that markets sometimes tend toward will inevitably detach artists from healthy social contexts, sucking dry any potential for flourishing as a result.

But what if the opposite is true? I offer the argument over at The Federalist.

Free economies introduce their own unique challenges for artists and consumers alike. We are justified in cringing at the array of bottom-dollar record-company execs and merchandising-obsessed Hollywood crackpots (though I will always prefer their ilk to your run-of-the-mill Commissar of the Arts). But the increases in economic empowerment that have led to these many marketing machines have also led to plenty of artistic empowerment in turn.

In an article for New York Times Magazine, Steven Johnson reinforces this very point, observing that the many apocalyptic prophecies about arts in the digital age have not quite manifested. “In the digital economy, it was supposed to be impossible to make money by making art,” he writes. “Instead, creative careers are thriving — but in complicated and unexpected ways.” (more…)

The-Cdecker-Theft-modOver the last couple of years there has been a lot of criticism over the crypto-currency Bitcoin—some of which I’ve made myself (I think it is doomed as a currency but would be a great “alternative to Western Union”). But Neil Stevens at RedState recently made one of the most intriguing criticism’s I’ve heard so far: Bitcoin, if adopted widely, would be a grave threat to property rights.

There may be another cryptocurrency that isn’t hostile to our liberties, but Bitcoin is incompatible with freedom under the rule of law.

If our nation’s founders are to be believed, our government exists to protect life, liberty, and property. The reason it exists, and the way it has legitimacy, is that it serves the people to protect our fundamental rights. That’s how the rule of law is better than anarchy, because we can have laws against murder, slavery, and theft.

Recently in Virginia, a man was caught after stealing $2 million worth of gold. One of the jobs of police in this matter is to recover the stolen property, including through a pawn shop where the thief ran $340,000 worth of the precious metals.
If the man had stolen Bitcoin instead of gold, that would be out of the question. Money in the form of cash or a bank account, or tangible goods like gold or silver, can always have unlawful transactions reversed. Money can be sent back to the person it was stolen from. Property can be taken and returned to its rightful owner. But Bitcoin? Bitcoin advocates brag about how Bitcoin payments are irreversible. Anything the thief spent is gone forever, and anything the thief didn’t yet spend is meant to be gone forever.

Perhaps I’m missing something but I think there is a key flaw in Stevens’ argument: being foolish with one’s property is not a violation of property rights.

income-inequalityIncome inequality and poverty are separate issues. For many people this is obvious. But there are numerous Christians who believe that income inequality is an important issue because they assume it is a proxy for poverty. If this were true, Christians would indeed need to be concerned about income inequality because concern about poverty is a foundational principle of any Christian view of economics.

Fortunately, there is neither a necessary connection nor correlation. A country could have absolutely no poverty at all and have extremely high-income inequality. The reason is because income inequality (measured by the Gini coefficient), measures relative, not absolute, income.

But you don’t have to take my word for it. Harry Frankfurt, a philosopher who has written a book on inequality, has a guest post at Forbes in which he makes the same point: income inequality and poverty aren’t the same thing.


trade21Many conservatives exhibit a peculiar tendency to be pro-liberty when it comes to business, trade, and wages, but protectionist when it comes to the economic effects of immigration.

It’s an odd disconnect, and yet, as we’ve begun to see with figures like Donald Trump and Rick Santorum, one side is bound to eventually give way. They’ll gush about the glories of competition, but the second immigration gets brought up, they seem to defer to labor-union talking points from ages past.

When pressed on this in a recent podcast, immigration protectionist Mark Krikorian argued that the difference is that immigrants are people not products, and thus they make things a bit more problematic. It’s more complicated and disruptive, he argues, when you’re dealing with actual people who have diverse and ever-shifting dreams. (more…)

In an interview with Reason TV, Whole Foods co-founder John Mackey answers a range of questions about why so many intellectuals are opposed to the free market, whether throughout history and to this today.

“Is it a misunderstanding of what business does?” asks Nick Gillespie. “Is it envy? Is it a lack of capacity to understand that what entrepreneurs do or what innovators do?”

Here’s a sample:

Intellectuals have always disdained commerce. That is something that tradesmen did; people that were in a lower class. And so you had minorities, oftentimes did it, like you had the Jews in the West. And when they became wealthy and successful and rose, then they were envied, then they were persecuted and their wealth confiscated, and many times they were run out of country after country. Same thing happened with the Chinese in the East. They were great businesspeople as well. So the intellectuals have always sided kind of with the aristocrats to maintain a society where the businesspeople were kind of kept down. You might say that capitalism was the first time that businesspeople kinda caught a break, because of Adam Smith and the philosophy that came along with that, and the industrial revolution began this huge upwards surge of prosperity.

Mackey does a nice job summarizing the historical and practical forces, but another dynamic worth noting is Thomas Sowell’s notion of the “unconstrained vision” (or the “vision of the anointed”), which one finds among many intellectuals. When Sowell talks about “visions” he’s speaking less to our particular position (vocationally or otherwise) and more to how we perceive the basic nature and destiny of man —“not simply his existing practices,” Sowell writes, “but his ultimate potential and ultimate limitations.” (more…)

Seattle Minimum WageLast year when Seattle announced it was raising the minimum wage to $15 per hour, I made four predictions about how the policy would affect the city over the next three years. One of the predictions was that,

Unemployment will increase for low-wage workers — It’s true that economists disagree about the effects of the minimum wage on employment and the living standards of minimum wage earners. But almost all of the disagreement is about relatively small increases—less than 20 percent. Seattle is about to increase the minimum wage by 61 percent — over three times the detrimental rate. Almost all economists agree that significant increases to the minimum wage or attempts to bring it in line with a “living wage” (e.g., $12-15 an hour) would lead to significant increases in unemployment.

The full effect of the wage increase won’t take effect for two more years. But there is already evidence that this prediction is coming true.

In January the state of Washington increased its minimum wage to $9.47 an hour, the highest in the country. Then on April 1, Seattle’s first increase kicked in, raising the city’s minimum wage to $11 an hour. The result: Seattle lost 1,300 restaurant jobs from January to June. As Mark Perry explains,

yuanSeveral years ago economist Bryan Caplan provided the most succinct and helpful statement about how we should think about free trade: “We’d be better off if other countries gave us stuff for free. Isn’t ‘really cheap’ the next-best thing?”

As with any simplification, critics could find many reasons to grumble about what that leaves unstated (e.g., trade leads to offshoring of jobs). But it highlights an important point about why free trade matters. Free trade is about as close to a “free stuff” economy as you can get in the real world.

Well, almost. China has actually found a way that is even closer: currency devaluation.

A simplified explanation of is that China is implementing policies to make it’s currency (the Yuan) 1.9 percent weaker versus the U.S. dollar. This makes Chinese goods now less expensive. The effect is like adding a “2 percent off everything” sale on goods America buys from China, a boon to millions of U.S. consumers, especially those in low-income groups.

As Mark Perry explains, by devaluing their currency China is essentially giving “foreign aid” to America: