Category: Economics

The gorilla-whale is back. And he’s here to stimulate the economy.

On Friday, theaters across the country will be debuting the fourth American remake of Godzilla (the name is a romanization of the original Japanese name “Gojira” — which is a combination of two Japanese words: gorira (‘gorilla’) and kujira (‘whale’). Over its opening weekend the film is projected to earn $78,000,000, and cumulative revenues of over $240,000,000. While that could be a generous stream of income for Hollywood, it’s a drop in the $17 trillion ocean that is the U.S. economy.

But what if instead of releasing the movie, the government were to convincingly lie to the American people about an imminent invasion by a 150 foot tall gorilla-whale? What would be the effect if the government said we must take action now to protect our way of life from the monster?

According to some liberal economists, it would lead to an economic boom. In defending President Obama’s stimulus proposal in 2011, Paul Krugman proposed a peculiar solution for economic recovery that is similar to an invasion by Godzilla:

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lincThis is only one powerful and horrific story that highlights the severe problems with Veterans Affairs Medical Centers. Unfortunately, there are easily thousands of stories like the one experienced by this veteran. Kay Daly sums it up well in the article from the American Thinker,

Fighting a bureaucracy the size of the VA leviathan is not only physically exhausting, it is soul crushing as well. My brother was literally losing his will to live. That’s what I saw in the picture he sent to me — a man who was defeated.

The VA is a giant maze of a bureaucratic nightmare. Claims often go missing, unfairly denied, or simply lost. I worked on VA casework for a U.S. Congressman over a decade ago, and the extensive problems with the system predate my experiences.

The VA healthcare system does of course serve as a model for what the future for care looks like most Americans with more government involvement. In 2009, I wrote a commentary on VA healthcare and noted that since government can’t meet the obligation to its veterans, more government control of health care will only “increase the likelihood and scale of injustice.” The VA offers us on a smaller scale a perfect picture of healthcare rationing.

In 2013, I highlighted the killing of veterans at VA hospitals. In some instances, individuals waiting for their colonoscopy procedures had Stage 1 cancers go to Stage 4 before diagnoses.

Now, at least five VA treatment centers are being investigated for keeping a secret list of appointment waiting times for patients. Those secretive actions are facilitated so hospital administrators and healthcare providers can secure bonuses for scheduling appointments in 14 days. It would be more shocking if these incidents are only contained to five VA hospitals. Of course the cover up is more widespread.

The American Legion
has called for Veterans Affairs Secretary Eric Shinseki to resign. A necessary action perhaps, since one of the main short terms problems is lack of accountability. But the federal government continues to prove that it cannot handle socialized medicine on an even smaller scale. It may be prudent to focus on clearing up the massive backlogs of VA disability and medical claims and offering vouchers for care elsewhere. This is one bureaucracy that is becoming more notable for collecting body counts. That’s never a good image for a healthcare facility.

castilloYou’ve probably never heard of Tony Castillo. Even if you live in West Michigan and have eaten at one of his three McDonald’s franchises you probably don’t recognize the name. But an inspiring profile of Castillo by MLive provides a number of lessons about economics and business that everyone should learn from this entrepreneur.

Lesson #1: To be a successful business owner you should care about your stakeholders (customers, employees, suppliers, etc.)

Ask Tony Castillo what he loves about owning and operating McDonald’s franchises, and he will tell you it’s the people.

By that, he means both his customers and employees.

The purpose of a business is to serve the needs and wants of people. While that may sound like an obvious point, it is surprising how many people—including many business owners—tend to overlook or ignore that reality. Sure, one of the goals of business is to make a profit. But if all you want is to make money there are easier ways to do it than owning and operating a business, especially a customer-service oriented business.

Lesson #2: Serving the poor doesn’t always look like you’d expect

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Regulatory Climate IndexThe revitalization of cities has become a significant focus among today’s Christians, with many flocking to urban centers filled with lofty goals and aspirations for change and transformation.

Last summer, James K.A. Smith expressed concern that such efforts may be overly romanticizing certain features (community!) to the detriment of others (government), concluding that “farmer’s market’s won’t rescue the city” but “good government will.” Chris Horst and I followed up to this with yet another qualifier, arguing that while both gardens and good governance are indeed important, so is business and entrepreneurship.

Families, churches, institutions, businesses, and governments all need to be in right relationship if cities are to flourish, and this means that Christians need to gain a clear understanding of what these relationships look like. How do the economies of love, creative service, wisdom, wonder, and order interact and intersect, and how do we orient our actions and attitudes accordingly?

For example, if a city’s economic future is driven, among other things, by entrepreneurialismhigh levels of human capitalclustering of skilled workers and industries, or in the case of North Dakota’s Bakken region, bountiful natural resources, what role should the People of God play therein? What role do families play in those endeavors? What about churches, community associations, organizations, or businesses? How ought public policy to guide (or not guide) various efforts? Christians are called to be concerned with all of the above.

In a new study by the U.S. Chamber of Commerce Foundation — Regulatory Climate Index 2014: The Cost of Doing Business in America — we see a great example of the types of questions we ought to be asking. Focusing on 10 cities across America, the study investigates “the efficiency of local regulations that apply to small businesses,” demonstrating the full impact that the dirtier, more “boring” and mundane elements can have on whether and how individuals are empowered to invest, serve, and sacrifice within and for their cities. (The project was led by Michael Hendrix, who has contributed here on the blog in the past.) (more…)

Nigerian school girls

Nigerian school girls

I don’t know any terrorists, but they seem to be very fearful people. They are afraid of new ideas, other religions, air strikes, and bathing. Nicholas Kristof, of The New York Times, says that what terrorists are really afraid of are educated women.

Kristof points out that the Boko Haram did not choose to bomb a church or go after politicians. They targeted a girls’ school. The biggest threat to a terrorist is a woman who can read, write, work, and raise educated children.

Why are fanatics so terrified of girls’ education? Because there’s no force more powerful to transform a society. The greatest threat to extremism isn’t drones firing missiles, but girls reading books.

In that sense, Boko Haram was behaving perfectly rationally — albeit barbarically — when it kidnapped some of the brightest, most ambitious girls in the region and announced plans to sell them as slaves. If you want to mire a nation in backwardness, manacle your daughters.

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America could have saved more jobs if, prior to the Industrial Revolution, politicians had banned the use of tractors. But that would have made everyone (especially those of us living in 2014) much worse off. Many Americans understand this point and yet still believe that when workers lose their jobs, we automatically become worse off.

Economist Bryan Caplan explains the problem with this ‘make-work’ bias, and why we are better off because of 19th century workers who lost their farm jobs.

800px-Hartmann_Maschinenhalle_1868_(01)In a marvelous speech on the origins of economic freedom (and its subsequent fruits), Deirdre McCloskey aptly crystallizes the deeper implications of her work on bourgeois virtues and bourgeois dignity.

For example, though many doubted that those in once-socialistic India would come to see markets favorably, eventually those attitudes changed, and with it came prosperity. As McCloskey explains:

The leading Bollywood films changed their heroes from the 1950s to the 1980s from bureaucrats to businesspeople, and their villains from factory owners to policemen, in parallel with a similar shift in the ratio of praise for market-tested improvement and supply in the editorial pages of The Times of India… Did the change from hatred to admiration of market-tested improvement and supply make possible the Singh Reforms after 1991? Without some change in ideology Singh would not in a democracy have been able to liberalize the Indian economy…

…After 1991 and Singh much of the culture didn’t change, and probably won’t change much in future. Economic growth does not need to make people European. Unlike the British, Indians in 2030 will probably still give offerings to Lakshmi and the  son of Gauri, as they did in 1947 and 1991. Unlike the Germans, they will still play cricket, rather well. So it’s not deep “culture.” It’s sociology, rhetoric, ethics, how people talk about each other. (more…)

mcdonalds“Clean up your own mess. Your mother doesn’t work here.”

That was a sign, printed on dot matrix printer paper, which hung in the breakroom of the McDonald’s where I worked. While that was nearly thirty years ago, I suspect that same sign is still there (though probably reprinted on a laser printer). But the idea behind it has changed. Your mother may not work at McDonalds, but the company—and others that hire low-skilled employees—are increasingly taking on the role of in loco parentis.

Lessons in basic life skills that were once taught by parents—such as punctuality, self-direction, basic personal hygiene—are increasingly being provided by the shift manager at the local fast food restaurant. That is why it’s absurd to claim that companies that are willing to hire people who are unqualified for the labor force are somehow getting over on the American taxpayer.

As Reihan Salam,
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On Exchange and Usury, Cajetan, ThomasChristian’s Library Press has released a new translation of two treatises on exchange and usury by Thomas Cajetan (1469-1534), a Dominican theologian, philosopher, and cardinal.

Although best known for his commentaries on the Summa of Thomas Aquinas, Cajetan also wrote dozens of other works, including short treatises on socioeconomic problems.

Published under the name On Exchange and Usury, these treatises reflect on the banking industry of the early modern era in the context of the Church’s usury doctrine, examining which transactions were licit, and which involved usury, among other things. The book is part of CLP’s growing series, Sources in Early Modern Economics, Ethics, and Law.

In the introduction, Raymond de Roover summarizes some of the historical context, as well as Cajetan’s contribution therein:

Because of the Church’s usury doctrine, bankers were not supposed to charge interest and, consequently, had to look for some other way of lending money at a profit, with the result that banking became tied to exchange: local banking to manual exchange (cambium minutum), and foreign banking to real exchange or exchange by bills (cambium per litteras). Since the discounting of commercial paper was ruled out by the usury prohibition, bankers bought bills of exchange at a price that was determined by the foreign exchange rates… (more…)

Seattle-mystWhen I was growing up I had a buddy—let’s call him “Bob”—who was constantly asking, “What happens if we do . . . ?” Bob’s curiosity, however, only led him to wonder about foolish actions. He never pondered, for example, what would happen if we all volunteered at the senior citizens center. Instead, his thinking ran more along the lines of what would happen if we jumped off the senior citizens center.

The reaction of me and the rest of my friends was always, “Let’s find out!” But we were more prudent than Bob (or maybe just more cowardly) so we’d encourage him to try whatever reckless idea he had in mind so we could learn from his experience. We learned, for instance, that if jump off the 3-story senior citizens center, a stack of cardboard boxes will not be enough to sufficiently break your fall.

Bob’s shenanigans would daily provide for us what social scientists would call a “natural experiment.” A natural experiment is a study of the effect of an independent variable, which has not been planned or manipulated by the researchers, on a dependent variable. (The word ‘natural’ in the term natural experiment therefore refers to an event that is not planned by the researchers.)

The city of Seattle is about to pull a Bob, by foolishly raising the minimum wage to $15 per hour. The effect on the citizens of Seattle will be almost entirely harmful. But it will provide a natural experiment on the effect of raising the minimum wage laws that the rest of American can learn from. Anyone who isn’t already convinced that increasing the minimum wage has a detrimental impact on employment and harm minority workers will, in a few years, have solid proof. We will all be able to look to Seattle to see the difference between good, albeit naive, intentions and sound economic policy.

Here are some of the effects I predict the policy will have in the next three years:
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