Posts tagged with: american enterprise institute

Now that our friend Eric Teetsel is moving over to the Colson Center, AEI’s Values and Capitalism project is looking for a new program manager. You can find more about the job here. Also, PowerBlog readers will be interested in V&C’s excellent blog. Check it out.

Roger Scruton has written an excellent piece on the moral basis of free markets; it’s up at MercatorNet. He begins with the Islamic proscriptions of interest charged, insurance, and other trade in unreal things:

Of course, an economy without interest, insurance, limited liability or the trade in debts would be a very different thing from the world economy today. It would be slow-moving, restricted, and comparatively impoverished. But that’s not the point: the economy proposed by the Prophet was not justified on economic grounds, but on moral grounds, as an economy of righteous conduct.

Our long-term economic malaise may mystify world leaders, but Scruton sees its causes clearly: ways intended to speed economic development have become ways to acquire luxuries without payment; we have confused trade in debts with others’ assumption of our debts. This moral confusion is as much to be found in governments as it is in private markets, because the incentives are exactly the same — anyone who denies it is lying.

If you borrow money you are obliged to repay it. And you should repay it by earning the sum required, and not by borrowing again, and then again, and then again. For some reason, when it comes to the state and its clients, those elementary moral truths are forgotten.

Scruton concludes that morality is inescapable — though we may delay it, judgment will come.

The moral sense emerged in human beings precisely because it has proved to be, in the long run, for their advantage. It is the thing that puts a brake on reckless behaviour, which returns the cost of mistakes to the one who makes them, and which expels cheating from the fold. It hurts to be punished, and states that act wrongly naturally try to avoid the punishment. And since they can pass on their hurt so easily to the rest of us, we turn a blind eye to their behaviour. But I cannot help thinking that the result is at best only a short term economic advantage, and that the long term costs will be all the greater. For what we are seeing, in both Europe andAmerica, is a demoralisation of the economic life. Debts are no longer regarded as obligations to be met, but as assets to be traded. And the cost of them is being passed to future generations, in other words to our children, to whom we owe protection and who will rightly despise us for stealing what is theirs.

Read the full text here.

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AEI President Arthur Brooks answers the question from MSNBC’s Matt Miller, “What do we do when huge forces beyond our control shape our destiny?”

Over the last several years I find myself more and more being drawn into conversation about religion—specifically, Orthodox Christianity—and economics. Originally, my interest in the economic side of the conversation was minimal. Embarrassing though it is to say now, I only took one economics class in college and while I got a “B” I was an indifferent student of the subject.

Thanks to personal friendships I’ve discovered the work of economists such as Ludwig von Mises and Fredrich A. Hayek—two dominant voices in the Austrian School of Economics. Even here though my interests were, initially at least, not so much in policy as methodology; unlike the quantitative and empirical approach I studied in college, the Austrian school conceives of economics more along the lines of the qualitative approach at the center of human science movement. This qualitative approach to economics has resulted in some interesting, and to my mind extraordinarily helpful and insightful, research into religion by scholars such as Laurence Iannaccone and Rodney Stark.

Among other things, the economic study of religion helps us understand why pluralism is good for religion in general but to the disadvantage of some religions in particular. Ironically, the free market in religion harms those liberal religious communities who value cultural pluralism and economic liberalism (in the contemporary American sense) but are suspicious, and even overtly hostile, to economic capitalism. On the other hand, those religious traditions that resist cultural pluralism and contemporary liberalism—but who often, though not universally—favor a free market approach to economics are the main benefactors of the free for all that characterizes the American religious landscape (see for example, Iannaccone, 1994).

Through this, circuitous route, I have lately come to an interest in economic public policy. Unfortunately such an interest is usually greeted with something less than enthusiasm—at least when (as in my case) you are an Orthodox priest. At the risk of making a gross generalization, clergy are typically as ignorant of economics and business as economists and business people are of moral theology and the ascetical tradition of the Church. Since I’m trading in stereotypes already, I would say that discussions between theologians and economists break down quickly since—intentionally or not—theologians assume economists are wicked even as economists assume that theologians are ignorant. Representatives of the two disciplines rarely understand each other because they rarely have even a basic grasp of the other academic discipline and the kinds of questions and concerns that its scholars seek to address.

This is why three small books published by the American Enterprise Institute are so welcome. The books (P. Wehner & A. C. Brooks, Wealth & Justice: The Morality of Democratic Capitalism; A. J. Pollock, Boom & Bust: Financial Cycles and Human Prosperity; S. F. Hayward, Mere Environmentalism: A Biblical Perspective on Humans and the Natural World) are part of AEI’s Common Sense Concepts series. They’re all short—each took just an afternoon to read—introductions to basic ideas in economics. What is especially important is that they do this in a way that takes seriously Christian moral concerns. Meant primarily for college students and written from a broadly Evangelical Christian perspective, singularly and together they offer a good ethical and practical defense of democratic capitalism.

That said though a defense of the American model of democracy and of the free market, these works do not allow either politics or economics to drive the conversation. Rather both are examined soberly in light of “merely Christianity.” I think the authors would all acknowledge, as Wehner and Brooks do explicitly in their book, that “capitalism, like American democracy itself, is hardly perfect or sufficient by itself” (p. 8). Both require “strong, vital, non-economic and non-political institutions—including the family, churches and other places of worship, civic associations, and schools—to complement,” sustain and (when needed) reform them.

But this symphonia is impossible without “an educated citizenry.” Such an education must be more than technical—essential though a sound technical foundation is. To fulfill the vision sketched out in these three books assumes that we possess personally what Peter Kreeft (1992) might call the “soft” virtues “such as sympathy, altruism, compassion” as well as the “hard” virtues of “self-discipline, perseverance, and honesty.” Like technological skill, personal virtue alone is insufficient. We need not only healthy, robust and vibrant families and churches, but also a political culture that supports and abides “by laws, contracts, and election results (regardless of their outcome). Without these virtues, capitalism [and democracy] can be eaten from within by venality and used for pernicious ends.”

Why are personal virtue and the rule of law essential? Because:

…capitalism, like democracy, is part of an intricate social web. Capitalism both depends on it and contributes mightily to it. Morality and capitalism, like morality and democracy, are intimately connected and mutually complimentary. They reinforce one another; they need one another; and they are terribly diminished without one another. They are links in a golden chain (p. 9).

As both an Orthodox Christian and a social scientist, seeing democratic capitalism in this way helps me understand how the ascetical and liturgical tradition of the Church can make a contribution to American civil society.

Especially for St Maximos the Confessor and St Gregory Palamas, the ascetical struggle does not extinguish desire (i.e., self-interest) as much as does purify it. As St Augustine argues, prayer, fasting and almsgiving teach me to order rightly the different elements of my life in light of the Gospel; asceticism points me beyond myself to Christ, helps me to love Christ, and in Christ to love my neighbor. Just as asceticism purifies my desires, the Church’s liturgical tradition provides me with a sense of the larger, eschatological context within which I live my life. Apart from such an eschatological experience, I will invariably and necessarily succumb to the temptation to take and make ultimate “the cares of this life” rather than to lay them aside as we hear in the Cherubic Hymn.

If Wehner and Brooks are correct, capitalism and democracy are “part of an intricate social web.” Understanding this social network requires not only personal virtue and just laws, but the eschatological vision that we receive in the sacraments and which we constantly accept and embody in the ascetical life.

In Christ,

+Fr Gregory

Work Cited:

Iannaccone, L. R. (1994). “Why Strict Churches Are Strong.” American Journal of Sociology, 99(5), pp. 1180-1211.

Kreeft, P (1992). Back to Virtue: Traditional Moral Wisdom for Modern Moral Confusion. San Francisco: Ignatius Press.

Today in Acton News & Commentary we brought you guest columnist Steven F. Hayward’s “Economists in the Wild,” based on his new American Enterprise Institute monograph, Mere Environmentalism: A Biblical Perspective on Humans and the Natural World. Hayward, the F.K. Weyerhaeuser Fellow at AEI, looks at how the “connection between rising material standards and environmental improvement seems a paradox, because for a long time many considered material prosperity and population growth the irreversible engines of environmental destruction.” Not so. Hayward:

The central insight of environmentalism is that humanity’s great leap in material progress has come at a high cost to nature: we tear down entire mountains for their minerals; divert rivers and streams and drain swamps to provide water for modern agriculture and urban use; clear large amounts of forests for other uses, often disrupting crucial habitat for rare animal species; and too often dump our waste byproducts thoughtlessly into the air, water, and land.

But this insight contains a paradox. Environmentalism arose precisely because we have mitigated the material harshness of human life through the Industrial Revolution; as Aldo Leopold, author of the classic environmental book A Sand County Almanac, put it: “These wild things had little human value until mechanization assured us of a good breakfast.”

I want to thank John Baden of the the Foundation for Research on Economics and the Environment in Bozeman, Mont., for bringing this to our attention. Baden’s introduction to Hayward’s commentary is worth reprinting here in full; it’s an excellent thumbnail summary of environmental economics.

Steve Hayward’s column … makes one wonder how noted environmental professionals, and even scientists, can be so, how can I say it gently, remarkably ignorant and intellectually arrogant as this: “Economics is a form of brain damage.” Economics isn’t an ideology or a mental affliction. Rather, it’s the systematic study of allocating scarce resources among contending ends.

When applied to environmental and natural resource problems, its practitioners make a few nearly universally valid assumptions. Here are a few.

When things are free, they are counted as such and hence often over used. Common pools of fish exemplify this.

As scarcity increases, people conserve and innovate. Consider barbed wires introduction to open range, the development of particleboard, laminated beams, and plywood. Entrepreneurs developed these solutions to the increased scarcity of grass and old growth timber.

Property rights and markets peacefully coordinate development and use among people who don’t know one another and generate incentives to act as though they care about unknown others. That’s one under-appreciated function of markets.

Bureaucratic-political management replaces market prices with political favor seeking. Corn ethanol is a classic example that causes untold human misery and great environmental damage.

Wealthier is greener; poverty is the worst polluter.

And this; things that are best and most easily measured are not those that matter most.

Economics isn’t about money, it’s about confronting and helping to resolve the many problems of scarcity in a clear and logical manner. Soft hearts need not imply a mushy brain.

Read Steven F. Hayward’s “Economists in the Wild” on the Acton site. Sign up for Acton News & Commentary here.

Last week President Obama gave an address outlining his new energy policy. In light of the tragic events in Japan, the speech was much anticipated especially considering the president’s prior commitment to nuclear energy.

As expected President Obama continued advocating for a greener energy policy while continuing to push for the country’s independence from oil. However, the President’s speech, an article by Reuters points out, was “short on details on how to curb U.S. energy demand.”

Furthermore, the President’s call for a path towards greener energy and energy independence will not be easy. The New York Times appropriately states, “The path to that independence — or at least an end to dependence on the Mideast — could well be dirty, expensive and politically explosive.”

President Obama continues to voice his support for alternative fuels and green energy. He argued for energy from wind, solar, natural gas, biofuels, natural gas, and nuclear. However, as I have argued in the past, these alternative fuels have costly subsidies, unintended consequences, are not cost effective, and have proven to be largely inefficient (I address the unintended consequences of ethanol here, here, and here and the unintended consequences with wind turbines here).

The president is calling for more government regulation. He gave a glimpse of a new energy standard he is going to pursue this summer, “This summer, we’re going to propose the first-ever fuel efficiency standards for heavy-duty trucks. And this fall, we’ll announce the next round of fuel standards for cars that build on what we’ve already done” he said. In an economy that is looking to rebound from a recession, businesses do not need another costly government mandate forcing them to change their transportation fleet. Instead, the President should rely on the market. Businesses will upgrade their transportation fleet naturally through the market when it is efficient and more cost effective for them to utilize heavy-duty trucks that are more fuel efficient.

The president also stated that we need to look to other countries, such as Brazil, for oil. However, an article published by Real Clear Markets is very critical of the President’s pursuit of Brazilian oil:

Now, with a seven-year offshore drilling ban in effect off of both coasts, on Alaska’s continental shelf and in much of the Gulf of Mexico – and a de facto moratorium covering the rest – Obama tells the Brazilians:

“We want to help you with the technology and support to develop these oil reserves safely. And when you’re ready to start selling, we want to be one of your best customers.”

Obama wants to develop Brazilian offshore oil to help the Brazilian economy create jobs for Brazilian workers while Americans are left unemployed in the face of skyrocketing energy prices by an administration that despises fossil fuels as a threat to the environment and wants to increase our dependency on foreign oil.

Furthermore President Obama’s talk of expediting drilling permits is not wholly accurate. The Obama Administration has not been friendly to offshore domestic drilling since the BP disaster last year. As the above quoted article from Real Clear Markets explains, there has been a seven-year offshore drilling ban on Alaska’s continental shelf and in much of the Gulf of Mexico. That has not changed under the Obama Administration. The Heritage Foundation pointed out in February:

Putting aside calls from some who want to increase domestic exploration to areas in Alaska and elsewhere, President Obama has completely shut down the existing oil drilling infrastructure in the U.S. At least 103 permits are awaiting review by the Bureau of Ocean Energy Management, Regulation and Enforcement. The federal government has not approved a single new exploratory drilling plan in the Gulf of Mexico since Obama “lifted” his deepwater drilling moratorium in October 2010. Obama also reversed an earlier decision by his administration to open access to coastal waters for exploration, instead placing a seven-year ban on drilling in the Atlantic and Pacific Coasts and Eastern Gulf of Mexico as part of the government’s 2012-2017 Outer Continental Shelf Program.

As expected the president’s energy speech is not receiving much praise from the oil industry. Obama claimed that the oil industry is sitting on leases instead of using these for oil production. Ken Cohen, Exxon Mobile Corp.’s vice president of public and government affairs addressed the President’s claims and reflected on his speech in a Wall Street Journal article:

Said Mr. Cohen: “90% of the words sound relatively right in line with what you’d hear us say,” in terms of enhanced use of natural gas, increasing energy efficiency, more research and development and more domestic production. But the speech didn’t address policies that Mr. Cohen said are hampering oil development, such as opening areas that are off limits to the industry, and insisted on uneconomic mandates for renewable fuel. Moreover, the mention that oil companies are hoarding unexploited leases is off the mark, he said.

“The notion that there’s some economic incentive to sit on a lease is wrong,” Mr. Cohen said, particularly when oil prices are above $100 a barrel.

Despite the recent tragic events of Japan’s nuclear power disaster, it was relieving to see the president not call a halt to nuclear energy. While it will most likely take time for nuclear energy to rebound from the catastrophic events, the president looked at the situation pragmatically by continuing to voice support for nuclear energy while requesting a Nuclear Regulator Commission safety review to make sure all existing nuclear energy facilities are safe.

Despite the criticism, it is still important to keep in mind that we are all stewards of the Earth and need to take care of the planet God has given us. We do not get a replacement and we must see that future generations have a planet they can live in without problems created by our generation. The President’s call to not waste energy should be applauded, and advice we should all heed. However, as the United States continues to define its energy policy it is also equally important to keep in mind we are called to not just be environmental stewards, but also financial stewards. Our energy policy should be for the well-being of the planet but also economically feasible without being burdened with costly subsidies and unintended consequence.

Full text from President Obama’s speech can be found here.

The American Enterprise Institute also provides and insightful critique on the President’s speech which can be found here.

Jordan Ballor, research fellow at the Acton Institute, will be a panelist at the American Enterprise Institute’s event “I Hope I Die Before I Get Old” on Wednesday, April 20. The event runs from 6-8 pm at the Wohlstetter Conference Center in Washington (1150 Seventeenth Street, N.W., Washington, D.C. 20036). The panel will be discussing and fielding questions on America’s long-term budget crisis and “The Call for Intergenerational Justice.”

Ballor has been very active in both topics. He recently wrote a commentary titled “Back to Budget Basics” and engaged in a discussion with Gideon Strauss, CEO of The Center for Public Justice and co-author of “The Call for Intergenerational Justice,” on The Call. Audio from the discussion can be found here.

If you plan to attend the event please be sure to register. The American Enterprise Institute will also be broadcasting live footage of the event for those who are unable to make it. To register for the event, find out more information, or to watch the event live on April 20th please click here.

Kenneth P. Green, of the American Enterprise Institute (AEI), recently examined green energy in Europe in an essay titled, “The Myth of Green Energy Jobs: The European Experience.” Green thoroughly analyzes the green industry in Europe while seeking to discover the reasons behind its current downward spiral. As readers discover, this is largely due to the green industry being unsustainable while heavily relying on government intervention and subsidies.

Green uses the failing green industry in Europe to forewarn the United States that its policies, if continued, will bring the same unfruitful results. If the green industry is going to succeed it should not be a government supported industry, as Green states:

…governments do not “create” jobs; the willingness of entrepreneurs to invest their capital, paired with consumer demand for goods and services, does that.

All the government can do is subsidize some industries while jacking up costs for others. In the green case, it is destroying jobs in the conventional energy sector—and most likely other industrial sectors—through taxes and subsidies to new green companies that will use taxpayer dollars to undercut the competition. The subsidized jobs “created” are, by definition, less efficient uses of capital than market-created jobs. That means they are less economically productive than the jobs they displace and contribute less to economic growth. Finally, the good produced by government-favored jobs is inherently a non-economic good that has to be maintained indefinitely, often without an economic revenue model, as in the case of roads, rail systems, mass transit, and probably windmills, solar-power installations, and other green technologies.

Spain, according to Green, destroys an average of 2.2 jobs for every green job created, and since 2000, it has spent 571,138 Euros on each green job which includes subsidies of more than 1 million Euros per job in the wind industry. Italy also is experiencing problems. If Italy spent the same amount of capital in the general economy as it does in the green sector, then that same amount of capital that creates one job in the green industry would create 4.8 to 6.9 jobs for the general economy.

Green further explains a feed-in law instituted in Germany which requires utilities to purchase different kinds of renewable energy at different rates. The feed-in law requires utilities to buy solar power at a rate of 59 cents per kilowatt-hour when normal conventional electricity costs between 3 and 10 cents, and feed-in subsidies for wind power were 300 percent higher than conventional electricity costs. The implementation of wind and solar power did not even save German citizens money in energy rates because the household energy rates actually rose by 7.5 percent.

Denmark is also experiencing its fair share of problems. According the CEPOS, a Danish think tank that issued a report in 2009:

[the] CEPOS study found that rather than generating 20 percent of its energy from wind, “Denmark generates the equivalent of 19 percent of its electricity demand with wind turbines, but wind power contributes far less than 19 percent of the nation’s electricity demand. The claim that Denmark derives 20 percent of its electricity from wind overstates matters. Being highly intermittent, wind power has recently (2006) met as little as 5 percent of Denmark’s annual electricity consumption with an average over the last five years of 9.7 percent.”

Denmark currently has the highest electricity prices in the European Union, but while Danes are paying such high prices, one would imagine that there is a cost benefit factor occurring, such as great environmental benefits and a lower carbon footprint.  However, Green explains that the greenhouse gas reduction benefits are actually slim to none: “The wind power consumed in Denmark does displace some fossil-fuel emissions, but at some cost: $124 per ton, nearly six times, the price on the European Trading System.”

With large inefficiencies and high costs in subsidies being paid in Europe, Green warns American policy makers not to follow in Europe’s footsteps. So the question is what should the U.S. Government do? The answer, according to the Las Vegas Review-Journal, is nothing.

In an editorial recently published the Las Vegas Review-Journal examines the costs of subsidies and support dollars per megawatt hour the U.S. spent in 2008. According to the Energy Information Administration, oil and natural gas received 25 cents per megawatt-hour, coal received 44 cents, Hydroelectric received 67 cents, nuclear power received $1.59, wind power received $23.37, solar power received $24.34 and refined coal received $29.81. The editorial also published comments from John Rowe, CEO of Chicago based Exelon which is the nation’s biggest nuclear power producer. In the editorial Rowe articulates a resonating message to President Obama and Congress concerning green energy policy:

…in trying to boost “clean” energy — wind, solar, nuclear and natural gas — Congress and the states have enacted or proposed bills that would burden consumers, cripple markets and increase federal debt but do little to clean up the air.

In a speech to the conservative-leaning American Enterprise Institute, Mr. Rowe said his message to lawmakers is simple: “I’m asking that Congress do nothing.”

Mr. Rowe said utilities across the country are turning to “cheap” natural gas to generate electricity and do not need a clean energy standard proposed by President Obama.

Rev. Robert A. Sirico, president and co-founder of the Acton Institute, published a new column today in the Detroit News:

‘Social Justice’ is a complex concept

Rev. Robert Sirico: Faith and Policy

A column by Anthony M. Stevens-Arroyo, a Catholic writer for the Washington Post, makes the claim that “Catholic social justice demands a redistribution of wealth.” He went on to say that “there can be no disagreement” that unions, the government and private charities should all have a role in fighting a trend that has “concentrated” money into the hands of the few. In this conjecture Stevens-Arroyo confused the ends with potential means.

What Stevens-Arroyo is promoting is an attenuated and truncated vision of “social justice” that has fostered a great deal of injustice throughout the world. This path, he should know, has been decisively repudiated by the Church.

He also betrays a strange split in thinking common to those on the religious left, who are quick to denounce the profit motive and commercialism. Yet, they seem to think that the key to happiness is giving people more stuff — by enlisting the coercive power of government. This perverse way of thinking holds that “social justice” demands that we take money from those who have earned it and give it to those who have less of it. That’s not social justice; that’s materialism.

A friend and colleague, Arthur Brooks, a social researcher who is now president of the American Enterprise Institute, has shown that what makes people truly happy is a system that “facilitates earned success among its citizens and does not create disincentives to achieve or squash ambition.” That’s the market economy.

The incredible growth of economies in places like China and India isn’t happening because wealth was being shifted around, but because wealth is being created.

What happens when wealth is “redistributed” is obvious now.

We’re seeing the train wreck of the “social assistance state” in Europe.

In his 1991 social encyclical “Centesimus Annus,” Pope John Paul II warned that a bloated state “leads to a loss of human energies and an inordinate increase in public agencies, which are dominated more by bureaucratic ways of thinking than by concerns for serving their clients, and which are accompanied by an enormous increase in spending.” I call that prophetic.

Let’s also be clear that the Church’s teaching condemns the idolatry of money and material goods.

The Church finds another way, neither condemning market activities nor exalting them beyond their rightful place in the grand scheme of things. It asks us to work for the highest good and to contribute as we can our time, talents and wealth that we have earned for the betterment of the world. The Church also demands that we build just systems of trade that enable the poor to be the agents of their own betterment.

So let’s drop these false notions about what constitutes the Church’s understanding of social justice.

A system that pits the haves against the have-nots, with politicians and bureaucrats acting as referees, should be rejected by anyone sincerely interested in building a just social order.

Blog author: jcouretas
Thursday, December 16, 2010
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In “Human Nature and Capitalism” on AEI’s The American, Arthur C. Brooks and Peter Wehner look at three different “pictures” of what it means to be human and point to the one, foundational understanding that has undergirded the flourishing American culture of democratic capitalism:

“If men were angels,” wrote James Madison, the father of the Constitution, in Federalist Paper No. 51, “no government would be necessary.” But Madison and the other founders knew men were not angels and would never become angels. They believed instead that human nature was mixed, a combination of virtue and vice, nobility and corruption. People were swayed by both reason and passion, capable of self-government but not to be trusted with absolute power. The founders’ assumption was that within every human heart, let alone among different individuals, are competing and sometimes contradictory moral impulses and currents.

This last view of human nature is consistent with and reflective of Christian teaching. The Scriptures teach that we are both made in the image of God and fallen creatures; in the words of Saint Paul, we can be “instruments of wickedness” as well as “instruments of righteousness.” Human beings are capable of acts of squalor and acts of nobility; we can pursue vice and we can pursue virtue.

And they draw a parallel to institutions of government where democracy, with all of its flaws, also works itself out to be the most fitting form of government under this model of human nature. When I engage with critics of the market economy, I use the following Churchill quote but substitute “market economy” for “democracy.” Valid, I think, because we have some disastrous experience with political systems that do not operate in concert with a more or less open market.

Many forms of Government have been tried and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time. — Winston Churchill (House of Commons, Nov. 11, 1947)

Brooks and Wehner:

… our “picture of human nature” determines, in large measure, the institutions we design. For example, the architects of our government carefully studied history and every conceivable political arrangement that had been devised up to their time. In the course of their analysis, they made fundamental judgments about human nature and designed a constitutional form of government with it in mind.

What is true for creating political institutions is also true for economic ones. They, too, proceed from understanding human behavior.

It is hard to overstate the importance of this matter. The model of human nature one embraces will guide and shape everything else, from the economic system one embraces (free-market capitalism versus socialism) to the political system one supports (democracy versus the “dictatorship of the proletariat”). Like a ship about to begin a long voyage, a navigational mistake at the outset can lead a crew to go badly astray, shipwreck, and run aground. To use another metaphor, this time from the world of medicine: A physician cannot treat an illness before diagnosing it correctly; diagnosing incorrectly can make things far worse than they might otherwise be.

Those who champion capitalism embrace a truth we see played out in almost every life on almost any given day: If you link reward to effort, you will get more effort. If you create incentives for a particular kind of behavior, you will see more of that behavior.

A free market can also better our moral condition—not dramatically and not always, but often enough. It places a premium on thrift, savings, and investment. And capitalism, when functioning properly, penalizes certain kinds of behavior—bribery, corruption, and lawlessness among them—because citizens in a free-market society have a huge stake in discouraging such behavior, which is a poison-tipped dagger aimed straight at the heart of prosperity.

Read the full article on The American.