Posts tagged with: economics

Sic semper tyrannis, eh?

Sic semper tyrannis, eh?

The Burger King acquisition of Tim Hortons and the resulting plans to move the corporate headquarters under the taxing authority of the Canadian government is being derided by some as unpatriotic.

This is the latest in a long string of similar phenomena over the last decade or so, as we see patriotic loyalty (or the lack thereof) becoming a political issue in the context of offshoring, globalization, outsourcing, and so on.

A response to the charge of being unpatriotic would seem to me to require at least two points.

First, the responsibilities of a business owner, CEO, or corporate board are different than those of a government politician. They have different loyalties, so to speak. So to judge the one by the standards of the other is an exercise in missing the point.

Second, I would respond with a query along these lines: Which is more unpatriotic, a greater disservice to a nation, for someone to be involved in: moving a business from one country to another or making the tax environment in a country inhospitable to businesses?

Earlier this month, I wrote a two part article for the Library of Law & Liberty, critiquing the uncritical condemnation of income inequality by world religious leaders.

In part 1, I pointed out that “while the Pope, the Patriarch, the Dalai Lama, and others are right about the increase in [global income] inequality, they are wrong to conclude that this causes global poverty—the latter is demonstrably on the decline. And that, I would add, is a good thing.”

F. A. Hayek

In part 2, drawing on the work of F. A. Hayek, I noted, “As societies learn to use their resources ‘more effectively and for new purposes,’ the cost of manufacturing luxury goods decreases, making them affordable to new markets of the middle class and, eventually, even for the poor.” I continue, “Such inequality not only accompanies the very economic progress that lifts the poor out of poverty, it is one essential factor that makes that progress possible.”

We may add to this two more ways in which focusing solely on income inequality can be misleading from article in the Wall Street Journal yesterday by Nicholas Eberstadt: increased equality in lifespan and education. He writes,

Given the close correspondence between life expectancy and the Gini index for age at death, we can be confident that the world-wide explosion in life expectancy over the past century has been accompanied by a monumental narrowing of world-wide differences in length of life. When a population’s life expectancy rises from 30 to 70, the Gini index drops by almost two-thirds—from well over 0.5 to well under 0.2.

This survival revolution—and the narrowing of inequalities in humanity’s life chances—is an epochal advance in the human condition. Since healthy life expectancy seems to track closely with overall life expectancy, a revolutionary reduction in health inequality may also have occurred over the past century. Improvements in global mortality for the poor have contributed to the very “economic inequality” so many now decry. This is another reason such measures can be deceiving.

The spread and distribution of education has had a similar impact. In 1950 roughly half of the world’s adults—and the overwhelming majority of the men and women from low-income regions—had never been exposed to schooling. By 2010 unschooled men and women 15 and older account for a mere one-seventh of the world’s adults, and about one-in-six from developing areas. (more…)

union-jack-flag-great-britain-x-nature-with-uk-for-2685143At the height of power, circa 1922, the British Empire was the largest empire in history, covering one-fifth of the world’s population and almost a quarter of the earth’s total land area. Yet almost one hundred years later, Great Britain is not so great, having lost much of its previous economic and political dominance. In fact, if Great Britain were to join the United States, it’d be poorer than any of the other 50 states — including our poorest state, Mississippi.

Fraser Nelson discovered that fact by using a “fairly straightforward calculation” (see the end of this article for an explanation, and what Nelson missed). The result, as Nelson explains, is that all but one income group in America is better off than the same group in Britain:
(more…)

Reading through the German economist Walter Eucken’s work The Foundation of Economics (1951), I came across one of the most helpful charts for economic analysis I have yet to find. In it, Eucken gives every possible form of market in a single table:

Eucken Chart

The Foundation of Economics, p. 158

Eucken adds four qualifications that are important to keep in mind:

  1. “These forms of market are actual forms which have been or are to be found in actual economic life (often blended with one another, and existing alongside the forms of a centrally directed economy). They are not given a priori. They are discovered with their distinguishing characteristics by studying the planning data of those taking part in the market….”
  2. “Under each particular form of market a man can act according to different principles, for example, that of maximum net receipts or that of optimum output….”
  3. “Each of these forms of market can appear in four types: both open, both closed, or closed on either side only.”
  4. “Fixing of prices by the state occupies a special position, since it can follow any form of market and has different effects accordingly…. For example, the significance of coal prices being fixed by the state varies according to whether perfectly competitive, oligopolistic, or monopolistic supply, or some other form of market, exists, or whether both sides of the market are open, or whether the supply side is closed by an investment veto. Governmental price-fixing is to be treated as a variant of the different market forms and not as a special market form of its own.”

So, what does this amount to? (more…)

sharing-economyJohn O. McGinnis, the George C. Dix Professor in Constitutional Law at Northwestern University, says we are in the midst of a sharing economy, and that’s a good thing. (Don’t get all socialist on me; a sharing economy is one driven by service and technology. We are not going to have to pool our food in the commune.) McGinnis says this type of economy is good for liberty as well.

There are three basic features of a sharing economy:

    1. It reduces costs, by matching up real-time idle services and resources with people in need.
    2. It employs the hard-to-employ, say, people who need a very flexible schedule.
    3. It creates new jobs – jobs that didn’t exist before.

    (more…)

    Francis (1)“If there is one thing that religious leaders around the world seem to agree on today,” says Acton research associate Dylan Pahman, “it is the evils of income inequality stemming from a globalized economy.” But as Pahman points out, there is a connection between inequality and poverty alleviation that affirms the moral merits of economic liberty:

    It would seem the consensus is that economic inequalities have increased worldwide, and this is a clear moral evil. But when we examine the numbers, a somewhat different picture emerges. Even as inequality has increased, extreme poverty has simultaneously decreased—a clear moral good. Considered in this light, and with the help of Nassim Taleb and (in Part Two of this post) Friedrich Hayek, I will examine the connection between inequality and poverty alleviation and argue that the data affirm, rather than refute, the moral merits of economic liberty.

    It stands to reason that if religious leaders are so willing to condemn global capitalism for its apparent evils, they ought to be even more eager to praise its actual goods. I will recommend a different moral metric, drawn from St. John Cassian and St. John Chrysostom, that would support people of faith in being attentive to the plight of the poor while prudently engaging the economic realities at hand.

    Read more . . .

    Participant in the Doe Fund, New York City

    Participant in the Doe Fund, New York City

    No one wants to be poor. No one enjoys figuring out how to stretch meals to last just three more days. No parent wants to tell their child they can’t play a sport or get a new backpack because there is simply no money. No one wants to be evicted. Poverty in America is a reality; so what are we going to do about it?

    The American Enterprise Institute has a few ideas. They’ve taken a look at where we are 50 years after the War on Poverty was declared. The conclusion is that we’ve not been successful in that war. Poverty in America—and What to Do About It is a compilation of essays on the topic.

    Aparna Mathur says the talk of late about “income inequality” is misleading. We must address poverty, not differences in individual income.

    We are now in the fifth year of an economic recovery that does not seem like a recovery to most people in the labor market. There are more than 10 million unemployed workers, of which nearly 4 million have been jobless for longer than 27 weeks. In addition, there are another 10 million who are either in involuntary part-time jobs, or are too discouraged to look for work. Therefore, I would argue that the focus on income inequality is somewhat misplaced. This is essentially a problem of poverty.

    (more…)

    Christian churches in the West have been focused on redistribution of income rather than the creation of wealth, says Brian Griffiths in this week’s Acton Commentary.

    Through much of the post-war period in the West, the formation of economic policy was dominated by Keynesian activism on the part of governments seeking an increasing role in providing public services, reducing material poverty, and reshaping income redistribution.

    In the United States, President John F. Kennedy launched the New Frontier program and his successor, President Lyndon Johnson, soon after embarked on what came to be called the Great Society. In both cases, emphasis was placed on increasing the role of the state in order to solve problems of poverty and destitution. In intellectual terms, the economist John Kenneth Galbraith made the case for trade unions and government becoming “countervailing powers” in capitalist economies in order to check the power of large corporations. In Britain, Harold Wilson nationalized various industries, developed a national plan, a comprehensive prices and incomes policy, and extended the scope of the welfare state. Across the Channel and Rhine, the Social Democrat Willy Brandt was a major influence in extending the role of government in social policy throughout West Germany.

    The full text of the essay can be found here. Subscribe to the free, weekly Acton News & Commentary and other publications here.

    pope washing feetArchbishop Charles Chaput of Philadelphia spoke recently at the Napa Institute on Pope Francis’ view of economics. Archbishop Chaput reminded the audience that the pope was not an economist, but spoke rather as a pastor and theologian. He went on to say that some of what the pope has to say about economics is “hard for some of us to hear” but told his listeners to read the pope’s writings for themselves, without the filter of the media.

    Archbishop Chaput also stated that Pope Francis’ message is not so different from that of his predecessors.

    In matters of economic justice, Francis’ concerns are the same as Benedict’s and John Paul II’s, and Pius XI’s and Leo XIII’s. He understands economic matters through the lens of Church teaching in the Compendium of the Social Doctrine of the Church.  Like his predecessors, he defends human dignity in a world that consistently threatens it. But Francis stresses more directly than they did that human solidarity is a necessary dimension of human dignity. We need both. Human dignity requires not just the protection of individuals, as in our prolife work, but an on-going commitment to the common good. (more…)

    “You are a slow learner, Winston.”
    “How can I help it? How can I help but see what is in front of my eyes? Two and two are four.”
    “Sometimes, Winston. Sometimes they are five. Sometimes they are three. Sometimes they are all of them at once. You must try harder. It is not easy to become sane.” – George Orwell, 1984

    In a calculation that surely qualifies as “new math,” the government has created an equation in which $29,000 is equal to $69,000. Within the current welfare structure a single mother is better off making $29,000 per year in income and subsequent welfare benefits, than she is making $69,000 per year in income alone. This perverse incentive is what perpetuates the cycle of poverty and condemns impoverished moms to dependence on a paternalistic state. Social Security, Medicare, Medicaid, and SNAP (food stamps) are all larger than ever before with no subsequent reversal in the level or scope of poverty.

    The “Welfare Cliff,” an economic model developed by Gary Alexander, the Secretary of Public Welfare in Pennsylvania, shows the amount of net income a person would need to receive in order to match their current net income plus welfare benefits. This is called a cliff, as there are drastic drop-offs in welfare benefits as one increases their income. In this graph, “the single mom is better off earning gross income of $29,000 with $57,327 in net income and benefits than to earn gross income of $69,000 with net income & benefits of $57,045.” In fact, if a single mother were to raise her income from $29,000 to just $30,000, she would lose nearly $10,000 in welfare benefits per year.

    The incentives provided under this system replace the desire for individual development with the maintenance of the status quo.  A single mother is highly unlikely to spend the time, effort, or capital in order to gain skills that result in receiving a lower disposable income. (more…)