Posts tagged with: economics

Today Sam Gregg’s article ‘Whither Central Banking?’ appeared in the blog of the Whitherspoon Institute, Public Discourse.  In light of Germany Chancellor Angela Merkel’s criticism of central banking Gregg takes a thoughtful analysis on improving central banking to help aid our recovery from the financial crisis we currently face.

Gregg addresses an important political question that must be addressed when determining the roles of central banks:

The bigger political question, however, is the place of central banks in democratic political orders. Insulating central banks from excessive political influence reflects recognition of the truth that even in a democracy there are many public-policy decisions that should not be made by legislative or popular votes. Most democracies, for example, embody constitutional limits on the ability of governments and legislatures to interfere with the judiciary’s operations. This is usually derived from awareness that the common good normally requires some separation of powers in order to prevent excessive centralization of power.

Another problem of central banks, argued by Gregg is:

The problem is that when it comes to the economy, governments have legitimate reasons for being concerned about and involved in the development of economic policy. This inevitably raises questions about how to maintain the autonomy of central banks and what ought to constitute the content of that autonomy. Governments committed to pursuing populist and socialist policies have no qualms about dramatically limiting or even abolishing such autonomy.

Gregg does not only address the problems, but he also suggests a solution.  Read more of Gregg’s essay at Public Discourse.

I have a piece up today at the First Things website on conservative Protestants (like me) and their attitude toward corporate behavior.

Here’s a clip:

Experience and prudence have demonstrated that free markets are demonstrably better than other alternatives. But the problem is that we have tuned our antennae in such a way such that they pick up market problems like the promotion of hedonistic vice but do not take adequate notice of other wrongs. Thus, conservative evangelicals are quick to protest against 7-11 carrying Playboy magazine but are slow to call to account the corporation that deals with employees in bad faith.

Without Christ this is a world in which the strong will abuse the weak, the rich ignore or exploit the poor, and those with authority seek advantages for themselves as they exercise their power. We know these things both from the Scriptures and from examining our own hearts.

If our cultural critique is to have integrity, we must simultaneously respect the market and call the corporate sector to righteousness in its business dealings. As uncomfortable as Mike Huckabee’s concerns with executive compensation made many Republicans, his words suggested a healthy willingness critically to examine corporate behavior. If we question corporations when they produce bad products like pornography and gambling operations, then we necessarily accept the notion that the logic of free markets does not insulate them from critique when they commit other types of wrongs.

By happy serendipity two books of related interest caught my attention today.

The first is David Cowan’s Economic Parables: The Monetary Teachings of Jesus Christ (Paternoster, 2007). Michael Kruse recommends the book in a brief review.

The other book is a newly-announced Christianity Today award winner in the “Biblical Studies” category. The judges describe Klyne R. Snodgrass’ Stories with Intent: A Comprehensive Guide to the Parables of Jesus as “a superb culmination of career-long reflection on one of the most important genres in biblical literature.”

Linked yesterday on the Drudge Report and picked up by news outlets all over the world is a brief Bloomberg report on a statement from the Italian Finance Minister Giulio Tremonti. Tremonti attributed to Pope Benedict XVI a “prophecy” dating from over twenty years ago concerning the current global financial meltdown.

Again, the story is quite brief, and here’s the gist:

“The prediction that an undisciplined economy would collapse by its own rules can be found” in an article written by Cardinal Joseph Ratzinger, who became pope in April 2005, Tremonti said yesterday at Milan’s Cattolica University.

Tremonti’s remarks were made at the inaugural academic year address at the university. It’s unclear to me what the context of Tremonti’s prophetic attribution is, and perhaps some of the colleagues in our Rome office can enlighten us as to Tremonti’s economic and religious perspective.

But if you want the original context of then-Cardinal Ratzinger’s statements, avail yourself of the only readily-accessible English translation of the article cited by Tremonti: “Market economy and ethics,” given by Ratzinger in in 1985 at a symposium in Rome, “Church and Economy in Dialogue.”

Here’s the full quote from Ratzinger’s paper:

It is becoming an increasingly obvious fact of economic history that the development of economic systems which concentrate on the common good depends on a determinate ethical system, which in turn can be born and sustained only by strong religious convictions. Conversely, it has also become obvious that the decline of such discipline can actually cause the laws of the market to collapse. An economic policy that is ordered not only to the good of the group — indeed, not only to the common good of a determinate state — but to the common good of the family of man demands a maximum of ethical discipline and thus a maximum of religious strength.

As you can see from this quote and the context of the larger paper, the import of Ratzinger’s warning is not simply about an “undisciplined economy,” but more specifically about an economy that lacks participants who act from the basis of a serious and committed moral foundation, one that is “sustained only by strong religious convictions.” It’s about a lack of religious discipline as much as economic discipline.

Reading Tremonti’s quote as it appears in the Bloomberg article (which admittedly might be quite different in its own original context) might lead one to think that Ratzinger was simply talking about the lack of material discipline, for which the “new frugality” would be an adequate cure. But as Ratzinger rightly observed then, the causes of poverty and economic distress are not simply material, but also spiritual.

Posted at the Center for a Just Society (notice courtesy the National Humanities Institute), Dr. Mark T. Mitchell asks a series of questions focused on the intersection between morality and economics in light of the recent financial crisis. In “Ten Questions and a Modest Proposal,” Dr. Mitchell invokes the institute’s namesake and this blog’s tagline.

In question number 9, Dr. Mitchell says,

Lord Acton’s hoary saying is pertinent: “power tends to corrupt.” If so, then we should make efforts to decentralize power. Such a sensibility is behind the separation of powers written into the fabric of the U.S. Constitution. We should be concerned, then, when big corporations get into bed with big government. The off-spring will be ugly and, we can rest assured, it will be big. This bailout represents a stunning consolidation of corporate and government power. Of course, we are promised that the government will regulate the corporations, but the conflict of interest is glaring. Could it be that the problem is not de-regulation but regulations that favor big corporations over small businesses?

Recent reports have placed the economic impact of a shutdown of one of the Big 3 automakers could cost 3 million jobs and $60 billion in 2009. Now Detroit automakers are apparently “too big to fail.” (Update: Ford has announced significant 3Q losses this year, and plans to cut 10% of its salaried workforce in North America.)

The other questions are prescient, as well, and Dr. Mitchell’s “modest” proposal is well worth considering: “The American way of life is sustainable only if we acknowledge that publicly and privately we are called to lives of responsibility. Hubris is only countered when we recognize limits.”

Is Senator Obama a closet socialist waiting for inauguration day, at which time he and a Democratic Congress will immediately pursue a massive increase in the size and power of government in our lives, accompanied by massive tax increases and massive redistribution of wealth? Or is he really a moderate pragmatist, a canny politician who when he was getting started in politics used his radical contacts from his ultra-leftwing Hyde Park community, but now is in a position to use more moderate figures to build a centrist working coalition? Which is the real Obama?

Stanley Kurtz of National Review has been investigating Obama’s political past for months now, and in a recent piece on Obama’s ties to such far left groups as Acorn and The New Party, Kurtz suggests a third alternative that I find both more nuanced and more cogent than either Obama-as-Clintonesque-pragmatist or Obama-as-Manchurian-Candidate. (more…)

There’s a lingering issue that continues to bother me about the so-called “global warming” Supreme Court case from 2007, Massachusetts v. EPA (05-1120), and that is a nagging concern about federalism and environmental standards.

As it stands currently, individual states are often prevented from enacting tougher legislation or regulation regarding some forms of pollution than the federal EPA standards. In order for a state EPA to partner with the federal EPA, be “authorized,” and thus receive funds, “a state must have enforcement programs and statutes that are essentially as stringent as the federal programs.”

One basic argument that the court found cogent in the Mass. v. EPA case was that individual states were prevented from creating standards that were more stringent regarding CO2 emissions than the EPA, and that since the EPA had not enacted any serious level of restriction, the states were unable to protect their environment.

This bothers me in part because one of my basic political impulses is a federalist one, an emphasis on the rights and sovereignty of individual states. The relationship between the federal and state environmental agencies seems to me to be fundamentally tyrannical, in that it overrides the ability of states to regulate themselves on these matters.

If you coopt the sovereignty of someone and then let your responsibilities lapse, then you have committed a pretty serious injustice. In 2007, the state of California sued to get the EPA to allow it to enact cleaner air standards, a right supposedly granted under the Clean Air Act. The EPA needed to agree to the tougher standards by granting a waiver, which it declined to do.

So there’s that political concern. But there’s also an economic concern, and this cuts both ways. Most often the federal government invokes the commerce clause to argue that it is within its rights and responsibilities to promote economic trade and stability by enacting nationwide standards. But in the case of environmental standards, that economic argument might not always be salient.

In a recent New York Times column, Tom Friedman calls for “a national renewable energy standard that would require every utility in the country to produce 20 percent of its power from clean, non-CO2-emitting, energy sources — wind, solar, hydro, nuclear, biomass — by 2025.” Friedman repeats the typical argument justifying national standards: “About half the states already have these in place, but they are all different. It would create a huge domestic pull for renewable energy if we had a uniform national mandate.”

John Whitehead, blogging at Environmental Economics, gives expression to the basic economic and political concern I had about the Massachusetts v. EPA decision as well as proposals for national mandates on environmental standards:

Most every environmental economics textbooks explain why uniform national standards are inefficient. Since benefits and costs are regionally different, it makes sense to adopt non-uniform standards — if standard adopting is a must.

Why not give federalism free reign on environmental issues, let states compete against each other, and see how things play out? If California wants to experiment with enacting tougher restrictions while attempting to remain economically competitive, why not see if the state is able to pull it off?

Writing a commentary for the United Methodist News Service, J. Richard Peck encourages readers to heed John Wesley’s advice on economic policy. “In short, Wesley called for higher taxes upon the wealthy and laws that would prohibit the wasting of natural products,” says Peck. He notes that the cure for economic troubles relating to the poor was to repress luxury.

While some of Wesley’s economc advice is certainly sound, especially his views on the danger of debt, his understanding of basic economic principles in a free economy is severely limited. Kenneth J. Collins, a premier scholar and admirer of Wesley in fact notes as much in his book The Theology of John Wesley: Holy Love and the Shape of Grace just how far Wesley actually misses the mark. Collins declares:

Arguing ostensibly from a larger theme of proper stewardship, Wesley posited a “zero sum” world in which the maxim, “if the poor have too little it must because the rich have too much,” by and large ruled the day. As such, not only did he fail to recognize how capitalism actually works in a growing economy, even in a mercantilist one, but also his concern for stewardship, of what he called robbing the poor,” often developed upon such petty matters as the size and shape of women’s bonnets (and he forgets that poor workers often made these accessories) or upon his favorite moral foibles of censure, the consumption of alcohol.

The Theology of John Wesley will be reviewed in the upcoming issue of Religion & Liberty.

Curiously, Peck also highlights Wesley’s advice for less reliance upon pharmaceuticals. However Peck does not add that Wesley was at war with some healers or physicians in his own time who were taking advantage of the poor with faulty and expensive cures. Wesley published Primitive Physic, or an Easy and Natural Method of Curing Most Diseases in 1747. He generously distributed copies for free for the poor to fight back against those taking advantage of them. In Wesley’s account there are certainly improvements in medical suggestions, and his tips on healthy living are fairly standard even today. Wesley did not pull these cures and suggestions from thin air, much of his tips came from doctors he trusted. Still there were suggestions like rubbing your head with raw onions for curing baldness and holding a live puppy on the abdomen as a recommendation for intestinal obstruction. The point is that we would not take medical advice from Wesley over more advanced modern medicine, nor should we take economic advice from somebody with little economic understanding. It’s important to note that Wesley’s passionate assistance to the poor is certainly an effort to emulate.

The best advice Methodists can take from Wesley is to be rooted in the Good News he so passionately preached and spread across the globe. When United Methodism as a whole fully recaptures Wesley’s chief suggestion to his followers which was to “preach Jesus Christ and him crucified,” his followers will then again be aligned with the ancient truths.

In the latest edition of an otherwise scholarly theological journal, a writer, who only ever writes about one subject, attacked the free market as usual. He wrote: “Neither can economics be satisfied with leaving human beings to the mercy of markets with their supposed ‘laws.’. . .” While there is certainly no space to take on his whole article, this part might just be the most serious error in it.

This particular writer, and those trained in his school, which he denies is the German Historical School, but it is, operate from a nominalistic approach. Nominalism, a school of thought begun in the Middle Ages by the Franciscan, William of Ockham, denies that there is any human nature. Therefore, human beings have no necessary consistency in them. In ethics, each person makes up his own code, and the codes can be very much at odds. To a nominalist, everything is will alone, not reason. This is why the writer in question asserts that people are at the “mercy of markets.” To those who think like this, everything is power. Even in moral theology, the reason one obeys the Ten Commandments is that it’s God’s will only, and there is no connection with those commandments and the nature of things. God could have commanded ten other things we were to avoid, and we would be required to obey them, because they are His will, even if they were the opposite of those actually listed. (I am sure many people would not have any trouble with the commandments were that the case) Thus, to those who think in this manner, markets are power, and that’s why there are no laws of economics. That’s why corporations are evil; because money gives them power, which they use to take advantage of others.

The truth of it is that human beings do participate in a common nature, created by God, and this common nature leads people to think and act alike generally speaking. The laws of economics come from this consistency of human nature. Markets do have laws because people make free choices as to what is best for them. The market exists for the sake of the consumer, which includes everybody. If I go to the store and want to buy bananas, and the bananas are rotten, why should I buy them; to support the farmer or the store? If we all did that, people would be encouraged to make junk and I would be encouraged to continue to buy it even if it did not fulfill my needs. Why would I do that?

Let’s take the example to a higher level. I know that there is a demand for office space in my city, so I want to build a tall office building. The office building has to be tall because land in a city is very scarce and therefore very expensive, so I have to build “up.” To do so I need strong steel. If company X has crummy steel, it will not hold up and the building will come crashing down at the first sign of stress. So I must go to company Y that sells steel that will be appropriate to the height of my proposed building. Should I buy the company X steel because I feel sorry for the workers who will not get my business? You tell me; rather you go tell that to the families of the victims of my collapsed building.

Will the steel from company X be cheaper? Perhaps. If I buy it and the building comes tumbling down, am I evil? Well, we cannot judge the soul of another, nor can we read his mind. One thing we do know is that this builder did ignore the laws of economics (and probably those of engineering as well).

Think about the decisions in your life, and see if there are no laws governing your decisions. If gasoline is $.10 per gallon cheaper in the next town, which is 45 minutes away, would you think it is worth it to drive there to get that particular gas, given not only the price but the time involved, and whether it is raining or snowing, and other things that you have to do? Well, you just did a cost-benefit analysis, which every sane human being does in their head many times a day whether they realize it or not. How can anyone say that there are no laws of economics.

Read more from Dr. Luckey at “Catholic Truths on Economics.”

With this issue of the Journal of Markets & Morality, we introduce a new semi-regular feature section, the Status Quaestionis. Conceived as a complement to our Scholia, the Status Quaestionis features are intended to help us grasp in a more thorough and comprehensive way the state of the scholarly landscape with regard to the modern intersection between religion and economics.

Whereas the Scholia are longer, generally treatise-length works located in the fifteenth, sixteenth, and seventeenth centuries, the Status Quaestionis will typically be shorter, essay-length pieces from the eighteenth, nineteenth, and twentieth centuries. The first installment of the Status Quaestionis features an essay by Sergey Bulgakov (1871–1944), a renowned and influential Russian Orthodox theologian. His essay included in this issue, “The National Economy and the Religious Personality,” first published in 1909 and translated here by Krassen Stanchev, represents the first and in many ways most lasting Orthodox Christian response to the Weber thesis.

Peter Klein, blogging at Organizations and Markets, considers the Bulgakov translation and notes, “Bulgakov, widely regarded as the greatest 20th-century Orthodox theologian, has been attracting increasing interest in recent decades, in both East and West.”

Indeed, Rowan Williams, Archbishop of Canterbury, says this of Bulgakov’s contribution in economics:

In his early work he picked up the language of creativity and applied it to civic relations. He proposed understanding business, commerce and, in fact, much of daily life in the context of creativity. In his book The Philosophy of Economy (1912) he said there was no such thing as economic man, homo economicus, which was to say, no set of economic answers that could tell us how society ought to be run. The context was Russia’s first 20th-century attempt to modernise by borrowing economic ideas from the west, and already Bulgakov was arguing, against certain German economists, that pure economics wouldn’t work in Russia.

Williams’ interview, which touches on Bulgakov, Dostoevsky, and the broader history of Russia, is wide-ranging and illuminating, especially given current developments in relations between Russia and former Soviet republics.

In the introduction to his translation, “Sergey Bulgakov and the Spirit of Capitalism,” Krassen Stanchev, who serves as board chairman of the Institute for Market Economics, observes that the “language of creativity” and “personalism” identified by Williams in Bulgakov,

was first outlined by Bulgakov in the essay translated here. The economy is a human destiny; the man is ‘master’ (in Russian this word means both ‘an owner’ and ‘a housekeeper’) of the worldly establishments; not a ruler or dictator but the one who humanizes the world. This concept, to my understanding, is compatible with the most enlightened economic thinking of the twentieth century.

For more on recent developments in the relationship between Orthodox theology and economic thinking, see John Couretas‘ review, “An Orthodox View of Contemporary Economics, Politics, and Culture.”

Also in this issue:

• Bishop Marcelo Sánchez Sorondo considers “The Importance and Contemporary Relevance of Joseph Ratzinger/Benedict XVI’s Jesus of Nazareth.”

• Marek Tracz-Tryniecki explores “Natural Law in Tocqueville’s Thought.”
• Christopher Todd Meredith examines “The Ethical Basis for Taxation in the Thought of Thomas Aquinas.”
• José Atilano Pena López and José Manuel Sánchez investigate “Smithian Perspective on the Markets of Beliefs: Public Policies and Religion.”
• Surendra Arjoon discusses ethics in the corporate culture with “Slippery When Wet: The Real Risk in Business.”
• Gregory Mellema expounds on “Professional Ethics and Complicity in Wrongdoing.”
• And a number of excellent reviews of recent books, put together under the direction of our book review editor Kevin Schmiesing.

The editorial and article abstracts of current issues, including my “The State of the Question in Religion and Economics,” are freely available to nonsubscribers (you can sign up for a subscription here, including the very affordable electronic-only access option). And as per our “moving wall” policy of two issues, the most recent publicly-available archived issue is volume 10, number 1 (Spring 2007).

If you are a student or a faculty member at an institution of higher learning, please take the time to recommend that your library subscribe to our journal. If you are in interested layperson or independent scholar, please consider subscribing yourself.