Posts tagged with: economics

In his book Elements of Justice (reviewed in the Journal of Markets & Morality here), University of Arizona philosophy and economics professor David Schmidtz introduces the idea of desert not simply as a compensatory notion, but also as including a promissory aspect. That is, what we deserve isn’t always about only what we have done. There might be a real sense in which what we do after an opportunity provides a kind of retroactive justification for having been given a chance.

There has been a flurry of negative reaction to the naming of President Obama as the recipient of this year’s Nobel Peace Prize. Even those in the mainstream media, considered by many to be rabidly pro-Obama, have noted that the committee must have been attempting to reward intentions rather than results.

Speaking of the concept of desert, Schmidtz writes that “what it needs to be in human affairs” is “a message of hope that is at the same time life’s greatest moral challenge.” It seems patently obvious that Obama does not deserve the Nobel Peace Prize according to any kind of compensatory calculus. The only even apparently viable justification, even if inadequate in the case of a prize like this, is promissory.

Others have noted what it might look like if potential starts becoming a valuable part of award formula. While the committee awarded the Nobel Prize in Economics this year to Elinor Ostrom and Oliver Williamson, Greg Mankiw made the case for the potential and promise present in a first-year econ grad student.

More seriously, Francis Beckwith points out how the concept of “potential” fails to be applied where it is most deserved: in the case of the unborn.

We welcome a new contributor to the Acton Commentary crew: Dr. Dwight R. Lee, the William J. O’Neil Endowed Chair in Global Markets and Freedom at Southern Methodist University. In this week’s commentary, Lee discusses how the social objectives of clergy and economists are remarkably similar, even though their “windows on the world” suggest different approaches to achieving the shared aim of building a better, more humane society. This week’s commentary is adapted from an article to be published in the Journal of Markets & Morality (Vol. 12, No. 2; Fall 2009). Excerpt:

My hope is that members of the clergy, in their desire to achieve a better world, will begin to see economists as allies instead of adversaries. This hope may be dismissed as preposterous by some since, as an economist, I argue that market incentives are the most effective way of achieving many of the social outcomes most of the clergy favor. But those most opposed to market incentives for achieving desirable objectives have the most to gain by taking a look through the economic window. Much of the skepticism, indeed hostility, towards markets is based on distorted and mistaken views of how markets operate and what they accomplish.

Religious differences notwithstanding, most people respect the clergy for their noble objectives and effort to achieve those objectives by encouraging and celebrating “the better angels of our nature” mentioned in Abraham Lincoln’s first inaugural address. Most approve of the clergy’s concern with encouraging behavior such as sharing with, and serving the interests of, others; helping the poor; sacrificing for the good of the wider community; acting as good stewards of the earth’s resources; being concerned with protecting the environment; and generally living a life that promotes social cooperation and harmony.

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The Surprising Life of a Medieval EmpireThe Oxford Handbook of Byzantine Studies. Edited by Elizabeth Jeffreys, John Haldon, Robin Cormack. Oxford University Press (2008)

Byzantium: The Surprising Life of a Medieval Empire by Judith Herrin. Princeton University Press (2008)

Ask the average college student to identify the 1,100 year old empire that was, at various points in its history, the political, commercial, artistic and ecclesiastical center of Europe and, indeed, was responsible for the very survival and flourishing of what we know today as Europe and you’re not likely to get the correct answer: Byzantium.

The reasons for this are manifold but not least is that as Western Europe came into its own in the later Middle Ages and Renaissance, Byzantium gradually succumbed piecemeal to the constant conquering pressure of Ottomans and Arabs. When Constantinople finally fell in 1453 (two years after the birth of the Genoese Christopher Columbus), Europe, now cut off from many land routes to Asian trade, was already looking West and South in anticipation of the age of exploration and colonization. Byzantium, and the Christian East, would fall under Muslim domination and dhimmitude for centuries and its history would fade away before the disinterest, or ignorance, of the West.

This “condemnation to oblivion” as the editors of The Oxford Handbook of Byzantine Studies, describe it, is “no longer quite so true as it once was.” New exhibitions of Byzantine art in Europe and America have been hugely successful in recent years and travel to cities with Byzantine landmarks and archeological sites in Greece, Turkey and the Balkans is easier than ever. Academic centers throughout western Europe and the United States host Byzantine Studies departments, scholarly journals proliferate, and a new generation of scholars has elevated the field from what once was a narrow specialty.

The Oxford Handbook of Byzantine Studies is a useful, one volume reference work that would well serve both the scholar and general reader with an interest in Byzantine culture. The editors have prefaced the volume with a detailed assessment of the Discipline, the state of scholarly learning on everything from art history to weights and measures. Other sections examine Landscape, Land Use, and the Environment; Institutions and Relationships (including the economy); and The World Around Byzantium. Each of the nearly two dozen subheadings include concise chapters with references and suggestions for further readings.

For those interested in the economic life of Byzantium, the Handbook offers an account in Towns and Cities that describes agricultural, commercial and industrial activity, and charts a decline in these areas during periodic invasions by various waves of Slav, Avar, Persian and Ottoman peoples, or bouts of the plague. Where political and military fortunes turned favorable, as in the 8th and 9th centuries, economic life enjoyed a parallel revival. Regional cities became economic centers, places like Thessalonike, Thebes (silk textiles) and Corinth, where glass, pottery, metals and textiles were produced. In his chapter on the Economy, Alan Harvey relates how Constantinople, in the 12th Century, “was clearly a bustling city with a wide range of skilled craftsmen, merchants, artisans, petty traders. There was also a transient population of various nationalities, in addition to the more settled presence of Italian merchants.”

And, because it was a Christian empire, the Handbook has a lot to say about the Byzantine Church, its relations with the Empire, and its developing rivalry with Rome, especially as the papal reform movement took hold in the 11th century. The Emperor and Court chapter in the Handbook should also go some way toward a better understanding of “late ancient state formation,” a subject the editors say has received “remarkably little attention” by historians and political theorists.

Writing in the Handbook’s summary chapter, Cyril Mango catalogs the achievements of Byzantium but also adds that historians have not “credited [the empire] with any advance in science, philosophy, political theory, or having produced a great literature.” Maybe the Byzantines had other ambitions. James Howard-Johnston asserts that the “ultimate rationale” of Byzantium’s existence was its “Christian imperial mission.”

That conviction, widely shared in a thoroughly Orthodox society, was the shaping influence on its foreign policy. It provides the basic, underlying reason for Byzantium’s tenacious longetivity, for its stubborn resistance in the opening confrontation with Islam, and, even more extraordinary, for the resilience shown in the last three and half centuries of decline.

For the general reader, perhaps a better place to begin to illuminate the “black hole” of Byzantine history is Judith Herrin’s fine book, Byzantium: The Surprising Life of a Medieval Empire. A senior research fellow in Byzantine Studies at King’s College London, Herrin sets out to trace the period’s “most significant high points as clearly and compellingly as I can; to reveal the structures and mentalities which sustained it.” Her aim is to help the reader understand “how the modern western world, which developed from Europe, could not have existed had it not been shielded and inspired by what happened further to the east in Byzantium. The Muslim world is also an important element of this history, as is the love-hate relationship between Christendom and Islam.”

Byzantium’s ability to conquer, Herrin writes, and “above all, to defend itself and its magnificent capital was to shield the northwestern world of the Mediterranean during the chaotic but creative period that followed the collapse of the Roman Empire in the West. Without Byzantium there would have been no Europe.” (more…)

A Caritas in Veritate Reader

In response to the ongoing interest in Pope Benedict’s new encyclical, the Acton Institute is readying the publication of Caritas in Veritate — A Reader.

This encyclical, in all of its remarkable depth, will no doubt be the subject of thoughtful analysis for a long time to come. Later this summer, Acton will gather the best of its own commentary on Caritas and selected articles from other observers in a single volume that will be available in hard copy and in a digital format. We trust that this Reader will serve as a guide to understanding the encyclical and the thinking of Pope Benedict on important social questions. We’ll update you with information on how to purchase or download the Reader as we get closer to the publication date.

Headline Bistro, a news service of the Knights of Columbus, published a new roundup of commentary on Pope Benedict’s Caritas in Veritate encyclical. I am joined in “Catholic Thinkers Reflect on Caritas in Veritate” by Michael Novak, Kirk Doran and Carl Anderson. Here’s the introduction and the article, which was written by Elizabeth Hansen:

Last month, Pope Benedict XVI released his much-anticipated social encyclical, Caritas in Veritate. While it addressed the global economic crisis and the need for reform in business practices, the document was marked overall by its underlying premise of fostering true, integral development of the human person: a goal achieved by practicing charity in truth. Three Catholic economists and social thinkers shared their reflections on Caritas in Veritate via email correspondence with Headline Bistro.

Balance: In a word, that is what Michael Novak, Father Robert Sirico and Kirk Doran would name as the strength of Caritas in Veritate, Pope Benedict XVI’s encyclical released one month ago today.

From discussing the pros and cons of development aid to a treatment on the theological principle of gratuitousness, the span of Caritas in Veritate is wide. The document’s suggestion of reform of the U.N. – “so that the concept of the family of nations can acquire real teeth,” the English translation said – grabbed headlines in the mainstream press, while Catholics noted Benedict’s insistence that true development involves the whole human person, on a spiritual as well as economic level.

Indeed, anything beyond a superficial read of the encyclical reveals its depth, which is what makes Pope Benedict’s ability to balance numerous perspectives and proposals on the technical end – even more, to transcend them – all the more impressive. (more…)

Blog author: hunter.baker
posted by on Tuesday, August 4, 2009

I just read today that the cars traded in for the Cash for Clunkers program are rendered unusable by running liquid glass through the engines.

Has anyone considered the impact of this on the poor? What has happened is that a huge number of low cost cars are being removed from the market. These are cars low income earners would ordinarily drive or teenagers would buy them who need to get to school or work.

What happens when we radically reduce the supply of a particular good? If there are no good substitutes, then the price goes up. In effect, this is a tax on the lower end of the market.

“Progressive” policy isn’t always good for the poor. Acton has been making that point for years. Hopefully, it is becoming more obvious.

The Public Discourse recently published my article, Rethinking Economics in the Post-Crisis World. Text follows:

In the wake of the financial crisis, we need an economics with greater humility about its predictive power and an increased understanding of the complicated human beings who, when the discipline is rightly understood, lie at its center.

Apart from bankers and politicians, few groups have received as much blame for the 2008 financial crisis as economists. “Economists are the forgotten guilty men” was how Anatole Kaletsky, former economics editor and current editor-at-large for the London Times, put it earlier this year when explaining why “a bank with just $1 billion of capital [would] borrow an extra $99 billion and then buy $100 billion of speculative investments.”

Greed and sheer imprudence played a role, but so too, Kaletsky argued, did those (unnamed) economists who posited that their models proved that events such as the collapse of Lehmann Brothers in 2008 or Long Term Capital Management in 1998 were mathematically likely to happen once every billion years.

Kaletsky’s broader point was that contemporary mainstream economics had been sufficiently discredited by the financial crisis that the entire discipline required what he called an “intellectual revolution,” or it risked being dismissed as a rather suspect sub-branch of statistical analysis and mathematical modeling.

Kaletsky is hardly alone in arguing that economists need to rethink key aspects of their discipline. Though unwilling to call for a total paradigm shift, the Economist recently opined that the financial crisis has raised profound questions of coherence about two areas of economics: macro-economics and financial economics. “Few financial economists,” the Economist observed, “thought much about illiquidity or counterparty risk, for instance, because their standard models ignore it.” Likewise, the Economist commented, “Macroeconomists also had a blindspot: their standard models assumed that capital markets work perfectly.”

All this is certainly true. But the key expression to note here is “their standard models.” (more…)

Blog author: jballor
posted by on Monday, July 27, 2009

Dr. David Murray of Puritan Reformed Theological Seminary investigates the concept of “biblical fundraising,” reasons to continue to give in the midst of difficult economic times, in the latest edition of his vcast, “puritanPod.” Dr. Murray uses 2 Corinthians 9 as the basis for his brief but valuable message.

Check out the video here.

The Rome Reports news service recently interviewed me about the new social encyclical, Caritas in Veritate. Here’s the segment, and a transcript of the interview.

Rome Reports: Benedict XVI’s encyclical, Charity in Truth is already on the list of best selling books this month. In it, the pope proposes the steps to achieve a sound economy and to avoid another economic crisis in the future.

Kishore Jayabalan: I think he is trying to change our orientation from a moral and ethical perspective, and to address economic and social affairs from a more Catholic moral perspective, sometimes we think catholic morality only has to do with marriage and family issues, or only as something that we hear about on Sundays in church.

RR: Kishore Jayabalan is an economist who directs the Acton Institute in Rome for the study of religion and freedom. He says that one of the most important points the pope stresses in building a new economy is respecting peoples rights to initiative and property.

Jayabalan: What the document refers to as breathing space, you have to let people on the grounds of subsidiarity come up with their our solutions to their own problems, they can’t all be dictated from the top down.

RR: Benedict also says the new economy should entail that globalization be a process that pursues the common good.

Jayabalan: The second thing, is that the rest of us needs to realize that globalization is a process for the good that excluding people from globalization is simply a way of spreading poverty more broadly across the world, which goes against catholic social teaching.

RR: According to Jayabalan, to solve economic problems, the theological aspect must also be included. In his encyclical, the pope explains why a relationship between God and man gives people more freedom.

Jayabalan: It allows for more freedom because it tells us that there is a relationship that the state cannot enter into, and I think this is why the encyclical refers to religious freedom for the first time in a social encyclical.

RR: But Jayabalan says that above all else, the pope seeks to unite two concepts that are often separated, respect for life and social justice. He says the popes gift to President Barack Obama the encyclical Dignitas Personae on Bioethics– clearly shows his agenda.

Jayabalan: The pro-life people tend to be on the right politically and the social justice people tend to be on the left politically and pope Benedict is trying to get us to look beyond those old categories.

RR: In short, according to Jayabalan, “Charity in Truth” is a call to work together for social justice, a goal that cannot be realized without a profound respect for human life in all its stages.

Back in 1983, economist Thomas Sowell wrote The Economics and Politics of Race, an in-depth look at how different ethnic and immigrant groups fared in different countries throughout human history. He noted that some groups, like the overseas Chinese, Japanese, and Jews, tended to thrive economically no matter where they went, bringing new skills to the countries that they arrived in and often achieving social acceptance even after facing considerable hatred and violence. Other groups, like the Irish and the Africans, tended to lag economically and found it difficult to become prosperous.

Sowell explained many of these differences by looking at the cultures both of the immigrant groups and of the dominant powers in the countries that they moved to. The Chinese, Japanese, and Jews, for example, valued work. They often arrived in countries with little more than the clothes on their backs, but they worked long and hard hours in menial labor and saved money scrupulously to make life better for their children. Even if they lacked social acceptance, they were allowed the freedom to develop their talents and contribute to the economic life of their new homes.

Irish and African cultures were never offered these opportunities. Ireland’s feuding lords had prevented hard work from being rewarded in Ireland, a situation that only got worse with British occupation. Sowell shows how Africans were similarly discouraged from working hard because slavery and the Jim Crow Era made it impossible for skills and effort to pay off in better standards of living. So long as hard work never paid off, there was no incentive for Irish or African cultures to emphasize entrepreneurship, and the members of these ethnic groups suffered from poverty rates much higher than those of other populations in the places they lived.

Fast forward to 2009. With many of the institutional barriers to the advancement of ethnic minorities gone from most countries, historically disadvantaged groups are catching up with the general population in economic terms. Pope Benedict revisited the theme of economics and culture in his encyclical Caritas in Veritate, coming to similar conclusions as Sowell does about the role that culture plays in the development of the human person. (more…)