Posts tagged with: economics

On June 27, 2013, Samuel Gregg, Acton’s Director of Research, discussed his book Becoming Europe: Economic Decline, Culture, and How America Can Avoid a European Future as part of the 2013 Acton Lecture Series. If you weren’t able to join us here at the Acton Building for the lecture, you can watch below:


Alejandro Chafuen, president and chief executive officer of the Atlas Economic Research Foundation and board member of the Acton Institute, recently wrote a piece for discussing youth unemployment in the United States. According to the latest report, U.S. youth unemployment is at 16.2 percent which is more than double the adult unemployment rate. The unemployment rate for youth in Europe is currently at 24 percent. Chafuen asks, “Can we learn from the European experience?”

Using data compiled by the economic freedom indices of the Fraser Institute in Canada, and the Heritage Foundation, in the United States, we recently looked at how economic freedom, labor regulations, social spending, and regulatory climate, correlated with youth unemployment. Against our preconceptions, at least as shown with our simple static analysis, there were no convincing results.  I will spare the reader the statistical jargon and graphs and focus on apparent contradictions. (more…)

Blog author: jcarter
Thursday, June 13, 2013

Among the most significant economic challenges in America today is getting Americans to understand what an economy is.

measure-economyWhen the Latin term oeconomia was first used in the 1500s it meant “household management.” A few centuries later, the term political economy was used in reference to the economies of states or polities. It wasn’t until the modern era, though, that “economy” became to refer primarily to the production and distribution of national income and wealth and lost almost all connection to the household.

Because of that shift, we often see a confusion of terms and concepts. Take, for instance, the opening sentence of this recent news report:

The U.S. economy grew at a modest 2.4 percent annual rate from January through March, slightly slower than initially estimated.

The problem with this is that “U.S. economy” is conflated with gross domestic product (GDP) — the market value of all officially recognized final goods and services produced within a country in a given period of time. While GDP can potentially be an important economic indicator, it is not a true measure of the nation’s economy (aka political economy).

Derek Scissors provide a superb explanation for why a better measurement is one that gauges the original economy:

The call to “buy American” is one we hear frequently or see plastered on the bumper of the car in front of us. Donald Boudreaux, senior economics advisor at Mercatus Center, explains the problem with this ideal in a letter to the Washington Post:made in usa

Let’s make a deal.  Government will agree to protect only those American workers and small-business owners who in return agree to stop buying foreign-made products. (more…)

Blog author: jcarter
Wednesday, June 5, 2013

trip_hurdles_400_clrOne of the most basic concepts in economics and business is marginal or incremental cost, the additional cost needed to produce or purchase one more unit of a good or service. For example, if a business can produce 100 widgets at a total cost of $5,000 and 101 widgets for $5,500, the marginal cost of the 151st unit is $500. At that rate, the company has a disincentive to produce more than 100 widgets since the cost rises sharply (an average additional cost of $4.45 per widget).

The same principle applies to the cost of labor. Imagine a worker who makes $16 an hour for 29 hours per week but whose incremental cost for the 30th hour of work each week rises to $112.15. For the 29 hours of labor, the cost is $464 while for 30 the cost is $576.15. That sharp increase would prevent many employers from hiring workers for more than 29 hours per week.

According to Jed Graham at Investor’s Business Daily, that is exactly what effect Obamacare will have on wages.

Kishore Jayabalan, Rome director of the Acton Institute for the Study of Religion and Liberty, clarified remarks made by Pope Francis at a May 16 reception of new Vatican ambassadors. The pope, calling for an examination of the world’s relationship with money, said we are facing “dire consequences” due to the power we give money.

Jayabalan had this to say:

If we look at money as wealth itself, we can very easily place it above everything else. But if we look at money as a representation of wealth, as a measure by which we can judge whether we are using our resources well, it need not be an idol, but a useful instrument. The same goes for finance and the allocation of capital needed for new ventures and progress.


German Finance Minister Wolfgang Schaeuble is a frustrated man. With unemployment rates in Germany hovering at around 8 percent, and Greece and Spain at almost 60 percent, he believes the EU is on the brink of “revolution.” His answer is not to protest signscrap the welfare model however; he wants to preserve it.

While Germany insists on the importance of budget consolidation, Schaeuble spoke of the need to preserve Europe’s welfare model.

If U.S. welfare standards were introduced in Europe, “we would have revolution, not tomorrow, but on the very same day,” Schaeuble told a conference in Paris.

Not everyone agrees. Italian Labour minister Enrico Giovannini says European youth are being asked to put their lives on hold, and that this is “unacceptable.” Werner Hoyer, head the European Investment Bank, acknowledged that there is no plan at this point to direct the spiraling downturn of the EU economy. There is, instead, a country-by-country “patchwork” approach. For instance, Greece is attempting to focus on job training and entrepreneurship for 350,000 young people, and France is working on a similar plan within its own borders. (more…)