Posts tagged with: economics

Blog author: jballor
posted by on Wednesday, October 29, 2008

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.

Blog author: rob.holmes
posted by on Wednesday, September 3, 2008

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.

Blog author: jcouretas
posted by on Thursday, August 7, 2008
Dr. Luckey

We welcome Acton adjunct scholar Dr. William R. Luckey, Professor of Political Science and Economics at Christendom College, to the PowerBlog. Dr. Luckey has expertise in Political Philosophy, Business and Economics, and Theology, and posts from his excellent Catholic Truths on Economics will be shared here. His tagline explains why he is a perfect fit for the PowerBlog: Guidance on Economics, its importance for Catholics, its importance to civilizations, and what are its objective truths. It might sound boring…but boy, we are all affected by it.

This is from his latest post, Are there economic laws?

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.

Read more. Dr. Luckey takes on questions such as Does John Courtney Murray’s Defense of Freedom Extend to Economics? An Austrian Perspective. He also weighs in on The Calumny Against “Speculators” and Catholics, Calumny and Oil Prices. Great stuff.

Welcome, Bill!

The Summer issue of City Journal features a piece worth reading by Guy Sorman titled “Economics Does Not Lie.” The paper includes weighty arguments favoring a free market economic system and the author does a good job explaining the rationale of those who criticize a free economy. Sorman says:

If economics is finally a science, what, exactly, does it teach? With the help of Columbia University economist Pierre-André Chiappori, I have synthesized its findings into ten propositions. Almost all top economists—those who are recognized as such by their peers and who publish in the leading scientific journals—would endorse them (the exceptions are those like Joseph Stiglitz and Jeffrey Sachs, whose public pronouncements are more political than scientific). The more the public understands and embraces these propositions, the more prosperous the world will become.

These are the ten propositions put forward by Sorman:

1. The market economy is the most efficient of all economic systems.

2. Free trade helps economic development.

3. Good institutions help development. (governments & rule of law)

4. The best measure of a good economy is its growth.

5. Creative destruction is the engine of economic growth.

6. Monetary stability, too, is necessary for growth; inflation is always harmful.

7. Unemployment among unskilled workers is largely determined by how much labor costs.

8. While the welfare state is necessary in some form, it isn’t always effective.

9. The creation of complex financial markets has brought about economic progress.

10. Competition is usually desirable.

Sorman adds:

These ten propositions should guide all economic policymaking, and to an increasing degree they do, worldwide. Does this mean that we’ve reached an “end of history” in economics, to borrow a phrase made famous by Francis Fukuyama, by way of Hegel and Alexandre Kojève? In one sense, perhaps: economic science will never rediscover the virtues of hyperinflation or industrial nationalization. Some critics charge that economics is not a science in the way that, say, physics is—after all, economists can’t make precise predictions, as an exact science can. But this isn’t quite true: economists can predict that certain bad policies will lead necessarily to catastrophe. If economics, a human science, lacks the precision of physics, a natural one, it advances the same way—evolving from one theory to the next, each approximating a reality that eludes our complete grasp.

On a somewhat related note about economic policy, here is a review I wrote about the book Good Capitalism, Bad Capitalism and the Economics of Growth and Prosperity. The review appeared in the Fall 2007 issue of Religion and Liberty.

While former Vice President Al Gore mesmerized activists at Netroots Nation this morning with a surprise visit to Austin, Texas, a different kind of conversation about global warming was taking place at the Right Online conference in the same city. The intensity and energy during the global warming session was by far the most passionate of any of the sessions I have attended here. It seems some conservative activists may be undecided about all the scientific data concerning global warming, but they understand some in the environmental and big government movements are using the climate change excitement to chip away at personal and economic freedoms.

Iain Murray
of the Competitive Enterprise Institute was present to discuss the topic with all the attendees. Murray cited the Cornwall Alliance as an important evangelical voice on this issue. He also summed up the failure of cap-and-trade measures in Europe and just how ineffective government spending on global warming has been across the pond.

Phil Kerpen of Americans for Prosperity was very straightforward about not understanding all of the scientific data, but still added some very prudent points. Kerpen contrasted the United States with socialist leaning Western European nations by noting an American approach to finding solutions is best, because we need to be on the right side of the economics, while also being on the right side of the environment. Krepen noted that we need to move away from “socialist regulatory schemes,” adding, “we won’t be the innovators [for long term solutions] if we go down that route.” Krepen understood that if we sacrifice prosperity, we actually sacrifice the ability to achieve the greatest energy breakthroughs through entrepreneurial innovation.

At the end, I spoke briefly about the Acton Institute’s research on this issue and directed the attendees to Dr. Jay Richards’ lecture on global warming, as well as his remarks at Acton University.

Earlier in the day the best speeches were delivered by former Maryland Lt. Governor Michael Steele and Michelle Malkin. Steele had some highly impressive comments on tax reform, wealth creation, and entrepreneurship.

Blog author: berndbergmann
posted by on Thursday, April 24, 2008

In the April 24 edition of the Vatican newspaper L’Osservatore Romano, Ettore Gotti Tedeschi focuses on the origins and lessons of the global financial crisis. In a previous article, Gotti Tedeschi argued that the downturn is an opportunity for Italy to reform its economy and cut down on unnecessary public spending.

He now examines what the crisis means for the state of international finance and draws some unusual but noteworthy conclusions. In his view, the principal answer for improving global financial architecture cannot be provided by more government regulation.

Instead, Gotti Tedeschi interprets the crisis as a wake-up call to return to “other rules – older rules which restore the priorities of the banking profession.” These rules of sound economics have been partly eroded by an excessive lowering of interest rates by central banks, inducing other actors to take excessive risks in their financial operations.

The over-stimulation of markets led bankers and business leaders to abandon the path of solid long-term growth in favor of short-term gain: “Too often managers with a poor sense of responsibility have created the illusion of realizing miraculous growth and profitability.” They abandoned the search for “concrete results and above all, long-term sustainability.” His advice is to return “to what is real, responsible and durable.”

He suggests that what is needed is a spiritual refreshment to deepen the understanding of how a successful bank or business is run. This would enable people to resist temporary financial fashions and evaluate real risks and possible gains adequately.

Gotti Tedeschi is in a good position to combine the practical insights of the world of banking with a profound theoretical grasp of business ethics. While he is one of the most well-known bankers in Italy, he has also found the time to write books about the relationship between Christian values and economics.

His advice deserves to be taken seriously. As politicians around the world propose a whole range of new regulation in response to the credit crunch, it must not be forgotten that public authorities provided the markets with cheap money and excessive stimuli. The result was a widely distorted perception of risk and profitability. It would be unfortunate if a period of over-stimulation was followed by a period of over-regulation.

Blog author: jballor
posted by on Tuesday, April 22, 2008

I know there are some economic arguments against recycling, at least some forms of it. Many of these seem to be based on the fact that there’s no real profit margin, so proponents have to either engage the coercive power of government to get people to recycle (by charging them a fee or by offering city services) or people have to simply donate their recycle-ables gratis.

But one “economic” argument I’ve never understood is the on that goes like this: it’s not worth my time. After all, I get paid $X per hour, and I’m not getting paid at all to recycle. Why waste the time doing something for free? One economist puts it like this: “as one of the great one-liners of economics goes: ‘Recycling is the philosophy that everything is worth saving except your time.’”

And so, “Why don’t we recycle in our house? Because our time is worth more than a pile of newspaper.” Other economists have made similar arguments against volunteering, to which I’m a bit more sympathetic, at least insofar as it isn’t always a better use of time to volunteer.

But c’mon, “our time is worth more than a pile of newspaper”? That sounds more like rationalizing laziness than true economic sensibility. I understand the concept of opportunity costs, but it isn’t as if you are making your standard wage 24/7/365.

My time is worth more than a pile of dirt, too, but that doesn’t mean my house doesn’t need to be cleaned. Just because the negative externalities of throwing your trash into a public dump aren’t visible doesn’t mean that you don’t have a responsibility to manage your waste.

And don’t tell me there aren’t good economic arguments in favor of recycling, too. Take a look at the legacy of Ken Hendricks, a high school dropout and an entrepreneur who made a fortune in the building materials business. He passed away late last year, and during his life “Hendricks loathed waste and dedicated his life to recycling and rehabilitation in all their forms. He resuscitated decaying buildings, directly through the millions of square feet he personally owned and indirectly through the hundreds of millions of square feet restored by his customers.”

Maybe Prof. Anthony Bradley can help me out

Hostility towards globalization is not the exclusive territory of the left in Italy. Giulio Tremonti, a former minister of the economy in Silvio Berlusconi’s centre-right government, has written a book called Fear and Hope (La Paura e la Speranza), largely arguing against free trade and the opening of international markets.

Tremonti blames the recent rise in the prices of consumer goods on globalization and says that this is only the beginning. The global financial crisis, environmental destruction, and geopolitical tensions in the struggle for natural resources are also fruits of globalization, according to Tremonti. He identifies the main problem as a lack of international governance of the process of globalization and calls for a new Bretton Woods-like system to confront the multiple crises caused by what he calls “marketism”.

The “dark side of globalization” can only be countered by a return to European values: tradition, the family, and the nation, adds Tremonti. Europe “needs a philosophy which makes politics and not economics the primary mover [of globalization]. This can only work if we go back to the roots of Europe, these are the roots of Judeo-Christianity”.

This “cure” to the ills of globalization remains vague (as one would imagine in a book of only 112 pages). Still more puzzling is his insistence on a contrast between market principles and traditional European values. The idea that a return to values must be coupled with a stronger politicization of the world economy clashes with experience. More regulation and state interference not only tend to reduce growth and living standards but also create new opportunities for rent-seeking and corruption, and thereby undermine the traditional virtues that Tremonti supports.

He misses the opportunity to discuss how certain values are enhanced by the market and how international competition has in fact strengthened Europe by highlighting its best qualities, both technologically and culturally, while repressing its worst.

Tremonti’s vision is inward-looking and profoundly pessimistic. Some market-oriented Italian commentators have pointed out that his ideas seem dangerously close to old-style protectionism. It is clear if Europe followed his analysis, it would be led on a path of future irrelevance both as an economic and a cultural model.