Posts tagged with: economics

Blog author: mvandermaas
posted by on Friday, March 7, 2008

Surely these are the words of a disciple of Hayek or Friedman, right?

Under the guise of protecting us from ourselves, the right and the left are becoming ever more aggressive in regulating behavior…

…The real question for policy makers is how to protect those worthy borrowers who are struggling, without throwing out a system that works fine for the majority of its users (all of whom have freely chosen to use it). If the tub is more baby than bathwater, we should think twice about dumping everything out…

…Anguished at the fact that payday lending isn’t perfect, some people would outlaw the service entirely, or cap fees at such low levels that no lender will provide the service. Anyone who’s familiar with the law of unintended consequences should be able to guess what happens next…

… I’ve come to realize that protecting freedom of choice in our everyday lives is essential to maintaining a healthy civil society.

Why do we think we are helping adult consumers by taking away their options? We don’t take away cars because we don’t like some people speeding. We allow state lotteries despite knowing some people are betting their grocery money. Everyone is exposed to economic risks of some kind. But we don’t operate mindlessly in trying to smooth out every theoretical wrinkle in life.

The nature of freedom of choice is that some people will misuse their responsibility and hurt themselves in the process. We should do our best to educate them, but without diminishing choice for everyone else.

Give up? How about George McGovern?

Ed Morrisey, writing at Hot Air, notes:

I find it fascinating that McGovern has transformed himself from a statist to a free-enterpriser simply because he left office. That isn’t a coincidence, and it explains why politicians tend to “grow in office” towards state-based solutions. After McGovern had to stop justifying his existence as a legislator, he discovered that legislators don’t need to intervene in the markets anywhere near as much as he presumed while in office.

Blog author: jcouretas
posted by on Wednesday, March 5, 2008
Vladimir Solovyov

Towards the end of his life, the 19th century Russian philosopher Vladimir Solovyov published his “On the Justification of the Good: An Essay on Moral Philosophy” (1897). In this book, wrote historian Paul Valliere, Solovyov abandonded his vision of a “worldwide theocratic order” in favor of the more concrete demands of building a just society. With “Justification of the Good,” Solovyov (1853-1900) presented a general theory of economic and social welfare based on the idea that all human beings have “a right to a dignified existence.”

The following excerpt is from the chapter, “The Economic Question from the Moral Point of View” in Solovyov’s “On the Justification of the Good.” Translated by Nathalie A. Duddington; annotated and edited by Boris Jakim; foreword by David Bentley Hart. Wm. B. Eerdmans (2005). Cross posted from The Observer.

For the true solution of the so-called ‘social question’ it must in the first place be recognized that economic relations contain no special norm of their own, but are subject to the universal moral norm as a special realm in which they find their application. The triple moral principle which determines our due relation towards God, men, and the material nature is wholly and entirely applicable in the domain of economics. The peculiar character of economic relations gives a special importance to the last member of the moral trinity, namely, the relation to the material nature or earth (in the wide sense of the term). This third relation can have a moral character only if it is not isolated from the first two but is conditioned by them in the normal position.

(more…)

Good news is not always so hard to find. Case in point: Free-market economics is making a comeback at the Vatican’s daily newspaper L’Osservatore Romano.

Previously known as a dry read, L’Osservatore Romano (which means The Roman Observer in English) now contains provocative interviews and real news stories from around the world. This is attributable to the paper’s new editor, Giovanni Maria Vian, who was appointed to the post by Pope Benedict last October (see here for the interesting background on the change by the Italian journalist Sandro Magister.)

Ettore Gotti Tedeschi, a well-known Italian economist and banker, has been given prominent space to comment on current economic developments. He is a strong defender of the link between Christian principles and free markets, having authored a 2004 book titled, Money and Paradise: The Global Economy and The Catholic World.

In a February 13 article titled “The capital we should value most is human,” he warns against the temptation to resolve economic problems by merely increasing public spending. As Italians know only too well, high public spending will at some point translate into higher taxes. He stresses that these, in turn, diminish human liberty and dignity.

He is also critical of the Italian welfare state which only distributes resources without enhancing individual responsibility and future opportunities. His solution to the current economic difficulties is to leave more space for the market to push Italian businesses to a higher level of competitiveness, which then helps to increase investments and create jobs.

Gotti Tedeschi’s latest front-page article deals with an equally important subject — the high price of oil and economic development. He directly confronts those who argue that we need to reduce economic growth in order to adapt to falling energy supplies.

In his view, this would signal an unwarranted pessimism and distrust in human creativity. Instead, future energy problems should be combated with more research in new technologies and through using existing technologies more efficiently. Getting human anthropology right and showing confidence in human inventiveness are crucial.

Gotti Tedeschi’s ability to combine economic issues with Christian thought greatly enriches L’Osservatore Romano and all supporters of the free market should be thankful for this turn to sanity. Three cheers for the Pope’s newspaper!

Blog author: jballor
posted by on Thursday, February 7, 2008

In any period of economic transition there are upheavals at various levels, and winners and losers (at least in the short term). We live in just such an age today in North America, as we move from an industrial to a post-industrial information and service economy, from isolationism to increased globalization. There’s no doubt that there have been some industries and regions that have been more directly affected than others (both positively and negatively).

Michigan, for example, has been one of the most manufacturing-rich states in the nation for the last century, and has been running record unemployment numbers for the last decade or so, as manufacturers move to more friendly economic environments, both within the US and without. Not least of these factors contributing to Michigan’s competitive disadvantage is the high labor costs associated with a labor union-laden state.

The perception that manufacturing workers are simply being left behind in the new economy is pervasive, such that popular opinion is shifting away from free trade. As Fortune magazine reports, “A large majority – 68% – of those surveyed in a new Fortune poll says America’s trading partners are benefiting the most from free trade, not the U.S. That sense of victimhood is changing America’s attitude about doing business with the world.”

As an aside, this is a perception that doesn’t quite match up with the typical caricature of globalization. After all, how can both America (as the “imperial” dominator) and the developing world (as the exploited poor) both be made worse off by international trade?

If it were truly the case that global trade weren’t mutually beneficial, that would be one thing. What’s visible on news reports everyday are the layoffs, buyouts, and unemployment levels in the US. What isn’t always so visible is the extent to which Americans depend on the low prices associated with many imported goods. One group you might think should know better than the average American about such complexities are professional economists. (more…)

Blog author: jballor
posted by on Thursday, January 31, 2008

What do you look for when you are searching for a job? A growth industry? A healthy bottom-line? A positive corporate culture? Some combination of the above?

Fortune magazine recently rated the “Top 100 Places to Work.” Not surprisingly, at the top of the list is Google, which not only is dubbed the “millionaire factory” because of its generous stock option packages and a matching top tier share price, but because of the innovation associated with its workplace. Employees are encouraged to spend a good chunk of their time focusing on their own “pet” projects.

But second on the list is a Michigan-based company, Quicken Loans. What makes Quicken a great place to work? “Ethically driven” is what one employee calls the online mortgage lender: “It avoided the subprime crisis by sticking with plain-vanilla loans.” You don’t need to be a “social entrepreneur” in the latest sense of the term to be “ethically driven.”

So what connection is there between the top two companies on Fortune‘s list? Google’s well-known motto is: “Don’t be evil.” You might call that the “silver rule” of business ethics. (The “golden rule” would be a positive statement like, “Do be good.”)

To the extent that Google and Quicken embody a way of doing business that emphasizes both profits and ethics, we can see how in the long run ethical business makes the most economic sense.

Also check out Christianity Today‘s annual feature, “Best Christian Places to Work.”

Blog author: rnothstine
posted by on Thursday, January 24, 2008
Ronald Reagan delivers his radio commentary

When I lived in Egypt one of the Egyptian drivers for diplomats at the American Embassy in Cairo explained how people had to wait five to seven years for a phone. He proudly stated he was on the list, but poked fun at the long wait for service. Of course, he also added that you might be able to speed the process up by a few months with bribes, or as it is more affectionately knows as in Egypt, “baksheesh.”

Ronald Reagan loved to tell jokes about the former Soviet Union, especially about the stark differences between the United States and Soviet economic systems. It was a tactic he often used to take the hard edge off his criticism of the Soviets, while still drawing sharp contrasts between the competing systems. It also deftly showed his solidarity or sympathy with the Russian people.

Often to the horror of some of his top foreign policy advisers, he loved delivering the jokes directly to Mikhail Gorbachev at summit meetings. Gorbachev would politely smile or sometimes counter by adding that the joke was just a caricature of the Soviet system. But Reagan had carefully collected many of the jokes from former citizens of the Soviet Union, diplomatic officials, and some of them were passed to him by the CIA. Many of them were real jokes that had circulated inside the Soviet Union.

Many of Reagan’s jokes were a critique of the insufficiency of the Soviet system.

A Russian man goes to the official agency, puts down his money and is told that he can obtain delivery of his automobile in exactly 10 years. “Morning or afternoon,” the purchaser asks. “Ten years from now, what difference does it make?” replies the clerk. “Well,” says the car-buyer, “the plumber’s coming in the morning.”

Another joke Reagan liked to deliver summed up his thoughts well. Two Russians are walking down the street, and one says, “Comrade, have we reached the highest state of communism?” “Oh, no,” the other replies. “I think things are going to get a lot worse.” (more…)

Blog author: jballor
posted by on Tuesday, December 4, 2007

Many of us have yet to finalize plans for our Christmas decorating this year. If you haven’t yet decided what kind of tree to put up, consider the truly environmentally-friendly choice: cutting down a live tree.

While that might sound counter-intuitive at first blush, the fact is that the alignment of consumer demand for live trees combines with the environmental interest in growing them to create a powerful alliance.

“Buying a real Christmas tree is the next ‘green decision’ the public can make,” said Mike Bondi, University of Oregon Environmental Science professor. “In fact, a real tree is the safest choice since the tree is helpful to the environment from the time it is planted right up to the recycling process.”

This isn’t your only ‘green’ option this year.

Industry trade groups are also touting live trees as the next “green” thing, including special labeling for trees grown in a particular way. Gayla Hansen, Pacific Northwest Christmas Tree Association president, says that when you buy a live tree, typically “you’re helping independently owned, family farms.” One way to ensure that there will be lots of evergreen trees grown around this country for years to come is to have a booming and consistent consumer demand for such trees.

This is a clear case of fiscal incentive combining with an environmental interest to create a synergy of economic and ecologic good. We have good reason to think, therefore, that economic and environmental concerns shouldn’t be viewed as polar opposites, but rather complementary aspects of the same basic issue.

A Norfolk Island Pine.

While a live tree is maturing, it takes in CO2 and produces oxygen, in addition to providing natural wildlife habitat. And when the Christmas season ends, trees can be easily mulched or composted (HT: The Evangelical Ecologist).

You might even choose to buy a tree that you can re-plant after its indoor use is finished. When I lived in Virginia where the climate was more temperate than here in Michigan, my mother and I often would reuse a Norfolk Island Pine (which admittedly sometimes looked like a Charlie Brown tree).

When there is reliable consumer demand for a product, there is additional incentive to motivate producers to have a sustainable source to meet that demand. That’s as true for Christmas trees as it is for African Blackwood (a preferred source for many woodwind instruments, including the bagpipe).

Washington Post columnist Robert J. Samuelson discusses a new book on economic history that looks at the poverty problem from the perspective of “nature vs. nurture.”

Comes now Gregory Clark, an economist who interestingly takes the side of culture. In an important new book, ” A Farewell to Alms: A Brief Economic History of the World,” Clark suggests that much of the world’s remaining poverty is semi-permanent. Modern technology and management are widely available, but many societies can’t take advantage because their values and social organization are antagonistic. Prescribing economically sensible policies (open markets, secure property rights, sound money) can’t overcome this bedrock resistance.

“There is no simple economic medicine that will guarantee growth, and even complicated economic surgery offers no clear prospect of relief for societies afflicted with poverty,” he writes. Various forms of foreign assistance “may disappear into the pockets of Western consultants and the corrupt rulers of these societies.” Because some societies encourage growth and some don’t, the gap between the richest nations and the poorest is actually greater today (50 to 1) than in 1800 (4 to 1), Clark estimates.

Samuelson notes that “Clark’s theory is controversial and, at best, needs to be qualified.” In his column, The Global Poverty Trap, Samuelson summarizes Clark’s view: “Capitalism in its many variants has been shown, he notes, to be a prodigious generator of wealth. But it will not spring forth magically from a few big industrial projects or cookie-cutter policies imposed by outside experts. It’s culture that nourishes productive policies and behavior.”

In my three and a half years as a student at Asbury Theological Seminary, I encountered more anti-capitalist rhetoric than I may have experienced in my entire life up to that point. Before Asbury, I attended a state and secular university, Ole Miss, where socialist propaganda was largely out of fashion.

Acton President Rev. Robert Sirico is quoted in a new piece titled, “The Religious Left, Reborn” by Steven Malanga. The article appears in the autumn issue of City Journal. Rev. Sirico notes the influence of unions and left wing clergy on young seminary students:

Younger seminarians may be particularly receptive to such experiences, Seminarians are preaching all the time, and if they don’t have an economic background, it’s easy for them to fall into the fallacy of the Left that our economy is a zero-sum game that demands conflict between business owners and workers.

This influence was especially evident at Asbury, which is an evangelical seminary and originally founded to combat the rise of liberal theology. Some new students at the school began to associate justice with wealth redistribution. This transformation in thinking often occurred after students were required to take a required class Kingdom, Church, and World. In this class, business, profit, entrepreneurs, and chief executive officers were often used as examples of anti-Christian behavior.

The free market was also seen as a system that subjugated labor, and especially third world nations. On occasion in Kingdom, Church, and World, I tried to defend the free market and was rebuked by my professor who told me, “Ray … capitalism is an enlightenment construct and not a Christian value.” Fortunately, this rebuke did not convince me that a command economy or a socialist-Marxist construct was better than the free market.

Another issue raised in the City Journal piece is the use of clergy by labor to advance its agenda. Many people who attend a mainline protestant church in America are very aware of this tactic, especially if they hold a differing opinion. Malanga declares:

The Wayne State University Labor Studies Center’s “activist handbook” advises living-wage campaigns always to put religious leaders out front. “As soon as you have clergy arguing for something called a ‘living wage,’ you’ve lost the battle if you’re representing businesses.

Malanga does an exceptional job at pinpointing the real reason why poverty plagues many people in the U.S. Quoting Michael Novak, he notes:

By contrast, observes Catholic neoconservative writer Michael Novak, research demonstrates that the way out of poverty for most Americans is to make a few simple life choices. “Some 97 percent of those who complete high school, stay married (even if not on the first try), and work full-time year-round (even at the minimum wage) are not poor,” Novak points out. “Nearly all poverty in the United States is associated with the absence of one or more of these three basic accomplishments”—not with insufficient social spending or a lack of economic opportunity.

Family stability, education, and a sound moral fabric can never be overestimated as elements necessary to escape poverty and create economic opportunities. What was so perplexing about the economic views of some students and professors in seminary was that they did not necessarily regard socialism as a negative. The Church would be wise to do its best at helping and encouraging those in need, instead of rallying to the aid of class warfare tactics already deeply entrenched in partisan politics.

Blog author: jballor
posted by on Thursday, October 4, 2007

The Free Exchange blog at Economist.com (HT) concludes a long and thoughtful post on fair trade, specifically in response to this recent NYT article, “Fair Trade in Bloom,” by wondering:

And how does this affect coffee supply? If a premium is available for fair-trade coffee, shouldn’t other growers enter the market to take advantage of it until the price of coffee is bid down to market levels, leaving total producer take–baseline coffee price plus premium–where it stood before? Such a scenario would also raise distributional questions. If higher coffee prices attract market entrants, then coffee-growing nations will shift resources into that sector, which might be good for grower incomes, but could potentially inhibit the development of other economic activities.

Not to take anything away from the stated goals of the fair-trade movement or the well-meaning consumers who wish to do better by farmers in poor countries. Still, in any economic process, it’s often difficult to foresee the second- and third-order effects of a decision. It will be interesting to observe how growth in fair-trade products changes the structure of markets for targeted commodities.

These sorts of questions and concerns are at the heart of my past criticisms of the fair trade movement.

To the extent that fair trade certifiers are simply acting as agents to inform consumers and guarantee certain practices, to which coffee buyers can freely respond either affirmatively or negatively, there’s no real complaint. Fair trade becomes a boutique item that has to compete in the free marketplace.

But to the extent that the fair trade movement reflects a more thoroughgoing critique of market forces and the “fairness” or justice of market prices, it becomes more problematic. It becomes an entirely different paradigmatic alternative to a system of free trade.

You’ve essentially replaced market prices with arbitrarily determined prices, which are subjectively determined to be “fair.” Compare this with the traditional and classic scholastic understanding of a “just” price as the market value in the absence of any and all fraud and conspiracy.

The Free Exchange blog piece points out all sorts of negative consequences of the change from “just” to “fair” prices, not least of which is the increasing saturation of an already saturated market because of artificial subsidization of a particular commodity. Furthermore, it’s hard to see how it makes good economic and environmental stewardship to subsidize and promote the growth and production of a commodity of which we already have too much.

For more on the disconnect between the intentions and the consequences of the fair trade movement, check out this study, “Does Fair Trade Coffee Help the Poor?”