Posts tagged with: economics

zero-sumWhy do liberal and conservative evangelicals tend to disagree so often about economic issues? This is the second in a series of posts that addresses that question by examining 12 principles that generally drive the thinking of conservative evangelicals when it comes to economics. The first in the series can be found hereA PDF/text version of the entire series can be found here.

In my first post, I covered the first four principles (#1 – Good intentions are often trumped by unintended consequences; #2 – Our current economic and historical context must be taken into account when applying Biblical principles; #3 – To exploit the poor, the rich need the help of the government; #4 – We love economic growth because we love babies). In this post I want to consider points #5 (The economy is not a zero-sum game) and #6 (Poverty in America is more often a matter of personal choice than structural injustice).

5. The economy is not a zero-sum game.

In a zero-sum game, one person’s gain (or loss) is exactly balanced by the losses (or gains) of the other participants. If the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero. It’s similar to dividing a pumpkin pie between five people: someone can only get a larger slice if someone else’s portion is smaller.

Many progressives in America, including far too many (though not all) liberal evangelicals, believe economics is a zero-sum game. They believe wealth, like a pumpkin pie, is fixed and that “there must be one winner and one loser; for every gain there is a loss.” This may be true in some economic systems, but it does not apply in free markets.

Jay W. Richards explains why free enterprise does not require that there be an economic loser for every economic winner:
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Blog author: jcarter
posted by on Wednesday, February 5, 2014

Over the past few months I’ve become obsessed with the idea that economic principles and arguments need to be explained more intuitively. I’ve assumed that the best way to approach that task would be to create robust metaphors that can be intuitively grasped. But a short parody video by Julie Borowski on the minimum wage has made me realize that sometimes all we really need is to show the obvious conclusions of policy positions.

Borowski’s presentation is silly, her style slapdash and homemade, and her argument well worn to the point of being trite. But there is something about having the argument presented visually that helps to put a fresh spin on an stale (and obvious) point.

Watch the video below and keep in mind that when she talks about “raising your own minimum wage” that this is exactly what we are asking the government to do on the behalf of low-skilled workers — often with the same results.

(Via: Cafe Hayek)

Blog author: mvandermaas
posted by on Thursday, January 30, 2014

Acton Institute Senior Editor Joe Carter joined host Darryl Wood’s Run to Win show on WLQV in Detroit this afternoon to discuss the issue of income inequality from a Christian perspective. The interview keyed off of Carter’s article, What Every Christian Should Know About Income Inequality. You can listen to the entire interview using the audio player below.

cpr uncle samThe Gateway Pundit gives us a list of “fun” facts about the economy. Of course, “fun” is used in an ironic way, which become clear when you look at just how dreary these facts are:

    • $1.8 Trillion: Cost Of ObamaCare’s Coverage Provisions From 2014 To 2023 (CBO, 7/30/13)
    • $1 Trillion: The Total Student Debt Held By Americans. (Josh Mitchell, “Student-Loan Debt Slows Recovery,” The Wall Street Journal’s Real Time Economics, 12/30/13)

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    Blog author: jcarter
    posted by on Thursday, January 23, 2014

    economistsIs the teaching of basic microeconomics — opportunity cost, supply and demand curves, incentives, etc. — a form of conservative propaganda?

    Most people, including almost all economists whether liberal or conservatives, would obviously say “no.” Yet many educators, as well as the general public, believe it’s true.

    In 1994, the Federal Goals 2000 Act expanded the national standards movement to include the teaching of economics in K-12 education. This led to the creation in 1997 of the Voluntary National Content Standards in Economics (VNCSE), which were organized around the core principles of the discipline. While there has been almost no controversy within the discipline over the VNCSE, notes Robert M. Costrell, the objections have come almost entirely from those outside the discipline. Costrell adds that, “There are many who believe that mainstream economics provides an unwarranted defense of free markets, or at least gives short shrift to the case for government intervention.”

    Joy Pullmann provides some examples of criticism from non-economists that Costrell chronicles:
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    100930_minimum_wageYesterday I mentioned that translating economic principles into intuitive concepts is one of the most urgent and necessary tasks to prevent such evils as harm to the poor. Today, William Poole provides an excellent example of what is needed with his “common-sense thought experiment” on minimum wage increases:

    Suppose Congress were to enact a minimum wage $50 higher than the current one of $7.25 per hour. Would a minimum of $57.25 reduce employment? I know of no economist who would assert a zero effect in this case, and recommend that readers ask their economist friends about this thought experiment. Assume that the estimate is that a minimum of $57.25 would reduce employment by 100,000. The actual number would be far higher but 100,000 will do for this thought experiment. Now, consider several other possible increases of less than $50. The larger of these increases would have substantial effects, the smaller ones smaller effects.

    But is there reason to believe that a minimum of $10 would have no effect? I have never seen a convincing argument to justify that belief. If you accept as a fact that a minimum wage of $57.25 would reduce employment, and you accept as a fact that some workers are currently paid $7.25 per hour, then logic compels you to believe that a small increase in the minimum wage above $7.25 will have at least a small negative effect on employment.

    The only escape from this logic is to believe that there is a discontinuity in the relationship between the minimum wage and employment. No one has offered evidence that there is a discontinuity at a certain minimum wage such that a minimum above that has an effect and one below does not.

    Far too often, advocates of minimum wage increases tend to dismiss such thought experiments before giving them due consideration. I think I know why. I don’t mean to cast aspersions on their motives (it certainly sounds like I’m about to cast aspersions on their motives, doesn’t it?), but I suspect they fear that admitting the undeniable logic of this reasoning will cause them to lose the moral high ground.
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    The_Moon_Is_A_Harsh_Mistress_fIt was once a common practice of saloons in America to provide a “free lunch” to patrons who had purchased at least one drink. Many foods on offer were high in salt (ham, cheese, salted crackers, etc.), so those who ate them naturally ended up buying a lot of beer.

    In his 1966 sci-fi novel, The Moon Is a Harsh Mistress, Robert Heinlein used this practice in a saloon on the moon to highlight an economic principle:

    “It was when you insisted that the, uh, young lady, Tish—that Tish must pay, too. ‘Tone-stopple,’ or something like it.”

    “Oh, ‘tanstaafl.’ Means ‘There ain’t no such thing as a free lunch.’ And isn’t,” I added, pointing to a FREE LUNCH sign across room, “or these drinks would cost half as much. Was reminding her that anything free costs twice as much in long run or turns out worthless.”

    “An interesting philosophy.”

    “Not philosophy, fact. One way or other, what you get, you pay for.”

    While the phrase “there ain’t no such thing as a free lunch” didn’t originate with Heinlein, he did help to popularize the concept. Nobel-winning economist Milton Friedman even used a variation for his 1975 book, There’s No Such Thing as a Free Lunch. Economist Campbell R. McConnel claims the phrase is the “core of economics“:
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    250px-Bankruptcy_monopolyAaron M. Renn’s reflections on the implications of Detroit’s bankruptcy are worth reading, especially as relate to the DIA, a topic of some previous interest over the last year or so:

    In the case of the DIA, the city owns the museum and the collection. Hence the question of whether or not art should be sold to satisfy debts. If it were typical separately chartered non-profit institution, this wouldn’t even be a question.

    At this point, I’d suggest cities ought to be taking a hard look at whether they own assets like museums, zoos, etc. that should be spun off into a separate non-profit entity. Keep in mind, the tax dollars that support the institutions can continue flowing to it. But this does protect the assets in the event of a bankruptcy.

    I think Renn’s advice is spot on, but I would also caution that Detroit’s experience might not be replicable elsewhere. As DIA director Graham Beal put it previously, the DIA’s dilemma is “singular and highly complicated.”

    How many cities own art collections worth potentially billions of dollars? Not too many, I’d suspect. And just what would the motivation be for city governments to reduce assets that could be leveraged in bankruptcy negotiations? What is in the best interest of the institution may not be in the interests of the city government and pensioners.

    The DIA might be something like Detroit’s “Get out of Bankruptcy Free” card. (Or if not “free,” then less scathed than otherwise. And that’s not counting the loss of cultural treasures, of course!) But even so it’s a card that can only be played once, and it’s a card that other cities might not have.

    Blog author: jballor
    posted by on Tuesday, January 7, 2014

    icon_22372Over at NRO, Thomas Sowell takes on what he calls the “lie” of “trickle-down economics.” Thus, writes Sowell, “the ‘trickle-down’ lie is 100 percent lie.” Sowell cites Bill de Blasio and Barack Obama as figures perpetuating the “lie,” along with writers in “the New York Times, in the Washington Post, and by professors at prestigious American universities — and even as far away as India.”

    But we should also note that “trickle-down theories” get a mention in Evangelii Gaudium, too: “some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world.”

    In the midst of his discussion, Sowell asks the following penetrating questions:

    Why would anyone advocate that we “give” something to A in hopes that it would trickle down to B? Why in the world would any sane person not give it to B and cut out the middleman?

    Whether or not there is such a thing as “trickle-down economics” in the discussions about the market economy, isn’t there something akin to what Sowell asks about at play in usual redistributive welfare programs? Don’t we “give” something to governmental bureaucracies and agencies in the hopes that they will in turn redistribute it (hopefully in more than a trickle) to the poor?

    And as for the “trickle” part of trickle-down welfare economics, Juan de Mariana long ago observed that “money, transferred through many ministers, is like a liquid. It always leaves a residue in the containers.” So why not give directly to the poor and cut out the middleman, as Sowell wonders?

    That’s precisely the discussion that’s been going on over at the Bleeding Heart Libertarians blog, among other places, about direct cash transfers to the poor instead of bureaucratic welfare programs. Head on over to the BHL blog to check it out.

    Blog author: jballor
    posted by on Monday, January 6, 2014

    The following is a letter written in response to a post from my friend Brad Littlejohn on the topic of the minimum wage

    Dear Brad,

    Thank you for your thoughtful and substantive engagement on the question of the minimum wage. I don’t think the conversation we had on Twitter earlier did justice to your work here, so I’m offering this response in hopes of furthering the conversation. I hope you find it fruitful. I certainly have. I should also note that I have been assuming the context of policy proposals to increase the minimum wage at the federal level in the United States. There are certainly aspects of what we’re discussing that apply to a greater or lesser extent in other contexts and at other levels of government, but at the level of individual states, for instance, the stakes are somewhat reduced and ameliorated by the realities of federalism.

    You write that you “want to reflect a bit more fully on what’s wrong with one of the common conservative arguments against the minimum wage: that the laborer is only worth his productivity.” I have significant concerns with equating someone’s worth with the economic value of their labor in the marketplace. I do not argue that the laborer is only worth his or her productive work. I argue that a worker’s work is only valuable in a market setting insofar as someone is willing to pay for it. I agree that there is a subjective element to work that is in some ways intimately identified with and inseparable from the person doing the working. But I do maintain that the worker and the work can, and indeed must, be distinguished. Perhaps what we disagree about is that you think the wage someone is offered is primarily a signal about how much that person is valued. I think that the wage someone is offered is primarily a signal about how much that person’s work is useful to others.
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