Posts tagged with: free-market

Blog author: jballor
posted by on Tuesday, July 8, 2014

davebratIn a piece today for the NYT Magazine, economics reporter Binyamin Appelbaum examines David Brat’s fusion of faith and free-market economics. Appelbaum finds that mixture problematic, to say the least, but it’s hard to sort out whether it is the religious faith or the free-market sympathies that Appelbaum finds more troubling.

In the opening paragraph, Appelbaum asserts that before Brat’s rise to prominence “there was plenty of skepticism about whether he merited the label of academic economist.” Who these skeptics are, who knew so much about Brat “even before” his “out-of-nowhere” victory, we are simply left to ponder. It seems some of his colleagues at Randolph-Macon College now harbor such skepticism. (Brat is running against a Randolph-Macon sociologist, Jack Trammell. Brat once wrote that “Capitalism is the major organizing force in modern life, whether we like it or not. It is here to stay. If the sociologists ever grasp this basic fact, their enterprise will be much more fruitful.”)

Brat’s academic record is a wortwhile question to take up, and one that there has been a great deal of interest in following his primary victory. I, like many others, wanted to find out more, and went in search of Brat’s publications (with the help of one of our interns). I’ve had a chance to look at a few, and even turned up the paper on Ayn Rand that had gained such notice. The Rand paper turned out to be a co-authored piece with a student, and something which barely qualified as a poorly-edited introduction to a conference presentation. It is certainly not a smoking gun for tracking down Randian sympathies.

The problem with Appelbaum’s piece isn’t that he is asking questions about Brat’s academic record. These questions should be asked. The problem is the tone of Appelbaum’s inquisition and his presumption against the coherence of Brat’s position. The sarcasm oozes from Appelbaum’s prose: Brat “is certainly not in danger of winning a Nobel Prize.” Likewise Brat has written “discursive papers devoid of math,” “cited Wikipedia as a source,” and “never been published in a significant journal.”
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[Part 1 is here.]

Some might answer any defense of the free economy by pointing to the housing and financial crisis that came to a head in 2008, holding it up as proof positive the free economy is a wrecking ball swinging through communities and leaving all manner of economic and cultural destruction in its wake. The financial crisis did enormous damage, but the major drivers of the crisis were a series of public policies that manipulated the market in pursuit of certain desired ends.

It all began modestly enough. The federal government built incentives into the tax code in favor of taking out a home mortgage. Many local governments also provide property tax breaks to home owners unavailable to renters. While people who are forced by circumstances to rent might question the fairness of such tax breaks, these measures are seen by most as relatively benign. Eventually, however, other top-down manipulations of the housing market were piled on top of these tax breaks.

The U.S. government offered implicit backing to mortgage giants Fannie Mae and Freddie Mac so that the companies understood that if they got into financial trouble, Washington would bail them out. This allowed Fannie and Freddie to offer low interest home loans to high risks borrowers, since the companies knew the government would come to their rescue if too many of these borrowers started defaulting on their loans.

The government also passed regulations that actually pushed mortgage companies, including Fannie and Freddie, to provide home loans to people with bad credit—subprime loans.

Finally, (more…)

Repurposed library card catalog

Repurposed library card catalog

I am not an economist. Truth be told, I only took one class in economics as an undergrad. However, I’ve learned a lot in the past few years, and one of the things I’ve learned is that most people don’t understand economics.

Pascal-Emmanuel Gobry knows this as well, and explains it far better than I could. In today’s Forbes, Gobry breaks down the understanding of economics into two broad camps: the “productivist” view and the “creativist.” First, the productivist:

Violently compressed, the productivist view of the economy holds that an economy works because it gives people stuff to do and stuff to buy. The reason why an economy which hums along hums along is because it produces enough stuff and people have enough money to buy that stuff so that people buy stuff and that gives jobs to the people who produce stuff, and in turn the stuff that is produced makes people want to buy them. To the productivists, the key thing is to keep the machine running and, hopefully, make it run faster, and more efficiently. But, fundamentally, what makes the economy run is this consumerist dynamic.

This, Gobry says, is the way most people – even economists – understand economics. It’s right in the short-term, but flawed. This viewpoint holds that economics is merely an endless cycle of buying and selling. As long as there is products are made, bought and sold, everything should be okay. (more…)

Calvin_Coolidge_and_Israel_Moore_Foster“The Power of the Moral Law” is the title of an address delivered by Calvin Coolidge at the Community-Chest Dinner in Springfield, Massachusetts on October 11, 1921. Published in The Price of Freedom, the text is only available online through Google Books.

Coolidge’s main point in his remarks was to reinforce the truth that it is prosperity not grounded in a deeper meaning that threatens our American Republic. Displaying his conservative thought, he challenges materialism of government interventionists and reminds proponents of business and the market that material success alone is insufficient. True progress must have a deeper foundation.

There are many lines that stand out in his address, but perhaps few stand out more than this simple sentence: “Ideals and beliefs determine the whole course of society.” Currently, we see this playing out powerfully in our culture today. The ideals that have held our Western and American civilization intact for centuries have largely eroded. Ideals and commonly held standards, especially in the academy, are attacked as backwards and oppressive.
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downloadIn his latest column for National Review, Jonah Goldberg notes the difference between being pro-business and pro-market and says the GOP can’t have it both ways anymore:

Just to clarify, the difference between being pro-business and pro-market is categorical. A politician who is a “friend of business” is exactly that, a guy who does favors for his friends. A politician who is pro-market is a referee who will refuse to help protect his friends (or anyone else) from competition unless the competitors have broken the rules. The friend of business supports industry-specific or even business-specific loans, grants, tariffs, or tax breaks. The pro-market referee opposes special treatment for anyone.

Politically, the reason the lines get blurry in good times and bad is that in a boom, the economic pie is growing fast enough that the friend and his competitor alike can prosper. In bad times, when politicians are desperate to get the economy going, no one in Washington wants to seem like an enemy of the “job creators.”

Goldberg is absolutely right about the difference being categorical. As economist Arnold Kling has helpfully outlined, support/opposition to markets and business gives us four categories:
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Pope Francis

Pope Francis

In today’s New York Post, Acton’s Michael Matheson Miller discusses Pope Francis’ views on poverty, in light of the pope’s upcoming meeting with President Obama. Miller reminds the reader that the pope is not an economist or a politician. Trying to view him through that type of lens is a mistake, says Miller.

Pope Francis is not an economist or technocrat laying out policy; nor does he see the government as the primary solution to all of our problems. He is a pastor exhorting us to take seriously the “joy of the Gospel” and to integrate it into every aspect of our lives, including economics.

I think it is fair to say that some of the pope’s words on economics lacked precision, yet his comments about the corrosive effects of consumerism and the exclusion of the poor are incisive.

Miller acknowledges that the  pope remains skeptical about free markets, which is problematic, given how much free markets have to offer the poor.

In La Cava, an impoverished neighborhood on the outskirts of Buenos Aires, I spoke with a pastor and a local city councilman. They explained that within La Cava there is no private property, and no rule of law. The police don’t even go inside, but only drive around the perimeter. (more…)

Who is the biggest enemy of the free market system? The late Milton Friedman, one of the 20th century’s most prominent free market champions, had a surprising answer: the business community.

Economist Arnold Kling explains why support for markets and business are not the same thing:
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liberal-conservativeWe read the same Bible and follow the same Jesus. We go to the same churches and even agree on the same social issues. So why then do liberal and conservative evangelicals tend to disagree so often about economic issues?

The answer most frequently given is that both sides simply baptize whatever political and economic views they already believe. While this is likely to be partially true, I don’t think it is a sufficient explanation for the views of more thoughtful and sophisticated evangelicals (which naturally, dear reader, includes you and me).* Even if we start with our naturally acquired political orientation, our engagement with the Bible tends to have a dialogical effect, causing us to modify and rethink our economic views in light of principles we discern from Scripture.

Because we conservatives and liberals come to different conclusions, though, one side will be right and the other wrong (or at least more right and more wrong than the other). We all believe our views on economics are true, which is why we are justified in holding these beliefs and think those who disagree are necessarily wrong. That is just how belief works.

But we often don’t have a sufficient depth of understanding about each others fundamental economic beliefs to know why exactly we come to such different conclusions. Too often we express disagreements about policy without comprehending what guiding principles are motivating our differences of opinion.
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Blog author: jsunde
posted by on Tuesday, December 31, 2013

????????????????????????????????????In a recent piece for the Wall Street Journal, Emory economics professor Paul H. Rubin makes an interesting argument about the way economists tend to over-elevate and/or misconstrue the role of competition in the flourishing of markets.

“Competition plays a supporting role,” he argues, but “cooperation makes markets thrive”:

The way we use the term competition instead of cooperation fosters anti-market bias. “Competition” carries a negative connotation because it implies winners and losers, and our minds naturally feel sympathy for the losers. But cooperation evokes a positive response: It’s a win-win situation with no losers. And in fact the word competition doesn’t depict market activity as aptly as the word cooperation. The “competitive economy” would be better described as the “cooperative economy.”

Consider the most basic economic unit, the transaction. A transaction is cooperative because both parties gain from a voluntary exchange. There is competition in markets, but it’s actually competition for the right to cooperate. Firms must compete for the privilege of selling to consumers—for the right to cooperate with consumers. Workers compete for the right to cooperate with employers. Competition matters because it ensures that the most efficient players will gain the right to cooperate on the best terms available. But competition plays a supporting role, while cooperation makes markets thrive. (more…)

Blog author: mvandermaas
posted by on Friday, December 13, 2013

Acton Institute Director of Research Samuel Gregg sat down with Daniel McInerny, the Editor of the English edition of Aleteia, to discuss his latest book, Tea Party Catholic. McInerny and Gregg explore what Catholics should believe regarding limited government, free markets and capitalism. Check out Sam’s book here, and view the interview below.