Posts tagged with: political economy

On Nov. 28, the Canada-based Fraser Institute released the eighth edition of its annual report, Economic Freedom of North America 2012, in which the respective economic situation and government regulatory factors present in the states and provinces of North America were gauged.

Global studies of economic freedom, such as the Heritage Foundation’s 2012 Index of Economic Freedom and the Fraser Institute’s Economic Freedom of the World 2012, rank the United States and Canada as two of the most economically free countries in the world. But, as data from the North America report shows, not all sections of the countries are experiencing an equal level of economic freedom and it is important to look at areas in which this falters.

States and provinces were evaluated and ranked within three categories: 1) Size of Government; 2) Takings and Discriminatory Taxation; and 3) Labor Market Freedom. The Canadian province, Alberta, claimed the top spot as most economically free, followed closely by Delaware. New Mexico placed 59th, making it the least economically free state, followed by Prince Edward Island of Canada, notching the rank of least economically free area in North America (between the United States and Canada).

The Economic Freedom of North America 2012 report draws a clear link between prosperity and economic freedom, through a comparison of states and provinces. “In the United States, the relatively free Georgia does much better than the relatively unfree West Virginia. In Canada, British Columbia, where economic freedom has been increasing in recent years, has been experiencing considerably greater growth on a per-capita basis than Ontario, where economic freedom has been decreasing in recent years.” (more…)

Is spartan austerity driving us over the fiscal cliff?

The latest step in the budget dance between House Republicans and the White House has to do with where tax increases (or revenue increases in general, depending on what is called what) fit with a deal to avoid the so-called “fiscal cliff.” As Napp Nazworth reports, President Obama has apparently delivered an ultimatum: “there would be no agreement to avert the ‘fiscal cliff’ unless tax rates are increased on those making more than $250,000 per year.”

On one level it seems reasonable to talk about addressing a deficit from both directions: cutting spending and raising revenue. But as Ray Nothstine put it so well earlier this week, without some structural (and cultural) changes to the way Congress works, it would be insane to think that giving politicians more money is going to change how they spend it. One definition of insanity is doing the same thing over and over again and expecting a different result. Historically “politicians spend the money as fast as it comes in – and a little bit more.” Without some kind of balanced budget agreement, something with real teeth, why should we think things will be any different this time around? (I’ve talked about a more promising “both/and” budget solution before.) As Ray and I have concluded elsewhere, “In the case of the federal spending, the government has proved to be untrustworthy with very much. It’s time to see if the politicians in Washington can learn to be trustworthy with less.”
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In this week’s Acton Commentary, I take a look at the relationship between sacrifice and self-interest. One of the common complaints against market economies is that they foster selfishness.

But as Paul Heyne points out, it is crucially important to distinguish between self-interest and selfishness: “Many of the most eminent and sophisticated theorists in the economics profession make no effort to distinguish between self-interest and selfishness or between rational behavior and greedy behavior.” The failure to make such a distinction leads to some pretty strange conclusions about the motivations behind human behavior. If you want to know why people work, just look at what they do with the money they earn.

To this end, I also highlight the perspective of Herman Bavinck, who describes the rhythmic relationship between the spheres of family and work:

Through the family God motivates us to work, inspiring, encouraging, and empowering us to work. Through this labor he equips us to survive not for the sake of satisfying our lusts but for the sake of providing for our family before God and with honor, and also to extend the hand of Christian compassion to the poor.

We go out to work to provide for our families, and we return home from work to enjoy and share the fruits of our labors. We do this daily, in fact. There is a deeply intimate connection here in the cycle between home and work, the dual aspects of the cultural mandate: Be fruitful and multiply and fill the earth and exercise dominion over it.
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After every electoral defeat—whether suffered by Republicans or Democrats—a period of hand-wringing and soul-searching inevitably develops in the days and weeks after the election. Journalists and politicians take to print to explain “What went wrong” and “Here’s what should be done differently.” Although the solutions are almost always what the pundits were saying before the election, the exercise in self-reflection is, on the whole, a much needed corrective. But too often the advice tends to be of the always terrible, “We should be more like the party that won.”

A prime example is an article today by Wick Allison, publisher of The American Conservative. Allison voted for Obama in 2008 and hinted that he would do so this year too. So it probably shouldn’t be surprising that that his economic solution looks similar to what President Obama would endorse.

Allison says that the “Republican Party can appeal to ‘Judeo-Christian values’ as long as the sun shines and their voices hold out. But they’ve abandoned the most basic moral value of all: fairness.” While he may have a valid point, Allison muddies the argument by his misunderstanding of both taxation and fairness:

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This week I wrote about the dignity of paying taxes (among other ways of contributing to social flourishing). But as we know, not all taxes are created equal. Indeed, as Antony Davies and James Harrigan write this week at US News, “Politicians are in the business of buying votes with tax breaks and sweetheart deals for their preferred constituencies, and they have to offset these deals by taxing disfavored constituencies at increased rates. The longer this game is played, the more convoluted the tax code becomes.”

As I argued previously at Capital Commentary, this amounts to a kind of back door social engineering (as well as playing favorites, picking winners, and so on). The fundamental purpose of taxation is not to buy votes and give preference to lobbies and special constituencies. Instead, as I write, “The point of taxation is to raise funds to enable the government to fulfill its moral, political, and social responsibilities.” Such a view is ultimately at odds with a Utilitarian theory, which considers taxation to be a tool rather used “to maximize overall well-being in society.” Matthew Weinzierl argues for greater attention to a theory of Equal Sacrifice, which on Weinzierl’s account “assumes individuals have the first claim to their output, and that they voluntarily agree to form societies that collect taxes in order to purchase public goods.”
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Blog author: jballor
Friday, September 28, 2012
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Article: “Big Questions and Poor Economics”
James Tooley. “Big Questions and Poor Economics: Banerjee and Duflo on Schooling in Developing Countries.” Econ Journal Watch 9, no. 3 (September 2012): 170-185.

In Poor Economics, MIT professors Abhijit Banerjee and Esther Duflo set out their solutions for global poverty. Their key premise is that development experts have been sidetracked by the “big questions” of development, such as the role of government and the role of aid. This approach, they say, should be eschewed in favour of adopting carefully tested “small steps” to improvement. The book ranges widely, covering topics such as food, health, family planning and microfinance. Here I treat only their arguments on education in developing countries. Poor Economics points to evidence that shows that governments have not been successful in bringing quality education to the poor. Nevertheless, the authors bring their own big-think judgments to suggest why, despite the evidence, governmentally owned and operated schooling should remain central. Part of their own evidence concerns how private schooling, including for the poor, is burgeoning and outperforming government schooling. But private education cannot be the solution, they argue, because private schooling is not as efficient as it could be. The problems identified by Banerjee and Duflo are, however, clearly caused by bad public policy. I suggest that development economists are quite justified in forming and exercising judgment on the big questions, and that when they do exercise such judgment they should be aware that they are doing so.

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Blog author: jballor
Wednesday, September 19, 2012
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Tyler Cowen fielded an interesting topic on his blog last week, focusing on economists who are (or were) clergy.

There’s an interesting list, including notables like the Salamancans, Paul Heyne, and Heinrich Pesch. I didn’t realize that Kirzner is a rabbi. Malthus is named first, but as the initial comment on Cowen’s post notes, anytime you mention Malthus you should mention Anders Chydenius in the following breath.

How about Edmund Opitz of the Foundation for Economic Education, or even Rodger Charles, S.J., or James Schall? It depends largely on how narrowly you define being an “economist,” of course, as the inclusion of the Salamancan theologians indicates. Being a moral theologian who focuses on ethics and economics might not be enough to qualify. Does being a political philosopher/political economist count? But certainly A. M. C. Waterman should be noted.

And of course it also depends on how narrowly you define “clergy.” As Asher Meir notes in the post, how about non-ordained academic theologians, or economists with theological training (or theologians with economic training)? Then the list would start to get very long, indeed.

Any other names come to mind?

Conference: “Global Commodities: The Material Culture of Early Modern Connections, 1400-1800″

Global History and Culture Centre – University of Warwick – 12-14 December 2012. This International conference held at the Global History and Culture Centre of the University of Warwick seeks to explore how our understanding of early modern global connections changes if we consider the role material culture played in shaping such connections. In what ways did material objects participate in the development of the multiple processes often referred to as ‘globalisation’? How did objects contribute to the construction of such notions as hybridism and cosmopolitanism? What was their role in trade and migration, gifts and diplomacy, encounters and conflict? What kind of geographies did they create in the early modern world? What was their cultural value vis-à-vis their economic value? In short, this conference seeks to explore the ways in which commodities and connections intersected in the early modern world.

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On FoxNews.com, Rev. Robert A. Sirico looks at the recent anti-capitalism, anti-NATO protests in Chicago:

In countless debates and conversations with modern proponents of social justice, I have noticed that they are less interested in justice than in material equality. They borrow the language of justice and the common good but have either forgotten or rejected the classical meanings of those terms.

In the classical tradition of reflection on justice (especially seen in Aristotle, St. Thomas Aquinas, and their intellectual descendants) it is clear that inequality—in the sense of unequal wealth or social status—is mostly compatible with justice, because justice is “to give to each his due.”

What one is due, of course, differs from person to person—in addition to those things due everyone: life, dignity, and liberty for example.

When we speak of the idea of the common good, we need to be open-minded about the most likely way to bring it about. The common good is, after all, a range of conditions, not a set of policies. It cannot be achieved by way of the “commonality of goods” proposed by socialists, but rather through the institutions that the socialists worked so hard to discredit.

Read “There is no ‘social justice’ without economic freedom” by Rev. Robert A. Sirico on FoxNews.com.

On The American Spectator, Acton Research Director Samuel Gregg observes that, “as evidence for the European social model’s severe dysfunctionality continues to mount before our eyes, the American left is acutely aware how much it discredits its decades-old effort to take America down the same economic path.” Against this evidence, some liberals are pinning the blame on passing fiscal and currency imbalances. No, Gregg says, there’s “something even more fundamental” behind the meltdown of the post-war West European social model. (Thanks to RealClearWorld for linking).

… this reality is that the Social Democratic project is coming apart at the seams under the weight of the economic policies and priorities pursued by most Social Democrats (whatever their party-designation) — including the American variety.

From the beginning, post-war Social Democracy’s goal (to which much of Europe’s right also subscribes) was to use the state to realize as much economic security and equality as possible, without resorting to the outright collectivization pursued by the comrades in the East. In policy-terms, that meant extensive regulation, legal privileges for trade unions, “free” healthcare, subsidies and special breaks for politically-connected businesses, ever-growing social security programs, and legions of national and EU public sector workers to “manage” the regulatory-welfare state — all of which was presided over by an increasingly-inbred European political class (Europe’s real “1 percent”) with little-to-no experience of the private sector.

None of this was cost-free. It was financed by punishing taxation and, particularly in recent years, public and private debt. In terms of outcomes, it has produced some of the developed world’s worst long-term unemployment rates, steadily-declining productivity, and risk-averse private sectors.

Above all, it slowly strangled the living daylights out of economic freedom in much of Europe. Without Germany (which, incidentally, also engaged in welfare reform and considerable economic liberalization in the 2000s), it’s hard to avoid concluding that Social Democratic Europe would have imploded long ago.

Read “The American Left’s European Nightmare” by Samuel Gregg on The American Spectator.