The Public Discourse recently published my article, Rethinking Economics in the Post-Crisis World. Text follows:

In the wake of the financial crisis, we need an economics with greater humility about its predictive power and an increased understanding of the complicated human beings who, when the discipline is rightly understood, lie at its center.

Apart from bankers and politicians, few groups have received as much blame for the 2008 financial crisis as economists. “Economists are the forgotten guilty men” was how Anatole Kaletsky, former economics editor and current editor-at-large for the London Times, put it earlier this year when explaining why “a bank with just $1 billion of capital [would] borrow an extra $99 billion and then buy $100 billion of speculative investments.”

Greed and sheer imprudence played a role, but so too, Kaletsky argued, did those (unnamed) economists who posited that their models proved that events such as the collapse of Lehmann Brothers in 2008 or Long Term Capital Management in 1998 were mathematically likely to happen once every billion years.

Kaletsky’s broader point was that contemporary mainstream economics had been sufficiently discredited by the financial crisis that the entire discipline required what he called an “intellectual revolution,” or it risked being dismissed as a rather suspect sub-branch of statistical analysis and mathematical modeling.

Kaletsky is hardly alone in arguing that economists need to rethink key aspects of their discipline. Though unwilling to call for a total paradigm shift, the Economist recently opined that the financial crisis has raised profound questions of coherence about two areas of economics: macro-economics and financial economics. “Few financial economists,” the Economist observed, “thought much about illiquidity or counterparty risk, for instance, because their standard models ignore it.” Likewise, the Economist commented, “Macroeconomists also had a blindspot: their standard models assumed that capital markets work perfectly.”

All this is certainly true. But the key expression to note here is “their standard models.” (more…)

Everybody realizes that the current healthcare system in the United States has problems. Unfortunately, much of the discussion about what to do rests on a false premise. The argument goes something like this: Our current free market system is not working: health care costs are astronomically high, and close to 50 million people aren’t insured. Maybe it’s time to let the government try its hand.

But we don’t have a free market health system; we have a highly managed, bureaucratic system that lowers the level of health care and increases costs.

As Acton’s Michael Miller argues in a new video short, the government is already involved in healthcare, and this is part of the problem. Getting the government more involved will only make the situation worse.

Blog author: ken.larson
Monday, July 27, 2009
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In the musical Camelot which first appeared on stage in 1960, Mordred — the antagonist, evil traitor and eventual deliverer of a mortal wound to King Arthur — appropriately lauds the antithesis of what good men are to pursue with his signature song titled “The Seven Deadly Virtues” the first line of which ends “those nasty little traps.”

The lyrics are clever. “Humility,” Mordred tells us, “means to be hurt. It’s not the earth the meek inherit but the dirt.” Hmmm. And the opposite of humility is — come on, all together — pride.

I had never heard of Harvard’s Professor Henry Lewis Gates Jr. until last week, but as with so many academics a quick click or two on an “.edu” web site, first to “Academics” then “Departments” and “Faculty” and voila, you’re opening up their cv online. That’s what I did this past week.

The nature of a resume or as they refer to them in academia and government work “curriculum vitae” — cv — can take lots of different forms. I’m used to seeing resumes from business people where you hope to find succinct goal/results stuff. Budgets are quoted to give the reader a sense of the scale and scope of the experiences; or growth of sales or start up schedules that paint a person who’s a can do, storm the barricades of commerce kind of guy/gal — if they’re there. I suggest resumes not exceed three pages.

Henry Gates’s cv is 27 pages long. While I’m sure there’s a condensed version somewhere you just have to skim through the document to note how he has spent his life. On the surface it’s been charmed and at variance with the titles of his articles. It’s all there, nothing it seems was deemed editable. But I focused on one thing in particular: Gates co-authoring of a book with Cornel West titled The Future of The Race. Who is Cornel West you ask? He’s the professor who left Harvard during the tenure of Larry Summers after having been asked to show up at his classes instead of sending in a grad student. After all Summers argued, Harvard was paying West nearly $400,000 and expected the man to be on site and not at lecture dates or book signings. I wonder what a faculty:student ratio at Harvard really means? In the end, West went to Princeton in a huff.

Now, back to the story.

You Are What You Eat; Play As You Practice; Your Friends Define You. These are phrases that once were needle pointed on course linen. These days they aren’t often repeated anywhere. Also neglected are the virtues they recall. The intellectual virtues are Art and Prudence and are characterized by an ordered approach toward the good. The moral virtues include Justice, Temperance and Fortitude. And the theological virtues are Faith, Hope and Charity. If you’re a math geek you’ve counted eight, not seven in this list. Correct! Mordred was focussing as do a number of us on the “moral” virtues. They include patience, meekness, modesty, piety, gratitude, affability, abstinence, sobriety, chastity, self restraint. He obviously cherry picked his list. Not alone in that, eh?

Now let’s look at the past week of national humiliation on You-Tube. A Maryland Senator blasts a constituent who was arguing that he is able to pay for his own medical expenses by suggesting that if the man gets a bill from a doctor or hospital he’ll ignore it. A junior Senator from California suggests that the President of the National Black Chamber of Commerce get in line with other black organizations and support the Obama energy plan.

Then President Obama in a hour long “news conference” suggests that doctors in the U.S. trump up ways to treat children in order to line their pockets with fees for service; and ends the week by suggesting — some might say profiling — that a police officer’s response to a suspected burglary was done stupidly.

All of this caused some to recall 2007 when the Obama campaign not wanting to be embarrassed, finally paid an assortment of parking tickets which had likely gone to “warrant” and dated back to the Presidential candidate’s student days at Harvard. Hmmm. What did that Maryland Senator accuse the constituent of?

My wife suggests that liberals often target behavior in others that they themselves are most guilty of. I’d say she’s on to something and it certainly includes ignoring the virtues. You pick which ones.

Dr. David Murray of Puritan Reformed Theological Seminary investigates the concept of “biblical fundraising,” reasons to continue to give in the midst of difficult economic times, in the latest edition of his vcast, “puritanPod.” Dr. Murray uses 2 Corinthians 9 as the basis for his brief but valuable message.

Check out the video here.

God is rational, and the universe is governed by unchanging natural laws instituted by Him. The Bible tells us in the Book of Genesis that “God created the heavens and the earth.” God is not arbitrary; the Bible also tells us that He is just and that He keeps promises to His people. The prophet Jeremiah tells us that God has established “ordinances of heaven and earth.” Since they come from a perfect lawgiver, we know that these laws do not change on a whim.

These beliefs were radical, and given historical trends in philosophy, they remain so. Pagans argued that truth exists, but that it is dependent on the will of the gods. Since these gods were capricious rulers of the universe, there were no unchanging laws that could be discovered by humans. In our own day, postmodern constructivist philosophers like Giambattista Vico also argue that objective truth is unknowable. For them, this is because truth is only accessible to humans insofar as we agree with something we have manufactured and labeled as the truth. As Vico put it, “the norm of the truth is to have made it.” If pure naturalism is correct and there is no role for God, then Vico can reasonably argue “the mind does not make itself as it gets to know itself and since it does not make itself, it does not know the genus or mode by which it makes itself.” After all, our ability to understand things as they truly are is difficult to argue in the absence of any reason to think that human reason itself is reliable.

Christianity offers just that reason by asserting two main points: that God has made the universe according to natural laws and that He has given humanity the means to understand them. As God asks Job, “Who endowed the heart with wisdom or gave understanding to the mind? Who has the wisdom to count the clouds? Who can tip over the water jars of the heavens when the dust becomes hard and the clods of earth stick together?” God gives understanding to the mind so that we may know Who has made the world and the universe as it is.

God intends for us to exercise our reason and seek to know reality. Jesus says that He is the Truth, and He promises His followers that “the truth will set you free.” The truth that Jesus speaks of is not, of course, purely scientific and rationalistic. It is the truth of the universe and of humanity. Pope Benedict XVI reiterates this in Caritas in Veritate, where he writes, “Truth, by enabling men and women to let go of their subjective opinions and impressions, allows them to move beyond cultural and historical limitations and to come together in the assessment of the value and substance of things.”

Since truth is objective, reason can discern it. Reason is the universal nature of humans, regardless of our race, culture, language, class, or religion. We all have access to the truth. In a world where subjective truths compete, humanity can no longer find common ground and rise above struggles for power and influence. The truth about humanity and natural reality becomes “Nordic,” “bourgeois,” “imperialist,” or “chauvinist.” The idea that truth is subjective does not set us free. It pits us against each other and fails to let us seek the truth.

Caritas in Veritate points out the dire social consequences: “Without truth, without trust and love for what is true, there is no social conscience and responsibility, and social action ends up serving private interests and the logic of power, resulting in social fragmentation, especially in a globalized society at difficult times like the present.” If we are to seek true solidarity and the creation of a humane world, we must commit ourselves to pursuing the truth. Otherwise, humanity’s divisions will only grow.

By choosing instead to follow constructivism, fundamentalism, fideism, and the consensus view of the truth, we are enslaving ourselves to error and cutting off the truth that unites us. We are also rejecting the duty that God has given us to use the gift of reason to seek Him out. Since this sin only gives us error in place of the truth about us and the universe we inhabit, it results in suffering, tyranny, and conflict.

The truth will set us free in the measure that we are willing to seek it as God commands us to, and in the measure that we reject anything less than the full, universal, reasonable nature that it has.

The Rome Reports news service recently interviewed me about the new social encyclical, Caritas in Veritate. Here’s the segment, and a transcript of the interview.

Rome Reports: Benedict XVI’s encyclical, Charity in Truth is already on the list of best selling books this month. In it, the pope proposes the steps to achieve a sound economy and to avoid another economic crisis in the future.

Kishore Jayabalan: I think he is trying to change our orientation from a moral and ethical perspective, and to address economic and social affairs from a more Catholic moral perspective, sometimes we think catholic morality only has to do with marriage and family issues, or only as something that we hear about on Sundays in church.

RR: Kishore Jayabalan is an economist who directs the Acton Institute in Rome for the study of religion and freedom. He says that one of the most important points the pope stresses in building a new economy is respecting peoples rights to initiative and property.

Jayabalan: What the document refers to as breathing space, you have to let people on the grounds of subsidiarity come up with their our solutions to their own problems, they can’t all be dictated from the top down.

RR: Benedict also says the new economy should entail that globalization be a process that pursues the common good.

Jayabalan: The second thing, is that the rest of us needs to realize that globalization is a process for the good that excluding people from globalization is simply a way of spreading poverty more broadly across the world, which goes against catholic social teaching.

RR: According to Jayabalan, to solve economic problems, the theological aspect must also be included. In his encyclical, the pope explains why a relationship between God and man gives people more freedom.

Jayabalan: It allows for more freedom because it tells us that there is a relationship that the state cannot enter into, and I think this is why the encyclical refers to religious freedom for the first time in a social encyclical.

RR: But Jayabalan says that above all else, the pope seeks to unite two concepts that are often separated, respect for life and social justice. He says the popes gift to President Barack Obama the encyclical Dignitas Personae on Bioethics– clearly shows his agenda.

Jayabalan: The pro-life people tend to be on the right politically and the social justice people tend to be on the left politically and pope Benedict is trying to get us to look beyond those old categories.

RR: In short, according to Jayabalan, “Charity in Truth” is a call to work together for social justice, a goal that cannot be realized without a profound respect for human life in all its stages.

Blue pill or red pill? No, it’s not the iconic scene from The Matrix, where Neo is given the choice of staying in his computerized dream world (blue pill) or leaving the Matrix and discovering reality (red pill). It’s President Obama boiling down the complex issue of health care reform on television last night: “If there’s a blue pill and a red pill, and the blue pill is half the price of the red pill and works just as well, why not pay half price for the thing that’s going to make you well?”

The Matrix: Blue Pill or Red Pill?

Washington Examiner columnist David Freddoso had this to say:

In last night’s press conference, President Obama seemed to be reliving that famous scene from The Matrix. The main character is offered a choice between a red pill that makes him see reality for what it is, and a blue pill that allows him to continue living in a pleasant world of illusions.

Last night, President Obama appeared to have taken the blue pill before his press conference. How else could he convince himself, the Congressional Budget Office’s numbers notwithstanding, that his health care reform bill will not increase both health care costs and the federal deficit? How else can he continue to make the argument that a massive expansion of government spending on health care will solve rather than exacerbate the current problems? How can he repeatedly express such absolute certainty that such a measure will easily pay for itself several times over in the long run? Why can he not at least acknowledge the possibility that it will become a costly and useless trillion-dollar boondoggle that follows in the footsteps of his stimulus package?

For an Acton Commentary on the problems with socialized medicine, see this piece by Dr. Donald Condit.

Also, Grace-Marie Turner, president of the Galen Institute, a health policy research organization, spoke at the Acton Lecture Series on the topic “Can We Repair What’s Wrong with our Health Care System through Christian Principles?” An online video of this excellent speech is available here.

We’ve said a lot already and will probably say a lot more about health care reform—its importance justifies the attention—but here are a few brief responses to President Obama’s remarks last night (based on the prepared notes posted at the White House web site).

If we do not reform health care, your premiums and out-of-pocket costs will continue to skyrocket. If we do not act, 14,000 Americans will continue to lose their health insurance every single day. These are the consequences of inaction.

I agree that reform is necessary. The potential for cost-savings by enhancing competitive incentives and bolstering individual responsibility is enormous. The proposed plans currently in congressional committees go the wrong way, and therefore, inaction is preferable.

If you already have health insurance, the reform we’re proposing will provide you with more security and more stability. It will keep government out of health care decisions, giving you the option to keep your insurance if you’re happy with it.

It is hard to believe that this claim is sincere. Obama has made a “government option” an essential element of any reform. A government option will almost certainly drive out private options, no matter how many promises concerning level playing fields are made. It seems reasonable to read this statement as, “If you’re very rich and money is no object, then you’ll be free to maintain expensive private insurance that contains all the special interest and ideology-driven mandates federal regulators will enact. Otherwise, you’ll be stuck with government health care.”

I have great health insurance, and so does every Member of Congress.

He’s on to something here. Federal employees don’t participate in Social Security, for example: they have a separate retirement program that invests actively in the stock market and delivers returns far superior to the New Deal dinosaur that the rest of us are compelled to fund [This claim in the original post is erroneous; see correction in comments below]. Any health reform plan must cover federal employees, including Congress. And no escape clauses (as in public schooling, which more than 4 in 10 congresspeople opt out of by sending their children to private schools): Members of Congress must be affected by health care reform in the same way that a majority of Americans are. So if a majority ends up covered by the public option, then every member of Congress must also be so covered (and no international medical tourism permitted).

A recent Fox News piece on President Obama’s “science czar,” John Holdren, makes for spooky reading, dramatizing where well-intended intellectuals can end up when they take a zero-sum view of our planet’s resources.

In a 1977 course book that Holdren co-authored with environmental activists Paul and Anne Ehrlich, the three make an extended case for aggressive global population control. As the Fox News article explains:

Holdren and the Ehrlichs offer ideas for “coercive,” “involuntary fertility control,” including “a program of sterilizing women after their second or third child,” which doctors would be expected to do right after a woman gives birth.

“Unfortunately,” they write, “such a program therefore is not practical for most less developed countries,” where doctors are not often present when a woman is in labor.

The Most Dangerous Game

The article provides a pdf of the relevant pages of the 1977 course book (go here). Reading these several pages makes it difficult to take seriously a statement by Holdren’s office that Dr. Holdren “does not now support and has never supported compulsory abortions, compulsory sterilization, or other coercive approaches to limiting population growth.” At best, a passage at the end of 788 and the beginning of 789 suggests that the three authors would happily opt for less coercive measures, provided those measures work to their satisfaction.

Holdren and the Ehrlichs are not alone. There’s a long history, dating back at least to the 1700s, of doomsters insisting that population growth coupled with a scarcity of natural resources will very soon ruin civilization.

What’s behind this pessimism, a pessimism apparently immune to contrary historical evidence? In Acton’s new Effective Stewardship DVD curriculum, soon to be released by Zondervan (go here), Acton president Rev. Robert Sirico puts the matter in philosophical and theological context. There he argues that the problem is rooted in a false anthropology, one in which the doctrine of the imago dei is eclipsed, and with it the powerful role of human creativity:

There are many people, including religious leaders, who say that the essential problem is a problem of resource, and that if it’s a problem of resource then it’s a problem of population. This is what I call humaniphobia.

The image in the humaniphobe’s mind is that the human person is one big mouth that is constantly ingesting, and then polluting.

On such a view, humans are the problem rather than the solution. The takeaway question is this: Do we really want to hand our health care over to the U.S. government when a science adviser like Holdren has the president’s ear?

Blog author: ken.larson
Wednesday, July 22, 2009
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In the July 22 Wall Street Journal, the editorial staff takes off on Congress for “bashing career colleges.” As a recruiter focusing primarily on manufacturing industries — where machines pound, pour, slit, weld, paint and deliver what the public demands and the guys up front have been able to book — I’ve noticed an increased lack of capable and eager young people for both the jobs on the shop floor and the ones in engineering.

The WSJ article suggests that career schools are looked at disparagingly by the state house and D.C. subsidy providers because they are mostly private and make profits. And I can testify to their being expensive because I’ve interviewed those who went to these schools for IT and “programming” training and have been told what their college loan balances are. They are not cheap at all. The larger question is why they have a place in the market.

At a high school I’m familiar with in southern California — I dare say at more than one — there is a thoroughly equipped wood shop. But the teacher on staff has only one course — CADD design. The machines are silent. And the same goes for many Catholic boy’s high schools that at one time filled the gap for a young man whose talents trended toward the engine of a car and not finding allusions in the poetry of Alexander Pope. “It’s all college prep now,” my very good Christian Brother friend informs me.

Well, if you read Charles Murray — I know, but let’s move past The Bell Curve for now, okay? — what you discover is a huge amount of research material that points toward an inescapable conclusion that not everyone should be going to college per se. “But, oh my God,” your wife intones, “what will they become without college?”

Those of you who’ve read my stuff over a period of time know I’m a movie guy. I periodically watch stories that give me an inspirational boost. In The Cowboys staring John Wayne, a rancher enlists the help of a dozen mostly pre-pubic young men from the town’s one-room school to help him drive his herd north for sale. It’s obviously a tough labor market. We learn it’s due to a gold rush. Wayne’s character doesn’t suffer fools easily but that’s not a bad thing and the boys are quickly transformed with the assistance of the hired cook played by Roscoe Lee Browne.

Along the way they meet a fellow who lies, has been in prison, tried gold but it required digging and has veered toward something he’s good at — taking other people’s property. His end is just. These are not boys anymore.

Murray suggests that the regime of college — and here let me be clear that I’m talking about a curriculum that presupposes a high school of preparation — is not suited to more than 30% of the population. While our culture has embraced “thinking man” and “debunker man” we’ve allowed “working man” to be neglected and looked down upon. That’s a bad thing. We’re not all rocket scientists and we all can’t get jobs working on rockets. And I have to tell you from experience, even jobs in exciting innovative industries can be menial to some who work there. I’ve listened to them complain.

When Leo XIII issued Rerun Novarum in 1891, a transitioning world and industrialization were in full stride. A division of labor was developing as processes became more complex than plant-harvest-eat. And we know markets are slow to adapt and unless all of us are on the straight and narrow — yea, lots of luck — we’re likely to meet guys like the one in the movie who takes “other people’s property” for a living. The operative word here is property because our talent, our time and what it provides us is OUR property. But this works only in a world where certain truths are known and become part of our formation as persons.

For me in my clumsy way — this is my understanding of Benedict’s reminder in Caritas in Veritate. And my illustration of the cattle drive strives to incorporate an example of subsidiarity — in this case a small family business. Just look at all the things it provided those boys, even the ones who didn’t make it home.

So, what do we do with Murray? The WSJ people are assuming that the only place we have to go is from where we are. But that means were laying courses on top of a foundation — oh God, I’ve used Obama’s illusion — that may not have any reinforcing steel in it. You know, lots of soil is expansive and steel helps tie things together. [Does "How firm a foundation, Ye Saints of the Lord" come to mind?]

It’s very illuminating to read letters from our Civil War soldiers to loved ones. They’re eloquent and most contain allusions found within the good book they had learned to read at home. They were mostly farmers and one among many children. And their letters are far better written than most emails I receive and covering letters sent to me with resumes from many who think they’re ready for the world of work.

We need to start school all over again, from scratch. And yes, there are models.