Acton Institute PowerBlog - Entries tagged as markets

The Lost Heritage of Economic Freedom in Italy

Wednesday, May 7, 2008

Next Monday will be the sixtieth anniversary of Luigi Einaudi’s inauguration as Italian President. Einaudi (1874-1961) was a distinguished economist and defender of classical liberalism. In the immediate period following World War II, he was governor of the Bank of Italy and finance minister. Many credit his policy of low taxes and dismantling tariffs with having laid the foundation for Italy’s “miracolo economico” of the 1950s and 1960s.

However, while his role as president between 1948-55 is still remembered, his legacy of economic freedom as a key to Italian post-war development has largely been forgotten. In a recent article, the Milanese financial newspaper Il Sole 24 Ore lamented that currently there is no political force in the country which feels inspired by Einaudi’s actions and insights.

The center-right led by Silvio Berlusconi which won the recent general elections in April cannot be considered a catalyst for market reforms. Its new economy minister Giulio Tremonti has expressed hostility to free trade and blames most of the world’s economic problems on an ideology he calls “marketism”. At the same time, the Northern League, Berlusconi’s junior coalition partner, is impossible to categorize in terms of its economic policy. It demands decentralization and reducing the role of the Italian state but also advocates protectionism.

Neither can Einaudi’s heirs be found on the Italian center-left. The recently founded Democratic Party (PD) has its origins in communism. One can appreciate its transformation towards more moderate positions and a certain openness to economic liberalization. However, the transition is not complete and cannot be compared to the process initiated by Tony Blair in the UK Labour Party in the 1990s.

It is regrettable that nobody wishes to emulate Einaudi’s achievements. These go beyond the technical mastery and application of market economics. Einaudi’s understanding of freedom also led him to insights of more wide-ranging importance for Italian society. He believed that an excess of state power tends to make citizens more lazy in the way they live their lives and think of their responsibility towards others. This attitude leads them to tolerate the social ills around them. They view the poor state of public services as inevitable and accept corruption and rent-seeking as unchangeable phenomena.

Now, that so many people in Italy worry about the economic situation of the country and feel alienated from the political institutions and their lack of accountability, one might think that the time is ripe to return to Einaudi’s lessons.

Posted by Bernd Bergmann in Business and Society at 10:31 | Comment (1) | Trackback

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government, italy, Luigi Einaudi, markets, reform

Markets and Their Importance to the Electorate

Thursday, August 2, 2007

I have argued for many years now that free markets are intrinsically good. I have tried to engage this issue with Christians but many are either not interested or do not see any importance in the pursuit. I know markets can become bad masters when people lack virtue. I also know that the alternatives to free markets have littered the twentieth century with more death than any single cause in human history. (Think socialism, fascism and Marxism.) And representative democracy, a republic of just laws, is not perfect either but it sure beats the alternatives. Shared power is always better than control by the one or the few. Social engineering and economic planning by an elite and powerful few strips us of both human dignity and true freedom.

Bryan Caplan, an economics professor at George Mason University, is the author of a new book, The Myth of the Rational Voter: Why Democracies Choose Bad Politics, that has a significant bearing on how we should think about the political side of economic concerns in America. Professor Caplan concludes, in words that are not at all comforting to me personally, that most Americans cast their votes on the basis of irrational biases about economics. This, he reasons, is why candidates who oppose free markets, free trade, profits and immigration win. Sadly, I am quite sure that he is right about this point.

Creators Syndicate writer John Stossel, in reviewing the professor’s new book, says: “People tend to acquire wrong opinions about economic policy packaged in worldviews they inherited while growing up.” Since people resist, and often strongly, having their own worldview challenged or changed they will vote for those candidates who make them feel good. Stossel concludes that this means “They will vote irrationally.” I have long sensed that this was true on an intuitive level but the professor’s argument tends to fortify what I had only sensed but not quite had a handle on how to argue my case well. Simply put, most voters see no compelling reason to vote otherwise since their choices in elections bear no direct consequence on their lives, at least as they understand their lives. Gloomily Stossel concludes, “When irrationality is free, people will indulge their biases.”

Continue reading "Markets and Their Importance to the Electorate"

Posted by John H. Armstrong at 13:27 | Comment (1) | Trackback (1)

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bryan caplan, economics, elections, markets, theology, voting

The Call of the Entrepreneur

Thursday, March 8, 2007

As many of you may know, Acton has been working on a documentary. The Call of the Entrepreneur will premier in Grand Rapids, Mich., on May 17 at Celebration Cinema North. Come one, come all, and see this wonderful documentary. The Call of the Entrepreneur tells the stories of three entrepreneurs: one a farmer in rural Evart, Michigan, another a mercantile banker in New York, and finally an entrepreneur in Hong Kong, China. The film examines the drive behind what these people do: Why are they driven to create wealth? Why do they produce? Who does it benefit?

This video clip is also available via YouTube and in a larger format here (Requires RealPlayer or Quicktime).

Posted by Jonathan Spalink in News and Events at 15:43 | Comments (2) | Trackback

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acton media, call of the entrepreneur, documentary, entrepreneur, free, markets, wealth

EO on the Morality of Markets

Tuesday, March 6, 2007

Joe Carter concludes:

What we need is a third way. We need a clear Christian vision that understands that markets are a moral sphere (contra the libertarians). We need to promote the idea that free individuals rather than government force is necessary to carry out this task (as the left often contends). We need to realize that the “market” is not a mystical system that will miraculously provide for our neighbor (as many conservatives seem to think). What we need is develop a coherent Biblically-based conception of how the market as a human institution can be used for the redemptive purposes of our Creator. As with every institution, what the markets need is for Christians to act more like Christ.

Posted by Jordan J. Ballor in Business and Society at 10:21 | Leave a comment | Trackback

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Christianity, markets, morality

Bozell's Odd Understanding of Coercion

Thursday, December 7, 2006

According to the Church Report’s Jennifer Morehouse, Parents Television Council President L. Brent Bozell is renewing an argument for the FCC to require a la carte cable programming. “It’s time to let the market decide what it wants on cable programming,” says Bozell.

I’m sympathetic to this view. I would prefer the option to be able to pick and choose which cable channels I pay for and get access to, instead of having to decide on subscription levels which include a lot of channels I’m not interested in.

But here’s where Bozell loses me: “Families, according to Bozell, have to pay for dozens of channels they do not watch and find offensive.” They only have to pay for them if they choose to have cable TV. Families make clear which of their desires are more powerful when they are willing to “subsidize some of the most graphic content imaginable” rather than forego cable television.

The market in this sense is working, as it is illustrating that cable consumers do not have sufficiently high interest to make it worthwhile for cable providers to respond and offer a la carte services. The problem with the cable market in the end is not that cable providers aren’t being required to offer a la carte, but that there is a lack of competition in local markets, although that is changing in a few places. Increased competition might make offering a la carte services more of a realistic option to give particular providers a competitive edge.

So, in my case, for instance, my desire for a la carte is not stronger than my desire for cable television/cable internet as it is now (although I do only get the lowest “basic” level of programming). I think this is probably representative of the position of many of the cable consumers Bozell is talking about. In no way, however, am I being forced to “subsidize the cable industry’s raunch.”

More on families and parenting in an age of technology later today.

Posted by Jordan J. Ballor in Technology & Regulation at 09:13 | Leave a comment | Trackback

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a la carte, cable television, fcc, federal communications commission, l. brent bozell, markets, parents television council, technology

Good News for the Moralists

Monday, November 27, 2006

Here’s some good news for those who prefer to combat cultural evil through the edification and cultivation of moral sensibilities: In “Repugnance as a Constraint on Markets,” Alvin E. Roth finds that “distaste for certain kinds of transactions is a real constraint, every bit as real as the constraints imposed by technology or by the requirements of incentives and efficiency.”

He also finds that “while repugnance can change over time, change can be quite slow.” This presumably applies to the decrease of a sense of repugnance over a currently outlawed activity, as well as the increase in repugnance to a currently practiced pursuit.

This means, though, that not only is patience required, but also that church leaders need to get their positions right before they have a chance of influencing culture for the better. This also means, in part, not calling evil good and good evil as false prophets do.

John Piper’s words from his foreword to John Owen’s Overcoming Sin and Temptation would seem to apply here:

As I look across the Christian landscape, I think it is fair to say con귎rning sin, ‘They have healed the wound of my people lightly’ (Jer. 6:14; 8:11, ESV). I take this to refer to leaders who should be helping the church know and feel the seriousness of indwelling sin (Rom. 7:20), and how to fight it and kill it (Rom. 8:13). Instead the depth and complexity and ugliness and danger of sin in professing Christians is either minimized—since we are already justified—or psychologized as a symptom of woundedness rather than corruption. This is a tragically light healing. I call it a tragedy because by making life easier for ourselves in minimizing the nature and seriousness of our sin, we become greater victims of it.

Posted by Jordan J. Ballor in Business and Society at 07:28 | Leave a comment | Trackback

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john piper, markets, morality, repugnance, sin, temptation

Stossel and Symmetric Information

Friday, October 20, 2006

Jim Aune, blogger-in-chief at The Blogora, complained yesterday about his health care treatment. He says, “I have been in constant pain for 36 hours. I actually used a cane to go to the office yesterday for some meetings. The problem? I have a trapped nerve in my abdomen from a double hernia repair a year ago. I got shot up with steroids about 3 weeks ago, and that worked for about 5 days, but I still can’t walk without a ripping sensation (as if my right leg were being separated from my side).”

That sounds horrible. He continues: “I’m about to go see the doctor again today (he’s a nice guy, as family practice doctors usually are, as the anesthesiologist at the pain clinic), so I decided to read up on the Internets about this condition. Now, a little learning, especially online, is a dangerous thing, but it appears that entrapped nerves have gone from happening in 1% of hernia repair patients to closer to 40%, and the speculation is that the new use of plastic mesh is a possible cause.”

It seems that Aune somehow associates John Stossel with his problem. “Enter the biggest jackass on television: John Stossel of 20/20, who believes that the market solves all problems, and that any government intervention in that frictionless market creates no end of bad ‘unintended consequences.’”

What is Aune’s argument against Stossel? After citing a Daily Kos item, Aune contends, “markets are wonderful things, but they only work in cases of ‘symmetric information.’ That is,they work efficiently when both parties to an exchange have nearly similar information.” (Last night’s episode of ER dealt with a very similar issue).

Markets only work in cases of symmetric information. Is this true? Or is the opposite true? Hayek’s observations about the nature of diffuse and unequal information are the basis for his arguments against the practicality of state intervention. As Steven D. Levitt and Stephen J. Dubner put it in their book Freakonomics, “We accept as a verity of capitalism that someone (usually an expert) knows more than someone else (usually a consumer).” Medical care isn’t the only example of information asymmetry, of course. Typical ones include car sales, or especially car repair, but they can apply in any instance where there is particular expertise involved.

Levitt and Dubner go on, “But information assymetries everywhere have in fact been mortally wounded by the Internet.” Now it is true that in practice, as in Aune’s experience, there are all kinds of limits on the potential for the Internet to even out information. It takes time, access, and a certain amount of patience to educate oneself about certain medical conditions, for example. Thus Levitt and Dubner go on to admit, “The Internet, powerful as it is, has hardly slain the beast that is information asymmetry.”

Aune later asserts, “markets do not work efficiently when information is asymmetric.” Maybe they don’t work as efficiently as they might otherwise, but they still seem to work, and perhaps better than any other option available to us. And there are methods for the sharing of information and such that does not necessitate government involvement (independent ratings, consumer reviews, and the like).

It’s not clear what Aune’s solution is (if there is one in his complaint), but I take it that Aune is arguing at least implicitly that the government needs to be the entity that solves the problem of information asymmetry. Would he rather have no choices, even the limited ones he is inadequately informed about, and instead have the government decide for him? Why don’t we just make doctors government employees? Then they can enforce the course of treatment they deem best.

Posted by Jordan J. Ballor in Business and Society at 10:14 | Comment (1) | Trackback

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capitalism, economics, er, f.a. hayek, health care, information asymmetry, markets, medicine