7

A Religious Turning Test

This post requires a bit of background explanation, so bear with me.

A few weeks ago, Paul Krugman made the following comment about conservatives and liberals:

[I]f you ask a liberal or a saltwater economist, “What would somebody on the other side of this divide say here? What would their version of it be?” A liberal can do that. A liberal can talk coherently about what the conservative view is because people like me actually do listen. We don’t think it’s right, but we pay enough attention to see what the other person is trying to get at. The reverse is not true. You try to get someone who is fiercely anti-Keynesian to even explain what a Keynesian economic argument is, they can’t do it. They can’t get it remotely right.

Krugman, of course, famously refuses to read conservative bloggers, and his work at the New York Times doesn’t exactly display a deep understanding of conservative ideas (perhaps he is a good example of the Dunning-Kruger Effect in action). In any event, libertarian blogger and economist Bryan Caplan responded to Krugman by proposing the following test: Continue Reading

38

Is it Anti-Catholic to Believe the Pope is the Anti-Christ?

Writing in the Atlantic, Joshua Green notes that Michelle Bachmann’s (now former) church holds some, shall we say, unflattering views about the papacy:

Bachmann was a longtime member of the Salem Evangelical Lutheran Church in Stillwater, Minn., which belongs to the Wisconsin Evangelical Lutheran Synod (WELS), a council of churches founded in 1850 that today comprises about 400,000 people. WELS is the most conservative of the major Lutheran church organizations, known for its strict adherence to the writings of Martin Luther, the German theologian who broke with the Catholic Church and launched the Protestant Reformation in the 16th century. This includes endorsing Luther’s statements about the papacy. From the WELS “Doctrinal Statement on the Antichrist”: “Since Scripture teaches that the Antichrist would be revealed and gives the marks by which the Antichrist is to be recognized, and since this prophecy has been clearly fulfilled in the history and development of the Roman Papacy, it is Scripture which reveals that the Papacy is the Antichrist.”

Bachmann, it seems, never subscribed to the belief in question, and left the church sometime last year. Nevertheless, some are drawing comparisons between the views of Bachmann’s former church and those of President Obama’s former pastor, Jeramiah Wright.

I confess that I am of two minds about this story. Continue Reading

59

Whatever Happened to Usury?

While the subject of usury used to be a hot topic in moral theology, the Church has not had much to say on the subject over the last couple hundred years. The Catholic Encyclopedia article on Interest ably sums up the current situation:

In our day, she [that is, the Church] permits the general practice of lending at interest, that is to say, she authorizes the impost, without one’s having to enquire if, on lending his money, he has suffered a loss or deprived himself of a gain, provided he demand a moderate interest for the money he lends. This demand is never unjust. Charity alone, not justice, can oblige anyone to make a gratuitous loan (see the replies of the Penitentiary and of the Holy Office since 1830) . . . . In practice, however, as even the answer of the Sacred Penitentiary shows (18 April, 1889), the best course is to conform to the usages established amongst men, precisely as one does with regard to other prices.

Periodically, however, someone will suggest that the Church’s teaching on usury needs to be revitalized. Continue Reading

13

Father Coughlin and the Great Depression

I recently finished Alan Brinkley’s Voices of Protest, which is a dual biography of Louisana politician Huey Long and radio firebrand Father Coughlin. Father Coughlin is known for being virulently anti-semitic, yet Brinkley takes pains to note that a focus on Jews only occurred towards the end of Coughlin’s career, long after he had ceased to be a major political figure. According to Brinkley, Coughlin is best understood as an heir to the midwestern populist tradition of William Jennings Bryan. And indeed there was quite a bit of overlap between the views advocated by Father Coughlin during the early 1930s and those of Bryan forty years earlier. The Principles of the National Union for Social Justice (Coughlin’s organization) supported the living wage, support for unions, a “conscription of wealth” in the event of war, and the nationalization of “banking, credit and currency, power, light, oil and natural gas and our God-given natural resources,”

Like Bryan, though, Coughlin’s main focus was on monetary policy. Continue Reading

42

Paul Ryan and Archbishop Dolan on Catholic Social Teaching and Budget

Recently, Rep. Paul Ryan wrote to New York’s Archbishop Timothy Dolan to “to provide facts about [Ryan’s proposed] Budget to help advance an informed debate in light of social teachings about the well-being of the family, subsidiarity, the preferential option for the poor, and the dignity of the human person.” The letter outlined some of the main features of the Ryan plan, and suggested ways in which this plan was designed to meet the goals and principles of Catholic Social Thought. Here’s a snippit:

Nothing but hardship and pain can result from putting off the issue of the coming debt crisis, as many who unreasonably oppose this Budget seem willing to do. Those who represent the people, including myself, have a moral obligation, implicit in the Church’s social teaching, to address difficult basic problems before they explode into social crisis. This is what we have done, to the best of our ability, in our Fiscal Year 2012 Budget Resolution.

Yesterday Archbishop Dolan responded: Continue Reading

3

Immigration vs. Euthanasia

First up, Matt Yglesias on How to Run America Like a Business:

If you’re trying to look at America from a balance-sheet perspective the problem is very clear. It’s not “entitlements” and it’s not “Social Security” and it’s not “Medicare” and it’s not “health care costs” it’s the existence of old people. Old people, generally speaking, don’t produce anything of economic value. They sit around, retired, consuming goods and services and produce nothing but the occasional turn at babysitting. The optimal economic growth policy isn’t to slash Social Security or Medicare benefits, it’s to euthanize 70 year-olds and harvest their organs for auction. With that in place, you could cut taxes and massively ramp-up investments in physical infrastructure, early childhood education, and be on easy street.

There’s an element of satire involved here, of course. But in my view the growing entitlement crisis is one of the reasons I worry about the eventual acceptance of euthenasia throughout the United States (the other being the temptation the children of baby boomers will have to euthanize their parents as a kind of revenge for killing off their brothers and sisters via abortion). Continue Reading

80

A Few Thoughts on Wisconsin and Unions

At the risk of losing some of my libertarian street cred, I have to say that I feel a lot of sympathy for the public employee members in Wisconsin. Even if you think that their salaries and benefits are excessive, those benefits and wages were contractually agreed to by their employers, and I’m sure that in many cases people have planned their retirements on the assumption that these contracts would be honored.

On the other hand, if having public employee unions leads to workers receiving promises of future pensions and benefits that can’t or won’t be met, then that could be a reason to reconsider whether public employee unions are such a great idea going forward. The Church recognizes the right of workers to unionize, but this right is fundamentally based not on any the supposedly good consequences that unions have for workers, but rather as an application of the right of private association. As John Paul II noted in Centesimus Annus, (“the Church’s defence and approval of the establishment of what are commonly called trade unions [is] certainly not because of ideological prejudices or in order to surrender to a class mentality, but because the right of association is a natural right of the human being, which therefore precedes his or her incorporation into political society.”

I’m willing to accept correction on this, but it seems to me that if the right to unionization is based in the right to association, then it would seem that the union relationship ought to be voluntary for all the parties involved. Forcing workers to join a union or forcing an employer to deal with a union on certain terms strikes me as being contrary to people’s association rights, not a fulfillment of them. In the case of public employee unions, the government is the employer, and so should have a wide latitude to decide to what extent it is willing to bargain with unions and to what extent it isn’t.

12

Pro-Life Incrementalism is Working

Over at the Corner, Michael New draws attention to a recent op-ed by Frances Kissling of the oxymoronic group Catholics for a Free Choice:

In a column that appeared in last Friday’s Washington Post, Frances Kissling, who served as president of Catholics for a Free Choice, offers some advice for supporters of legal abortion. Kissling acknowledges that recent pro-life efforts — specifically our focus on fetal development and our efforts to pass incremental laws — have been effective in shifting public opinion in a pro-life direction. She acknowledges that supporters of legal abortion are now losing, and that the pro-choice arguments that were persuasive in the 1970s are no longer working today.

As a result, Kissling suggests a shift in strategy. Specifically, she urges her pro-choice allies to support some restrictions on late-term abortions. She states that supporters of abortion rights need to “firmly and clearly reject post-viability abortions, except in extreme cases.” She even says that abortions in the second trimester “need to be considered differently.” Kissling encourages an approach that would mandate counseling for women seeking abortion in these circumstances.

Continue Reading

5

Against Small Pox

There is a saying among logicians: one man’s modus ponens is another man’s modus tollens. In english, the idea is that different people often respond to the same argument by reaching opposite conclusions. If you see that an argument is valid, a logical response is to accept its conclusion. But another, equally logical response is to reject the argument’s premise.

That seems to be the situation with a recent post by David Curz-Uribe of the blog Vox Nova. David begins by contrasting two different views of the relationship between human beings and the rest of creation:

In the first account God tells Adam and Eve: “Be fertile and multiply; fill the earth and subdue it. Have dominion over the fish of the sea, the birds of the air, and all the living things that move on the earth.” The sense here is of total control, ownership, “dominion.” On the other hand, in the second account it says that “The LORD God then took the man and settled him in the garden of Eden, to cultivate and care for it.” Here the sense is of stewardship: caring for something that they do not own.

I do not want to read too much into these short passages, but I think that this tension still affects our current understanding of the world around us. If the world is “ours” in the sense we have complete control over it, then we can do what we want, subject only to our prudential judgment of how to treat our property. On the other hand, if the world is God’s, then our decisions must show deference to God’s own plan. We are stewards, and presumably (like all stewards) have a great deal of autonomy and authority, but in the end we are constrained by the plan of the actual Master of creation.

In the abstract I am more inclined towards the stewardship interpretation than the dominion interpretation given above (if for no other reason than that “stewardship” sounds nice while “dominion” sounds bad). Yet as David notes, the stewardship interpretation has some unusual implications: Continue Reading

16

Obama Administration to Stop Reporting Abortion Statistics?

Beginning in 1969 the Centers for Disease Control and Prevention collected data on legal abortions carried out in the United States through its Abortion Surveillance System. The report based on this data ordinarily appeared as an article in CDC’s professional journal, The Mortality and Morbidity Weekly Report (MMWR) the week after Thanksgiving. The report lagged the data by three years, i.e., the 2006 data were printed in 2009.

While not comprehensive, the CDC report provided the best single estimate of abortions in the US, as well as providing detailed breakdowns: the age of the baby at the time of abortion, age of the mother, number of abortions the mother had previous to the current one, etc. People on both sides of the abortion debate have cited these statistics to make their points.

Last year, contrary to the long-established practice, November came and went with no report posted on the CDC’s website. Over the following weeks, multiple visits to the site proved fruitless. The possibility the report was not merely delayed, but had in fact been axed from higher up, had to be considered.

Last week, RedState began investigating by calling those in DC who might have some answers. After several attempts, we finally received confirmation from Rhonda Smith at the CDC’s press office in Atlanta that the report has been buried indefinitely; the CDC “will not have stats available at any time in the near future” and there “are no plans for them to come out any time soon.”

More. This is outrageous, and raises the question of why the Obama Administration wouldn’t want the report published.

5

Egypt Thought of the Day

Bryan Caplan asks, a propos of events in Egypt, why some revolutions end up making things better while others make things worse. His answer (which he admits is unconvincing) is that revolutions make things better when they are against totalitarian regimes and worse when they are against authoritarian regimes, because “the point of totalitarian regimes is to give people less freedom than the median voter wants, but the point of authoritarian regimes is often to give people more freedom than the median voter – or at least the median man of violence – wants.”

I don’t think that works. Marcos wasn’t a totalitarian, for example, and neither was Milosevic. When I consider which revolutions turned out badly and which turned out well, the thing that really jumps out at me is the degree to which the revolution in question was achieved by peaceful as opposed to violent means. There are exceptions, of course, but for the most part violent revolutions have tended to end badly (very often making things even worse than before), whereas largely non-violent revolutions have tended to make things better. Violent revolutions end up being led by violent men, and once in charge they have a tendency to turn their talents on others. Whereas the leaders of non-violent revolutions tend to be better at democratic politics (and if they aren’t they don’t try to hold onto power by killing their opponents).

Something to think about.

25

The Ultimate Left-Wing Tax System

Recently Matt Talbot of Vox Nova offered up the following plan for tax reform:

I propose that there is a one-time, 20% federal tax on all financial assets over $2 million – assets in IRA’s and 401(k) plans would be exempt, provided the particular accounts were held on, say, September 15, 2008 (this would prevent using retirement accounts as an anticipatory shelter.) Yes, the stock and bond markets would take a hit; can’t be helped, and the stock market is way over-valued anyway, by historical standards. The stock market should be there to finance capital investment, not to enrich Wall Street greedheads.

In the comments my co-blogger Darwin had some negative things to say about this plan. Truthfully, though, I think that properly implemented a one-time wealth tax could work pretty well. In fact, I would say that the main problem with Matt’s proposal is that it is much too modest.

For one thing, as was noted in the comments to his post, restricting the tax to financial assets over $2 million excluding IRAs and 401(k)s is not going to raise much revenue. And the more exemptions you have in the system, the more likely it is that the rich will just hire tax attorneys to hide their assets and avoid the tax. To deal with these problems, I would make the wealth tax all-inclusive.

Since wealth inequality is much much greater than income inequality, this would be a highly progressive measure. However, without a lower limit, you might worry about the impact of this proposal on the poor. To offset this, I would institute a guaranteed minimum income. The minimum income level would have to be pretty low to avoid work disincentives and keep the plan fiscally responsible, but it would be high enough that even in the first year it would be enough for the poor to pay the tax. Unlike the wealth tax, the guaranteed minimum income program would be ongoing, and would be in addition to rather than instead of all existing federal assistance programs.

Going forward, I would replace corporate taxes at the federal level by raising the capital gains tax rate to 23%. Finally, I would simplify the tax code, eliminating all deductions and replacing the current bracket system with two brackets: 10% for income under $100k, 23% for above that.

Finally, to ensure that the rich don’t hide their assets to avoid the tax, I would deputize every store clerk in America as an IRS enforcement agent. Try as they might, wall street greedheads would not be able to avoid the tax. They could bury their gold in the backyard if they wanted, but as soon as they dug it up to buy a new yacht we’d get ’em. Continue Reading

5

Vatican Bank Chief Condemns Keynesianism

Current fiscal and monetary policies in the United States and Europe risk increasing government control over national economies, resulting in weakened political strength throughout “the whole of the western world,” the Vatican’s top banking expert said.

Writing in the Jan. 14 edition of the Vatican newspaper, L’Osservatore Romano, Tedeschi warned of the growing influence of “Keynesian” economic theory on both sides of the Atlantic.

Governments on both sides of the Atlantic, he said, are committed to Keynes’ policy of increasing public debt to sustain levels of economic production, consumption, and employment.

He said artificially low interest rates are another key to the strategy of increasing spending and discouraging saving. With no incentive to keep money in the bank, those who would have otherwise been savers are pushed to spend.

“Zero interest rates factually equal a de facto transfer of wealth from he who was a virtuous saver (although not for Keynes) to he who has become virtuously (for Keynes) indebted,” he said. “Practically, it’s about a hidden tax on poor savers, a tax transferred to the wealthy, (that is), over-indebted states, business people and bankers.

More. That sound you hear is Morning’s Minion’s head exploding. Continue Reading

50

Is A Preferential Option for the Poor Bad for the Poor?

Admittedly this sounds like a silly question, but it is effectively one that Kyle Cupp is asking over at Vox Nova:

Putting aside whether or not the theory actually works in practice, a question I don’t here wish to debate, does trickle-down economics embody what has been called in Catholic circles the preferential option for the poor?

I’m inclined to answer that it does not, that while helping to generate pools of capital at the top may benefit the poor through a process of “trickling down,” the theory itself embodies a preferential option for the rich.

Kyle wants us to put aside the question of whether “trickle-down” economics actually works, so for purposes of considering the question we can assume that trickle-down does make the poor a lot better off than any alternative. So what Kyle is really asking here is whether a preferential option for the poor might require us to make the poor worse off (e.g. by rejecting trickle-down economics). Continue Reading

12

Federal Judge Rules Individual Mandate Unconstitutional.

A copy of the decision is here. Two other federal district courts have previously upheld the individual mandate against constitutional challenge, and at least one suit remains pending.

It’s often claimed that the individual mandate is a necessary compliment to the provisions of ObamaCare banning denial of coverage based on pre-existing conditions and so forth. The idea is that if an insurance company can’t deny you coverage once you are already sick there is a strong incentive not to get coverage until you are already sick, which leads to a death spiral (that’s a technical term) of increased insurance prices and lower levels of coverage.

However, as Paul Starr noted back when the bill was being debated, there are ways of dealing with this problem that don’t involve a mandate:

The law could give people a right to opt out of the mandate if they signed a form agreeing that they could not opt in for the following five years. In other words, instead of paying a fine, they would forgo a potential benefit. For five years they would become ineligible for federal subsidies for health insurance and, if they did buy coverage, no insurer would have to cover a pre-existing condition of theirs.

The idea for this opt-out comes from an analogous provision in Germany, which has a small sector of private insurance in addition to a much larger state insurance system. Only some Germans are eligible to opt for private insurance, but if they make that choice, the law prevents them from getting back at will into the public system. That deters opportunistic switches in and out of the public funds, and it helps to prevent the private insurers from cherry-picking healthy people and driving up insurance costs in the public sector.

For whatever reason, the Democrats choose not to head this advice, and didn’t include any alternative to the mandate in the bill, even as a fall back measure. This means that, if the mandate is ultimately found unconstitutional, there will be nothing in the law to prevent the “death spiral” scenario. Granted, this can always be passed in the future, but this may not be as easy to do depending on the political environment at that time. Why the Democrats didn’t do this is a mystery to me.

6

Tight Money is a Tax on the Unemployed

One argument commonly made by inflation hawks is that inflation is bad because it is a tax on savers. The idea being that since inflation erodes the purchasing power of a dollar, those who keep their money in a savings account will end up being able to buy less with that money down the road if there is inflation than if there is not. There is an element of truth to this idea, though if inflation is expected there are ways to deal with the problem, such as offering higher interest rates for savings accounts.

A propos of David’s post earlier to day, however, it occurs to me that there is a flip side to the inflation taxes savings argument, namely that disinflation (i.e. lower than expected inflation) functions as a tax on the unemployed. When a certain amount of inflation is expected over the coming years, this ends up getting built into people’s wage demands, contracts, loans, etc. If inflation is approximately 2-3% a year for several decades, then people will come to expect a raise of at least 2-3% a year to cover the increase in the cost of living, and they will get upset if this doesn’t happen, even if inflation is significantly below 2-3% (on election day I met a man who was angry he had been denied a cost of living raise in his Social Security for 2009, even though there was deflation that year).

If expected inflation doesn’t appear, there won’t be enough money for businesses to pay their workers and will have to cut either wages or employment. But since workers hate nominal wage cuts (even where these don’t translate into real wage cuts), employers tend to respond to this situation by laying people off rather than spreading the pain around. The result is that during inflationary or disinflationary periods real wages tend to increase (since prices are falling while wages remain constant in nominal terms) and so does unemployment. Functionally this acts as a kind of wealth transfer from the unemployed to those who still have jobs. Thus, tight money is a tax on the unemployed.

18

Quote of the Week

So I’ve been reading Fintan O’Toole’s Enough is Enough: How to Build a New Republic on my Kindle recently. I know what you’re thinking: why would someone read a book about how to make Irish politics more left-wing when he is neither 1) Irish nor 2) left-wing? And it’s true, I have a problem; I need help.

But leave that aside for now. I’m currently on a section in which O’Toole rails against the large place the Catholic Church has in providing health care in Ireland. It seems that the Irish bishops have actually had the temerity to oppose increased government involvement in health care, as this would interfere with the Church’s role. For example, in 1948 the Bishops opposed a government plan to provide free health care to children and new mothers. O’Toole quotes Bishop Cornelius Lucey of Cork laying out the Church’s view on the part the state should play in health care:

What should we expect from the State? Help to enable us to help ourselves. Thus, instead of providing directly through its own agencies free housing for all, free health services for all, free school meals for all, etc., it should rather see to it that these are available and that people can afford to pay for them. Thus the real answer to the problem of the man who cannot afford medical care for his wife and children is not a free mother and child service for all, but a rise in wages – or cut in taxes – sufficient to enable him to pay.

Milton Friedman couldn’t have said it better himself.

I note this because you sometimes hear it said that American political culture is fundamentally protestant, and that Catholics who believe in limited government are somehow buying into protestant individualist notions. Correct me if I’m wrong, though, but my impression is that Ireland circa 1948 was pretty Catholic.

20

Is Inflation Hiding?

There’s an old saying, which I’ve seen attributed to every from Daniel Patrick Moynihan, to the effect that while a man is entitled to his own opinion he is not entitled to his own facts. This saying would seem to be particularly relevant to current arguments about the Federal Reserve and monetary stimulus. As I noted in my last post, some commentators have been warning for years that the Fed’s actions would cause a return to the high inflation of the 1970s, if not to 1920s Germany. Yet more than two years on, this inflation has failed to materialize.

Continue Reading

30

More Money, Less Problems

If the case for increased monetary stimulus could be summed up in one picture, it would be the above chart. For the last several decades, nominal spending in the U.S. has increased at a fairly steady rate, and businesses and individuals acted in the expectation that this trend would continue. Contracts were written, debts undertaken, and business ventures began under the assumption that there would be roughly 2% inflation per year. The lower total spending means that there is not enough money flowing through the system to fulfill these contracts and pay back these debts, which the result that you get lots of defaults, unemployment, and less economic growth. Monetary stimulus, such as the Fed’s QEII program, is aimed at returning nominal spending to trend, leading to lower unemployment, fewer defaults, and higher economic growth. Continue Reading

6

The True Cost of TARP

What does the fact that, so it now seems, the TARP program will only end up costing taxpayers $25 billion tell us about the merits of the program? According to Jonathan Chait, this low price-tag makes the program “one of the most successful policy initiatives in American history.” This is a bad argument. If, as its proponents claim, TARP really did stave off a second Great Depression, then it would have been one of the most successful policy initiatives in American history even if it had cost taxpayers the full $700 billion. On the other hand, if TARP wasn’t necessary, then it likely wasn’t worth it even at the cost of only $100 per American.

Positive assessments of TARP seem to typically assume that the alternative to TARP would have been doing nothing (actually many opponents of TARP also tend to assume this). But this is not plausible. If Congress had decisively rejected TARP, it’s not like Bernanke was going to pull a Ray Patterson and book a cruise to Fiji. Instead we likely would have had an earlier bigger QE I. The overall economy would have ended up roughly in the same place, except that Wall Street would have borne a larger share of the pain.

This, at any rate, is the view of a number of iconoclastic economists on both the left and right. Continue Reading

17

Apologia Pro Libertarianism Sua

There’s been a bit of discussion about the nature of libertarianism on the blog recently, and as the resident pseudo-libertarian, I thought I would re-state where I come down on the matter (this is based largely on an older post I did on the subject, which sadly is now lost in the cyber-ether).

To understand where I am coming from, one needs to make a distinction between political positions held as a matter of moral principle, and those held as a matter of prudence. Take the issue of torture. One might oppose the use of torture on the grounds that it’s not a good way to get information from suspects, or because by using torture on the enemy you risk retaliation by the enemy on your people, etc. Alternatively one might believe that torture is just immoral, and you should do it regardless of whether or not it is effective.

Call the first type of objection to torture “pragmatic” and the second “principled.” (A person might object to torture on both pragmatic and principled grounds, in which case the opposition would be principled, though buttressed by pragmatic considerations). Dividing the justifications for various political positions into principled or pragmatic can be sometimes tricky, but the basic idea is, I hope, intuitive enough.

A principled libertarian, as I use the term, is someone who holds libertarian political beliefs for principled reasons. Taxation is theft, my body, my business, etc. In my experience, when you say libertarian this is what people think of. Continue Reading

25

Open Letter to Conservatives on Monetary Policy

By monetary economist Scott Sumner:

1. The Fed isn’t really trying to create inflation.

The Fed doesn’t directly control inflation; they influence total nominal spending, which is roughly what Keynesians call aggregate demand. Whether higher nominal spending results in higher inflation depends on a number of factors, such as whether the economy has a lot of underutilized resources. But it’s certainly true that for any given increase in NGDP, the Fed would prefer more RGDP growth and less inflation. Even after QE2, the Fed still expects less than 2% inflation for years to come. If the Fed had any marketing sense, they’d be telling the public they are trying to boost recovery by increasing national income, not increasing the cost of living. It would also have the virtue of being true.

2. “But doesn’t economic theory teach us that printing lots of money creates high inflation?”

In general that is true. But there are three important exceptions:

1. If the monetary injections are expected to be temporary, the inflationary effect is far smaller. The Japanese central bank did lots of QE in 2003, but pulled much of the money out in 2006 when deflation ended. It worked in preventing high inflation, indeed it may have worked too well.

2. If interest rates are near zero, the public demands more liquidity. The Fed can supply that liquidity with little impact on the price level.

3. If the Fed pays interest on reserves, then the quantity theory of money (more money means more inflation) doesn’t necessarily hold. They recently started paying interest on reserves, and that’s one reason why the big injections from 2008 didn’t have an inflationary impact. The Fed can adjust the rate as necessary, and indeed in my view a lower IOR would be more effective that QE2. Continue Reading

3

Moralism and Monetary Policy

Last week I mentioned in the comments to this post that I think most political and financial problems are fundamentally technical rather than moral and cultural in nature. Several people took exception to this idea, so I figured I should probably try to elaborate a bit on what I meant.

Start with a historical example. During the 14th century, European society was rent asunder by the Black Death. Between a third and half of people died, and the resulting turmoil caused serious political, economic, and social upheavals. As Wikipedia notes, many governments “instituted measures that prohibited exports of foodstuffs, condemned black market speculators, set price controls on grain and outlawed large-scale fishing,” none of which stopped the spread of the disease. Given the vast amount of suffering, it’s only natural that many people concluded that the causes of the Black Death were fundamentally moral or cultural in nature. Many people argued that human sinfulness, greed, pride, etc., had caused God to turn his back on Western society, whereas others sought to blame the outbreak on a specific group, such as the Jews. Today, of course, most people recognize that the cause of the plague was less a matter of morality than of hygiene. But if you were to tell an average 14th century European that the plague was being caused by fleas from rats, he would likely think you were naively trivializing the issue. Continue Reading

Caritas in Veritate 25, By the Numbers

My co-blogger Tim recently highlighted the following statement from Pope Benedict’s latest social encyclical, Caritas in Veritate:

The global market has stimulated first and foremost, on the part of rich countries, a search for areas in which to outsource production at low cost with a view to reducing the prices of many goods, increasing purchasing power and thus accelerating the rate of development in terms of greater availability of consumer goods for the domestic market. Consequently, the market has prompted new forms of competition between States as they seek to attract foreign businesses to set up production centres, by means of a variety of instruments, including favourable fiscal regimes and deregulation of the labour market. These processes have led to a downsizing of social security systems as the price to be paid for seeking greater competitive advantage in the global market, with consequent grave danger for the rights of workers, for fundamental human rights and for the solidarity associated with the traditional forms of the social State. Systems of social security can lose the capacity to carry out their task, both in emerging countries and in those that were among the earliest to develop, as well as in poor countries. Here budgetary policies, with cuts in social spending often made under pressure from international financial institutions, can leave citizens powerless in the face of old and new risks; such powerlessness is increased by the lack of effective protection on the part of workers’ associations.

Now in this passage, the Pope makes a number of factual and causal claims. First, he claims that the global market has led countries to “attempt to attract foreign businesses” by adopting “favourable fiscal regimes and deregulation of the labour market.” Second, the Pope claims that these reforms (i.e. adopting “favourable fiscal regimes and deregulation of the labour market”) have led to “a downsizing of social security systems” and “cuts in social spending.”

Continue Reading

On Not Having Sex At Harvard

From the New York Times:

There was a time when not having sex consumed a very small part of Janie Fredell’s life, but that, of course, was back in Colorado Springs. It seemed to Fredell that almost no one had sex in Colorado Springs. Her hometown was extremely conservative, and as a good Catholic girl, she was annoyed by all the fundamentalist Christians who would get in her face and demand, as she put it to me recently, “You have to think all of these things that we think.” They seemed not to know that she thought many of those things already. At her public high school, everyone, “literally everyone,” wore chastity rings, Fredell recalled, but she thought the practice ridiculous. Why was it necessary, she wondered, to signify you’re not doing something that nobody is doing?

And then Fredell arrived at Harvard.

Continue Reading

Progressives Are Not Cynical Enough About Business

One thing my study of economics has taught me is that businesses will tend to act in whatever way they think will bring them the most profit. There may be rare exceptions, and of course businessmen often have mixed motives. But the overall tendency in this direction is very strong.

My guess is that if you surveyed people, many more self-described progressives would say that they agreed with the statement than self-described conservatives. Indeed, progressives often criticize conservatives and libertarians for being insufficiently attuned to the rapacious self-interest motivating businessmen.

Yet oddly enough, it seems to me that one of the main problems with progressive thought is that they don’t take the idea that businesses act to maximize profit seriously enough. For a group that claims to have a low opinion of businessmen, progressives have a strange habit of advocating policies that will only work on the supposition that businesses won’t act to maximize profit, and then react with shock when they proceed to do so.

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HHS Statement on Abortion Funding

The Department of Health and Human Services has released the following statement regarding allegations that newly approved Pre-Existing Condition Insurance Plans would cover abortions:

As is the case with FEHB plans currently, and with the Affordable Care Act and the President’s related Executive Order more generally, in Pennsylvania and in all other states abortions will not be covered in the Pre-existing Condition Insurance Plan (PCIP) except in the cases of rape or incest, or where the life of the woman would be endangered.

Our policy is the same for both state and federally-run PCIP programs. We will reiterate this policy in guidance to those running the Pre-existing Condition Insurance Plan at both the state and federal levels. The contracts to operate the Pre-existing Condition Insurance Plan include a requirement to follow all federal laws and guidance.

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Remembering Bastille Day

Today is Bastille Day, typically associated with the start of the French Revolution. In honor of that blessed event, I offer up this classic piece by John Zmirak:

Remember when the L.A. riots spun out of control, and engulfed the whole United States? The key moment was no doubt when police and Army commanders took fright and changed sides, throwing their support to the Committee for Public Safety led by Tom Hayden, along with Noam Chomsky, Barbara Boxer, Michael Moore, and Edward Said. After Hayden’s fall and execution, his successor, Marion Barry, insisted that President Bush and his wife Barbara be tried for treason. Their executions shocked the world but sparked wild celebrations in the capital, as the First Couple’s severed heads danced on poles in daylong parades. A crack whore was duly enshrined in the National Cathedral as the Goddess of Reason.

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Inequality: Can't Live With It, Can't Live Without It

In my last post I looked at the question of how to calculate the just or living wage, using figures from Father Ryan’s classic text A Living Wage brought up to date by adjusting for inflation. Commenter Restrained Radical, however, thinks that in merely adjusting for inflation I was being too stingy:

Adjusting for inflation isn’t necessary the best way to adjust Fr. Ryan’s figures. Real GDP per capita grew faster than inflation. In other words, Americans got wealthier. Using Fr. Ryan’s figures today adjusted for inflation would be appropriate if real GDP per capita was stagnate for 89 years. In 1919, GDP per capita was $805. If you only adjust for inflation, that would be $9,897 today. That’s somewhere between Cuba and South Africa. So $6.15/hour would be an appropriate living wage for a family of 5, in Cuba.

If instead we adjust for unskilled labor wage increase (4.24% annualized since 1919), $1,400 to $1,500 then would be $56,388 to $60,416. That’s probably closer to what Fr. Ryan had in mind.

In 2008, median household income in the United States was $52,029. If Restrained Radical’s interpretation is correct, then it would seem Father Ryan was advocating a kind of Lake Wobegon society, where everyone has the right to an above average income.

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The Advantage of Ideology

One of the main problems with politics is that it is complicated. Take, for example, the recently passed health care bill. The bill was over 2,000 pages. I haven’t read it. Neither, I imagine, have most of our readers (indeed, it would not surprise me if no single person has read every word of the bill, though obviously each of the bill’s many provisions has been read by someone).

Of course, even if someone had read every word of the bill, this would not be sufficient to have a truly informed position on it. To have a truly informed position one would have to not only read the bill but understand it. And to do that would require a great deal of knowledge about fields as complicated and diverse as the law, medicine, political science, economics, bureaucratic management, etc.

And, mind you, even if one were somehow able to master and muster all of this information, that would only entitle one to a have a truly informed position on that one bill.

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Libertarians vs. Rand Paul

A couple of months back Republican Senate candidate Rand Paul stirred up a hornets’ nest of controversy when he (briefly) indicated his opposition to Title II of the Civil Rights Act of 1964, which banned racial discrimination in “public accommodations” like restaurants and hotels. The controversy was notable not only for its utterly irrelevance to any current political issue, but also for the fact that even many libertarians distanced themselves from Paul’s position. I was out of the country at the time and so didn’t get a chance to comment, but libertarian think tank the Cato Institute recently published a libertarian defense of Title II and other civil rights legislation, which got me thinking about the issue again.

Defenders of Paul’s position (and there were a few) typically made one of two arguments; one based on an appeal to principle; one based on free market economics. The first argument is the straightforwardly libertarian one that individuals have the right to dispose of their property as they see fit, and while we might not like it if a business owner refuses to serve members of a particular racial group, it is still wrong to violate his property rights by telling him he can’t do so. I don’t have much to say about this argument, except to note how incongruously unpersuasive it is to most everyone today. Libertarianism is also criticized as being absolutist, but of course there are areas in which lots of people are willing to be comparably absolutist in their defense of individual freedom. Had Paul said, for example, that he supported the right of neo-Nazis to march through the streets of Jewish neighborhoods waving swastikas, his views would have been in keeping with those of most of the intelligentsia. Yet displaying a similar solicitude when the subject involves commercial activity is viewed as borderline crankish. The reasons for this discrepancy are probably worth further reflection, but I won’t dwell on them here.

Perhaps sensing that the argument from principle is a surefire loser, others have contended that laws such as Title II weren’t really necessary to end private discrimination by businesses. According to this argument, any business that turned away a substantial number of potential customers would soon find itself out of business, and absent legal mandates segregation would simply collapse under its own weight (call it the ‘everyone’s money is the same color’ argument).

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I Give Up, Here's a Links Round-up

“The Vatican” endorses the Blues Brothers.

North Korea embraces neoliberalism (baby steps).

Matt Yglesias is my kind of liberal.

The Onion channels Bertolt Brecht.

Israel further loosens border restrictions with Gaza.

A lot of people seems to think this is good news for Afghanistan. Have they never heard of the resource curse?

The menace of friendship. Paging Eve Tushnet.

What the Left Cannot Supply, the Right Will Not Demand

Recently I’ve been toying with the idea of doing a series of posts looking at the recent survey purporting to know a lack of economic knowledge on the Left, with one post for each of the eight questions on the survey. As I look at the list of questions, however, a clear theme emerges, namely that liberals tend to think that the price of a good or service isn’t much affected by the supply of that good or service or visa versa. According to the survey, liberals tend to think that restricting the supply of housing doesn’t increase the price of housing (question 1), that restricting the supply of doctors (through licensing) doesn’t increase the price of doctors (question 2), and that price floors won’t decrease the supply of either rental space (question 4) or jobs (question 8).

Coincidentally, I’m currently reading a (surprisingly good) book by Paul Krugman, in which he argues that conservatives tend to minimize or dismiss the part changes in demand have on getting us into or out of recessions. Naturally this got me thinking whether one of the things separating left from right in this country is a difference in the importance of supply and demand in economic phenomenon. For the above issues, at least, liberals seem to be ready to discount the importance of supply, whereas conservatives underestimate the importance of demand.

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Is Collective Punishment Always Wrong?

As readers of this blog are probably aware, I am not a fan of the Israeli blockade of Gaza. I find the blockade to be morally unjustifiable and ultimately not in the interests of Israel’s security. Yet I do wonder about some of the moral claims made in the course of the controversy.

For example, a recent Vox Nova post by contributor Morning’s Minion contains the following aside:

Remember, collective punishment is absolutely forbidden under the moral law.

Morning’s Minion, of course, is hardly the only one to make this point, and at first blush it seems fairly sensible and obvious. It’s easy to see why punishing one person for the crimes of another, which is what collective punishment seems to consist in, would be morally objectionable, and one might readily conclude that, just as a straightforward application of moral logic, collective punishment is always and everywhere morally wrong.

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Israel to Loosen Gaza Blockaid

Palestinian official Raed Fattouh, who coordinates the flow of goods into Gaza with Israel, said soda, juice, jam, spices, shaving cream, potato chips, cookies and candy were now permitted. He said Israel rebuffed Palestinian requests for construction goods, raw materials for factories to operate and medical devices.

Israeli officials, speaking on condition of anonymity because they were discussing internal policymaking, said their goal in allowing more goods into Gaza was to defuse pressure for an international investigation of the sea raid.

More.  Since the blockaid is essential to Israel’s security and right to defend itself, one can only assume that the country will now cease to exist.

The Nuclear Option

It was September of 1966, and gas was gushing uncontrollably from the wells in the Bukhara province of the Uzbek Soviet Socialist Republic. But the Reds, at the height of their industrial might, had a novel solution. They drilled nearly four miles into the sand and rock of the Kyzyl Kum Desert, and lowered a 30-kiloton nuclear warhead — more than half-again as large as “Little Boy,” the crude uranium bomb dropped over Hiroshima — to the depths beneath the wellhead. With the pull of a lever, a fistful of plutonium was introduced to itself under enormous pressure, setting off the chain reaction that starts with E = MC2 and ends in Kaboom! The ensuing blast collapsed the drill channel in on itself, sealing off the well.

The Soviets repeated the trick four times between 1966 and 1979, using payloads as large as 60 kilotons to choke hydrocarbon leaks. Now, as the Obama administration stares into the abyss of the Deepwater Horizon spill, and a slicker of sweet, medium crude blankets the Gulf of Mexico, slouching its way toward American beaches and wetlands, Russia’s newspaper of record is calling on the president to consider this literal “nuclear option.”

As well he should. It’s a little less crazy than it sounds. The simple fact is that the leak has confounded all conventional efforts to quell it, forcing British Petroleum and its federal overseers to resort to a series of untested, increasingly unwieldy, and heretofore unsuccessful backup plans as the American people’s impatience and rage grow at geometric rates. In the madness that is Deepwater Horizon, The Bomb may be the sanest choice.

More.

Political Correctness Trumps Expertise in Gulf Oil Spill Response

During his press statement last week, President Obama said that in dealing with the recent oil spill in the Gulf, he was “examining every recommendation, every idea that’s out there, and making our best judgment as to whether these are the right steps to take, based on the best experts that we know of.”

That, however, is not entirely true:

A St. Louis scientist who was among a select group picked by the Obama administration to pursue a solution to the oil spill in the Gulf of Mexico has been removed from the group because of writings on his website, the U.S. Energy Department confirmed Wednesday.

Washington University physics professor Jonathan Katz was one of five top scientists chosen by the Department of Energy and attended meetings in Houston last week.

Though considered a leading scientist, Katz’s website postings often touch on social issues. Some of those writings have stirred anger in the past and include postings defending homophobia and questioning the value of racial diversity efforts.

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Is the Means of Production an Obsolete Idea?

The “means of production” (which may be defined, roughly, as consisting of capital goods minus human and financial capital), is a central concept in Marxism, as well as in other ideologies such as Distributism. The problems of capitalism, according to both Marxists and Distributists, arise from the fact that ownership of the means of production is concentrated in the hands of the few. Marxists propose to remedy these problems by having the means of production be collectively owned. Distributists want to retain private ownership, but to break the means of production up (where practicable) into smaller parts so that everyone will have a piece (if you wanted to describe the difference between the Marxist and Distributist solutions here, it would be that Distributists want everyone to own part of the means of production, whereas Marxists want everyone to be part owner of all of it).

Where a society’s economy is based primarily on agriculture or manufacture, thinking in terms of the means of production makes some sense. In an agricultural economy wealth is based primarily on ownership of land, and in a manufacturing economy ownership of things like factories and machinery plays an analogous role. In a modern service-based economy, by contrast, wealth is based largely on human capital (the possession of knowledge and skills). As Pope John Paul II notes in Centesimus Annus, “[i]n our time, in particular, there exists another form of ownership which is becoming no less important than land: the possession of know-how, technology and skill. The wealth of the industrialized nations is based much more on this kind of ownership than on natural resources.”

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Arizona, Immigration, and Moral Panic

When I first heard of the controversy swirling around Arizona’s “draconian” new immigration law, I’ll admit I was skeptical. It’s not that I thought I would approve of the Arizona law (I tend to be of the view that immigration is a net benefit to America). But hyperbole is an all too common feature of political discourse, and I had to wonder whether the bill was really as harsh and wrongheaded as its critics were making out.

After reading the text of the bill, however, I have to say that, yes, it really is that bad. The bill would criminalize charitable activities directed at illegal immigrants, would making it a crime for an illegal immigrant to try to get a legitimate job, and, in an Orwellian twist, would make illegal immigrants guilty of trespassing for being on private property even with the owner’s permission.

The law also requires state officials to enforce federal immigration laws, effectively turning every Arizona cop into a part time border patrol agent. Arizona’s politicians may like the idea of having cops enforce the immigration code because it makes them look tough, but actual police tend to hate the idea, as it makes their job more difficult and forces them to take resources away from actual police work. (During the debate on the Bush immigration bill back in 2006, for example, the Major Cities Chiefs Associations came out against a requirement for state police to enforce immigration laws, arguing that doing so “undermines trust and cooperation with immigrant communities, which are essential elements of community oriented policing,” and would require scarce resources to be devoted to immigration enforcement rather than other, higher priorities). Continue Reading