Few things are more annoying to me than the obstruction of both semantic quibbles and logical fallacies to a clear understanding of reality. Thus my experience as a Distributist has become one of near-perpetual annoyance, given the proliferation of both throughout the Distributist camp. Here I want to address a few of the latest examples of this obstruction, and provide some insights as to how and why it ought to be overcome.
First, there is John Medaille’s interview with the Young Turks, in which he declares that one cannot be in favor of both free markets and capitalism, simply because he has defined a free market as a situation in which there are vast numbers of competitors, and capitalism as a situation in which economic power has been concentrated in the hands of a few large firms. When challenged on this distinction by the interviewer, who asserted that capitalism could be defined as a free market economy while this economic concentration could be defined as corporatism, Medaille essentially had no choice but to agree. He then decided to add that “the capitalism we have” is what he claims to be talking about, regardless of how one wants to “define it in the abstract.”
By answering in this way, however, Medaille might leave you with the impression that people who claim to be in favor of capitalism aren’t interested in criticizing that which “we have”, when it is beyond obvious to anyone who actually reads the material of self-identified pro-capitalist organizations such as the Mises Institute that they view “what we have” as corporatism or statism or state-capitalism or some variation on that theme, and oppose it as well.
In a remarkably good article here at newgeography, Joel Kotkin details how California has been transformed from the Golden State to the state most likely to go bankrupt. He sums up his argument as follows:
What went so wrong? The answer lies in a change in the nature of progressive politics in California. During the second half of the twentieth century, the state shifted from an older progressivism, which emphasized infrastructure investment and business growth, to a newer version, which views the private sector much the way the Huns viewed a city—as something to be sacked and plundered. The result is two separate California realities: a lucrative one for the wealthy and for government workers, who are largely insulated from economic decline; and a grim one for the private-sector middle and working classes, who are fleeing the state.
Kotkin notes that government spending was completely out of control prior to the present Great Recession:
Between 2003 and 2007, California state and local government spending grew 31 percent, even as the state’s population grew just 5 percent. The overall tax burden as a percentage of state income, once middling among the states, has risen to the sixth-highest in the nation, says the Tax Foundation. Since 1990, according to an analysis by California Lutheran University, the state’s share of overall U.S. employment has dropped a remarkable 10 percent. When the state economy has done well, it has usually been the result of asset inflation—first during the dot-com bubble of the late 1990s, and then during the housing boom, which was responsible for nearly half of all jobs created earlier in this decade. Continue reading
Another first rate video from the Econ 101 series of the Center for Freedom and Prosperity. This video exlores the concept of moral hazard in economics. A moral hazard occurs in economics when one of the parties to a transaction is insulated from bad effects if the transaction goes south. This will cause that party to behave more recklessly than if the full impact of the failure of the transaction were felt. Government bailouts of course establish a precedent that if a big business suffers a loss, that the government might bail it out. No doubt many of our major financial institutions have learned the lesson that if a financial fiasco is large enough, Uncle Sucker will come to the rescue, and put the taxpayers on the hook for another few trillion that they can’t repay. Moral hazard indeed!
Once upon a time there was a country — it had its problems as any nation does, but it did well enough. Its people prided themselves on working hard, and they were comparatively well off: less so than the UK, more so than Spain and Italy.
They’d had the good fortune to have none of their infrastructure destroyed during World War II, and after the war they experienced a boom as an exporter. Things slowed, however, in the late 60s and early 70s. Some said this was because the rest of the world got better at growing their own food and manufacturing their own goods. Others said it was because they allowed too much immigration. Some said it was because the welfare programs they created in the 60s ate away at the motivation to work hard. Others said it was because unions became weak. Whatever the reason, their average income in inflation adjusted terms grew much more slowly than it had, and there was a good deal of discontentment and disagreement as to what to do about it all and who was at fault. Here’s a graph of their average family income in inflation-adjusted US Dollars.
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.
This was going to be a comment on Blackadder’s post which has turned into a discussion on licensing and whether it raises prices, but since I only have time to write out one thought process today I thought I’d turn it into a post.
Most folks outside economics see licensing as a way of legally certifying duties and providing a means of redress when incompetence occurs. Not only does a plumber who consistently allows sewer gases to enter a home get sanctioned civilly, he can be sanctioned by license loss and prevented from harming other households.
Let’s try two examples on our theoretical plumber here:
1) Say that we have a local economy in which licensing is not mandatory. If I want some plumbing done, I have several options: I could open up the phone book, call around, and hire the absolute cheapest guy who says he’s willing to give plumbing a job. He may do a terrible job, and set sewage to run through my ice maker.
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.
Great minds think alike. I had prepared a post on this subject and I see that Darwin already has posted on the same topic. Normally I would simply trash my post, but this time I think our readers might find it amusing to see our different takes on this topic.
Everyone loves a pop quiz right, especially on economics! Here are eight questions. Possible answers are : 1) strongly agree; 2) somewhat agree; 3) somewhat disagree; 4) strongly disagree; 5) are not sure.
Here are the questions:
1) Mandatory licensing of professional services increases the prices of those services.
2) Overall, the standard of living is higher today than it was 30 years ago.
3) Rent control leads to housing shortages.
4) A company with the largest market share is a monopoly.
5) Third World workers working for American companies overseas are being exploited.
6) Free trade leads to unemployment.
7) Minimum wage laws raise unemployment.
8) Restrictions on housing development make housing less affordable. Continue reading
Zogby researcher Zeljka Buturovic and I considered the 4,835 respondents’ (all American adults) answers to eight survey questions about basic economics. We also asked the respondents about their political leanings: progressive/very liberal; liberal; moderate; conservative; very conservative; and libertarian.
Rather than focusing on whether respondents answered a question correctly, we instead looked at whether they answered incorrectly. A response was counted as incorrect only if it was flatly unenlightened.
Consider one of the economic propositions in the December 2008 poll: “Restrictions on housing development make housing less affordable.” People were asked if they: 1) strongly agree; 2) somewhat agree; 3) somewhat disagree; 4) strongly disagree; 5) are not sure.
Basic economics acknowledges that whatever redeeming features a restriction may have, it increases the cost of production and exchange, making goods and services less affordable. There may be exceptions to the general case, but they would be atypical.
Therefore, we counted as incorrect responses of “somewhat disagree” and “strongly disagree.” This treatment gives leeway for those who think the question is ambiguous or half right and half wrong. They would likely answer “not sure,” which we do not count as incorrect.
In this case, percentage of conservatives answering incorrectly was 22.3%, very conservatives 17.6% and libertarians 15.7%. But the percentage of progressive/very liberals answering incorrectly was 67.6% and liberals 60.1%. The pattern was not an anomaly.
After calling for Catholics to be liberated from their pet ideologies, Pope Benedict is helping flesh out a moral economic vision that puts the standard Left- socialism/Right- Free Markets debate into the dust bin for faithful Catholics. The bottom-line seems obvious to me- you can’t demonize government and you can’t demonize business- both bring difficulties into play- over-regulation can harm economic development, but lack of regulation can lead to corporate dominance which is a problem when one considers that corporations typically are upfront about being in existence to pad their investor’s bank accounts, not being much concerned with the universal common good. Our Pope clarifies the inherent morality(read Natural Law) in the economy in this article from one of my favorite web sites Zenit.org:
To follow up on my first installment of “Set Me Free (From Ideologies), I am going to draw again from the rich well of Pope Benedict’s powerful encyclical Caritas In Veritate. In this case it would seem that in paragraph #25 the Pope is sounding kinda liberal if we would attempt to fit the views expressed into one or another of our American political ideologies. Continue reading
Economics may be the “dismal science”, but I find this kind of story about the interconnectedness of the world endlessly fascinating. With flights restricted throughout the UK and Northern Europe because of the volcanic eruption, vegetable and flower growers in Kenya find themselves with mountains of produce with no market.
If farmers in Africa’s Great Rift Valley ever doubted that they were intricately tied into the global economy, they know now that they are. Because of a volcanic eruption more than 5,000 miles away, Kenyan horticulture, which as the top foreign exchange earner is a critical piece of the national economy, is losing $3 million a day and shedding jobs.
The pickers are not picking. The washers are not washing. Temporary workers have been told to go home because refrigerated warehouses at the airport are stuffed with ripening fruit, vegetables and flowers, and there is no room for more until planes can take away the produce. Already, millions of roses, lilies and carnations have wilted. Continue reading
One often hears polemics against the fact that our country is now dominated by the “service economy”. It is one of those phrases that gives a strong impression, yet is oddly difficult to pin down.
If I may be indulged in an open-ended post:
1) How would you define the “service economy”? (with examples)
2) Is the service economy new, or merely expanded/changed, versus what you would consider a more traditional time? (Whether that is 100 years ago or 500 years ago.)
3) Is it a problem that the service economy is so large, and if so why?
The Oregonian features an article on how Chinese workers who spent years working in factories for American brands like Nike and Columbia Sportswear have become a major source of business startups and wealth in China’s rural interior.
WUHU, China — Years after activists accused Nike and other Western brands of running Third World sweatshops, the issue has taken a surprising turn.
The path of discovery winds from coastal factory floors far into China’s interior, past women knee-deep in streams pounding laundry. It continues down a dusty village lane to a startling sight: arrays of gleaming three-story houses with balconies, balustrades and even Greek columns rising from rice paddies.
It turns out that factory workers — not the activists labeled “preachy” by one expert, and not the Nike executives so wounded by criticism — get the last laugh. Villagers who “went out,” as Chinese say, for what critics described as dead-end manufacturing jobs are sending money back and returning with savings, building houses and starting businesses.
Workers who stitched shoes for Nike Inc. and apparel for Columbia Sportswear Co., both based near Beaverton, are fueling a wave of prosperity in rural China. The boom has a solid feel, with villagers paying cash for houses.
“No one would take out a mortgage to build a house,” said Wang Jianguo, 37, who returned after a factory injury in a distant province to the area near Wuhu, west of Shanghai. “You wouldn’t feel secure living in a house you didn’t own.”
The interview changed the way Dodson talked with other supervisors and managers of low-income workers, and she began to find that many of them felt the same discomfort as the grocery store manager. And many went a step further, finding ways to undermine the system and slip their workers extra money, food, or time needed to care for sick children. She was surprised how widespread these acts were. In her new book, “The Moral Underground: How Ordinary Americans Subvert an Unfair Economy,” she called such behavior “economic disobedience.”
I’m perplexed as to why Prof. Dodson is so surprised by this. Continue reading
I don’t believe any good Catholic would say they are happy with the situation of so many sweatshops operating in China et al. The problem is what to do (or not do) about it. I am giving my students a research project premised on a single sentence- “How can I avoid buying sweatshop products?”. We are simultaneously studying the good Pope Benedict XVI’s “Caritas In Veritate”- specifically paragraphs #21, 22, 25, 27, 35, 36, 37, 38, 40, 41, 44, 48, 49, 51, 60, 63, 64, 65, 75, and 76. You can follow along at home!
The so-called American conservative movement is not conservative in the sense that many of its proponents would suggest. In reality, American conservatism, in many ways seeks to preserve and reassert classical liberalism. In fact, the entirety of the American political spectrum is liberal in different ways and varying degrees—but it is unmistakably and manifestly liberal.
This should come as no surprise since many of the Founding Fathers were men of the Enlightenment and there is no more obvious case than that of Thomas Jefferson, the author of that quintessential Enlightenment masterpiece The Declaration of Independence. The philosophical paradigm by 1776 had already shifted—anthropology was evolving toward an increasingly false view of man and the natural law (because the philosophical concept of “nature” was changing) was something different than that articulated by classical philosophers, which had been incorporated into the Christian tradition.
The American legal tradition seeking to adhere to the letter of the social contract, i.e. The Constitution of the United States of America, seems to have individual liberty at issue in every question of law. This, to be sure, is not something to be regarded as a problem in and of itself, insofar as the operative definition of liberty is not philosophically false and the norms of justice, in the classical sense, are not contradicted.
To the learned mind, it is patently clear that the predominant philosophical paradigm, anthropological assumptions on human nature, concept of the nation-state, view of society, of freedom, of responsibility, and so forth found in the Western world is undoubtedly borne of Enlightenment thinking. The United States is most certainly no exception. In America, across the political spectrum, there is a dubious philosophical premise, that of an abstract ideal of autonomy, which, no matter how admirable or attractive it may seem, is radically incomplete. Indeed, man does possess a free will, but the form of freedom requires content. Continue reading