From Marginal Revolution University.
Globally, the number of people living in extreme poverty ($1.25 a day) is shrinking. The global poor are not getting poorer. The world population grew from 4.5 billion people in 1981, to 6.9 billion in 2010, - a 60% increase. The percentage of people living in extreme poverty in developing nations dropped from over 50% to 21%. (From about 1.95 bil to 1.2 bil - and estimates are now well below 1 bil in 2015.)
That doesn't mean life just above the extreme poverty line is desirable. That doesn't mean there isn't a great deal more to do. But let's be honest about the trajectory. And let's also be honest that central to the decline in extreme poverty has been inclusion of the poor in networks of productivity and exchange - that is to say, they embraced some form of market capitalism. Unqualified dismal of "capitalism" (almost never defined by critics), as some religious leaders are prone to do, should be challenged.
Source: World Bank - State of the Poor
Conversable Economist: The Rise of Remittances
"Here's a pattern showing the rise in remittances over time compared to some other international financial flows. Back in 1990, international remittances were lower than official development assistance (ODA). Flows of foreign direct investment (FDI) to developing countries were also smaller than ODA, as were flows of private debt and portfolio equity to developing countries. (The FDI flows to developing countries show here exclude China.) Remittances have been larger than development assistance for some years now, and the gap is growing. Perhaps more surprising, remittances also outstripped debt and portfolio equity flows to developing countries in recent years. The flows of remittances also look quite stable compared to other private-sector capital flows."
Conversable Economist: Americans, Led by Democrats, Get Friendlier With Free Trade
" ... I welcome the overall shift toward a more positive view of foreign trade among Americans. As I've argued on this blog before, the next few decades seem likely to be a time when the most rapid economic growth is happening outside the high-income countries of the world, and finding ways for the US economy to connect with and participate in that rapid growth could be an important driver of US economic growth in the decades ahead. In a broad sense, US attitudes over foreign trade mirror the behavior of the US trade deficit: that is, when the US trade deficit was getting worse in the early 2000s, the share of those viewing trade as a "threat" was rising, but at about the same time that the US trade deficit started declining, the share of those viewing trade as an "opportunity" started to rise.
New York Times: A Call to Look Past Sustainable Development - Eduardo Porter
If billions of impoverished humans are not offered a shot at genuine development, the environment will not be saved. And that requires not just help in financing low-carbon energy sources, but also a lot of new energy, period. Offering a solar panel for every thatched roof is not going to cut it.
“We shouldn’t be talking about 10 villages that got power for a light bulb,” said Joyashree Roy, a professor of economics at Jadavpur University in India who was among the leaders of the Intergovernmental Panel on Climate Change that won the 2007 Nobel Peace Prize.
“What we should be talking about,” she said, “is how the village got a power connection for a cold storage facility or an industrial park.”
Changing the conversation will not be easy. Our world of seven billion people — expected to reach 11 billion by the end of the century — will require an entirely different environmental paradigm....
... The “eco-modernists” propose economic development as an indispensable precondition to preserving the environment. Achieving it requires dropping the goal of “sustainable development,” supposedly in harmonious interaction with nature, and replacing it with a strategy to shrink humanity’s footprint by using nature more intensively.
“Natural systems will not, as a general rule, be protected or enhanced by the expansion of humankind’s dependence upon them for sustenance and well-being,” they wrote.
To mitigate climate change, spare nature and address global poverty requires nothing less, they argue, than “intensifying many human activities — particularly farming, energy extraction, forestry and settlement — so that they use less land and interfere less with the natural world.”
As Mr. Shellenberger put it, the world would have a better shot at saving nature “by decoupling from nature rather than coupling with it.”
This new framework favors a very different set of policies than those now in vogue. Eating the bounty of small-scale, local farming, for example, may be fine for denizens of Berkeley and Brooklyn. But using it to feed a world of nine billion people would consume every acre of the world’s surface. Big Agriculture, using synthetic fertilizers and modern production techniques, could feed many more people using much less land and water.
As the manifesto notes, as much as three-quarters of all deforestation globally occurred before the Industrial Revolution, when humanity was supposedly in harmony with Mother Nature. Over the last half century, the amount of land required for growing crops and animal feed per average person declined by half. …
… Development would allow people in the world’s poorest countries to move into cities — as they did decades ago in rich nations — and get better educations and jobs. Urban living would accelerate demographic transitions, lowering infant mortality rates and allowing fertility rates to decline, taking further pressure off the planet.
“By understanding and promoting these emergent processes, humans have the opportunity to re-wild and re-green the Earth — even as developing countries achieve modern living standards, and material poverty ends,” the manifesto argues. …
Read the whole thing. Decoupling is essential. We have already seen this with land use. We are using no more land for agriculture in the United States than we were 100 years ago. Before that time it took a fixed amount of land to feed each person. That same decoupling is developing worldwide but it could be accelerated. The amount of energy consumed per unit of GDP has now begun to decline. We see this decoupling with other resources. Add a move to solar and nuclear power in combination with decoupling and we have a real chance to drive down carbon emissions drastically.
I haven't yet read the whole EcoModernist Manifesto linked in the article, but the parameters and reasoning laid here is the best articulation of my views on economic development and sustainability that I have read.
I recently linked an article about What Buy Local Gets Wrong. I quote Jason Sorens observation:
"If you buy everything within that circumscribed area and exclude everything outside it, your community will be worse off than it would be if it bought from any willing seller."
I came across this quote in a recent article on the surprising rise of independent bookstores.
When you buy a book at one [independent store], you keep your money in the local economy, something that appeals to many shoppers. You're also more likely to find a unique selection of curated books and personalized recommendations from the store's employees, who are usually enthusiastic evangelists of the written word.
The second sentence points to a key issue. The only way you compete in business is either to be the low cost provider or to offer a premium with your product for which people are willing to pay more. The second sentence is good example of stores finding a premium.
While the first sentence may be accurate in describing motivations for some people to shop at Indy stores, it is an irrational and destructive mindset. People are saying it is ALWAYS better to buy things in the local economy - in this case books. Let's follow that logic for a moment.
First, lets say local is anything within ten miles of my house. I'm going to buy local so I go to the indy bookstore and buy my book. Where did the bookseller get the book? Does the author live within ten miles? Was the paper in the book from trees grown and harvested in the community? Was the pulp producer located in the community? How about the chemical producers and processors who made the ink and glue? How about the printing company? If so, was the digital printing and binding equipment - and all the component parts - made and bought locally? How about the currency used to buy the book? I can go on but you get my point.
If we were to apply "buy local" reasoning consistently we would all be much worse off. All things being equal, buying a product simply because it is local is illogical unless you wish to diminish everyone's standard of living. This is true no matter how big you define local as anything short of global.
God made us for community. Face-to-face community has irreplaceable benefits in some aspects of life but we were also made for the community of commercial society. By specializing in our labor according to gifts and looking to the needs of others as reflected through price in a market exchange, we all benefit.
Thirty years ago this July, Bob Geldof helped organize Live Aid, a concert to help victims of a lengthy famine in Ethiopia. Months earlier, he was behind the release of the song Do They Know It's Christmas? that raised money for Ethiopia as well. While clearly well intended, both ventures - and the Aid ventures they would spawn - reflected a highly Western-centric and paternalistic view of Africans, portraying Africans as dysfunctional and helpless without the help of the Great White Hope. Their welfare is a contingent on Western benevolence, not their own initiative and creativity.
Pope John Paul II said the poverty is not lack of wealth. Poverty is exclusion from networks of productivity and exchange. The solution to poverty is appreciation for the God given creative capacity in each person and the inclusion of everyone in networks of productivity and exchange.
Now, thirty years later, some of these rockers are seeing the light. Bono of U2 has been singing the praises of entrepreneurial capitalism for a few years now. (Bono: 'Capitalism Takes More People Out of Poverty Than Aid') And now we learn Bob Geldof himself has entered the venture capital business. (Rock Star Bob Geldof Spearheads U.S. Private-Equity Push Into Ethiopia)
Below is a video interview with Geldof about his ventures. Note that right out of the gate the interviewer challenges Geldof because Geldof will be making a profit off of his ventures. Yes! That is exactly right! That is because profit for all parties is what happens when equals - creative productive people - specialize and began to exchange goods and services. Their profits get invested in expansion or in new ventures, creating more wealth, jobs, and higher standards of living. Instead, the interviewer's paradigm is of a patron to an inferior, an inferior with nothing of value to produce and exchange. Maybe some of our paternalism will begin to fade as these high profile celebrities begin to embrace economic development and exchange.
The Atlantic: Welfare Makes America More Entrepreneurial
A common perspective among political conservatives, especially of the libertarian and Tea Party varieties, is that welfare is a drag on economic growth and it is a disincentive to initiative. Paul Ryan wants a safety net and not safety hammock. Some libertarians don’t even want the net. It would be better to let people assume their own risks. Money taxed away by the government is money that people could have used to buy goods and services and boost the economy.
I do not dispute that government programs could be a drag on the economy but this conservative narrative is grossly incomplete! Entrepreneurship and economic innovation are, at the heart, calculations about risk. By taking a bold step, what are the chances I will be better off (however I measure that) and what are the chances I could lose everything? Do the chances of “better off” outweigh the status quo, especially if I could lose even what I have now? So here is the key point: By reducing the risk of losing everything we tip the risk calculation toward taking making more risk, and therefore economic growth.
... Take food stamps. Conservatives have long argued that they breed dependence on government. In a 2014 paper, Olds examined the link between entrepreneurship and food stamps, and found that the expansion of the program in some states in the early 2000s increased the chance that newly eligible households would own an incorporated business by 16 percent. (Incorporated firms are a better proxy for job-creating startups than unincorporated ones.)
Interestingly, most of these new entrepreneurs didn’t actually enroll in the food stamp program. It seems that expanding the availability of food stamps increased business formation by making it less risky for entrepreneurs to strike out on their own. Simply knowing that they could fall back on food stamps if their venture failed was enough to make them more likely to take risks. ...
... The rate of incorporated business ownership for those [CHIP] eligible households just below the cutoff was 31 percent greater than for similarly situated families that could not rely on CHIP to care for their children if they needed it.
The same is true of recent immigrants to the United States. Contrary to claims by the right that welfare keeps immigrants from living up to their historic role as entrepreneurs, CHIP eligibility increased those households’ chances of owning an incorporated business by 28 percent.
The mechanism in each case is the same: publicly funded insurance lowers the risk of starting a business, since entrepreneurs needn’t fear financial ruin. (This same logic explains why more forgiving bankruptcy laws are associated with more entrepreneurship.) ...
... American men were more likely to start a business just after turning 65 and qualifying for Medicare than just before. Here again, government can make entrepreneurship more appealing by making it less risky. ...
... Sometimes, though, a robust safety net may serve to discourage entrepreneurship. The best path in such cases, however, may not be to cut the program, but rather, to reform it. When France lowered the barriers to receiving unemployment insurance, it actually increased the rate of entrepreneurship.. Until 2001, citizens on unemployment insurance had little incentive to start businesses, since doing so would terminate their benefits. Instead of gutting the program, the state simply decided to let anyone who founded a business keep drawing benefits for a limited period, and guaranteed that they would be eligible again if that business failed. The result: a 25 percent increase in the rate of new-firm creation. ...
Other examples are reported. You get the picture. Here is the conclusion.
... The evidence simply does not support the idea of a consistent tradeoff between bigger government and a more entrepreneurial economy. At least in some cases, the reverse is actually true. When governments provide citizens with economic security, they embolden them to take more risks. Properly deployed, a robust social safety net encourages more Americans to attempt the high-wire act of entrepreneurship.
The challenge is not the particular size of government. The issue is the precise programmatic design of any given program. Markets generate a real-time feedback loop that allows independent individuals to prioritize their choices. Government has less effective ways of being adaptive and responsive. I lean toward market solutions where practical. Yet, there are some deliverables that markets alone are not capable of generating. How this mix should all come together is a topic on which reasonable people can disagree. But the idea that government cuts necessarily lead to more economic vitality is no more valid than the idea that wildly throwing money at welfare programs helps people. The real world is far messier than ideologues are willing to grant.
Ethics and Economic Education of New England: Buying local and blocking out the sun
Incorporating the lens of opportunity cost into to decision-making is probably one of contributions of economic thinking. Failure to incorporate it is what often leads well intentioned movements into destructive outcomes. Jason Sorens does a good job illustrating this with the "Buy-Local" movement.
So return to the example of the plastic bins [Buying bins for $1 at Wal-Mart vs. local for $2]. If I buy them from Wal-Mart, I save $1. I can use that dollar to buy other things or to invest in producing things (by saving). I am better off than if I buy the bins at $2 each from the local retailer, Wal-Mart is better off, and whoever would benefit from my spending or saving that extra dollar is also better off. Only the local retailer is worse off.
Do the gains from buying from Wal-Mart rather than the local retailer in this example outweigh the losses? Yes. To see this, imagine that everyone bought local, all the time. Cars, airplanes, software, clothing, food… everything would have to be made and exchanged in the town where you live. What would happen to everyone’s standard of living? It would fall dramatically. (How many skilled airplane manufacturers does your town have?) The same principle applies at the national level, or any other geographic level you choose. If you buy everything within that circumscribed area and exclude everything outside it, your community will be worse off than it would be if it bought from any willing seller.
Now, that’s an extreme example, but it illustrates the principle. Some things are impossible to make locally (airplanes). Other things are difficult and costly to make locally (shipping and retailing of plastic bins). A few things will be most efficiently and affordably made locally, and you will want to buy them locally without having to be goaded into doing so – they’ll simply be the best products for the price. Goading your community into buying shoddier or more costly products just because they’re local or American or whatever just makes your community poorer.
Read the whole thing.
There are lessons here for both left and right.
First, this should show progressives that the government doesn't actually have to mandate a minimum wage hike for wages to go up. There are other, market-based ways to get wages to increase, like tightening labor markets.
For companies, raising wages is not an exercise in philanthropy. It's a business decision. They'll almost certainly make it up in higher retention and productivity. ...
... Whenever a problem arises that progressives want to fix with some heavy-handed government intervention, conservatives respond that the market will take care of it — and they're very often right. But here's the thing: "The market" is not a demigod who lives on the planet Neptune. The market is simply decisions made by individual human beings, and human beings can decide to do some things and not others.
The progressive demand for government intervention often arises from cultural failures, and cultural remedies do not spring up magically into existence. They have to be created. Sometimes conservatives risk adopting their own version of the left's materialistic Vulgar Marxism when they think of "the market" as an autonomous force that drives history and doesn't leave room for individuals to choose to drive it in one direction or another. As the economic historian Deirdre McCloskey and the philosopher Michael Novak have shown, a thriving free enterprise system rests on the exercise of virtues and not just the laws of supply and demand.
If we conservatives think the federally mandated minimum wage is a terrible policy (and it is), we shouldn't just explain why it is a terrible policy, and we shouldn't even just support alternatives like wage subsidies. We conservatives should also actively make the case to companies like Walmart that they should pay their employees more. Same thing with rethinking work-life balance and careers for women. It's striking that we almost never hear the expression "civic duty" anymore; the reason why the demand for regulation arises is because people are no longer expected to exercise private virtue.
PBS News Hour has a piece Why employees earn more at big-box chains than mom-and-pop shops.
Contrary to widespread belief, big-box stores and chains have increased wages in the retail sector as they have spread, according to “Do Large Modern Retailers Pay Premium Wages?” (NBER Working Paper No. 20313). Retail wages rise markedly with the size of the chain and the individual store, according to the study by Brianna Cardiff-Hicks, Francine Lafontaine and Kathryn Shaw. As retail chains’ share of establishments has risen from one-fifth in 1963 to more than one-third by 2000, the number of jobs that pay better than traditional mom-and-pop stores has proliferated.
Half of the difference in wages between large and small retailers appears to be attributable to differences in the average skill level of workers in the two groups of firms. On average, better workers find their way to the bigger companies. With more levels of hierarchy than small stores, larger establishments also allow better workers to move into management positions, increasing their pay even more.
“The increasing firm size and establishment size that are a hallmark of modern retail are accompanied by increasing wages and opportunities for promotion for many workers,” the authors write. “While retail pay is considerably below that in manufacturing, pay in retail is above that found in service jobs… [These results] contradict the image of the retail sector as one comprised of the lowest paying jobs in the economy.” ...
An anti-consumerism Dickensian narrative frequently emerges among critics of big box stores. Wal-Mart (or another big box) moves into an area, drives out virtuous small businesses and their owners, drives down wages, and throws people into the cold uncaring machinery of greedy behemoth. The narrative is wrong at several levels.
First, there is considerable nostalgia and romance built into the preference for small businesses. In reality, relative to big box stores, small businesses vary widely in quality of management. Management and personnel policies are often subject to quirky whims of the owners. Cross-training to improve skills and opportunities for advance are minimal. Family nepotism not infrequently triumphs over meritorious performance. Wages are lower. Big box stores are better on all these fronts.
Second, stores like Wal-Mart do not tend to drive out small business. Wal-Mart’s major disruptive impact is on other discount store chains. In fact, Wal-Mart can be a boost to small business. By creating high traffic areas, small specialty businesses can open nearby and draw from the traffic generated by Wal-Mart.
Third, rather than drive down wages, these stores actually pay better wages than the mom and pop enterprises. The also offer substantially greater opportunity for learning and wage growth, even management opportunity. And if you think the stores are monolithic soul-sucking monstrosities, I’d invited you to read about Charles Platt’s experience as an editor for Wired who went to work for Wal-Mart to find out what it was like. See Life at Wal-Mart.
Finally, there is an additional indirect, but significant, Wal-Mart impact. Your standard living can improve in two ways: Increased wages and lower prices. The article makes clear that big box stores like Wal-Mart raise wages. But Wal-Mart also brings in a wide range of quality goods at low prices. It particularly does so for things like food, clothing, household goods, and medicine. These items make up a much higher percentage of the monthly budget for low-income people. Through low prices, big box stores have a positive impact on living standards that disproportionately benefits low income people.
When Wal-Mart stores open, it is not uncommon to have ten times as many applications as jobs. Wal-Mart tried to open a store in Chicago five years ago and one source published a map that shows support for the idea by Ward (See here.) The strongest support came from the poorest wards and support decreased as you moved up the economic scale. The big box stores offend the aesthetic and ideological sensibilities of the wealthy but low-income people overwhelmingly embrace them.
I do not give blanket endorsement to the big box stores but if my wealthier and more intellectual friends are truly concerned about justice and poverty, they may want to dig a little deeper than their moralistic anti-consumerism narratives take them.
FCS Ministries Blog: Relationships That Make a Difference
Relationships. Two teenagers tossing a football. A couple falling in love, getting married, having kids. Business partners launching a new venture. Church friends sharing a meal.
Relationships all. Why do we have them? Fun, intimacy, profit, nurture? For social creatures like us, relationships have a whole range of benefits, all of which add value to our lives.
So when an affluent American church says they are building a relationship with a poor African church, what value are they expecting to gain? Relationship-talk is common among churches these days. It usually means something like: “We are not giving them money, not much anyway, not yet. We want to establish a relationship first, get to know them, build mutual trust. Then perhaps we will find healthy ways to invest together in ministry. But it’s the relationship that’s most important.” This is familiar, politically correct mission-speak that’s currently in vogue.
Something had to change when colonialistic missions fell out of favor. But simply channeling funds to indigenous leadership had its challenges. Long distance partnerships, we found, were difficult to manage.
So the alternative was relationships. If we invest time simply being together, learning from each other, experiencing the distinctives of each others’ cultures, then friendships will grow, trust will deepen, and we may find our way into productive, enduring mission together. We hope.
But how long will this take? How long before we can launch into a productive project together – one that will not end in misunderstandings or unhealthy dependency? And, of course, our African friends are wondering how long it will be before we trust them enough to let loose of our ample reserves.
It’s a delicate dance, this relationship building. We wonder when (or if) our relationships will become strong enough or our agendas align well enough to allow a true partnership.
Genuine liking. Mutual respect. Enjoyment of each others’ company. Appreciation of each others’ uniqueness. All important, yes. But is this all we want? At what cost? Cultural exchange is a pricey process.
Come on. Is cultural exchange really what we want? Don’t we really want to do something? Build something. Help someone? Don’t we really want to effect change, make a difference?
How long do we have to wait around pen-pal-ing and guest-swapping before we actually accomplish something of significance?
So what is it in Africa (or our other favorite place of need) that we are really interested in fixing? Saving souls? Africans are far better evangelists than we are and besides, they speak the local language and know the culture.
Building orphanages and schools? That may be fine so long as we make a heavy commitment to fund on-going scholarships and overhead. But, of course, we are well aware of the problems such dependency creates. We also know that education without a good job at the end is futile.
At the risk of sounding unspiritual and upending our mission-trip methodology, why don’t we just go ahead and invest our mission money in something that will make a lasting difference? Like a profitable business that will create legitimate local employment as well as produce a return that can be re-invested.
When local people are working, the need for subsidized social services decreases. A profitable company can provide health care. A business that shares profits enables employees to educate their children. Workers with disposable income can improve their homes, maintain their water supply, build their own churches.
Decent jobs do all of this. And more. Profitable businesses spawn other businesses that create additional jobs. Isn’t it time for us to admit that what works so well for us in our culture may be the very thing that will allow other cultures to flourish?
Legitimate business relationships – now there’s the kind of relationship that adds value.
(Republished with permission)
Order at Amazon: Nothing is Free: The Price Only Business can Pay to Protect Free Markets.
What is the purpose of business, particularly as it relates to the welfare of employees? Economists, business leaders, and theologians engage in endless debate about this topic. Regrettably, it tends to be two separate debates with economists and business leaders talking amongst themselves and theologians talking to each other. The first debate tends to be long on economic ramifications but without considerable reflection on what moral imperatives might be at play. The second debate tends to be long on moral reflection but too often within the context of (sometimes profound) economic illiteracy. Each community tends to view the other with suspicion, if not hostility. Layer on top of this the political divide between libertarians who see only a minimal role for government intervention in business, and liberals who believe a primary purpose of government is to intervene in economic affairs to ensure equitable outcomes, and you frequently end up with unproductive heated debates.
This inability to reflect both economically and morally on such questions leads to significant compartmentalization, so well described in John Knapp’s How the Church Fails Business People (and What Can Be Done About It. See my blog series on the book here.) Businesses frequently dissuade people from bringing their morals into the workplace. Pastors are reticent to approach the topic, except in platitudes, feeling inadequate to wrestle deeply with economic implications. Some businesspeople prefer not to hear about such topics at church (either distrusting the pastor’s understanding or because they see church as a safe haven from the cares of the world) and most pastors are content to oblige. (And from my experience, those pastors do that do aggressively raise the topic, frequently do so from a variety of deep ideological convictions that tend not to generate helpful dialog and reflection.) Yet what we need is “courageous conversations,” as Knapp calls them, where we genuinely explore how work and faith interact. But how do we begin such a conversation?
Dave Geenens, Director of the School of Business and Graduate Business Programs at Benedictine College in Atchison, Kansas, has given us a wonderful gift in starting courageous conversations with his new book Nothing is Free: The Price Only Business can Pay to Protect Free Markets. This is NOT an academic treatise. It is a fable.
One of the first lessons I learned in business was that nothing is free. Free freight? There is no such thing. That simply means that the cost of freight is covered by profit made elsewhere. By one, get one free? The cost of the second item is covered in the margin of the first one. Interest free? The cost of interest is absorbed in the profit made on the sale of the item. Nothing is free.”
The book introduces Rebecca Morton, founder of the franchise business Cupcakes and Coffee, based in Atchison, Kansas, just as the corporation is about to go public. Rebecca is wrestling with the implications of what this means for her and her business, particularly with the increased focus on increasing shareholder value. Then she meets Brother Mark, a Benedictine Monk. Throughout the book we listen in on Rebecca’s conversations and inner reflections as she tries to make sense of it all.
Geenens draws on Roman Catholic social teaching to highlight the good that business is intended to do. At the risk of spoilers, if business fails to live out its charge to care for the well-being of its employees, other institutions (namely government) must intervene to correct the inadequacy. Advantage gained by business through the neglect of employees and failure to the good it is intended to do isn’t free. The cost is increased government intervention.
What is the good that business is to do and how do we achieve it? It is a complicated question that Geenens does not directly answer. Instead, he invites us to consider the four cardinal virtues: justice, wisdom, courage, and moderation. How might these inform us as we think about the intersection of work and faith? I won’t give away the whole story here. Geenens’ ideas are pulled together into one image at the end of the book, but you’ll need to buy the book to see what I mean.
The book is well written and accessible to most audiences. (No degrees in economics or theology required.) I can see this as a wonderful selection for a church book club, any community of business professionals interested in integrating faith and work, as well as a text for college or graduate classes. Despite the explicitly Christian context of the story, I think the book has merit beyond discussion in religous communities as we think about business ethics. The book is a wonderful discussion starter … a great starting place for a courageous conversation. Buy your copy now at Amazon: Nothing is Free: The Price Only Business can Pay to Protect Free Markets.
Critics of economics, particularly in the world of religion, frequently charge that the discipline is grounded in a mindset of scarcity and competition versus what they champion: abundance and cooperation. The critique is considerably overblown.
First, economists recognize the world for what it is. Virtually nothing we use comes in usable form directly from nature. Everything we use requires human transformation from a less useful form into a more useful form. Economists study how human beings (individually and corporately) prioritize and decide what to make, how to make, and how to distribute. Economics is focused on how people create abundance out of scarcity, not on competing over a fixed set of existing goods as so many of the critics imagine economists to be advocating.
Second, economists mean something specific when they speak of competition. Timothy Taylor recently wrote in his post, Competition as a Form of Cooperation:
“… The kind of market competition that economists typically invoke is not about wolves competing in a pen full of sheep, nor is it competition between weeds to choke the flowerbed. The market-based competition envisioned in economics is disciplined by rules and reputations, and those who break the rules through fraud or theft or manipulation are clearly viewed as outside the shared process of competition. Market-based competition is closer in spirit to the interaction between Olympic figure-skaters, in which pressure from other competitors and from outside judges pushes individuals to strive for doing the old and familiar better, along with seeking out new innovations. Sure, the figure-skaters are trying their hardest to win. But in a broader sense, their process of training and coming together under agreed-upon rules is a deeply cooperative and shared enterprise.”
Competition is not a creation of economists or capitalism. Competition is the natural order of the world God created. At any given moment, we have a fixed amount of resources available and a fixed number of hours in a day. We cannot do everything at once and we do not all share the same priorities on what to do next. Those resource limits and differing priorities are what put us in competition, not some economic theory. So the abundance seeking economist might ask how we make more goods with less resources? How might we improve the productivity of each hour? These lead to a greater abundance of goods and choices.
Markets do no create competition. Markets are a human response to focus the competition that God has an inherently placed in the world toward greater abundance and cooperation. They aren't perfect, but they have no parallel for a vast array of decisions that must constantly be made. Economics recognizes the existence of scarcity and competition while seeking a world of abundance and cooperation.
I just read Cathedral, Forge, and Waterwheel: Technology and Invention in the Middle Ages by Frances & Joseph Gies. The book focuses on technological development during the 1,000 years from 500-1500 C.E. The Middle Ages were once cast as an age of regression from the golden age of Greece and Rome until the Renaissance and the Enlightenment saved the day. Furthermore, capitalism is often seen as a product of the last two or three centuries. Modern scholarship debunks these characterizations. This book does a great job at showing the cultural and technological ferment of the Middle Ages, as well as showing how many of the key components of the modern economic world (companies, risk management, double-entry bookkeeping, finance, technological innovation, labor specialization, factories, to name a few) were already coming to flower by 1500. Here are two insights from the end of the book:
… “Asian priority in a wide range of [technological] innovations is established. Asia, however, showed little inclination to borrow, and so, after giving much to others, allowed its own technology to wither, as demonstrated in the history of the two epoch-making inventions of printing and firearms. Each originated in China, but each was allowed to languish, while Europe seized them in both hands to make them major instruments of change. An authority [Timo Myllyntaus] on technology transfer in the modern world asserts that the process ‘is not just a matter of moving some piece of hardware from one place to another… A material infrastructure is not enough. There must also be sufficient nonmaterial infrastructure.’ In the ‘nonmaterial infrastructure’ of medieval Europe was a spirit of progress whose ingredients included intellectual curiosity, a love of tinkering, an ambition ‘to serve God’ and also ‘to grow rich as all men desire to do.’
A sense of progress implies a sense of history, something missing among the Egyptians, Greeks, and Romans. ‘Lacking any objective understanding of the past – that is, lacking history,’ says [D. S. L.] Cardwell, ‘the hierarchical and slave-owning societies of classical antiquity failed to appreciate the great progress that had been achieved by and through technics.’ On the contrary, the ancients were fond of looking back to what they conceived as a vanished ‘golden age,’ a conception the reverse of progress. The Christian Church, whose pioneering monastic orders made many practical and material contributions to medieval technology, also supplied a noncyclical, straight-line view of history that allowed scope for the idea of progress.” (287-288)
The book concludes with this paragraph:
“’Technology,’ says Melvin Kranzberg, founder of the Society for the History of Technology, ‘is neither good nor bad; nor is it neutral.’ It is what each age and each society make of it. The Middle Ages used it sometimes wisely, sometimes recklessly, often for dubious purposes, seldom with a thought for the future, and with only a dim awareness of the scientific and mathematical laws governing it. But operating on instinct, insight, trial and error, and perseverance, the craftsman and craftswoman, the entrepreneurs, the working monks and the clerical intellectuals, and the artist-engineers all transformed the world, on balance very much to the world’s advantage.” (291)
I've read a number of books on the history of technology. This is one of the best short surveys I have read, reading more like a novel than a history book.
Well, I think I might have met his match. She's called Deirdre McCloskey. ...
... McCloskey on the other hand, who is meant to be the conservative one, has the zeal of a revolutionary. She describes herself as an ex-Marxist, Christian libertarian. She is the most notable transgender economist in the world (I can’t recommend strongly enough Crossing, A Memoir, her moving account of her journey from Donald to Deirdre.) She is an entertainer and storyteller; one of the few serious economists who is as likely to quote the poetry of Robert Burns in support of an argument as she is to quote wheat prices in the 15th century.
But forget the characters. It is the intellectual contrast which gets to the heart of the debate between those who worry about in-equality and those who don’t. ...
... McCloskey, by contrast, has long argued that economists are far too preoccupied by capital and saving. She doesn’t even like the word capitalism, on the grounds that capital is not what got us where we are today. ‘If Scotland is trying to become Holland, then capital accumulation is how to do it. That will double your income, maybe triple it.’ But for her, that sort of accumulation is a scratch-card-sized prize — and the lottery jackpot beckons. She enthuses about the Great Enrichment of the 19th century. ‘What happened, understand, is not 100 per cent growth, but anywhere from 2,900 per cent growth to 9,900 per cent growth. A factor of either 30 or 100.’
That jump in incomes came about not through thrift, she says, but through a shift to liberal bourgeois values that put an emphasis on the business of innovation. In place of capitalism, she talks of ‘market-tested innovation and supply’ as the active ingredient of our economic system. It is incidentally a system ‘drenched’ in values and ethics overlooked by economists. ...
... The answer to that question determines what should be done about inequality. Piketty wants a progressive tax on wealth to prevent high returns entrenching the power of the richest. McCloskey, needless to say, is not keen on redistribution. Taking from today’s rich may give you a one-off uplift in the incomes of the poor of, say 30 per cent, she says; but that is nothing to the uplift from innovation and growth, which can double incomes every generation.
So much for the central disagreement between them. Here’s my problem. Many people with strong views on inequality consciously or unconsciously think of this as a binary choice: profits go to either a deserving or undeserving rich, depending on your view. It’s all about capital, or all about wealth creation. But I struggle to see it that clearly. I’d like to know how much of the return on capital that so concerns Piketty is actually income earned from entrepreneurial wealth creation. I’d also like to know how important that income is to innovation.
Piketty is well aware of this vulnerability in his argument. ...
She is admirably pure in her view, but is it as black and white as she portrays it?
Bill Gates or Liliane Bettencourt? They co-exist, of course, and have both had a pretty good time of it in recent decades. The question is which one better characterises the very rich. And also which risk you would rather take: taxing the Bills at the risk of deterring them from creating Microsofts? Or not taxing the Lilianes, at the risk of letting them become ever wealthier and more powerful while sitting at home doing nothing?
I know that the 99 per cent of the population have no difficulty coming to a view. I’m in the sad 1 per cent, who can see both sides.
Very interesting article! I lean more in McCloskey's direction. I think the impact of innovation is invisble to so many and it is radically underappreciated by others who acknowledge it. But I also share the ambivalence so well expressed by the author in this article. Here is a clip of McCloskey:
Economist: Not so fair trade
BUYING ‘Fairtrade’ coffee is not really helping the very poor, new research suggests. By comparing living standards in Fairtrade-certified producing areas in Ethiopia and Uganda with similar non-Fairtrade regions, four development economists from the School of Oriental and African Studies (SOAS) in London found that Fair Trade agricultural workers often earned lower incomes.
After four years of fieldwork in the coffee, tea and flower sectors in Ethiopia and Uganda, where they gathered 1,700 survey responses and conducted more than 100 interviews, the SOAS researchers found people living in ordinary rural communities enjoyed a higher standard of living than seasonal and casual agricultural workers who received an apparently subsidised wage for producing Fairtrade exports. Women’s wages were especially low among producers selling into Fairtrade markets, according to the researchers. ...
... PS: The Fairtrade Foundation has published a lengthy reply: "We note the innovative methodology and large sample size that SOAS’s research project has used to answer its three research questions, only one of which focuses on Fairtrade. We also note however that the study has not sought to evaluate the impact of Fairtrade’s model and interventions as it has not followed an impact evaluation methodology."
I began this essay noting that humans have intrinsic value. However, goods (and the labor entailed in making them) do not. Goods and labor have instrumental value. Let us explore this in more detail. Two clarifications before we begin.
First, I want to distinguish between goods and natural resources. Goods are the things we use to meet our particular wants and needs. Resources are the materials, energy, plants, and animals we form into goods. Nearly all goods have an element of human labor contributing to their value. While there is an abundance of natural resources, the quantity of goods is directly connected to the productivity of humans transforming natural resources (and more recently data) from less useful forms into more useful forms.
Second, there is a difference between the value of any particular good to a particular individual, and the value of a category of goods to the community. The value attributed to a stapler may vary considerably from individual to individual at any given moment but the market price tells us the collective value the community places on particular goods at a particular time. (More to follow.) For our purposes here, I’m concentrating on the communal value as reflected in a market price.
So what value do goods have? It has long been a confounding question. Some people have said that goods have intrinsic value and that this value can be stated in terms of a market price. Other people have seen more subjective factors at work, believing the more important a good is the more value it should have. Still others have observed that the supply of a good is key to understanding its value.
Many thinkers have wrestled over the years with making a sense of the subjective and objective aspects of value but not to very satisfying conclusions. Since most economies prior to the 17th Century were relatively stagnate and trade played a smaller role, life seemed to move along just fine without precision of thought in this area.
From the late Middle Age of Europe on into the early stages of industrialization, thinkers began to appreciate that the value of goods and labor was not as fixed as previously thought. Economic data began to be collected and scrutinized. Accelerating Change in productivity, coupled with the Enlightenment’s push to make rational sense of human affairs, pressed thinkers for a more precise understanding of how value is determined by 18th Century. Thinkers, most notably Adam Smith, came to see that labor was the key issue. One hour of labor by any person was seen as mostly interchangeable with an hour of labor by any other person. An hour of labor was understood to have intrinsic value. Price was not inherent in the thing itself; rather the price of a good was set by the amount of labor applied to creating it. This was the labor theory of value. (Both Adam Smith and Karl Marx subscribed to this idea.)
However, by the late Nineteenth Century a profound reality began to dawn on thinkers: The communal value of a good is whatever price the community of buyers and sellers agree to through exchange. This was not a new idea. Thinkers of the past had stumbled upon it. Several of the Scholastic philosopher-theologians had written about this, dating back to Thomas Aquinas in the 13th Century, but they seemed to have little influence on economic affairs.
This revolution in understanding meant that goods, and the labor that produced them, have only instrumental value. Instrumentality is a subjective judgment. But these more recent theorists understood that there is an objective reality that influences a good’s value as well. The general price of a good is determined by the intersection of two variables:
This means that the value is dynamic. It is subject to the changing needs and wants of the community, as well as to the quantity of goods available for use. But when we understand the value of things in this way, something even more remarkable occurs. Prices (i.e., value stated in terms of a currency) form a continuous feedback loop between buyers and sellers. Why is that important?
On any given day each individual has a fixed number of hours, a fixed level of technological understanding, and a fixed amount of resources available for producing goods. The latter two can be altered over time but on any given day they are all fixed. A community’s productive capacity (whether a village or the entire planet) is the sum of these individual capacities. Priorities must be set because capacity is limited. Otherwise, we will end up with too much of some things and too little of others. Material resources and labor will be wasted and needs will go unmet. This is a challenge for any society.
Management of economic activity may not pose a particular challenge in a face-to-face community of a couple dozen people. If there is community solidarity, each individual is likely known to the others. All individual needs can be known and considered. It will be clear how well each person is working, who is incapacitated, and who is best suited for which jobs. It will be known who needs what and how much.
However, this natural information system breaks down when communities grow much beyond a few dozen people. There is no way to be well acquainted with hundreds of people, much less thousands or millions. Not only is it beyond our capacity to know so many people but each of us has economic priorities that are constantly shifting. Discerning and planning for the community becomes unmanageable. Prices derived through market exchange become the real-time communication channel through which we are able to coordinate our work with the world beyond our face-to-face communities, to meet each other’s needs. Distorted prices mean distorted communication.
Imagine we own a factory that makes toy wagons. Two workers make wheels. The workers are equally earnest employees who work the same number of hours each day. But one worker meticulously crafts perfectly square wheels while the other worker with equal diligence makes perfectly round wheels. Are we to say that each hour of labor has intrinsic value and that each should be compensated the same? No.
The labor of the worker making round wheels is clearly offering something of value that the other worker is not; to us as the employer and ultimately to the consumer. While the square versus round wheel example is obviously an extreme case to make a point, the issue is that one hour of labor is clearly not identical to any other hour of labor. Compensating the workers according to the value of their work motivates them toward activity that the community values and away from activity that it does not. The maker of square wheels has an incentive to alter her labor to provide products that bring more value to others, while the maker of the circular wheels has an incentive to get ever better at the craft and earn more.
If a genuinely open market exchange happens, then the price of goods and labor are going to reflect the priorities of the community. Attempts to distort the prices up or down will lead to some distortion of what the community has said it values in the favor of some individual or group, possibly leading to waste and poorly meet needs.
Now please note that I began the first sentence of above paragraph with “if.” That is a huge “if.” Furthermore, are we saying that the community always values all things correctly? And what about those who simply can’t offer labor that earns them enough to sustain life? All good questions and we will come to them. But we first need to finish the discussion of value. I’ve opined on the subjective value component. Now we turn to the objective aspect of value. It adds a significant wrinkle to our discussion.
Wall Street Journal: The World's Resources Aren't Running Out
As I listen to conversations about our economic future, I hear two visions of the future being articulated and I think both are inaccurate. First, there are what I call the Malthusians. They see a world of imminent collapse, limits to growth, exhausted resources, and such. We are warned that if we keep going the way we are, X will run out, or Y will be destroyed. And they are right ... if there "if" stays true. And that is just the point. We don't keep going they way we are presently going when challenges emerge. We innovate. We substitute better models of doing things for the old ones. We substitute more plentiful materials for ones becoming more costly or scarce. The Malthusians have been singing their chorus of collapse for 200 years and they have always been wrong. And we still at the beginning, not the end, of learning how to address a multitude of problems that have continually plagued us.
I call the second group the Cornucopians. They see a world of unprecedented technological breakthroughs that will effortlessly make the world of 2100s like a utopia compared to our day. Now I will confess that I lean toward the Cornucopian side of this continuum and I believe the world will be a much better place. But I also look back over the last 200 years since the beginning of the Industrial Revolution, and while I see unquestionable improvement in the world's standard of living that is in accelerated upward movement, I also see great wars, injustices, and waste that happened along the way. The future is likely to hold more of the same.
As someone who works continuously at integerating faith and economics, I am deeply persuaded that growth is going to happen, that innovation and substitution is going to trip up the Malthusians once again. But that doesn't mean the process change is always going to painless and without injustice. And if the church is to have a meaningful impact on shaping our coming world, it has to live in this reality. Regretably, most of my Mainline Protestant tribe has succombed to Malthusian visions, and rather than working as a force to shape the new world, equates working against its emergence as a prophetic witness. Meanwhile, more conservative Christians seem to carry on as if just implementing free markets and making America strong is all we need. Unless this changes, the church, in America at least, will find itself swept along by these economic and technological changes, not shaping them.
Matt Ridely recently wrote a piece in the Wall Street Journal called The World's Resources Aren't Running Out. A very much resonate with what has written in this piece.
"Ecologists worry that the world's resources come in fixed amounts that will run out, but we have broken through such limits again and again.
"... But here's a peculiar feature of human history: We burst through such limits again and again. After all, as a Saudi oil minister once said, the Stone Age didn't end for lack of stone. Ecologists call this "niche construction"—that people (and indeed some other animals) can create new opportunities for themselves by making their habitats more productive in some way. Agriculture is the classic example of niche construction: We stopped relying on nature's bounty and substituted an artificial and much larger bounty.
Economists call the same phenomenon innovation. What frustrates them about ecologists is the latter's tendency to think in terms of static limits. Ecologists can't seem to see that when whale oil starts to run out, petroleum is discovered, or that when farm yields flatten, fertilizer comes along, or that when glass fiber is invented, demand for copper falls.
That frustration is heartily reciprocated. Ecologists think that economists espouse a sort of superstitious magic called "markets" or "prices" to avoid confronting the reality of limits to growth. The easiest way to raise a cheer in a conference of ecologists is to make a rude joke about economists. ..."
"The developed world holds up the ideals of capitalism, democracy and political rights for all. Those in emerging markets often don't have that luxury. In this powerful talk, economist Dambisa Moyo makes the case that the west can't afford to rest on its laurels and imagine others will blindly follow. Instead, a different model, embodied by China, is increasingly appealing. A call for open-minded political and economic cooperation in the name of transforming the world."
This is a from Bob Lupton, FCS Urban Ministries, in the Urban Perspectives newsletter. He is always thought provoking. This issue was especially good! (Note: Urban Perspectives allows copying these articles if attritbtion is given.)
Wealth. A sign of God’s favor. At least that’s how it was viewed in Old Testament times. Wealth was equated with prominence, influence, leadership, and yes, even righteousness. Consider Job and Abraham. Oh yes, there were evil and corrupt rich men to be sure. The prophets took them on. But generally riches were seen as evidence of God’s blessing. That’s why the disciples were so puzzled by Jesus’ pronouncement that it was harder for a rich man to enter the Kingdom than for a camel to go through the eye of a needle. “Well who can get in, if not the wealthy?!” they questioned. It was clear that they viewed wealth like most other devout Jews – as a sign of God’s favor. Their Teacher was casting an entirely new (and dubious) light on the nature of riches.
Money, power, prestige – these would no longer be the measures of prominence in this Kingdom Jesus was introducing. Meekness, humility, compassion – these would become the defining attributes of greatness. Rich people could certainly join, He said, but this new order of things would be difficult for them – difficult to divest their personal assets rather than contine to accumulate more, difficult to subordinate their privileged status to those of lesser social standing, difficult to place their security in God rather than in their wealth. It would not be impossible, He said, just difficult. Matthew the tax collector was case in point, and of course the very wealthy Zacchaeus. Luke the physician was another. But by and large the wealthy were relegated to lower standing in the pecking order of the Kingdom. It was all upside down – the first being last and the last first. Big change from Old Testament to New.
And so the value of being wealthy was turned on its ear. The well-off became suspect. It was a rich man who treated poor Lazarus poorly and was condemned to eternal damnation. A rich young ruler too tied to his wealth to become a follower. A proud rich man in the Temple whose offering was unacceptable. A successful farmer who took early retirement who was declared “a fool.” Deceitful Ananias and Sapphira, tragic examples of rich folk who held out on God. Wealth became associated with self-indulgence, with mercilessness, with arrogance, with fraudulence. As a matter of fact, one is hard pressed to find a single reference in the New Testament affirming wealth as God’s blessing. Warnings, yes, but no recognition of its essential role in Shalom.
But just behind the scenes, unmentioned but clearly present, were wealthy supporters of this Kingdom. Zacchaeus was still one of the richest men in Jericho even after he made restitution and gave half his money to the poor. And what about Matthew’s tax business and Luke’s medical practice? And the women of means who supported the Messiah campaign? And members of the early church that sold property to underwrite the church budget? Oh yes, wealth was there alright. It’s just that generosity and self-sacrifice and living by faith were the themes that got the sermon coverage.
But then, how could it be any different? Everybody in the early church was readying for the eminent return of the Messiah. Everyone was on a short-term schedule. Don’t even get married, the apostle Paul urged. Put all your energy into preparedness for the second coming. But Christ didn’t return as expected. (Not yet.) And so in time everybody began settling into a new normal of church and community life, some thriving, others surviving. The themes of generosity, self-sacrifice and living by faith imbedded themselves in the culture of the church. Wealth remained suspect. The apostle James made quite sure that the rich were not shown deference.
And so the issue churns. Those who create wealth continue to receive the warnings while those modest souls who live off the benefits of the economy that wealth-producers create receive the affirmation. John Coors, a very wealthy and very devout Christian, calls it an “industry of making the rich feel guilty.” Billionaire Robert Kern, who loves the church but endures the judgment, has allocated a large portion of his estate to educating ministers in the fundamentals of how the economy works.
“Give it all away,” Jesus said. Even your second coat. Don’t concern yourself about tomorrow. Budgeting? Trust a miracle. Hmm. Does the One who holds the economies of the world in his hand not realize that thoughtful planning and responsible investing are essential for stable societies? Was it not He who gave the promise of prosperity to Israel if they would keep His commands? Was He not the One who warned Joseph in a dream about seven years of famine that would befall Egypt, and positioned him to plan ahead during seven years of plenty? How then are we to understand this radical “take-no-thought-for-tomorrow” departure from divinely guided resource management?
He came to fulfill the law, not do away with it, He said. Don’t abandon the God-given teachings and principles of the past – take them to a deeper level. The blessing of wealth is meant for the Shalom of the entire community, not to be hoarded for personal sumptuousness. Managed well, it provides a stable lifestyle for a workforce and their families, stimulates ancillary enterprises, contributes to the prosperity of the whole village or region. No, He did not come to destroy Shalom but to inspire it. Admittedly, He did use some highly provocative words and actions to shake up a religious culture that was misusing wealth to amass personal power, privilege and possessions. Scattering stacks of money-changers’ cash all over the Temple portico floor was a bit extreme perhaps. But sometimes dramatic intervention is required when greed and self-indulgence become acceptable norms within the Temple community. And He certainly did that!
But perhaps the time has come to bring theological balance back to our understanding of wealth. 2000 years of cautions for those who have the gift of wealth creation may be an adequate length of time to make the point that mammon is seductive, that one’s heart must be carefully guarded against its enticements. At a time when the entire world is awakening to the reality that healthy economic systems are fundamental to the elimination of extreme poverty, perhaps this is a moment for resourced members of the Western church – who have unparalleled capacity to create profitable businesses – to step forward. Perhaps this is the time when the church begins to see itself as more than a purveyor of compassionate service, but as a catalyst of just and fruitful economies. Might this be a turning point when the wealthiest church in history awakens to the reality that their job creators are the very ones gifted by God to bring economic wholeness to struggling souls too long resigned to unending poverty?
Below is a presentation by Bjorn Lomborg at Creative Innovation 2013: Asia Pacific. I think this is a remarkable presentation. First a few remarks.
How much can the global economy grow? That is a big issue in economics and in environmentalism. Clearly the earth has a fixed quantity of resources. If the economy grows exponentially, then one day we run out of resources and the world system collapses. We must limit growth if we are to survive. It seems so plainly obvious. Limits to Growth was an attempt to quantify just how this all played out and to advocate for changes.
My Dad was a professor and research chemist during my childhood. He was intensely focused on energy. Limits to growth conversations were in the ether all around me during my junior high, high school, and college years in the 1970s. I volunteered in the 1980 John Anderson presidential campaign, in part because he wanted to impose a $.50 a gallon gas tax that would get us off of petroleum and move toward nuclear and renewable fuels. Limits to Growth (LTG) was very much a product of the thinking of the 1970s mindset but its influence is still very strong today.
But the problem is that the LTG framing is spectacularly wrong! In the video below, Bjorn Lomborg unpacks why this is so. LTG focused on five factors:
Each of these was believed to be growing exponentially. Population was growing exponentially. It requires a certain amount of acreage to generate enough food to feed each person. Feeding this growing number of people will mean cultivating evermore acreage. Supplying basic goods to these people will mean exponential growth in industrial production, with an attendant rise in resource consumption and pollution.
What the scenario spectacularly overlooks is human innovation and substitution. For example, population is growth is slowing and will likely stop at between 10 and 11 billion in the second half of this century. The growth was a direct result of the life enhancing technology that caused a sharp decline in death rates. But birth rates took far more years to adjust. Thus, millions of children that would have died young in past eras were now becoming adults and having children. But overtime, the fertility appears to drop back down to the replacement rate and even lower in some places. People innovated.
Another example. The amount of agricultural land to feed one American stayed constant until about 1910, when 310 million acres were in production. Now if you went back in time and told Americans that the population would triple during the next century and asked them how much agricultural land would be needed they could easily tell you? An additional 600 million acres, or most of the land area east of the Mississippi. How many acres are in production today? 310 million acres, the same as 1910. Innovation and technology allowed us to become magnitudes more efficient in agriculture to the point that not only are we able to feed the additional Americans but we export food. This is called decoupling because the two variables of population and agricultural land use no longer move in tandem. Americans innovated.
Here is one chart from the video below that shows a similar development in world agriculture.
Even with population growth, the land needed for agricultural is projected to remain about the same, or a little higher by other estimates. More decoupling through innovation.
Then there is this recent chart. It suggests that energy consumption may be decoupling from economic output:
As Lomborg notes, innovation is the missing element in LTG. Through recycling of some non-renewable resources, using nanotechnology to redesign materials at the molecular level, and eventually substituting renewable materials for non-renewables, the possibilities for growth are inestimable.
There is a caveat here. As we innovate it is possible that we may not find it possible to innovate quickly enough on a particular challenge to avoid creating considerable hardship for segments of the human race at a particular time. I’m not suggesting we should be without caution, just that the limits idea is very flawed.
Here is the video. Enjoy:
Rev. Dr. Susan Brooks Thistlethwaite has a post at the Huffington Post today titled Proof Jesus Was Not a Capitalist: The Richest 1 Percent Own Half the World's Wealth. Here is my response.
...Biblically speaking, probably not. As Jesus warned, you have to choose. Either money rules you, or your highest values rule you. There's no middle ground. "No one can serve two masters. Either you will hate the one and love the other, or you will be devoted to the one and despise the other. You cannot serve both God and money." (Luke 16:13)
Jesus was not a capitalist.
God's rules on economics, as articulated both by the prophets and Jesus of Nazareth, are strikingly clear. Not small concentrations of great wealth and the vast majority of people in poverty, but 'each under their own vine and fig tree, living without fear.' (Micah 4:4) Jesus announces his ministry as "good news to the poor" (Luke 4:18), that is, the "Jubilee," the really radical redistributive economic strategy of ancient Israel.
So, is it likely the leaders gathered at the World Economic Forum in Davos serve that vision, a vision of a reasonable abundance shared by all, or are they in service to the vast accumulated wealth of the 1 percent? Is it going to be possible for people at that meeting to enact policies that start to close this disastrous economic gulf between the rich and the poor? ...
First, advanced agrarian societies of the Near East and Rome are the context of the Bible (Hebrew and Christian Testaments.) The economy, to the limited degree they even thought in macroeconomic terms, was a zero-sum game. Land and labor were the two inputs for production. Both were relatively fixed. There was little you could do to alter the productivity of land and one person’s labor was not substantially different from another's. Consequently, with variable productivity off the table, economics was constrained to considerations of consumption and distribution. Both personal and societal abundance was cyclical and sharing of the fixed pie was essential for community survival.
The great divergence of the past two centuries or so is the realization that productivity can be radically altered. Through the application of technology, energy, exchange, stable institutions, and improving human capital, productivity can be radically altered. But these changes have included the need to concentrate wealth into productive assets and assume larger risks in order to effectively achieve greater productivity. We live in a different world from advanced agrarian societies and trying to apply morals from their context directly to ours is useless.
Second, the Jubilee was categorically not a “radical redistributive economic strategy.” Land was to revert back to its perpetual owners every 50 years. Jubilee stated that if someone needed to “sell” their land, then the price would be determined based on the number of crops that could be gathered between the “sale” date and the next Jubilee. Then the land would revert back to the perpetual owner. In other words, it was a lease. A person could “sell” their labor on the same conditions. These provisions only applied to agricultural land and it had nothing to do with non-agricultural land or other private property. Significantly, it ensured that everyone had access to at least a minimal level of capital (land and labor) to provide for themselves and to produce goods for exchange, living individually and corporately as God’s stewards. That has interesting theological implications for thinking about economics but it was not radical redistribution.
Third, from where does abundance come? Apart from maybe air and sunlight, name one thing that humans use that does not require human action to transform matter, energy, and data from a less useful form to a more useful form? Absent human action, there is near absolute scarcity of the things that humanity uses. If we each had to provide for ourselves and our families alone, our days would be a precarious existence, doing little else but hunting and gathering our way through life. But through specialization, technology, concentration of wealth in productive enterprises, and trade (i.e., capitalism) we achieve high levels of productivity resulting in unprecedented abundance. Had Jesus known that productivity could be radically altered, I suspect he may have offered different guidance (and I don't mean a blanket blessing of the American economic system.)
Fourth, just what is the negative impact of inequality that should give us pause? The article doesn't say, but it is strongly implied: If wealth is becoming concentrated at the top, then it must be that it is being taken from others, making them poor (1% are wealthy while 99% are in poverty) ... the rich are getting richer and the poor are getting poorer. She is not alone in this thinking. A recent survey of Americans showed that 66% of respondents think that the proportion of the global population living in poverty has doubled in the past twenty years and another 29% think there has been no change (total of 95%), when in fact the proportion has been halved:
Furthermore, the number of well-paying jobs is expanding around the world. Life expectancy at birth, the most holistic measure of human well-being, is now at 70 years and closing in on the 80 year mark enjoyed by the wealthiest nations. Studies show that inequality within nations is increasing but inequality between nations is falling.
Now none of this is to say that rising inequality is good or bad. We have to be specific by what metric we use. If the metric is that inequality means more poverty and is therefore bad, then the assertion the inequality is "bad" isn't true. People are not getting poorer. That doesn't mean inequality isn't problematic for other reasons but we need to specific about what we are tackling.
“Unregulated market capitalism has only one master, and that is money. And that is why 85 people control half the wealth of the whole world.”
Dr. Thistlethwaite, if you identify one nation on the face of the earth that has “unregulated market capitalism,” then I will right you a check for $1,000 right here and now. They don't exist! This issue is not unregulated market capitalism but corporatism. If there is a governance problem it is that the biggest corporate entities and government have joined together to stack things in favor of their mutual interests over and against market forces that might threaten them. That is corporatist business capitalism and antithetical to market capitalism. Furthermore, economists have not reached a consensus on why there has been an increasing concentration at the top but the idea that it is summed up in “unregulated market capitalism” is just absurd.
With all that said, I’m not saying that growth in inequality isn’t a problem and that it isn’t worthy of theological and moral reflection. I am asking for a more responsible discussion.
I will also agree that change largely begins from the bottom up. Muhammad Yunus uses the image of a bonsai tree. The seed that grows into the tiny bonsai tree is the same seed that grows into the tall tree in the forest. The difference is that the bonsai grows from the limited foundation of the flower pot while the tall tree has the rich foundation of the forest bed. The poor are bonsai people. By improving the soil in which they grow, by instituting property rights and rule of law, by including them in networks of productivity and exchange, they too can flourish as people in wealthier nations have. Trickle-up capitalism is a promising strategy. It is already at work around the world. Let's joing them and support them. Populist ideological warfare about poorly defined issues and remedies is nothing but a moralistic distraction. The world deserves better from Christian thinkers.
Yahoo! News: Nordic welfare state being cut down to size
Copenhagen (AFP) - The Nordic model, known for high taxes and its cradle-to-grave welfare system, is getting a radical makeover as nations find themselves cash-strapped.
During the post-war period, the Scandinavian economies became famous for a "softer" version of capitalism that placed more importance on social equality than other western nations, such as Britain and the United States, did.
But globalisation, economic necessity and an ideological shift to the right has led to a scaling back of the public sector.
In Sweden, visitors are sometimes surprised to learn about year-long waiting times for cancer patients, rioting in low-income suburbs and train derailments amid lagging infrastructure investment.
"The generosity of the system has declined," said Jonas Hinnfors, a professor of political science at the University of Gothenburg.
"Much of this already started changing in the 1980s and especially in the 1990s," he added. ...
Public Discourse: Max Weber Was Wrong - Samuel Greg
... Second, the empirical evidence disproving Weber’s connection between Protestantism and the emergence of capitalism is considerable. Even Catholic critics of modern capitalism have had to concede that “the commercial spirit” preceded the Reformation by at least two hundred years. From the eleventh century onward, the words Deus enim et proficuum (“For God and Profit”) began to appear in the ledgers of Italian and Flemish merchants. This was not a medieval version of some type of prosperity gospel. Rather, it symbolized just how naturally intertwined were the realms of faith and commerce throughout the world of medieval Europe. The pursuit of profit, trade, and commercial success dominated the life of the city-states of medieval and Renaissance Northern Italy and the towns of Flanders, not to mention the Venetian republic that exerted tremendous influence on merchant activity throughout the Mediterranean long before 1517.
Since Weber’s time, much scholarly work has been done to illustrate the advanced state of market-driven economic development in the Middle Ages. Throughout the 1940s and 1950s, the Belgian scholar Raymond de Roover penned numerous articles illustrating that, during the Middle Ages, financial transactions and banking started to take on the degree of sophistication that is commonplace today. Likewise, The Commercial Revolution of the Middle Ages, by the Italian-American historian of medieval European economic history, the late Robert S. Lopez, shattered the historical claims that formed much of the background of Weber’s argument. Lopez demonstrated in great detail the way in which the Middle Ages “created the indispensable material and moral conditions for a thousand years of virtually uninterrupted growth.”
In recent decades, the historians Edwin Hunt and James Murray have illustrated just how much the medieval period was characterized by remarkable innovation in methods of business organization. They also suggest that the advent of modernity actually heralded the expansion of state economic intervention and regulation in an effort to constrain economic freedom. In a similar fashion, the sociologist Rodney Stark has gathered together disparate sources of historical and economic analysis to illustrate the origins of capitalism and major breakthroughs in the theory and practice of wealth creation in the medieval period. Central to Stark’s analysis is his highlighting of the way pre-Reformation Western Christianity saw the world as one in which humans were called upon to use their reason and innate creativity to develop its resources—including economically.
Here one could add that, before Adam Smith, some of the most elaborate thinking about the nature of contracts, free markets, interest, wages, and banking that developed after the Reformation was articulated in the writings of Spanish Catholic scholastic thinkers of the sixteenth and seventeenth centuries. Theologians such as Francisco de Vitoria OP, Martín de Azpilcueta, Juan de Mariana SJ, and Tomás de Mercado OP, anticipated many of the claims made by Smith two centuries later.
To be sure, much of this thinking occurred by way of side-effect rather than as a result of the systematic analysis undertaken by Smith. For as commercial relationships expanded throughout Europe in the centuries preceding and following the Reformation, there was a marked increase in the number of penitents asking their confessors for guidance about moral questions with a strong economic dimension. What was the just price? When was a person no longer obliged to adhere to a contract? When was charging interest legitimate? When did it become usurious? As a result, priests looked to theologians for guidance on how to respond to their penitents’ questions. Thus, as Jürg Niehans stressed in his History of Economic Theory:
The scholastics thus found it necessary to descend from theology into the everyday world of economic reality, of early capitalism, foreign trade, monopoly, banking, foreign exchange and public finance. What one knew about these things in the School of Salamanca was hardly less than Adam Smith knew two hundred years later, and more than most students know today.
Even when we consider modern capitalism’s emergence, a direct connection between this event and Protestantism is very open to question. ...
This is a really excellent piece on the history of capitalism.
We're living at a far more equal, peaceful, and prosperous time than the pontiff acknowledges....
Pope Francis is Times’ Person of the Year, an excellent pick in my estimation. He strikes me as man with incredible integrity. I’m enjoying watching him live into this new calling.
Of particular interest to me has been response to his Evangelii Gaudium, with the left gleeful about his condemnation of capitalism and the right going apoplectic about the same. In our age of bumper sticker sound bites, I don’t think either side is listening with appropriate nuance. I haven’t read and digested the whole document but I have read the sections that deal with economic issues. I don’t see a radical departure with what previous Pope’s have written.
Twenty years ago Pope John Paul II wrote the following in Centesimus Annus:
Can it perhaps be said that after the failure of communism capitalism is the victorious social system and the capitalism is the victorious social system and that capitalism should be the goal of the countries now making efforts to rebuild their economy and society? Is this model which ought to be proposed to the countries of the Third World which are searching for the path of true economic and civil progress?
The answer is obviously complex. If by “capitalism” is meant an economic system which recognizes the fundamental and positive role of business, the market, private property, and the resulting responsibility for the means of production as well as free creativity in the economic sector, then the answer is certainly in the affirmative, even though it would perhaps be more appropriate to speak of a “business economy,” “market economy,” or simply “free economy.” But if by “capitalism” is meant a system in which freedom in the economic sector is not circumscribed within a strong juridical framework which places it at the service of human freedom in its totality and which sees it as a particular aspect of that freedom, the core of which is ethical and religious, then the reply is certainly negative. (Centesimus Annus, 42)
I don’t find Pope Francis saying a great deal different although his emphasis may be a little different. We need to remember that John Paul II ministered under the tyranny of Soviet Communism while Francis did so under the tyranny of right-wing dictatorship. These differences are surely a factor.
The part that does trouble me some, as it does with an overwhelming number of religious figures who speak to economic issues, is a distorted picture of what is happening in the world. It isn’t what is said. It’s what’s missing. For the past century or two we have been living through the most astonishing surge in human flourishing in history. That reality needs to be brought into discussion every bit as much as the challenges and the injustices.
David Ropeik in How Risky Is It Really: Why Our Fears Don’t Always Match the Facts shows that we are innately inclined to fixate on threats and negative developments. People who do so aren’t stupid or ideological … they are human. All of us do it. The inclination to focus on threats is instinctive and has served human beings well over millennia. But in the face of very complex issues we need to bring our concerns into perspective with more objective analysis. Otherwise we run the risk of doing more harm than good. We need to approach problems with warm hearts and cool heads.
I have some minor quibbles with Tupy in the article but it brings important balance. I’ve documented some similar factors in past series like American Social Indicators and World Social Indicators, two series I intend to update next year. I think the challenge is to hear the Pope’s important calls for inclusion of the poor and his warning against our propensity to justify indifference. Not heeding the Pope's warnings is also to misunderstand the world. But we need to heed the warnings with an informed understanding of what is unfolding in the world. Read the Atalantic article and see what you think.
A great map that gives insight into how the global market works. As I read this the stories of "I, Pencil" and "I, Smartphone," which I've previously blogged about here, illustrating the amazing complexity of market economies and how things are coordinated.
New York Times: How Mandela Shifted Views on Freedom of Markets
When you think about Nelson Mandela, you probably think about freedom — free people, free country, free speech. What may be overshadowed by Mr. Mandela’s extraordinary legacy was his complicated journey to support free markets and a free economy.
When Mr. Mandela was released from prison in 1990, he told his followers in the African National Congress that he believed in the nationalization of South Africa’s main businesses. “The nationalization of the mines, banks and monopoly industries is the policy of the A.N.C., and a change or modification of our views in this regard is inconceivable,” he said at the time.
Two years later, however, Mr. Mandela changed his mind, embracing capitalism, and charted a new economic course for his country.
The story of Mr. Mandela’s evolving economic view is eye-opening: It happened in January 1992 during a trip to Davos, Switzerland, for the annual meeting of the World Economic Forum. Mr. Mandela was persuaded to support an economic framework for South Africa based on capitalism and globalization after a series of conversations with other world leaders.
“They changed my views altogether,” Mr. Mandela told Anthony Sampson, his friend and the author of “Mandela: The Authorized Biography.” “I came home to say: ‘Chaps, we have to choose. We either keep nationalization and get no investment, or we modify our own attitude and get investment.”
Inside South Africa, Mr. Mandela’s quick reversal was viewed with skepticism, and questions have long persisted about whether he was somehow pressured by the West to open up the country’s economy.
However, according to Tito Mboweni, a former governor of the South African Reserve Bank, who accompanied Mr. Mandela to Davos, Mr. Mandela’s change of heart was genuine. ...
New Geography: Norway Breaks with Social Democracy
Largely uncommented on in the US press, Europe’s long-standing social democratic tilt has changed. During recent years, almost all Western European nations have seen a dramatic fall in support for the traditional Social Democratic parties, which for so long have dominated the political landscapes. In response, the centre-left parties have morphed, moving towards greater emphasis on the benefits of free markets and individual responsibility. In several countries the former communist parties now claim that they fill the role of traditional Social Democrats. A new breed of modernized centre-left parties is likely to replace several centre‑right governments during coming years. The third consecutive loss for the German Social Democrats illustrates the continuing difficulties for Europe’s labor movements to gather the strong support that they previously almost took for granted.
Until recently oil-rich Norway has remained unique, as the only
nation where Social Democrats have resisted change to highly generous
welfare benefits. In 1999 the former Swedish social democratic minister
of business, Björn Rosengren, famously called Norway “the last Soviet
state” due to the lack of willingness to adopt market policies. But now
even Norway is shifting with the recent election of a centre‑right
government formed by Erna Solberg. Making the transition from a
full-scale welfare state to a system which consistently rewards work
more than public handouts will be a difficult one for Norway.
Hopefully, the newly elected government will draw inspiration from the
neighbor to the east.
Politicians in Norway for long admired the Swedish social system, seeing their larger neighbor as a pioneer of Social Democratic policies.
Recently however, particularly the left has begun to emphasize the uniqueness of the Norwegian Welfare Model rather than the Scandinavian Welfare Model. Swedish policies have even been used in the recent election as deterrence by the left. It is easy to see why. The current centre-right government in Sweden, elected in 2006 and re‑elected in 2010, has focused on a broad reform agenda. The workfare policies introduced include: somewhat less generous benefits, tax reductions aimed particularly at those with lower incomes, liberalizations of the temporary employment contracts and a gate-keeping mechanism for receiving sick and disability benefits. ...
I always think of articles like these everytime I hear American conservatives complain we are becoming more like Sweden, or liberals highlighting how we need to adopt socialism based on how happy the Scandinavians are. Both sides may want to look a little closer.
MIT Technology Review: Technology Is Wiping Out Companies Faster than Ever
... Today’s S&P 500 includes many familiar firms, like Apple, AT&T, Corning, Ford, Intel, and Yahoo (and Hewlett-Packard, too). Yet at today’s fast rate of turnover, three out of four names on the list will be banished into obscurity within the next fifteen years.
Foster’s view is that big companies can’t ever out-innovate the market. Instead, he thinks that to stay big, companies need to be willing to exit old businesses and enter new ones—and do it quite boldly. (HP, by contrast, can’t decide whether to jettison its PC business.) ...
... In this infographic we trace the iPhone supply and manufacturing chain. We’re providing snippets of information on both of the existing flagship model plus early breaking rumors for the next-gen iPhones. Did you know, for example, that 90% of all the rare-earth minerals used on an iPhone 5’s circuitry, screen, speakers, and glass cover are mined in China and Inner Mongolia? And did you know that Foxconn might soon be overtaken by Pegatron as Apple’s biggest manufacturing partner in China?
What does the rest of the world contribute to the making of the iPhone? Let’s find out!
New Geography: Should Uncle Sam Chase a Scandinavian Model?
When American progressives dream their future vision of America, no place entices them more than the sparsely populated countries of Scandinavia. After all, here are countries that remain strongly democratic and successfully capitalist, yet appear to have done so despite enormously pervasive welfare systems. ...
... But before we all go out drinking aquavit, shouting "skol" and dyeing our hair blonde, it makes sense to recognize that not only is relatively small, historically homogenous Scandinavia an ill-suited role mode for a megapower like the U.S., but that, in many ways, the Nordic system may be far more limited than its admirers here might acknowledge. ...
... In addition, not all the reasons for Scandinavia's relative health are those that would warm the heart of U.S. progressives. These countries, led by Sweden, have reformed many aspects of their welfare state, including such things as labor laws, and reduced taxes in ways that make them more competitive – and far less egalitarian than in the past.
Another positive factor for Scandinavia lies in their exploitation of resources, something many progressives, notably green policy aficionados, tend to view with disdain. Sweden exports loads of iron ore to drive its economy and employs massive dams to drive hydropower, which accounts for 42.8 percent of their energy. Norway benefits from a gusher of oil and gas that, producing nearly 2 million barrels of oil per day, making it the 14th largest oil producer in the world despite having a population of 5 million. If anything, Norway can be a model socialist economy because its economic base resembles the Nordic enclave of North Dakota. Overall, the tiny country produces nearly 15 times as much oil per person than the U.S.
There's also the matter of scale. Demographically, Scandinavia's population is microscopic compared to our far vast multi-ethnic Republic. Taken together the four Scandinavian countries – Finland, Denmark, Sweden and Norway – are home to barely 26 million people, far fewer than California and about the same as Texas. These hardy souls are widely dispersed. The population density of Norway and Finland is roughly half that of the U.S., while that of Sweden is one-third less.
Sweden, to put things in perspective, has fewer people than Los Angeles County. ...
... Scandinavia's greatest strength may lie in its least political correct asset: its Nordic culture. Scandinavians' traditional interest in education, hard work and good governance serves them well both at home and abroad. It's not socialism that is primarily responsible. ...
... More troubling still, notes Sanandaji, who is of Swedish-Kurdish ancestry, many young Scandinavians also seem to be rejecting the old Nordic social compact. Increasing numbers of people under 40 are retiring early, citing disabilities and sickness.
These trends point to serious problems for countries whose birthrates, despite widely praised natalist policies, are dropping and generally are below ours. With immigration growing ever more unpopular, further demographic decline in the Nordic countries seems inevitable.
As a result, the Scandinavian welfare state faces challenges arguably far worse than those here at home. ...
... But the Arab Spring was a demand for freedom, not necessarily democracy – and the distinction between the two is crucial. Take, for example, the case of Mohammed Bouazizi, who started this chain of events by burning himself alive on a Tunisian street market two years ago. As his family attest, he had no interest in politics. The freedom he wanted was the right to buy and sell, and to build his business without having to pay bribes to the police or fear having his goods confiscated at random. If he was a martyr to anything, it was to capitalism.
All this has been established by Hernando de Soto, a Peruvian economist who travelled to Egypt to investigate the causes of the Arab Spring. His team of researchers found that Bouazizi had inspired 60 similar cases of self-immolation, including five in Egypt, almost all of which had been overlooked by the press. The narrative of a 1989-style revolution in hope of regime change seemed so compelling to foreigners that there was little appetite for further explanation. But de Soto’s team tracked down those who survived their suicide attempts, and the bereaved families. Time and again, they found the same story: this was a protest for the basic freedom to own and acquire ras el mel, or capital.
Forty-one years after publication of the infamous Limits to Growth, Bjorn Lomborg offers this excellent piece, The Limits to Panic:
... But the report’s fundamental legacy remains: we have inherited a tendency to obsess over misguided remedies for largely trivial problems, while often ignoring big problems and sensible remedies.
In the early 1970’s, the flush of technological optimism was over, the Vietnam War was a disaster, societies were in turmoil, and economies were stagnating. Rachel Carson’s 1962 book Silent Spring had raised fears about pollution and launched the modern environmental movement; Paul Ehrlich’s 1968 title The Population Bomb said it all. The first Earth Day, in 1970, was deeply pessimistic.
The genius of The Limits to Growth was to fuse these worries with fears of running out of stuff. We were doomed, because too many people would consume too much. Even if our ingenuity bought us some time, we would end up killing the planet and ourselves with pollution. The only hope was to stop economic growth itself, cut consumption, recycle, and force people to have fewer children, stabilizing society at a significantly poorer level.
That message still resonates today, though it was spectacularly wrong. For example, the authors of The Limits to Growth predicted that before 2013, the world would have run out of aluminum, copper, gold, lead, mercury, molybdenum, natural gas, oil, silver, tin, tungsten, and zinc.
Instead, despite recent increases, commodity prices have generally fallen to about a third of their level 150 years ago. Technological innovations have replaced mercury in batteries, dental fillings, and thermometers: mercury consumption is down 98% and, by 2000, the price was down 90%. More broadly, since 1946, supplies of copper, aluminum, iron, and zinc have outstripped consumption, owing to the discovery of additional reserves and new technologies to extract them economically.
Similarly, oil and natural gas were to run out in 1990 and 1992, respectively; today, reserves of both are larger than they were in 1970, although we consume dramatically more. Within the past six years, shale gas alone has doubled potential gas resources in the United States and halved the price.
As for economic collapse, the Intergovernmental Panel on Climate Change estimates that global GDP per capita will increase 14-fold over this century and 24-fold in the developing world.
The Limits of Growth got it so wrong because its authors overlooked the greatest resource of all: our own resourcefulness. Population growth has been slowing since the late 1960’s. Food supply has not collapsed (1.5 billion hectares of arable land are being used, but another 2.7 billion hectares are in reserve). Malnourishment has dropped by more than half, from 35% of the world’s population to under 16%.
Nor are we choking on pollution. Whereas the Club of Rome imagined an idyllic past with no particulate air pollution and happy farmers, and a future strangled by belching smokestacks, reality is entirely the reverse.
In 1900, when the global human population was 1.5 billion, almost three million people – roughly one in 500 – died each year from air pollution, mostly from wretched indoor air. Today, the risk has receded to one death per 2,000 people. While pollution still kills more people than malaria does, the mortality rate is falling, not rising.
Nonetheless, the mindset nurtured by The Limits to Growth continues to shape popular and elite thinking. ...
... Obsession with doom-and-gloom scenarios distracts us from the real global threats. Poverty is one of the greatest killers of all, while easily curable diseases still claim 15 million lives every year – 25% of all deaths.CommentsThe solution is economic growth. When lifted out of poverty, most people can afford to avoid infectious diseases. China has pulled more than 680 million people out of poverty in the last three decades, leading a worldwide poverty decline of almost a billion people. This has created massive improvements in health, longevity, and quality of life. ...
The key issue here is innovation. Think in terms of a continuum. At one end is the ape from the opening of 2001: A Space Odyssey. The first human ancestor discovers the idea of using a large bone as a tool for manipulating his environment.
Further along the continuum might be simple tools like hammers and plows. They are extensions of the human body. Then come machines. Human beings are no longer wielding tools but are directing and servicing machines. Next there is artificial intelligence, where computers are able to make some decisions for us, as well as doing repetitive dehumanizing work. Finally, at the other end, might be something like the replicator in Star Trek, where you simply state your wish and a device rearranges atoms to create the desired object.
The problem with the Limits to Growth mentality is that it is locked into a current point along the continuum. It correctly observes that there is a fixed amount of resources in the world but it incorrectly assumes that economic growth means increased use of a materials at rate proportional to the rate of economic growth. To get the depletion date for a resource you calculate the quantity of a material known to exist, calculate annual present usage of the material, project a rate of economic growth, and subtract the projected annual usages from the total.
Total Resource/Current Annual Resource Usage = Years to Depletion (Increase economic growth and the years to depletion shrinks.)
Since the material quantities are fixed, the only variable is economic demand. Consequently, economic growth … whether the result of escalating wants and needs per capita or from increasing population … is unsustainable. (Similarly, take the current level of pollution and multiply it times the rate of economic growth to see how polluted the world will be.) Human innovation is nowhere in sight!
But we are not frozen at a point on the continuum. Human creativity is constantly changing the equation. Here is how.
First, in the short run, there is productivity. As demand for a natural grows it becomes more profitable to go after previously unconsidered deposits of that resource. For example, copper is everywhere but it varies in its accessibility and quality. Quality accessible cooper is the first to be used. But as demand increases, new techniques are invented for finding cooper, accessing deposits, and processing cooper. The Limits to Growth report estimated available cooper in the world in 1972 and projected we would run out of cooper by 2000. Today, not only have we not run out, but we are using more annually and the amount of available cooper has grown magnitudes larger.
Second, economizing. Figuring out how to do twice as much (sometimes much more) with the same resource changes the equation. Household appliances today use less than half the power they did forty years ago and often have features that were not imagined then.
Third, substitution of less plentiful resources with more plentiful resources, especially renewable resources. It is true that over a long time horizon that cooper would one day be depleted barring changes in consumption. But as productivity and economizing gradually lose their ability to keep cooper plentiful, the price of cooper will begin to rise. Recycling cooper will become more attractive. But even more likely is replacement of cooper by other alternatives. Think how much of our communication now is done with sand (fiber optics are made from silica) versus cooper (our old phone lines.) Furthermore, virtually everything made of nonrenewable resources can eventually be made using renewable resources.
Fourth, nanotechnology. We are in the beginning stages of manipulating matter at the molecular level. Nanorobots, about fifteen times the size of an atom, that can disassemble molecules and assemble atoms into new molecules. 3-D printers are already “printing” a range of items, including human tissue and organs. Scientists are developing printed food for long-term space voyages. Something akin to a replicator is not that unthinkable. The range of materials we can use for particular applications, our ability to manipulate matter at the molecular level, and our flexibility at forming matter into useful forms continues to evolve.
A finite stock of materials is not a limit to economic growth. That is not to say to we are without challenges. While many resources can be made more plentiful over time it is true that the very near term there can be shortages and injustices. Extraction of raw materials without adequate consideration for environmental impact could lead to horrific consequences. I’m not making the case that everything will magically take care of itself. I’m making the case that opposition to economic growth based on static zero-sum perceptions of the world that sees inevitable depletion of resources or over-pollution is groundless.
Huffington Post: How Free Trade Might Be the World's Best Option - Bjorn Lomborg
... The classic argument for free trade points out that specialization and exchange benefits everyone, because goods are produced by the countries that specialize in those goods and produce them most efficiently. The standard World Bank models show that realistic free trade, even just by the end of this decade would increase global GDP by several hundred billion dollars per year, with perhaps $50 billion accruing to the developing countries. Towards the end of the century, the annual benefit will likely exceed Cameron's $1 trillion annually, with half going to the developing world.
But a growing number of academic studies now show that the free trade story goes much further than simple specialization. History shows that open economies grow faster. Good examples include Korea from 1965, Chile from 1974 and India from 1991, which all saw their growth rates increase significantly after liberalization. Even modestly freer trade helps domestic markets become more efficient and get supply chains better integrated. At the same time trade transfers knowledge, which spurs innovation. Free trade means we don't all have to reinvent the wheel over and over again.
This is perhaps best captured in a recent state-of-the-art literature review by Professor Kym Anderson for the Copenhagen Consensus think tank. Anderson, one of the World Bank's lead modelers, shows that the long-run benefits from even a modestly successful Doha free trade round would be vast. The annual GDP compared to no extra free trade would in 2020 be about $5 trillion larger, with $3 trillion going to the developing world. Towards the end of the century, slightly higher growth rates will have accumulated to benefits exceeding $100 trillion annually, with most going to the developing world. By then, benefits would add about 20 percent annually to developing world GDP. ...
Adam Smith's Lost Legacy (Gavin Kennedy): Once More on Adam Smith and Self-Interest
... Consider what Adam Smith states early in Wealth Of Nations about “self-interest”:
"In civilized society he stands at all times in need of the co–operation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons. In almost every other race of animals each individual, when it is grown up to maturity, is intirely independent, and in its natural state has occasion for the assistance of no other living creature. But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only.6 He will be more likely to prevail if he can interest their self–love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self–love, and never talk to them of our own necessities but of their advantages” (WN I.ii.2: 26-27).
Read the above carefully. To obtain our self-interests of obtaining the ingredients of our dinner (or whatever), we must persuade the “butcher, brewer, and baker” to supply them to us. Insisting on our self-interest as imagined by the lonesome image of the Hollywood scriptwriter would not secure our dinner (or anything else) for us. We must persuade them to supply us; not demand they meet our needs. What about their needs? What do they do? Just say in response: “yes, sir, no sir, three bags full sir”?
Indeed, Smith underlines that point by insisting that we must address “their self–love, and never talk to them of our own necessities but of their advantages”. In short, we mediate our different self-interests by taking into account the self-interests of others. This is the exact opposite of Arturo Cuenllas’s presentation.
An egoistic non-cooperator would soon starve. ...
Yogi Berra once said, "I didn't really say all the things I said." Smith has to be the Yogi Berra of economists. Misunderstanding Adam Smith's ideas about "self-interest" can only be second to misunderstanding his two passing references to an "invisible hand" in The Wealth of Nations.
One of my favorite niche economics blogs is Gavin Kennedys' Adam Smith's Lost Legacy. Many of his posts go after people using Adam Smith's "invisible hand" metaphor. He tirelessly points out that Smith used the metaphor only twice in the Wealth of Nations, and on neither occasion was it used to describe the economics in the way attributed to Smith by economists in the second of half of the Twentieth Century. But his larger concern is rampant illiteracy about Smith, but also about our economic past in general. He recently encountered someone who wants to replace the "invisible hand" with the "invisible heart." Here is part of his response in his post Need for Historical Perspective on Poverty.
... It seems to be another blueprint to save the world from the only phenomenon called ‘capitalism' that has raised millions from poverty to standards of living beyond anything achieved in previous millennia, including the frightful poverty experiences of Soviet-style communism.
Much of the ancient curse of poverty persists in large geographical spaces of the world affecting billions of people, though the total numbers living on $1 a day has diminished at an historical high also by a billion or so since the 1960s. The poor in the richer countries have lower standards than the very rich, but those poor are incomparably richer than the richest minority living in the millennia before the change from agriculture and primitive commercial markets, including the richest Emperors, Kings, War Lords and Conquerors. I
It would help if those who seek to “tackle the problem of poverty” for the very best of humanitarian reasons, like Terry Hallman and Sir Ronald Cohen, and many others, would get some historical perspectives on the relative scale of human poverty over the last 1,000 years. ...
... You may not have noticed, but last week was promoted as something called “Imports Work Week.” The celebrate the importance of imports in the U.S., a group of business associations led by the National Retail Federation (NRF) has released a study showing the many ways that imports benefit American consumers and businesses alike.
Cheaper prices are the most obvious benefit. “In the past decade, the price of television sets sold in the United States has dropped 87 percent. Computers have gone down 75 percent, toys 43 percent and dishes and flatware by a third,” the NRF’s Jon Gold explains in a blog post. “Why? The answer is easy – imports."
But the benefits don’t stop there, according to the study, which runs down how imports also help farmers, mom-and-pop businesses, working-class Americans, and even U.S. manufacturers. Here are a few of the groups that should love what imports do for them, per the report:
• Imports improve American families’ standard of living. They help families make ends meet by ensuring a wide selection of budget-friendly goods, like electronics we use to communicate and many clothes and shoes we wear, and improve the year-round supply of such staples as fresh fruits and vegetables.
• Imports support more than 16 million American jobs. A large number of these import-related jobs are union jobs, held by minorities and women, and are located across the United States.
• More than half the firms involved in direct importing are small businesses, employing fewer than 50 workers.
• American manufacturers and farmers rely on imports including raw materials and intermediate goods to lower their production costs and stay competitive in domestic and international markets. Factories and farms purchase more than 60 percent of U.S. imports. ...
Protectionism is one of the most persistent misunderstandings I encounter when talking about economics. What person wants to make everything the use ... car, computer, house, clothes, etc. ... or become an expert on any number of topics to live self-sufficiently ... medicine, climate, chemistry, biology, etc. At the micro-level of our personal lives, we intuitively understand that specializing in our work and then engaging in exchange with neighbors who specialize in their work benefits everyone involved. We seem to get that benefits multiply if we expand exchange beyond our neighborhood, to our city, state, region, and country. But somehow when expand the idea beyond national boarders, this understanding flies out the window.
Some will say their concern is international trade is unfair because workers in other countries get paid lower wages. But they are also far less productive. Given a relatively free market, as workers’ productivity increases, so does their wages. And while there are certainly some exploitive circumstances around the world, multinational corporations and their satellites typically offer some of the highest wages and have the most sought after jobs. There are challenges when societies of different degrees of development interact but I don't perceive that this is really the issue behind much protectionist thinking. Rather it is the abstract belief that our country will be better off our country made everything we consume, a standard we do not apply to our state, city, neighborhood, or family. And this is particularly problematic for the many who say they want justice for the poor but want to exclude the foriegn poor from networks of growing productivity and exchange.
... Barely half of Americans polled in 2010 by GlobeScan said they believed in the free-market system, down from 80 percent in 2002. A large majority had lost trust in government. The most recent Edelman Trust Barometer found that trust in business has been below 50 percent for 8 of the past 12 years. Throughout Europe, only small minorities said they believed in free-market capitalism.
Meanwhile, social entrepreneurs are developing innovative business models that blend traditional capitalism with solutions that address the long-term needs of our planet. They are tackling chronic social problems, ranging from healthcare delivery in sub-Saharan Africa to agricultural transformation in East Asia and public-school funding in the United States. Social entrepreneurs are working in close collaboration with local communities, incubating groundbreaking (and often lifesaving) innovations; modeling synergistic partnerships with governments, companies, and traditional charities; and building business models that deploy technology and enable networking to create wins for investors and clients alike. “Social entrepreneurs are mad scientists in the lab,” says Pamela Hartigan, director of the Skoll Centre for Social Entrepreneurship at Oxford University. “They’re harbingers of new ways of doing business.”
We believe this collaborative approach offers intriguing hints about how enterprises of all sizes can deliver value for themselves and society. Below we suggest four ways in which social entrepreneurs are showing the way forward.
USING PROFIT TO FUND PURPOSE ...
DELIVERING INDIVIDUALIZED PRODUCTS THAT MARRY NEED AND WANT ...
CROWDSOURCING THE SOLUTION ...
WORKING THEMSELVES OUT OF A JOB ...
This piece is a little too narrow in attributing positive change almost exclusively to markets. I would argue that things are considerably more complicated and the video would be more convining with some balance. But the video does do a powerful placing our economic moment in time in context.
New York Times: Is It Crazy to Think We Can Eradicate Poverty?
... Fortunately, this deadly and cyclical form of poverty [living on less than $1.25 a day] is already on its way toward obsolescence, and much faster than many development economists expected. The first Millennium Development Goal — to halve the proportion of the world population living in dire poverty by 2015 — was met five years early, as the rate fell to an estimated 21 percent in 2010, from 43 percent in 1990. Some economists had feared that the recession would arrest or even reverse the trend, given how interconnected the global economy is, but the improvement continued, unabated. Annual growth dipped for developing economies in 2009 but has since rebounded to about 5.3 percent a year, a figure dragged down by weaker peripheral European economies.
For much of the improvement, the world can thank one country: China, which alone accounts for about half of the decline in the extreme poverty rate worldwide. It has also driven significant gains across the region. In the early 1980s, East Asia had the highest extreme-poverty rate in the world, with more than three in four people living on less than $1.25 a day. By 2010, just one in eight were. But other middle-income countries, like Brazil, Nigeria and India, have experienced significant growth, too — in no small part because tens of millions of the very poor have moved from rural areas to cities, where they become richer, healthier and more productive for their economies....
... For the poor living in poor countries, particularly the profoundly unstable ones, gains have been harder-fought and slower, a trend that the World Bank’s own economists describe as worrisome. But that is not to play down the successes so far. In 2008, for the first time since the bank started measuring the statistics, the number of people living in dire poverty and the dire-poverty rate fell in every region around the world. Extreme poverty in sub-Saharan Africa has at last dipped below the 50 percent mark. Still, many within the development world doubt the ability of NGOs to cure the world’s most troubled nations of their woes. “I don’t think we have a recipe for fixing the Congo or South Sudan or Afghanistan,” says Birdsall, of the Center for Global Development. ....
True capitalism lacks a strong lobby.
That assertion might appear strange in light of the billions of dollars firms spend lobbying Congress in America, but that is exactly the point. Most lobbying seeks to tilt the playing field in one direction or another, not to level it. Most lobbying is pro-business, in the sense that it promotes the interests of existing businesses, not pro-market in the sense of fostering truly free and open competition. Open competition forces established firms to prove their competence again and again; strong successful market players therefore often use their muscle to restrict such competition, and to strengthen their positions. As a result, serious tensions emerge between a pro-market agenda and a pro-business one, though American capitalism has always managed this tension far better than most.
This also explains why many people bristle at the term "free market." They incorrectly perceive that "free market" means unfettered businesses having the freedom to stack things in their favor (and indeed some business lobbyists try to twist free market constructs to justify efforts to curb challenges from competition contributing to the confusion.) They advocate for "fair trade" but free trade is fair trade. They should be championing a free market in opposition to many pro-business agendas.
Foreign Affairs: Unfair Trade
The Fair-Trade Movement Does More Harm Than Good
... Until now, any questioning of the fair-trade movement has been limited to the micro level. The movement has faced repeated criticisms, for example, for the relatively expensive fees that producers must pay to get a fair-trade label, which make it ineffective for many poor farmers. Another area of concern is just how lucrative the process is for middlemen and retailers. Finally, several studies show that very little of the premium that consumers pay actually reaches needy producers. Consumers might be surprised to learn that only one or two percent of the retail price of an expensive cup of “ethical” coffee goes directly to poor farmers.
The adverse effects of fair trade are even more worrying at the macro level. First, fair trade deflects attention from real, long-term solutions to rural poverty in developing countries; and second, it has the potential to fragment the world agricultural market and depress wages for non-fair-trade farm workers. ...
... Fair-trade enthusiasts might argue that the world would be better off if the fair-trade market replaced the free-trade one. But in fact, such an outcome would destroy the livelihoods of millions of farmers who do not have the luxury of paying for fair-trade certification. To survive, these farmers would likely have to stop planting basic crops, such as wheat, corn, and rice, and shift to cash crops, such as coffee, tea, and fruits, which could bring in the income for certification. The immediate effect would be a prohibitive hike in food prices. Further, as farmers shift their production, non-fair-trade basic food products would become more vulnerable to price instability caused by supply and demand shocks, because there would be fewer producers willing to take the risk of non-subsidized farming.
If the fair-trade movement eventually came to encompass all categories of agricultural production (including basic food products), the price shocks would be even worse. Rather than responding to market prices, farmers in developing countries would be incentivized to produce whatever products garner the greatest subsidies. With subsidies, not consumer demand, dictating production, consumers in the developed and developing worlds would see further increases in basic food prices. ...
... Self-proclaimed ethical consumers need to start looking reality in the eye. Fair trade is a form of protectionism, and it should not be allowed to hide behind the mask of morality. There is nothing ethical about privileging small groups of producers while the majority are sinking deeper into poverty.
This is one of those topics where a particular activity (buying fair trade goods) feels so worthwhile and yet does harm in ways that are not readibly discernable. When it comes to commodities, I suspect the authors are right that fair trade does more harm than good. Fair trade doesn't fully account for the economic complexity involved. It becomes yet another form of toxic charity. However, it is not clear to me that all fair trade products have the same consequences. For instance, handcrafted products sold through stores like Ten Thousand Villages are not commodities and I don't think they subject to the same type of economic realities. I haven't seen a detailed analysis by economist that would help me clarify the differences.
Once again we need to heed the admonition to act with warm hearts and cool heads. For an insightful booklet on the problems with Fair Trade Coffee see Victor Claar's Fair Trade? Its Prospects as a Poverty Solution. I suspect that what he says about coffee applies to all agricultural commodities.
I've been doing some writing about the common misperception of the economy as a zero-sum game and the fear that we will soon (or ever) run out of nonrenewable resources. This is counterintuitive to so many people that I feel the need to address it some detail. I written a draft of this section for my book I'm working on but I need to massage more before posting it here.
In the meantime, Mark Perry has this interesting chart from his post Bad news for pessimists: Malthus was wrong. If commodities are becoming scarcer, then prices will go up. But as this chart shows, commodity prices over the long-haul, are getting less expensive in real dollars. Other databases I've seen show this to be true as far back as at least the mid-1800s. The trend is expected to continue for the foreseeable future. Why? I'll get to that in coming posts but here is the evidence making my point. Read Perry's post for more details on the data.
1. Scientific American has some interesting thoughts on How Your Language Affects Your Wealth and Health
... Different languages have different ways of talking about the future. Some languages, such as English, Korean, and Russian, require their speakers to refer to the future explicitly. Every time English-speakers talk about the future, they have to use future markers such as “will” or “going to.” In other languages, such as Mandarin, Japanese, and German, future markers are not obligatory. The future is often talked about similar to the way present is talked about and the meaning is understood from the context. A Mandarin speaker who is going to go to a seminar might say “Wo qu ting jiangzuo,” which translates to “I go listen seminar.” Languages such as English constantly remind their speakers that future events are distant. For speakers of languages such as Mandarin future feels closer. As a consequence, resisting immediate impulses and investing for the future is easier for Mandarin speakers. ...
2.Fair Trade 2.0? Coffee’s Economics, Rewritten by Farmers
3. R. J. Moeller qutoes from John Mackey's (Whole Foods CEO) new book:
“Capitalism has a purpose beyond just making money. I think the critics of capitalism have got it in this very small box. That it’s all about money. It’s based in being greedy, selfish and exploitative. And yet, I haven’t found it to be that way. Most of the hundreds of entrepreneurs I know and have met did not start their business primarily out of a desire to make money. Not that there’s anything wrong with making money. My body cannot function unless it produces red-blood cells. No red-blood cells and I’m a dead man. But that’s not the purpose of my life.
Similarly, a business cannot exist unless it produces a profit . . . but that’s not the only reason it exists.”
4. David Henderson with thoughts on economic impact of marriage: "Get Married and Stay Married"
When I was writing a review of Dwight Lee's and Richard McKenzie's excellent book, Getting Rich in America: 8 Simple Rules for Building a Fortune and a Satisfying Life, I called Dwight to ask a question and we got talking about Rule #5: Get Married and Stay Married. Dwight pointed out that if you follow the other 7 rules but don't get married or stay married, you have a substantial probability of building a fortune and a satisfying life. But, he said, if you don't get married and stay married, you tend not to follow at least some of the other 7 rules.
5. With more thoughts on the economic impact of marriage, Glen Reynolds reflects on The other marriage inequality
While the upscale college-educated crowd continues to marry at very high rates, marriage rates are plummeting among those further down on the socioeconomic ladder.
6. Steven Pearlstein with a thoughtful essay: Is capitalism moral?
... A useful debate about the morality of capitalism must get beyond libertarian nostrums that greed is good, what’s mine is mine and whatever the market produces is fair. It should also acknowledge that there is no moral imperative to redistribute income and opportunity until everyone has secured a berth in a middle class free from economic worries. If our moral obligation is to provide everyone with a reasonable shot at economic success within a market system that, by its nature, thrives on unequal outcomes, then we ought to ask not just whether government is doing too much or too little, but whether it is doing the right things.
7. Matt Ridley with an interesting piece on how Obsidian chronicles ancient trade. This conclusion was interesting.
Instead, Dr. Butzer argues that Sargon's conquest itself caused the collapse of trade by destroying cities and disrupting what had till then been "an inter-networked world-economy, once extending from the Aegean to the Indus Valley." In other words, as with the end of the Roman empire, the collapse of trade caused the collapse of civilization more than the other way around.
8. Speaking of economic History, Rewriting Biblical history? Agriculture might be 5,000 years older than believed.
A new find suggests farmers in Bible lands built channels for irrigation long before historians thought they did, allowing for cultivated vineyards, olives, wheat and barley.
10. The New York Times on New Reasons to Change Light Bulbs. (To LEDs)
11. Science 2.0 on A Biological Basis For Gender Differences In Math?
... “Educational systems could be improved by acknowledging that, in general, boys and girls are different,” said University of Missouri biologist David Geary in their statement. “For example, in trying to close the sex gap in math scores, the reading gap was left behind. Now, our study has found that the difference between girls’ and boys’ reading scores was three times larger than the sex difference in math scores. Girls’ higher scores in reading could lead to advantages in admissions to certain university programs, such as marketing, journalism or literature, and subsequently careers in those fields. Boys lower reading scores could correlate to problems in any career, since reading is essential in most jobs.”
Generally, when conditions are good, the math gap increases and the reading gap decreases and when conditions are bad the math gap decreases and the reading gap increases. This pattern remained consistent within nations as well as among them, according to the work by Geary and Gijsbert Stoet of the University of Leeds that included testing performance data from 1.5 million 15-year-olds in 75 nations. ...
14. Mashable has great advice with 5 Alternatives to Unfriending Someone on Facebook
15. David Brooks with insight on How Movements Recover
... Two rival reform movements arose to restore the integrity of Catholicism. Those in the first movement, the Donatists, believed the church needed to purify itself and return to its core identity. ...
... In the fourth century, another revival movement arose, embraced by Augustine, who was Bishop of Hippo. The problem with the Donatists, Augustine argued, is that they are too static. They try to seal off an ark to ride out the storm, but they end up sealing themselves in. They cut themselves off from new circumstances and growth.
Augustine, as his magisterial biographer Peter Brown puts it, “was deeply preoccupied by the idea of the basic unity of the human race.” He reacted against any effort to divide people between those within the church and those permanently outside. ....
16. A great piece by someone who considers them unaffiliated with any religion. Every Christian and congregation needs to reflect on the insignificance of the church in this writers life. His tribe is growing: The significant insignificance of religion
1. The Economist has an interesting graph showing the captialism has led to greater happiness in member countries of the Commonwealth of Independent States (former Soviet Union countries excluding the three baltic countries.)
2. AEI has an informative piece on economic mobility in the United States: How’s the American Dream doing? Well, which one?
There are two ways to define economic mobility: 1) absolute mobility, whether each generation is financially better off than the one before; and 2) relative mobility, whether you can change your income rank vs. your parents. Most Americans probably think both measures important. We want to be more prosperous than mom and dad, but also be able to change our circumstances and make our dreams come true. ...
... A San Francisco Fed study – using data tracking families since 1968 — looks at both versions of the American Dream, finding one healthier than the other. Looking at absolute mobility, researchers Leila Bengali and Mary Daly find the United States “highly mobile.” Over the sample period, 67% of US adults had higher family incomes than their parents, including 83% of those in the lowest birth quintile, or bottom 20% (versus 54% for children born into the top quintile, or top 20%.) ...
3. Concerning gender income inequality, Mark Perry says ‘Studies’ that compare average wages by gender, without controlling for demographic factors, can’t be taken seriously
4. Clive Crook thinks an ownership society may be the answer to reducing wealth inequality: Liberals Should Embrace the Ownership Society
... It’s true that conservatives’ standard proposals for privatizing Social Security and voucherizing Medicare would shift risk onto beneficiaries -- but this plainly isn’t a necessary consequence of the basic principle. I agree with Konczal that adequate insurance against economic risk, underwritten by the government, is essential. I also agree that most conservatives aren’t interested in providing that guarantee. That’s exactly why liberals ought to take up the ownership society themselves.
Ownership entails risk, it’s true, but insurance can minimize it. Ownership also provides control, independence and self-respect -- things it wouldn’t hurt liberals to be more interested in. And when it comes to inequality and stagnating middle incomes, ownership can give wage slaves a stake in the nation’s economic capital.
Done right, an equity component in government-backed saving for retirement could be the best idea liberals have had since the earned-income tax credit (oh, sorry, that started out as a conservative idea as well). ...
5. Scientific American: Massive Open Online Courses, aka MOOCs, Transform Higher Education and Science
6.Scientific American also has interesting piece on how Brain Researchers Can Detect Who We Are Thinking About
FMRI scans of volunteers' media prefrontal cortexes revealed unique brain activity patterns associated with individual characters or personalities as subjects thought about them.
7. Gizmodo reports that Sex in Space Could Be Deadly.
Researchers already knew humans, animals and plants have evolved in response to Earth's gravity and they are able to sense it. What we are still discovering is how the processes occurring within the cells of the human and plant bodies are affected by the more intense gravity, or hypergravity, that would be found on a large planet, or the microgravity that resembles the conditions on a space craft.
According to estimations, engineers expect the the store to generate around 265,000 kilowatt hours (kWh) per year. Store operation will only require 200,000 kWh, so perhaps that extra wattage could be pumped back into the grid or used to power nearby utilities.
9. CNN reports on How online ruined dating ... forever
When people can browse potential dates online like items in a catalog, geo-locate hook-ups on an exercise bike just seven feet away, arrange a spontaneous group date with the app Grouper or arrange a bevy of blind dates in succession with Crazy Blind Date, it makes me wonder if all this newfound technological convenience has, in fact, made romance that much more elusive. Now, we may be more concerned with what someone isn't rather than what they are. And as that twenty-something entrepreneur reminded me over coffee, services like OkCupid, and even Facebook, sap a lot of the mystique out of those first few dates. So, sure, it may be easier than ever to score a date, but what kind of date will it really be?
10. Interesting piece on Why Do People Use Nope Even Though No Is Shorter?
11. Is the New Pope More Liberal Than the Last Two? Why It's Hard to Tell. Emily Chertoff offers some insightful analysis.
12. Michael Bird offer this quote from Michael Goheen and Craig Bartholomew's "The Drama of Scripture" in his post The Importance of the Narrative of Scripture.
Many of us have read the Bible as if it were merely a mosaic of little bits – theological bits, moral bits, historical-critical bits, sermon bits, devotional bits. But when we read the Bible in such a fragmented way, we ignore it’s divine author’s intention to shape our lives through its story. All humanity communities live out some story that provides a context for understanding the meaning of history and gives shape and direction to their lives. If we allow the Bible to become fragmented, it is in danger of being absorbed into whatever other story is shaping our culture, and it will thus cease to shape our lives as it should. Idolatry has twisted the dominant cultural story of the secular Western world. If as believers we allow this story (rather than the Bible) to become the foundation of our thought and action, then our lives will manifest not the truths of Scripture, but the lies of an idolatrous culture. Hence the unity of Scripture is no minor matter: a fragmented Bible may actually produce theologically orthodox, morally upright, warmly pious idol worshippers! (p. 12).
13. Scot McKnight has a great piece on what constitutes legalism: Legalism: Old and New Perspectives
14. Thom S. Rainer on Ten Things Pastors Wish They Knew Before They Became Pastors
Read the whole thing.
15. Joseph Sunde rates the 5 TV Shows That Demonstrate the Importance of Ordinary Work
A thought provoking peace about how we think about charity. His characterization of Puritanism is way off but most of his substantive points are important to consider.