Jay Richards: eight common myths about wealth, poverty and the free market

Have you read Jay Richards’ book “Money, Greed and God?” Because if you haven’t, he’s written a series of articles that summarize the main points of the book.

The index post is here.

Here are the posts in the series:

  • Part 1: The Eight Most Common Myths about Wealth, Poverty, and Free Enterprise
  • Part 2: Can’t We Build A Just Society?
  • Part 3: The Piety Myth
  • Part 4: The Myth of the Zero Sum Game
  • Part 5: Is Wealth Created or Transferred?
  • Part 6: Is Free Enterprise Based on Greed?
  • Part 7: Hasn’t Christianity Always Opposed Free Enterprise?
  • Part 8: Does Free Enterprise Lead to An Ugly Consumerist Culture?
  • Part 9: Will We Use Up All Our Resources?
  • Part 10: Are Markets An Example of Providence?

Parts 4 and 5 are my favorites. It’s so hard to choose one to excerpt, but I must. I will choose… Part 4.

Here’s the problem:

Myth #3: The Zero Sum Game Myth – believing that trade requires a winner and a loser. 

One reason people believe this myth is because they misunderstand how economic value is determined. Economic thinkers with views as diverse as Adam Smith and Karl Marx believed economic value was determined by the labor theory of value. This theory stipulates that the cost to produce an object determines its economic value.

According to this theory, if you build a house that costs you $500,000 to build, that house is worth $500,000. But what if no one can or wants to buy the house? Then what is it worth?

Medieval church scholars put forth a very different theory, one derived from human nature: economic value is in the eye of the beholder. The economic value of an object is determined by how much someone is willing to give up to get that object. This is the subjective theory of value.

And here’s an example of how to avoid the problem:

How you determine economic value affects whether you view free enterprise as a zero-sum game, or a win-win game in which both participants benefit.

Let’s return to the example of the $500,000 house. As the developer of the house, you hire workers to build the house. You then sell it for more than $500,000. According to the labor theory of value, you have taken more than the good is actually worth. You’ve exploited the buyer and your workers by taking this surplus value. You win, they lose.

Yet this situation looks different according to the subjective theory of value. Here, everybody wins. You market and sell the house for more than it cost to produce, but not more than customers will freely pay. The buyer is not forced to pay a cost he doesn’t agree to. You are rewarded for your entrepreneurial effort. Your workers benefit, because you paid them the wages they agreed to when you hired them.

This illustration brings up a couple important points about free enterprise that are often overlooked:

1. Free exchange is a win-win game.

In win-win games, some players may end up better off than others, but everyone ends up better off than they were at the beginning. As the developer, you might make more than your workers. Yet the workers determined they would be better off by freely exchanging their labor for wages, than if they didn’t have the job at all.

A free market doesn’t guarantee that everyone wins in every competition. Rather, it allows many more win-win encounters than any other alternative.

2. The game is win-win because of rules set-up beforehand. 

A free market is not a free-for-all in which everybody can do what they want. Any exchange must be free on both sides. Rule of law, contracts, and property rights are needed to ensure exchanges are conducted rightly. As the developer of the house, you’d be held accountable if you broke your contract and failed to pay workers what you promised.

An exchange that is free on both sides, in which no one is forced or tricked into participating, is a win-win game.

On this view, what you really need to fear as a consumer is government intervention that restricts your choices in the marketplace.

Economists agree on the benefits of free trade

Who could possibly disagree with free trade? Well, many people on the left do. They favor imposing restrictions on free trade. For example, people on the left favor making those who import goods pay tariffs, which makes it harder to trade with other nations. People on the left want to pass rent control laws to block landlords and tenants from trading more freely. People on the left want to pass minimum wage laws that block employers and workers from trading wages for labor more freely. But economists generally don’t agree with any of restrictions on free trade. In fact, even across the ideological spectrum, the majority of economists view free trade as a wealth creating policy, and restrictions on free trade as a wealth destroying policy.

Harvard economist Greg Mankiw explains what most professional economists agree on.

Excerpt:

Here is the list, together with the percentage of economists who agree:

  1. A ceiling on rents reduces the quantity and quality of housing available. (93%)
  2. Tariffs and import quotas usually reduce general economic welfare. (93%)
  3. Flexible and floating exchange rates offer an effective international monetary arrangement. (90%)
  4. Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)
  5. The United States should not restrict employers from outsourcing work to foreign countries. (90%)
  6. The United States should eliminate agricultural subsidies. (85%)
  7. Local and state governments should eliminate subsidies to professional sports franchises. (85%)
  8. If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. (85%)
  9. The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged. (85%)
  10. Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84%)
  11. A large federal budget deficit has an adverse effect on the economy. (83%)
  12. A minimum wage increases unemployment among young and unskilled workers. (79%)
  13. The government should restructure the welfare system along the lines of a “negative income tax.” (79%)
  14. Effluent taxes and marketable pollution permits represent a better approach to pollution control than imposition of pollution ceilings. (78%)

Now when you are talking to a Democrat, you are talking to someone who disagrees with most or all of those common sense economic policies. For example, Obama’s backers in the labor movement inevitably endorse higher import tariffs, which discourage free trade between countries. No economist supports these tariffs on imports, because history has shown (e.g. – Smoot-Hawley Act) that tariffs destroy economic growth and reduce wealth creation. And that’s what I mean when I talk about economic illiteracy – I mean ignoring what we know from economics and our past experience with bad policies.

Democrat economic policies don’t work because they are making policies that are based on economic myths. We know that these myths are myths because of economics is a mathematical science, and because we have tried good and bad policies in different times and places. We have calculations and we have experience to know what works and what doesn’t work. If you want to help the poor, you have to respect what economists know about how wealth is created. The solution is not to “spread the wealth around”, it’s to encourage people to create more wealth by inventing things that people freely choose to buy.

Three UVA students who knew “Jackie” challenge Rolling Stone rape story

This is from the leftist Washington Post, of all places.

Excerpt:

It was 1 a.m. on a Saturday when the call came. A friend, a University of Virginia freshman who earlier said she had a date that evening with a handsome junior from her chemistry class, was in hysterics. Something bad had happened.

Arriving at her side, three students —“Randall,” “Andy” and “Cindy,” as they were identified in an explosive Rolling Stone account — told The Washington Post that they found their friend in tears. Jackie appeared traumatized, saying her date ended horrifically, with the older student parking his car at his fraternity, asking her to come inside and then forcing her to perform oral sex on five men.

In their first interviews about the events of that September 2012 night, the three friends separately told The Post that their recollections of the encounter diverge from how Rolling Stone portrayed the incident in a storyabout Jackie’s alleged gang rape at a U-Va. fraternity. The interviews also provide a richer account of Jackie’s interactions immediately after the alleged attack and suggest that the friends are skeptical of her account.

The scene with her friends was pivotal in the article, as it alleged that the friends were callously apathetic about a beaten, bloodied, injured classmate reporting a brutal gang rape at the Phi Kappa Psi fraternity. The account alleged that the students worried about the effect it might have on their social status and how it might reflect on Jackie during the rest of her collegiate career and that they suggested not reporting it. It set up the article’s theme: That U-Va. has a culture that is indifferent to rape.

“It didn’t happen that way at all,” Andy said.

Instead, the friends remember being shocked. Although they did not notice any blood or visible injuries, they said they immediately urged Jackie to speak to police and insisted that they find her help. Instead, they said, Jackie declined and asked to be taken back to her dorm room. They went with her — two said they spent the night — seeking to comfort Jackie in what appeared to be a moment of extreme turmoil.

[…]They said there are mounting inconsistencies with the original narrative in the magazine. The students also expressed suspicions about Jackie’s allegations from that night. They said the name she provided as that of her date did not match anyone at the university, and U-Va. officials confirmed to The Post that no one by that name has attended the school.

Also, photographs that were texted to one of the friends showing her date that night were actually pictures depicting one of Jackie’s high school classmates in Northern Virginia. That man, now a junior at a university in another state, confirmed that the photographs were of him and said he barely knew Jackie and hasn’t been to Charlottesville for at least six years.

The friends said they were never contacted or interviewed by the pop culture magazine’s reporters or editors. Although vilified in the article as coldly indifferent to Jackie’s ordeal, the students said they cared deeply about their friend’s well-being and safety.

[…]They also said Jackie’s description of what happened to her that night differs from what she told Rolling Stone. In addition, information Jackie gave the three friends about one of her attackers, called “Drew” in the magazine’s article, differ significantly from details she later told The Post, Rolling Stone and friends from sexual assault awareness groups on campus. The three said Jackie did not specifically identify a fraternity that night.

[…]The article’s writer, Sabrina Rubin Erdely, did not respond to requests for comment this week.

Rolling Stone also declined to comment, citing an internal review of the story.

The leftist site Slate has an article by well-known radical feminist Hanna Rosin, who analyzes the Washington Post article.

She writes:

The Washington Post has an update on Rolling Stone‘s UVA story that strongly implies, without outright saying so, that the gang rape at the center of Sabrina Rubin Erdely’s article might be fabricated. Post reporter T. Rees Shapiro spoke at length with the three friends who met up with Jackie, the student who says she was raped, on the night in question. In the Rolling Stone story this scene was crucial. Erdely described Jackie as standing mute in her bloody dress, the Phi Kappa Psi house where the alleged rape happened looming in the background, as her friends callously debated whether they should take her to the hospital and risk ruining their social reputations. This set up the larger theme of a university culture and social scene indifferent even to the most brutalized victims of rape.

Earlier, those friends told the Post that Jackie told them she’d been forced to have oral sex—a much different story than what Jackie told Rolling Stone. This new Post article adds some details that make the entire account seem more suspicious. Jackie had told her friends—referred to by the pseudonyms “Cindy,” “Andy,” and “Randall” in the original story and in the Post’s follow-ups—that she had a date on Sept. 28, 2012, with a handsome junior in her chemistry class. (In the version she told to Rolling Stone, that date was with someone she’d met at her lifeguarding job.) But in the Post story, the friends imply that this junior might not exist and may have been invented by Jackie to make Randall jealous.

When the friends first heard about this junior, they were intrigued and asked Jackie for his number. They started exchanging text messages with him, and he described Jackie as a “super smart hot” freshman. He complained, though, that she liked a “nerd 1st yr”— meaning Randall—who is “smart and funny and worth it.” Jackie’s friends could never find this junior in the UVA database nor on social media. She provided her friends with a picture of him, but the Post has since learned that the guy in the picture is a high school classmate of Jackie’s who does not go to the University of Virginia and was in another state participating in an athletic tournament on the night of the alleged rape. (More recently, Jackie gave her friends the name of a different guy. The Post also contacted him, and he said he’d never met Jackie.)

[…]Jackie has now given her friends two different names for the man she was with that night. Neither of them was in fact with her, ever dated her, or even knew her all that well. She appears to have invented a suitor, complete with fake text messages and a fake photo, which suggests a capacity for somewhat elaborate deception. Jackie, though, has not recanted her story. Her attorney would not answer questions for the Post‘s story on Wednesday and has told reporters to stop contacting Jackie.

Here’s the most disturbing journalistic detail to emerge from the Post‘s reporting: In the Rolling Stone story, Erdely says that she contacted Randall, but he declined to be interviewed, “citing his loyalty to his own frat.” Randall told the Post he was never contacted by Erdely and would have been happy to be interviewed.

A web site called GotNews is claiming to have identified the Jackie from the story, and the Jackie they identified was a student activist in high school. That woman’s Pinterest page sported a lot of radical feminist “rape culture” memes. Also, the author of the Rolling Stone piece is a well-known feminist activist and she has in the past confessed to “shopping around” for victims in order to further her feminist agenda. That link takes you to a Youtube video where she explains her feminist agenda in her own words. This is what students learn as gospel in college, though. Our laws and our culture are built around this Sabrina / Rolling Stone view of men.

Astronomer Guillermo Gonzalez lectures on intelligent design and habitability

The 5 video clips that make up the full lecture.

The playlist for all 5 clips is here.

About the speaker

Guillermo Gonzalez is an Associate Professor of Physics at Grove City College. He received his Ph.D. in Astronomy in 1993 from the University of Washington. He has done post-doctoral work at the University of Texas, Austin and at the University of Washington and has received fellowships, grants and awards from such institutions as NASA, the University of Washington, the Templeton Foundation, Sigma Xi (scientific research society) and the National Science Foundation.

Learn more about the speaker here.

The lecture

Here’s part 1 of 5:

And the rest are here:

Topics:

  • What is the Copernican Principle?
  • Is the Earth’s suitability for hosting life rare in the universe?
  • Does the Earth have to be the center of the universe to be special?
  • How similar to the Earth does a planet have to be to support life?
  • What is the definition of life?
  • What are the three minimal requirements for life of any kind?
  • Requirement 1: A molecule that can store information (carbon)
  • Requirement 2: A medium in which chemicals can interact (liquid water)
  • Requirement 3: A diverse set of chemical elements
  • What is the best environment for life to exist?
  • Our place in the solar system: the circumstellar habitable zone
  • Our place in the galaxy: the galactic habitable zones
  • Our time in the universe’s history: the cosmic habitable age
  • Other habitability requirements (e.g. – metal-rich star, massive moon, etc.)
  • The orchestration needed to create a habitable planet
  • How different factors depend on one another through time
  • How tweaking one factor can adversely affect other factors
  • How many possible places are there in the universe where life could emerge?
  • Given these probabilistic resources, should we expect that there is life elsewhere?
  • How to calculate probabilities using the “Product Rule”
  • Can we infer that there is a Designer just because life is rare? Or do we need more?

The corelation between habitability and measurability.

  • Are the habitable places in the universe also the best places to do science?
  • Do the factors that make Earth habitable also make it good for doing science?
  • Some places and times in the history of the universe are more habitable than others
  • Those exact places and times also allow us to make scientific discoveries
  • Observing solar eclipses and structure of our star, the Sun
  • Observing stars and galaxies
  • Observing the cosmic microwave background radiation
  • Observing the acceleration of the universe caused by dark matter and energy
  • Observing the abundances of light elements like helium of hydrogen
  • These observations support the big bang and fine-tuning arguments for God’s existence
  • It is exactly like placing observatories on the tops of mountains
  • There are observers existing in the best places to observe things
  • This is EXACTLY how the universe has been designed for making scientific discoveries

This lecture was delivered by Guillermo Gonzalez in 2007 at the University of California at Davis.