Tag Archives: Socialism

News

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

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I have a key that will unlock a puzzling mystery
I have a key that will unlock a puzzling mystery

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, or makes some choices more expensive than they need to be (tariffs).

If you care about poverty, it’s often tempting to think that it can only be solved one way – by transferring wealth from the rich to the poor. But that is a very mistaken view, as any economist will tell you. The right way to create prosperity is by creating laws and policies that unleash individual creativity. Letting individuals create innovative products and services, letting them keep what they earn, making sure that the law doesn’t punish entrepreneurs – that incentivizes wealth creation. Fixing poverty does not mean transferring wealth, it means giving people more freedom to create wealth on their own. Free trade between nations is an important way that we encourage people to create better products and services that what they have available in their own countries.

Economists agree on the benefits of free trade

Who could possibly disagree with free trade? Well, many people on the left do. But economists across the spectrum of ideology (university and private sector and public sector) agree on the benefits of free trade.

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%)

Socialist 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.

If you made it this far, I have a fabulous parody video about the perils of tariffs and the benefits of free trade, made by Remy. He’s a libertarian, but that just means we don’t listen to him about foreign policy and morality. Only fiscal policy.

Polemics

Abortion debate: a secular case against legalized abortion

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Unborn baby scheming about being only two months old
Unborn baby scheming about being only two months old

Note: this post has a twin! Its companion post on a secular case against gay marriage is here.

Now, you may think that the view that the unborn deserve protection during pregnancy is something that you either take on faith or not. But I want to explain how you can make a case for the right to life of the unborn, just by using reason and evidence.

To defend the pro-life position, I think you need to sustain 3 arguments:

  1. The unborn is a living being with human DNA, and is therefore human.
  2. There is no morally-relevant difference between an unborn baby, and one already born.
  3. None of the justifications given for terminating an unborn baby are morally adequate.

Now, the pro-abortion debater may object to point 1, perhaps by claiming that the unborn baby is either not living, or not human, or not distinct from the mother.

Defending point 1: Well, it is pretty obvious that the unborn child is not inanimate matter. It is definitely living and growing through all 9 months of pregnancy. (Click here for a video that shows what a baby looks like through all 9 months of pregnancy). Since it has human DNA, that makes it a human. And its DNA is different from either its mother or father, so it clearly not just a tissue growth of the father or the mother. More on this point at Christian Cadre, here. An unborn child cannot be the woman’s own body, because then the woman would have four arms, four legs, two heads, four eyes and two different DNA signatures. When you have two different human DNA signatures, you have two different humans.

Secondly, the pro-abortion debater may try to identify a characteristic of the unborn that is not yet present or developed while it is still in the womb, and then argue that because the unborn does not have that characteristic, it does not deserve the protection of the law.

Defending point 2: You need to show that the unborn are not different from the already-born in any meaningful way. The main differences between them are: size, level of development, environment and degree of dependence. Once these characteristics are identified, you can explain that none of these differences provide moral justification for terminating a life. For example, babies inside and outside the womb have the same value, because location does not change a human’s intrinsic value.

Additionally, the pro-abortion debater may try to identify a characteristic of the already-born that is not yet present or developed in the unborn, and then argue that because the unborn does not have that characteristic, that it does not deserve protection, (e.g. – sentience). Most of the these objections that you may encounter are refuted in this essay by Francis Beckwith. Usually these objections fall apart because they assume the thing they are trying to prove, namely, that the unborn deserves less protection than the already born.

Finally, the pro-abortion debater may conceded your points 1 and 2, and admit that the unborn is fully human. But they may then try to provide a moral justification for terminating the life of the unborn, regardless.

Defending point 3: I fully grant that it is sometimes justifiable to terminate an innocent human life, if there is a moral justification. Is there such a justification for abortion? One of the best known attempts to justify abortion is Judith Jarvis Thomson’s “violinist” argument. This argument is summarized by Paul Manata, one of the experts over at Triablogue:

Briefly, this argument goes like this: Say a world-famous violinist developed a fatal kidney ailment and the Society of Music Lovers found that only you had the right blood-type to help. So, they therefore have you kidnapped and then attach you to the violinist’s circulatory system so that your kidneys can be used to extract the poison from his. To unplug yourself from the violinist would be to kill him; therefore, pro-lifers would say a person has to stay attached against her will to the violinist for 9 months. Thompson says that it would be morally virtuous to stay plugged-in. But she asks, “Do you have to?” She appeals to our intuitions and answers, “No.”

Manata then goes on to defeat Thomson’s proposal here, with a short, memorable illustration, which I highly recommend that you check out. More info on how to respond to similar arguments is here.

Here is the best book for beginners on the pro-life view.

For those looking for advanced resources, Francis Beckwith, a professor at Baylor University, published the book Defending Life, with Cambridge University Press, 2007.

News

New study: Biden’s tax hikes hit 80% of Americans, $6,500 less median household income

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These people are all voting for Joe Biden - are you?
These people are all voting for Joe Biden – are you?

This study actually appeared in the Wall Street Journal, but since they have a paywall, I am linking to The Federalist instead. This new study comes from the Hoover Institute at Stanford University. The Biden campaign is claiming that middle-class households won’t feel any effects from these tax increases. But the study is clear. Not only will 80% of Americans pay more, but many jobs will also be lost.

The Federalist reports on the study, which has some very prestigious authors:

A new study shows that Democratic Presidential Nominee Joe Biden’s proposed economic plan would significantly hurt the long-term American economy if implemented.

While many mainstream media outlets claim Biden’s plan will target the wealthy and save the middle-class money, the 50-page study released by the Hoover Institution shows different results.

“Economists have paid too little attention to the economic effects of the Biden plan,” said Casey B. Mulligan, professor of economics at the University of Chicago. “Our report, which focuses on taxation, health insurance, regulation, and energy policy, suggests that these effects are potentially very large indeed.”

The study conducted by a group of financial and economic experts including Mulligan, former Chief Economist of the White House Council of Economic Advisers, and Kevin Hassett, Chairman of the Council of Economic Advisers since 2017, demonstrates how Biden’s plan will hurt everyone.

This is the bottom line: higher unemployment, lower household income for the average household:

“We conclude that, in the long run, Vice President Biden’s full agenda reduces full-time equivalent employment per person by about 3 percent, the capital stock per person by about 15 percent, real GDP per capita by more than 8 percent, and real consumption per household by about 7 percent,” the report stated.

If Biden’s proposed changes are implemented, the economists warn that, according to the Congressional Budget Office’s projections, 2030 may yield “4.9 million fewer employed individuals, $2.6 trillion less GDP, and $1.5 trillion less consumption in that year alone.” The economists also note that the median household income in 2030 would fall by $6,500 despite Biden’s promises to prioritize the middle class.

You’re not going to be immune to this, even if you’re poor:

While Biden and his VP Nominee Kamala Harris previously promised that they will not “raise taxes on anyone who makes less than $400,000,” they have also promised to repeal the tax cuts made by President Trump, which gave 80.4 percent of all taxpayers a cut and 91 percent of the middle quintile a cut.

I don’t like numbers like this. It’s not just that I have to work the same amount for less take-home pay, which reduces my freedom. It’s also that the pressure on “the rich”, i.e. – MY EMPLOYER, causes companies to ship jobs overseas where labor costs are lower. Did you know that higher taxes causes outsourcing of jobs? The more that business owners have to pay, the more likely they are to pick up and move somewhere else – taking their jobs with them.

I don’t like this. It’s hard enough for me to make a living without the government taking more of what I earn. I’ll have to work longer in order to make up the difference – assuming I can even keep my job.