Markets and Miracles:
What the Market Economy Needs to be Moral

Economics & Law — By on March 6, 2007 at 1:35 am

Almost everyone has heard economics referred to as “the dismal science.” And if you took a course in macroeconomics you probably recognize that the appellation was given by the Scottish historian Thomas Carlyle. But what few people realize is that Carlyle coined the term in an 1849 magazine article titled Occasional Discourse on the Negro Question in which he denounced the two groups within the UK who championed the cause of antislavery: market economists and evangelicals.
Today we have become so accustomed to hearing criticisms of free market economics from socialists, Marxists, and other extremes of the political left that we find it difficult to imagine that it being opposed by conservatives. Attitudes toward the market economy, however, have less to do with the political spectrum than they do with the conception of who should retain control over economic life. Progressives, fearing that no one is in control and that powerful will take advantage of the weak, believe the state must step in to prevent inequitable and unjust outcomes. Conservatives (as we would define them today), by contrast, put their faith in the system itself and believe that left unhindered by the state, is sufficient to lead to the best possible end result. Libertarians, who view markets as morally neutral, contend that the individual, when allowed total liberty, will usher in the ideal end state. While all of these positions have some merit, they all ultimately fail when they leave out the most significant reason for putting our trust in the markets: because all control ultimately belongs to God.
Recognizing this fact, however, does not release homo economicus from all responsibility. A market is, after all, merely a mechanism for buying and selling goods and services. And while it is often viewed as highly individualistic and selfish, the fact remains that markets cannot exist without a network of humans in relationship with one another. As with all human interactions, though, our natural proclivity to sin can have a detrimental effect. Market forces and outcomes are prone to injustice and inequitable distribution precisely because man is by nature a sinful creature.
As Christians, we can never embrace any system or institution without being wary of how we are likely to abuse it for our own depraved purposes and rationalize our reasons for doing so. This is the primary reason we cannot fully embrace either a conservative or libertarian view of market economics.


But we should also be leery of falling for the progressive tendency to believe that government is the proper defender against economic injustice. While we might agree that protections are often necessary, we should reject the notion that the state has the moral authority to carry out that task. As William McGurn writes in Is the Market Moral?, it is naive to expect government to properly counter powerful market forces when the state has a monopoly on power. Indeed, there are few examples in history where government has circumvented the natural inclinations of its citizens in order to make a market more moral.
If governmental intervention is not the answer, how then should we show concern for the poor? By providing them the opportunities, the resources, and the freedom to more fully enter the market economy. As McGurn points out, “For the poor the real danger is almost never markets and almost always the absence of them.”
“It strikes me as not a coincidence,” adds McGurn, “that the God who made thinking beings in his own image appears to have put us in a world in which our wealth and well-being depend not only on our own freedom but that of our neighbors.”
How odd it is that we believe that free markets are beneficial for our own lives yet reject it as a solution for our neighbors. We wouldn’t accept having our own economic freedom and access to markets stifled by an intrusive government yet we often believe this is the best option for “the poor”, whether in our own inner cities or on the continent of Africa. Why is there two sets of standards for how to increase freedom and prosperity?
In a post on ethics and markets, Andy Morriss recounts an anecdote he heard on the radio:

One minister recounted how another minister had told him how God had answered his prayers and healed a headache the second minister had before a major sermon. The first minister commented on how arrogant the second minister was, to demand a miracle to cure his headache when God had already provided aspirin. Surely it is arrogant for us to pray for miracles to relieve drought and poverty when God has already handed us the means to do so – markets. Again, however, we rarely hear moral criticism of those who refuse the miracle of the market and insist that God (or someone) perform the far greater miracle of making economic planning work.

This raises an interesting question for Christians: Does God’s sovereignty not extend to markets? If so, then why do we expect, as Morris says, for God to circumvent the institution he has created and provided for our well-being by providing a “miracle?” The primary reason, in my opinion, is that we no longer think theologically about economics. While we evangelicals often form our views on such institutions as marriage and the family from our theology, we acquire our understanding of markets from our politics. If we subscribe to a progressive politics, then we adopt the Left’s criticism of markets. If we subscribe to conservative politics, then we embrace the Right’s unquestioning allegiance to unfettered markets.
What we need is a third way. We need a clear Christian vision that understands that markets are a moral sphere (contra the libertarians). We need to promote the idea that free individuals rather than government force is necessary to carry out this task (as the left often contends). We need to realize that the “market” is not a mystical system that will miraculously provide for our neighbor (as many conservatives seem to think). What we need is develop a coherent Biblically-based conception of how the market as a human institution can be used for the redemptive purposes of our Creator. As with every institution, what the markets need is for Christians to act more like Christ.



  • http://www.gopunditgo.com Terrence

    Here’s an interesting scenario: What happens when Christians desire to regulate markets for the sake of morality? For example, if we worked towards making pornography as difficult to obtain as, say, assault rifles, the porn industry would obviously fight tooth and nail against such market regulation.
    However, it is the right thing to do, even if pornographers lose their jobs because of market regulation.
    Dr. J Vernon Magee decried the depravity of “Godless capitalism” and as Christians we need to do the same. Free markets are powerful – they can lift entire nations out of poverty faster than any other economic system – but when Christians trust market provision more than God’s provision we’re stuck with a form of capitalism that yields to greed, corruption and sin rather than freedom, growth and Godly industry.

  • http://www.thingswesaid.blogspot.com Marie

    Gary North has written extensive articles and books regarding the Christian philosophy of Economics. Very good source material.

  • http://contraniche.blogspot.com August

    The first way is coercion. You are forced to live your life, use your resources, etc. as someone else sees fit.
    The second way is anarchy. In this case you are still forced to do all the same things, but there is a small chance you can kill your oppressor, take all his goods, and start oppressing others.
    The third way is free markets. In this case, someone uses just enough force to make sure everyone trades freely and peacefully.

  • http://www.new-life.org.au Keith

    Free markets are in fact morally neutral, and this is where Christians do need to enter the debate forcefully.
    If there is no regulation (either by legislation or by overwhelming community consensus) then the markets will happily deliver slaves to those who want them, crack to anybody who wants to try it, alcohol to minors, nuclear weapons to suburban terrorists. The only qualification being the cash to purchase the item.
    The fact is that we do rely on governments to use market forces to achieve social goals– that’s why tobacco and alcohol have huge taxes and licences restricting their sales, police forces try to limit the supply of hard drugs to force the prices out of the reach of average people, slavery is illegal etc. The market could never achieve these goals in a “free” environment.
    Governments also tinker with the demand side by using advertising and education to change perceptions about what is desirable.
    The debate then is what should be the goals of government intervention in the market and how do we achieve those goals. Because this is a political process, christians have to be present either directly in the political process or in the form of advocating for the goals they think are important.
    We also need to encourage people to live ethically and morally within a market economy, so that we work out if some products simply should not be produced or, if they are produced, then not purchased.
    Of course regulation is always a lot easier than persuasion!

  • http://www.neumatikos.org Kyle

    That was NICE. It’s a rare thing when you get legitimately original Christian thinking on a subject like this. Thanks.

  • Tim L

    Capitalism is the best system out there!
    Period!
    That doesn’t mean it is anywhere near perfect.
    I agree with what Keith says.
    Plus, regulation is not a problem, over regulation is!
    Kind of like the difference between desire and overdesire. God wants us to desire many things in life, its when we overdesire that we get in trouble.

  • http://rememberruss.blogspot.com/ Russ

    Tim,
    I agree with your point about capitalism but it has its proper place. I say this because the big problem with the health care for our troops at places like Walter Reed has deteriorated because of the privatization that took place. The competition and accountability that should have been there was replaced by cronyism and greed. Its also according to books about Bremer and the neocon experiment in Iraq was a disaster. As one neocon said, “I was mugged by reality.”

  • http://TheEverwiseBoonton.blogspot.com Boonton

    Keith
    Free markets are in fact morally neutral, and this is where Christians do need to enter the debate forcefully.
    I disagree. A free market is highly moral in my opinion. It is premised on providing your fellow human beigns with the uptmost amount of respect. All use of force is taboo, you can only control their behavior by ‘selling’ your ideas to them.
    If there is no regulation (either by legislation or by overwhelming community consensus) then the markets will happily deliver slaves to those who want them, crack to anybody who wants to try it, alcohol to minors, nuclear weapons to suburban terrorists. The only qualification being the cash to purchase the item.
    Isn’t this what God has already given you in the form of free will. If he is willing to live with humans being free to choose why aren’t you? More to the point, slavery is not a free market. Crack and alcohol would be part of a free market but I have seen that many times our law enforcement system often ends up making problems worse. I often wonder if maybe the libertarians don’t have a point and freedom to choose wouldn’t be the least bad option here rather than paternalism? Yea I guess the ‘free market’ may produce nuclear weapons. This is the extreme, though, and it is interesting that three nations who are causing the most trouble with their production of nukes are not ideal free market zones but highly theocratic states (I’m speaking of Iran and Pakistan which are heavily Islamic states and North Korea which has its own type of state invented religion of its ‘fearless leader’).

  • http://www.gopunditgo.com Terrence

    Russ,
    Do you have a source for that last quote?

  • Russ

    Terrence,
    I could even tell you who said it but it will have to wait, (I can’t remember) because I’m off to work and I listened to it on a book on tape called Imperial Life in the Emerald City: Life in the Green Zone.

  • ex-preacher

    Joe writes: “If governmental intervention is not the answer, how then should we show concern for the poor? By providing them the opportunities, the resources, and the freedom to more fully enter the market economy.”
    This is an excellent argument for something I can endorse: vastly increasing the opportunities for immigrants to enter the U.S. I don’t understand why so many people who favor free markets and free trade are so opposed to the free movement of people across borders.

  • http://www.gopunditgo.com Terrence

    ex-preacher,
    As an econ professor of mine once said, “You can have a welfare state or you can have open borders, but you can’t have both.”

  • http://evangelicalperspective.blogspot.com Collin Brendemuehl

    I’m not so certain.
    While I certainly disagree with the coercive redistribution of the left, I also find a lot of naive people on the right who consider our economic liberty a panacea — if everyone would participate then we could all be successful, and failure comes from non-participation.
    I find that this ignores the problems of current and original sin. The internal human condition does not change because provide an external resource. The capacity of people to do harm to themselves and to others is not relieved because of economic liberty. Many on the Left hold to a Keynesian economic, where the government isn’t the manager, as with the socialists, but the active stimulator. Quasi-free, quasi-socialist.
    Now, I enjoy our current liberties and have no intention of surrendering them. But no system works fully, only best. So let’s not tie our faith to the inadequacy of human experience but to the end product of the coming final Redemption where The Economy will provide True Justice.

  • kbiel

    Terrence said:

    For example, if we worked towards making pornography as difficult to obtain as, say, assault rifles, the porn industry would obviously fight tooth and nail against such market regulation.

    However, it is the right thing to do, even if pornographers lose their jobs because of market regulation.

    Why was that the right thing to do? Did the regulation bring anybody to Christ? Did it open their hearts to the leading of the Holy Spirit? No. It’s more likely that it hardened their hearts even more.
    Markets are as morally neutral as a gun or a car or a house. People are the only moral agents on this planet. The way to bring morality to the marketplace is to act morally ourselves and convince our fellow humans of the benefits of our morality. Of course there will need to be some regulation as slavery, exploitation of children, and some forms of coercion are not only morally reprehensible but also forces some people into immoral and destructive situations. That some people choose to sin is not only something that we need to learn to live with, but also something that no amount of regulation will prevent. If you doubt this, then you need only study study the U.S.S.R. They had a command economy and regulated or banned many vices. But even in a government dominated society where people were not free to choose sin, alcoholism, pornography and drug abuse still existed.
    I liken this to guns. Many people, including a majority of Christians, think guns are bad. But guns are just inanimate objects without moral purpose or will. It is the person using the gun that imparts moral purpose and will to the gun. A murderer uses the gun for immoral purposes. A police officer or a parent protecting their family gives the gun a moral purpose. Banning guns does not change that situation because it can be replace with a knife, a baseball bat, a lead pipe, a car, et cetera. The same goes for the marketplace. You can make it more restrictive or replace it with a restrictive system such as communism, but that won’t effect the morality of the people involved or win souls for Christ.
    The way to make the marketplace more moral is for Christians to first have self restraint (do not indulge in vices such as pornography yourself) and then to fully engage in the marketplace. As more Christians are involved and choosy about their spending, the market will follow.
    This is starting to happen in the movie industry as some in Hollywood are starting to realize that there is a large market for wholesome and religious entertainment. As more Christians refuse to watch crud like “American Pie” and positively effect the market by patronizing “The Passion of the Christ” and “Amazing Grace” then moral entertainment becomes more profitable and attractive to Hollywood. As it becomes more profitable, Hollywood will continue to produce more movies like “Amazing Grace”. As more of these movies are produced, more people who may not have accepted Christ and/or drifting morally will be exposed to the moral messages and Christian doctrine. And that is a good thing.

  • ucfengr

    I say this because the big problem with the health care for our troops at places like Walter Reed has deteriorated because of the privatization that took place.
    The reason WRAMC has deteriorated is because it is on the BRAC list (i.e. it is scheduled to close in 2011), not due to any “privatization”. The military tries not to spend a lot of money on bases they are about to close. The real problem is that that the 2006 Defense Budget was, in real dollars, about the size of the 1988 budget and that’s after several years of increases. Essentially you have a military that has been trying to fight a war and at the same time re-capitalize on a peace time budget. Somethings gonna give. Should Walter Reed have done a better job? Of course. Who’s to blame? A large part of the blame must rest with President Bush and Secretary Rumsfeld, for not requesting a much larger military in the wake of 9/11 and for requesting a suspension of BRAC closures, especially critical wartime facilities like Medical Centers, but Congress also must shoulder a large part of the blame. After all they have Defense oversight. Heck, WRAMC is practically across the street from Congress. How hard would it have been for a couple of Congressmen to inspect the base, while visiting their military constituents?

  • http://TheEverwiseBoonton.blogspot.com Boonton

    The real problem is that that the 2006 Defense Budget was, in real dollars, about the size of the 1988 budget and that’s after several years of increases.
    According to http://www.gpoaccess.gov/eop/2007/B20.xls defense spending was 462.3 billion dollars in 1988. In 2005 it was 878.3 billion.
    Converting that into 1982-84 dollars (using http://www.gpoaccess.gov/eop/2007/B60.xls) I get $391.1B spent in 1988 and $459.3B in 2005. So in real dollars we are 18% higher than we were in 1988.
    I suspect that the 2005 number may not include ‘supplemental’ funds issues for the war that are seperate from the budget. In that case we are spending a lot more on defense than even this quick analysis indicates.
    I’m not very sympathetic to the argument that the pie just wasn’t big enough to run the hospital cleanly AND fight the war. Perhaps the hospital should have been closed early and casualities gathered into a major medical center that could be run at peak efficiency (or yes, even outsourced entirely to private hospitals who would bill the DoD).
    The responsibility therefore does not rest very much with Congress, IMO. The pie was plenty big. The DoD allowed the hospital to deteroriate and the administration is therefore responsible because they are in charge.
    The reason WRAMC has deteriorated is because it is on the BRAC list (i.e. it is scheduled to close in 2011), not due to any “privatization”. The military tries not to spend a lot of money on bases they are about to close.
    That’s understandable yet it doesn’t change the fact that as long as it is running it has to be maintained at acceptable standards. Imagine if they were decommissioning an aircraft carrier next year and we read that it was sitting in the middle of the ocean becaue it had run out of fuel? Otherwise they should have closed it early. Certainly the BRAC did not shut down every military medical facility!

  • http://rememberruss.blogspot.com/ Russ

    Terrence,
    Imperial Life in the Emerald City: Life in Baghdad’s Green Zone … As Agresto told Chandrasekaran, “I’m a neoconservative who’s been mugged by reality.” …
    This is a great book by the way.

  • ucfengr

    Curse you Boonton, for making me look at yet another spreadsheet.
    According to http://www.gpoaccess.gov/eop/2007/B20.xls defense spending was 462.3 billion dollars in 1988. In 2005 it was 878.3 billion.
    You read the spreadsheet wrong. It looks like you are using Column C, which is both defense and non-defense federal expenditures. Column D deals only with defense spending. Those figures are $354.9B for 1988 and $589.3B for 2005.
    Converting that into 1982-84 dollars (using http://www.gpoaccess.gov/eop/2007/B60.xls) I get $391.1B spent in 1988 and $459.3B in 2005. So in real dollars we are 18% higher than we were in 1988.
    Using the figures from Column D, I get $383.5B in 1988 dollars for 2005, which gives us an increase of 8%. It is an increase, but considering that we are fighting a shooting war and have pilots flying 30+++ year old aircraft (it’s similar with much of the military’s heavy equipment) it’s not much of one.
    I suspect that the 2005 number may not include ‘supplemental’ funds issues for the war that are seperate from the budget. In that case we are spending a lot more on defense than even this quick analysis indicates.
    A lot of those supplemental increases goes towards rebuilding Iraq, so they impact military spending a lot less than they would appear from their size.
    I’m not very sympathetic to the argument that the pie just wasn’t big enough to run the hospital cleanly AND fight the war. Perhaps the hospital should have been closed early and casualities gathered into a major medical center that could be run at peak efficiency (or yes, even outsourced entirely to private hospitals who would bill the DoD).
    Of course if they had done that they would have had a dozen Congressmen from Maryland and Virginia holding hearings and trying to insert legislation preventing that from happening.
    The responsibility therefore does not rest very much with Congress, IMO. The pie was plenty big. The DoD allowed the hospital to deteroriate and the administration is therefore responsible because they are in charge.
    I understand why you are quick to absolve Congress, your guys are in charge there now, but that doesn’t excuse them from their oversight responsibility. Heck, they probably have constituents at WRAMC, from their own states National Guards. They have a duty to know too.
    That’s understandable yet it doesn’t change the fact that as long as it is running it has to be maintained at acceptable standards. Imagine if they were decommissioning an aircraft carrier next year and we read that it was sitting in the middle of the ocean becaue it had run out of fuel?
    Your hypothetical ship wouldn’t run out of fuel, but it would be pretty damn hard to buy a new engine for it. Just like at WRAMC, they weren’t running out of aspirin and bandages, but they weren’t getting many new buildings. Heck, I work on a base that isn’t closing and we have a bunch of substandard buildings. I am sure Command would like to fix them all, but the resources just aren’t there.

  • Russ

    ucfengr,
    The reason WRAMC has deteriorated is because it is on the BRAC list (i.e. it is scheduled to close in 2011), not due to any “privatization”.
    ______
    Is it a good idea to be closing down facilities in the middle of two wars?

  • http://TheEverwiseBoonton.blogspot.com Boonton

    Using the figures from Column D, I get $383.5B in 1988 dollars for 2005, which gives us an increase of 8%. It is an increase, but considering that we are fighting a shooting war and have pilots flying 30+++ year old aircraft (it’s similar with much of the military’s heavy equipment) it’s not much of one.
    True but 1988 was well through the build up in our military muscle that began at the end of the Carter administration and was pushed through full force during the Reagan years. Yes we are fighting a shooting war but we are not losing ships, large planes and tanks. We are losing ammo, helicopters and vehicles.
    Fair catch on the spreadsheet.
    A lot of those supplemental increases goes towards rebuilding Iraq, so they impact military spending a lot less than they would appear from their size.
    http://en.wikipedia.org/wiki/Financial_cost_of_the_2003_Iraq_Conflict puts the cost of the Iraq War at $379B and counting. One would think reconstruction money proper would fall into the non-defense budget while supplemental spending for soldier pay, equipment purchases, repairs etc. woudl be defense but your guess is as good as mine how the Econ. Report of the President coutns this.
    Of course if they had done that they would have had a dozen Congressmen from Maryland and Virginia holding hearings and trying to insert legislation preventing that from happening.
    Perhaps, allowing a hospital to fall below standards while caring for wounded seems to provide even more ammunition to angry congressmen.
    I understand why you are quick to absolve Congress, your guys are in charge there now, but that doesn’t excuse them from their oversight responsibility. Heck, they probably have constituents at WRAMC, from their own states National Guards. They have a duty to know too.
    True they do have oversight responsibility. Also you may want to note that ‘my guys’ only recently took command. It seems this place was falling apart when Congress was firmly in Republican hands.
    Russ
    Is it a good idea to be closing down facilities in the middle of two wars?
    Probably so, look at ucfengr’s post:
    Your hypothetical ship wouldn’t run out of fuel, but it would be pretty damn hard to buy a new engine for it. Just like at WRAMC, they weren’t running out of aspirin and bandages, but they weren’t getting many new buildings. Heck, I work on a base that isn’t closing and we have a bunch of substandard buildings. I am sure Command would like to fix them all, but the resources just aren’t there.
    The military could probably do a lot better with the bases it wants and needs to keep if they weren’t wasting resources keeping unneeded bases on life support.

  • http://alangrey.blogspot.com Alan Grey

    Joe. I have been thinking about this too. This is why I think the bibles sheer genius is so self-evident. If you look at how certain regulations and societal structures were set it, it provides an amazingly effective method of dealing with the poor and a market.
    For instance, the whole idea of the year of jubilee, where every 50 years all property is redistributed back to ALL the original families/descendents. What an amazing way of keeping the very efficient market economy which encourages responsibility with what you have, but not letting things get too out of hand by stopping the poor to continue getting poorer. Genius (Leviticus 25)
    Another example is the command to not reape the edge of the fields or glean after reaping, which was to allow the poor to come and gather food for themselves. (Leviticus 19, Ruth 2). What a great way (which unfortunately won’t work in our society today) to allow the poor to get food. Not a simple handout, but something they have to work for. Yet with no motivation for the rich to create poor in order to have them provide the service. (E.g. today, you could create a work for social security scheme to achieve your own purposes and so there would be motivation to abuse/keep the poor poor, in order to have almost slave labor).
    Cheers

  • JohnW

    Boontoon,
    Don’t you know anything…the reason for all the problems at Walter Reed Hospital is the defense budget is not big enough…geez. It has nothing to do with greed and corruption.
    Our priorities are all wrong.-WE SIMPLY MUST START SPENDING MORE ON DEFENSE!

  • http://www.gopunditgo.com Terrence

    Russ,
    Thanks for the source. I heard of Chandrasekaran’s book when it came out and noticed it was mostly lauded by pundits who were vocally critical of our efforts in Iraq.
    I’m sure the author points out some serious mistakes made by the CPA (no war reconstruction zone goes without them), but he has also been criticized for painting too simple of a story, neglecting to acknowledge that many of the senior CPA administrators were indeed bipartisan, non partisan, or Democrats who were well regarded as experts in their fields of influence.
    But, I do thank you for the source and will take your endorsement of the book into consideration when I next come across it.

  • ucfengr

    Russ–Is it a good idea to be closing down facilities in the middle of two wars?
    It’s probably not a good idea to be closing your major medical facilities, but for better or worse, the base closure process is supposed to be non-political. The way it works is the BRAC (an independent commission) puts together a list of bases to close. Then Congress votes up or down on the whole list with no changes allowed.
    Boonton–Yes we are fighting a shooting war but we are not losing ships, large planes and tanks. We are losing ammo, helicopters and vehicles.
    Actually, it is not just enemy fire that causes loss, it is also increased tempo. Without getting too technical, you can wear equipment out. Aircraft for example, is generally rated for a certain number of hours before it is considered used up, combat ops uses up the hours even faster (i.e. 1 combat hour = 2-3 normal flight hours).
    One would think reconstruction money proper would fall into the non-defense budget while supplemental spending for soldier pay, equipment purchases, repairs etc. woudl be defense
    Reconstruction expenses do fall under the supplemental spending as does the increases costs of paying soldiers (soldiers in Iraq get combat pay and are also tax exempt, which increases their cost).
    The military could probably do a lot better with the bases it wants and needs to keep if they weren’t wasting resources keeping unneeded bases on life support.
    The way the Base Closure Commission works is that it is supposed to be independent from the military and Congress. The BRAC puts together a list of bases to close from DoD inputs and then Congress has to vote yes or no on the entire list.
    John–Our priorities are all wrong.-WE SIMPLY MUST START SPENDING MORE ON DEFENSE!
    Wow, we agree on something.

  • JohnW

    ucfengr,
    Here is some more stuff we might agree on:
    LET’S SPEND MORE ON DEFENSE, CUT TAXES, ELIMINATE SOCIAL SECURITY, AND ABOLISH THE DEPARTMENT OF EDUCATION….AND START ANOTHER WAR TO IMPROVE OUR ECONOMY AND ELIMINATE POVERTY.
    I have a new theory. Eventually all that money from defense contracting well spread all throughout the economy. And if someone can’t find a job, just join the military.

  • ucfengr

    LET’S SPEND MORE ON DEFENSE, CUT TAXES, ELIMINATE SOCIAL SECURITY, AND ABOLISH THE DEPARTMENT OF EDUCATION….AND START ANOTHER WAR TO IMPROVE OUR ECONOMY AND ELIMINATE POVERTY.
    Wow John, I had no idea you were such a fascist. Talk about swinging from one extreme to the other. Eliminating Social Security would probably be a bad idea, but adding private accounts based on the Federal Employees’ Thrift Savings Plan might be a good idea. Eliminating the Department of Education might be a good idea. Has education in the US measurably improved since the DOEd was established? If yes, then it is probably a bad idea, but if no; well I don’t think it is a good idea to reinforce failure.

  • http://TheEverwiseBoonton.blogspot.com Boonton

    but adding private accounts based on the Federal Employees’ Thrift Savings Plan might be a good idea. Eliminating the Department of Education might be a good idea.
    What are IRA’s, Roth IRA’s, 401K’s and educational 401K’s plus now medical savings accounts? Anyone who wants to save more has a host of tools already that make it easier for them.
    Has education in the US measurably improved since the DOEd was established? If yes, then it is probably a bad idea, but if no; well I don’t think it is a good idea to reinforce failure.
    Let’s see, the US labor force is the most productive in the entire world. We are quite adopters of high-tech and quite good at innovating. While it’s hard to figure out how much of this is due to education and how much to other factors but this seems to counter the arguemnt that the US education system has failed.
    As for the performance of the DOE. From what I understand, the DOE primarily funds special education for children with severe handicaps. While I know there is probably a lot of abuse and waste with special needs money the fact remains a single child with a severe handicap could cost a huge amount of money for a small school district so I’m not very bothered that the Federal Gov’t chips in. The other thing I know the DOE does is the ‘No Child Left Behind Act’ which basically just requires schools to test the kids and report to parents how they perform (and make options available to parents when the schools perform very badly).
    While many have criticized that as big gov’t, to me it seems very well balanced. Schools are not told how to teach or even what to teach. They only have to report how they do on some type of objective standard. To me this is no worse than a mutual fund being required to disclose its management fees and honest calculations of its historical returns.

  • JohnW

    Uncenfgr,
    I feel asleep on the couch the other night while watching that lovely temptress, Ann Coulter on Hannity and Colmes…and the next day all my views changed. All that fascist thinking must have snuck into my sub-conscious while I was asleep.
    I’ll go visit “The Nation” and “Democracy Now” websites to get my thinking back to normal.

  • JohnW

    Uncenfgr,
    I fell asleep on the couch the other night while watching that lovely temptress, Ann Coulter on Hannity and Colmes…and the next day all my views changed. All that fascist thinking must have snuck into my sub-conscious while I was asleep.
    I’ll go visit “The Nation” and “Democracy Now” websites to get my thinking back to normal.

  • http://www.active.com/donate/tntmn/jimbob jimbob-in-mn

    Scripture has a lot to say about fairness in the marketplace:
    Lev 19:35 You shall do no wrong in judgment, in measures of length or weight or quantity.
    Deu 25:15 A full and fair weight you shall have, a full and fair measure you shall have, that your days may be long in the land that the Lord your God is giving you.
    Pro 20:23 Unequal weights are an abomination to the Lord,
    and false scales are not good.
    My own take is that libertarians and communists are both naive and dangerous, not taking in to account human nature.

  • ucfengr

    What are IRA’s, Roth IRA’s, 401K’s and educational 401K’s plus now medical savings accounts? Anyone who wants to save more has a host of tools already that make it easier for them.
    If all of these are good things, why would adding a private account option to Social Security be a bad thing?
    Let’s see, the US labor force is the most productive in the entire world. We are quite adopters of high-tech and quite good at innovating. While it’s hard to figure out how much of this is due to education and how much to other factors but this seems to counter the arguemnt that the US education system has failed.
    Where did I make the argument that the US education system has failed? All I said was that if the Department of Education is measurably improving the US education system, we should keep it; if it isn’t, we shouldn’t. Do you think we should keep the DoEd, even if it isn’t measurably improving US education?

  • http://TheEverwiseBoonton.blogspot.com Boonton

    If all of these are good things, why would adding a private account option to Social Security be a bad thing?
    Because they already exist. This is a bit like asking why don’t we put a subway system in New York City.
    All I said was that if the Department of Education is measurably improving the US education system, we should keep it; if it isn’t, we shouldn’t. Do you think we should keep the DoEd, even if it isn’t measurably improving US education?
    Probably because there are many things that cannot easily be measured. If you can show me a good way to measure what the DOE should be doing then let’s go from there. Often the measures put forth are various metrics of test scores that quite frankly often end up measuring only themselves.
    It is often taken as a fact that the US education system has failed or is failing. The debate often begins with “how do we fix education”. I’d like to point out that I see very little real evidence that education has failed. You get an education not to score well on a test but to get a good job, do it well and generally be able to manage your life. By that scale the US population has the best education system in the world.
    Back around 1984 I remember the huge hoopla over the “Nation at Risk Report”. It said the US system was so bad if it had been instituted by a foreign country it would fairly be considered an act of war. Yet here’s a funny thing, the high school graduates of 1984 have been in the market for 23 years right now. The bulk of the economy in the US is produced by people who were products of that horrible system.
    Yet the last quarter century the US economy seems to have suffered nothing by being inflicted with this poorly educated workforce. This poorly educated workforce ushered in the Information revolution with barely a hiccup.
    This odd little fact, though, seems to give no one pause when they casually whip up the old ‘our education system is failing us’ line. It’s almost as if the earth experiences deep freezing blizzards year round for the next 50 years and neither advocates or critics of global warming bother to notice!

  • http://TheEverwiseBoonton.blogspot.com Boonton

    If all of these are good things, why would adding a private account option to Social Security be a bad thing?
    To be more specific, though, here is the reason.
    Giving a tax advantage to desired behavior is a double edged sword. Suppose you want to encourge more peole to donate to charity so you give a special 1% credit for every donation. Ok, so Bill who never gives anything ponies up $100 to the Red Cross. So for a cost of just $1 to the taxpayer $100 has been given to a good cause!
    Not quite, for every Bill maybe there were 1000 people who already gave $100. They too get the credit for what they were already doing. So while Bill did generate $100 in new giving at a cost of $1, the other thousand people also took this credit for producing no new giving. This program to encourage new giving to charity ends up costing $1,001 while only yielding $100 in new giving. Even if gov’t was 50% wasteful it could have done five times better just directly granting money to charities.
    There are already people who max out all the tax deferred options available for saving. These people, let’s call them chronic savers, are highly unlikely to need the help of a social safety net. They are probably already earning very high incomes (which is why they are tapping out retirement accounts) and they are already probably going to be fine in their old age unless they make exceptionally stupid investment decisions in those retirement accounts (like putting it all to a favorite penny stock they got as email spam).
    So no, IMO, yet another tax subsidized saving account option to litter the playing field that is already kind of large would not do much additional good.
    Now you could mandate private savings. Say require people to put 1% of their income into a special retirement account (or even just a long term savings account…say you can take it out only after 5 or 10 years). That would increase savings for many people because we know that most people don’t come anywhere near maxing out their 401K options. But this is a very strange thing to advocate when you think about it. Why are you telling people how much they need to save? Do we need more paternalism by government? If you want to argue we should in t his case then go ahead, argue it.
    The other option is you could reduce Social Security benefits but instead of reducing Social Security taxes you mandate that the balance be saved in a private account. I can see a good argument to use this in place of unemployment taxes…instead of having to work at a place at least 6 months and then argue with the unemployment dept. over whether you’re really trying to find new owrk or not just put the money in an account and you tap it if you’re out of work.
    But for retirement we are already pushing private accounts to the hilt with IRA’s, 401K’s etc. Social Security is a nice piece of diversification since it pays you a constant stream of income for just being alive. SS was envisioned as part of a three legged retirement plan. One is SS, the other is private savings and the third was employer pensions. Ideally there was reduncy and backups in the system. If your employers pension plan went broke there was still SS and hopefully some private savings. If your investments bombed you had your pension and SS to fall back on. Yes it hurt but it wouldn’t be fatal. Pensions seem to be collapsing into private savings now so IMO it seems unwise to further decrease diversification.

  • ucfengr

    Probably because there are many things that cannot easily be measured. If you can show me a good way to measure what the DOE should be doing then let’s go from there. Often the measures put forth are various metrics of test scores that quite frankly often end up measuring only themselves.
    Sounds like I need to get a job at the Department of Education. Where else could I go to manage billions of dollars without ever having to show that the money is doing what I say it will do? Are you really meaning to imply that when someone at the DoE proposes a program, they don’t have to identify any metrics or even show results, because that’s just too hard? Sounds like a good reason to get rid of the agency to me. The military spends a lot of money on education; if you went into the CG of TRADOC (military training command) and proposed changing the way he trains his soldiers without out providing metrics to measure performance, you’d probably find yourself commanding the latrince cleaning platoon in Topeka, Kansas.

  • ucfengr

    Boonton, what’s the basis for your assumptions in your treatrise against a private account component for Social Security? Looks like you’ve tailored your assumptions to prove your point as opposed to making any realistic assumptions about what a change in the tax structure might do to impact charitable giving or savings rates. As any decent engineer knows, I can prove anything I want with the right assumptions. There’s an old engineering joke about a student who has to solve a problem about getting out of a deep whole; the first part of his answer was “assume a ladder.”

  • ucfengr

    Of course, “whole” should be “hole”. Doh!!!

  • http://TheEverwiseBoonton.blogspot.com Boonton

    Are you really meaning to imply that when someone at the DoE proposes a program, they don’t have to identify any metrics or even show results, because that’s just too hard?
    Errr, I thought I invited you to propose a metric(s) that we could use to judge the DoE as a whole.
    Sounds like I need to get a job at the Department of Education. Where else could I go to manage billions of dollars without ever having to show that the money is doing what I say it will do?,
    Or just government in general. What is a police department supposed to do? Fight crime? Ok, so when there’s lots of crime we cut the police department’s budget? Ohhh wait, no we don’t. We usually hear calls to increase it.
    Looks like you’ve tailored your assumptions to prove your point as opposed to making any realistic assumptions about what a change in the tax structure might do to impact charitable giving or savings rates
    No I tailored my assumptions to illustrate a point about the limits of using the tax code to create desired outcomes. Whether or not there is a net increase in charitable giving the fact remains you’re going to lose some funds to subsidizing giving that would have happened anyway. As you start piling on more and more incentives this ‘leakage’ will grow until you get to the point where your additional incentives cause no additional giving but just add to your costs.
    Already most people never come close to maxing out their tax-subsidized savings options. So why would yet another one add to more savings as opposed to simply adding more reward to people who are already doing a huge amount of saving?
    If we were having this conversation a few decades ago when 401K’s were brand new I would say we were probably at the point where such an incentive would still be ‘in the black’ in terms of sparking more saving than it cost.

  • ucfengr

    Or just government in general. What is a police department supposed to do? Fight crime? Ok, so when there’s lots of crime we cut the police department’s budget? Ohhh wait, no we don’t. We usually hear calls to increase it.
    We can measure the success or failure of a police department and we can identify the causes, because we have……(wait for it)….METRICS. According to your thesis, we can’t measure if the DOE is succeeding or failing, because the METRICS are too hard. It would be like you doctor giving you a pill for your high blood pressure, and you never checking your blood pressure again. You will just assume that the drug is working and not worry about it.
    No I tailored my assumptions to illustrate a point about the limits of using the tax code to create desired outcomes.
    Exactly, you tailored your assumptions to prove your point, not because they had any basis in reality. We’ll make an engineer out of you yet.

  • http://TheEverwiseBoonton.blogspot.com Boonton

    One more thing, it is true I pulled the rates of leakage out of ‘my hat’ in the previous example. To actually find them you would probably have to do some serious econometric work…if you’re into that you should probably be trying to publish your results in an Economics Journal rather than here.
    The leakage problem applies, though. How much more would you contribute to charity if you had a 1% incentive? 25%? That would be a pretty dramatic increase but that means for every $1.25 of giving $1.00 already would have happened. 80% of the incentive would be going for what would have happened anyway.
    What then is the rate of waste if you have the government do it? If you’re goal is simply to keep the homeless warm on very cold winter nights are you telling me it couldn’t be done with less than 80% of the money wasted? If the goal required $100 then you need $500 to achieve it with a rate of waste of 80%.
    To make matters worse the gov’t has an incentive to overuse the above type of incentive. Why? Because that 1% incentive probably doesn’t show up as spending but as a tax cut! Yet if the gov’t’s rate of waste is less than 80%, say 50% we could spend $200 for the shelter and have $300 available for tax cuts.
    Do you want to tell me gov’t is inefficient? I believe you but I believe it isn’t that dramatically wasteful and where it is the most efficient correction is probably better management (and probably some prosecutions for gross fraud). Do I think there might be some areas where people would respond dramatically to a small incentive? I’m sure. But to make this work you need a very high degree of government waste combined with a massive private sector response to a small incentive.
    That’s a pretty rare combination IMO which is why I think using the tax code to achieve a lot of this stuff is usually a stupid way of doing things.

  • ucfengr

    One more thing, it is true I pulled the rates of leakage out of ‘my hat’ in the previous example. To actually find them you would probably have to do some serious econometric work…if you’re into that you should probably be trying to publish your results in an Economics Journal rather than here.
    Boonton, my point is that tailoring your assumptions to prove your point is dishonest. If you don’t want to be bothered with validating your assumptions, than use a real world example; don’t just pull stuff out of your a**.

  • http://TheEverwiseBoonton.blogspot.com Boonton

    ucfengr
    I didn’t tailor my assumptions to prove my point. I used examples to illustrate what type of numbers you need for something like this to work. I was clear that I don’t know what the numbers actually are (and they are probably changing anyway so they will never be constant) but there are good reasons to believe they are rarely aligned just right so such policies would be cost effective.

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