Tuesday, March 3, 2015

Debunking Economic Fallacies

What follows is my recent Op-Ed in The Orlando Sentinel.  Enjoy...
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While some people cannot resist the temptation to drive slowly and gawk at car accidents, I struggle with a different fascination that provides no more joy than is derived from staring at carnage on Interstate 4.

My problem occurs over a cup of coffee every morning with the Letters to the Editor page of the Orlando Sentinel in front of me.
It is here that I find the musings of residents of Central Florida on the favorite topic of economics. Specifically, the letters I most often gravitate toward are the ones filled with emotional rants against wealth, profit, self-interest, capitalism and anything that allows the letter writer to claim some sort of victim status at the hands of greedy businesses and "obscenely rich" Americans.

I always check to see if these folks are economists. Alas, they never are.

Unwittingly, many letter writers are passing along misguided economic fallacies that, when believed by others, welcome more unnecessary government intrusions into the lives of citizens who would be better off with less government in their lives.
Therefore, I will attempt to shed some light on some of the inherent, inarguable truths about economics that every American — whether they know it or not — implicitly agrees with.
One letter writer argues that people who apply their "time, effort, knowledge and skills to produce goods or services" are more valuable than those who enjoy the "accumulation of wealth from wealth."
Wrong.
I put in time and effort, possess knowledge and have skill in teaching college students the principles of economics. For my work, this letter writer would argue that I deserve more money than, say, an investor who pours millions of dollars into the stock market. The investor simply gains wealth from wealth, according to the Marxian theory espoused by this letter writer.

In reality, the investor is providing the necessary capital from which new and existing businesses can grow. This growth means job creation, new products and services, and greater income and wealth for far more people than I will ever assist. In order to have a vibrant, growing economy where even poorer people have cellphones, access to electricity, food and clothing, people like me are of far less value (measured by the returns to society from our work) than a wealthy person who is exposing his or her wealth to risks that generate immeasurable multiplier effects.

The same goes for the fallacy espoused by another letter writer. She argues that the "obscenely wealthy" become so on the backs of "thousands of poorly paid employees," citing the heirs to the Wal-Mart fortune as examples.

Nope.

First, Sam Walton and his heirs are more special than their employees. This fact is derived from the laws (not theories) of supply and demand.

There are millions of people who can put a box of cereal on a shelf. There are not many people capable of starting (Sam Walton) or running (his kids) a global corporation. It is also a fact that the overall revenue generated by someone stocking a shelf is lower than the revenue generated by a CEO working on expansion plans all over the globe.

Without knowing it, we all agree with these ideas. Every day we pay homage to the capitalists out there who, out of their self-love, provide us with miraculous products and services and the jobs and income that follow. Everywhere in the world where people are not allowed to pursue money, we see poverty and emigration to nations that are more capitalistic. Yet, in America — the richest place in history, ignorance of where those riches came from abounds.

The inherent danger of failing to understand who creates wealth and where our pay comes from is clear. When economic ignorance is combined with a voters-registration card, terrible things happen.
Those terrible things come in the form of angry, resentful, coveting citizens voting for the politician who will promise the highest taxes, the most rules and the most redistribution of wealth that can be imposed on the real wealth creators.

When that trend starts, it does not take many years for the disgruntled masses to be left with greater poverty, fewer job opportunities and the question: "Where did all the rich people go?"

Thursday, February 19, 2015

The Economics of "Free" Community College Education

http://websflash.valenciacollege.edu/videoPlayer.html?appl=Economics&inst=ECO2023&vid=mp4:150125-01ECON


The link provided above is to a lecture I recently gave on President Obama's plan to provide free community college education to us "deserving" Americans.  Enjoy and pass it on.  It also covers capital gains taxes, the Kennedy and Reagan tax cuts, the concept of plunder, the U.S. Constitution and more.

Wednesday, February 4, 2015

Was Christ a Progressive? by Larry Reed

I thought many of you would enjoy the following from the President of The Foundation for Economic Education  www.fee.org
 
Enjoy!
 
 
The Foundation for Economic Education (FEE) is proud to partner with Young America’s Foundation (YAF) to produce “Clichés of Progressivism,” a series of insightful commentaries covering topics of free enterprise, income inequality, and limited government. See the index of the published chapters here.
#42 – “Jesus Christ Was a Progressive Because He Advocated Income Redistribution to Help the Poor”
 
 
You don’t have to be a Christian to appreciate the deceit in this canard. You can be a person of any faith or no faith at all. You just have to appreciate facts.
 
I first heard something similar to this cliché some 40 years ago. As a Christian, I was puzzled. In Christ’s view, the most important decision a person would make in his earthly lifetime was to accept or reject Him for whom He claimed to be—God in the flesh and the savior of mankind. That decision was clearly to be a very personal one—an individual and voluntary choice. He constantly stressed inner, spiritual renewal as far more critical to well-being than material things. I wondered, “How could the same Christ advocate the use of force to take stuff from some and give it to others?” I just couldn’t imagine Him supporting a fine or a jail sentence for people who don’t want to fork over their money for food stamp programs.
 
“Wait a minute,” you say. “Didn’t He answer, ‘Render unto Caesar the things that are Caesar’s, and unto God the things that are God’s’ when the Pharisees tried to trick Him into denouncing a Roman-imposed tax?” Yes indeed, He did say that. It’s found first in the Gospel of Matthew, chapter 22, verses 15-22 and later in the Gospel of Mark, chapter 12, verses 13-17. But notice that everything depends on just what did truly belong to Caesar and what didn’t, which is actually a rather powerful endorsement of property rights. Christ said nothing like “It belongs to Caesar if Caesar simply says it does, no matter how much he wants, how he gets it, or how he chooses to spend it.”
 
The fact is, one can scour the Scriptures with a fine-tooth comb and find nary a word from Christ that endorses the forcible redistribution of wealth by political authorities. None, period.
 
“But didn’t Christ say he came to uphold the law?” you ask. Yes, in Matthew 5: 17-20, he declares, “Do not think that I have come to abolish the Law or the Prophets; I have not come to abolish them but to fulfill them.” In Luke 24: 44, He clarifies this when he says “…[A]ll things must be fulfilled which were written in the law of Moses, and in the prophets, and in the psalms, concerning me.” He was not saying, “Whatever laws the government passes, I’m all for.” He was speaking specifically of the Mosaic Law (primarily the Ten Commandments) and the prophecies of His own coming.
 
Consider the 8th of the Ten Commandments: “You shall not steal.” Note the period after the word “steal.” This admonition does not read, “You shall not steal unless the other guy has more than you do” or “You shall not steal unless you’re absolutely positive you can spend it better than the guy who earned it.” Nor does it say, “You shall not steal but it’s OK to hire someone else, like a politician, to do it for you.”
 
In case people were still tempted to steal, the 10th Commandment is aimed at nipping in the bud one of the principal motives for stealing (and for redistribution): “You shall not covet.” In other words, if it’s not yours, keep your fingers off of it.
 
In Luke 12: 13-15, Christ is confronted with a redistribution request. A man with a grievance approaches him and demands, “Master, speak to my brother and make him divide the inheritance with me.” The Son of God, the same man who wrought miraculous healings and calmed the waves, replies thusly: “Man, who made me a judge or divider over you? Take heed and beware of covetousness, for a man’s wealth does not consist of the material abundance he possesses.” Wow! He could have equalized the wealth between two men with a wave of His hand but he chose to denounce envy instead.
 
“What about the story of the Good Samaritan? Doesn’t that make a case for government welfare programs, if not outright redistribution?” you inquire. The answer is an emphatic NO!” Consider the details of the story, as recorded in Luke 10: 29-37: A traveler comes upon a man at the side of a road. The man had been beaten and robbed and left half-dead. What did the traveler do? He helped the man himself, on the spot, with his own resources. He did not say, “Write a letter to the emperor” or “Go see your social worker” and walk on. If he had done that, he would more likely be known today as the “Good-for-nothing Samaritan,” if he was remembered at all.
 
What about the reference, in the Book of Acts, to the early Christians selling their worldly goods and sharing communally in the proceeds? That sounds like a progressive utopia. On closer inspection, however, it turns out that those early Christians did not sell everything they had and were not commanded or expected to do so. They continued to meet in their own private homes, for example. In his contributing chapter to the 2014 book, “For the Least of These: A Biblical Answer to Poverty,” Art Lindsley of the Institute for Faith, Work and Economics writes,
 
Again, in this passage from Acts, there is no mention of the state at all. These early believers contributed their goods freely, without coercion, voluntarily. Elsewhere in Scripture we see that Christians are even instructed to give in just this manner, freely, for “God loves a cheerful giver” (2 Corinthians 9:7). There is plenty of indication that private property rights were still in effect….
 
It may disappoint progressives to learn that Christ’s words and deeds repeatedly upheld such critically-important, capitalist virtues as contract, profit and private property. For example, consider His “Parable of the Talents” (see one of the recommended readings below). Of several men in the story, the one who takes his money and buries it is reprimanded while the one who invests and generates the largest return is applauded and rewarded.
 
Though not central to the story, good lessons in supply-and-demand as well as the sanctity of contract are apparent in Christ’s “Parable of the Workers in the Vineyard.” A landowner offers a wage to attract workers for a day of urgent work picking grapes. Near the end of the day, he realizes he has to quickly hire more and to get them, he offers for an hour of work what he previously had offered to pay the first workers for the whole day. When one of those who worked all day complained, the landowner answered, “I am not being unfair to you, friend. Didn’t you agree to work for a denarius?  Take your pay and go. I want to give the one who was hired last the same as I gave you. Don’t I have the right to do what I want with my own money? Or are you envious because I am generous?”
The well-known “Golden Rule” comes from the lips of Christ Himself, in Matthew 7:12. “So in everything, do unto others what you would have them do unto you, for this sums up the Law and the Prophets.” In Matthew 19:18, Christ says, “…love your neighbor as yourself.” Nowhere does He even remotely suggest that we should dislike a neighbor because of his wealth or seek to take that wealth from him. If you don’t want your property confiscated (and most people don’t, and wouldn’t need a thief in order to part with it anyway), then clearly you’re not supposed to confiscate somebody else’s.
 
Christian doctrine cautions against greed. So does present-day economist Thomas Sowell: “I have never understood why it is ‘greed’ to want to keep the money you have earned but not greed to want to take somebody else’s money.” Using the power of government to grab another person’s property isn’t exactly altruistic. Christ never even implied that accumulating wealth through peaceful commerce was in any way wrong; He simply implored people to not allow wealth to rule them or corrupt their character. That’s why His greatest apostle, Paul, didn’t say money was evil in the famous reference in 1 Timothy 6:10. Here’s what Paul actually said: “For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.” Indeed, progressives themselves have not selflessly abandoned money, for it is other people’s money, especially that of “the rich,” that they’re always clamoring for.
In Matthew 19:23, Christ says, “Truly I tell you, it will be hard for a rich person to get into the kingdom of heaven.” A progressive might say, “Eureka! There it is! He doesn’t like rich people” and then stretch the remark beyond recognition to justify just about any rob-Peter-to-pay-Paul scheme that comes down the pike. But this admonition is entirely consistent with everything else Christ says. It’s not a call to envy the rich, to take from the rich or to give “free” cell phones to the poor. It’s a call to character. It’s an observation that some people let their wealth rule them, rather than the other way around. It’s a warning about temptations (which come in many forms, not just material wealth). Haven’t we all noticed that among the rich, as is equally true among the poor, you have both good and bad people? Haven’t we all seen some rich celebrities corrupted by their fame and fortune, while others among the rich live perfectly upstanding lives? Haven’t we all seen some poor people who allow their poverty to demoralize and enervate them, while others among the poor view it as an incentive to improve?
 
In Christ’s teachings and in many other parts of the New Testament, Christians—indeed, all people—are advised to be of “generous spirit,” to care for one’s family, to help the poor, to assist widows and orphans, to exhibit kindness and to maintain the highest character. How all that gets translated into the dirty business of coercive, vote-buying, politically-driven redistribution schemes is a problem for prevaricators with agendas. It’s not a problem for scholars of what the Bible actually says and doesn’t say.
 
Search your conscience. Consider the evidence. Be mindful of facts. And ask yourself: “When it comes to helping the poor, would Christ prefer that you give your money freely to the Salvation Army or at gunpoint to the welfare department?
 
Christ was no dummy. He was not interested in the public professions of charitableness in which the legalistic and hypocritical Pharisees were fond of engaging. He dismissed their self-serving, cheap talk. He knew it was often insincere, rarely indicative of how they conducted their personal affairs, and always a dead-end with plenty of snares and delusions along the way. It would hardly make sense for him to champion the poor by supporting policies that undermine the process of wealth creation necessary to help them. In the final analysis, He would never endorse a scheme that doesn’t work and is rooted in envy or theft. In spite of the attempts of many modern-day progressives to make Him into Robin Hood, He was nothing of the sort.
 
Summary
  • Free will, not coercion, is a central and consistent element in the teachings of Christ.
  • It is not recorded anywhere that Christ called for the state to use its power to redistribute wealth.
  • Christ endorsed things like choice, charity, generosity, kindness, personal responsibility, and voluntary association—things that are irreconcilable with coercively-financed redistribution schemes.
  • For further information, see:
“For the Least of These: A Biblical Answer to Poverty,” Anne Bradley and Art Lindsley, editors:  http://tinyurl.com/kez32e3
“Socialism: Spiritual or Secular?” by Francis Mahaffey: http://tinyurl.com/njpd2kx
“The Parable of the Talents: The Bible and Entrepreneurs” by Robert Sirico: http://tinyurl.com/p4gr8yl
“Lawrence Reed on The Platform” – a short video interview on income redistribution, the welfare state and Christianity: https://www.youtube.com/watch?v=reo0p9N1p4A
“Beyond Good Intentions: A Biblical View of Economics” by Doug Bandow: http://tinyurl.com/n9sjth9
Cliché #20: “Government Can Be a Compassionate Alternative to the Harshness of the Marketplace” by Lawrence W. Reed: http://tinyurl.com/nnt3qty
“Christian Charity and the Welfare State” by Mark W. Hendrickson:  http://tinyurl.com/ks2xdxn

Monday, January 12, 2015

Some thoughts on what it means to be "ripped off"


What follows is my Op-Ed in the January 10, 2015 edition of The Orlando Sentinel.  Enjoy.  Or not...
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Last week, I attended the Buffalo Wild Wings Citrus Bowl with my 14-year old son. As fans of the Minnesota Gophers, we were excited to spend the day together in the newly renovated Citrus Bowl. Of course, as anyone who has attended an event there knows, the parking has not been renovated, so I braced my son for what could be a tough search.

As it turned out, it was a day for learning about the difference between free-market entrepreneurship and government inefficiency.

When we exited onto Tampa Avenue, within seconds a man came running alongside my vehicle telling us to follow him if we wanted to park. I had seen signs for $25, but as a typical economist, I think 25 cents for parking is worth haggling over; $25 is worth driving a few miles away.

I asked the man his price as he ran, sweat pouring from his face; $20 was his offer. I countered with $15, and he agreed and instructed me to follow him.

As I turned right onto a side street, I saw a police officer on a motorcycle who, with the aid of a loudspeaker, said, "Do not pay to park on the city streets! If you do, you are being ripped off!"

When the man who led me to a parking spot — on the city street — guided me in, I asked him if this was what the officer meant. Another officer came by proclaiming the same, and the fellow I agreed to give $15 to quickly left — with none of my money.

When I got closer to the stadium, I spotted him and gave him money anyway. The way I looked at it was simple: He and I reached an agreement through the spirit of mutual self-interest. I did not agree to pay $15 as long as the parking was not on the street. I agreed to pay $15 for help finding parking. His service was worth it to me: I did not have to keep driving, and he guided me to a great spot. The police officer had no business telling me I was being ripped off when I was fine with the arrangement.

Bear in mind, millions of dollars of taxpayer money went into the remodeling of the Citrus Bowl. That includes some dollars that could be used for city services. After these tax dollars are taken from us to make the stadium nicer, the city allows corporations to come in and charge $11 for a beer and $25 for cheaply-made T-shirts, to name only two items that folks could claim are priced at "rip-off" levels.

During the game, my son and I sat in a section in the upper deck. The section next to us was filled with beer-swilling Minnesota fans — most of whom looked much closer to 18 than the legal age of 21. By the third quarter, public drunkenness and profanity filled that section.

A few feet away, an Orlando police officer stood by. Near my section, not the Minnesota kids'. I walked over to him and asked him how often he finds himself thinking, "There is no way that person is 21."

He said he finds himself thinking that he missed his days in college — but he did not do anything about the possibility of underage drinking or drunkenness.

So I wonder, in which case was the city of Orlando served best — by the young man who ran alongside my truck to help me park on the taxpayers' streets, or the person paid by the taxpayers to maintain order?

Perhaps the phrase "ripped off" is appropriate after all.

 

Monday, November 10, 2014

An Unpopular Question for Veteran's Day

A few minutes ago I was on the first floor of the building where I work talking to a young man in charge of Valencia's Veteran's Day ceremony.
 
Valencia had a large display of photos of men and women from this college who had served in foreign wars since September 11th.    Valencia also had music playing.
 
I was about to give an exam in a room very close to where the speakers where located and was concerned that my students would be distracted while trying to take their exam. 
 
As I was politely and respectfully asking the coordinator if the music could be turned down a little a young man standing next to him bluntly and tersely said, "This music is for dead soldiers."
 
He proceeded to tell me that his grandfather and father had preceded him in service to our country and informed me that he had lost half his foot in battle.  I did not know if he was being truthful or not but he persisted in his contempt for my mere request that music be turned down.  At one point he said, "While you were in college, I was serving my country."   This was an interesting claim for two reasons.  First, he did not know anything about my past.  Second, given his age it is more likely that while I was in college, he was not even born.
 
Yet, his willingness to give me his biography of service in the military - and his claim that I was disrespectful to our veterans - reminds me of something that I have been bothered by for a long time. 
 
I seem to recall reading, on many occasions, that when veterans of World War II came home they simply got back to work, kept largely quiet and tried to re-establish their lives as civilians.
 
I do not believe there where any hats sold that read, "World War II Veteran" or constant reminders - by the veterans - that they had served.
 
My grandfather - several generations removed - served in the New Jersey militia during the Revolutionary War.  His grandson served in the army in New Orleans in 1803.  My father served in missile silos during the height of the Cold War.  My wife's uncle dropped into Normandy on D-Day.   I never served in the military but have spent 25 years teaching the principles our military stands for. 
 
Should I have a hat or shirt or jacket or bumper sticker made to mention any of this?
 
No disrespect intended, but when did our country lose its sense of doing ones duty without constantly reminding everyone that your duty had been done?
 
There have been untold numbers of Americans who have contributed with swords, guns and words (see Ronald Reagan, Thomas Jefferson & Thomas Paine to name a few) without succumbing to the temptation to constantly remind people what they had done.
 
This should be particularly useful to veterans of more modern wars.  None were drafted, all knew what was going on in the Middle East and no one has treated them like we treated Vietnam veterans upon their return.
 
If there is anything today's veterans should be pointing out to the rest of us it is this:
 
Our nation no longer stands for the principles of liberty that the Revolutionary War and World War II veterans fought for.  We have become a nation of characterless, welfare-seeking, selfie-taking people who do not know anything - and care even less - about what our veterans were fighting for.
 
That reality is worth a bumper sticker.

Thursday, November 6, 2014

I am pretty sure my life is almost over....

It is that time of year folks - the tests my students have taken are on my desk, my red pen is in my hand and I get to dive into the minds of people who have spent 13 years in America's government schools.

Reading exams literally causes my chest to tighten, my left arm to go somewhat numb and words to form in my mind (and sometimes mouth) that would make Chris Rock blush.

For example.

Question six on my recent midterm exam reads:  Graphically illustrate and fully explain how falling gasoline prices could impact the market for large pickup trucks.  Then, graphically illustrate and explain how rising health care costs could impact consumer prices. 

Here is an answer I just finished reading.  As always, these are unedited.

"If gas prices fell.  That would mean our trucks could pay less and go further.  Our wal-mart trucks could rapidly supply thing in case of emergency disaster.  If this happened we could pay our drivers more which in turn make them value their jobs & take them seriously no falling asleep at the wheel.  The rising in health care cost is crazy.  If this is a forever thing our economy will be shot.  If we have to pay more for health care we have less money for the medication we need.  As well will the consumers levels for the meds.  Our hard studied pharmacist will have to get cut hours & pay this will lead to their familys suffering they will need a second job & will have less time with kids or any loved ones."

Yes, you read this correctly.  This is not uncommon, either.

People ask me all the time, "How is work?" 

My answer always hinges on whether I have had any tests to grade at the time they ask the question. 

I love teaching.

I hate reading much of the musings that are rolling around in the minds of my students.

Back to work.  Pray my wife doesn't find my remains slumped over a pile of papers...



Monday, November 3, 2014

Should People be Forced to Serve?

What follows is my Op-Ed in the October 31, 2014 Orlando Sentinel.  I hope you find it useful.
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At the height of the Vietnam War, President Richard Nixon appointed two economists — Milton Friedman and Alan Greenspan — to examine the efficacy of maintaining America's long tradition of compulsory military service. During one particularly contentious conversation with Gen. William Westmoreland, Friedman compared a military made up of drafted men to slavery. Westmoreland countered with the argument that he would not want "mercenaries" under his command. By mercenaries, Westmoreland of course meant people who volunteered to join the military out of self-interest, rather than the "public good" of serving his fellow man.
Since that time, the U.S. military — made up of an all-volunteer force — has maintained a level of productivity, strength and dedication to service that would seem unlikely to people who believe that only through compulsion can we maintain a fighting force of men and women who would be willing to die for their country.

The same is true in other organizations that require putting the interests of strangers ahead of the love of self.

In America today, millions of people devote countless hours to religious and secular charities. From missionary work of Christian organizations all over the world to the Peace Corp, the Salvation Army, Goodwill and innumerable other charities, we have seen the power of voluntary association continue to grow. This was a predictable outgrowth of the system of liberty formulated by our Founding Fathers.
 
In the early 1830s, Alexis de Tocqueville spent nine months traveling throughout Canada and the United States, recording his observations in what would become the basis of his classic writing, "Democracy in America." One of his many comments on the character of the American people is as follows: "I must say that I have seen Americans make a great deal of real sacrifices to the public welfare; and have noticed a hundred instances in which they hardly ever failed to lend a faithful support to one another."

What de Tocqueville recognized was the fact that in a society where voluntary association is viewed as a right to the human existence, charity and mutual cooperation will always take place.

Adam Smith taught us in 1776 that human beings are driven by their self-interest to serve their fellow man. For Smith — and eventually the Founders who codified our rights to "pursue happiness" — human beings recognize that in order to gain what we desire, we must serve our fellow man. In business this means that serving others creates profit. But when it comes to altruism (which is also a natural human emotion), our self-interest is promoted by helping others who are in need of everything from protection from foreign enemies to protection from hunger and disease.

No one has had to force Bill and Melinda Gates to give away billions of dollars. No one coerces those who work for Habitat for Humanity. No one needed to force former National Football League star Pat Tillman to leave his life of prosperity to join the Army Rangers in the wake of the Sept. 11 attacks.
As long as we are a nation of rights to life, liberty and the pursuit of happiness, people will freely choose to assist in the protection of these rights for total strangers. By respecting our right to serve, or not serve, we maintain a system where many productive people self-select military or charitable service while other people — who believe they would best serve as entrepreneurs or college students — pursue those goals.

Forcing people to serve in areas where they have little desire not only leads to less effective "public service" organizations, and a weaker military, but also an economically inefficient redistribution of talent away from where it would be best placed.