Entries Tagged 'Economics' ↓

“No, Mr. Green. Communism is just a red herring. Like all members of the oldest profession, I’m a capitalist.”

-Miss Scarlet, Clue (1986)

If something is inherently capitalistic in nature does that make it inherently good?

Perhaps I was a bit hasty in characterizing Walter Block as a very persuasive debater in my introductory post about Defending the Undefendable.  Block’s first chapter “The Prostitute” was underwhelming at its best and highly offensive at its worst.  I do not believe that prostitution should be illegal.  I believe that good arguments can be made against outlawing prostitution.  I just don’t think Block made any of them.  Instead of attempting to show that prostitution should not be subject to criminal sanction, Block tries to show that this is a legitimate good and somehow beneficial to society.

Block’s first argument attempts to compare prostitution to a Norman Rockwell painting where a milkman and a pieman trade wares.  Both people have made the transaction voluntarily, without force or fraud, so this is in essence the same type of situation.  Here Block makes the same mistake that many Christians do in failing to distinguish between sins and crimes.  It’s almost a “libertarian positivist” type of thinking.  If no coercion or fraud is involved it must be good.  By what standard?  Good for whom?  Block also advances an essentially utopian view of prostitution where abusive pimps are the exception rather than the rule and the prostitute can voluntarily leave the trade at any time.  He implies that any correlation between abuse and prostitution is merely coincidental.

My disagreement with Block here is metaphysical.  He must believe that sex is somehow a neutral action just as the market is amoral.  Neither of these can be supported by Block’s arbitrary worldview.  The Bible tells another story.  Sex outside of marriage is inherently sinful.  It always leads to degradation rather than glorification in all circumstances.  Block fails to prove that if a trade is not coerced, it is necessarily a good thing.  Why can’t you have a situation where a trade takes place and yet both parties end up worse off than before?

Although no Christian should ever participate in prostitution as a buyer or a seller, the solution is not to make it illegal.  The women who brought the baby before Solomon to judge between them in the famous case (I Kings 3:16-28) were both prostitutes.  In this passage where Solomon is portrayed as the wisest of kings, he did not punish them criminally for being prostitutes.  He also did not remove the child from the custody of its mother because she was a harlot (much to the chagrin of contemporary social service types).  As is readily apparent, perverted people will still engage in prostitution regardless of whether it is legal or not.  Scripture should be our standard of whether prostitution ought to be criminal or not.  The prohibitionist is trying to be wiser than God.  As the gospel permeates the world and the nations are discipled, prostitution will pretty much disappear due to decline of both supply and demand.  This will be accomplished by the church and not the civil magistrate.

Block tries to show that not only should we not make prostitution illegal, but we should not criticize it either.  That’s kind of preachy for what I thought would be a defense of the “amoral” market, and he bites off more than he can chew.  Block presses his error of conflating sins and crimes by implying that because this “trade” shouldn’t be prohibited, it shouldn’t be considered wrong either.  This is well beyond the scope of the philosophy he presented in the introduction, but he doesn’t seem to care.  He argues that many dating patterns resemble prostitution.  Here I’d tend to agree with him, but as an argument against the dating patterns rather than for prostitution.

Then Block trashes marriage by trying to use the same argument.  All relationships are trades; therefore marriage is morally little different than prostitution.  “The marriages in which the husband provides the financial elements, and the wife the sexual and housekeeping functions, also conforms clearly enough to the model.  In fact, all voluntary human relationships, from love relationships to intellectual relationships, are trades. In the case of romantic love and marriage, the trade is in terms of affection, consideration, kindness, etc. The trade may be a happy one, and the partners may find joy in the giving. But it is still a trade. It is clear that unless affection, kindness, etc., or something is given, it will not be reciprocated (Block, 6).”  Block’s reductionism here is repugnant.  I did not vow to marry my wife only if affection and kindness were reciprocated.  I vowed to unite my life with hers in sickness and health, richness and poverty, for better or for worse.  I vowed to enter into a relationship that mysteriously images the relationship between Christ and the Church.  Even if (for the sake of argument which in no way corresponds to the most joyous reality of my actual marriage) my wife never reciprocated anything, I would still be compelled to love, protect, and cherish her.  My duty to be a faithful husband is in no way impacted by what I receive in return.

Block concludes “Several social commentators have correctly [sic] likened marriage to prostitution.  But all relationships where trade takes place, those which include sex as well as those which do not, are a form of prostitution.  Instead of condemning all such relationships because of their similarity to prostitution, prostitution should be viewed as just one kind of interaction in which all human beings participate. Objections should not be raised to any of them—not to marriage, not to friendship, not to prostitution (Block 6-7).”  This is as preachy as an Al Gore documentary.  How anything like “should” exists within Block’s worldview is still beyond me.  This first chapter was truly disappointing.  I expected better.

I first heard of the book Defending the Undefendable by Dr. Walter Block in late 2007.  The book certainly piqued my curiosity, and I have wanted to read it for a while.  It turns out that this book is available online from the Mises Institute.  I imagine that my interaction with the book will be slower than my handful of readers might like, but I think an interaction with the work will prove profitable.

In DtU, Walter Block attempts to show that all non-coercive elements of a market economy have an economic value and benefit society.  He looks at the most extreme cases: the pimp, the drug addict, the blackmailer, the denier of academic freedom, the person who yells “fire” in a crowded theater, the (non-government) counterfeiter, the slumlord, and the stripminer among others.  These extreme cases can be used to make an a fortiori argument for the free market.  If even these “economic scapegoats” are beneficial to a free market economy, then less controversial professions would also be beneficial.  As Dr. Block states in the introduction, “This book is a defense of the marketplace. It singles out for special praise those participants in the free enterprise system who are the most reviled by its critics. It does so because if the price system can be shown to be mutually beneficial and productive in these extreme examples, then the case for markets in general is strengthened even the more [Block: xv].”

I read the foreword by Murray Rothbard, the commentary by F.A. Hayek, and Block’s own introduction to the book.  I can already see that this will be a thought-provoking and entertaining read, but I can also anticipate where I’m likely to disagree with Professor Block.

First, Block contends that the free enterprise system must be seen as amoral–neither moral nor immoral.  As a Van Tillian Calvinist, I cannot let this slide.  Block argues that the free market is an amoral tool just like a gun or a typewriter.  Even those instruments are only neutral until a man lays hold of them and uses them (either in obedience to God toward the end of glorification or in disobedience toward the end of degradation).  In the nature of the case, every action executed within a market has human involvement and consequent ethical ramifications.  If every particular action within an economic system is either moral or immoral, how can the system as a whole (which is the set of all these particulars) suddenly become amoral?  If Block wants to look at these things hypothetically, then my critique would be that his approach ends up becoming Utopian rather than grounded in reality.  Ironically, this critique of Utopianism can also be levied against Marx’s “scientific socialism” which is on the opposite extreme ideologically.

You will not have a free enterprise system if every action or person is immoral. What is going to stop immoral people from using coercion?  Isn’t the non-coercion principle arbitrary?  Why shouldn’t you use coercion [if there's no God who will judge all men at the last day]?  The fact of the matter is that you will only have anything resembling a free enterprise system if you have a foundation built upon the Triune God who revealed himself in the scriptures.  If we do not let the Word of God depart from our mouths and we are careful to obey it, then we will have the prosperity and success of what is essentially the free market economy which I anticipate Block will ably defend.  If we build our foundation upon a would-be autonomous system like libertarianism, then we’ll get something that essentially resembles what we see around us today.  The only reason why Block can make any of his arguments is because he is borrowing capital from the Christian worldview.

That being said, I think that mature Christians will benefit greatly from reading this book.  In many cases the things that Block defends here are sins (no associated penal sanction with the commandment) in the Bible rather than crimes (which have an associated penal sanction).  When we attempt to make things like prostitution and drugs illegal (in our own attempts to be autonomous), we almost always do more harm than good.  Many of these issues truly are problems, but the only true solution to them is the preaching of the Word, the diaconal ministry, and the faithful administration of the sacraments to convert souls.

In some cases (the inheritor, the advertiser, the denier of academic freedom, the scab, the employer of child labor, and especially the rate buster) there may be no sin at all, and I imagine I’ll agree with just about everything Block says.

If you are not well-grounded in a Scriptural Christian worldview, get well grounded in that worldview before reading this book.  Walter Block is a very intelligent man and a very persuasive debater.  If you aren’t steeped in Scripture, this book may have the same subtle influence (“hath God really said…”) as the serpent in the garden.  Libertarianism, like any philosophy that is explicitly anti-Christian, can only end in weeping and gnashing of teeth if applied consistently in the real world.  I would argue that libertarianism and consistent Christianity look very similar in a lot of the external particulars, but only Christianity can provide an intelligible foundation for them.  In most cases, libertarians want all the benefits they can get from living in a Christian society without actually bending the knee and confessing that Jesus Christ is Lord.

At least that’s my impression from reading the introduction.  I’ll issue any retractions as I am convinced I need to make them.

Chapter reviews:

Chapter 1: The Prostitute

If you are not familiar with Harry Nilsson, I cannot recommend him highly enough as a singer/songwriter within the classic rock genre.  One of the tracks from his brilliant album Nilsson Schmilsson (1971) is called “Coconut.”  In this song a woman gets a bellyache from putting the lime in the coconut and drinking them both up.  She calls the doctor (probably a witch doctor) and he prescribes she should take the lime in the coconut and drink them both together in order to  order to cure the bellyache caused by taking the lime and the coconut and drinking them both up.

This is clearly insanity.

Nilsson’s song humorously reveals and illustrates an interesting aspect of human nature that is widely applicable.  When you misdiagnose a problem, and you treat the symptoms rather than the cause, you may believe that the solution is more of what actually caused the problem.

With regard to the current financial turmoil, all of the government monetary policy witch doctors are prescribing more artificial liquidity injected by the Federal Reserve.  The present bust was caused by Greenspan’s insane expansion of the money supply starting in 2001 in an attempt to artificially create a boom (which in itself was to try to fix a bust caused by a previous artificial boom to fix a previous bust, and so on back to the artificial boom created by the establishment of the Federal Reserve in 1913).  Note in these cycles that the booms are artificially created by monetary policy fiat and the busts are market’s natural corrections to the bad economic decisions that were made during these booms by those who didn’t know what was going on.  The busts bring you back to reality.  In all of these cases, the expansionary monetary policy causes the boom-bust cycle.  When a bust happens, politicians try to fix the problem by printing more money and throwing it at the problem.  (Of course, they don’t make it look that simple or people might realize that’s what they’re doing and ask questions.  There’s a very intricate sleight of hand procedure involving the Federal Reserve, the U.S. Treasury, and the banks to print this money.)  This idea that you can save the economy by using the same procedures that destroyed the economy is what I will henceforth call “Lime-in-the-Coconut Economics.”  Maybe it will become as famous as “Reaganomics” or “trickle-down economics.”  A competent medical doctor like Ron Paul knows that this diagnosis of our present economic crisis is hogwash.

Those involved in this process are either woefully ignorant of economics, blinded by ideology, or diabolically evil.

Most people fall into the first category.  This would include President Bush, most members of the House and Senate, petty bureaucrats, and just about any voter who has received no economic education outside of a government school.

The second category is comprised of devout adherents to that flat earth society known as the Keynesian school of economics.  This would include most government school economics teachers, college economics professors, and monetary policy makers.  They believe that if we can only engineer the right balance between growth and inflation, and regulate things enough we will enter into a utopian Golden Age.  One comfort that you can take away from this crash and burn of the economy, it is that the Triune God is not mocked and he has a way for dealing with false messiahs, by demonstrating the futility of their idols.  Get your popcorn ready!

The final category is a small group of elite, brilliant, unspeakably evil people.  These are the people who know exactly what is going on and advocate these policies anyway for their own benefit.  I could only speculate as to who is actually in this group today, so it would be irresponsible to name names without hard evidence.  For a thorough examination of the history of some of the people in this third group from the beginning of the previous century, I highly recommend The Creature from Jekyll Island by G. Edward Griffin.  It should be noted that the members of this group are only human.  They aren’t seven feet tall with the ability to consume us with fireballs from their eyes and bolts of lightning from their…  Well, you get the picture.  God is sovereign and they are not.  Some of them will be brought to ruin in this life, the rest on the day of judgment.

Doug Wilson posted a good, quick perspective on economics and how the only thing most of us can do is cultivate a robust sense of humor in this mess.  In the comments section a debate has broken out about regulation.  Since I am limited to 300 words there, I will refute the idea (advanced by The Scylding) that we need “good” economic regulations to control greed and that Canada is an example of good economic regulation.

Is there such a thing as a good economic regulation?  There is, but it’s nothing of the order that The Scylding is advocating.  And those good economic regulations are defined by the word of God.  Here are a couple:

“Thou shalt not have in thy bag divers weights, a great and a small.  Thou shalt not have in thine house divers measures, a great and a small. But thou shalt have a perfect and just weight, a perfect and just measure shalt thou have: that thy days may be lengthened in the land which the LORD thy God giveth thee. For all that do such things, and all that do unrighteously, are an abomination unto the LORD thy God.” (Deuteronomy 25:13-16)

“Thou shalt not remove thy neighbour’s landmark, which they of old time have set in thine inheritance, which thou shalt inherit in the land that the LORD thy God giveth thee to possess it.” (Deuteronomy 19:14) . . . “Cursed be he that removeth his neighbour’s landmark. And all the people shall say, Amen.” (Deuteronomy 27:17)

These are both commandments against fraud.  These are good commandments, and the civil government ought to uphold such things and punish violators by forcing them to pay restitution.  Modern governments, through their central banks and volumes of arbitrary regulations, are the greatest violators of these two commands from God.

Regulations “against greed” as The Scylding advocates are not only impractical but immoral for several reasons.

1. The Creator-creature distinction: God is God.  His creation is not God.  Only God has the wisdom to manage the economy as a whole, and his primary means for regulating the economy is letting people reap what they sow.  When a speculative bubble bursts, the greedy man is punished and the prudent man is vindicated.  Human regulators are not capable of centrally planning an economy without committing gross injustice against many citizens.  It is precisely because of the extreme interconnectedness of the economy, that these regulations will not be just.  (This first part is not even taking the sinfulness of the regulators into account.  These are just unintended consequences.)  Any attempt to centrally plan an economy must necessarily lead to a messianic view of the state.
2. Moral hazard: Once you have man-made centrally planned regulations in place, especially when they are as bloated and arbitrary as those of the modern messianic state, people will inevitably begin to think that if something is within the bounds of the regulations, it must be a sound investment.  Even worse, if the government subsidizes something it distorts the prices and values of these things.  The government-subsidized artificially low interest rates distorted the value of everything that people might borrow money to buy.  When a government subsidized entity fails, it gets bailed out.  (If a government-subsidized program was to fail, it would look bad.)  This encourages subsidized entities to be as reckless as possible.  The U.S government had been subsidizing crazy risk for years.  Now that it has bailed out this risk, you will get more of it.  This punishes prudent behavior while rewarding recklessness.  Regulations don’t stop greed, they reward it.
3. Regulations benefit the politically-connected (large corporations): The primary reason for a vast majority of regulations is to keep small businesses from being able to compete with large corporations who can afford the quasi-bureaucracy necessary to comply with all the regulations.  The logical ends of these regulations are monopolies and cartels.
4. Political power breeds corruption: The more powerful a government is, the more corruption there will be.  This spirals upon itself.  The type of people who are generally attracted to and succeed in political office are intelligent, manipulative, dishonest men who seek power for its own sake.  As such, politicians are even more disqualified from being able to regulate economics than normal people.

What about deregulation?  There is no such thing as “deregulation” in the U.S. (nor was there in Iceland).  Changing your regulations so they are looser is not deregulation and has the same problems as covered above.  In an unregulated economy (exept for the civil magistrate punishing theft, fraud, and other things the Bible expressly permits the government to act on), you will reap what you sow.  If you deposit your silver in a bad bank, and that bad bank fails because they were irresponsible and make loans based on fractional reserves, then you are receiving the consequences of your actions.  (Note that an unregulated economy, your money would be commodity-based or “hard money” economy.  Paper money and electronic money would need to be backed by some sort of commodity or it would trade at a discounted rate.)  In a regulated economy, you get punished for other people’s actions and failures.  (A tax burden of 35%-50% for said bloated government is an example of being punished for other people’s actions and failures.)

Canada is all about Keynesian central economic planning just as the US is.  The Canadian government is just not destroying its economy as radically or as quickly as the United States is, largely because they don’t have a worldwide empire and enormous standing army to maintain.  (I’m actually commending Canada on these points, by the way.)

…for my utter contempt between McCain and Obama.  I was only able to stomach about 35 minutes of this evening’s presidential debate.

It was a fiercely contested battle as to who is the most economically ignorant candidate, heavily seasoned with cheap shots toward the other candidate (which, incidentally, were the most truthful portions of the debate).

The idea that this kind of economic disaster can be solved by additional money being spent in the public sector is just lunacy.  It’s right out of the Hoover/Roosevelt playbook.  If American ingenuity and creativity is the best in the world, it has been so despite the fact that the parasites within the beltway steal 50% of the private sector’s potential productivity.

Do you want energy independence?  Get the government away from energy.  (This includes doing away with monopolistic government corporatism.)  Do you want affordable health care?  Get the government out of the picture.  All of the regulations passed in Washington are done for the benefit of big business special interests in order to keep small businesses from breaking into the market.  Do you want to make this inevitable correction of the Greenspan/Bernanke bubbles easier on the little guy?  Get rid of minimum wage laws and protectionist tariffs.  There’s nothing patriotic about paying more than a product is worth.

Both of these men voted to fleece the American taxpayers out of $850 billion in the Middle Class Elimination Bailout of ‘08.  I can’t believe that McCain can talk in public about resisting pork laden monstrosities less than a week after voting for that oinkfest.  These men have less than zero credibility.  If you think that either of these men are capable of leading this country, then I have some mortgage-backed securities to sell you.