Transcript Document

Religion, Politics, Biology, and Economics:
The Struggle of Reason with Emotion
September 28, 2009
copies of this presentation can be found at
www.antolin-davies.com
1
Much valuable
discussion fails to
occur because of
pride and prejudice.
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Prejudice
• Humans who work in private industry are greedy.
• Humans who work in public sector are altruistic.
Pride
• Economic truths are opinion (relativism).
• Inability or unwillingness to admit limitations (hubris).
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Economic Truths
• Everything is scarce.
Everything.
• Every choice includes a tradeoff.
A choice to pursue something is a choice not to
pursue something else.
4
Economic Truths
• People respond to incentives.
Airplanes and car seats
Entrepreneurship and taxes
Russians and dead light bulbs
• Exchange is a positive-sum game.
Absent coercion and misrepresentation, people
only exchange if they believe the exchange will
make them better off.
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Economic Truths
• Profit happens when someone creates value for
others.
We think of wealth as the means to obtain stuff
from others.
In fact, wealth is the reflection of stuff we have
already provided to others.
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Economic Truths
You want it.
• Everything is scarce.
• Every choice involves a tradeoff.
• People respond to incentives.
What are you going to
do about it?
You can’t
have it.
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Economic Truths
The answer lies in
community.
• Everything is scarce.
• Every choice involves a tradeoff.
• People respond to incentives.
• Exchange is a positive-sum game.
• Profit happens when someone creates value for others.
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Socio-economic debates are heated because the two sides
proceed from a different underlying assumption.
Markets-As-Exploitation Assumption
Markets lead to a centralization of political and economic
power, decreased competition, and the concentration of
wealth.
Markets-As-Empowerment Assumption
Markets lead to a decentralization of political and economic
power, increased competition, and the dissemination of
wealth.
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Some Markets-As-Exploitation Claims
• Globalization = income disparity, exploitation, unemployment
• Markets = “rich get richer while the poor get poorer”
• Minimum/living wage protects the poor in their working years
• Social Security protects the poor in their old age
• Godless markets reduce human lives to dollars
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Globalization and Income
Market-As-Exploitation Claim
• Globalization results in a transfer of income from the less
wealthy to the more wealthy countries.
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$40,000
Greater per-capita trade is associated with greater per-capita income.
$35,000
Per-capita Trade (US$)
$30,000
R2 = 0.56
$25,000
$20,000
$15,000
$10,000
$5,000
$0
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
Per-capita Income (US$)
Source: International Financial Statistics, International Monetary Fund, December 2001
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$40,000
Greater per-capita trade is associated with
more equitable income distributions.
$35,000
Per-capita Trade (US$)
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.0
60.0
65.0
Gini Coefficient (0 = equitable, 100 = inequitable)
Source: International Financial Statistics, International Monetary Fund, December 2001, and Measuring Income Inequality: A New Database, Deininger, Klaus,
and Lyn Squire, World Bank, 2002
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$3,000
Lithuania
Per-capita Trade (US$)
$2,500
Greater per-capita trade is also associated
with more equitable income distributions
among the poorest countries.
$2,000
Fiji
Thailand
$1,500
$1,000
Ukraine
$500
$0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.0
60.0
65.0
Gini Coefficient (0 = equitable, 100 = inequitable)
Source: International Financial Statistics, International Monetary Fund, December 2001, and Measuring Income Inequality: A New Database, Deininger, Klaus,
and Lyn Squire, World Bank, 2002
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Globalization and Income
Reality
• Globalization results higher incomes and lesser income gaps.
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Globalization and Exploitation
Market-As-Exploitation
• Globalization results in an increased exploitation.
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Per-capita Trade (US$, logarithmic scale)
$100,000
GDI measures quality of life (longevity,
education, literacy, income) for women
relative to men.
$10,000
Greater per-capita trade is associated
with
R2 = 0.80
greater gender equality.
$1,000
$100
$10
$1
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
Gender Related Development Index (0 = low gender adjusted HDI, 1 = high gender
adjusted HDI)
Source: International Financial Statistics, International Monetary Fund, December 2001, and Human Development Report, United Nations Development
Programme, 2002
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$100,000
Per-capita Trade (US$, logarithmic scale)
Greater per-capita trade is associated with reduced child labor.
$10,000
$1,000
R2 = 0.54
$100
$10
$1
0
10
20
30
40
50
Children 10 to 14 in the Labor Force (as % of age group)
Source: International Financial Statistics, International Monetary Fund, December 2001, and World Development Indicators, World Bank, 2002
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Per-capita Trade (US$, logarithmic scale)
$10,000
$1,000
$100
$10
Even among middle-lower and lower income countries, greater per-capita
trade is associated with reduced child labor.
$1
0
10
20
30
40
50
60
Children 10 to 14 in the Labor Force (as % of age group)
Source: International Financial Statistics, International Monetary Fund, December 2001, and World Development Indicators, World Bank, 2002
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Globalization and Exploitation
Reality
• Globalization results in higher gender equality and lower
incidence of child labor.
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Globalization and Unemployment
Market-As-Exploitation Claim
• Globalization results in an increased unemployment.
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January 1975 to June 2006
12%
Greater per-capita trade is associated with reduced unemployment.
Unemployment Rate
10%
8%
6%
4%
2%
0%
12%
14%
16%
18%
20%
22%
24%
26%
28%
30%
Trade (imports plus exports) as % of GDP
Source: Bureau of Labor Statistics, and Bureau of Economic Analysis
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January 1975 to June 2006
Average Real Hourly Earnings (2000$)
$15.00
Greater per-capita trade is associated with increased real wages.
$14.50
$14.00
$13.50
$13.00
$12.50
$12.00
12%
14%
16%
18%
20%
22%
24%
26%
28%
30%
Trade (imports plus exports) as % of GDP
Source: Bureau of Labor Statistics, and Bureau of Economic Analysis
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Globalization and Unemployment
Reality
• Globalization results in reduced unemployment and higher
wages.
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Markets and the Income Gap
Market-As-Exploitation Claim
• As markets grow, the rich get richer while the poor get
poorer.
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% of Households in Each Income Bracket (2006$)
Source: Statistical Abstract of the United States, U.S. Bureau of the Census, 2009, Table 668.
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% of Households in Each Income Bracket (2006$)
From 1980 to 1990, the number of households with purchasing power of at least $75,000
grew while the number with purchasing power less than $75,000 declined.
Source: Statistical Abstract of the United States, U.S. Bureau of the Census, 2009, Table 668.
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% of Households in Each Income Bracket (2006$)
From 1990 to 2006, the number of households with purchasing power of at least $75,000
grew while the number with purchasing power less than $75,000 declined.
Source: Statistical Abstract of the United States, U.S. Bureau of the Census, 2009, Table 668.
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Markets and the Income Gap
Reality
• As markets grow, rich and poor get richer.
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Markets, Wages, and the Poor
Market-As-Exploitation Claim
• Minimum wage (or “living wage”) protects the poor in their
working years.
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College Education (1984-2004)
4%
Unemployment Rate
3%
3%
2%
2%
1%
Increases in the minimum wage are not associated with changes
in unemployment for workers with college educations.
1%
0%
0.3
0.32
0.34
0.36
0.38
0.4
0.42
0.44
Min Wage as Fraction of Avg Hourly Wage
Source: Statistical Abstract of the United States, and Bureau of Labor Statistics
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HS Education (1984-2004)
9%
8%
Unemployment Rate
7%
6%
5%
4%
3%
2%
Increases in the minimum wage are associated with increased
unemployment rate for workers with only high school diplomas.
1%
0%
0.3
0.32
0.34
0.36
0.38
0.4
0.42
0.44
Min Wage as Fraction of Avg Hourly Wage
Source: Statistical Abstract of the United States, and Bureau of Labor Statistics
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Less than HS Education (1984-2004)
16%
14%
Unemployment Rate
12%
10%
8%
6%
4%
Increases in the minimum wage are associated with increased
unemployment for workers without high school diplomas.
2%
0%
0.3
0.32
0.34
0.36
0.38
0.4
0.42
0.44
Min Wage as Fraction of Avg Hourly Wage
Source: Statistical Abstract of the United States, and Bureau of Labor Statistics
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Unemployment for Teenagers Relative to Adults (1964-2004)
Unemployment Population Ratio for 16-19 Year Olds as Percentage of 20-64 Year
Olds
Unemployment Population Ratio for 16-19 Year
Olds as a Percentage of Ratio for 20-64 Year Olds
3.3
3.1
Increases in the minimum wage are associated with
increases in unemployment for less skilled workers.
2.9
2.7
2.5
2.3
2.1
1.9
1.7
1.5
0.3
0.32
0.34
0.36
0.38
0.4
0.42
0.44
Minim um Wage as Percentage of Average Hourly Earnings
Minimum Wage as Percentage of Average Hourly Wage
0.46
0.48
Source: Bureau of Labor Statistics
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Markets, Wages, and the Poor
Reality
• Minimum wage (or “living wage”) hurts the lesser educated
and the lesser skilled.
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Markets, Wages, and the Poor
Market-As-Exploitation Claim
• Social Security protects the poor in their old age.
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Social Security Tax and Benefits (College Graduate)
Retirement at age 66, wage growth 3%, inflation 3%, median probability of employment, median
mortality, 7% interest yield.
Compiled from data published in 2006 Statistical Abstract of the United States, U.S. Bureau of the Census
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Comparison of Social Security to Privatized Cash Flows (College Graduate)
Average withdrawal from privatized account is 6 times
the average Social Security payment.
Retirement at age 66, wage growth 3%, inflation 3%, median probability of employment, median
mortality, 7% interest yield.
Compiled from data published in 2006 Statistical Abstract of the United States, U.S. Bureau of the Census
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Comparison of Social Security to Privatized Cash Flows (HS Graduate)
Average withdrawal from privatized account if 4 times
the average Social Security payment.
Retirement at age 66, wage growth 3%, inflation 3%, median probability of employment, median
mortality, 7% interest yield.
Compiled from data published in 2006 Statistical Abstract of the United States, U.S. Bureau of the Census
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Net Present Value of Social Security Benefits by Race and Gender
NPV is at age 20 and assumes retirement at age 66, median wages, median probability of
employment, 3% inflation, 5% discount rate.
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Markets, Wages, and the Poor
Reality
• Social Security is a net negative for all except those earning
a wage below the poverty line and is a greater negative for
minorities.
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Lives and Dollars
Market-As-Exploitation Claim
• Markets reduce human lives to dollars.
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Pick One: Compact Car or SUV
Price
$23,000
Fatalities per million vehicles
Price
117
$44,000
Fatalities per million vehicles
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Those who chose the compact car just valued their lives at
under $3 million.
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Seat Belts on School Buses
It costs (on average) $2.5 million for every child’s life saved.
 Should we install seatbelts on school buses?
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Spend $2.5 million on:
# Lives Saved Annually
Seatbelts on school buses
1
Airbags in cars
3
Heart transplants
13
Malaria prevention
975
Midwife training in third world
310,000
HIV tests for sex workers
715,000
If our concern is saving lives, then we should not spend money
for seatbelts on school buses because every 1 life saved will be
offset by 715,000 lives we might otherwise have saved.
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Lives and Dollars
Reality
• Markets enable us to make the best decision in the face of
distasteful tradeoffs.
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Some Major Themes from Catholic Social Thought
Option for the Poor
“…the more fortunate should renounce some of their rights so as to place their goods
more generously at the service of others.” (Octogesima Adveniens, Paul VI, 1971)
Rights and Responsibilities
“…when people are without a chance to earn a living, and must go hungry and
homeless, they are being denied basic rights.” (Economic Justice for All, US Catholic
Bishops, 1986)
Economic Justice
“…it is necessary that economic undertaking be governed by justice and charity as the
principal laws of social life.” (Mater et Magistra, John XXIII, 1961)
Role of Government and Subsidiarity
“…it is gravely wrong to take from individuals what they can accomplish by their own
initiative and give it to the community…” (Quadragesimo Anno, Pius XI, 1931)
“A community of a higher order should not interfere with the life of a community of a
lower level, taking over its functions.” (Centesimus Annus, John Paul II, 1991)
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Catholic Social Thought versus Economics
How can Catholic social teaching be consistent with what we
understand about economic truths?
What does it mean to be created in the image and likeness of
God?
 To be created with free will.
What is the prerequisite for behaving morally?
 To have freedom of action.
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Catholic Social Thought versus Economics
Freedom
“…we must reappropriate the true meaning of freedom, which is not an
intoxication with total autonomy, but a response to the call of being,
beginning with our own personal being.” (Caritas in Veritate, Benedict
XVI, 2009)
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Catholic Social Thought, Economics, and Freedom
In the four Gospels, the poor are mentioned twenty-one times
• Four times, the poor are mentioned as a fact.
• Six times, the poor are called “blessed” or singled out as a
special group who will receive the Gospel.
• Eleven times, Jesus instructs the listener to give to the poor.
Question
Why, at no point, do the Gospels justify taking in the name
of the poor?
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Catholic Social Thought, Economics, and Freedom
Question
Why, at no point, do the Gospels justify taking in the name of the poor?
Observation #1
To rely on coercion to feed the poor dehumanizes the poor by
regarding them as “mouths to be fed.”
Observation #2
To rely on coercion to feed the poor dehumanizes the rich by
regarding them as “sources of revenue.”
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Catholic Social Thought, Economics, and Freedom
Question
Why, at no point, do the Gospels justify taking in the name of the poor?
Proposition
Poverty is a mechanism for forging a bond between rich and poor.
If we regard the elimination of poverty as an end in itself, we miss
the greater opportunity that poverty offers – to bring the rich and
poor together in community.
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Catholic Social Thought, Economics, and Freedom
Question
Why, at no point, do the Gospels justify taking in the name of the poor?
Corollary
Rights and responsibilities are inextricably linked.
If we give the state the responsibility for fulfilling our moral
obligations, then we give the state the right to determine what
our moral obligations are.
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Catholic Social Thought, Economics, and Freedom
Epilogue: The Nagging Doubt
What if, in their freedom, the rich don’t give to the poor?
“The poor you will always have with you, but you will not always
have me.”
(Matthew 26:11)
“The poor you will always have with you, and you can help them any
time you want. But you will not always have me.”
(Mark 14:7)
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Religion, Politics, Biology, and Economics:
The Struggle of Reason with Emotion
September 28, 2009
copies of this presentation can be found at
www.antolin-davies.com
55