Progressives and Race

I've written on this topic several times, and here, in NRO, comes someone more expert than I to discuss the connections between the Progressive movement and racial segregation in the in 19th and 20th century Sadly, two of the most prominent Progressives in this article were leading lights in the emerging Economics profession. However, the prize for most outlandish proposal goes to the sociologist who promoted forced labor camps for blacks. Yes, let's have more national discussions on race, and establish once and for all who established Jim Crow laws, disfranchisement, and educational segregation.

What is Poor?

Co-author Brad Hansen sent this link to the blog Pyromaniacs, which combines the statistics of a BBC video hosted by Hans Rosling, the blogger's own analysis of the U.S. data in terms of the complaints of the Occupy Wall Street Movement, and Chrisitian theology.

Brad asked if I had any further thoughts, and the blog suggests several. One thing that I think we ought to consider at the start is that the terms "income" and "wealth" are often used interchangeably, and they are not. (Part of the problem is that "poor" is popularly used as the opposite of both "wealthy" and "high income.") I believe that I recall reading recent data that income in the U.S. has become less equal but wealth has not. How could that be? There are several factors, including greater life-cycle disparities in income that don't translate into wealth disparities, problems with valuation of assets (wealth, such as home values or even wealth intangibles like the social wealth of living in a safe neighborhood), increasing differential returns from education, income statistics that don't capture all aspects of government income redistribution etc.. I'll try to check this out further, and maybe post some other thoughts.

David Brooks on Inequality

I have mixed reactions to David Brooks, but his article today on "inequality" was thought-provoking. Even here, we can see the cultural divides between Manhattan/Chevy Chase and "flyover country". Brooks asserts that's it's not acceptable to wear clothing with religious messages. I think if Brooks walked around Tennessee or Texas or Iowa more he might see that a lot of people have t-shirts with explicitly religious or, more neutrally, "I love First Church" type messages. Nevertheless, although the article is humorous, I think it raises interesting questions for Christians. It would make a good single-meeting Bible study resource. (Thanks to hotair.com for the tip on the article).

Rent

In a discussion in our Theory of Moral Sentiments Readings Group, we delved into Prof. Gordon Tullock's pathbreaking article in which he introduced the idea of rent seeking (although the name came later from Anne Krueger). One of the questions Gordon raised was how one would measure rent seeking. For the United States, I have long promoted a metric such as "Count the number of Nordstrom and Neiman-Marcus stores in the Washington DC metropolitan area and multiply by the a normalized difference of the excess increase in housing prices in the D.C. area compared to the rest of the United States." Just kidding. But consider the news yesterday that the Washington, D.C. metropolitan area which historically has manufactured virtually nothing, long ago quit growing (gasp) tobacco, and has no known natural resources other than mosquitoes, is now officially the wealthiest (actually, highest income) part of the United States. This Versailles-on-the-Potomac produces one thing: government. I think that it's interesting to consider there were many things that the U.S. government, some of them relatively well, with Washington remaining a relatively sleepy Southern town. The big changes in D.C. came with the ramp up of the New Deal, then The Great Society, and then the social regulatory programs of one of America's most economically liberal Presidents, Richard Nixon (sorry Republicans, but do the math: OSHA, EPA, wage and price controls, AMTRAK, Title IX, and so forth). The current administration has successfully pushed the Washington team over the goal-line. (As long as I am ranting, can you imagine any other part of the country as hypocritical as Washington D.C. having a professional football team named the "Redskins" in the midst of all of the political correctness that it imposes on the rest of the country? To think that Florida State had to fight to retain the name "Seminoles" which is an actual (both historical and living) proper name and not an ethnic slur like "Redskins", well ... I guess it's time to stop ranting.)

Indeed

From the New York Sun, a quote from the just-announced winner of the 2011 Nobel Prize in Economics, Thomas Sargent:

“Everyone responds to incentives, including people you want to help. That is why social safety nets don’t always end up working as intended.”

Could Not Have Said It Better

Brad Hansen, our co-author on Wise As Serpents, brought this video to our attention. It is part of the launch of a new initiative called povertycure.org which is designed to bring entrepreneurial solutions to issues of economic development, particularly in Africa. In the video, the narrator says that is it easy to have a heart for helping the poor, but harder to have the mind to do so. This is very much the motivation behind the FSU course on the Economics of Compassion. Best wishes to them in their efforts.

Name That President

A future President once said "Facts are Stubborn Things." So let's describe the facts about another President, because it's important in understanding macroeconomic policies.

This President did not believe in anything like what we would call the free market or spontaneous in order in things like wages and prices. In fact, he used the bully-pulpit of the White House to intervene to keep workers' wages high. Coming into office, Americans recognized him as one of the smartest men ever to hold the office, and he certainly believed in the appropriateness of an activist government managed by the elites of educated society. He approximately doubled the size of the federal government under his tenure, and ran unprecedented peacetime budget deficits, deficits so large that his successor campaigned vigorously against them. He raised taxes, with an especially big hit on what we would probably now call the millionaires and billionaires. He used federal funds in ways that most Americans had never anticipated were the province of the federal government: promoting home ownership, massive public works projects, and bailouts for failing banks. He was not generally a supporter of free trade, and under his watch he helped enact massive new barriers to the free flow of goods and services. Who was this President? Click here to find out.

Gee Officer Kurpke, Krup You

Urban renewal was one of the pinnacle dreams of the Progressive/Social Gospel/New Deal streams of American economics and politics. Government "experts" decided which neighborhoods were "blighted", used the police power of government in the guise of eminent domain to take the property from it's rightful owners, and replaced the existing "slums" with (typically butt-ugly) housing "projects" that were often either government operated or handed out by government to political cronies. (In some cases the land was turned over to private corporate development).

We find ourselves in a position today of trying to figure out how to "fix" unsustainable programs of government provision of health care (Medicare and Medicaid). Other Americans receive government provided food (at school) , and we were in the 1950s well on our way to having government being a dominant direct provider of housing. (Instead, we had two government created frankenfirms, Fannie Mae and Freddie Mac, subsidizing home mortgages through smoke and mirrors).

This Reason TV program highlights the damage to the lives of the poor through one government directed "urban renewal program." I know I sound like a broken record, but no oppression of the poor is more condemned in the Bible than oppression of the poor that operates out of the domination of the government by the rich and powerful. Indeed, if you want to see what replaced the living spaces of the West 99th Street families, read the full story of what is now called "Olmstead House on Central Park West." Maybe for New York City a one bedroom apartment for $3,300 per month is a steal.

Boogity, Boogity, Boogity, Amen

Are we too uptight and proud and concerned about our image to pray sincerely for the things that have been blessings to us or that are in our concerns?

The Aliens Among You

It would be hard to make a list of all of the exhaustive themes in Deuteronomy, but one of them certainly is that the Israelites were to treat fairly and with dignity the sojourners (aliens) among them because they too had been sojourners in another land. Now, like with almost anything in the Bible, we need to be very, very careful in transition to specific policy prescriptions, especially in the heat of partisan politics. But my personal opinion is that there has to be some kind of moderation between the Obama administration executive decisions that come close to granting amnesty in direct contravention of what our elected representatives have decided (one the one hand) and (on the other) the out right meanness exhibited by almost all of the Republican candidates (except Rick Perry) to the sojourners in our land who were brought here, through no fault of their own, by their parents. I found the attached op-ed to do a good job of expressing my own thoughts policy after that debate:

http://www.redstate.com/thesophist/2011/09/23/perry-illegals-and-in-state-tuition/

What this article doesn't add is the Deuteronomic exhortation that we Christians, in particular, ought to take seriously.

Calling Prof. Hayek: A Central Planner Dropped Some Knowledge and Wants You to Return It

Embedded in today's New York Times article on the Solyndra solar manufacturing bankruptcy is the following amazing statement from the deputy director of the Office of Management and Budget:

"While taxpayers could lose the $528 million the company borrowed from the Treasury, Jeffrey D. Zients, deputy director of the Office of Management and Budget, said that the system for evaluating such loans was sound. He said it was inevitable that some cutting-edge firms would fail but that over all, the investments would prove worthwhile. He did allow, 'The lesson learned here is that marketplaces can change even more rapidly than one would have anticipated.'"

The lesson learned here is that marketplaces can change even more rapidly than one would have anticipated, indeed.

Epstein and Pope Benedict: Cont'd

Doug and my co-author (and my former pastor) Brad Hansen has an outstanding discussion about the issues of the O.T. Law and economic life in his "comment" on the previous Epstein and Pope Benedict post. If you can take the time, please go read it.

The Rain in Spain Blocks the Sun and Causes Pain, Part 3,545

Why the fancy numbering on the continuing saga of the Green Jobs Bubble? Because that's what the Washington Post this morning reported is the actual number of jobs (3,545) created by the government's 38.6 billion dollar green jobs loan guarantee program, or a cost of over 10 million dollars in loan guarantees per job. Government reports that the number is closer to 60,000 jobs apparently include accounting that claims that about half of the Ford Motor Company workforce has been converted into green jobs and therefore "created". Even at 60,000 jobs, that would be a cost of over $600,000 in loan guarantees per job. Apparently as the fund has been only half allocated, one might argue that you could cut those numbers in half, so that the cost per "green job" drops to somewhere between $300,000 and $5,000,000 in loan guarantees per green job. But, as the famous Spanish report (see posts below) pointed out, this doesn't allow for any jobs lost due to the financing of the program.

Now one could argue that as these are loan guarantees, eventually the government will get its money back. But as the Solyndra bankruptcy shows, that is not guaranteed.

(H/T to Hot Air for the track to the WaPo article).

(After the first publish, I edited the text to make clear that this program is a loan guarantee program as distinguished from a direct grant program).

Epstein and Pope Benedict, Cont'd

I'm afraid that this is going to come off disjointed. The starting point is that I've been reading Deuteronomy (which means the second telling of the Law). From the very beginning Christians have been debating what role the Old Testament Law Code should have in the life of a Christian. Almost no Christians believe that every Mosaic law is binding upon Christians. Some Christians go to the opposite extreme of antinomianism, which says that the law has no role in our lives. I suspect that the vast majority of Protestant Christians come somewhere along the lines of the reformers, who believe that the sacramental laws are no longer binding, but that there are certain of the laws that are moral laws that serve functions separate from any kind of works righteousness: they can be moral guideposts for what is expected of a sanctified life, for example.

One problem is where is the dividing line between the sacramental and the moral law? I think that most Christians wouldn't have any trouble putting the prohibition against weaving together two types of cloth or clean and unclean foods in the former category. But what about the prohibition against tattoos? According to my study Bible, tattoos were a sign of cultic paganism. But what about today, when that connection has been lost? Maybe we should see this law, given its ancient cultural context, as essentially sacramental. But if we are going to make cultural drift a part of the distinction between sacramental and moral laws, where do we stop? Does that lead us to surrender ALL of our moral values to our culture?

I think that most Christians would argue that the 10 Commandments form the core of an unambiguous moral law. But if we stop with the Decalog, what do we have to guide the kind of moral context for economic life that I mentioned in the last post? One: "Thou shall not steal" is pretty good. And bearing false witness could include all kinds of deceit and fraud. But much of what forms our debate on economic policy is found in the extra-decalog Mosaic rules: the restrictions on usury, the jubilee and tort codes, and so forth. So are the rules against usury like the rules against theft or like the rules against tattoos?

Another approach is to note that the 10th Commandment is unique in that it prohibits a particular way of thinking: coveting your neighbor's stuff. And that's where this all loops around back to Deuteronomy. It is in Deuteronomy that Jesus pegs "the Greatest Commandment", and it is another rule about our thinking and not our actions: "Hear O Israel: The Lord our God, the Lord is one. And you shall love the Lord your God with all your heart and with all your soul and with all your mind and with all your strength" (Mark 12:29, quoting Deut 6:4-5).

But how, you may be asking, does this get us back to economics. Well, just 2 chapters later is an amazing command from God that is also a "right thought" command and it certainly goes to the heart of our economic life. From Deuteronomy 8:

"Take good care lest you forget your God by not keeping his rules and his statutes, which I command you today, lest when you have eaten and are full and have built good houses and live in them, and when your flocks multiply and your silver and gold is multiplied and all that you have is multiplied, then your heart be lifted up and you forget the Lord your God....Beware lest you say in your heart, 'My power and the might of my hand have gotten me this wealth.' You shall remember the Lord your God for it is he who gives you the power to get wealth, that he may confirm his covenant that he swore to your fathers, as it is this day."

Epstein Part II: Pope Benedict

In the post below, I linked to Richard Epstein's discussion about Warren Buffett. But I mentioned that the first part of Prof. Epstein's article was a critical discussion about Pope Benedict's statements in Spain on economics.

Prof. Epstein says that the Pope is attacking markets. But his quotes (and those in the embedded link) don't obviously follow in that direction. I agree with Prof. Epstein that "putting people before profits" and "the common good" are two of those vacuous phrases that shows a lack of serious thinking about ethics and economics. On the other hand, the Pope warned against consumerism and hedonism which, to me, is a legitimate social criticism that has little to do with criticizing markets per se. On the other (third?) hand, his argument that a people or a society need an ethical framework seems to have morphed into a statement that an economic system as as system needs an ethical framework. I'm not ready to go there.

I remember when the Pope's encyclical on economics was released. I read through it, and I thought that it read as though it was written by a committee, full of "on the one hand but on the other" type of discussion of economic theory and what we know about the functioning of markets. Some of the sections were quite perceptive and economically literate, others were on the level of the "people before profits" slogans mentioned above.

At the end of the day, while I may literally come down on the side of Prof. Epstein in his critique of Pope Benedict's summary statements, at least Pope Benedict has attempted to articulate a theology of ethics and the marketplace that combines a positive analysis of how economies operate with a Christian ethical theology. This is something much more than many if not most mainline Protestant leaders have accomplished, even if I don't find it consistent or completely satisfying.

A New Category on Today's "Jeopardy!", for A Half-A Billion Dollars, Alex

We've presented numerous posts in the category "unintended consequences". It looks as though we need a new, continuing category:

"The Guys in Spain Warned Us About The Unsustainability of A Centrally Planned Green Jobs Bubble"

Here's a Washington Post/Tulsa World report on the failure of Solyndra, a solar energy company with a a half-a-billion dollars in federal loan guarantees.

Meditation 3: Language

Yesterday was my 27th birthday. Today, maybe, I feel marginally wiser so that's good news. But, what struck me yesterday reading facebook wall posts and talking to people was the power of language and words. The love and encouragement from others was palpable. And, with that sentiment, combined with conversations earlier in the week, my meditation is simple: Words have the power of life or death, and, we should remember that when we speak.

Also, the manner with which we speak is like a litmus test for the heart. As Jesus said, 

"The good man brings good things out of the good stored up in his heart, and the evil man brings evil things out of the evil stored up in his heart. For out of the overflow of his heart his mouth speaks." (Luke 6:45)

Awesome.

Did I say that this story is awesome. This is about America. This is about why there is a difference between free markets and "greed is good." This is about the flyover country that DC and New York and Boston and Berkeley love to sneer at. This is about your neighbors helping each other in hard times. This is about entrepreneurship as opposed to a sterile static model of "perfect competition." This is about waffles.

(Hat tip to awesome Jonah Goldberg at NRO for the link).

And God Said: "Let Me Entertain You"

One model for the reinvigoration of the independent sector in the provision of compassionate activities is the so-called public/non-profit partnership. (If you are asking how a non-profit can receive taxpayer funds and still be independent, then you've got an idea of where I am going). This report from the Washington Times out of (where else) Washington, D.C. shows why this half fish/half fowl program model can be a very bad idea.

Just For Fun

Which NFL team should I root for? I've seen this on several sites, but this one on NRO has the best resolution. The listed author is "Interpretation By Design" and it is very, very funny. I am slammed. Right out of the gate: Do People Already Hate You? Yes. Then you're a Cowboys fan. To get to Doug's favorite Chicago Bears you have to go through about 20 nodes.

Steve Jobs the Entrepreneur

What a great article by Nick Schulz in NRO on Steve Jobs and the role of an entrepreneur. Schumpeter could not have written this any better himself.

Warren Buffett, Math Genius

Let's hear it for Lawyer Richard Epstein who unlocks the secret of algebra for Billionaire Warren Buffett, who believes that, having reached the deck of the luxury liner, it's time to pull up the ladder for everyone else trying to get there by making them pay higher taxes. (Buffett himself could always write a check to the U.S. Treasury to sooth his own social conscience).

Here is Buffett's argument:

"In 1992, the top 400 [tax filers] had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent."

Here's the algebra:

1992 ) .292 * 16.9 billion = 4.93 billion paid in taxes

2008 ) .215 * 90.9 billion = 19.54 billion paid in taxes

What Epstein didn't do is to adjust for inflation, which my quick calculation of the CPI shows that, even in inflation adjusted terms, the 400 top filers paid 12.53 billion in "real 1992" taxes in 2008 compared to 4.93 billion in taxes in 1992. So, while lowering the tax rates we more than doubled the tax collections from wealthy Americans. Buffett's argument, both explicitly and implicitly, is that these two things have nothing to do with one another. In other words, Warren Buffett believes that there is zero response in anyone's behavior due to after-tax returns.

And, to repeat, if Warren Buffett believes that he is underpaying for the services and/or satisfaction he receives from the federal government at the current tax rates, by all means let him write a check to the U.S. Treasury. The instructions on how to do so are here. Now, Doug and I have research which shows that people look upon taxes as a group commitment device. But, as one of America's wealthiest men, does Buffett really need to know that all of the little people of the world are falling into line before he steps forward and takes the lead on helping to do whatever it is that his increasing the federal general Treasury receipts will do? (Of course, Epstein's argument is essentially that following Buffett's prescription about raising tax rates may actually lower tax receipts anyway).

Can someone be as successful as Warren Buffett and NOT understand this basic math? It should not go without comment that Buffett's Berkshire-Hathaway's business lines are likely to increase in profits if there are expansions in things like life insurance, tax-deferred annuities, and municipal bonds, time-tested ways by which wealthy people avoid paying more taxes from higher (estate tax and marginal income tax) rates. The link in the previous sentence shows that B-H explicitly markets their products with an eye to helping customers legally reduce the taxes they pay to Uncle Sam. Maybe Buffett is a math genius after all.

Notice also that the first part of Epstein's article is a critique of Pope Benedict's economic comments. I plan to talk more about that in a later post.

Hat Tip to Andrew Stuttaford at NRO for the tip on Epstein's article.

I Thod I Saw a Puddy Cat! Sufferin Succotash. No One Here But Us Federal Bureaucratttsh.

This story has been bouncing around the internet for several days on many other blogs. I wanted to post a link also, but it was so outrageous that I assumed it would be exposed an an Onion myth or something. Alas, as CBS, the heirs to Walter Cronkite (if not also Dan Rather) have confirmed the story, I guess there must be some truth. So, in case you have not already heard it, here is the story of the young environmentalist schoolgirl who was mugged by the reality of "a woman" from the U.S. Fish and Wildlife Service. Why is this stopping with a vague apology of a "clerical error" of "processing" by the USFWS? It would never have been "processed" if the federal agent hadn't reported the little girl in the first place. It seems to me that bowing, scraping, and groveling in person by the unnamed agent is a more appropriate closure.

Hat tip to: numerous bloggers who have been on top of this story, especially Mark Steyn.

Wise as Serpents: The Movie

Not really. But Wise as Serpents, the book, by Brad Hansen, Mark Isaac, and Doug Norton is now available on Kindle for only $1.99. We think it can be a great resources for highschool and/or college study groups wishing to establish both a Christian foundation for an analysis of economic questions, and an economics foundation to inform discussion of policy based upon Biblical justice.

Friday Posts: Spanish Jobs Program Bombs, so Does American*

Doug and I were at one of the first conferences in which an academic report (Calzada et al.) on the bursting of the Spanish "Green Jobs Bubble" was presented, and we've been using the results in our Economics of Sustainability class. I don't know what effect that evidence has had on American students with an initial inclination to follow the Spanish model. (Full disclosure: I recently bought a set of solar garden lights, and so far I am very happy with them).

But, the transferability to the U.S. of the problems with promoting "green" technology as fundamentally a "jobs" program is now evident, as these three media articles from this week demonstrate: my previous post from Seattle on their cash for caulkers program, this from the Boston Herald on the bankruptcy of a "star" Massachusetts solar firm, and even this from the New York Times . Venture capital firms constantly make guesses about which firms are making new products or offering new services that are going to have profitable markets. Many, many times those start-up firms fail to pan-out. That's the nature of the business, but the risks are absorbed for the small chance of investing in the next Apple or Facebook. Survival for a VC firm will include having staff with a good nose for good investments and, as Alchian so famously pointed out in the 1950's, good or bad luck. We need to fundamentally rethink the models, popular with both "liberal" and "conservative" politicians, of the government acting like a venture capital firm: what works, what are the costs and distortions, and what is the ultimate goal? ("Number of jobs" is not necessarily a good indicator of long term success,as the Spanish bubble demonstrated).

*Hat tip to Hotair on the New York Times article. And, yes, the title is a musical reference.

Ah, That Stimulating Cup of Seattle Juice, Leaking Out of the Bucket All Over The Pavement.

According to KOMO News in Seattle, on Earth Day "last year" (so I'm assuming that's April 22, 2010) Seattle received a $20 federal million weatherization("cash for caulkers") grant that was supposed to retrofit 2,000 homes and create 2,000 "green jobs." Sixteen months later, a grand total of 3 homes have been retrofitted and 14 (mostly administrative, not construction) jobs have been "created" --- I put that in quotes because it assumes no job loss from the taxes and borrowing that funded the $20 million. Now that's a "leaky bucket."

As President Obama says, he was shocked to discover that there is no longer any such thing as a "shovel ready" project. This is a serious macroeconomic problem, because it calls into question a most basic, practical level the usefulness of macroeconomic counter-cyclical (Keynesian) stimulus programs. In other words, even if Keynes was correct in his underlying formal theory, if the environmental impact statements and labor and wage studies and so forth make it impossible to time counter-cyclical stimulus correctly, then it doesn't matter how correct Keynes' theory is/was, it's not going to work in practice. That's why I was in favor of the idea that if the Administration was going to try a Keynesian stimulus, it should have addressed this problem head on, by a decree of an economic emergency that would have suspended many barriers to shovel-readiness.

Hap Tip to Drudge.

Friday Link: Taking it in the Shorts

My link for Friday is this Bloomberg discussion about several European countries banning short selling in their stock markets. "Unintended consequences" is only the beginning of a discussion of why this is a bad idea (and note that the topic of "unintended consequences" is discussed explicitly in the article). How about: "May have the exact opposite effect as intended." Or, as I read yesterday, (and I apologize for not writing down the author of the quote), "This is like unhooking your heart monitor because you don't want to hear bad news."

BPD, West Virginia

There is one area in which I am in partial sympathy with the late Senator Robert Byrd. I believe that the federal government is too concentrated in Washington, D.C. For example, I find the idea that the National Museum of the American Indian is in Washington, DC not only an example of more wealth transfer to an area simply because it exercises political power, but also bordering on the insulting given the atrocities inflicted on Native Americans from Washington, D.C.. I actually find it refreshing when some important functions, such as the Centers for Disease Control, are located elsewhere (CDC is in Atlanta).

On the other hand, the late Senator Robert Byrd's lifetime challenge seems to have been to move as much of the federal government as he could get away with to West Virginia. (In this he simply followed in the great tradition of Lyndon Johnson who tried to move as much of the federal government to Texas as he could get away with.)

I remember a complicated legal question I had for the IRS a few years ago, and I was told "Oh, you need to talk to our office in West Virginia." Well, you remember all the brouhaha we've been having recently over our public debt. What I didn't know until I read an article by Mark Steyn and double checked it in an archived article in TIME, is that the U S Bureau of the Public Debt is located in...West Virginia. So if the US ever defaults on our public debt, does that mean that all of those Chinese and European creditors will have to stand in a line waiting for payment....in West Virginia? That will have to be good for their hotel, motel, and restaurant business. Somewhere, Robert Byrd is smiling (something he actually didn't do very much when he was alive).

Friday Links

Here are my two choices for the week:

Selling Lemonade Is Not A Crime. I agree wholeheartedly, but let's admit that there are lines to be drawn. Many homeowners agree to property covenants that they will not operate a business out of their residence. If Junior is 24 and operating a lunch wagon on the front yard, then there's probably an enforcement issue.

Tax Holidays Are A Bad Idea: Unintended consequences, unintended consequences, unintend.....

As Belgium Waffles....

As I am writing this at the closing bell, the Dow Jones Industrial average has dropped over 500 points (over 4 % of value) today. The talk is not a lot about what is going on in the U.S. (although the July Unemployment numbers come out tomorrow) but rather what is going on in Europe. Why should our markets be so nervous? Why should we care that the Wall Street Journal reported today U.K. regulators' interest in Belgian debt, in addition to the known problems of Greece, Ireland, Spain, and Italy. I ask you, when was the last time you had a thought about Belgium one way or another (and I don't count Belgian waffles)?

This is why you should care.

Good. Food.

Doug and I have been involved in a lot of recent discussions about the Lord's Supper (Communion, the Eucharist). For those of you who would like to read a very well written discussion of the Reformed view of Communion (which, as the author points out, turned out to be in many ways similar to the Orthodox view), I invite you to read this fine article.

Johnny, We Hardly Knew Ye?

There are several media reports (I got mine from Rich Lowry) that Sen. Richard Durbin (D- IL) is saying that with the passage of the compromise agreement on the debt ceiling, we are witnessing "the final internment of John Maynard Keynes." As an economist, I wonder if that's true? If so, why? And, to what effect?

Are we witnessing the death of Keynes own formidable intellectual legacy? I don't think so. The death of naive post-war Keynesianism? That died during the simultaneous inflation/recessions of the 1970s. Perhaps we are witnessing the death of the facility with which those who politically favor more and more government central planning of the economy can merge Keynesian-like economic arguments with their own political agendas. But if that died, it died several weeks and months ago, as it became clear that the massive ratcheting up of the trajectory of federal spending (and with it the federal debt) has failed to solve the nation's current economic problems.

Don't take this that I am an enemy of Keynes. I'm not a macroeconomist by research field, by I teach it in principles courses and I have to keep a straight face when I discuss other economic theories that try to explain-away the disaster and misery that were the Great Depression of the 1930s. Keynes at least recognized that something was amiss.

I also think that the first Keynes versus Hayek "rap" video was fun, but I kind of wish that the creators would put it to rest. Economics shouldn't be about (although it sometimes is) some kind of zero-sum smackdown in the schoolyard at recess. It seems to me, as an outsider with no skin in the macroeconomics theory game, that there are more similarities between Keynes and Hayek that might be realized. I hear both Keynesians and Austrians talking about asset bubbles, for example. Keynes famously referred to "animal spirits". Schumpeter highlighted the crucial role of entrepreneurs. Neither Keynesians nor Austrians are fans of the static, soul-less, microeconomics of equilibrium price theory. I am sure there are others. The point is, Keynesianism may indeed be dying, but I wouldn't count out that dead scribbler John Maynard Keynes, at least not yet.

TBD

When the Collective Bargaining Agreement (CBA) for the NFL was completed the pulse of Sports Talk radio spiked and excited fans like me tuned in to hear all the latest news. Now, I am ready for the season to start and I'm tired of hearing whether people are satisfied/dissatisfied with their team's brief off-season acquisitions and cuts. But, perhaps what I was most dissatisfied about were the numerous comparisons between the NFL and Players Association and the debt ceiling negotiations. The latter is about the future landscape of the United States in almost all imaginable ways, while the former is about a sport (albeit a beloved one) and how to divide a pie.

This morning when I pocketed my iPhone, the news alert box reported a debt ceiling agreement (still needs to be passed). The bill was not beloved amongst everyone. Democratic House Member Emanuel Cleaver called the deal a "sugar-coated Satan sandwich", and, while Republican House Members have not provided quotes quite as memorable many of them are also dissatisfied. But, the Wall Street Journal reported this morning that this was perhaps the greatest victory for conservatives since the 1996 Welfare Reform.  This was a compromise that does not solve all the problems instead it kicks the ball in the conservative direction to be determined later. The bill still leaves open a number of political strategies for both parties to exhaust in the upcoming 2012 elections. Meanwhile, those elections will determine whether the American people have more appetite for conservative reforms. 

As mentioned earlier, these are more than standard negotiations. The United States is at a turning point in history where it will decide whether to adopt large government that wields panels of experts slated to solve all our problems or a smaller government that allows people to select into and exit from specific governance communities based on how well those people solve problems. Like Charles Krauthammer wrote in a recent National Review article,

We’re only at the midpoint. Obama won a great victory in 2008 that he took as a mandate to transform America toward European-style social democracy. The subsequent counterrevolution delivered to that project a staggering rebuke in November 2010. Under our incremental system, however, a rebuke delivered is not a mandate conferred. That awaits definitive resolution, the rubber match of November 2012.

Like the sports radio soon I will be tired of reading and listening to these discussions. For now, I read about them, knowing that next November will go a long way to determining the future of our country.

Revised and Resubmitted

What happened to the plans, plans to dive into deep mathematics and understand the mystery of Mas-Colell? Simple. There were those revise-and-resubmits on pending manuscripts, building up other research projects, and a teaspoon of dread/laziness. Allow me to share a brief overview of the projects:

Endogenous Institutions and the Possibility of Reverse Crowding Out -Since the implementation of New Deal programs in the 1930s voluntary charity (e.g. churches and non-profits) has receded and become dominated by government provision of charitable goods/services. Is this reversible? There are two conditions that must be met for what we call "reverse crowding out" to occur. First, taxes must go down. Second, total provision of the charitable goods and services must at least remain the same. We design an economics experiment that is intentionally staged (to mimic the historical evolution of charity in the U.S.). We allow in later stages for participants to vote on their own tax levels, where the tax is 80% efficient (the selection of tax levels is the endogenous institutions part). One of our central findings is that what we called "reverse crowding out" was rarely obtained. However, one interesting result that emerged regarded TRUST. If groups had a high level of provision in Stage 1 they often did not vote for high taxes later in the experiment. To me, this finding is of serious interest because it indicates that for a slew of things people view taxes as a COMMITMENT DEVICES to secure charitable goods they deem valuable. This causes me to consider a quote from Adam Smith,

"What institution of government could tend so much to promote the happiness of mankind as the general prevalence of wisdom and virtue? All government is but an imperfect remedy for the deficiency of these."

 
Experts with Conflicts of Interest: A Source of Ambiguity? - With specialization comes expertise, people who have deep knowledge about a small sliver of material. We call on these people to guide our actions and provide us with good advice. Yet, many professions whether they are doctors, lawyers, financial advisors, computer specialists, mechanics, etc. have conflicts of interest which could lead to distortion of such advice. Some folks have advocated that conflicts of interest be subject to full disclosure. We  model an experimental environment in which an "expert" knows information with certainty but has a financial incentive to distort the truth. Yet, we are more interested in how the "clients" perceive this advice. The paper has two goals. First, from the point of view of the economics literature this bridges research on ambiguity (which you can think of as situations where known-to-be-relevant information is not known) and "credence goods" (which studies how "experts" decide to treat customers). Moreover, this ambiguity flowing from a conflicted expert is far more naturally occurring than standard balls-and-urns or compound lotteries. The second goal is to show when clients accept advice from the conflicted expert. Clients with low outside options (alternatives) were more likely to take the advice. In our experiment this worked out well; however, if experts lied this may not have been so benign. To me, this suggests that those without greater alternatives are more likely to be hoodwinked in situations where there are conflicts of interest.

Intermission: "On Missing the Boat"

My last post was about the essence of globalization, this post, however, shares a lesson about the outcomes of globalization and what it might do. Collier's intermission chapter, "On Missing Boat", is descriptive of this point. Collier recognizes the outcomes of globalization have been superlative over the last 30 years, yet, the prospects of bottom billion countries breaking into the world market are not great at this point because they have fallen into the "traps". In short, the bottom billion countries have a lot of catching up to do.


First, let's present some of the outcomes of globalization from 1980 onward. Most globalization did not begin until the 1970s with improvements in technology that lowered barriers to transportation and communication. Below are the $2 poverty rates. On the y-axis is the percent of the population living on less than $2.16 per day (which is adjusted across time by inflation and across countries for purchasing power parity).   

We can see that since the 1980s there has been a large drop in this kind of poverty in countries such as China and India (which have posted massive growth numbers). Other declines have been more modest but those are also good signs. But, notice that the Sub-Saharan African countries are a flat line. There rate of poverty has not improved over nearly 30 years. Have they missed the boat to prosperity?


As mentioned earlier, this question is Collier's chief concern. What he is worried about is an idea called "Economies of Agglomeration" (EOA) (this idea was popularized by Paul Krugman, and, is the reason he won the Nobel Prize). When companies decide to make investments in other countries either to outsource or break into a new market many costs are borne on the first-mover. A company must ask whether the area they are considering as a workforce with the requisite skills, necessary transportation networks in-and-out of the country, legal systems that do not make conducting business too cumbersome, and is the necessary infrastructure such as electric and sewer in place? These are just a sample of the questions that companies must ask prior to a decision to move into an area. Once one company moves in and builds some of the infrastructure up, trains workers, and builds a trusting relationship with the government/law it reduces the cost for subsequent movers.


This notion of EOA is important because investment in the bottom billion countries does not seem attractive at the moment. Why invest in countries that have little infrastructure, little legal stability, and untrained workers? There are safer investments to be had. And, indeed, American and European investors are not the only ones of this mindset. Collier reports that there are massive amounts of "capital flight" in these countries. People within the country are "voting with their dollars" by investing money in countries not their own! Also, people who are educated and highly skilled are seeking opportunities by migrating outside of their home country. Those facts are far from a vote of confidence.


When you see how many jobs have been created and how people have lifted themselves out of poverty this makes people champions of globalization. There are some critics of globalization on different fronts (cultural, environmental, ease of operating illicit industries, etc.). These concerns have some merit but there is also tremendous hope in globalization. As Nicholas Kristof writes in "Where Sweatshops are a Dream", "The best way to help people in the poorest countries isn’t to campaign against sweatshops but to promote manufacturing there." Unfortunately, Collier's discussion of EOA, capital flight, and migration point to the fact that some countries are not likely to be successful overnight. He writes, "This all adds up to a depressing picture of what globalization is doing for the bottom billion. To get a chance to play in the global economy, you need to break free of the traps . . . Even once free of the trap, countries are liable to be stuck in a kind of limbo ---no longer falling apart, but not able to replicate the rapid growth of Asia . . ." There are some policies rich countries can enact that could help hasten this. We will talk about those in the next post on The Bottom Billion. 

You've Got Creative Destruction

It was a wonder: both the Tallahassee Democrat and the Wall Street Journal writing similar articles on the same day: people getting teary-eyed over the closing of Borders. Wait, I thought, wasn't it just a few years ago that most of America cheered plucky Meg Ryan as she fought to stop the collapse of American (e.g. Upper West Side Manhattan) civilization as she knew it by fighting the arrival of a chain bookstore?* I had visions of finally fulfilling my ambition of combining my work as an economist with my long abandoned dream of becoming a comedy writer by writing a sequel in which a now much older (sorry Meg, but aren't we all) Meg Ryan can't understand as her plucky daughter (who is appropriately plucky today?) tries to stop the collapse of American (e.g. Upper West Side Manhattan) civilization by fighting to preserve a Borders from the encroachment of e-books, embodied by a young techie played by Colin Hanks. The economist in me would feature history's only second sexy lead economist character (this was the first) explaining that this is all a lesson in Joseph Schumpeter's idea of creative destruction: the essence of the competitive market is not static competition among existing firms with static product lines. Instead, it is the ability of entrepreneurs to create value by innovations in products, services, delivery systems, etc.

Alas, my Hollywood visions were once again crushed under the heartless weight of the City of A Thousand Broken Dreams as Rich Lowry today published essentially the same article.

* Disclosure: at the time of You've Got Mail my favorite bookstore was "The Haunted Bookshop" in Tucson.

Globalization (A Primer for Collier's Intermission)

Globalization is a hot topic and will, no doubt, remain a hot topic for a long time. But, the phenomenon is not new. Let me borrow from Nobel Prize Economist Amartya Sen,

[Globalization is], in fact, neither new nor necessarily Western. And it is not a curse. Over thousands of years, globalization has contributed to the progress of the world through travel, trade, migration, spread of cultural influences and dissemination of knowledge and understanding (including that of science and technology) . . . The high technology in the world of 1000 A.D. included paper, the printing press, the crossbow, gunpowder, the iron-chain suspension bridge, the kite, the magnetic compass, the wheelbarrow and the rotary fan. A millennium ago, these items were used extensively in China — and were practically unknown elsewhere. Globalization spread them across the world, including Europe.-Amartya Sen, "Does Globalization Equal Westernization?", The Globalist 2002  

There are a couple important points here. First, globalization is multi-faceted. The acronym I like to use with my class to explain the essence of globalization is PIPI (which I pronounce pee-pee in hopes that it will stick in their memories): Products, Investments, People, and Ideas. Yes, we all know about Products made in other countries from the "Made in China" or "Made in Korea" stickers to the tags of the very shirts on our backs.

Some of us have also heard about Investment. We know that many other countries are buying United States debt. We also know that U.S. companies are Investing in a variety of locales throughout the world (contrary to what you might be thinking most of the investments do not go to the really poor countries ---that is the topic for the next post). The next two portions of globalization are not well known: People and Ideas. But, these are quite powerful components of globalization. When people and ideas are free to flow across borders there are many cultural exchanges -new outlooks, new perspectives, etc. but these People and the Ideas they share can also have economic consequences.

Here is a story to the affect of the Ideas facet of globalization. These ideas happened to be transmitted not by people directly but by products.

The Indian automobile industry was protectionist with plenty of price controls and sales and distribution regulations. At the same time, this was untrue of the industry for small scooters. In terms of innovation the scooter industry thrived while the automobile industry took a dive (in terms of innovation). The question is why? Consider that when we purchase a product we do not just purchase the function of the product but we purchase the ability to learn from the product. The smart and industrious people of India did not merely buy scooters ---they bought the engineering of scooters. Ideas are replicable. Before long India became the arguably the "scooter capital of the world".

In the next blog post on globalization we will broach Amartya Sen's statement that, "[Globalization] is not a curse." We will look at this through the lens of Collier's intermission in the Bottom Billion to discuss globalization.

Who Would've Thought? (Maybe an Economist?)

'[“There is no clear evidence that playground safety measures have lowered the average risk on playgrounds,” said David Ball, a professor of risk management at Middlesex University in London. He noted that the risk of some injuries, like long fractures of the arm, actually increased after the introduction of softer surfaces on playgrounds in Britain and Australia.

[“This sounds counterintuitive, but it shouldn’t, because it is a common phenomenon,” Dr. Ball said. “If children and parents believe they are in an environment which is safer than it actually is, they will take more risks. An argument against softer surfacing is that children think it is safe, but because they don’t understand its properties, they overrate its performance.”

[Reducing the height of playground equipment may help toddlers, but it can produce unintended consequences among bigger children. “Older children are discouraged from taking healthy exercise on playgrounds because they have been designed with the safety of the very young in mind,” Dr. Ball said. “Therefore, they may play in more dangerous places, or not at all.”]'

See the full Today article in which these paragraphs appear here. Thanks to hotair.com for the tip for the link.

That Thing We Do

If you've ever wondered how seemingly complicated academic exercises such as economic theory (specifically mathematical auction theory) and experimental economics can play an important role in public policy towards the disadvantaged in society, you might be interested in this video by Prof. Peter Cramton of the University of Maryland on some appalling policy decisions by the people who run Medicare. Disclosure: I am one of the economists who signed the petitions mentioned in the video.

The Bottom Billion: A Book Review (The Traps)

Well, it has been too long since my last blog post, so I'll get back in the saddle with a book review that could have been written long ago. For three years now I've utilized chapters in The Bottom Billion for the Economics of Compassion course. The author, Paul Collier, writes in excellent prose some fairly advanced concepts, but, another reason I like the book is because it represents an in-between view of the politicized foreign aid debate between Sachs and Easterly.  The book has an intuitive structure where Collier diagnoses the so-called "Traps", holds intermission with a discussion on globalization, and continues by offering his "Prescriptions". Overall there is a strong admonition not to fall victim to the "headless heart". In fact, like Saint Ignatius said, "God assumes intelligence" and we are also to love God with all of our hearts, soul, strength, and mind.  Thus, long time readers of the blog should not be shocked, I am an advocate of using the mind.

The so-called "traps" are conflict, natural resources, landlocked with bad neighbors, and bad governance in small countries. What does Collier mean by "traps"? These are not black holes of failure from which countries shall never return, rather, these four traps (conflict, natural resources, landlocked with bad neighbors and bad governance) are difficult to escape from and can potentially lead to cycles of poverty. In an effort to help my class remember the key content from those chapters I came up with the following mnemonic: DUMP SID NOT CARL. To our single female readers: you are welcome for the free advice.

The Conflict Trap (DUMP - Destruction, Uncertainty, Misery, and Poverty) 

This trap begins with destruction. Conflict destroys physical infrastructure such as buildings and transportation materials as well as disrupts present production. Additionally, conflict also severs social bonds and disrupts children emotionally and hinders their ability to acquire knowledge. Perhaps the most vile fact about conflict is the legacy it leaves: uncertainty. Because there is such a high reversion into conflict after recently emerging from a civil war (Collier cites 50% chance) companies are reluctant to invest in such an unstable nation. Meanwhile there are no opportunities, prospects, or hope for the future. What is there? Misery. The most likely candidates for recruitment into rebel forces to start a new conflict are young males with low education and no dependents. Also, no job equals low opportunity cost for joining the ranks. Now, restart the conflict. This both creates poverty and a situation in which poverty can persist.

The Natural Resource Trap (SID - Survival of the Fattest, Institutions, and Dutch Disease)

This seems like an oddity. Why on earth would natural resources such as oil, gas, diamonds, metals, etc. be a trap? It seems like natural resources ought to be a blessing. And, they are, now here is the the big BUT, without good institutions they will become the profits for power. (Remember, institutions are the social and legal rules governing human interaction. Such rules would include property rights, transparency over where government funds are allocated, the checks and balances of democracy, etc.) Good institutions can help the natural resources to be prosperity enhancing, without them, natural resources basically promote poverty because the potential profits to be made attract certain kinds people to power.

*Notice in the last sentence I said "can help". Why didn't I use the stronger statement "will help"? Dutch Disease. There is this idea in economics that large natural resource endowments can actually harm an economy. For example, imagine that a country is a big exporter of motor scooters when suddenly some in-land farmers are shooting dinner and that good ol' black gold bubbles up. Now the country exports oil and motor scooters, but, their scooter market is in shambles because the value of the currency has gotten so high. Why is the currency high? When you buy a country's goods like oil you buy their currency. As more people are demanding the country's currency (to buy the oil) the value of the currency increases. What does this have to do with scooters? Where an importer of scooters would only need to pay $50 per scooter before they will now have to buy the country's more valuable currency in order to import the same scooter. Now it might cost them $70 for the same scooter. Maybe they will buy elsewhere. What can combat Dutch Disease? We'll get to that in the next post.

The profits to power from controlling a natural resource leads into a core idea Collier has called Survival of the Fattest. Normally in electoral competition the politician who promotes the best mix of policies wins the election. This would be Survival of the Fittest. In countries with large natural resource endowments however this kind of electoral competition does not take place as easily due to corruption. Instead, politicians in these crooked regimes can use the profits from the natural resource to buy votes. Moreover, their corrupt practices keep potentially good politicians from entering the political process because they can see everything is rigged. Such a rigged process and the wealth it creates for the select few in higher ranks of government also attracts more power hungry. Over time the integrity of the government disintegrates.  

Landlocked with Bad Neighbors (NOT - Neighbors, Opportunities, Transaction Costs)

Close your eyes and imagine your most unreliable friend. What would happen if you had to bet your future on them coming through for you? That is the situation of the people in landlocked countries with bad neighbors. It is all about the neighbors. Switizerland for example is landloced; yet, Switzerland is successful in part because France and Germany are both well-functioning economies. When landlocked countries have bad neighbors they lack opportunities. As Collier writes, "When you're coastal you serve the world. When you're landloced you serve your neighbors." Bad neighbors make fore weak opportunities. What further harms opportunities are the high transaction costs. Transaction costs are obstacles to trade. They can be anything from poor roads, bad ports, no airfield, extortion that occurs on the road or from customs officials. All of these things increase the cost of trade. Being landlocked is not so bad, but, being landlocked with bad neighbors hurts.

Bad Governance in Small Countries (CARL - Corruption, A?, Reform, Largeness)   

This underpins most of the traps already discussed. The role of corruption is simple: It corrodes political checks and balances and hinders growth (we can talk about this in greater depth on a future blog post if you like). But, the reason Collier writes that bad governance is such a hindrance to "small countries" is based on an empirical finding. In order to reform a country Collier argues that countries need a large educated population and a large general population. This helps with building a critical mass of people for reform within a country. Also, Collier argues that recent emergence from civil war helps to turnaround a country's prospects. Think about that on an individual level. When are you most likely to change? Perhaps when you have hit rock-bottom. Things are more fluid in those situations and we are more accepting of change than we otherwise would be. But, reform is more than population size and level of secondary education it also requires courage and a special person to stick their neck out. There is no doubt a human element. Becoming free and staying free however are two different things.

What keeps a country free from falling back into all these traps? Stay tuned.

Take the Money and Run

The Rockefeller family were never wallflowers when it came to building churches. On the left is the interior of Riverside Church in Manhattan, funded by John D. Rockefeller, Jr. and built for modernist Baptist preacher Harry Emerson Fosdick. You can easily see how this church reflects the simplicity typical of the Baptist roots of Rockefeller and Fosdick. (Yes, that was sarcasm). To the above right is a picture of the "Rockefeller Chapel" funded by equally Baptist John D. Rockefeller, Sr, who also founded the University of Chicago on which the "chapel" resides.

The Economic Science Association recently had its world meetings at the University of Chicago School of Business, directly across the street from Rockefeller Chapel. One day during a break I decided to wander over and see the chapel. I guess I shouldn't have been surprised. The stone carvings above the door had the IHS indicating the chapel's Christian origins. Inside, there was no communion table in sight. The pews were stripped of any Bibles or hymnals. I found it impossible to tell by anything not relating to the original structure that this was in any sense a Christian, must less sacred, space.

Upon moving to the lobby, I noticed a large marble dedicatory building stone, with the following carving:

"The founder of the University of Chicago, John D. Rockefeller, on December 13, 1910, made provision for the erection of this chapel and thus defined its purpose: As the spirit of religion should penetrate and control the university, so that building which represents religion ought to be the central and dominant feature of the university group. Thus it will be proclaimed that the university is dominated by the spirit of religion. All it's departments are inspired by religious feeling, and all its work is directed to the highest ends."

A docent was sitting right next to the tablet, and I asked her: "Do you think this is true?"

She said, "Is what true?"

I said, "What it says on this tablet about the spirit of religion permeating and controlling the University of Chicago."

She said, "Well, that probably true for the divinity school."

I said, "But that's not what it says. It says 'all its departments.' Do you think that if I walked into the Political Science department that they would say that the spirit of religion was permeating and controlling their teaching and research?"

She said, "That's a really good question. No one has ever asked me that before."

It took much less than 101 years for the University of Chicago to be stripped of its Christian moorings. That's a sliver of time that it took for Princeton and others. The process of secularization marches faster and faster. The question is, when will donors such as John D. Rockefeller recognize the corrosive effects of time and modernism and change the way they are stewards of their resources, even when they have the best intentions with respect to making those resources available to the work of the Gospel.

On a Roll, With Government Protected Butter

Wow. AEI is on a roll with it's analyses of U.S. farm policies. Here's another link to a summary paper about how United States agricultural policies harm the world's poor people.

How Many Times....When Will They Ever Learn?

Can this be for real? Do we really have the federal government once again pressuring banks to make mortgages to people who can't afford to make the payments? Please. Make it stop. Or tell me that this is an Onion parody. Or that this is really April 1.

Indeed.

I realize that the attached document, by Goodwin et al. is relatively lengthy for a blog-post, but it is one of the best attempts I have seen to lay out the intricate parts of our expensive agricultural subsidy programs and to debate which ones could and should be cut.

Meditation 2: The Great Separator

There is a scene in L.A. Confidential where Dudley Smith (James Cromwell) is hammering Sid Hudgins (Danny Devito) with his fists. Then, Dudley Smith drops this pearl, "Reciprocity Boyo! It's the key to human relationships." Indeed! Reciprocity seems like the natural fuel for human relations. If we keep careful record of rights-and-wrongs then we each have incentives to keep doing right. Reciprocity also seems symmetric. But, in such an environment we must ask, "Where is love? Where is grace? Where is forgiveness?"  

But reciprocity is not the only ingredient in human relationships. Empathy has also been an important fuel for human relationships. Consider the fact that many cultures have had something akin to the Golden Rule, "Do to others as you would have them do to you." (Luke 6:31). In fact, Wikipedia cites numerous examples throughout history which seem to consider the welfare of others.

The meditation, or what we shall call "The Great Separator", is about what separates Christian thought from the reciprocity and empathy that has been practiced by other cultures. Jesus teaches us an important and radical lesson in the Sermon on the Mount:

“If you love those who love you, what credit is that to you? Even sinners love those who love them. ³³ And if you do good to those who are good to you, what credit is that to you? Even sinners do that. ³⁴ And if you lend to those from whom you expect repayment, what credit is that to you? Even sinners lend to sinners, expecting to be repaid in full. ³⁵ But love your enemies, do good to them, and lend to them without expecting to get anything back. Then your reward will be great, and you will be children of the Most High, because he is kind to the ungrateful and wicked. ³⁶ Be merciful, just as your Father is merciful.

Tell Me What You Really Believe

One of my academic mentors, the late Ed Zajac, told me of being schooled at old Bell Labs on how to conduct yourself when being interviewed by the press. At that time, the idea of staying on topic was just becoming conventional wisdom. However, Ed Miliband, the Opposition (Labour) Leader in the U.K. has given "staying on topic" an entirely new dimensionality, if not singularity, in this now almost viral interview. (Thanks to HotAir for the original tip for the link).

Bonhoeffer Part 3: The Second Myth

I'm continuing with my discussion about how Eric Metaxas' book Bonhoeffer: Pastor, Martyr, Prophet, Spy upended some of my views about Dietrich Bonhoeffer. In this blog, I assert that there is a second Bonhoeffer myth in many religious circles, namely that Dietrich Bonheoffer was a committed pacifist, who underwent some kind of wrenching spiritual reorientation to join in the plots against Adolf Hitler.

To argue that this is a myth, please note carefully my modifier "committed" on the noun "pacifist." It is clear in Metaxas as in every other Bonhoeffer biography I have ever read that Dietrich Bonhoeffer was not a militarist nor a scholastic "just war" advocate. He passionately believed in the Sermon on the Mount and its directions of peacemaking. He fervently hoped that Europe would not enter into another World War and correctly saw that it could only lurch the continent from disaster to disaster. But that doesn't make him what I would call a committed pacifist. This is my own personal, subjective judgment: I am convinced that, even early in his career, if Dietrich Bonhoeffer were standing on the street and saw SS thugs kicking Jewish prisoners to death, and that if he had an ax or a baseball bat in his hand, he would resort to violence against the storm troopers to attempt to save the lives of the prisoners. In this regard, I have come to believe, from the documents in Metaxas' book, that Bonhoeffer's transition into the anti-Hitler conspiracy was not a wrenching reorientaion, but a painful natural progression that Bonhoeffer saw far in advance.

There are, in Bonhoeffer:P,M,P,S three key pieces of documentation for me.

First, there is a letter to Anglican Bishop George Bell, a close confidant,upon the news that Bonhoeffer's birth year was likely to be called up for military service (p. 322-323 in Metaxas).

Bonhoeffer states clearly it would be "conscientiously impossible to join a war under the current circumstances." (Emphasis mine.) A full-blown pacifist would never add the qualifier "under the current circumstances." Then he says that "Perhaps the worst thing of all is the military oath which I should have to swear." Again, to a committed pacifist the worst thing about being in military service would not be the swearing-in oath, it would be the violence expected of a soldier. Bonhoeffer continues: "So I am rather puzzled on this situation, and perhaps even more because I feel it is really only on Christian grounds that I find it difficult to do military service under the present conditions, and yet there are only a few friends who would approve of my attitude. In spite of much reading and thinking concerning this matter, I have not yet made up my mind what I would do under different circumstances. But actually, as things are I should have to do violence to my Christian convictions, if I would take up arms 'here and now'". (Again, emphasis added by me). Metaxas also provides ample documentation that Bonhoeffer did not pressure his students to refuse to serve in the armed forces.

Secondly, there is the testimony of Eberhard Bethge. Bonhoeffer was Bethge's mentor, and Bethge was very likely Bonhoeffer's best friend through most of his adult life. Bethge reports (Metaxas pp 360-361) that Bonhoeffer, as early as 1935, was leading his students to understand that "Mere confession, no matter how courageous, inescapably meant complicity with the murderers....Thus we were approaching the borderline between confession and resistance; and if we did not cross this border, our confession was going to be no better than cooperation with the criminals."

Finally, one problem for all of Bonhoeffer's biographers is that there is no single letter or diary entry at which point Bonhoeffer wrote, "Today I decided to help kill Adolf Hitler." If you believe in the "gut-wrenching reorientation" model, then what we are looking for is a missing piece of the puzzle. But, if instead, you believe that Bonhoeffer's joining the Abwehr conspiracies was instead the naturall progression of a man who believed that we must obey God in everything, and who also saw, long before so many of his fellow Germans, the horrific evil of the Nazi regime, then doesn't the absence of such a "Road to Damascus" letter make perfect sense?

What we do know is that the Bonhoeffer family and circle were collecting evidence of Nazi atrocities and run-ups to the final solution perhaps as early as the invasion of Poland. Bonhoeffer would have most certainly been aware of this information. Metaxas provides, to me for the first time, a startling point at which we can be sure that Bonhoeffer had crossed into active participation in the conspiracies (pp. 361-362). In early 1940, Bonhoeffer and Bethge are visiting a small German village pub when news comes over the radio that France had surrendered to Germany. There was, apparently much cheering, and singing, and giving the Nazi salute:

"Bethge was flabbergasted: along with everyone else, his friend [Bonhoeffer] stood up and threw out his arm in the 'Heil, Hitler' salute. As Bethge stood there gawking, Bonhoeffer whispered to him: 'Are you crazy? Raise your arm! We'll have to run risks for many different things, but this silly salute is not one of them.' ... It was then, Bethge realized, that Bonhoeffer crossed a line. He was behaving conspiratorially."

As Metaxas documents on page 369, in July 1940, Dietrich Bonhoeffer went to work for the Abwehr, the German military intelligence. He became a spy, and joined the conspiracy to topple, and most likely to kill, Adolf Hitler.

Go Noles!

It's always good news when a major national blog (Instapundit) highlights research from a fellow FSU faculty member. And, by the way, were you aware that tropical storm/hurricane activity has been at recent historically low levels in the past few years? (Just as a word of warning, go back to the mid 1980s and observe that it was also in a period of low hurricane activity. It was in that "low" period that Tallahassee last got slammed by a major hurricane.) So if you standing at Spot X on the Gulf or Atlantic coast, the "average" level of activity may not be much comfort to you if the one storm that hits the U.S. that year is heading in your direction! (For that matter, my wife and I survived the 1983 tropical storm that came up the Gulf of California and rained destruction on Tucson, Arizona). In economics it's called not confusing ex ante expectations with ex post realizations.

Bonhoeffer Part 2: The First Myth

MYTH: Because Dietrich Bonhoeffer's two visits to the United States were in conjunction with the liberal Union Seminary, we can view Bonhoeffer as a typical, early 20th century modernist liberal in the Union Seminary mold. (By the way, I am using the term "liberal" to describe a theological, not political viewpoint.)

I’m not sure of the protocol on blogging when you want to make a point by referencing a lot of material in another source. Metaxas’ depth of research on Bonhoeffer’s letters about the modernist theology that he saw in the United States at Riverside Church (Harry Emerson Fosdick) and at Union Theological Seminary is extraordinary. So I’ll err on the side of intellectual property rights and say “read the book” while quoting just these two summary passages regarding Bonhoeffer’s second visit to the United States.

On his earlier visit, Bonhoeffer had been warned that the Broadway Presbyterian Church, just down the road from Union Seminary, was a hotbed of “fundamentalism.” But Bonhoeffer was dissatisfied by the theology of worship at Riverside (p. 333), and he wrote about a sermon was centered around not the Bible but rather the philosophy of William James:

“The whole thing was a respectable, self-indulgent, self-satisfied religious celebration. This sort of idolatrous religion stirs up the flesh which is accustomed to being in check by the Word of God….The tasks for a real theologian over here are immeasurable. But only an American himself can shift all this rubbish, and up till now there do not seem to be any about.”

So Bonhoeffer ventured forth into forbidden territory. He’s what Mextaxas reports that he wrote when he attended Broadway Presbyterian Church:

“Now the day had a good ending. I went to church again. As long as there are lonely Christians there will always be [church] services. It is a great help after a couple of quite lonely days to go into church and pray together, sing together, listen together. The sermon was astonishing (Broadway Presbyterian Church, Dr. McComb) on our ‘likeness with Christ.’ A completely biblical sermon --- the sections on ‘we are blameless like Christ,’ ‘we are tempted like Christ,’ were particularly good.” In perhaps a second part of that letter or another letter, he said of Broadway Presbyterian Church “This will one day be a center of resistance when Riverside Church has long since become a temple of Baal. I was very glad about the sermon.”

The key part, I think, in this puzzle (at least for those who have been taught to see Bonhoeffer as a “modernist”) is the phrase “Word of God.” Bonhoeffer was out of step not only in the Upper West Side of Manhattan but also in Germany, where he was a rebellious “academic grandson” of Friedrich Schleiermacher. According to Metaxas (p. 136-137) Bonhoeffer wrote to his more typically 20^th century German liberal brother-in-law:

“First of all, I will confess quite simply --- I believe that the Bible alone is the answer to all our questions, and that we need only to ask repeatedly and a little humbly, in order to receive this answer. One can’t simply read the Bible, like other books. One must be prepared really to enquire of it, only thus will it reveal itself. Only if we expect from it the ultimate answer, shall we receive it. That is because in the Bible God speaks to us. And one cannot simply think about God in one’s own strength, one has to enquire of him. Only if we seek him, will he answer us….

“If it is I who determine where God is to be found, then I shall always find a God who corresponds to me in some way, who is obliging, who is connected with my own nature. But if God determines where he is to be found, then it will be in a place which is not immediately pleasing to my nature and which is not at all congenial to me. This place is Cross of Christ. And whoever would find him must go to the foot of the cross, as the sermon on the mount commands.”

Here are three closing thoughts. First, many of those who read this passage will find it beautiful, even powerful, but may not understand how much of an outsider these views made Bonhoeffer in the world of "establishment" German and American Christianity in the early part of the 20^th century.

Secondly, it was mind-boggling humbling to read Mextaxas’ historical narration, knowing how it would all end, and to follow day after day the Dietrich Bonhoeffer who never ceased studying the Bible and praying: in life, in prison, and on the doorstep of death.

Finally, does it bother you to read the thoughts of a passionate Christian such as Bonhoeffer describing sermons and theology of Christians (Christians who are probably in most of our hymnbooks) as "idolatrous" and “rubbish” and comparing a famous Christian church to a “Temple of Baal”? I know it did me. In our culture there are strong constraints against being judgmental, and those cultural constraints have become a part of our religious identity. We don’t want to be seem as being judgmental of other Christians. Was Bonhoeffer out of place, or is it our reluctance to call out bad theology that is the outlier?

Mark's Friday Links

1 ) It surprises me the number of people today who want to march under the banner "progressive" when the actual time in America in which self-proclaimed "Progressives" were in power included such abuses as Jim Crow segregation and eugenics. Probably the height (or depth) of the Progressive Era support for eugenics was in forced sterilization laws. Here is an article on attempts to provide compensation for some of the still-living victims of that program. (Hat Tip to Instapunidt).

2 ) Not exactly a link, but here is a headline from this morning's Wall Street Journal: "Airbus Caps Week With Record Order." It seems that while one of America's biggest and most successful employers and exporters, Boeing, is having to spend energy, time and resources fighting our own government over Boeing's right to optimize their production model by building things in that strange foreign country known as South Carolina, Boeing's biggest rival (Airbus) is spending its energy, time, and resources, you know, building and selling airplanes.

UPDATE: Here are some from Doug

This is a really interesting non-economic perspective on immigration by President of Asbury Theological Seminary Timothy C. Tennent. The video is a short 5 minute talk and well worth the time.

I've started reading this really good book on hospitality called Making Room. The book begins with this fantastic quote from Henri Nouwen, "If there is any concept worth restoring to its original depth and evocative potential, it is the concept of hospitality."

Here is a fantastic new podcast on "benevolent autocrats" by William Easterly. Normally I am not a fan of sarcasm; however, I find Easterly's sarcastic bent to be funny. It's definitely worth listening to if you're curious about the growth miracles in China, South Korea, Singapore, etc.  

Meditation 1: Freedom

Truth can become stale but meditations can bring fresh revelation. In that spirit I'm looking forward to bringing my attention to important truths about Christianity that we ought to keep fresh. Freedom. Last I considered freedom in this blog post about the Passover Feast. The Jewish people remember the Lord who led them out of Egypt. We remember Jesus who led us out of spiritual slavery. But, there is a difference between being free and staying free.  That is the subject of this meditation. We cannot obtain freedom on our lonesome. When we try on our own we feel confined and get depressed at how much bondage we may still experience. This verse from Romans 8 (The Message) spoke to my heart:

"Those who think they can do it on their own end up obsessed with measuring their own moral muscle but never get around to exercising it in real life. Those who trust God's action in them find that God's Spirit is in them ---living and breathing God! Obsession with self in these matters is a dead end; attention to God leads us out into the open, into a spacious, free life."

To live a free life we need correct focus. In some ways this is a question of magnification. Consider the heroic stories of faith from Hebrews 11. These people did great things because they magnified a magnificent God. That is, they paid less attention to themselves and more attention to God. My meditation is simple: We remain free when we magnify God more than ourselves and our problems.