Mark and Doug are two Christian economists seeking to combine economics and theology in a fun, thoughtful, and inviting fashion. The name of the blog is a reference to Jesus' admonition to his disciples to be "wise as serpents and innocent as doves" (Matthew 10:16) when going forth into the world. We hope you join the conversation.
The Sabbath by Abraham Heschel tip-toes the line of soul and mind. The dream-like prose is packed with zeal for a day he calls, "a palace in time":
The seventh day is a mine where spirit's precious metal can be found with which to construct a palace in time, a dimension in which the human is at home with the divine; a dimension in which man aspires to approach the likeness of the divine. For where shall the likeness of God be found? There is no quality that space has in common with the essence of God. There is not enough freedom at the top of the mountain; there is not enough glory in the silence of the sea. Yet the likeness of God can be found in time, which is eternity in disguise.
According to Heschel there are two divisions of the world: space and time. We are well acquainted with space, creating and toiling, but, we are less familiar with time. First, we start with space. Our endeavors in space can help us understand God as Creator. For example, I built Adirondack chairs the other week, therefore, I created on a much smaller scale. Furthermore, I can tell you, there is satisfaction in the toil and I feel a connection to the chairs built. In this sense, with this small metaphor I gain insight into God. Yet, as Heschel points out the likeness of God is too grand to be captured in an object.
What Heschel spends much more pages writing about is time. Writing about the nature of time Heschel looks to the Bible and ancient rabbis. Genesis 2:2 reads, "On the seventh day God finished his work," Exodus 20:11 reads, "In six days the Lord made the heaven and earth." Wait a minute . . . He made the heaven and the earth in 6 days but finished on the 7th? The rabbi's resolved this by stating that menuha was created on the Sabbath. Menuha is not an object like my Adirondack chair that can be grasped, rather, Heschel states menuha means something akin to "tranquility, serenity, peace, and repose". God created an architecture in time and menuha is the special attribute of the seventh day.
The fact that God blessed the seventh day, and not the other days, should hint that the seventh day is special. What this means is that time is not homogeneous ---some time is different than other time. What I take this to mean is, there is time for creating and time for remembering that we were created. On the seventh day we remember our relationship with God, that remembrance is a refuge from a fury of sound and distraction. What is more, this remembrance carries us through the rest of the week.
Heschel regales the reader with stories of Jewish people practicing the Sabbath and embracing the day with vigor and longing. There are many stories that could be presented here, but, I will share only one,
Rabbi Solomon of Radomsk once arrived in a certain town, where, he was told, lived an old woman who had known the famous Rabbi Elimelech. She was too old go out, so he went to see her and asked her to tell him what she knew about the great Master. ---I do not know what went on in his room, because I worked as one of the maids in the kitchen of his house. Only one thing I can tell you. During the week the maids would often quarrel with one another, as is common. But, week after week, on Friday when the Sabbath was about to arrive, the spirit of the kitchen was like the spirit on the eve of the Day of Atonement. Everybody would be overcome with an urge to ask forgiveness of each other. We were all seized by a feeling of affection and inner peace.
This book gave me a passion and appreciation for the Sabbath that I did not have before reading this book. Heschel (below) at one point asks, ". . . is there any institution which holds out greater hope for man's progress than the Sabbath?"
This is a great question. Given the level of pressure and stress, which negatively impacts many people's lives, it would seem we need to learn the discipline of rest. Not merely diversion but a palace in time that anchors our identity as image bearers of God.
OK, I said I wasn't going to write on Bonhoeffer until I had finished, but I couldn't resist this one tidbit. To the Presbyterian Church (USA) The Barmen Declaration (Theological Declaration of Barmen) by the German Confessing Church against the Nazi-dominated "German Christian" heresy is one of the most important statements in our tradition. It has been elevated to the status of an official "Confession" in our Book of Confessions. The author of the Barmen Declaration was theologian Karl Barth, who was also an opponent of the rationalist theological liberalism that had dominated Protestantism at the turn of the 19th/20th centuries.
On a seemingly separate topic, the PCUSA continues with its Social Gospel, Prohibitionist strains by "requesting" that the independent Presbyterian Foundation refrain from investing in certain types of stocks. You may have heard the fracas that erupted a few years ago when we came close to disinvesting in some companies that did certain types of business in Israel (that would have been a truly shameful blot on our denomination, in my humble opinion---never mind the irony that a denomination that honors the Barmen Declaration wanted to punish Israel, but that's another story). One of the categories of stocks that has successfully been placed on the boycott list is that of tobacco companies.
Well I guess that I shouldn't be surprised that Barth, that "neo-orthodox" opponent of empty liberalism had this to say about how the Barmen Declaration came to be written:
According to Metaxas: "The principal author of the Barmen Declaration was Karl Barth, who claimed to have produced the final version 'fortified by strong coffee and one or two Brazilian cigars'." Bonhoeffer also shared Barth's appreciation for a good cigar.
Barth and Bonhoeffer: Neo-orthodox, anti-Nazi, pro-cigar. What's more do you need to call them modern prophets of the Church?
I thought I might post something now aboutBonhoeffer, the 2010 biography of Dietrich Bonhoeffer by Eric Metaxas, but I don't know where the start, and I'm only a third of the way through. This book will upend so much of what you thought you knew about Bonhoeffer. I will try to revisit this after I've soaked it in more.
The World Bank introduced $1 poverty rates into our vernacular in 1990 with their World Development Report. However, little was known about how these people, classified as extremely poor, actually lived. Since then research such as that described in an earlier post titled "Economic Lives of the Poor" shed some light on this question. Carrying forward that research agenda is a 2009 publication from Princeton Press called Portfolios of the Poor. Four economists tell a fascinating story about the financial lives of the poor and how the world's poor live on such little money.
What is novel about Portfolios of the Poor is how it moves beyond the static story of year-to-year statistics and into a more dynamic realm. In other words, former studies were like pictures that represented snap-shots in time, this book is like the introduction of the motion picture. The authors are able to improve in this way because of their unique data. Throughout three countries Bangladesh, India, South Africa the authors employ financial diaries (which participants filled out fortnightly) as a vehicle to acquire information about how poor people make decision with their money.
What emerges from the diaries is a bounty of information about the daily grind. First, it was interesting to learn what kinds of occupations employed the poor. The occupations in their sample were varied from sheep intestine seller, rickshaw driver, construction labor, factory labor, small farmer, cab driver, cigarette roller, and many more. Secondly, it was a revelation to learn that their occupations and incomes were frequently irregular. Many of the households in their sample pieced work together from regular wages, casual work, and self employment (~65% in South Africa, nearly 70% in Bangladesh, and more than 85% in India. Moreover, the $1 or $2 per day measures used by the World Bank were averages over the course of the year. Put another way, they could earn $3 on Monday, $0 on Tuesday, $1 on Wednesday, $4.25 on Thursday and etc. The poor had to stitch together a livelihood from multiple sources.
At the most basic level the poor are in a particular bind because they suffer from what the authors call "The Triple Whammy": low incomes, irregularity, and a lack of financial instruments. These open the door to a myriad of questions: How do the poor handle negative and unpredictable shocks such as illness in the family?, How do the poor acquire enough savings with their low incomes to send their children to school, buy grains to store during the monsoon season, or host a special even such as weddings or funerals? The authors have distilled these kinds of questions into three categories of financial needs for the poor:
"1. Managing basics: cash-flow management to transform irregular income into a dependable resource to meet daily needs.
2. Coping with risk: dealing with the emergencies that can disrail families with little in reserve.
3. Raising lump sums: seizing opportunities and paying for big ticket expenses by accumulating large sums of money."
Currently the poor manage their money largely through informal channels. This is probably not surprising since there are a shortage of formal lending and borrowing institutions geared towards poor households. Moreover, microfinance institutions are often focused on helping the poor raise money for capital investments. There is nothing inherently wrong about that focus, but, the poor have immediate needs in addition to building up their long term prospects. In managing their money day-to-day the poor will rely on neighbors and/or family members who are marginally better off as lenders or "money guards". A money guard is simply a person who safely stores the money given to them by another person (sometimes for free but often for a fee). The rationale for this institution is simply a commitment to self-control. Seeking family for both lending and money guarding it is stressful for the poor for at least three reasons: unreliability, lack of privacy, and lack of transparency. For example, these informal loans are unreliable because the money guards might have spent the money (the money guards are still poor). A lack of privacy is important because people may not want to borrow because they feel ashamed and pay a big emotional toll. Moreover, if they borrow money they will later be expected to reciprocate. Finally, sometimes the transparency of the interest rate is questionable when lending through informal channels. All of this adds up to high risk in gathering substantial sums of money and a stressful situation for the poor.
Having access to some credit or savings is very important because the poor are rarely insured against a variety of events. For example, if a family member develops a sudden illness this acts as a large negative shock to their income. In rich countries we have various kinds of insurance to protect us against such risks; however, insurance is a difficult financial instrument to use amongst the poor. People have tried to provide so-called "micro insurance" with mixed results. In particular, in the authors' sample the results for insurance in Bangladesh and India were quite bad with poor management of funds that resulted in an inability to payoff the insured.
Alas, if the poor are uninsured they must have the ability to acquire a loan or dip into savings to absorb risk. Then, the question becomes, "How do the poor accumulate larger sums of money?". So far we've talked about informal loans which you can think of as "accelerators" but the poor will sometimes utilize different kinds of savings arrangements ---we'll call those "accumulators". The authors discuss a few accumulators such as savings clubs, rotating savings and credit associations (RoSCAs) and accumulating savings and credit associations (ASCAs). Savings clubs are simple commitment devices in which a large group of people save X dollars for Y months and then receive X*Y at the end. The purpose of joining a savings club is simply to encourage each other to stay committed. RoSCAs and ASCAs on the other hand are a little more complex because people take turns reaping the benefit of the savings. In RoSCAs each person puts in X dollars a month and every Y months it's your turn to receive all the money in the pot. Some RoSCAs are even more sophisticated where they auction the right to the money to people who haven't taken their turn (which essentially acts as an interest rate). Finally the ASCAs are like the RoSCAs but don't zero out the pot each time. Some money is left in the pot to act as loanable funds to increase the overall wealth of the membership.
Then, the authors discuss some of the most up-to-date innovations in microfinance and other commercial banks. With commercial banks the authors provide the example of "Kishan Credit Cards" which allow for small and marginal farmers to improve their cash flow. The farmers can use these credit cards anytime throughout the year and must pay them back by the end of the year to use the credit card in the subsequent year. This allows for farmers, whose incomes are seasonal, to smooth their consumption over the year. Another innovation that comes from microfinance is the concept of "top-up" for loans. Without top-up borrowers needed to pay the entire loan back before receiving more money; however, with top-up borrowers are able to refresh the loans to their original amount even when they haven't paid back the whole loan.
These innovations are an excellent example of institutions. Institutions are the "rules of the game" and small changes in the rules of the game can have a significant impact on the ability for the poor to meet their daily needs. Finally, after discussing some of the innovations the authors are able to cull some additional insights from their research about the what characteristics of financial instruments are most important for the needs of the extremely poor. The authors identify four such characteristics: reliability, convenience, flexibility, and structure.
Reliability - The poor need a safe place to store their money with someone who is trustworthy and will not be tempted to spend their savings. Reliability is crucial in their financial instruments because so many other facets of their lives are irregular from earned income to schools and clinics to care for them.
Convenience - One of the primary reasons the poor in the authors' sample did not take advantage of microfinance institutions is that they were not convenient. The poor needed to travel long distances or attend regular meetings to obtain credit. The more accessible the financial instruments the more likely they are to be used. The authors provide the example of some microfinanciers who have begun daily visits to provide people with more opportunities to repay and take-up loans.
Flexibility -Because incomes are so irregular the poor need some flexibility in the payment schedules for the loans. The Kishan Credit Card is a good example of providing such flexibility. The main objective is for the loan to be paid in full, but, it allows the poor to supplement their less abundant months with credit while paying off the loan in the more abundant months.
Structure -Even with flexibility there needs to be some structure because it is difficult to maintain self-control when you're living on such a small income.
There were many other interesting facets of the book such as how interest is charged in the microfinance industry and how the interest rates are not as exorbitant as they may look at first blush because they are nominal rather than compounded. Also, the interest rates must be somewhat higher because of high default rates and because debts owed are cancelled upon death. To me the book comes down to this really central point from the authors:
"In the rich world, a household's portfolio of financial instruments is usually managed on the basis of risk and return. The portfolios of the poor households are instead managed to ensure money can be obtained in the desired amounts at the desired times."
The book was a joy to read and gave me a lot of insight into how the poor actually live and the struggles they face. Below is a video of well-known development economist Bill Easterly discussing the book.
This best-selling book showcased Michael Lewis' excellent writing style even on such an opaque topic as sub-prime mortgage backed securities. Filled with an intriguing cast of characters and colorful dialogue Lewis recounts the events leading up to the largest financial collapse in the history of Wall Street. He tracks
four groups of men: Scion Capital, FrontPoint, Cornwall Capital, and Deustche Bank who noticed that (or heard from others and believed that) loans were essentially being given to Americans who would soon have no ability to repay them. The mystery that befuddled these men was that Wall Street did not seem to pay attention to this fact. Lewis tells the story as if Wall Street financiers were under a trance and the misguided delusion that these people repay their loans. If that wasn't the case then a less savory explanation exists ---they knew and they didn't care (because these sub-prime mortage backed securities were making them rich).
Financial economics is not an area that I'm familiar with; however, it was interesting to get a perspective from "inside the doomsday machine". There were also interesting discussions at the end of the book about moral hazard, risk, and agency problems. People have an incentive to engage in risky behavior when they do not experience the negative consequences of their actions. Moreover, bosses could not easily monitor what their employees were actually doing with the firm's money. Some food for thought at the end was whether all this could be traced back to the 1980s. When Salomon Brothers transitioned from a partnership to a publicly traded company they essentially shifted the risk away from their clients and themselves and onto the shareholders. Also, as new financial instrument became more exotic they became more opaque and nobody could really understand them. If you can't explain what is a "collateralized debt obligation" or which mortgages are contained in the sub-prime mortgage backed securities then we're in trouble.
This leaves me with a final thought: Charles McDaniel spoke at ASSA meetings in a special session for the Association for Christian Economists a couple years ago. He was citing GK Chesterton and his belief that if the economics was too complex to explain there was probably something wrong and perhaps that road should not be traveled. After reading this book I couldn't agree more.
Tonight the Economics Club and others will watch L.A. Confidential. Meanwhile Mark and I will wait in the wings to present our research on how the LAPD went from worst to first in only five or six years. The corruption portrayed in L.A. Confidential is not a caricature of the LAPD in the late 1940s --- in fact, the portrayal is only a shadow of the extent of corruption. When William Parker became police chief in 1949 (after a massive prostitution scandal) he quickly turned the corrupt situation into the model of police professionalism.
I'm certain Mark and I will summarize this research in a future and more detailed blog post; however, the talk tonight reminded me to write a book review of Economic Gangsters. This book was written by Edward Miguel and Raymond Fisman (2008) Princeton Press and explores some important questions surrounding corruption.
Understanding corruption is extremely important because the stakes are so high. First, I will place corruption in the context of the larger debate on economic development. Both Fisman and Miguel were students of Jeffrey Sachs (author of The End of Poverty) at Harvard. Sachs' core idea is "the poverty trap" which suggests that poor people are unable to escape poverty because they have 1) Low Savings, 2) Many Children, 3) Threshold Effect of Capital. Put another way, poor people do not have enough money to make investments that will improve productivity. This leads Sachs to conclude that impoverished countries need a "Big Push" to escape their poverty. What is a "Big Push"? A massive infusion of foreign assistance. Fisman and Miguel write,
"Sachs's ideas for ending poverty make sense in theory. But many other economists hold the opposite view, that we're spending too much on foreign aid already ---or at least spending it in all the wrong ways and places. Bill Easterly is the public face for these arguments . . . [Easterly claims] Sachs's plan of expanding aid five-fold would likely fritter away trillions more [dollars]. Easterly argues that these enormous sums of aid money have often been spent on grandiose centrally planned projects ---hydroelectric dams, four-lane highways, destinations plants ---in countries ill-prepared to oversee their construction, operation, and upkeep"
Then, Fisman and Miguel add,
"What we do know today is that much of the developing world doesn't have a lot to show for these past foreign aid efforts, barely anything beyond a collection of rusting monuments to good intentions."
Put simply, the effectiveness of foreign aid, in part, depends upon corruption. When we provide aid assistance to other countries we must ask whether the leadership will invest that money for the body politic or if they will pocket the money for themselves and their cronies. The authors tell six stories, three on corruption and three on violence which help shed light on these problems which are critical to helping people experiencing extreme poverty (I write about the stories of corruption here). These stories utilize very interesting methods to research problems (most corrupt people do not announce their corruption to the world and keep well documented Excel spreadsheets of their bribery and extortion). In the end these stories provide some insight into human behavior and ways to get ahead of the curb on corruption.
Chapter 2: Suharto Inc.: This chapter tracks the exploits of "Tommy", the son of Indonesian President Suharto. The question centers around how Tommy accumulated such wealth as a businessman. Was it through shrewd investment or political ties? Then, the question becomes, "How can you prove it?" In a survey, people could say that Tommy was corrupt, but, talk is cheap. We want people put their money where their mouth is. The closest thing to that kind of bet is the stock market.Fisman and Miguel describe how certain stocks dropped significantly whenever Suharto became sick. Those certain stocks were also ones that Tommy was affiliated with. We can infer from those drops and the affiliation that these companies were considered valuable due to their political ties. If Suharto died Tommy would no longer have the same political persuasion and those companies would be less valuable.To boot, this chapter has a nice section on potential benefits from organized crime.
Chapter 3: The Smuggling Gap: Smuggling is big business. Mr. Lai smuggled $6 billion in merchandise from Hong Kong to China during the 1990s. This chapter is primarily about incentives and how criminals respond to prices and incentives. Because some products were taxed more heavily by the Chinese inspections officials, masking the nature of the product can be pretty profitable. For example, Lai would lie about tobacco being wood pulp or chickens being turkeys (whichever had a lower tarriff rate). Additionally, it is estimated that half of the customs officials were "on the take". One lesson learned from this is that tariff rates on similar looking items should be equal. But, there are a lot of really intriguing nuances in this chapter such as whether bribery is grease or sand in the wheels of the market.
Chapter 4: Nature or Nurture: This chapter is a personal favorite because it is just really really cool and involves an interesting population and subject: diplomats and parking tickets. Because each diplomat has diplomatic immunity each of the diplomats face the same external incentives for racking up parking tickets: their wrong behaviors will not be punished by the U.S. There is a high correlation between the most corrupt countries in the world and the diplomats from those countries racking up parking tickets. Since presumably it is equally difficult for everyone to find parking and everyone faces the same incentives Fisman and Miguel infer that there is a significant cultural element to corruption. Some of the diplomats didn't rack up parking tickets simply because that would be taking advantage of their position. It was part of their identity. Fisman and Miguel conclude, "The central lesson . . . is that reformers . . . must be aware that values and social norms can undermine their attempts at change."
As I said earlier, there were three more chapters about violence and conflict which I can certainly write about in a later blog post. But, to conclude, this book was a smooth read on a timely topic. Any person with an interest in development economics should definitely read it. Judging by the popularity of Law and Order, CSI, and other crime shows there would certainly intrigue and thrill from the general population. Additionally, you'll get to hear about how these economic sleuths uncovered corruption. Overall, the book is a well formed pair of entertainment and significance.
The slender paperback "Dimensions of Prayer" by Douglas Steere sat dusty and mostly unread on my shelf since I purchased it in August 2009 at Duke Seminary. Douglas Steere writes with powerful prose, and the wisdom of a life lived with Christ causes truth to pour from each page. The book was well organized and divided into four chapters and numerous subsections. The way Steere regales the reader with stories and wisdom from giants of the Christian tradition made the concepts easy to understand and a joy to read. Once you have set your mind to reading "Dimensions of Prayer" you could finish it in a flash. I would recommend this book to anyone who wants to develop a more powerful inner life.
The reason the book sat "mostly unread" was because of my own cowardice. Sometimes truth is difficult to stomach or irritates the status quo. Douglas Steere explains, "To come near to God is to change", if we draw near to God we cannot expect to stay the same. Steere invokes an image familiar to fans of Screwtape Letters when he writes:
"Is it not the dread of this self-awareness and this change that causes each of us to resist the call to continued prayer? . . . It can be put almost as bluntly as this: we do not pray, or we give up prayer, because a strategist within us knows all about what takes place in this prayer chamber, knows that a drastic change is involved, and senses the threat."
The rest of the review will follow the sequence of his chapters: Prayer and the Human Situation, To Pray is to Change, The Power of Prayer, and The Dialogue Between Prayer and Action.
1. Prayer and the Human Situation
Prayer sometimes seems boring and tiresome. But consider how bold the following statement is: "Francois de Sales expressed this [importance o prayer] very simply by telling those who pray to begin by remembering Whose Presence they were to come". How bold! When we kneel to pray and surrender our hearts we are making a declaration that we wish to have communion with the Creator of the Universe!
Moreover, He wants intimacy and relationship with us. Steere reminds us, "We do not project or generate grace. Nor do we initiate the redemptive order or process which, when we let it, sweeps into its course our scarred lives, our prayers, and our concerns for others. The redemptive process is already going on. It sprang out of the heart of the Creator of nature; it is a second kind of creation." He wants intimacy and worship because our proximity to Him will make us beautiful people.
He reaches out for us like in Luke 15; but, sometimes his outreach looks different (He also invented hide-and-seek). Steere relays the following story that illustrates this point,
"There is a Jewish Hasidic story of a rabbi's son who came in drenched with tears from a game of hide-and-seek with some neighborhood playmates. When his father asked him what was the matter, his son told him that he had hidden as was expected but that no one had bothered to seek him. The rabbi drew his son to himself and tenderly told him that now, perhaps, he could for the first time know how the dear Lord felt who also hid himself in order to be sought, and was still waiting in vain for his people to seek him."
God never leaves or forsakes us, but, sometimes He hides to help cultivate an attitude of intentionality and desire. No matter whether we feel God reaching for us, or whether He has withdrawn to cultivate this intentionality, we must place God at the center of our lives. And, He will sustain and grow us.But, more than bustling overtures of God's grand love Steere invites readers into the practical part of prayer.
What do we do when we pray? Steere comments, "The scaffolding of prayer is a human matter," and "In order to pray, you have to stop being 'too elsewhere'" The details such as kneeling, suppine, sitting, whatever ---these are humanly devised. The importance of prayer, Steere says, is to be receptive to the Divine. You have to want to pray. Quoting John Wesley, "Whether you like it or no, read and pray daily. It is for your life; there is no other way: else you will be a trifler all of your days . . . Do justice to your own soul; give it time and means to grow. Do not starve yourself any longer."
Devotional reading is important, but, Steere warns that devotions should not replace prayer. If we substitute reading for prayer we have been tempted to evade direct communion with God. Prayer may take a lot of conscious effort; however, these willful and deliberate acts give rise to communion. Finally, when you pray Steere writes, "Real prayer is focused upon God and God's redemptive love . . . Real prayer is capable of rising to another level."
The wisdom culled from Steere in this section is too much to write in this blog post. But, to close this section: What about distraction? Our minds race in prayer. Teresa of Avila confessed, "My mind wandered about like an insane person from room to room . . . [yet] we are bound to pray with attention and may God grant that . . . we may succeed . . . without wandering thoughts. I sometimes suffer from them and I find the best remedy is to keep my mind fixed on Him to whom my words are addressed." Steere advises us to accept and acknowledge distractions and His grace will cover even some of our most feeble attempts.
2. To Pray is to Change
TO COME NEAR TO GOD IS TO CHANGE. God is the Potter and we are the clay. He is always molding us, and, in prayer we will undergo a continual conversion. The cost of this renewal though is nothing less than our whole lives. We must have hearts that do not hold back. In this section Steere invites adventure and heroics like a brilliant pre-battle speech.
The pearl of greatest price was not purchased for a trifling sum. Someone found it so gorgeous and worthwhile they were willing to give up everything. Likewise we should not hold back with God. Steere advises that our prayer lives will soar when we stop holding back.
Prayer must not ignore adoration. Steere writes, "There are many people in our time who simply have no conception of what adoration is or what part it must take in the practice of prayer . . . The adoration of God in prayer is a mixture of gratitude and reverance and awe." The side effects of adoration are peace and blessing. When we spend time in God's presence, adoring, thanking, praising we will be changed people.
. . . uh, I may need to write a Part II Review, because this book was so thick with wisdom I'm finding in nearly impossible to winnow down observations. In short, prayer removes the dross of the world from our hearts and awakens our identities as sons and daughters of the Living God. We are invited to become people that live from the inside out rather than outside-in (which is the way I have done so many things in the past).
Steere is a highly qualified guide to help navigate the terrain of prayer. This book is highly recommended.
Economists gravitate toward explanation by incentives; but, values also constitute motivations for action. The premise of this book was to investigate the values-based explanations and demonstrate the “Critical Role of Values in the Economy”. Sadly, if that was the aim of this book it was a disappointment. While the diversity of disciplines provides alternative perspective on values (their transmission, acceptance, evolutionary basis) the feel of the whole book is disjointed. There were, however, a few bright spots amidst several misguided articles. The particulars of the basis for my critique are below, but, overall I would still recommend the book as a first cut at a discussion about morality and markets.
Paul Zak’s introduction and chapter “Values and Value” as well as Schwab and Ostrom’s article “The Vital Role of Norms and Rules in Maintaining Open Public and Private Economies” come the closest to integrating values. Particularly, Schwab and Ostrom explain the need for values when they discuss the infinite regress problem, “Thus, at some point, we must cease to rely upon institutional corrections and place our faith in a citizenry well educated in virtue. Ultimately we must guard the guardians. It is our hope that, by keeping our rules for institutional design in mind, we can guard them well.
That is, good institutions help; however, when there is always an incentive to defect for personal gain (from each guardian), at least one guardian must say, “I will not defect because of that’s not part of my value system.” That there is a necessary critical mass of pre-existing values is important. Now, how those values come about is another story.
Zak’s discussion of the importance of empathy is a phenomenal starting point to consider where those other values (fairness, trustworthiness, honesty, etc) emerge. As Solomon tells us in the book empathy is the basis of Adam Smith’s Theory of Moral Sentiments (since empathy was not yet invented as a word Smith used “sympathy”). Our ability to feel for another person is central to personal exchange and speaks towards the kinds of policies we desire to impose on impersonal exchange.
Other excellent articles included Casebeer’s “The Stories Markets Tell”, Kimbrough et al “Building a Market”, and Erin O’Hara’s “Trustworthiness and Contract”. In particular Casebeer offers an interesting take on how markets fail to win people’s hearts and how fallacies about the market persist. The middle of the book contained a variety of stories about monkies (which did not really tell us very much that we didn’t already know from experimental economics) and macro-cultural evolution which attempts to tackle a very large problem rather than focusing on devices that coordinate large-scale identity.
There are two short critiques followed by two longer critiques:
1. This book on “the critical role of values” pursues only evolutionary explanations of values and disregards the role of religion in values formation. Sometimes this disregard is not merely from absence but is rather flippant. For example, Goodenough writes, “Where does the capacity for such internal commitments come from? Some look to religion, and indeed a divine, designing power would have good reason as a matter of mechanism design to put such a capacity into humans, a gift as essential to their eventual well-being as sight and locomotion. But such a divine gift is not the province of science; we rely on that wonderful mechanism for bootstrapping adaptive design: evolution.” Not a peep about religion and the formation of values. What makes this more interesting is that this project was funded by the Templeton Foundation!
2. There should have been a concluding chapter. With all of the disjointedness of content there should have been a chapter that sought to tie the disparate units together for the reader.
3. There is a sense that some of the authors begrudgingly admit that markets are overall a “good thing”. This is captured well in Charles Handy’s final chapter “. . . the urgent question now is how best to retain the energy produced by the old model without its flaws.”
The authors are willing to admit that capitalism provides a dynamic environment in which innovation is allowed with greater incentive, but, they seem reluctant to embrace the outcomes of capitalism. One might think that the authors would say, “Yes, indeed we are reluctant to embrace capitalism ---look at all the cowboys out there screwing everything up!” (this book was being written in the midst of all the financial scandals). But, what is the alternative? More regulation?
The reliance of government would present plenty of public choice problems. Then, we must point to the importance of values in the political process! The critique is meant to elucidate the fact that human beings are flawed people and since humans comprise government, business, and other organizational structures those same problems will persist in all contexts unless values are strong.
4. Many of the other articles are based either on straw men, or, they are a commentary about how non-cooperative game theory has overtaken the economics profession. Let me explain. A number of the articles begin by discussing Homo Economicus –“the cartoon character”- and proceed to bash the model of rational calculation and self-interested agents as though it were a piñata. Their mistake however is that the Homo Economicus they portray is not part of the neoclassical vernacular, but, rather an invention of non-cooperative game theorists.
While it is true that the “economic man” (a term given to JS Mill’s theoretical abstraction) was part of neoclassical economic history “economic man” was always embedded in an environment of property rights and other social institutions. This can even be clearly seen at the dawn of game theory with Morgenstern and von Neuman, “Theory of Games and Economic Behavior” where they assume norm adherence as important for a cooperative solution.
Why is this important? This questions the ability of many of the authors to use this model as a platform for stating the obvious, “humans care about things other than monetary payment.” But, ever since the marginalists, neoclassical theory has used utility space which can include a variety of arguments outside of financial payment (see Blaug). I know the authors know this because they cite people like Bolton and Ockenfels and Fehr and Schmidt. But, their insistence leads me to believe that they are just raging against the perception that economists only care about self-interest.
In the end, this book has a dual identity. I believe the book was supposed to be about the “critical role of values in the economy”, but, some of the authors merely saw it as an opportunity to bludgeon a wrongly labeled neoclassical model of self-interest. For example, authors in this volume, Boyd and Richerson state, “Challenging the emphasis of selfish rationality in conventional economic theory is the main theme of this book.”
As a Presbyterian, I’m a member of a denomination that has a long and proud history of debate (which is kind of a nice way of saying pushing and shoving) on both theology narrowly defined and on how we are expected to live as followers of Jesus in the world. Presbyterians have been in the heat of these things from the Protestant reformation, through the English Civil War, the American Revolution, the civil rights movement, and today's "culture wars". Today, Presbyterians probably try to take positions on 19 of the 12 things in our society that they should.
In some ways, I have grown weary of this inside the Presbyterian denomination because the debates are so predictable that they simply mirror the external world’s dimension of political liberalism or conservatism: tell me how a Presbyterian believes about abortion and the War in Iraq and I can, with an economically respectable probability of about 95 percent, predict how they will come down on just about any other social issue: fast food boycotts, divestment from companies doing business in Israel, capital gains taxes, and so forth. So I find it interesting when I see Christians who seem to break out of these patterns: Rod Dreher has become famous for his program of “crunchy conservatism”. Likewise, I enjoyed reading the book The Irresistible Revolution by Shane Claiborne, an unabashedly Evangelical Christian who, as I think he would like to say, wants to turn our view of our labels of other Christians upside down. Shane lives as a part of an intentional Christian community (known as the Potter Street Community) in inner city Philadelphia.
When I read through a book, I tend to use personal coded markings that I have to explain to people. Underlines or sidelines usually means I agree with or have learned something. Notes in my personal scribbled version of an unknown tongue usually indicate where I take issue. So it is a good thing that I finished IR with both many underlines and many scribbles. By itself that is my recommendation for reading the book. This blog is not really the place for a full-fledged book review, so I will just sketch a couple of my underlines and introduce some of my scribbles.
First, I have enormous respect for advocates of social-justice, even when I disagree with some (if not many) of their economic prescriptions, when they are obviously sincere, dedicated, and attempting to live a Christian life of peace and justice far beyond what I would be comfortable doing from my middle-class lifestyle. Shane Claiborne clearly is a person whose entire life is modeled on the sacrificial life of people such as Mother Theresa. Shane and his colleagues are as far away as it is possible to get from my stereotype of the Christian liberal who opposes school choice and globalization while driving his kids to a private school in a Volvo. I can’t in a short space do credit to the wonderful work that the Potter Street folks are doing in living and working in inner-city Philadelphia.
Theologically, Shane equally and correctly critiques the emptiness of some of the mainline (less evangelical) denominations’ worship experiences while raising crucial questions to conservatives, such as “Why should any Christian church ever have a national flag (American, British, Ugandan, whatever) at the front of the sanctuary where the most holy of Christian symbols reside?” Shane challenges our current Christian safe zones on issues such as the anonymity of charity and consumerist life styles in a way that ought to make almost any modern, Western Christian uncomfortable.
On the other hand, my overall criticism of the book is that, in spite of his desire to transcend old political labels, in his political commentary (what I associate with the broader agenda organization “The Simple Way”) Shane is much more comfortable and explicit in criticizing “conservative” rather than “liberal” Christian voices. For example, although he speaks against abortion, his words don’t carry the same sense of personal passion as his criticism of, for example, U.S. foreign policy[1]. While the day to day life that Shane leads boldly mirrors that of Mother Theresa, once he starts to systematize his ideas for what amounts to a prescriptive policy of economics, it starts to sound pretty much like warmed over undergraduate utopian Marxism. He doesn’t seem to connect his reflexive faith in “progressive” economic rhetoric with the fact that “progressive” economic policies are at the root of things like the city government regulations that cause his community so much grief.If you don't understand how wealth is created, you can't really understand how poverty can be eliminated. As an economist, I found this example of the community’s attempt to swear off of “money” both funny and instructive (p. 179):
“In Philly, we have an ongoing dialogue about creating a village of communities, bartering with one another, sharing things we need --- even creating a new currency where people exchange hours of work and are valued not because they have money but because they are willing to contribute to others and offer their time to service. One community may have a plumber but need a gardener; another may have a gardener but need blankets; and yet another may have blankets but need a plumber.”
So, having cast off one of civilization’s oldest inventions, money, Shane envisions returning to a barter economy. But the problem with a barter economy is that bilateral exchange cannot address the so-called “double co-incidence of wants”: the plumber – gardener – blankets problem. So to solve this, Shane proposes creating a “new currency” … that is to say, money. Suffice it to say that I have a new story for my principles of economics lecture on why humans use money.
Finally, let me close on a bothersome point. Irresistible Revolution has the marks of being what I would call “lightly edited” by the publisher, Zondervan. Shane’s strength as an evangelist is in cutting through theological fog with simple, powerful Biblical points. But simplification requires a discipline against distortion and factoids. The Part II of this post will elaborate on this criticism (the “scribbles”).
One of the things I do as a professor is review work, so because of that I’m very used to a positive review being one that both praises and criticizes the work, so please don’t be surprised when I say this is a productive, challenging book for all Christians working out their salvation with fear and trembling. For those of you with further interest, a colleague of Shane’s e-mailed Doug and me with information on a new DVD series that they have produced:
“Hey if you're a fan of Shane Claiborne and his book, then you should really check out the Another World is Possible DVD series. It's a multimedia project by Shane Claiborne and Jamie Moffett (co-founders of the Simple Way) that emerged in response to their belief that things are not right in the world, and that they don't have to stay that way. There are three DVD's, one on war, one on poverty, and one on creation. You can find out more about them at www.awip.us.”
[1]As someone old enough to remember the well meaning but badly mistaken Christians who misrepresented what was really going on inside of the Iron Curtain, I have many reservations about Shane’s views on foreign policy, but that’s a deeply complicated issue that I may save for another blog.
