Salerno on the Latest Winner of the Economics Nobel Prize

Praise from across the journalistic and economics worlds have been heaped upon the awarding of this years Nobel Prize in economics to Jean Tirole, a French game theorist who has specialized in finding market failure in large businesses, especially if they are vertically integrated.

In the Financial Post, economist Joseph Salerno says "Au contraire." He notes:

Tirole was awarded the Nobel Prize for concocting complex technical solutions to what Austrian School economists have long known and taught to be pseudo-problems for a dynamic market economy driven by rivalrous competition among entrepreneurs eager to earn profits by anticipating and serving ever-changing consumer demands.

EPA's Power Plant Rule Is Too Draconian

. . .And will do much more harm than good. That was the primary message of a panel I was a part of who sat down with some of the editors of the Harrisburg Patriot-News on Wednesday.

You can read about our meeting in the paper's very fair write-up, "Pa. industry leaders take aim at EPA's power plant rule: Six takeaways"

As the piece notes, "John Pippy of the coal alliance and Dave Taylor of the manufacturers' group visited the PennLive editorial board Wednesday, with Shawn Ritenour, professor of economics at Grove City College, to voice their concerns with EPA's plan."

The EPA wants to reduce CO2 emissions from coal-fired electricity plants by 30 percent by 2030. Doing so requires draconian measures that are not even possible with current technology.

Our main points were as follows:

• What the EPA wants power plants to do is unrealistic and unachievable and will kill off coal plants.

• Renewable energy can't replace the power supplies that will be lost if EPA's rule takes effect.

• The EPA is not giving due credit for reductions in carbon pollution made since 2005.

• The EPA regulations provide little if any benefit to the environment for way too many bucks. And that does not even consider the moral issue surrounding the encroachment of private property

• A tax on carbon pollution is not a good alternative, either. I made the point that, among other weaknesses, any carbon tax would be arbitrary and, therefore, unsuited to accomplishing what its proponents want it to.

You can read the entire piece by clicking here.

Christian Professors Weigh in on Markets, Justice, and Exploitation

On September 5, Christianity Today published an article by Dr. Kevin Brown, seeking to examine the relationship between capitalism and the common good. Brown is assistant professor at the Howard Dayton School of Business at Asbury University and in his essay he chastises the Institute for Faith Work and Economics' video, I Smartphone as a too simplistic, pro-capitalist work that tempts us to "deify the market."The Institute subsequently asked six professors from various disciplines to comment on the question whether markets, within a biblical framework, lessen exploitation. I was one of the professors asked to share my thoughts and they are included in this blog post.

Obviously, a single blog post is not nearly enough to do justice to the question, however some points are clear enough. I wrote:

The market is a network of voluntary exchange. Nothing more, nothing less. It is not the arbiter of truth and beauty, but it is a marvelous institution nonetheless, because the market price system allows for the coordination of a vast, complex market division of labor that increases the productivity, income, wealth, and standard of living of everyone who participates.

This even includes those employed in harsh working environments at what most Americans would think of as unacceptably low pay. We should note, however, that what most people see as labor exploitation is, in fact, people choosing work under such conditions because it is their best alternative.

Of course Christ calls us to be responsible market participants. However, responsibility includes not harming others in the name of good intentions. We do not help the most vulnerable of our society by taking away their best alternatives.

I encourage you to read the entire post that features insights from five economists and an associate professor of New Testament studies.

Obama Climate Policies Hurt the Poor

From my latest op-ed in the Harrisburg Patriot-News:

In anticipation of this week's United Nations Climate Summit, tens of thousands of activists stormed Manhattan in what organizers dubbed "The Peoples Climate March."

Organized by environmentalist, labor, and self-styled social justice groups, marchers demanded "climate justice now," even observing a minute of silence to recognize those most affected by climate change. 

They should have taken a moment to pray for the world's poor, too. Because the policies they demand would devastate hundreds of millions of lives worldwide.
That's the conclusion of a new report published by the Cornwall Alliance, A Call to Truth, and co-signed by 150 evangelical leaders, pastors, economists, scientists, and others, including myself.

We analyzed how environmental legislation and regulations—like the ones called for by President Obama at the U.N.—reduce the standard of living for hundreds of millions of the world's poorest citizens.

Mandatory reductions in carbon dioxide emissions are among the most common demands of climate activists.

 

Raising their electricity prices through government mandates is the economic equivalent to a regressive poverty tax.

By cutting these emissions across the board, the argument goes, it will reduce greenhouse gas emissions and lower global temperatures. This supposedly will save the earth by healing her atmosphere and calming her seas.

What this argument does not include, however, is the effect such draconian cuts will have on electricity prices.

By effectively prohibiting the cheapest and most abundant sources of energy—i.e., fossil fuels—government-imposed cuts to carbon dioxide emissions necessarily cause electricity bills to skyrocket. Forcing millions of people who can't even afford food for dinner to pay more for electricity is far from social "justice."

Read the rest of the article

Jeremy Shearmur at Grove City College

This Friday September 12, the Grove City College Economics Department is hosting Jeremy Shearmur, emeritus professor at the Australian National University, who will be speaking on the topic, “Commitment, Scholarship, and Objectivity.” The lecture will be in Sticht Lecture Hall at 7:00-8:00 on Friday, September 12.

In his lecture, Shearmur will discuss questions such as how can a political commitment to freedom or traditional values, or a religious commitment, best be squared with the production of good scholarly work and with the successful pursuit of an academic career? He will also suggest one way in which the problems in this area might be resolved.

Shearmur is an Emeritus Fellow in the School of Philosophy, Australian National University.  He was educated at the London School of Economics, University of London, where he subsequently worked for eight years as assistant to Professor Sir Karl Popper, the political philosopher and philosopher of science. Shearmur taught philosophy at the University of Edinburgh, political theory at Manchester University, and was Director of Studies at the Centre for Policy Studies in London (a public policy institute of which Mrs Thatcher was a founder).  He was subsequently a Research Associate Professor at the Institute for Humane Studies, George Mason University, and then taught political theory and subsequently philosophy at the Australian National University.

He has wide academic interests in philosophy, political theory and the history of political thought, has published books on Popper and on Friedrich Hayek, and is currently editing Hayek’s Law, Legislation and Liberty for inclusion in Hayek’s Collected Works.  In addition to Popper and Hayek, he has a particular interest in C. S. Lewis, and in the ‘classical liberal’ or libertarian tradition.

I hope to see you there.

The Worst Five Years Since World War II

In a new essay, my colleague, Tracy Miller, explains why our economy has turned in the worst five-year performance since World War II. Miller notes that:

The Obama administration has pursued several policies that make it harder for market forces to work. These include: bailouts, expansion of entitlement programs, regulation of the economy, tax increases, and huge government deficits.

These policies cumulatively result in capital consumption and curtailment of entrepreneurship. They reduce the incentive and ability of people to save and invest and hamper the price system, making it more difficult for entrepreneurs to do their job of allocating resources to their most highly value uses.

Three Reasons Private Property Is Essential for Human Flourishing

In his Elements of Moral Science, published in 1835, Baptist minister and college president Francis Wayland cogently identified the positive link between private property and human flourishing.

He describes it in elegant prose:

Just in proportion as the right of property is held inviolate, just in that proportion civilization advances, and the comforts and conveniences of life multiply. Hence it is, that, in free and well-ordered governments, and specially during peace, property accumulates, all the orders of society enjoy the blessings of competence, the arts flourish, science advances, and men begin to form some conception of the happiness of which the present system is capable.

Economic theory teaches that Wayland was speaking truth. The right to property is absolutely essential for human flourishing, for it is the social institution necessary for the engines of economic prosperity to function.

Read the rest of the article