religion, politics, biology, and economics: the struggle of reason with emotion september 28, 2009

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Religion, Politics, Biology, and Economics:

The Struggle of Reason with Emotion

September 28, 2009

copies of this presentation can be found atwww.antolin-davies.com

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Much valuable discussion fails to occur because of pride and prejudice.

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Prejudice

•Humans who work in private industry are greedy.•Humans who work in public sector are altruistic.

Pride

• Economic truths are opinion (relativism).• Inability or unwillingness to admit limitations

(hubris).

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Economic Truths

• Everything is scarce.

Everything.

• Every choice includes a tradeoff.

A choice to pursue something is a choice not to pursue something else.

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Economic Truths

• People respond to incentives.

Airplanes and car seats

Entrepreneurship and taxes

Russians and dead light bulbs

• Exchange is a positive-sum game.

Absent coercion and misrepresentation, people only exchange if they believe the exchange will make them better off.

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Economic Truths

• Profit happens when someone creates value for others.

We think of wealth as the means to obtain stuff from others.

In fact, wealth is the reflection of stuff we have already provided to others.

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Economic Truths


• Every choice involves a tradeoff.


You want it.

What are you going to do about it?

You can’t have it.

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Economic Truths


• Every choice involves a tradeoff.


• Exchange is a positive-sum game.

• Profit happens when someone creates value for others.

The answer lies in community.

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Socio-economic debates are heated because the two sides proceed from a different underlying assumption.

Markets-As-Exploitation Assumption

Markets lead to a centralization of political and economic power, decreased competition, and the concentration of wealth.

Markets-As-Empowerment Assumption

Markets lead to a decentralization of political and economic power, increased competition, and the dissemination of wealth.

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Some Markets-As-Exploitation Claims

•Globalization = income disparity, exploitation, unemployment

•Markets = “rich get richer while the poor get poorer”

•Minimum/living wage protects the poor in their working years

•Social Security protects the poor in their old age

•Godless markets reduce human lives to dollars

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Globalization and Income

Market-As-Exploitation Claim

•Globalization results in a transfer of income from the less wealthy to the more wealthy countries.

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R2 = 0.56

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000

Per-capita Income (US$)

Per

-cap

ita

Tra

de

(US

$)

Source: International Financial Statistics, International Monetary Fund, December 2001

Greater per-capita trade is associated with greater per-capita income.

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$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 55.0 60.0 65.0

Gini Coefficient (0 = equitable, 100 = inequitable)

Per

-cap

ita

Tra

de

(US

$)

Source: International Financial Statistics, International Monetary Fund, December 2001, and Measuring Income Inequality: A New Database, Deininger, Klaus, and Lyn Squire, World Bank, 2002

Greater per-capita trade is associated with more equitable income distributions.

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$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 55.0 60.0 65.0

Gini Coefficient (0 = equitable, 100 = inequitable)

Per

-cap

ita

Tra

de

(US

$)

Source: International Financial Statistics, International Monetary Fund, December 2001, and Measuring Income Inequality: A New Database, Deininger, Klaus, and Lyn Squire, World Bank, 2002

Greater per-capita trade is also associated with more equitable income distributions among the poorest countries.

Thailand

Lithuania

Fiji

Ukraine

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Globalization and Income

Reality

•Globalization results higher incomes and lesser income gaps.

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Globalization and Exploitation

Market-As-Exploitation

•Globalization results in an increased exploitation.

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R2 = 0.80

$1

$10

$100

$1,000

$10,000

$100,000

0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00

Gender Related Development Index (0 = low gender adjusted HDI, 1 = high gender adjusted HDI)

Pe

r-c

ap

ita

Tra

de

(U

S$

, lo

ga

rith

mic

sc

ale

)

Source: International Financial Statistics, International Monetary Fund, December 2001, and Human Development Report, United Nations Development Programme, 2002

GDI measures quality of life (longevity, education, literacy, income) for women relative to men.

Greater per-capita trade is associated with greater gender equality.

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R2 = 0.54

$1

$10

$100

$1,000

$10,000

$100,000

0 10 20 30 40 50

Children 10 to 14 in the Labor Force (as % of age group)

Per

-cap

ita

Tra

de

(US

$, l

og

arit

hm

ic s

cale

)

Source: International Financial Statistics, International Monetary Fund, December 2001, and World Development Indicators, World Bank, 2002

Greater per-capita trade is associated with reduced child labor.

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Source: International Financial Statistics, International Monetary Fund, December 2001, and World Development Indicators, World Bank, 2002

$1

$10

$100

$1,000

$10,000

0 10 20 30 40 50 60

Children 10 to 14 in the Labor Force (as % of age group)

Per

-cap

ita

Trad

e (U

S$,

lo

gar

ith

mic

sca

le)

Even among middle-lower and lower income countries, greater per-capita trade is associated with reduced child labor.

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Globalization and Exploitation

Reality

•Globalization results in higher gender equality and lower incidence of child labor.

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Globalization and Unemployment


•Globalization results in an increased unemployment.

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Source: Bureau of Labor Statistics, and Bureau of Economic Analysis

January 1975 to June 2006

0%

2%

4%

6%

8%

10%

12%

12% 14% 16% 18% 20% 22% 24% 26% 28% 30%

Trade (imports plus exports) as % of GDP

Un

emp

loym

ent

Rat

e

Greater per-capita trade is associated with reduced unemployment.

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January 1975 to June 2006

$12.00

$12.50

$13.00

$13.50

$14.00

$14.50

$15.00

12% 14% 16% 18% 20% 22% 24% 26% 28% 30%

Trade (imports plus exports) as % of GDP

Av

era

ge

Re

al H

ou

rly

Ea

rnin

gs

(2

00

0$

)

Source: Bureau of Labor Statistics, and Bureau of Economic Analysis

Greater per-capita trade is associated with increased real wages.

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Globalization and Unemployment

Reality

•Globalization results in reduced unemployment and higher wages.

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Markets and the Income Gap


•As markets grow, the rich get richer while the poor get poorer.

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Source: Statistical Abstract of the United States, U.S. Bureau of the Census, 2009, Table 668.

% of Households in Each Income Bracket (2006$)

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From 1980 to 1990, the number of households with purchasing power of at least $75,000 grew while the number with purchasing power less than $75,000 declined.



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From 1990 to 2006, the number of households with purchasing power of at least $75,000 grew while the number with purchasing power less than $75,000 declined.



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Markets and the Income Gap

Reality

•As markets grow, rich and poor get richer.

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Markets, Wages, and the Poor


•Minimum wage (or “living wage”) protects the poor in their working years.

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College Education (1984-2004)

0%

1%

1%

2%

2%

3%

3%

4%

0.3 0.32 0.34 0.36 0.38 0.4 0.42 0.44

Min Wage as Fraction of Avg Hourly Wage

Un

em

plo

ym

en

t R

ate

Source: Statistical Abstract of the United States, and Bureau of Labor Statistics

Increases in the minimum wage are not associated with changes in unemployment for workers with college educations.

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HS Education (1984-2004)

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

0.3 0.32 0.34 0.36 0.38 0.4 0.42 0.44


Un

em

plo

ym

en

t R

ate


Increases in the minimum wage are associated with increased unemployment rate for workers with only high school diplomas.

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Less than HS Education (1984-2004)

0%

2%

4%

6%

8%

10%

12%

14%

16%

0.3 0.32 0.34 0.36 0.38 0.4 0.42 0.44


Un

em

plo

ym

en

t R

ate


Increases in the minimum wage are associated with increased unemployment for workers without high school diplomas.

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Source: Bureau of Labor Statistics

Unemployment for Teenagers Relative to Adults (1964-2004)

1.5

1.7

1.9

2.1

2.3

2.5

2.7

2.9

3.1

3.3

0.3 0.32 0.34 0.36 0.38 0.4 0.42 0.44 0.46 0.48Minimum Wage as Percentage of Average Hourly Earnings

Un

em

plo

ym

en

t P

op

ula

tio

n R

ati

o f

or

16-1

9 Y

ear

Old

s a

s P

erc

en

tag

e o

f 20-6

4 Y

ear

Old

s

Minimum Wage as Percentage of Average Hourly Wage

Unem

plo

ymen

t Pop

ula

tion R

atio

for 16-19

Year

O

lds

as a

Per

centa

ge

of R

atio

for

20

-64

Year

Old

s

Increases in the minimum wage are associated with increases in unemployment for less skilled workers.

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Reality

•Minimum wage (or “living wage”) hurts the lesser educated and the lesser skilled.

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•Social Security protects the poor in their old age.

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Social Security Tax and Benefits (College Graduate)

Retirement at age 66, wage growth 3%, inflation 3%, median probability of employment, median mortality, 7% interest yield.Compiled from data published in 2006 Statistical Abstract of the United States, U.S. Bureau of

the Census

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Comparison of Social Security to Privatized Cash Flows (College Graduate)


the Census

Average withdrawal from privatized account is 6 times the average Social Security payment.

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Comparison of Social Security to Privatized Cash Flows (HS Graduate)


the Census

Average withdrawal from privatized account if 4 times the average Social Security payment.

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Net Present Value of Social Security Benefits by Race and Gender

NPV is at age 20 and assumes retirement at age 66, median wages, median probability of employment, 3% inflation, 5% discount rate.

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Reality

•Social Security is a net negative for all except those earning a wage below the poverty line and is a greater negative for minorities.

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Lives and Dollars


•Markets reduce human lives to dollars.

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Pick One: Compact Car or SUV

Price $23,000

Fatalities per million vehicles 117

Price $44,000

Fatalities per million vehicles 56

Those who chose the compact car just valued their lives at under $3 million.

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Seat Belts on School Buses

It costs (on average) $2.5 million for every child’s life saved.

Should we install seatbelts on school buses?

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Spend $2.5 million on: # Lives Saved Annually

Seatbelts on school buses 1

Airbags in cars 3

Heart transplants 13

Malaria prevention 975

Midwife training in third world 310,000

HIV tests for sex workers 715,000

If our concern is saving lives, then we should not spend money for seatbelts on school buses because every 1 life saved will be offset by 715,000 lives we might otherwise have saved.

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Lives and Dollars

Reality

•Markets enable us to make the best decision in the face of distasteful tradeoffs.

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Some Major Themes from Catholic Social Thought

Option for the Poor“…the more fortunate should renounce some of their rights so as to place their goods more generously at the service of others.” (Octogesima Adveniens, Paul VI, 1971)

Rights and Responsibilities“…when people are without a chance to earn a living, and must go hungry and homeless, they are being denied basic rights.” (Economic Justice for All, US Catholic Bishops, 1986)

Economic Justice“…it is necessary that economic undertaking be governed by justice and charity as the principal laws of social life.” (Mater et Magistra, John XXIII, 1961)Role of Government and Subsidiarity“…it is gravely wrong to take from individuals what they can accomplish by their own initiative and give it to the community…” (Quadragesimo Anno, Pius XI, 1931)

“A community of a higher order should not interfere with the life of a community of a lower level, taking over its functions.” (Centesimus Annus, John Paul II, 1991)

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Catholic Social Thought versus Economics

How can Catholic social teaching be consistent with what we understand about economic truths?

What does it mean to be created in the image and likeness of God?

What is the prerequisite for behaving morally?

To be created with free will.

To have freedom of action.

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Catholic Social Thought versus Economics

Freedom

“…we must reappropriate the true meaning of freedom, which is not an intoxication with total autonomy, but a response to the call of being, beginning with our own personal being.” (Caritas in Veritate, Benedict XVI, 2009)

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Catholic Social Thought, Economics, and Freedom

In the four Gospels, the poor are mentioned twenty-one times

• Four times, the poor are mentioned as a fact.

• Six times, the poor are called “blessed” or singled out as a special group who will receive the Gospel.

• Eleven times, Jesus instructs the listener to give to the poor.Question

Why, at no point, do the Gospels justify taking in the name of the poor?

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Question


Observation #1

To rely on coercion to feed the poor dehumanizes the poor by regarding them as “mouths to be fed.”

Observation #2

To rely on coercion to feed the poor dehumanizes the rich by regarding them as “sources of revenue.”

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Proposition

Poverty is a mechanism for forging a bond between rich and poor.

If we regard the elimination of poverty as an end in itself, we miss the greater opportunity that poverty offers – to bring the rich and poor together in community.

Question


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Corollary

Rights and responsibilities are inextricably linked.

If we give the state the responsibility for fulfilling our moral obligations, then we give the state the right to determine what our moral obligations are.

Question


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Epilogue: The Nagging Doubt

What if, in their freedom, the rich don’t give to the poor?

“The poor you will always have with you, but you will not always have me.”(Matthew 26:11)

“The poor you will always have with you, and you can help them any time you want. But you will not always have me.”(Mark 14:7)

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Religion, Politics, Biology, and Economics:

The Struggle of Reason with Emotion

September 28, 2009

copies of this presentation can be found atwww.antolin-davies.com

religion, politics, biology, and economics: the struggle of reason with emotion september 28, 2009

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