Religion, Politics, Biology, and Economics: The Struggle of Reason with Emotion September 28, 2009

1. Religion, Politics, Biology, and Economics: The Struggle of Reason with Emotion September 28, 2009 copies of this presentation can be found at www.antolin-davies.com

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

3. 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).

4. Economic Truths • Everything is scarce. • Everything. • Every choice includes a tradeoff. • A choice to pursue something is a choice not to pursue something else.

5. 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.

6. 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.

7. You want it. You can’t have it. What are you going to do about it? Economic Truths • Everything is scarce. • Every choice involves a tradeoff. • People respond to incentives.

8. Economic Truths The answer lies in community. • Everything is scarce. • Every choice involves a tradeoff. • People respond to incentives. • Exchange is a positive-sum game. • Profit happens when someone creates value for others.

9. 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.

10. 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

11. Globalization and Income • Market-As-Exploitation Claim • Globalization results in a transfer of income from the less wealthy to the more wealthy countries.

12. Greater per-capita trade is associated with greater per-capita income. Source: International Financial Statistics, International Monetary Fund, December 2001

13. Greater per-capita trade is associated with more equitable income distributions. Source:International Financial Statistics, International Monetary Fund, December 2001, and Measuring Income Inequality: A New Database, Deininger, Klaus, and Lyn Squire, World Bank, 2002

14. Greater per-capita trade is also associated with more equitable income distributions among the poorest countries. Lithuania Fiji Thailand Ukraine Source:International Financial Statistics, International Monetary Fund, December 2001, and Measuring Income Inequality: A New Database, Deininger, Klaus, and Lyn Squire, World Bank, 2002

15. Globalization and Income • Reality • Globalization results higher incomes and lesser income gaps.

16. Globalization and Exploitation • Market-As-Exploitation • Globalization results in an increased exploitation.

17. GDI measures quality of life (longevity, education, literacy, income) for women relative to men. Greater per-capita trade is associated with greater gender equality. Source:International Financial Statistics, International Monetary Fund, December 2001, and Human Development Report, United Nations Development Programme, 2002

18. Greater per-capita trade is associated with reduced child labor. Source: International Financial Statistics, International Monetary Fund, December 2001, and World Development Indicators, World Bank, 2002

19. Even among middle-lower and lower income countries, greater per-capita trade is associated with reduced child labor. Source: International Financial Statistics, International Monetary Fund, December 2001, and World Development Indicators, World Bank, 2002

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

21. Globalization and Unemployment • Market-As-Exploitation Claim • Globalization results in an increased unemployment.

22. Greater per-capita trade is associated with reduced unemployment. Source: Bureau of Labor Statistics, and Bureau of Economic Analysis

23. Greater per-capita trade is associated with increased real wages. Source: Bureau of Labor Statistics, and Bureau of Economic Analysis

24. Globalization and Unemployment • Reality • Globalization results in reduced unemployment and higher wages.

25. Markets and the Income Gap • Market-As-Exploitation Claim • As markets grow, the rich get richer while the poor get poorer.

26. % of Households in Each Income Bracket (2006$) Source: Statistical Abstract of the United States, U.S. Bureau of the Census, 2009, Table 668.

27. % of Households in Each Income Bracket (2006$) From 1980 to 1990, the number of households with purchasing power of at least $75,000 grew while the number with purchasing power less than $75,000 declined. Source: Statistical Abstract of the United States, U.S. Bureau of the Census, 2009, Table 668.

28. % of Households in Each Income Bracket (2006$) From 1990 to 2006, the number of households with purchasing power of at least $75,000 grew while the number with purchasing power less than $75,000 declined. Source: Statistical Abstract of the United States, U.S. Bureau of the Census, 2009, Table 668.

29. Markets and the Income Gap • Reality • As markets grow, rich and poor get richer.

30. Markets, Wages, and the Poor • Market-As-Exploitation Claim • Minimum wage (or “living wage”) protects the poor in their working years.

31. Increases in the minimum wage are not associated with changes in unemployment for workers with college educations. Source: Statistical Abstract of the United States, and Bureau of Labor Statistics

32. Increases in the minimum wage are associated with increased unemployment rate for workers with only high school diplomas. Source: Statistical Abstract of the United States, and Bureau of Labor Statistics

33. Increases in the minimum wage are associated with increased unemployment for workers without high school diplomas. Source: Statistical Abstract of the United States, and Bureau of Labor Statistics

34. Increases in the minimum wage are associated with increases in unemployment for less skilled workers. Source: Bureau of Labor Statistics

35. Markets, Wages, and the Poor • Reality • Minimum wage (or “living wage”) hurts the lesser educated and the lesser skilled.

36. Markets, Wages, and the Poor • Market-As-Exploitation Claim • Social Security protects the poor in their old age.

37. 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

38. Comparison of Social Security to Privatized Cash Flows (College Graduate) Average withdrawal from privatized account is 6 times the average Social Security payment. Retirement at age 66, wage growth 3%, inflation 3%, median probability of employment, median mortality, 7% interest yield. Compiled from data published in 2006 Statistical Abstract of the United States, U.S. Bureau of the Census

39. Comparison of Social Security to Privatized Cash Flows (HS Graduate) Average withdrawal from privatized account if 4 times the average Social Security payment. Retirement at age 66, wage growth 3%, inflation 3%, median probability of employment, median mortality, 7% interest yield. Compiled from data published in 2006 Statistical Abstract of the United States, U.S. Bureau of the Census

40. 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.

41. Markets, Wages, and the Poor • Reality • Social Security is a net negative for all except those earning a wage below the poverty line and is a greater negative for minorities.

42. Lives and Dollars • Market-As-Exploitation Claim • Markets reduce human lives to dollars.

43. 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.

44. 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?

45. 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.

46. Lives and Dollars • Reality • Markets enable us to make the best decision in the face of distasteful tradeoffs.

47. 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)

48. Catholic Social Thought versus Economics How can Catholic social teaching be consistent with what we understand about economic truths? What does it mean to be created in the image and likeness of God?  To be created with free will. What is the prerequisite for behaving morally?  To have freedom of action.

49. 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)

50. 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?