A collection of short essays by Acton writers, click a link to jump to that article:
- "Economic elites" by Kishore Jayabalan
- "Changing for the climate" by Gregory Jensen
- "How close are we to ending extreme poverty?" by Joe Carter
- "The immorality of the inheritance tax" by Ángel Manuel García Carmona
- "Property rights and water conservation" by Sarah Stanley
- "How Catholic social teaching strengthens the case for trade" by Kaetana Leontjeva-Numaviciene
- "How much does crime pay?" by Joe Carter
- "Three reasons income tax cuts (almost) always benefit the wealthy" by Joe Carter
- "Marketers “nudge” us, but should government?" by Victor V. Claar
Kishore Jayabalan, Acton Rome
Intellectuals are often vocal critics of capitalism. Most of them lean left politically, so it is easy to identify anti-capitalism with progressivism. It is therefore no coincidence that the modern welfare state has been administered by elites eager to correct supposed market failures on the way to a more egalitarian society. Leftist elites tend to be university professors rather than captains of industry, but elites they remain.
How, then, are we to explain the growing dissatisfaction with capitalism among those hardy band of intellectuals who call themselves conservatives? Has capitalism changed in some fundamental way so as to lose their support? Or was it always seen as the ugly sister to be tolerated for the sake of the alliance against Communism? Perhaps there is something about intellectuals, regardless of their political affiliation, that leads them to look down on moneymaking as the driving force of society.
In a sense, this is nothing new. Historian Jerry Z. Muller explains the ways intellectuals have criticized capitalism in his book The Mind and the Market. Nowadays anti-market sentiment is especially strong among one small but influential subset of intellectuals: conservative theologians.
Free-market advocates, however, should admit that economics and “the economic way of thinking” also affect culture in no small ways. They need to address questions such as: What social or cultural factors keep economics in check, especially in a society that places commerce at its center? What happens when economics overcomes these limits and comes to dominate at the expense of other goods? What are the downsides of the unlimited acquisition of wealth and an increasingly financialized economy?
Politics and religion often take a condescending view of economics and assume it can be directed and controlled at will, which the Keynesians were all too willing to allow. Elites tend to like dealing with other elites at the expense of the people. The problem is that the people need to work and will find ways to do so regardless of what their betters tell them and whichever models they may design.
Thankfully non-Keynesian economists take a much more humble approach to what can be known and dictated to a free people. Dare I call such economists populists? Maybe there is a way to bridge the growing divide between conservatives and libertarians after all.
Changing for the climate
Gregory Jensen, Acton Commentary
Too frequently, and despite overwhelming evidence to the contrary, environmental debates assume human beings are incapable of adapting to change. This is more than a little ironic, since most environmentalists would argue that climate change is the result of increased industrialization. The climate is changing because human beings continue to change and adapt to our environment.
As our ability to change led to industrialization (and diminishing global levels of poverty and increased standards of living), it has, in turn, brought about technological developments and cultural shifts that diminish negative human impact on the environment. Water and air, for example, are dramatically cleaner now than when I was a boy.
Government regulations played a role. But these regulations reflected changes in human desires, technological advances, and the increased wealth. It isn’t enough to want a better life or a cleaner environment. We also need the means to bring this about. More people around the globe have these means at their disposal, because we can change.
How close are we to ending extreme poverty?
Joe Carter, Acton Powerblog
The World Bank defines extreme poverty as living on less than $1.90 per person per day. How close are we to eliminating that level of poverty? Closer than you may think.
From the beginning of human history until about 1970, more people were living in extreme poverty than people who were not. But around 1970, economic growth began to lift millions out abject destitution. As poverty researchers Max Roser and Esteban Ortiz-Ospina explain, since around 1970 we began “living in a world in which the number of non-poor people is rising, while the number of poor people is falling. According to the estimates … there were 2.2 billion people living in extreme poverty in 1970, and there were 705 million people living in extreme poverty in 2015. The number of extremely poor people in the world is 3 times lower than in 1970.”
The idea that extreme poverty may have already “ended” and yet twice the current U.S. population is living on less than $1.90 a day may sound underwhelming. Even as we reach the “end of extreme poverty,” we’ll still need to continue, of course, to seek to have every person on earth have what they need to live. Yet considering that for most of human history everyone lived in extreme poverty, reducing the number to a mere 8 percent of the global population would be an astounding achievement and one of the greatest blessings in the history of the world. We may have a lot of work to do, but we should be grateful to God for having come so far in the past few decades.
The immorality of the inheritance tax
Ángel Manuel García Carmona, Transatlantic
Spain has one of the highest inheritance tax rates in the OECD, charging up to 34 percent of an estate upon someone’s death.
The inheritance tax is immoral not only because its original Spanish form violated European legal norms and procedures but also because it forces children to pay taxes, for a second time, on the fruit of their relatives’ or loved ones’ labor. Those loved ones already paid tax on this income during their lives; now the state will charge another person a separate tax on the same income. Nor should the state so freely inherit and dispose of estates as politicians, rather than their earners, see fit. It is not right to use their hard work to benefit politicians or convert the state into a real estate agency.
Families should not be forced to sacrifice their property to sustain an expensive state. Entrepreneurs and businessmen are the ones who created this prosperity. Socialist bureaucrats must not undermine principles of social solidarity and subsidiarity.
Property rights and water conservation
Sarah Stanley, Acton Brief
Conservationists are very concerned about protecting salmon and steelhead trout. The biggest issue they face isn’t quality of the water, its water temperature. If there’s too little water in the streams, the temperature rises and the fish die.
Conservationists allocate a certain amount of water for natural waterways so that streams maintain a reasonable temperature range.
Because of the amount of water that needs to go into the streams and rivers, there’s a tight limit on the amount of water allotted to agriculture. Because of the “use it or lose it” rules in Washington state, people are essentially encouraged to waste: Why save water if you’ll lose a portion of the total amount of water you receive next time?
Todd Myers, director of the Center for the Environment at Washington Policy Center, suggests giving property rights to the water. Once it becomes a farmer’s property, they will do whatever they can to use as little as possible. They’d then sell any remainder to other farmers or conservation groups who would then make sure it all went back into streams. A farmer’s decision about how much to use will be based on the price of water. Without that kind of incentive, they likely won’t invest in better sprinkler systems or other technology to monitor water usage. “The free market is great,” Myers explains. “It encourages people to do more with less. Our current system, the regulatory system in water, encourages the opposite, which doesn’t benefit the farmer, other farmers or the fish.”
How Catholic social teaching strengthens the case for trade
Kaetana Leontjeva-Numaviciene, Acton Brief
The Roman Catholic Church reminds us that we are all a family, and manmade restrictions should not be put up to prevent the cooperation of its members.
By restricting trade, politicians undermine not only trade as such but also the specialization and realization of human talents. Naturally, it is not “America” that trades with “China,” but American individuals, families, communities and companies that trade with their Chinese counterparts. The obsession with national balances of trade is meaningless.
Pope St. John Paul II stressed in his encyclical Sollicitudo Rei Socialis that “the economically weaker countries, or those still at subsistence level, must be enabled, with the assistance of other peoples and of the international community, to make a contribution of their own to the common good with their treasures of humanity and culture, which otherwise would be lost forever.”
Obviously, free trade should not turn it into an idol. We often hear that free trade has lifted billions of people out of poverty, when in fact it is billions of people – through their hard labor and unrestricted exchange – who lifted themselves out of poverty. Free trade should be recognized for what it is: an exchange among free persons; a process; a means to a better end, not an end in itself. A means that, when people are free, brings about their true flourishing as God intended.
How much does crime pay?
Joe Carter, Acton Powerblog
The claim that “crime doesn’t pay” was an early slogan of the FBI. In the short-term, however, criminal activity can produce an income comparable to the earnings of a middle-class worker according to a new paper published in the journal Criminology. The data was provided by interviews in the Pathways to Desistance Study and the National Supported Work Demonstration Project.
Individuals in this study reported earning an average of $1,470 a week through criminal activities. Out of this group, 83 percent reported selling drugs for money, 41 percent engaged in burglary and 12 percent reported engaging in robbery. Participants reported working a traditional job an average of 11 weeks over a one-year period.
The other survey, by the National Supported Work Demonstration project, conducted interviews with people who were unemployed and had a history of employment problems but may not have had criminal backgrounds. Individuals in this study reported earning an average of $914 a week through criminal activities. Out of this group, 55 percent reported selling drugs to earn money. In slightly more than 8 percent of interviews, they reported engaging in robbery. An estimated 38 percent of participants said they had engaged in other income-generating crimes. Participants in this group reported spending an average of 57 hours working a traditional job over a nine month period.
For both groups, those who did more legal work tended to have lower illegal earnings. For every $1 earned legally, there was a 7 percent reduction in illegal earnings.
Three reasons income tax cuts (almost) always benefit the wealthy
Joe Carter, Acton Powerblog
As Congress discusses tax reform, the debate about who will benefit from tax cuts is back in the news. And many people are concerned with how the changes will favor highincome earners. The reality is that there is almost no way to cut income taxes without most of the benefits going to high-income workers.
1. Americans with high incomes pay most of the taxes
The intended goal of reducing taxes on Americans can have a significant effect on whose taxes are being cut. For example, let’s say the goal is to cut income taxes to return a specific amount of money back to citizens – $500 billion – in the hopes of stimulating consumer spending.
If that is our goal, then we can’t cut the income taxes paid by the bottom 45 percent of American earners. Why? Because they already don’t pay any income taxes. For 2017, official government data shows the top 20 percent will pay 95 percent of all income taxes. The rich benefit from income tax cuts because they pay most of the income taxes.
2. Americans with lower incomes already have low tax rates
But what if instead of focusing on a dollar amount, we just cut income tax rates? Couldn’t we just cut the rates on the lower rungs of the income ladder? Not really, because they are already low. “The fact that they don’t pay very much in taxes means that it’s very hard to provide them with a large tax cut,” says Adam Looney, a former deputy assistant treasury secretary for tax analysis in the Obama administration.
3. Marginal tax cuts benefit everyone
Income taxes are based on marginal rates, the amount of tax paid on an additional dollar of income. “It’s basically impossible to have a large tax cut that doesn’t involve most of the benefits going to high-income groups just because that’s who pays taxes now,” says Looney.
The real questions Americans—especially American Christians—should be asking is, why does it matter? Why are we so worried that the wealthy may be getting some sort of advantage that is out of proportion to what we may be getting? Perhaps we should be less concerned about sinful class envy and more focused on developing prudent tax policies that benefit everyone and lead to greater economic flourishing.
Marketers “nudge” us, but should government?
Victor V. Claar, Acton Commentary
In the wee hours of October 9 in the United States, the Royal Swedish Academy of Sciences announced that it had awarded the 2017 Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel to the University of Chicago’s Richard Thaler for his work in behavioral economics. Thaler’s work raises important questions about the state’s influence over human action.
Put simply, behavioral economics is the application of insights from other social sciences, such as psychology, to the decision-making that economic agents like you and me face every day. Behavioral economists like Thaler are convinced that even small deviations of individual behavior from predicted rational choices can add up to significant shifts for society more broadly, away from what pure economic theory might have suggested. And such accumulated shifts may prove costly. Behavioral economics brings a variety of other insights to bear on our decision-making. For example, we tend to discount the consequences for our future selves of our actions today.
Perhaps the most interesting part of Thaler’s legacy is that it has led to a phenomenon known as “nudge units.” Drawn from the title of Thaler’s bestselling book Nudge (coauthored with Cass Sunstein), nudge units are government agencies specifically intended to nudge you and me into making choices that are better than the ones we might make otherwise. Several countries, including the United States and the United Kingdom, created such nudge units, and their job is to reframe the decisions we face so that we will be nudged into better choices for diet, exercise, saving, etc. Defenders of public nudging argue that you and I still face the same range of options, though the clever positioning of the choices by the nudge unit might steer us in a better direction.
But there is a fundamental tradeoff to be considered when government undertakes the task of being “nudger in chief.” While it’s true that such nudging might encourage us to engage in the right behavior in the short run, it may very well weaken our innate ability to do the right thing simply because it’s the right thing to do. If nudging weakens our capacity to see clearly the future consequences of our own actions or erodes our fortitude to follow through, then we risk becoming a society of sheep: going in whatever direction we’re nudged, without any ability to make virtuous choices of our own.
This essay is adapted from a recent Commentary.