Category: Economic Issues

thought for food

Darwin Catholic makes a pointed Thanksgiving observation about how far removed most Americans are from the source of their food:

. . . we modern Americans would do well to recall that food comes from somewhere — and indeed that it either comes or it doesn’t. One may talk of rights to food and shelter and medical care and such all day long. But at the most basic, human level: our existence and comfort depends on those who till the soil . . .

And what I would like to observe is this: Farming is skilled labor.

When I read about the history of education, it seems like what usually gets published is the history of literacy.  The underlying assumption is that if a child isn’t taught to read and write, he isn’t taught.

Don’t mistake me, I am enormously in favor of the widespread practice of literary skills, and have the bookshelves and the blogs to prove it.  But at the end of day, I know two things:

-I can’t eat books.

-I don’t know how to farm.

And from this, I make two further conclusions:

– Farming is, on the list of human pursuits, priority #1*.

-Farming is a skill that needs to be taught.

This in turns tells me that all those generations of people who taught their children how to grow food, but never did get to the business reading and writing, these were people with their priorities in order.   People to whom the rest of us owe an enormous thanks, for it is their diligence that gave us our existence.

I am concerned that my generation knows so little about the growing of food.  The SuperHusband & I both have grandparents who grew up on farms; as adults though they practiced other professions, they continued to grow a significant portion of their own food.  The same can be said of several of my neighbors — like my grandparents, they either have very large gardens in the yard, or else own a second parcel of land they cultivate for food.

But this skill and practice has not been handed down.  My parents gardened occasionally — they knew how — but not so much that they taught us.  Our generation wants to have a garden, and we’re pretty happy if we get a few tomatoes out of it.  It is a skill we never learned as children, and don’t integrate into our lives as adults.  We seem to always be finding some other activity is more important.

We aren’t starving as a result.  Specialization of labor has done what it promises: those of my generation who do know how to farm, do it amazingly well — well enough to feed the rest of us with no apparent difficulty.  And I’m all about specialization of labor — I haven’t got the body for farming whether I wanted to do it or not.  (And I like doing other things anyway.)  But still, I think we are, as a society, over-specialized to the point of being a bit impoverished by it.  It’s a poverty we don’t notice, but I think it is there all the same.

*Alongside the worship of God, of course.  The two seem to go hand in hand rather naturally . . . wow, almost amazingly joined as, say, the body & soul that make up a human being.  Go figure.

Ridiculously tired today, and as I’m finally getting around to writing tonight, my head is about as foggy as I’ve ever known it. So rather than try to put together a good article for you (lost cause), I’ll just let loose on something funny I read during the last weeks of the presidential election campaigns.

**

So the Wall Street Journal ran a series on the editorial page comparing the two major candidates’ stances on various topics. Shoehorned into the ‘education’ category was the topic of volunteering. Working from memory, here’s the executive summary:

McCain: Tells people they really ought to volunteer more.

Obama: Plans to expand the Peace Corps and launch a handful of similar government-run, tax-funded volunteer organizations to target other areas of need (education, local community service, etc.). Encourage mandatory ‘volunteering’ by tying certain federal education funding to community service requirements for students.

Not to jump all over our president-elect (really, if this were his only fault, I’d be a very happy person), but what?! It’s volunteering. I have never, ever, in all my long life, had difficulty finding an outlet for my freely-offered labor. Hard time finding a paying job? Yes. Yes indeed. Hard time finding people willing to hire me for no pay? Nope. Not once.

And here we are, a government in debt, with expensive wars and corporate bailouts going on, and we are going to spend more money on more programs . . . so people can work for no pay? Um, really, they can do that without a government program. If you have to pay people to do a given job, it is not actually volunteering. It is a federal program that pays a very low wage.

(–> Now if what you want is a low-wage jobs program, just come out and say so.)

I expect the origin of this particular plank of the campaign platform came from two bad habits we’ve gotten into. The first, is thinking that if our country has a problem, or a perceived problem in this case, the president ought to have a plan for how to fix it. When really, some of the time, the president ought to look us sternly in the face and say:

Well, get your act together.

But I suppose that is not very popular with voters, and we have thus trained our candidates to pretend they can fix us.

And then from there, it is only a matter of what kind of fix the candidate is used to tossing out. As a democrat, a shiny new program, or a beefed-up old program, is just the thing. If a republican felt the need to propose a fix, it would be a tax deduction, a tax credit, or maybe a special law allowing employers in certain altruistic industries to hire workers at lower-than-minimum wage.

[Republicans are at an advantage in this particular example, because we already have the tax deduction thing in place. Now they can just smile and tell their voter base to go start a 501(c)3 and be done with it. I agree. But don’t kid yourselves, if republican voters were still itching for more help in the ‘volunteering’ department, I am sure, just sure, there is a way to make a corporate subsidy for the purpose.]

**

What significance for the junior economist? Well, a couple summary points:

Our candidates can’t necessarily add, it isn’t your imagination. I think ‘economic platform’ ought to be read as a kind of form of poetry, one of those genres that you must not read literally. Luckily much of what they put on their economic platforms would never pass through congress anyhow, so in the off chance they really mean what they say (the policy-platform equivalent of discovering that someone really does have butterflies in their stomach, or that cats and dogs truly are falling from the sky), there is still hope that it won’t come to pass.

Really smart people can still come up with dumb ideas. (Just ask my children about their mother.) As I mentioned in my ‘why economics is so confusing’ post, sometimes when something doesn’t make any sense to you, it is because it doesn’t make any sense, period.

If we voters actually want ‘change’, we are some of the people who are going to have to change. We can’t be pushing for a federal program or a new law or some other government action every time we see a problem, and then be surprised that our politicians are always trying to come up with new programs and laws for us. Do you want a shorter tax form? Quit asking for so many tax credits.

–> And so long as we evaluate a candidate’s stance on a given issue based on whether they voted to fund this or that special program, or put into place this or that new law, we are going to keep getting the programs and laws. It is entirely possible to be, say, in favor of helping the poor, without necessarily voting in favor of every bill that is labeled ‘help for the poor’.

And this last bit is tricky. Because if your representative voted against this or that social justice bill, how do you know whether it was because of an anti-social-justice bias, or just a disagreement with that particular bill? It means you have to know the candidate much better, over a much longer term. Which is not easy.

Wealth, Abstraction, and the Too-Vivid Imagination

An internet friend asks: Why do I find this economics stuff so confusing?

I could only guess, but knowing her to be an intelligent, financially-responsible type of person, as well as the mother of four children, my thoughts immediately went to potty training.

Potty training? Here’s why:

One of the famous potty-training motivation techniques is the Sticker Chart. We used a sticker chart once, and it was spectactularly unsucessful, but other people find the stickers quite helpful. You put up a calendar-type chart, and each time the child uses the potty, you put a sticker on the chart. If yours is a child who is highly motivated by the earning of stickers, this can be just the thing to motivate the ready-but-reluctant preschooler to make the move into world of No More Diapers.

What does this have to do with the ecomony? (Sorry, no it isn’t the potential for toilet humor.) It is this: The stickers provide a record of your childs’ potty-training accomplishments. More stickers on the chart is evidence of more sucessful trips to the bathroom. Nice little visual indicator to see how the whole program is progressing.

Economics is like this. Instead of sticker charts, we used things like “GDP” to represent national wealth production or “the Unemployment Rate” to represent how many people are looking for work.  [We call these types of calculations ‘economic indicators’.  Just like the number of stickers on the chart is an ‘indicator’ of how potty training is coming along.] It should all be pretty simple. You have to learn a little more than Shiny Star = Pants Clean and Dry, but the concept is the same. Most people understand the real-world concepts behind unemployment or GDP, so learning the technical terms and how they are calculated is not all that hard. If you’re a person who can balance your own checkbook (my friend is such a person) you can learn economics. Given a good instructor, anyway. (I was blessed with a handful of these.)

But the trouble is this: Sometimes economic-policy talk degenerates into sticker management. Rather than focusing on “is my child making progress in using the potty”, we work on managing the indicator – how many stickers are on the chart? How can I get more stickers up? If I can just get a few more stickers up, that means I’m closer to Diaper Emancipation, right? Maybe I should start giving more stickers per trip to the potty, that’ll help my chart fill up faster . . .

Think I’m kidding?  I once read an actual economics professor (remaining nameless to protect the guilty) state something along the lines of, “Hurricane Katrina will result in increased wealth because of all the proceeds from insurance companies and the employment due to rebuilding.” That’s right. Money is changing hands, which increases GDP, and unemployment will be helped by all the new jobs in construction, therefore, we as a nation are richer because the gulf coast was just destroyed? No no no. The hurricane *destroyed* wealth. The fact that we’re going to replace a portion of what was lost does not make us wealthier.

Put concretely: I had six apples. Five were destroyed. I picked two more off my tree. So I’m richer than before, because I just earned two apples? No. I’m still three apples poorer than when I began. Looking at income alone doesn’t tell the whole story.

***

We get into economic trouble, whether in our personal life or as a nation, when we lose track of our economic reality. When we get too focused on managing a calculation, and too little on the facts behind that calculation.

The mortgage crisis, and the resulting credit crisis, are a classic example of imaginations run wild followed by sober reality. I [the hypothetical homebuyer] imagined I could afford a house, because I qualified for some kind of loan and was, at the time, capable of making the payments. My lender imagined I could afford the house for the same reasons. We used the fact that we were able to make up a financial instrument – a calculation – that ‘proved it’ to us. Perhaps we persuaded ourselves that rising housing costs were based on some inherent increase in the value of homes, rather than a temporary surge in demand over supply, and used the ‘promise’ of a continued rise to justify excessive borrowing.

And then reality struck. Now we have a ‘credit crisis’, in which lenders are doing crazy stuff like saying that if can’t you afford to pay for a particular car, perhaps you should buy a less expensive one. The Wall Street Journal is reporting that about 64% of car loans are being approved as of Sept. 20th. Down significantly from an 83% approval rate a year earlier – but knowing what we know about American’s spending and lending habits a year earlier, one has to wonder if maybe it is simply lenders catching on to the financial reality a little bit more quickly than borrowers?

I’m not saying there is no crisis whatsoever. The normal thing for humans to do in the face of disaster is to over-compensate. After a fire, we become hyper-vigilante about fire safety. After a car wreck, we become excessively cautious drivers. After a credit fiasco, we become overly cautious about lending. (And we ought to become more cautious about borrowing as well.) The potential for a real downward economic spiral is certainly there.

But we kid ourselves if we think that we, as a nation, ought to try to manipulate the markets in order to return to the old ‘normal’. Because the old normal was built on imagination, not reality. Large amounts of debt are a sign that we are pretending to have wealth we simply don’t posess. We were pretending, as a nation, to be richer than we were. In potty-training speak, we were handing out too many stickers. We are not significantly poorer now than we were a few months ago – but our numbers look quite a lot worse, because they are now closer to reality.

I don’t think nothing should be done. We are in the post-traumatic-stress phase of an economic eye-opener, and we need to make sure that we, as a nation, don’t curl up into an economic corner become completely dysfunctional. We do need to make sure that those who are most vulnerable economically can ride out the wave of post-crisis panic without suffering physical harm (hunger, lack of medical care, sleeping out-of-doors, etc.).

As I write this, the bailout just passed the House. I’m afraid at this time the best I can manage is a gape-mouthed, ‘Wow, that’s a lot of money.’ (Same reaction I’ve been having for the past week or so – apparently I’m consistent this way.) But I will say: Inasmuch as the bailout is based on trying to bring the American economy to a viable, stable, realistic level of activity, it has the potential to be helpful. To the extent that the bailout is designed to make things look good, to build up a ‘confidence’ in the economy that is really foolish bravado, it will only be a very expensive way of putting ourselves back into trouble.

[BTW, I promised my friend I would try to fish out a really good library book that teaches Econ 101 in a readable, understandable manner. If I find it I will post it here.]

bailout commentary

This friday we’re up for an economics post again, and what timing.  I’ll sit on my hands until then, because I don’t have anything to say (yet) on the bailout that isn’t being said better elsewhere.  To summarize: I am a Jim Curley dittohead.  (Reading from Oct 1 down – not linked to any one post, because he has a handful of them.)

Nice post at Darwin Catholic on the habit of thinking large government programs are the best way to handle social problems.

Something that concerns me with large American-government programs, is that we tend to be too rich about it. We spend money we don’t have, hence the huge national debt. I’ve noticed in contrast that when help is provided by immediate friends and neighbors:

1) Recipients expect less, and seek to do more for themselves first

2) Donors have a better sense of what they can and can’t afford

–> this even though the giving can be downright sacrificial.

It is hard to ignore needs that are right in front of us, and easier to evaluate them. When the donor is our friend or neighbor, we are more aware of the sacrifice they are making.

But privately-provided mutual aid depends on us knowing each other. In a society where we don’t really live with each other, such a system simply can’t be. We can’t know each other’s needs, because our lives are too separated. And when our lives are separated from one another, it is harder, logistically, to provide for a need even if we know of it and want to help.

As I understand it, the Amish communities that Darwin cites really do live together. They work, socialize, recreate and worship all with the same people. I don’t think every element of Amish culture needs to be re-created in order for wider American society to depend more on mutual assistance and less on governmental programs. But I do think that particular aspect of community life is absolutely essential.

On a related note, Jim Curly at Bethune Catholic has a post up about Chesterton, automobiles, and small farmers. Another piece of the same puzzle.

Structures of Justice

The Living Wage – Structures of Justice

From CCC 2425: Regulating the economy soley by centralized planning perverts the basis of social bonds; regulating it soley by the law of the marketplace fails social justice, for “there are many human needs which cannot be satisfied by the market.” (CA34). Reasonable regulation of the marketplace and economic initiatives, in keeping with a just hierarchy of values and a view to the common good, is to be commended.

In the land of social justice activists, sometimes the terms “just structures” or “structures of justice” gets thrown about. And when I used to hear those terms, good student of classical economics that I was, I would shudder. Because I was certain – certain – that what the speaker really meant was “we should all be socialists”.

Now the sordid truth is that sometimes – sometimes — talk about “structures of justice” really is codespeak for “You should pass this disasterous piece of legislation that sounds good but is completely divorced from reality and will harm us more than it helps us.”

But it doesn’t have to be this way. And the purpose of this article is to look at what a “structure of justice” might be, and how it fits into a morally sound, economically efficient society.

So what is a “structure of justice”? For our purposes today, a “structure of justice” is anything that is: a) firmly established by society b) that is actually *optional* and c) that changes the balance of the social and economic system.

a) “Firmly established” because it is, after all, a “structure”. It can be a legal structure, such as the tax code or the right to vote, or a physical structure, such as a bridge or a hospital.

b) “Optional”: We often fall into the rut of thinking that because something exists, it must exist. We currently fund the public hospital via property taxes, therefore we *must* fund the public hospital through taxes, and we must have *property* taxes to do it with. Not so. Hospitals can be privately funded, or publicly funded through some other system. Another example, laws against homicide: Now we really must have a law against homicide, nothing optional about that. But we are in no way required to have the exact particular organizational structure and funding system for enforcing that law that currently exists in our community. We could do things differently, and that would . . .

c) . . . change our society. We tend to think of “how things are now” as being “neutral”. No, no. This is the great blind spot of “laissez-faire” economics – the notion that you can somehow have a neutral set of laws and institutions. The various structures we have in place in our society right now are having a constant impact on how our society is – what it is like to live here, who benefits, who suffers, all of that. What we have now is not neutral, and we cannot get to netural. There is no such thing as an economy or a government that is “hands off”, that lets society run its “natural course”. No such thing. Every government, or lack thereof, has its impact.

Here’s an example:

Sidewalks

Where I live, there are almost zero sidewalks. Therefore, children who are zoned to “walk” to the local public school, do not have a safe way of getting to and from school. People who are unable to drive a car for whatever reason (financial, physical, etc) do not have a safe way of getting around town. Even where there are sidewalks, wheelchair (and stroller, and children’s bicycle . . .) accesibility varies from poor to horrendous. How does this change things?:

-Even if you live within walking distance of the place you want to go, you cannot walk there.

-Therefore, you must drive a car.

-Therefore, in order to participate in ordinary social functions such as shopping, working, going to school, visiting friends and relatives, you must be able to afford your own car, and be able to drive it, or find someone to drive it for you.

-Because everyone drives everywhere, obesity and its resulting health problems are becoming widespread. (And because there are few places to walk safely, it can be quite difficult to get out for exercise.)

-Because everyone drives everywhere, pollution is a problem.

-Because businesses must provide large amounts of parking for customers, it is more expensive to operate a business.

-Because businesses must provide large amounts of parking for customers, all the resulting asphalt creates storm water drainage problems.

-Because of all the pavement, our commercial districts tend to be about 10 degrees hotter in the summer than what our normal climate ought to be. Which means we spend more energy on air-conditioning to compensate.

-Because many people must walk (because they cannot drive or cannot afford to drive), even though there is no safe place for them to do so, a certain number of pedestrians are killed every year by motor vehicles. [Though as it happens, in our city, once the proper number of school children have been killed, the local government will, eventually, put in a sidewalk for the survivors.]

Now before you get too excited about my sidewalk rant, let’s reverse it.

Roads:

-Provide us a way to move large quanities of goods efficiently.

-Allows emergency vehicles to access the community quickly and efficiently.

-Allow citizens to travel longer distances with more flexibility than either mass transit or walking and cycling permit.

-Therefore local neighborhoods can remain more stable, even as economic conditions fluctuate – you don’t need to move if you get a job across town, you can reasonably hope to commute. Both spouses can work outside the home without needing to find jobs that are in the immediate area. [Mass transit does this to a certain extent, but tends to favor certain routes, and tends to offer less flexibility than an expansive road network.]

-Makes it possible for institutions [churches, schools, dentists, grocery stores] to set up a single location from which to serve people from a wide geographic area.

You could build your own examples. For example, how does your local property tax structure change the incentives for holding onto different types of real estate? If you had to pay tuition to attend your local public school, would it change your educational choices? [Most of my catholic friends send their children to public schools, which are already ‘paid for’. I balk at high parochial school tuition myself.] What about if there were no public library? [As a homeschooler, I’d be sunk. I live for that place.]

—> The point is this: As a community we tend to fall into the assumption that how things are now is how they have to be, and that any change is ‘extra’. In reality, how things are now is how we are actively choosing them to be.

Now what does this have to do with a living wage?

This: Structures of justice are going to change the living wage. If your workers must own a car in order to get to and from work, you are going to have to pay them more than if they can walk or bike to work. If your local land use policies discourage local agriculture, food prices are going to be a lot more sensitive to fuel prices – which means that when fuel prices go up, the living wage will go up, even if food production itself is not affected.

And in this way, the living wage provides something of a feedback loop. Say, for example, that the local laws lend themselves to concentrating most land ownership into the hands of a few wealthy landowners. Well in that case, employers are going to have to include in their living wage income to cover relatively high rents for their employees’ housing. (Monopolies and oligopolies tend to charge somewhat higher prices.) Which gives employers an incentive to change the local legal structure to encourage more small property owners, so that the wages employers must pay can be lower.

–> When employers are obligated to pay a living wage (whether by law, by social pressure, or by personal moral conviction), a kind of solidarity develops between employer and employee. And then the most basic economic force – personal self interest – can do its job to wake us up to which structures in our society are helping us, and which need to be changed.