A Biblical View of Economics

A Biblical View of Economics by Kerby Anderson, Director of Probe Ministries International.

As the website states, “Probe Ministries
Probe’s mission is to present the Gospel to communities, nationally and internationally, by providing life-long opportunities to integrate faith and learning through balanced, biblically based scholarship, training people to love God by renewing their minds and equipping the Church to engage the world for Christ. “

A pretty good site from what I’ve seen. It’s a Christian site; it has some political articles, as the one I linked to here, but it has a wide variety of articles, and is hardly devoted to just politics.

This article deals with the moral issues surrounding economic systems. It takes the fallen nature of man as a given, and it focuses on the system that minimizes the sinful effects of man. As the article states

Since the Bible teaches about the effects of sinful behavior on the world, we should be concerned about any system that would concentrate economic power and thereby unleash the ravages of sinful behavior on the society. Christians, therefore, should reject state-controlled or centrally controlled economies, which would concentrate power in the hands of a few sinful individuals. Instead, we should support an economic system that would disperse that power and protect us from greed and exploitation.

I agree (no surprise), but not just with their conclusions, but with their approach. No economic system can ascribe value to mankind. We should assume that man is sinful and greedy, and look at the system that minimizes the affects. While I do not support greed, in a more socialist system, people of greed attain more money typically through government actions, such as transfer payments. In a capitalist system, people who are greedy have to attain their money by providing services to others.

The article also focuses on pure economic criticisms, which include the question of monopolies and the issue of pollution. In Anderson’s view, monopolies are the result of “too little government and too much government”, with the latter being primarily responsible of late. He believes government should take action to break up monopolies. I don’t know what to think of this currently, because I have also heard arguments that the free market naturally regulates against monopolies, but I have not done enough research in this area.

Concerning pollution, the author sums up my believes exactly.

The second criticism of capitalism is that it leads to pollution. In a capitalistic system, pollutants are considered externalities. The producer will incur costs that are external to the firm so often there is no incentive to clean up the pollution. Instead, it is dumped into areas held in common such as the air or water.

The solution in this case is governmental intervention. But I don’t believe that this should be a justification for building a massive bureaucracy. We need to find creative ways to direct self-interest so that people work towards the common good.

I agree with this view. I believe that the free market is not sufficient to regulate the environment, but the environment should be regulated within reason.

The moral critique Anderson focuses on is that of greed, which is really the kicker for many people, and the primary Christian concern regarding capitalism.

Anderson states

Because people are sinful and selfish, some are going to use the capitalist system to feed their greed. But that is not so much a criticism of capitalism as it is a realization of the human condition. The goal of capitalism is not to change people but to protect us from human sinfulness.

Capitalism is a system in which bad people can do the least harm, and good people have the freedom to do good works. Capitalism works well if you have completely moral individuals. But it also functions adequately when you have selfish and greedy people.

Anderson also differentiates between selfishness and self-interest and states “It is in our self-interest to accept Jesus Christ as our savior so that our eternal destiny will be assured.” Now, such a heavy statement takes further examination, but I’ll just through that in for now. Concerning socialism, he states

By contrast, other economic systems like socialism ignore the biblical definitions of human nature. Thus, they allow economic power to be centralized and concentrate power in the hands of a few greedy people. Those who complain of the influence major corporations have on our lives should consider the socialist alternative of how a few governmental bureaucrats control every aspect of their lives.

Anderson states very affectively what I have been trying to say. There are selfish people in a capitalist society and a socialist society, but in a capitalist society, these selfish people have the power to do less harm. In theory, I honestly like the idea of socialism, where people are provided with the basic needs, such as food, shelter, and these days, oil. But history, in my view, as shown that this does not work out as planned. Socialism assumes that all the bureaucrats in charge are moral people. Capitalism allows for greedy people in charge of major corporations, but our interactions with them are more optional.

This is a huge issue, and Anderson cannot possibly address every concern, and I certainly cannot. I think the relationship of Christianity with the proper economic system is an interesting and important topic that should continually be discussed among Christians.

Reggie Bush not the number one pick!!!

Well, the news is out. NC State Defensive End Mario Williams will be the number one draft pick, chosen by Houston.

I’m totally surprised that Houston is passing on Bush, and I wonder if the fans will be angry. I know many fans wanted Houston native Vince Young, but were probably not terribly dissapointed when the person in his place was expected to be Heisman trophy winner Reggie Bush. Is Williams a good choice? I’ll leave that up to the analysts to decide. I respect Houston for not going for the popular decision.

It’s surprising with all the offensive talent, one super-hyped running back and three hyped quarterbacks, that a defensive end is going first. I’ll be interested to see if Leinart actually falls out of the top 10, some experts say they don’t expect it, but it’s a possibility.

Now, I’m not actually going to watch this thing. For one, I don’t have cable, and for another, I can simply look online.

More on gas prices

I know I have been talking a lot about gas prices lately, but its on the news so much, I felt like talking about it some more. Also, there was an interesting discussion on another blog I visit about the morality of oil companies being able to set their prices. I think this is a good discussion, and if that person happens to see this post, I’m not hammering on your opinions, I think its a good discussion that I want to talk about on my blog. This discussion has seemed to take a slightly different direction than on the other blog, however.

Sure, with capitalism there is a concern about a company being able to set their own price. This is where competition comes in. Competition is what regulates unmitigated greed. It is a sort of checks and balances. The more a company charges higher prices and tries to own the entire market, the easier it is for another company to come in.

Now, there is concern that with mergers and such, that there is not sufficient competition, and this is a legitimate concern. Right now it is very difficult for a company to simply start up their own oil company. This can be made easier by decreasing regulations and taxation on refineries built. This is not to say that environmental regulations concerning pollution should not be respected, however, but there is a lot of red tape before anyone even considers the environment.

However, even with fewer regulations, starting up oil companies is still a costly venture, and I’m not going to say straight-faced that the only thing preventing more oil companies from popping up is governmental regulations. Maybe it is, but I don’t know enough about it to make such a claim.

As gas prices go up, however, I believe there will be a push for alternative fuels. I personally do not support government measures to push towards alternative fuels (tax breaks, subsidies to car/oil companies, etc…), because I think that people’s motivations to save is a sufficient impetus for the market. For example, I don’t need a tax break to buy a hybrid car; I will already be motivated based on the money it saves me, if that is the case. If I decide the costs and benefits of a hybrid car is not worth it, it soon will be if the cost of gas climbs. Same with gov’t standards for fuel efficiency. Companies are already motivated to build fuel efficient cars for customers who want to save on gas money. Sure, right now people are still buying SUVs, but there will be a breaking point eventually where people decide it is just not worth it.

So, maybe the oil company competition is not satisfactory, but there will be, I believe, increasing competition from outside the oil industry as mentioned above, and decreased demand through conservation methods.

Many complain about how much a CEO makes with such huge spikes in gas prices. The CEO’s salary for Exxon last year was $38 million, out of 36.1 billion made, so his salary was about .1% of the total profit. Assume that gas is $3.00, $2.50 before taxes, with a 10% profit around $0.25. If the CEO worked for free, it would reduce that profit of $0.25 by 1%. So, the price of gas would be reduced from $3.00 to $2.9975.

Of course, there is still the other 36.062 million in profits. Now, nevermind the fact that anyone with a few extra bucks can invest in the oil companies themselves. People invest in the oil company to make money; with no promise of profit, oil companies cannot obtain the capital needed to operate. As the Cato Institute article in my previous post states: “Who would want to park their money in an industry like that? [with windfall profit taxes] If investors were discouraged from putting their money into the oil sector, where would the capital come from to put more oil and gas into a resource-starved market? “

Now, if one wants to claim that the oil companies are charging too much, that’s a fair judgment, but one must consider that oil companies are competing with any other publicly owned companies in the promise of returning a profit. Also, this goes back to my statement that how much an oil company can charge is limited by competition. But, as I mentioned earlier, there is concern about sufficient competition in the oil industry, and this is a fair concern. Currently though, oil companies profit margins are not outrageous (around 10.7%), and the fact that gas prices have gone up more than this amount leads me to believe that much of the price surge has been other factors, other than shareholders wanting to make more profits.

Perhaps the toughest point to debate is the fact that oil is not really a luxury, and therefore should be less subject to market forces. While oil companies make less in profit margin than say Apple Computer, Citibank, Yahoo (again, referred to at Cato), oil is a necessity, whereas an internet search engines, a computer, or a credit card are more as a luxury.

This concern really lies at the heart of capitalism vs. socialism, that is, should basic necessities be guaranteed, or at least, be handled some way by the gov’t so that people have easier access to it. This is not an either/or situation, where one has to go one way or the other. Many will claim that there is a balance in between. But the question of what to do with basic necessities is fundamental, not because someone must choose the side of Socialist or Capitalist (as I sometimes forget), but because how they feel about the question can often be indicative of how they feel about the free market and the government’s role in the economy as a whole.

People who lean to the far right economically, such as myself, ultimately believe the free market can produce the goods better than a more government-controlled economy. The possibility of making oil a more socialized commodity may have the initial promise of being more accessible and maybe even guaranteed to everyone, but economic conservatives and libertarians believe that ultimately this is not the case, that a free market ultimately makes a good more accessible to everyone. This belief is based upon empirical evidence in comparing everyday market goods and services to those provided by the government, and through the belief that people’s drive to make money will motivate them to do a better job in providing services (this second argument is more of a slippery slope because I do not believe that greed makes the world go round, as some objectivists believe).

Dow was highest since January 2000 this past Thursday

According to USA Today’s Thursday, April 27 issue, The Dow was the highest since January 2000. I’m curious what type of news coverage this gets. I’ve been watching a lot of CNN lately (its all I get where I’m at currently), and I haven’t seen anything about it.

The thing with the immigration debate is…

…How do you decide who to let in and who to boot out? Obviously, we should not let people in who are a threat to this country. So, as unfair as it sounds, we should not let a huge influx of people in from Afghanistan or Iraq, Iran, etc…

But what about the others? Do you base it upon numbers, letting in so many people per month/year? How do you differentiate between those let in and those who are not?

For right now, I support open borders to peaceful immigrants, perhaps giving them a certain amount of time to find a job.

I would be curious though what ideas other people have, that is the best I have for right now.

Concerning the language issue, there is the issue with kids in schools, and with people out and about in the outside world. I would not say that adult immigrants necessarily have to learn the language, they just need to understand that not everyone is going to be able to accomodate them. They need to understand that their inability to speak language will affect them in getting a job or ordering a hamburger. I have a “door-swings-both-ways” philosophy. I don’t care if you speak your own native tongue, just do not expect me to speak it as well.

The school issue is a trickier one. I suppose public schools should have teachers and classes for Spanish-speaking students, with the ultimate goal of having them learn English. Perhaps this is how its done now, but I would not be surprised if some schools handle Spanish-speaking students with no expections of teaching them English.

Concerning those currently in our borders illegally, perhaps Bush has the right idea. Many conservatives think he is being way too soft, but I think simply hauling back a ton of illegal aliens is unenforceable. And, let’s be honest, having a softer approach to immigration will help the Republicans with Hispanics in the long run. That may sound tacky, but I say that so fellow conservatives won’t give Bush such a hard time, and part of politics is fostering relationships.

The Minimum Wage

Walter Williams explains why the minimum wage is not a good idea.

Let ’em play

I usually don’t find libertarian-minded, or even political, articles on a sports website, but here goes. I think Dan Wetzel makes a lot of sense.

With the moving truck’s brake lights still freshly glowing, questions abound whether Reggie Bush’s family received use of a house – a house! – from a would-be middle man/marketing guy.

If true, it does beg another question: If Michael Michaels – who owned the $757,000 home, as Yahoo! Sports Charles Robinson first reported – didn’t sign Bush, then what did agent Joel Segal and marketer Michael Ornstein do to get him?

Nothing? Anything? Everything?

At this point in the long history of dealings between sports agents and potentially high draft picks, nothing should come as a surprise. Perhaps everything is on the up and up. Or perhaps this is just another case of the vibrant underground economy of college athletics.

We do know Ornstein, according to the Sports Business Journal, employed Bush last summer as a “paid intern.” Ornstein is a Reebok “consultant” frequently spotted on the USC sideline during games who, in November, admitted he was “assisting” Bush in the selection of his agent and in the end also advised Bush that his best choice for a marketing guy would be – surprise, surprise – Michael Ornstein.

All of this nonsense is possible because of the peculiar way America treats its young football and basketball players. The NFL and NBA employ unfair age restrictions for their entry draft with arbitrary numbers that have nothing to do with preparedness. Meanwhile, the NCAA’s outdated amateur rules continue to put kids in near impossible positions.

The fact is, Reggie Bush should have been able to buy his parents that suburban San Diego home a year ago, had he so chosen. He should have been allowed to turn pro after his spectacular sophomore season, where scouts say he would have been a likely first-round pick.

Instead, he returned to the Trojans and won the Heisman Trophy. That’s fine, if that had been his choice all along. But he should have had the choice.

Instead, Bush was also placed in a bizarro world where he was worth millions but forced to stay a pauper – not because he wasn’t physically or mentally ready for the NFL, but because, we believe, someone else may not have been.

Meanwhile, everyone around him cashed in. Big time.

The USC athletic department earned revenues of $60.7 million last year, according to the U.S. Department of Education. Almost all of that came from football or from football-related revenue (i.e., merchandise and donations).

Bush’s coach, Pete Carroll, is reportedly paid nearly $3 million per year. His athletic director, Mike Garrett, makes hundreds of thousands.

The Trojans, with Bush carrying the ball, became a team for the ages, scoring huge television ratings, selling newspapers and magazines, not to mention tickets, T-shirts and assorted trinkets. USC was Los Angeles’ pro team, except the players weren’t getting paid. At least officially.

To be Reggie Bush last year would be a most confusing existence. You live in one of the richest, most materialistic cities on earth – a place where everyone is on the take and gain as much fame as Hollywood actors – but you can’t afford the designer clothes they wear, the tricked-out cars or the jewelry.

You are more talented at your craft than most of Young Hollywood is at theirs. Bush is certainly a better football player than Nick Lachey is a, well, whatever Nick Lachey purports to be, but Bush can’t get paid and Lachey can because, well, just because.

Perhaps Reggie Bush never took a single dime or a single freebie. If so, he is one incredibly ethical person. We’re talking Mother Theresa level. They ought to give him a trophy just for that.

USC was a powder keg waiting to happen for this kind of stuff. It is essentially impossible to control agents and boosters in one of those college towns surrounded by vast farmland. In L.A.? Forget it. With Snoop Dogg (let alone Michael Ornstein) on the sidelines, what message does a player get?

This is why young athletes should be able to turn pro when they want. After any year in college. After any year in high school. Yeah, it’s radical, but not as radically ridiculous as our current system.

LeBron James could have been a multi-millionaire and a top-five NBA draft pick after his sophomore year of high school, but he had to wait solely because he hits free throws and not forehands and because he slam-dunked rather than sang and danced.

By the time Britney Spears would have graduated from Kentwood (La.) High School, she sold 19 million albums for Jive Records. No one suggested she should have been singing in the school choir, let alone forced to attend Louisiana State for three years before she was “ready” to embark on a career. (Well, maybe some of the frat boys at LSU would have argued that was a good idea, but otherwise, no one.)

Society’s argument is that this is designed to “protect” kids from making bad decisions, which is patronizing, un-American and depends completely on your perspective (mostly college fans being selfish). For most athletes, cashing in while they can is the best decision. If someone wanted to legally make Bush a millionaire and train him in his career, how was preventing him that option a good thing?

In too many cases, young athletes are exploited most when they are handcuffed by NCAA restrictions, stuck with netherworld guys, store-front unaccredited high schools and college coaches who are flat-out liars.

Phoenix Suns star Amare Stoudemire went to six high schools, was nearly conned by his own convicted felon minister and was used by at least two dozen people as an “amateur.” As a high school senior, he told me, “My life is part nightmare.” Once he was able to turn pro and just play ball, all the bad pub and scandal went away. He’s living a dream life now. His quaint view of amateur athletics might be a bit different than yours.

While the idea of protecting kids who think they are better than they are is, perhaps, an admirable goal, it is an uncomfortable double standard, especially since the vast majority of said athletes are poor and black.

No one seems to care about the gymnasts, the figure skaters, the singers and actors. No one cares about baseball or hockey players.

No one worried about the Olsen Twins missing out on the “experience” of starring in humble school plays.

In America, people have the freedom to chase their dreams and do nearly anything they choose, no matter how foolish. Adults make dumb decisions all the time. They start businesses that are doomed to fail. They buy real estate that is sure to bottom out. They marry Charlie Sheen.

If a kid mistakenly turns pro too early, it’s his loss. If a team mistakenly drafts too young of a prospect, that should be its loss – pro teams make dreadful decisions on college seniors, too.

As long as we force young football and basketball players to make everyone but themselves money so the NCAA and the professional leagues can benefit from the marketing, the extra scouting exposure and all those millions in revenue, these stories of possible corruption will go on and on and on.

This isn’t about Reggie Bush and a house. This is about the system that virtually assures such a thing will keep on happening.

Now, the NBA and NFL have every right to pass age restriction limits, as they are private organizations, tt’s not like government stepping in and setting the age limits for them. However, Wetzel makes a good case why they (NFL, NBA) shouldn’t pass the restrictions.

No windfall profit taxes!

From the Cato Institute

Exxon’s Earnings: No Apology Necessary
by Peter Van Doren and Jerry Taylor

Jerry Taylor and Peter Van Doren are both senior fellows.

Exxon Mobil announced this week that it earned $10.3 billion in the fourth quarter of 2005, up 23% from the same quarter in 2004. The company’s earnings for the year totaled $36.1 billion, the most profitable year (in nominal terms, anyway) for any company in U.S. history.

Tar was gathered, feathers distributed, and the political mob undertook its predictable march.

Perspective, however, is everything. If we simply divide Exxon Mobil’s net income by sales, we discover that the company reported a 10.7% profit margin in the quarter. That’s probably a bit above the U.S. industrial average, but it is hardly remarkable.

For instance, the nation’s moist prominent critic of “oil profiteering” – Fox News personality Bill O’Reilly — works for a company (News Corp.) that reported a 10.2% profit in the fourth quarter.

If you’re after big earners, check out Yahoo (a 45.5% profit margin), Citigroup (33.4%), Intel (24%) or Apple (22.7%).

Returns on invested capital over a longer time frame are even more telling. Analysts at Goldman Sachs found that returns on investment capital in the oil and gas sector from 1970-2003 were less than the U.S. industrial average over that same period. The oil industry would have to earn record profits for some time before it would produce above-average returns for its long-term investors.

Political threats to impose windfall profit taxes are counterproductive for two reasons. First, they threaten to institutionalize a form of one-way capitalism in which investors are allowed meager profits, but more robust earnings are punished.

Who would want to park their money in an industry like that? If investors were discouraged from putting their money into the oil sector, where would the capital come from to put more oil and gas into a resource-starved market?

Second, the U.S. already has a corporate income tax in place to harvest a share of those windfall profits regardless of which sector produces them. Any policy that subjects income from particular industrial sectors to more onerous taxation because they are the villain de jure is bad public policy. In essence, it gets the government in the business of allocating capital to different sectors of the economy and sets up incentives for rent-seeking be- Whether Exxon Mobil is making good or bad decisions with its operating capital is not the government’s business. Behavior on the part of corporations and their political patrons.

How Exxon Mobil’s profit was earned and how that money will be used is also at issue. Some critics allege that the company’s market power—augmented by mergers and acquisitions within the oil sector — gives Exxon Mobil (or some shadowy group of corporate conspirators led by Exxon Mobil) the power to set whatever price it wishes.

Nonsense.

World crude oil prices – and thus retail gasoline prices — are established in commodity spot markets. Exxon Mobil executives do not plot in back rooms to decide what to charge at the pump. Instead, Exxon Mobil’s contracts with its own stations tie wholesale fuel prices to prices in the nearest spot market plus transportation costs.

Others attack the company’s decisions about how best to employ this surge of revenue.

House Speaker Dennis Hastert and many House Republicans complain that the industry is not investing enough in domestic oil refining capacity.

Consumer activists complain that too little is going into oil exploration and development.

Others complain that not enough is being “given back” to the poor in the form of free or low-cost energy assistance programs.

The entire conversation is misguided. Whether Exxon Mobil is making good or bad decisions with its operating capital is not the government’s business.

Even if it were, politicians are not in a position to intelligently discuss the matter.

In a free-market economy, capital is best allocated by market actors disciplined by profit and loss, not by vote-maximizing politicians who are unlikely to know what they are doing.

Exxon Mobil has nothing to apologize for regarding recent earnings statements.

If consumers were better served by lower corporate earnings, we’d all be visiting Zimbabwe for economic advice.

This article appeared in Investor’s Business Daily, February 2, 2006.

I’ve been tagged

I’ve been tagged by my friend Josh.

Four jobs you have had in your life:

1. Worker at Arby’s
2. Telemarketer
3. Math tutor
4. Software engineer

Four movies you would watch over and over:
1. Zoolander
2. Matrix
3. Return of the King
4. Austin Powers

Four places you have lived:
1. Claremore, OK
2. Tulsa, OK
3. Austin, TX
4. Colorado Springs, CO

Four TV shows you love to watch:
1. Simpsons
2. Scrubs
3. CSI
4. Joey

Four places you have been on vacation:
1. Kauai, Hawaii
2. San Diego, CA
3. Riviera Maya, Mexico
4. Eureka Springs, Arkansas

Four websites you visit often.
1. Glen Dean
2. Gabbatha University
3. Cato Institute
4. NewsOK

Four of your favorite foods
1. Steak medium rare
2. Pizza
3. Mexican food (preferably made by people with immediate Mexican ancestry, but On the Border will do)
4. Quizno’s

Four places you would rather be right now:
1. At home with my wife and cat
2. Eating at Quizno’s
3. Playing Halo
4. Culver’s Ice Cream

The Reggie Bush scandal

Yahoo Sports reports

SPRING VALLEY, Calif. – In this sprawling hilltop community with a breathtaking view of Sweetwater Lake, it was no secret who lived in the 3,000-square-foot house at the corner of Apple Street and Luther Avenue.

That home, residents would tell you, was where Reggie Bush’s family lived.

That is, until this weekend, when the family abruptly packed up and vacated the residence – less than 24 hours after Yahoo! Sports approached Bush’s mother about information linking the property to Michael Michaels, a man who is alleged to have tried to play a role in steering Bush toward an agent and who also has ties to a sports marketing company.

Okay, let’s look at the real issue here. The sports agent’s name referred to in this article was Michael Michaels. I mean, c’mon, how ridiculous is that! Michael is a great name, but could his parents do no better than to look beyond their own last name to come up with a name for their son? Were the parents simply too tired after the birthing process to spend any amount of time going through a list of names. There are books for that you know! Or maybe they liked the name of Michael so much they wanted it twice. I wonder what his middle name is?