Articles by Dr. William Luckey
Self-Interest and the Founding Fathers
Apr 24, 2009 / 00:00 amThere is a new-ish theory going around conservative and Catholic circles, and it was expressed by two recent thinkers who spoke at our college this month. The theory goes like this:
It’s Beyond Economics Now
Apr 3, 2009 / 00:00 amThis past week, President Obama forced the CEO of General Motors to resign. The real significance of this may be lost on most people. Some might say, "Well, if General Motors is not doing well, the CEO should be replaced." The major difficulty with this is that this is a special power of the GM Board of Directors, not the President of the United States. Effectively, this makes President Obama the Board of Directors of General Motors, and any other company he wants to control, and makes the Board a mere figurehead. Slowly but surely, this is moving us to a fascist form of government. In fascism, the companies still exist, but the government tells them what to do. This was similar to Mercantilism, which was the predominant economic system in Europe from about the 1600s until 1800, more or less. Mercantilism was the system of economics that Adam Smith wrote against in his famous An Inquiry into the Nature and Causes of the Wealth of Nations, which most people shorten to the cryptic Wealth of Nations. Smith was trying to show that government control of business impoverishes nations. Instead, he posited "a system of natural liberty," which allowed people to follow their natural pursuits, take on the risk of doing so, and allow the market, that is, the countless decisions of people, to decide the outcome. It was the realization of the truth that Smith expressed in his work that subsequently brought prosperity to countless nations.
The Signs of the Times – Part V
Mar 27, 2009 / 00:00 amIn this series, we have seen the lot of nations that have abandoned God. God is truly the protector of those nations who believe in him, trust in him, and do his will. Even though salvation is of the individual soul, salvation takes place in the context of social units—family, neighborhood, country. God can protect the milieu within which we and our families and our politicians flourish, but he does so because the people want him to. God does not force himself on anyone. If a person or a society generally, by coldness or immorality, tells God that they want him out of their lives, he will get out. But this does not mean he totally abandons them. God is the “Hound of Heaven.” His constant baying never ceases to call us back to the source of all truth and of all love. He raises up saints in all walks of life to be prophets to continue this call. And of course, suffering comes on the society which no longer wants his protection because of his holiness.
The Signs of the Times – Part IV: Déjà Vu, All Over Again
Mar 23, 2009 / 00:00 amThe time—July 13, 1917. The place—Fatima, Portugal. The appearance of the Blessed Mother of God to three little children.
The Signs of the Times – Part III
Mar 13, 2009 / 00:00 amIn case the reader was thinking that the events related in Part II were ancient history with no reference to more recent times, let us remind ourselves that God is God. He is unchanging. And while Our Blessed Lord and Savior brought the new Law of Love to earth, this does not mean that God has somehow become a fool.
The Signs of the Times - Part II
Mar 6, 2009 / 00:00 amThe time—722 B.C. The place—Israel, the northern kingdom of the Holy Land, with its capital in Samaria. The event—conquest of the northern kingdom by the Assyrians.
Father Francis P. Canavan, S.J. Passes Away
Feb 27, 2009 / 00:00 amI have just gotten the news that the man I studied under for my doctorate at Fordam University, Rev. Francis P. Canavan, S.J., Ph.D. has passed away.
The Signs of the Times
Feb 20, 2009 / 00:00 amPart I – Introduction In the Gospel of St. Matthew, Our Lord says the following: "When evening comes, you say, ‘It will be fair weather, for the sky is red,’ and in the morning, ‘Today it will be stormy, for the sky is red and overcast.’ You know how to interpret the appearance of the sky, but you cannot interpret the signs of the times."Vatican II’s Gaudium et Spes asks us to try to interpret the signs of the times in the light of the Gospel. Obviously, interpreting the signs of the times is very important, but not easy. Today, as in other times, the United States is confronted with many serious problems. A failing economy, the imposition of many socialist measures which purport to deal with the failing economy, the growth of statism here and in Russia, and declining morality, which seems to be picking up some speed lately. Our young people have profligates and libertines in the entertainment industry as heroes. We have a society loaded with cheaters: cheaters on taxes in the President’s cabinet; cheaters on spouses so common that almost no one is shocked by it; liars as governors of states and senators; clerics living double lives; and an epidemic of cheating on examinations. Islamic fascism still threatens us, but so many politicians, lawyers and media personnel act as if this is all in our heads. Now, economics and political science are real sciences and successfully attempt to explain many of these phenomena. The problem is that at times another science needs to be brought in to help us to understand the reality behind these distressing things. That science is sacred theology. What does theology tell us? It tells us that there is a whole sub- and super-strata surrounding the visible world. As for the sub-strata, St. Paul tells us, “For our struggle is not against flesh and blood, but against the rulers, against the authorities, against the powers of this dark world and against the spiritual forces of evil in the heavenly realms” (Eph 6:12). In other words, behind the visible life we see is a struggle going on between Satan and his minions and God and his angels, with us the living as the battlefield. We Catholics cannot afford the luxury of working on our personal salvation only. The whole cultural and unseen spiritual milieu affects the spiritual life of everyone. To ignore this, as most of us do, is to let the forces of Satan triumph. In his famous book The Apostleship of Prayer, Father Ramière, S.J., writes that just as God will not save us without our cooperation, neither will he save our brothers and sisters without our cooperation. The world lives in darkness (see 1 Jn). In order to dispel the darkness, Jesus Christ must be brought into the world. God has entrusted his Church—all of it—clergy, religious and especially laity, to bring the light of Christ into the world. (See John Paul II’s encyclical Christifidelis laici.) But the signs of the times demonstrate clearly that this is not being done. This will be a five-part series that will examine the signs of the times and hopefully will evoke severe soul-searching among us Catholics who tend to look on the natural side of current affairs. We will look at events in the Scriptures and in history, and then at spirituality to provide food for thought and prayer, so that we can do all in our power to turn things around toward the Truth.
The Pandora’s Box of Non-profit Organizations
Feb 13, 2009 / 00:00 amThe notion of capital formation and accumulation led me to wonder whether the formation or accumulation of capital in non-profit organizations was the same as it is in regular businesses. In order even to begin to understand the non-profit organization, one must realize that there are different types. There are some that function like a business, taking money for services from those who use the organization, such as colleges and most hospitals. But there are others who give their services to those from whom they expect no contribution, such as the St. Vincent de Paul Society, and those who rely on mere donations, as opposed to payment, from those who use their services, such as churches. The complexity discovered in this initial search led to the perusal of some of the standard literature on the subject of non-profit organizations. The results can be summarized as follows: a. Many sources see the purposes of non-profits as taking up the slack from either market failure or government failure, thus revealing a pro-statist, anti-market bias. b. The rest of the studies tend to cram the non-profit organization into the neo-classical paradigm. These studies, assuming the “maximization of profit” rationale, also assume that the non-profit organization must be maximizing something. Thomas Carroll of Memphis State writes: “One [allegedly] fruitful approach is to view not-for-profit producers [notice the term producers] as professional syndicates, whose members try to maximize the sum of income and amenities. This sometimes leads to tensions between the ‘professionals’ and the ‘staff’ of such institutions.” One example he gives is that of well-heeled physicians wanting more money and exploiting underpaid nurses, an example that is irrelevant in that the physicians are usually independent operators, and the examples he gives really do not say much about the organization itself.1c. There is, in the neo-classical analysis, both of non-profit organizations and of business in general, too much orientation to heavy industry, reflecting the era in which most of the terms and concepts were developed. The Austrians are also influenced in this way, though to a lesser extent. d. The “standard” Austrians have virtually nothing to say regarding non-profits, even though non-profits comprise 2–3 percent of GDP. What this means, of course, is that my desire to discuss capital accumulation in non-profits is now subordinated to a study of the real nature and behavior of non-profits. By far the best study that I came across on non-profit organizations was done by the Austrian management expert Peter Drucker, in Managing the Non-profit Organization: Principles and Practices2. While he is not primarily an economist, somewhere I read that Drucker says that he has been heavily influenced by the Austrian economists. In point of fact, as is typical of an Austrian analysis, we recognize real human beings in Drucker’s analysis, and not in the neo-classical analysis. For example, instead of maximization of the utility of the managers or workers of the non-profit organization, Drucker says that the purpose of the non-profit organization is to produce a “changed human being.”3 In these organizations, the people, including the board, are “deeply committed,” and this explains the high level of volunteers, unpaid staff and low-paid professors at certain private religious colleges. Returning to the problem of capital accumulation in non-profits, since non-profits do not produce anything, it cannot be said that the production of the capital they do acquire is stimulated by a perceived market demand as it is in a real business. Major exceptions to this might be medical equipment and the scholarly publishing industry, with all that these imply, but I doubt that these are non-profit. But then it comes to mind that the source of most funds gotten by most non-profit organizations are contributions. Every non-profit has a list of regular contributors, and acquires lists of potential contributors. Since the contributors are not usually the beneficiaries of the services of the organization, they are not the customers, although they are the source of funds. Are the contributors the capital? My recommendations are as follows: a. To follow Aristotle’s advice in book II of the Politics, and adapt the methodology of the study to the requirements of the subject at hand. Certainly, the current concentration on “production” and “maximization” and “profit” has led to a dead end in not only in the current economy but in the non-profit segment as well. b. A completely new study of non-profit organizations is necessary, being sure to separate them by types. The category “non-profit” is too broad for a (shall we say) “profitable” analysis. c. It needs to be asked whether some organizations, because they were run by the Church and religious orders in the middle ages for free, should still be non-profit. Would it not be more efficient for the non-profit organizations that get money from those who use their services to be for-profit organizations? There are already some examples. Some technical colleges and hospitals are for-profit. Are there any studies of these organizations comparing them to their non-profit counterparts? ____________________________________ 1Thomas M. Carroll, Microeconomic Theory: Concepts and Applications (New York: St. Martin’s Press, 1983), 314. 2(New York: HarperBusiness, 1992). 3Drucker, xiv. His emphasis.
Another Way to Kill Business: Taxes
Feb 6, 2009 / 00:00 amThere are so many people out there who think that businesses are just rich, evil institutions. They do not reflect that it is business that gives us all the wonderful things we have today, many of which did not even exist in my childhood, and also employ countless people. They therefore cry out to government to tax corporations, because these folks think that they have too much money, and somehow they have stolen it from us, forgetting that no one is forced to buy anything. Let us look at the business tax situation. 1. Taxes on earnings. After deducting expenses to run the business, a company must pay taxes on its remaining earnings. The person on the street says, “Well, they should!” But let us look at business as the dynamic institution it is. Competition keeps a company sharp, efficient, and forces it to upgrade its current products and bring new ones to market. We benefit from these activities. In order to do this, the company needs money. Now a company has a number of ways to get that money. First, it can issue stock. But that option is limited by at least two things. What is the current price of its stock? If it is low, the investment bank who will buy the initial offering of stock might not be willing to buy it, or will give it too low a return. Secondly, it can borrow it, by selling bonds or going to a bank. If they do that, they have to pay interest, and as we wrote last time, that raises the cost of capital and makes it have to get a larger return on their product in order to pay the interest back. The best way to pay for the development of new products is to take it from your net earnings. There is no interest on your own earnings. But the more earnings are taxed, the less earnings available to use for product development. The result of the taxes on earnings is that it forces many businesses into the credit market. If the economy is in a recession, the interest rates might be very high due to less savings. If the Federal Reserve tries to lower interest by swelling the money supply, this will cause inflation, and raise the cost of capital, because inflation drives up prices. So if I borrow a million dollars today in an inflation environment, by the time I get to pay for the product development, I see that I did not borrow enough, prices having risen. This forces the company to borrow more, and so forth. 2. Sales taxes. This one is easy. A sales tax artificially raises the price of an item and with that price rise, sales decline. So the buyer pays more for the item, and the company sells less. Therefore the income of the company declines in a proportion to the level of the tax. Some states have very high sales taxes, and those states have always seen a flight of the tax base as companies go elsewhere. This is a main cause of the growth of the “sunbelt” in the 1970s and 1980s. Even I, a native New Yorker, live in Virginia, something I never thought I would be doing. So the next time someone says, “Let’s tax these evil corporations,” remember that those who say that are cutting your throat, or even their own.
One Way to Kill Business: ‘Crowding Out’
Jan 30, 2009 / 00:00 amWhat happens when government does not take in enough money in taxes as it spends? It borrows. How does it do that? It issues bonds. A bond is a certificate for a loan. If you buy a government bond, or any kind of bond, for that matter, you are loaning the entity from which you bought it money. The bond contains a rate of interest which you get during certain time periods for corporate bonds, or at the end for government bonds. The rate of interest paid is directly related to the demand and supply of bonds. If there is a big demand for your bonds, you can offer a smaller rate of interest than if you have to “force” people to buy them, which requires a larger rate. (For the sake of this article we will not complicate the model by talking about selling bonds on the bond market, prior to maturity, although the same economic rules hold.) Government bonds do not have as high an interest rate as corporate bonds, and one main reason for this is safety. Companies do go out of business, and there is a possibility that the bondholders might not get their money. But what is the likelihood that the government will go out of business? Not much. Investment managers like to show good returns for their companies by purchasing bonds, but a large part of their portfolio will be in “safe” bonds. The safer bonds are public utilities bonds and the like, AND government bonds. Even though the fund managers want to get a respectable return, they do not want to take too much risk, so a large part of their portfolio will be in safe investments. The safest bonds are government bonds. Now you are a corporation who needs a very expensive piece of equipment and you do not have enough profits saved up to buy this machine. Not buying this machine will mean that your business will come to a dead stop because you will not be able to make a component of your product. So you issue bonds. The problem is that your bonds are competing against a ton of safe government bonds. In tough economic times there is a “flight to safety,” which means investors are more likely to buy “safe” bonds than regular corporate bonds. In order to get people to buy your bonds, you must offer a high rate of interest to entice them away from the government bonds. But this raises what is called “the cost of capital.” This means that the corporation will have to make more money on their product to pay the higher interest rate than they would if they did not have to compete with government bonds. This is similar to a situation where you need a car for work. You have no choice but to buy a reliable car. But because your credit rating is not as good as that of your neighbor, Fred, you get charged a higher rate of interest to buy the car. Both you and Fred are competing for the same available money. Because he is “safer” than you, his “cost of capital,” the interest on his car, is less. If your personal budget is already strained, you will lose weight quickly, because you still have to get to work, but will not be buying your usual quota of food. If you cannot make the payments because of the high interest, the car gets repossessed, and you are out of work completely. Now, how does the company make more money to pay the larger rate of interest? In a competitive market, it cannot raise prices, because most of their customers will go to its competitors. It could improve the product, it could do better advertising, but none of these things guarantee success, and they cost money, which was the problem in the first place. In truth, the company might not be able to buy the machine, or, having bought the machine, not be able to keep up the interest, or the cost of capital. They then will declare bankruptcy, or just go out of business. So when government tells you that it will spend tons of money to help the economy, and taxes are not scheduled to pay for these expenditures, remember there will be many more safe government bonds available to compete with corporate ones, which will be crowded out of the market, making it harder for companies to borrow money in the bond market. Government deficit spending (sound familiar, President Obama) to help the economy is actually helping to kill it!
Ann Coulter and Single Mothers
Jan 23, 2009 / 00:00 amAnn Coulter recently published a book entitled Guilty. I have not read the book, but what I do know is that it has generated some controversy on at least two TV shows, namely, The View and The O’Reilly Factor. The essence of the controversy, at least as it was shown on these shows, had to do with statistics Coulter cited in the book about social problems and single mothers. It turns out that many if not most of social offenders, that is, criminals, delinquents, druggies and others, were raised by single mothers. The women on The View and an actress who is a single mother interviewed on The O’Reilly Factor seemed to be accusing Ms. Coulter of blaming single mothers for this social aberration of their children, as if they intended bad outcomes for their children. I do not believe that Ms. Coulter defended herself well verbally. That being said, let’s analyze the situation. 1. There is such a thing as statistical correlation. For instance, 95% of the time I hit my head when getting into my wife’s car. This statement is a fact (it’s really an estimate). The data correlates. If you took count of the times I got into my wife’s car, you would see that 95 out of 100 times I hit my head getting in. 2. Statistical correlation does not prove cause and effect. In the example of my wife’s car and my head, one cannot point to the cause of the hitting of my head merely from the data. More is needed. 3. Folks who talk about these things usually fail to make proper distinctions. To say that Coulter was blaming the single women for poor parenting skills is insufficient to be meaningful. Do some mothers (single or not) have bad parenting skills? Of course. Do some single mothers try their best to raise their children properly? Yes. Do all single mothers succeed in raising good children? No. The question we have to ask ourselves is, "Are the children of single mothers more likely to become socially aberrant than the children raised by a mother and father both permanently present in the home?" Ms. Coulter’s data seems to say yes. But why is that true? Firstly, children need the role models of both a male and female in the home. The mother and father show different complimentary strengths which benefit the upbringing of any child. In a single-parent home, half of this influence is missing. Secondly, when children get to those difficult teenage years, the mothers frequently have difficulty handling unruly children, where most fathers would have no problem, purely because of their size and temperament. Countless talk shows have shown that when teenagers get out of control, the mothers get physically intimidated by children who are having obedience problems. I was over 6 feet tall at an early age, and my mother was a skinny 5' 1¼". I was a good kid, raised by a mother and a father, but if it was my mom vs. me, there is no way she could stop me from going out, or whatever. Now my father was a skinny, athletic 5' 10" World War II veteran. Even though I was much bigger than he, he had no fear of anything, and I would not have succeeded in my plans. Thirdly, being a single mother is one of the biggest causes of poverty. Men are the ones who pursue careers and generally obtain the credentials and experience to advance in jobs, which means in salary as well. Mothers frequently put off career and/or education to start a family. If the husband leaves, and especially if he is not paying proper child support and alimony, the mother has to go to work at low-end jobs. Children end up in day care or with babysitters other than the mother. This is a further drain on funds, and on the bonding between mother and child. This might not be so bad if there were still extended families, where the mother could leave the children with her sister, or grandma, especially if the relatives shared the same dwelling with the mother and child in question. But these extended families are less prevalent all the time. Fourthly, a big result of the sexual revolution is promiscuity and illegitimate pregnancies. There was an article in Newsweek years ago where black teenagers were interviewed about their illegitimate children. The boys were proud of fathering, not just a child, but children all over the neighborhood, of different mothers. Many of the fellows did not even care to be around the mothers or their children. The young mothers were almost as bad; they gave in to the desires of these men and to their desires to father children. It is almost as if the girls were so desperate for children at their young age that they would do anything to have them, and to heck with the consequences. Lastly, the desire to have a man in a woman’s life does not die with the flight of the irresponsible father of her child. This leads many women to have serial boyfriends, many of them sleeping with her, and playing the role of temporary father. This produces confusion in the mind of the child, and frequently worse consequences, where the man is only interested in the woman. It should be understood that many single women have heroically overcome these barriers, but the data seems to indicate that heroism, because it is heroic, is not that common. The actress who was on The O’Reilly Factor seemed to be saying that because she was successful, anyone can be. The fact that actresses are wealthy, while most single moms are not, pokes a big hole in her argument. Most single mothers obviously could not afford to give the time and care to their children that this actress could. All of this points to the main issue here. God intended children to be conceived in love, by a male and female parent, both of which are committed for life. Falling short of the standard is a sad fact of life, but has been exacerbated by promiscuity, lack of understanding or even desire for monogamous marriage, irresponsibility, selfishness and heartlessness. To assert that this thinking will not be an influence on the children is foolish, if not outright stupid. Children need love and stability from their mother and father. Not adhering to God’s plan for families will produce aberrations, and the aberrations will be passed on from generation to generation, because the children will think that the aberration is the norm. This will produce misery for parents, children and the society at large, not to mention, put countless souls in jeopardy.
Professor Kmiec: Round Two
Jan 16, 2009 / 00:00 amAs many readers have no doubt read, law professor Douglas Kmiec, who is Catholic and has pro-life credentials, has taken offense at some criticisms leveled at his pro-Obama stance. If you read his comments, he makes it appear that he has been attacked only by immature, name-calling, right-wing Catholic nuts. Of course, others, like myself on these pages, criticized him on reasonable grounds, he has yet to respond to.
Cosmos and Taxis
Jan 9, 2009 / 00:00 amMany people cannot get the idea into their heads that society was not created nor is run by a single authority. Now someone objected to this idea once by saying that since God created everything, He is effectively the creator of society as well. That is true in a sense, but one thing I have insisted on, along with the late Pope John Paul II, is that God made man a co-creator with him. This applies to inventions, etc., but also applies to society and the market as well. Remember, John Paul II held that we humans have self-possession and self-governance which give us self-determination. Men are in control of their actions (assuming they are not a slave to their passions or public opinion, or something else), and therefore are responsible for those actions. This includes the setting up of institutions, usually occurring over long periods of time, and resulting from trial and error. These institutions serve the function of human flourishing. For example, look at the way universities evolved since the later middle ages. They went from monastic schools, meant for monks, to being open to others, to the great universities in the major cities, to the institutions we have today. Are they perfect? Of course not—nothing man does can be so. But one cannot argue that they have not been centers of great learning and progress for the benefit of the human race. The same is true of the growth of markets. Agricultural inventions in the middle ages allowed more than minimal food to be grown, thus allowing people to travel. They traveled to the great trading cities and brought back things never available to people in the medieval non-costal areas before. These folks set up bazaars, which the people visited and bought things which enhanced their quality of life. These turned into towns when the patterns of trade became habitual. The towns became cities, etc. The great Austrian economist Friedrich Hayek uses the Greek terms “cosmos” and “taxis” to describe the difference of worldview between those who see the spontaneous order of society and the market and those who do not. Cosmos describes the self-governing order of things—like the cosmos. Did you know that the Andromeda galaxy and our Milky Way galaxy are on a collision course—and there is nothing we can do about it? This is an example of cosmos in the area of space. Think of taxis in the sense of hailing a taxi cab, and then telling the driver where to take you. In this case, you are directing the cab. In the first instance, the cosmos is self-directing. Society and the market conform to the cosmos rather than the taxis. Both are self-generating by the billions of interactions between thinking human beings all over the globe and those interactions are based on the interactions yesterday and those are based on the interactions on the day before that, etc. No one controls this. This does not mean that large institutions can’t influence the society and market. But there is no control here. Even with President-elect Obama’s economic “stimulus” plan, no one is really sure how the market is going to react to it. How did it react to the original issuing of money to free up loans? Well, Donald Trump put it this way the other day: “No matter what your credit rating or your track record, you still can’t get a loan.” The implications are clear. Those who say that they can fix this, that, or the other thing, in society or the market are blowing smoke. Even if they can influence things, this influence might not be for the better, because of the Law of Unintended Consequences, which is founded on the fact that people will act in their own perceived best interest, regardless of what a government program will try to accomplish. This is why it is better to let the economy deal with circumstances than try to tweak it. It was that constant meddling with the economy which caused the problems in the first place. More meddling can’t remedy the results of the original meddling—at least if we are not in some kind of dream world.
The Economics of Politics
Dec 12, 2008 / 00:00 amPUBLIC CHOICE I—THE MEDIAN VOTER RULEDuring each election season, many Catholics wonder why so many Catholic politicians do not vote according to their professed beliefs. It is disheartening to have one famous Catholic politician say publicly that he takes his faith very seriously and a woman’s right to choose abortion very seriously as well. The answer can be found in a relatively new school of economics called Public Choice. Since economics studies the actions of people in general, the laws of economics, logically apply to the actions of persons in public office as anywhere else. In this case, we will study what is called the “median voter rule.” A normal statistical curve looks somewhat like a camel’s hump with a line straight up the middle. That middle line is the average. Assuming that this is a curve of voters, 68.2% of all the voters fall within one standard deviation of either side of this average voter. This is the majority. Now, the United States, not being a Catholic country, cannot boast of the average voter agreeing with most of the tenets of the Church on moral-political issues. So unless the candidate is from a state or district where the mean (or median) voter agrees with the Church on public issues, he will not be able to get majority support. This is why, at times, a candidate will speak to religious groups and assure them that he agrees with them, and then, if he happens to get elected, votes inconsistently—if he wants to keep his job. This politician might have gotten elected the first time by avoiding any controversial stands, so that even the median voter liked him. But in office, a stand must be taken on issues that appear in legislation. This becomes public record, and that is when we see a movement to the “center,” i.e., waffling on serious issues. After all, who wants to come home and tell his wife that after moving all the way to Washington, they now have to go back home and he has to get a real job? PUBLIC CHOICE II—PUBLIC SERVICE Now let us talk about the notion of public service—the idea that governmental people are in their jobs only to help others. One of the basic premises of economic theory is that people generally act in their own interest. Contrary to what you may have heard, this is not necessarily a bad thing. If we did not act in our own interest, we would not be able to put food on the table, or go to the doctor when ill, or go to school, or marry the person with whom we are in love. The world would be topsy-turvy. We would work for no pay and starve to death; we would die of a curable illness, and our married life would be a living hell. This does not preclude working for others—as any legitimate occupation is automatically done for others, or no one would pay you for it. But things change when it comes to working for the government, and especially on the margins. Self-interest leads men to produce products and services their customers need or want. In government, self-interest produces programs that some people want at the expense of others, with one main beneficiary being the one who administers the program for pay. In the market, when a product or service is no longer wanted or needed, people stop purchasing it, and the business fails, or produces another one that people are willing to buy. In government, if a program no longer works, it does not go away, but continues year after year, wasting more and more of peoples’ hard-earned money, and, in some cases, such as welfare dependency, ruining peoples’ lives. On the margin refers to when a politician gets stuck in a dilemma. Suppose a politician takes a strong stand in favor of issue A. Suppose then his district changes its views and generally opposes issue A. If he continues his strong stand, he will get voted out. This means he will have to change if he wants to stay in office, or he will have to waffle on it to make his stand acceptable to the new demographic in some way. This will lead him to make distinctions, subtleties, etc., which will make him seem to support both sides. His new stand will depend on how you read his remarks. Why, then, do so many Catholics look to government as the solution for social problems? The answer seems to be that they have fallen for the “racket.” Politicians would not get elected if they admitted what they were up to, so they must persuade the population that they are out for the public interest. Since most of the people have never studied these things in any serious fashion, they believe the propaganda. This is not to say that there are not any sincere politicians out there, but again, on the margin, they will be exposed.
Long-Run Wisdom—Short-Run Stupidity
Dec 5, 2008 / 00:00 amSince economics is a part of a science of human action, we can relate some basic human behaviors to their effects on economics. One of these is the penchant for what is called "instant gratification." People generally have what is called a high time horizon, which means that they prefer things now rather than later. Would you like $100 dollars now or next June? Obviously you would want it now. If I am going to put it off, you will want it with interest, because $100 dollars in June is worth less than $100 now, firstly, due to inflation, and secondly, the wait. But a good person must learn to temper this natural human tendency for instant gratification, and the failure to do this leads to a lot of trouble. Let’s take a few examples. 1. Two 17-year-olds are dating, and they both realize that, as far as they can tell, they are meant for each other. The natural tendency of those who have found each other is marriage, and with it, conjugal privileges. But that means that these two lovebirds have to wait until circumstances permit the tying of the permanent knot, hardly the case at 17 in this modern society. But the drive for the conjugal privileges is there now. If they have no ability to temper this above named tendency, they will lose their virginity, and a possible pregnancy will result when neither is ready to care for this new life. 2. A person is raised in a comfortable family. The person is not spoiled, but he or she has always had whatever he or she needed. The parents were good providers. They went on nice vacations, the person went to private schools, got music lessons, etc. Then they graduate from college and get an entry-level job. They are used to living the comfortable life, not only for their whole childhood, but even in the college they went to where everything was provided for them. They did not have to cook or work, etc. But now their salary cannot provide that type of life. They are paying a high rent, which eats up a large part of their pay. Then there are the utilities, transportation, clothing, and so forth. To the rescue comes the credit card, or even the bank loan for that house so that the person does not have to live in an apartment. The result—massive debt. Why? The failure to control the time horizon has resulted in a failure to wait until, like his parents, he could afford to live a better life. 3. Every year or quarter accountants issue the financial statements of companies. The statements have their purpose. They give a picture of the health of the company. But what happens if the company lost money this quarter? Well, to the trained eye, factors can be seen that can explain the losses. Coupled with other sources, and an examination of the economy, one can make a reasoned judgment about what the company should do, or stop doing, to get out of the hole. But this loss is not a cause for panic, all things being equal. The function of the management is to enhance the wealth of the stockholders. This task is a long-run job, and at times, just like my alma mater’s basketball team, might require a few years of "rebuilding." But since most people have a high time horizon, they want instant gratification. They want the stock price to go up now; they want to be rich today; they are unwilling to wait for the company to grow. So they dump their stock. When the economy recently began to decline, one guy on a financial channel advised folks to dump all of their stocks and go into cash. This was totally foolish advice, and if you had a high time horizon, you are just the person who listened to this advice. The company should produce a positive return now, or good-bye. The effect of this growing attitude of the public on CEOs is dangerous, because now they will fear to grow the company if this means taking a loss for a period, because they will be punished by the stockholders for their long-term plans. They will then do things to look good in the short term—things which might be to the detriment of the company in the long run, such as entering into a deal for a new product without much forethought because the publicity will make the company hit the news just before the financial statements come out. Those who have studied for an MBA know better, but the big CEO salary creates an interest that might trump knowledge, and even morality. But the source of this problem is the society in general. We must not be hyper-critical; to take the beam out of our own eye before taking the speck out of our brother’s eye. Our materialist society more and more has encouraged the high time horizon attitude. No one wants to put off anything anymore; no one can see the long-term benefits in things. No payoff now and I’m not interested. This has even affected the Church, where so many people think that serving God doesn’t pay off now (of course it does, but you have to experience it before you realize it, or you have to trust the saints) or you refuse to abide by the teachings. Prayer is useless to so many people if it is not a "gimme" prayer, and God’s answer is "no." This may even be a cause of college students’ binge drinking. It is possible that they see no intrinsic value in the long-term study process they are engaged in, so they hide in alcohol and rampant sexuality. We need to teach each other and our youth that a low time horizon is a good thing. Waiting pays off bigger than instant gratification. Self-control is a virtue, and the widespread acquiring of this virtue will be reflected in a better society, and a more healthy economy. There are many more implications to this, but space will not permit me to follow them up now. One line of thought is the Federal Reserve’s constant expansion of the money supply to give the illusion of prosperity. Perhaps next time.
Radio Interview: The Bailout
Nov 28, 2008 / 00:00 amListen to me being interviewed on the Drew Mariani Show on Relevant Radio, October 3, 2008. The focus is on the bailout issue.
The Common Good as an Excuse to Override Human Dignity
Nov 21, 2008 / 00:00 amI cannot tell you how many times Catholics have used "the common good" as an excuse for more government involvement in peoples’ lives and the installing of socialistic, "spread the wealth" programs. This version of the common good is the foundation for some people’s idea of distributive justice, but actually it is based on the "Robin Hood fallacy" of robbing from the rich and giving to the poor. How did I come to this conclusion? I did so merely by reading Aristotle and St. Thomas. Both of those great thinkers say that government must rule for the common good, but both of them oppose "common good" to the "particular" or "private" good. This means, as Aristotle writes, that any law must be good for not a ruler alone, or his cronies, or even the majority, but for the state as a whole. To use the analogy Plato makes in the Statesman, a physician gives a medicine to a sick person even if the sick person finds it distasteful. When he leaves the scene, he leaves behind a prescription containing his instructions. The instructions are not for his good, or the family’s benefit, but for the health of the sick person. BUT . . . nowhere in Aristotle or St. Thomas does it say that the common good is the exclusive or even main province of the government. They merely give a negative prohibition that the state cannot make laws which are good for only one segment of society. The Church, as opposed to some Catholic writers, recognizes this. The Church holds to the principle of subsidiarity, originally enunciated by Leo XIII and actually named as such by Pius XI. Firstly, this principle states that nothing should be done by a higher level of society that can be done by a lower level. This means that, say, in my profession, the professor in the classroom is presumed to be doing his job unless some serious problem arises. His department chairman is not to be breathing down his neck and nitpicking his work. Certainly, the chairman’s boss, the dean, has no business butting into the professor’s work. If a problem arises, and the dean hears about it, he should ask the chairman to investigate and take care of it, assuming the chairman has not done so already, which is an unlikely assumption.
Why Professor Kmiec Cannot Make the Proper Choice
Nov 14, 2008 / 00:00 amThe Catholic News Agency reported an exchange of letters between Catholic and pro-life Law Professor Douglas Kmiec of Pepperdine University and Archbishop Chaput of Denver. In a speech, the Archbishop chided Kmiec and other pro-Obama Catholics for producing confusion among the faithful by supporting the radically pro-abortion Obama. By doing this, the archbishop said, among other things, that these Catholics are confusing the "natural priorities of Catholic social teaching, undermining the progress pro-lifers have made, and have provided an excuse for some Catholics to abandon the abortion issue instead of fighting within their parties and at the ballot box to protect the unborn." Kmiec responded in a letter made public that "the Archbishop’s approach to the abortion issue ‘will lead many in parishes around the country to neglect what they can do to build up the culture of life through the promotion of the social gospel in its fullest sense’" (emphasis added). The key to Professor Kmiec’s view is seen in the emphasized words above, the social gospel. One can see his point. He is saying that the culture of life is broader than abortion, which is very true, and is very obvious. What he fails to see is that the killing of the unborn human person is the most serious and barbaric aspect of the decline of the culture of life. The term "social gospel" is generally never used by the Church. The reason for this is that traditionally the expression was used by those who saw Christ as a kind of divine social worker, and the only really purpose of the Church was to help the poor and downtrodden. This is a total twisting of the mission of the Catholic Church, unfortunately bought into by many Catholics today, thanks to the number of priests who received their training in the 1960s and ’70s. The primary mission of the Catholic Church is to produce sanctity in people so that they can be admitted into the indescribable loving relationship with God that we call the beatific vision. St. James tells us that faith without works is dead, so Catholics show their love of God by showing love of their brothers and sisters in Christ. As Mother Teresa said, "Christ comes to us in distressing disguises." God told St. Catherine of Siena that He owns the whole world, so that the faithful can not give Him anything, but our neighbor was given to us so that we could do for him what we would want to do for God. This is why Jesus said that what you do for the least of His brethren, you did for Him. But while these two things, love of God and neighbor, go hand in hand, a clear moral and common sense principle is that the most serious problems have priority. The legal and systematic killing of innocent unborn children has a higher priority than that of taking care of the poor, which in the United States are not that poor compared to many parts of the world, seeing that the number of people living below the poverty line had drastically declined over the past two years and government and private charities provide assistance to almost anyone who needs it. This is not to mention that over 90% of Americans have televisions, once considered a luxury item. Anyway, who says that the government actually helps the poor in a meaningful way? Jesus did not say that anyone who gets the government to help one of these little ones does it to Me. He clearly said it is our personal responsibility. Pope Pius XII bemoaned the fact that the modern welfare state does not give personal aid to the poor as a private charity would. The government has "caseworkers" who take no personal interest in the people whose records they review. Private charities have trained social workers, who not only take a personal interest in the people they assist, but help them in other areas: moral, budgeting, psychological, etc., very much in the tradition of St. Vincent de Paul. I have written elsewhere that thinking that the government is the main vehicle to help the poor has derailed many Catholics into the party of abortion and that this should create a moral dilemma for them, but this is apparently not so in the case of Professor Kmiec. While it is true that we all must work to produce a culture of life in every area, to neglect or encourage the killing of the unborn is a grave evil. It is almost like saying that we should vote for Mussolini so that the trains can run on time. It is important that the trains run time, but hardly as important as basic human freedom. So, to come full circle, it is important to help the poor, but not to encourage the death of the innocent in the process.
Principles…and Interest
Nov 7, 2008 / 00:00 amThis title sounds like I am going to write about money. Well, I am, but not directly. It doesn’t say “principals.”