God is a Capitalist

Saturday, February 17, 2018

Is it time to sell?

The two recent plunges in the stock market have investors’ knees shaking. Is this a normal, healthy correction that forces expectations to align more with reality, or is this the beginning of the big one, the aftershocks of which will take the market down 50% as happened in 2000 and 2008? I’ll be able to tell you in about six months. I only predict the past because forecasting the future is too difficult.

A recent paper by the University of Chicago Booth School of Business professor George M. Constantinides and McGill University’s Anisha Ghosh, “What Information Drives Asset Prices?” offers some insights. One is that the Consumer Price Index and average hourly earnings provide better guidance about the direction of the market than does consumption spending alone. In other words, Keynes was wrong.

But the best insight is that the phase of the business cycle we are in offers the best advice on the market’s future. The authors call the phases “regimes” and use just two, expansion or recession.
The consumption and dividend growth rates have higher means in the first regime than in the second one. Therefore we identify the first regime as the regime of economic expansion, with a higher mean of consumption and dividend growth rates and longer duration than the second regime...In other words, the investor is able to effectively forecast the regime in the next period...”
So the investors who accurately guess whether the next period will usher in a recession or continue the expansion will do better at predicting the market. The authors of the paper assume that investors use a range of macroeconomic variables, including Consumer Price Index and average hourly earnings, to guess what regime or phase of the cycle comes next.

Wednesday, February 14, 2018

Free God is a Capitalist

Since I can't offer the PDF version of God is a Capitalist anymore because of the Kindle contract, I can offer the Kindle book free for five days each quarter. The first free days will be March 1-5. I cleaned up the PDF, corrected many errors and added some new material to the Kindle version. Please leave a review whether negative or positive! Just click on the picture of the book on the right to go to the Amazon web page for the book.

Monday, February 12, 2018

What is free market capitalism?

People in the West are confused about capitalism because they don’t know enough about socialism. Karl Marx had a greater respect for capitalism than do modern socialists or conservatives. 

Karl Marx fabricated the term “capitalism” and defined it as the private ownership of the means of production. He did not conflate capitalism with commerce, as do most historians today who see shoots of capitalism sprouting throughout human history. Neither did the monasteries of medieval Europe birth capitalism as some historians claim. Is it really necessary to remind historians that monks owned no property and took vows of poverty? Monasteries were closer to the many small socialist experiments, like the kibbutzim of Israel. Marx saw the origins of capitalism in the 17th century.

Marx pretended to have discovered the secret forces of history that had led mankind from tribal economies through feudalism to capitalism and ultimately will usher in socialism. And he insisted that society must follow that sequence. They could not jump from feudalism to socialism because only capitalism could produce the wealth necessary for its socialist heirs to live in abundance. Trying to shorten the path would perpetuate poverty and misery. That’s why Marx was skeptical about the possibility of backward nations such as Russia succeeding with socialism.

Sunday, February 4, 2018

Don’t nudge; reform Social Security

My sister-in-law taught me to do the “Dallas nudge.” It’s sort of a dance, like the Texas Two-Step, except it’s a tactic for getting onto one of Dallas’ many twelve-lane expressways. So you floor the gas pedal to match the speed of the traffic you want to merge with and then look away. The other drivers think you can’t see them and make room for you.

Behavioral economists have been pushing the government to nudge us since some of their own won the Nobel Prize. Like CS Lewis’ “do gooders,” we’ll never be free from their needling and meddling. The latest comes from the Chicago Booth School of Business in an article “Why policy makers should nudge more" by Alex Virkhivker. He wrote,
In one case, the researchers looked at a nudge by the tax-preparation firm H&R Block, which offered clients assistance in filing college financial-aid paperwork, and compared that approach with subsidies and tax incentives offered at the state and federal levels. The nudge produced 1.5 additional college enrollees per $1,000 spent—making it 40 times more effective than the next most effective intervention the researchers analyzed.
Likewise, nudging turned out to be the most cost-effective way of encouraging energy conservation. One program to nudge consumers into lower electricity use, sending letters comparing a household’s energy consumption to that of its neighbors, saved 27 kilowatt-hours per dollar spent. In contrast, a rebate offered by California utility companies produced savings of only 3.4 kWh per dollar, and other demand-management policies that relied on a combination of consumer education and monetary incentives averaged 14 kWh per dollar.

Monday, January 29, 2018

Book on race advertises failure of state programs

Divided by Faith: Evangelical Religion and the Problem of Race in America by Michael Emerson and Christian Smith rocked the white evangelical world when it came out in 2000. It appealed to the evangelical’s love of wool shirts and launched a new genre of books and articles promoting white evangelical guilt over racism. In 2013, Christians and the Color Line: Race and Religion after Divided by Faith was the booster rocket to keep the movement in orbit.

 Structural racism in the US in spite of the Civil Rights movement horrified the authors of Divided by Faith. By structural racism they mean free markets. They wanted to tax the rich at higher rates and redistribute it to poor. That such taxation would hurt rich blacks and that most of the poor are white (though the poverty rate among blacks is higher) didn't enter their calculations. 

Frustrated by the white evangelical insistence on individual responsibility and personal evangelism, they determined to move white evangelicals away from their fixation on the individual and toward solving structural issues through the government. Their solution was for white evangelicals to get to know blacks personally by having them to dinner and integrating churches. They reasoned that if whites could know black people well enough they would become as socialist as the authors. 

Tuesday, January 23, 2018

The derelict economics of the Benedict Option

Rod Dreher’s book The Benedict Option: A strategy for Christians in a post-Christian nation was a best seller last year. It’s difficult to complain about most of what Dreher has to say in his book. It would be like opposing motherhood and apple pie. He advocates building stronger churches and communities, praying and reading the Bible more and improving our children’s education.

The problem with this book and his earlier one, Crunchy Cons, is that his solutions have nothing at all to do with the causes of the illnesses he associates with modern Western culture. The first chapter of the Benedict Option laments the moral decline of the US as evidenced in the endorsement of homosexual marriage and the full hug of transgenderism. The second chapter traces the origins of these problems to the following:
Fourteenth century: The defeat of metaphysical realism by nominalism in medieval theological debates removed the linchpin linking the transcendent and the material worlds...
Fifteenth century: The Renaissance dawned with a new, optimist outlook on human potential and began shifting the West’s vision and social imagination from God to man...
Sixteenth century: The Reformation broke the religious unity of Europe...
Seventeenth century: ...The Scientific Revolution struck the final blow to the organic medieval model of the cosmos, replacing it with a vision of the universe as a machine...
Eighteenth century: The Enlightenment attempted to create a philosophical framework for living in and governing society absent religious reference...

Nineteen century: The success of the Industrial Revolution pulverized the agrarian way of life, uprooted the masses from rural areas, and brought them into the cities...
Twentieth century: The horrors of the two world wars severely damaged faith in the gods of reason and progress and in the God of Christianity...

Thursday, January 18, 2018

Is the GOP tax plan moral?

Socialists complain that the recent tax reform package passed by Republicans in Congress and lauded by President Trump as America’s Christmas present is immoral because it provides some relief to the wealthy. Behind the complaint lies the offense to socialists that rich people exist at all. Unless a tax plan euthanizes the rich, socialists will consider it immoral.

It’s important to keep in mind that when socialists talk about morality they don’t mean what people have meant for two thousand years. For most of Christian history morality meant those principles that would cause humanity to prosper if we follow them. We got them from God because only our Creator knows what is best for us. Socialists murdered God in the Enlightenment and changed the definition of morality to mean whatever socialists prefer. That is the socialist MO: redefine words so that their arguments win by default.