My Response to Tony Perkins

Tony Perkins is the President of the Family Research Council and recently put an editorial up on CNN.com called "Jesus was a free-marketer, not an occupier." There's a lot to discuss as a response to this editorial. To start with, I dislike anyone stating what Jesus would think or do as if it were some how predictable. But I suppose "most likely" and "probably" are out of vogue in editorial journalism. Absolutes and for-sures are the thing of the day.

I also think it's silly to pretend we would know how Jesus would act if he were here today. I'm pretty sure I know what his opinion would be on the financial elite that caused the mess back in 2008 -- not a single one of whom has been charged with a crime. Compared to the thousands that have been foreclosed through no fault of their own (yes, I'm purposely leaving out the minority who were foreclosed THROUGH fault of their own -- i.e. they walked away from underwater mortgages or they knowingly bought more than they could afford in hopes of "flipping"). I think he would be disgusted at the dichotomy there.

I also think I know how he'd probably feel about the increasing income polarity in this country. What he would DO however is much harder to identify. Would he march down to the DOJ and demand CEO heads on a platter? Would he put the golden roads of Revelation on the market and use the profits to re-purchase the homes lost to foreclosure and give them freely back to the evicted? Or would be pitch a tent in lower Manhattan? I have no idea.

But now for a look at Mr. Perkins's post in specific. Point/counterpoint style.

Here's the direct quote from Luke: "He called his ten servants, and gave to them ten minas, one mina each (a mina today would be worth around $225), and he then told them to 'Occupy till I come.' " (Luke 19:13, King James Version)

Beware of anyone attempting exegesis using only the KJV. NRSV uses "do business." I know, it doesn't tie in as nicely with the #ows movement, but this verges on cherry picking.

 Does it mean take over and trash public property, as the Occupy movement has?

Or as Jesus did to the money changers in the temple?

Does it mean engage in antisocial behavior while denouncing a political and economic system that grants one the right and luxury to choose to be unproductive?

Jesus entire message rests on actions that were viewed as "anti-social." I'll be honest, I don't even understand what the second half of this means. If he's referring to unemployment insurance or welfare, I think it's pretty clear where Jesus would side on those issues. Perhaps that's the stance with the least need to nuance or hedge our wording. Jesus would almost assuredly support unemployment insurance and welfare support.

From a spiritual perspective, the mina in this parable represents the opportunity of life; each of us is given the same opportunity to build our lives, and each of us shares the same responsibility to invest our lives for the purpose of bringing a return and leaving a legacy. Jesus gave equal responsibility and opportunity to each of his 10 servants.

This is true. And hard to argue with. I hope Perkins also realizes that what we do with what we're given is not based solely on merit or hardwork. That is clear in the Bible as well. Bad things happen to good people and good things happen to bad people. Out of work people aren't out of work simply because they wasted their "mina." Admitting that would in no way undermine the importance of hardwork.

The fact that Jesus chose the free market system as the basis for this parable . . . He used a free market system to bring a tenfold return on investment.

Whoa whoa whoa whoa whoa . . . Jesus chose the free-market system??? The Jerusalem of Jesus's time was a free-market democracy? That is anachronistic to the point of hyperbole.

 Jesus rejected collectivism

Interesting non-sequitur. I'm not sure he Perkins gets here. If anything, the Gospels and Acts point to a world that was moving more towards collectivism than away.

There are winners and yes, there are losers. And wins and losses are determined by the diligence and determination of the individual.

And if we read the parable in the way Perkins is expecting us to, ENRON would be at the Lord's right hand when his kingdom comes! Again, we should not . . . we MUST not measure merit by success.

Some would argue that such an approach encourages abuses, the likes of which we have seen on Wall Street. While some egregious abuses have taken place, they are not inevitable or intrinsic to free enterprise.

Now Perkins lays out the exception to his rule.  Sometimes the winners AREN'T deserving. But then he twists it so that these undeserving winners didn't win because of the system, but because of something else. Apparently he believes that #OWS is against free enterprise. This is a strawman. #OWS seeks justice, not a revolution from free-market capitalism to socialism. They (we) seek a shift from crony capitalism to democratic capitalism. From stockholder-centric management to stakeholder-centric management.

The parable of the king and the servants endorses the principles of business and the free market when properly employed.

Here is where I have to ask, "Who is Tony Perkins?" This man is attempting an exegesis of a parable and is on CNN.com's front page educating the nation to what Jesus is saying. Look no further.  Tony Perkins is a career politician and now a lobbyist. He is not educated in theology, homiletics, hermeneutics or any other subject that would help him expound upon what Jesus meant anymore than Joe Blow.

Yes, I believe in the priesthood of all believers. That doesn't mean, however, that we all have the appropriate credentials to be interpreting scripture on the front page of CNN.com.

Income Polarization and Asking the Right Question

An article on Yahoo News today addressed the truth to Obama's statements that the rich have been getting richer while the poor get poorer (Economic Study). The article is based on Richard Burkhauser's work. One of his articles that has already been published is similar to the Yahoo article. The one specifically referenced in Yahoo, however, is still coming down the pike.

The article that is already available is "Presidential Address: Evaluating the Questions That Alternative Policy Success Measures Answer" (a bit of an unwieldy title, huh?). Burkhauser makes an important point that at the bottom of every answer is a question, and how one asks the question often greatly affects the answer. So the question "are the rich getting richer while the poor get poorer?" is a great question for casual conversation, but when it comes to actually answering it, things get much more complicated. Specifically, how should we measure how rich or poor someone is? Usually we just look at income, but as Burkhauser points out, this can often be too simplistic.

Burkhaused has an issue with the convenient use of the "bottom 90% and top 10%" as definitions of rich and poor. He prefers to use quintiles (5 groups separated by 20%). Sounds good. Another problem Burkhauser has is with using just income as a judge. He says:

However, this measure of

income growth does not recognize that tax units are a subset of households and that

income sharing can occur across tax units within households. (For example, two

unmarried persons who live together must file their income tax forms separately.

Doing so makes them two separate sharing units in the Piketty and Saez world of

column 1, but they are nevertheless likely to share their market income between

them in their single household.)

Again, he may be onto something. He also believes we should include "in-cash government transfers." Taking these three new additions to the measure of rich or poor:

When we then acknowledge that households are of different sizes and that the

income available to a given individual will be affected by the number of persons in

his or her household (returns to scale are not perfect) and adjust our measure of

income in column 4 accordingly, we find that the increase of the median person’s

household size–adjusted pre-tax, post-government in-cash income increased by 23.6

percent, more than seven times the growth in column 1. The definition of income

used in column 4 is the one most often used in the United States poverty, income,

and income inequality literatures.

OK, I can dig it. Maybe those sounding the alarm about income polarization are a bit hyperbolic. Burkhauser then goes on to add fringe benefits to the mix. This makes income polarization even less likely.

So in addressing what the proper question should be, Burkhauser has revised the conventional approach and added some important ways to better judge income polarization. But has he arrived yet at the right question? No where does Burkhauser address hours worked per week. If the lower 20% are working twice as many hours a week for an increase in his revised income measure of 26.4%, that isn't a real increase. Or if a middle income earner spent 3 years going to school to get a degree and spent $60k of their own money to increase their human capital, that too must be included in the question. Other examples would be easy to come up with.

I appreciate Burkhauser's casuistry, but two things must go along with his revisions. One is the realization that his question still hasn't gotten to the bottom of the Question. And secondly, the more details and specifics that are included (and even those which are left out) can make it much more difficult to tell if a researcher is cherry-picking data in order to arrive at a pre-arranged solution. I am in no way implying that is what Burkhauser has done, simply that it needs addressed.

Not Capitalism, but capitalisms

One pet peeve of mine is that when people are critical of the economic structure of the US, the free-market capitalists say "but that's not capitalism." As if the macroecnomic situation in this country were merely a case of semantics. Call it by another name and everything is fine, just don't call it capitalism.

Well obviously what we have in this country is capitalism. Vietnam has capitalism as well. So does England. Heck even China is approaching what could be called capitalism. There is no Capitalism with a capital C. There are merely various capitalisms.

At the heart of this argument is the difference between ideal types and reality. Some hold the Smith view of capitalism as the only ideal type for capitalism. Anything else demands another name. This is simply semantic hairsplitting. There will never be a real life incarnation of Smith's capitalism -- so making it the benchmark to judge whether an economy is "capitalist" or not is moot. What exist in the world are real-life versions of capitalism. And there are many of them. They are certainly not the same, but they are all capitalism.

(As an aside, I would offer the theory that economies and finance are socially constructed realities. Since all societies differ, their forms of economy will differ. This also means that what works well for one society may not work well for another. Hence the failure of exporting American capitalism to the developing world.)

I'm currently finishing Joseph Stiglitz's Making Globalization Work (I got it used for $2.25 on eBay and little did I know was signed by the author :O) and then moving onto James Childs's Greed (connecting the economic and Christian ethics dots) before hitting thesis reading full time. In his preface, Stiglitz says much more eloquently what I've been trying to say:

There is also a growing recognition that there is not just one form of capitalism, not just one "right" way of running the economy. There are, for instance, other forms of market economies . . . that have led to quite different societies, marked with better health care and education and less inequality. . .. And when there are alternatives and choices, democratic political processes should be at the center of the decision making -- not technocrats. 

Fixing Our Economy Is As Easy As 1 2

Two changes to help sort our stuff out. These are a combination that I think are direly needed (and related). 


(1) As pointed out by Russ Roberts over at Cafe Hayek (already linked his paper a couple time), loss needs to be returned to the market. The financial meltdown occurred in large part because the financial industry felt confident betting with other people's money with the implied assurance that the government would bail them out if something drastic happened. 


(2) The state needs to supervise the market as opposed to the other way around (a point brought up by Foucault cited by Palma in a good article on the meltdown). It doesn't do us much good to ask GE to write tax laws. It doesn't do much good to allow Wall St to pick and choose which regulators they'd like. Or to ask polluters to write laws on pollution. The government determines the rules that the market will play by. Or at least that's the way it should be.

There is nothing "natural" about markets or capitalism. They are products of our cultural milieu -- in much the same way that football is. There is nothing "natural" about football. Someone invented it and then we found out it worked (and we liked it). But football does not exist outside of the rules that were constructed to play it. The same goes for the market. The government sets up the rules that the market should play by, then the market plays. The way things have been operating (since 1980 or so) has been, in effect, that the Super Bowl winners have been allowed to write the rules for next season.


And this brings us to campaign finance reform and political contributions. 

Who Decides the American Dream?

Now that we are 3+ years removed from the beginning of this financial mess, and with each set of data a recovery seems underway, many are starting to turn to the job of finding out just what happened and how to prevent it in the future. At the heart of this debate is homeownership and the perennial question "Who decides who gets to own a home?" Dig a little deeper and the question is "Who decides who decides who gets a home?"

Many point to the GSEs (Fred and Fan Mae) as being the responsible parties in subprime loans. They follow that one step further to the goals laid down by George W and Bill Clinton to boost homeownership which then gets backtracked to the Community Reinvestment Act of 1977. There is still an underlying question that isn't addressed by these causes though. The GSEs, Bill and George, and the CRA were merely trying to increase homeownership of those people who could afford a home but simply didn't qualify for a "conforming" mortgage as laid out by banks.

The above causes contributed to innovations such as 3% down mortgages and piggy-back loans which both served to counter the 20% down rule of conforming loans (I don't want to touch on 0 down loans as they seem barely justifiable even in highly specific cases). Russ Roberts lays out some good ideas in "Gambling With Other People's Money":

The opportunity to borrow money with a 3 percent down payment has three effects on the housing market: 

• It allows people who normally wouldn’t have accumulated a sufficient down payment to buy a house. 

• It encourages homeowners to bid on larger, more expensive houses rather than cheaper ones. 

• It encourages prospective buyers to bid more than a house is currently worth if the house is expected to appreciate in value

The first of the three points above is the whole point of the changes to conforming loans. The other two points are interesting but would take me way too long to comment on.

 Now we have a working class family that makes $40k a year with both parents working who want to buy a $120k house able to put down under $4000 instead of $24,000. Quite a difference. Assuming they can make the monthly payments, is there any reason they should not have the 3% mortgage available to them?

Was this push for higher homeownership rates simply identified with revisions to conformity rules on mortgages? Were banks (especially the GSEs) pressured to give more loans not only with less money down, but to people less likely to be able to pay? Part of this question addresses how the banks decided who was "worthy" of a loan. Whether upper-middle class families play the credit rating game better, or whether the rules to the credit rating game are biased towards the upper-middle class, I don't know. I do know that if you look at just credit scores, you will get some glaring disparities between the results and the actual thing you're trying to measure -- the credit worthiness of an individual. So the GSEs came up with some new ways to determine credit worthiness. Some of them were probably very good. Some of them ended up being pretty bad. No/low documentation mortgages and 0 down mortgages are glaringly bad. Looking at more than just credit rating is pretty darn good.

Now in 2011 we have some people trying to say the "American Dream" of homeownership isn't even all that great. A soon to be released article attempts to show that homeownership compared to renting isn't even beneficial financially: Second Thoughts on the American Dream. This premise seems awfully specious to me. I'll have to reserve judgement until the whole article is published though. And hope there aren't too many math problems in it. Owning a home isn't for everyone. And it's certainly not a right. I agree. But for whom is it for then? If one looks at the homeownership rates by income level, it seems pretty obvious that homeownership is a benefit. Homeownership rates go up as income goes up. This seems pretty damning evidence for this article.

At the end of all of this, who "deserves" a house? Who decides who deserves a house? Are the rules we make concerning mortgages, conformation, percent down, credit-worthiness, etc. effective at limiting homeownership to those who can afford it? Or are they constructed in a way that prohibits some from buying a home that otherwise could afford it?

Gambling with other people's money

I'm reading Russ Roberts's report on the financial crisis an came across a paragraph that I think directly relates to the debate on racism found two posts ago. I dug myself a hole by using "evidence" and "hints" as two different forms of proof. I should have gone with what Roberts ends up using: "direct" and "indirect" evidence. While Roberts is talking about the effects of low-probability of loss on risk taking, if you read this paragraph in relation to racism I think it also makes a lot of sense. Bold is mine.

While direct evidence is unlikely, the indirect evidence relies on how people generally behave in situations of uncertainty. When expected costs are lowered, people behave more recklessly. When football players make a tackle, they don’t consciously think about the helmet protecting them, but safer football equipment encourages more violence on the field. Few people think that it’s okay to drive faster on a rainy night when they have seatbelts, airbags,and antilock brakes, but that is how they behave. Not all motivations are direct and conscious.

Mike Foxtrot Takes on Wall Street's Charlie Foxtrot

Still working on my Foucault paper. It'll attempt to be a Foucaultian analysis of the subprime financial meltdown. Here's a brief summary. Stay tuned for more!

The neoliberalism beginning in the late 70s and gaining steam in the Reagan/Thatcher years was a technology of power that boasted of increased freedom but which actually increased subjection. The deregulation of neoliberalism, a prima facie reading of which would yield increased egalitarianism, actually resulted in increased income polarization. This came to manifest itself in the technological trap of the subprime financial crisis.