Can religion spur economic growth?

Last week we had a discussion on how culture, and therefore religion, could have an effect on an economy's performance. Brendan Nevin and I continued the discussion we started in class by email. Here is was we wrote:

"Mr. Vandamme

You may be interested in the article below. R H (Richard Henry) Tawney 1880-1962 was a Christian socialist economic historian who for 30 years until his retirement in 1949 lectured at the LSE. His classic work is 'Religion and the Rise of Capitalism' (1926) which supports and builds upon Weber's thesis. Tawney's work was, however, criticised by the Oxford historian Hugh Trevor-Roper (1914-2003) who was personally militantly anti-clerical and rabidly anti-Catholic. He nonetheless attacked - sometimes vitriolically - the whole Religion and the Rise of Capitalism orthodoxy of Weber and Tawney and pointed out (as also did Weber's contemporary, the economist Joseph Schumpeter 1883-1950), that capitalism did not begin with the Industrial Revolution but in fourteenth century Italy and that Antwerp in the sixteenth century was a major commercial centre of Europe. In addition, predominantly Calvinist Scotland did not enjoy any significant economic growth in the Reformation period and predominantly Catholic Belgium industrialised much earlier in the nineteenth century than did heavily Calvinist Holland, and was indeed one of the centres of the Industrial Revolution in continental Europe.

Weber a Prussian - is known to have been strongly prejudiced against Catholicism whereas Schumpeter was born to Catholic parents and the American philosopher Michael Novak is still a practicing Catholic of Slovak antecedents.

The foregoing encapsulates, I hope, what I was attempting to say on Thursday last but I accept I might have expressed myself better. In any case, I find the cultural aspect surrounding capitalism and industrialisation of particular interest and would venture the opinion that Weber's thesis is perhaps a gross oversimplification of a very complex reality.

With best regards.

Brendan Nevin"

My response:
"I agree with the fact that a country's economic performance cannot depend on a variable as abstract as religion and that this thesis would be a gross oversimplification. However, from what I can recall that's not exactly what Weber says. I his famous book I think he argues that the protestant ethic is at the origin of a particular work ethos which in turn may have been one of the factors leading to economic success, but definetely not the only one. Therefore a different cultural framework in a different time in a different place may of course also have contributed to a country's economic performance. Also, the Belgian example you give is only partly true. Southern Belgium's early industrialisation, and hence impressive economic performance, had more to do with the presence of raw materials than with religion. The fact that Flanders did not have these commodities to exploit and given that it were a catholic region as opposed to protestant Holland (and therefore being the victim of some sort of economic discrimination - the House of Orange indeed refused to invest in infrastructure in most parts of Northern Belgium) probably offer a better explantion why until WWII it has always economically limped behind its Northern and Southern neighbours.

Also, I never said capitalism is a protestant invention, but merely that the protestant work ethos may have been a better match to the incentives a capitalist society gives.

Another interesting author that has widely published on the subject is the controversial Deirdre McCloskey (formerly known as Donald McCloskey). I had the chance meeting her a couple of years ago when she presented her new book "The bourgeois virtues: ethics for an age of commerce" and she is a very interesting lady: http://www.deirdremccloskey.com/

Looking forward to continue this little discussion on Wednesday afternoon!
Kind regards,

Brieuc Van Damme"

Jon Stewart from the daily show interviews Obama's new economic adviser Austan Goolsbee

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
style='padding:2px 1px 0px 5px;' colspan='2'Austan Goolsbee
www.thedailyshow.com
Daily Show Full Episodes Political Humor Rally to Restore Sanity

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
style='padding:2px 1px 0px 5px;' colspan='2'Exclusive - Austan Goolsbee Extended Interview
www.thedailyshow.com
Daily Show Full Episodes Political Humor Rally to Restore Sanity

Are tea partiers racist?

"A new study shows that the movement's supporters are more likely to be racially resentful." This Newsweek article seems to say they are more than average.

"Few signs at tea party rally expressed racially charged anti-Obama themes." This article from the Washington Post is more reserved.

This article from Salon will give you a very interesting overview of the history of populist movements like the Tea Party in the United States.

The Effect of Prayer on God's Attitude Toward Mankind

Believe it or not, but professor James Heckman from the University of Chicago, the author, wan the Nobel prize in economics. This paper, which shouldn't be taken too seriously though, (I suspect him trying to provocatively make a statistical argument rather than truly investigating the effects of prayer) Heckman uses data available from the National Opinion Research Center's (NORC) survey on religious attitudes and powerful statistical methods to evaluate the effect of prayer on the attitude of God toward human beings. The empirical conclusion from this analysis is "important" to the author: A little prayer does no good and may make things worse; much prayer helps a lot. The complete IZA paper, which is only three pages long, can be found here.

The tea party warns of a New Elite. They're right.

"On one side, we have the elites," Fox News host Glenn Beck explained last month, "and the other side, we have the regular people." The elites are "no longer in touch with what the country is really thinking," Nevada Senate candidate Sharron Angle complained this summer. And when Delaware Senate candidate Christine O'Donnell recently began a campaign ad by saying, "I didn't go to Yale," she could be confident that her supporters would approve.
[...]
"But the politics of the New Elite are not the main point. When it comes to the schools where they were educated, the degrees they hold, the Zip codes where they reside and the television shows they watch, I doubt if there is much to differentiate the staff of the conservative Weekly Standard from that of the liberal New Republic, or the scholars at the American Enterprise Institute from those of the Brookings Institution, or Republican senators from Democratic ones. "
Read the complete column in The Washington Post here.

Why Has America’s Economic Recovery Stalled?

Fifteen months after the US economy returned to growth, the level of real GDP is still lower than it was when the recession started, in part because households have tripled their rate of saving. That alone, if sustained, implies little prospect of robust GDP growth in the coming years... Read Harvard Professor Feldstein's column for Project Syndicate here.

Obama Underappreciation Syndrome

"Faced with this truly puzzling conundrum, Dr. Obama diagnoses a heretofore undiscovered psychological derangement: anxiety-induced Obama Underappreciation Syndrome, wherein an entire population is so addled by its economic anxieties as to be neurologically incapable of appreciating the "facts and science" undergirding Obamacare and the other blessings their president has bestowed upon them from on high. ". Read Krauthammer's provocative column in The Washington Post here.

For Blacks, Progress in Happiness

A new study has found that there is one big realm in which black Americans have made major progress: happiness. Read the complete article in The New York Times here.

Big Ideas from Small Countries

Where should countries look now, in 2010, for models of economic success to emulate? Read the answer of Harvard Professor Jeffrey Frankel on Project Syndicate here.

Colbert making fun of Mankiw

Stephen Colbert makes fun of Gregory Mankiw in this video:

The Colbert Report	Mon - Thurs 11:30pm / 10:30c
style='padding:2px 1px 0px 5px;' colspan='2'Tax Shelter Skelter
www.colbertnation.com
Colbert Report Full Episodes 2010 Election March to Keep Fear Alive

British fashion victims

In the spring of 2010, fiscal austerity became fashionable. I use the term advisedly: the sudden consensus among Very Serious People that everyone must balance budgets now now now wasn’t based on any kind of careful analysis. It was more like a fad, something everyone professed to believe because that was what the in-crowd was saying... Paul Krugman's article in The New York Times here.

Taxing Times for Americans

Why taxes should not be raised on the wealthy, with Gregory Mankiw, former White House Council of Economic Advisers chairman and professor of economics at Harvard University.

Surprisingly, economist Greg Mankiw from Harvard - often considered as a rather liberal university - is pleading for an extension of the Bush tax cuts in this The New York Times op-ed, while Thaler, an economist from the free-market oriented University of Chicago, is making an argument against it, also in The New York Times. Economists are full of surprises and contradictions, and here is the reason why.

Healthcare reform tutorial

Everything you've always wanted to know about the US healthcare reform summarised in a Kaiser tutorial.

A “one dollar, one vote” explanation of the welfare state

Why do Europe and the US, both affluent regions, differ so much in the size of their welfare state? To answer this question, this column examines OECD countries between 1975 and 2001, finding that countries with wealthier rich- and middle-classes are associated with a smaller welfare state while those with a richer poor class are associated with a larger one – supporting the “one dollar, one vote” explanation. Read the complete article on EUVOX here.

From Obama, the Tax Cut Nobody Heard Of

What if a president cut Americans’ income taxes by $116 billion and nobody noticed? Read the complete article in The New York Times here.

Drugs and security in North America: Mexican waves, Californian cool

I tried to have a little class debate on this topic, but I felt my class wasn't overwhelmingly enthusiastic about it. Perhaps because they are scared to express their opinion, or perhaps because they don't have one (something I have a hard time believing). I'm trying to provoke them one last time with this article from The Economist:
Three things to stop the gangs: better police in Mexico, stricter gun laws in America and legal pot in California.

The Diamond, Mortensen and Pissarides Nobel: Search and market frictions

This week the last Nobel prize, the one for economics, has been awarded to Peter Diamond, (MIT) Dale Mortensen (Northwestern University), and Christopher Pissarides (London School of Economics) "for their analysis of markets with search frictions". This column by Barbara Petrongolo on EUVOX explains how their research relates to fundamental economic issues that are both at the core of the wellbeing of society at large and now near the top of many policymakers’ agendas.

U.S. Trade Deficit With China Widens

The trade deficit in August increased 8.8 percent, to $46.3 billion, while the Producer Price Index rose 0.4 percent in September. Read the complete article in The New York Times here.

Currency chaos

The controversy over China’s exchange-rate policy has morphed into a global macroeconomic clash between advanced and emerging countries, owing to a lack of global coordination. This suggests that the solution to currency wars is not to declare a truce, but to recognize the nature of the issue and overcome the problems that block an adjustment that is in everyone's interest. Read Jean Pisani-Ferry's opinion article on Project Syndicate here.

Who caused the currency wars?

The world is on the brink of a nasty confrontation over exchange rates – now spilling over to affect trade policy (America’s flirtation with protectionism), attitudes towards capital flows (new restrictions in Brazil, Thailand, and South Korea), and public support for economic globalization (rising anti-foreigner sentiment almost everywhere). Who is to blame for this situation getting so out of control, and what is likely to happen next? Read MIT Professor Johnson's opinion article on Project Syndicate here.

New Deficit-Reduction Plan Would Jeopardize Health Reform

We talked about how difficult it is for government spending to actually decrease because voters very easily get addicted to the entitlements they recieved, even the temporary ones. This article from the Center on Budget and Policy Priorities warns for reducing the budget deficits because future healthcare entitlements could be jeopardized.

Reducing Drug Trafficking Revenues and Violence in Mexico - Would Legalizing Marijuana in California Help?

This is a publication of one of the biggest and most influential think-tanks in the US: the RAND Corporation. Because California is facing huge budget deficits (some commentators speak of the Broke State) and the war on drugs leading to an increasing amount of casualties, Californian policymakers are seriously considering legalizing marijuana. There's no doubt conservatives will do everything to prevent this from happening. On the state level first, but if necessary they'll go to the Supreme Court. If the debate interests you, this is probably one of the better publications. It may also give you an idea of how think-tanks in the US (try to) influence policymaking. You'll find the abstract as well as the complete study here.

I'll try to find equivalent papers from libertarian and conservative think-tanks as well.

Conservative think-tanks don't seem to like the subject but it didn't take long to find the libertarian point of view. This short article from Harvard scholar and Cato fellow Jeffrey Mirron is really worth reading. Here the same author makes an economic case for legalizing drugs. And this is a 62 page long study on its budgetary impact.

The rise of the 'ordinary' elite - and why many Americans hate them

This article from the Washington Post has much more to do with sociology than with economics, but it is really worth reading. For those of you who are too lasy to read it completely, this passage summarizes its content quite well:
"I suspect the "anti-elite-educationism" that Bell predicted is growing now not despite the rise of meritocracy but because of it. The old Establishment was resented, but only because its wealth and power were perceived as undeserved. Those outside could at least feel they were cleverer and savvier, and they could blame their failures on "the system." Nowadays, successful Americans, however ridiculously lucky they have been, often smugly see themselves as "deserving." Meanwhile, the less successful are more likely to feel it's their own fault -- or to feel that others feel it's their fault -- even if they have simply been unlucky."

Ill fares the US

You may have heard something about a recession ending AND jobles growth.

There's some hope things may get better as small business optimism ticks up according to the Wall Street Journal.

The age of austerity

The same spending cuts and tax increases that we need also threaten economic growth. Read Robert J. Samuelson's column in The Washington Post here.

The Beat Generation and the Tea Party

It's not an easy comparison to make, but like the Beats, the Tea Partiers are driven by that principle at the heart of protest movements: individual freedom. Read what Lee Siegel made of it in this weekends edition of The New York Times here.

The best Congress money can buy?

For all the money sloshing around in American politics, you still cannot buy the results of elections. It is fair to say that the Supreme Court of Chief Justice John Roberts is not extravagantly admired by Democrats. Of all its conservative rulings, the one they find most enraging as November’s mid-term elections approach is undoubtedly its 5-4 decision in January in the case of Citizens United. This held that since the first amendment tells Congress to make no law abridging the freedom of speech, previous legislation that barred companies, unions and other groups from paying directly for political advertisements during election campaigns was unconstitutional. Read the complete article in The Economist here.

Watch a related video on The New York Times website here.

Two Fed Officials Speak Out Against Stimulative Action

Additional asset purchases by the Federal Reserve to stimulate a sluggish U.S. economy aren't "a foregone conclusion" and the topic will be subjected to vigorous debate and discussion by central-bank officials, some Fed officials indicated Thursday. Dallas Fed President Richard Fisher said news reports suggesting that the Fed is likely to launch a new round of buying medium- and longer-term fixed-income securities to push down yields and cheapen borrowing costs for households and companies are inaccurate. Read the complete article in the Wall Street Journal here.

Fed's $2 trillion may buy little improvement in jobs

Oct. 7 (Bloomberg) -- For $2 trillion, Federal Reserve Chairman Ben S. Bernanke may buy little improvement in growth, employment or inflation over the next two years. Read the complete article in the Washington Post here.

Judge Rules Health Law Is Constitutional

A federal judge in Michigan on Thursday dismissed one of more than 15 legal challenges to the new health care law, becoming the first to rule that the law is constitutional. Read the complete article in the NYTimes here.

Class of 10/14/2010

Next week we'll talk about the origins of American growth. By then, please read:

• Gordon (2002). Two centuries of economic growth (50 p.)
• Rogoff (2010). An age of diminished expectations (1p.)
• Sachs (2010). Sow the seeds of long-term growth (2 p.)

All three authors are very famous American economists.

I'll be updating the blog on a regular basis. Feel free to react on the posts or suggest additional readings yourself.

Scruton's Liberalism vs. Conservatism: the questions we discussed in class

What are the two basic principles of liberalism and why do they lead to a dichotomy?

What are the advantages of utilitarianism compared to liberalism? Explain with an example.

What are the three steps of the Kantian theory according to Scruton? Why are liberalism and socialism alike? Do you agree that the transcendental self is not an agent of change? Why?

What advantage does conservatism offer?
Answer: it reconciles the demands of love (for freedom and equality) and the imperfect object of love. How? By offering a long term perspective based on local values. Why? Because those local values nurture the first person perspective.

Can you give concrete examples in the light of which these concepts can be applied? Explain.
Examples:
Should human rights be universal?
Are conservatives truthful to their own, original beliefs in the immigration debate?
Most tea partiers are from the working class. Why then would they so ferociously oppose healthcare reform and be in favor of keeping the Bush tax cuts?

Liberalism vs. Conservatism: additional readings

Why are liberals so condescending? By Gerard Alexander, The Washington Post.
America's deepening moral crisis. By Jeffrey Sachs, Project Syndicate.
The seduction of the Tea Partiers. By Ross Douthat, The New York Times.
US politics is angry, polarised and gridlocked. Can it be reformed? By Timothy Garton Ash, The Guardian.

The IMF’s New Growth Projections look gloomy for the US

Principles of economics, translated

Phd economist and stand-up comedian Yoram Bauman translates the 10 economic principles of Mankiw's bestselling textbook. Watch the video here. Find everything about the world's first and only stand-up economist here.

What to monitor?

Here are a couple of (economic) websites I like to monitor - other suggestions will be appreciated!:

Newspaper and magazines
www.economist.com - Probably the best magazine in the world (and all its content can be found online free of charge!)
www.nytimes.com - Probably the most important liberal newspaper in the US
www.wsj.com - Probably the most important free-market newspaper in the US
http://www.project-syndicate.org/ - the world's pre-eminent source of original op-ed commentaries.

Websites and blogs
http://gregmankiw.blogspot.com/
http://www.becker-posner-blog.com/
http://www.huffingtonpost.com/
http://freakonomics.blogs.nytimes.com/
http://www.rtable.net/index/rt/economics/recent/
http://www.economist.com/blogs/freeexchange/
http://blogs.wsj.com/economics/
http://mjperry.blogspot.com/
http://www.thedailyshow.com/

Welcome!

This blog has been designed for the students of "The Contemporary American Economy" class of the M.A. Program in American Studies at the University of Antwerp.

General content of the class:
After the Second World War it seemed that Western societies were growing more equal. Thanks to the unprecedented economic growth of the 50’s and 60’s Welfare states were gradually being established and in the U.S., Roosevelt’s New Deal of the 30's would guarantee prosperity for all. However, this optimism slowly eroded along the way and had to make place for new economic preoccupations. What happened to government spending, the dollar and the trade deficit? What will happen, if anything, to the predominance of the US economy and its ideological model? Why do some people so badly want healthcare and financial reform? Does America need new economic recipes, or does it need to fall back on the old ones? This course explores the internal and external dynamics of the American market economy in the post-WW II era. We will develop on some core aspects of the contemporary American economy, primarily in a theoretical framework, but always illustrated with current events by using the American economic and financial press as important references. The ideological divide between the so called liberal or left-wing economists and their conservative or right-wing counterparts will guide most of the class discussions.

The purpose of this blog is threefold:
1. It will be updated on a weekly basis with interesting (opinion) articles, reports, figures, video's, etc. about the ongoing socioeconomic debates in the US. This will allow students to gain more practical insights into some of the key economic concepts and reasonings seen in class. It will also provide students with additional arguments and points of view which they will be able to use during the - graded - class discussions and the final exam.
2. I will be communicating the practical issues regarding the CAE class through this blog: readings, presentations, possible exam-type questions, etc.
3. This blog should also be seen as a forum for students. They'll be able to start debates on topics discussed during the lectures, exchange report summaries, post additional materials they find interesting, ask questions, and so on.

However realistic, and despite the limited number of students, I hope we'll all be sufficiently active on this blog for it to generate - and here comes the first important economic concept - network effects. In economics and business, a network effect (also called network externality) is the effect that one user of a good or service has on the value of that product to other people. When network effect is present, the value of a product or service increases as more people use it.

The classic example is the telephone. The more people own telephones, the more valuable the telephone is to each owner. This creates a positive externality because a user may purchase their phone without intending to create value for other users, but does so in any case. Online social networks work in the same way, with sites like Twitter and Facebook being more useful the more users join.

The expression "network effect" is applied most commonly to positive network externalities as in the case of the telephone. Negative network externalities can also occur, where more users make a product less valuable, but are more commonly referred to as "congestion" (as in traffic congestion or network congestion).

Over time, positive network effects can create a bandwagon effect as the network becomes more valuable and more people join, in a positive feedback loop.