Monday, November 10, 2014

Trade-Offs ... Or Why Things Are Not As Black and White As They Seem

The last few posts have been about the Bible and economics. This post is along those lines but it is really on how what is called "the economic way of thinking" can help us analyze issues in our society. Some are under the impression that the field of economics is just about business or the stock market or about the federal budget. It's more than that. It's about human behavior, especially in regard to choices that people make that has to do with money. That covers a lot, including those decisions that we make as a society.

What does this have to do with the Bible? Well, it might not have anything directly to do with the Bible, but it does have do with how Christians might want to influence things like public policy. Much is made today about various issues regarding things like the poor and the environment and the influence that Christian have, or ought to have, with regards to public policy.

Before we get to some examples, we need to know how economists examine issues. What they do is look at choices as trade-offs. That means that if you do one thing that you cannot do another. For instance, if I want to live in New York that means that I cannot live in California. I have to make a choice. I weigh the advantages and disadvantages of each possibility and decide what I would prefer to do. Now before you say 'no kidding, Brian, I know that if you do one thing that it excludes another and I know that there are advantages and disadvantages to making decisions'. Okay, there is no great insight here, but it is amazing how often in discussing public policy, Christian and non-Christian alike don't do this. They act as if their solution is obviously the just one and any other is evil or selfish or sinful. They somehow think that there can be no negative consequences to our choices simply because we want justice or something.

Let's take the recent issue of coal in Kentucky. The eastern part of Kentucky has coal-fired electrical plants. These coal-burning plants pollute the air and not a little. The EPA wants them to be shut down. They speak of both pollution in general and of climate change. (I am not discussing here whether or not I think that climate change is a big problem. That is not the role of the economist. The economist just clarifies the choices.) Those on one side of the political spectrum support the EPA in this. On the other side of the political spectrum, there are those who oppose this plan because it will raise prices and this will negatively affect the poor as well as anyone else who buys electricity. It will make the poor poorer.

So where does the Christian or anyone who cares about "social justice" issues say about a case like this? It seems to me that there is no one correct position on this. There is an issue regarding the poor as well as an environmental issue - and they are on opposite sides. We will hurt the poor by helping the environment and we will hurt the environment by helping the poor. We, naturally, don't like these kinds of dilemmas. We don't like choices that will hurt one way or another. That is why advocates for something always talk about solutions, not trade-offs. Their side has the solution to all our problems.

It is very rare that we ever have "solutions", trade-offs are almost always involved. And if you think that this particular kind of trade-off is rare, think again. Whenever environmental regulations are put in place, it almost always makes things more expensive for the poor (and everyone else). The thing is that we must be willing to look at all of the consequences of the options and make a decision.

Another example: outsourcing jobs. To some this is a justice issue. It is wrong, some say, when a business closes a factory here and open one in a poor country to save money. It's just raw greed is the claim. (Whether or not greed is involved is irrelevant according to our previous analysis. We will simply examine the case.)

Let's look at a company who manufactures children's shirts. Before the outsourcing happens, the shirts cost $10 a piece at Walmart. But now the company is getting pressure to lower its prices. It moves its plant overseas where the wages are one-tenth what they are in the US. Let's say that 200 US workers are put out of a job. Obviously, those people will suffer. Who benefits? Just the greedy business owners? No, they hire initially 200 workers overseas to make the shirts. The cost of the shirts drops so they can sell them for less. They are now $5 at Walmart. A single mother comes into Walmart to get shirts for her children. She finds that instead of $10 a piece that they are only $5. She can now either buy more shirts for her children or she can spend the other %5 on other things her children need. This happens millions of times all over the US. Poor people benefit from outsourcing and the company sells more shirts, so many that they increase production and hire another 400 workers overseas.

Summary: Who loses - obviously, it is the 200 US workers. Who wins - the company, poor shoppers in the US, 600 people overseas who are now making more than they ever have. Is there really an injustice here or should we only say that those who lost out are unfortunate? I think what people who don't like this is the fact that nobody can stop a business from doing this. It seems to me that the overall outcome is better. And please do not think that this scenario is fantasy. It is how it actually works. Sometimes we do not like how things actually work because we want all our decisions to turn out for the best for everyone all the time. Sorry to bust your bubble but we are living in a fallen world where decisions do not always make things better for everyone.

Additionally, we need to stop demonizing those who would make a different decision by claiming that the other side "doesn't care about the poor" or "doesn't care about the environment" or "doesn't care about the working man or woman". And please stop acting as if you are God's voice for justice when you do not know all sides of the issue and realize that there may be no "just" solution to a problem.

[BTW, check out the website run by the Cornwall Alliance, an evangelical group that understands the economic impact of environmental regulations on the poor. They are people who truly care for both the environment and the poor. ]

No comments:

Post a Comment