Economics in the Bible

 This week for Ask an Economist I received a question from Steve R. It’s a question of Biblical proportions! He says:

This past Sunday the pastor talked about 2 Kings 4: 1-7, the story of Elisha and the widow’s oil.

My mind went off on a tangent regarding the miraculous creation of olive oil from the widow’s small container, which filled many other containers so she could pay off her late husband’s debts and even live off the rest of the money.

I got to thinking about whether it’s different from the way central banks print money and devalue currency.

Steve goes on to give two hypothetical differences between God’s creation of olive oil and the central bank’s creation of more money. I’ve chosen to exclude them at this point because he isn’t far off, and I’d rather build toward the answer than lay it out. Steve concludes with:

I just wondered if my conclusions are correct and if you had ever thought about this or other economic situations from the Bible.

So the two questions are:

1. What are the similarities/differences between God’s creation of olive oil in 2 Kings 4:1-7 and the central bank’s creation of money?

2. Have you ever thought about other economic situations from the Bible?

I’ll consider both in turn.

The Supply of Oil

So what’s the difference between increasing the money supply and increasing the supply of a commodity like oil? To start, let’s consider the effect of increasing the supply of a commodity like oil.

In order to sell oil, producers must bear some cost. For example, if producing a cup of oil costs $1 sellers must receive at least $1 in order to be willing to produce. Based on this, it may be tempting to claim that prices are determined by cost, but this is not right.

Prices are completely determined by consumer valuations which often manifest in terms of costs.

For example, imagine the only ingredient to making olive oil is olives. Now let’s say consumers are willing to pay 20 cents per olive, and it takes five olives to make one cup of oil. These numbers are unrealistic, but will help us understand the market.

If a company wants to make one cup of olive oil, it must give up the money from the sale of five olives. Five olives which cost 20 cents a piece means that producing one cup of olive oil causes the producer to forgo $1 (5 x $0.20) of money from olives. Thus the cost of one cup of olive oil is $1.

But remember that the cost itself is derived from how much consumers value olives! If consumers suddenly decided they liked olives more (say they were willing to pay $1 for each olive now) then olive oil producers would have a higher cost per cup of production ($1 x 5 rather than $0.20 x 5). But, ultimately, the cost is derived from how much the consumers value the alternative goods produced by the inputs.

This remains true even if we make the example more complicated with more production inputs.

It’s also the case that as production increases, sellers are going to require higher prices, all else held constant. To understand why, imagine some olives are better for making olive oil than others.

This violates an unspoken assumption we’ve had to this point that all olives are equally good for eating and oil production. But if some olives are better at producing oil than others, businesses will use the ones best suited for producing oil first. This means the more the business produces, the more olives are going to be required to produce the same amount of oil, because the best oil-producing olives are used first.

In other words, as the quantity of oil a business supplies increases, the sale price required to satisfy the producer will increase because the cost of the inputs (olives) used increases as determined by consumer valuations.

Economists capture this idea neatly in what is called the supply curve. The supply curve illustrates the various quantities which producers are willing to sell at any given price. This relationship between quantity supplied and price is called supply by economists. Because of the logic above, the supply curve slopes upward and will look like this.

Economists similarly are interested in the quantity of a good consumers are willing to purchase at any given price. This concept is called demand. Steve’s question is primarily about supply, so I’ll spend less time explaining demand.

Essentially, though, consumers use the first unit(s) of a good to satisfy their most urgent desires. This implies every subsequent unit is used to satisfy a less urgent desire. In other words, as you receive more units of a good, you value the next unit relatively less because it serves a less valuable end. As such, as the quantity of a good increases, consumers’ willingness to pay for each additional unit of that good falls.

In other words, the demand curve for a good slopes down. Supply curves are actually derived from the same logic applied in a more roundabout way. So our supply and demand curves for oil might look something like this.

In this market, consumers will buy 3 cups of olive oil. Why? Well the supply curve shows us that sellers are willing to sell the first cup for $1 and buyers are willing to pay $5 for it. So it makes sense for an exchange to occur. Similarly sellers are willing to sell the second for $2 and customers are willing to pay $4. Again, this is a win-win.

For the third cup, sellers need at least $3 to sell and buyers are willing to pay $3. Both are willing to agree to the exchange. So in the end three cups are sold and the price that enables this is $3. This point where supply and demand cross is called the equilibrium point by economists, and it illustrates how the market process determines prices—everything else held constant.

Armed with this knowledge, we can now see the effect of the miraculous creation of oil in second Kings. At every given price, there is now more oil available than before. In other words, our supply increases. We can illustrate this by having a larger quantity of oil at every given price. That looks like this:

Notice what happened to the equilibrium. There is now more oil being sold (3.5 cups) and a lower price for oil ($2.50).

This is what I expect is the effect of the miracle in second Kings. The increasing supply led to a larger quantity of oil being consumed at a lower price. There’s a way to conceptualize this as being a demand change instead, but this analysis does the job fine.

The Supply of Money

So let’s talk about what happens now when the supply of money increases. Right now we live in a monetary system where the money is issued by the government as a legal means of paying debts. Economists call this a fiat money system. Fiat money is contrasted with commodity money systems where the currency is redeemable for some fixed amount of some commodity (like gold or silver).

The supply of money can be increased in both a commodity system and a fiat system. In the former case, increasing the supply of the commodity (e.g., mining gold) will increase the supply, and in the latter case the government could increase the supply (e.g., printing money). The constraints on producing more fiat money are different than for producing more commodity money, but they both have variable supplies.

But what happens when the supply of money increases? Well, the market for money is much like the market for other goods. People demand to hold money. The “price” of money is what it costs in goods to obtain a unit of money. The more goods you need to obtain one unit of money, the higher the “purchasing power of money” is. So, one way we can think about the price of money is that the price of money is its purchasing power.

As the purchasing power falls (i.e., as money prices of goods and services rise), people want to hold more money to satisfy every day needs for money. It’s important to note that when we’re talking about “money” here we don’t mean “wealth.” You can hold your wealth in many forms: stocks, real estate, and paintings to name a few. However, when economists talk about the demand for money, they’re talking about the demand to hold money rather than other assets.

For sake of ease, let’s assume some fixed amount of money exists—say 100 units. Here is our supply and demand for money.

Now let’s imagine that the supply of money suddenly doubles. Look what happens:

The purchasing power of money falls. Just like our oil example, when the supply of money increases, the value of money decreases. So in one way our miracle in second Kings is similar to an increase in the money supply. Both result in the good which increased in supply having a lower value relative to other goods and services.

But here is the primary difference. Money represents one side of nearly all exchanges. For (almost) every exchange that happens, one side is bringing money to the table. This is not the case with olive oil. So when God increases the supply of olive oil, the market for olive oil (and closely related markets) is impacted. However, when the supply of money increases, every price is impacted. Prices of all goods and services rise.

This leads to a few important issues. First, because of limited knowledge, the price changes that happen due to an increase in the money supply don’t all happen at once. Instead, new money affects prices and incomes in some markets before others. This means the relative prices of many goods and services will be disturbed while the new money ripples through the economy. These price changes in turn result in distortions in the structure of production, a phenomenon known as the Cantillon effect.

Second, because many people store a significant amount of their wealth in the form of money, the lower purchasing power means lower wealth for a large portion of people. Specifically, increases in the money supply hurt money savers. In contrast, an increase in the supply of olive oil would impact those who hold a significant amount of wealth in olive oil. While such a change would hurt olive oil investment maximalists, the increase in the supply of money would be painful for the much larger group of currency savers.

Third, one very important type of exchange which is paid out with money is impacted: labor contracts. Many salaries and wages are pinned at somewhat fixed amounts. For example, if you signed a contract agreeing to work for $50,000 per year, that amount won’t increase with inflation. As such, an increase in the supply of money will hurt those whose income terms are relatively more fixed.

In some ways, money is “just a good.” People, and society as a whole, are better off for having access to a medium of exchange. In other ways, though, money is more than just a good. Since money makes up half of all exchanges, a disturbance in the market for money has much larger consequences for the economy as a whole.

Biblical Economics

Steve’s last question was about whether I’ve considered other similar questions about the Bible and economics. I have and can think of three separate types of questions at the intersection of the Bible and economics.

1. Moral/ethical

This category considers whether certain economic actions or policies are morally right or wrong by Biblical standards. Alejandro Chafuen has written a great book on the subject titled Faith and Liberty: The Economic Thought of the Late Scholastics. The book examines the Christian Late-Scholastics who discuss the morality of everything from taking bread while starving to monetary policy.

2. Philosophical

This category considers the nature of God’s creation and asks what role economic concepts have in it. For example, is the existence of scarcity a result of the fall, or does God’s call for Adam and Eve to work in the garden provide evidence that some level of scarcity is consistent with “good” creation?

3. Functional

This category examines the results or economic reasons for particular Biblical actions or institutions. The question about the supply of oil is a functional one. Similarly, many of my professors and colleagues are economists who are interested in explaining the rationale behind certain economic systems. My graduate Microeconomics professor Walter Williams includes the following list of questions for his PhD students on his website:

Give economic interpretation of the following excerpts from Exodus and Deuteronomy: Nonsense is forbidden!

(a) ‘The woman shall not wear that which pertaineth unto man, neither shall a man put on a woman’s garment: for all that do so are an abomination unto the Lord thy God.’

(b) ‘Thou shalt not plow with an ox and an ass together.’

(c) ‘He that is wounded in the stones, or hath his privy member cut off shall not enter into the congregation of the Lord.’

(d) ‘Honor thy father and mother. . . .’ (How come honoring of children is not required by the Commandments?)

(e) ‘Thou shalt have no other gods before me.’

(f) ‘And if a man entice a maid that is not betrothed, and lie with her, he shall surely endow her to be his wife. If her father utterly refuses to give her unto him, he shall pay money according to the dowry of virgins.’

(g) ‘A bird in the hand is worth six in the bush.’

For statement (a), it seems like the most likely explanation is that such an arrangement allows clothing sellers to charge different prices to men and women according to their different willingness to pay. Economists call this price discrimination. If groups with different willingness to pay can resell their products to each other, price discrimination is impossible. However, if resale is prohibited by law (Biblical or otherwise) price discrimination is possible!

You can spend your time trying to think through the other questions. Similarly, a few other economists I know have recently tried to explain how the Jewish ban on pork served the function of eliminating pig-based externalities.

Some Christians are uncomfortable with these sorts of functionalist explanations because there is a fear that they undermine the explanation that Biblical laws are written based on moral truth. Personally, I don’t see any contradiction between the two. It seems likely to me that moral laws would be functional as 

In conclusion, I think the intersection of the Bible and economics is truly a fruitful one, and I’m grateful that Steve gave me a chance to explore this topic.

Article by: Peter Jacobsen

Peter Jacobsen teaches economics and holds the position of Gwartney Professor of Economics. He received his graduate education George Mason University. His research interest is at the intersection of political economy, development economics, and population economics.

This article was originally published on FEE.org. Read the original article.

What Is Scarcity, Really?

 The most basic concept in economics is scarcity. If you open an economics textbook, the first chapter will undoubtedly mention the concept.

Unfortunately, the concept of scarcity suffers from the problem of multi-sense. In other words, scarcity is used both inside and outside the economics field to mean more than one thing. Not only that, but sometimes the word is used to describe concepts that are at odds with sound economics.

So let’s explore scarcity and what it does and does not mean.

Economic Scarcity

The first definition of scarcity we’ll focus on I call “economic scarcity.” This is the scarcity that sound economics textbooks focus on.

Economic scarcity describes the relationship between people, the ends they seek, and the means they have to achieve those ends.

We live in a world of economic scarcity, where the ends we desire exceed our means of attaining those ends. In short, we want more than we have.

The evidence for that is simple—people act! Every day, you and I take actions because we want something we don’t have. Why do people go to college, start a family, or get a job? They have some end goal they’re trying to achieve. This insight comes primarily from the economist Ludwig von Mises in his magnum opus Human Action. Mises says:

Means are necessarily always limited, i.e., scarce with regard to the services for which man wants to use them. If this were not the case, there would not be any action with regard to them. Where man is not restrained by the insufficient quantity of things available, there is no need for any action.

Conscious action implies economic scarcity. As long as people are intentionally acting, they prove that they have desires which are not yet met.

Consequently, as long as there is human action there will always be scarcity. Even in supposedly post-scarcity utopian stories like Star Trek, scarcity is present. Economic scarcity is even present in the Biblically perfect world of the Garden of Eden. Adam acts in the Garden, which signals his desire to change his state of affairs.

In a certain sense, this type of scarcity is binary. It defies simple measurement in terms of more or less. If there is something (tangible or intangible) that a person desires but does not have, then he or she faces scarcity.

Insofar as we can measure economic scarcity, the best way to do so would be to measure the cost of obtaining some desired end. When we act and use resources, we give up some alternative action and use of those resources. Economists call this lost opportunity of an action its opportunity cost.

If the opportunity cost of something grows, then it probably makes sense to think of that thing as “more scarce.” There are different ways to try to quantify opportunity cost. The economist Julian Simon argued that the best way to quantify economic scarcity was to look at inflation-adjusted prices over time. Gale Pooley and Marian Tupy, in their recent book Superabundance, attempt to put costs in terms of the time it takes the average person to acquire something (they call this measure a time price).

So if your cost of obtaining a good or end falls, it makes sense to think of it as becoming less scarce; but, for the reasons discussed, we shouldn’t mistakenly think that falling scarcity of one good means we will someday eliminate scarcity.

Economics is fundamentally about how humans cooperate under the condition of scarcity. The economic institutions we create to deal with this problem may change as it changes form, but these systems and their study will always be relevant so long as humans act to attain things they desire. In this sense, we will never overcome scarcity.

The Scarcity Mindset

Economic scarcity may be an unavoidable fact, but that doesn’t mean we can’t overcome some of the other “types” of scarcity.

Another way the word scarcity is used is related to the scarcity mindset. The short summary is that the scarcity mindset views one person’s gain as another person’s loss. If you’re doing well, someone else must be doing poorly. If you’re winning, someone else must be losing. Economists call this a zero-sum view of the world.

Viewing the world as a zero-sum game or resources as a fixed pie is the essence of the scarcity mindset. Sometimes when people say, “Resources are scarce,” what they’re really saying is, “All interactions have a winner and a loser.” My colleague Patrick Carroll addresses this fallacy in more detail here, and I owe him for bringing my attention to how this is connected to the scarcity mindset.

This view of scarcity is wrong. It is not true that one person’s gain is always to the detriment of others. Humans have the potential to create new value and new economic resources.

The simplest example of this is exchange. In the morning, my wife and I give our girls vitamins to start their day. My oldest prefers the pink vitamins, and her younger sister prefers purple vitamins. Unfortunately for them, I don’t take time digging through the vitamin bottle for their favorite colors. When it comes to Dad giving vitamins, you get what you get.

But sometimes, something magical happens. My oldest will get a purple vitamin, and her younger sister will get pink. It didn’t take long to figure out the magic of mutually beneficial exchange.

When they receive each other’s favorite, they trade. When they do this, both of them are happier. Notice, the number of vitamins remained the same, but the happiness created by the vitamins increased due to trade. The “pie” of satisfaction is not fixed merely because the resources are countable. Trade increases the size of the economic pie!

This capacity to increase the size of the pie grows when we consider that humans can also behave entrepreneurially and create resources of value. Once upon a time, oil was of no value to human beings. It was just a messy annoyance. Then, some brilliant innovators discovered that it could be converted into usable, cheap energy for generations of humans.

Value creation is all around us. This doesn’t mean that there aren’t any zero-sum games in the world. Sometimes there is a winner and loser—think sports. But the point is that sometimes we have win-win scenarios. Sometimes creative people grow the pie. Insofar as people use scarcity to mean that the pie is fixed and cannot grow, they are wrong.

This also helps us reconcile two ideas that seem at odds but aren’t in fact.

The economist Thomas Sowell famously said: “The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”

Seemingly in tension with this, Julian Simon makes an interesting claim:

Our supplies of natural resources are not finite in any economic sense. Nor does past experience give reason to expect natural resources to become more scarce. Rather, if history is any guide, natural resources will progressively become less costly, hence less scarce, and will constitute a smaller proportion of our expenses in future years.

How do we square these two quotes? Do they contradict? Not at all.

Thomas Sowell is talking about the realm of politics. In politics, all policies are paid for by someone else. Every dollar spent on the military is a dollar the taxpayer could have spent on something else. Politics is zero-sum.

On the flip side, Simon is talking about how human creativity channeled in markets and voluntary exchange can lead to a decline in scarcity. Notice, Simon claims resources are not finite in an economic sense (more on that later), but he never claims resources are not scarce in an economic sense. Simon agrees with Sowell—resources are scarce. However, he adds that human ingenuity in markets gives us the potential for decreasing scarcity. We can reject the zero-sum scarcity mindset while maintaining that the government is incapable of providing a free lunch.

Physical Scarcity

One last way people talk about scarcity is in a physical sense. People count the resources around them, and they take this counting to be a measure of scarcity. I’ll call this type of scarcity physical scarcity.

It’s important to note that while counting according to some physical metric matters in an engineering sense, it matters much less for understanding economic scarcity. To see why, you just have to notice that something being limited in quantity does not make it something people desire.

Imagine scientists discover an element that emits significant radiation. Now let’s imagine that there is no safe way to handle or convert the element (even as a weapon). How much would people be willing to pay for such an element? My guess is they wouldn’t pay for such an element. In fact, people would probably pay to avoid it. Even if this element is physically rare, it may not help people attain their ends. In that case, it is not scarce.

In contrast, we can imagine something physically plentiful being scarce. There are thousands of tons of gold that exist below the earth’s surface. Does the existence of this physical quantity of gold make it less scarce? No. If it isn’t accessible to use to achieve human ends, it does not alleviate scarcity. Physical scarcity and economic scarcity are not the same thing.

As a last example, we can imagine a natural resource that becomes less scarce without any change in physical quantity. This happens with gasoline. Imagine that suddenly a clever entrepreneur develops a new, more efficient car engine which raises fuel efficiency to 100 miles per gallon. The physical supply of gasoline remains unchanged, but the economic scarcity of gasoline would diminish immediately.

This isn’t to say that there is absolutely zero relationship between physical and economic scarcity. There is some relationship. But the point is that what directly matters to humans is the economic scarcity of the resource, which is diminished by human creativity. To paraphrase Julian Simon, oil comes from the human mind, not the ground.

Abundant Hope

There are likely more ways that the term scarcity is used and misused, but these are the major three senses.

Separating these three different concepts which are described by scarcity helps us reconcile the inevitability of scarcity with an unyielding optimism.

It’s true that people will always have goals they have yet to achieve, but this shouldn’t make us gloomy. In their pursuit of these goals, humans use their creativity and perseverance to grow the pie and alleviate the economic scarcity around us. Doing so does not have to mean that someone else loses. Instead, a world of economic scarcity, natural abundance, and win-win scenarios can exist without contradiction.

Article by: Peter Jacobsen

Peter Jacobsen teaches economics and holds the position of Gwartney Professor of Economics. He received his graduate education George Mason University. His research interest is at the intersection of political economy, development economics, and population economics.

This article was originally published on FEE.org. Read the original article.

New Study Shows Anti-Oil Policies Could Be Causing More Oil Consumption

 Every few weeks, the environmental zealots of the organization “Just Stop Oil” make headlines for trying to destroy something important to bring attention to their goal of stopping oil.

?Breaking News?

What appear to be @JustStop_Oil supporters are spraying orange paint on the stones of Stonehenge. pic.twitter.com/mgGFXb2beZ

— David Atherton (@DaveAtherton20) June 19, 2024

It turns out, though, like many shortsighted policy prescriptions, the means are not conducive to the ends. In other words, legislative efforts to stop oil might cause more oil to be used rather than less.

A recent working paper by Maya A. Norman and Wolfram Schlenker out of the National Bureau of Economic Research (NBER) finds evidence that the “Green Paradox” is real.

But what is the Green Paradox? Well, the idea of the Green Paradox was put forward by economist Hans-Werner Sinn in what Wikipedia calls a “controversial” book. The 2012 book is titled The Green Paradox after the theory.

The idea is relatively straightforward. Those who own oil and oil reserves are rational economic agents. That means that they will extract and sell their oil at a particular rate that maximizes long-term profits. Owners don’t want to pull every drop of oil out of the ground because it would be costly to do so quickly, but they also want to sell the resource at a quick enough pace to meet demand.

However, so-called “green policies” change this calculus. If oil owners believe that sometime in the future a policy will be passed that makes it illegal or even more expensive to sell their oil, they will begin to try to extract and offload the oil before the policy passes.

The result is counterintuitive to shallow thinking—green policies aimed at regulating oil may actually increase the speed at which oil is produced and consumed. This is the Green Paradox.

As I mentioned before, Wikipedia calls this book “controversial,” though it doesn’t cite any source for that particular editorialization. However, even if the book were controversial, this new paper should make it less so.

The authors examine the Green Paradox with a few tests, but one result sticks out.

They examine a 2009–10 Waxman-Markey Bill, a cap-and-trade law which would have been burdensome for the oil industry.

The authors consider prices of oil futures compared to market expectations about the Waxman-Markey Bill’s likelihood of passing. If the argument of the Green Paradox is correct, the price of oil futures should fall as the likelihood of the bill passing increases. Documenting results, they say:

Consistent with this prediction, we find a significant negative coefficient; prices of oil futures decline whenever the expected likelihood that the bill will pass increases. This effect is persistent across all futures contracts, even increasing for longer-term maturities, suggesting that the relationship reflects long-term adjustments in the expected oil price path rather than temporary shocks. Through our analysis we find (i) the passage of the Waxman-Markey bill would have increased global oil consumption 2–4% and (ii) Waxman-Markey deliberations increased oil consumption by 8–27 million metric tons equivalent to 1–3 days of global oil consumption.

So, not only would the bill have led to increased oil consumption if it had passed; the mere possibility of it passing led to millions of tons of extra oil consumption. The Green Paradox stands.

One of the most important functions of economics is that it often shows that the means of policy-makers are not actually capable of achieving the desired ends. Policy-makers don’t like this, of course, which is why good economic ideas, like the Green Paradox, tend to be disparaged with terms like “controversial.”

This shouldn’t surprise us.

In his 1949 magnum opus Human Action, the economist Ludwig von Mises brilliantly highlighted this phenomenon:

It is impossible to understand the history of economic thought if one does not pay attention to the fact that economics as such is a challenge to the conceit of those in power. An economist can never be a favorite of autocrats and demagogues. With them he is always the mischief-maker, and the more they are inwardly convinced that his objections are well founded, the more they hate him.

Long live the mischief-makers.

Article by: Peter Jacobsen

Peter Jacobsen teaches economics and holds the position of Gwartney Professor of Economics. He received his graduate education George Mason University. His research interest is at the intersection of political economy, development economics, and population economics.

This article was originally published on FEE.org. Read the original article.

Childcare Regulations May Be Stifling Fertility, New Paper Finds

 The population bust has made its way into popular discussion about the looming issues we face as a country and a world. After centuries with a growing population, humanity is finally projected to begin to shrink by the end of this century.

The realization of the downsides of fewer brains has dawned on many, including Elon Musk, who views it as a major problem:

Population collapse is a major risk to the future of civilization https://t.co/ZI8QRt2Ev4

— Elon Musk (@elonmusk) January 24, 2023

In this vein, some have begun to seek answers on how to turn the situation around. The cause of the problem is difficult to diagnose. The rising opportunity cost of children for women, cheap access to birth control, and cultural and institutional changes are all brought up as major contributors.

While it’s safe to say that the situation is too complex to provide a one-size-fits-all diagnosis and cure, a new working paper out of George Mason University sheds some light on the issue.

Authors Anna Claire Flowers, Vincent Geloso, Clara Piano, and Lyman Stone argue that regulations are part of the story.

To understand their paper, you first need to understand that, at least in the US, women have fewer children than they say they want to have. When women are surveyed about how many children they want, researchers consistently find that the number of children they actually have falls short. This is known as the fertility gap.

In a summary of the paper for the Institute for Family Studies, Anna Claire Flowers explains that the fertility gap ranges from 0.3 to 1.3 across states. To be clear, a fertility gap of 0.3 means that women on average want 0.3 more children than they have. Or, put another way, in a group of 10 women, they are on average 3 children short of their combined goal. So a gap of 1.0 would indicate that, on average, all women surveyed have 1 less child than they want.

Again, these are averages, so it isn’t the case that every woman wants more children; but women do want more on average, to varying degrees across the US.

Here’s where the paper gets interesting. The authors compare the fertility gap across the US to the childcare regulations that exist in different places.

What is a childcare regulation? Some states require care facilities to have certain children-to-staff ratios or educational attainments on the part of their staff. The authors give the example: “[Washington, DC,] requires all early childhood educators to have an associate’s degree or higher in early childhood education or a closely related field, regardless of experience level.”

Different states have varying levels of regulation with respect to childcare. Regulations on childcare may be well intentioned, but they result in higher costs for parents.

If someone is required to have a degree to work in a daycare, the daycare must compete with the higher-paying jobs she qualifies for by virtue of her degree, and it can only do that by offering more pay. But money does not grow on trees. The only way daycares can pay more is if they charge their customers more. In other words, competition for these higher-skilled workers results in higher prices for customers—whether policy-makers want higher prices or not.

The results are exactly what you’d expect. According to the authors:

Our results consistently show fewer childcare regulations are associated with smaller fertility gaps. This suggests that women are better able to achieve their fertility goals in policy environments that allow for more flexibility in childcare options and lower costs.

In other words, states with more childcare regulations tend to have larger fertility gaps—women are less able to have as many children as they’d like. The fascinating implication, of course, is that reducing or eliminating childcare regulations could help facilitate higher birth rates.

One of the persistent drawbacks associated with pronatal policies is that they tend to be high-cost. But the implication of this new paper is that they need not be. By allowing parents to regulate childcare with their purchasing decisions, rather than relying on politician-assigned standards, it seems possible to lower the cost of childcare and, as a result, support parents in having larger families.

Article by: Peter Jacobsen

Peter Jacobsen teaches economics and holds the position of Gwartney Professor of Economics. He received his graduate education George Mason University. His research interest is at the intersection of political economy, development economics, and population economics.

This article was originally published on FEE.org. Read the original article.

Zuckerberg Is Removing Fact-Checkers. Did He Just Have a Change of Heart?

 Meta, Facebook and Instagram’s parent company, recently made a big announcement: the platforms are going to stop fact-checking user posts. Instead, Meta will be moving to a community-driven system (similar to X’s “community notes”).

The move represents an about-face for Zuckerberg. In early 2018, Zuckerberg voluntarily testified before Congress to apologetically discuss Facebook’s role in spreading Russian disinformation. It was around this time that Facebook rolled out fact-checks.

Meta’s fact-checking was subject to scrutiny within months of its implementation. Much of the scrutiny has stemmed from Meta getting fact-checks wrong on several major issues over the last few years, including the Covid-19 lab-leak theory and the Hunter Biden laptop scandal.

In his testimony, he went so far as to say, “The most important thing I care about right now is making sure no one interferes in the various 2018 elections around the world.” When asked whether he would support new regulations, he said he would if they were “the right regulations.”

In 2020, Zuckerberg donated over $400 million to election nonprofits such as the Center for Tech and Civic Life to ensure “election integrity.”

So why the change? Why is Meta changing from a fact-checking hall monitor to a hands-off bystander?

Rent Extraction, Regulatory Capture, and Fact-Checking

After the 2016 election, Trump’s victory was considered an aberration. His narrow victory and the now-debunked Russian collusion narrative dominated major outlets.

Many Democrats blamed Facebook for the loss. They argued that voters had been swayed by Russian-funded propaganda spread on Facebook. Clinton herself took to The Rachel Maddow Show to scold Facebook for its role in spreading “disinformation.”

As the 2018 midterms approached, the mainstream media took aim at Facebook for being the cause of Trump’s 2016 win. One article from the New York Times used a meme of Jesus and the Devil arm-wrestling as their top example of Russian-paid disinformation. Was the meme paid for by Russians trying to sow discontent? It seems like it. Did a meme of Jesus and the Devil arm-wrestling cost Clinton the election? I’ll let you answer that.

Regardless, Zuckerberg was clearly feeling the heat and began trying to work with Democrats to stop the apparent misinformation problem on Facebook.

Why would Zuckerberg go from ridiculing the disinformation charges to spending millions to ensure election integrity? One possibility is that he changed his mind, but I think there’s a more likely answer. Zuckerberg was concerned that Democrats’ rhetoric against him would turn into retaliatory regulation, so he gave money and lip service to Democratic efforts.

When politicians use their power to threaten companies into doing things that benefit them or their party, economists call their actions rent extraction.

There’s a second force at play here. If Zuckerberg agreed to cooperate with regulators, there is a chance he, or his team, could be involved in writing the regulations. Politicians aren’t exactly tech-savvy, which means they need to rely on experts to help create regulations. Oftentimes, the best experts are industry insiders like Zuckerberg and his employees. When industry leaders can write regulations for their own businesses—inevitably in ways that favor those businesses—economists call this regulatory capture.

So, by pivoting toward concern about disinformation, Zuckerberg was able to avoid retaliatory regulation and position himself to write new regulations. Rent extraction and regulatory capture explain the pivot. By 2021, Zuckerberg had gone from election-theft-enabler to savior of the 2020 election. All it cost was incorrectly fact-checking user claims and hundreds of millions of dollars.

Tech and the Triumph of Trump

Trump’s 2024 win struck a different chord. Unlike 2016, Trump got more of the popular vote than the Democrats, and there’s been very little talk of Russian campaigns to upend the election.

One tech giant, Elon Musk, bet big on Trump and won. Elon’s support of Trump was a risky move that certainly would’ve come back to bite him if Trump lost.

Tech CEOs have noticed the changing tides, and are responding. Apple, Meta, Amazon, and OpenAI have donated $1 million each to Trump’s inauguration. To be blunt, it looks like a new sheriff’s in town.

Trump’s relationship with Musk, his new friendly view of TikTok (which he credits his son Barron for), and his support of H-1B visas (a major supply of tech-industry labor) highlight his friendly relationship with the industry.

It’s unsurprising that Zuckerberg is trying to jump on the same bandwagon. The community notes system, although not immune to error, is not viewed as censorship in the same way Meta’s fact-checking system was.

Zuckerberg maintains that the timing of these changes is coincidental in a recent Joe Rogan interview, but there are two problems with taking this at face value. One, talk is cheap. Making ideological changes for cynical reasons tends not to sit well with people. Secondarily, it’s possible that Zuckerberg is the type of person who acts in accordance with beneficial trends without even realizing it himself. Being business-savvy as a second nature may mean Zuckerberg can make otherwise calculated decisions using heuristics which themselves are more complicated than he realizes.

With Democrats firmly out of the halls of power, Zuckerberg no longer feels the heat of rent extraction, and it makes more sense to saddle up with the GOP if he wants to be on the ground floor of tech regulations. As a result, Meta is killing its fact-checking.

It’s also important to note how other factors may be influencing this decision. For example, international controversies (such as the war in Gaza) likely make the system more expensive as more sites with variable languages need to be assessed.

Overall, supporters of free speech can be happy about this, but they should be careful to recognize that Meta’s decision (and perhaps Zuckerberg’s libertarian turn in general) is probably the result of cold political calculations rather than changed minds and hearts.

Article by: Peter Jacobsen

Peter Jacobsen teaches economics and holds the position of Gwartney Professor of Economics. He received his graduate education George Mason University. His research interest is at the intersection of political economy, development economics, and population economics.

This article was originally published on FEE.org. Read the original article.