1

Religion, Biology, Politics, and Economics:

The Struggle of Reason with Emotion

copies of this presentation can be found atwww.business.duq.edu/faculty/davies

2

Trade and Per-Capita Income

Conventional wisdom

Trade leads to a shift in wealth from workers and consumers to multinational corporations, and from developing nations to developed nations.

3

R2 = 0.56

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000

Per-capita Income (US$)

Per

-cap

ita

Tra

de

(US

$)

Source: International Financial Statistics, International Monetary Fund, December 2001

Greater per-capita trade is associated with greater per-capita income.

4

Distribution of Income

Conventional wisdom

Trade results in a concentration of income so that the few benefit dispro-portionately to the many.

5

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 55.0 60.0 65.0

Gini Coefficient (0 = equitable, 100 = inequitable)

Per

-cap

ita

Tra

de

(US

$)

Source: International Financial Statistics, International Monetary Fund, December 2001, and Measuring Income Inequality: A New Database, Deininger, Klaus, and Lyn Squire, World Bank, 2002

Greater per-capita trade is associated with more equitable income distributions.

6

Gender Equality and Child Labor

Conventional wisdom

Trade results in the exploitation of women and children.

7

R2 = 0.80

$1

$10

$100

$1,000

$10,000

$100,000

0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00

Gender Related Development Index (0 = low gender adjusted HDI, 1 = high gender adjusted HDI)

Pe

r-c

ap

ita

Tra

de

(U

S$

, lo

ga

rith

mic

sc

ale

)

Source: International Financial Statistics, International Monetary Fund, December 2001, and Human Development Report, United Nations Development Programme, 2002

GDI measures quality of life (longevity, education, literacy, income) for women relative to men.

Greater per-capita trade is associated with greater gender equality.

8

Source: International Financial Statistics, International Monetary Fund, December 2001, and World Development Indicators, World Bank, 2002

$1

$10

$100

$1,000

$10,000

0 10 20 30 40 50 60

Children 10 to 14 in the Labor Force (as % of age group)

Per

-cap

ita

Trad

e (U

S$,

lo

gar

ith

mic

sca

le)

Even among middle-lower and lower income countries, greater per-capita trade is associated with reduced child labor.

9

Trade and Unemployment in the U.S.

Conventional wisdom

Trade destroys American jobs.

10

Source: Bureau of Labor Statistics, and Bureau of Economic Analysis

January 1975 to June 2006

0%

2%

4%

6%

8%

10%

12%

12% 14% 16% 18% 20% 22% 24% 26% 28% 30%

Trade (imports plus exports) as % of GDP

Un

emp

loym

ent

Rat

e

Greater trade is associated with reduced unemployment.

11

Trade and Unemployment in the U.S.

Conventional wisdom

Trade erodes Americans incomes.

12

January 1975 to June 2006

$12.00

$12.50

$13.00

$13.50

$14.00

$14.50

$15.00

12% 14% 16% 18% 20% 22% 24% 26% 28% 30%

Trade (imports plus exports) as % of GDP

Av

era

ge

Re

al H

ou

rly

Ea

rnin

gs

(2

00

0$

)

Source: Bureau of Labor Statistics, and Bureau of Economic Analysis

Greater trade is associated with increased real wages.

13

Global Warming

Conventional wisdom

Global temperatures are rising at an alarming rate.

14

Source: NASA Goddard Institute for Space Studies

1880-2003

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

18

80

18

85

18

90

18

95

19

00

19

05

19

10

19

15

19

20

19

25

19

30

19

35

19

40

19

45

19

50

19

55

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

Te

mp

era

ture

De

via

tio

n (

de

gre

es

C a

bo

ve

/be

low

th

e a

ve

rag

e

for

19

79

th

rou

gh

19

85

)

Over the period 1880-2003, global temperatures have risen, on average, by 1.1 degrees Celsius.

15

Source: CDIAC, Oak Ridge National Laboratory

Compared to the past 400,000 years, the current rise in global temperatures is neither extreme nor unexpected.

16

CO2 Levels Cause Global Warming

Conventional wisdom

Global warming is due to man-made CO2 levels.

17

1880 - 1985

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0 1000 2000 3000 4000 5000 6000

Man-Made CO2 Emissions (Tg)

Te

mp

era

ture

De

via

tio

n (

de

gre

es

C

ab

ov

e/b

elo

w t

he

av

era

ge

fo

r 1

97

9 t

hro

ug

h

19

85

)

Source: www.johnstonsarchive.net/environment/co2table.html

18

Income Inequality

Conventional wisdom

The rich are getting richer while the poor get poorer.

19

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

< $

15,0

00

$15,0

00 -

$25,0

00

$25,0

00 -

$35,0

00

$35,0

00 -

$50,0

00

$50,0

00 -

$75,0

00

$75,0

00 -

$100,0

00

> $

100,0

00

% o

f H

ou

seh

old

s

1980

Source: Statistical Abstract of the United States, U.S. Bureau of the Census, 2006, Table 673.

Income Distribution for 1980 (in 2003$)

20

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

< $

15,0

00

$15,0

00 -

$25,0

00

$25,0

00 -

$35,0

00

$35,0

00 -

$50,0

00

$50,0

00 -

$75,0

00

$75,0

00 -

$100,0

00

> $

100,0

00

% o

f H

ou

seh

old

s

1980 2003

Source: Statistical Abstract of the United States, U.S. Bureau of the Census, 2006, Table 673.

Income Distribution for 2003 (in 2003$)

21

U.S. Manufacturing

Conventional wisdom

The U.S. manufacturing sector is in decline.

22

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1948

1951

1954

1957

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

Em

plo

ym

en

t as %

of

Civ

ilia

n L

ab

or

Fo

rce

Manufacturing, Mining, and Natural Resources Services Government

Source: Bureau of Labor Statistics (via www.economy.com)

Since 1948, employment in Services industries has grown by 50% while employment in Manufacturing industries has declined by 50%.

23

0

20

40

60

80

100

120

1948

1951

1954

1957

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

Ind

ust

rial

Pro

du

cti

on

(20

02=

100

)

Source: Bureau of Labor Statistics (via www.economy.com)

While the number of American jobs in manufacturing has been declining, American production of industrial goods has been rising. This implies that American manufacturing is becoming more efficient as it produces ever more output using less labor.

24

Minimum Wage

Conventional wisdom

Increases in the minimum wage help the poor.

25

Less than HS Education (1984-2004)

0%

2%

4%

6%

8%

10%

12%

14%

16%

0.3 0.32 0.34 0.36 0.38 0.4 0.42 0.44

Min Wage as Fraction of Avg Hourly Wage

Un

em

plo

ym

en

t R

ate

Source: Statistical Abstract of the United States, and Bureau of Labor Statistics

Increases in the minimum wage are associated with increases in unemployment among the lesser educated.

26

College Education (1984-2004)

0%

1%

1%

2%

2%

3%

3%

4%

0.3 0.32 0.34 0.36 0.38 0.4 0.42 0.44

Min Wage as Fraction of Avg Hourly Wage

Un

em

plo

ym

en

t R

ate

Source: Statistical Abstract of the United States, and Bureau of Labor Statistics

Increases in the minimum wage are not associated with increases in unemployment among the better educated.

27

Price of Gasoline

Conventional wisdom

The price of gas is rising.

28

Average Retail Price per Gallon of Gasoline

$0.00

$0.50

$1.00

$1.50

$2.00

$2.501967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

Source: Statistical Abstract of the United States, 2003 (Table 725), 1996 (Table 759) 1995 (Table 775).

The price of gas rose more than seven-fold from 1967 through 2005.

29

Per-Capita Disposable Income

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

Source: Bureau of Labor Statistics (via www.economy.com).

Per-capita disposable income has risen more than ten-fold from 1967 through 2005.

30

Cost of 1 Gallon of Gas as a % of Disposable Income

0.000%

0.002%

0.004%

0.006%

0.008%

0.010%

0.012%

0.014%

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

Source: Bureau of Labor Statistics (via www.economy.com).

For gas today to be as expensive as it was in 1967, gas would have to cost more than $3.25 per gallon.

For gas today to be as expensive as it was in 1981, gas would have to cost $4.00 per gallon.

31

Social Security

Conventional wisdom

People need Social Security to insure they can survive retirement.

32

($30,000)

($20,000)

($10,000)

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 100

Compiled from data published in 2003 Statistical Abstract of the United States, U.S. Bureau of the Census, and provided by the Social Security Administration

Expected annual Social Security tax payments

Expected annual Social Security benefits

Expected tax payments and benefits reflect the likelihoods of employment and mortality.

33

($30,000)

$20,000

$70,000

$120,000

$170,000

$220,000

$270,000

$320,000

1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77

Compiled from data published in 2003 Statistical Abstract of the United States, U.S. Bureau of the Census, and provided by the Social Security Administration

Expected annual Social Security tax payments

Expected annual benefits from privatized accountThis chart assumes that 100% of the

worker’s current Social Security taxes are diverted to a private investment account.

34

Religion, Biology, Politics, and Economics:

The Struggle of Reason with Emotion

copies of this presentation can be found atwww.business.duq.edu/faculty/davies