Spiritual resources for the crisis

Yesterday's "Speaking of Faith" program on public radio had an interview with Parker Palmer about the economic crisis, and how we can make use of our faith in dealing with it. It's very interesting, and can be found here. In fact, they're collecting a whole series of resources about this.

And in church, the appointed Psalm for Advent 3 was 126: "Restore our fortunes, O Lord, like streams in the Negev." Sometimes these readings come up in a really providential fashion. Anyway, that's one to tape to the bathroom mirror until the crisis is over.

Review: Calvinism in the Las Vegas Airport by Richard Mouw

I recently finished Richard Mouw's Calvinism in the Las Vegas Airport, which is his approachable apology for Calvinist theology. As a Calvinist who is only beginning to learn the theology and history of this tradition, I found the book to be a helpful summary of how Mouw allows this tradition to shape his thinking and his life.

The only part of the book which really changed my thinking was his emphasis on "Heidelberg One" as the starting point for understanding Calvinism. His argument is that a person's acknowledgement that they are utterly dependent on God for all good is the central element of Calvinism, and that the doctrines of the Cannons of Dordt, while a defining element of Calvinist theology, are less widely applicable to our lives.

My only disappointment with the book was Mouw's sometimes overly apologetic tone. He seems to recognize that Calvinism is somewhat unpopular, and spends a lot of time acknowledging and dealing with the difficulties that people have. While this is helpful, he spends less time explaining the positive aspects of this theology – the freedom that results from recognizing God's ultimate sovereignty. Overall, however, the book was a very easy read, and does a good job of explaining the importance of Calvinist theology for his own life (and presumably his readers' lives).

The Butterfly and its Maker

I ran across the following line as I was reading Kent Van Til's article in Perspectives:

Christians aver that a butterfly never seen by human eyes nevertheless has the end to glorify its Maker, providing God with a small dosis of enjoyment as She watches its beautiful wings flutter. (pg 16, Nov 2008)

The statement is simple, but it is probably the most convincing argument I have heard against the standard approach for assigning value to environmental goods. Even if people are not willing to pay money either to visit the butterfly or to simply know that it exists, that does not mean that the butterfly is without value.

Now I have to reconsider my thinking on the environment.

I needed some uplifting news and found this happy note from today's Nikolas Kristof opinion piece.

Jimmy Carter is by far the best ex-president the United States has ever had,
and he underscored that again this morning by announcing that Guinea Worm cases
have reached an all-time low. For those of you who have never heard of it,
Guinea Worm is one of the worst parasites you can get. The worms burrow inside
of you, grow to almost three feet long, are incredibly painful, and finally pop
out of the skin and have to be reeled out, inch by inch, over many days. They
are an ancient affliction in tropical countries, but Carter has led an effort to
eradicate them.
...

Today he announces that Guinea Worm is down to 5,000 cases worldwide — mostly in Sudan, Mali and Ghana — and tantalizingly close to eradication. If it is eradicated, it will be only the second ailment, after smallpox, that we’ve been able to eliminate form Earth.

...

Worldwide cases have already been reduced by 99.7 percent, and Carter’s work
has truly transformed those villages where the worm used to be endemic. He shows
that these are battles we can win.

That is great news and truly did give me hope about the ability for human beings to work together for the good of this planet (Does that hope wax and wane for you as much as it does for me?). To be honest, though, the reason I went to that article was because the blurb about it on the front of nytimes.com was: "Jimmy Carter's efforts to eradicate a tropical parasite should set an example for future former presidents." I truly expected to see Jimmy Carter holding a gun on Robert Mugabe (Apparently I've been reading too much from The Onion). Oh well...maybe that can be George Bush's good deed as a former president.

Regulation and the crisis

One of the basic rules of banking that I teach in econ 331 is "Never take a risk you don't understand." The current crisis seems to have its roots in a new fashion in the banking industry to ignore this rule. Such behavior is remarkably foolish. But perhaps behavioral economics can explain it as a reaction to the invention of so many new types of financial instruments with extremely obscure risk characteristics. Rather than forego buying these things and risk looking stupid or slow, bankers bought them, hoping (or trusting) that their inventors were not selling them something dangerous. Of course, the result is that the bankers who bought these things now look stupid and slow. Better to say "Sorry, I don't buy things I don't understand" than to ruin your company.

Regulation could have forbade these instruments, or penalized banks that held them, but that would run a serious risk of stifling innovation, which we don't want to do. Bankers should be smart enough to reject innovations that are not transparent enough to be really useful. The real regulatory failure that is clear now (in retrospect) is that capital requirements for investment banks and hedge funds (and insurance companies that acted like hedge funds) were too low. This is the area that needs attention as we review regulation in the light of the crisis. The commercial banks and thrifts, with their higher capital requirements, are mostly OK.

While we're on the subject, I was always a fan of the original rescue plan for the Treasury to buy distressed mortgage-backed securities from the banks in a reverse auction. The government would not have had to buy all of them in order to establish a price, and private demand would have followed. Once a price was set, the size of the banks' losses is determined, and on that basis they could have gone to the private market to raise capital. But the approach that was followed (direct injections of equity capital from the Treasury) did not resolve the uncertainty about the magnitude of the banks' losses, and so did not open the private market to them. Who wants to inject capital into a bank and then see it eaten up by toxic securities that were already on the books?

The Best Line I Have Read So Far Today

"I had rather see coming toward me a whole regiment with drawn swords, than one lone Calvinist convinced that he is doing the will of God."

Nicholas Wolterstorff, in the first chapter of Until Justice and Peace Embrace, quotes an unnamed "seventeenth-century English writer," as having written this, but does not name the author. Does anyone know who wrote this?

Is Deregulation the Problem?

A recent New York Times article about Phil Gramm paints one congressman's efforts to deregulate (or resist regulation of) financial markets as a prime cause of our current economic problems. Here is the key passage:

On Capitol Hill, Mr. Gramm became the most effective proponent of deregulation in a generation, by dint of his expertise (a Ph.D in economics), free-market ideology, perch on the Senate banking committee and force of personality (a writer in Texas once called him "a snapping turtle"). And in one remarkable stretch from 1999 to 2001, he pushed laws and promoted policies that he says unshackled businesses from needless restraints but his critics charge significantly contributed to the financial crisis that has rattled the nation.

Although the author does a pretty good job trying to come up with smoking guns that point to Gramm and deregulation as the problem, this narrative seems a little too simple. I suspect that we could only properly regulate our way out of this crisis only in hindsight, and as the conversation on this blog has indicated, the factors contributing to the crisis are difficult to distill down to this or that government action.

It is fascinating, however, to watch the economic narrative in the media change in response to this crisis. Will the narrative about regulation change within the economics profession as well?

The Implications of Gender Gaps in Education

In a recent TCS Daily article Bill Costello marshals a significant amount of demographic data regarding differences between the genders and makes a compelling case that the gender gap in education is a dangerous trend. Here is his conclusion:

In short, the education gender gap that starts in kindergarten is leading to a nation of undereducated men who are contributing less and less to the economy and the family structure. This will adversely impact our nation's productivity, prosperity, and society.

It is a little difficult to get too excited about women out-performing men in education given the history of limited opportunity for women in this country. That said, if Costello is correct that this trend leads to the continued breakdown of the family structure, it is probably worth paying attention to.

Unfortunately, it seems that much of the difference between the performance of men and women in education is due to unequal virtue: women tend to work harder and are less likely to commit crimes or use illegal drugs. While it is possible that there are elements of our education institutions that favor women, it is not immediately obvious that this is so. As such I doubt that men have a good excuse for their poor performance.

Calvin Economics: Economics and Faith?

Calvin Economics: Economics and Faith?
This comment is primarily in response to Kurt's comment on where to point fingers for the financial mess.

It is clear that blunders in and political shenanigans in the Congressional regulation of Freddie and Fannie had some role in the current financial mess, but I dispute that this was the the primary issue. I agree more with Alice Rivlin of the Brookings Institute who states:

It is tempting in mid-catastrophe to point fingers at a few malefactors or
identify a couple of weak links in a larger system and say, “Those are the
culprits; if we punish them, the rest of us will be off the hook.” But the
breakdown of financial markets had many causes of which malfeasance and even
regulatory failure played a relatively small role. Americans have been living
beyond our means, individually and collectively, for a long time. We have been
spending too much, saving too little, and borrowing without concern for the
future from whomever would support our over-consumption habit—the mortgage
company, the new credit card, or the Chinese government. We indulged ourselves
in the collective delusion that housing prices would continue to rise.

(from the speech )

Putting much of the blame on the encouragement FM and FM were given to loan to low income people does a disservice to many very good loan programs that have helped low income people own homes. To me this sounds a lot like a 'blaming the poor' for the financial mess argument. Though some of the loans granted under these programs have now gone bad, the lion's share of these loan programs were not sub-prime. My understanding of the FM and FM history is that the mortgage back securities (MBSs) that they sold to financial markets were based upon 'prime' loans (to people with good credit histories and adequate or subsidized down payments) until quite late in the game when they began trading in sub-primes to compete with the other financial houses. The MBSs with 'subprime' mortgages behind them were issued initially by the financial institutions like Lehman, Bear Stearns, etc. To satisfy world demand for MBS's that had higher rates of return than competing securities, more and more sub-prime mortgages were marketed, ie. fewer and fewer credit checks for borrowers to qualify for loans coupled with 'exotic' mortgage products that kept payments low for borrowers (adjustable rate mortgages, interest only mortgages, with 2-3 year reset dates, to name a couple).

The consequence of this was that the volume of loans, increasingly with much higher risk of default, ballooned since 2000. In 2000, there were only about 200,000 sub-prime mortgages and most were on relatively low value properties. By 2005, nearly 2.25 million sub-prime mortgages were in the market, with much higher property values as the property values ballooned. (from Christopher Waller presentation) It was not primarily low income people involved with this volume of loans. And the volume of the subprimes continued to grow, with the volume of loans requiring a reset peaking in August of 2008. Apicture from Swiss Bank captures the problem well (if only I could figure out how to insert it here) while also indicating that there is a future overhang of more recently issues Alt-A loans looming.

So, I think it is important that we see the complexity of the financial mess with the many complicit parties in it--consumers of many financial stripes wanting more house than they could afford, investors wanting higher rates of return without little (apparent?) risk, mortgage writers wanting income with little risk, investment houses wanting to boost profits by marketing large volumes of high return (low risk?) securities, government and Fed officials wanting to make home ownership possible for as many as possible, and even an economics profession that for decades has preached efficiency in capital markets if regulation is limited (see Allen Greenspan). I'm sure there are other's who bear responsibility too.

I hesitate to call this greed, for reasons Kurt mentioned in his comment. But the phrase I have used to describe the root of the financial mess is: 'a culture of manic consumerism,' fueled by very easy fiscal and monetary policy for quite a long time.

Economics and Faith?

So, in response to my own comment on the about the light-duty articles about churches in the WSJ (see comment on Mystery church visitors entry below), I thought I would see if there might be a heavy-duty article about economics in The Christian Century, one of my sources for thoughtful theological insight. I found James Halteman's 10/21/08 article which is a clear description of the economic forces behind the current melt-down situation. However, given that this journal would be an appropriate outlet for theological reflection, repentance, and even possibly jeremiads, I was expecting a different ending.

Instead, his answer to his own question about where the responsibility lies for this mess was the same old finger-pointing to Wall Street greedsters, with only a teeny-tiny toss of responsibility to us, the over-consumers:

The culprits? Certainly some responsibility is borne by the eager brokers who sought easy commissions, enticing financially ill-prepared people to take on mortgage debt. Responsibility also falls on the people who took out the mortgages without working out a viable budget.

But the most disturbing element in the sequence of events behind the crisis is the behavior of the Wall Street investment banks...

I say, opportunity lost. There is a heap of responsibility for this mess on this entire country's addiction to living on credit, and especially funding it through home equity.

I would want to have ended an article about economics and housing that was going to be read by a huge section of the Christian community not by blaming wallstreeters, as usual, but to point out the mantle we wear too of greed and suggest that we might need to re-gain the will to sacrifice, and advocate sounder policy and action toward those who are not able to sup at the wealth-accumulation table. Does this financial crisis hold up a mirror so that we can re-examine the true nature of wealth disparity? What are the true questions we should ask ourselves as a Christian community? What are the true economic goals we should be seeking?

Mystery Worshipper & Market Driven Churches

In a recent Wall Street Journal article Alexandra Alter documents the practice of bringing in profession "mystery worshippers" to critique a church's ministry. Here is a brief excerpt:

Mr. Harrison – a meticulous inspector who often uses the phrase "I was horrified" to register his disapproval of dust bunnies and rude congregants -- poses as a first-time churchgoer and covertly evaluates everything from the cleanliness of the bathrooms to the strength of the sermon. This summer, Mr. Harrison scoured a megachurch in Cedar Hill, Texas, and jotted down a laundry list of imperfections: a water stain on the ceiling, a "stuffy odor" in the children's area, a stray plastic bucket under the bathroom sink and a sullen greeter who failed to say good morning before the worship service. "I am a stickler for light bulbs and bathrooms," he says.

Mr. Harrison belongs to a new breed of church consultants aiming to equip pastors with modern marketing practices. Pastors say mystery worshippers like Mr. Harrison offer insight into how newcomers judge churches -- a critical measure at a time when mainline denominations continue to shed members and nearly half of American adults switch religious affiliations. In an increasingly diverse and fluid religious landscape, churches competing for souls are turning to corporate marketing strategies such as focus groups, customer-satisfaction surveys and product giveaways.

I cannot shake the belief that type of behavior is a symptom of a church body that has mixed up priorities. Still, let me try to put this in the best possible light.

We know that individual congregations can become blind to their own faults, just as individuals can. A congregation may be failing to minister to the community around them because they are the only ones to don't see these faults. In this case, it is the job of the wider church (iron sharpening iron and all that) to help these congregations come to terms with the problems that are hindering their ministry.

If we buy this, then the real complaint with this mystery worshiper phenomenon is probably one of the following:

• These consultants focus on things that are very low priority (i.e. sidewalk cracks), in which case we should ignore their advice and find better consultants.
  
• This job should not happen via the market, we should not be paying people to do this. Constructive criticism should come to the church from some other means. The way I would recommend that churches do self examination is through internal prayer and study, as well as external consultation with other churches within the same denomination/tradition (preferably one with long roots and a grounded theology).

The article includes some theological doubt:

Some theologians warn that mystery-worshipper services will drive "spiritual consumerism." Evaluating churches as if they were restaurants or hotels might encourage people to choose their church not according to its theology, but based on which one has the best lattes or day care, says Paul Metzger, professor of theology at Multnomah Biblical Seminary in Portland, Ore. "We tend to look for religion or spirituality that will give us what we want, when we want it," Prof. Metzger says. "There's a pressure for the church to be something that the church is not."

This is something to think about.