Jason Hartman hosts Dr. Robert Whaples, Professor and Chair in the Department of Economics, Wake Forest University, and co-editor and managing editor of The Independent Review. They have a conversation on the current Pope and his world view. They look at how the economy is connected to this worldview. Then they discuss environmental regulations and taxes.
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Welcome to the Solomon success show, where we explore the timeless wisdom of King Solomon and the Bible, as it relates to business and investing false prophets and get rich quick schemes are everywhere. Let’s not be distracted by these. Instead, let’s go to the source, the eternal principles that create a life of peace, power, and prosperity. Here’s our host, Jason Hartman.
Jason Hartman 0:40
It’s my pleasure to welcome Dr. Robert waples. To the show. He is book review editor for the the economic history Association, research fellow at the independent Institute, managing editor for the independent review and professor of economics at Wake Forest University and editor of the new book, Pope Francis and the caring Society. Robert, welcome. How are you?
Dr. Robert Whaples 1:02
Thanks for having me. I’m doing great today. It’s good to have you on Good to have you on. So Pope Francis Saad, this is quite a really a new direction, isn’t it for the Catholic Church, I mean, sort of a very modern Pope, right. In many ways. He’s moving the church into some new directions. But it turns out that the church’s history is, you know, long and rich. And so especially when it comes to what the pope saying about the economy, and also the environment, those kinds of things, actually not that groundbreaking, just maybe moving tacking the church back over in a direction that some of the earlier Pope’s would have had, maybe a little less friendly to the market than his most immediate predecessors would be.
Jason Hartman 1:49
Good. So what does he think about you know, give us some, maybe his worldview on capitalism, charitable giving, things like that?
Dr. Robert Whaples 1:58
Yeah. So I think the best place you can find him talking about this isn’t the encyclical that came out a couple years ago called laudato. Si, on the care of our common home. And well, a lot of people think of it as his environmental encyclical. It’s as much about the economy as it is about the environment. It’s as much about the rich and the poor as about the earth itself. And so I think one way to frame the Pope’s view on these things is to think about his background. Until just five years ago, he was living down in Argentina. And I think that gave him a little different view on the economy than we would have here. He’s described himself as kind of allergic to all things economic. And, you know, you just don’t see him being as supportive of a market system as some of his predecessors were. And I think that has a lot to do with his Argentine background. Argentina, if you went back a century, a little more than a century ago, was one of the most successful economies in the world. It was Up there in the top handful in terms of standards of living,
Jason Hartman 3:03
it’s amazing what decades of corruption will do.
Dr. Robert Whaples 3:06
Yeah, their standards of living have gone up as they have all over the world, you know, because we have better technology and all that but you are exactly right. The corporatist model, the, you know, one perone, the parent nieces, which is a model where, you know, the government is totally intertwined with business and to be successful in business, you need to be in league with the government. And so we would call that crony capitalism around here. I think that’s what Pope Francis views as capitalism. So, you know, I would consider that kind of a misperception on his part, but you can understand why coming from where he does, we always have to be worried about crony capitalism, having the government be the one determining the winners and losers. But it isn’t really the rule and a better functioning economy has one where, you know, firms really do compete for customers to deliver the best products at the best prices and then much more. The benefits go along to the consumers their and standards of living are a lot higher and you solve tough problems like absolute poverty so much more quickly, which adopt a more free market oriented economy. Okay, so
Jason Hartman 4:11
I just want to make sure this is clear for myself and then of course, the listeners. So you’re saying that because he has this somewhat like tainted view of capitalism, because of the Argentine model where it’s much more I mean, it’s, you know, they we complain about crony capitalism here in the States, but you know, God, it’s, it’s worse there. So that would make him less capitalistic in his statements and his worldview, right.
Dr. Robert Whaples 4:37
I think that’s exactly right, that he just kind of has a natural gut reaction to this thing that a market economy isn’t going to solve your problems very well, because I think he’s seen a market economy that just wasn’t a strong market economy. It was one that had handcuffs on. Yeah. And so one thing to compare him with is john paul, the second who grew up in Poland under communism. So he saw bad communism work. And he said, more supportive things of a democratic capitalist system than like just about any other Pope ever has, then you can see how their backgrounds would have affected that. Now, one thing that economists would say if they had a chance to sit down and chat with Pope Francis is that, in fact, the various types of the economies around the world that are moving toward the free market have generated so much economic growth in recent decades, that it has wiped out a much absolute poverty that exists around the world. The World Bank calculates that over a billion people in the last few decades have been lifted out of absolute poverty. And they define that people living on less than $1 90 a day. And so as China has moved to market mechanisms in the countries in Africa, Indonesia and you know big places all over the world, have done this. We have seen, you know, they copied what we did in this country and other countries did capturing the power of a market economy, people working together. And they’ve seen just absolute poverty melt away. And so that’s a wonderful success that I don’t think the pope acknowledges as much as you would like him to. Yeah,
Jason Hartman 6:20
definitely agree with you there. So connect the economy with the environment, if you would, of course, it’s extremely connected but connected in the Pope’s worldview, if you would,
Dr. Robert Whaples 6:29
I guess in the Pope’s worldview, business can be a noble profession if directed to the right ends, but he worries that in fact, it gets directed toward the wrong and you know, people kind of just line their own pockets and earn big profits and in the process, maybe just putting their costs off onto other people if they can get away with it. And that obviously happens. And when you see that happening in the environment, it can be very destructive. Absolutely and and in so many other ways. If I may interrupt you for a moment, I just want to bring this up to the listeners because I
Jason Hartman 7:05
think this word that I’m about to say, of course, you know, the word is not used enough in our dialogue about the economy, the environment, or many other parts of life and the word is externalities. externalities, we really need to start talking about externalities more often. So in the kind of context, we’re using it, of course, you know, that the company goes out and they do their manufacturing and they pollute the river, right? polluting the river is not a cost of doing business directly to the company, but it’s an externality and a cost that we all bear because the river is polluted, right, and someone has to clean it, hopefully. But there are externalities in so many other areas of life. I mean, you know, the little pet peeves that I have in my life like leaf blowers, one of the worst inventions in human history, I believe is
Dr. Robert Whaples 7:57
winding down for a half an hour and
Jason Hartman 7:59
the dust slide away, you’re like, dust in the pollution. It’s terrible. Yeah. And loud motorcycles and loud cars. These are externalities. Other people bear the cost of them. So back to the Pope. I just wanted to go on that little tangent for a moment.
Dr. Robert Whaples 8:15
Yeah. And so I think that Pope Francis is entirely right, that many individuals, many businesses will push their costs off onto other people if they can get away with it. But what a successful market economy does is make sure that they don’t get away with it. Right. And so we pass laws that say polluters have to pay. And you know what, it turns out? I’m a polluter to. I’ve got lights on in my office, and there’s a place not too many miles away from here. That’s burning coal, to create the electricity, right. And luckily, they’ve got scrubbers and things in their smokestacks. And there’s not too much that that that comes out. But I’m the one paying them to do that. Right, right. Yeah. And so when an economist says The solution to this problem is to make the polluter pay. They don’t just mean the businesses, I mean, the consumers as well. They share those costs. And it will, you know, depend on the forces of competition who bears those costs. But in fact, what you need to do to solve an environmental problem like that, is sit down and make polluters pay. That can be through attacks, if there’s no other way. But another way that usually works much more successfully, is to create a property right, so that somebody owns something, and then has an incentive to take care of it. Now, owning the air, that’s a hard one.
Jason Hartman 9:37
Yeah. But you know, when you’re not owning your
Dr. Robert Whaples 9:39
land, owning water, those kinds of things. And so here’s an example that one of the authors in our book brings out, you can see from hundreds of miles up in space, a difference between one end of the island of Hispaniola and the other end, that’s the island in the Caribbean that’s got Haiti on one Right in the Dominican Republic on the right, the Dr. Is Greener on one side of the island than the other. Yeah. And the reason goes back to decades of corrupt governments in Haiti, where nobody had a secure property, right? You owned your land, sort of, but the government could come on and grab stuff, their cronies could come in and grab stuff, they could clear cut your land or something. So what did you do? You cut the trees down before they got a chance, or maybe you didn’t cut the trees down before they got the chance. But everything just kind of gets cut down. And then there’s all this erosion and you know, the whole environment is out of whack because they didn’t have an honest government that defined and enforced property. Okay, so
Jason Hartman 10:43
I’m so glad, Robert, you brought this up. Let me let me let me ask you a couple questions about this. I agree with you. Philosophically, no question. And I remember reading a Greenpeace magazine. And it was, you know, your several years after the Soviet Union had fallen collapsed, you know, it just profiled and the pictures were astonishing. They were just terrible. The birth defects, the pollution,
Dr. Robert Whaples 11:08
the air was more environmental degradation within the Soviet Union and has been in communist countries. Any other place?
Jason Hartman 11:16
In the thesis being what you say is that when people don’t own something, they don’t care about it. And I agree, you know, how well do you take care of your own car versus a rental car? How well do you take care of a rented house versus your own house? Of course, that’s true. But but but, you know, if Monsanto or Dow Chemical, they want to buy a big plot of land next to their factory and, you know, pollute it, I mean, that might actually be a good equation for them. You know, that even though they own it, the ownership society concept is true, and philosophically valid. It just might be an expedient business decision, you know, it. It does seem like and as much of a libertarian as i think i Yeah, you know, it seems like we do have to have some, some tax or some kind of regular regulation as a tax. But yeah, I don’t know, what are your comments on that?
Dr. Robert Whaples 12:09
I think you are right, that there are times when it makes sense for if there’s a product we really want, and it’s messy to make it, the mess has to go somewhere. And so it makes sense that you would give them a place that they could put it on their own land rather than dumping it on somebody else’s land. But what’s really interesting is if you just look at the most basic measures of Environmental Quality, you know, how much junk there is in the air that you breathe? how clean is the water that you actually get to drink, those kinds of things. What economists have discovered is a distinct pattern that you see for just about every pollutant and that is as economies grow from a very, you know, low agrarian kind of level. The pollution levels start to go up but then they peak and they start to go down once countries get rich. Enough. How do they get rich like that? Well, they’re the market economies. And so the market economies get richer and richer, and then we can afford to clean things up, we demand to clean things up. We have the spare resources with which we can clean things up, right. And so we’ve got about the cleanest air in the world around here in this country. It’s far cleaner than it was a few decades ago when I was growing up. I remember before there were catalytic converters on a rock. I remember to think like that just feeling it in my lung.
Jason Hartman 13:28
Oh, yeah. Well, the leaf blowers don’t have catalytic converters, you know, when these these dumb little golf carts running around Billy’s and, you know, I mean, I’ve been to 81 countries and it’s just disgusting how they are, yeah, but in a sense, couldn’t want to argue that the US through its trade policy, which is we’re seeing that reverse now, through its trade policy has exported the pollution to China and created an externality, you know, as Kennedy said, we all breathe the same air, right? It’s I don’t know you know, I have we just moves in Beijing, you know,
Dr. Robert Whaples 14:02
there is, you know, a degree of validity to that argument. But of course, what also needs to be brought in is that sometimes people are willing to make trades like that with you. China receives money for the products that we buy from them raising their standards of living. And they have, I guess, collectively said that we’re okay getting dirtier air, at the same time that we’re getting richer. But even if they’re not collectively saying that even if it’s kind of forced on them from above, China is now at the level, basically, of a mid income country. The richer areas along the coast are now above the world average and moving up toward first world standards. And in fact, the environment and the environment in many Chinese cities is now getting cleaner, right? Eating intentional, get objective measures of this, right. There’s just the total amount of sit in the air and those kinds of things is going down. And so they’ve turned corner in an important way. Yeah,
Jason Hartman 15:02
yeah. Good point. Good point.
Dr. Robert Whaples 15:04
Okay. And I have been, I’ve been binge watching the lately, old Mission Impossible episodes.
Jason Hartman 15:10
I watched them. So you know,
Dr. Robert Whaples 15:12
they’re from the late 1960s and early 1970s. And you see a car driving off, and there’s all this stuff that comes out of the tailpipe. You see planes taking off, there’s all this junk coming out. It’s such a change in, you know, the 40 or 50 years since that happened. It’s just you can spot it with your eyes. My mom
Jason Hartman 15:29
used to tell me about how businessmen would go to work in the morning with a white shirt. Yeah. And at the end of the day, it would be great in many American cities, they had detachable collars back
Dr. Robert Whaples 15:41
in the old days, you know, that’s the part sticking out above your vest or whatever. And you just take the collar off and put a new one on through the day or something like that. So you could have a clean color. It’s just
Jason Hartman 15:53
Yeah, so the point being and you know, we agree on what capitalism is good for the environment, but the folks on the left Listening would argue that that’s because of government regulation. And I remember when I was in a group called leadership tomorrow in when I lived in Southern California, we spent an entire day at the aq MD, the Air Quality Management District in, I believe, Yorba Linda, California, or Diamond Bar. And I remember the person speaking to us, she proudly got up and said, she spoke to our group and said, you know, we don’t take any taxpayer money here. And they have these gorgeous offices with brand new, you know, beautiful furniture and I thought, wow, this place is pretty posh. And she’s probably said, we don’t take any taxpayer money. And I said, Well, where do you get your revenue? And she said, by assessing levying fines against companies that don’t comply with things like making it a longer walk, if you don’t have a fuel efficient car in the parking lot, you have to park further away if you don’t carpool if you don’t have a fuel efficient car, etc. So you know, they would find big companies, you know, thousands of dollars A day like exorbitant fines, of course that passes through to the conclusion
Dr. Robert Whaples 17:03
of finance attacks by another name.
Dr. Robert Whaples 17:09
And so the point is that there are sometimes we do need to get together and act collectively. Right. Okay. And so, yeah, I mean, government needs to be part of the solution, not part of the problem. What economists have generally found, though, is that government has had a track record, especially the federal government, when they put these regulations in place, they do so in a very inefficient way, they could have had other regulations, other rules that reduced the pollution, the same amount at a much, much lower cost, right, because they want to call the shots on everything, rather than just give you the incentive to reduce the things and you find out the cheapest way to do it. Right, like the walking from the parking lot example. And so, you know, I think that’s very important to realize that government is part of the solution, but maybe not a perfect part of the solution. If you Get the trend in many of the levels of pollutants in the United States before and after the federal government passed their clean air or clean whatever acts. The pollution levels were already coming down. And the trend didn’t really change too much when the federal government got into the game. Interesting.
Jason Hartman 18:17
Interesting. Yeah, yeah. Yeah, I can’t imagine government being inefficient. That’s just really, I’m joking. Of course, you know,
Dr. Robert Whaples 18:25
that the incentives just aren’t there. It’s not part of your bottom line. And you know, bureaucrats have a hard time I’ve talked with bureaucrats about issues like this, and then I can empathize with them. They just don’t have the same incentives. They have to please higher ups in different ways than people in business who please them by earning more profits and things like that. And so you can see why they often end up implementing rules that aren’t going to work that
Jason Hartman 18:51
well speaking of bureaucrats I just, you know, let’s wrap up with I want to ask you about one other chapter in the book, the uneven playing fields, Mark. gets an oligarchy? What about that? And where does the Catholic Church in the pope come in on that?
Dr. Robert Whaples 19:05
Yeah. And so that’s a interesting chapter in the book. That’s by Gabrielle Martinez, who’s done it Ave Maria college down in Florida. And so I would say of all the chapters in the book, it’s kind of the one that goes out of its way to take Pope Francis on his own terms, and not trying to be the outsider economist being critical and kind of showing him what we can teach him. And I think, a number of the other places in the book, the authors, including myself, in the introduction, point out that we have a lot of things that we can learn from what Pope Francis says. I think the most important one of them, in my opinion would be this. Fans of the free market. Many economists often take a completely materialistic view of things as though spiritual matters are of no concern whatsoever. And that especially comes through, when you kind of open up an economics textbook, and it just gives you a blunt assertion that we’re going to run with from now on. more is better. more is better. And Pope Francis says, You know what, I just don’t buy that. The fact more can be very bad for you, you know that you could eat too much food, you know, the right you could consume too much. He points out that so many of us have kind of traded God in from Amman. And we’re caught up as he says in this whirlwind of consumption. You know, we’ve got to have the latest thing and then this phone is two years old, you’re gonna turn it in or get rid of it and get even newer spiffier one, and we just like, turn our lives over to these things. The Lesser lights of the world drown out the eternal light. And that is such an important point that we people in prosperous societies are not using our economy to its greatest potential. We don’t have to be using the economy to just be getting more and more junk that we don’t really need. We could be using it for higher purposes. Yeah, well
Jason Hartman 21:09
that’s a great point and I’m glad that you you kind of closed on that note because what’s interesting about it is the way the consumer society was created in America you know, goes back to who the torches of freedom guy, what’s his name? I can’t think of it right now. That really created modern PR and advertising and Madison Avenue before Mad Men. Gotcha. His name is gonna come to me right after this interview, but you know, with one in smoke the cigarettes and you know, I’m talking about, I’m sure, before that Americans like other people around the world we’re not into they didn’t always have to have the newest better thing. The consumer society really you can see, like, right where it changed. It was, you know, it was within a decade it interests there was this shift this growth at all costs. That’s the way the economy is set up. You’ve just got to sell more widgets and more widgets, no matter how much of a steward of the environment you are. You’re not you need them. Yeah, you’re gonna create externalities. And what do we do about that? Is there even a solution?
Dr. Robert Whaples 22:13
If there is a solution? It’s not a top down solution. You know, it’s not like somebody would get elected office on a platform like admin be able to implement some policies. It’s from the subtle out, right? It’s a person at an individual level saying, I don’t need this extra stuff. I don’t need to work this extra time to get this extra thing. Or maybe if I am going to work more, I don’t need to take it and buy something to show up my neighbor or catch up with my neighbor. I could use it for more noble purposes. I could donate my excess funds to somebody who needs them far more than I do. I could just reorient my life so that I don’t need to use all the resources because I’m not in this giant rat race with other people. And so really, it’s it’s one that you Gotta Do you got together rather than you and Uncle Sam together, you know, huh,
Jason Hartman 23:05
by the way, the name I was looking for was Edward Bernays, who really invented modern public relations in 1929. And that’s when they look it up, folks, if you have not read about this or watched any of the documentary is about Edward Bernays and torches of freedom. It’s quite fascinating and so well, that there was this shift, you know, right at the Great Depression, when companies had to figure out how to get people to want stuff didn’t need. And boy, have we doubled down on that one more than
Dr. Robert Whaples 23:35
a lot of human creativity and intelligence that was harnessed for that project. And maybe could have been harnessed for that.
Jason Hartman 23:42
No question.
Dr. Robert Whaples 23:44
No question about that. No question about that. Well, hey, it was great talking with you about the book. I wish you a lot of success with it. give out your website and tell people you know where they can find you go to the independent Institute’s website, so it’s www dot independent. dot org and you will find this book there and all sorts of other wonderful things that the institute does.
Jason Hartman 24:05
Excellent stuff. Robert, thanks for joining us. It was my privilege to be on Thank you so much. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.