"Praying In Public" Discount & Why Price Discrimination Is Not Inherently Evil

In North Carolina, there was a diner that recently had a peculiar pricing practice: provide a 15 percent discount to those who prayed in their diner. The Freedom from Religion Foundation (FFRF), which is a non-profit organization promoting atheism and separation of church and state, put legal pressure on the diner, at which point the diner discontinued the pricing practice. Aside from grinding an anti-religious axe, why did the FFRF do what they did? They thought the practice of offering such a discount was discriminatory, and should thus be stopped. Is this sort of outrage against this specific example, as well as price discrimination in general, justifiable?

Before providing an answer, let's ask ourselves what price discrimination entails. Price discrimination is the practice of a producer selling the same product to different individuals at different prices not based on production costs, but willingness to pay. First-degree price discrimination is extremely rare because the probability of a business knowing the willingness to pay for every single customer is nigh impossible, not to mention that the vast majority of businesses do not have the monopolistic power required. Second-degree price discrimination is typically done with quantity discounts (e.g., bulk buyers pay less per unit). Third-degree price discrimination deals with a price variation based on location or some other customer segmentation. These degrees are not necessarily mutually exclusive from one another. That being said, let's get into some examples of price discrimination:

1. Flying on an airplane. Just because you fly from Chicago to New York doesn't mean you're going to pay the same price as everyone else. Someone in the business class pays more [due to inelastic demand] than someone in the coach class [who has a more elastic demand]. The reason for this is business travelers have a higher willingness to pay than pleasure travelers. Additionally, airlines will charge different amounts based on how far in advanced the flight is booked, day of the week and time of day of the booking of the flight, as well as other discounts and fees that come along with booking a flight.
2. Coupons. Coupons are an advertising gimmick to get customers to buy their good who otherwise would not. The differentiation is that the customer who is willing to collect coupons has a higher price sensitivity than the one who is not on the hunt for coupons. A similar argument can be made for those who decide to stand in long lines on Black Friday. 
3. Haggling. Negotiating for a price "on the spot" has been a common form of price discrimination practiced for centuries. Some countries still practice it quite frequently. In the United States, however, you only really come across it when negotiating the price for something like an automobile or a house. This type of negotiating is decidedly a form of price discrimination because the producer or broker is trying to assess your willingness to pay for a good.  
4. Financial aid for university. Every student is offered the same base price, but incentives in the form of financial aid are offered so the student can afford it (as a tangent, that's probably just the feeling one gets. Odds are that it actually fuels tuition inflation). This form of price discrimination is based on individuals from lower-leveled socio-economic status being able to afford a college education.
5. Student and senior discounts. You see these sort of discounts crop up when the operating costs for places like the movie theatre or museum are primarily fixed costs. The marginal cost of another attendee is next to nil, which is why using an incentive to bring in more attendees with lower willingness to pay, such as students or senior citizens, is such a good marketing tool.  
6. Bulk purchasing. You notice how when you buy more of a certain good in a larger quantity, you tend to get a better deal? That's the producer utilizing economies of scale. The reason why buying a large coffee at Starbucks is cheaper per unit than buying a smaller cup the output per unit decreases with increased scale. That is the joy of "three-for-two" offers and buying in bulk at Sam's Club or Costco. 

Although I could provide more examples, the point is that we do not live in a world of uniform pricing, nor is that optimal from the standpoint of maximizing revenues or consumer surplus. When people capriciously say that such price discrimination is unfair, like they do with price gouging (see my analysis here and why government setting prices in general makes for lousy economics and detrimental policy), these individuals tend to have good intentions while lacking the basest understating of the economic ramifications of their decision. 

So let's go back to the diner in North Carolina. There are certain individuals who are offended or feel coerced because not praying would mean having to pay an extra 15 percent in comparison to those who decided to pray. Let me point out a few things in response. Article 1, Section 10 of the Constitution guarantees that no one impairs the obligation of contracts. What is implicit is that you are not required to enter a contract unless you are a willing party. This is an important cornerstone of a lawful society based on respect for economic freedom, which not-so-incidentally means the protection of property rights, and by extension, letting businesses operate with whichever pricing mechanisms, provided that they do not violate the nonaggresion axiom.   

In a liberalized economy, an exchange takes place between a willing buyer and a willing seller. That is the beauty of a capitalist society. No one is legally obligated to sell a certain good or service at a given time. With the possible exception set by the Supreme Court's idiotic ruling on Obamacare, no one is obligated to buy a good or service. In a market economy, people voluntarily exchange goods because both seek a benefit in the transaction.

If you don't like the fact that Mary's Gourmet Diner in Winston-Salem gives a 15 percent discount for those who decided to pray during their time there, you have a few options. You could stop going to that restaurant. Winston-Salem alone has over 500 other restaurants to choose from. Finding a restaurant that has a different pricing system is not that difficult. The vast majority of industries in general are competitive marketplaces. Going to a competitor means that the other business loses out on revenue because of their poor business decision. If you like the restaurant, you could alternatively pretend to pray to get the discount or simply pay the extra amount because you like the food. It depends on your willingness to pay (and in this case, your willingness to pray). In the improbability that you don't have a lot of other restaurants in the area, you can either make the drive to a larger town or city, or you can simply eat at home. It's not as if restaurants are the only source of food, and it's not as if the producer has some obligation, legal or otherwise, to provide you a dining experience without such a discount. Economists call this phenomenon the substitution effect. Once again, it depends on your willingness to pay to go to a restaurant that has a public prayer discount. You are able to assess your willingness to pay, adjust your consumption patterns accordingly, and make voluntary economic transactions based on your consumer preferences.

This is the essence of economic liberty. Producers have the freedom to produce whichever good or service with whichever pricing mechanism they like. Consumers have the freedom to consumer whichever good or service that suits their fancy. We shouldn't implement arbitrary, deleterious rules simply because someone is offended. Pricing discrimination is fair and just. If an establishment providing a certain pricing mechanism really bothers you that much, it's really quite simple: use your economic freedom and go elsewhere.

Reflecting on Robin Williams' Suicide and Market-Based Solutions for Depression

The death of Robin Williams has taken many aback, myself included. For the past few days, I have asked myself how a man who brought laughter to millions could have committed suicide. The irony of a man who played humorous characters in such films as Mrs. Doubtfire, Birdcage, and Aladdin, not to mention the television program Mork and Mindy, and could not feel joy to his own life is saddening. If a man as hilarious as Robin Williams was unable to defeat his depression, what hope does that leave for those who are dealing with their own depression? What's even scarier is that Williams had been dealing with it throughout his entire life. His ability to overcome substance abuse, only to relapse once again, shows just how difficult it is to not have depression dominate one's life (And I'm sure dealing with the early stages of Parkinson's disease wasn't helping Williams, either). That's another thing with depression: even if it goes away or dissipates, it can always reemerge. Williams' untimely death has been a wake-up call in terms of the effects of depression (see infographic from Healthline here) and its prevalence.

The amount of Americans that are currently dealing with major depression is about 6.9 percent. The lifetime risk of depression is about 17 percent. Depression is the most common cause of suicides (alcoholism being the second most common cause of suicides), and suicide is one of the leading causes of death in this country. The prevalence of mood disorders is truly a public policy issue, and the fact that we treat it as a sign of mental weakness instead of it being the complex mental disorder that it is only creates stigma for those who legitimately need help. Depression affects people because it creates an obstacle in terms of being productive members of society and pursuing happiness.

The silver lining in this whole discussion is that the vast majority of suicides can be prevented, and that study after study shows that depression is treatable [as opposed to being curable] for a large majority of those with depression. From a public policy standpoint, how can we prevent suicides and decrease the rate of depression?

One of the challenges is that it is not easy to detect or diagnose, which is yet another reason I think rates of depression are actually underestimated. Unless someone explicitly tells you that they are depressed or they are clearly exhibiting symptoms, odds are that you are not going to know if a loved one is struggling with depression. That is why I have to wonder just how much the government could do to help. Does the government possess such omniscience that they can detect depression at the click of a button or with some gadget? I think not. If it's difficult enough for friends or family who are close to depressed individual to detect it, how do you expect a bureaucratic agency in DC to figure it out? Short of subsidizing treatments for depression or reforming the disaster known as Obamacare so that people have better access to mental health treatment options, there is not too much the government can do.

So much of being able to help those going through depression is being able to make sure people have support systems in their lives. Since we don't know what sort of internal battles people are having, it is all the more imperative to give people as much of a benefit of a doubt as humanly possible and show some empathy.

Yes, the depressed individual needs to choose to make steps towards treatment and work on cognitive-based therapy or other methods towards treatment. But the individual also needs friends, family, and community, i.e., a social network, to make sure one can get through the treatment process. It's about creating a network and environment that fosters strong emotional health and welfare. As Gandhi, another individual who suffered from depression, said, "Be the change you wish to see in the world." We need to start with being empathetic towards those who are in our lives and go from there. Creating a world in which we show kindness to others and help others with their struggles is a step in the right direction, particularly in terms of helping those with depression.

If you are someone or know someone struggling with depression or suicidal thoughts, don't wait. Make sure they get the help they need right away.

Social Security Disability Insurance Is The Social Security Program in Most Dire Need of Reform

The recently published Social Security Trustees Report isn't something that leaves much to be desired, at least in terms of good news. I have discussed Social Security on this blog enough times, whether it is about policy reform, its inefficiencies, or the fact that it is one of the major cost drivers in the federal budget. It should be no surprise that I am hardly a fan of Social Security, and would personally be happy if the United States government created a policy that gradually resulted in the privatization of retirement benefits. There is one aspect of the Social Security program that does not get enough attention but should: Social Security Disability Insurance (SSDI). This might be because the aforementioned Trustees Report projects that the SSDI Trust Fund will be depleted in 2016 (p. 3), which is only in two years! If something is not done within the next two years, those on SSDI will be facing a twenty percent reduction on their benefits, which is hardly flattering.

What is the SSDI? How much should we care about its fund exhaustion in two years? Is there anything that can be done to ameliorate this situation? The Congressional Budget Office (CBO) and its 2012 policy report on SSDI policy alternatives provides a good primer for the discussion. Essentially, the Disability Insurance (DI) program was established back in 1956 to provide cash benefits for non-elderly individuals who were able to work in the past, but are since unable to do so due to a disability. Current SSDI expenditures are about $143B per annum (Trustees Report, p. 32), which makes up about 16 percent of overall Social Security expenditures.

One of the major issues with SSDI is that the ratio of disabled-worker beneficiaries to insured workers [for disabilities], i.e., the prevalence rate, has increased substantially (Congressional Research Service, p. 1). This trend is fueled by many factors, including the increase of Baby Boomers in the labor market (CBO, p. 3), more female workers in the labor force (p. 4), more lax requirements under the 1980 Social Security Disability Amendments (ibid), an increased full retirement age (ibid), and the recession (p. 5). Since the SSDI is a fixed tax, and not based on the number of employees on SSDI, it creates a major disincentive for employers to accommodate workers who have reached enough of a rough patch where they need cash assistance. It's easier for the employer to get the employee on SSDI and hire someone else instead of retaining the employee, which is why the current program discourages work (Maestas et al., 2013; Autor and Duggan, 2010). Work is not as strenuous as it was when the SSDI was enacted in 1956. Many who are considered disabled can still participate in the labor force. The fact that SSDI cannot encourage employment and economic self-sufficiency is a damning statement of its efficacy. To quote the Cato Institute's analysis on SSDI, "SSDI is a classic example of a well-intentioned effort to provide modest support to truly needy people that has exploded into a massive entitlement that is driving up the federal deficit."

What is to be done about the current SSDI system? More from a pragmatic sense, i.e., the Overton Window, something tells me that Congress is not going to willingly eliminate the program. Even in a libertarian context, one could argue for a basic social safety net (the operative word being "basic"). It would certainly be an improvement of SSDI acting as a form of welfare. Assuming that we opt to create a basic safety net for those who become disabled, how can we reform the current system? Let's go through a list of policy reforms on the table:

1. Increase the SSDI tax. Although this might create some additional tax revenues (CBO p. 7), this alternative is as simplistic as it is naive. All this does is encourage the same disincentives while creating further disincentives that taxes typically do. Plus, let's remember that DI rolls are going to outpace population growth, which means further deficits. Further tax burden on a declining labor force participation rate is simply a bad idea.
2. Decrease benefits through changing the DI Benefit Formula. The government can adjust the primary insurance amount factors and the bend points (CBO, p. 12), which would decrease the outlays, thereby making the program more solvent. 
3. Require stricter eligibility requirements. As the CBO brought up (p. 4), there have been more lax requirements based on more subjective determinations. The other issue is that one could qualify for SSDI by combining non-severe disabilities to count as "one severe disability," whereas it was only possible prior to if there was a severe disability. There needs to be a more clear-cut set of rules [than what we have now] of what is defined as a severe disability. Based on the current finances, we cannot fund and try to save everybody, which is why if we are to create a basic social safety net, it needs to go to those who need it the most. In that vein, it would also be a good idea to require applicants to have more work experience (CBO, p. 14)
4. Create an "experience rated" tax system. Instead of making the government responsible for paying disability insurance, this policy would shift the burden more directly onto the employer. This is not a policy alternative that was recommended by the Right-leaning American Enterprise Institute. It is also joint policy alternative by the Left-leaning Center for American Progress (CAP) and the centrist Brookings Institution. I'm not all that enthused about mandating that employers pay a certain amount to disability insurance. However, I also have to realize that the government is doing that already with SSDI. At least this policy would keep the insurance in the private sector. Furthermore, since there would be vocational support and short-term wage replacement, this policy would actually encourage disabled workers to return to work, but it would also decelerate the growth of people receiving SSDI benefits. There would also be the advantage of incentivizing employers to interact with private disability insurers at the onset of the disability. 
5. Relegate fraud monitoring to the private sector. The Social Security Administration (SSA) is not the best at detecting SSDI fraud. If Dutch disability insurance reform has taught us anything, it's that employers and private insurance companies can monitor and detect fraud better than the federal government (Van Sonsbeek, 2011).
6. Demonstration programs. The folks over at the Brookings Institution came up with the idea of implementing various programs to reform SSDI. Much of it is surrounded the idea of targeting disabled employees at the onset, although the third demonstration program is essentially the joint program by Brookings and CAP mentioned in Point 4.
7. Modify the waiting period. The current waiting period before one receives SSDI benefits is five months. The CBO suggested two modifications: eliminating the waiting period and extending it to twelve months. I would be more prone to opt for a longer waiting period (CBO, p. 14). Not only does it deter individuals from gaming the system, but it also decrease the outlays by 7 percent in 2037 (p. 7).
8. Create a $1-for-$2 offset. The premise behind this offset is to ease the phase-out of the benefits. There ends up being a dollar reduction in benefits for each two dollars in earnings the beneficiary earns above the substantial gainful activity (SGA). Preliminary studies show the program to have improvements over the status quo (Wang, 2012; Benítez-Silva et al., 2010).
9. Create a generalized period offset. What this policy alternative would be a more intense version of the $1-for-$2 offset. The $1-for-$2 offset essentially acts as a de facto increased marginal tax rate on beneficiaries. This offset would theoretically solve the cash cliff issue. Due to time constraints on my end, I will simply post this Cato Institute analysis here.

Postscript: In order to mitigate the mess of SSDI, you need to address the incentive structure to make sure it encourages employment and its current finances, the latter of which means you need to decrease expenditures and enact more stringent requirements. Whichever combination of policies that can pull that off would certainly be an improvement over the status quo.

Tipping at Restaurants Does Not Make Economic Sense, But Should We Ban It?

In many restaurants in America, one is served their food by a waiter or waitress. After the meal, one is expected to pay a certain amount of money for a service charge, which is known as a tip or gratuity.  The premise of this social custom is to compensate service workers (and in this case, waiters and waitresses) since they are paid $2.13 per hour and have to rely on good tips to help make ends meet. Gratuity is meant to be an act of altruism. However, I have to say that I am annoyed by this non-optional social convention, especially after listening to this Freakonomics podcast and reading up on tipping research.

What's the issue with tipping? For starters, it's a practice that parades itself as the façade of being an option, but unless you don't care at all what other people think, it's a de facto quid pro quo arrangement. Although some people tip because they get a kick out of it (Lynn and Wang, 2013), most people do so not because of altruism or compassion, but because of social pressure, guilt, and embarrassment (Azar, 2008), which creates a negative externality. Although there is an incentive to free ride and pay next to nothing on the tip (Margialoth, p. 122) when you're not going to return to the restaurant (not to mention that you're not legally obligated to pay the tip), it would explain why many people still tip. We don't want to come off as stingy or frugal, and gratuity somehow seemingly abates that. Plus, there is the idea in longer-term game theory (i.e., people expect better service next time they return), it can provide an incentive for the server to do a better job next time. Additionally, servers do not have a consistent wage, but they can better evade taxes (Estreicher and Nash, 2004). There is also the matter that the practice has a racial component. Some empirical evidence shows that African-Americans are perceived to tip less, which means poorer quality service (Nash and Pugh, 2012). This ends up creating a racial disparity in restaurant service.

People can do their job just fine without tips. There is little evidence that the tipping system is particularly effective. Providing very good service only gives about a two percent bump in one's tips (Lynn, 2003), which just tells me that tipping is not performance-based, but typically based on the size of the check (Margialoth, p. 125). This means that tipping does not save on service-monitoring costs, and instead creates market inefficiencies (ibid., p. 126) because it "exerts indirect upward pressure on spending by the median earner....which results in overconsumption, less leisure time, and overall decreases in welfare (ibid., p. 127)." This would also mean that a transaction with unfair values took place, which is unfair to the customer.

On a personal level, I think that we should get rid of tipping. This makes me ask the question of how to address the issue. For the most part, this is not an issue created by the government. Granted, the government sets the minimum wage for servers at $2.13, which indirectly perpetuates the practice, as does the fact that employers also benefits from the current tipping system by paying less taxes (Margialoth, p. 133). However, this is primarily a market failure. Without the government changing the minimum wage of the server, the only other alternatives for businesses to implement are service-inclusive pricing or a service charge. Each business practice comes with its advantages and disadvantages. I think service-inclusive pricing is most fair because it includes all labor costs in the pricing, but customers could complain because of perceived, albeit inaccurate, unfair pricing. Why they would complain if the net amount spent is comparable is beyond me, but maybe the irrationality is that it's more disconcerting for a customer to see it as a service fee or to see food prices to increase than to remove the current system. Ultimately, we have the freedom to practice whichever forms of altruism the way we want. Imposing minimum wage laws or irrational social norms is not the way to go. Putting an end to tipping in our personal lives will force restaurants to switch over to service-inclusive pricing, which will improve the restaurant industry in the long-run.

Lowering or Eliminating the Corporate Tax Would Stop American Corporations From Relocating

Walgreens, the Fortune 500 Company drug retailing chain, was looking to relocate its corporate headquarters using a tax inversion. Demonized by Obama as an "unpatriotic tax loophole," Walgreens was looking to relocate to Switzerland, a country known for being a tax haven, while maintaining its material operations in the current county, so that it could reduce its corporate tax burden. Earlier this week, however, Walgreens caved into the political pressure exerted by Democratic lawmakers and activists to keep its corporate headquarters located in Illinois. Is Walgreens, or any other company looking to relocate its corporate headquarters, an exploitative, greedy entity that only cares about the bottom line or was Walgreens right in moving its corporate headquarters because the idea of having to pay such a corporate tax rate is that ridiculous?

Before getting into the economic effects of corporate taxes, let's briefly define the corporate tax. Although corporate tax law varies enough from country to country, in as brief terms as possible, the corporate tax is a tax on the income or capital of legal entities, most notably legally-defined corporations. Who pays the corporate tax? I can get snide and say that for proponents of Big Government, corporations are only people when you want to tax them into oblivion. Aside from that, I guess not. But in all sincerity, one can only levy a tax against a corporation. People ultimately pay taxes. Is it done by passing the costs on to the consumer? How about in the form of lower wages? Perhaps it's done through lower stock dividends. The answer will vary by industry, but looking at studies on the issue will show that someone ends up paying for the tax. There are some who think that the burden goes to the worker in the form of lower wages (Carroll, 2009; Randolph, 2006), although the Congressional Research Service [CRS] finds that the owners of capital take the burden (CRS, 2014a, p. 16). Economist Steve Horwitz is spot-on of the deleterious effects of the corporate tax, regardless of incidence: "If corporations respond to tax hikes by reducing compensation or firing workers, the impact of the tax hike hits the employees. If they raise prices, the impact falls on the consumers who buy the product. And if they take a reduction in profits, the falling stock value lowers the value of various investment funds on which millions of Americans depend for retirement and other income." Considering that one of the main functions of a tax is to discincentivize behavior (the other being to collect revenue), this makes economic sense.

I'm not against the corporate tax simply because it's a tax. Granted, I believe that the private sector can and should do just about everything that a government can theoretically do because the private sector tends to allocate resources more efficiently, thereby generating better results. However, being a consequentialist libertarian, I realize that there are some basic services that the government has to perform, which would explain why I believe in smaller and less intrusive government than no government involved. In order to perform these rendered services, the government needs a revenue base. I would rather have that revenue base be as minimalist, indirect, and efficient as possible. The corporate tax cannot be considered efficient or helpful. The Organization for Economic Cooperation and Development (OECD), which is not a free-market organization by any means, recognizes that corporate taxes are the most harmful when it comes to economic growth (OECD, 2008, p. 2). The corporate tax reduces productivity of labor, disincentivizes investment (Chen and Mintz, 2011), creates a huge marginal excess tax burden (Conover, 2010), and acts as an additional tax on already-taxed income, thereby creating a double taxation effect. 

When I look at the corporate tax for America, it gives me a particular gag reflex. Compared to OECD countries, we have the highest statutory corporate tax rate, not to mention one of the highest effective corporate tax rates in the entire world. Look at the revenue as a share of the GDP, and it can hardly be considered an efficient form of taxation.

What can the American government do about its relatively high effective corporate tax rate? Although I found this Congressional Budget Office report outlining some policy alternatives, I'll go through three policy alternatives that I found more palatable: lower the tax rate, create a territorial tax system, and eliminate the corporate tax. 

The first policy alternative would be for the federal government to lower the marginal corporate tax rate. If the corporate tax rate is high compared to the rest of the developed world, it gives the United States a distinct disadvantage in terms of attracting investment. The Leibniz Information Centre for Economics calculated "tax attractiveness," and found that the United States is on the bottom of the list in terms of overall government treatment of business income. Having to pay one of the highest effective corporate tax rates is not exactly an economic turn-on. Conversely, Canada, Estonia, and Ireland have reduced their corporate tax rates and it has done wonders. Economic advisers for the Obama Administration published a report on corporate tax reform back in 2010 stating that lowering the corporate tax would "encourage saving and new investment (p. 69)." Lowering the corporate tax translates into an increase in foreign direct investment (Wijeweera et al., 2007). Increasing the corporate tax rate doesn't do the trick because as former Obama economic adviser Christina Romer discovered, a corporate tax increase of 1 percent of the GDP leads to a three percent decrease in output (Romer, 2010). Interestingly enough, a decreased tax rate would increase revenue due to the effects of the Laffer Curve (also see Schuyler, 2013; Brill and Hassett, 2007).

The second policy alternative would be to create a territorial tax system. The difference between a global system and a territorial one is that in the latter, the government only collects only on income generated within the borders. The International Monetary Fund, as well as the people over at the Left-Leaning Center on Budget and Policy Priorities, calculate that a territorial tax system would actually create more incentives to invest overseas. Those over at the Right-leaning Heritage Foundation estimate that a territorial tax system would actually create more domestic jobs and increase wages. From the looks of it, a territorial tax system would be preferable to a global system. 

However, let me propose a simpler solution: eliminate the corporate tax (Viard and Toder, 2014; Fehr et al., 2013). It's one of the few things economists across the board can agree on. There are even those on the Left who think that eliminating the corporate tax is a swell idea (also see here and here). The Congressional Research Service found (CRS, 2014b, p. 8) that the only tax rate that really could really stop inversions is 0 percent, which partially makes me wonder about elimination versus reduction of the tax rate. We can eliminate the corporate tax and substitute it with more efficient taxes. Regardless of which reforms we opt for, let's find a better way to produce government revenue while we protect shareholders, workers, and consumers from economic stupidity like the corporate tax.

1-3-2015 Addendum: If you need more reasons to dislike the corporate tax, the Wall Street Journal recently put out an article with ten reasons.

4-30-2017 Addendum: Last month, the Congressional Budget Office (CBO) released a paper on corporate tax rates in developed countries. The CBO found that the U.S. has the highest statutory rate, the third highest average corporate rate, and the fourth highest effective corporate tax rate. 

5-16-2021 Addendum: I came across a research paper from the National Bureau of Economic Research (Baker et al., 2020). It found that only 31 percent of the tax incidence falls on the shareholders. The remaining 69 percent is paid by the consumers through higher prices (31 percent) and by the workers via lower wages (38 percent).

Don't Cry for Argentina and Its Latest Default

I find myself in a sardonic enough of a mood to wonder if defaulting has become an Argentinian pastime. About a week ago, Argentina de facto defaulted on its bonds for the second time in thirteen years per a New York court ruling. If you need a good primer on Argentina's history on defaulting and how we arrived at this situation, the Washington Post has a good analysis on it. There are some speculations as to the effect this default will have both on the defaulting country and the global market. Default is typically rough on a country because it becomes nigh impossible to borrow money from other countries to help the defaulting country rebuild its economy. This is the eighth time in Argentinian history that it has defaulted, so maybe the eighth time is the charm. So who do we blame for Argentina's default?

Maybe Argentina was receiving bad advice from its lawyer. Maybe this is a sign we need to adjudicate sovereign-debt disputes in international courts because Argentina was not given enough leeway with being able to restructure its debt (although, in all fairness, the court ruling is too narrow to have broader implications). I'm actually going to put the vast majority of the blame on Argentina. While I was in graduate school, I wrote a policy paper for one of my classes outlining the fiscal irresponsibility and poor macroeconomic decisions that led to the 2001 default. It doesn't help that Argentina's economy is not in the greatest of shape (although it could be doing much, much worse), nor that its freedom of press has been in decline. And let's not forget its deteriorating economic freedom (see here and here). This is not a case of a victimized nation-state that has been bullied or coerced. It is about Argentina needing to make payments that it promised to make. Some kvetch how it's unfair to make Argentina payments on "vulture funds," but you know what is truly unfair? Reneging on debt payments you promised to pay. Refusing to keep to your word is something that should put any sensible creditor at ease.

Whether it's dealing with student loans, mortgages or sovereign debt payments, we should hold contracted parties accountable for their financial irresponsibility. That is why the court-induced default was a victory for the rule of law. Argentina chose to borrow money under New York jurisdiction, waived sovereign immunity, and agreed to no collective action clauses (Collective action clauses are more common in such debt restructuring now than it was when Argentina first took out the loans, which is another reason why this court ruling isn't going to have broader implications). Argentina lost fair and square because it preferred to borrow money at a lower interest rates and for a longer period of time than to borrow elsewhere. Either pay what you owe, which seems to be in Argentina's power, or default. Argentina has weathered worse economic conditions before, it hasn't had the same potential for the contagion effect that the last default had, and I think they will be able to make it through this default. There's no reason to cry for Argentina, so why waste your tears?

Tisha B'Av: Redemption Through Consoling Others

As we approach the most somber day of the year on the Jewish calendar, Tisha B'Av, I tend to get more contemplative. Tisha B'Av is a commemoration that is more difficult for a modern-day, non-Orthodox Jew such as myself, but I can still find reasons to observe Tisha B'Av. I don't mourn for the loss of a building because at the very least, if a building or a sacrificial system were that essential to Judaism or its spiritual core, Judaism would have ceased to exist for about two millennia. I mourn for the spiritual downfall that resulted in the Jewish people losing their spiritual center. I still mourn because the very baseless hatred (שנאת חנם) that destroyed the Second Temple and brought about the exile of the Jewish people still exists. Sure, we have more feelings of unification and ahavat Yisrael, such as when Hamas decides to attack Israel. However, if precedent is any indicator, we'll eventually go back to the internal quarreling and backbiting that is regrettably so common amongst Jews who disagree with one another, which is so regrettable since we are already such a small people and can hardly afford divisiveness.

When we interact with others, it's all too easy to forget that on the other end of that interaction is another live, sentient human being. Ego and the self can get in the way, which has the potential to distort the purpose in our interpersonal interactions. The reason that such שנאת חנם exists in the first place is that because people have a propensity to forget what it means to treat people with basic respect. 

How we go about treating people is all the more pronounced during Tisha B'Av. Tisha B'Av is a time to mourn and grieve. Similar to the Exodus that we are supposed to relive during Passover, we are asked to relive the emotional tumult that the Jews experienced when they lost the Second Temple, or even when a subset of Jews was exiled from a given country. We are to recreate the sense of loss through memory. We realize that there is a time to feel suffering. Do we want fellow human beings, or even G-d, hating on us when we're down? Absolutely not! When we're down on our luck is when we need to be most consoled. 

As Dr. Erica Brown points out in her well-written book In the Narrow Places: Daily Inspiration for the Three Weeks, there is one time in the year in the prayer book that we explicitly ask G-d to console us: Tisha B'Av. The additional supplication inserted in which we ask G-d to console us [specifically to rebuild Jerusalem] is נחם ("Console [us]"). While it's true that the Jewish people have restored Jerusalem back to Jewish sovereignty, there is still the need to relive what so many of our ancestors lived. Why? Because it helps us put ourselves in their shoes. It helps us understand the pain they felt, even though we never directly experienced it. It is a lesson in developing sympathy for others and the losses they feel. We should decidedly take the experience felt in נחם and apply it to our daily lives. How so?

We need consoling when things are not going well. We ask G-d to console us in our hour of need. If we ask this of G-d, we should also ask this of other human beings because we are created in G-d's Image. Suffering and struggle are part of the human experience. We all come across it a various moments in our lives. And when we do come across it, we hope that we can feel a sense of consolation. It helps to be able to reach out to others, verbalize our troubles, and have other people find ways to surmount the tough times. Even if they cannot do anything to change the circumstances, at least consoling you will help you weather it. As Dr. Brown brings up in her book (p. 75), "It is always more of a consolation if people understand our pain and reach out to us before we have to articulate our distress. We feel more loved when others can anticipate our feelings rather than when we have to spell them out. It makes us feel like we are the objects of their genuine concern. They have been thinking of us before we even told them of our distress."

In a more abstract sense, how does this work? The Sages had an answer to this: "Who is wise? He who foresees the consequences of his actions" (Tamid 32a). When we know someone is not doing well, we put ourselves in that person's shoes. The quintessential example of this in Jewish practice is when someone is sitting shiva. When attending a house of mourning, you should have the foresight, not to mention the social tact, to realize that there are certain things you do not say to someone in the grieving process. There are also proper ways to go about helping a person in their time of mourning.

It doesn't even have to be a time of mourning in which someone is in trouble. Take Abraham as an example. When the three men came to his tent, Abraham did not even need to ask what they needed (Genesis 18). Abraham had the foresight to realize that they were wandering in the desert, and that they would be hungry and thirsty. Without hesitation or question, Abraham immediately provided for all of their amenities because he had this foresight. 

We can act with this sort of alacrity in our own lives. If someone lost their job, חס ושלום, you would let them vent, emotionally support them through their period of unemployment, and help that individual find a job. If they broke their leg or fell ill, חס ושלום, you would visit them on a bikkur cholim visit and do whatever you could to help ensure a speedy recovery. There are many opportunities that we can help other people, Jewish or not, to ease their pain and suffering, and in certain cases, even eliminate it. While consolation is hardly the only way in which we can connect to others, it is certainly a way that we can perform mitzvahs, help the world be a better place than it was before, and inculcate the appreciation of essential humanity of those who are around us. Only by reversing the שנאת חנם that destroyed of the Second Temple can we hope to bring about the Messianic Era.