Tag Archives: markets

The Myth of the Robber Barons with Burt Folsom

[HT Markets & Economy]


Problems with church planting: A saturated market

One of the saddest things to watch is when a business fails by refusing to recognize the reality of their market. What’s even sadder is when these businesses decide that the solution is not to invest in learning, but rather to spend more time and energy in establishing a plethora of new establishments in hopes that a few will find purchase and become productive. The problem with this approach, however, is that by ignoring market conditions, they are just as likely to accelerate their own demise as they are to facilitate growth.1

The market condition in which church businesses2 find themselves is not very good. In fact, according to the statistics which are coming out year after year, they are downright dismal. Baptisms are down, the membership is growing older, giving is down, and if something is not done soon, thousands of church businesses are faced with the real prospect of closing up shop. In fact, many already have.

So what do the Southern Baptists plan to do about this? Well the buzz in the past few years has been church planting. In fact, the North American Mission Board has recently announced it’s intention to direct the majority of it’s efforts towards planting new churches in North America, specifically in the north and Canada. I suppose the hope here is the akin to throwing a bunch of mud at a wall and hoping some of it sticks.

But what about the practical implications of encouraging and funding many new start-up businesses in an already saturated market?

In economics 101 we learn that every market contains a saturation limit. This fact is readily obvious here in the Bible-belt where a church can be found on almost every corner and mega-churches are a dime a dozen.

From a business analysis perspective it is hard to see how the approach of starting new businesses in a saturated market makes much sense at all, especially since donations are a finite resource. In my next post, I will address the market conditions in areas which do not have an abundance of buildings to service an underdeveloped market.

  1. For a good example of this market phenomenon, think about the recent mortgage crisis and how banks decided to employ a staggering amount of leverage to squeeze more profit out of a saturated financial market. Sure, the fact that the lending practices were flawed to the core didn’t help either, but that could have been easily corrected for if they had taken the time to grow slowly and deliberately. []
  2. If you wonder why I use this particular phrase, I invite you to visit my previous post in this series where I define terms such as “church”. []

The economics of non-profits

Non-profit entities depends on begging for money. And contrary to popular belief, the market for begging is finite. The market for begging depends primarily on two factors.

1. The supply of empathy we possess towards others
2. The supply of disposable income we have available to spend.

A popular belief is that Americans are not a giving people. On the contrary, the market for begging is generally over-saturated. There are simply too many non-profits begging people for money. A cursory glance around at the number and size of non-profits ought to be enough to dispel the twin myths that Americans are not a giving people and that non-profits are just that, not for profit.

The fact is that like any other business in America, non-profits are really out to make a profit. To grow. To become bigger and more prosperous. And that prosperity is, like all other businesses, measured in dollars. Unfortunately, however, unlike other businesses, most non-profits rarely produce a good or service that is a general benefit to society. A common mistake most people make is thinking that non-profits are not driven by money or as competitive as their for-profit counterparts.

The truth is, however, that they are even more competitive because their market of empathy and, in the current economic climate, the resources of those they prey beg from are very limited.

I believe the best thing for us as a society would be to stop pretending there is a division between for and not for profit institutions and simply incentivize what we wish to see more of (through tax breaks) but still tax everything all the same. At least then we would hopefully end up with fewer organizations begging for our money and, hopefully, fewer people drawing large salaries while still claiming to work at a not-for-profit institution.

As a footnote I want to add that I am not opposed to charity. As a follower of Christ I readily embrace charity. However I am a firm believer that charity is best done on an individual basis. Sure, individuals can pool their resources for greater impact, but this should rightly be called a corporation. And while I recognize that there are genuinely altruistic not-for-profit institutions, what I am writing against here are the organizations which, quite simply, not.

In the coming days I will be writing on one such abuse of the not-for-profit system in America, the church planting movement.


Another defense of capitalism

A friend of mine recently commented on Facebook:

Capitalism looks at developing countries in the same way that Britian looked at colonized countries. They were places to steal resources from. The bible tells us “not to show favoritism” and to consider the least as equal with the greatest. Here in America we waste so much we have to take other’s portion.

Since conservatives believe in not spending more than we have capital for, I wonder if they will submit that same ideology to natural resources? Only use what you can produce.

My reply:

Capitalism does not look anywhere and the reality is that while some companies have unfortunately decided to exploit the resources (which includes human capital) of other nations such a practice is not in accord with traditional capitalism because it is not sustainable in the long term.

Conversely, it is remarkable that if given the choice nations unilaterally turn to capitalism as the exclusive economic system for pulling themselves out of poverty. Take India, China, Russia, etc. as examples and contrast this with the corrupt practices found in many African nations where it is not capitalism that is at fault but the corrupt governments that do not allow free trade.

Further, conservatives who believe in spending more than we have capital for are, by definition not conservatives.

And finally, the whole concept of “use only what you can produce” is a red herring simply because in an economic system. Particularly a free-market economic system demand regulates and drives supply and supply is determined by degree of scarcity of resources. All that to say that the whole concept of “raping the environment” by taking more than we need is, by definition, false.

Simply put, supply and demand subjugates no one. Economic forces in a free-market capitalistic system harm no one.

Faulty businesses can and do harm people but markets and governments are responsible for keeping them in check. Likewise markets (consumers, aka us) and governments also play a big role in the whole free market system.

However, at the end of the day we are not dealing with a zero-sum game where if i make a dollar you loose a dollar. One of the beauties of a free market system is that everyone wins because everyone is getting something they desire.

Law of supply and demand does wonders. If the price of water/gas were to rise in proportion to the degree of scarcity that people claim then demand would necessarily be diminished in direct proportion to the corresponding rise in price.

To me:

I don’t think we are against PROPER use of resources, but in America, we want to drive gas guzzlers as long as we can pay for them, not understanding the excess consumption of gas bleeds the overall resource pool down for everyone. We want to water our lawns and wash our cars as long as we “pay the bill” not thinking that the water pool for our neighbors shrinks also. So we over consume and have to buy from the middle east. We almost run out of water here in the ATL, but we cry about our dirty cars and whine about our brown lawns.

It is a mindset that we our superior, and as long as we have the money, we make the rules. It is an anti-Christ mindset. We use more than we produce.

How can you square over cumsumption with a conservative philosphy?

My response:

As for the supposed anti-Christ mindset of “we have the money, we make the rules” I would like to point out that the Bible clearly states that A.) the borrower is a slave to the lender B.) economic systems that are based more on money simply changing hands (usury, interest, etc.) are heavily discouraged in Scripture C.) a hallmark of a free market system is the freedom of both parties such that neither party is forced to do business with the other.

As to your question of how I would square “over consumption” with my view on conservatism I would simply say that I do not believe there is such a thing as “over consumption” in the sense that we produce/consume too much in terms of raw economic output or input. Now individually you might be able to make that case in certain circumstances but I fear a big problem that comes into play when discussing an economic system is that too often people fall into the trap of defining the system (universal) by it’s individual parts/players (particulars).

For anyone who is wondering, I consider capitalism to be the best economic system we’ve come up with simply because it does the best job of accounting for human depravity and is the most fair when it comes to the unequal distribution of scare resources. In sum, it is built and based on freedom which is a principle that finds it’s root in God’s own character.