Category Archives: Free Markets

What The Torah & Talmud Teach About Moral Hazard (Bailouts)

Economy, Free Markets, Hebrew Testament, Judaism & Jews, Justice

In “Jews Against Judaism,” I highlighted The Jerusalem Institute for Market Studies’ efforts to educate about Judaism’s philosophical affinity with the free market.

Now JIMS, with which I am affiliated, has inaugurated the Center for the Study of Judaism and Economics.

Delivering the inaugural lecture was Nobel laureate economist Professor Robert (Yisrael) Aumann. Professor Aumann addressed the role ascribed to economic incentives in the Torah and Talmud—for example, “unfettered price competition” and the imprimatur to collect on loans.

Professor Aumann also talked about the many discussions of the moral hazard problem in the Torah and Talmud, and how moral hazard is currently at the heart of the faulty proposals currently being offered to solve the current financial crisis. The term moral hazard is used by economists to describe the fact that when an individual, a firm or an institution is “insured”, there is an incentive to act less carefully and take harmful risks.

This should not surprise anyone who appreciates the centrality of justice in the Jewish tradition. What are economic laws if not natural laws? And what is the natural law if not immutable and just? It follows from this that to adhere to the economic laws of nature is to be faithful to truth and justice.

“Justice, justice shall you pursue.” (Devarim 16:20)

What The Torah & Talmud Teach About Moral Hazard (Bailouts)

Free Markets, Hebrew Testament, Judaism & Jews, Justice

In “Jews Against Judaism,” I highlighted The Jerusalem Institute for Market Studies’ efforts to educate about Judaism’s philosophical affinity with the free market.

Now JIMS, with which I am affiliated, has inaugurated the Center for the Study of Judaism and Economics.

Delivering the inaugural lecture was Nobel laureate economist Professor Robert (Yisrael) Aumann. Professor Aumann addressed the role ascribed to economic incentives in the Torah and Talmud—for example, “unfettered price competition” and the imprimatur to collect on loans.

Professor Aumann also talked about the many discussions of the moral hazard problem in the Torah and Talmud, and how moral hazard is currently at the heart of the faulty proposals currently being offered to solve the current financial crisis. The term moral hazard is used by economists to describe the fact that when an individual, a firm or an institution is “insured”, there is an incentive to act less carefully and take harmful risks.

This should not surprise anyone who appreciates the centrality of justice in the Jewish tradition. What are economic laws if not natural laws? And what is the natural law if not immutable and just? It follows from this that to adhere to the economic laws of nature is to be faithful to truth and justice.

“Justice, justice shall you pursue.” (Devarim 16:20)

Misdirecting Production

Economy, Free Markets, Government, Political Economy

The planned $25 billion to a favored and failing industry, GM, will cause other, perhaps successful, companies to fail. It’s what Frédéric Bastiat referred to as “What Is Seen and What Is Not Seen“:

In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.
There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.
Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.


We are being sapped by bad economists and their political pimps.

Ludwig von Mises wrote this in Interventionism: An Economic Analysis:

“In the unhampered market, forces are at work which tend to put every means of production to the use in which it is most beneficial for the satisfaction of human wants. When the authority interferes with this process in order to bring about a different use of the productive factors it can only impair the supply, it cannot improve it.” (P. 17)

Jews Against Judaism

Capitalism, Democrats, Economy, Free Markets, Judaism & Jews

The excerpt is from “Jews Against Judaism,” which you can read on WND.com:

“Rep. Debbie Wasserman Schultz (D-Florida) has become a popular participant on cable TV shout-fests. The pretty blond puts her velvety voice and forceful personality to use in promoting Obama’s statist schemes. (“Obama, a leftist big-government progressive”, has, naturally, captured the media’s imagination more so than “McCain, a conservative big-government progressive.”) …

Wasserman Schultz’s Jewishness is central to her political pitch. (But her double-barreled, affectatious surname isn’t; so I’m dropping it.) Her congressional page states that she is “the first Jewish Congresswoman ever elected from Florida.” Another of Wasserman’s listed accomplishments is to have called on the president to declare a Jewish American Heritage Month. He, and the House, obliged her. Wasserman regularly touts Obama, former friend to race-baiters and Israel haters, as a solid ally of Israel. …

Jews, with the exception of Wasserman and her ilk, have always been among the most individualistic, original, and entrepreneurial members of American society. Think of Ayn Rand, Ludwig von Mises, Murray Rothbard, and Milton Friedman. Or, of Google co-founder Sergey Brin, the eponymous mastermind of Dell Inc., casino mogul Sheldon Adelson, and many more.

Unfortunately, fellow Jews like Wasserman have done more than their fair share to swell the counterproductive ranks of the State. The congresswoman fits the well-founded stereotype of the well-to-do, left-liberal Jew. …

An existential contradiction, really. Overwhelmingly self-reliant and self-made, Jews thrive in the free market—and in bygone, perilous times have survived by it. Nevertheless, they’ve consistently championed an elaborate, intrusive welfare state.

“American Jews are the most educated ethnic group in the United States,” write Corinne and Robert Sauer of the Jerusalem Institute for Market Studies. …

“Champaign Socialism” is how the Sauers characterize this penchant among American Jews—they tenaciously defy “any empirical regularity that links higher income levels with more conservative, or economically liberal (in the European sense), political positions.”

The complete column, “Jews Against Judaism,” now on WND.com.