Category Archives: Economics

Pondering Wealth

Don Boudreaux ponders the wealth of the richest American, and what would happen if we took it all and gave it to other people.

And this fact does mean, therefore, that taking money from Gates and giving it to other Americans will – if these Americans spend all or most of this transfer on consumption goods – reduce the productivity of the economy.  It will diminish the economy’s capacity to produce material goods and services over time.  Over time, it will make all of us less able to consume.

Read all of it.  And if you have time, read more posts at Cafe Hayek.


If only there were some example of this not working in recent history…

Alas, President Obama, like most of his supporters, believe history started in 2008.  So he’s proposed making it easier for people who can’t afford mortgages to get them.

If only we knew what might happen.


When someone else says it perfectly…

Warren Meyer at Coyote Blog explains why the minimum wage is a disaster.  An excerpt:

The minimum wage raises the first rung on the ladder of success higher than Bobby can possibly reach. This is not an accident. Early proponents of the minimum wage in the early 20th century supported it precisely because it protected white workers from competition from blacks attempting to enter the work force. The minimum wage began as, and still is, a tool of oppression,preventing young men like Bobby from gaining access to good employment.

Today, the unemployment among black teens has risen to nearly 40%. This is because the government has been working for years to help older white workers with political clout keep men like Bobby out of the workforce, and the minimum wage is their most powerful tool for doing so.

Understand now why unions are so often for the minimum wage?  It creates another barrier to entry to protect their jobs.


Minimum Wage History

All the talk about the new Lincoln movie has rekindled some interest in history.  For example, few know (or care) that Lincoln’s goal after emancipation of the slaves (which was in and of itself a last resort) was to deport them to Africa, as he was a white supremacist.

Anyway, there’s some interesting racially charged history when it comes to the minimum wage, as well.  See back in the day, some folks in Congress actually did understand the economic ramifications of minimum prices.  Don Boudreaux at Cafe Hayek has more.

 


Explosion of inequality? Depends on how you look at it.

Fantastic new study from the AEI looks at consumption.. you know, the stuff we buy and use every day, and finds things haven’t changed much in the last 20 years, and in fact, we’re all richer.

First, instead of looking at income inequality, Hassett and Mathur look at consumption inequality, which represents a broader look at the economic resources a person can summon. Looking just at income ignores how individuals are generally able to smooth consumption by borrowing in the low-income years — such as during retirement or when they are just entering the workforce — and saving in the high-income years. Studies of income alone often exclude things like Social Security, Medicare, and food stamps.

Additionally, tax return data of the sort Piketty and Saez discuss can be influenced by changes in tax rates, giving a highly distorted picture of income inequality. For example, the personal tax rate reductions of the 1980s and the early 2000s caused businesses to shift income out of the corporate form and into the personal tax, thus raising reported incomes at the top.

So what does the consumption data tell us?

In 1984, households in the top income quintile, or top 20%, accounted for 37% of total consumption spending. Households in the bottom quintile accounted for only 10 percent of total spending. So the ratio of top-to-bottom consumption was approximately 3.8.

By 2010, that ratio had increased to just 4.4. This hardly represents an explosion in inequality. As measured by this ratio, consumption inequality has increased marginally over time, averaging 4.21 between 1984 and 1990, 4.29 between 1991 and 2000, and 4.46 between 2000 and 2010.

The graphs and charts tell quite a story, but not the narrative politicians want you to hear (click to enlarge):

I often mention seeing folks paying for food with “Independence” cards at the local grocery store while talking on an iPhone.  Those people are far richer than the poor of 20+ years ago.  Maybe we need to look at why they are richer now, instead of using force to take my stuff.

 


The end of nation states?

Seth Godin notes what the future holds in the information age.

The nations that will prosper in the future are the ones that adopt Classical Liberalism (Libertarian) philosophy first.


Light Rail vs Reality

17 mile trip in 78 minutes.  Cost to rider $5.  Cost to taxpayers $22.


Create Value

From Adam Gurri, via Cafe Hayek.

The point is, our goal should never be to “create jobs”. Our goal should be to enable people to contribute something valued by other people. The value is the point, not the work. If someone finds a way to provide value to hundreds of millions of people and it requires no more effort from them than batting their eyelashes, that would be a win.

It is all about value.  Value is why raising the minimum wage does harm, not good, and why we need to put less power in the hands of the likes of SEIU, not more.

 


Think of all the jobs you could save

Don Boudreaux at Cafe Hayek writes a letter to an idiot in Congress.

Fred Barnes reports in the Weekly Standard that you refuse to use computerized checkout lanes at supermarkets (“Boneheaded Economics,” Oct. 24).  As you – who are described on your website as “progressive” – explain, “I refuse to do that.  I know that’s a job or two or three that’s gone.”

Overlooking the fact that you overlook the lower prices on groceries made possible by this labor-saving technology, I’ve some questions for you:

Do you also avoid using computerized (“automatic”) elevators, riding only in those few that still use manual elevator operators?

Do you steer clear of newer automobiles equipped with technologies that enable them to go for 100,000 miles before needing a tune-up?  I’m sure I can find for you, say, a 1972 Chevy Vega that will oblige you to employ countless mechanics.

Do you shun tubeless steel-belted radial tires on your car – you know, the kind that go flat far less often than do old-fashioned tires?  No telling how many tire-repairing jobs have been destroyed by modern technology-infused tires.

Do you and your family refuse flu shots in order to increase your chances of requiring the services of nurses and M.D.s – and, if the economy gets lucky and you and yours get seriously ill, also of hospital orderlies and administrators?  Someone as aware as you are of the full ramifications of your consumption choices surely takes account of the ill effects that flu shots have on the jobs of health-care providers.

You must, indeed, be distressed as you observe the appalling amount of labor-saving technologies in use throughout our economy.  It is, alas, a disturbing trend that has been around for quite some time – since, really, the invention of the spear which destroyed the jobs of some hunters.

Ms. Lee is easy pickins… she’s a moron.


Don Boudreaux on Inequality

Specifically, Muscle Inequality.

Really, though, how seriously do I want this outcome?  I could build more muscle if I spent not six hours weekly at the gym but, rather, six hours daily.  But I choose not to do so.  Spending more time at the gym means spending less time working (that is, earning income), less time with family and friends, and less time doing other things that I judge to be worthwhile.  The fact that I’d be more buff if being more buff were costless is irrelevant.  It’s not costless; therefore, the size of my muscles is largely the result of the way I choose to make trade-offs.

So I resist the temptation to envy men with bigger muscles (men whose muscles, do note, were not built with fiber taken from my muscles).  And if muscle redistribution by government were possible, I’d oppose it.  Not only would the result be less muscle bulk to ‘redistribute’ (Would you pump weights for hours each day knowing that a large chunk of what you build will be stripped away and given to someone else?) but, more importantly, I’m not entitled to the confiscated fruits of other people’s efforts.

You should read everything he writes.


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