We are getting a strong dose of socialism along with the expected results: depressed, stagnant economic activity. In addition we are getting increased government spending, borrowing, and printing of money, which is the usual socialist fix to economic stagnation, which as usual, only make the problem worse.
We have riots and wars throughout the Middle East, all of which we should have kept our nose out of, except the Iranian pro-democratic riots, which were the only ones the our government did not support.
I usually feel better when I listen to Atlas Shruggs (Pam Geller) or Sarah Palin, so here is Atlas talking about Sarah:
http://www.youtube.com/watch?v=0ycPSsERhbo&feature=related
and on Ann Coulter
http://www.youtube.com/watch?v=Xz8VbtHJp3M&feature=related
Atlas gets quite serious discussing radical Islam:
http://www.youtube.com/watch?v=XkiqzpXKNVQ
lastly, Atlas on Obamacare, Tea Parties, Climate Justice...
http://www.youtube.com/watch?v=jEmlye62sfw&NR=1
Fabulous News: The movie Atlas Shrugged comes out in a few weeks.
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Friday, April 1, 2011
Monday, July 19, 2010
Economics of Unemployment Benefits
It is a truism of economics that unemployment is caused by wages being too high. How can that be? Simple: government intervention. Unemployment benefits are only one form of government intervention that prop up wages. Government hiring for work projects is another. We are doing both of these now. Most attempts at regulation in that area distort the market for labor. Labor laws that make it difficult and costly to dismiss workers once hired is a disincentive for business to hire. Uneven labor laws often give business only the option to cave in to union demands or go out of business -- negotiating at the point of a gun as they say. These laws are enacted to support union workers but actually hurt them and other workers. Due to higher labor costs, the level of production is decreased. Therefore, not only are fewer union workers hired, but nonunion hiring is diminished due to lower overall production.
Adjustments of price is the mechanism that allows markets to clear. In order for markets for labor or anything to clear, prices must adjust downward until a buyer comes forward. Labor prices, i. e. wages, are notoriously sticky downward. This is because of reasons outlined above and because of similar government intervention policies.
These are simple and basic economics principles. Even socialist economist, for the most part, agree. The difference is that champions of the free market want market principles to prevail so that we can have sustainable economic functioning and growth. Socialists want to intervene to 'correct' the market. They also favor certain groups to enhance their political power so they can implement more intervention policies. The progressive believes that policies of more and more government intervention will lead to continuing improvement in people's lives. The actual outcome of their policies is increasingly depressed levels of employment and production. Progressives' only remedy is to increase government intervention. This has always led to still worsening conditions. There seems to be no limit to their interventionist economic ideas. They have all proved to be destructive. Ultimately complete or nearly complete loss of liberty can be the only outcome. We have Cuba and North Korea as leading examples.
Unemployment benefits lasting over two years are currently a major impediment to lower wages. (This is obvious, but to state the obvious, many will not want employment if they are paid benefits, which in addition to the value they put on their free time, exceed the amount being offered. Therefore, employers have to offer more to purchase labor.) Employment benefits should be limited and the amounts paid should gradually diminish. Now is the time for choosing freedom and prosperity, not slavery and impoverishment.
Adjustments of price is the mechanism that allows markets to clear. In order for markets for labor or anything to clear, prices must adjust downward until a buyer comes forward. Labor prices, i. e. wages, are notoriously sticky downward. This is because of reasons outlined above and because of similar government intervention policies.
These are simple and basic economics principles. Even socialist economist, for the most part, agree. The difference is that champions of the free market want market principles to prevail so that we can have sustainable economic functioning and growth. Socialists want to intervene to 'correct' the market. They also favor certain groups to enhance their political power so they can implement more intervention policies. The progressive believes that policies of more and more government intervention will lead to continuing improvement in people's lives. The actual outcome of their policies is increasingly depressed levels of employment and production. Progressives' only remedy is to increase government intervention. This has always led to still worsening conditions. There seems to be no limit to their interventionist economic ideas. They have all proved to be destructive. Ultimately complete or nearly complete loss of liberty can be the only outcome. We have Cuba and North Korea as leading examples.
Unemployment benefits lasting over two years are currently a major impediment to lower wages. (This is obvious, but to state the obvious, many will not want employment if they are paid benefits, which in addition to the value they put on their free time, exceed the amount being offered. Therefore, employers have to offer more to purchase labor.) Employment benefits should be limited and the amounts paid should gradually diminish. Now is the time for choosing freedom and prosperity, not slavery and impoverishment.
Thursday, August 6, 2009
CNN Money Poll Re: Cash for Clunkers
I tried to respond to CNN Money's question about Cash for Clunkers. I do not seem to be smart enough to understand how to log into Facebook, which they requitre. So I will post my comment here:
As far as stimulus, this is an example of the broken window fallacy (See “Economics in One Lesson” http://jim.com/econ/chap02p1.html). Essentially, you do not cause net economic gain by destroying property in the hope of stimulating the industry that replaces it. That is because the resources expended would have been used elsewhere anyway. I suppose that if you have a favored industry (e.g. government owned or political supporters), such a policy could stimulate it at the expense of other industries and the economy as a whole. Taken to the extreme, all of the destruction of war can be seen as economic “stimulus” according to the Clunker theory.
The argument that holds water, a little, is that cash for clunkers helps reduce dependence on foreign oil sources by increasing the fleet turn over rate toward newer, higher mileage vehicles. (That is assuming that the owners of the newer cars won’t just drive more – as I would.)
As far as stimulus, this is an example of the broken window fallacy (See “Economics in One Lesson” http://jim.com/econ/chap02p1.html). Essentially, you do not cause net economic gain by destroying property in the hope of stimulating the industry that replaces it. That is because the resources expended would have been used elsewhere anyway. I suppose that if you have a favored industry (e.g. government owned or political supporters), such a policy could stimulate it at the expense of other industries and the economy as a whole. Taken to the extreme, all of the destruction of war can be seen as economic “stimulus” according to the Clunker theory.
The argument that holds water, a little, is that cash for clunkers helps reduce dependence on foreign oil sources by increasing the fleet turn over rate toward newer, higher mileage vehicles. (That is assuming that the owners of the newer cars won’t just drive more – as I would.)
Thursday, July 23, 2009
Supernormal Profits
In a lecture, one of my economics professors said that there are only two ways to make more that a "normal" profit over any length of time. Either 1) by providing something no one else can, by possession of a secret formula, for example; or 2) by providing something no one else is allowed to, by possession of a government patent, for example.
No entrepreneur wants to just make a "normal" profit. He or she goes into business to make a killing. Innovation and hard work is the starting point but once you start succeeding, the competition will start to imitate your plan. They might have better financing or more energy. This is where the government connection makes sense. The more power government has, the more it can help. Government can limit entry into your industry, allow you to (or prevent you from) buying up the competition, tax away foreign competitors, mandate the use of your product, there is a never-ending list of possibilities.
Favors, perks, and pay-offs to government officials often helps to smooth the way to higher profits. This is called "corruption." It is usually frowned upon. (For instance, George W. Bush is often accused of giving companies lucrative contracts for government work in Iraq, in return for some pay-off. If his administration did give out contracts without competitive bidding, it may have been because Halaburton was the only company that wanted the job.) Unquestionably, corruption leads to economic inefficiencies. IT HAS NOTHING TO DO WITH WHAT I WOULD CALL FREE MARKETS (see the Basiat quote in an earlier post). Preventive regulation hardly ever works, becomes corrupted itself, and stifles innovation more than it stops corruption. The best preventive is to refrain from giving the government much power to sell. Our founders created governmental checks and balances to limit the influence of this special interest corruption.
Ramming through legislation with arm twisting and political back room favors are exactly where the danger lies. This too used to be frowned upon. The current administration seems to be doing exactly what they accused the previous administration of doing but could never prove. Actually, the Republicans are usually kept in line by the press anyway. Democrats, because they favor bigger government, have always been more usefully to special business interests. Democrats also seem to have immunity from popular press criticism, until lately.
No entrepreneur wants to just make a "normal" profit. He or she goes into business to make a killing. Innovation and hard work is the starting point but once you start succeeding, the competition will start to imitate your plan. They might have better financing or more energy. This is where the government connection makes sense. The more power government has, the more it can help. Government can limit entry into your industry, allow you to (or prevent you from) buying up the competition, tax away foreign competitors, mandate the use of your product, there is a never-ending list of possibilities.
Favors, perks, and pay-offs to government officials often helps to smooth the way to higher profits. This is called "corruption." It is usually frowned upon. (For instance, George W. Bush is often accused of giving companies lucrative contracts for government work in Iraq, in return for some pay-off. If his administration did give out contracts without competitive bidding, it may have been because Halaburton was the only company that wanted the job.) Unquestionably, corruption leads to economic inefficiencies. IT HAS NOTHING TO DO WITH WHAT I WOULD CALL FREE MARKETS (see the Basiat quote in an earlier post). Preventive regulation hardly ever works, becomes corrupted itself, and stifles innovation more than it stops corruption. The best preventive is to refrain from giving the government much power to sell. Our founders created governmental checks and balances to limit the influence of this special interest corruption.
Ramming through legislation with arm twisting and political back room favors are exactly where the danger lies. This too used to be frowned upon. The current administration seems to be doing exactly what they accused the previous administration of doing but could never prove. Actually, the Republicans are usually kept in line by the press anyway. Democrats, because they favor bigger government, have always been more usefully to special business interests. Democrats also seem to have immunity from popular press criticism, until lately.
Saturday, July 18, 2009
A Few Quotations
"... the worst thing that can happen to a good cause is not to be skillfully attacked, but to be ineptly defended." -- Frederic Bastiat
"This is the way an opinion gains acceptance in France. Fifty ignoramuses repeat in chorus some absurd libel that has been thought up by an even bigger ignoramus; and, if only it happens to coincide to some slight degree with prevailing attitudes and passions, it becomes a self-evident truth." Frederic Bastiat /How well said, how true today./
"Do what you will, gentlemen; you cannot give money to some without taking it away from others. If you absolutely insist on draining the taxpayer dry, well and good; but at lest do not treat him like a fool. Do not tell him: 'I am taking this money from you to repay you for what I have already taken from you." -- Frederic Bastiat /BHO take heed/
one more:
"...competition in modern society is far from playing its natural role. Our laws inhibit it at least as much as they encourage it; and to answer the question whether inequality is due to the presence or the absence of competition, we need only observe who the men are who occupy the lime light and dazzle us with their scandalous fortunes, to assure ourselves that inequality, in so far as it is artificial and unjust, is based on conquest, monopolies, restrictions, privileged positions, high government posts and influence, administrative deals, loans from the public funds -- with all of which competition has no connection." -- Frederic Bastiat
"This is the way an opinion gains acceptance in France. Fifty ignoramuses repeat in chorus some absurd libel that has been thought up by an even bigger ignoramus; and, if only it happens to coincide to some slight degree with prevailing attitudes and passions, it becomes a self-evident truth." Frederic Bastiat /How well said, how true today./
"Do what you will, gentlemen; you cannot give money to some without taking it away from others. If you absolutely insist on draining the taxpayer dry, well and good; but at lest do not treat him like a fool. Do not tell him: 'I am taking this money from you to repay you for what I have already taken from you." -- Frederic Bastiat /BHO take heed/
one more:
"...competition in modern society is far from playing its natural role. Our laws inhibit it at least as much as they encourage it; and to answer the question whether inequality is due to the presence or the absence of competition, we need only observe who the men are who occupy the lime light and dazzle us with their scandalous fortunes, to assure ourselves that inequality, in so far as it is artificial and unjust, is based on conquest, monopolies, restrictions, privileged positions, high government posts and influence, administrative deals, loans from the public funds -- with all of which competition has no connection." -- Frederic Bastiat
Subscribe to:
Posts (Atom)