Thursday, June 30, 2011

Quote of the Day: Unbelievably Loopy Economics; CAP Finds That Demand Curves Slope Upward

"The Center for American Progress, often called the think tank for the Obama White House, recently recommended another increase in the minimum wage to $8.25 an hour. Though the U.S. unemployment rate is 9.1%, the thinkers assert that a rising wage would "stimulate economic growth to the tune of 50,000 new jobs." So if the government orders employers to pay more to hire workers when they're already not hiring, they'll somehow hire more workers. By this logic, if we raised the minimum wage to $25 an hour we'd have full employment."

~WSJ editorial

115 Comments:

At 6/30/2011 10:44 PM, Blogger Benjamin said...

Better would be a federal mandate that local municipalities cannot both monopolize all public spaces and then prevent enterprises on those spaces.

In other words, people should be allowed to conduct enterprise on public spaces, perhaps in exchange only for a modest license fee, of less than $100.

The purpose of the license is not to prevent enterprise, but to limit bad apples, who would spoil the whole bushel.

BTW, the minimum wage, adjusted for inflation is lower than in the 1960s.

Decades and decades of rising economic tides has not naturally raised the lowest wages, as we all thought would happen, lo those many decades ago.

Should we dispense with the minimum wage and child labor laws too?

 
At 6/30/2011 11:07 PM, Blogger Whiskey Jim said...

Month 1: Hired.
Month 3:
Me, aged 12: "Thank you sir, for the raise."
Boss: "Don't thank me. The government raised the minimum wage. I was going to fire you, but you work so damn hard I'm hoping you'll get better. I decided to just fire Joe."

Lesson 1.

 
At 7/01/2011 2:20 AM, Blogger juandos said...

"Decades and decades of rising economic tides has not naturally raised the lowest wages, as we all thought would happen, lo those many decades ago"...

Maybe there's a good reason those making the lowest wage and should continue to make that wage...

"Should we dispense with the minimum wage and child labor laws too?"....

Well yes!!

Peter Schiff: Employment: Minimum Wage, Maximum Stupidity

 
At 7/01/2011 2:43 AM, Blogger PeakTrader said...

I think, the minimum wage should be raised to $10 an hour, and adjusted for inflation every one to three years.

In the U.S., a subsistance wage where workers are financially independent may be at least $10 an hour.

Also, a higher minimum wage will attract more productive workers and provide an incentive for many to seek work.

Moreover, workers may find the cash benefit more useful than non-cash benefits, and spend that cash.

A minimum wage rise to $25 an hour is too high, because too much of the shift would not come from non-cash benefits to the cash benefit.

Part of the shift may come from profits (e.g. excess profits) or wages of other workers (e.g. from overpaid workers to underpaid minimum wage workers).

A higher minimum wage is about the only good economic policy from the Pelosi-Reid-Obama regime.

 
At 7/01/2011 2:58 AM, Blogger James said...

BTW, the minimum wage, adjusted for inflation is lower than in the 1960s.

True.

Two hours work at minimum wage would buy a tank of gas or treat 5 people to a McDonald’s cheeseburger, fries, and a coke.

In 1963 I got a summer job in the metallurgy lab at US Steel in Gary Indiana making $2.475 an hour. The minimum wage, prominently displayed in the HR waiting room, was $1.25 an hour. Using the BLS CPI Inflation Calculator in 2011 dollars that would be $9.23.

That summer I paid 19.9 cents a gallon for regular gas at a name brand station Sunoco. Sunoco sold 5 grades of gas from a sub-regular at 17.9 cents a gallon to a high performance grade at more. I ate at McDonald’s for the first time buying a cheeseburger, fries, and a coke and got 2 pennies change from two quarters.

A lower real minimum wage today produces a higher unemployment among low skilled workers than a higher real minimum wage in the 1960s. I conclude from that that we are doing something fundamentally wrong today and it is NOT our minimum wage.

See The Interests of U.S. Corporations and the Country ‘have diverged’

 
At 7/01/2011 3:34 AM, Blogger Michael E. Marotta said...

The Center says that more jobs were created in years with higher taxes on the rich. On the other hand, they support Charter Management of Schools (some schools, any way). They also published a poll on public attitudes toward global warming and "science" (alternate energy) funding.

On the one hand, the polling shows that only 64 percent of Americans believe global warming is happening, with only 47 percent believing humans to be the main cause. Yet the other poll from the same month showed that 71 percent of Americans said addressing global warming should be a very high, high, or medium priority for Congress, and a whopping 91 percent of Americans—including 85 percent of Republicans—said developing clean energy should be a very high, high, or medium priority.

Ayn Rand famously claimed that contradictions do not exist. Apparently, they do.

 
At 7/01/2011 3:35 AM, Blogger PeakTrader said...

Also, I may add, some workers are overpaid, because of seniority or family-friendship connections.

A minimum wage worker may be overpaid initially, but typically will become more productive after some experience.

Moreover, corporate profits and proprietors' income have increased faster than wages or compensation, over the past three decades.

 
At 7/01/2011 5:50 AM, Blogger geoih said...

Quote from PeakTrader: "I think, the minimum wage should be raised to $10 an hour, and adjusted for inflation every one to three years.

I think we should decrease the acceleration of gravity and adjust it down as people get fatter. Maybe we should make everybody more beautiful, too.

 
At 7/01/2011 6:07 AM, Blogger Rufus II said...

Any business-owner I've ever known hired more workers when he had to have more workers. If he didn't need more workers it didn't matter what the "minimum" wage was, he wasn't hiring.

It costs so much to hire a worker (insurance, unemployment, fica, training, etc,) that it seems highly unlikely that a $1.00/hr increase in minimum wage would come into play very often.

 
At 7/01/2011 6:32 AM, Blogger Rufus II said...

Also, if the stocker down at the local Walmart takes home an extra $30.00 that money isn't going to get "locked up" in a Cayman Islands Savings Account. It's going to flow through the economy, creating Demand for other products - which could, conceivably, lead to more hiring other places.

It would probably be "net jobs, positive," I think.

 
At 7/01/2011 8:03 AM, Blogger Jet Beagle said...

Rufus and Peak Trader,

Have either of you taken a microeconomics class? Did you not learn that when the price of a good (unskilled labor) increases, producers use less of that good? Is that very simple concept still taught in microeconomics classes?

 
At 7/01/2011 8:09 AM, Blogger Rufus II said...

JB, I ran many small businesses. Sometimes the "book" is clueless.

 
At 7/01/2011 8:14 AM, Blogger Methinks said...

Rufus,

How many of them were successful?

 
At 7/01/2011 8:22 AM, Blogger Rufus II said...

All of them (to a degree, anyway.)

 
At 7/01/2011 8:23 AM, Blogger Rufus II said...

A couple Were touch n' go. :)

 
At 7/01/2011 8:26 AM, Blogger Rufus II said...

Of course, that would only be anecdotal, at best.

I think there has been some recent work showing very little correlation between "raising the minimum wage," and unemployment "in recent years."

 
At 7/01/2011 8:28 AM, Blogger Rufus II said...

The thing is, there are so many coincident, extraneous factors that analysis of something of this sort is, really, very difficult. It almost gets down to a simple "matter of faith."

 
At 7/01/2011 8:38 AM, Blogger Rufus II said...

Let's look at it this way: Would it have more effect on our "Local" economy if that stocker got a $30.00/wk raise, or if Walmart put an extra $30.00 a week in their account in the Netherlands?

 
At 7/01/2011 8:59 AM, Blogger Methinks said...

I think there has been some recent work showing very little correlation between "raising the minimum wage," and unemployment "in recent years."

Right, Rufus. What changes is who is employed. the Demand curves slopes downward.

If your employee produces $2/hr of value for your firm and the government mandated a minimum price of $3/hr, you would would replace your $2/hr employee with one who can produce at least $3/hr of value. The guy who can only generate $2/hr goes on public assistance and his kids sell drugs to your kids for extra cash.

I'm sure you're familiar with this way of thinking even running touch 'n go businesses. And it's straight from "the book" because "the book" illustrates this way of thinking. It doesn't dictate that it's correct.

 
At 7/01/2011 9:10 AM, Blogger Rufus II said...

Methinks, I think it's kind of a matter of "scale." As I said, a dollar/hr isn't really much of a change when all of the other costs of employing a worker is considered.

I doubt many employers can/will cut it that "fine." If you were talking three or four dollars, that might make a difference. Maybe even two or three dollars.

Anyways, I imagine most of us could argue it "round," or "flat." There are probably quite a few things out there that are going to affect our lives more.

 
At 7/01/2011 10:04 AM, Blogger aldom said...

Mark, How does the 24% of teens EMPLOYED square with the 24.2% teenage unemployment in your note of 9/29 - see the ladder with rungs missing? BLS dtat supports the 24.2% unemployed.

How can the WSJ state that only 24% have jobs?

 
At 7/01/2011 10:15 AM, Blogger Mark J. Perry said...

Aldom: The WSJ is reporting the "employment to population ratio" for 16-19 year olds, here's the data. I was reporting the unemployment rate for 16-19 year olds.

 
At 7/01/2011 10:35 AM, Blogger Buddy R Pacifico said...

This comment has been removed by the author.

 
At 7/01/2011 10:41 AM, Blogger Ron H. said...

"In 1963 I got a summer job in the metallurgy lab at US Steel in Gary Indiana making $2.475 an hour. The minimum wage, prominently displayed in the HR waiting room, was $1.25 an hour. Using the BLS CPI Inflation Calculator in 2011 dollars that would be $9.23."

James, I think you have shown that the minimum wage was too high in 1963.

 
At 7/01/2011 10:46 AM, Blogger Buddy R Pacifico said...

If Washington state's unemployment is 9.1% and it's minumum wage is $8.67 then: How will a national minumum wage of $8.25 get the jobless rate under the same 9.1% of WA, who pays at least $8.67?

Back to the drawing board CAP. Better yet, hire people who have had to make payroll and promote their ideas on job creation ideas.

 
At 7/01/2011 10:54 AM, Blogger Methinks said...

Rufus,

Ever heard of "thinking at the margin"? Opportunity cost? I don't really care about all the costs of employment individually. If any of those variables increases, my cost of production increases - that's what I care about. I start looking for substitutions. In this way, as government has made it more of a pain in the ass to hire employees (read: raised the cost), I've turned to technology to replace people. But, then I run a very successful business.

Demand curves still slope downward. As the cost of labour rises (in my case, because of regulation, not minimum wage), the alternative (technology) becomes more attractive.

If the cost of labour rises because demand for labour rises, then that's a great thing. If the government artificially increases the cost of labour, then employing humans becomes less attractive and that's a very bad thing for job seekers.

 
At 7/01/2011 11:04 AM, Blogger Ron H. said...

Methinks - "If your employee produces $2/hr of value for your firm and the government mandated a minimum price of $3/hr, you would would replace your $2/hr employee with one who can produce at least $3/hr of value. The guy who can only generate $2/hr goes on public assistance and his kids sell drugs to your kids for extra cash."

Rufus - "I doubt many employers can/will cut it that "fine." If you were talking three or four dollars, that might make a difference. Maybe even two or three dollars."

Rufus, if Methink's excellent explanation was too complicated for you, consider it another way:

In a business with high employee turnover, like for instance McDonald's, when an employee producing $2/hr of value leaves, they won't be replaced by another employee who can only produce $2/hr in value. Only those able to produce $3/hr or more will be hired.

Is that any easier to understand?

 
At 7/01/2011 11:10 AM, Blogger Jet Beagle said...

Rufus,

I've managed and later owned small businesses. For rational employers like me, the demand curve slopes downward: when labor prices go up, we use less labor. You may believe otherwise. If so, you are mistaken.

 
At 7/01/2011 11:13 AM, Blogger Ron H. said...

"If the cost of labour rises because demand for labour rises, then that's a great thing. If the government artificially increases the cost of labour, then employing humans becomes less attractive and that's a very bad thing for job seekers."

Especially US job seekers. Those elsewhere may benefit from US government price fixing.

 
At 7/01/2011 11:26 AM, Blogger James said...

”I think you have shown that the minimum wage was too high in 1963”

I think I showed that it did little harm in 1963 as I did get a summer job at a very good wage of $18.28 an hour in 2011 dollars (know any college kids doing that well today?) and that since the real minimum wage is lower today blaming it for the lack of jobs today is unrealistic.

What fault do you find with this logic?

Put another way the real world data show that the harmful influence on jobs of a high minimum wage was reduced and jobs got harder to find. That points to saying either a decrease in minimum wage leads to higher unemployment and conversely a higher minimum wage would lead to higher employment or some other factor caused today’s higher unemployment. I go with the latter.


Opinion: The minimum wage was an impediment to jobs then as now but then as now other factors constitute the controlling influence. Don’t sweat the small stuff and in the overall scheme of things the minimum wage is small stuff.

 
At 7/01/2011 11:30 AM, Blogger juandos said...

"I think, the minimum wage should be raised to $10 an hour, and adjusted for inflation every one to three years"...

Yeah, PT is willing money where is mouth is!! Go for it employers, PT has got your back...

"Also, a higher minimum wage will attract more productive workers and provide an incentive for many to seek work"...

On what planet?

 
At 7/01/2011 11:37 AM, Blogger Walt G. said...

"when labor prices go up, we use less labor."

How about the supply curve, Jet Beagle? Do you leave customers waiting in line to get into your business because you don't have the employees to serve them?

 
At 7/01/2011 12:21 PM, Blogger FirstPost said...

This comment has been removed by the author.

 
At 7/01/2011 12:23 PM, Blogger FirstPost said...

Holy cow. I just wasted 5 minutes of my time reading people who "think", "hope", and "believe" that a higher minimum wage would create jobs. This classic videoclip from the movie Billy Madison sums up my feelings.

http://www.youtube.com/watch?v=5hfYJsQAhl0&feature=related

 
At 7/01/2011 12:27 PM, Blogger Whiskey Jim said...

I think, the minimum wage should be raised to $10 an hour, and adjusted for inflation every one to three years.

Let us propose a 5 year experiment say, in California. Would the Left intelligentsia support this idea? After the CAP proclamation, I am confused about the nuance of their arguments. But surely California could use the jobs that would result.

 
At 7/01/2011 1:34 PM, Blogger Ten Mile Island said...

Cute cartoon here.

http://bluntobject.wordpress.com/2011/06/30/it-continues-to-amaze-me/

 
At 7/01/2011 2:22 PM, Blogger Methinks said...

Especially US job seekers. Those elsewhere may benefit from US government price fixing.

Tuh-rue! Providing an excellent opportunity for pundits and politicians to bitch about outsourcing so they can lay the blame at the feet of "greedy corporations".

 
At 7/01/2011 2:25 PM, Blogger Methinks said...

How about the supply curve, Jet Beagle? Do you leave customers waiting in line to get into your business because you don't have the employees to serve them?

He substitutes low producers with high producers who can do not only the job the low producers were doing but also something else too. So, the janitor gets fired and the sales staff is required to sweep the floor and take out the trash at night instead.

 
At 7/01/2011 2:38 PM, Blogger PeakTrader said...

Geoih, let's be real. If a teen mowed your lawn or shoveled snow at your house for an hour (which aren't highly skilled jobs), and did a reasonably good job, you'd pay him $10. Perhaps, $15 or $20, if he did a good job, over that hour.

Jet Beagle, I have degrees in economics, and I've completed lots of microeconomics classes (up to the 6th year level), although my fields of specialty are international trade and money & central banking.

Your microeconomic analysis is incomplete, to say the least.

 
At 7/01/2011 3:07 PM, Blogger PeakTrader said...

Also, my comments were more about labor economics than microeconomics.

 
At 7/01/2011 3:18 PM, Blogger PeakTrader said...

Juandos, if it makes some people feel better, a subsistance wage can be offset by eliminating tax credits, establishing a flat tax, and filing taxes on a postcard (this type of economics is called "public choice").

 
At 7/01/2011 4:05 PM, Blogger Jet Beagle said...

Peak Trader,
If you believe that the demand curve for unskilled labor is anything other than downward-sloping, then I doubt that you received an education in economics.

 
At 7/01/2011 4:18 PM, Blogger Jet Beagle said...

Walt: "How about the supply curve, Jet Beagle? "

The supply of unskilled labor may increase temporarily after employers are forced to increase wages. But that won't change the fact that demand for unskilled workers will decline both in the short term and even more in the long term. Employers, faced with increased labor costs, will:

1. Automate jobs;
2. Move jobs to low wage nations;
3. Close a business which becomes unprofitable due to labor cost increases.

 
At 7/01/2011 4:47 PM, Blogger PeakTrader said...

Jet Beagle, where did I say the demand curve for labor doesn't slope downward?

If I demand your labor for $9 an hour and your reservation wage is $10 an hour, you'll reject my offer.

You'll be unemployed, because you value leisure more than you value labor at $9 an hour.

Even if you're dependent on your parents, you may never want to mow my lawn again if I pay you $2 or $5 for an hour's work when you expected at least $10.

 
At 7/01/2011 4:54 PM, Blogger Ron H. said...

"Let us propose a 5 year experiment say, in California. Would the Left intelligentsia support this idea? After the CAP proclamation, I am confused about the nuance of their arguments. But surely California could use the jobs that would result."

California needs jobs so badly that it would likely take a min wage of $29/hr to reduce unemployment sufficiently. :)

 
At 7/01/2011 5:05 PM, Blogger Methinks said...

Jet Beagle, where did I say the demand curve for labor doesn't slope downward?

Nowhere. But, you don't seem to know what that means. It's not enough to study economics. You also have to understand it.

You'll be unemployed, because you value leisure more than you value labor at $9 an hour.

No he won't. He won't be employed mowing your lawn is all. What the hell does that have to do with minimum wage?

 
At 7/01/2011 5:09 PM, Blogger PeakTrader said...

Jet Beagle, would you keep shopping at a store where customer service is awful?

Or can you afford to buy and maintain machines, move to China, or close the store, because you can't even afford cheap labor?

 
At 7/01/2011 5:18 PM, Blogger Ron H. said...

"How about the supply curve, Jet Beagle? Do you leave customers waiting in line to get into your business because you don't have the employees to serve them?"

My need for more employees to serve my customers is part of the demand curve. Unless the supply of available workers is severely constrained, and it certainly isn't these days, an artificial increase in price will cause me to demand less labor.

If my business is doing well and the number of customers is increasing, causing a need for more employees, I will hire more. But I will only hire those who can produce more value for me than I pay them. Those whose value is now below the new min wage will remain unemployed.

Like any other commodity, labor must follow the laws of supply and demand. There is currently a glut of available unskilled and low skilled labor, so it's a particularly clueless idea right now to recommend a higher min wage, which can only increase the glut.

 
At 7/01/2011 5:19 PM, Blogger PeakTrader said...

Methinks, I'm trying to show Jet Beagle economics exists in more than two-dimensions and in sets of equations.

Of course, it's way beyond the capacity of some.

 
At 7/01/2011 5:24 PM, Blogger Charles7045 said...

I think you mis-interpreted their message.

I think they are saying that if the minimum wage worker is paid more he will spend more. This additional cash flow would create additional supply demands therefore more workers needed.

This logic may be flawed but at least argue in the venue that it was proposed.

 
At 7/01/2011 5:57 PM, Blogger Methinks said...

Well, it definitely seems to be well beyond your capacity to explain it. Usually an inability to explain a concept means you don't understand it.

 
At 7/01/2011 5:58 PM, Blogger Methinks said...

the above was meant for Peak Trader.

 
At 7/01/2011 6:08 PM, Blogger PeakTrader said...

Methinks, have you ever considered you may have an inability to understand it?

Economists understand exactly what I'm saying, and I doubt it could be much more clear to them, and most others, if they just stopped and thinked.

 
At 7/01/2011 6:10 PM, Blogger PeakTrader said...

(I should've used thought instead of thinked :))

 
At 7/01/2011 6:34 PM, Blogger juandos said...

"I have degrees in economics..."...

Keynesian economics?

 
At 7/01/2011 6:50 PM, Blogger Craig said...

Ayn Rand famously claimed that contradictions do not exist. Apparently, they do.

No contradictions there -- just people thinking sloppily. Ayn Rand was all over that.

 
At 7/01/2011 6:59 PM, Blogger juandos said...

"California needs jobs so badly that it would likely take a min wage of $29/hr to reduce unemployment sufficiently. :)"...

Well Ron H California is pricing itself out realistic options...

 
At 7/01/2011 7:17 PM, Blogger Whiskey Jim said...

California needs jobs so badly that it would likely take a min wage of $29/hr to reduce unemployment sufficiently. :)

My point exactly. Since I do not understand the nuance of the argument, how do you figure out when it is too high? Why not $100/hr?

What is the cool little algorithm that figures this out in our complex society, and what variables do they hold constant to demonstrate significance?

 
At 7/01/2011 7:27 PM, Blogger Methinks said...

Peak, my dear, you're not the only one here with degrees in econ. Your "economists" think they can centrally plan and inflate their way out of recessions. They think they can regulate people into submission and they think there's a Keynesian multiplier. So pardon me if don't buy every stupid thing they vomit up and I'm not surprised if they nod knowingly reading this drivel too.

Mercifully, even the dumbest Keynesian economists overwhelmingly agree that minimum wage is an utter disaster for the unskilled and low skilled worker.

I completely understand what you've written on the subject here and I recognize it as bullshit. That you have yet to figure that out is your problem, not mine.

To understand why it's bullshit, one only needs the first day of the first econ class where we all learned the definition of economics and supply and demand. The real question is why are you so averse to allowing the market to set the wage rate? Is it just hubris on your part or is it discomfort with allowing people you consider beneath you to negotiate their own wage rate? Oh wait. That falls under hubris as as well.

 
At 7/01/2011 7:48 PM, Blogger Methinks said...

Let's just have a look at your assertions, shall we, Peak?

Also, a higher minimum wage will attract more productive workers and provide an incentive for many to seek work.

I'm an employer in real life. If I wanted to attract more productive workers, I don't need a government mandated minimum wage to do that. I, along with other employers, bid for labour all the time and I generally have to pay whatever is required to lure the employee I want away from other employers.

I don't doubt that a guy whose labour is worth $5/hour will seek work if the minimum wage were raised to $10/hour, but he won't find work. See the difference?

Moreover, workers may find the cash benefit more useful than non-cash benefits, and spend that cash.

God forbid anyone should save, right? Keynes taught us that savings is waste. And, of course, fewer of the people who make minimum wage will be employed - what with demand curves the way they are and all.

Part of the shift may come from profits (e.g. excess profits) or wages of other workers (e.g. from overpaid workers to underpaid minimum wage workers)

Now, the thing is I don't have any profits I consider "excess". As my costs rise and eat into my profit, I start to make adjustments - by cutting costs. For every business, labour is the largest cost. So, guess what's always on the chopping block!

I also don't have a single overpaid employee. In my firm (and in every other firm I've ever worked in) an overpaid employee goes by another name: former employee.

I also don't have underpaid workers. Those people who consider themselves underpaid go by another name in my firm: ex-employee. Generally, if people are truly underpaid, they can always find another employer who will pay them more. If they can't, they're not underpaid. Unless, of course, you think you know better what people are worth. If you do, you're going to have to explain to me how you attained such wisdom (I'm assuming you're a mere mortal, yes?).

Now, I realize that your favourite debating technique is an appeal to authority: "All the other economists totally get it". But, I find it more useful to discuss facts and reality rather than marvel at how many years you've spent with your nose stuck in econ texts. I grew up surrounded by Ph.D.'s, so I'm not terribly impressed by all that.

 
At 7/01/2011 8:13 PM, Blogger Ian Random said...

Peaktrader,

I patronize a local restaurant and found out the other day, my waiter is an ex-welder. He hated working outside apparently. In Oregon, tipped and non-tipped have the same minimum wage. So here is a skilled welder displacing a job that a less skilled laborer could fill. Maybe that explains all the strip clubs in the crumbling deserted downtime.

To me the minimum wage is too high. The janitor at my workplace was getting take-out from a franchise restaurant (not the same place with the ex-welder).

In my perfect world. No IRS harassing American contract programmers, driving companies to India. Piece work would be legal without the wage cushion. No restrictions on internships of any kind. If there are enough jobs, the minimum wage is irreverent. Because as soon as you get enough experience, you quit and move on. A high minimum wage prevents that, plus the productivity ceiling ships low value added jobs overseas.

 
At 7/01/2011 8:44 PM, Blogger Ron H. said...

"Even if you're dependent on your parents, you may never want to mow my lawn again if I pay you $2 or $5 for an hour's work when you expected at least $10."

We would have agreed on the amount I would be paid before I performed the work.

If we had not, and this was my first job ever, I would consider it an invaluable life lesson. Sort of like an internship.

The NEXT time we would have a complete understanding beforehand.

 
At 7/01/2011 8:53 PM, Blogger Ron H. said...

"if they just stopped and thinked."

That's "stopped and thought".

As the newly appointed grammar policeman, your punishment is to refrain from writing comments on this thread for 30 minutes.

And while you are idle, I'd recommend you dust off and read some of those old economics texts you are saving.

 
At 7/02/2011 2:02 AM, Blogger Ron H. said...

"What fault do you find with this logic?"

Well, at least three things:

First of all, your individual experience in 1963 isn't relevant to a discussion of minimum wage, and doesn't support any position, for or against it.

Second, no one blames min wage for the high unemployment levels we are experiencing today. The min wage adversely affects low skilled and inexperienced workers. Those people will experience higher unemployment rates, due to higher min wage, than more valuable workers. An employee must be able to produce more than they are paid, or they won't become, or continue to be employed.

Third, it's not clear what else you're claiming. If it's the notion that higher min wage = lower unemployment, and lower min wage = higher unemployment, then you must believe that the demand curve slopes upward. That's never happened yet on this planet.

 
At 7/02/2011 3:48 AM, Blogger Ron H. said...

"I have degrees in economics..."...

Keynesian economics?
"

Can there be any doubt? Thanks for the link. Hazlitt is one of my favorites. very clear & easy to read.

 
At 7/02/2011 4:03 AM, Blogger Ron H. said...

"What is the cool little algorithm that figures this out in our complex society, and what variables do they hold constant to demonstrate significance?"

It's a cool little item exercised by the market, called 'price'. It's an amount an employer and an employee mutually agree to. It is negotiated thousands, if not millions of times a day, and no government bureaucrat can possibly know what this price should be.

 
At 7/02/2011 12:03 PM, Blogger James said...

…they think there's a Keynesian multiplier

Yes Virginia, I mean Methinks, there is a Keynesian multiplier! Although Keynes gets the credit it was invented by French economist Francois Quesnay in 1759.

John Maynard Keynes was a brilliant man. The politicians who claim they implement Keynes to get us out of our current slump not so much. When a country needed a stimulus Keynes advocated subsidizing exports and restricting (tariff) imports to produce a positive balance of trade. Both Bush and Obama tried using stimulus but without trade restriction. Neither attempt worked for the US economy as neither attempt to stimulate the economy produced a multiplier for the US economy. None the less there was a multiplier. Without trade restrictions the money leaked out of the US economy. The US taxpayer got the debt and the rest of the world got the multiplier. Another case of “I am from the government and I am here to help you.”

 
At 7/02/2011 12:58 PM, Blogger Methinks said...

Yes Virginia, I mean Methinks, there is a Keynesian multiplier! Although Keynes gets the credit it was invented by French economist Francois Quesnay in 1759.

Too bad it's negative and what makes you think the source of the incorrect idea matters? Whether or not there is, in fact, a multiplier is an empirical question. Where is your empirical evidence? Aggressive assertion, last I checked, is not evidence.

John Maynard Keynes was a brilliant man.

Is that supposed to mean something? It's always trotted out as if it matters. And, btw, not all brilliant men are brilliant economists.

While I agree with you that not every dumb idea in economics came from Keynes and not every dumb policy the monkeys in the Capitol Hill Zoo fling at us is Keynesian in nature, what you describe as Keynes' proposition is just spending + mercantilism with an unsubstantiated claim about what happened to the mythical multiplier (I assume this is your attempt to explain why the multiplier remains a myth).

Wow. That was a long sentence.

 
At 7/02/2011 1:11 PM, Blogger Ron H. said...

"Keynes advocated subsidizing exports and restricting (tariff) imports to produce a positive balance of trade."

Questions:

Since everyone can't have a positive balance of trade, does this mean that there always must be losers in trade? Is this idea that government intervention is necessary, also known as mercantilism, what you favor?

Would an equal balance of trade be beneficial also? What about a zero balance, no trade at all? Is that preferable to a negative balance of trade?

What is it about the concept of comparitive advantage that you disagree with? Your view seems to be that it operates to everyone's benefit until they cross a national border, then there are winners and losers. How is that possible?

 
At 7/02/2011 1:16 PM, Blogger Ron H. said...

"And, btw, not all brilliant men are brilliant economists."

Nor is their brilliant thinking necessarily correct.

 
At 7/02/2011 1:48 PM, Blogger Methinks said...

Ron, Ron, Ron, Ron

*shaking head*

What you're missing is that Keynes was a brilliant man. Just brilliant. Just keep repeating that until there's no room in your brain for any actual thinking.

 
At 7/02/2011 1:59 PM, Blogger Ron H. said...

"What you're missing is that Keynes was a brilliant man. Just brilliant. Just keep repeating that until there's no room in your brain for any actual thinking."

It's too late for such trickery. I've read Hazlitt & I'm now immune.

 
At 7/02/2011 2:17 PM, Blogger Benjamin said...

Often economists posit that people will work harder to make more money.

If people receive a higher minimum wage, do they work harder? Why not? They can still get fired.

So, more pay does not equal more output?

Then we does anyone receive higher pay?

And when can we get rid of child labor laws?

 
At 7/02/2011 2:30 PM, Blogger Ron H. said...

"So, more pay does not equal more output?"

It's the other way around. More output results in higher pay.

 
At 7/02/2011 2:43 PM, Blogger Methinks said...

Ron H.,

How about you and I go up in our own helicopter and, while Ben is dropping bills fresh off the press, drop Hazlitt's books (including "economics in one lesson") on Econ departments across the country. There's even a chance that a few of the students will stop drinking and partying long enough to read them.

Had I had less Keynes and math in my undergraduate program and more economics, I might not have spent my twenties idiotically defending government borrowing and spending as "okay because we owe it to ourselves". Imagine the embarrassment I could have spared myself if someone had shoved Hazlitt or Hayek book in my hand then!

 
At 7/02/2011 3:55 PM, Blogger Ron H. said...

"How about you and I go up in our own helicopter and, while Ben is dropping bills fresh off the press, drop Hazlitt's books (including "economics in one lesson") on Econ departments across the country. There's even a chance that a few of the students will stop drinking and partying long enough to read them."

I LOVE the idea, but that last part about students may be wishful thinking.

"Had I had less Keynes and math in my undergraduate program and more economics, I might not have spent my twenties idiotically defending government borrowing and spending as "okay because we owe it to ourselves". Imagine the embarrassment I could have spared myself if someone had shoved Hazlitt or Hayek book in my hand then!"

Perhaps I was fortunate to have had relatively little formal economics education, so there was less damage to undo. I do recall that lame "owe it to ourselves" mantra, and the even more dangerous propaganda defending forced redistibution of income, to the effect that it didn't matter who spent the money, as long as it was spent.

I didn't meet the Austrians until much later in life, when it became obvious even to me that things weren't going well.

 
At 7/02/2011 4:05 PM, Blogger geoih said...

Quote from PeakTrader: "Methinks, I'm trying to show Jet Beagle economics exists in more than two-dimensions and in sets of equations."

Well, at least we know what fantasy world you're living in. The utopia where discrete data are suddenly continuous and the completely subjective and unrelated can be added and subtracted. And you think my analysis is incomplete. Perhaps, but at least it's based in reality.

 
At 7/02/2011 5:09 PM, Blogger Methinks said...

I LOVE the idea, but that last part about students may be wishful thinking.

I have always been a dreamer. Plus, I want to throw things from a low flying helicopter.

Nobody in my undergraduate program heard of the Austrian school either. It was never mentioned. Yes, your lack of formal economics education left you lacking in jargon, but far less crappola to overcome.

 
At 7/02/2011 5:10 PM, Blogger Ron H. said...

Also, depending on how many bills Helicopter Ben drops, It's possible they could become more valuable as bookmarks for the Hazlitt books, than as currency.

 
At 7/02/2011 7:17 PM, Blogger jlkinsella said...

An interesting Government report was just published on the impact of minimum wage on employment in American Samoa.

http://www.gao.gov/new.items/d11427.pdf

 
At 7/02/2011 8:16 PM, Blogger Methinks said...

Ron H., I fear you are correct!

 
At 7/02/2011 8:35 PM, Blogger Methinks said...

Thank you for posting that, JlKinsella.

The minimum wage was increased in 2007

From the report:

"Social Security Administration (SSA) data show that from 2008 to 2009, the total number of people employed in American Samoa declined 19 percent (from 19,171 to 15,434) and that over the entire period from 2006 to 2009, employment declined 14 percent (from 17,852 to 15,434, with a peak of 19,171 in 2008).....Private sector officials said minimum wage was one of a number of factors, including the high cost of goods and utilities, making it difficult to do business in American Samoa. American Samoa government data show the minimum wage increases would raise government payroll costs for its employees by about 1 percent (about $9 million) over 7 years, and the American Samoa governor and other public officials said they supported a return to biennial reviews of minimum wage in American Samoa or other alternatives to the scheduled increases.....

...Some workers said they had looked forward to the 2010 minimum wage increase and were disappointed to see the increase delayed. However, more workers, particularly tuna canning workers, expressed concern over job security than favored a minimum wage increase with the potential for subsequent layoffs."

Very interesting. The canning industry is facing stiff competition from abroad and is undertaking pretty big cost cutting measures and labour costs are a huge issue for them.

So you mean that the increase in minimum wage didn't come from "excess profits" or "overpaid workers"? So, are you saying price controls don't work? But...but...Peak Trader's models say that demand curves slope upward. Maybe Peak is just dyslexic.

 
At 7/02/2011 9:09 PM, Blogger PeakTrader said...

Methinks, you're confusing supply curves with demand curves.

The U.S. functions in a global economy. It's no longer a "closed economy."

Our trading partners' low wages and open borders don't cause upward pressure on U.S. wages.

The result is lower living standards for lower income Americans (although, it's partially offset by lower import prices).

 
At 7/02/2011 9:25 PM, Blogger PeakTrader said...

It seems, American Samoa has a per capita income of $8,000 compared to $45,000 in the U.S.

Raising the minimum wage to $7.25 may be like raising it to $42.00 in the U.S..

 
At 7/02/2011 11:07 PM, Blogger Methinks said...

Peak,

It's pretty clear you've never seen either a demand or a supply curve.

 
At 7/02/2011 11:59 PM, Blogger James said...

”What is it about the concept of comparative advantage that you disagree with?”

It addresses only the short term. By following it a short term gain will result in a long term loss.

It assumes that capital does not cross international borders and does not address the impact of capital leaving the country.

It applies to products not labor but is often used to make labor a commodity. To Ricardo labor was a factor of production not a commodity. Free trade and outsourcing would be completely different to Ricardo.

It assumes that the market is large enough to absorb additional production.

It uses as proof an example of two countries and they make only two goods and generalizes to the real world.

Ricardo's theory assumes that countries can switch production from one thing to another without any sort of cost or time delay.

It assumes that there are no barriers to trade/protectionist measures or any transport costs. It assumes that there are no industrial policies that coerce investment and technology
transfer. Such coercion is widely practiced causing jobs to move offshore not because
the market demands it but because a government makes access to its market conditional on it.

The Theory of Comparative Advantage is an ivory tower theory that fails in the real world. In the real world trade protection works long term while Comparative Advantage fails long term. Except for Hong Kong, the Netherlands, and Switzerland (before World War I) all wealthy countries became wealthy with trade protection. Great Britain became wealthy with trade protection then adopted free trade only to be eclipsed by a trade protected USA. After a hundred years of suffering the harm of free trade the people of Great Britain voted in socialism. China has historically been a wealthy country. Its descent into poverty came after Great Britain imposed free trade on China after the

 
At 7/03/2011 3:01 AM, Blogger Ron H. said...

"What is it about the concept of comparative advantage that you disagree with?


It addresses only the short term. By following it a short term gain will result in a long term loss.

Etc...
"

Wow. That's a lot of characteristics of comparative advantage I've never heard of. Are you sure you aren't making all that up? Where could I find something that supports your claims? Please don't cite Ian Fletcher.

What about my other two questions?

 
At 7/03/2011 3:11 AM, Blogger Ron H. said...

"China has historically been a wealthy country. Its descent into poverty came after Great Britain imposed free trade on China after the"

Reread that. How can free trade be imposed? Did you really mean to write that?

 
At 7/03/2011 8:14 AM, Blogger Methinks said...

Except for Hong Kong, the Netherlands, and Switzerland (before World War I) all wealthy countries became wealthy with trade protection.

Ah, there it is. All Mercantilists rely on the post hoc ergo propter hoc fallacy.

I assume since free trade is such a disaster that you refuse to damage your household by importing goods into it, yes? Oh, but you're using a computer...

 
At 7/03/2011 5:06 PM, Blogger Ron H. said...

"Methinks, you're confusing supply curves with demand curves."

I used to confuse them frequently, also. Our econ instructor taught us a neat trick for remembering which is which. It has helped me ever since.

It's this: The curve that slopes upward, and has a big "S" by it, is the Supply curve. S = Supply, get it?

The one sloping down that has a big "D" by it is the Demand curve. D = demand. Pretty slick, eh?

 
At 7/04/2011 2:15 PM, Blogger James said...

Ron H.

China has historically been a wealthy country. Its descent into poverty came after Great Britain imposed free trade on China after the"


Reread that. How can free trade be imposed? Did you really mean to write that?


China: How can free trade be imposed:

From Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism By Ha-Joon Chang

“Apart from Britain itself the practitioners of free trade during this period were mostly weaker countries that had been forced into, rather than voluntarily adopted, it as a result of colonial rule or ‘unequal treaties’ (like the Nanking Tready), which, among other things, deprived them of the right to set tariffs and impose externally low flat-rate tariffs (3-5%) on them.”

Read an exert at Google books


Wow. That's a lot of characteristics of comparative advantage I've never heard of. Are you sure you aren't making all that up? Where could I find something that supports your claims? Please don't cite Ian Fletcher.


It addresses only the short term. By following it a short term gain will result in a long term loss.

See Reassessing comparative advantage: the impact of capital flows on the argument for laissez-faire

“There are two problems with this argument. First, the theory of comparative advantage does not incorporate time into its presentation. This is a fault to the extent that projections that estimate the gains to be obtained from liberalized trade are typically long term.”

It assumes that capital does not cross international borders and does not address the impact of capital leaving the country.

See the above link for:

In the event that real capital should leave a country, we know, from the neoclassical theory of production, that workers working with less capital become less productive.



The arguments advanced in this paper suggest that it is difficult to be theoretically or practically complacent with regard to the issue of international capital mobility. In particular, the theory of comparative advantage provides an inadequate representation of the issues posed by the existence of large international capital flows. Comparative advantage was not designed to handle such issues, and it should be no surprise to discover that it fails to do so. For this reason, there are grounds to believe that nations and individuals who have exhibited a reluctance to embrace a more liberal worldwide trade regime may have been correct in their assessment of the problem presented by capital mobility.


As for the rest I will leave as a exercise for the student. Read the theory and think.

BTW: What is wrong with citing Ian Fletcher? He has put out a lot of good stuff.

 
At 7/04/2011 3:59 PM, Blogger Ron H. said...

I have read Chang's book "Bad Samaritans", and he, like you, doesn't seem to understand the meaning of the word "Free".

Free trade is something one engages in voluntarily, and willingly, and both parties benefit from the exchange; otherwise, it is not free trade. It cannot be imposed on you by someone else. How is that not clear?

From your BNET article:

"Comparative advantage was not designed to handle such issues, and it should be no surprise to discover that it fails to do so."

Comparative advantage wasn't "designed" at all. It is the concept that two parties can both gain from trade if, in the absence of trade, they have different relative costs for producing the same goods or services.

There is no "design" involved, and no attempt to explain economics in its entirety. If your concern is with balance of trade and capital accounts, you should address those issues. If you blame a simple concept like comparative advantage for what you perceive as a problem, you might as well consider any and all trade to be a problem.

You previously called Ricardo's example of two countries and two goods too simple, but the concept IS simple, so only a simple explaination is required. Comparitive advantage works just the same if you include dozens of countries and thousands of goods, but makes an explanation difficult.

From BNET:

"It can be demonstrated from the revisions of his [Ricardo] most important theoretical work that he was not convinced that free trade was an unconditional benefit to everyone."

Well, of course he wasn't. That would be to expect perfection, which can never be. But, the overall gains from free trade outweigh the losses. To suggest otherwise, opens that old discussion of how widely trade benefits spread, and for you, they end abruptly at a national boundary. I suspect your concerns are more nationalistic than economic.

The same is true of your hero Ian Fletcher, and is the reason I don't need further references to him. He is wrong for the same reasons you are.

Here are some interesting comments on some of Fletcher's articles by Don Beaudreaux at Cafe Hayek:

here

and

here

You can find others by serarching Cafe Hayek.

 
At 7/04/2011 4:01 PM, Blogger Methinks said...

Bad Samaritans is an entire book of post hoc ergo propter hoc fallacy.


I sprained an eyeball rolling my eyes reading that garbage.

 
At 7/04/2011 4:10 PM, Blogger Ron H. said...

"Bad Samaritans is an entire book of post hoc ergo propter hoc fallacy.


I sprained an eyeball rolling my eyes reading that garbage.
"

At the time I read it, I was trying to be "fair and balanced" in my approach to learning more economics. I have since learned not to waste so much time, although I do want to test my beliefs on a regular basis. I find that I'm tested almost daily at this blog.

My bullshit detector is becoming more and more accurate.

 
At 7/04/2011 5:58 PM, Blogger James said...

Ron H.

Let us approach this from the other end. Rather than my pointing out the deficiencies of free trade how about you addressing the differences between what free trade was supposed to give us and what we actually have. Let us avoid those things that are unclear to the degree that neither of us can provide convincing data like lower prices, and trading bad jobs for good jobs, and giving up low wage jobs for high wage jobs. Address jobs and only jobs. Not wages, not prices, not quality of life, just jobs. We have more free trade now than we have ever had. According to Mortimer B. Zuckerman’s article Why the Jobs Situation Is Worse Than It Looks

Total payrolls today amount to 131 million, but this figure is lower than it was at the beginning of the year 2000, even though our population has grown by nearly 30 million.

Where are the jobs that free trade was going to give us?

By jobs I mean net jobs. The difference between the jobs gained from free trade and the jobs lost to free trade.

 
At 7/04/2011 7:41 PM, Blogger Ke said...

I just got a lot dumber reading posts by Benjamin, Peak Trader, and James.

 
At 7/04/2011 7:48 PM, Blogger PeakTrader said...

Ke, that's not possible.

 
At 7/04/2011 7:51 PM, Blogger James said...

I just got a lot dumber reading posts by Benjamin, Peak Trader, and James.

Ke,

Does that means you can not tell me where all the jobs free trade was supposed to give us went to?

 
At 7/04/2011 10:26 PM, Blogger Ron H. said...

"We have more free trade now than we have ever had. According to Mortimer B. Zuckerman’s article Why the Jobs Situation Is Worse Than It Looks"

Well, although Zuckerman's opinion piece on jobs and employment was informative, and well written, it didn't cover any new ground. I think everyone is aware that the BLS numbers tell the whole story of jobs and employment.

And, no matter how hard I looked, I couldn't find anything at all in it about trade, or free trade.

If you want to make some connection between jobs and free trade, you should use something else.

"Where are the jobs that free trade was going to give us?

By jobs I mean net jobs. The difference between the jobs gained from free trade and the jobs lost to free trade.
"

I don't believe net jobs can be quantified as relates to only trade and nothing else, as jobs lost to trade are easier to count than those that replace the lost jobs or are created because of trade, as jobs are affected by many things, trade being only on of them.

Although it's slightly dated,here's a good article on the subject.

 
At 7/04/2011 10:38 PM, Blogger Methinks said...

James,

So, you would like to ignore all of the things that are relevant about free trade and all of the empirical evidence and you would like to focus on jobs lost as a result of the housing and credit bubbles bursting so you can blame the losses on free trade.

I somehow don't think that's going to fly with Ron H.

 
At 7/04/2011 10:42 PM, Blogger Methinks said...

Ron H., I posted before I saw your reply. I see it didn't.

And since James hasn't stopped banging away at his computer, I see he wasn't stopped importing into his household either. One has to wonder why he's so insistent on impoverishing his household.

 
At 7/05/2011 1:57 AM, Blogger Ron H. said...

Correction to a previous comment:

"I think everyone is aware that the BLS numbers don't tell the whole story of jobs and employment."

 
At 7/05/2011 2:14 AM, Blogger Ron H. said...

This comment has been removed by the author.

 
At 7/05/2011 2:25 AM, Blogger Ron H. said...

Methinks,

James & I have had variations of this discussion many times, and he understands the benefits of trade, but beyond the US border, any benefits cease to exist. Without protective tariffs, we are doomed.

It seems that none of my arguments have any effect.

"And since James hasn't stopped banging away at his computer, I see he wasn't stopped importing into his household either. One has to wonder why he's so insistent on impoverishing his household."

Im also pretty certain that computer was manufactured not only outside his household, but outside the US, so I'm not sure how he sleeps at night, knowing that somewhere, a former computer manufacturer employee is about to collect his last unemployment check. The selfishness is astounding.

 
At 7/05/2011 8:18 AM, Blogger Methinks said...

Ah, Ron H., thanks for the info. I did not know that.

It's always a bad sign when a commenter does what James does - never answers a direct question but insists you do. It implies he is disingenuous and not worthwhile. These are people who will insist that you can walk off the edge of the earth no matter how much evidence you provide of its spherical shape.

 
At 7/05/2011 11:56 AM, Blogger big_wannabe said...

Any chance you'll respond to Ritholtz's comments on the same issue/article?

http://www.ritholtz.com/blog/2011/07/why-only-one-in-four-teens-is-employed/

 
At 7/05/2011 1:46 PM, Blogger Ron H. said...

"Any chance you'll respond to Ritholtz's comments on the same issue/article?"

Thanks for the link. That's an interesting article. And, while there are no doubt many reasons for declining teen employment rates, in his zeal to show that federal min wage isn't one of them, Invictus cleverly avoids any mention of STATE min wage rates, 41 of which are already at or higher than the new federal rate.

 
At 7/05/2011 3:46 PM, Blogger Jet Beagle said...

Ron H: "Invictus cleverly avoids any mention of STATE min wage rates"

Exactly right, Ron H.

Barry Ritholz tries to argue that teenage employment dropped as much from 2000-2007 as it did once the 2007 federal minimum wage laws were enacted. So he concludes that minimum wage laws could not be responsible for teenage unemployment.

Of course, some large states were increasing their state minimum wages even before 2007:

MA in 2001
WA in every year after 2001
CT in 2001, 2002, 2003, and 2004
CA in 2001 and 2002
OR in 2003, 2004, 2005, and 2006
IL in 2004 and 2005
NY in 2005 and 2006
FL in 2006

 
At 7/05/2011 4:11 PM, Blogger Ron H. said...

"Barry Ritholz tries to argue that teenage employment dropped as much from 2000-2007 as it did once the 2007 federal minimum wage laws were enacted. So he concludes that minimum wage laws could not be responsible for teenage unemployment."

I can only conclude that such deceptive arguments are intentional, as his extensive attention to detail as to the requirements for paying min wage to teens, almost precludes his missing the effect of state rates.

And the suggestion that an increase in the number of 55+ workers is costing teens jobs at the minimum wage? Give me a break! Classic correlation = causation.

 
At 7/05/2011 5:37 PM, Blogger Methinks said...

And the suggestion that an increase in the number of 55+ workers is costing teens jobs at the minimum wage? Give me a break! Classic correlation = causation.

Uh....I don't know any retired 55 year-olds who are not independently wealthy. People are working longer at their professional jobs. Jobs not available to teenagers. I confess that I don't eat at fast food restaurants, but I've not seen any old grandpas working there or in retail or delivering my paper (traditional bastions of teenage employment).

 
At 7/05/2011 5:39 PM, Blogger Methinks said...

This is exactly why I skip over Ritzhole, or whatever his name is. I put up with enough idiocy in my daily life to have my fill. I don't seek out more.

 
At 7/05/2011 7:37 PM, Blogger James said...

”I don't believe net jobs can be quantified as relates to only trade and nothing else, as jobs lost to trade are easier to count than those that replace the lost jobs or are created because of trade, as jobs are affected by many things, trade being only on of them.”

I Think I am Beginning to See the Light

Free trade is good because the Theory of Comparative Advantage, The Theory of Absolute Advantage, and a few others say it is good.

These trade theories say that free trade leads to jobs but I just can not find where those jobs are so millions of Americans are unemployed. The lack of jobs should not be blamed on free trade because the theory says free trade creates jobs so free trade is good and protection is bad.

When companies outsource because free trade allows them to do so any jobs lost should not be counted as a failure of free trade because free trade is good and protection is bad.

Free trade has us give up low quality jobs for high quality jobs and those people who got the training they needed to do the lost jobs are just out of luck and unemployed because they do not have the training to do the new jobs. Marie Antoinette was right “let them eat cake” after all they trained themselves for jobs that free trade eliminated. It is their own fault. If they want a job let them work for Chinese wages.

Free trade gives me lower prices on imported goods but just not enough lower to notice.

To the extent that the lower prices from free trade are offset and possibly eclipsed by higher prices on the domestic consumption goods exported (grain) and higher prices due to the devaluation of the dollar (gasoline) to increase exports should be ignored because free trade is good and protection is bad. I should look only at the lower prices of imports and be grateful and ignore any higher prices that free trade produces because free trade is good and protection is bad.

Bottom line:

Free trade is good and trade protection is bad and the fact that I can not see it is my failing not a failing of free trade. The failure to find definitive real world data to support the theory is a failure of the real world not the theory. The benefits of free trade are there they just can not be seen. Kinda like UFOs from Mars!

 
At 7/06/2011 4:01 AM, Blogger Ron H. said...

Look, James, you've provided nothing to show that free trade is bad, only unsupported opinions, and suggestions that correlation is causation.

Every argument you make against international trade could be applied to trade among states in the US, except in that case, they sound silly.

Are you really serious when you suggest that the USD is losing value due to trade? Surely you're aware of the vast amounts of counterfeit money the Feds have been printing. Don't you think that's a better explanation? Besides, a lower value dollar should increase exports and decrease imports: that's a good thing, right?

Do you suppose that recent high unemployment could be the result of a severe recession? What connection can you make, other than supposition, that connects high unemployment to trade?

Yes. I know some jobs are lost to outsourcing, but I think you will find the numbers are much lower than you think, and that far more jobs are lost to automation and the employment of more capital per employee. Is that also a bad thing? Do you, like Obama, bemoan the loss of bank teller jobs to ATMs? Do you really wish to return to the days when bank access was limited to 10-3 Mon-Fri?

By the way, what do you suppose all those unemployed tellers are doing now?

Perhaps a remedy for unemployment in the US would be to eliminate all corporate income taxes, so companies would flock to the US as a tax haven, instead of the other way around.

 
At 7/06/2011 4:10 AM, Blogger Ron H. said...

"...after all they trained themselves for jobs that free trade eliminated. It is their own fault. If they want a job let them work for Chinese wages."

Well, they can't do that no matter how much they would like to, as the government has made it illegal for them to work for any amount less than the min wage, so I guess they will just be unemployed.

What's wrong with cake?

 
At 7/06/2011 4:19 AM, Blogger Ron H. said...

"I confess that I don't eat at fast food restaurants, but I've not seen any old grandpas working there or in retail or delivering my paper (traditional bastions of teenage employment)."

I confess that I do occasionally eat at fast food restaurants, and I have only once seen an old grandpa working in one, but I think he probably started working there as a teenager, and wasn't really crowding out any others.

 

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