Archive for the ‘Econ. 101’ category

Coronavirus Consequences: Intended And Unintended

April 8, 2020

 

Consequences Just Ahead Green Road Sign with Dramatic Storm Clouds and Sky.

HOW DO EXPERTS VIEW THE WORLD

The lens through which experts see a problem is important in understanding why they make the decisions they do. Engineers, chemists, immunologists, economists, lawyers, psychiatrists, social workers, farmers, politicians, and bureaucrats could look at the same thing and see it differently.

 

IMMUNOLOGIST

The head of the White House Coronavirus Task Force, Dr. Fauci, is the director of the National Institute of Allergy and Infectious Diseases. He sees our current crisis through the lens of being an immunologist. The end he seeks is the eradicate the Coronavirus. He chooses means that he believes will bring about the end he seeks.

What he doesn’t see are the consequences produced, outside of eradicating the Coronavirus, by the means he has chosen.

 

ECONOMICS

Economics isn’t really about finances, making money, business, profit etc. Economic principles are in play in situations that have nothing to do with money and finances.

Economic principles apply to everything in life. Medics on the battlefield perform triage on the wounded soldiers. They are deciding how to allocate their scarce medical resources, including their time, to the most productive use. Some soldiers have a chance to survive if they get immediate care. Some have wounds that can be addressed quickly and fixed later. Some can’t be saved. Triage is how these doctors make these trade offs. If they spend all their time on a soldier that can’t be saved, others will die who could have been saved and some may lose limbs that wouldn’t have.

Each of us has a limited number of hours (24 ) in a day. And we have an unlimited number of ends to choose from. We choose certain ends and also choose the amount of time we are going to allocate to each.

Good economists see the world differently. They do not see one size fits all solutions in a world of scarce means and unlimited ends. They don’t see a decision as a choice between either A or Z . They see decisions as trade offs between A and Z.

 

THAT WHICH IS SEEN AND THAT WHICH IS NOT SEEN

Frederic Bastiat was an economist in France during the mid 1800’s. His essay, That Which Is Seen and That Which Is Not Seen, starts like this: “In the economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause – it is seen. The others unfold in succession – they are not seen: it is well for us if they are foreseen. Between a good economist and a bad economist this constitutes the whole difference……the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, at the risk of a small present evil.”

I’m not picking on Dr. Fauci. Every profession, by the very fact of being specialized, has built in blind spots weather it is politicians, bureaucrats, engineers, lawyers, psychiatrists or social workers.

We have to understand this reality and do a better job of looking at the trade offs instead of the one size fits all solution. The financial cost, the psychological cost and the high cost of agreement, have to be seen and considered in every decision.

I know our politicians and bureaucrats are not weighing all the costs of the decisions they have been made concerning the Coronavirus crisis. And the reason is they see the crisis not as a problem to be “solved”, but as a chance to increase government power, and shrink the rights of the individual. Because “You Never Let A Serious Crisis Go To Waste.”

 

ARTICLES

Complex Systems Collide, Markets Crash, by James Rickards, at dailyreckoning.com.    Excerpt from the article:

“Complexity theory has four main pillars. The first is the diversity of actors. You’ve got to account for all of the actors in the marketplace. When you consider the size of global markets, that number is obviously vast.”

“The second pillar is interconnectedness. Today’s world is massively interconnected through the internet, through social media and other forms of communications technology.”

“The third pillar of complexity theory is interaction. Markets interact on a massive scale. Trillions of dollars of financial transactions occur every single day.”

“The fourth pillar, and this is the hardest for people to understand, is adaptive behavior. Adaptive behavior just means that your behavior affects my behavior and my behavior affects yours. That in turn affects someone else’s behavior, and so on.”

“Understanding the four main pillars of complexity gives you a window into the inner workings of markets in a way the Fed’s antiquated equilibrium models can’t. They let you see the world with better eyes.”

“People assume that if you had perfect knowledge of the economy, which nobody does, that you could conceivably plan an economy. You’d have all the information you needed to determine what should be produced and in what number.”

“But complexity theory says that even if you had that perfect knowledge, you still couldn’t predict financial and economic events. They can come seemingly out of nowhere.”

“I make the point that a snowflake can cause an avalanche. But of course not every snowflake does. Most snowflakes fall harmlessly, except that they make the ultimate avalanche worse because they’re building up the snowpack. And when one of them hits the wrong way, it could spin out of control.”

 

The Costs Are Mounting In This Government-Imposed Economic Collapse, by William Anderson, at mises.org.   Excerpt from the article:

“What we are seeing is how many people want governments to respond to a situation characterized by uncertainty. In such circumstances, they demand “solutions” that only can make things worse, and there is no better way to make the masses vulnerable to disease than to impoverish them. Furthermore, theNew York Times and the American Conservative’s one-two punch demanding total subjectivity to the whims of government makes it very difficult for there to be even a smidgen of rational discussion as to what is taking place no matter what one’s ideological stance might be.”

“First, instead of assuming that regulators really intended to minimize costs but somehow proceeded to make crazy mistakes, I began to assume that they were not trying to minimize costs at all……… They were trying to minimize their costs, just as most sensible people do.”

“Politicians are rationally risk averse, and when they shift the costs of their decisions upon the people they ostensibly wish to protect, they are not acting out of character, either of themselves or of the political system. That they wreck the livelihoods of millions of people in the process is of no concern to them and their adoring media. Instead, blame the capitalists.

 

“If Getting Us Into $6 Trillion More Debt Doesn’t Matter, Then Why Not $350 Trillion?” at zerohedge.com.         Excerpt from the article:

“… in case anyone still hasn’t figured it out, the whole “republican, democrat” split of the population in two rival camps is nothing more than theater meant to distract while those in control loot not only the here and now, but also rob the future generations blind. Because the sad truth is that behind the fake veneer of either progressive ideals of conservative values, politicians on both sides have one simple directive: to perpetuate the broken status quo for as long as humanly possible, and get as rich as possible in the process.”

 

“A Multitrillion Dollar Helicopter credit Drop”: How The Fed Turned $450 Billion Into $4.5 Trillion, at zerohedge.com.   This stimulus bill allows The Fed to print $4 trillion dollars. The bill also allows The Fed to bailout anything or anyone it wants. It also allows it to do it secretly.  Why can’t I get a $1 million dollar bailout? I’m a great guy! And I’m great at keeping secrets!

 

Corona Cash Grab: Pelosi, US Agencies Compile Lists For Phase 4 Stimulus, at zerohedge.com.    At what point will this massive amount of debt become too heavy for the real economy to prop up. These geniuses think printing money and going into debt have no consequences. Economic reality will eventually win. And It will be ugly.

 

Michigan Democrat Governor Begs Feds For Hydroxychloroquine Just Days After Threatening Doctors For Prescribing It, at zerohedge.com.  This shows what a B.S. game politics is.  I will play politics until I need something to save my a$$.

 

Stimulus Package Projected To Save The Lives Of At Least 85,000 Government Programs, at babylonbee.com.   The Bee is great. This headline is funny because it is true.

 

The Things You CANNOT Say About Coronavirus, by James Corbett, at guardian.org.  If I don’t buy in 100% to what the “Experts” say about the Coronavirus, everyone acts as if I have committed a mortal sin against humanity. Most people will cave when it looks like the crowd is against them. I’m not most people.

 

How Governments Are Deploying Big Data To Enforce Covid-19 Quarantines, at zerohedge.com. And this article:  Kansas Using Residents’ Cell-Phone Location Data To Fight Pandemic, by Tobias Hoonhout, at nationalreview.com. These articles give us insight into how tyrannical politicians can be in the name of doing good. This is surveillance without a warrant. This is essentially what the FBI got the FISA court to do to Trump.

Garcetti To Non-Complying Businesses: ‘We Will Shut You Down, at laist.com.   Where do these governors get the power to confiscate a businesses property. In reality this is what they are doing with these shut down rules. Do these rules have the force of law behind them or are these Governors using intimidation to get people to do what they want?

$350k Bond For Man Charged In ‘We Don’t Give A F*** Caronavirus’ Video, at fox19.com.    $350,000 bond for a second degree misdemeanor?  Seriously?  Here is what the Prosecutor said: “Millions of Ohioans are following Governor Mike DeWine’s social distancing order. It’s not a suggestion, it’s the law,” Hamilton County Prosecutor Joe Deters said in a tweet over the weekend. “Gathering in big groups is dangerous, especially to our police when they have to intervene. It’s real simple: stay at home or expect to be prosecuted.”

This is all about intimidating people to do something that is an order (Suggestion) and not a law. These are the very real unintended consequences of Government is doing. This guy committed a mortal sin against the powers that be.

 

From Denmark, A Clever Way To Stop Panic-Buying And Hoarding, by Mark J. Perry, at carpediemblog.   This is how you ration scarce resources. Raise the price. But this is really thinking outside the box. One bottle of hand sanitizer $5.73,  2 bottles $143 each. This should be the pricing system for toilet paper and paper towels.

 

UK Drug Dealer: People Are “Panic-Buying Cocaine And Weed To Cope With Covid-19 Lockdown, at zerohedge.com.    In the UK people are panic buying cocaine and marijuana. A dealer said: “…the price of cocaine is set to surge because there are no new shipments coming in from abroad for at least six weeks……When the stock begins to run low, people higher up the chain will charge more or cut the cocaine and decrease its quality.”   Economic principles are always in play. Even in the black market. The price will go up to ration the scarcity, or they will cut the quality to extend the supply.

Solutions? Or Trade Offs?

March 24, 2020

Diagram of tradeoff

I heard this statement the other day about our present Covid 19 “crisis”: ” Do we save lives and kill the economy? Or do we save the economy and kill lives?

I’ve learned from economist Thomas Sowell that in our imperfect world, there are no solutions, there are only trade offs. What does that mean? It means that the two choices above are not the only choices. These choices are stated as all or nothing categorical decisions. But many of “experts” fail to see the incremental trade offs that can be made between these two extremes.

When a “crisis” pops up, a particular “solution” to the crisis is imposed on us by an “expert”. People who criticize the “solution are usually hit with this statement: “Even if it saves just one life, isn’t it worth it?” My answer to that question is, “NO” it is not worth it.

The question implies that there is no limit to the amount of resources that should be used in order to save just one life. But a price is put on life everyday. If these people were serious about “saving just one life” they would fight to get the speed limit reduced to 20 mph. Would any of us be willing to trade off the economic benefits of a higher speed limit as well as our ability to get places faster, for the lives lost in accidents.

The deaths of coal miners and power line workers are an acceptable trade off to have electricity in our homes. Some of the most deadly professions are fisherman, farmers and loggers. Yet we don’t think twice about the trade off of these lives when we eat crab legs or a steak or build a house.

The point is, there is a trade off between lives lost and the goods and services our free market economy produces. In fact the standard of living produced by free market capitalism has saved exponentially more lives than have been lost in the production of that standard of living.

Swine Flu data from 09-10 shows 60 million contracted the virus and 22,469 died. Influenza data for this flu season shows between 38-59 million contracted the flu and between 23,000-59,000 died. These were no big deal to the media. These lives were an acceptable trade off to the powers that be and the media. So why is our present “crisis” different?

 

Here are some great articles with great information.

Coronavirus Isn’t A Pandemic, by Richard Epstein, at ricochet.com.

Excerpt from the article:

“But why might the dire predictions be wrong? The theoretical answer to the question of how deadly the virus will turn out lies in part in a strong analytical relationship between the rate of spread and the strength of the virus. Start with the simple assumption that there is some variance in the rate of seriousness of any virus, just as there is in any trait for any species. In the formative stage of any disease, people are typically unaware of the danger. Hence, they take either minimal or no precautions to protect themselves from the virus. In those settings, the virus—which in this instance travels through droplets of moisture from sneezing and bodily contact—will reach its next victim before it kills its host. Hence the powerful viruses will remain dominant only so long as the rate of propagation is rapid. But once people are aware of the disease, they will start to make powerful adaptive responses, including washing their hands and keeping their distance from people known or likely to be carrying the infection. Various institutional measures, both private and public, have also slowed down the transmission rate.”

“At some tipping point, the most virulent viruses will be more likely to kill their hosts before the virus can spread. In contrast, the milder versions of the virus will wreak less damage to their host and thus will survive over the longer time span needed to spread from one person to another. Hence the rate of transmission will trend downward, as will the severity of the virus. It is a form of natural selection.”

 

Coronavirus Overreaction, by Richard Epstein, at ricochet.com.

Here is a point that jumps out at me: “Italy has taken the lead with 6,077 deaths……… which stems, it appears, from a conscious decision not to supply ventilators to anyone over 60.” Death panels anyone?

Excerpt from the article:

“Out of over 367,000 COVID-19 cases reported as of noon March 23, 2020, 16,000 people have died, a rough increase of about 9,500 from the past week. China has contributed about 3,500, a figure that is holding relatively stable — if we are to believe the reporting coming out of the People’s Republic of China — as is Iran’s total of 1,812 deaths (another potentially dubious total). In Spain, the death toll is 2,206. Italy has taken the lead with 6,077 deaths, 85 percent of which are of people over 70, which stems, it appears, from a conscious decision not to supply ventilators to anyone over 60. These four nations make up close to 13,000 deaths or about 82 percent of the total. Taken together, these four countries account for over 13,595 of the 16,097 deaths. The good news here is that the growth rates in both Italy and Spain have turned downward in the past 48 hours.

“We need a public debate on the political response to COVID-19, and we need it now. I fully understand the need for immediate responses to immediate threats, like fires, but not for crises that may last for three months or more. At this point, everyone knows that people who are elderly, especially those with chronic conditions, should stay out of harm’s way. But that prohibition is self-enforcing because those people know that it is in their best interest to self-quarantine, at least in place of high incidence, but by no means nationally. But for low-risk groups, a different set of precautions may fit the bill — an emphasis on thorough hand washing, reduced work hours, reducing workers per shift, and better availability of ventilation equipment.”

“The central Hayekian principle applies: All of these choices are done better at the level of plants, hotels, restaurants, and schools than remotely by political leaders. Our governors have failed to ask a basic question: When all the individual and institutional precautions are in place, what is the marginal gain of having the government shut everything down by a preemptive order? Put otherwise, with these precautions in place, what is the extent of the externalities that remain unaddressed?”

“Progressives think they can run everyone’s lives through central planning, but the state of the economy suggests otherwise. Looking at the costs, the public commands have led to a crash in the stock market, and may only save a small fraction of the lives that are at risk. In addition, there are lost lives on both sides of the equation as many people will now find it more difficult to see a doctor, get regular exercise, stay sober, and eat healthily. None of these alternative hazards are addressed by the worthy governors.

 

Podcast: Richard Epstein Talking With Nick Gillespie About Coronavirus, at reason.com. Listen to this podcast. Epstein makes good sense.

 

Article here: The Costs Are Mounting In This Government-Imposed Economic Collapse, by William L. Anderson, at mises.org.

Excerpt from the article:

“Federal and local authorities are stretching their constitutional limits well beyond anything our ancestors would have recognized in their attempts to keep people away from each other and prevent social contact.”

“…….. Military terms such as “shelter in place” now are part of ordinary language as governments at every level issue orders, with governors competing to see how they can be perceived as being “in charge” as they bark out increasingly draconian commands, threatening deadly force if necessary.”

What we are seeing is how many people want governments to respond to a situation characterized by uncertainty. In such circumstances, they demand “solutions” that only can make things worse, and there is no better way to make the masses vulnerable to disease than to impoverish them. Furthermore, the New York Times and the American Conservative’s one-two punch demanding total subjectivity to the whims of government makes it very difficult for there to be even a smidgen of rational discussion as to what is taking place no matter what one’s ideological stance might be.

As noted earlier, all of this is a response to the uncertainty of just how much this virus will spread and what its actual effect will be on the health of Americans. What we do know (at least at this point), however, does not exactly raise our confidence in American politicians and the media, especially the elite media.

 

Prevention Expert:Data Shows Our Fight Against Coronavirus May Be Worse Than The Disease, by James Barrett, at dalywire.com.

Excerpt from the article:

“…..By taking an “at war” approach to fighting COVID-19 widespread shutdowns and isolation of the entire population rather than a “surgical strike” approach focusing on the truly vulnerable, Katz argues, we have set ourselves on the path to “uncontained viral contagion and monumental collateral damage to our society and economy.” 

“The reason this is so dire, he underscores, is that our current approach is rapidly causing severe damage socially, economically and in terms of public health.”

“I am deeply concerned that the social, economic and public health consequences of this near total meltdown of normal life — schools and businesses closed, gatherings banned — will be long lasting and calamitous, possibly graver than the direct toll of the virus itself,” Katz writes.”

“While the stock market might rebound, many businesses and thus many jobs, may never come back, a result that has massive societal ramifications. Meanwhile, by stretching our limited health care resources “so widely, so shallowly and so haphazardly,” we are likely setting ourselves up for failure on multiple levels.”

 

Never Let A Serious Crisis Go To Waste

Thomas Sowell: “The first rule of economics is scarcity, there are not enough resources to meet the desires and needs of everyone. The first rule of politics is to ignore the first rule of economics.

If that is the first rule of politics than the second rule of politics is: Politicians are always trying to increase the power of government. But when a crisis hits that effort increases exponentially.

I don’t like the fact that the multiple trillion dollar “Stimulus” bill will bail out banks and corporations that previously used The Feds printed money to buy back their stock in order to prop up their stock price. You and I also know that this will end up being more like 4 trillion dollars when you add everything up. This 2-4 trillion is all debt. This debt will be purchased directly or indirectly by the Federal Reserve’s printing press. We are piling more debt on top of what we all ready have. This is what we did in the 2008 crisis (TARP Bailout). Non of the 08 debt has been repaid. We have a Empire State building of debt built on a sand foundation. It is totally top heavy like an inverted pyramid. But we’ll address the Fed money printing in another post.

I also don’t like the Democrats 1400 page bill that is nothing more than the democrat policy platform for the 2020 election. They are trying to implement their agenda before the election takes place.

Here are a few things that are in the 1400 page bill. Increased fuel emission standards for airplanes. Same day voter registration, early voting, voting by mail, and something called ballot harvesting (no potential for voter fraud here). Reserve collective bargaining power for unions. Expand wind and solar tax credits. Money for planned parenthood.

The Democrats, Republicans and the Federal Reserve are definitely not letting this crisis go to waste.

These articles have more info in them.

Nancy Pelosi Proposes 1,400 Page Coronavirus Bill Stuffed With Pork, at breitbart.com.

McConnell: Dems Holding Up Coronavirus Relief Over solar Panel Tax Credits, at breitbart.com.

Everyone In America Should Read About Dems Killing Emergency Relief Package, at theblaze.com.

 

Some Econ Homework

July 16, 2019

Austrian Business Cycle Theory, Explained, by Murry N. Rothbard, at mises.org. This is a short explanation of the boom-bust cycle that is created by monetary intervention into the free market via bank credit expansion. Excerpt from the article:

…bank credit expansion sets into motion the business cycle in all its phases: the inflationary boom, marked by expansion of the money supply and by malinvestment; the crisis, which arrives when credit expansion ceases and malinvestments become evident; and the depression recovery, the necessary adjustment process by which the economy returns to the most efficient ways of satisfying consumer desires.

Keynesian Fake News In The Wall Street Journal, by Daniel J. Mitchell, at mises.org. Government spending will not stimulate the economy. Government can only spend what it takes from the private sector. There is only a transfer of how the private sector would allocate its production, to government politicians and bureaucrats who will allocate their newly confiscated production according to what they value. Government doesn’t produce anything that it can exchange for money. It can only confiscate private sector production. The transfer via taxes is a transfer of something for nothing. It is not only theft, it is a reduction of wealth.

Why Socialism Must Fail, by Hans Hermann Hoppe, at mises.org. Excerpt from the article:

Socialism and capitalism offer radically different solutions to the problem posed by scarcity: everybody can’t have everything they want when they want it, so how can we effectively decide who will own and control the resources we have? The chosen solution has profound implications. It can mean the difference between prosperity and impoverishment,

“The United States is not fully socialized, but already we see the disastrous effects of a politicized society as our own politicians continue to encroach on the rights of private property owners. All the impoverishing effects of socialism are with us in the U.S.: reduced levels of investment and saving, the misallocation of resources, the overutilization and vandalization of factors of production, and the inferior quality of products and services. And these are only tastes of life under total socialism.”

When Will The Stock Market Respond to 2016’s Liquidity Collapse? by Frank Shostak, at mises.org. Intervention into the free market via lower interest rates and an increase of the money supply leads to artificial booms and all to real busts. If the Fed is to keep the Stock Market from correcting the Feds previous monetary expansion, it has to lower interest rates.

Social Pressure vs. Consumer Preferences, by Joakim Book, at mises.org. Excerpt from the article:

“Indeed, on a more fundamental economic level, this is the logical conclusion of division of labor. Taking information from others is how we survive in large-scale complex market societies. This is easy to see when discussing a broken car or leaking pipes: you could probably learn how to fix those pipes yourself and develop your car mechanic skills to be able to repair the car, but it would likely take much more time, effort and money than you’re willing to part with — hiring a specialist makes economic sense. Similarly, you can think of relying on others’ tastes when it comes to music or food flavors or TV shows to be a trove of useful information, deflated appropriately by how much you tend to like what others like.”

What’s Up With The Obsession About Low Interest Rates, by Mark J. Perry, at carpediemblog. Excerpt from the article:

“Raising/lowering prices, wages, or interest rates can only benefit one half of the market (buyers or sellers, workers or employers, borrowers or savers, but not both) and those benefits come at the direct expense of the other half of the market (buyers/sellers, workers/employers, borrowers/savers). In other words, it’s is zero-sum outcome that redistributes gains and losses, but without any net gains, similar to the Keynesian stimulus fallacy illustrated below.”

So what’s with the obsession, especially the political obsession, with lower interest rates that are guaranteed to do great harm to savers while benefiting borrowers?”

“The answer must be that there’s a much greater political short-run payoff from lower interest rates than from higher interest rates. That is, borrowers (including corporations) must have a louder and more organized political influence than disorganized savers. In that case, aren’t lower interest rates a form of legal plunder and crony capitalism that allow borrowers to take advantage of savers enabled by easy monetary policy by the Fed?”

Thomas Sowell: Discrimination and Disparities

May 31, 2018

Thomas Sowell

Thomas Sowell is my favorite author. It was my great fortune to have stumbled upon his books in the mid 90’s. Dr Sowell has the ability to make complex concepts understandable to regular people like you and me. He digs into statistics from various studies and figures out what they reveal and what they do not reveal. He is an economist by trade. This background allows him to see discernible patterns that are hidden to most of us.

His writings have equipped me with a series of questions that I ask myself when confronted with any issue or anyone speaking about an issue. Here are the questions.

– Compared to what?

– At what cost?

-Is what is being compared, comparable?

– And then what?

– Numbers? In what context?

– Can someone be ethical while being political and can someone be unbiased while being an advocate?

– What is important is not what decision should be made? The real question is who is to make the decision? Through what process? Under what incentives and constraints? With what feedback mechanism?

If you remember these questions the chances of being fooled decreases exponentially.

DISCRIMINATION AND DISPARITIES

Although Dr. Sowell does not write his weekly column anymore, fortunately for us he is still writing books.

Dr. Sowell has written a new book titled “Discrimination and Disparities“. Dr. Sowell is being interviewed by Peter Robinson in this interview on Uncommon Knowledge. It will be a great investment of your time to listen to Dr. Sowell in this interview.

Here are some excerpts from the video:

“The fact that economic and other outcomes often differ greatly among individuals, groups, institutions and nations poses questions to which many people give very different answers. At one end of the spectrum…..The belief that those who have been less fortunate…..are genetically less capable. At the other end….. the belief that those less fortunate are victims of other people…..”

“Disparities can also reflect the plain fact that success in many kinds of endeavors depends on prerequisites peculiar to each endeavor and a relatively small differences in meeting those prerequisites can mean a very large difference in outcomes.”

“Professor Turman of Stanford did an empirical study where he picked something like 1500 people who had IQ’s in the top one percent. And he followed them for 50 years to see how they turned out…..The disparaties within that narrow range……the top third had more than ten times as many post grad degrees as the bottom third among people who were all in the top one percent. So there is obviously many other things that had to come together…..The other thing was that two people who failed to make the 140 IQ cut off ended up getting Nobel Prizes in physics, and nobody among the 1500 ever did. So obviously there has to be a lot of things that come together…..”

“The biggest differentiating factor in this study was family backgrounds. The ones who were in the top third came from families who were more educated. The ones who were in the bottom third had a parent who had dropped out of school before the eighth grade. So it doesn’t matter how much brain power you may have, if you are not raised in a home where people are thinking, where they’re doing intellectual things, you are not in the same position as someone with the same IQ who is in a family that has that kind of background. This blows the genetic argument is ruled out-of-bounds in terms of smarts. But so is the argument that anybody victimized them. The principle factors that accounted for success as opposed to failure was family background. That’s not really victimization, that’s a question of almost cosmic luck…. Too many observers….reason as if Intentions automatically translate directly into outcomes.”

The only times over which we have any degree of influence at all are the present and the future. Both of which can be made worse by attempts at symbolic restitution among the living for what happened among the dead who are far beyond our power to help or punish or avenge. Any serious consideration of the world as it is around us today must tell us that maintaining any common decency, much less peace and harmony among living contemporaries, is a major challenge both among nations and within nations. To admit that we can do nothing about what happened among the dead is not to give up the struggle for a better world, but to concentrate our efforts where they have at least some hope of making things better for the living.

 

Related Posts

Thomas Sowell: Wealth, Poverty and Politics, at austianaddict.com.

Thomas Sowell: “Economic Problems Don’t Have Political Solutions”, at austrianaddict.com.

Thomas Sowell: Vision Of The Anointed, at austrianaddict.com.

Thomas Sowell: The Economics And Politics Of Race, at austrianaddict.com.

Michelle Obama vs. Thomas Sowell On The Politics Of Race, at austrianaddict.com.

The ‘Disparate Impact’ Racket By Thomas Sowell, at austrianaddict.com.

Thomas Sowell: Human Capital More Important Than Physical Capital, at austrianaddict.com.

If you type Thomas Sowell in the search box you, will be treated to more of his writings.

Must Reads For The Week 2/10/18

February 11, 2018

 

THE FED AND THE STOCK MARKET

Is The 9-Year Dead Cat Bounce Finally Ending? By Charles Hugh Smith, at oftwominds.com. The Feds double edged sword of artificially low interest rates and money printing have created bubbles in the financial markets. No one knows what is and is not a bubble activity. We just know printed money went into the financial markets. As Jim Grant has said, “It is money in search of mischief”. In other words, artificially low interest rates and printed money misallocates scarce resources to activities that would not exist under free market interest rates and stable money.

When the Fed raises interest rates and takes money out of the system by unwinding its balance sheet, the bubble activities will be revealed. Could this be what is happening to the stock market now. The Fed’s QE Unwind Accelerates Sharply, at zerohedge.com. The Fed created the financial bubble in the first lace and is now trying to figure out how to gradually let the air out, instead of popping it. They hope a stronger economy can help release the air slowly over time.

Former Fed Chairman Alan Greenspan Warns: “We Have A Stock Market Bubble, at zerohedge.com. No kidding! You helped cause it by lowering interest rates and printing money.

The worlds Central Banks Holding Steady, But Promise More Rate Hikes, at mises.org. I scratch my head when I hear central banks talk about price inflation without mentioning that their policies are the cause of inflation. Prices will go up and down because of supply and demand. But this is not inflation. Money printing is the definition of inflation.

DEBT

Pentagon Auditor Can’t Account For $800 Million In Spending, at zerohedge.com. No shock here. There is waste, theft and fraud everywhere tax payer money is spent.

Credit Card, Student and Auto Debt All Hit Record Highs In December, at zerohedge.com. Borrowing money means you bring your future consumption into the present. How much more do you have to produce in order to be able to pay off the interest and inflated cost of present consumption and to also be able to consume when the future becomes the present?

Republican Fiscal Hawks Revolt Against Budget Deal, Suspension Of Debt Ceiling, at zerohedge.com. How can the Republicans in Congress say they are for small government when they pass a budget that increases the yearly budget debt by $400 billion? Only fiscally responsible Republicans stood against this budget. With the Fed saying they are going to increase interest rates, the $20 plus trillion national could increase exponentially.

Student-Loan Crisis Worsens; Looming Defaults Strain Govt Bailout Program, at zerohedge.com. Since the Government took over student loans it has become a bubble activity. The rise in the cost of college tuition is being caused by borrowed money being used to pay for college. When students get out of college and have more debt than income there will be defaults. These defaults will eventually be paid by you and me the tax payer. What a scam!

The Cure, at ericpetersautos.com. Excerpt from the article: “Imagine how different cars would be if people had to pay for them – as opposed to financing them. Debt – which is what financing is – allows people to buy more car than they can afford. It hides the actual cost of the car. It enables the government to impose costs in the forms of mandates which would otherwise be unaffordable – and so, objectionable. People would complain in the one language the government understands. They would not comply – because they could not buy.”

OTHER STUFF

We Say Peoplekind”: Trudeau Mansplains To woman That “Mankind” Is Not an Appropriate Term, at zerohedge.com. This is the the idiocy of political correctness. Everyone with a brain knows what mankind means.

Lawmakers Want To Ban Tide-Pods From Looking So Delicious…. Seriously, at zerohedge.com. Who in their right mind would think eating laundry pods is a good idea? What kind of ego does it take to think it is your job to protect these idiots from themselves?

The Greatest Public Health Mistake Of The 20th Century, at mercola.com. We have been told for decades to stay out of the sun or wear sunscreen when you have to be out in it. But staying out of the sun causes a vitamin D deficiency. The study says that vitamin D may prevent 30 deaths for each death caused by skin cancer. Thomas Sowell is right again when he said, “There are no solutions in life. There are only trade offs.” We were sold a bill of goods on a bad trade off.

The Fragile Generation, at zerohedge.com. Excerpt from the article: “Bad policy and paranoid parenting are making kids too safe to succeed…..This generation of kids must be protected like none other. They can’t use tools, they can’t play on grass, and they certainly can’t be expected to work through a spat with a friend.”

 

Hurricane Irma: Credentialed Ignorance vs. Uncredentialed Intelligence.

October 5, 2017

 

The credentialed ignorance of NY Federal Reserve president William Dudley is revealed by Evelyn’s uncredentialed intelligence. Evelyn quotes Henry Hazlitt, Frederic Bastiat, and Thomas Sowell to make her economic argument that the destruction by hurricane Irma is ‘the broken window fallacy’ on a much larger scale.  Fed president William Dudley seems to think the destruction by hurricane Irma will improve the economy. I bet William Dudley has never read anything written by Hazlitt, Bastiat or Sowell.

INTELLIGENCE.

Here is Evelyn’s short video about the Broken Window Fallacy.

IGNORANCE.

Now watch the credentialed ignorance exhibited by NY Federal Reserve President William Dudley in this CNBC interview (click here).

If we believe the economic ignorance of William Dudley we would think that Puerto Rico’s $73 billion debt problem (read here) will magically go away because the island was almost destroyed by hurricane Maria. I bet the people of Puerto Rico don’t realize how lucky they were that Maria hit them directly.

CONCLUSION

You don’t need an economics degree to understand economics. But I think you need an economics degree in order to become ignorant about economics.

 

By the way. Evelyn uses one of my favorite Thomas Sowell quotes: “The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first rule of politics is to disregard the first lesson of economics.

 

Related ArticleHurricane Sandy And The Broken Window Fallacy, at austrianaddict.com.

Related ArticleThe Broken Window, at mises.org.

Related ArticleA Keynesians Dream; Cruise Missile Strikes In Syria. at austrianaddict.com.

Some Econ Homework

June 20, 2017

Jean-Baptiste Say And The “Law Of Markets“, by Richard Ebeling, at fff.org. Say’s ‘Law Of Markets’ states: “A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value.”…..As each of us can only purchase the productions of others with his own productions – as the value we can buy is equal to the value we can produce, the more men can produce, the more they will purchase.”

You can’t consume what has not been produced. Production creates the ability to consume. The more you produce the more you can consume.

Say: “It is not the abundance of money but the abundance of other products in general that facilitates sales….Money performs no more than the role of a conduit in this double exchange. When the exchanges have been completed, it will be fount that one has paid for products with products….Should a tradesman say, ‘I don not want other commodities for my woolens, I want money,’ there could be little difficulty in convincing him, that his customers cannot pay him money, without having first procured it by the sale of some other  commodities of their own….”

Counterfeiting money creates an exchange of an actual produced good for dollars that are not backed by corresponding production. This is theft. Even if the counterfeiting is done ‘legally’ by The Federal Reserve, it is still an exchange of something for nothing (aka theft).

There are always imbalances with supply and demand in the market, but they are usually corrected rather quickly. Monetary intervention by the Fed creates imbalances that last much longer and are only corrected by stopping the monetary intervention or an eventual bursting of the bubble.

Federal Reserve monetary manipulation has been going on for about a decade. Does anyone know what is real and what is fake in our economy right now? All we can say is there are major imbalances in our economy that will eventually be liquidated, and it won’t be pretty.

“Priming The Pump” Won’t Create Real Wealth, by Frank Shostak, at mises.org. When a recession happens labor and capital become idle. ‘Experts’ think the way out of the recession is to increase demand for goods and services so these idle labor and capital will become employed once again. Ignoring how the over-supply of labor and capital happened in the first place can lead to the same Government and Fed policy solutions which created the problem in the first place. Idle resources are not the problem. Idle resources are the symptom of the problem. The problem is the initial intervention into the market using the policies of below market interest rates and injecting electronically printing counterfeit money into the economy.

Excerpt from the article: “Commentators are correct in believing that what prevents the expansion of the production and the utilization of idle resources is the lack of credit. There is, however, the need to emphasize that the credit that is lacking is the productive credit – the one that is fully backed by real wealth (real savings). The fact that this type of credit is scarce is the outcome of previous episodes of expansionary monetary mischief by the central bank, which resulted in the diversion of wealth from wealth producers to non – wealth producers.”

“What most commentators advocate is the expansion of credit out of “thin air,” via central bank…. direct monetary injections or via intervention in the money markets to maintain a lower target interest rate……This expansion of unbacked credit not only cannot revitalize the economy but, on the contrary, will set in motion a further weakening of the process of wealth generation.

Fed Officials Can’t See What’s Right In Front Of Them, Jonathan Newman, at mises.org. Fed officials can’t see the forest for the trees.

Here is an excerpt from the article:”Minnesota District Bank president, Neel Kashkari recently wrote…..the Fed faces a dilemma regarding asset bubbles and whether of not they should be met with raising interest. He summarizes in five points.”

-“It is really hard to spot bubbles with any confidence before they burst.”

-“The fed has limited policy tools to stop a bubble from growing, even if we thought we spotted one.”

-“The costs of making policy mistakes can be very high, so we must proceed with caution.”

-“What we can and must do is ensure that the financial system is strong enough to withstand the inevitable bursting of a bubble.”

-“Monetary policy should be used only as a last resort to address asset prices, because the costs of the economy of such policy response are potentially so large.”

“Then he admits that it is possible artificially low-interest rates increase the probability of asset bubbles forming: “Low rates…could make bubbles more likely to form in the first place.” He laments that there is no economic theory to back this up….”

It is hard to believe that with his myriad of  ‘credentialed ignorance’ he has never heard of the Austrian Business Cycle Theory.  Excerpt from the article:

“For Mises and Hayek, the policy mistake involves any creation of credit out of thin air…….If any central bank increases the money supply through the financial system, it means that borrowers have the privilege of being the first to bid up prices as the new money ripples through the economy.”

“It means that nominal incomes, employment, consumption, the prices of capital goods, and other asset prices will increase. It means that capital will be directed into new, longer, and riskier lines of production, beyond what would have happened at the prevailing levels of real saving. These lines of production will turn out to be unprofitable as the increasing scarcity of capital becomes apparent and the costs of production become prohibitively high. Incomes, employment, consumption, and stock prices plummet as laborers and capital owners seek productive and profitable employment. The bust is made up of all of the necessary corrections for the errors made during the boom. Additional artificial credit will only delay this process and make it more painful when the day comes.

Mr. Kashkari, you said: ” Monetary policy should be used only as a last resort to address asset prices, because the cost to the economy of such policy responses are potentially so large.” Mr. Kashkari, do you know that the Fed monetary policies “of last resort” have been in effect since before 2000? These policies caused the tech and housing bubbles. What have been the costs to the economy after 20 years of these policies? They are incalculable. The only way to stop this waste is to allow interest rates to be set by the market and stop the money printing. This will bring about a recession which will correct all the dislocations of resources, capital and labor that were brought about by these policies. All thought the losses will be high, they won’t come close to the losses that will be incur the longer these monetary policies are allowed to continue.

Related ArticleInterest Rates Set By The Market vs. Interest Rates Set By The Fed, at austrianaddict.com.

Related ArticleReal Savings = True Credit. Printed Savings = False Credit, at austrianaddict.com.

Related ArticleThomas Woods Explains The Austrian Business Cycle, at austrianaddict.com.

Related ArticleThe Fed has Proved The Lefts “Trickle down Straw Man” Doesn’t Work. at austrianaddict.com.

Is There A Wage Gap Between Men And Women?

April 4, 2017

The ‘gender pay gap’ is a myth which has been spread for years. I have been reading about this ‘fake cause’ since I can remember. In 1984 Thomas Sowell covered this topic in chapter 5 of his book “Civil Rights: Rhetoric or Reality”.

Here is a Prager University video by Christina Hoff Sommers explaining the statistical fudging that takes place when the gender pay cause becomes bigger than the truth.

THOMAS SOWELL  addresses this topic in my article: “The ‘Equal Pay Day’ Canard” .

In this article titled: Equal Pay Day Is An Annual Event That Spreads Statistical Misinformation About The Gender Pay Gap, by Mark J. Perry, at carpediemblog, Mark J. Perry says choices made about hours worked, type of work, and marriage and motherhood are three of the deciding factors on how much a person is paid. Women and men make different choices in these three areas. When you compare men and women who make the same decisions the wage gap is negligible.

Mark J. Perry’s article titled: “Equal Pay Day’ This Year Is April 4th – The Next ‘Equal Occupational Fatality Day’ Will Be On January 21st 2029, shows how men work in riskier jobs than women. Thirteen men die while working on the job for every one women who dies on the job. Riskier jobs pay more. Choices have consequences.

Ignorance Perpetuates This Myth.

Supposedly smart people are ignorant when it comes to the gender pay gap. Here are two articles showing this ignorance.

The Chief Operating Officer Of Facebook Appears Clueless When It Comes To The Wage Gap, at economicjournal.com.

Ivanka Wage Gap Ignorance, at economicpolicyjournal.com.

We don’t have to be ignorant about issues like this. All we have to do is look beyond the rhetoric of the people pushing the cause.

Healthcare: Market Solutions vs. Bureaucratic Decrees

March 28, 2017

Modern thin line design concept for HEALTHCARE website banner. Vector illustration concept for healthcare diagnosis and treatment.

Our current battle over healthcare is being debated from a false premise. Most people have bought into the lie that healthcare is or should be a right. It isn’t a right as understood by most people. The right to keep and bare arms doesn’t mean someone else is obligated to supply a gun. The right to free speech  doesn’t mean someone else is obligated to supply a microphone, a stage and an audience. But for some reason we think a right to healthcare means someone is obligated to provide it.

The truth is healthcare is an economic good or service produced by individuals. These individuals own what they produce. It is their property. No one has a right to what someone else produces.

How can you gain possession of what someone else owns? 1) You can produce something they want and exchange it for what they have produced. 2) They may give it to you as a gift. 3) You can steal it. 4) You can have someone steal another persons production, exchange it for what you want, and have them give it to you indirectly. 5) You can have someone else steal it and give it to you directly.

Government intervention into the healthcare market, up to and including Obamacare, has been an incremental march away from the first two and toward the last two. Everyone knows that direct theft of another person’s property is unethical and immoral because it is illegal. But when we are one or two steps removed from the direct theft, for some reason we think it’s ethical and moral because government says it’s legal.

hand writing economic demand - supply graph on chalkboard

ECONOMIC REALITY OF HEALTHCARE

Healthcare is an economic good ruled by the laws of economics. Scarcity, subjective value, supply and demand are a few laws we need to look at in order to understand why government central planning isn’t the right process to ration the scarce good we call healthcare.

SCARCITY: Healthcare has to be produced. It is a scarce good. It isn’t like the air we breathe. Air doesn’t have to be produced by anyone. The abundant supply of air exists naturally. You might say the air I put in my tires Isn’t free. The air you put in your tires is first compressed and then forced into your tires. Compressed air has to be produced, therefore it is an economic good and not free like the air you breathe.

SUBJECTIVE VALUE: Everyone values healthcare differently. There is no objective value that can be placed on healthcare. The value for healthcare is subjective depending on each individual’s needs and wants. Both the demand for and the supply of healthcare is valued subjectively.

SUPPLY AND DEMAND: Since healthcare is scarce and valued subjectively, the law of supply and demand comes into play coordinating its production and consumption. The price reflects subjective valuations by individuals related to supply and demand. The subjective valuations at the existing price drives supply and demand to a new coordinating price.

The law of supply and demand states that more is demanded at a lower price than a higher price and more is supplied at higher price than a lower price. Price changes are constantly re-coordinating supply and demand according to the subjective valuations of individuals.

The supply of healthcare is limited by the scarcity of the resources, labor, capital and time needed to produce it. It is also limited by the demand for healthcare. If the demand for healthcare increases against a fixed supply, the price will go up in order to ration the scarce resource. As the price rises more resources, labor, capital, and time will be attracted to producing healthcare. As the supply increases to meet the higher demand a point will be reached where the price will stabilize and then decrease as supply outpaces demand.

The changing price sends information to consumers and producers about the scarcity of healthcare. These price changes are figured into the subjective valuations of how much each consumer will demand and how much each producer will supply.

Free market prices are the most efficient way to ration healthcare in a world of scarcity and subjective value.

government regulations, magnifier, pencil

GOVERNMENT INTERVENTION INTO HEALTHCARE

Government mandated healthcare subsidies, taxes and regulations distort the prices that would normally exist in a free market. Consumers demands and producers supplies are going to change according to these distorted prices. A mismatch of the supply of and demand for these scarce resources is brought about by government intervention.

What did you think was going to happen when more consumers were brought into the market by the Obamacare individual mandate? Subsidies also increase demand. Prices were guaranteed to rise as demand was artificially increased.

What happens when prices for healthcare services paid by Medicare and Medicaid are fixed below what they would be in a free market? The supply of health care would decrease at these lower prices.

Obamacare created more demand and at the same time created the incentive to supply less. What happens to the price when more is demanded and less is supplied? Even though our politicians told us costs would go down under The Affordable Care Act, anyone who understood basic economics could have predicted which way the price would go. And that isn’t even including paying for the government bureaucracy needed to implement the ACA.

NOW WHAT?

The failure of the Republican repeal and replace bill is a good thing. The bill was just an exchange of a set of not quite as bad new government regulations for the existing bad government regulations. Their is only one way to reduce the cost of healthcare. Get rid of government subsidies, taxes and regulations. Unfortunately all Democrats and a majority of Republicans don’t understand basic economics.

Quoting Ludwig von Mises – “Economic history is a long record of Government policies that failed because they were designed with a bold disregard for the laws of economics.

Republicans are also scared of political fall out when they get rid of healthcare entitlements. The Democrats and their accomplices in the main stream media will trot out all the sob stories of people whose ‘access’ to healthcare was taken away. Of course the MSM didn’t tell the stories of all the people who had their healthcare costs sky rocket under the ACA. These rising premiums paid for the increased costs and subsidies caused by government intervention.

Millions of families got crushed by the higher cost of healthcare. These were small businessmen and people who worked for small businesses in the more rural counties in America. These are the same people who were barely able to stay afloat when the economy crashed in 08. They cut their discretionary spending to the bone. Many had to use their savings and retirement accounts to make it through the recession.

When the Affordable Care Act was implemented after 2013 there was no spending left to cut to pay for the higher cost of healthcare. Wives had to go back to work just for the insurance. Men took second jobs for the same reason. These are the people in the swing states of Ohio, North Carolina, Florida, Iowa, and the Democrat States of Wisconsin, Michigan and Pennsylvania who voted for Trump. He was their only hope. They literally couldn’t afford to vote for Hilary.

Fortunately market alternatives to Obamacare are starting to appear around the country.

Read Here- Direct Primary Care, A No-Insurance Model.

Read Here – Florida West Virginia Lawmakers Take Interest In Insurance Free Approach.

Read Here – Atlas MD, Wichita’s Premiere Cash-Only Clinic.

As the price of Obamacare goes higher the demand for Obamacare will decrease. This higher price will also bring about lower cost market alternatives to the Government run system. These alternatives will be outside of the system. We can call these free market alternatives as long as Government doesn’t try to shut them down with regulations. If they do try to shut them down they will then become black market alternatives (the new free market).

Fracking is an example of a market alternative to the OPEC cartel and our Governments regulations on drilling off shore and on public land. When the price of oil rose to above $110 dollars a barrel it became affordable for hydraulic fracturing to take off on private land. Now that it is profitable to frack at $45 a barrel the OPEC cartel has lost its monopoly power. The high price of $110 was what eventually brought the price of oil down. Healthcare will be no different. The market will find an alternative as the price goes higher.

Read Here – Trumpcare Defeat Could Be A Small But Important Victory For Healthcare Freedom.

Read Here – Ryancare Is Failing -What Should Happen Next?

Read Here – Forget Obamacare, Ryancare, And Any Future Reformcare – The Healthcare System Is Completely Broken.

Economic reality will end Obamacare. Let’s hope the Government doesn’t end the market alternatives that have started to take root.

 

Economic Ignorance Has Caused Our Political Chaos.

March 8, 2017

Microeconomics or Micro Economics as a Concept

What do Jeffery Sachs (economics professor at Columbia), Bill Gates, the Pope, Donald Trump and Republicans in Congress have in common?….. Economic ignorance!

Why are  pronouncements by people with authority rarely challenged?….. Economic ignorance!

I found some recent articles on economicpolicyjournl.com which have a similar theme: People with authority demonstrating their ignorance about basic economic principles.

Here are the articles.

Harvard Educated Economist Clueless About The Fundamentals Of Economics.

I Never Realized The Economic Ignoramus Bill Gates Is….Until Now.

The Pope’s Problem With Basic Economics.

Trump In Melbourne Spilling His Economic Plans And How Non-Free Market Are They.

House Republican Border Adjustment Tax Plan Gains Support In White House: Prepare For Higher Prices And Less Product.

Jeffery Sachs, Bill Gates and the Pope don’t have the power of Government behind anything they say. Their authority exists in the minds of the people who believe they have authority. They can’t force their economic ignorance on us

The President and Congress have the power of Government behind their policies. Politicians and bureaucrats can force their economic ignorance on us.

OUR ECONOMIC IGNORANCE

The increasing political chaos existing in the U.S is rooted in the economic ignorance of a vast majority of people. Both the masses, and people with “authority”, bear responsibility for our present political and economic situation.

People with “authority” being economically ignorant creates a problem because we the masses accept what they say as truth. This leads to the passage of Governmental policies which can’t produce the outcomes predicted by the people with authority.

We have the power to be a check on these people with authority. But we reinforce their authority on the one hand, and increase the economic ignorance of the masses on the other, when we don’t challenge the economic validity of what they say.

People with authority always want more power. Their power can’t be increased unless we allow it. Authority not backed by the force of Government isn’t real authority. We voluntarily give people their position of authority.

With politicians and bureaucrats it’s different. Their authority is backed by the force of Government. Our first non-violent voluntary recourse to their power is to vote the economically ignorant out of office, or not to vote them into office in the first place. Our second is putting political pressure on politicians. But this only works if a overwhelming majority of people put political pressure on them.

The ability of politicians and bureaucrats to grow their power, rests on the economic ignorance of the electorate. If the economic consequences of the policies passed by these politicians were known by the voters, they wouldn’t have been passed. Understanding basic economic principles allows us to look over the horizon and see the consequences of these policies.

EXAMPLES OF FAILED POLICIES

The Affordable Care Act aka Obamacare sounds great. But the laws of economics will not allow the ACA to lower the cost of healthcare. The costs can be shifted, but not lowered by government decree. The result of passing the ACA is chaos in the healthcare market, or what is left of a healthcare market.

Increasing the minimum wage for low skilled workers sounds great. But the laws of economics won’t allow increasing the minimum wage, above what that labor produces. The result of passing this law is fewer low skilled workers will be employed.

FORSEEABLE CONSEQUENCES

If, we the people, understood some basic principles of economics we wouldn’t allow these interventionist ideas to be planted, let alone take root.

Some of these basic principles are: 1) Scarcity, 2) Subjective Value, 3) Supply and Demand 4) Production Precedes Consumption.

Lets look at the Affordable Care Act and mandated minimum wage increases through the binoculars of scarcity, and supply and demand.

Scarcity is the first rule of economics. Scarcity simply means, “what everybody wants adds up to more than there is”. Put differently. Their are limited means available to satisfy the unlimited ends we seek. These limited means have to be allocated toward producing the ends we seek. There are two ways to allocate these means. One way is voluntary cooperation, through prices in a free market. The other way is force, through the edicts of politicians and bureaucrats using government power.

Supply and Demand is easy to understand. Put simply; More is demanded and less is supplied at a low price, and more is supplied and less is demanded at a high price. Prices reflect and drive supply and demand. If their is a sudden drop in the supply of a product, the price rises. This increase in price rations the existing supply, and sends a signal that more needs to be produced. On the flip side of the coin, if their is a sudden increase in the supply of a product, the price will go down. This decrease in price sells off the existing glut, and sends a signal less needs to be produced.

AFFORDABLE CARE ACT AND MINIMUM WAGE LAWS

The Affordable Care Act forced “30 million” uninsured people to enter the healthcare market. This meant the demand for healthcare was going to increased. Even though the supply of healthcare couldn’t be increased as quickly. (Example) It takes years for people to become doctors and nurses. Increasing the supply takes more time than the almost instant increase in demand brought about by the stroke of pen. If we apply the economic principles of scarcity, and supply and demand to the Affordable Care Act, what was going to happen to the price of healthcare? And this is not even calculating the cost of the regulations and new bureaucracy created by the 2500 page bill.

Raising the minimum wage increases the price of labor. According to the law of supply and demand, less is demanded at the high price. Voting for laws which increase the wages of people who we think are not being paid enough doesn’t help these people. Fewer people will be employed at the higher price. Many times these low skilled workers jobs will disappear all together because they can be replaced by automation. The price of labor was artificially increased to the point where it was economical to automate (read here). If we apply the law of supply and demand to the rhetoric of increasing the minimum wage, people wouldn’t have been fooled into thinking they were helping the people the law was actually hurting..

OUR CHOICES

Economic principles are always in play. Government edicts can’t negate economic reality. The political chaos we have today is the result of ignoring the reality of basic economics. We can’t wish these realities away because we don’t like the fact they limit what we demand.

I’m going to quote a person with authority at this point. So don’t take this quote as authoritative. Figure it out yourself.

F. A. Hayek a Nobel Prize winning economist, (how is that for status), said: “Planning, or central direction of economic activity, presupposes the existence of common ideals and common values; and the degree to which planning can be carried is limited to the extent to which agreement on such a common scale of values can be obtained or enforced.

Let’s get educated in basic economics. Life is easier to understand when you understand how the world works. Here is another quote.

F. A. Hayek: “The curious task of economics is to demonstrate to men how little the really know, about what he imagines he can design.”

We have two choices. Scarce resources can be rationed through prices voluntarily in the free market. Or Scarce resources can be rationed forcibly by politicians and bureaucrats through the power of Government. Which direction are we moving?

CONCLUSION

Political insiders of both parties have shaped the battle field into a choice between the R’s and the D’s. In reality the real battle is between the insiders in both parties who want to grow the power of Government, and people who stand for free markets and want to cut the power of government. Neither group is a majority. The majority of people are the economically ignorant. These people have been fooled into fighting the battle through the R and D paradigm.

Our job is to educate the economically ignorant. When this majority understands basic economic principles, they will they stop fighting on the fake R and D battlefield and start fighting on the real battlefield: central planning vs. voluntary cooperation.

 

Related ArticleMinimum Wage Laws Create Unemployment, at austrianaddict.com

Related ArticleIncome Inequality Part II: Increase The Minimum Wage, at austrianaddict.com.

Related ArticleThe Reality Of Obamacare, at austrianaddict.com.

Related ArticleThe Economics of Healthcare vs. The Right To Healthcare, at austrianaddict.com.