Posted tagged ‘Income Inequality’

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Socialism Sounds Great

June 1, 2016

The definition of socialism is, government ownership of the means of production. Many countries we call socialist today, don’t actually own the means of production, they just encumber the private owners of the means of production with rules, regulations, and taxes to the point that the businesses have limited freedom to make decisions concerning their business. Government is the silent partner with businesses today. Silent from the stand point of what the public sees, but boisterous from the businesses point of view. “Socialism” today is nothing more than a modern day version of fascism, corporatism, mercantilism, or simply interventionism.

Thomas Sowell

SOCIALISM FOR THE UNINFORMED

In this article, Socialism For The Uninformed (read here), Thomas Sowell gives his insight into, not only what modern-day socialism is, but where it leads. Here are some excerpts from the article.

“Socialism sounds great. It has always sounded great. And it will probably always continue to sound great. It is only when you go beyond rhetoric, and start looking at hard facts, that socialism turns out to be a big disappointment, if not a disaster.”“While throngs of young people are cheering loudly for avowed socialist Bernie Sanders, socialism has turned oil-rich Venezuela into a place where there are shortages of everything from toilet paper to beer, where electricity keeps shutting down, and where there are long lines of people hoping to get food, people complaining that they cannot feed their families.”

“With national income going down, and prices going up under triple-digit inflation in Venezuela, these complaints are by no means frivolous. But it is doubtful if the young people cheering for Bernie Sanders have even heard of such things, whether in Venezuela or in other countries around the world that have turned their economies over to politicians and bureaucrats to run.”

“The anti-capitalist policies in Venezuela have worked so well that the number of companies in Venezuela is now a fraction of what it once was. That should certainly reduce capitalist “exploitation,” shouldn’t it?”

“But people who attribute income inequality to capitalists exploiting workers, as Karl Marx claimed, never seem to get around to testing that belief against facts — such as the fact that none of the Marxist regimes around the world has ever had as high a standard of living for working people as there is in many capitalist countries.”

“Facts are seldom allowed to contaminate the beautiful vision of the left. What matters to the true believers are the ringing slogans, endlessly repeated.”

“…..But the very idea of subjecting their pet notions to the test of hard facts will probably not even occur to those who are cheering for socialism and for other bright ideas of the political left.”
“The great promise of socialism is something for nothing. It is one of the signs of today’s dumbed-down education that so many college students seem to think that the cost of their education should — and will — be paid by raising taxes on “the rich.”

“Here again, just a little check of the facts would reveal that higher tax rates on upper-income earners do not automatically translate into more tax revenue coming in to the government. Often high tax rates have led to less revenue than lower tax rates.”

“In a globalized economy, high tax rates may just lead investors to invest in other countries with lower tax rates. That means that jobs created by those investments will be overseas.”

“None of this is rocket science. But you do have to stop and think — and that is what too many of our schools and colleges are failing to teach their students to do.”

 

 THE LEFT’S SUPPORT OF STATE OVER PROSPERITY
-In this article, Chili, Venezuela, And The Left’s Support Of State Over Prosperity (read here), Dan Mitchell shows the difference between Chili and Venezuela over the last 40 years. Look at the data in the charts from this article. It shows that when a government allows more economic freedom than currently exists, production increases. Since production is the creation of wealth, the country becomes wealthier. When a government takes economic freedom away where it has existed in the past, production decreases. Lower production leads to less wealth creation and ultimately a poorer country. Chili and Venezuela are countries going in very different directions.
 -Here are some excerpts from the article.
 -“Chile’s success starts in the nid-1970’s when Chile’s military government abandoned socialism and started to implement economic reforms. In 2013 Chile was the world’s 10th freest economy. Venezuela, in the meantime, declined from being the world’s 10th freest economy in 1975 to being the world’s least free economy in 2013.”
 -“Chile is not a perfect role model, to be sure, because of an unsavory period of military rule. But the good news, is that economic liberty has led to political liberty. whereas the opposite has happened in Venezuela.”
 -“…..as the people of Chile grew richer, they started demanding more say in the running of their country. Starting in the late 1980’s the military gradually and peacefully handed power over to democratically elected representatives. In Venezuela the opposite has happened. As the failure of socialism  became more apparent, the government had to resort to ever more repressive measures in order to keep itself in power.”
 -“Yes, it’s very desirable for all citizens to benefit from economic growth. But if you look at the charts in the article, it’s abundantly clear which nation is producing better outcomes from average citizens.
this is fundamental flaw of Statists. By fixating on redistribution and equality, this leads them to policies that re-slice a shrinking economic pie.“
 Related Article – Why Socialism Won’t Work? Human Nature, at austrianaddict.com.

Related Article – Milton Friedman – Socialism Is Force, at austrianaddict.com.

 Related Article – America’s Socialist Origins, by Prager University, at austrianaddict.com.
 Related Article – Capitalism vs. Crony Capitalism, at austrianaddict.com.
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The “Equal Pay Day” Canard

April 9, 2014

Thomas Sowell

I have read Thomas Sowell’s analysis concerning this topic since I stumbled upon his writings in 1995. I thought he had driven as stake through the heart of  “the gender pay gap” myth. I wasn’t going to post anything about this topic, but reading and listening to the news this week has changed my mind. Since I couldn’t possibly cover this topic as authoritatively or as eloquently as Thomas Sowell, I’m not even going to try. I’m going to let him do it in his own words.

QUOTE FROM THOMAS SOWELL’S ‘KNOWLEDGE AND DECISIONS’

Here is an excerpt from my favorite book, Knowledge and Decision, which Dr. Sowell wrote in 1980:

“With women the key variable is marriage. Even before “affirmative action” quotas, women in their thirties who worked continuously since high school earned slightly more than men in their thirties who worked continuously since high school. In the academic world, where many discrimination charges have been filed under affirmative action, female academics earned slightly more than male academics when neither were married  – again even before “affirmative action” – and unmarried female Ph.D.’s who received their degrees in the 1930’s and 1940’s became full professors in the 1950’s to a slightly greater extent than did unmarried male Ph.D’s of the same vintage. In short, the male-female differences in incomes and occupations are largely differences between married women and all other persons….the clear-cut income parity (or better) among women who never married suggests once again that systemic variables have more to do with the statistics than the intentional decisions at the work place at which the statistics were collected.”

He wrote this in 1980 so it’s safe to say that the gender pay gap canard was used as a political bludgeon for many years prior to 1980.

THOMAS SOWELL ON FIRING LINE

Dr Sowell is discussing the gender pay gap issue in this video from 1981.

Click, Firing Line – Thomas Sowell  w/ William Buckley Jr. 1981, to watch the whole show.

 THOMAS SOWELL ARTICLE “THE REAL WAR ON WOMEN”

Here is an article by Thomas Sowell titled, The Real ‘War On Women’. It was written in 2012, and covers the same gender pay gap fallacy. Here are some excerpts form the article.

“The old — and repeatedly discredited — game of citing women’s incomes as some percentage of men’s incomes is being played once again, as part of the “war on women” theme.”

“When you compare women and men in the same occupations with the same skills, education, hours of work, and many other factors that go into determining pay, the differences in incomes shrink to the vanishing point — and, in some cases, the women earn more than comparable men.”

“But why let mere facts spoil the emotional rhetoric or the political ploys to drum up hysteria and collect votes?”

THOMAS SOWELL ON ‘UNCOMMON KNOWLEDGE

Here is a video of Thomas Sowell in 2008 on,Uncommon Knowledge, with Peter Robinson, talking about Gender Bias and Income Equality.

QUOTE FROM THOMAS SOWELL’S ‘ECONOMIC FACTS AND FALLACIES’

In Economic Facts And Fallacies, Chapter 3 titled, Male-Female Facts And Fallacies, covers gender pay gap and much more. Here is an excerpt form the chapter.

“Even when women and men earn the same incomes in the same occupations, differences in the distribution of the sexes among different occupations lead to differences in their average incomes.

“In principle it does not matter whether the attorney is male or female but, in practice, with women more often than men carrying the burden of domestic responsibilities for children and the care of the home, careers that involve much unpredictable night and weekend work are less attractive to women. Having it all – a career and a family and an upscale lifestyle- is fine but doing it all is often harder for a woman, given the usual division of domestic responsibilities between the sexes and the inevitable differences in childbearing.”

“Moreover since men are never pregnant, women are disadvantaged in such work by the physical limitations of pregnancy, which can be work limitations as well in obs that require long, irregular and unpredictable hours,….”

Related Article – The New, Old, Buzz Words, “Income Inequality”, at austrianaddict.com.

Related Article – Income Inequality II: Increase The Minimum Wage, at austrianaddict.com.

 

 

 

 

 

 

 

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Thomas Sowell Discusses “Fact Free Liberals”

January 23, 2014

Thomas Sowell

I love when Thomas Sowell writes articles taking the educated elite to the cleaners by challenging  the facts they cite to prove their reality. The first article is titled, Fact-Free Liberals, read here. Here are some excerpts from the article.

“Someone summarized Barack Obama in three words — “educated,” “smart” and “ignorant.” Unfortunately, those same three words would describe all too many of the people who come out of our most prestigious colleges and universities today.”

“……The net results are bright people, with impressive degrees, who have been told for years how brilliant they are, but who are often ignorant of facts that might cause them to question what they have been indoctrinated with in schools and colleges.”

“All too often when liberals cite statistics, they forget the statisticians’ warning that correlation is not causation.”

“But who reads history these days? Moreover, those parts of history that would undermine the vision of the left — which prevails in our education system from elementary school to postgraduate study — are not likely to get much attention.”

After wetting your appetite by tackling issues like women getting paid three-quarters of what men make, income mobility, black applicants for mortgage loans being turned down at twice the rate of white applicants, and other issues , he challenges more Progressive sacred cows in his next article titled, “Fact Free Liberals: Part II”, read here. Here are some excerpts from this article.

“Words seem to carry far more weight than facts among liberal….”

“When words trump facts, you can believe anything. And the liberal groupthink taught in our schools and colleges is the path of least resistance.”

He analyzes rent control laws, and minimum wage laws in this article, and then takes on “the war on poverty, sex education, and the murder rate in this article titled, “Fact-Free Liberals: Part III”, read here. Here are some excerpts from the article.

“The actual signing of the “war on poverty” legislation took place in August 1964, so the 50th anniversary is some months away. But there have already been statements in the media and in politics proclaiming that this vast and costly array of anti-poverty programs “worked”.”

Of course everything “works” by sufficiently low standards, and everything “fails” by sufficiently high standards. The real question is: What did the “war on poverty” set out to do — and how well did it do it, if at all?

“Without some idea of what a person or a program is trying to do, there is no way to know whether what actually happened represented a success or a failure. When the hard facts show that a policy has failed, nothing is easier for its defenders than to make up a new set of criteria, by which it can be said to have succeeded.”

“While the fact-free liberals celebrate the “war on poverty” and other bright ideas of the 1960s, we are trying to cope with yet another “reform” that has made matters worse, ObamaCare.”

Reading Thomas Sowells books is like receiving a vaccine, inoculating you from the lies of politicians, journalists, and the educational establishment, who are unapologetic about pushing their ideology through propaganda.

Other Thomas Sowell Posts You Might Like.

Thomas Sowell’s Vision of the Anointed, at austrianaddict.com. Short video.

Thomas Sowell Used To Be A Marxist? at austrianaddict.com. Short video.

Thomas Sowells Take On The Federal Reserve, at austrianaddict.com. Short video.

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

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Income Inequality Part II: Increase The Minimum Wage

January 15, 2014

Economic theory suggests an excessive minimum ...

The two recent, but not new, political solutions for income inequality (aka income redistribution), are extending unemployment benefits, and raising the minimum wage. In this post we will look at the consequences of the political solution, “raising the minimum wage”, but first lets start with an understanding of the nature of exchanges.

TYPES OF EXCHANGES

The free market is nothing more than individuals making voluntary exchanges. What is produced and consumed in the free market is the result of these individual decisions. All actions by individuals are exchanges, whether it’s an isolated exchange or an exchange involving other people.

An example of an isolated exchange would be you deciding to run on your treadmill. You are exchanging the time on the treadmill for other activities that could have been done with that time and at that time. This exchange reveals your value preference no matter what you might have said about that preference before your choice. Value is revealed in action and not one second before the action takes place.

Examples of exchanges between individuals, or interpersonal exchanges, would be you exchanging your labor for money, you exchanging that money for a treadmill, a steak dinner, a ticket to a baseball game, or having your roof repaired. These voluntary interpersonal exchanges increase the value for both parties involved, or they wouldn’t have taken place. Put another way, each person values what they are receiving in the exchange more than what they are giving up.

Are there involuntary interpersonal exchanges, or exchanges an individual wouldn’t choose unless he was forced or defrauded? Yes: examples of these involuntary interpersonal exchanges would be a robber taking your wallet at gun point or under the threat of physical harm, a slave owner taking the labor of the slave under the threat of violence, or a counterfeiter stealing what you’ve produced in a fraudulent exchange of something for nothing. So, in review there are two types of exchanges, isolated and interpersonal, and there are two types of interpersonal exchanges, voluntary and involuntary. Now lets look at raising the minimum wage and extending unemployment benefits through this lens.

THE REALITY ABOUT LABOR AND WAGES

When Government officials make a law raising the minimum wage, it voids the wage contract voluntarily agreed on by the employer and the employee. Each person in this exchange decided that the terms of employment were beneficial, or their wouldn’t have been an exchange of the labor for money. The Government is a third-party to the exchange between the employer and the employee. It forces an agreement on both parties that one, or both, would have never decided to make under a voluntary situation. It forces an involuntary exchange to be made.When Government officials mandate a higher wage, the employee would obviously like this exchange of his labor for more money, but the employer wouldn’t voluntarily make this exchange. What if Government officials mandated all wages be lowered? The employers would like these new terms, but the employees wouldn’t voluntarily make this exchange. Labor is ruled by the same economic laws as every other good or service supplied in the market, in spite of the Marxist brainwashing about the specialness of labor, that has taken place over the last seventy plus years.

We know from the law of supply and demand that more is demanded at a lower price than a higher price, and more is supplied at a higher price than a lower price. We have this concept of supply and demand bass ackwards when it comes to labor because we think the supplier is the employer and the demander is the employee. In reality the demander of labor is the employer and the supplier of labor is the employee. The employee is demanding money, not a job, and the employer is supplying money, not a job. When a wage is high, workers will supply more labor at this higher price than they would supply if the wage is lower. When the wage is high the employer will demand less labor than he would demand if the wage was lower. This applies to labor in general, but labor is more complex than this.

Labor is not homogeneous it is specific. Labor can be broken down into specific general categories like construction, healthcare, food services etc; and each general category can be broken down into specific jobs with specific skills like welder, plumber, doctor, nurse, cook, server etc. Each specific skills value is determined by the demand for that skill, balanced by the supply of that skill. If there is a high demand for a skill that’s rare, the price for that skill will be high. If there is a low demand for a common skill the wage will be low. The combinations of how much demand there is for a skill, and how rare or common it is, determines how much money that skill can demand, and how much money the employer will supply.

The demand for NFL quarterbacks is limited to the number of teams in the NFL, 32, and there is no real demand for this skill outside of the NFL. There are roughly 64 quarterbacks in the NFL, counting starters and backups, and these 64 are demanded differently. The demand for the skill level of  Tom Brady or Payton Manning is greater than the demand for the skill level of Ryan Mallet or Josh Johnson, and this difference in skill level determines how much money each can demand.

Millions of people have the ability to dig with a shovel, making it a common skill, and if you add to it the fact that we use machines to dig, we get a situation where there is a large supply of potential labor for the low demand job of digging with a shovel. The result is a low wage for that particular skill. The varying  combinations of the supply for specific labor, and the demand for that specific labor is why wages differ. If you factor in the reality that these combinations are constantly changing, because technology and innovation are constantly changing the supply and demand for labor, you have a situation where no one politician or bureaucrat, or group of politicians or bureaucrats, could possibly have enough knowledge to arbitrarily set wages. Although they certainly have enough arrogance and ignorance to try.

GOVERNMENT MANDATES VS. INDIVIDUAL CHOICES

There is one factor these moral crusaders fail to think about when they make these third-party mandates. Individuals may not comply. In an involuntary interpersonal exchange, like robbery at gun point or forced slave labor, the person being robbed or enslaved can simply not comply and accept being beaten or killed, or he may fight back if he thinks he has a chance of prevailing over his aggressors. In the case of the minimum wage being artificially raised above what labor produces, the employer has options besides complying with the law. The employer can 1)use capital in place of labor,  2) get rid of, or not hire low skilled labor and spread the work among his higher skilled employees, or 3) a combination of the two.

CONCLUSION

The reality is, when the price of labor is artificially set above the cost of labor, there will be less labor. Raising the minimum wage increases unemployment. Politicians really don’t care about the reality that their minimum wage mandate will hurt the people they say they are trying to help. Politicians are only interested in how morally righteous they look in the fight against income inequality. Low skilled workers are being sacrificed on the altar of politics, because political reality is the only reality that interests politicians.

Related Article – Minimum Wage Laws Create Unemployment, by austrianaddict.com.

Related  Article – Politics And Minimum Wage, by Walter E. Williams, at jewishworldreview.com.

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The New, Old, Buzz Words, “Income Inequality”

January 13, 2014

142763 600 New Years Resolutions cartoons

INCOME INEQUALITY AS POLITICAL BLUDGOEN

As the 2014 mid-term election cycle begins, big government politicians are starting to use the phrase “income inequality” as a talking point. It must be the new focus group tested phrase that appeals to emotions, which is why politicians are using it. The political solutions concerning “income inequality” elicit an emotional frenzy among the economically ignorant, that is difficult to overcome with logical analysis about the economic reality of “income equality”.

INCOME INEQUALITY IS REALITY

The politically self-righteous start from the premise that income inequality is a problem with the free market that shouldn’t exist and something has to be done about it. The political solutions they invoke are simply the forcing of what they want done for the voluntary decisions individuals have made in the market process. These solutions always benefit the politicians at the expense of everyone, including the people they are purporting to help. The invented problem of “income inequality” isn’t a problem with the laws of economics. Inequality in general, and income inequality in particular, are realities of life, and putting the word income in front of the word inequality doesn’t change that reality. These invented problems are made worse when we try to solve them through the political process.

INDIVIDUALS CAN’T BE EQUAL

The simple reason there is income inequality is because people aren’t equal. People have different skills, different desires concerning the use of those skills, different desires on how productive they want to be, with all of these being influenced by where they were born, who their parents are, how much education they have, and who they gravitated to outside of their family structure, among many factors. Could a crab fisherman in Alaska develop the skills or have the desire to grow oranges, or could an orange grower in Florida develop the skills or have the desire to fish for crab. How many hockey players come from the state of Hawaii, and how many surfers come from the state of Minnesota. The fact that we are individuals, means we are not the same, which means we are not equal.

GREEDY CONSUMERS SET WAGES

Another reason for income inequality is the consumer decides peoples salaries. What a person gets paid isn’t decided by the boss, it is decided by what the consumer will pay for a  particular good, or service. The price of a good isn’t decided by adding up the cost of all the material and labor used to produce it, and the consumer pays that price. What really happens is the entrepreneur takes a risk thinking that consumers will pay a certain price for a particular good and then goes about trying to produce that good at a cost lower than the price he thinks the  consumer will pay. The wages of workers are determined by what the consumer will pay for the finished product. The cost of labor is part of the cost of production, nothing more nothing less. Marxist thinking has so permeated our society that we think labor is sacred and shouldn’t be ruled by something as heartless as economic laws. When the cost of production rises, businesses can’t just raise prices to cover the cost, if this were the case no business would ever go under. Put another way if business could have higher total revenue by simply raising prices they would have already raised them. If you are mad about income inequality, don’t point your finger at the greedy owner of the business for not paying a higher salary, blame the greedy consumer for not being willing to pay more for the product. This Peter Schiff Video: Will Wal-Mart Customers Support Higher Wages For Wal-Mart Workers? , at economicpolicyjournal.com, will show you how eager people are to pay higher prices for their consumer goods.

In the next post we will discuss two ways politicians try to fight income inequality, 1) Raising the minimum wage and 2) Extending unemployment benefits. Do they really work, or do they benefit the politicians prospects for reelection?

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