27 March, 2015
Economics, Truly, Affects Everything
Economics, Truly, Affects Everything
BY GEORGE F. WILL
03/25/2015 05:39 PM ET
Every day the Chinese go to work, Americans get a raise:
Chinese workers, many earning each day about what Americans spend on a Starbucks latte, produce apparel, appliances and other stuff cheaply, enlarging Americans' disposable income. Americans similarly get a raise when they shop at the stores that made Sam Walton a billionaire.
The ranks of billionaires are constantly churned. Most of the persons on the original Forbes 400 list of richest Americans in 1982 were off the list in 2013. Mark Zuckerberg, Facebook's CEO, was not born until 1984. America needs more billionaires like him, Michael Dell, Bill Gates, Jeff Bezos and Steve Jobs.
With the iPod, iPhone and iPad, unique products when introduced, Jobs' Apple created monopolies. But instead of raising prices, Apple has cut them because "profits attract imitators and innovators." Which is one reason why monopolies come and go.
When John D. Rockefeller began selling kerosene in 1870, he had approximately 4% of the market. By 1890, he had 85%. Did he use this market dominance to gouge consumers?
Kerosene prices fell from 30 cents a gallon in 1869 to 6 cents in 1897. And in the process of being branded a menacing monopoly, Rockefeller's Standard Oil made gasoline so cheap that Ford found a mass market for Model T's.
Monopoly profits are social blessings when they "signal to the ambitious the wealth they can earn by entering previously unknown markets." So "when the wealth gap widens, the lifestyle gap shrinks."
Hence, "income inequality in a capitalist system is truly beautiful" because "it provides the incentive for creative people to gamble on new ideas, and it turns luxuries into common goods." Since 2000, the price of a 50-inch plasma TV has fallen from $20,000 to $550.
Henry Ford doubled employees' basic wage in 1914, supposedly to enable them to buy Fords.
Actually, he did it because in 1913 annual worker turnover was 370%. He lowered labor costs by reducing turnover and the expense of constantly training new hires.
All these thoughts are from John Tamny, a one-man antidote to economic obfuscation and mystification.
Thomas Carlyle (1795-1881), who called economics "the dismal science," never read Tamny, a Forbes editor, editor of RealClearMarkets, and now author of the cheerful, mind-opening book, "Popular Economics: What the Rolling Stones, Downton Abbey, and LeBron James Can Teach You About Economics."
In the early 1970s, when the Rolling Stones were coining money and Britain's top tax rate was 83%, Keith Richards, lead guitarist and social philosopher, said: "That's the same as being told to leave the country."
The Stones decamped to France, leaving Britain, Tamny notes, to collect 83% of nothing.
Americans execrate "outsourcing," which supposedly involves sending "American jobs" overseas. Well, Nike employs 40 times more manufacturing workers in Vietnam than in America, but could not afford as many American workers as it has without the efficiencies of outsourcing.
Tamny cites Enrico Moretti, a Berkeley economist, who says that when Americans buy an iPhone online, it is shipped from China and the only American who touches it is the UPS delivery person.
Is it regrettable that Americans are not doing the assembly jobs for which Chinese are paid the "latte wage"?
Actually, Americans incessantly "outsource" here at home by, for example, having Iowans grow their corn and dentists take care of their teeth, jobs at which Iowans and dentists excel and the rest of us do not.
LeBron James could be an adequate NFL tight end, but why subtract time from being a superb basketball player? The lesson, says Tamny, is that individuals — and nations — should do what they do better than others, and let others do other things.
Millions of jobs, he says, would be created if we banned computers, ATMs and tractors. The mechanization of agriculture destroyed millions of jobs performed with hoes and scythes. Was Cyrus McCormick a curse?
The best way to (in Barack Obama's 2008 words to Joe the Plumber) "spread the wealth around," is, Tamny argues, "to leave it in the hands of the wealthy." Personal consumption absorbs a small portion of their money and the remainder is not idle. It is invested by them, using the skill that earned it. Will it be more beneficially employed by the political class of a confiscatory government?
"Nothing," Tamny demonstrates, "is easier to understand than economics. It is everywhere you look."
Readers of his book will subsequently look at things differently.
25 March, 2015
Minimum Wage & Ruinous 'Compassion'
Ruinous 'Compassion'
Mar 18, 2015
It is fascinating to see brilliant people belatedly discover the obvious -- and to see an even larger number of brilliant people never discover the obvious.
A recent story in a San Francisco newspaper says that some restaurants and grocery stores in Oakland's Chinatown have closed after the city's minimum wage was raised. Other small businesses there are not sure they are going to survive, since many depend on a thin profit margin and a high volume of sales.
At an angry meeting between local small business owners and city officials, the local organization that had campaigned for the higher minimum wage was absent. They were probably some place congratulating themselves on having passed a humane "living wage" law. The group most affected was also absent -- inexperienced and unskilled young people, who need a job to get some experience, even more than they need the money.
It is not a breakthrough on the frontiers of knowledge that minimum wage laws reduce employment opportunities for the young and the unskilled of any age. It has been happening around the world, for generation after generation, and in the most diverse countries.
It is not just the young who are affected when minimum wage rates are set according to the fashionable notions of third parties, with little or no regard for whether everyone is productive enough to be worth paying the minimum wage they set.
You can check this out for yourself. Go to your local public library and pick up a copy of the distinguished British magazine "The Economist."
Whether it is the current issue or a back issue doesn't matter. Spain, Greece and South Africa will be easy to locate in the table near the back, which lists data for various countries. Just look down the unemployment column for countries with unemployment rates around 25 percent. Spain, Greece and South Africa are always there, whether or not there is a recession. Why? Because they have very generous minimum wage laws.
While you are there, you can look up the unemployment rate for Switzerland, which has no minimum wage law at all. Over the years, I have never seen the unemployment rate in Switzerland reach as high as 4 percent. Back in 2003, "The Economist" magazine reported: "Switzerland's unemployment neared a five-year high of 3.9% in February."
In the United States, back in what liberals think of as the bad old days before there was a federal minimum wage law, the annual unemployment rate during Calvin Coolidge's last four years as president ranged from a high of 4.2 percent to a low of 1.8 percent.
Low-income minorities are often hardest hit by the unemployment that follows in the wake of minimum wage laws. The last year when the black unemployment rate was lower than the white unemployment rate was 1930, the last year before there was a federal minimum wage law.
The following year, the Davis-Bacon Act of 1931 was passed, requiring minimum wages in the construction industry. This was in response to complaints that construction companies with non-union black construction workers were able to underbid construction companies with unionized white workers (whose unions would not admit blacks).
Looking back over my own life, I realize now how lucky I was when I left home in 1948, at the age of 17, to become self-supporting. The unemployment rate for 16- and 17-year-old blacks at that time was under 10 percent. Inflation had made the minimum wage law, passed ten years earlier, irrelevant.
But it was only a matter of time before liberal compassion led to repeated increases in the minimum wage, to keep up with inflation. The annual unemployment rate for black teenagers has never been less than 20 percent in the past 50 years, and has ranged as high as over 50 percent.
You can check these numbers in a table of official government statistics on page 42 of Professor Walter Williams' book "Race and Economics."
Incidentally, the black-white gap in unemployment rates for 16-year-olds and 17-year-olds was virtually non-existent back in 1948. But the black teenage unemployment rate has been more than double that for white teenagers for every year since 1971.
This is just one of many policies that allow liberals to go around feeling good about themselves, while leaving havoc in their wake
It is fascinating to see brilliant people belatedly discover the obvious -- and to see an even larger number of brilliant people never discover the obvious.
A recent story in a San Francisco newspaper says that some restaurants and grocery stores in Oakland's Chinatown have closed after the city's minimum wage was raised. Other small businesses there are not sure they are going to survive, since many depend on a thin profit margin and a high volume of sales.
At an angry meeting between local small business owners and city officials, the local organization that had campaigned for the higher minimum wage was absent. They were probably some place congratulating themselves on having passed a humane "living wage" law. The group most affected was also absent -- inexperienced and unskilled young people, who need a job to get some experience, even more than they need the money.
It is not a breakthrough on the frontiers of knowledge that minimum wage laws reduce employment opportunities for the young and the unskilled of any age. It has been happening around the world, for generation after generation, and in the most diverse countries.
It is not just the young who are affected when minimum wage rates are set according to the fashionable notions of third parties, with little or no regard for whether everyone is productive enough to be worth paying the minimum wage they set.
You can check this out for yourself. Go to your local public library and pick up a copy of the distinguished British magazine "The Economist."
Whether it is the current issue or a back issue doesn't matter. Spain, Greece and South Africa will be easy to locate in the table near the back, which lists data for various countries. Just look down the unemployment column for countries with unemployment rates around 25 percent. Spain, Greece and South Africa are always there, whether or not there is a recession. Why? Because they have very generous minimum wage laws.
While you are there, you can look up the unemployment rate for Switzerland, which has no minimum wage law at all. Over the years, I have never seen the unemployment rate in Switzerland reach as high as 4 percent. Back in 2003, "The Economist" magazine reported: "Switzerland's unemployment neared a five-year high of 3.9% in February."
In the United States, back in what liberals think of as the bad old days before there was a federal minimum wage law, the annual unemployment rate during Calvin Coolidge's last four years as president ranged from a high of 4.2 percent to a low of 1.8 percent.
Low-income minorities are often hardest hit by the unemployment that follows in the wake of minimum wage laws. The last year when the black unemployment rate was lower than the white unemployment rate was 1930, the last year before there was a federal minimum wage law.
The following year, the Davis-Bacon Act of 1931 was passed, requiring minimum wages in the construction industry. This was in response to complaints that construction companies with non-union black construction workers were able to underbid construction companies with unionized white workers (whose unions would not admit blacks).
Looking back over my own life, I realize now how lucky I was when I left home in 1948, at the age of 17, to become self-supporting. The unemployment rate for 16- and 17-year-old blacks at that time was under 10 percent. Inflation had made the minimum wage law, passed ten years earlier, irrelevant.
But it was only a matter of time before liberal compassion led to repeated increases in the minimum wage, to keep up with inflation. The annual unemployment rate for black teenagers has never been less than 20 percent in the past 50 years, and has ranged as high as over 50 percent.
You can check these numbers in a table of official government statistics on page 42 of Professor Walter Williams' book "Race and Economics."
Incidentally, the black-white gap in unemployment rates for 16-year-olds and 17-year-olds was virtually non-existent back in 1948. But the black teenage unemployment rate has been more than double that for white teenagers for every year since 1971.
This is just one of many policies that allow liberals to go around feeling good about themselves, while leaving havoc in their wake
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