Why can't the other side understand?

NBarnes12

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Jun 21, 2012
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Why can't the other side understand simple economics? Please, someone tell me how the programs enacted under their administrations justify, if you will, a capitalist society? It recently came to me that they simply can't. It's impossible.

Look at the minimum wage law. Although it had well intentions (Like most of their programs), its results are devastating. But, we'll just stick to the facts and not debate the effects and results it has on the US economy.

Any person who has ever studied simple economics knows about supply and demand. It's a basic function for a capitalist nation. But, it seems to me that one side never really got this part of economics 101. Look at supply and demand quickly. Supply and demand generates an equilibrium point, where the producer and consumer are both satisfied with whatever that price may be. Just like in supply and demand for labor, the employer pays a worker for his labor, and that wage must justify his labor or else he wouldn't work. However, the minimum wage law tinkers with the invisible hand and sets a wage above the wage that would prevail in the free market (The market equilibrium point).

Now, once this happens, you have employers supplying less labor than the demand for labor, which results in unemployment. THESE ARE FACTS that can't be disputed. We will not talk about the law being a good one or not.

My simple question to everyone is: Doesn't this law contradict the very capitalist nation we claim to be?
 
My simple question to everyone is: Doesn't this law contradict the very capitalist nation we claim to be?

1) we never claimed to be a pure capitalist nation. In Econ 101 our economy was always described as a mixed economy
 
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Now, once this happens, you have employers supplying less labor than the demand for labor, which results in unemployment. THESE ARE FACTS that can't be disputed. We will not talk about the law being a good one or not.

My simple question to everyone is: Doesn't this law contradict the very capitalist nation we claim to be?

Except it's not a fact. It's a model, and one built on a faulty assumption. An elementary supply/demand model doesn't work for the labor market because different individuals have different marginal propensity to consume. Raising the minimum wage, ceteris paribus, shifts income toward lower income earners. Since those earners have, on average, a higher marginal propensity to consume, they'll buy more goods and services, increasing aggregate demand beyond what it otherwise would be. The balance between this factor and the simple clearing approach you're talking about is why increases in the minimum wage don't increase unemployment.
 
Now, once this happens, you have employers supplying less labor than the demand for labor, which results in unemployment. THESE ARE FACTS that can't be disputed. We will not talk about the law being a good one or not.

My simple question to everyone is: Doesn't this law contradict the very capitalist nation we claim to be?

Except it's not a fact. It's a model, and one built on a faulty assumption. An elementary supply/demand model doesn't work for the labor market because different individuals have different marginal propensity to consume. Raising the minimum wage, ceteris paribus, shifts income toward lower income earners. Since those earners have, on average, a higher marginal propensity to consume, they'll buy more goods and services, increasing aggregate demand beyond what it otherwise would be. The balance between this factor and the simple clearing approach you're talking about is why increases in the minimum wage don't increase unemployment.

We need a $75,000 annual minimum wage
 
Go play in the yard Frankie, the adults are trying to have a conversation.
 
Go play in the yard Frankie, the adults are trying to have a conversation.

Translation: I'm trying to pass off a system with a 100% Guaranteed Fail Rate as plausible and you're ruining it for me
 
increases in the minimum wage don't increase unemployment.

thats like saying the death penalty doesn't deter murders. Does it encourage murders??

how nice for liberals that raising the minimum wage doesn't deter employers, it mysteriously leaves then saying, no worry the more we pay the more they buy so there is no big deal lets be nice and raise it to 20 or 40 a hour.
 
An elementary supply/demand model doesn't work for the labor market


if you're a liberal it doesn't work for health care or free trade or the environment or monetary policy or the minimum wage or anywhere. Maybe its because a liberal is in reality a dumb socialist





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Now, once this happens, you have employers supplying less labor than the demand for labor, which results in unemployment. THESE ARE FACTS that can't be disputed. We will not talk about the law being a good one or not.

My simple question to everyone is: Doesn't this law contradict the very capitalist nation we claim to be?

Except it's not a fact. It's a model, and one built on a faulty assumption. An elementary supply/demand model doesn't work for the labor market because different individuals have different marginal propensity to consume. Raising the minimum wage, ceteris paribus, shifts income toward lower income earners. Since those earners have, on average, a higher marginal propensity to consume, they'll buy more goods and services, increasing aggregate demand beyond what it otherwise would be. The balance between this factor and the simple clearing approach you're talking about is why increases in the minimum wage don't increase unemployment.

We need a $75,000 annual minimum wage

why not!!!!! the more a business pays in wages the higher the demand for his products!!! I say try $100,000 annual minimum!! I'll never understand why the USSR didn't work. The liberals got to try try every anti-capitalist scheme in the book!
 
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I'm all for getting rid of the minimum wage, but I'm just gonna make this side point:

Econ 101 is bullshit. What's taught in an introductory course is invariably over-simplified, unsophisticated, out of date hogwash. Things taught in Econ 101 are there for a tractable introduction to economic thinking; usually that means being unnuanced and over-simplified to the point of being completely useless in actual economic analysis. Being in Econ 101 doesn't mean something is a basic truth, it means it's a useful lie to help you eventually understand what's actually going on.
 
I'm all for getting rid of the minimum wage, but I'm just gonna make this side point:

Econ 101 is bullshit. What's taught in an introductory course is invariably over-simplified, unsophisticated, out of date hogwash. Things taught in Econ 101 are there for a tractable introduction to economic thinking; usually that means being unnuanced and over-simplified to the point of being completely useless in actual economic analysis. Being in Econ 101 doesn't mean something is a basic truth, it means it's a useful lie to help you eventually understand what's actually going on.


so why be so afraid to give us your best example??
 
I'm all for getting rid of the minimum wage, but I'm just gonna make this side point:

Econ 101 is bullshit. What's taught in an introductory course is invariably over-simplified, unsophisticated, out of date hogwash. Things taught in Econ 101 are there for a tractable introduction to economic thinking; usually that means being unnuanced and over-simplified to the point of being completely useless in actual economic analysis. Being in Econ 101 doesn't mean something is a basic truth, it means it's a useful lie to help you eventually understand what's actually going on.


so why be so afraid to give us your best example??

Can't infer one from context, huh? Perfectly competitive labour markets with downward sloping demand schedules and upward sloping supply schedules.
 
I'm all for getting rid of the minimum wage, but I'm just gonna make this side point:

Econ 101 is bullshit. What's taught in an introductory course is invariably over-simplified, unsophisticated, out of date hogwash. Things taught in Econ 101 are there for a tractable introduction to economic thinking; usually that means being unnuanced and over-simplified to the point of being completely useless in actual economic analysis. Being in Econ 101 doesn't mean something is a basic truth, it means it's a useful lie to help you eventually understand what's actually going on.


so why be so afraid to give us your best example??

Can't infer one from context, huh? Perfectly competitive labour markets with downward sloping demand schedules and upward sloping supply schedules.

no markets are perfectly competitive. Does this mean liberals should intervene to achieve correct results in each market?

Also, why would Friedman support massive QE in Japan to inject high powered money when it would merely result in government having even more money to build bridges?
 
so why be so afraid to give us your best example??

Can't infer one from context, huh? Perfectly competitive labour markets with downward sloping demand schedules and upward sloping supply schedules.

no markets are perfectly competitive. Does this mean liberals should intervene to achieve correct results in each market?

Not what I said. You'll note that I said I'm against the minimum wage. The point was that Econ 101 is full of bullshit (deliberately, to learn some broad strokes easily). If what you're saying is from Econ 101, then what you're saying is probably bullshit.

Also, why would Friedman support massive QE in Japan to inject high powered money when it would merely result in government having even more money to build bridges?

How is that relevant? :eusa_eh:

It doesn't result in the government having more money. You understand how open market operations work, right? Remember the bonds are bought in the secondary market. They're increasing the quantity of bank reserves. They're not giving the government money.
 
I'm all for getting rid of the minimum wage, but I'm just gonna make this side point:

Econ 101 is bullshit. What's taught in an introductory course is invariably over-simplified, unsophisticated, out of date hogwash. Things taught in Econ 101 are there for a tractable introduction to economic thinking; usually that means being unnuanced and over-simplified to the point of being completely useless in actual economic analysis. Being in Econ 101 doesn't mean something is a basic truth, it means it's a useful lie to help you eventually understand what's actually going on.


so why be so afraid to give us your best example??

Perfectly competative markets with an infinite number of buyers and selllers, perfect information, no barriers to entry, and diminishing returns on increasing production quantity.
 
Not what I said. You'll note that I said I'm against the minimum wage. The point was that Econ 101 is full of bullshit (deliberately, to learn some broad strokes easily). If what you're saying is from Econ 101, then what you're saying is probably bullshit.


you still have not given us your best example of where Econ 101 is BS. You say labor supply demand is not perfect or BS but you want to get rid of liberal attempts at prefecting market???


It doesn't result in the government having more money..

who would buy in the primary market if they could not sell in secondary? Hence, QE, in effect insures a steady flow of new bridges in Japan.
 
Not what I said. You'll note that I said I'm against the minimum wage. The point was that Econ 101 is full of bullshit (deliberately, to learn some broad strokes easily). If what you're saying is from Econ 101, then what you're saying is probably bullshit.


you still have not given us your best example of where Econ 101 is BS. You say labor supply demand is not perfect or BS but you want to get rid of liberal attempts at prefecting market???

I did. The unquestioned assumption of downward sloping demand curves and upward sloping supply curves.

It doesn't result in the government having more money..

who would buy in the primary market if they could not sell in secondary? Hence, QE, in effect insures a steady flow of new bridges in Japan.

Do you want to think about that for half a second? Maybe... people who want to hold to maturity? Either way it's irrelevant. There's no profit to be made buying in the primary specifically to sell in the secondary because interest rates are stuck near zero.

Either way, this whole way of looking at it is strange. When the Fed lowers interest rates normally, it's cheaper for the government to borrow. It's cheaper for everybody to borrow. Would you rather that when the natural rate of interest falls the Fed just kept money overly tight rather than trying to maintain macroeconomic equilibrium, just to stick it to the government?

Also, if the Fed were to actually ease by providing forward guidance via an NGDP level target, they'd have to contract the base and the natural rate of interest would actually rise. Low interest rates and a bloated monetary base are signs that money has been excessively tight.
 
increases in the minimum wage don't increase unemployment.

thats like saying the death penalty doesn't deter murders. Does it encourage murders??

how nice for liberals that raising the minimum wage doesn't deter employers, it mysteriously leaves then saying, no worry the more we pay the more they buy so there is no big deal lets be nice and raise it to 20 or 40 a hour.

It is like saying that, but it's also the answer to only relevant question (unless someone is arguing increases in the minimum wage boost employment). In case you're wondering, the evidence shows the death penalty doesn't have an impact on the murder rate on way or the other. Tilts slightly toward showing the death penalty encourages murders, but most researchers think that's just noise in the data.

And saying "why not raise it to 20 or 40 a hour" is a strawman. As I said earlier, it's a balancing test. Eating a bowl of ice cream isn't going to cause me to have a heart attack, but eating a wheelbarrow full may.
 
An elementary supply/demand model doesn't work for the labor market


if you're a liberal it doesn't work for health care or free trade or the environment or monetary policy or the minimum wage or anywhere. Maybe its because a liberal is in reality a dumb socialist

The elementary model doesn't work for much of anything. People learn it because the more advanced models build off of it. Health care doesn't work a market good (go back and read Arrow's work). A relatively simple model can work for the environment, as long as you're okay with such large amounts of pollution that rivers catch on fire. The basic models for monetary policy actually work very well, it's conservatives that spent the past three years shouting otherwise.
 
Look, there is little doubt that Adam Smith did not see large corporations, much less very large multinational corporations. But even he realized that monopoly would be a problem, he just could not anticipate how large a problem it would become.

Even Smith believed and recommended regulation of monopoly businesses. We keep hearing about the wonders of the market system, and the great invisible hand. What those who are so busy discussing those wonders are missing is that we do not have, overall, a market economy. We have a great deal of monopoly power at the corporate (and other) level. So, a monopolistic industry such as gas production is NOT PART OF THE MARKET SYSTEM. It is an entirely different thing, and anyone expecting to be happy with the actual outcome is nuts.
 

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