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Impending Minimum Wage hike causing restaurants to close

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  • Joel
    replied
    Originally posted by Starlight View Post
    Yes, some capital is always required to purchase current technology - eg to buy a tractor, to buy irrigation equipment etc.
    No, I'm not talking about money, I'm talking about the existence of the tractor, irrigation equipment, etc. If all our modern equipment (our stock of capital goods) disappeared, and yet we retained the technical knowledge of how they work, that will not be sufficient to produce them all again overnight. It would likely take centuries, building up from the ground again. At first most of our time would be spent on barely scraping by with no technological aid. We would have lots of technological knowledge that could not, at first be used, because we don't have the means. If we can manage some spare time in our primitive scramble for life, we could start slowly using our advanced technological knowledge to first build simple tools, then simple machines, and gradually build up over centuries.

    You dismissed this point arguing that a necessary condition is not necessarily a cause. Okay, but I'm not describing a necessary condition. I'm pointing out that building up to our existing technological level from scratch would likely take centuries, even if we retain our technical knowledge. If we suppose that technological knowledge remained fixed, over that time, that lengthy process of growth would not be driven by increasing technical knowledge. Therefore increasing technical knowledge is not the only thing that causes growth.

    No customer will have the slightest clue how many goods exist in the supply - the customer will simply see some of those goods on the shelf, or they won't. The customer won't know if there's a warehouse out the back that has 10 million of the widgets sitting in storage, or if the ones on the shelf in front of them are the last of those widgets in the world. Supply won't affect the price because the market has no knowledge about the supply.
    The demanders don't need to know the facts about the quantity of total supply. As you say, what they see is goods on the shelf (or already in their possession) or not, and the current going price. That is sufficient.

    The way that it balances out, is that:
    1) If at the going price, demanders want to increase their personal stock of the good but they can't find willing sellers (the "shelves" are empty), the total quantity demanded exceeds the size of the total stock. The price will be driven up (along the demand curve) until the point is reached where the quantity demanded equals the quantity of the total stock of the good.

    On the other hand:
    2) If at the going price, people want to decrease their own stock of the good but can't find willing buyers, the total stock exceeds the total quantity demanded. The price will be driven down (along the demand curve) until the point is reached where the quantity demanded equals the total stock.

    Each actor only sees his own shortage or surplus, and the combined actions of the actors in the market reveals the total shortage or surplus. One of those actors includes the owner of the 10 million widgets in the warehouse, who, at the current going price either wants to keep holding them (is part of the demand to hold widgets) or wants to sell them.

    Thus an increase in the stock of the good causes the price of that good to fall. That is, if, for a given stock, we were at equilibrium (meaning everyone holds exactly the quantity they want to hold at the current price), and then the stock increased, then at the same price, there is more stock than what people want to hold. The attempts to get rid of the surplus stock will drive down the price towards the point where everyone holds exactly the quantity they want. (And likewise a decrease in the stock pushes price upward.)

    And that is one of the two reasons I gave for why marginal revenue is not flat: changes in the stock of the produced good affect the price of that good, and thus affect the marginal revenue.


    Originally posted by Joel
    Also, if this producer of yours stubbornly insists on price X, even if the supply were cut in half of the quantity that is demanded at price X, then he's a poor businessman.
    In the real world businesses very very often have no clue what the effect of changing their prices will be. They simply have no data whatsoever about what the supply and demand curve looks like at different price points. All they know is what the demand is like at the current price point.
    Sure, but if the quantity demanded at the current price X is Q, and the current supply is Q/2, then the businessman can know that the equilibrium price (at Q/2) is higher than X. You are right that it is not known right away how much higher. What the businessman would see is that the quantity that customers want to buy at X greatly exceeds the supply of Q/2. So he knows he can raise price, such as by trial and error to find the point on the demand curve at Q/2.

    At Q/2 the price will tend to be pushed upward above X toward the demand curve. That is, the demand curve is downward sloping. Thus marginal revenue is not flat.

    (You suggest various reasons why the businessman won't raise price. If competitors had sufficient supply he the excess demand will go to competitors anyway. If he is being hounded by excess quantity of demand, increasing price won't lose business to competitors. Those businessmen who, in his position, are most able to raise price appropriately will be the ones to succeed the most. There is a competitive advantage to having lower costs of changing prices. Changing quantity takes some time. At any given time a point below the demand curve will cause upward pressure on prices, and a point above the demand curve will cause downward pressure on prices.)

    Originally posted by Joel
    As the amount of labor services increases, the quantity of output per additional unit of labor falls. (The law of diminishing returns.)
    Maybe a little bit. Probably not enough to even be noticeable on the overall scale of the business.
    What we can know for sure from the law of diminishing returns is that MR meets average revenue at the peak of AR, and that MR falls eventually to zero. And firms will tend to operate in between those two points, in the area of diminishing MR. And thus MR is not flat.

    (And keep in mind that what matters for the market price of unskilled labor, is the economy-wide market for unskilled labor, thus market-wide MR and MC of unskilled labor. Not just that of a single firm.)


    Originally posted by Joel
    In the case of a surplus, price is quickly driven down as long as people want to sell more quantity at the current price than buyers are willing to buy.
    No. I think that as a matter of empirical reality this is just not something that happens much. If supply is high, and the warehouse is full of unsold stock, the business owner will often cut supply and lay off workers until his supply of unsold stock diminishes to a more manageable level.
    Before you were claiming that businessmen always want to sell more quantity at the current price.
    Now you are claiming that that doesn't happen much.

    You are criticizing the idea that changes in the market will induce price changes in the immediate run and induce adjustments to production in the long run. Instead you are saying that this is short-cut: that the alleged long-run corrections happen in the short-run. Okay, so you are saying the market adjusts itself even faster than I was claiming.

    Either way, the point is that price & quantity tend toward the demand curve, which is downward sloping, so MR is not flat. (As well as not flat due to diminishing marginal returns.)
    And MC of low skilled labor is an upward-sloping curve (which you did not respond to in this post). So they'll cross each other somewhere.

    Your flat MR is just representative of one point on the actual downward-sloping MR curve.
    Your scenario where your flat MR runs into the demand curve such that MR is still above MC, (and where all competitors are stuck in that scenario) still implies that a cunning businessman has room to capture profits that his competitors aren't capturing by decreasing price somewhat (to where quantity demanded is greater), leaving his MR still above his MC, allowing him to expand total production and sales and increase his profits. He has the profit incentive to keep doing so as long as MR is above MC. And because MC of labor is rising, it will drive wages upward. If the original gap between MR and MC (that you proposed) is large, this businessman will leave his competitors in the dust.

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  • Bill the Cat
    replied
    Originally posted by Starlight View Post
    Quoting your study summary:
    "Public policy has reduced the market-generated level of inequality... the growth of government, and particularly the introduction of a broadly based income tax during World War II, coincided with and partly produced the sharp downward shift in inequality of that era..
    Which still does nothing to support your original claim "Poverty went down massively throughout the 20th century due to government redistribution programs. "

    It may have slightly contributed to reducing the inequality of the WWII era, but was not "due to". It was one of MANY factors, and not even a major one.

    . Public income transfer programs have reduced poverty rates appreciably in recent decades."
    Which also refutes the other part of your initial claim "Unfortunately, due to widespread defunding of those programs it's beginning to increase again". Poverty rates can't go down AND up at the same time.

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  • Starlight
    replied
    Originally posted by Bill the Cat View Post
    Sorry, but the study says nothing about government programs influencing "income inequality".

    Not according to the study I cited. You have better proof than your say-so?
    Quoting your study summary:
    "Public policy has reduced the market-generated level of inequality... the growth of government, and particularly the introduction of a broadly based income tax during World War II, coincided with and partly produced the sharp downward shift in inequality of that era... Public income transfer programs have reduced poverty rates appreciably in recent decades."

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  • Starlight
    replied
    Joel,

    Our discussion is covering quite a few concepts which are quite interesting and fundamental to the way economies work. So I am finding the discussion interesting, even given the fact that you and I seem to be in relatively complete disagreement. So I just want to say, don't let the fact that I'm disagreeing with you wrongly imply to you that I'm not finding this discussion interesting and stimulating and that I'm not thinking about your points.

    Originally posted by Joel View Post
    That cannot be true. In order to make mass use of scientific knowledge, we must have capital goods (means of production).
    That's true. We also have to have human labor, and a few other things are preferable also, like a decent amount of law and order and at least a somewhat functioning economy.

    However, given that we have a moderate amount of all those things, the sole determining factor of long-run economic growth is scientific development. In 1 AD, the richest farmer in the world could buy the world's best oxen to pull his plow and a golden handle for his hoe, but his productivity per worked hour still wasn't remotely close to a modern farmer who has modern technology at his disposal in terms of tractors, irrigation machinery, and pesticides. There's a multiplicative factor of about 150x which has occurred due to scientific development. Equally, we can imagine that 1000 years in the future, a human might fly his spaceship over an as-yet-undeveloped planet and press a single button and a million nanobots will drop down to the planet and plant seeds in a hundred fields at once. The amount of productivity resulting from a single hour of human action will potentially be 1000x what it is currently due to technological development. Yet at our present level of technological development, not even the richest man on earth can attain that level of productivity no matter how he spends his money. This is a really important concept in thinking about long-run economic growth so it bears emphasizing.

    Yes, some capital is always required to purchase current technology - eg to buy a tractor, to buy irrigation equipment etc. However as a matter of everyday practice the amount of capital required doesn't often tend to be the limiting factor - banks are always prepared to loan huge amounts of money to farmers precisely because they know that the returns on investment are high and the farmers will be able to quickly pay them back. Even with a loan, any given person might not be able to afford the absolute best equipment that money can buy, but they can generally afford to purchase something decent. The productivity of that equipment won't fall far short of the productivity of the absolute best equipment that money can buy at that particular time, but it will generally fall far short of what the same money could buy 50 years later, when scientific development had produced something new. The world's most expensive computer in 1950 simply wouldn't have done calculations remotely as fast as a $50 cellphone can do them today. In the long-run, capital does not control economic growth: Technological development does. Capital merely controls whether an individual in the present can attain the current technological limits of productivity. It doesn't control whether those technological limits of productivity will increase over time or not.

    If the existing stock of capital goods vanished (yet we retained our scientific knowledge), we would be sent back to the stone age (or before), most of the population would die of starvation,
    Sure, but not really relevant. If law and order disappeared from our societies and we were thrown into total anarchy and chaos, people would die, many of starvation. Yet the existence of law and order in and of itself isn't the long-run cause of economic growth. Our societies need various things to function, period, but what causes productivity to gradually increase over time is that technological development results in the tools we use producing more output for the same amount of human input.

    It matters, because MC of an input (such as labor services) is relevant to the price of that input, and MC of the output is not.
    The MC of labor tends to equal MR of labor.
    MC of output tends to equal MC of output (but that doesn't tell us anything about labor or wages specifically).
    And it is not the case that MC of the output tends to equal MR of labor.
    If I am a business owner running a minimum wage business, and I am thinking of employing one more worker or one less worker than what I currently have, then the calculation that goes through my head is as follows:
    "If I were to employ one more worker, then they would be able to make 100 widgets per day on my production line, so that would make me $1000 additional income if I could successfully sell those widgets at the price of $10 each that I am currently selling widgets for. But it would cost me the price of that worker's wages per day, and the price of the parts for those 100 widgets."
    The marginal revenue is the increased revenue I would get from the additional worker. The marginal cost is the increased cost I would bear. The business owner is highly likely to include both costs (labor + parts) together in a single calculation.

    At any given time there is some quantity/stock of a good. That stock can be represented as a vertical line at that quantity. It crosses the demand curve somewhere (this is the demand to possess units of that good). An increase in the stock shifts the vertical line to the right. Because the demand curve is downward sloping, the price falls. No need to worry about the "psychology of the business owner". The price is dependent solely upon the total demand to possess units of the good (including perhaps the business owner in question, if he wishes to hold units of the good), and the quantity of the current stock of the good.
    With the exception of eBay, that is not how the real world works. On a site like eBay, the total supply and demand are very visible and will indeed cause prices to change rapidly toward and equilibrium based on supply and demand. However, the vast majority of businesses on earth select a certain price for their goods and then sell the goods at that price. No customer will have the slightest clue how many goods exist in the supply - the customer will simply see some of those goods on the shelf, or they won't. The customer won't know if there's a warehouse out the back that has 10 million of the widgets sitting in storage, or if the ones on the shelf in front of them are the last of those widgets in the world. Supply won't affect the price because the market has no knowledge about the supply.

    The business owner himself might, however, at irregular intervals decide to review his pricing. He might say "well those widgets sold out rather fast, we're out of stock already, so next time I'll sell them at a higher price" or he might say "well I've still got those 10 million widgets sitting in storage, so maybe I'll drop the price a little and see if I can sell more of them if I sell them cheaper." However, what our hypothetical business owner might equally say, in exactly the same situations is "well those widgets sold out rather fast, we're out of stock already, and I made a good profit, clearly there is great demand for this good, so what I'm going to do is expand my business and double the amount of the widgets I'm producing, so I can sell twice as many and make twice as much money", or in the other situation "well I've still got those 10 million widgets sitting in storage, they're selling a lot slower than I thought they would, so I'll cut production and lay off half my staff, and continue slowly selling off the ones sitting in storage, because we are making a profit with every sale and the money's nice."

    As a matter of empirical reality, business owners tend to opt for that second set of choices (scaling supply up or down to meet demand while keeping the price fixed) rather than that first set of choices (scaling price up or down to meet supply while keeping supply fixed). This tends to be because business owners tend to feel they don't have much flexibility in their choice of price-point - they can't reduce the sales price below the cost price and still make a profit and they can't raise the sales price too high or customers will buy the goods of their competitors instead. So the sales price tends to be a reasonably inflexible fact of reality for many business owners. But what they can freely do is employ less workers or more workers to produce less or more of their products, so that is usually the choice they make in response to market conditions. So it's important to bear in mind that as a basic empirical fact of how our businesses tend to work is: price tends to stay relatively fixed, and as the external input of demand changes, business owners will adapt to the changes by altering supply - in the very short run by scheduling current staff on for additional shifts to meet increased demand, or if demand continues for multiple weeks by employing more workers, or if demand continues for multiple months by opening more factories.

    Thus fluctuating demand (aka "consumer spending") is a crucial factor in economies. Businesses will typically respond to changes in demand by changing supply in order to attempt to satisfy demand at the existing price-points. Over the long run, price may eventually change (and not necessarily in a predictable way), but that is typically a very slow process within the economy, as most businesses are often reluctant to change their prices more than about twice a year. Whereas businesses who roster staff already, may respond to additional demand within 24 hours by rostering staff on to work additional hours within the same day of the demand increasing.

    Sure that would be true if that the producer stubbornly insists on a particular price, regardless of anything else. But that would be silly.
    Most do. That's just the empirical reality of the world. I don't think it's "silly". I think that business owners commonly operate in a way that makes changing their price not very easy to do. They may have to reprint all their advertisements, inform all their customers/stockists etc: Changing their price may have a significant overhead cost that gives them a strong financial disincentive to avoid doing it too often. If they are selling to the public, they may want to only sell their product for a round number - eg $9.99, $14.99, $19.99, and not wish to sell it for $12.78, and so their pricing scale isn't a continuous sliding scale that can be scaled infinitesimally up and down in a mathematically perfect way. They may feel that given their costs they can't lower their price, and given their competitor's price that they can't raise their price, so may feel their can neither raise nor lower their price at all.

    None of those are "silly" reasons. All of them make perfect business sense, and would go through the heads of many business owners worldwide on a daily basis. The people who are silly are those economists who do not base their mathematical models of businesses on the actual empirical realities of how business owners actually operate their businesses in the real world, and instead construct fantasy worlds in which everyone acts "rationally" according to the economist's own definition of the term which doesn't account for the actual realities of the business world.

    I'm sure you've walked into many stores and seen that they are "sold out" of a particular item. I doubt you've ever seen the store owner walk over to the shelf that you just bought an item from and reprice the remaining items at a higher price to reflect the fact that supply just got reduced due to your purchase. This reflects the empirical reality that price is relatively slow to change compared to supply and demand. That's just an empirical fact of how our current markets work, which a lot of economists sadly get wrong at the theoretical level. Interestingly, this may no longer be the case with some of the emerging markets like eBay, where price is indeed extremely flexible and tends to change from moment to moment based on supply and demand.

    Also, if this producer of yours stubbornly insists on price X, even if the supply were cut in half of the quantity that is demanded at price X, then he's a poor businessman.
    In the real world businesses very very often have no clue what the effect of changing their prices will be. They simply have no data whatsoever about what the supply and demand curve looks like at different price points. All they know is what the demand is like at the current price point. Given they know they are making a profit margin of $X per unit sold at the current price point, they are always more than happy to supply more of their product at the current price point if there is demand for it. This is probably why their first response to seeing an increase in demand is to ramp up their supply to meet that demand: They get to capture the extra business and make the extra profit from it. Changing their price, by contrast, is a giant step into the unknown that they have no way of predicting the effects of - they might make a lot of money from the higher sales price or demand might drop off even to zero and they might go out of business.

    As the amount of labor services increases, the quantity of output per additional unit of labor falls. (The law of diminishing returns.)
    Maybe a little bit. Probably not enough to even be noticeable on the overall scale of the business.

    Free markets adjust quickly.
    It's an issue of how they adjust, really though, isn't it? As we've seen, business owners have choices in how to respond to given market situations. I've suggested that as a matter of empirical reality, the most rapid response that occurs within most free markets that exist in the world today is a response that alters supply quickly in response to the external input of demand while price remains fixed. Over a longer period, price may alter, and demand may subsequently alter in response to price.

    In the case of a surplus, price is quickly driven down as long as people want to sell more quantity at the current price than buyers are willing to buy.
    No. I think that as a matter of empirical reality this is just not something that happens much. If supply is high, and the warehouse is full of unsold stock, the business owner will often cut supply and lay off workers until his supply of unsold stock diminishes to a more manageable level.

    In some markets like the stock market and housing market, undoubtedly supply and demand and price have a more "economically rational" interaction with each other, because supply is relatively fixed and price can fluctuate hugely. But in most businesses - eg your local Subway sandwich outlet - their prices are relatively fixed but they can change how many employees they have rostered on at a given time from one day to the next, and so ramp up their supply rather rapidly, and their first response to increased demand will be to hire more employees at their local outlet, not to toy with their prices which are set State-wide or nation-wide and which change at most quarterly. So it's worth considering that there are definitely different types of market (stocks, eBay, Subway-like businesses etc) and how each one responds to demand can be different. As I've explained, the current market realities are that most businesses that hire minimum wage workers operate with the sort of MR-MC curve I drew for you previously, and they sell goods at a fixed price but they vary the supply to meet the demand. The consequence of this is that there is nothing about the MR-MC curve that provide any information about the "correct" level for wages to be at, or any long-term market pressure for wages to be at those "correct" levels.
    Last edited by Starlight; 04-18-2015, 05:57 AM.

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  • Bill the Cat
    replied
    Originally posted by Starlight View Post
    Bill the Cat,

    There's nothing in the summary of poverty and inequality that you cite that I wasn't already aware of, because I have read a fair amount of this subject. You seem to be misunderstanding the summary though, so I will try to explain it for you.

    Up until WWII there were a few extremely wealthy people, and quite a lot of extremely poor people. So inequality was very high. During the 50s and 60s a lot of complicated things happened all at once, but the upshot of a massive number of different post-war effects and government policies, was that the situation of the desperately poor people improved significantly. We also saw the 'rise of the middle class'. There was also a substantial reduction of the number of excessively-wealthy people in most Western countries during this period (income taxes were at 90% for them, in France the government simply seized their assets, etc). As a result, inequality went down to historically low levels in the 50s and 60s - to the lowest levels it has ever gone to in recorded history.
    Since the 70s, inequality has risen, back towards pre-WWII levels. The rich are getting much richer once again.
    Sorry, but the study says nothing about government programs influencing "income inequality". It cites technology, recoveries from war, and labor force participation fluctuations as the main reasons for the reduction in inequality.

    The changes in inequality and poverty in the post-War period coincided with many different things happening within society, and economic historians continue to debate the relative effects of the various changes.
    But again, you made a sweeping statement that it was due to government programs. Which is demonstrably false.

    Bigger government resulted in significantly reduced inequality and significantly reduced poverty.
    Not according to the study I cited. You have better proof than your say-so?

    Changes to government policy since then have favoured the wealthy (ie smaller government, lower taxes on the rich, higher taxes on the poor, less welfare).
    Yet upward mobility remains at a pretty flat rate since the 70s.

    Source: http://obs.rc.fas.harvard.edu/chetty/mobility_geo.pdf


    We find that the level of intergenerational mobility (national rank-rank slope) has remained stable for the 1971-1993 birth cohorts in the U.S., especially in comparison to the degree of variation across areas.

    © Copyright Original Source



    So, if your conclusion had any validity to it, the more the changes in government policy, the harder upward mobility should become. But as we can see by the study by Chetty et al., there is little correlation between the two.

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  • Starlight
    replied
    Bill the Cat,

    There's nothing in the summary of poverty and inequality that you cite that I wasn't already aware of, because I have read a fair amount of this subject. You seem to be misunderstanding the summary though, so I will try to explain it for you.

    When the twentieth century is viewed as a whole, no clear trend in income inequality emerges.
    Inequality was high and rising during the first three decades and peaked during the Depression. It fell
    sharply during World War II and remained at the lower level in the 1950s and 1960s. From the 1970s
    through the mid-1990s inequality steadily increased to levels not seen since World War II, though well
    below those during the first three decades.
    Up until WWII there were a few extremely wealthy people, and quite a lot of extremely poor people. So inequality was very high. During the 50s and 60s a lot of complicated things happened all at once, but the upshot of a massive number of different post-war effects and government policies, was that the situation of the desperately poor people improved significantly. We also saw the 'rise of the middle class'. There was also a substantial reduction of the number of excessively-wealthy people in most Western countries during this period (income taxes were at 90% for them, in France the government simply seized their assets, etc). As a result, inequality went down to historically low levels in the 50s and 60s - to the lowest levels it has ever gone to in recorded history.
    Since the 70s, inequality has risen, back towards pre-WWII levels. The rich are getting much richer once again.

    Changes in inequality were produced largely by demographic and technological changes, the
    growth and decline of various industries, changes in patterns of international trade, cyclical
    unemployment, and World War II. The primary drivers of the rate of poverty were economic growth and
    factors that produced changes in income inequality, particularly demographic change and
    unemployment.
    The changes in inequality and poverty in the post-War period coincided with many different things happening within society, and economic historians continue to debate the relative effects of the various changes.

    Public policy has reduced the market-generated level of inequality, but since 1950 has had little
    effect on the trend in inequality. Prior to 1950, the growth of government, and particularly the
    introduction of a broadly based income tax during World War II, coincided with and partly produced the
    sharp downward shift in inequality of that era. Government had little effect on poverty rates until 1950.
    Public income transfer programs have reduced poverty rates appreciably in recent decades.
    Bigger government resulted in significantly reduced inequality and significantly reduced poverty.

    Since World War II, when they have been on a large enough scale to matter, changes in tax and transfer policy have
    tended to reinforce market-generated trends in inequality and poverty rather than offset them.
    Changes to government policy since then have favoured the wealthy (ie smaller government, lower taxes on the rich, higher taxes on the poor, less welfare).

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  • Joel
    replied
    There's a lot there, so I'm not going to respond to everything you said. I'll try to focus on that which is most relevant to the discussion of minimum wage.

    Originally posted by Starlight View Post
    And about half them show an effect and about half don't. There's been a huge deal of discussion on this topic among economists in recent years as to why the studies show inconsistent results and trying to determine what is really going on. There have been several meta-studies done in recent years and they've generally concluded that overall, once all the various different studies are analyzed, that there's no effect.
    And your report also talks about such studies that do find it causes unemployment.

    One problem with attempting to empirically measure the effect, is that what we really would need to measure is what happened as compared to what would have happened otherwise (without the minimum wage increase, or without the minimum wage law at all). And the latter, can't be measured. And no controlled experiment is possible because millions of variables are always changing at once.

    To give an idea of the problem, suppose that the demand for labor happens to be increasing at the same time as a minimum wage increase. The minimum wage (assuming it's above the equilibrium wage) increase will still cause unemployment increase compared to what would have happened without the increase, but the increase in unemployment will be smaller due to the simultaneous increase in demand for labor. If the increase of demand is greater, we could see unemployment remain constant or even fall over time, in which case the effect of the minimum wage increase is to reduce the amount by which unemployment would have fallen. So it is certainly possible for someone to see a fall in unemployment that happens to coincide with a minimum wage increase, and interpret it as the minimum wage having no (or beneficial) effect, although something else was the cause.

    We should also expect the effect of any particular minimum wage to vary based on place and time. For example, in an affluent city like Seattle, the equilibrium wage is likely higher than in a poor area. So I would expect the same minimum wage to have a harsher effect in that poor area than in Seattle.

    So it also seems unreasonable to state something such as "...there really doesn't seem to be any job loss caused by moderate minimum wage increases." After all that would depend on numerous variables. For example, no one thinks an increase below the equilibrium has any negative effect. While increases above the equilibrium get worse and worse, the farther above the equilibrium you get. If the claim were really true, then we could have no job loss by an arbitrarily large increase, because we could just subdivide it into a bunch of "moderate" increases, each of which supposedly causes no job loss.

    No. Absolutely and totally false. I don't think there can be any serious argument over this: Scientific development is 100% responsible for our modern prosperity.
    That cannot be true. In order to make mass use of scientific knowledge, we must have capital goods (means of production). There are lots of technological ideas today that cannot yet be implemented (or not yet at a mass-production level), because we lack sufficient capital goods. Accumulation of capital goods (via economically-sound saving and investing) was required to achieve our modern prosperity. Thus increase in scientific knowledge cannot be 100% responsible. If the existing stock of capital goods vanished (yet we retained our scientific knowledge), we would be sent back to the stone age (or before), most of the population would die of starvation, and it would likely take centuries to slowly build back up (assuming we had free markets conducive to that).

    Nope. Economies of scale mean things get cheaper the more you buy of them.
    I think this idea of economies of scale everywhere always is ridiculous. However, it's not relevant, because we are talking about the supply of low-skilled labor, which doesn't get cheaper just because the total demand for it increases. On the contrary, that drives the price up. This can be seen in various ways. For one, if an employer wants to hire additional units of labor services, he must bid it away from other uses (e.g. other employers or from leisure time), thus bidding up the price.
    The exception is if the current price happened to already be above the equilibrium price (e.g. by minimum wage laws).

    I get that these [MC of output and MC of an input] are different things, however I disagree that the difference is important. It doesn't really matter which one you speak of, which is why I freely swap between them.
    It matters, because MC of an input (such as labor services) is relevant to the price of that input, and MC of the output is not.
    The MC of labor tends to equal MR of labor.
    MC of output tends to equal MC of output (but that doesn't tell us anything about labor or wages specifically).
    And it is not the case that MC of the output tends to equal MR of labor.
    In this discussion you have to be careful to distinguish them.

    What's more, MC of the output is ambiguous because it depends on which input(s) is/are being varied to achieve the change in one unit of output (and if multiple inputs, in what ratio).
    And units of an input (such as labor) and units of output are not in a fixed/constant ratio, because of diminishing returns.

    Originally posted by Joel
    There are two reasons why marginal revenue is not flat:
    1) An increase in the quantity supplied of the produced good causes the price of that good to fall.
    Well that assumes a complex and long-term interaction between the market and the psychology of the business owner.
    No, it doesn't. At any given time there is some quantity/stock of a good. That stock can be represented as a vertical line at that quantity. It crosses the demand curve somewhere (this is the demand to possess units of that good). An increase in the stock shifts the vertical line to the right. Because the demand curve is downward sloping, the price falls. No need to worry about the "psychology of the business owner". The price is dependent solely upon the total demand to possess units of the good (including perhaps the business owner in question, if he wishes to hold units of the good), and the quantity of the current stock of the good.

    [G]iven the price he has chosen and current market conditions, we want to examine the effects of him making one less good vs one more good
    That's not what I am talking about.
    Now I understand why you think MR is flat and then falls instantaneously to zero. Sure that would be true if that the producer stubbornly insists on a particular price, regardless of anything else. But that would be silly.
    True, if the seller insists on selling only at price X, he will not sell at anything but X (or zero, for units he doesn't sell). That is tautologically true.
    With multiple sellers (possibly including previous buyers willing to resell), competition will drive the market price, and this stubborn seller will just amount to one part of the make-up of the total demand to hold the good (because he wants to hold onto additional units that can only be sold below X).
    If he produces additional units that he doesn't want to sell at the market price (wants to hold them, at the market price) then he's both increased the stock of the good and increased the demand (i.e., his own demand) for that stock. Thus we aren't talking about an increase in the stock with demand held equal.

    Even a monopolist normally will not stubbornly stick with a chosen price, but will try to pick a point on the demand curve, pricing lower if he wants to sell a higher quantity, or pricing higher but selling less quantity. Because he (or a set of competitors combined) face that downward sloping demand curve, that causes their MR curve to be not flat--quantity sold is inversely related to selling price.

    Also, if this producer of yours stubbornly insists on price X, even if the supply were cut in half of the quantity that is demanded at price X, then he's a poor businessman. But that's what you are assuming businessmen would do.

    Originally posted by Joel
    2) It is necessarily the case that the profit-maximizing point is in a range where marginal physical output is positive but falling. (This is the law of diminishing returns. Adding an additional unit of input will increase the output, but not by as much as the previous unit of input.)
    No. Due to the fact that consumers will buy a specific number of goods at the chosen price point for retail, the MR curve may suddenly zero at any location on the X-axis depending on market conditions and the wisdom of the price-point chosen. The location at which it does so is the profit-maximizing point, because that is where it crosses the MC curve.
    Your comment here doesn't address what I said.
    As the amount of labor services increases, the quantity of output per additional unit of labor falls. (The law of diminishing returns.) Thus, even if the marginal price of the output were to remain constant (which it doesn't), the MR would be decreasing, because the additional output per additional unit of labor is falling.

    Such a theory supplies no explanation of how long markets are likely to take to achieve equilibrium. A free market might take decades, centuries, or millennia to achieve equilibrium.
    Free markets adjust quickly. In the case of a surplus, price is quickly driven down as long as people want to sell more quantity at the current price than buyers are willing to buy.

    But does it really matter? In this case of disequilibrium we are talking about wages being already above the equilibrium, thus higher than their MR!

    Leave a comment:


  • lilpixieofterror
    replied
    Originally posted by Starlight View Post
    Poverty went down massively throughout the 20th century due to government redistribution programs. Unfortunately, due to widespread defunding of those programs it's beginning to increase again.
    As Bill as pointed out, that is 100% totally false. Besides, poverty has dropped, over the past 3 centuries not because of your redistribution plans, but because of technology. Likewise, you seem to be too stupid to figure out the recent rises in poverty has to do with this little economic depression thing that has been going on since what... 2007 and we are just now starting to see some kind of 'recovery' (which 1% rises in GDP really isn't much of a recovery). Imagine that... poverty levels rise in accordance with economic depressions.

    There are less poor people now. There are slowly becoming more poor people again because we're going too far to the right politically. Europe is doing better than the US. There is income inequality because we've gone politically too far to the right.
    Asserted, not shown. I do love though how you blame all of your problems on the other party and flat out ignore changes in parties tend to happen when things go wrong. Have you been asleep in the past decade? Did you ignore this little economic depression thing that has been going on over the past decade? Of course you did because if you included ALL the facts, instead of your selective picking and choosing, it would destroy your delusions. Now, try again and this time, think before you speak.

    Your obsession with the phrase "ever expanding government" is insane. Please just shut up with that phrase. I've made it clear over and over and over and over that I propose a government of the size that was present in many Western countries in the 1950s and 1960s. That's not an "ever expanding" government. That's a finitely sized government.


    That is just plain wrong, you idiot, and anybody who does the slightest reading knows that one. Has the number of government employees grown or shrunk, in the past 50 years? Has the percentage of government spending, per GDP grown or shrunk, in the past 50 years? Oh, that's right, they have grown so you are flat out wrong when you try to say, "DUH! THEY ARE FINITELY SIZED!" while technically true, they are expanding and growing. Try again sweety and this time, research before you open your mouth.

    They do, and did. Right wing craziness is beginning to unsolve them.
    Another bald assertion that isn't backed up. If you don't back up this bald assertion; I'm afraid I got to throw it away.

    Any standard can be potentially interesting. If you want to look at overall performance then it is preferable to use a very multi-faceted standard that takes into account many many different things, eg 25 different indicators in a diverse range of things. I particularly enjoy looking a different multi-faceted reported because they can often illuminate interesting differences between countries that I wouldn't have thought to look at myself. Or it can be interesting to look at a particular thing - that can be very interesting, but at the same time it is important to realize that that is just one particular thing and you're not getting a broad view from it. (I don't like HDI because it is the worst of both worlds - it mostly focuses on one particular thing but obscures what it's focusing on by pretending to be slightly multifaceted.)
    In other words, "WAAA!!!! THE HDI TELLS ME STUFF I DON'T LIKE HEARing, I'M GOING TO IGNORE IT AND CRY AWHILE LONGER BECAUSE I DON'T LIKE IT!!!!" For all of your ranting, you still haven't explained what the objective measurements that they are using and why they picked those measurements and not others. So all you have, yet again, is your opinions and selected facts that tell you what you want to hear and ignore the rest. Now, I want you to explain how you are able to objectively measure happiness. I want you to explain the objective measurements for 'culture' and how this report determined 'culture'. I'll be waiting or you could just admit that you have a personal preference for Europe, but that would require you having to admit you have nothing and you're incapable of admitting to that.

    However one likes. There's a whole sub-field of psychology dedicated to the subject, which has found that how you measure it doesn't really matter as you tend to get the same results regardless of measurement techniques. Simply asking people how happy they are or how satisfied with their lives they are on a scale of 1 to 10 gives you good and accurate answers.
    And again idiot, find 10 people, at about the same point in their life, with similar income levels, martial status, children, etc and ask them how happy they are. Bet you'll get 10 different answers because I have noticed people are happy about different things (imagine that). Now go ahead, give your objective measurement and explain how you can objectively measure happiness and what make people happy. I'm waiting or are you just going to repeat your subjective measurement without explaining how you can account for variables?

    No. Not to the same extent.
    Asserted, not shown.

    No. Not to the same extent.
    Asserted, not shown.

    Yes. You said "the US has a huge population, with quite a bit of diversity, that your Scandinavian friends don't have to deal with. Let's try dumping a few million immigrants on top of your Scandinavian friends and see how well they handle it... The US takes in more immigrants than any other western country. Did you ever think that a huge influx of millions of people, that come with almost nothing, might have something to do with what goes on here in the US?"
    More than just Mexican immigrants, have or do come to the US, you dumb twit. You do understand that, right? Now, idiot, let me try to explain this to you in a way, even your tiny little mind can comprehend. 97% of the population of Norway, is Norwegian, meaning only 3% are not native to the country or have ancestors native to the country. Likewise, Norway has a very small population. Did your tiny mind ever consider that demographics do matter and these demographics play into Norway's favor? Of course not because you never try to figure out anything beyond what you want to see and ignore the rest.

    This is the second time today I've had to correct you about what you actually said when you falsely accuse me of this. Get a clue.
    Nope, you're just stupid and try to make people say what you want them to say vs what they actually say because you're incapable of admitting you're wrong. I know you're really really stupid and really really doubling down on your own incompetence, but if you're too stupid to understand that more than Mexican immigrants immigrant to the US and you're too stupid to understand that you changed up your goal post from blaming Christians for treatment of gays, to blaming Christians, Jews, and Muslims for treatment of gays... it isn't my fault that you can't admit you're wrong and would rather change up your goal post. Don't worry, I'll continue to correct your stupidity and point out your strawman and goal post changes every time you do it.
    Last edited by lilpixieofterror; 04-09-2015, 08:14 PM.

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  • Starlight
    replied
    Originally posted by Joel View Post
    "Ironically, contrary to the consensus of historians, it was not the existence of monopoly which caused the federal government to intervene in the economy, but the lack of it."
    So I think that sentence of the guy you quoted gives it away that "the consensus of historians" do not actually agree with him on this. I'm not saying he might not be right... just saying chances are good that he probably isn't.

    It does have that effect, according to a huge number of studies spanning 50 years compiled by the U.S. House of Representatives.
    And about half them show an effect and about half don't. There's been a huge deal of discussion on this topic among economists in recent years as to why the studies show inconsistent results and trying to determine what is really going on. There have been several meta-studies done in recent years and they've generally concluded that overall, once all the various different studies are analyzed, that there's no effect. This report summaries all the various studies done on the minimum wage and includes the graph from one of the meta-reviews:
    minwage.png
    Each dot represents a study done on the effects of the minimum wage increasing, with the X axis showing what the study found to be the effects on employment, and the Y axis showing how statistically significant that study's results were. The obvious result is that basically ALL the studies of any great statistical significance (ie high up the Y axis) found ZERO effect on employment.

    As a result of a series of these meta-studies in the last ten years all concurring that overall the hundreds of studies on the effects of the minimum wage don't seem to show any effect, the consensus of economists has shifted in recent years to endorsing the idea that there really doesn't seem to be any job loss caused by moderate minimum wage increases.

    If a legal minimum wage causes that person to become unemployed, then it makes that person even worse off. That is sufficient reason not to impose the minimum wage.
    No, and no.

    To my mind, talking about job losses in relation to the minimum wage is a total red-herring, because I think it's largely irrelevant whether they happen or not. The primary purpose of raising the minimum wage is to make sure full time workers are earning enough money to live on. And, secondarily, to try to make sure that workers are actually being paid a reasonable percentage of the profits they are making for their employers, and not being paid only a tiny tiny fraction of the wealth they are actually generating by their work. And, thirdly, to stimulate the economy by increasing demand through ensuring that poorer people have more money (which they, being poor, will spend, which will stimulate the economy). Where any job losses do or don't happen as a result is largely irrelevant to those three purposes. If minimum wage increases cause ten people lose their jobs and go onto government welfare programs, but cause 100,000 people to have the money they need to feed their families and live without the worry of how they'll pay their next bill, then they are a really really really good idea. Even if it caused a small amount of job losses, reasonable minimum wage increases would still be a great idea due to the numerous other benefits.

    Secondly, if we get rid of all the government interventions that cause and worsen poverty, and cause economic depression, and reduce growth, and increase inequality,

    Well, actually I think all the government interventions do exactly the opposite.

    Free-er markets have been the best thing in history for raising the vast majority of humanity out of poverty and into prosperity.
    No. Absolutely and totally false. I don't think there can be any serious argument over this: Scientific development is 100% responsible for our modern prosperity. You can argue that markets distribute what we have well or badly, and you can argue that markets might spur innovation or hinder it. However what seems extremely clear is that it is the technological development that has caused us to become more productive. A farmer today can produce 150 times the food that a farmer in 1 BC could produce, due to technological development. We all have lots of things today because human effort today is hugely more productive that human effort was in ancient times because of technology. That is why we have so much prosperity today. In the long run, prosperity is 100% about technology. The market, functioning perfectly, can only achieve perfectly efficient allocation of the produced goods. It might inspire humans to work longer hours or put in more effort, but there's a extremely finite number of hours in the day that a human can work and an extremely finite amount of increased productivity that a human can achieve just by putting in more effort. The market can't make human effort in and of itself more productive, only technology can do that - when you take the oxen away from the farmer and hand him a tractor instead, then he suddenly becomes much more productive.

    The reason why the [MC] curve increases is that moving to the right on the curve represents an increase in the quantity demanded of that good (whether labor service or iron or lumber).
    If I run a business, and I need to buy twice the amount of materials from my supplier (eg I buy meat patties for my burger business, or I buy paper for my printing business, or gelato for my gelato vending), then I can expect to pay twice the price I previously did or slightly less since I might reasonably expect a discount for my bulk purchasing. Nearly all businesses offer discounts if you're prepared to buy in bulk, and will offer higher percentage discounts the more you buy. That's just how economies of scale work. As a result there is essentially never an increase in the MC curve, there is only ever decrease, because the more quantity you demand of a good in any standard market conditions the cheaper it gets due to economies of scale associated with its production. If a good happens to be currently scarce, then there might be difficulties quickly obtaining more of it, however long term the supplier will likely be more than happy to ramp up production to meet demand - I have yet to hear of any business owner unwilling to sell more of their product to willing customers. The only hypothetical exception to this is if a particular good you're trying to obtain is extremely limited and due to it being in extremely scarce supply you do find yourself having to pay increasing amounts to get it - which almost never is the case in any business in the world.

    In a free market, as the quantity demanded increases, the price will increase, all else being equal.
    Nope. Economies of scale mean things get cheaper the more you buy of them. When was the last time you walked into a store and the sign said "buy 10, pay for 11"? Never. It's always "buy 10, pay for 9" or similar - the more you buy the cheaper the cost gets per item. Equally suppliers give bulk discounts to client businesses who purchase things off them in large quantities - the larger the quantity the bigger the percentage discount they're prepared to offer.

    This is especially clear when we are interested in talking about businesses economy-wide expanding or contracting (as we are in this case).
    Er, no we weren't. Well I wasn't. I was talking about a single business, and looking at how a single business has a MR-MC curve, because we want to know what would happen if a single business that employs a lot of minimum wage workers thought about employing one extra employee or one less employee. To do that, we need to hold everything else constant. So there's certainly no "economy-wide" expansion or contraction being factored in here!

    Your inclusion of the cost of additional raw materials purchased is misguided. The marginal cost of labor services is the cost of hiring an additional unit of services while holding all other inputs constant.
    Meh. It doesn't really matter. I guess it simplifies it slightly to leave out the additional raw materials, because then the MC curve becomes closer to being absolutely flat - each additional minimum wage worker costs the minimum wage.

    Here you are shifting to a different thing. When we speak of marginal cost we must be clear which thing we are referring to. Marginal cost of a unit of the product (e.g. software) is not the same thing as marginal cost of hiring a unit of labor services.
    I get that these are different things, however I disagree that the difference is important. It doesn't really matter which one you speak of, which is why I freely swap between them.

    There are two reasons why marginal revenue is not flat:
    1) An increase in the quantity supplied of the produced good causes the price of that good to fall.
    Well that assumes a complex and long-term interaction between the market and the psychology of the business owner. My example business owner has done his initial market analysis and decided to sell his goods for a certain price, eg he's selling his ice-cream for $4 per tub, or selling his pens for $1 each, or his burgers for $5.50 because that's what he's decided is a good idea. Given the price he has chosen, whatever that may be, customers will buy a certain specific number of goods. He might later decide to change the price he's selling his goods for, based on his perceptions of market conditions, or even on a whim. However, given the price he has chosen and current market conditions, we want to examine the effects of him making one less good vs one more good (or the effects of employing one less person vs one more person, whichever unit you prefer to use on the MC curve). If he makes more goods than there is demand for at his chosen price-point then his additional goods won't sell, so the MR on any goods beyond the demand limit is $0. If he makes one less good, or two goods less, than what there is demand for, then every single good he makes will successfully sell at his chosen price-point meaning the MR on each good is the price-point he has set. This makes the MR curve flat at his price-point, and makes it zero at above the demand limit.

    2) It is necessarily the case that the profit-maximizing point is in a range where marginal physical output is positive but falling.
    No. Due to the fact that consumers will buy a specific number of goods at the chosen price point for retail, the MR curve may suddenly zero at any location on the X-axis depending on market conditions and the wisdom of the price-point chosen. The location at which it does so is the profit-maximizing point, because that is where it crosses the MC curve.

    That would happen only if the demand curve had a discontinuity, suddenly dropping (instantaneously, perfectly inelastic) to zero.
    Not at all. The demand curve tells us precisely that quantity demanded is finite for any given price and the demand curve itself tells us exactly what that quantity is. ie the demand curve tells us at what point our business' MR curve will drop to zero, given the price that our business own has decided to put his product on the market at.

    And in a free market, markets clear. That is, the supply and demand (for labor in this case) tend toward where they are equal. At which point there is no involuntary unemployment. Involuntary unemployment happens in the case of an unfree market (e.g., wages are forced above that equilibrium by minimum wage laws). The fact that we have persistent involuntary unemployment is an indicator of just how unfree the market is.
    Such a theory supplies no explanation of how long markets are likely to take to achieve equilibrium. A free market might take decades, centuries, or millennia to achieve equilibrium.

    Leave a comment:


  • Bill the Cat
    replied
    Originally posted by Starlight View Post
    Poverty went down massively throughout the 20th century due to government redistribution programs. Unfortunately, due to widespread defunding of those programs it's beginning to increase again.
    Boy, you need to do some research...

    Source: http://www.irp.wisc.edu/publications/dps/pdfs/dp116698.pdf


    When the twentieth century is viewed as a whole, no clear trend in income inequality emerges.
    Inequality was high and rising during the first three decades and peaked during the Depression. It fell
    sharply during World War II and remained at the lower level in the 1950s and 1960s. From the 1970s
    through the mid-1990s inequality steadily increased to levels not seen since World War II
    , though well
    below those during the first three decades.


    Changes in inequality were produced largely by demographic and technological changes, the
    growth and decline of various industries, changes in patterns of international trade, cyclical
    unemployment, and World War II.
    The primary drivers of the rate of poverty were economic growth and
    factors that produced changes in income inequality, particularly demographic change and
    unemployment.

    Public policy has reduced the market-generated level of inequality, but since 1950 has had little
    effect on the trend in inequality.
    Prior to 1950, the growth of government, and particularly the
    introduction of a broadly based income tax during World War II, coincided with and partly produced the
    sharp downward shift in inequality of that era. Government had little effect on poverty rates until 1950.
    Public income transfer programs have reduced poverty rates appreciably in recent decades. Since World
    War II, when they have been on a large enough scale to matter, changes in tax and transfer policy have
    tended to reinforce market-generated trends in inequality and poverty rather than offset them.

    ~ The Twentieth Century Record of Inequality and Poverty in the United States
    ~ Institute for Research on Poverty
    ~ Discussion Paper no. 1166-98

    © Copyright Original Source



    So, the only factual part of your comment is the fact that poverty went down. You were wrong on why and how.

    Leave a comment:


  • Starlight
    replied
    Originally posted by lilpixieofterror View Post
    So why are there still poor people, why is there still rich people, and why is there still 'income inequality' if your plan has worked?
    Poverty went down massively throughout the 20th century due to government redistribution programs. Unfortunately, due to widespread defunding of those programs it's beginning to increase again.

    why are there still poor people, why is Europe not doing better than the US, and why is there still 'income inequality' if your plan is working?
    There are less poor people now. There are slowly becoming more poor people again because we're going too far to the right politically. Europe is doing better than the US. There is income inequality because we've gone politically too far to the right.

    It sure seems to produce an ever expanding government that requires yet more money to work,
    Your obsession with the phrase "ever expanding government" is insane. Please just shut up with that phrase. I've made it clear over and over and over and over that I propose a government of the size that was present in many Western countries in the 1950s and 1960s. That's not an "ever expanding" government. That's a finitely sized government.

    but it seems the problems never get solved.
    They do, and did. Right wing craziness is beginning to unsolve them.

    Now again... what standard are you using to measure by and why that standard and not another standard?
    Any standard can be potentially interesting. If you want to look at overall performance then it is preferable to use a very multi-faceted standard that takes into account many many different things, eg 25 different indicators in a diverse range of things. I particularly enjoy looking a different multi-faceted reported because they can often illuminate interesting differences between countries that I wouldn't have thought to look at myself. Or it can be interesting to look at a particular thing - that can be very interesting, but at the same time it is important to realize that that is just one particular thing and you're not getting a broad view from it. (I don't like HDI because it is the worst of both worlds - it mostly focuses on one particular thing but obscures what it's focusing on by pretending to be slightly multifaceted.)

    How does one measure 'happiness'?
    However one likes. There's a whole sub-field of psychology dedicated to the subject, which has found that how you measure it doesn't really matter as you tend to get the same results regardless of measurement techniques. Simply asking people how happy they are or how satisfied with their lives they are on a scale of 1 to 10 gives you good and accurate answers.

    So do the poor still exist in these countries?
    No. Not to the same extent.

    Does income inequality still exist in these countries?
    No. Not to the same extent.

    Did I say anything about Mexican immigrants being a burden on the system?
    Yes. You said "the US has a huge population, with quite a bit of diversity, that your Scandinavian friends don't have to deal with. Let's try dumping a few million immigrants on top of your Scandinavian friends and see how well they handle it... The US takes in more immigrants than any other western country. Did you ever think that a huge influx of millions of people, that come with almost nothing, might have something to do with what goes on here in the US?"

    No I didn't, so nice trying to shove words down my throat
    This is the second time today I've had to correct you about what you actually said when you falsely accuse me of this. Get a clue.

    Leave a comment:


  • lilpixieofterror
    replied
    Originally posted by Starlight View Post
    You know what is frustrating about you? You see everything that you disagree with as "communism" even when it's got nothing to do with communism and has never been associated with communism.
    Just because you haven't got a clue what communism actually isn't, doesn't mean the rest of us don't. You are aware that one can be a communist, without being a dictatorship, right?

    The non-American democratic West in the 1950s and 1960s was not communist. Can you get that through your head? France, Denmark, Sweden, Norway, New Zealand, Australia, Canada, the UK etc are not communist and have never been communist. Within the last century or so, they've all been democracies, they've not had dictatorships, and they've never been communist. But at various times they've had strong redistributive economic policies, and depending on your definition of the term, you might want to label them 'socialist' or give them that label at certain periods of their history.
    Than you might want to tell other people that one, that have said many of them have adopted communist principles and have even elected self proclaimed communist/socialist to power or did you forget facts like that because they don't tell you stuff you don't want to hear? Sorry Sweety, but the idea that the rich have too much and it needs to be taken from them is straight from the pages of communism and you can claim, "BUT THEY ARE NOT DICTATORSHIPS!" who said a dictatorship was required, for somebody to use communist ideas and principles? Oh that's right your black/white fundy brain is incapable of understanding degrees. Anyway, here it is... 60 years later and yet... why is it that there's still wealthy people and still poor people? How many more decades and how much more money will it require for the problems of poverty and 'wealth inequality' to be solved?

    So your argument seems to go "well we can't have the policies that worked in those countries because communism didn't work!" which is just stupid. Yes, communism didn't work. I agree. But what did work, and worked very well, was the redistributive economic policies that a wide variety of successful Western countries have tried.
    So why are there still poor people, why is there still rich people, and why is there still 'income inequality' if your plan has worked? While watching you attempt to sweep these facts under the rug, I'd like an answer to the questions I keep asking and you keep avoiding... why are there still poor people, why is Europe not doing better than the US, and why is there still 'income inequality' if your plan is working? It sure seems to produce an ever expanding government that requires yet more money to work, but it seems the problems never get solved. Hummm... I wonder why...

    I do trust my government. I wouldn't trust the american government though. You guys have a serious corruption problem which needs a major solution.
    Asserted, not shown. Sorry sweety, assertions are not arguments, but it is entertaining to watch an idiot talk about things he knows nothing about.

    Only some countries in Europe have followed the kinds of policies I support. Other countries in Europe have had fascist dictators or communist ones. So Europe overall is a very mixed bag of different recent histories.
    Nice burden shift, but we're taking about Western Europe and not the former communist block countries. Now again... what standard are you using to measure by and why that standard and not another standard? I even picked out a standard to use, the HDI, but the HDI doesn't quite back up your claims, so you need to ignore it (because 3% is hardly something to write home about, so you need to pick something new, that whispers sweet nothings into your ear).

    It also depends on what you mean by "thriving and doing much better than the US". The HDI report you cite makes a little bit of an effort to combine various factors but not a great one, and seems to overly favor GDP. Because, yes, I think that on an overall balance of factors, much of Europe is doing much better than the US and I would much rather live there than in the US.
    And have you ever lived in the US? I've lived in the US, Europe, and Asia (you travel a lot, when in the military). While the historian in me enjoys visiting 1000+ year old historical sites (not many of those exist in the Western Hemisphere), it is always good to go back home to the states. In reality, the only thing you've proved is that you have a cultural biasness for Europe, but you haven't shown an actual objective measurement for why. I freely admit my preference is due to growing up in the US, while you seem to pretend your preference has some sort of objective bases (when you haven't actually shown it). Now again, what objective measurement are you using? I picked one, but you don't like it because it doesn't prove what you want it to prove, so you ignore it. Nice.

    Yes. So on a multi-factor analysis like this one, the US is 21st, behind many European countries. On this OECD one the US is doing better at 7th, still behind the Scandinavian countries and others. On the single factor of happiness (although arguably happiness is itself very multi-factor in origin) the US is 10th, once again behind all the socialist-democracies of Europe.
    How does one measure 'happiness'? What is the objective measurement that you have developed, that tells us happiness? Asking people and hoping they tell you what you want to hear? See, funny thing about that... it isn't hard to get the results you want... if you know who to ask and what to ask. Your first list, how did they measure 'culture'? How about equality? Oh yeah, I forgot... those things tell you stuff you like hearing, so you listen to them and ignore ones that don't tell you want to want to hear (such as the HDI list). How amusing, as I said before, all depends on who you ask and well... if we ask the UN... it says your precious 'non-American west' isn't really objectively better, but if we ask other people... it could be. There we go... it seems to primarily boil down to differences of opinion and little real objective data. The only thing we seem to conclude is that dictatorships are pretty bad things, but it seems you don't actually have much of anything and only listen to stuff that tell you things you like hearing and ignore ones that don't.

    The countries that consistently score the best on these multi-factor analyses are the Scandinavian countries, France, Switzerland, the Netherlands, the UK, Ireland, Australia, NZ and Canada. And the US is typically somewhere on the tail-end of this list or off the bottom of it - often quite far off it. You can often almost split the first-world countries into two groups on a lot of these lists, with the US typically being in the 2nd tier of first-world countries, while the historically socialist democracies are all the ones in the first tier. That is how I tend to mentally think of the US - as a second-tier first-world country.
    In other words, people that tell you stuff you like hearing, rank countries you want on the top, at the top. So what we got is that people that tell you stuff you like hearing, rank things where you want them, while you downplay sources that tells you stuff you don't like hearing. Why should we ignore the HDI report and only use your sources? Oh, I know why... because they tell you what you want to hear, so it must be objective because it is objective! You got nothing, but your opinion. Perhaps you can answer for your first source, how did they objective measure the criteria they set and why? Likewise, how does one objectively measure happiness? Who did they ask? What did they ask? All questions you need to answer, but I suspect the answer is just in your own biasness so only go to sources that tell you stuff you like hearing and ignore the rest.

    The things these top countries have in common are:
    1. Modern western democracies.
    2. Free market capitalism.
    3. Very low corruption.
    4. Strong government services.
    5. A history of strongly redistributive government economic policies.
    In other words, sources that you liked hear, put countries you pretend are 'the highest' on the parts of a random list you wanted them at. You than, picked out what criteria you wanted to hear, and ignored the rest. How funny! So the HDI is wrong because it is wrong and other ones are right because why? They tell you want you wanted to hear? Now please tell me how your sources objectively measured the criteria they used and why they picked that criteria and not another. I'll be waiting.

    I concede a legitimate discussion can be had over which of these things are more important factors than others. And I also concede that the fact that a lot of these countries have significantly changed the structure of their economies within the last 30 years and significantly altered the strengths of their redistributive policies can make it hard to disentangle whether their current good performance is a after-effect of good historical policies that gave them a fundamentally sound and well-structured society, or whether it stems from very recent policies.
    So do the poor still exist in these countries? Does income inequality still exist in these countries? Why did you pick those criteria and not another criteria? Oh, perhaps you should concede to one thing... you're very good at picking and choosing what you want to hear and ignoring the rest. I could pick an criteria I want and do the same thing. It isn't that hard to do, you just need to know what to pick and what not to pick.

    Yes, generally much better in almost all areas. The US has had certain advantages in some areas due to simply having a larger population. Thus total US productivity and spending tends to look humongous when compared to any of the other much smaller Western countries.
    That's nice, but even splitting the US into different states doesn't help you much. Germany has a GDP of 3.7 trillion dollars, with a population of 80.6 million. California has a GDP of 1.95 trillion dollars, with a population of 38.8 million. Germany is among the most prosperous nations in Europe though and California has the 8th largest economy in the world. 3 US states have a GDP of over 1 trillion dollars (California, Texas, and New York) with 36 having a GDP over 100 billion dollars. So even breaking down the US into states really doesn't end up helping you much either. Besides, California outperforms countries that are far larger and should be performing better. Russia has a GDP of 2.097 trillion, with a population of 143 million people. Population, in of itself, is not an indication of how economically successfully a country will be. Both China and India have a larger population vs the US, but have a lower GDP (and therefore a low income throughout the population). Russia is nearly beat by a single state, with a population less than 1/4th of all of Russia. Clearly, more factors play into economic success than merely the amount of people a country has. What do you suppose some of those things are?

    I agree that a high rate of culturally-dissimilar immigration can pose serious problems. However, I note that typically in the US, Mexican immigrants tend to work hard and form a significant part of your minimum wage / lower than minimum wage labor force, doing many of the low-wage jobs such as cleaning and farm-work that a lot of Americans would prefer not to do themselves. And your perceived problem with government dependency is not with Mexican immigrants, but rather is with Black Americans. So as far as I can tell, your Mexican immigration appears to be making your country richer rather than costing you money, because for the most part they are not being given government services and are instead acting as slave-labor. Whereas I get the impression that Black Americans probably are a net economic drain on your system, but they're not recent immigrants.
    Did I say anything about Mexican immigrants being a burden on the system? No I didn't, so nice trying to shove words down my throat. You do know that I grew up in Southern California, right? I actually do like some of these immigrants because they come to the US to make something for themselves and their children and sometimes end up doing quite well (some even business owners). Ironically, do you know what class your redistribution plans effect the most? Not so much those who are already wealthy (because as you said yourself, Europe still has quite a few wealth aristocrats left over from the 19th century and before), but those attempting to gain wealth.

    It's cute how Americans re-imagine themselves as the great benevolent rescuer who swooped in to save everyone. When in actuality, the US stayed out of WWII until they were actually attacked themselves. Not exactly the unselfish motivations you'd like to re-imagine it as being. And the fact that additional forces were enough to tip the balance is not at all the same as winning the war single-handedly.
    It's cute how 'non-American westerns' (AKA you) pretend as though the precious 'non-American west' is just a century of progress and just flat out ignore the fact that the 'non-American west' spent the first half of the 20th century blowing each other to bits, in destructive wars, and were only saved by foreigners bailing them out military wise and than investing huge amounts of capital to rebuild their shattered countries afterwords (funny how the US rebuilt itself after the destructive civil war, but the US has to rebuild Europe after it blew itself to bits?). Anyway, I see you're unaware of the lend-lease act (which happened before the Japanese attack), in which the US loaned the allies tons of materials, for almost nothing. I see you also didn't hear about the Destroyers for Bases Agreement (put into act in Sept 1940) in which the US gave the British 50 destroyers for land rights at overseas bases. You also seem to be unaware that the US Navy was running escorts, for the British, before official action was declared. What is really entertaining though is to watch you whine about, "DUH THE US DIDN'T DECLARE WAR BEFORE IT WAS ATTACKED!" while complaining about Obama being too much of a 'war-hawk', but complain that the US didn't take 'any action' (which I already proved is 100% bogus anyway) before being attacked. What should it be, should the US engage in pre-emptive attacks upon 'future threats' or not? What side of your mouth will you try speaking out of today? The point is though, your precious 'non-American west' isn't nearly as great as you seem to claim. They spent the first half of the 20th century blowing each other to bits and the next half staring down the USSR (with American help of course) across a heavily armed border, with the possibility of blowing each other to tiny bits, yet again. It is only in the past few decades that your precious 'non-American west' has even become what you so desire it to be. Too bad it could end up falling apart, if a serious threat comes over the horizon. Don't worry though, perhaps you can run to the US and hope they save you again (so you can bad mouth the US again, as soon as the crisis is over).

    I agree the post-war rebuild was a really good idea and really successful. It's good to finally reach agreement that large government programs to build up economies and infrastructure are a great idea.
    And it's too bad that your precious 'non-American west' would not exist, in the way it does today, without US intervention. You'd think you'd be more appreciative of the country that helped out your precious 'non-American west' so much, but nah... you'd rather talk trash and pretend you know what you're talking about. So, what do you plan on doing if another threat comes over the horizon? Are you going to run to the US again and than complain about the US after it gets done saving you from your own destruction?

    Leave a comment:


  • Joel
    replied
    Originally posted by Starlight View Post
    LOL, okay you've managed to find quite possibly the single least reputable person in the entire country: That bloggers' corruption and horrible character was literally the major scandal of last year's election. And he's then citing a fringe extremist claiming how literally almost everybody in NZ who thinks they know something about inequality is actually wrong, including all the experts on it.
    Okay, I'll have to take your word for it. The chart of rising incomes says it's from Bryan Perry of the Ministry of Social Development, which seems to be this:
    https://www.msd.govt.nz/about-msd-an...ehold-incomes/
    The chart can be seen on page 12 of that report.
    Is that the fringe extremist you are talking about?

    A lot of libertarians I've heard talk don't seem to realize that currently nearly all governments in the world each have a department permanently dedicated to preventing monopolies forming and actively breaking up any monopolies that do form. That is why the monopolies that do exist tend to be government created - because ones that are not government approved are actively eradicated. You can't say "look at the world and see that the free market is not producing monopolies", because it the free market keeps regularly trying to form monopolies and governments keep preventing it doing so.
    So we have to look to the past, before such anti-monopoly laws were used much. What I've seen is that free-market attempts such as mergers and formation of cartels were largely unsuccessful.

    E.g., in the U.S.:

    As Gabriel Kolko demonstrates in his masterly The Triumph of Conservatism and in Railroads and Regulation, the dominant trend in the last three decades of the nineteenth century and the first two of the twentieth was not towards increasing centralization, but rather, despite the growing number of mergers and the growth in the overall size of many corporations,

    "toward growing competition. Competition was unacceptable to many key business and financial leaders, and the merger movement was to a large extent a reflection of voluntary, unsuccessful business efforts to bring irresistible trends under control. ... As new competitors sprang up, and as economic power was diffused throughout an expanding nation, it became apparent to many important businessmen that only the national government could [control and stabilize] the economy. ... Ironically, contrary to the consensus of historians, it was not the existence of monopoly which caused the federal government to intervene in the economy, but the lack of it."
    http://praxeology.net/RC-BRS.htm

    In the U.S., my understanding is that anti-trust law has mainly been used as a weapon by some big players against their competition.

    My own preferred solution for handling industries that suffer from monopolistic problems is for the government to own a company competing in the industry, which is itself run as a private company and is no different to any other company other than that the government is the majority shareholder.
    But those who want such a company to exist don't need to get the government to do it. You can do it yourselves. And by doing that, you wouldn't even have to share control of it with opposing politicians or the fickle voters. You could run it exactly the way you want: non-competitive practices, you could donate the profits to the government if you want. Win-win.

    Well everything ultimately has effects. The government's monetary policy is inherently non-neutral - the way the entire fiscal system is set up and how the printing of money works and how banks work is all non-neutral.
    And I oppose those things too. They only cause problems.

    Originally posted by Joel
    If you hated the low-skilled and wanted to price them out of the market (and create unemployment), a legal minimum wage would be a good way to achieve that end.
    Well, except that it doesn't actually achieve that end as a matter of fact according to the dozens of empirical studies that have now been done on the subject.
    It does have that effect, according to a huge number of studies spanning 50 years, compiled by the U.S. House of Representatives. The list is copied here:
    http://seanwmalone.blogspot.com/2009...c_location=ufi

    I'm curious: In your idealistic libertarian utopia, how do these people who are earning much lower than the current minimum wage survive? Let's say that working 80 hours a week they have enough money for food and possibly a roof over their heads. How do they pay for healthcare? What happens if they get sick and can't work any more?
    First of all, that's not the relevant question. If a legal minimum wage causes that person to become unemployed, then it makes that person even worse off.
    That is sufficient reason not to impose the minimum wage.

    Secondly, if we get rid of all the government interventions that cause and worsen poverty, and cause economic depression, and reduce growth, and increase inequality, then fewer people will ever require assistance, those who do will need less assistance, and more people will be more willing and able to voluntarily help those who do. Things like voluntary charity, churches, and mutual aid societies would be sufficient to help the few remaining who need assistance.

    Free-er markets have been the best thing in history for raising the vast majority of humanity out of poverty and into prosperity.

    Firstly, that logic suggests that the marginal revenue and marginal cost curves cross one another in the vicinity of the final employee. So maybe the final person employed, plus or minus one person, will cost the employer close to the marginal revenue (as it happens, this is not actually the case, as I'll argue below). So this says nothing about the relationship of the other employees to their productivity it says nothing at all about how close or not close the marginal revenue and marginal cost curves are to each other in other sections of the curves.
    Marginal revenue & cost refer to a pool of (approximately) homogeneous goods. In this case we are talking about mostly-interchangeable units of some kind of low-skilled labor. Because they are effectively interchangeable, any one unit can be treated as the "last" unit that can be hired or not hired, and thus the marginal revenue and cost is the same for each of them.

    If some workers are more productive than the others, then the pool of labor services is not homogeneous. Their labor services would most profitably be considered as a separate pool, with its own, separate marginal cost and marginal revenue, both almost certainly higher, thus higher wages.

    The marginal cost curve plotted against number of workers tends to be nearly always very very close to flat but slightly decreasing, for the following reasons....Thus the marginal cost curve is almost flat but a little decreasing due to economies of scale. That curve is not overly exciting. (Although it is worth noting that a lot of people get this curve factually wrong by showing pictures of this curve increasing.
    The reason why the curve increases is that moving to the right on the curve represents an increase in the quantity demanded of that good (whether labor service or iron or lumber). This is especially clear when we are interested in talking about businesses economy-wide expanding or contracting (as we are in this case). In a free market, as the quantity demanded increases, the price will increase, all else being equal.

    Your inclusion of the cost of additional raw materials purchased is misguided. The marginal cost of labor services is the cost of hiring an additional unit of services while holding all other inputs constant. Those other inputs have marginal costs and marginal revenues of their own (each pair tending to be equal).

    But many empirical studies have found that there are almost no businesses in the entire world that operate on an area of this curve where marginal cost is increasing.
    If so, this is likely due to the prevalent existence of artificially raised prices (such as via minimum wage laws), held above the market equilibrium. This causes a "surplus"--a pool of unemployed workers. In that case an increase of quantity demanded only serves to draw from the pool of the unemployed (and tend toward eliminating the surplus), instead of raising price, because the price is already held above equilibrium.

    In many businesses involving digital content the marginal cost can even be pretty much zero eg the cost of selling an additional piece of pre-made software or an additional instance of an audiobook can have an essentially zero cost for the vendor.)
    Here you are shifting to a different thing. When we speak of marginal cost we must be clear which thing we are referring to. Marginal cost of a unit of the product (e.g. software) is not the same thing as marginal cost of hiring a unit of labor services. And both of those are different from the marginal cost of using an additional unit of lumber.
    You shifted from talking about the marginal cost of a factor of production (an input) to talking about the marginal cost of the produced output. Those are very different. This also makes suspect your previous comments in that paragraph, because it isn't clear when you made that mental shift.

    The interesting curve, which has an unexpected shape for the uninitiated, is the marginal revenue curve. Now each additional minimum wage worker on the production line, much like the one before him, can churn out X number of whatever-he's-making in a year and they'll each be sold for some price $Y based on whatever the owner has decided to market his product for. So the marginal revenue curve is flat, absolutely flat.
    This is incorrect.
    There are two reasons why marginal revenue is not flat:
    1) An increase in the quantity supplied of the produced good causes the price of that good to fall.
    2) It is necessarily the case that the profit-maximizing point is in a range where marginal physical output is positive but falling. (This is the law of diminishing returns. Adding an additional unit of input will increase the output, but not by as much as the previous unit of input.)

    The second of the two contributes to the marginal revenue falling. The first of the two could cause marginal revenue to be rising or falling, depending on the elasticity of demand for the product. So, combined the marginal revenue could be increasing if demand for the output is elastic enough, and marginal revenue is necessarily falling if demand is inelastic.

    [...]And then, at some point on the graph, the marginal revenue curve has a discontinuity it drops to zero instantaneously due to demand for the product being exhausted.
    That would happen only if the demand curve had a discontinuity, suddenly dropping (instantaneously, perfectly inelastic) to zero. Which doesn't seem likely. You used the example of pens. I don't think it's likely that pens are at a point of perfectly inelastic demand.
    As well it seems unlikely that the demand for pens is perfectly elastic prior to that point, as you claim. It is far more likely that the demand for pens is relatively gently downward sloping. Sure the demand curves eventually reach zero, but there's no reason to assume that they somewhere drop instantaneously to zero.

    Even if, for some good, the demand curve does have such a discontinuity, there is no guarantee that that is where marginal cost and marginal revenue cross (because MC is increasing and MR is not flat prior to the hypothetical discontinuity.)


    Your following analysis of "supply-side" vs "demand-side" is a non-sequitur. A business can expand (or contract) due to either 'side'. An increase in the marginal revenue (e.g. due to an increase in the supply curve) would cause the business to expand. Likewise a fall in the marginal cost curve would cause a business to expand production, unless you try to assume, as you do, that demand is always everywhere perfectly inelastic. Which in the big picture cannot be true. Say's Law, properly understood, is one way to show that. Additional production of valued goods for sale necessarily increases aggregate demand.

    (When MR-MC curves are drawn wrongly with increasing MC curves, then it becomes obvious that businesses would not want to advertise because they don't want to sell any more of their products because they're too expensive to make.
    That doesn't follow. If advertising were to push up the demand curve and thus push up the MR curve, and MC is increasing, then MR and MC will simply cross at a point of higher output (and higher $). This increases total profit even though the firm is now operating at a point of higher MC, because the increase in revenue was greater than the increase in cost. (The increase in the demand curve itself increases the price of output at the current quantity of output, thus increasing revenue. It also raises MR above MC thus creating the opportunity for additional profit by expanding production.)


    The market mechanism that actually causes wages to rise and employees to be paid what they are worth is only present when there is full employment. When there are zero remaining unemployed people available for exploitation yet there still remains demand for additional products, then the employers who would then like to employ more workers then have to compete with other employers for the employees.
    And in a free market, markets clear. That is, the supply and demand (for labor in this case) tend toward where they are equal. At which point there is no involuntary unemployment. Involuntary unemployment happens in the case of an unfree market (e.g., wages are forced above that equilibrium by minimum wage laws). The fact that we have persistent involuntary unemployment is an indicator of just how unfree the market is.

    Leave a comment:


  • Sparko
    replied
    Originally posted by Cow Poke View Post
    Yup - a friend of mine works in an upper end steakhouse, and said he'd be happy to work for FREE + tips. He's the kind of guy who is genuinely friendly and efficient - not the "fake" friendly or the "I'm only being friendly cause I want money" friendly. You just naturally want to tip the guy well! OH - one of the things he really works at is learning the customers' names - that's always impressive when the waiter greets you by name and welcomes you back.
    We had a building worker here that was like that. He was friendly and always remembered someone's name and greeted them by it when he saw them. And we are talking about hundreds of people! The building's owners laid him off due to cutbacks. Everyone in the building who knew him gave money to a collection for him.

    Leave a comment:


  • Cow Poke
    replied
    Originally posted by Sparko View Post
    Yeah I bet the wait staff really loves that part. According to the article they were making like $27/hour with tips. Now they get $15/hour
    Yup - a friend of mine works in an upper end steakhouse, and said he'd be happy to work for FREE + tips. He's the kind of guy who is genuinely friendly and efficient - not the "fake" friendly or the "I'm only being friendly cause I want money" friendly. You just naturally want to tip the guy well! OH - one of the things he really works at is learning the customers' names - that's always impressive when the waiter greets you by name and welcomes you back.

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