Category: Economics

Blog author: jcarter
Tuesday, August 4, 2015
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Many people believe that market economies create a dog-eat-dog environment full of human conflict and struggle. But as Prof. Aeon Skoble explains, the competition in markets encourages people to cooperate with one another for mutual benefit.

(Via: Cafe Hayek)

dan-price-gravityThey say the road to hell is paved with good intentions. What they don’t often mention is that, like a parade route, both sides of that road are crowded with well-wishers cheering you on.

In a country where we give children “participation trophies” for merely showing up and “doing their best,” it’s not surprising that we applaud business leaders simply for “trying to make a difference.” As long as their intentions are good, why should we criticism their efforts?

I was reminded of that pervasive attitude after writing about Dan Price and Gravity Payments. My article in April on “Why the $70,000 Minimum Wage is Doomed to Fail” was the most criticized piece I’ve ever written for this blog. As one commenter wrote, “We just witnessed a CEO become a humanitarian and I’ve never seen so many people wish for his failure.”

This was a typical reaction to the article, and an all-too-common response to any criticism of good intentions, especially in the business world. Merely pointing out that a policy is likely to conflict with the norms of economics and human behavior is enough to get you labeled a cold-hearted pessimistic scrooge. Why focus on the negatives, people say, when someone is merely trying to do good?

The reason, as the old proverb implies, is that when divorced from prudence good intentions can lead us to be worse off than we were before. That was the reason I was critical of Price’s decision to pay every one of his 120 employees a minimum of $70,000 a year. I thought then—and believe still—that is could lead to unemployment for the company’s workers.

However, in my article there was one thing I was clarly wrong about. I assumed the policy would lead to the company’s bankruptcy within 5 years. A new article in the New York Times shows that the company many not last even that long.
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look-hereOn an average day, a person is subjected to more than 5,000 advertisements and exposures to brands. Out of that number about 362 are “ads only.” That means that during your waking hours you are exposed to an average of 23 ads per hour, or about one advertisement every two and a half minutes.

A lot of people along the advertising chain—from creation to display of ads—are getting paid. If everyone else is getting paid to distribute the ads, why shouldn’t you get paid to see them? After all, as Benjamin Franklin said, time is money. Isn’t your time and attention worthy of compensation?

Philosopher Thomas Wells thinks so. He makes an intriguing market-based argument that we need an effective property-rights regime that gives individuals the right to control where we direct our attention. “Advertisers should pay us,” says Wells, “not third parties.”

“Advertising is a natural resource extraction industry, like a fishery,” adds Wells. “Its business is the harvest and sale of human attention. We are the fish and we are not consulted.”
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U.S. Rep. Justin Amash, in an article for www.mlive.com, discussed the recent charter expiration of the Export-Import Bank (Ex-Im) and how that is a good first-step toward reducing the corporate welfare and crony capitalism that has infected American politics and economics:

If a man swipes your wallet, he’s a thief. We don’t ask whether the pickpocket ultimately spent the cash on a worthy cause. Yet, supporters of corporate welfare would have you believe that as long as the companies receiving welfare prosper, you shouldn’t care that the government snatched your money to make it happen.

The moral implications of cronyism are abundant. As public/private partnerships expand, the market system slowly transforms from free enterprise and competition driven by market forces to government control of who succeeds and fails based on loans or bailouts to favored groups and corporations. In an interview with the Acton Institute’s Religion & Liberty, Peter Schweizer discussed how cronyism is creating a moral crisis and how it is affecting the poor:

Our poverty programs get distorted by crony corporations. Just look at how the food stamp program has expanded over the years. Initially, it was a safety net to provide basic provisions, and most people agree basic safety nets are needed. The problem is that when the government started throwing around billions of dollars, the snack food and soft drink industry saw dollar signs. So they lobbied and got the regulations changed so that snack food and sodas are now covered by government assistance. It’s now a $10 billion industry for soft drink companies. Then it got expanded to include convenience stores, and now you’ve got the fast food industry lobbying lawmakers to let people use EBT cards at fast food establishments.

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Kishore Jayabalan, director of the Istituto Acton in Rome, talked to Voa News yesterday about the flaws in Pope Francis’s pronouncements on free markets and globalization, as articulated in the recent encyclical Laudato Si’.

“When the pope says that this economy kills, that this economy destroys the environment, I’m not quite sure what economy he’s talking about,” said Jayabalan.

Read the full article here.

jeb

During a recent interview, presidential candidate Jeb Bush outlined his economic plan, which included a goal of achieving 4 percent economic growth.

As for how we might achieve that growth, Bush went on to commit a grave and sinful error, daring imply that Americans might need to work a bit harder:

My aspiration for the country — and I believe we can achieve it — is 4 percent growth as far as the eye can see,” he told the newspaper. “Which means we have to be a lot more productive, workforce participation has to rise from its all-time modern lows. It means that people need to work longer hours and, through their productivity, gain more income for their families. That’s the only way we’re going to get out of this rut that we’re in.

The pundits descended, the trolls ignited, and the competing politicians proceeded to pounce, including his chief rival, Hillary Clinton, who tweeted: “Anyone who believes Americans aren’t working hard enough hasn’t met enough American workers.” The media followed in turn, running numerous stories on the “real” barriers to economic growth: economic inequality, low wages, and — my personal least-favorite — a lack of “good jobs.” (more…)

more-moneyA perennial complaint by the political left is that the CEOs of American companies earn too much money. The implication is not, however, that the “excess” money should be distributed to the shareholders (who actually own the company). Instead, the idea is that “fairness” requires that much of the profit that normally goes toward the CEO’s pay should be redistributed to the rest of the company’s employees.

But what if we took it a step further: What if we redistributed all corporate profits to workers? What if the profits of every American company were not given to the shareholders but divided equally among every worker in America?How much do you think it would raise the average worker’s pay?

Take a moment to do a rough guestimation of how much the hourly wage would be raised if all profits were redistributed. Have a number in mind?

The answer to the question is that the average worker’s hourly wage would increase by . . .

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