Category: Economics

20140313__0314wealth1“No one in America should be working 40 hours a week and living below the poverty level,” said Joe Biden last year, “No one. No one.”

That’s a sentiment I share with the vice president. And the good news is that almost no one who works 40 hours a week lives below the poverty level.

That’s the finding of the latest report on income and poverty from the Census Bureau. For those aged 18 to 64 who work full time, year round the poverty rate is a mere 2.4 percent. Those who did not work full-time had a poverty rate that was more than ten times higher—31.8 percent.

But as Preston Cooper points out, the number of full-time workers in poverty may be even less since the definition of poverty used by the Census Bureau does not take into account taxes and transfers such as the Earned Income Tax Credit, which tops up the wages of low-income workers.
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Blog author: jcarter
Tuesday, October 18, 2016
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Note: This is the sixth post in a weekly video series on basic microeconomics.

Last week we took a deeper look into the demand curve, examining how to read the demand curve, how demand curves shift, and consumer surplus. This week we want to take a closer look at the supply curve and what it reveals to us.

And in this next video from Marginal Revolution University we consider the factors that shift the supply curve. How do technological innovations, input prices, taxes and subsidies, and other factors affect a firm’s costs and the price at which the firm is willing to sell a good? By answering these questions we can gain a better understanding of how and why the supply curve shifts.

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Economic GrowthIn 1820, America’s per capita income averaged $1,980, in today’s dollars. But by 2000, it had increased to $43,000. That economic growth has benefited the rich, of course. But it has also transformed the lives of the poor—and prevented many more from becoming or staying poor. Because of economic growth we not only have less poverty and hunger, but less disease and and increase in life expectancy measured in decades.

Yet despite these benefits we are often uncomfortable with economic growth, i.e., a rising standard of living for the clear majority of citizens. Indeed we are, as Benjamin M. Friedman says, we tend to denigrate the material welfare of ourselves and our neighbors are being of little moral consequence:
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initiativeThe term “free market” doesn’t really capture the essence of the economic system that produces prosperity, says Michael Novak. The secret that “liberated more than a half billion of their citizens from poverty” was not mere freedom but private ownership and personal initiative.

The new economy in which we live is often called “the free market economy.” But markets are universal. Markets were central during the long agrarian centuries, through biblical times, in all times. For this reason, the term “the market economy” or even “the free-market economy” somewhat misses the mark.

More accurate is the “initiative-centered,” the “invention-centered,” or in general the “mind-centered economy.” More than anything, mind is the cause of wealth today. The Latin word caput (head) — the linguistic root of “capitalism” — has inadvertently caught the new reality quite well.

“The free economy” captures only part of the secret — it emphasizes the conditions under which the mind is more easily creative, in the fresh air of freedom. Freedom is a necessary condition, but the dynamic driving cause of new wealth is the initiative, enterprise, creativity, invention — which use the freedom.

Freedom alone is not enough. Freedom alone can also produce indolence and indulgence. To awaken slothful human beings out of the habitual slumber and slowness of the species, the fuel of interest must normally be ignited. One must move the will to action by showing it a route to a better world. Since humans are fallen creatures, mixed creatures, not angels, the fuel of interest is a practical necessity. The fire of invention lies hidden in every human mind, the very image of the Creator infusing the creature. To ignite it, one must offer incentives, a vision of a higher, better human condition, not only this-worldly, but also nourishing the expansion of the human soul and easement of bodily infirmities.

There is a natural desire in every human being, although it is often slumbering, to better his or her condition. And it is good for a woman to liberate herself and her whole people from the narrower horizons within which they find themselves. It is good for humans to catch glimmers of new possibilities for human development.

This, or something very like this, is the famous, celebrated and usually misunderstood “spirit of capitalism.” This is not a spirit of greed or avarice, which are grasping and small, not creative. It is an esprit, a gift of the spirit rather than of the body.

Read more . . .

co-bot“We’re going to need to see your birth certificate,” the manager said, making a notation on my employment application, “But you’re hired. Show up a 10 a.m. on Thursday for training.”

I was too young and dumb to realize he was calling my bluff. I had to be 16 to take the job and I could barely pass for 14 (which I wouldn’t be for a another month). Yet instead of pointing out that I was lying about my age (which, obviously, I was), he figured he’d mark me down in the hired column and assume I’d be one of the dozen new people to not show up for the first day of work.

But I did show up, because I had nothing better to do. I was spending the summer with relatives in Houston, and to get me out of the house my aunt suggested I apply at McDonald’s. A new franchise had just opened and hiring almost anyone who applied. Fast-food outlets have a high worker turnover and new stores have any higher rates of attrition. The hiring manager knew he’d need to hire at least three times as many people they knew that most people wouldn’t last more than a week before getting quitting.

And that’s how I got my first factory job.

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 Capitalism tends to make Christians uneasy and conflicted. On the one hand, we recognize that free enterprise has been the most effect means of poverty reduction in the history of the world. But on the other hand, we are forced to admit that the system can be used to destroy the good, the true, and the beautiful.

How can we resolve this tension?

One important step, as Nathan Smith explains, is to better understand the “ideological heart of capitalism”—the doctrine of revealed preference as a theory of value:
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epipen22Pharmaceutical company Mylan recently spurred a flurry of outrage after raising the price of their lifesaving EpiPen by 400%, leading many to decry “corporate greed” and point the finger at capitalism.

Unfortunately, such anger routinely fails to consider the systemic reasons as to why Mylan can charge such prices, resorting instead to knee-jerk calls for fresh tricks by the FDA and new layers of price-fixing tomfoolery from Washington.

Yet the problem, as detailed by Rep. Mick Mulvaney in a new video from FEE, begins with the very same interventions, back-room deals, and price manipulations that the critics now propose.

Why, we might ask, is Mylan able to wield this monopolistic power and exploit its consumers with little challenge? As Mulvaney demonstrates, the answer has far more to do with the FDA, Congress, President Obama, and the Affordable Care Act than a free market with free-flowing prices. (more…)