Category: Economics

clinton-trumpImagine if Donald Trump made a campaign promise that he would lower the pay of every American, but would ensure that the poorest 10 percent have their pay lowered the most. Would you vote for him then? Or imagine if Hillary Clinton said she would increase inflation substantially to make the economy more “fair” for everyone. Would she win your support?

Neither candidate has made such a claim—at least not directly. The American people would immediate reject such harmful economic policies, and politicians know they’d be rejected for making such inane promises.

In reality, though, both Clinton and Trump (as well as the candidates for the Green Party, Constitution Party, and the American Solidarity Part) have promised to implement policies that would have the same effect as increasing inflation or reducing pay, for all have proposed a means of lowering purchasing power.
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“Supporting markets as the economic arrangements most likely to help promote human flourishing doesn’t necessarily mean you accept libertarian philosophical premises” says Acton Institute Director of Research Samuel Gregg in an essay published today at Public Discourse.  This comes in response to “Koch Brothers Latest Target: Pope Francis,” an Oct. 14  article written by John Gehring at the American Prospect that claims the Acton Institute is part of a larger network of organizations behind “a decidedly different message than Pope Francis does when it comes to the economy and climate change.”  Gehring, Catholic program director at Faith in Public Life, labels various free-market organizations as “libertarian” and asserts that “libertarian thought … is the exact opposite of Catholic teaching.”

Gregg begins his response by noting some of the contributions that great libertarian thinkers such as Hayek and Mises have made to economics:

Libertarianism’s great strength lies in economics. Prominent twentieth-century libertarian economists, such as Ludwig von Mises and Friedrich von Hayek, made major contributions to the critique of socialist economics. While ridiculed by some at the time, their criticisms turned out to be spot-on.

In Socialism (1922), for example, Mises illustrated that socialist economies can’t replicate the market price system’s ability to signal the supply and demand status for countless goods and services to consumers and producers at any one point in time. However intelligent and statistically equipped the top-down planners might be (whether they take the form of a Communist politburo, a Fascist dictator, or a 1970s British government), they simply cannot know the optimal price for any good or service at any point in time. Any attempt to dictate prices from the top-down will lead, paradoxically, to economic disorder and dysfunction.

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sweatshop-workersA recent study of Ethiopian workers released last week by the US National Bureau of Economics Research found “sweatshops” were unpleasant, risky, and paid even less than self-employment in the informal sector. But, the researchers also found, countries were still better off than not having those jobs at all. As Michael J. Coren of Quartz writes,

By encouraging mass hiring in the economy, even low-wage factories could lift everyone’s wages. Fewer desperate workers competing for jobs meant employers must pay more for labor, argue economists Chris Blattman of the University of Chicago and Stefan Dercon of Oxford University in the latest study. But countries could ensure those factories treated their workers more fairly, and remove barriers for entrepreneurs building their businesses.

“More manufacturing firms is a good thing,” said Blattman in an interview. “This is going to happen. This is the development process in most countries. We shouldn’t sugar coat it.”

I think that’s the right approach: Don’t “sugar coat” the hardships such work entails—but don’t ban sweatshops either.

A “sweatshop” is the pejorative term for a workplace that has working conditions those of us in the West deem socially unacceptable. Because of Western laws and norms, sweatshops are now found mostly in developing countries.

To understand the defense of sweatshops requires recognizing that it is not a defense of deplorable living or working conditions. In fact, a moral defense of sweatshops is based on limiting or ending deplorable living or working conditions. The disagreement centers around how we go about that task of pursuing justice.
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love_gov_screenshot_independent_instituteDespite the partisan rhetoric that tends to dominate in America, most of us realize that, for all our disagreements, our neighbors often have the best of intentions. But when it comes to public policy, good intentions are not enough to create human flourishing. That’s why a primary task of the Acton Institute is “connecting good intentions with sound economics.” Without sound economics as a foundation, good intentions tend to lead to detrimental unintended consequences.

Convincing the public of this reality isn’t easy, but a video series produced by the Independent Institute provides some amusing and thought-provoking examples. The series Love Gov portrays the federal government as an overbearing boyfriend—Scott “Gov” Govinsky—who imposes his “good intentions” on the hapless, idealistic college student, Alexis. The results of Gov’s well-meaning actions are frequently not what Alexis would have expected.

Here is the trailer and the first two videos of the award-winning series:
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trump-clinton-debateLast night Chris Wallace moderated the third and final debate of this presidential season. Many commentators have remarked that it was the most substantial policy debate of the year. But because of the interruptions and recriminations, it can be difficult to ascertain exactly what each candidate was proposing.

Below I’ve summarized the actual policy statements made by each candidate about the economy, and included the verbatim text of their remarks from which the summary is taken. In the summaries (the sections in bold), I’ve stripped away the claims made by each candidate about the other and focused solely on the position they advocated or defended.
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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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