Posts tagged with: economics

The_Moon_Is_A_Harsh_Mistress_fIt was once a common practice of saloons in America to provide a “free lunch” to patrons who had purchased at least one drink. Many foods on offer were high in salt (ham, cheese, salted crackers, etc.), so those who ate them naturally ended up buying a lot of beer.

In his 1966 sci-fi novel, The Moon Is a Harsh Mistress, Robert Heinlein used this practice in a saloon on the moon to highlight an economic principle:

“It was when you insisted that the, uh, young lady, Tish—that Tish must pay, too. ‘Tone-stopple,’ or something like it.”

“Oh, ‘tanstaafl.’ Means ‘There ain’t no such thing as a free lunch.’ And isn’t,” I added, pointing to a FREE LUNCH sign across room, “or these drinks would cost half as much. Was reminding her that anything free costs twice as much in long run or turns out worthless.”

“An interesting philosophy.”

“Not philosophy, fact. One way or other, what you get, you pay for.”

While the phrase “there ain’t no such thing as a free lunch” didn’t originate with Heinlein, he did help to popularize the concept. Nobel-winning economist Milton Friedman even used a variation for his 1975 book, There’s No Such Thing as a Free Lunch. Economist Campbell R. McConnel claims the phrase is the “core of economics“:
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250px-Bankruptcy_monopolyAaron M. Renn’s reflections on the implications of Detroit’s bankruptcy are worth reading, especially as relate to the DIA, a topic of some previous interest over the last year or so:

In the case of the DIA, the city owns the museum and the collection. Hence the question of whether or not art should be sold to satisfy debts. If it were typical separately chartered non-profit institution, this wouldn’t even be a question.

At this point, I’d suggest cities ought to be taking a hard look at whether they own assets like museums, zoos, etc. that should be spun off into a separate non-profit entity. Keep in mind, the tax dollars that support the institutions can continue flowing to it. But this does protect the assets in the event of a bankruptcy.

I think Renn’s advice is spot on, but I would also caution that Detroit’s experience might not be replicable elsewhere. As DIA director Graham Beal put it previously, the DIA’s dilemma is “singular and highly complicated.”

How many cities own art collections worth potentially billions of dollars? Not too many, I’d suspect. And just what would the motivation be for city governments to reduce assets that could be leveraged in bankruptcy negotiations? What is in the best interest of the institution may not be in the interests of the city government and pensioners.

The DIA might be something like Detroit’s “Get out of Bankruptcy Free” card. (Or if not “free,” then less scathed than otherwise. And that’s not counting the loss of cultural treasures, of course!) But even so it’s a card that can only be played once, and it’s a card that other cities might not have.

icon_22372Over at NRO, Thomas Sowell takes on what he calls the “lie” of “trickle-down economics.” Thus, writes Sowell, “the ‘trickle-down’ lie is 100 percent lie.” Sowell cites Bill de Blasio and Barack Obama as figures perpetuating the “lie,” along with writers in “the New York Times, in the Washington Post, and by professors at prestigious American universities — and even as far away as India.”

But we should also note that “trickle-down theories” get a mention in Evangelii Gaudium, too: “some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world.”

In the midst of his discussion, Sowell asks the following penetrating questions:

Why would anyone advocate that we “give” something to A in hopes that it would trickle down to B? Why in the world would any sane person not give it to B and cut out the middleman?

Whether or not there is such a thing as “trickle-down economics” in the discussions about the market economy, isn’t there something akin to what Sowell asks about at play in usual redistributive welfare programs? Don’t we “give” something to governmental bureaucracies and agencies in the hopes that they will in turn redistribute it (hopefully in more than a trickle) to the poor?

And as for the “trickle” part of trickle-down welfare economics, Juan de Mariana long ago observed that “money, transferred through many ministers, is like a liquid. It always leaves a residue in the containers.” So why not give directly to the poor and cut out the middleman, as Sowell wonders?

That’s precisely the discussion that’s been going on over at the Bleeding Heart Libertarians blog, among other places, about direct cash transfers to the poor instead of bureaucratic welfare programs. Head on over to the BHL blog to check it out.

Blog author: jballor
Monday, January 6, 2014
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The following is a letter written in response to a post from my friend Brad Littlejohn on the topic of the minimum wage

Dear Brad,

Thank you for your thoughtful and substantive engagement on the question of the minimum wage. I don’t think the conversation we had on Twitter earlier did justice to your work here, so I’m offering this response in hopes of furthering the conversation. I hope you find it fruitful. I certainly have. I should also note that I have been assuming the context of policy proposals to increase the minimum wage at the federal level in the United States. There are certainly aspects of what we’re discussing that apply to a greater or lesser extent in other contexts and at other levels of government, but at the level of individual states, for instance, the stakes are somewhat reduced and ameliorated by the realities of federalism.

You write that you “want to reflect a bit more fully on what’s wrong with one of the common conservative arguments against the minimum wage: that the laborer is only worth his productivity.” I have significant concerns with equating someone’s worth with the economic value of their labor in the marketplace. I do not argue that the laborer is only worth his or her productive work. I argue that a worker’s work is only valuable in a market setting insofar as someone is willing to pay for it. I agree that there is a subjective element to work that is in some ways intimately identified with and inseparable from the person doing the working. But I do maintain that the worker and the work can, and indeed must, be distinguished. Perhaps what we disagree about is that you think the wage someone is offered is primarily a signal about how much that person is valued. I think that the wage someone is offered is primarily a signal about how much that person’s work is useful to others.
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The Ballors went with a live tree this year. We bought it at Flowerland and I do not know the name of the farm whence it came.

Over at the American Conservative, Micah Mattix reflects on the Christmas tree market, which in his neck of the woods is “notoriously unstable.” In Ashe County, North Carolina, says Mattix, a dilemma faces the small tree farmer: “It is not sell or starve, but it is sell or go without a new septic tank, a repaired roof, a mended this or that.” Although not specifically about Christmas trees, the difficult choice faced by the poet in the Robert Frost poem Mattix engages at length is also reminiscent of the dynamic of poverty in Winter’s Bone.

Mattix explores some valid concerns about the human cost of low prices: “When we look for ‘deals’ at Christmas, I doubt many of us think about the labor another human being expended to make a certain object and whether the price we pay for it is a fair one. We think, rather, of big corporations and highly paid CEOs who can afford a dollar to two less and who have probably already calculated the discount into the cost of production.”

In the context of a market transaction, particularly in a globalized marketplace where we cannot possibly know all the people that have been involved in bringing a commodity to market, there is a kind of anonymity that is inherent in the system. Thus, writes Mattix, “But an anonymous market economy can obscure the relational aspect of trade—it can obscure the fact that transactions are always, ultimately, between people. And when we look to buy objects for as little as possible without any consideration of the labor of others, we are acting no differently than CEOs who look to maximize profit, whatever the human expense.” Perhaps. Perhaps.
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52-Kids-innovationInequality in consumption used to be a matter of acreage. Throughout most of history, economic value was chiefly found in land or personal property. The divide between the rich and the poor was therefore between those who owned property and those who did not.

But the age of technology has changed that. “A billionaire and a member of the middle class have relatively equal portals to the wonders of the internet,” says John O. McGinnis, “certainly far more equal access than the rich and the rest of society would have had to the material goods that defined wealth in centuries past.” Nowadays, if we want to reduce inequality we need to focus on redistributing the benefits of ideas and innovations:
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Blog author: ehilton
Friday, December 13, 2013
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cardsOn some snowy winter afternoon, bored with everything in the house, you probably tried to build a house of cards. From this experience, you know you have to build a large base, and work your way up to a smaller and smaller peak. That’s the only sensible way to do it.

Obamacare, on the other hand, is a house of cards inverted. It is structured in a way that the young must hold up the aging population. And the young are staying away from Obamacare in droves. The base can’t hold up the larger peak. (more…)