Category: Economics

Fast Food Workers Strike

May 15, 2014 / / 0 Comments

The local news/talk station had a little blip about how fast food workers here in Tampa and across the nation are doing a one-day strike. Apparently they want $15/hr and to unionize.

Really? How is that going to help you?

Let’s go over this again. Wages are the price paid by an organization for a person’s time and expertise. When you are at the low end (like fast food), it’s mostly for your time. Like every other price, wages reflect the value provided by what is being purchased. Artificially raising the price of labor does not increase it’s value. If anything, it makes the labor less valuable, and the organization will respond to those incentives by reducing the amount purchased (reducing hours/employees) or find another source (automation). The worst outcome for everyone would be that the owners of the business decides that it is no longer in their best interest to continue and shuts down.

Unionizing low-skilled workers does nothing but drive the price up for those workers while reducing those workers’ paychecks through dues. They can’t guarantee quality of worker for the employer, and because unions are focused on protecting all of their members, they depress the potential earnings of high-performers.

It’s interesting to see people protesting to cut their own necks because of the gilded lies they’ve been told.

Why We Despise Crony Capitalism Part 1043

April 22, 2014 / / 0 Comments

Oklahoma State House passes bill that would require people who put up solar panels and wind turbines to be energy independent to still pay a fee to the energy utility companies! Seriously, WTF? Has this become a big enough issue in Oklahoma that it’s seriously hitting their profits?

Yet, we are in an economy where the government can tell us that we must buy certain products whether we want to or not. Combine that with companies that use armies of lobbyists for rent-seeking, and this is what results. Markets are supposed to force innovation through seeking a better product to sell to more people. Corrupt markets destroy innovation unless through carefully controlled oligarchies of companies.

It’s worse when the consumers are getting punished for doing what they’ve been told is responsible behavior. Here in Florida we have Water Management Districts. The one responsible for where I live is the Southwest Florida Water Management District, colloquially referred to as SwiftMud (and that should tell you a great deal). About a decade ago, when we were in a severe drought SwiftMud kept telling the residents to conserve water. We did it so well, that they had to raise water rates to maintain the proper revenue streams to the utility companies/organizations.

Please tell me again how giving monopolies to utilities makes things better?

H/t Jay G

It’s Scary That You Actually Believe What You’re Saying

March 27, 2014 / / 0 Comments

One of Slate’s writers did a cute little animated video on why we shouldn’t worry about the debt.

I’m sorry to tell you this, but the government can’t indefinitely print money (ask the Weimar Republic) and our inflation rate is missing two key indicators (food and energy). You’re also missing something in the neighborhood of $200 trillion in unfunded obligations (Social Security, Medicare, federal pensions).

Update: Reason has a better article on what’s wrong with the video.

Slate, please go talk to a real economist and try again.

Friday Quote – John Adams

December 27, 2013 / / 0 Comments

There are two ways to enslave and conquer a nation. One is by the sword. The other is by debt.

John Adams, Founding Father and second President of the United States

On an individual level, debt represents both a risk and a cost. A risk because the debt can be called, and if unable to pay, assets can be seized. A cost because a premium must be paid on the money borrowed in the form of interest.

On a national level, the costs (interest) represent services not rendered or additional money pulled out of private hands while the risks represent danger to the economy.

H/t reader David

Friday Quote – Gary S. Beck

December 20, 2013 / / 0 Comments

Capitalism was doomed-not by its failures, as in Marxian analysis, but by its successes. For according to Schumpeter, capitalism alienated intellectuals, who were unhappy because they are not important players in a decentralized free-market system. Moreover, intellectuals do not like the profit motive that drives this system. But Schumpeter greatly exaggerated the long-run influence of intellectuals on public policy.

-Gary S. Becker, review of Joseph Schumpeter’s Capitalism, Socialism, and Democracy.

Another book to add to the pile.

Friday Quote – Thomas Sowell

December 6, 2013 / / 0 Comments

The first lesson of economics is scarcity: There is never enough to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.

Thomas Sowell, economist, author, and commentator

The fast-food workers demanding that companies pay them $15/hour are also disregarding the first lesson of economics. They are also forgetting that they cannot dictate value. If the worker is not producing $15/hr worth of work, then the company will do one if three things:

  1. Lower the workforce until each worker is producing the value of being paid $15/hr. This may include bringing in higher levels of automation. Like touchscreen kiosks.

  2. Lower the quality of the product to make up for additional labor costs (which might work for some low end products, but not in the cutthroat competition of fast food).

  3. Go out of business. And for those of you who might gloat that big corporations would go bankrupt, they won’t. The small franchisee, on the other hand, will. People who have sunk their life savings into a couple of stores and who do their good works in their local communities.

You want to make $15/hr, then provide the company more than $15/hr worth of value. That might mean stepping up into management, or bringing in some unique skill. It also might mean taking a chance on a new job. If you think you’re worth the money, then prove it.

Friday Quote – Thomas Sowell

June 28, 2013 / / 0 Comments

This week’s Friday Quote is a long one:

Why do price controls cause shortages? There are basically two reasons: supply and demand.

People will not supply as much at a lower price as they will at a higher price. Some oil wells that will repay their costs and earn a profit when the price of oil is $25 a barrel will not cover their costs when the price is $15 a barrel. Some people who will rent out a bungalow in their backyard when rents are high will not bother when rents are low. Some farmers will give up farming when food prices are kept below the point where they can earn a living.

On the demand side, people will demand more when the price is kept artificially low by price controls. Before rent control laws were passed in Sweden, less than one-fourth of unmarried adults there had their own separate housing units, but afterwards more than half did. People buy more of anything that is cheaper. With more being demanded and less being supplied, shortages are inevitable, whether with housing, food, medical care or whatever.

Thomas Sowell

This applies to guns/ammunition as well. As demand kicks in (thanks, Mr. President!), prices must go up. There might be some price stability as businesses pay the opportunity costs (forgoing additional revenue to offset their own higher costs) in order to maintain customer loyalty. That will last only if the demand spike is of a short duration. If we as customers demand that businesses keep prices the same, the effect will be the same – shortages.

Now, why can’t I find ammo?