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murphy560
MemberThat makes perfect sense…you’re brilliant. Thank you again.
murphy560
MemberWhat about the following scenario: Technological innovation (i.e. fracking) causes expansion of production in a factor market. The resulting drop in price of the producers’ good (i.e. oil) causes a.) current gasoline producers to lower their selling price/increase production due to changing cost structure in order to maximize profits under the new market, or, b.) new gasoline producers enter the market due to increased profit expectations and the resulting increase in gasoline production leads to lower prices? Wouldn’t both of these scenarios be plausible and wouldn’t they both be examples of lower factor prices causally leading to lower consumer good prices? Thanks as always for your time.
murphy560
MemberTwo things:
1.) Employers pay their employees a TOTAL compensation based on their marginal productivity, not just wages. For example, if an employer pays a given employee wages + paid holidays + paid sick leave + paid personal days + paid vacation time + employer subsidized dental/medical/vision/prescription insurance + retirement plan employer contributions + employer paid life insurance + Medicare tax + Social Security tax + unemployment tax + workers compensation tax + etc., etc., etc. Economic theory shows that the TOTAL compensation paid for an employee (not just the hourly wage rate) equals marginal productivity.
2.) From the Bureau of Labor Statistics website (they put together these graphs):
“Labor Productivity: Labor productivity describes the relationship between real output and the labor
hours involved in its production. These measures show the changes from period to period in the amount
of goods and services produced per hour worked. Although the labor productivity measures relate output
in an industry to hours worked of all persons in that industry, they do not measure the specific
contribution of labor to growth in output. Rather, they reflect the joint effects of many influences,
including changes in technology; capital investment; utilization of capacity, energy, and materials; the
use of purchased services inputs, including contract employment services; the organization of
production; managerial skill; in addition to the characteristics and effort of the workforce.”Their idea of “labor productivity” is an aggregate average among only manufacturing industries. This is not the same as the “discounted marginal revenue product” (the amount of additional revenue generated by one hour of a specific individual’s labor) that sound economic theory shows actually determines wage rates.
murphy560
MemberThank you. Also, when we say that these production processes prove unprofitable, how is this unprofitability ultimately revealed? Is it that when interest rates eventually rise future business loans are more expensive than anticipated or that the unexpected competition for factors of production between lower and higher stages lead to higher factor prices than originally expected?
murphy560
MemberThanks. If we imagine a production structure with five stages (each of equal duration) why is it that lower interest rates disproportionately favor expansion of the higher stages? If each stage takes the same amount of time, why would low rates favor stages more temporally removed from consumption? Wouldn’t investors just be concerned about their one year long production process instead of the five years to consumption? Also, when we say that these production processes prove unprofitable, how is this unprofitability ultimately revealed? Is it that when interest rates eventually rise future business loans are more expensive than anticipated or that the unexpected competition for factors of production between lower and higher stages lead to higher factor prices than originally expected?
murphy560
MemberThanks as usual for the very thorough answer. I have one question regarding terminology. I’ve heard the term “dollar denominated asset” many times but I’m not exactly clear on its meaning. Does this simply mean US commercial/government stocks/bonds that can only be bought and sold in dollars and interest/dividends are paid to holders in dollars or is there more to it?
murphy560
MemberThanks guys, as always your responses are incredibly thorough and helpful.
murphy560
MemberDan (great name by the way), in my humble opinion, I don’t feel there’s anything wrong with nationalism per se. Quite the opposite, I think a feeling of belonging to a community and love of one’s family, culture, geography, way of life, etc. is a natural and important part of any thriving human life. Where the problem arises, in my view, is when one confuses blind obedience to the state with “doing what’s best for my country” or confuses the will of the few in control of the state mechanism with “the will of the people.” When this sense of community drives people to join together to do great things, build everyone’s standard of living, break down barriers for those whose rights have been infringed, etc. this is no doubt a wonderful thing. However, when one makes the argument that “nationalistic pride” requires the committing of atrocities or the destruction of the rights of others, whoever they may be, it’s not “nationalistic pride” that is wrong, it’s the argument.
Best regards,
Dan M.murphy560
MemberI took a look at shadowstats and M3 is actually around 55% higher than it was in 2006 so it is still growing robustly, just as we all expect. I think you may be looking at the solid line which represents year-over-year change of M3 whereas the shaded region actually represents M3 itself. The rate-of-change is considerably lower than it has been in the past (as much as 17% annual growth) but it is still growing at about 5% annually according to shadowstats.
murphy560
MemberThanks for the response. I am reading American Scripture now and I will put your book next on my list. By “as we know it” I meant the formal union under the Constitution as opposed to the union under the Articles of Confederation or the “union” under the Continental Congresses. On further inspection, I guess this question answers itself.
murphy560
MemberProfessors Gutzman and McClanahan, thanks for the responses. For a man who was never a “committed abolitionist” and said in his first inaugural address that he didn’t intend to interfere with the institution of slavery, my real question is why was it that he decided to issue the EP at all? As a “war measure” do you think he did it to damage the southern economy further, to provoke a slave uprising, to gain European support for the north, etc.? Or did he decide in the middle of the war that, with how horribly things were going, he should take this as an opportunity to end slavery once and for all? If this was the case then why would he free slaves in only rebel states?
murphy560
MemberProfessor Herbener, following your excellent explanation of booms and busts can one say with confidence that with the recent unprecedented issue of fiduciary media, unprecedented running up of the monetary base, unprecedented lowering of interest rates for an unprecedented amount of time by the Federal Reserve, that the bust that will no doubt follow will be unprecedented in world history or is it more complex than that?
murphy560
MemberThanks, here’s what I was originally thinking…Since the total money stock must equal the sum of all individual cash balances, and as you said “One can determine the money stock in the economy by adding up all money proper plus all money substitutes, i.e., all redemption claims to money payable on demand at par” then money in checking and savings accounts must constitute only cash balances (assuming they are redeemable on demand at par for cash). Since true savings-investment, at least in the Austrian sense, cannot be immediately redeemable but payable only at the end of a stage of production or the maturity of the investment contract (i.e. a bond or certificate of deposit) it seems to me that it would make sense to say that one’s cash balance is composed of currency, checking deposits, and savings deposits whereas one’s savings-investment is composed of things like certificates of deposit, bonds, etc. It was then my conclusion that, even in a fractional reserve system, checking/saving deposits can not be considered true investment and should be considered as one’s cash balance just as much as money stored under the mattress is. Is this a reasonable line of thinking?
murphy560
MemberIt sounds like my error in thinking, when applied to a modern complex economy, was that I imagined that, in the case of automobile production, there would have to be stages added BEFORE iron ore mining (and I couldn’t imagine what those would have been) when in reality there would be more stages added BETWEEN iron ore mining and final car production. Is this true? Thank you for your thoughtful and thorough responses.
murphy560
MemberProfessor Gutzman, specifically regarding the statement “The United States shall guarantee to every State in this Union a Republican Form of Government,” does this mean that the federal government must be of a republican form or that all state governments must be of republican form or both? Also, why would this be attached to a clause specifying the federal government’s duty to protect states from invasion and domestic violence? They seem very different. Thanks.
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