[negligible91]

Thank you for the sources, Dr. Herbener. I completely agree size of business is a red herring and what is important is whether they are satisfying consumer desires or not.

However, just to focus for a moment on this red herring: do you agree it might be incorrect to say that in this current market hampered by the State, business, ceteris paribus, is bigger than it would be on the free market?

The reason my friend said this statement was incorrect is because lobbying is a skill like all other specialized talents. Individuals skilled at lobbying government to create regulations that outlaw competition could very well be skilled at satisfying consumer desires instead (in a sense, there is an opportunity cost to developing lobbying skills). Do you agree with this logic? Or do you think there is something I am missing here?

[negligible91]

Thanks as always!

[negligible91]

(Bumping up this thread because my question is a follow-up to Dr. Herbener’s response)

Although Dr. Gordon explains the axiom as a common sense claim that we know from experience, would he still say that economics starts off with reflective facts rather than observable ones like the natural sciences (here I am alluding to what you say in lecture 1) because we only bring meaning to action (action is purposeful; it applies a means to a given end, it is motivated by that end, etc.) by reflecting on it? I recently read Plato’s The Republic and I am reminded of a passage where Socrates in the dialogue explains that there is a difference between the seen and the understood. So in other words, we can see and observe action all around us, but because our reflection gives it meaning, the fact that human beings act would be considered a reflective one, not an observable one. Am I right in thinking this way about economics?

[negligible91]

“The first counterargument that comes to mind relates to scarcity. Do the proponents of this argumentation really believe we are on the verge of eliminating scarcity?”

Just my two cents, but I don’t know how well this would work against them. They seem to be saying that there is so much new technology that workers are constantly being displaced and cannot move from job to job quickly enough because it takes time to develop new skills, etc.

So maybe this counterargument could be part of a larger counterargument, but I don’t think it works by itself. For example, you could point out the fact there’s a minimum wage, safety net, etc.

[negligible91]

Oh yeah haha I just thought it was funny. I subscribed to the thread so I got the original comment in an e-mail.

[negligible91]

Thanks, those examples help me see the difference more clearly. Just to be absolutely sure, would books such as Thomas Woods’s Meltdown and Murray Rothbard’s America’s Great Depression be examples of both economic history and applied economics then? Since they both use judgment to pick causes that led to certain events, and also analyze those causes using economic theory to show what effects they each have?

[negligible91]

They ought to have reputation buttons so I could +1 you for your original post, hayek_novice. Made my advice seem pretty useless though!

[negligible91]

If you’re dealing with a fairly large group of people with opposing views, it can be hard to speak up and state your own opinion. Psychology terms a similar (or perhaps the same) phenomena “groupthink,” where groups tend to come to a certain conclusion while avoiding alternative viewpoints simply to pursue conformity and minimize conflict. For all you know, you’re not the only one with your viewpoint. Maybe there are 1 or 2 other people in your class with beliefs influenced by Austrian economics and/or libertarianism.

Usually in situations like these, stating your opinion for the first time is the hardest. Speaking up will get much easier after that.

What I’d recommend, is if you can’t find a specific point where you feel comfortable giving your opinion as a statement, is to ask it in the form of a question.

For example, your teacher or classmate says “The gun murder rate in the US is so much higher than in our country. Gun control is obviously the sensible solution.”

You could reply:
1) “Did you know that the UK used to have very lax gun laws and yet its crime rate was very low? From that it seems apparent that crime and murder rates don’t always move inversely with the amount of gun control. Do you think the high crime rate or murder rate in the US could be a consequence of something else, such as the drug war?”
2) “I read online that the crime rate and the murder rate in the US are down 50% since 20 years ago. I know we don’t normally hear facts like this, but the # of guns (or guns/capita) increased over that time (I think? Don’t use this statistic if it’s wrong haha, but giving it as an example anyway). Why do you think that is? If this trend continues, won’t the US’s murder rate become extremely low without gun control?

Sometimes questions like these are even better than outright stating your opinion because it makes your classmates think. Occasionally when two sides have opposing viewpoints, each side can get very hostile, stop listening to each other, and start trying to win the argument rather than discussing what will actually make the world a better place. You don’t want to fall in this trap, especially when you’re alone vs. maybe 20 others. Try to have a proper discussion with your classmates and don’t get heated up. You said you’re confident you can back up your opinion, but if for some reason you can’t, never be afraid to say “I don’t know” or “I probably need to look into that.” The only people don’t want to say things like that is if they’re too intent on winning the argument rather than having a discussion geared toward finding the truth. (I know this only because I have been one of those people that just want to win the argument haha) And of course, if they ask you what your opinion is, be ready to state it. This isn’t a way to completely avoid stating your opinion, it’s a way to ease into it when you’re uncomfortable doing it outright.

So if this appeals to you, you don’t have to use my questions of course, make your own or choose whatever you’re comfortable with.

[negligible91]

You probably should give Bob Murphy’s blog a try. He writes Sunday blogs weekly about religion, so I’m sure he’s given this topic considerable thought.

Use the categories option (>Religion) on the left, or use the search bar.

His blog:
http://consultingbyrpm.com/blog

Quick finds:
http://consultingbyrpm.com/blog/2012/11/libertarians-love-homesteading-theory-except-if-god-exists.html
http://consultingbyrpm.com/blog/2012/08/reader-mail-reconciling-anarcho-capitalism-with-christianity.html

[negligible91]

This is in the wrong section, but I agree. I was just watching those lectures and it seems as if something has been cut out at the end. The transition in thought from that Washington lecture to the next isn’t so smooth.

[negligible91]

Yup, I’m having same problem.

[negligible91]

I’d say there’s some truth to that. It’s likely that the whole point of the minimum wage is to raise the wage of some (those in unions who aren’t unemployed by it) at the expense of others (those unemployed by it). Hopefully, someone else can explain how it eventually effects people even far higher up in wage. However, there is an effect that many don’t account for, which is that small businesses will be able to compete more easily without a minimum wage. Like any regulation, it makes it much more difficult for them to start up, and allows big businesses to lower wages because there is less competition for their laborers.

If you want a make a moral argument (a lot of moral arguments are inextricably tied up with economics anyway), you could imagine a situation where there is no minimum wage as your starting point. Is it okay to unemploy some people just to increase some other people’s wages? Is it okay if I lobby Congress to outlaw your friend’s employment because my friend happens to be competing with him, and will have a higher wage if he is unemployed?

I don’t know what he means by ‘benchmark.’ If he means there has to be a floor keeping up wages above the “living” wage, then I get that point (I’ll reply to that further below). If he means that employers can’t figure out what wage their worker should get without a ‘benchmark’, then I think that is a strange case to make, and the onus should be on him to explain that further.

If he really is making the “living’ wage argument, I’ve always thought this was ludicrious. What is a living wage? Ask him for a precise definition, what is the exact amount of that wage, and how does he know what it is? Many people cite a “living” wage as their reason for supporting a minimum wage, but few rarely define it. Last time I checked, you could go to Publix (or whatever grocery store), and get bread and peanut butter for under 5 dollars. With a little more money you could probably buy a blanket and perhaps construct yourself some shelter in the woods to sleep in. Sounds like a terrible life, and not one I want to live, but you’re certainly living, aren’t you?

Other than that, it sounds somewhat like your friend just ignores some of your points. Does he really believe there is no unemployment caused by the minimum wage? If so, go through the logic with him. If a minimum wage is above what an employer believes an employee can produce, he will fire that employee because he cannot get profits by keeping him employed. If your friend agrees with this logic, ask him why he believes not a single person produces less than the minimum wage (current or at whatever level your friend thinks they should be at).

[negligible91]

To elaborate, when I say the government will “have to raise the money from the market,” I mean that it will have to rely on others buying bonds.

So in other words, in order to pay back what it’s borrowed from SS, it will have to borrow more from other people. It’s like paying back what you owe to one credit card by charging it on another credit card. And since the interest income SS needs to pay its expenditures is expanding, SS is on the fast track to its own demise. There is absolutely no way the federal government will be able to borrow all that money. Its taxes are already less than its expenditures, and printing that amount of money would lead to inflation like we’ve never seen before.

[negligible91]

I was confused about what some of these progressives have been saying as well. Where they go wrong is when they start discussing the surplus. The surplus is a myth. Extra income above expenditures for SS is used to buy bonds from the federal government. The government then spends this money and owes it to SS. In other words, these are IOU’s. So while it’s true that SS maintains a ‘surplus’, non-interest income is over time playing a smaller and smaller role in its overall expenditures, while interest income is playing a larger and larger role. And this interest income comes from the federal government, which will have to raise the money from the market. It cannot do this sustainably.

Here’s Robert Wenzel on the subject:
http://www.economicpolicyjournal.com/2012/10/glenn-greenwalds-problem-with-math-and.html

[negligible91]

If I was pro-MW, I would respond to Michael’s first point by saying that if employers hire employees for extraordinarily low wages, a minimum wage will bump them up to a level closer to their respective MRPs rather than unemploying them.

In response to that, as a anti-MW, I would ask what evidence there is that a person’s current wages and MRPs are actually such an amount that the MW would not unemploy them and would actually raise their wages instead. I’d then ask them why they’re not in favor of more business competition through lower regulations, since competition for workers drives up wages. After all, if employer A can make a $5.00 profit from hiring a specific worker (for a wage $5.00 less than his MRP), employer B would also see a profit opportunity, and hire that same worker for a $4.00 profit. And as such, wages would tend toward the MRP.

And after all, isn’t the MW itself a regulation that reduces competition? A MW decreases the number of people a business can profitably hire. By making it harder to take advantage of low skill, low wage employees, the MW makes it more difficult to start new businesses. In his desire to raise the wages of those being “exploited”, he is instead making their “exploitation” all the more worse.

I made two blog posts (here and here) in the past about the minimum wage, so if you’re interested in that, feel free to read. If that’s the case, I’d also encourage you to point out any mistakes I made or anything you may disagree with. I only try to look for the truth but I definitely have biases I sometimes don’t think about, so I don’t want to make false arguments.

If they bring up the welfare argument while simultaneously arguing the MW, they are actually making an irrelevant statement. In the first link above, I state:

“Another line of argument would follow: well, we can just put those individuals unemployed under the minimum wage on welfare. Although I am not a proponent of welfare, I won’t argue against it here because it is irrelevant for this discussion. Even if we think welfare is good, it is not an argument for the minimum wage. This is because we could eliminate the minimum wage and still give out welfare. Instead of saying (for example), that everyone unemployed because of a $x minimum wage receives a certain amount of welfare, we could say that people earning under $x dollars receives that same amount of welfare (or perhaps less than that if we want to simply make it so that their total income (wages + welfare) equals the $x of the earlier minimum wage).”

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