Thu, 25 Jan 2007

Minimum Wage as a cause of injustice

Nearly everyone in the USA agrees with the 5th Amendment's prohibition on the taking of private property for public use without just compensation. Yet a very large percentage of people in the USA want a higher minimum wage. What about the people whose private jobs are taken for public use? Where is their compensation?

Nobody seriously believes that you can raise the price of something, and everybody will buy just as much as before. Nothing is completely insensitive to price. So what of the people whose labor is worth less than the minimum wage? Of course the minimum wage helps people who remain employed. It harms people who lose their jobs. Some people say "Well, the people who are helped are helped much more than those who are harmed, so it's okay." You could say the same thing if the government was to simply confiscate property in the way of a road. Yet nobody in the USA speaks in favor of that. Why do they speak in favor of confiscating somebody's job so that others may be paid more?

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Mon, 22 Jan 2007

Deflation

UPDATE: followup at Deflation 2.

I keep seeing this fear of deflation everywhere. I don't know where it comes from. Deflation is the natural consequence of free trade with a fixed amount of currency. Consider this: If you have eggs to sell, and want to buy plums, let's sake that you'll take an even trade. A dozen plums for a dozen eggs. Of course, you want the plums more than the eggs, so once you get the dozen plums, you would only be willing to give up 11 plums to get back the dozen eggs.

Now imagine that your country uses plums as money. You're willing to pay 12 plums for a dozen eggs. You like those plums, so you'll only pay 11 for the dozen eggs. The plums are the same, and so are the eggs. What's the difference? Why have the plums deflated? The answer is that the trade has pleased you. You are wealthier, so you value your money more.

As long as the number of plums is fixed, this process will go on forever. Plums will become more and more valuable, as each trade makes people more content. If you see deflation as a reflection of increasing contentment, then you, like me, will wonder why people don't like deflation.

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Sun, 21 Jan 2007

Fortification

I dislike the use of war metaphors in economic thinking, because economic exchange is not warlike; it is peaceful. In this case, however, I think it's apt. The principle is simple: when you build a fort, it can be taken from you, and used against you. Thus, when people think that government legislation protects them against corporations, they are sadly misguided. Some might .... but it's not a given. Posted [15:04] [Filed in: ] [permalink] [Google for the title] [digg this]