My Response to the Atlantic's The Curse of Econ 101
Are people who advocate for increasing the minimum wage (or having one at all) using a more advanced understanding of economics than those who oppose it?
A friend of mine shared an article on Facebook this morning, and I wrote a response I'd like to share here to spark some discussion. First, give this article a read: The Curse of Econ 101. Second, give me your thoughts on my reply below.
This is a good article which certainly challenges a lot of my views as I'm a fan of Hayek and Friedman. For me, the problem comes down to the use of force. Are those offering an employment position at a less than subsistence wage aggressing against others immorally? If so, then I can get behind the use of force to defend those who are being aggressed against. That said, I find that argument very hard to support. If I offer up a contract to the world and say, "Does anyone want to provide me with X service at Y price?" how have I aggressed against anyone? This is a voluntary contract. If my terms are horrible, it might make me a bad person and the community may need to shame and ostracize me, but have I really aggressed against someone by offering the contract?
On the flip side, every government regulation is backed by a gun. Do what we say or we will either steal your stuff via fines, confiscation, etc or we'll go so far as to put you in a cage after sending people with guns to threaten you. I can't morally justify that use of force against peaceful people.
I get we have a serious income inequality problem and it will only get worse over time. Automation is going to massively change the workforce and challenge our notions of how human beings provide value to each other. This is why I've been writing about universal basic income. Currently (sadly, IMO) governments have a monopoly on currency creation so they get to set the economic rules. They are pushing for business owners to shoulder the burden of those who can't provide enough economic value to the market given their education and skill set while at the same time sending 4,000 troops to Poland at a cost of $1,000,000 per year per troop. It's insanity. The productive economic output of our society is being siphoned off via currency creation and funneled into the military industrial complex. It's beyond wasteful. It's immoral.
Forcing changes to the economy to facilitate wealth distribution is (to me) a flavor of a philosophy which leans towards government-backed economic socialism which has (IMO) proven to fail every time. I do recognize there is a massive amount of wealth we all should benefit from as an emergent property of our technological advances and shared efficiencies. I think a blockchain-based universal income could solve many of these problems without the use of force or the centralization of power into the hands of those who control the guns which historically, always, without fail, leads to corruption.
What I don't like about this article is it does what many left-leaning arguments do. It tries to argue those who disagree are stupid or ignorant. It makes fun of those simpletons who only understand "Econ 101" while at the same time admitting the jury is still out given the research we have available. I appreciate calling attention to the studies and asking for people to be less sure of their basic economic convictions, but that doesn't mean those who hold those opinions are wrong or simpletons.
The mention of unions is interesting because ultimately it's not just about employment. I could hire someone to dig a ditch and fill it up again and society does not benefit. If, however, the decrease in unions brought about more competition which led to new innovation, new entrepreneurship, new technological advances, etc, etc... then we all benefit from the emergent properties there. Why not just pay that ditch digger a portion of the economic value of society for doing nothing and free them up to go do something which does actually benefit society like reading books to their children?
As the article tries to argue, these things are not that simple. We have to get away from the partisan talking points of "unions good" or "minimum wages bad" if we want to make progress. In order to evaluate "good" and "bad" I think we need to start with a shared understanding of morality (which is where I started this rant).
Great post. Here is my answer to this problem.
crypto currency escape from socialism
Wow, great post! Sad to see it didn't get more votes. I hope you grow your readership. I've started following you myself.
The problem with this entire discussion is that it is trying to pull/push levers on a system that is inherently corrupt and broken. No matter how you arrange the chairs on the Titanic, its going to sink.
We do not have capitalism because we have a central bank. One half of every transaction is controlled by a central authority. They fix prices so that the larger the entity, the less they have to pay for goods. (like a corporation borrowing money, at almost 0% interest to buy their own stock)
The root of why we have people living in poverty is housing. And housing prices are a result of how big of a loan a person can get with their wages.
$1,000 / mo @ 8% for 15 yrs = $97,000 purchase price
$1,000 / mo @ 4% for 30 yrs = $208,000 purchase price.
So, the house price went up significantly without any change in the underlying economy. And since the bank makes the money up out of thin air to finance the loan, it inflates everything else too.
What has happened is that we have given the bank all of our land and now are paying whatever we can to keep a roof over our heads. No amount of changing minimum wages will fix this. The housing costs will continue to eat a larger and larger portion of your income until this system is destroyed.
Even with a negative tax (or UBI)
I agree with your premise. However, I think 3d printed housing can solve this issue.
3d printed houses are a stupid idea in our 1950s technology.
And yes, I know a great deal about CNC and house building.
3d printed houses are not cheaper.
Maybe someday in the future they will be.
There is a company that makes foam/OSB laminate and then CNC cuts out all the parts to a house, which then just have to be snap-fit together.
However, the base idea is what is necessary.
My term is building a tiny house for everyone on the planet.
Basically, if you can have a room to sleep in just for the showing up, then housing becomes a luxury that you afford or not; take it or leave it.
The only problem is that there isn't much difference between these tiny houses and jail cells, except which side the door locks on.
China is building them @ $5000 a piece.
Wow, great line. Well said.
Very well said. I think a UBI run by the blockchain might bring some sanity to the system. Once the currency itself can't be arbitrarily manipulated (can't create more bitcoin out of nothing), then we might see people being a little more sane with loans and mortgages. That's my hope anyway.
In my opinion, the main reason that many fast food restaurants and other service based industries have chosen not to employ their automation yet is simply because of their fear of public backlash. Once a major chain makes the switch i believe many of the others will follow.
If we were to see an increased minimum wage put into effect than I believe that all of the service jobs would quickly switch over to a much more automated system, therefore eliminating a majority of the jobs at that pay rate.
The major fast food establishments already have the technology to support a much more automated system, but most have not employed full scale automation yet.
It's sad to say but many of the vocal and avid advocates of these types of laws are the same people who are bound to be negatively impacted by these types of laws in the long term.
That's a very interesting point. Once one does it, the others will have to in order to stay competitive or else they'll face the wrath of their share holders. And I agree, those complaining the most are going to have a heck of a lot more to complain about if they get their way. This is why I think we'll need to have some kind of UBI... It's either that or people rioting in the streets because they can't feed their families.
Labour laws (at least in Europe) make is so that automation cannot make up more than X% for your workforce. That being said, when the inevitable happens, incentives and programs will need to be set up to assist people transitioning.
If we can free peoples time up and couple that with access to resources- wow! Innovation will soar!
In my experience, this is quite weak argument. It doesn't usually change anybody's mind.
In this case maybe better way of argumentation would be to say that in the real world things are not simple. It might be true in some cases that minimum wage will be beneficial, but it doesn't mean it's a good idea to implement.
To have a minimum wage, we need to have an institution that have power to decide how much the wages should be. That is very great responsibility. We can't just let anybody have that power. We need to make sure that the institution will use that power only for good and never for bad and that is completely different problem.
People who advocate minimum wages or some other socialist solutions never tell how these institutions should be designed. As we have seen, usually all kind of central planning will fail in someway.
So it doesn't matter whether or not you can find research that says that minimum wage is ok until you have a system that can set the price to a beneficial level and keep it in there for long term. So far we haven't seen anything like that.
When it comes to the strength of an argument, should it be about changing minds or about truthful accuracy? You may be right that it doesn't change people's minds and maybe that does make it a weak argument, but I still feel it's the right one. Starting with morals enables of to clarify what "good" and "bad" even means within the context of the discussion.
Excellent point. I think it goes back to the moral problems we have with failures we see all over regarding centralized, corrupt power and socialism gone bad.
Now, to play devil's advocate a bit, I also think there's an argument to be made for where things work rather well, such as the nordic countries which are highly socialized but don't have the same dictator/tyranny structures of government. My friends who support government will argue, "We just need to do more of what they are doing" and I have to admit, from a certain perspective, they have a point. Again though, I'm not okay with the fundamental moral position of national governments which I view as a monopoly on the use of force within a geographic region. Eventually, from my perspective, it turns into human farming.
I don't think it's either-or question. You can have both.
Are you talking to yourself or preaching to the choir? It might be fun to write exactly as you would like to see written, but that doesn't change the world. IMHO libertarian activists could be much more efficient if they would test what kind of argumentation is best and use it, and not stick to the kind of that just feels good.
There are certain elements in Nordic countries that work well, like rule of law, low level of corruption and property rights. But most of the socialist elements don't do so well.
For example, here in Finland we have massive unemployment because of bad regulation and high taxes. Usually people who admire Nordic countries don't want to see it. It comes from the bad institutions, which originally were set up by well-meaning people to help the workers. But it's really difficult to produce good regulation and find the optimal level for taxation so it all failed. And now we can't get rid of those institutions and have to live with them.
Very well said. Institutions and organizations (especially government ones) are like organisms whose sole purpose is to survive and multiply. Killing them off is quite difficult.
Great point, but the challenge for me is giving up the perceived "moral high ground" in doing so. If the argument is based on a morally superior stance, that's the one I want to use while appealing to a virtue ethics perspective. If clickbait headlines and such are more effective, is that really the direction we want humanity to go? Maybe it's an ends justify the means thing... but it's certainly a tricky thing to figure out. You might get what you want only to realize you lost your way along the path and are now at a completely different destination because the moral framework has shifted.
You can use the moral high ground, but don't use it as your primary argument. If somebody wants to talk how economics 101 is too simplified, you should first address that. After you have built a good argument based on economics, you can add "and btw, my stance is also morally superior".
Excellent. I think the same. The labour market is no different from any other market in that it requires at least two parties to disagree on the value of the commodity (time, labour) and agree on the price (wage). If unfair wages exist, it's because people agree to work for those wages. However, if you're desperate to eat, you may have no choice. If there was a universal basic income, anyone entering a contract of employment would be completely voluntary and not out of desperation. Though I may have a simpleton's understanding of a complex problem.
This is, indeed, the crux of the problem. A UBI done via the blockchain might help solve this. I don't trust governments to manage programs like this. If work was about getting more beyond the basics of what you need, work would be much more voluntary. Unfortunately, we as a species continually change our expectations and what we consider "basics" for survival. It's not just food, shelter, clothing, and a means of transportation. Now it's healthcare, Internet, a nice TV, eating out once in a while, etc, etc.
I think we can use Automation as an opportunity to drastically reduce the cost of living. With a lower cost of living the 'average' person can work less while maintaining their standard of living. Then they can have the option of working less per week (with the business hiring an additional person to fill the missed time) or working hard now to reduce their retirement age.
The automation revolution could improve lives with no regulation gun pointing.
I like this in theory, but I also recognize the emergence of value which should be spread to individuals as you describe gets stolen off the top. $8 trillion in new currency was added over the last 8 years or so and yet we didn't experience hyperinflation. Sure, we had some inflation, but without injecting that money, shouldn't we have seen $8 trillion worth of deflation? Shouldn't prices have gone down and people's standard of living gone up? Instead, those at the top with government and banking connections seem to get first access to the new money (not to mention the military industrial complex) at the expense of everyone else.
The problem may be that we simply aren't satisfied. Our desires are limitless. In the future, people are going to be doing space tourism, just because they can. I'm not saying that's bad. It's actually pretty freaking awesome! But the reality is, some will use their increased potential to obtain more while others will be scrapping to get by because they don't have the education or skills required to provide value to a fellow human being enough to pay for their basic needs. What happens then? Do we get rioting in the streets?
This is exactly why we keep pushing decentralization, makes any system harder to control or game for personal advantage.
Hell yes! Preach it. :)