Sunday, July 22, 2018

Economics

FYI.

---------- Forwarded message ----------
From: John Coffey <john2001plus@gmail.com>
Date: Sun, Jul 22, 2018 at 1:18 PM
Subject: Re: Korea
To: Albert Nelms 
Cc: Steve


Al,

I am going to address several
​of your ​
points here ...

On Sat, Jul 21, 2018 at 10:48 AM, Albert Nelms <alnelms@gmail.com> wrote:
>
> We need to have minimum wage keep up with inflation. However, any politician suggesting such a thing would be run out on rails.


I don't see why this is politically impossible.  Any party that suggests an increase in the minimum wage, perhaps moderate, would likely get votes.

This makes certain assumptions.  What business is it of the state to say what kind of wage people agree to work for?  If I choose to work someplace for $5 an hour, it is because I can't get anything better.  Maybe my circumstances are so bad that nobody will hire me at minimum wage.  It is like the application at Taco Bell that says, "What drugs have you done?", as to opposed to asking if you have done drugs
​ at all​
.

The purpose of minimum wage is not to provide a living wage.  It is for unskilled workers who might in time develop skills and be worth more.  It is intended for entry level jobs.

In reality, many places pay more than minimum wage.  People at Burger King told me that
​they ​
make $11 an hour.  Do you think that Burger King would pay $11 an hour if it could get away with paying minimum wage?  There must be some demand for workers, maybe reliable ones, that compels them to pay higher.

 
>
> There was a time when a person could graduate from high school and get a job in which he was able to support his family and eventually enter middle class.


That time seems to have passed
​ for many people​, but some people can still do this. 
  This is one reason we need an environment that is pro-business. Economic growth
​, preferably strong economic growth,​
is the only thing that will get us out of the debt bubble we are in, assuming that is even possible, and help us to solve many other economic problems
​,​
​ like having enough good paying jobs​
.

If a person can not make enough to support a family, then they shouldn't start a family.  Should there be a safety net for people who otherwise would not survive on low wages?  I think so.  We might need more of this if automation takes away jobs
​, but I am hoping that healthy economic growth can avoid this.​


 
>
> Today, college degrees are tied into student loans which in turn ties the graduate down to long term debt right off the bat. So, if the college grad has student loans he may never get to middle class. Now with internet degrees diluting the on campus degrees salaries for college graduates are dropping.with a few exceptions like doctors, lawyers, engineers, etc.


https://www.youtube.com/watch?v=T9luf6IOpV4

The problem is that the government is spending over $200 Billion a year on higher education. When you subsidize something, you get more of it, whether you need it or not. When 40% of
college graduates are forced to take a job that would not require a college degree, then we are throwing away money educating too many people. The solution is to get government out of higher education and let the free market decide how
people need to be educated.

 
>
> The solution? Good question. There was a time when Americans who bought goods from say Japan or Germany were considered traitorous.


I think that international trade is vastly misunderstood.  When you buy something from Japan ...

1.  You do so because they can make it cheaper or better than the equivalent thing made in America.  In economics they talk about comparative advantage, where you might be really good at doing one thing, which is highly profitable for you, so you would rather somebody else do the thing that is less profitable for you.

2.  The dollars you send to Japan are no good to them unless they can exchange them for yen or buy our goods, and the currency exchange market only works if goods are going both ways.  
If there is an imbalance of trade, in an ideal world the currency exchange market would cause our currency to devalue and theirs to increase, which results in their goods no longer being as attractive to us because they are more expensive, and our goods becoming more attractive to them because they are cheaper.
​  This would result in trade becoming balanced.
 
​One​
 problem here is that governments will intervene to try to control the value of their currency.
​ 
Where it gets complicated is when they use their surplus of dollars to buy investments or property in America.

​​

>
>
Now no one cares about their fellow American. If I owned a McDonald franchise and raised my prices so I could pay $15 per hour minimum, I'd be out of business in a week. The new American spirit is selfish and focuses only on ones best interest. The country and fellow Americans take a back seat.

As a general rule, people everywhere focus on their self interest.  This is not a bad thing, at least most of the time. The free market is a system where you have to give to get.  Adam Smith wrote that the baker (or substitute any other profession) does not bake bread out of the goodness of his heart.  He does so for his own prosperity, and by doing so he provides a service that other people need.

The American spirit has always been selfish, as it is human nature to be selfish.  If I am robbing you, then that is a bad form of selfishness where I am using force, but if hypothetically I write an iPhone app that you need, then this is a voluntary exchange where both parties get something they want, so both parties benefit.  The problem with the government is that it engages in involuntary exchanges, because if it was voluntary then the government wouldn't need to use force to achieve its aims.  The problem with involuntary exchanges is that one party benefits at the expense of another.


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