Economics

How to summarize half a dozen developmental economics books in one sentence

You want to boil down hundreds of pages from several books? I came across one sentence that does a good job:

…poverty is a symptom— of the absence of a workable economy built on credible political, social, and legal institutions.

I’ve been reading a lot of economics books lately. (Okay, okay, you can pray for me – a CPA reading economics books for relaxation and learning and growth.)

(Cross-post from my other blog, Nonprofit Update.)

If we can figure out how we on this planet have gotten to the place where we have the highest wealth, best health, and longest life expectancy in history, we can keep going on the same path. Likewise, we can maybe figure out how to bring along those people groups that don’t share in the abundant bounty.

Here is the ache in many hearts:  How do we ‘solve’ poverty and suffering?

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By Jim Ulvog, ago

The minimum wage made unemployment worse during the Great Depression

Minimum wage laws also extended the Depression. That from Amity Shlaes, in The Minimum Wage Makes Depressions Worse. (cross post from Outrun Change.)

In a lousy economy, forcing wages above the value of the output makes employment worse. When there is currency deflation the effect is compounded. Adding another layer of minimums every couple of years and slowly gathering more employers into the minimum wage rules further compounds the effect.

If you can’t afford the staff you have, and you can’t reduce wages, what options are left? Lay off more employees. Shrink your company.

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By Jim Ulvog, ago

How did we get to the place where we can ask “Why Does 1% of History Have 99% of the Wealth”?

Why we are so much better off than 200 years ago? Explained in 3 minutes. Check out the video by Prof. Dierdre McCloskey:

[youtube=http://www.youtube.com/watch?v=a0nsKBx77EQ&feature=player_embedded]

(Cross-posted from my other blog, Outrun Change.)

Here’s my 200 word summary of the video:

Until 1800, the average person made the inflation-adjusted equivalent to $3 a day. It’s been that way for thousands of years. Starting in 1800, a graph of average income looks like a hockey stick, going almost straight up after being flat for thousands of years.

Why?

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By Jim Ulvog, ago

Consider the radical transformation in the last 300 years. And capitalism’s role therein.

Here’s the formula: compare life for the typical person today to 30, 100, 300 years ago. The things we take for granted to today would have been an unimaginable blessing back then. I get a kick out of that story line every time I see it.

The latest in a long line of examples is from Don Boudreaux at Cafe Hayek:  Capitalism: The Greatest Engine of Equality. He ponders what a man from 1700 would think of a visit to Bill Gates. Just about every one of the astounding things observed by the visitor from 1700 is also available to almost every person living in the U.S.

(Cross-post from my other blog, Outrun Change.)

The driving force behind all of this?

Capitalism.

And property rights.

And a functional legal system.

And a functional democracy.

Read the full article. A few things that would have been beyond the wildest dream 300 years ago: (more…)

By Jim Ulvog, ago

Tidbit to remember next time someone says the private sector deserves 100% of the blame for the financial crisis.

The Wall Street Journal editorial on 1-28 evaluated The Bernanke Legacy. (cross-post from my other blog, Outrun Change.)

In dividing his tenure into three parts, before/ during/  after the financial meltdown, they provide a good assessment of the during phase. An evaluation of the after phase will have to see how the Fed unwinds the gazillions of dollars of quantitative easing.

On the before phase the assessment places much blame for the housing bubble on the Fed in general and Mr. Bernanke in particular. Their comment: (more…)

By Jim Ulvog, ago

3 of the common myths about capitalism

  • Pro-capitalism = pro-business
  • Capitalism generates unfair distribution of income
  • Capitalism is responsible for the financial crisis and great recession

Not true. Those three (false) myths disposed of in this video:

[youtube=http://www.youtube.com/watch?feature=player_embedded&v=KGPa5Ob-5Ps]

 

That is from Professor Jeff Miron from Harvard.

A few highlights from the video:

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By Jim Ulvog, ago

Graph to illustrate Thatcher’s comment that socialists want the poor poorer provided the rich were less rich – Part 2

Previously mentioned a graph that illustrates the idea that socialists

would rather the poor were poorer provided the rich were less rich.

Here is a revised graph:

inequality graph 2

This is a much busier graph. Like the earlier graph, it is from Dave Poling and is used with his permission. Here are a thousand words to describe his graph.

It shows the same relationships –

In a generation, the poor become as well off as the middle were a generation earlier. The middle gains a lot and is as well off as the rich a generation earlier. And yes, the rich become really rich.

Under socialism, the rich, middle, and poor all get worse off.

An addition to this graph is the government and cronies. I call the latter group the crony capitalists, those companies and individuals who make their business thrive by lobbying the government and getting special treatment. They do quite nicely under socialism, thank you very much.

Since there is so much going on here, let’s look at the graphs in more detail.

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By Jim Ulvog, ago