Economics

Another farm illustration of improved productivity – 10

Previously discussed the mind-boggling improvement in productivity in egg production.

I’m a city boy and don’t understand farms. However, I have one last comparison.

When my dad was a boy, his dad and mom ran a 360 acre farm with help from my dad and seven siblings along with some occasional hired hands. Adjust that count anyway you wish for the lower number of hours the kids worked and their lower productivity, but that’s still 10 people to work a 360 acre farm.

I have a cousin whose husband and son run a farm today. (more…)

By Jim Ulvog, ago

Interference in the market pricing disrupts the supply and demand equation. What bad things will happen?

Disrupt the supply/demand equation and what are the fully expected results?

Distortions, shortages, rationing, waiting lines, black markets. Those are the logical consequences of price controls.

Could someone explain to me why shortages and rationing and black markets are morally superior to free enterprise?

Check this out:

[youtube=http://www.youtube.com/watch?feature=player_embedded&v=7MY7E_VhKMM]

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By Jim Ulvog, ago

Prices know more than you do

How much information do prices contain? A huge amount.

Which is better for making a decision? Knowing the price of something or having perfect knowledge what something should cost?

If you think the latter, then you need either a crystal ball or tremendous amount of time to accurately research every single fact in the entire world-wide market.

If you think the former, then you can just look at the price of an item.

Professor Michael Munger illustrates this in a video, What Do Prices “Know” That You Don’t.

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

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By Jim Ulvog, ago

How the price of eggs show we have seen a twentyfold increase in the standard of living in the last 100 years. – 8

Found an incredibly helpful explanation of the radical change in the standard of living over the last 100 years. It is an explanation of the change in the price of eggs provided by Prof. Russell Roberts in his book The Price of Everything. I’ve been discussing this book in the last several posts starting here and most recently here and here.

A challenge I have had when looking at history, particularly the Civil War, is trying to relate salaries or costs from back then to today. It’s one thing to say a soldier made $10 a month or a skilled laborer made $100 a month or a set of uniforms cost $17 or a barrel of flour went from this price to that price in the South. However, I can’t relate that to anything.

How do those prices compare to now? Adjusting for inflation doesn’t really work. Comparing those prices to the cost of an ounce of gold or an ounce of silver helps a little, but that brings in distortions from inflation that we have seen in the last 30 years along with the odd things in today’s economy.

How about using a comparable job to buy a comparable product then and now?

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By Jim Ulvog, ago

Comparative advantage is humane, encourages tolerance, and is a force for peace

Comparative advantage is the idea that if I am better at one task and you are better at another task, we will both be far better off if we trade in what we are each better at.

In this video, Jonathan Sacks explains the deeper, moral benefits of comparative advantage.

[youtube=http://www.youtube.com/watch?v=50tQT1dmIHQ&feature=player_embedded]

A few of his comments and my observations:

He suggests that comparative advantage builds human dignity, peace, and tolerance.

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By Jim Ulvog, ago