Economics

[DougMacG]

Judge every Democrat proposal to help or expand the "Middle Class" with this in mind...

"The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle-class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle-class people. But homeownership and college aren’t causes of middle-class status, they’re markers for possessing the kinds of traits — self-discipline, the ability to defer gratification, etc. — that let you enter, and stay, in the middle class. Subsidizing the markers doesn’t produce the traits; if anything, it undermines them."

https://www.usatoday.com/story/opinion/2017/05/01/trump-test-democrats-tax-patriotism-glenn-reynolds/101159082/?siteID=je6NUbpObpQ-sSZk.GAzZjnKA3Zm_U0Yyg

https://philoofalexandria.wordpress.com/2010/09/25/reynolds-law/

[G M]

"Everybody gets a trophy", writ large.

Judge every Democrat proposal to help or expand the "Middle Class" with this in mind...

"The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle-class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle-class people. But homeownership and college aren’t causes of middle-class status, they’re markers for possessing the kinds of traits — self-discipline, the ability to defer gratification, etc. — that let you enter, and stay, in the middle class. Subsidizing the markers doesn’t produce the traits; if anything, it undermines them."

https://www.usatoday.com/story/opinion/2017/05/01/trump-test-democrats-tax-patriotism-glenn-reynolds/101159082/?siteID=je6NUbpObpQ-sSZk.GAzZjnKA3Zm_U0Yyg

https://philoofalexandria.wordpress.com/2010/09/25/reynolds-law/

[DougMacG]

"Please feel free to post that in the Tax thread here and the Economics thread on the SC&H forum too."

 http://www.heritage.org/node/18247/print-display
The tax rate cuts of the 1920s were followed by a 61% increase revenues over 7 years.
The Kennedy tax rate cuts brought a 62% increase in revenues over 7 years.
The Reagan tax rate cuts yielded a 54% increase over 6 years (100% over 10 years).

Then when Bush or Trump propose tax rate cuts, the media demands to know how they will deal with the static revenue loss - a demonstrably false premise question.
--------------------------------------

Opponents argue that revenues increase anyway, but the point is that if revenues surge after rates are lowered, the increase in income is that much more - which is a good thing!

[DougMacG]

"High social transfers not tied to work incentives emerged as the most likely explanation for the low participation rate. The phase-in of ... minimum wage ... may have also helped to drive down participation rates."   - BROOKINGS INSTITUTION (regarding fiscal collapse in Puerto Rico)

http://caseymulligan.blogspot.com/2017/01/who-wrote-this.html?m=1
https://www.brookings.edu/book/restoring-growth-in-puerto-rico/  (Page 29)


Pay for not working hurts work participation.  Who knew?

[ccp]

"High social transfers not tied to work incentives emerged as the most likely explanation for the low participation rate"

What are "high social transfers" - is this politically correct speak for free government sponsored benefits ?

[DougMacG]

"High social transfers not tied to work incentives emerged as the most likely explanation for the low participation rate"

What are "high social transfers" - is this politically correct speak for free government sponsored benefits ?

Right.  The redistribution economy run amok.  Government directed theft from producers to non-producers both reduces the incentive to produce and increases the receive.  Every additional dollar transferred doubles this incentive/disincentive problem.  Each time one more person switches from contributing to receiving, we are two steps closer to an economy that will not support those in real need.  In the case of the US, we are already $19 trillion in debt, short of being able to pay our bills.

In the US, 27% of the people have full time, private sector jobs.  (I rounded up, using 2014 numbers.)

http://www.cnsnews.com/commentary/terence-p-jeffrey/86m-full-time-private-sector-workers-sustain-148m-benefit-takers

[DougMacG]

Written from a political perspective but quite telling about how things work economically.
http://www.realclearmarkets.com/articles/2017/06/12/the_democrats_new_economic_agenda_will_solidify_their_minority_status_102738.html

The Democrats' New Economic Agenda Will Solidify Their Minority Status
By John Tamny
June 12, 2017
 The Democrats' New Economic Agenda Will Solidify Their Minority Status
In a column from December of 2015, the Wall Street Journal’s Mary O’Grady unveiled a rather inconvenient fact that poverty warriors on the American left and right would perhaps prefer remain hidden: from 1980 to 2000, when the U.S. economy boomed, the number of Mexican arrivals into the U.S. grew from 2.2 million in 1980 to 9.4 million in 2000. The previous number is a clear market signal that the U.S. is where poverty has always been cured, as opposed to a condition that requires specific U.S. policy fixes.

O’Grady’s statistics came to mind while reading a recent New York Times column by Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities. He writes that a “highly progressive agenda [from Democratic scholars and politicians] has been coming together in recent months, one with the potential to unite both the Hillary and Bernie wings of the party, to go beyond both Clintonomics and Obamanomics.” The problem is that the agenda that's got Bernstein so giddy has nothing to do with the very economic growth that is always the source of rising economic opportunity for the poor, middle and rich.

Up front, Bernstein expresses excitement about a $190 billion (annually) program that he describes as a “universal child allowance.” The allowance would amount to annual federal checks sent to low-income families of $3,000/child. It all sounds so compassionate on its face to those who think it kind for Congress to spend the money of others, but given a second look even the progressive and hysterical might understand that economic opportunity never springs from a forcible shift of money from one pocket to another. If it were, theft would be both legal and encouraged.

The very economic growth in the U.S. that has long proven a magnet for the world’s poorest springs not from wealth redistribution, but instead from precious capital being matched with entrepreneurs eager to transform ideas into reality. Just as the U.S. economy wouldn’t advance if Americans with odd-numbered addresses stealthily 'lifted' $3,000 each from those with even-numbered addresses, neither will it grow if the federal government is the one taking from some, only to give to others. Economic progress always and everywhere springs from investment, yet Bernstein is arguing with a straight face that the U.S.’s poorest will be better off if the feds extract $190 billion of precious capital from the investment pool. As readers can probably imagine, he doesn’t stop there.

Interesting is that Bernstein’s next naïve suggestion involves “direct job creation policies, meaning either jobs created by the government or publicly subsidized private employment.” Ok, but all jobs are a function of private wealth creation as Bernstein unwittingly acknowledges given his call for resource extraction from the private sector in order to create them. This begs the obvious question why economic opportunity would be enhanced if the entrepreneurial and business sectors had less in the way of funds to innovate with. But that’s exactly what Bernstein is seeking through his $190 billion “universal child allowance,” not to mention his call for more “jobs created by the government.” Stating what’s obvious even to Bernstein, government can’t create any work absent private sector wealth, so why not leave precious resources in the hands of the true wealth creators? Precisely because they’re wealth focused, funds kept in their control will be invested in ways that foster much greater opportunity than can politicians consuming wealth created by others.

Still, Bernstein plainly can’t see just how contradictory his proposals are; proposals that explicitly acknowledge where all opportunity emerges from. Instead, he calls for more government programs. Specifically, he’s proposing a $1 trillion expansion of the “earned-income tax credit” meant to pay Americans to go to work. As he suggests, the $1 trillion of funds extracted from the productive parts of the economy would lead to family of four tax credits of $6,000 in place of the “current benefit of about $2,000.” Ok, but what goes unexplained here is why we need to pay those residing in the U.S. to work in the first place.

What gives life to the above question is the previously mentioned influx of Mexican strivers into the U.S. during the U.S. boom of the 80s and 90s. What the latter indicated rather clearly is that economic growth itself is the greatest enemy poverty has ever known. It also indicated that work is available to those who seek it, and even better, the work available is quite a bit more remunerative than one could find anywhere else in the world. Rest assured that the U.S. hasn’t historically experienced beautiful floods of immigration because opportunity stateside was limited. People come here because the U.S. is once again the country in which the impoverished can gradually erase their poverty thanks to abundant work opportunities. If Mexicans who frequently don’t speak English can improve their economic situations in the U.S., why on earth would the political class pay natives who do speak the language to pursue the very work that is the envy of much of the rest of the world? Put rather simply, those who require payment above and beyond their wage to get up and go in the morning have problems that have nothing to do with a lack of work, and everything to do with a lack of initiative. Importantly, handouts from Washington logically won’t fix what is a problem of limp ambition. At best, they'll exacerbate what Bernstein claims to want to fix.

Most comical is Bernstein’s assertion that the tax credits will allegedly mitigate “the damage done to low- and moderate-wage earners by the forces of inequality that have steered growth away from them” in modern times. What could he possibly mean? The U.S. has long been very unequal economically, yet the world's poorest have consistently risked their lives to get here precisely because wealth gaps most correlate with opportunity. Translated, investment abundantly flows to societies where individuals are free to pursue what most elevates their talents (yes, pursuit of what makes them unequal), and with investment comes work options for a growing number. Doubters need only travel to Seattle and Silicon Valley, where the world's five most valuable companies are headquartered, to see up close why the latter is true.

Similarly glossed over by this rather confused economist is that rising inequality is the surest sign of a shrinking lifestyle inequality between the rich and poor. We work in order to get, and thanks to rich entrepreneurs more and more Americans have instant access at incessantly falling prices to the computers, mobile phones, televisions, clothing and food that were once solely the preserve of the rich. Just once it would be nice if Bernstein and the other class warriors he runs with would explain how individual achievement that leads to wealth harms those who aren’t rich. What he would find were he to replace emotion with rationality is that in capitalist societies, people generally get rich by virtue of producing abundance for everyone. In short, we need more inequality, not less, if the goal is to improve the living standards of those who presently earn less.

Remarkably, Bernstein describes the ideas presented as “bold” and “progressive,” but in truth, they’re the same lame-brained policies of redistribution that the left have been promoting for decades. And as they’re anti-capital formation by Bernstein’s very own admission, they’re also inimical to the very prosperity that has long made the U.S. the country where poverty is cured. To be clear, if this is the best the Democrats have, they’ll long remain in the minority.

John Tamny is editor of RealClearMarkets, a Senior Fellow in Economics at Reason Foundation, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). He's the author of Who Needs the Fed? (Encounter Books, 2016), along with Popular Economics(Regnery, 2015)

[DougMacG]

With the collapsing cost of oil and information we need a new way of measuring productivity.

https://www.the-american-interest.com/2017/05/17/the-new-oil-reality/

It’s possible that the productivity increases are appearing as lower prices rather than as higher incomes. If the price of oil falls from $100 per barrel to $50 per barrel due to increasingly cheap and efficient methods of production, then everybody in the industry is more productive in terms of barrels of oil per hour of work, but since the oil price has gone down, that productivity increase won’t be captured by statistical methods that calculate productivity in terms of money.
...
The African villager with a solar powered smartphone has more access to more information than Louis XIV in the halls of Versailles.

[Crafty_Dog]

http://www.latimes.com/business/la-fi-seattle-minimum-wage-20170626-story.html

[G M]

http://www.latimes.com/business/la-fi-seattle-minimum-wage-20170626-story.html

https://townhall.com/tipsheet/christinerousselle/2016/11/30/mcdonalds-to-install-ordering-kiosks-instead-of-paying-people-15hour-n2252849

[DougMacG]

http://www.latimes.com/business/la-fi-seattle-minimum-wage-20170626-story.html

https://townhall.com/tipsheet/christinerousselle/2016/11/30/mcdonalds-to-install-ordering-kiosks-instead-of-paying-people-15hour-n2252849

The costs to low-wage workers in Seattle outweighed the benefits by a ratio of three to one, according to the study, conducted by a group of economists at the University of Washington who were commissioned by the city. The study, published as a working paper Monday by the National Bureau of Economic Research
https://www.washingtonpost.com/news/wonk/wp/2017/06/26/new-study-casts-doubt-on-whether-a-15-minimum-wage-really-helps-workers/?utm_term=.9290384225c1

And once again, "unexpectedly".

[Crafty_Dog]

Coming soon!  Government repeals Law of Gravity!

[G M]

https://www.facebook.com/Robots4MinimumWage/

[DougMacG]

Catching up on my Alan Reynolds readings this am.

https://www.cato.org/blog/compare-medical-college-inflation-services-not-goods

JULY 24, 2017
Compare Medical and College Inflation with Services, not Goods
By ALAN REYNOLDS

A Wall Street Journal report, “Colleges Pull Back Tuition’s Long Rise,” includes a graph showing the cumulative increases in consumer price indexes (CPI) since 1990 for College Tuition, Medical Care, and All Consumer Prices.

Adding up nearly three decades of increases looks dramatic, but doesn’t show when various prices changes accelerated or slowed. More important, prices for college tuition and medical care are dominated by skilled human services, so they should be properly compared with service prices in general rather than with all items.

All Consumer Prices (shown as an erratic black line in the graph) includes falling quality-adjusted prices for such tech products as computers and televisions, for example, and cyclically-volatile prices of internationally traded commodities such as oil, steel, and grain.

Service prices largely reflect wages and benefits for skilled labor, which (unlike commodity prices) almost never fall. If service prices did not increase faster than the CPI in general, then real compensation in service sectors could never rise.

See graph:  https://object.cato.org/sites/cato.org/files/wp-content/uploads/compare_medical_care_with_services_not_goods.png

Medical care prices compared to other services & CPI

This graph omits college tuition because that CPI item is particularly problematic due to averaging large differences in quality and “financial aid” (selective discounts from sticker prices). The Bureau of Labor Statistics explains some of the difficulties:

“The inclusion of financial aid has added to the complexity of pricing college tuition. Many selected students may have full scholarships (such as athletic), and therefore their tuition and fixed fees are fully covered by scholarships. Since these students pay no tuition and fees, they are not eligible for pricing. In addition, there are other students who pay a very small fee to the college since the majority of their tuition and fixed fees are covered by scholarships. When these situations are priced by BLS Field Staff, normal increases in tuition/fees and minor declines in scholarship awards can provide extremely large changes for entry in the CPI index. For some of these same quotes, minor tuition declines or minor scholarship award increases can actually result in negative prices, which make the quotes ineligible for use in the CPI.”

The graph compares two decades of year-to-year price increases for Medical Care and Services in general. The CPI for medical services alone (not shown in the graph) has actually increased somewhat less than the CPI for all Medical Care, which suggests prices of drugs and medical devices increased faster than physician and hospital fees. There have been major improvements in the quality of drugs and medical devices, however, and economists doubt the CPI adequately adjusts for quality improvement. As a BEA report notes, “If there are unobserved attributes that change over time (e.g. perceived efficacy or experience with the drug), these indexes will count any price increases associated with these changes as increases in price, not quality.”

Have Medical Care prices risen faster than Services prices in general? Yes, but the difference in annualized price increases was typically smaller than one percentage point except in 2002 and 2010, when recession’s aftermath depressed other services prices more than (heavily-subsidized) medical care prices.

Recessions’ impact on commodity prices pushed the year-to-year overall CPI below zero at times, which underscores the inaptness of comparing prices of medical or educational services to any price index such as the CPI which is heavily weighted by goods.

[DougMacG]

" It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. "

  -  by Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776

http://geolib.com/smith.adam/won1-02.html

[DougMacG]

Taking a bit of the Venezuelan story over here including GM's video for illustration.
----------------------------------------------------------
Coercive 'Paternalism' vs freedom with inequality

On the right, what went wrong in Venezuela is a stupid question, too obvious for words.  Socialism led to economic collapse.  On the left, it is the missing question, seldom or never asked.

Hugo Chavez was the hero of the American Left.  Some were explicit; others just argued we should implement all the same policies here. 
"These days, the American dream is more apt to be realized in South America, in places such as Ecuador, Venezuela and Argentina, where incomes are actually more equal today than they are in the land of Horatio Alger. Who's the banana republic now?"  - Bernie Sanders, August 5, 2011  https://www.sanders.senate.gov/newsroom/must-read/close-the-gaps-disparities-that-threaten-america

A year ago I asked my closest, then-leftist confidant the question:

If socialism is so great, how do you explain what is happening in Venezuela?

For background, I even included the following information: 
The story of Chile’s success starts in the mid-1970s, when Chile’s military government abandoned socialism and started to implement economic reforms.  In 2013, Chile was the world’s 10th freest economy.
Venezuela declined from being the world’s 10th freest economy in 1975 to being the world’s least free economy in 2013 (other than North Korea).
http://dogbrothers.com/phpBB2/index.php?topic=1307.msg98285#msg98285

She answered with the best explanation possible:  Maybe they (the socialists) went too far.
I agree and would add at least two exclamation points, They went too far!!
https://www.youtube.com/watch?v=IaCSdtG4MmI

Coercive Paternalism versus Income Inequality

No one on the right wants zero public sector or no safety net, but we want to limit the powers of government and enlarge the liberties of the individual.  In a freer, market-based economy, income inequality is a fact - a feature, not a bug.  Some people make more money than others.  Some work harder, smarter, longer hours or more than one job chasing a dream.  Some keep making more and more over the working lifetime as they get smarter, more experienced and have more invested. Others hang out on discussion boards...  The fruit of our labor is one reason why labor gets done, goods produced and services provided.  The fruit of our investment, too.  Without fruit of your labor, goods don't get produced and services don't get provided.  It's not rocket science but we keep steering away from what is known to work best.

Coercive Paternalism is the ideal of The Left.  http://www.nybooks.com/articles/2013/03/07/its-your-own-good/  I kid you not! You don't want or need free choice when 'smart-planners' can do that for you and do it better.  http://dogbrothers.com/phpBB2/index.php?topic=1518.msg71031#msg71031 

You don't get to equality without coercion.  And then you don't get there anyway.  Big powerful government is a feature not a bug in real world socialism.

In Venezuela, they pursued the policies and dreams of the American Left.  We should thank them and pay them for their experiment.  They took from the rich and they gave to the people, well actually the government, on behalf of the people (the government).  But private sector capitalism requires private sector capital and they chased it away.  Ironically, Public sector investment also requires a vibrant private sector to support it - and they chased it away.  It's a fact, not a cliche, that eventually you run out of other people's money [Margaret Thatcher].

Among the endless ironies of the left is that as you pursue equality and grow poorer, inequality worsens anyway.  Compare Chavez' daughter with median income or see President Obama's record in the US.
http://dailycaller.com/2015/08/10/iron-fisted-socialism-benefited-hugo-chavezs-daughter-to-the-tune-of-billions-reports-say/
http://publications.credit-suisse.com/tasks/render/file/index.cfm?fileid=AD783798-ED07-E8C2-4405996B5B02A32E
https://www.counterpunch.org/2016/02/26/during-obamas-presidency-wealth-inequality-has-increased-and-poverty-levels-are-higher/

Who knew?

https://www.youtube.com/watch?v=l5KUadzyV9A
"How important is income equality to you?"
"Really important!"

Good luck with that.
https://www.youtube.com/watch?v=bDm2-1NZBLw

[Crafty_Dog]

http://www.ftportfolios.com/Commentary/EconomicResearch/2017/9/1/hurricane-harvey-and-broken-windows

[DougMacG]

I took another look at this because people on the left or looking for balance are still quoting and recommending it.

For anyone interested, please listen to this interview debunking Piketty up, down and sideways.  His little technical flaws make his thesis false.  His dates and basic facts are wrong such as when tax rates were raised in the US during the great depression.  Among his flaws he completely ignores depreciation, meaning that all capital ever put into use is still of full value and in use.

http://tomwoods.com/thomas-piketty-refuted/

All his errors are coincidentally in the direction of supporting his flawed thesis, not in random directions.

As with all leftists, they measure income and wealth of the lower earners without counting their income or wealth.  Housing capital is not capital or wealth, for example.  WIth the rich, they tell how much higher their income and wealth is without accounting for the actions we are already taking (taxation) to limit and discount their income and wealth.

Among those debunking Piketty is Piketty:
http://ww2.cfo.com/the-economy/2015/03/economist-piketty-backtracks-inequality-theory/

His work that ignores capital flight is not as popular in Europe, already plagued by capital flight.

Wages depend on productivity of labor which is dependent on labor.  To fight against capital is to fight against wages.  Who knew.

One who believes his own proposed tax on wealth is not doable is ... Piketty.

https://www.youtube.com/watch?v=QIGM9ga1sWc
http://dailysignal.com/2015/02/18/economic-research-refutes-piketty/
http://www.salon.com/2015/01/02/joseph_stiglitz_thomas_piketty_gets_income_inequality_wrong_partner/
http://www.realclearmarkets.com/articles/2014/04/22/the_systematic_errors_in_thomas_pikettys_new_book_101016.html
https://www.youtube.com/watch?v=QIGM9ga1sWc
https://www.amazon.com/Pikettys-Capital-Theory-Destructive-Program-ebook/dp/B00M0D69S2
https://economics21.org/html/problems-piketty-1307.html

I don't look for economists to predict the future.  I will happily settle for economists who can analyze the past and the present correctly.

Search this thread or "Piketty" in topic search for more on this.

[DougMacG]

https://www.amazon.com/My-Life-Work-Henry-Ford/dp/1497432251
https://www.youtube.com/watch?v=fAtyxuaRnHM

The right to the fruits of our labor
Excerpts from Henry Ford’s ‘My Life and Work,’ 1922

When you get a whole country — as did ours — thinking that Washington is a sort of heaven and behind its clouds dwell omniscience and omnipotence, you are educating that country into a dependent state of mind, which augurs ill for the future. Our help does not come from Washington, but from ourselves; our help may, however, go to Washington as a sort of central distribution point, where all our efforts are coordinated for the general good. We may help the Government; the Government cannot help us. The slogan of “less government in business and more business in government” is a very good one, not mainly on account of business or government, but on account of the people. Business is not the reason why the United States was founded. The Declaration of Independence is not a business charter, nor is the Constitution of the United States a commercial schedule.

The United States — its land, people, government and business — are but methods by which the life of the people is made worthwhile. The Government is a servant and never should be anything but a servant. The moment the people become adjuncts to government, then the law of retribution begins to work, for such a relation is unnatural, immoral and inhuman. … The welfare of the country is squarely up to us as individuals. That is where it should be, and that is where it is safest. Governments can promise something for nothing, but they cannot deliver. …
 
The economic fundamental is labor. Labor is the human element which makes the fruitful seasons of the earth useful to men. It is men’s labor that makes the harvest what it is. That is the economic fundamental: Every one of us is working with material which we did not and could not create, but which was presented to us by Nature.

The moral fundamental is man’s right in his labor. This is variously stated. It is sometimes called “the right of property.” It is sometimes masked in the command, “Thou shalt not steal.” It is the other man’s right in his property that makes stealing a crime. When a man has earned his bread, he has a right to that bread. If another steals it, he does more than steal bread; he invades a sacred human right. If we cannot produce, we cannot have — but some say if we produce it is only for the capitalists. Capitalists who become such because they provide better means of production are the foundation of society. …

The only strong group of union men in the country is the group that draws salaries from the unions. Some of them are very rich. Some of them are interested in influencing the affairs of our large institutions of finance. Others are so extreme in their so-called socialism that they border on Bolshevism and anarchism — their union salaries liberating them from the necessity of work so that they can devote their energies to subversive propaganda. All of them enjoy a certain prestige and power, which, in the natural course of competition, they could not otherwise have won.

If the official personnel of the labor unions were as strong, as honest, as decent, and as plainly wise as the bulk of the men who make up the membership, the whole movement would have taken on a different complexion these last few years. But this official personnel, in the main — there are notable exceptions — has not devoted itself to an alliance with the naturally strong qualities of the workingman; it has rather devoted itself to playing upon his weaknesses, principally upon the weaknesses of that newly arrived portion of the population which does not yet know what Americanism is, and which never will know if left to the tutelage of their local union leaders.

The workingmen, except those few who have been inoculated with the fallacious doctrine of “the class war” and who have accepted the philosophy that progress consists in fomenting discord in industry, have the plain sense which enables them to recognize that conditions change. The union leaders have never seen that. They wish conditions to remain as they are, conditions of injustice, provocation, strikes, bad feeling and crippled national life. Else where would be the need for union officers? Every strike is a new argument for them; they point to it and say, “You see! You still need us.” …

The workingman himself must be on guard against some very dangerous notions — dangerous to himself and to the welfare of the country. It is sometimes said that the less a worker does, the more jobs he creates for other men. This fallacy assumes that idleness is creative. Idleness never created a job. It creates only burdens. The industrious man never runs his fellow worker out of a job; indeed, it is the industrious man who is the partner of the industrious manager — who creates more and more business and therefore more and more jobs.

It is a great pity that the idea should ever have gone abroad among sensible men that by “soldiering” on the job, they help someone else. A moment’s thought will show the weakness of such an idea. The healthy business, the business that is always making more and more opportunities for men to earn an honorable and ample living, is the business in which every man does a day’s work of which he is proud. And the country that stands most securely is the country in which men work honestly and do not play tricks with the means of production. We cannot play fast and loose with economic laws, because if we do, they handle us in very hard ways.

The fact that a piece of work is now being done by nine men which used to be done by 10 men does not mean that the 10th man is unemployed. He is merely not employed on that work, and the public is not carrying the burden of his support by paying more than it ought on that work — for after all, it is the public that pays!

https://books.google.com/books?id=8elRmsxDBWsC&pg=PA7&lpg=PA7&dq=clouds+dwell+omniscience+and+omnipotence&source=bl&ots=LyEftCsOah&sig=2PsozpcwrE8HYJeHC0lOwQrW9b8&hl=en&sa=X&ved=0ahUKEwiHh5Lc66LWAhUE5oMKHcmuAM8Q6AEIOTAE#v=onepage&q=clouds%20dwell%20omniscience%20and%20omnipotence&f=false

[ccp]

Obamster has no problem cashing on the fruits of HIS labor doe  he?

[G M]

https://www.facebook.com/Robots4MinimumWage/

https://techxplore.com/news/2017-09-burger-robots.html

[DougMacG]

https://www.facebook.com/Robots4MinimumWage/

Why robots support a higher minimum wage
https://www.americanexperiment.org/2017/08/why-robots-support-a-higher-minimum-wage/

People Versus Machines: The Impact of Minimum Wages on Automatable Jobs
http://www.nber.org/papers/w23667.pdf

Raising the minimum wage by $1 equates to a decline in ‘automatable’ jobs of 0.43%. Certain industries were affected far more than others. In manufacturing, a rise of $1 in minimum wage drove employment in automatable jobs down a full percentage point.

If you raise the price of something, people will switch to substitutes.


A lot of economic turmoil comes from disruptive innovation and the globalization of markets.  Minimum wage legislation speeds up exactly what they wish to stop.

Leftists stuck on stupid.  Denying science.

[Crafty_Dog]

https://www.nytimes.com/2017/10/09/business/nobel-economics-richard-thaler.html?emc=edit_na_20171009&nl=breaking-news&nlid=49641193&ref=cta

[Crafty_Dog]

https://www.forbes.com/sites/louiswoodhill/2014/03/19/the-war-on-poverty-wasnt-a-failure-it-was-a-catastrophe/#6620686a6f49

[ccp]

   
"War on Poverty was a Catastrophe"

The LEFT can fix this easily by confiscating more from those who produce .  They curse the rich but at the same time they would have zero power without them.

[DougMacG]

https://www.forbes.com/sites/jeffreydorfman/2017/12/22/why-growth-matters/#1b84ddcb7141

[Crafty_Dog]

https://seekingalpha.com/article/4134231-amazon-multi-trillion-dollar-monopoly-hidden-plain-sight?ifp=0

[ccp]

CD,

cannot read article without logging in

[Crafty_Dog]

Summary

Amazon is both a direct retailer and a near indispensable platform for competing resellers.

In that latter capacity, it sets the rules and it can tilt the game in its favor and extract most of the value and valuable data and information.

That information allows it to start competing businesses by picking off its merchants' best-selling products.

It's difficult to see how this can be stopped bar action by competition authorities.

The year 2017 was certainly the year of big tech rising. FANG stocks, like Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB) Google (NASDAQ:GOOG) (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Netflix (NASDAQ:NFLX), have risen sheer inexorably:

And there seems to be good reasons for most if not all the rise of the shares of these companies. Facebook and Google have basically cornered the online ad market and they are now responsible for nearly all of its growth. From Business Insider (our emphasis):

    The 10 leading ad-selling companies accounted for 73% of total revenues in Q4 2016, according to the report. So who are these 10 companies that grab the largest share of these revenues? The report didn't say. But analysts for the Pivotal Research Group, cited by Reuters, reported the only two names that really matter: Facebook and Google. In terms of the industry growth, so in terms of the 22% or $12.9 billion year-over-year increase in total internet advertising revenue, Facebook and Google together grabbed 99% of the growth! They're sitting at the sweet spot. Everyone else is fighting for crumbs.

And of course this sets up a virtuous cycle as their platforms become more useful for advertisers and less intrusive for users and it allows them to gather even more data about its users, the input for even better targeted ads, etc.

This data then serves other purposes as well. It's a giant treasure trove for AI applications that can kick these virtuous cycles into overdrive.

The position of Amazon seems only slightly less untouchable. Its leading position in cloud computing brings in the dough, and its ever expanding online (and increasingly offline) retail business doesn't actually have to make a profit.

This allows the company to keep investing in cementing its advantage (like robot technology for automated warehouses, etc.) and riding economies of scope as it expands its reach.

And of course, Amazon has also accumulated a wealth of data about its users which will enable it to put through machine learning and work into AI applications, turning it into gold.

The positions of the other three companies mentioned seem less unassailable to us. While Apple has a booming service business, most of its revenue depends on its sales of its iPhone, which is an already mature market.

One or two relatively less successful new models could quite dent the financials here. Mind you, this is not what we're predicting (we are in fact long in Apple for the SHU portfolio), but it could happen.

Microsoft increasingly depends on its booming cloud business for growth, but it's still distant second behind Amazon here. Netflix also faces considerable competition from Amazon (and others) and could stumble on a variety of issues (lack of a hit series, content cost, mispricing subscriptions, not to mention misbehaving stars).

Again, we don't predict this happening; we merely point out that their position is less unassailable than those of Facebook, Google or Amazon. These three are the top three real big tech commandeering companies, and even in theory it's simply difficult to imagine what could unseat their positions.
Amazon

Amazon is such a juggernaut that it flattens whole retail sectors, malls, and the retail landscape and in doing so it is amassing ever more power. The way it treats its warehouse employees has also come under scrutiny.

Amazon is already generating 30% of all (online + offline) retail sales growth in the US and (from the Atlantic):

    Last year, Amazon sold six times as much online as Wal-Mart, Target, Best Buy, Nordstrom, Home Depot, Macy’s, Kohl’s, and Costco did combined

Source: ILSR
Losses

Amazon has incurred losses on many ventures, but this only serves as a way to flatten the competition and establish a dominant position and hook customers in. It sells at prices and gives perks (free shipping, etc.) which few if any competitors can match.

Equally, Amazon's access to cheap finance allows it to undercut the competition and amass resources with which to expand its advantage and platform.

For instance, it has allowed it to amass a distribution network and fulfillment centers which have been automated by its purchase of Kiva Systems.

And while normal companies suffer when they acquire another company at a steep premium, Amazon's stock actually went up when it acquired Whole Foods earlier in the year; on the day actually by roughly the same amount as the acquisition cost ($13.4B), making it essentially free. Perhaps investors know something that competition watchdogs have yet to wake up to this. From ILSR (PDF):

    Between October 2014 and October 2016, Amazon’s market capitalization - the total value of its outstanding stock - rose from about $140 billion to about $380 billion. In the eyes of investors, Amazon is now worth nearly twice what Wal-Mart is worth, even though the latter generated $80 billion in profit over the last 5 years, while Amazon cleared only a little more than $1 billion.2

It's only gotten worse since. Apparently, investors see something that competition authorities seem to be blind to. Chamath Palihapitiya, a Silicon Valley venture capitalist, argued that ILSR:

    “We believe there is a multi-trillion-dollar monopoly hiding in plain sight.”

Indeed, as Amazon is becoming the first place for shoppers to look for stuff, it is becoming the indispensable gateway for suppliers to sell. And by selling through Amazon, they become captive to its terms and conditions, and the multiple ways in which Amazon can tilt the game in its favor. It is like Wal-Mart (NYSE:WMT) owning all shopping malls.
Indispensable Gateway

Market share figures really do not capture the market power the company has amassed. Its market power is simply hidden in plain sight - hidden because Amazon actually produces very meager margins and profits (apart from its cloud business). Here is an extensive report from the ILSR:

    Today, half of all U.S. households are subscribed to the membership program Amazon Prime, half of all online shopping searches start directly on Amazon, and Amazon captures nearly one in every two dollars that Americans spend online.

Since competition policy, especially that in the US, focuses on companies raising prices for consumers as a sign of monopolistic behavior, this is a pretty efficient decoy. The company actually does the opposite.

But it is not the actual slice of the market that is the most worrying part of Amazon's market power, even if this is growing pretty fast. It's its control over an increasing part of the infrastructure of sales. From the ILSR (our emphasis):

    Amazon increasingly controls the underlying infrastructure of the economy. Its Marketplace for third-party sellers has become the dominant platform for digital commerce. Its Amazon Web Services division provides the cloud computing backbone for much of the country, powering everyone from Netflix to the CIA. Its distribution network includes warehouses and delivery stations in nearly every major U.S. city, and it’s rapidly moving into shipping and package delivery for both itself and others. By controlling this critical infrastructure, Amazon both competes with other companies and sets the terms by which these same rivals can reach the market.

That is, companies that want to reach the market increasingly have to rely on Amazon. Basically everything Amazon does is targeted at becoming the indispensable gateway for online sales (and increasingly offline sales as well), creating the famous flywheel that Jeff Bezos likes to invoke as its business model.

Third-party sellers broaden Amazon's sales, make the platform more valuable for shoppers, and allow it to gain knowledge of new segments and amass invaluable data in order for it to extract much of the value from these third-party sellers, or even enter these segments itself and eliminate them.

Half of worldwide Amazon sales are generated by third-party sellers, but buyers wouldn't know it, as they are almost completely anonymous on Amazon's platform. And apart from invaluable data and amassing buyers fortifying its platform, Amazon also gets a cut (15% to 50% in some cases) with zero effort.

Take for instance LeTravelStore.com. It did very well online until more and more people skipped online search and went straight to Amazon. For the owners, it became clear that if you want to sell online, you have to go through Amazon.

But that wasn't a success either, as Amazon restricted its interaction and building relationships with customers, and the company closed. It's not alone. From ILSR:

    They can either continue to be independent, hanging their shingles out on search engine byways less and less traveled by shoppers, or they can set up shop as third-party sellers on Amazon’s site, forfeiting much of their knowledge, revenue, and autonomy to their most powerful competitor.

Or take Nike (NYSE:NKE), or Hachette, From Fast Company:

    Last week, Amazon offered to police the many counterfeiters that sell fake Nike shoes on its site as a bargaining chip to get Nike to agree, for the first time, to offer a full line of its products to Amazon. Similarly, when the publisher Hachette resisted Amazon's demands in negotiations over book pricing, it found the buy-buttons removed from all of its titles, putting thousands of books off-limits to both buyers and sellers.

Birkenstock, another shoe brand, fell into the same problem as Nike. And as strict as Amazon is with policies in its Marketplace, it is lax with others, like those involving counterfeited items. This is just another way for Amazon to gain leverage.

Keep in mind that Nike and Hachette aren't exactly small companies, but Amazon can waltz right over them nevertheless. As a side note, Speaker of the House Paul Ryan was one of its victims, as he has just had a book published by Hachette. Amazon restored his book to normal status (instead of delaying shipping and modifying search and recommendation algorithms), but not those of others.

In the book business, Amazon is extracting ever more value in annual negotiations about fees from publishers (the so-called "Gazelle project"). Those that don't play ball risk payback that will severely affect its sales.

Publishing house Melville House experienced the removal of buy buttons from all its titles on Amazon when the latter was shaking it down for another hike in fees.
Data

Amazon amasses a treasure trove of data from its own sales and those on Marketplace. From the ILSR:

    The company uses its data on what we browse and buy to shape what we see and adjust prices accordingly, and its control over suppliers and power as a producer itself means that it’s increasingly steering our choices, deciding what products make it to market and what products we’re exposed to... Already there is evidence that Amazon is using its huge trove of data about our browsing and buying habits to selectively raise prices, and it’s also started blocking access to certain products and delaying shipping for customers who decline to join its Prime program.

The mechanisms involved aren't really all that different from those that provide Facebook and Amazon with their increasing return in the online ad market.

Instead of ever better targeted ads, the company can provide customers with ever better targeted products and services. In itself, this isn't bad, but the company has a lot of leeway to skew the process, just like Russian trolls can misuse Facebook or Twitter to skew political processes.

And there is another side to this. In skewing, Amazon can also tilt the production of goods and services itself and/or demand a premium for premium access, or even any access at all.
Amazon products

Another thing that Amazon increasingly does with all the data it has amassed both from its own sales and that of third-party sellers selling on its platform. From The Atlantic:

    Some merchants have accused Amazon of secretly using Marketplace as a laboratory: After collecting data on which products do best, it introduces low-price competitors available through its flagship service.

Since half of all online shopping searches start directly on Amazon, it can heavily skew these searches in favor of its own (or preferred party) solutions. After all Amazon increasingly produces stuff itself, like books, audio books (Audible), TV shows, video games (via its platform Twitch), it has its own streaming music solution, groceries, etc. From ILSR:

    Earlier this year, the company unveiled 7 of its own fashion lines, offering more than 1,800 items of apparel. It’s added hundreds of new products to its AmazonBasics brand, which now furnishes a wide range of household items, from computer cables to swivel chairs. On Amazon.com, many of these products rank as top sellers in their categories and show up first in search results. Amazon publishes books too, and it’s not uncommon for as many as half of the titles on its Kindle bestseller list to be its own.

And the Marketplace also serves as a great lab to figure out where to expand. From ILSR:

    It also appropriates their product knowledge. Upstream Commerce recently tracked 857 apparel items first offered for sale by Marketplace sellers and found that, within 12 weeks, Amazon began selling 25 percent of their top-selling items. Another study by researchers at Harvard Business School also looked at patterns in Amazon’s entry into new product areas and found, “The likelihood of Amazon’s entry is positively correlated with the popularity and customer ratings of third-party sellers’ products.”

Other elements

The acquisition of Whole Foods gives Amazon another leg up in its competition with other retailers:

    Another series of distribution centers often located in the best neighborhoods.
    The ability to merge online and offline data to create an even bigger data advantage (readers might want to read up on the possibilities here, for instance, through our treatment of the same topic describing Alibaba's (NYSE:BABA) O2O strategy).

See for instance how its ever denser network of fulfillment centers gives it a leg up in distribution. From Business Insider:

    New and improved Amazon shipping options made it easy to get last-minute holiday gifts in time for the holiday. Customers use of Amazon's one-day, same-day, and two-hour delivery doubled this holiday, according to the company. This dovetails with Amazon's commitment to being the most convenient option to gain market share, at the expense of margin.

Another brilliant idea to rope in consumers was Amazon Prime, which provides a series of perks like streaming media (competing with the likes of Netflix). But perhaps its most important feature is free shipping. The benefits of this accumulate with use so it greatly reduces people's motivation to shop anywhere else (ILSR):

    Less than 1 percent of Prime members visit competing sites while shopping on Amazon, and Prime members spend almost three times as much with the company as non-Prime customers do

Then there is its digital assistant, Alexa, which is a full frontal attack on brand power. Do you want batteries? Alexa doesn't give you the option of choosing between brands. And Alexa's reach is rapidly increasing. From Business Insider:

    The Alexa app, which is required to set up Amazon's Echo devices and other products with the Alexa digital assistant built in, was the top app for Android and iPhone on Christmas day. Since app store rankings reflect what people are downloading almost in real-time, it's a strong indication that Echo products were some of the most popular gifts this Christmas.

From ILSR:

    Amazon presents a vastly more dangerous threat to competition than Wal-Mart, because its ambition is not only to be the biggest player in the market. Its intention is to own the market itself by providing the underlying infrastructure—the online shopping platform, the shipping system, the cloud computing backbone— that competing firms depend on to transact business. In effect, Amazon is turning an open, public marketplace into a privately controlled one.

Already there is evidence that Amazon is using its huge trove of data about our browsing and buying habits to selectively raise prices, and it’s also started blocking access to certain products and delaying shipping for customers who decline to join Prime.
In summary, how Amazon squeezes the competition

    Half of shoppers already begin their search on Amazon; Amazon has the ability to produce at a loss aided by cheap finance; and its fast and cheap shipping are becoming the norm. All of this gives independent sellers little choice but to join Marketplace.
    Once they join, they have to accept the terms and conditions (like no interaction with customers outside Amazon's platform and little in the way of marketing or branding). Fulfillment terms are another point of leverage for Amazon.
    Amazon's platform is strengthened by more third-party Marketplace sellers, and here Amazon gains knowledge of new verticals and transaction data which it can then use against these third-party sellers.
    It can tilt the playing field (fulfillment, search and recommendation algorithms, or even removing the sell button or the seller altogether) in order to extract better conditions.
    It can also use the seller data to see what sells best and to produce similar items (again tilting the field in its favor).
    Amazon Prime is another powerful instrument to get even more people to its platform and stick with it, as the transport cost reductions are cumulative for instance.
    Alexa can further reduce brand power of suppliers and make the shopping experience seamless and sticky.

This is by no means a complete picture, but you get the idea of the flywheel which Bezos likes to talk about. A bleak conclusion from Fast Company:

    Amazon treated the book industry the same way companies like Wal-Mart once treated the territories into which they expanded: Use a war chest of capital to undercut prices, put competitors out of business, become the sole employer in the community, turn employees into part-time shift workers, lobby for deregulation, and effectively extract all the value from a given region before closing up shop and moving to the next one.

Conclusion

Amazon is both a retail competitor and a near indispensable platform for other retailers to sell on. But in that second capacity, Amazon has numerous ways to extract value and valuable data and information from these third-party sellers, and it has multiple ways at its disposal to tilt the playing field in its advantage. After all, it's Amazon's playing field. Amazon sets the rules, and Amazon controls the information and the customer interface.

The flywheel is all but unstoppable; Amazon is indeed a multi-trillion-dollar monopoly hidden in plain sight. Investors seem to realize this, but few others do - certainly not competition authorities, who happen to be the only ones who can do something about it. They, like consumers, are loving it.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in AMZN over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
About this article:Expand

[DougMacG]

It was utter nonsense for our economically illiterate mainstream media to poll CEOs of existing large businesses and ask them how they will distribute the windfall of a static  tax rate cut as they pay out a smaller portion in taxes of a fixed pie.  If they are benevolent, the story goes, they will give all of it to workers, and if they are mean and selfish they will pocket it for themselves and their shareholders.  As Woody Boyd might say, that isn't how it works in the real world.  Companies don't pay more for inputs like labor because they want to.  They pay what they need to pay in competition with other bidders for scarce resources.

Lower business tax rates and other improvements like immediate expensing of capital equipment purchases means that, all other things equal, more capital will be invested in this economy.  Now we hear that Samsung, LG, Toyota and Mazda are building plants or expanding in the US.  (Maybe Apple will come to the US someday too!)

These companies and their expansions add jobs, but how, when the unemployment rate is at essentially at ground zero.?

Newly relocated companies with really good jobs to offer have to hire people away from other companies, not invent people out of thin air.  The existing companies that stand to lose good employees have to drive those wages up.  How can they do that?  Capital investment is investment is synonymous with productivity improvement.  They will have to invest more, grow, innovate and be more efficient and effective in their field.

When they do lose key employees to competition, they have to promote people up and hire people in.  This affects supply and demand up and down the labor economic ladder.  The people out of the workforce coming in might not land jobs as plant managers or robotics engineers but their world of incentives, disincentives and job offers will be affected by incoming investment and hiring.

We live in an amazingly integrated and interconnected economy, not a trickle down one that flows in only one direction. 

Hiring and retaining good people is the hardest job of every vibrant and dynamic organization.  Let the bidding begin!

[DougMacG]

I look occasionally for writings from some of the better economists and noticed there are so few columns lately from Alan Reynolds, who I usaually find to be brilliant and prescient.  I should give him a break; he is 75 years old.  Anyway I was surprised to notice that he posts quite frequently on twitter:
https://twitter.com/alanreynoldsecn?lang=en

A lot of good material there if anyone has time or inclination to follow.

[Crafty_Dog]

Excellent find!

[DougMacG]

Posting this in two places.  Valuable info IMHO. 
---------------------------------------------------------
Not just the printing of money but by their interference in markets, take a look:



Notice in the chart below that it is the high-inflation items that are most influenced by government – things like health care and government-subsidized education. (If you think education is not influenced by the government, you are not paying attention.) The items that are not growing in price? Those are more purely market-driven.

http://www.mauldineconomics.com/frontlinethoughts/inflation-and-honest-data

[Crafty_Dog]

http://www.aei.org/publication/the-first-lesson-that-larry-kudlow-should-deliver-to-trump-trade-deficits-are-made-in-the-usa/?mkt_tok=eyJpIjoiTldSa1ptWXdZVFkzTjJWaSIsInQiOiJmRlpBVTVaRG8rZlBUT3FEUW51Z25pa1Z6RDZoNDRiNFFaeENCVU9QUittMXNMZzBUMmtVS0RoNUNyYTduOTQ5UVk5WHVsYmI4K1dKXC9oNGdNcGlxSlA0c0VpcE0wNHVpMnV0RDM0XC9SMWc0enk4Vm91V3Q4V1k3K1Q5TTlJRndiIn0%3D

[DougMacG]

Jobs that are difficult to automate from an engineering perspective may be exactly the jobs pushed to extinction by automation because they cannot compete.

http://caseymulligan.blogspot.com/2018/02/your-job-cannot-be-automated-then-you.html

[DougMacG]

Doug's theory, we aren't equal.  We aren't even equal with ourselves doing different tasks at different times in our careers. Greg Mankiw: Roger Federer has a greater economic advantage playing tennis than mowing lawns even if he is good at both.

Socialism takes away the incentive to do what you do best.  In fact, it takes away all incentives, is a denial of science, math and history.

Only by coercion can we pretend we are equal and so coercion and tyranny are necessary to implement socialism.

But even then, argued below, a benevolent Venezuela or North Korea would still be starving poor.
----------------------------
https://fee.org/articles/you-cant-argue-against-socialisms-100-percent-record-of-failure/
You Can't Argue against Socialism's 100 Percent Record of Failure
After more than two dozen failed attempts, Socialism has proven itself to be a disastrous philosophy.

by Kristian Niemietz   April 16, 2018
Socialism is extremely in vogue. Opinion pieces which tell us to stop obsessing over socialism’s past failures, and start to get excited about its future potential, have almost become a genre in its own right.

For example, Bhaskhar Sunkara, the founder of Jacobin magazine, recently wrote a New York Times article, in which he claimed that the next attempt to build a socialist society will be completely different:

This time, people get to vote. Well, debate and deliberate and then vote—and have faith that people can organize together to chart new destinations for humanity. Stripped down to its essence, and returned to its roots, socialism is an ideology of radical democracy. […] t seeks to empower civil society to allow participation in the decisions that affect our lives.

Nathan Robinson, the editor of Current Affairs, wrote in that magazine that socialism has not “failed." It has just never been done properly:

It’s incredibly easy to be both in favor of socialism and against the crimes committed by 20th-century communist regimes."

When anyone points me to the Soviet Union or Castro’s Cuba and says “Well, there’s your socialism,” my answer […] [is] that these regimes bear absolutely no relationship to the principle for which I am fighting. […] The history of the Soviet Union doesn’t really tell us much about “communism” […]

I can draw distinctions between the positive and negative aspects of a political program. I like the bit about allowing workers to reap greater benefits from their labor. I don’t like the bit about putting dissidents in front of firing squads.”

Closer to home, Owen Jones wrote that Cuba’s current version of socialism was not “real” socialism—but that it could yet become the real thing:

“Socialism without democracy […] isn’t socialism. […] Socialism means socializing wealth and power. […]

Cuba could democratize and grant political freedoms currently denied as well as defending […] the gains of the revolution. […] The only future for socialism […] is through democracy. That […] means organizing a movement rooted in people’s communities and workplaces. It means arguing for a system that extends democracy to the workplace and the economy.

And Washington Post columnist Elizabeth Bruenig wrote an article with the self-explanatory title It’s time to give socialism a try:

Not to be confused for a totalitarian nostalgist, I would support a kind of socialism that would be democratic and aimed primarily at decommodifying labor, reducing the vast inequality brought about by capitalism, and breaking capital’s stranglehold over politics and culture.

Despite differences in style and emphasis, articles in this genre share a number of common flaws.

Socialists insist that previous examples of socialism were not “really” socialist, but none of them can tell us what exactly they would do differently.

Flawed Arguments
First, as much as the authors insist that previous examples of socialism were not “really” socialist, none of them can tell us what exactly they would do differently. Rather than providing at least a rough outline of how “their” version of socialism would work in practice, the authors escape into abstraction, and talk about lofty aspirations rather than tangible institutional characteristics.

“Charting new destinations for humanity” and “democratizing the economy” are nice buzzphrases, but what does this mean, in practice? How would “the people” manage “their” economy jointly? Would we all gather in Hyde Park, and debate how many toothbrushes and how many screwdrivers we should produce? How would we decide who gets what? How would we decide who does what? What if it turns out that we don’t actually agree on very much?

These are not some trivial technical details that we can just leave until after the revolution. These are the most basic, fundamental questions that a proponent of any economic system has to be able to answer. Almost three decades have passed since the fall of the Berlin Wall—enough time, one should think, for “modern” socialists to come up with some ideas for a different kind of socialism. Yet here we are. After all those years, they have still not moved beyond the buzzword stage.

Secondly, the authors do not seem to realize that there is nothing remotely new about the lofty aspirations they talk about, and the buzzphrases they use. Giving “the people” democratic control over economic life has always been the aspiration, and the promise, of socialism. It is not that this has never occurred to the people who were involved in earlier socialist projects. On the contrary: that was always the idea. There was never a time when socialists started out with the express intention of creating stratified societies led by a technocratic elite. Socialism always turned out that way, but not because it was intended to be that way.

Contemporary socialists completely fail to address the deficiencies of socialism in the economic sphere.

Socialists usually react with genuine irritation when a political opponent mentions an earlier, failed socialist project. They cannot see this as anything other than a straw man, and a cheap shot. As a result, they refuse to address the question why those attempts have turned out the way they did. According to contemporary socialists, previous socialist leaders simply did not really try, and that is all there is to know.

They are wrong. The Austro-British economist Friedrich Hayek already showed in 1944 why socialism must always lead to an extreme concentration of power in the hands of the state, and why the idea that this concentrated power could be democratically controlled was an illusion. Were Hayek to come back from the dead today, he would probably struggle a bit with the iPhone, Deliveroo and social media—but he would instantly grasp the situation in Venezuela.
https://capx.co/john-mcdonnells-excuses-for-venezuela-just-dont-stack-up/

Thirdly, contemporary socialists completely fail to address the deficiencies of socialism in the economic sphere. They talk a lot about how their version of socialism would be democratic, participatory, non-authoritarian, and nice and cuddly. Suppose they could prove Hayek wrong and magically make that work. What then?

Economics Matters
They would then be able to avoid the Gulags, the show trials and the secret police next time, which would obviously be an immeasurable improvement over the versions of socialism that existed in the past. But we would still be left with a dysfunctional economy.

Ultimately, the contemporary argument for socialism boils down to: “next time will be different because we say so.”

Contemporary socialists seem to assume that a democratized version of socialism would not just be more humane, but also economically more productive and efficient: reform the political system, and the rest will somehow follow. There is no reason why it should. Democracy, civil liberties, and human rights are all desirable in their own right, but they do not, in and of themselves, make countries any richer.

A version of East Germany without the Stasi, the Berlin Wall, and the police brutality would have been a much better country than the one that actually existed. But even then: East Germany’s economic output per capita was only one third of the West German level. Democracy, on its own, would have done nothing to close that gap.

A version of North Korea without the secret police and the labor camps would be a much better country than the one that actually exists. But even then: the North-South gap in living standards is so vast that the average South Korean is 3–8cm taller than the average North Korean, and lives more than ten years longer. Democracy would not make North Koreans any taller, or likelier to reach old age.

Ultimately, the contemporary argument for socialism boils down to: “next time will be different because we say so.”

After more than two dozen failed attempts, that is just not good enough.

[DougMacG]

https://twitter.com/scandalofmoney?lang=en

[Crafty_Dog]

It was today in 1723 that the economist Adam Smith was born. Like Benjamin Franklin, Adam Smith is credited with “inventing” something—capitalism, in this case—that of course had existed since the dawn of time. But what people don’t know about Smith is what a profoundly moral and just person he was (his best book is The Theory of Moral Sentiments). They also don’t know the source of his keen moral sensibility: Stoicism. Smith’s teacher, Francis Hutcheson, was actually a translator of The Meditations of the Emperor Marcus Aurelius Antoninus, which may have been how Smith was introduced to Stoicism.

In any case, we find in Smith’s work constant reference to the Stoics and how Stoicism influenced his belief in capital markets, the “invisible hand,” and the beauty and wonder of the efficiency of people pursuing their self-interest. You could say that Stoicism was what tempered Smith’s belief in capitalism and why he would have rejected the later Ayn Randian-narcissism and heartlessness that many capitalists would try to justify through him. As he writes,

“One individual must never prefer himself so much even to any other individual, as to hurt or injure that other, in order to benefit himself… and who does not inwardly feel the truth of that great stoical maxim, that for one man to deprive another unjustly of any thing, or unjustly to promote his own advantage by the loss or disadvantage of another, is more contrary to nature, than death, than poverty, than pain, than all the misfortunes which can affect him, either in his body, or in his external circumstances.”
It’s ironic that the father of market capitalism makes the Stoics sound like communists. Marcus Aurelius has a phrase, διάνοια δικαία καὶ πράξεις κοινωνικαὶ (“a just mind and acts for the common good.”) He says elsewhere, “What’s bad for the hive is bad for the bee.” This is actually what Smith believed too: That if we take care of ourselves, if we hold ourselves to high standards, and we actively work not to hurt other people (because we are all citizens of the same world, as Marcus put it), then we indirectly and directly make everything better for everyone.
 
It’s important to remember that Stoicism is not sociopathy. No, it’s about responsibility. To yourself. To “nature.” To virtue. To your work and your skills. The baker serves his fellow citizens by being a great baker, a great businessman, a great father, a great friend, and a good Samaritan. That’s what Adam Smith believed, and how he rendered to the world—developing and modern alike—an enormous service by articulating and popularizing the market economy.

The question for each of us then is whether we are going to properly play our role or are we going to be one of the bad actors who abuses the freedom we’ve been given to take advantage of other people?

[DougMacG]

Does the income increase one person makes take away from the income of the others or does the size of the economic pie grow with each person's growth?  This is the key difference between Leftist myth and real, measured and proven economics.
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Quote of the Day, Cafe Hayek:  "… is from page 4 of Alan Reynolds’s excellent 2006 book, Income and Wealth:"
https://cafehayek.com/2018/07/quotation-of-the-day-2497.html#.W03Jsn1sECk.facebook

The two young founders of Google, Larry Page and Sergey Brin, quickly made something like $12 billion each by greatly facilitating our information, education, and shopping efficiency. Why should anyone care how much money the founders of Google, Apple, or Microsoft made? Some might object that they earned a larger share of income, but in what sense can we regard their income as shared? Google is something new – without Google there could be no income from Google. The Google founders have their income and you have yours. What they earn has nothing to do with how much or how little you can earn, except that their invention may help you earn more (personally, I feel as though I owe them a really big check).

   - Alan Reynolds’s 2006 book, Income and Wealth, p.4
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Doug:  Dynamic capitalism up close can look ugly as it happens but is better than all the alternatives.  By contrast, the poor and the working people always fare far worse in countries that have no rich, no capital, no capitalists.  See Venezuela, Republic of the Congo, North Korea.

[DougMacG]

If nobody owns anything, nothing is maintained much less improved.  If property rights are insecure, long-term planning and contracts are impossible.  - Alan Reynolds
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The above should be so obvious as to go without saying, however the left is alive and well and in control of the media, Academia and what up are political parties. Look at Venezuela. They took away property rights and look at what happened. Look at New York City, Alexandria Ocasio - whatever her name is. Capitalism will not always be here on Earth. Look at the Democratic Party, Bernie Sanders almost won the nomination and Hillary adopted his views. Keith Ellison is vice chair. Their messages are the antithesis to property rights. These basic economic arguments go on until our demise.

[DougMacG]

Credit Larry Elder on radio for bringing this issue forward. I didn't hear all of his sources but found this:

https://www.libertarianism.org/publications/essays/how-laissez-faire-made-sweden-rich

Johan Norberg:  "I got interested in theories of economic development because I had studied a low-income country, poorer than Congo, with life expectancy half as long and infant mortality three times as high as the average developing country.

That country is my own country, Sweden—less than 150 years ago.

At that time Sweden was incredibly poor—and hungry. When there was a crop failure, my ancestors in northern Sweden, in Ångermanland, had to mix bark into the bread because they were short of flour. Life in towns and cities was no easier. Overcrowding and a lack of health services, sanitation, and refuse disposal claimed lives every day. Well into the twentieth century, an ordinary Swedish working-class family with five children might have to live in one room and a kitchen, which doubled as a dining room and bedroom. Many people lodged with other families. Housing statistics from Stockholm show that in 1900, as many as 1,400 people could live in a building consisting of 200 one-room flats. In conditions like these it is little wonder that disease was rife. People had large numbers of children not only for lack of contraception, but also because of the risk that not many would survive for long.

As Vilhelm Moberg, our greatest author, observed when he wrote a history of the Swedish people: “Of all the wondrous adventures of the Swedish people, none is more remarkable and wonderful than this: that it survived all of them.”1

But in one century, everything was changed. Sweden had the fastest economic and social development that its people had ever experienced, and one of the fastest the world had ever seen. Between 1850 and 1950 the average Swedish income multiplied eightfold, while population doubled. Infant mortality fell from 15 to 2 per cent, and average life expectancy rose an incredible 28 years. A poor peasant nation had become one of the world’s richest countries.

Many people abroad think that this was the triumph of the Swedish Social Democratic Party, which somehow found the perfect middle way, managing to tax, spend, and regulate Sweden into a more equitable distribution of wealth—without hurting its productive capacity. And so Sweden—a small country of nine million inhabitants in the north of Europe—became a source of inspiration for people around the world who believe in government-led development and distribution.

But there is something wrong with this interpretation. In 1950, when Sweden was known worldwide as the great success story, taxes in Sweden were lower and the public sector smaller than in the rest of Europe and the United States. It was not until then that Swedish politicians started levying taxes and disbursing handouts on a large scale, that is, redistributing the wealth that businesses and workers had already created. Sweden’s biggest social and economic successes took place when Sweden had a laissez-faire economy, and widely distributed wealth preceded the welfare state.

This is the story about how that happened..."   More at the link.

[Crafty_Dog]

I will be giving this a close read.

[DougMacG]

I will be giving this a close read.

Thank you. Everyone on our side should learn these lessons fully. The actual policies of Venezuela are identical to those proposed by the American Left, but when you confront them on that they point to Scandinavia  stead and not to Venezuela. But Sweden and Denmark did not build what they have under a socialist system. They turned to a social safety net after they became prosperous and that worked during the time that receiving welfare had a stigma and their entire homogenous culture had a strong work ethic. Now their biggest problem is the same as the rest of Europe, immigration. You cannot have a generous safety net and open borders.

Yes, there is a lesson for the American lLeft in Scandinavia.

[DougMacG]

The world runs on individuals pursuing their separate interests.
...
There is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system.

https://www.goodreads.com/quotes/241181-well-first-of-all-tell-me-is-there-some-society

Proven right, over and over and over.

[DougMacG]

http://thefederalist.com/2018/08/21/want-economic-power-people-choose-capitalism/

The Federalist

 Want More Power To The People? Choose Capitalism

Capitalism encourages people to improve their lives by satisfying others’ needs and desires, by providing things other people want at a price they can pay.

By Andy Pudzer

The debate between capitalism and socialism is at least partly a debate over morality. The left claims benevolent socialism is necessary to protect the masses from the immorality of capitalist greed. Much of America’s youth appears to be buying into this myth.

A recent Gallup poll found that young Americans were actually more positive about socialism (51 percent) than about capitalism (45 percent). The percentage of young Americans with a positive view of capitalism has declined 23 points since 2010, when 68 percent viewed capitalism positively. That’s not surprising, given that most of these young people have been educated in a system controlled by progressives and fed leftist ideology as entertainment.

Filmmaker Oliver Stone personified the progressive notion of capitalist greed in the 1987 movie “Wall Street,” in which his character, Gordon Gekko—the Left’s stereotype of a capitalist—utters the phrase “Greed is good.” But, outside Hollywood, greed is not good, and capitalism is not based on greed. To the contrary, capitalism encourages people to improve their lives by satisfying others’ needs and desires, by providing the products or services that other people want at a price they can pay.

There’s a reason for the business mantra “the customer is always right.” To be a successful capitalist, you have to shift your focus outward, to the consumer. When I was the CEO of CKR Restaurants, Inc., the owner of the Carl’s Jr. and Hardee’s restaurant chains, we spent millions of dollars every year trying to determine exactly what consumers wanted. Under capitalism, knowing what your customers want and offering it to them at an affordable price is the key to success. In fact, it’s the key to survival.

Capitalism is a kind of economic democracy, where consumers vote with every dollar they spend, determining which businesses succeed and fail. Look at the thousands of products in your local grocery store, shopping mall, or on Amazon, all vying for your attention. These products represent entrepreneurs striving to meet your needs as the way to achieve their own success. That may not be purely altruistic conduct, since capitalism depends on the desire of people to better their own lives, but it channels that natural desire into focusing on the opinions and preferences of a broad class of consumers.

In a socialist economy, rather than meeting the needs of others, you improve your life by getting more for yourself from the limited supply of goods, services, or benefits the government either makes or allows others to make available. Whether you get those goods depends on how well you please the political elites. People who are willing and able to make themselves useful to the powerful get special privileges, and since socialist systems produce so little wealth, everyone who is neither useful nor well connected stands in the inevitable bread line or waits her turn for gasoline.

In Venezuela today, under socialism there is a shortage of almost every basic consumer product. But you can bet that Venezuelan President Nicolas Maduro’s inner circle of friends, and the army troops that keep them in power, can get whatever they want. That’s the “benevolence” of socialism.

To distract from socialism’s history of failure, its proponents point to Nordic countries, Denmark in particular, where they claim that a new form of Democratic socialism has succeeded. But Denmark is not a socialist state. Rather, Denmark is a free market economy with an expanded welfare system.

You can argue about the costs of such a system and the point at which it reduces individual initiative, thus doing more harm than good. The Danes have been debating exactly those issues for years. But only a capitalist free market economy can produce the wealth necessary to sustain such programs.

In a 2015 speech at Harvard University, Denmark’s prime minister stated: “I know that some people in the U.S. associate the Nordic model with some sort of socialism, therefore I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy.” In 2016, a noted Danish economist told CNN that Denmark’s major political parties would oppose many of democratic socialist Sen. Bernie Sanders’ regulatory policies “as being too leftist.”

Rather than a heavily regulated socialist economy, the Heritage Foundation/Wall Street Journal’s 2018 Index of Economic Freedom ranks Denmark the 12th most economically free nation in the world, well ahead of the United States at 18th. It’s no coincidence that the impoverished socialist nations Cuba, Venezuela, and North Korea are listed as numbers 178, 179, and 180 out of the 180 nations the index ranks.

I have good news for young Americans today. Despite what you’ve been taught, the economic system in which you live is the best system ever devised for the poor and the marginalized. It gives them power, creates the opportunities that make them prosperous, and encourages everyone who wants to get ahead to satisfy the needs of others.

That system is currently driving a tremendous economic surge, lifting Americans from every class and race into a better life. It’s called capitalism.

[DougMacG]

https://twitter.com/TheAtlasSociety/status/1039959993527627776?s=17

2 minutes, judge capitalism versus socialism on its results not its ideals.

[DougMacG]

"[Freshman Tiger Woods]  took my Economics 1 course in 1996. He was the best economics student: he learned opportunity costs so well that he left Stanford and joined the pro tour."
   - John B. Taylor   https://economicsone.com/
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We continue teaching the whole principles course in one term combining micro and macro. I think this approach makes economics more interesting for students, and is especially needed when discussing key topics like the financial crisis of ten years ago. The crisis along with the slow recovery and other associated changes can only be understood with a mix of micro and macro. As I wrote earlier, “One must know about supply and demand for housing (micro), interest rates that may have been too low for too long (macro), moral hazard (micro), a stimulus package (macro) aimed at such things as health care (micro), a new type of monetary policy (macro) that focuses on specific sectors (micro), debates about the size of the multiplier (macro), excessive risk taking (micro), a great recession (macro), and so on.” It you look at any explanation of the crisis and the slow recovery, you’ll see a mix of micro and macro.

I think a combined micro-macro approach works no matter what your view is of the crisis and the policy response.
https://economicsone.com/2018/09/24/econ-1-tiger-woods-and-the-crisis10/

[Crafty_Dog]

That seems right.

[Crafty_Dog]

Fake Economics To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 11/12/2018

Politics and economics are interwoven. Government grants licenses, enforces contracts and the rule of law, provides fire and police protection, a national defense, and can call on resources to recover from crisis. Without these institutions, activity would slow. No one is building billion-dollar hotels in Syria, Libya, or Iraq; stability and certainty support investment.

The rule of law and stable institutions don't create growth by themselves, but they do provide the framework. It's entrepreneurs that see opportunity and reorganize existing resources in a different, more efficient, and more profitable way. That's how growth happens. Human nature, however, doesn't change. Politicians want to take direct credit for growth. Remember when Al Gore said he helped "create" the Internet?

One of the greatest myths in all of economics is the "Government Spending Multiplier" sometimes called the "Fiscal Multiplier." This concept came from a Keynesian, demand-side analysis of the economy that looks at something called the "marginal propensity to save." Someone who earns $100 but only spends $90 has a 10% marginal propensity to save. In the demand-side world, where consumption drives economic activity, the $10 in savings is seen as a negative. Having $10 less spending means $10 less in demand.

Politicians argue that taking that $10 from the saver, and giving it to someone who will spend it, increases growth. For example, Nancy Pelosi said back in 2013 that "unemployment benefits remain one of the best ways to grow the economy" because it "injects demand into our markets." She said every dollar spent on unemployment creates up to an extra $2 in GDP.

This is magic, it's like turning lead into gold. All you have to do is win election, raise taxes, put those taxes in the hands of someone with a 0% marginal propensity to save, and voila, you've created your own economic growth.

But clearly, this is a myth. Imagine we redistributed away all the savings in an economy. Without savings there would be no investment, and without investment there would be no long-term growth. That's why we focus on the supply side of the economy. From a supply-side view of the world, new inventions create growth and new inventions need savings and investment. Demand did not create the cell phone or apps. Before the inventors of Bird or Lime, consumers were not prowling the streets looking for electric scooters to ride.

From 2010-2017, real GDP grew just 2.1% per year, in spite of massive deficits and the largest share of GDP redistributed in the history of the U.S. In the past year, following deregulation and tax cuts, and the number of people receiving unemployment benefits falling to its lowest level since 1973, real GDP growth has accelerated to 3%. This is evidence that the "fiscal multiplier" is a myth.

This brings us to infrastructure spending, which many think will be one of the first things the newly divided government will agree on. Of course, good infrastructure helps promote efficient economic activity. But it won't create net new jobs. By borrowing or taxing money from the private sector to build the infrastructure, politicians harm growth elsewhere. In the long run it may be positive, but in the short-run, at best, it's neutral. Beware of politicians saying they can create jobs and speed growth. That's demand-side thinking, and it hasn't worked anywhere in the world up to this point.

[DougMacG]

Tax rates increased hoping to get more revenue out of high income earners.  Bush broke his pledge and risked and lost his Presidency for the greater good evil.

Revenues decreased after a significant rate increase - same as for every retailer.  (Who knew?)

WHY DID THIS HAPPEN?  Famous people NOT reading the forum.

https://www.cato.org/blog/1990-bush-tax-increase-reduced-taxes


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Also in the numbers above, Bush's last year growth rate that media reported still in recession (fake news) had a higher growth rate than Clinton's first year that followed.