Are Libertarian Economics Fundamentally Sound?

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WinePusher

Are Libertarian Economics Fundamentally Sound?

Post #1

Post by WinePusher »

Abraxas and WinePusher have agreed to do a head to head debate on economics. We will be tackling 4 major topics and I will present my arugments and evidence for why a free market approach is the best approach while Abraxas will present his arguments as to how his approach is the better approach.

This debate will consist of 4 Rounds consisting of 4 Posts. Each round will have its own topic.

Round 1: The Enviroment, Energy and Food Safety

Post 1: Abraxas presents an argument for why government intervention is needed
Post 2: WinePusher presents rebuttal
Post 3: WinePusher presents an argument for why a Free Market Approach is more fundamentally sound
Post 4: Abraxas presents rebuttal

Round 2: Poverty and Healthcare

Post 1: Abraxas presents an argument for why government intervention is needed
Post 2: WinePusher presents rebuttal
Post 3: WinePusher presents an argument for why a Free Market Approach is more fundamentally sound
Post 4: Abraxas presents rebuttal

Round 3: Labor, Discrimination and Civil Rights

Post 1: Abraxas presents an argument for why government intervention is needed
Post 2: WinePusher presents rebuttal
Post 3: WinePusher presents an argument for why a Free Market Approach is more fundamentally sound
Post 4: Abraxas presents rebuttal

Round 4: Fiscal Policy and Monetary Policy

Post 1: Abraxas presents an argument for why government intervention is needed
Post 2: WinePusher presents rebuttal
Post 3: WinePusher presents an argument for why a Free Market Approach is more fundamentally sound
Post 4: Abraxas presents rebuttal

WinePusher

Post #21

Post by WinePusher »

WinePusher wrote:Abraxas and I have agreed to a revised format for this debate to allow for more posting and rebuttals....for the remainder of the debate. So the next post in this thread will be post 3, a rebuttal by Abraxas.
Abraxas wrote:Thank you WP, I appreciate you posting this. It would have felt in appropriate, as the first person to post under the new format, for me to make the announced change in rules or to make another post without announcing it.
Sure. If you want to bring up unresolved issues in the comments thread I'd be happy to participate there also. I'll probably be doing that myself with the upcoming posts.
WinePusher wrote:Comparatively, labor conditions in the United States were far better off than the conditions that existed in many other countries at that time. Another factor that characterized the industrialization of America was immigration, and the magnet that attracted so many immigrants was labor. Immigrants came because working conditions were better than the conditions that existed in their own country.
Abraxas wrote:I don't see how any of this changes my argument. I think our bar can be a bit nigher than not the worst in the world.
You have to compare something with something Abraxas. I'm making realistic comparisons between the working conditions of industrialized countries at that time and all you're doing is using some unrealistic arbitrary standard. Yea, it would have been ideal if working conditions and worker's rights were perfect at the inception of the industrial age. But society doesn't operate like that. When a new phenomona, such as industrialization, comes into existence problems with this new phenomona, such as the maltreatment and safety of workers, will also come into existence. These problems are dealt with gradually. During the time periods you base your argument on, industry was just beginning in America. As industry developed and expanded, working conditions also rose. Capitol goods are a product of production and are themselves subject to innovation. Somebody has to produce the machinery used in producing automobiles, somebody has to produce the electrical wiring used to power the building. As industry expanded things like machinery were innovated to accomidate things such as safety, as industry expanded it created demand for specialized labor which lead to the creation of things like benefits and insurance and pensions.
WinePusher wrote:Can you actually define a wage that would be appropriate? Again Abraxas, in a free labor market wages are determined by an easy concept: supply and demand, the supply and demand for workers who are allocated to different firms through wages. If a firm has a demand for a particular skill, and the supply of workers who possess that skill is plentiful than the wage is necessarily low. Anybody off the street in 19th century America could work in a factory, meaning that the supply of factory workers was high which forced wages to be low. Wage controls merely distort the market mechanism and create unconventional problems. This is what ultimately confuses me, it's as if you believe the government knows everything. The government just knows the right wage that workers should be paid, the government just knows how many Americans ought to own homes. Matters like these are governed by market mechanisms.
Abraxas wrote:Forced them to be low? Yeah, I'll bet the industrialists in the day suffered much arm twisting and lamentation before they were cruelly forced to make more money by cutting the wages of their workers. No, the industrialists took advantage of a large labor force that allowed them to cut wages, in some cases to levels that amounted to virtual slavery, such as Ludlow.
The reason you're confused is because you're not looking at the situation in terms of supply and demand. Wages are merely prices, specifically they are the price of labor. If there's a huge supply of labor then the wage is going to be low no matter what. Why do you think there's a wage discrepency between physicians and hospital cafeteria workers? Because almost anybody can be a hospital cafeteria worker, meaning the supply of hospital cafeteria workers is huge which is why they are paid a relatively low wage.
Abraxas wrote:Can I define what wages are appropriate? Probably not. Can economists find an appropriate minimum wage? Yes, they have before, they can again. But more to the point, not all government controls require direct caps. Things like guaranteeing union protections can help give workers the tools they need to help keep their own wages fair.
Unions don't fight for wages that are fair, a wage that's fair is determined by the market. Unions fight for wages that are above the market value. And how do you think a wage increase is paid for? If a company raises the wages of their employees because they are forced to at gun point rather than raising the wages voluntarily because of increased revenue, who makes up the difference? Free lunches don't exist Abraxas. You can't simply raise the wages of unionized workers without creating negative effects elsewhere. When unionized workers get a wage increase, the difference comes out of the wage of non union workers. Unions raise the wages of their members and at the same time lower the wages of non union workers. Another thing is that if a business is forced to pay a higher wage to a group of unionized workers, they will most likely raise the price of whatever good or service they offer in order to compensate for the difference. If you only look at the surface, you see that unions do alot of beneficial things for their members. If you look below the surface, you'd see that unions do alot of harm to nonunion workers and average consumers who suffer from higher prices.
WinePusher wrote:Work days are not uniform across all firms, not every worker has the same hours as another worker. In a free market, workers negotiate their hours with their employer. More hours means more money Abraxas, perhaps some workers prefered working long egregious hours because it meant they'd earn more in their paycheck. You don't know, I don't know, only they know and they express their desires through negotiation. The government may think it's preferable to impose 40 hour work weeks, but this merely inhibits the freedom of workers during negotiation.
Abraxas wrote:Excuse me, on what basis do you assert more hours means more in their paycheck?
Whether you're paid by the hour or on comission, the more time you put into your job the more money you get.
Abraxas wrote:Very often this wasn't the case and workers had to engage in unpaid labor or get fired. But hey, that's the free market, right? Work longer hours for nothing or get the axe and lose the ability to feed your family, choose freely. I do know, Winepusher, because I know what rights workers pushed for when they did unionize and among those rights were standardized hours and pay for overtime. If workers did not want these things they would not have unionized to demand these things. Who do you think pushed the 40 hour work week to begin with if not labor unions, aka laborers?

http://en.wikipedia.org/wiki/Eight-hour_day
It's funny how every argument you make has already been refuted. The fact that we both accept is that work hours declined over time. What we apparently disagree on is what caused the decline. You attribute it to unions as you've done with nearly everything, I would say it's because of the fact that over time worker productivity increases. In a given hour, an individual worker might be able to produce 2 automobiles and if the quota is 10 automobiles per day the worker would have to work 5 hours per day. Over time, the productivity of the worker increases so that he might be able to produce 4 cars in a given hour which would reduce the number of hours he would have to work to about 2 and a half hours per day. Shorter work weeks are the result of a gradual increase of worker productivity, not unions.
WinePusher wrote:I really don't think you know what you're talking about here. Real wages refers to the final wage earned after inflation has been incorporated. It's the same as Real GDP, where inflation has already been incorporated, as opposed to Nominal GDP, where inflation hasn't been incorporated. Real wages did decline under Reagan, but not because of the reason you've provided. If you know your history, you'd realize that inflation was rampant throughout the decades preceding Reagan and even into the early years of his presidency. Around that same exact time real wages began to decline. That's because inflation reduces real wages. It's the reason why inflation is a problem in the first place. If prices rise and real wages rise at the same time there would be no problem, but what happens is prices rise, nominal wages generally rise, and real wages almost always fall. So, the stagnation in real wages before and during the Reagan administration is traced back to inflation, not the 'weaking of union protections under federal law.'
Abraxas wrote:Sorry, reality disagrees. If what you are saying were true, we should expect real wages to start increasing again once inflation was reversed by the mid eighties, and, behold, it slowed to a fraction of the rate before the inflation crisis. Inflation was not the cause of the stagnation in real wages, if it were you should see a consistent change across all tiers in reduction of real income, instead, you see the very wealthy go up and the poor fall flat. That is a result of the destruction of regulation of industry.
This would be a good argument if it were actually true, but it isn't. You can't expect real wages to rise back up right away. Nothing operates instantly like that. It takes time for the different variables to react to one another. Real wages began to rise gradually after inflation was wrung out, not instantly. Look at whatever graph you want and it will correspond to what I'm saying. And besides, you've made no logical argument explaining how weakening unions causes real wages to decline. What you're saying is nonsense. Unions do nothing to benefit workers. They are worthless institutions that are only good at vandalizing neighborhoods and harassing communities.
WinePusher wrote:Go ahead and show how the goal of profit maximization destroys the conditions in which people work, the wages people recieve, and the benefits and pensions people recieve. You think profits are the root of all societies problems and you have a biased and skewed understanding of what profits actually are.
Abraxas wrote:Wages are costs, cutting costs raises profits, raised profits is good for the employer, and so cutting wages as much as you can get away with is good for the employer.


They're miniscule costs when compared to all the other costs employers have to pay for. I'm not a business guru, but generally speaking wage cuts and layoffs come very last. That shows that there are other more effective ways to maximize profits rather than cutting wages or laying off workers. But really, your alternative scenario is not realistic. The higher a minimum wage, the more people lose out on jobs. Despite what you may think, there is alot of value in a job that pays virtually nothing, especially if you're just entering the abor market. It gives you experience and an oppurtunity to climb the ladder. Minimum wage laws destroy these oppurtunities that would otherwise be available to individuals without any experience or skills and makes it much more difficult for them to get a strong foot in the job market.
WinePusher wrote:But aside from that, you have not really specified anything you'd like the government to do. What intiatives and policies would exist under this governmental framework?
Abraxas wrote:Much of it is or was being done, formalize protections for unions, legislate things like minimum safe work conditions, minimum wage laws, socialized medicine, etc. I feel many of these things should be expanded in certain ways. The current minimum wage is insufficient, inspections should be more complete and inspectors have more authority to cite companies for dangerous behavior; things of this nature. Companies will learn how to be more competitive in that environment or they will leave it and a niche will open up and new companies will come in. If they can't operate fairly and safely, maybe they shouldn't operate at all.
I broght up the minimum wage in another thread and you seemed reluctant to debate it. If you want to debate it, I'll be happy to participate in the comments thread. But the minimum wage, along with unions, end up hurting workers rather than benefiting them. This has been a motif of government intervention that you haven't caught onto yet. Whenever the government intervenes, you get results that are opposite of what was expected. Minimum wage laws are expected to benefit workers, they do the exact opposite. Rent control laws are expected to benefit consumers, they do the exact opposite. If you actually cared about workers, you would be behind a national right to work law and I doubt you are.
WinePusher wrote:This is a poor argument Abraxas. You happily attribute any advancement in civil rights to the federal government, but ignore the hinderences in civil rights that the federal government was responsible for. Many of the cases you cite are merely instances of the Court correcting or reversing the abborent decisions it made before. Brown v. Board of Education was merely a reversal of Plessy v. Ferguson. Had there been no Plessy v. Ferguson there would have been no need for Brown v. Board of Education. Had the Supreme Court not set the precedent of de jure segregation in Plessy there would not have been a need for half of the cases you cited. Using your logic, there would have been no Civil War had there been no Dred Scott v. Sandford. This is a classic example of starting the story in the middle. If you had began the story at the beginning, you'd realize that it was the government that was the primary entity responsible for segregation and racism and slavery and that these cases you cite are merely corrections of prior actions. It's like saying that a mother deserves an award for caring and attending to her mentally retarded child, when in fact the only reason why the child is retarded is that the mother drank and did drugs during her pregnancy.
Abraxas wrote:You are completely misrepresenting what happened there. Plessy v. Ferguson was a (bad) ruling that a state law in Louisiana did not violate constitution. It was not, as you are representing, a federal enforcement of segregation, but rather gave states the power to create their own laws, which states and local jurisdictions used to create their own segregation laws.
Ok Abraxas, I guess you need a crash course on federalism. Whenever the Supreme Court rules on a case, that ruling becomes binding law at the federal level. Knowing this, why would the Supreme Court of the United States (an institution of the federal government) take up a case concerning state law? Because the issue was a federal issue, the issue was the 'Seperate but Equal' doctrine which was a federal statute, not a state statute.
Abraxas wrote:Put another way, this was an instance of the federal government not making something which is reprehensible illegal, in other words, leaving it to your free society, and they took it and ran to make racism over and systematic. Had the government ruled initially it was in violation of federal law, it would have solved the problem then instead of waiting until Brown. This is a case of insufficient government intervention, certainly not too much as you are pretending.
You have it all backwards. If there were no laws enforcing segregation in the first place, there would have been no need for any of this. You forget that the primary place where segregation occured were in the public schools, schools run by the government. There would have been no need to make it illegal because it wouldn't have been legal to begin with.
WinePusher wrote:Every single black individual who was denied access from entering a restaurant reserved for whites cost that restaurant owner his or her business. In a free market, segregation would have never manifested itself in society because it would not be profitable for a business owner to deny service to an individual on this basis of his or her race.
Abraxas wrote:I don't believe you honestly think this is true. You know, as well as I do, the vast, vast majority of Jim Crow laws came from the state and local level, not federal.

http://en.wikipedia.org/wiki/List_of_Ji ... s_by_State

It was a free market and segregation did manifest itself in society. You think things like sundown towns were the result of government intervention, no, they were the result of a deeply racist society willing to absorb any minor economic impact, assuming there even would be one to begin with, in order to ensure their racist views were the defacto law of the land.
I'm well aware of the fact that Jim Crow laws were primarily state and local laws. I've never argued against that. What I'm saying is you have is a combination of two evils: state and local governments actively enforcing segregation and the federal government permitting state and local government to enforce segregation. You still haven't adequately answered my question. Absent government at any level, how would it be possible to enforce segregation? It wouldn't, structural segregation would dissolve if there was no government involved. If schools were private and didn't have a steady and reliable source of funding coming from the government, they would have to appeal to every single family and child out there regardless of their race. If the school was picky and only admitted white students they would be losing out on the tuition fees of the black students they rejected. By discriminating against blacks they are imposing a cost upon themselves that they would not have had otherwise. I suggest you start looking at this issue in terms of opportunity costs Abraxas, it'll clear up alot of things for you.
WinePusher wrote:It is not feasiable in a free market to open up a restaurant and only allow whites in,
Abraxas wrote:Excuse me, but that simply is untrue. It may not work now due to social changes, but until the 60s businesses could and did as a matter of routine.
Then tell me what exactly has changed in society between then and now.
WinePusher wrote:as it wasn't feasible to only allow whites to ride buses in the south. When blacks began to boycott public transportation, public transportation businesses began to incur huge losses and were eventually forced to accept their demands.
Abraxas wrote:Yes, they did, eventually. Up to that point, the free market buses were still segregated however. Interesting story about why blacks began to boycott them, maybe you should look into it before claiming the market won't allow segregation.
You didn't refute my point. This is a classic example of segregation being dealt with by market mechanisms. Busing companies began to suffer a loss because they were engaging in segregation. They stopped segregating buses because their base of consumers was limited only to whites. This is why segregation isn't feasible in a free market.
WinePusher wrote:This is an absurd argument. The market does not encourage any type of behavior.
Abraxas wrote:This is an absurd claim. The market most certainly does encourage behavior that maximizes profits.


Hahaha!! :lol: This is only true for For Profit institutions. What about Not For Profit institutions, are they encouraged by the market to 'maximize' profits? Of course not. I'm talking about individuals, not businesses. In a free market, or perhaps to be more clear, in a free society racism is not encouraged or discouraged. In a free society you can harbor any opinions and beliefs you want to. If you are racist, you have a right to cling to those beliefs. You, however, do not have a right to exercise those beliefs because they impede the freedom of other individuals. And since you bring up the subject of profits, I'll go back to my original argument. In a market governed by Profit and Loss, excluding a large group of people from partaking in the service or product you provide would not maximize profits, it would instead minimize profits.
WinePusher wrote:The market allows individuals to engage in whatever type of behavior they want as long as it doesn't harm or impede the freedom of other individuals. The reason you don't see very many working class people at yacht clubs is because most working class people can't afford memberships to yacht clubs, only individuals with disposable income can.
Abraxas wrote:Because they keep membership fees high to keep those people out, aka catering to exclusivity.
I'm sure you actually believe this, which is sad. Working class people generally have a lower amount of disposable income than the upper class do. So of course you're going to see more upper class people at plaes like yacht clubs because they have more disposable income. But let me guess, your liberal mentality leads you to believe that everybody should have a right to have yacht club memberships, and if someone can't afford the membership fees I and the rest of society should subsidize them?
WinePusher wrote:Reverse discrimination is the synonym for Affirmative Action. I didn't plan on debating Affirmative Action here but if you want to then I'd be happy to debate it. All you have done is dismiss any criticism of reverse racism as nonsense without providing any logical or intellectual argument. Racism, as it's defined, is merely discrimination based upon an individuals race. If an employer hires a white individual over a black individual solely because he's white, liberals like you would begin to indignantly scream racism at the top of your lungs. If an employer hires a black individual over a white individual solely because he's black, liberals like you start applauding and praising the decision. In your mind, the former is racism and the latter is 'affirmative action.' In my mind both instances are examples of racism. Do you see the inconsistency in your position yet?
Abraxas wrote:A complete misrepresentation of the position. Due to centuries of abuse, African Americans are at a disadvantage. Statistically, they come from poorer neighborhoods, haven't had access to the same educational facilities, are still widely and actively discriminated against. Affirmative action helps to narrow the gap created by a circumstance beyond their control that was inflicted upon them by Jim Crow and segregation. There is a systematic disadvantage to being black in America, it seems only fitting we take systematic action to overcome it.
Have you ever analyzed the logic of the talking points you just posted? Blacks do come from poorer neighborhoods, many of these neighborhoods are located in populated urban cities such as chicago and new york city where progressive policies, such as government housing, welfare and rent control are ubiquitous. Blacks do attend poor quality schools that set them up for failure in life, these schols are government run and blacks are forced to attend them. Blacks are institutionally discriminated against by employers because the government forbids an employer to pay a young black individual with limited skills the market value of his or her labor. In some aspects blacks are a disadvantaged group, but that's because they are a group that have been subject to the tyrannies of government throughout their history in this country.

There's an interesting book by Thomas Sowell called Affirmative Action Around the World where he analyzes preferential policies in various countries. One country he examines is India, where you would think Affirmative Action would be the most appropriate due to their caste system. You have a small faction of people, called untouchables, who are worthless members of society that don't and can never amount to anything. Guess what, the untouchables in India are far more disadvantaged than the blacks have ever been in America, yet as a collective group they have not benefited from AA. The society has merely harbored additional resentment against them because they are occupying positions they are unqualified to occupy. If a university has a certain limit on how many students they can admit, and they base their admissions criteria on not only academics but also ethnicity, you would have academially qualified students being rejected because they don't belong to a ethnic group. You cover your ears all you want Abraxas, but that's racism defined. If you were a great student in high school and were rejected from Yale only because they had to set aside a certain number of slots for black people and you weren't black, you would rightly feel angry. Anybody in that situation would be angry. All AA policies do is increase social tensions between racial groups.


Note: I just got home from break and had some spare time to respond to our head to head. Unfortunately tommorow I'm returning to my regular schedule and don't know when my next post will be up. But if you want to respond to some things I've written her in the comments thread I'll make an effort to participate there.

WinePusher

Post #22

Post by WinePusher »

Round 3, Post 5: Labor, Discrimination and Civil Rights

I'll be dividing my post into two sections. I'm going to address the issue of labor in the first section and the issue of discrimination and civil rights in the second section.

The free market approach to labor is based upon voluntary negotiations between workers and employers. In a free market, the conditions in which workers work and the amount workers are paid would be determined by negotiations between the worker and the employer. However, the government skews this framework by setting predetermined standards such as guranteeing union protections, establishing minimum wage laws, equal pay for equal work laws and distributing unemployment benefits to discouraged workers.

WinePusher

Post #23

Post by WinePusher »

Round 3-Labor, Discrimination and Civil Rights, Post 5: WinePusher's initial argument

Like Abraxas, I'll break up my post into two seperate sections. The first will deal with labor and workers, and the second will deal with discrimination and civil rights. There are alot of issues concerning labor markets, so I'll be addressing them in sequential order and making the case why government intervention isn't neccessary and why it would be best if the labor market were left free. I'll be focusing specifically on unemployment, wages/income, and working conditions/worker protections.

Individuals are hired by employers because the employer believes they will be an asset to his or her company. If the individual becomes a liability instead of an asset, they are let go. So, the question I want to pose is whether unemployment would be higher in a government, centrally planned economy or in a free market economy. The answer is that unemployment would be higher in a centrally planned economy for a number of reasons. I don't think you would disagree with the idea that the Free Market and Capitalism is the best economic model for allocating resources. Since all resources are scarce, they must be allocated, distributed and assigned to various parts of the market in an effective way. Resource allocation can refer to a number of things: such how much should a business produce in a given year, or how much a business should save in a given year, or how much a business should invest in a given year. In a free market, resources are allocated according to prices while in a government planned economy resources are allocated according to a group of central planners referred to as a bureaucracy.

Since workers are simply a resource used in the production process, unemployment would be higher in a centrally planned economy because the model is inefficient at allocating resources. In a free market workers are allocated to different jobs an occupations based on wages, which is basically the price of labor. This model has worked well for ages. However, government mandates on employers skews this process and disincentivizes employers from hiring, resulting in higher unemployment levels. Proof of this lies in the recent recession, the government has intervened in massive scales yet unemployment levels remain persistently high. Why is that? For one, the government discourages employers from hiring through termination laws. It's virtually impossible to fire public sector workers (1) and there are a host of laws that make it nearly impossible for private employers to fire workers (2). Since it's so difficult to fire workers, employers become more and more reluctant to hire workers in the first place. While the government gurantees the safety of your job through these laws, they actively discourage employers from hiring. Another government intervention that contributes to unemployment is occupational licensing. In a free market, individuals would make voluntary and mutual agreements with eachother based on negotiations. In a free market, if someone wanted to start up their own hair salon or their own medical clinic they would be allowed to, the quality of the service they provide would be determined by the amount of business they get since customers would voluntarily choose to go there. However, occupational licensing prohibits this because it requires professionals in certain fields to have a government issued license before they can practice their trade. Getting an occupational license is not free and requires alot of effort and work. It would be fine if getting a government license was optional, and if there was a public demand for licenses you would see consumers go to business and firms that employed professionals with government licenses and those business and firms that employed professional without licenses would go out of business, but that is not the case. In order to work in your specific occupation, you must have a government license and getting a license costs alot and requires alot (3) (4). My conclusion is that unemployment would be far lower and far less prevalent if the labor market was free from these government mandates and interventions.

Wages and incomes have become an extremely contentious issue within the recent years, especially among the occupy wallstreet crowd which I would assume you sympathize with (correct me if I'm wrong). First of all, low wages aren't necessarily a bad thing. Second of all, income inequality among groups is not indicative of labor discrimination and can be a good thing. And finally, wages will rise and have risen the most under a free market model, not a government planned model.

Wages correspond to a workers productivity and skills. A worker who has low skills and low productivity will earn a low wage. This is also part of how Free Markets effectively allocate resouces. However the minimum wage, which is a government intervention in the labor market, skews this and forces employers to pay a high wage to a low skilled worker. While it is intended to help low skilled workers it hurts them by keeping them out of the job market. Proof of this lies in the fact that teenagers, eligiable workers with virtually no skills, are afflicated with some of the highest levels of unemployment (5). The second issue I want to address is income inequality, and the three groups I want to analyze are Males-Females, Blacks-Whites, and the Rich-Poor. There is an income gap between males and females and blacks and whites, you and I can probably agree on this. However, we would disagree with the cause and whether or not the government should intervene to rectify the problem. Liberals attribute the gap to employer discrimination and believe the government should intervene through laws like Equal Pay for Equal Work and so on. I attribute the gap to voluntary choice on the part of the individual, and believe that the government should do nothing because it's not a real problem. There is an income gap between males and females (6) and the gap exists because of a variety of voluntary decisions made on the part of females as a collective group, not because of employer discrimination or this so called 'glass ceiling.' First of all, more women choose to work part time and more men work full time (7) and part time jobs pay less than full time jobs. And looking all the overall earnings of individuals in part time jobs, women tend to earn more than men (8). Second of all, men occupy higher paying positions while women occupy lower paying positions. This is because working women who have kids are forced to take time out of the labor force on maternity leave (9).
Taken from source (9):
---A greater percentage of women than men tend to work part-time. Part-time work tends to pay less than full-time work.
---A greater percentage of women than men tend to leave the labor force for child birth, child care and elder care. Some of the wage gap is explained by the percentage of women who were not in the labor force during previous years, the age of women, and the number of children in the home.
Considering these factors, anti discrimination laws and equal pay for equal work laws, like the Lily Ledbetter Fair Pay Act, are a waste of time on Congress' part. The racial income gap is somewhat of a different situation. The reason why a wage gap exists between whites and blacks is not because of employer discrimination, it is because of education. The gap in wages between whites-blacks has been growing smaller as the education gap between whites-blacks grows smaller (10), showing the connection between the two. It's to bad we didn't devote a section in this debate to education and public schools, since government run public schools set blacks up for failure in life. Just to name a few things:
---In 2005, only 55 percent of all black students graduated from high school on time with a regular diploma, compared to 78 percent of whites.
---In 2005, the on-time graduation rate for black males was 48 percent nationally; for white males it was 74 percent.
Nearly half of the nation’s African American students, but only 11 percent of white students, attend high schools in which graduation is not the norm.
---In 2002, 23 percent of all black students who started public high school left it prepared for college, compared to 40 percent of whites.
On average, African American and Hispanic twelfth-grade students read at approximately the same level as white eighth graders.
About half of poor, urban ninth graders read at only a fifth- or sixth-grade level.8
---The National Assessment of Educational Progress reports that 88 percent of African American eighth graders read below grade level, compared to 62 percent of white eighth graders.
---The twelfth-grade reading scores of African American males were significantly lower than those for men and women across every other racial and ethnic group.
(11)

Since blacks are at an educational disadvantage, which is the governments fault, they are more likely to enter low skilled, low paying jobs (12) which is why we see a wage disparity between blacks and whites. I'll try to address this more in the section of discrimination and civil rights, but the basic conclusion is that the racial income gap is the fault of the government for providing poor schooling. In a free market schooling would be in the hands of the parents, not the government, and we would most likely see blacks come out of school far better equiped to enter the labor market. The final gap in wages and income is the gap between the rich and the poor. Alot of liberals believe that wages and incomes have been stagnate, or even falling, for many Americans except for the rich and the top %1. The question that has to be asked, then, is what causes wages to rise? Capital and investment goods causes wages to rise. I'm going to guess that you're one of those people that believes the introduction of machinery and technology kills jobs, but it doesn't. I've never heard of a machine that can fully operate itself. And investment goods benefit the condition of workers as opposed to harming it. Wages correspond to productivity, and machines and technology increases workers productivity which increases their wage ipso facto. This is a free market innovation, not a government intervention. Furthermore, the incomes of the middle class have risen along with the incomes of the upper class. A liberal like Paul Krugman prefers to measure income growth in terms of households cause the data fits his narrative (13). Using household incomes as a measurement you would see stagnate incomes (14) Chart H-11. However, using the same data you see that the size of households has been declining over time. Households consist of less people, which results in less incomes which is reflected in the household measurment since it does not control for the number of people. Using a per capita income measurement, which measures income per individual instead of incomes per households, you'd see that incomes have been rising at a fast and consistent pace (15) Chart P-1.

The final topic I will address in the labor section of this debate will be working conditions and worker protections. You spent a large amount of font in your last post talking about unions and how unions are the source of bliss and goodness for workers. Sadly you omitted crucial facts from your analysis, probably because they don't coincide with your position. Approximately 12% of the entire workforce is unionized and if you break down the data even further you'd see that 36% of the 12% are public sector worker and only 7% of that 12% are private sector workers (16). How can you possibly say that unions are the reasons why working conditions have improved and why wages have risen when only 12% of all workers actually belong to a union? In a free market people should have the right to associate with whomever they want, this means that they should have the right to join or form a union. But it's a total exaggeration to say that things like working conditions and benefits arose out of unionization. One way to measure the effect of working conditions is using indicators such as on the job injuries, on the job deaths, and so on. Tell me how unions solved these problems because I've yet to hear a logical argument connecting the two, or how the government solved these problems. These problems were solved by the market, by the innovation and introduction of new technologies and machines. And please explain how unions cause wages and incomes to rise. As I said before, unions are sometimes able to raise the income and wages of union workers at the expense of non-union workers. The reason why wages rose over time is because worker's productivity rose overtime (17) despite any government interference.

Moving onto discrimination and civil rights. In this section of the debate I'll be addressing three issues concerning race, discrimination and civil rights: segregation and anti-discrimination laws.

Racial segregation refers to the seperation of groups based upon their race and ethnicity. As I have said before, it is impossible for me to imagine how racial segregation could manifest itself in a free market and a free society. A rational businessowner in a community dominated by blacks would be a fool if he limited his services only to whites. He is limiting his customer base which cuts against his goal of profit maximization. The free market has a self regulation that essentially deterrs segregation because if a business owner wants to exclude blacks from his business, he is imposing a cost on himself. Even if segregation was not against the law, do you really think that a federation such as the NBA would segregate itself? Do you think blacks would be excluded to one team and whites to another? If the owner of the Miami Heat decided to exclude blacks from his team beause he is racist, he would probably suffer loss after loss because he is limiting the base of basketball players he can choose from. This is why the period of racial segregation in America is referred to as de jure segregation (18) because it was law enforced and sanctioned by the government and if it wasn't it could not exist. After a while the government did strike down these laws, but it was merely an example of self correction. Segregation was the fault of the government, not the fault of the free market. And racial segregation continues to exist to this very day in government run housing projects (19). It's pure absurdity to say that government intervention is needed to remedy this problem when in fact it is a problem because of government in the first place.

As for discrimination and anti-discrimination laws, I'm just going to say that individuals have a right to discriminate and a law preventing this tramples over their right of association and their property rights. Think about it logically for a second. If an employer is looking over a stack of applications for a job as a waiter at an authentic chinese restaurant, he is going to automatically discriminate against all non-chinese speakers and would focus only on the pool of candidates who are bilingual. If an individual is looking for a worker to move his furniture, he is going to automatically discriminate against midgets, paraplegics and teenage girls and search for people who can demonstrate a reasonable amount of strength and stamina. People discriminate all the time in their daily lives and they have a right to. Have you ever been inside a restaurant that has a sign saying No Shirt, No Shoes, No Service? The employer is actively discriminating and has the right to do so because it is his property. Would you argue against this?

---------------------------------------
Case 1: Apartheid in South Africa

The apartheid in South Africa is an extremely complicated issue, but it nicely proves everything I'm talking about. The thing to know is that apartheid refers to racial segregation, and that Apartheid in South Africa refers to racial segregation in South Africa (20). What is so interesting about South Africa is how things that you support, Unions, Minimum Wages, Equal Pay laws were used by racists as tools to keep blacks excluded. White's formed unions in order to restrict blacks from entering the job market (in this case it was mining) and unions in turn advocated for minimum wages and equal pay laws because they knew these tools would prevent blacks from getting hired (21). What is even more interesting is that the apatheid group in South Africa opposed Capitalism, and the reason was that the principles under which a capitalist, free market economy operates would not have supported nor allowed apartheid to exist (22).

Case 2: The British Agricultural Revolution

The case of Agrarian Britian proves what I was saying about how market innovations in technology and machinery are what improve working conditions and the standard of living for workers. What made the agricultural revolution in Britain possible was the increase in the productivity of farmers and laborers due to the introduction of capital such as plows, carts and wagons (23). Because the productivity of workers rose, working conditions and wages rose as well which marked the beginning of the Industrial revolution in Britian. To reiterate, the British Agricultural Revolution was the result of market innovations that subsequently led to improvements in working conditions and wages. Nowhere was the government involved in planning or running the agriculture market.

Case 3: The Auto Industry Bailout and the UAW

Here, I don't want to focus on the wisdom of Bailing out the Auto Industry, but on why the Auto Industry needed a bailout in the first place. What caused the Big Three to go under? The answer is the United Auto Workers Union (24). This case shows how detrimental unions are not only the non-union workers, but to the industries they're involved with. The wages and benefits demanded by the UAW were totally unrealistic, but because of the government gurantees and protecetions they recieved the Big 3 had no choice but to cave to their demands. Here's an interesting statistic comparing the Big 3 with foreign Japanese auto makers: on average Chrysler, GM and Ford pay $29 per hour than Toyota, Honda and Nissan do (25). It should be pretty clear why the Big 3 went under.

Sources:
1) http://www.politifact.com/truth-o-meter ... n-federal/
2) http://smallbusiness.findlaw.com/employ ... asons.html
3)
4) http://reason.com/archives/2010/03/11/the-right-to-work
5) http://online.wsj.com/article/SB1000142 ... 69840.html
6) http://www.ask.com/wiki/Male%E2%80%93fe ... ted_States
7) http://economix.blogs.nytimes.com/2010/ ... -earn-men/
8) http://economix.blogs.nytimes.com/2010/ ... -earn-men/
9) https://docs.google.com/viewer?url=http ... Report.pdf
10) http://www.ask.com/wiki/Racial_wage_gap ... isparities
11) http://www.all4ed.org/files/AfAm_FactSheet.pdf
12) http://en.wikipedia.org/wiki/File:US_oc ... bution.png
13) http://krugman.blogs.nytimes.com/2011/0 ... ld-income/
14) http://www.census.gov/hhes/www/income/d ... index.html
15) http://www.census.gov/hhes/www/income/d ... index.html
16) http://www.ask.com/wiki/Labor_unions_in ... ions_today
17) http://www.econlib.org/library/Enc1/Wag ... tions.html
18) http://en.wikipedia.org/wiki/Racial_seg ... ted_States
19) http://www.ask.com/wiki/Residential_seg ... ic_Housing
20) http://en.wikipedia.org/wiki/Apartheid_in_South_Africa
21) http://www.econlib.org/library/Enc/Apartheid.html
22) http://www.thefreemanonline.org/columns ... -williams/
23) http://www.ask.com/wiki/British_Agricul ... griculture
24) http://cnsnews.com/news/article/uaw-was ... n-coburn24)
25) http://www.econosseur.com/assets_c/2008 ... p2008.html

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Abraxas
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Post #24

Post by Abraxas »

WinePusher wrote: Individuals are hired by employers because the employer believes they will be an asset to his or her company. If the individual becomes a liability instead of an asset, they are let go. So, the question I want to pose is whether unemployment would be higher in a government, centrally planned economy or in a free market economy.
Why? To begin with it is a false dichotomy. There is a lot of space between market completely absent of government intervention and one controlled in everything by the government. Nobody is arguing for a centralized economy and to this question is essentially a strawman, the attack of a position nobody is holding. Even then though, for positions that should become clear momentarily, I think you reached the wrong conclusion.
The answer is that unemployment would be higher in a centrally planned economy for a number of reasons. I don't think you would disagree with the idea that the Free Market and Capitalism is the best economic model for allocating resources. Since all resources are scarce, they must be allocated, distributed and assigned to various parts of the market in an effective way. Resource allocation can refer to a number of things: such how much should a business produce in a given year, or how much a business should save in a given year, or how much a business should invest in a given year. In a free market, resources are allocated according to prices while in a government planned economy resources are allocated according to a group of central planners referred to as a bureaucracy.
Other than disagreeing that a completely free market is the best way to allocate resources I am with you so far.
Since workers are simply a resource used in the production process, unemployment would be higher in a centrally planned economy because the model is inefficient at allocating resources.
No, actually, this is wrong. There is a reason the Soviet Union had an effective zero percent unemployment rate because they could artificially increase the demand for workers almost infinitely. There were reports of the Soviet Union quite literally having one factory melt scrap steel into ball bearings and shipping them to another factory to melt ball bearings into scrap steel just to keep unemployment down. The reason a central economy can keep unemployment lower is it has a much greater tolerance for activities which provide no actual benefit to the nation. With this in mind, you should have argued against regulated markets vs. free, not centralized vs. free because you are way off base.

Now, in a regulated market, can it maintain an unemployment and underemployment rate equal to or lesser than a free one? Probably, we've not seen substantially higher rates in Europe than in the US historically. Many are substantially lower. Plus, regulations themselves take workers to draft, enforce, and determine compliance with. Unless you can demonstrate expansion in all other market sectors to accommodate the workers leaving those positions, I don't think you can make that argument.
In a free market workers are allocated to different jobs an occupations based on wages, which is basically the price of labor. This model has worked well for ages. However, government mandates on employers skews this process and disincentivizes employers from hiring, resulting in higher unemployment levels. Proof of this lies in the recent recession, the government has intervened in massive scales yet unemployment levels remain persistently high. Why is that? For one, the government discourages employers from hiring through termination laws. It's virtually impossible to fire public sector workers (1) and there are a host of laws that make it nearly impossible for private employers to fire workers (2). Since it's so difficult to fire workers, employers become more and more reluctant to hire workers in the first place. While the government gurantees the safety of your job through these laws, they actively discourage employers from hiring.
Federal employees really aren't at issue for determining a free market vs. regulated market. Further, the reason for that is simple, and even pointed out in your first link. When you are dealing with a government elected, it becomes really easy for a process by which the government has unlimited and unrestricted power to fire for any reason to do so on a partisan basis which would make running a government essentially impossible when dealing with very high turnover. It also notes that as many as ten thousand federal workers are fired each year, which kind of indicates it isn't as hard as everyone says.

At the private level, your link belies your argument. It says, and I quote;

"A majority of all employees in the United States are "at will" employees. What this means is that you can fire these employees at any time and for any reason, so long as the reason is not discriminatory, retaliatory or otherwise illegal."

Well, what is illegal? Discrimination under federal discrimination laws, refusing to take a lie detector test, retaliation for employees asserting rights or complaints about OSHA violations, or for refusing to commit illegal or moral actions. What is not illegal is the firing of private employees for poor performance or misconduct. Since the employer can fire for those things, there is no evidence to support fear of not being able to discourages hiring.

As for what is driving the current unemployment figures, a lot of that has to do with employers having discovered they can work their current employees longer and harder to get the same job done, and the continued replacement of workers with machines. Government involvement in the recession, has, however, demonstrably saved jobs as several major banking institutions would have collapsed as would the auto industry, costing hundreds of thousands of jobs.
Another government intervention that contributes to unemployment is occupational licensing. In a free market, individuals would make voluntary and mutual agreements with eachother based on negotiations. In a free market, if someone wanted to start up their own hair salon or their own medical clinic they would be allowed to, the quality of the service they provide would be determined by the amount of business they get since customers would voluntarily choose to go there. However, occupational licensing prohibits this because it requires professionals in certain fields to have a government issued license before they can practice their trade. Getting an occupational license is not free and requires alot of effort and work. It would be fine if getting a government license was optional, and if there was a public demand for licenses you would see consumers go to business and firms that employed professionals with government licenses and those business and firms that employed professional without licenses would go out of business, but that is not the case. In order to work in your specific occupation, you must have a government license and getting a license costs alot and requires alot (3) (4).
that should balance itself. If licenses and fees discourage people from entering the market, that should increase the pay for those getting those jobs due to a smaller supply, which should in turn encourage more people into the field for the higher pay. Further, what is the alternative? Letting people practice medicine who know absolutely nothing of medicine? What do you suppose the death rate would be if doctors didn't have a medical background due to medical related accidents and malpractice? Now, would I agree that not every profession, e.g., the florists from your link, requires licensing? Absolutely. But there are some professions such as surgeon or electrician or pharmacologist where the risk of putting people in positions where they have no idea what they are doing leaves dead bodies and so any reasonable society will have standards that must be met before allowing someone to practice. As Mr. Stossel points out even with minimum standards a lot of bad gets through, can you imagine no standards at all making this better?
My conclusion is that unemployment would be far lower and far less prevalent if the labor market was free from these government mandates and interventions.
Great, and when you feel like providing some support for that conclusion I'd love to see it.
Wages and incomes have become an extremely contentious issue within the recent years, especially among the occupy wallstreet crowd which I would assume you sympathize with (correct me if I'm wrong).
Some of them. OWS has a problem in that absolutely anyone has as much claim as the next to claim affiliation and so there are a fair number who are absolutely nuts, like the bridge bombers.
First of all, low wages aren't necessarily a bad thing. Second of all, income inequality among groups is not indicative of labor discrimination and can be a good thing. And finally, wages will rise and have risen the most under a free market model, not a government planned model.

Wages correspond to a workers productivity and skills. A worker who has low skills and low productivity will earn a low wage.
You are lacking a key word in there which is "marketable". Low marketable skills. Someone could be the greatest programmer for a computer language on the planet one year, have a new computer language come along the next, and make them completely unmarketable. How many skilled laborers have been rendered "low skilled" due to advances in technology taking over jobs once held by humans? Skill isn't something you either have or do not have, everyone has different skills to different degrees and depending on the movement of the market skills of one sort can go from being worthless to being incredibly lucrative such as extreme sports athletes or the opposite, such as watchmakers.
This is also part of how Free Markets effectively allocate resouces. However the minimum wage, which is a government intervention in the labor market, skews this and forces employers to pay a high wage to a low skilled worker. While it is intended to help low skilled workers it hurts them by keeping them out of the job market. Proof of this lies in the fact that teenagers, eligiable workers with virtually no skills, are afflicated with some of the highest levels of unemployment (5).
Is that because of the minimum wage or because of a shrinking number of available skilled jobs forces people with more work experience to take jobs more normally associated with teenagers? How do you know? How can you show it?

Also, as posted in a graph earlier, real wages for the bulk of Americans grew fastest in more heavily regulated markets. When the deregulation started under Nixon to some degree and to a much greater extent under Reagan, that is when wages leveled off and stopped growing despite the wealthy doing much better than ever before.

http://en.wikipedia.org/wiki/Household_ ... ted_States

The second issue I want to address is income inequality, and the three groups I want to analyze are Males-Females, Blacks-Whites, and the Rich-Poor. There is an income gap between males and females and blacks and whites, you and I can probably agree on this. However, we would disagree with the cause and whether or not the government should intervene to rectify the problem. Liberals attribute the gap to employer discrimination and believe the government should intervene through laws like Equal Pay for Equal Work and so on. I attribute the gap to voluntary choice on the part of the individual, and believe that the government should do nothing because it's not a real problem. There is an income gap between males and females (6) and the gap exists because of a variety of voluntary decisions made on the part of females as a collective group, not because of employer discrimination or this so called 'glass ceiling.' First of all, more women choose to work part time and more men work full time (7) and part time jobs pay less than full time jobs. And looking all the overall earnings of individuals in part time jobs, women tend to earn more than men (8). Second of all, men occupy higher paying positions while women occupy lower paying positions. This is because working women who have kids are forced to take time out of the labor force on maternity leave (9).
Taken from source (9):
---A greater percentage of women than men tend to work part-time. Part-time work tends to pay less than full-time work.
---A greater percentage of women than men tend to leave the labor force for child birth, child care and elder care. Some of the wage gap is explained by the percentage of women who were not in the labor force during previous years, the age of women, and the number of children in the home.
Considering these factors, anti discrimination laws and equal pay for equal work laws, like the Lily Ledbetter Fair Pay Act, are a waste of time on Congress' part.
All true, but also insufficient to explain it.

http://en.wikipedia.org/wiki/Male%E2%80 ... er_pay_gap

"By looking at a very specific and detailed sample of workers (graduates of the University of Michigan Law School) economists Robert Wood, Mary Corcoran and Paul Courant were able to examine the wage gap while matching men and women for many other possible explanatory factors - not only occupation, age, experience, education, and time in the workforce, but also childcare, average hours worked, grades while in college, and other factors. Even after accounting for all that, women still are paid only 81.5% of what men "with similar demographic characteristics, family situations, work hours, and work experience" are paid.[20]"
The racial income gap is somewhat of a different situation. The reason why a wage gap exists between whites and blacks is not because of employer discrimination, it is because of education. The gap in wages between whites-blacks has been growing smaller as the education gap between whites-blacks grows smaller (10), showing the connection between the two. It's to bad we didn't devote a section in this debate to education and public schools, since government run public schools set blacks up for failure in life.
Not too late, we can do a round five if you are feeling up for it.
Just to name a few things:
---In 2005, only 55 percent of all black students graduated from high school on time with a regular diploma, compared to 78 percent of whites.
---In 2005, the on-time graduation rate for black males was 48 percent nationally; for white males it was 74 percent.
Nearly half of the nation’s African American students, but only 11 percent of white students, attend high schools in which graduation is not the norm.
---In 2002, 23 percent of all black students who started public high school left it prepared for college, compared to 40 percent of whites.
On average, African American and Hispanic twelfth-grade students read at approximately the same level as white eighth graders.
About half of poor, urban ninth graders read at only a fifth- or sixth-grade level.8
---The National Assessment of Educational Progress reports that 88 percent of African American eighth graders read below grade level, compared to 62 percent of white eighth graders.
---The twelfth-grade reading scores of African American males were significantly lower than those for men and women across every other racial and ethnic group.
(11)

Since blacks are at an educational disadvantage, which is the governments fault, they are more likely to enter low skilled, low paying jobs (12) which is why we see a wage disparity between blacks and whites. I'll try to address this more in the section of discrimination and civil rights, but the basic conclusion is that the racial income gap is the fault of the government for providing poor schooling.
That alone is still insufficient to explain the gap:

http://en.wikipedia.org/wiki/Racial_wag ... ates#Black

While progress in wage inequality for blacks has been made since the passage of the 1964 Civil Rights Acts, inequality and discrimination still exist. A study conducted by Major G. Coleman (2003) reports that as black and white men have more similar competitive performance ratings, racial wage differences increase rather than decrease. He also found that black wages are less than white wages in the same industry.[2] When no factors other than race are considered, Coleman predicts the black hourly wage to be $7.49 and the white hourly wage to be $8.92, 19 percent higher than the black hourly wage. When Coleman controlled for human capital, such as education and skills, the difference decreased to 11 percent. Coleman attributed this 11percent difference to racial discrimination.[2]



In a free market schooling would be in the hands of the parents, not the government, and we would most likely see blacks come out of school far better equiped to enter the labor market. The final gap in wages and income is the gap between the rich and the poor. Alot of liberals believe that wages and incomes have been stagnate, or even falling, for many Americans except for the rich and the top %1.
Not the top 1%, but the top 20%.
The question that has to be asked, then, is what causes wages to rise? Capital and investment goods causes wages to rise. I'm going to guess that you're one of those people that believes the introduction of machinery and technology kills jobs, but it doesn't. I've never heard of a machine that can fully operate itself.
No, but one machine operator is many times more productive than non automated workers. You may need one machine operator and one machine repairman, but if it can do the job of ten people, it is still a net loss of eight jobs.
And investment goods benefit the condition of workers as opposed to harming it. Wages correspond to productivity, and machines and technology increases workers productivity which increases their wage ipso facto.
Often not. Compare the rate of production now to fifty years ago and compare the median income. You will see this does not hold true.
This is a free market innovation, not a government intervention. Furthermore, the incomes of the middle class have risen along with the incomes of the upper class. A liberal like Paul Krugman prefers to measure income growth in terms of households cause the data fits his narrative (13). Using household incomes as a measurement you would see stagnate incomes (14) Chart H-11. However, using the same data you see that the size of households has been declining over time. Households consist of less people, which results in less incomes which is reflected in the household measurment since it does not control for the number of people. Using a per capita income measurement, which measures income per individual instead of incomes per households, you'd see that incomes have been rising at a fast and consistent pace (15) Chart P-1.
Chart P-1 is completely useless as it does not adjust for percentile. If the top earners are going up but the bottom ones aren't you would see the exact same results.
The final topic I will address in the labor section of this debate will be working conditions and worker protections. You spent a large amount of font in your last post talking about unions and how unions are the source of bliss and goodness for workers. Sadly you omitted crucial facts from your analysis, probably because they don't coincide with your position. Approximately 12% of the entire workforce is unionized and if you break down the data even further you'd see that 36% of the 12% are public sector worker and only 7% of that 12% are private sector workers (16).
And?
How can you possibly say that unions are the reasons why working conditions have improved and why wages have risen when only 12% of all workers actually belong to a union?
Because 12% now has nothing to do with the percentage who were in unions at the time the rights were initially secured. If you would like to introduce those figures we can discuss them.
In a free market people should have the right to associate with whomever they want, this means that they should have the right to join or form a union. But it's a total exaggeration to say that things like working conditions and benefits arose out of unionization. One way to measure the effect of working conditions is using indicators such as on the job injuries, on the job deaths, and so on. Tell me how unions solved these problems because I've yet to hear a logical argument connecting the two, or how the government solved these problems.
The appropriate place for these questions would have been your initial response to my post, but very well. You know, I could debate this with you, but I think I will just quote your own link instead.

"This spectacular change in worker safety resulted from a combination of forces that include safer production technologies, union demands, improved medical procedures and antibiotics, workmen's compensation laws, and litigation.

To say they arose of unionization alone would be an exaggeration, to say unions were a major force in their implementation would not.
These problems were solved by the market, by the innovation and introduction of new technologies and machines.
Evidence please.
And please explain how unions cause wages and incomes to rise.
By collectively negotiating for them from the position of being able to do so without all being fired on the spot or be instantly replaced.
As I said before, unions are sometimes able to raise the income and wages of union workers at the expense of non-union workers. The reason why wages rose over time is because worker's productivity rose overtime (17) despite any government interference.


That certainly didn't hurt but if you think that is the only cause, you are sadly mistaken. Further, studies show that non-union employees in heavily unionized sectors still make more than comparable laborers in other market sectors and so unions actually benefit them indirectly.

http://www.epi.org/publication/briefingpapers_bp143/

The idea that unions hurt the wages of non-union members is simply counterfactual.
Moving onto discrimination and civil rights. In this section of the debate I'll be addressing three issues concerning race, discrimination and civil rights: segregation and anti-discrimination laws.

Racial segregation refers to the seperation of groups based upon their race and ethnicity. As I have said before, it is impossible for me to imagine how racial segregation could manifest itself in a free market and a free society. A rational businessowner in a community dominated by blacks would be a fool if he limited his services only to whites.
Well, frankly, then you must not have been paying attention because that is precisely what did happen, only the business owners would not set up in a black neighborhood to begin with. They set up in white neighborhoods and then segregated.
He is limiting his customer base which cuts against his goal of profit maximization. The free market has a self regulation that essentially deterrs segregation because if a business owner wants to exclude blacks from his business, he is imposing a cost on himself.
But if the presence of blacks were to discourage whites from patronizing the business, as was the case in the south, allowing blacks in would impose that cost which is why a lot of southern businesses were segregated even though there was no law requiring them to be.
Even if segregation was not against the law, do you really think that a federation such as the NBA would segregate itself?
I don't know about the NBA but professional baseball most certainly did.
Do you think blacks would be excluded to one team and whites to another?
Uh, yeah. Are you completely unfamiliar with Negro League Baseball?
If the owner of the Miami Heat decided to exclude blacks from his team beause he is racist, he would probably suffer loss after loss because he is limiting the base of basketball players he can choose from.
Or they would form their own league of all white teams which is exactly what happened.

"Prior to the 1930s, basketball would also suffer a great deal of discrimination as well.[22] Black and whites played mostly in different leagues and usually where forbidden from playing in inter-racial games.[22]"
This is why the period of racial segregation in America is referred to as de jure segregation (18) because it was law enforced and sanctioned by the government and if it wasn't it could not exist.
From your own source:

"Racial segregation in the United States can be divided into de jure and de facto segregation. De jure segregation, sanctioned or enforced by force of law, was stopped by federal enforcement of a series of Supreme Court decisions after Brown v. Board of Education in 1954. The process of throwing off legal segregation in the United States lasted through much of the 1950s, 1960s and 1970s when civil rights demonstrations resulted in public opinion turning against enforced segregation. De facto segregation — segregation "in fact" — persists to varying degrees without sanction of law to the present day. The contemporary racial segregation seen in America in residential neighborhoods has been shaped by public policies, mortgage discrimination and redlining among other things."

Both de jure and de facto segregation existed simultaneously, they were not independent eras.
After a while the government did strike down these laws, but it was merely an example of self correction. Segregation was the fault of the government, not the fault of the free market. And racial segregation continues to exist to this very day in government run housing projects (19). It's pure absurdity to say that government intervention is needed to remedy this problem when in fact it is a problem because of government in the first place.
Please provide some evidence for this. In a lot of areas there were absolutely no laws requiring segregation but proprietors chose to implement it anyway to meet the demands of their clientele. Please, explain to me how your theory of the government being to blame for everything accounts for this.

As for discrimination and anti-discrimination laws, I'm just going to say that individuals have a right to discriminate and a law preventing this tramples over their right of association and their property rights. Think about it logically for a second. If an employer is looking over a stack of applications for a job as a waiter at an authentic chinese restaurant, he is going to automatically discriminate against all non-chinese speakers and would focus only on the pool of candidates who are bilingual. If an individual is looking for a worker to move his furniture, he is going to automatically discriminate against midgets, paraplegics and teenage girls and search for people who can demonstrate a reasonable amount of strength and stamina. People discriminate all the time in their daily lives and they have a right to. Have you ever been inside a restaurant that has a sign saying No Shirt, No Shoes, No Service? The employer is actively discriminating and has the right to do so because it is his property. Would you argue against this?
Discriminating against people for the reasons of hygiene or the inability to perform a job correctly, no. For simple race, yes.
---------------------------------------
Case 1: Apartheid in South Africa

The apartheid in South Africa is an extremely complicated issue, but it nicely proves everything I'm talking about. The thing to know is that apartheid refers to racial segregation, and that Apartheid in South Africa refers to racial segregation in South Africa (20). What is so interesting about South Africa is how things that you support, Unions, Minimum Wages, Equal Pay laws were used by racists as tools to keep blacks excluded. White's formed unions in order to restrict blacks from entering the job market (in this case it was mining) and unions in turn advocated for minimum wages and equal pay laws because they knew these tools would prevent blacks from getting hired (21). What is even more interesting is that the apatheid group in South Africa opposed Capitalism, and the reason was that the principles under which a capitalist, free market economy operates would not have supported nor allowed apartheid to exist (22).
Firstly, it wasn't the anti-capitalists supporting apartheid, the opposite is true. In particular the self professed communists and socialists were deeply opposed to apartheid but the capitalists favored it because it provided a bulwark against the expansion of the Soviet Union. Secondly, there is no reason one cannot have unions and equal pay laws so I fail to see the point of bringing this up. I already agreed government regulation can be used to discriminate, but it is also the most powerful tool for ending it on a national wide level.
Case 2: The British Agricultural Revolution

The case of Agrarian Britian proves what I was saying about how market innovations in technology and machinery are what improve working conditions and the standard of living for workers. What made the agricultural revolution in Britain possible was the increase in the productivity of farmers and laborers due to the introduction of capital such as plows, carts and wagons (23). Because the productivity of workers rose, working conditions and wages rose as well which marked the beginning of the Industrial revolution in Britian. To reiterate, the British Agricultural Revolution was the result of market innovations that subsequently led to improvements in working conditions and wages. Nowhere was the government involved in planning or running the agriculture market.
And, what exactly? I never said the market never improves on its own.
Case 3: The Auto Industry Bailout and the UAW

Here, I don't want to focus on the wisdom of Bailing out the Auto Industry, but on why the Auto Industry needed a bailout in the first place. What caused the Big Three to go under? The answer is the United Auto Workers Union (24). This case shows how detrimental unions are not only the non-union workers, but to the industries they're involved with. The wages and benefits demanded by the UAW were totally unrealistic, but because of the government gurantees and protecetions they recieved the Big 3 had no choice but to cave to their demands. Here's an interesting statistic comparing the Big 3 with foreign Japanese auto makers: on average Chrysler, GM and Ford pay $29 per hour than Toyota, Honda and Nissan do (25). It should be pretty clear why the Big 3 went under.


Except the 73 dollars an hour figure is dishonest at best as it includes all compensation as part of the pay figure, including things like healthcare that are paid for out of taxpayer dollars in Japan. Actual wages for auto workers are closer to 40 an hour, very comparable to the actual wages in Japan, and pensions for retired workers.

http://www.nytimes.com/2008/12/10/busin ... =permalink

Further, how could you even possible accept this at face value if you are going to claim unions cannot raise wages, how can you then blame the union for keeping wages too high to be competitive?

WinePusher

Post #25

Post by WinePusher »

WinePusher wrote:Individuals are hired by employers because the employer believes they will be an asset to his or her company. If the individual becomes a liability instead of an asset, they are let go. So, the question I want to pose is whether unemployment would be higher in a government, centrally planned economy or in a free market economy.
Abraxas wrote:Why? To begin with it is a false dichotomy. There is a lot of space between market completely absent of government intervention and one controlled in everything by the government. Nobody is arguing for a centralized economy and to this question is essentially a strawman, the attack of a position nobody is holding. Even then though, for positions that should become clear momentarily, I think you reached the wrong conclusion.
Everything you've been arguing for in this thread have been examples of a centralized economy. I understand the distinction you're trying to make, but it doesn't work. I believe that economic decisions and choices should be diversified and widely dispensed and dispersed throughout a society, on the other hand you seem to believe that decisions and choices should be concentrated and centralized in the government. That's what every single governmental regulation ends up amounting to, and if I'm not mistaken you're in favor of heavy governmental regulations.
WinePusher wrote:Since workers are simply a resource used in the production process, unemployment would be higher in a centrally planned economy because the model is inefficient at allocating resources.
Abraxas wrote:No, actually, this is wrong. There is a reason the Soviet Union had an effective zero percent unemployment rate because they could artificially increase the demand for workers almost infinitely.

There were reports of the Soviet Union quite literally having one factory melt scrap steel into ball bearings and shipping them to another factory to melt ball bearings into scrap steel just to keep unemployment down. The reason a central economy can keep unemployment lower is it has a much greater tolerance for activities which provide no actual benefit to the nation. With this in mind, you should have argued against regulated markets vs. free, not centralized vs. free because you are way off base.
Sorry, but there is no actual difference between 'regulated' and 'centralized.' The only distinction between the two is that regulated markets refers to individual firms and markets (microeconomic) while centralization refers to the overall economy (macroeconomic). But that's a trivial point.

As for the Soviet Union, you forgot to mention that while everybody virtually does have a job, every is paid the exact same amount of money. Under a capitalist free market system there are discrepencies in wages and incomes, and this is vital for a labor market to function. Was there an abundance of high skilled workers, such as doctors and engineers in comparison with low skilled farm laborers, in the Soviet Union? No, because of one simple fact. Nobody in their right mind would work their butt off to acquire the skills it took to be a doctor or an engineer if they knew their income would match that of a farmer. To go off on a bit of a tangent, this is why allows Capitalism to function. Entreprenuership, which is one of the four factors of production, and has an inherent risk. The reason why people are willing to take this risk is because they believe the return they will earn will exceed the risk. Once you start taxing those who are successful, you stifle entrepreuership and economic activity. And what do you mean by 'artificially increase the demand for workers infinitely?'
Abraxaas wrote:Now, in a regulated market, can it maintain an unemployment and underemployment rate equal to or lesser than a free one? Probably, we've not seen substantially higher rates in Europe than in the US historically. Many are substantially lower. Plus, regulations themselves take workers to draft, enforce, and determine compliance with. Unless you can demonstrate expansion in all other market sectors to accommodate the workers leaving those positions, I don't think you can make that argument.


Again, you're leaving out crucial factors which is why you've committed multiple post hoc ergo propter hoc fallacies. Why does EU, which does regulate their markets much more than the US, have lower unemployment rates? Maybe because they have a smaller labor force than the US due to a lower retirement age and since the average European worker gets enourmous amounts of leisure time more people must be pulled into work which accounts for the low unemployment rate. Nothing about regulations accounts for the rate, just the European culture and lifestyle. And Americans are the lazy ones? :roll:
Abraxas wrote:At the private level, your link belies your argument. It says, and I quote;

"A majority of all employees in the United States are "at will" employees. What this means is that you can fire these employees at any time and for any reason, so long as the reason is not discriminatory, retaliatory or otherwise illegal."

Well, what is illegal? Discrimination under federal discrimination laws, refusing to take a lie detector test, retaliation for employees asserting rights or complaints about OSHA violations, or for refusing to commit illegal or moral actions. What is not illegal is the firing of private employees for poor performance or misconduct. Since the employer can fire for those things, there is no evidence to support fear of not being able to discourages hiring.
This is one huge non sequitor. I never disputed the fact that most employees are 'at will' employees. What I said is that governmental regulations make it more difficult for employers to fire workers, and for you to counter by saying most employees are at will employees does not address my point.
Abraxas wrote:As for what is driving the current unemployment figures, a lot of that has to do with employers having discovered they can work their current employees longer and harder to get the same job done, and the continued replacement of workers with machines. Government involvement in the recession, has, however, demonstrably saved jobs as several major banking institutions would have collapsed as would the auto industry, costing hundreds of thousands of jobs.
Not really, the government cannot create any actual economic demand or any actual jobs. All the government can do is create artificial demand and artificial jobs. I mean, all we have to do is look back through history to see how wrong your idea is. Towards the inception of this recession, we have had massive amounts of fiscal stimulus yet the unemployment rate has not gone down, it hasn't even remained constant, it actually increased beyond what economists predicted. That's really all I need to show how government intervention fails, but we can debate this issue further in the next round, devoted to fiscal/monetary policy.
Abraxas wrote:Further, what is the alternative? Letting people practice medicine who know absolutely nothing of medicine? What do you suppose the death rate would be if doctors didn't have a medical background due to medical related accidents and malpractice?
Do you see the hidden implication in your statement? What you're basically saying is that a doctor who hasn't gotten a government license knows nothing about medicine and that could not be further from the truth. First of all, I am not saying that absolutely anybody should be allowed to practice medicine. There is one restriction that prevents random people from entering the medical field, and it's called a medical degree. Once you complete your medical degree, which takes several years including residency, you should be able to practice without having to go further to get a government license. Once you get out of medical school you're most likely going to be burdened with massive debt, so the ideal thing would be to start practicing right away in order to pay off this debt. However, going onto get a license will burden you with more debt which is why the concept of occupational licensing deters perfectly competant people from entering a field and which is why markets that are heavily licensed suffer from higher prices.
Abraxas wrote:But there are some professions such as surgeon or electrician or pharmacologist where the risk of putting people in positions where they have no idea what they are doing leaves dead bodies and so any reasonable society will have standards that must be met before allowing someone to practice. As Mr. Stossel points out even with minimum standards a lot of bad gets through, can you imagine no standards at all making this better?
You forget that it is the government who is issuing this license, and therefore, setting the standards for the particular occupations. How does the government know what the standards should be? The basic idea behind a regulated market is that the government is omniscient and knows everything. This idea was debunked by F.A Hayek. The government doesn't actually know anything, they only pretend to know and every economic decision or regulation is akin to an educated guess which is why government intervention is the reason for the boom and bust cycles.
WinePusher wrote:My conclusion is that unemployment would be far lower and far less prevalent if the labor market was free from these government mandates and interventions.
Abraxas wrote:Great, and when you feel like providing some support for that conclusion I'd love to see it.
Already have.
WinePusher wrote:First of all, low wages aren't necessarily a bad thing. Second of all, income inequality among groups is not indicative of labor discrimination and can be a good thing. And finally, wages will rise and have risen the most under a free market model, not a government planned model.

Wages correspond to a workers productivity and skills. A worker who has low skills and low productivity will earn a low wage.
Abraxas wrote:You are lacking a key word in there which is "marketable". Low marketable skills. Someone could be the greatest programmer for a computer language on the planet one year, have a new computer language come along the next, and make them completely unmarketable. How many skilled laborers have been rendered "low skilled" due to advances in technology taking over jobs once held by humans? Skill isn't something you either have or do not have, everyone has different skills to different degrees and depending on the movement of the market skills of one sort can go from being worthless to being incredibly lucrative such as extreme sports athletes or the opposite, such as watchmakers.


So you're saying that a school bus driver has an equal amount of skill as a physician? Obviously the physician is more skillfull than the schoolbus driver because of the mere fact that the physician can do both jobs while a schoolbus driver can only drive a school bus. And because the schoolbus driver's skills are limited, he is paid a substantially lower wage than a physician. When you begin to disproportionately raise his wage to the point where it doesn't correspond to his skill you create imbalances in the market, and in trying to restore balance you get less and less school bus driving jobs.

And I don't disagree with your computer programmer example. As computer technology evolves a computer programmer will have to keep up with the changes and if he doesn't he'll be out of work. But, what's your point? There have been vast changes in virtually all industries throughout America's history, and the labor force has adjusted to these changes. There are a number of areas where technology has taken over jobs once done by humans, like the introduction of machinery during the British Agricultural Revolution. Machines and plows made many human jobs obselete, but new jobs became available in other markets. The unemployment was structural, and structural unemployment is when workers are transitioning and adjusting to changes in the economy. It's not permanent, it's temporary.
WinePusher wrote:This is also part of how Free Markets effectively allocate resouces. However the minimum wage, which is a government intervention in the labor market, skews this and forces employers to pay a high wage to a low skilled worker. While it is intended to help low skilled workers it hurts them by keeping them out of the job market. Proof of this lies in the fact that teenagers, eligiable workers with virtually no skills, are afflicated with some of the highest levels of unemployment (5).
Abraxas wrote:Is that because of the minimum wage or because of a shrinking number of available skilled jobs forces people with more work experience to take jobs more normally associated with teenagers? How do you know? How can you show it?
I know that I'm right because of history, and I can show that I'm right using history. You, on the otherhand, cannot. Here's the reason why the minimum wage is the cause of unemployment amoung unskilled workers. Between 1948-1951, unemployment rates amoung teenagers were at an all time low, and the unemployment rate between white and black teenagers was equal. That's because the minimum wage was irrelevant because it was not adjusted for inflation. Afterwards, the government began adjusting the minimum wage for inflation and teenage unemployment, especially black teenage unemployment, gradually rose. This shows that the minimum wage is responsible for the loss of employment among unskilled workers, such as teenagers. Source.
Abraxas wrote:Also, as posted in a graph earlier, real wages for the bulk of Americans grew fastest in more heavily regulated markets. When the deregulation started under Nixon to some degree and to a much greater extent under Reagan, that is when wages leveled off and stopped growing despite the wealthy doing much better than ever before.

http://en.wikipedia.org/wiki/Household_ ... ted_States
Did you miss the part where I showed household income measurements to be useless and flawed?
Abraxas wrote:Not too late, we can do a round five if you are feeling up for it.


Yea, I'm absolutely down to do another round if you are. But since we've been tackling multiple issues in each round why don't we devote round 5 to social issues in general. This would include topics such as education, abortion, gay marriage, gun control, the economic impact of the wars, etc.
WinePusher wrote:The question that has to be asked, then, is what causes wages to rise? Capital and investment goods causes wages to rise. I'm going to guess that you're one of those people that believes the introduction of machinery and technology kills jobs, but it doesn't. I've never heard of a machine that can fully operate itself.
Abraxas wrote:No, but one machine operator is many times more productive than non automated workers. You may need one machine operator and one machine repairman, but if it can do the job of ten people, it is still a net loss of eight jobs.


True, but if a machine can do a job better and more efficently than a human why should we stop using machines? Yea, it results in unemployment but it benefits consumers. And the unemployment is temporary.
WinePusher wrote:And investment goods benefit the condition of workers as opposed to harming it. Wages correspond to productivity, and machines and technology increases workers productivity which increases their wage ipso facto.[/quote="Abraxas"]Often not. Compare the rate of production now to fifty years ago and compare the median income. You will see this does not hold true.


Why would I compare this production rate now to the production rate fifty years ago? We're in a recession now, and that means there is not as much production. Compare the production rate prior to the recession to the rate fifty years ago and you won't see a difference.
WinePusher wrote:This is a free market innovation, not a government intervention. Furthermore, the incomes of the middle class have risen along with the incomes of the upper class. A liberal like Paul Krugman prefers to measure income growth in terms of households cause the data fits his narrative (13). Using household incomes as a measurement you would see stagnate incomes (14) Chart H-11. However, using the same data you see that the size of households has been declining over time. Households consist of less people, which results in less incomes which is reflected in the household measurment since it does not control for the number of people. Using a per capita income measurement, which measures income per individual instead of incomes per households, you'd see that incomes have been rising at a fast and consistent pace (15) Chart P-1.
Abraxas wrote:Chart P-1 is completely useless as it does not adjust for percentile. If the top earners are going up but the bottom ones aren't you would see the exact same results.
It actually does because it's a median figure. The income earned by everybody is averaged out, making it a comprehensive representation of the entire population. It doesn't just measure the top earners, it measures everybody.
WinePusher wrote:How can you possibly say that unions are the reasons why working conditions have improved and why wages have risen when only 12% of all workers actually belong to a union?
Abraxas wrote:Because 12% now has nothing to do with the percentage who were in unions at the time the rights were initially secured. If you would like to introduce those figures we can discuss them.
I expected you to raise this objection. So basically you're saying that the number of workers belonging to unions declined overtime? That's partially true, but even iff you look at the statistics you'd see that the peak of union membership was around 26-27% of the labor force which is still miniscule:

Image

And notice how the increase in the number of people belonging to unions rose during the post war period. You have alot of people returning home from the war and re-enterting the labor force, and some of them are obviously going to join unions. And besides, this was the 20th century, not the 19th century when industrial America was establishing itself.
WinePusher wrote:In a free market people should have the right to associate with whomever they want, this means that they should have the right to join or form a union. But it's a total exaggeration to say that things like working conditions and benefits arose out of unionization. One way to measure the effect of working conditions is using indicators such as on the job injuries, on the job deaths, and so on. Tell me how unions solved these problems because I've yet to hear a logical argument connecting the two, or how the government solved these problems.
Abraxas wrote:The appropriate place for these questions would have been your initial response to my post, but very well. You know, I could debate this with you, but I think I will just quote your own link instead.

"This spectacular change in worker safety resulted from a combination of forces that include safer production technologies, union demands, improved medical procedures and antibiotics, workmen's compensation laws, and litigation.

To say they arose of unionization alone would be an exaggeration, to say unions were a major force in their implementation would not.
Unions can demand things and bargain for things. Great, everybody already knew that. Things like safer production technologies and improved medical care came about through the free market, they were not the result of union activity or government interference. It doesn't even make sense to say that safer technology and improved medical care was the result of unions and government intervention since they have no jurisdiction over these things anyways.
WinePusher wrote:These problems were solved by the market, by the innovation and introduction of new technologies and machines.
Abraxas wrote:Evidence please.


How else do you think safety conditions could have improved in the work place?
WinePusher wrote:As I said before, unions are sometimes able to raise the income and wages of union workers at the expense of non-union workers. The reason why wages rose over time is because worker's productivity rose overtime (17) despite any government interference.
Abraxas wrote:That certainly didn't hurt but if you think that is the only cause, you are sadly mistaken. Further, studies show that non-union employees in heavily unionized sectors still make more than comparable laborers in other market sectors and so unions actually benefit them indirectly.

http://www.epi.org/publication/briefingpapers_bp143/

The idea that unions hurt the wages of non-union members is simply counterfactual.
I read the section of your source concering union wages, non-union wages and total wages and it's nonsense. It doesn't even begin to address the fundamental problem, which is that in order for a union to be effective it must raise wages above the level of the actual market value wage. When it does this, the firm must make up the difference somehow. How does it do this? Higher prices, non-union worker wage cuts, or in the case of the Big 3, do nothing, run an unbalanced budget and run to the government when financial disaster hits.
WinePusher wrote:He is limiting his customer base which cuts against his goal of profit maximization. The free market has a self regulation that essentially deterrs segregation because if a business owner wants to exclude blacks from his business, he is imposing a cost on himself.
Abraxas wrote:But if the presence of blacks were to discourage whites from patronizing the business, as was the case in the south, allowing blacks in would impose that cost which is why a lot of southern businesses were segregated even though there was no law requiring them to be.


And you think this was true for all businesses in the south? I could cite dozens of instances where blacks and whites had integrated despite the fact that the government was enforcing segregation. I'll use my bus example again. Both blacks and whites rode the bus together, and blacks were not disallowed from riding the bus because busing companies relied on the business of black people. Using your hypothesis, busing companies should have completely excluded blacks from their buses because their white customers would feel uncomfortable, but they didn't.
WinePusher wrote: Do you think blacks would be excluded to one team and whites to another?
Abraxas wrote:Uh, yeah. Are you completely unfamiliar with Negro League Baseball?
Yea, I am. I follow Basketball though and my point was that many great players in the NBA are black, so it would be impossible for the NBA to segregate itself into white vs. black teams.
WinePusher wrote:This is why the period of racial segregation in America is referred to as de jure segregation (18) because it was law enforced and sanctioned by the government and if it wasn't it could not exist.
Abraxas wrote:From your own source:

"Racial segregation in the United States can be divided into de jure and de facto segregation. De jure segregation, sanctioned or enforced by force of law, was stopped by federal enforcement of a series of Supreme Court decisions after Brown v. Board of Education in 1954. The process of throwing off legal segregation in the United States lasted through much of the 1950s, 1960s and 1970s when civil rights demonstrations resulted in public opinion turning against enforced segregation. De facto segregation — segregation "in fact" — persists to varying degrees without sanction of law to the present day. The contemporary racial segregation seen in America in residential neighborhoods has been shaped by public policies, mortgage discrimination and redlining among other things."

Both de jure and de facto segregation existed simultaneously, they were not independent eras.
I dont' see how this refutes anything I said. Obviously de jure segregation is far worse than de facto segregation, and the extent to which de facto segregation exists is disputable. I don't consider things like 'white flight' to be de facto segregation, I consider it an appropriate exercise of the right of association and property. Also terms like 'mortgage discrimination' are incredibly dumb and demonstrate how illogical liberals think. Blacks get turned down more often than whites do for mortgages. In a liberals mind, it's obviously because those mortgage lenders are racist scumbags who don't want blacks to own a home, right? Conservatives think a little more clearer than that. In a conservatives mind, it could be due to the fact that blacks, as a collective group, tend to be financially worse off than whites which is why they are more likely to be deemed unfit for loans.
WinePusher wrote:After a while the government did strike down these laws, but it was merely an example of self correction. Segregation was the fault of the government, not the fault of the free market. And racial segregation continues to exist to this very day in government run housing projects (19). It's pure absurdity to say that government intervention is needed to remedy this problem when in fact it is a problem because of government in the first place.
Abraxas wrote:Please provide some evidence for this. In a lot of areas there were absolutely no laws requiring segregation but proprietors chose to implement it anyway to meet the demands of their clientele. Please, explain to me how your theory of the government being to blame for everything accounts for this.
Evidence for what? The fact that government housing is a prime example of segregation in modern day America? Or the fact that segregation could not exist in a free market? If it's the latter, I've already explained my rationale behind that statement. If a businessman chooses to segregate his business, he will lose out on the revenue he would have otherwise earned from those customers he segregated against. This is a market regulation that deters this type of thing. Businesses seek to maximize profits, as you said profits=revenue-expenses, and by discriminating and segregating their business they are limiting their revenue and thereby limiting their profits. The only way the scenario you describe could happen is if blacks made up a small portion of the community. If there was a community with a small population of blacks, a racist businessowner could probably get away with discriminating. But that's the only way, and there still is a cost imposed upon him.
Abraxas wrote:Discriminating against people for the reasons of hygiene or the inability to perform a job correctly, no. For simple race, yes.
Ok, in your mind there's 'good' discrimination and 'bad' discrimination. You don't see any reason why an employer would discriminate against a black other than him being a diehard racist? What would you say to the owner of a chinese restaurant who wanted to hire chinese waiters and waitresses? Is that an example of 'good' or 'bad' discrimination?
WinePusher wrote:Case 1: Apartheid in South AfricaThe apartheid in South Africa is an extremely complicated issue, but it nicely proves everything I'm talking about. The thing to know is that apartheid refers to racial segregation, and that Apartheid in South Africa refers to racial segregation in South Africa (20). What is so interesting about South Africa is how things that you support, Unions, Minimum Wages, Equal Pay laws were used by racists as tools to keep blacks excluded. White's formed unions in order to restrict blacks from entering the job market (in this case it was mining) and unions in turn advocated for minimum wages and equal pay laws because they knew these tools would prevent blacks from getting hired (21). What is even more interesting is that the apatheid group in South Africa opposed Capitalism, and the reason was that the principles under which a capitalist, free market economy operates would not have supported nor allowed apartheid to exist (22).
Abraxas wrote:Firstly, it wasn't the anti-capitalists supporting apartheid, the opposite is true. In particular the self professed communists and socialists were deeply opposed to apartheid but the capitalists favored it because it provided a bulwark against the expansion of the Soviet Union.
Well, some of that is true. But it doesn't refute the fact that apartheid implemented policies that you are in favor of that were used to as a tool for racists. Yea, capitalists and the government of south africa were allied against the Soviet Union but that's a non sequitor.
Abraxas wrote:Secondly, there is no reason one cannot have unions and equal pay laws so I fail to see the point of bringing this up.
What? Please clairfy what you're saying here.
WinePusher wrote:Case 2: The British Agricultural Revolution

The case of Agrarian Britian proves what I was saying about how market innovations in technology and machinery are what improve working conditions and the standard of living for workers. What made the agricultural revolution in Britain possible was the increase in the productivity of farmers and laborers due to the introduction of capital such as plows, carts and wagons (23). Because the productivity of workers rose, working conditions and wages rose as well which marked the beginning of the Industrial revolution in Britian. To reiterate, the British Agricultural Revolution was the result of market innovations that subsequently led to improvements in working conditions and wages. Nowhere was the government involved in planning or running the agriculture market.
Abraxas wrote:And, what exactly? I never said the market never improves on its own.
I never said that you did. My purpose in citing the agricultural revolution in Britain is to show the advancement in the conditions of workers despite government, or unions, interfering.
WinePusher wrote:Case 3: The Auto Industry Bailout and the UAW

Here, I don't want to focus on the wisdom of Bailing out the Auto Industry, but on why the Auto Industry needed a bailout in the first place. What caused the Big Three to go under? The answer is the United Auto Workers Union (24). This case shows how detrimental unions are not only the non-union workers, but to the industries they're involved with. The wages and benefits demanded by the UAW were totally unrealistic, but because of the government gurantees and protecetions they recieved the Big 3 had no choice but to cave to their demands. Here's an interesting statistic comparing the Big 3 with foreign Japanese auto makers: on average Chrysler, GM and Ford pay $29 per hour than Toyota, Honda and Nissan do (25). It should be pretty clear why the Big 3 went under.
Abraxas wrote:Except the 73 dollars an hour figure is dishonest at best as it includes all compensation as part of the pay figure, including things like healthcare that are paid for out of taxpayer dollars in Japan. Actual wages for auto workers are closer to 40 an hour, very comparable to the actual wages in Japan, and pensions for retired workers.

http://www.nytimes.com/2008/12/10/busin ... =permalink
So because healthcare and pensions are included, the figure is dishonest??? I don't really care what the exact figure is, all I care about is the fact that UAW workers at Big 3 manufacturers made signficantly more than workers at Japanese companies like Toyota. Your source, written by a liberal, agrees with this. Unions were the cause of the Big 3's decline, unless you can provide a better more plausible cause?
Abraxas wrote:Further, how could you even possible accept this at face value if you are going to claim unions cannot raise wages, how can you then blame the union for keeping wages too high to be competitive?
Did I ever say unions can't raise wages? I made it clear that unions can raise wages for union workers and that this generally creates negative effects elsewhere. I mean, do you not think the UAW has an ironclad grip on the throats of the Big 3 or that the UAW played a substantial role in their decline? Again, look at the statistic I posted. We're not talking about auto workers based in Japan, we're talking about auto workers at Japanese firms based in the United States. There is a huge discrepency in the pay and benefits recieved by a UAW worker at one of the Big 3 companies, and a worker at a Japanese company like Toyota. The Big 3 needed a bailout, Japanese firms like Toyota didn't. Why? Because of the UAW, why else?

WinePusher

Post #26

Post by WinePusher »

WinePusher wrote:Individuals are hired by employers because the employer believes they will be an asset to his or her company. If the individual becomes a liability instead of an asset, they are let go. So, the question I want to pose is whether unemployment would be higher in a government, centrally planned economy or in a free market economy.
Abraxas wrote:Why? To begin with it is a false dichotomy. There is a lot of space between market completely absent of government intervention and one controlled in everything by the government. Nobody is arguing for a centralized economy and to this question is essentially a strawman, the attack of a position nobody is holding. Even then though, for positions that should become clear momentarily, I think you reached the wrong conclusion.
Everything you've been arguing for in this thread have been examples of a centralized economy. I understand the distinction you're trying to make, but it doesn't work. I believe that economic decisions and choices should be diversified and widely dispensed and dispersed throughout a society, on the other hand you seem to believe that decisions and choices should be concentrated and centralized in the government. That's what every single governmental regulation ends up amounting to, and if I'm not mistaken you're in favor of heavy governmental regulations.
WinePusher wrote:Since workers are simply a resource used in the production process, unemployment would be higher in a centrally planned economy because the model is inefficient at allocating resources.
Abraxas wrote:No, actually, this is wrong. There is a reason the Soviet Union had an effective zero percent unemployment rate because they could artificially increase the demand for workers almost infinitely.

There were reports of the Soviet Union quite literally having one factory melt scrap steel into ball bearings and shipping them to another factory to melt ball bearings into scrap steel just to keep unemployment down. The reason a central economy can keep unemployment lower is it has a much greater tolerance for activities which provide no actual benefit to the nation. With this in mind, you should have argued against regulated markets vs. free, not centralized vs. free because you are way off base.
Sorry, but there is no actual difference between 'regulated' and 'centralized.' The only distinction between the two is that regulated markets refers to individual firms and markets (microeconomic) while centralization refers to the overall economy (macroeconomic). But that's a trivial point.

As for the Soviet Union, you forgot to mention that while everybody virtually does have a job, every is paid the exact same amount of money. Under a capitalist free market system there are discrepencies in wages and incomes, and this is vital for a labor market to function. Was there an abundance of high skilled workers, such as doctors and engineers in comparison with low skilled farm laborers, in the Soviet Union? No, because of one simple fact. Nobody in their right mind would work their butt off to acquire the skills it took to be a doctor or an engineer if they knew their income would match that of a farmer. To go off on a bit of a tangent, this is why allows Capitalism to function. Entreprenuership, which is one of the four factors of production, and has an inherent risk. The reason why people are willing to take this risk is because they believe the return they will earn will exceed the risk. Once you start taxing those who are successful, you stifle entrepreuership and economic activity. And what do you mean by 'artificially increase the demand for workers infinitely?'
Abraxaas wrote:Now, in a regulated market, can it maintain an unemployment and underemployment rate equal to or lesser than a free one? Probably, we've not seen substantially higher rates in Europe than in the US historically. Many are substantially lower. Plus, regulations themselves take workers to draft, enforce, and determine compliance with. Unless you can demonstrate expansion in all other market sectors to accommodate the workers leaving those positions, I don't think you can make that argument.


Again, you're leaving out crucial factors which is why you've committed multiple post hoc ergo propter hoc fallacies. Why does EU, which does regulate their markets much more than the US, have lower unemployment rates? Maybe because they have a smaller labor force than the US due to a lower retirement age and since the average European worker gets enourmous amounts of leisure time more people must be pulled into work which accounts for the low unemployment rate. Nothing about regulations accounts for the rate, just the European culture and lifestyle. And Americans are the lazy ones? :roll:
Abraxas wrote:At the private level, your link belies your argument. It says, and I quote;

"A majority of all employees in the United States are "at will" employees. What this means is that you can fire these employees at any time and for any reason, so long as the reason is not discriminatory, retaliatory or otherwise illegal."

Well, what is illegal? Discrimination under federal discrimination laws, refusing to take a lie detector test, retaliation for employees asserting rights or complaints about OSHA violations, or for refusing to commit illegal or moral actions. What is not illegal is the firing of private employees for poor performance or misconduct. Since the employer can fire for those things, there is no evidence to support fear of not being able to discourages hiring.
This is one huge non sequitor. I never disputed the fact that most employees are 'at will' employees. What I said is that governmental regulations make it more difficult for employers to fire workers, and for you to counter by saying most employees are at will employees does not address my point.
Abraxas wrote:As for what is driving the current unemployment figures, a lot of that has to do with employers having discovered they can work their current employees longer and harder to get the same job done, and the continued replacement of workers with machines. Government involvement in the recession, has, however, demonstrably saved jobs as several major banking institutions would have collapsed as would the auto industry, costing hundreds of thousands of jobs.
Not really, the government cannot create any actual economic demand or any actual jobs. All the government can do is create artificial demand and artificial jobs. I mean, all we have to do is look back through history to see how wrong your idea is. Towards the inception of this recession, we have had massive amounts of fiscal stimulus yet the unemployment rate has not gone down, it hasn't even remained constant, it actually increased beyond what economists predicted. That's really all I need to show how government intervention fails, but we can debate this issue further in the next round, devoted to fiscal/monetary policy.
Abraxas wrote:Further, what is the alternative? Letting people practice medicine who know absolutely nothing of medicine? What do you suppose the death rate would be if doctors didn't have a medical background due to medical related accidents and malpractice?
Do you see the hidden implication in your statement? What you're basically saying is that a doctor who hasn't gotten a government license knows nothing about medicine and that could not be further from the truth. First of all, I am not saying that absolutely anybody should be allowed to practice medicine. There is one restriction that prevents random people from entering the medical field, and it's called a medical degree. Once you complete your medical degree, which takes several years including residency, you should be able to practice without having to go further to get a government license. Once you get out of medical school you're most likely going to be burdened with massive debt, so the ideal thing would be to start practicing right away in order to pay off this debt. However, going onto get a license will burden you with more debt which is why the concept of occupational licensing deters perfectly competant people from entering a field and which is why markets that are heavily licensed suffer from higher prices.
Abraxas wrote:But there are some professions such as surgeon or electrician or pharmacologist where the risk of putting people in positions where they have no idea what they are doing leaves dead bodies and so any reasonable society will have standards that must be met before allowing someone to practice. As Mr. Stossel points out even with minimum standards a lot of bad gets through, can you imagine no standards at all making this better?
You forget that it is the government who is issuing this license, and therefore, setting the standards for the particular occupations. How does the government know what the standards should be? The basic idea behind a regulated market is that the government is omniscient and knows everything. This idea was debunked by F.A Hayek. The government doesn't actually know anything, they only pretend to know and every economic decision or regulation is akin to an educated guess which is why government intervention is the reason for the boom and bust cycles.
WinePusher wrote:My conclusion is that unemployment would be far lower and far less prevalent if the labor market was free from these government mandates and interventions.
Abraxas wrote:Great, and when you feel like providing some support for that conclusion I'd love to see it.
Already have.
WinePusher wrote:First of all, low wages aren't necessarily a bad thing. Second of all, income inequality among groups is not indicative of labor discrimination and can be a good thing. And finally, wages will rise and have risen the most under a free market model, not a government planned model.

Wages correspond to a workers productivity and skills. A worker who has low skills and low productivity will earn a low wage.
Abraxas wrote:You are lacking a key word in there which is "marketable". Low marketable skills. Someone could be the greatest programmer for a computer language on the planet one year, have a new computer language come along the next, and make them completely unmarketable. How many skilled laborers have been rendered "low skilled" due to advances in technology taking over jobs once held by humans? Skill isn't something you either have or do not have, everyone has different skills to different degrees and depending on the movement of the market skills of one sort can go from being worthless to being incredibly lucrative such as extreme sports athletes or the opposite, such as watchmakers.


So you're saying that a school bus driver has an equal amount of skill as a physician? Obviously the physician is more skillfull than the schoolbus driver because of the mere fact that the physician can do both jobs while a schoolbus driver can only drive a school bus. And because the schoolbus driver's skills are limited, he is paid a substantially lower wage than a physician. When you begin to disproportionately raise his wage to the point where it doesn't correspond to his skill you create imbalances in the market, and in trying to restore balance you get less and less school bus driving jobs.

And I don't disagree with your computer programmer example. As computer technology evolves a computer programmer will have to keep up with the changes and if he doesn't he'll be out of work. But, what's your point? There have been vast changes in virtually all industries throughout America's history, and the labor force has adjusted to these changes. There are a number of areas where technology has taken over jobs once done by humans, like the introduction of machinery during the British Agricultural Revolution. Machines and plows made many human jobs obselete, but new jobs became available in other markets. The unemployment was structural, and structural unemployment is when workers are transitioning and adjusting to changes in the economy. It's not permanent, it's temporary.
WinePusher wrote:This is also part of how Free Markets effectively allocate resouces. However the minimum wage, which is a government intervention in the labor market, skews this and forces employers to pay a high wage to a low skilled worker. While it is intended to help low skilled workers it hurts them by keeping them out of the job market. Proof of this lies in the fact that teenagers, eligiable workers with virtually no skills, are afflicated with some of the highest levels of unemployment (5).
Abraxas wrote:Is that because of the minimum wage or because of a shrinking number of available skilled jobs forces people with more work experience to take jobs more normally associated with teenagers? How do you know? How can you show it?
I know that I'm right because of history, and I can show that I'm right using history. You, on the otherhand, cannot. Here's the reason why the minimum wage is the cause of unemployment amoung unskilled workers. Between 1948-1951, unemployment rates amoung teenagers were at an all time low, and the unemployment rate between white and black teenagers was equal. That's because the minimum wage was irrelevant because it was not adjusted for inflation. Afterwards, the government began adjusting the minimum wage for inflation and teenage unemployment, especially black teenage unemployment, gradually rose. This shows that the minimum wage is responsible for the loss of employment among unskilled workers, such as teenagers. Source.
Abraxas wrote:Also, as posted in a graph earlier, real wages for the bulk of Americans grew fastest in more heavily regulated markets. When the deregulation started under Nixon to some degree and to a much greater extent under Reagan, that is when wages leveled off and stopped growing despite the wealthy doing much better than ever before.

http://en.wikipedia.org/wiki/Household_ ... ted_States
Did you miss the part where I showed household income measurements to be useless and flawed?
Abraxas wrote:Not too late, we can do a round five if you are feeling up for it.


Yea, I'm absolutely down to do another round if you are. But since we've been tackling multiple issues in each round why don't we devote round 5 to social issues in general. This would include topics such as education, abortion, gay marriage, gun control, the economic impact of the wars, etc.
WinePusher wrote:The question that has to be asked, then, is what causes wages to rise? Capital and investment goods causes wages to rise. I'm going to guess that you're one of those people that believes the introduction of machinery and technology kills jobs, but it doesn't. I've never heard of a machine that can fully operate itself.
Abraxas wrote:No, but one machine operator is many times more productive than non automated workers. You may need one machine operator and one machine repairman, but if it can do the job of ten people, it is still a net loss of eight jobs.


True, but if a machine can do a job better and more efficently than a human why should we stop using machines? Yea, it results in unemployment but it benefits consumers. And the unemployment is temporary.
WinePusher wrote:And investment goods benefit the condition of workers as opposed to harming it. Wages correspond to productivity, and machines and technology increases workers productivity which increases their wage ipso facto.[/quote="Abraxas"]Often not. Compare the rate of production now to fifty years ago and compare the median income. You will see this does not hold true.


Why would I compare this production rate now to the production rate fifty years ago? We're in a recession now, and that means there is not as much production. Compare the production rate prior to the recession to the rate fifty years ago and you won't see a difference.
WinePusher wrote:This is a free market innovation, not a government intervention. Furthermore, the incomes of the middle class have risen along with the incomes of the upper class. A liberal like Paul Krugman prefers to measure income growth in terms of households cause the data fits his narrative (13). Using household incomes as a measurement you would see stagnate incomes (14) Chart H-11. However, using the same data you see that the size of households has been declining over time. Households consist of less people, which results in less incomes which is reflected in the household measurment since it does not control for the number of people. Using a per capita income measurement, which measures income per individual instead of incomes per households, you'd see that incomes have been rising at a fast and consistent pace (15) Chart P-1.
Abraxas wrote:Chart P-1 is completely useless as it does not adjust for percentile. If the top earners are going up but the bottom ones aren't you would see the exact same results.
It actually does because it's a median figure. The income earned by everybody is averaged out, making it a comprehensive representation of the entire population. It doesn't just measure the top earners, it measures everybody.
WinePusher wrote:How can you possibly say that unions are the reasons why working conditions have improved and why wages have risen when only 12% of all workers actually belong to a union?
Abraxas wrote:Because 12% now has nothing to do with the percentage who were in unions at the time the rights were initially secured. If you would like to introduce those figures we can discuss them.
I expected you to raise this objection. So basically you're saying that the number of workers belonging to unions declined overtime? That's partially true, but even iff you look at the statistics you'd see that the peak of union membership was around 26-27% of the labor force which is still miniscule:

Image

And notice how the increase in the number of people belonging to unions rose during the post war period. You have alot of people returning home from the war and re-enterting the labor force, and some of them are obviously going to join unions. And besides, this was the 20th century, not the 19th century when industrial America was establishing itself.
WinePusher wrote:In a free market people should have the right to associate with whomever they want, this means that they should have the right to join or form a union. But it's a total exaggeration to say that things like working conditions and benefits arose out of unionization. One way to measure the effect of working conditions is using indicators such as on the job injuries, on the job deaths, and so on. Tell me how unions solved these problems because I've yet to hear a logical argument connecting the two, or how the government solved these problems.
Abraxas wrote:The appropriate place for these questions would have been your initial response to my post, but very well. You know, I could debate this with you, but I think I will just quote your own link instead.

"This spectacular change in worker safety resulted from a combination of forces that include safer production technologies, union demands, improved medical procedures and antibiotics, workmen's compensation laws, and litigation.

To say they arose of unionization alone would be an exaggeration, to say unions were a major force in their implementation would not.
Unions can demand things and bargain for things. Great, everybody already knew that. Things like safer production technologies and improved medical care came about through the free market, they were not the result of union activity or government interference. It doesn't even make sense to say that safer technology and improved medical care was the result of unions and government intervention since they have no jurisdiction over these things anyways.
WinePusher wrote:These problems were solved by the market, by the innovation and introduction of new technologies and machines.
Abraxas wrote:Evidence please.


How else do you think safety conditions could have improved in the work place?
WinePusher wrote:As I said before, unions are sometimes able to raise the income and wages of union workers at the expense of non-union workers. The reason why wages rose over time is because worker's productivity rose overtime (17) despite any government interference.
Abraxas wrote:That certainly didn't hurt but if you think that is the only cause, you are sadly mistaken. Further, studies show that non-union employees in heavily unionized sectors still make more than comparable laborers in other market sectors and so unions actually benefit them indirectly.

http://www.epi.org/publication/briefingpapers_bp143/

The idea that unions hurt the wages of non-union members is simply counterfactual.
I read the section of your source concering union wages, non-union wages and total wages and it's nonsense. It doesn't even begin to address the fundamental problem, which is that in order for a union to be effective it must raise wages above the level of the actual market value wage. When it does this, the firm must make up the difference somehow. How does it do this? Higher prices, non-union worker wage cuts, or in the case of the Big 3, do nothing, run an unbalanced budget and run to the government when financial disaster hits.
WinePusher wrote:He is limiting his customer base which cuts against his goal of profit maximization. The free market has a self regulation that essentially deterrs segregation because if a business owner wants to exclude blacks from his business, he is imposing a cost on himself.
Abraxas wrote:But if the presence of blacks were to discourage whites from patronizing the business, as was the case in the south, allowing blacks in would impose that cost which is why a lot of southern businesses were segregated even though there was no law requiring them to be.


And you think this was true for all businesses in the south? I could cite dozens of instances where blacks and whites had integrated despite the fact that the government was enforcing segregation. I'll use my bus example again. Both blacks and whites rode the bus together, and blacks were not disallowed from riding the bus because busing companies relied on the business of black people. Using your hypothesis, busing companies should have completely excluded blacks from their buses because their white customers would feel uncomfortable, but they didn't.
WinePusher wrote: Do you think blacks would be excluded to one team and whites to another?
Abraxas wrote:Uh, yeah. Are you completely unfamiliar with Negro League Baseball?
Yea, I am. I follow Basketball though and my point was that many great players in the NBA are black, so it would be impossible for the NBA to segregate itself into white vs. black teams.
WinePusher wrote:This is why the period of racial segregation in America is referred to as de jure segregation (18) because it was law enforced and sanctioned by the government and if it wasn't it could not exist.
Abraxas wrote:From your own source:

"Racial segregation in the United States can be divided into de jure and de facto segregation. De jure segregation, sanctioned or enforced by force of law, was stopped by federal enforcement of a series of Supreme Court decisions after Brown v. Board of Education in 1954. The process of throwing off legal segregation in the United States lasted through much of the 1950s, 1960s and 1970s when civil rights demonstrations resulted in public opinion turning against enforced segregation. De facto segregation — segregation "in fact" — persists to varying degrees without sanction of law to the present day. The contemporary racial segregation seen in America in residential neighborhoods has been shaped by public policies, mortgage discrimination and redlining among other things."

Both de jure and de facto segregation existed simultaneously, they were not independent eras.
I dont' see how this refutes anything I said. Obviously de jure segregation is far worse than de facto segregation, and the extent to which de facto segregation exists is disputable. I don't consider things like 'white flight' to be de facto segregation, I consider it an appropriate exercise of the right of association and property. Also terms like 'mortgage discrimination' are incredibly dumb and demonstrate how illogical liberals think. Blacks get turned down more often than whites do for mortgages. In a liberals mind, it's obviously because those mortgage lenders are racist scumbags who don't want blacks to own a home, right? Conservatives think a little more clearer than that. In a conservatives mind, it could be due to the fact that blacks, as a collective group, tend to be financially worse off than whites which is why they are more likely to be deemed unfit for loans.
WinePusher wrote:After a while the government did strike down these laws, but it was merely an example of self correction. Segregation was the fault of the government, not the fault of the free market. And racial segregation continues to exist to this very day in government run housing projects (19). It's pure absurdity to say that government intervention is needed to remedy this problem when in fact it is a problem because of government in the first place.
Abraxas wrote:Please provide some evidence for this. In a lot of areas there were absolutely no laws requiring segregation but proprietors chose to implement it anyway to meet the demands of their clientele. Please, explain to me how your theory of the government being to blame for everything accounts for this.
Evidence for what? The fact that government housing is a prime example of segregation in modern day America? Or the fact that segregation could not exist in a free market? If it's the latter, I've already explained my rationale behind that statement. If a businessman chooses to segregate his business, he will lose out on the revenue he would have otherwise earned from those customers he segregated against. This is a market regulation that deters this type of thing. Businesses seek to maximize profits, as you said profits=revenue-expenses, and by discriminating and segregating their business they are limiting their revenue and thereby limiting their profits. The only way the scenario you describe could happen is if blacks made up a small portion of the community. If there was a community with a small population of blacks, a racist businessowner could probably get away with discriminating. But that's the only way, and there still is a cost imposed upon him.
Abraxas wrote:Discriminating against people for the reasons of hygiene or the inability to perform a job correctly, no. For simple race, yes.
Ok, in your mind there's 'good' discrimination and 'bad' discrimination. You don't see any reason why an employer would discriminate against a black other than him being a diehard racist? What would you say to the owner of a chinese restaurant who wanted to hire chinese waiters and waitresses? Is that an example of 'good' or 'bad' discrimination?
WinePusher wrote:Case 1: Apartheid in South AfricaThe apartheid in South Africa is an extremely complicated issue, but it nicely proves everything I'm talking about. The thing to know is that apartheid refers to racial segregation, and that Apartheid in South Africa refers to racial segregation in South Africa (20). What is so interesting about South Africa is how things that you support, Unions, Minimum Wages, Equal Pay laws were used by racists as tools to keep blacks excluded. White's formed unions in order to restrict blacks from entering the job market (in this case it was mining) and unions in turn advocated for minimum wages and equal pay laws because they knew these tools would prevent blacks from getting hired (21). What is even more interesting is that the apatheid group in South Africa opposed Capitalism, and the reason was that the principles under which a capitalist, free market economy operates would not have supported nor allowed apartheid to exist (22).
Abraxas wrote:Firstly, it wasn't the anti-capitalists supporting apartheid, the opposite is true. In particular the self professed communists and socialists were deeply opposed to apartheid but the capitalists favored it because it provided a bulwark against the expansion of the Soviet Union.
Well, some of that is true. Yea, capitalists and the government of south africa were allied against the Soviet Union but that's a non sequitor. It doesn't refute the fact that apartheid implemented policies that you are in favor of that were used to as a tool for racists.
Abraxas wrote:Secondly, there is no reason one cannot have unions and equal pay laws so I fail to see the point of bringing this up.
What? Please clairfy what you're saying here.
WinePusher wrote:Case 2: The British Agricultural Revolution

The case of Agrarian Britian proves what I was saying about how market innovations in technology and machinery are what improve working conditions and the standard of living for workers. What made the agricultural revolution in Britain possible was the increase in the productivity of farmers and laborers due to the introduction of capital such as plows, carts and wagons (23). Because the productivity of workers rose, working conditions and wages rose as well which marked the beginning of the Industrial revolution in Britian. To reiterate, the British Agricultural Revolution was the result of market innovations that subsequently led to improvements in working conditions and wages. Nowhere was the government involved in planning or running the agriculture market.
Abraxas wrote:And, what exactly? I never said the market never improves on its own.
I never said that you did. My purpose in citing the agricultural revolution in Britain is to show the advancement in the conditions of workers despite government, or unions, interfering.
WinePusher wrote:Case 3: The Auto Industry Bailout and the UAW

Here, I don't want to focus on the wisdom of Bailing out the Auto Industry, but on why the Auto Industry needed a bailout in the first place. What caused the Big Three to go under? The answer is the United Auto Workers Union (24). This case shows how detrimental unions are not only the non-union workers, but to the industries they're involved with. The wages and benefits demanded by the UAW were totally unrealistic, but because of the government gurantees and protecetions they recieved the Big 3 had no choice but to cave to their demands. Here's an interesting statistic comparing the Big 3 with foreign Japanese auto makers: on average Chrysler, GM and Ford pay $29 per hour than Toyota, Honda and Nissan do (25). It should be pretty clear why the Big 3 went under.
Abraxas wrote:Except the 73 dollars an hour figure is dishonest at best as it includes all compensation as part of the pay figure, including things like healthcare that are paid for out of taxpayer dollars in Japan. Actual wages for auto workers are closer to 40 an hour, very comparable to the actual wages in Japan, and pensions for retired workers.

http://www.nytimes.com/2008/12/10/busin ... =permalink
So because healthcare and pensions are included, the figure is dishonest??? I don't really care what the exact figure is, all I care about is the fact that UAW workers at Big 3 manufacturers made signficantly more than workers at Japanese companies like Toyota. Your source, written by a liberal, agrees with this. Unions were the cause of the Big 3's decline, unless you can provide a better more plausible cause?
Abraxas wrote:Further, how could you even possible accept this at face value if you are going to claim unions cannot raise wages, how can you then blame the union for keeping wages too high to be competitive?
Did I ever say unions can't raise wages? I made it clear that unions can raise wages for union workers and that this generally creates negative effects elsewhere. I mean, do you not think the UAW has an ironclad grip on the throats of the Big 3 or that the UAW played a substantial role in their decline? Again, look at the statistic I posted. We're not talking about auto workers based in Japan, we're talking about auto workers at Japanese firms based in the United States. There is a huge discrepency in the pay and benefits recieved by a UAW worker at one of the Big 3 companies, and a worker at a Japanese company like Toyota. The Big 3 needed a bailout, Japanese firms like Toyota didn't. Why? Because of the UAW, why else?

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Abraxas
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Post #27

Post by Abraxas »

WinePusher wrote:
WinePusher wrote:Individuals are hired by employers because the employer believes they will be an asset to his or her company. If the individual becomes a liability instead of an asset, they are let go. So, the question I want to pose is whether unemployment would be higher in a government, centrally planned economy or in a free market economy.
Abraxas wrote:Why? To begin with it is a false dichotomy. There is a lot of space between market completely absent of government intervention and one controlled in everything by the government. Nobody is arguing for a centralized economy and to this question is essentially a strawman, the attack of a position nobody is holding. Even then though, for positions that should become clear momentarily, I think you reached the wrong conclusion.
Everything you've been arguing for in this thread have been examples of a centralized economy. I understand the distinction you're trying to make, but it doesn't work. I believe that economic decisions and choices should be diversified and widely dispensed and dispersed throughout a society, on the other hand you seem to believe that decisions and choices should be concentrated and centralized in the government. That's what every single governmental regulation ends up amounting to, and if I'm not mistaken you're in favor of heavy governmental regulations.
WinePusher wrote:Since workers are simply a resource used in the production process, unemployment would be higher in a centrally planned economy because the model is inefficient at allocating resources.
Abraxas wrote:No, actually, this is wrong. There is a reason the Soviet Union had an effective zero percent unemployment rate because they could artificially increase the demand for workers almost infinitely.

There were reports of the Soviet Union quite literally having one factory melt scrap steel into ball bearings and shipping them to another factory to melt ball bearings into scrap steel just to keep unemployment down. The reason a central economy can keep unemployment lower is it has a much greater tolerance for activities which provide no actual benefit to the nation. With this in mind, you should have argued against regulated markets vs. free, not centralized vs. free because you are way off base.
Sorry, but there is no actual difference between 'regulated' and 'centralized.' The only distinction between the two is that regulated markets refers to individual firms and markets (microeconomic) while centralization refers to the overall economy (macroeconomic). But that's a trivial point.
No. Just no.

Setting rules for how individuals and businesses interact is a vastly different thing from telling them what to make and it what quantities. Regulations limit how things get done, centralization determines what things get done. This is a very important distinction, but one honestly only marginally relevant to the thread.
As for the Soviet Union, you forgot to mention that while everybody virtually does have a job, every is paid the exact same amount of money.
I didn't forget, it wasn't relevant to the point of unemployment. If you want to discuss wage equality in a centralized system vs. a market one, we can, but that wasn't the original point.
Under a capitalist free market system there are discrepencies in wages and incomes, and this is vital for a labor market to function. Was there an abundance of high skilled workers, such as doctors and engineers in comparison with low skilled farm laborers, in the Soviet Union? No, because of one simple fact. Nobody in their right mind would work their butt off to acquire the skills it took to be a doctor or an engineer if they knew their income would match that of a farmer.
And yet, somehow, the Soviet Union managed to go from a borderline agrarian society to a fully industrialized one in a much shorter period of time than the US or Europe did, and did so while largely keeping technologically abreast of the Western world, in some cases being flat out superior as was the case with Sputnik.
To go off on a bit of a tangent, this is why allows Capitalism to function. Entreprenuership, which is one of the four factors of production, and has an inherent risk. The reason why people are willing to take this risk is because they believe the return they will earn will exceed the risk. Once you start taxing those who are successful, you stifle entrepreuership and economic activity.
Not really. Even if you take half the next dollar I earn in taxes, I still have fifty cents more than I had before. My labor still makes me better off than I was, and when I am working with billions of dollars that move percentages at a time, that is a heck of a lot of money even with the taxes.
And what do you mean by 'artificially increase the demand for workers infinitely?'
I mean that in a centralized economy, where the state can tell each worker where to work doing what (which is not the same as a regulated economy), the state can artificially lower unemployment figures through essentially unlimited capacity for nonproductive action, ala the steel balls and the steel scraps. Since they don't worry about making a profit or gains, they have enormous tolerance for activities that do not benefit them economically.
Abraxaas wrote:Now, in a regulated market, can it maintain an unemployment and underemployment rate equal to or lesser than a free one? Probably, we've not seen substantially higher rates in Europe than in the US historically. Many are substantially lower. Plus, regulations themselves take workers to draft, enforce, and determine compliance with. Unless you can demonstrate expansion in all other market sectors to accommodate the workers leaving those positions, I don't think you can make that argument.


Again, you're leaving out crucial factors which is why you've committed multiple post hoc ergo propter hoc fallacies. Why does EU, which does regulate their markets much more than the US, have lower unemployment rates? Maybe because they have a smaller labor force than the US due to a lower retirement age and since the average European worker gets enourmous amounts of leisure time more people must be pulled into work which accounts for the low unemployment rate. Nothing about regulations accounts for the rate, just the European culture and lifestyle. And Americans are the lazy ones? :roll:
Yes, thank you for making my point. Through government regulation to things like the work day, retirement age, and so on, the nations of Europe enjoy more leisure time, lower unemployment rates, and all the luxuries of Western living. I honestly don't understand why you keep returning to this point, harping on the fact that Europeans tend to have more time to enjoy their lives both in retirement and in living and acting like it is a horrible failing. As a species we are thousands of times more productive than we used to be, why shouldn't we pause for a second and start enjoying the fact we live well through less labor instead of pushing even harder?
Abraxas wrote:At the private level, your link belies your argument. It says, and I quote;

"A majority of all employees in the United States are "at will" employees. What this means is that you can fire these employees at any time and for any reason, so long as the reason is not discriminatory, retaliatory or otherwise illegal."

Well, what is illegal? Discrimination under federal discrimination laws, refusing to take a lie detector test, retaliation for employees asserting rights or complaints about OSHA violations, or for refusing to commit illegal or moral actions. What is not illegal is the firing of private employees for poor performance or misconduct. Since the employer can fire for those things, there is no evidence to support fear of not being able to discourages hiring.
This is one huge non sequitor. I never disputed the fact that most employees are 'at will' employees. What I said is that governmental regulations make it more difficult for employers to fire workers, and for you to counter by saying most employees are at will employees does not address my point.
It does. You said government regulations discourage employers from hiring, in particular you applied it to this recession and that termination laws discourage hiring because of the difficulty in firing. I pointed out that this is not the case because it is still trivially easy to fire in the private sector most of the time and also because the only reasons that it is illegal to fire for are for blatantly unethical reasons to begin with and that conduct, nonperformance, and value added to the company are not among them. The things that actually impact how well the company is able to compete, short of breaking the law, they very much can fire for and do so without restriction.

That being the case, there is no reason to believe termination laws have anything to do with unemployment being what it is.
Abraxas wrote:As for what is driving the current unemployment figures, a lot of that has to do with employers having discovered they can work their current employees longer and harder to get the same job done, and the continued replacement of workers with machines. Government involvement in the recession, has, however, demonstrably saved jobs as several major banking institutions would have collapsed as would the auto industry, costing hundreds of thousands of jobs.
Not really, the government cannot create any actual economic demand or any actual jobs.
Certifiably untrue. While a favorite talking point, there are all kinds of actual jobs the government can create. Public servants being the most obvious, like police, soldiers, teachers, etc. After that, regulations create a demand for people with skills to interpret and argue those regulations (law creates demand for lawyers). A third area the government creates jobs is in high risk experimental technologies with only limited, or even nonexistent commercial applications. Capitalism is very good about refining existing technologies, taking what already exists and making it more powerful, more efficient, etc. However, it has not always been as good at revolutionizing, taking big leaps towards the fringes of our understanding. The reasons for this are obvious, a lot of risk, a lot of expense, but not a lot of gains in the short term. Few companies can afford to maintain billions of dollars a year speculating on technologies that may or may not pan out as commercially viable. Government can, and sometimes when they do it pays off in a big way. The internet, and all the commerce that came with it, stemmed from a DARPA project.
All the government can do is create artificial demand and artificial jobs. I mean, all we have to do is look back through history to see how wrong your idea is. Towards the inception of this recession, we have had massive amounts of fiscal stimulus yet the unemployment rate has not gone down, it hasn't even remained constant, it actually increased beyond what economists predicted.
This is simply wrong; unemployment has been dropping for a while. Yes, it spiked high, but it has been on the decline, dropping over 2.5% from its high of 10.9%
Abraxas wrote:Further, what is the alternative? Letting people practice medicine who know absolutely nothing of medicine? What do you suppose the death rate would be if doctors didn't have a medical background due to medical related accidents and malpractice?
Do you see the hidden implication in your statement? What you're basically saying is that a doctor who hasn't gotten a government license knows nothing about medicine and that could not be further from the truth. First of all, I am not saying that absolutely anybody should be allowed to practice medicine. There is one restriction that prevents random people from entering the medical field, and it's called a medical degree. Once you complete your medical degree, which takes several years including residency, you should be able to practice without having to go further to get a government license. Once you get out of medical school you're most likely going to be burdened with massive debt, so the ideal thing would be to start practicing right away in order to pay off this debt. However, going onto get a license will burden you with more debt which is why the concept of occupational licensing deters perfectly competant people from entering a field and which is why markets that are heavily licensed suffer from higher prices.
Oh please, get real. Are you honestly contending people will take hundreds upon hundreds of thousands of debt and countless years of time for the education but the token waiting period and licensing fee are just too much?

Further, how is getting a medical degree as a requirement to practice medicine as opposed to a medical license anything more than slightly less regulatory structures already in place? Still government restricting people from seeking care from those not approved by the government.
Abraxas wrote:But there are some professions such as surgeon or electrician or pharmacologist where the risk of putting people in positions where they have no idea what they are doing leaves dead bodies and so any reasonable society will have standards that must be met before allowing someone to practice. As Mr. Stossel points out even with minimum standards a lot of bad gets through, can you imagine no standards at all making this better?
You forget that it is the government who is issuing this license, and therefore, setting the standards for the particular occupations. How does the government know what the standards should be?
Through experts in the field? The same way a company looking to build an airplane when the company owners know nothing of airplanes would.
The basic idea behind a regulated market is that the government is omniscient and knows everything. This idea was debunked by F.A Hayek. The government doesn't actually know anything, they only pretend to know and every economic decision or regulation is akin to an educated guess which is why government intervention is the reason for the boom and bust cycles.
I never liked Hayek. Perfect market knowledge requires perfect market transparency and honest players, none of which exist. However, the government knows more than you give it credit for, and it can take an active part in shaping the rules of the game which can change the outcome. It does not need to know everything, just enough to seek those who understand medicine to form regulations for medicine.
WinePusher wrote:My conclusion is that unemployment would be far lower and far less prevalent if the labor market was free from these government mandates and interventions.
Abraxas wrote:Great, and when you feel like providing some support for that conclusion I'd love to see it.
Already have.
No, actually, you provided no evidence why a free market, just speculation that doesn't have any kind of statistical backing or concrete evidence, just two lines of reasoning that were deeply flawed. Further, when it was pointed out that those with regulated markets seem to be doing comparably, you conceded the point even if you did throw in qualifications.
WinePusher wrote:First of all, low wages aren't necessarily a bad thing. Second of all, income inequality among groups is not indicative of labor discrimination and can be a good thing. And finally, wages will rise and have risen the most under a free market model, not a government planned model.

Wages correspond to a workers productivity and skills. A worker who has low skills and low productivity will earn a low wage.
Abraxas wrote:You are lacking a key word in there which is "marketable". Low marketable skills. Someone could be the greatest programmer for a computer language on the planet one year, have a new computer language come along the next, and make them completely unmarketable. How many skilled laborers have been rendered "low skilled" due to advances in technology taking over jobs once held by humans? Skill isn't something you either have or do not have, everyone has different skills to different degrees and depending on the movement of the market skills of one sort can go from being worthless to being incredibly lucrative such as extreme sports athletes or the opposite, such as watchmakers.


So you're saying that a school bus driver has an equal amount of skill as a physician?
No. I said no such thing.
Obviously the physician is more skillfull than the schoolbus driver because of the mere fact that the physician can do both jobs while a schoolbus driver can only drive a school bus.
On what basis do you assert a physician an drive a bus? He could be a terrible driver. Further, the bus driver may be a much more skilled father than the doctor, and may be more skilled with money, mechanics, and painting than the doctor. On what basis do you assume that ones profession describes their entire skill set?
And because the schoolbus driver's skills are limited, he is paid a substantially lower wage than a physician. When you begin to disproportionately raise his wage to the point where it doesn't correspond to his skill you create imbalances in the market, and in trying to restore balance you get less and less school bus driving jobs.
How does any of this contradict what I said other than by building in the unwarranted assertion that marketable skills encompass all skills?
And I don't disagree with your computer programmer example. As computer technology evolves a computer programmer will have to keep up with the changes and if he doesn't he'll be out of work. But, what's your point? There have been vast changes in virtually all industries throughout America's history, and the labor force has adjusted to these changes. There are a number of areas where technology has taken over jobs once done by humans, like the introduction of machinery during the British Agricultural Revolution. Machines and plows made many human jobs obselete, but new jobs became available in other markets. The unemployment was structural, and structural unemployment is when workers are transitioning and adjusting to changes in the economy. It's not permanent, it's temporary.
There is a difference between the workforce making the transition and individual workers. The fact is that while a workforce might be able to migrate to a new skill set, an individual worker may not. Imagine, you spend your entire life devoted to mastering a skill, and not just any skill, an extremely valuable skill, say managing hedge funds. You are the absolute master of this, then, one day, MegaCorp unveils the FundHedger 9000, a computer that through programming can do your job better than you can. It can read millions of reports a day to your thousands, it can simultaneously track every publicly traded stock on the market, it uses advanced analytic software that can predict likely market changing events long before a company announces them based on trends. Then what? You devoted your life and time to mastering a skill that no longer matters because a machine can do it better. Are you supposed to go back to low skill no skill work?

Is a society just when the price of progress is the complete destruction of those unable to keep up with the pace of change? Who through luck of the draw chose a field destined to become obsolete before they do? You should think carefully on this because the computer revolution we've seen, its nothing. It is a drop in the bucket. If computer power trends continue at historical rates, inside of twenty years we will have computers a thousand times more powerful than what we have today. A million in 40. Computer software is becoming complex enough to read advanced English and quickly comprehend as seen when the computer Watson flattened two Jeopardy grandmasters in competition. They can already trade stocks with the best of them. How much longer do you suppose it is going to be before human labor is effectively obsolete, or. at least enough of it is to push 20, 20, 50% or more unemployment? How well do you suppose an economy will function under those conditions and what will we do with those left behind?

WinePusher wrote:This is also part of how Free Markets effectively allocate resouces. However the minimum wage, which is a government intervention in the labor market, skews this and forces employers to pay a high wage to a low skilled worker. While it is intended to help low skilled workers it hurts them by keeping them out of the job market. Proof of this lies in the fact that teenagers, eligiable workers with virtually no skills, are afflicated with some of the highest levels of unemployment (5).
Abraxas wrote:Is that because of the minimum wage or because of a shrinking number of available skilled jobs forces people with more work experience to take jobs more normally associated with teenagers? How do you know? How can you show it?
I know that I'm right because of history, and I can show that I'm right using history. You, on the otherhand, cannot. Here's the reason why the minimum wage is the cause of unemployment amoung unskilled workers. Between 1948-1951, unemployment rates amoung teenagers were at an all time low, and the unemployment rate between white and black teenagers was equal. That's because the minimum wage was irrelevant because it was not adjusted for inflation. Afterwards, the government began adjusting the minimum wage for inflation and teenage unemployment, especially black teenage unemployment, gradually rose. This shows that the minimum wage is responsible for the loss of employment among unskilled workers, such as teenagers. Source.
That establishes a correlation, not causation. Your own link indicated some researchers viewing the data found the link inconclusive or nonexistent. Further, inflation could be the answer itself, resulting in more women taking part time jobs or men adding a second job, back when one working parent was common or just more teens competing for the same jobs for more money for the family.
Abraxas wrote:Also, as posted in a graph earlier, real wages for the bulk of Americans grew fastest in more heavily regulated markets. When the deregulation started under Nixon to some degree and to a much greater extent under Reagan, that is when wages leveled off and stopped growing despite the wealthy doing much better than ever before.

http://en.wikipedia.org/wiki/Household_ ... ted_States
Did you miss the part where I showed household income measurements to be useless and flawed?
Yes, I caught the part where you tried and failed due to not reading closely enough, but we will come back to that in a moment.
Abraxas wrote:Not too late, we can do a round five if you are feeling up for it.


Yea, I'm absolutely down to do another round if you are. But since we've been tackling multiple issues in each round why don't we devote round 5 to social issues in general. This would include topics such as education, abortion, gay marriage, gun control, the economic impact of the wars, etc.
We can work out the specifics in PM or the GC thread.
WinePusher wrote:The question that has to be asked, then, is what causes wages to rise? Capital and investment goods causes wages to rise. I'm going to guess that you're one of those people that believes the introduction of machinery and technology kills jobs, but it doesn't. I've never heard of a machine that can fully operate itself.
Abraxas wrote:No, but one machine operator is many times more productive than non automated workers. You may need one machine operator and one machine repairman, but if it can do the job of ten people, it is still a net loss of eight jobs.


True, but if a machine can do a job better and more efficently than a human why should we stop using machines? Yea, it results in unemployment but it benefits consumers. And the unemployment is temporary.
How temporary? How do you know those jobs will ever come back at a rate in keeping with population growth? I'm not saying we should stop using machines, I'm just saying the demand for labor is likely going to shrink over time as humans become more productive, potentially exponentially more productive, and our economic models must take this into account in a just society.
WinePusher wrote:And investment goods benefit the condition of workers as opposed to harming it. Wages correspond to productivity, and machines and technology increases workers productivity which increases their wage ipso facto.[/quote="Abraxas"]Often not. Compare the rate of production now to fifty years ago and compare the median income. You will see this does not hold true.


Why would I compare this production rate now to the production rate fifty years ago? We're in a recession now, and that means there is not as much production. Compare the production rate prior to the recession to the rate fifty years ago and you won't see a difference.
What? Our rate of production is vastly higher now than it was 50 years ago. Median wages are not.
WinePusher wrote:This is a free market innovation, not a government intervention. Furthermore, the incomes of the middle class have risen along with the incomes of the upper class. A liberal like Paul Krugman prefers to measure income growth in terms of households cause the data fits his narrative (13). Using household incomes as a measurement you would see stagnate incomes (14) Chart H-11. However, using the same data you see that the size of households has been declining over time. Households consist of less people, which results in less incomes which is reflected in the household measurment since it does not control for the number of people. Using a per capita income measurement, which measures income per individual instead of incomes per households, you'd see that incomes have been rising at a fast and consistent pace (15) Chart P-1.
Abraxas wrote:Chart P-1 is completely useless as it does not adjust for percentile. If the top earners are going up but the bottom ones aren't you would see the exact same results.
It actually does because it's a median figure. The income earned by everybody is averaged out, making it a comprehensive representation of the entire population. It doesn't just measure the top earners, it measures everybody.
That's not what median means. Median means that if you lined everyone up by income and picked the guy in the dead center, it would be what he makes. It is a good way to eliminate outliers. The chart is a list of mean earnings, which includes all outliers as part of the whole. If everything stays the same except the top end increases, the mean will increase too. This is what your chart shows. If I have one guy with a billion dollars and 999 with nothing, their mean wealth is a million. If his wealth increases to ten billion, their average wealth as a group has increased to ten million, even though his was the only one that changed. The same principle is at work here.
WinePusher wrote:How can you possibly say that unions are the reasons why working conditions have improved and why wages have risen when only 12% of all workers actually belong to a union?
Abraxas wrote:Because 12% now has nothing to do with the percentage who were in unions at the time the rights were initially secured. If you would like to introduce those figures we can discuss them.
I expected you to raise this objection. So basically you're saying that the number of workers belonging to unions declined overtime? That's partially true, but even iff you look at the statistics you'd see that the peak of union membership was around 26-27% of the labor force which is still miniscule:

Image
Largely because they are including as part of the labor force agricultural and service sector workers who make up an enormous portion of the labor market but had few to no unions. The manufacturing sector is where a lot of the advances were driven and it had a much stronger degree of unionization.
And notice how the increase in the number of people belonging to unions rose during the post war period. You have alot of people returning home from the war and re-enterting the labor force, and some of them are obviously going to join unions. And besides, this was the 20th century, not the 19th century when industrial America was establishing itself.
Yes, and you note the graph cuts off before then. If you go back further, to the 20s, you'll notice on the other side of WWII and the Great Depression, union membership goes up sharply again.

http://en.wikipedia.org/wiki/Labor_hist ... .80.931929
WinePusher wrote:In a free market people should have the right to associate with whomever they want, this means that they should have the right to join or form a union. But it's a total exaggeration to say that things like working conditions and benefits arose out of unionization. One way to measure the effect of working conditions is using indicators such as on the job injuries, on the job deaths, and so on. Tell me how unions solved these problems because I've yet to hear a logical argument connecting the two, or how the government solved these problems.
Abraxas wrote:The appropriate place for these questions would have been your initial response to my post, but very well. You know, I could debate this with you, but I think I will just quote your own link instead.

"This spectacular change in worker safety resulted from a combination of forces that include safer production technologies, union demands, improved medical procedures and antibiotics, workmen's compensation laws, and litigation.

To say they arose of unionization alone would be an exaggeration, to say unions were a major force in their implementation would not.
Unions can demand things and bargain for things. Great, everybody already knew that. Things like safer production technologies and improved medical care came about through the free market, they were not the result of union activity or government interference. It doesn't even make sense to say that safer technology and improved medical care was the result of unions and government intervention since they have no jurisdiction over these things anyways.
So? Once more, it was never my contention that unions were the only force in these changes, just a major one.
WinePusher wrote:These problems were solved by the market, by the innovation and introduction of new technologies and machines.
Abraxas wrote:Evidence please.


How else do you think safety conditions could have improved in the work place?
Regulation and demands for workplace standards of safety by unions, just like your link said.
WinePusher wrote:As I said before, unions are sometimes able to raise the income and wages of union workers at the expense of non-union workers. The reason why wages rose over time is because worker's productivity rose overtime (17) despite any government interference.
Abraxas wrote:That certainly didn't hurt but if you think that is the only cause, you are sadly mistaken. Further, studies show that non-union employees in heavily unionized sectors still make more than comparable laborers in other market sectors and so unions actually benefit them indirectly.

http://www.epi.org/publication/briefingpapers_bp143/

The idea that unions hurt the wages of non-union members is simply counterfactual.
I read the section of your source concering union wages, non-union wages and total wages and it's nonsense. It doesn't even begin to address the fundamental problem, which is that in order for a union to be effective it must raise wages above the level of the actual market value wage. When it does this, the firm must make up the difference somehow. How does it do this? Higher prices, non-union worker wage cuts, or in the case of the Big 3, do nothing, run an unbalanced budget and run to the government when financial disaster hits.
You neglect they could just accept lower profits. Market value is whatever someone is willing to pay for it and if it were above market value, the unions would not have had employment.
WinePusher wrote:He is limiting his customer base which cuts against his goal of profit maximization. The free market has a self regulation that essentially deterrs segregation because if a business owner wants to exclude blacks from his business, he is imposing a cost on himself.
Abraxas wrote:But if the presence of blacks were to discourage whites from patronizing the business, as was the case in the south, allowing blacks in would impose that cost which is why a lot of southern businesses were segregated even though there was no law requiring them to be.


And you think this was true for all businesses in the south? I could cite dozens of instances where blacks and whites had integrated despite the fact that the government was enforcing segregation. I'll use my bus example again. Both blacks and whites rode the bus together, and blacks were not disallowed from riding the bus because busing companies relied on the business of black people. Using your hypothesis, busing companies should have completely excluded blacks from their buses because their white customers would feel uncomfortable, but they didn't.
I said nothing of the sort. That a company could be profitable through excluding certain customers does not imply all businesses could do so nor that it would be in all their interests to do so. Buses, for example, are low income transportation. They catered to poor people who had fewer options and since blacks were largely poor and the rest couldn't really go anywhere else, it didn't hurt them. More upscale establishments that catered to the well to do might adopt a different business model for their businesses. This one size fits all for customer bases idea is nonsense.
WinePusher wrote: Do you think blacks would be excluded to one team and whites to another?
Abraxas wrote:Uh, yeah. Are you completely unfamiliar with Negro League Baseball?
Yea, I am. I follow Basketball though and my point was that many great players in the NBA are black, so it would be impossible for the NBA to segregate itself into white vs. black teams.
Perhaps, but they could have two different leagues entirely, which is what they actually did.
WinePusher wrote:This is why the period of racial segregation in America is referred to as de jure segregation (18) because it was law enforced and sanctioned by the government and if it wasn't it could not exist.
Abraxas wrote:From your own source:

"Racial segregation in the United States can be divided into de jure and de facto segregation. De jure segregation, sanctioned or enforced by force of law, was stopped by federal enforcement of a series of Supreme Court decisions after Brown v. Board of Education in 1954. The process of throwing off legal segregation in the United States lasted through much of the 1950s, 1960s and 1970s when civil rights demonstrations resulted in public opinion turning against enforced segregation. De facto segregation — segregation "in fact" — persists to varying degrees without sanction of law to the present day. The contemporary racial segregation seen in America in residential neighborhoods has been shaped by public policies, mortgage discrimination and redlining among other things."

Both de jure and de facto segregation existed simultaneously, they were not independent eras.
I dont' see how this refutes anything I said. Obviously de jure segregation is far worse than de facto segregation,
Is it? De jure segregation has more teeth, perhaps, but it is also far easier to get rid of. De facto segregation is more insidious and very likely more damaging.
and the extent to which de facto segregation exists is disputable. I don't consider things like 'white flight' to be de facto segregation, I consider it an appropriate exercise of the right of association and property.
What part of that makes it not segregation.
Also terms like 'mortgage discrimination' are incredibly dumb and demonstrate how illogical liberals think. Blacks get turned down more often than whites do for mortgages. In a liberals mind, it's obviously because those mortgage lenders are racist scumbags who don't want blacks to own a home, right? Conservatives think a little more clearer than that. In a conservatives mind, it could be due to the fact that blacks, as a collective group, tend to be financially worse off than whites which is why they are more likely to be deemed unfit for loans.
Kind of ironic how in a rant about how conservatives don't stereotype you so thoroughly stereotyped.

Did it ever occur to you that the truth lies somewhere between those positions? That blacks who were more qualified had been denied loans because as a group they were considered to be less financially sound and that this resulted in a persistent systematic inequality? There were practices that discriminated against blacks, like redlining that made it impossible to get a mortgage in a neighborhood with black people in it regardless of your individual qualifications.

Reality is a complicated thing, calling it all one thing or all another is a good way to ensure you are at least partially wrong.
WinePusher wrote:After a while the government did strike down these laws, but it was merely an example of self correction. Segregation was the fault of the government, not the fault of the free market. And racial segregation continues to exist to this very day in government run housing projects (19). It's pure absurdity to say that government intervention is needed to remedy this problem when in fact it is a problem because of government in the first place.
Abraxas wrote:Please provide some evidence for this. In a lot of areas there were absolutely no laws requiring segregation but proprietors chose to implement it anyway to meet the demands of their clientele. Please, explain to me how your theory of the government being to blame for everything accounts for this.
Evidence for what? The fact that government housing is a prime example of segregation in modern day America? Or the fact that segregation could not exist in a free market? If it's the latter, I've already explained my rationale behind that statement. If a businessman chooses to segregate his business, he will lose out on the revenue he would have otherwise earned from those customers he segregated against. This is a market regulation that deters this type of thing. Businesses seek to maximize profits, as you said profits=revenue-expenses, and by discriminating and segregating their business they are limiting their revenue and thereby limiting their profits. The only way the scenario you describe could happen is if blacks made up a small portion of the community. If there was a community with a small population of blacks, a racist businessowner could probably get away with discriminating. But that's the only way, and there still is a cost imposed upon him.
Well, it only took a few posts to come around to my position, that in an area with low numbers of minorities someone could discriminate against other races openly, and do so with some support in sufficiently racist areas. I think it clear those places did exist even in recent history in America, places like sundown towns. If we can both admit it can and could exist in a free market, the question becomes should it be permitted to and if not, what possible way to get rid of it is there but to use regulation?
Abraxas wrote:Discriminating against people for the reasons of hygiene or the inability to perform a job correctly, no. For simple race, yes.
Ok, in your mind there's 'good' discrimination and 'bad' discrimination. You don't see any reason why an employer would discriminate against a black other than him being a diehard racist? What would you say to the owner of a chinese restaurant who wanted to hire chinese waiters and waitresses? Is that an example of 'good' or 'bad' discrimination?
Don't know. I have mixed thoughts on this one. I would need to be swayed one way or another that for a restaurant server appearances is a function of the job, which I'm leaning towards it can be. Same thing with an actor, I wouldn't expect an Asian actor to be given the part of Shaka Zulu were that to be made into a movie. That said, each instance would have to be case by case.
WinePusher wrote:Case 1: Apartheid in South AfricaThe apartheid in South Africa is an extremely complicated issue, but it nicely proves everything I'm talking about. The thing to know is that apartheid refers to racial segregation, and that Apartheid in South Africa refers to racial segregation in South Africa (20). What is so interesting about South Africa is how things that you support, Unions, Minimum Wages, Equal Pay laws were used by racists as tools to keep blacks excluded. White's formed unions in order to restrict blacks from entering the job market (in this case it was mining) and unions in turn advocated for minimum wages and equal pay laws because they knew these tools would prevent blacks from getting hired (21). What is even more interesting is that the apatheid group in South Africa opposed Capitalism, and the reason was that the principles under which a capitalist, free market economy operates would not have supported nor allowed apartheid to exist (22).
Abraxas wrote:Firstly, it wasn't the anti-capitalists supporting apartheid, the opposite is true. In particular the self professed communists and socialists were deeply opposed to apartheid but the capitalists favored it because it provided a bulwark against the expansion of the Soviet Union.
Well, some of that is true. Yea, capitalists and the government of south africa were allied against the Soviet Union but that's a non sequitor. It doesn't refute the fact that apartheid implemented policies that you are in favor of that were used to as a tool for racists.
I'm in favor of hammers. Are you in favor of hammers? I am. Hammers are great, you can build houses with hammers. Playground equipment too. Even railroads and many other useful things. What's that? You know someone who got their head caved in by someone wielding a hammer? Maybe, just maybe the hammer is a tool and how you use the tool is what counts.
Abraxas wrote:Secondly, there is no reason one cannot have unions and equal pay laws so I fail to see the point of bringing this up.
What? Please clairfy what you're saying here.
Equal pay laws and unions can coexist. The two are not mutually exclusive, even if they were used that way in one case.
WinePusher wrote:Case 2: The British Agricultural Revolution

The case of Agrarian Britian proves what I was saying about how market innovations in technology and machinery are what improve working conditions and the standard of living for workers. What made the agricultural revolution in Britain possible was the increase in the productivity of farmers and laborers due to the introduction of capital such as plows, carts and wagons (23). Because the productivity of workers rose, working conditions and wages rose as well which marked the beginning of the Industrial revolution in Britian. To reiterate, the British Agricultural Revolution was the result of market innovations that subsequently led to improvements in working conditions and wages. Nowhere was the government involved in planning or running the agriculture market.
Abraxas wrote:And, what exactly? I never said the market never improves on its own.
I never said that you did. My purpose in citing the agricultural revolution in Britain is to show the advancement in the conditions of workers despite government, or unions, interfering.
That's fine. Doesn't change my overall point that sometimes intervention is useful and helpful.
WinePusher wrote:Case 3: The Auto Industry Bailout and the UAW

Here, I don't want to focus on the wisdom of Bailing out the Auto Industry, but on why the Auto Industry needed a bailout in the first place. What caused the Big Three to go under? The answer is the United Auto Workers Union (24). This case shows how detrimental unions are not only the non-union workers, but to the industries they're involved with. The wages and benefits demanded by the UAW were totally unrealistic, but because of the government gurantees and protecetions they recieved the Big 3 had no choice but to cave to their demands. Here's an interesting statistic comparing the Big 3 with foreign Japanese auto makers: on average Chrysler, GM and Ford pay $29 per hour than Toyota, Honda and Nissan do (25). It should be pretty clear why the Big 3 went under.
Abraxas wrote:Except the 73 dollars an hour figure is dishonest at best as it includes all compensation as part of the pay figure, including things like healthcare that are paid for out of taxpayer dollars in Japan. Actual wages for auto workers are closer to 40 an hour, very comparable to the actual wages in Japan, and pensions for retired workers.

http://www.nytimes.com/2008/12/10/busin ... =permalink
So because healthcare and pensions are included, the figure is dishonest??? I don't really care what the exact figure is, all I care about is the fact that UAW workers at Big 3 manufacturers made signficantly more than workers at Japanese companies like Toyota. Your source, written by a liberal, agrees with this. Unions were the cause of the Big 3's decline, unless you can provide a better more plausible cause?
Lower quality vehicles? Emphasis on SUVs and other gas hogs during a period where gas was expensive? It wasn't just unions, though some of the retirement plans contributed to their decline, they had a lot of problems. Their workers being paid too much really wasn't one of them though, as the link shows, first, a lot of income counted towards their total were benefits that in Japan come as a social service from the government, and second, the way retirement was being counted vastly skewed the graph. Overall, their wages were within a few dollars.
Abraxas wrote:Further, how could you even possible accept this at face value if you are going to claim unions cannot raise wages, how can you then blame the union for keeping wages too high to be competitive?
Did I ever say unions can't raise wages? I made it clear that unions can raise wages for union workers and that this generally creates negative effects elsewhere. I mean, do you not think the UAW has an ironclad grip on the throats of the Big 3 or that the UAW played a substantial role in their decline? Again, look at the statistic I posted. We're not talking about auto workers based in Japan, we're talking about auto workers at Japanese firms based in the United States. There is a huge discrepency in the pay and benefits recieved by a UAW worker at one of the Big 3 companies, and a worker at a Japanese company like Toyota. The Big 3 needed a bailout, Japanese firms like Toyota didn't. Why? Because of the UAW, why else?

All covered above.

WinePusher

Post #28

Post by WinePusher »

This debate has been left hanging for quite some time and I'm not quite sure what happened to Abraxas. I hope he's alive and well, but I would like to continue so I've taken the intiative to change the format of our debate. For the past three rounds Abraxs has been the one posting the first set of arguments but since he hasn't been on for quite some time, I'm going to post the first arguments for round 4 and hopefully he'll be able to respond in the near future. So, the format for round 4 has been revised to this:

Round 4: Fiscal and Monetary Policy

Post 1: WinePusher initial argument
Post 2: Abraxas rebuttal
Post 3: WinePusher rebuttal
Post 4: Abraxas final rebuttal

Post 5: Abraxas initial argument
Post 6: WinePusher rebuttal
Post 7: Abraxas Rebuttal
Post 8: WinePusher final rebuttal

WinePusher

Post #29

Post by WinePusher »

Deleted Post.
Last edited by WinePusher on Tue Dec 17, 2013 6:25 am, edited 1 time in total.

WinePusher

Post #30

Post by WinePusher »

Round 4: Fiscal and Monetary Policy / Post 5: WinePusher's intial argument

Introduction:
For this portion of the debate, I will be arguing that a free market-libertarian approach to fiscal and monetary policy is a more economically beneficial and effective approach than Abraxas' alternative. Specifically, I will be arguing for 3 major points:

1. Fiscal Policy: The current United States tax code needs to be radically reformed. Many of the current taxes that exist should be abolished and all taxes should be siginificantly reduced across the board, even for the top 1% of income earners. The United States government needs to drastically cut spending on welfare and entitlements. The deficits that the United States has been running, and the massive debt that the United States has accumulated, is exceptionally harmful to economic growth.
2. Recessions/Depressions: Governments should not intervene when the economy is in a recession. Governmental policies are one of the main reasons why recessions and depressions occur. When the government attempts to stimulate the economy during periods of recession it makes the problem far worse.
3. Monetary Policy: The federal reserve bank, and other central banks in general, should not have the power to arbitrarily change the money supply. The money supply should be tied to some exogenous source, such as a commodity and should also derive its value from that commodity.

Fiscal Policy:
In the past couple of years there has been a major push by liberals to increase the top marginal tax rate on the rich. This is a policy that Abraxas undoubtedly supports. So, I have to ask Abraxas what he thinks the consequences of this 'tax the rich' policy will be? Anyone who has studied economics knows that there are real, negative economic consequences caused by high taxes and that excessively taxing the rich will reduce economic growth and economic welfare for the middle class.
This review of empirical studies of taxes and economic growth indicates that there are not a lot of dissenting opinions coming from peer-reviewed academic journals. More and more, the consensus among experts is that taxes on corporate and personal income are particularly harmful to economic growth, with consumption and property taxes less so. This is because economic growth ultimately comes from production, innovation, and risk-taking. (1)
It is a fact that our economy is driven primarily by rich and wealthy individuals. Only people with large amounts of disposable income are going to invest in new businesses, stocks, bonds, capital equipment, etc. So, in many ways all the money that these millionaries and billionaries have accumulated is used solely for economic purposes, ie: purchasing stocks and bonds, investing in new products and businesses, etc. By taxing this money, the government is essentially stifling economic growth by taking the money out of the private economy and transferring it to the public sector where it will most likely be inefficiently spent. The more the government taxes the rich, the more they will be unwilling to do business in America. (2)(3) They will instead relocate their investments and their businesses to countries where they will get a greater return. You see, entreprenuers and investors are going to do business only in places where they feel they will get the greatest return on their investments. By increasing taxes on corporations, capital gains and the rich you are reducing their gains and returns and as a result they will leave and do business elsewhere. (4)(17) The United States was founded on the principle of low taxation, and in many ways America was to be a tax haven that would attract entreprenuers, investors and busiessmen. For many decades the United States was a tax haven and it became the largest, most productive economy in the world due to its low taxes. It is also unclear how much liberals want to tax the rich. The rich already pay more than 30% in taxes and they have the largest tax burden in the entire nation. How much more does Abraxas think they should pay?

Additionally, much of what the government spends on today is unconstitutional. Clearly, the only functions that the federal government is constitutionally permitted to have are those which are explicitly outlined in article 1 section 8. Therefore, the federal departments of agriculture, energy, commerce, labor, health and human services, transportation, interior, housing and urban development along with the EPA and the FDA are unconstitutional and the government is not justified to tax and spend for these purposes. The government is only justified in taxing and spending for the purposes outlined in article 1 section 8. If all of these unconstitutional departments and offices were abolished then there would be no need to have high taxes. The government would be smaller, and therefore it wouldn't need as much money to operate and we could do away with the current tax code. My specific proposal would be to eliminate all forms of direct taxation (the income, corporate profits, capital gains, payroll, property and death tax) and replace it with a system of indirect taxation comprised mainly of sales and value added taxes.

Simply put, the government needs to stop excessively spending money. There should be a balanced budget amendment added to the constitution forbidding Congress from spending more than what it takes in through tax revenues. Economic research has shown that excessive government spending and debt slows down economic growth significantly. Again, the main objective for any policy should be to grow the economy because as a result it benefits all people throughout the economy. Economic growth is a rising tide that lifts all boats, but the two policies Abraxas seems to be in favor of (higher taxes and more government spending) and his apathy towards government debt reduces economic growth and welfare. (5)

The Business Cycle:
For those who don't know, the business cycle refers to the ups and downs in the economy. The 'ups' are the periods of economic growth and expansion while the 'downs' are the periods of recessions, depressions and contractions. With the inception and widespread popularity of Keynesian economics, many economists and politicians believe that the government should intervene in the economy using a mix of expansionary fiscal policy (more government spending) and expansionary monetary policy (increasing the supply of money) in order to try to stimulate the economy and end a recession. It is my belief that the government should do neither. The government should abstain from doing anything at all and let the recession run it's course. This way, the recession will end quicker and be less painful. Keynesians typically view recessions as the labor market failing to clear itself due to sticky wages. In general, Keynesians see all prices throughout the economy as being sticky (meaning that they are inflexible downwards and won't change even if supply and demand conditions change). This is why many Keynesians often advocate for government intervention to boost aggregate demand. A recession is characaterized by high supply and low demand across all markets, including the labor market. Under normal market clearing conditions, prices would adjust correspondingly and this would result in a new equilibrium between supply and demand, and this would clear all markets of surpluses and shortages. But, the Keynesian assumption is that prices will not adjust. Prices are sticky, and they will not fall when demand falls. Since prices are reluctant to fall, the government must intervene in order to increase demand in order to bring it back up to match the price level.

Unfortunately for Keynesians, there really is no proof that prices and wages are sticky.(6) Keynesians wrongly assume that markets fail to achieve equilibrium in the short run, and they argue that it is because of sticky wages. Even Keynesians themselves are in a huge disarray about this and none of them seems to be able to explain how wages can possibly be sticky. Also, none of this adequately explains how recessions and depressions are caused. Keynes merely provided a faulty framework illustrating how a recession manifests itself, but he did not explain how a recession is caused.

I think it is important to note that whatever economic theory we decide to adopt, there will always be a business cycle. There will always be recessions and depressions because they are an inherent and vital part of Capitalism. The only way Capitalism can advance itself is by first clearing the economy of inefficient firms and businesses and replacing them with newer, more efficient firms and businesses. Capitalism must first destroy the old, outdated way of doing things and create a newer, better way of doing things. This is known as creative destruction, and recessions/depressions facilitate this crucial and necessary process. But, the pain and adverse effects that are associated with recessions and depressions can be limited and reduced if one can sufficiently understand and pinpoint how recessions are caused. My contention is that recessions are primarily caused by monetary overexpansion on the part of central banks. Not only do central banks cause recessions, they prolong them.

There were 6 recessions and 1 depression under the First and Second Bank of the United States. After these banks were abolished, the United States didn't have a central bank for quite some time and this is known as the free banking era. Under the free banking era, there were many small bank panics and a total of 16 recessions that lasted about one year on average. After the creation of the Federal Reserve bank the United States experienced the worst economic depression and the worst economic recession in its entire history. In total, the United States has had 13 major recessions and 1 catastrophic depression under the current Federal Reserve system. (7)

In conclusion, the business cycle was much smoother and less volatile during the free banking era. The evidence has clearly shown that central banks have done and can do nothing to level out the business cycle and eliminate recessions. In fact, central banks do the exact opposite by causing recessions and prolonging them. This is because recessions are normal market processes that naturally occur. A recession can be seen as the market trying to reallocate resources that were misallocated during the economic boom. An economic boom is characterized by large amounts of consumption and spending, and has a result firms and businesses begin to produce more in order to satisfy this demand. However, the bust occurs because this consumption and spending was not real. It was articifically created by monetary over-expansion on the part of the federal reserve. Thus, the consumption and spending has to come back down and since there will be less demand throughout the economy businesses will have to produce less and viola, you have a recession. But, it has to occur in order to get rid of all the phony consumption and spending that was created due to bad monetary policy on the part of the federal reserve. (8)

Monetary Policy:
Most economists agree that governments should not fix prices. Meaning, the government should not be able to set the price of things like food, electricity, clothes, and other goods. The price of all goods and services in the economy should be determined by supply and demand forces, and like I said, very few people would argue otherwise. Yet, when it comes to interest rates most mainstream economists and the public in general seem to have no problem with the government coming in and interfering with the price. Interest rates are prices, specifically they are the price of borrowing loanable funds and like all other prices, they should be determined by the market forces of supply and demand. But for some reason, interest rates are determined by a group of central planners (the board of governors of the federal reserve) and this has been extremely toxic for our economy. It would be completely unfathomable to have a group of government officials setting the price of our food, or the price of our energy, or the price of our furniture and to those of us who use consistent logic, it is still is unfathomable that the government sets the price of our money.

First of all, let me say that there is some room for government intervention when it comes to money. In order for any economy to function there has to be some sort of medium of exchange that facilitates transactions, and it should be the governments job to create money and inject it into the marketplace. This is where I would disagree with many Austrian economists who seem to think that money can magically appear out of thin air and that there can be numerous amounts of competing currencies. The government should coin and produce the money and inject it into the economy via the banking system. This would make it a fiat currency and this would make the production of money inherently monopolistic because the government is the sole producer of it. But, I would agree with the Austrian school on several points: increasing the money supply is inherently inflationary, monetary overexpansion is the primary driver of the business cycle and due to the federal reserve the dollar has lost a substantial amount of its purchasing power.

But while the government should be the sole entity that creates and injects the money into the economy, the price of money (the interest rate) should be left to market forces to determine. According to the loanable funds model, interest rates are determined by the supply of loans and the demand for loans. The federal reserve changes the interest rate by manipulating the supply of loans through open market operations/quantitative easing. The federal reserve purchasing treasury securities and bonds on the secondary market. The investors sell the Fed their bonds and the Fed gives them hard money in return. The assumption is that these investors will deposit their money into banks, and this will increase the amount of reserves the banks has and in turn the banks will loan out all of these excess reserves. To put it shortly, the Fed floods the banking system with a bunch of cash and then banks loan out this cash to people who want to borrow money. Because banks have more cash to loan out the supply of loanable funds has increased, and this causes interest rates to decrease. My view is that the federal reserve should not have this power at all. The federal reserve should exist, but it should be stripped of it's power to change interest rates and increase/decrease the money supply. It is absurd to think that a few people sitting around in a room know what the proper rate of interest should be. Like all other prices, interest rates should be determined by supply and demand. If there are alot of people in the economy who want to take out loans, then the interest rate will obviously increase. But, if the demand for loans is relatively low and there aren't many people looking to take out a loan then the interest rate will decrease. This way, the interest rate is reflective of real savings and real demand and supply in the economy.

On a final note, I would like to talk about what I think the role of the federal reserve should be. I think Milton Friedman and the rest of the monetarist school of thought got it right and I'm in complete agreement with their prescriptions for the Fed. The only thing the federal reserve should do is maintain a monetary base (what Friedman called high powered money) and increase the money supply in small increments in order to accommodate for economic growth.

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Case 1: The Great Recession

The Great Recession proves two points I made above. First, that monetary overexpansion causes economic recessions and second, that Keynesian stablization policies only make recessions worse. The cause of the Great Recession was an artificially low interest rate that the federal reserve created. In the early part of the 2000's the federal reserve attempted to stimulate economic growth by pushing interest rates down in an attempt to increase investments. As a result of the low interest rate, loans were made cheaper and more people began taking out mortgages on home due to the low rates. Had the Fed not pushed interest rates down there would have been no economic boom, and subsequently there would be no bust and no recession. (9)(10)

Also, the response on the part of the federal government has made the economic recovery one of the slowest and sluggish recoveries in the history of America. In the wake of the recession, the federal government followed the normal Keynesian prescription of more fiscal stimulus and more monetary expansion but unemployment has remained stubbornly high and economic growth has remained stagnate. Had the federal government not intervened the recession would have ended much quicker and the recovery would have been more swifter. (11)

Case 2: The Great Depression

The case of the Great Depression shows how much real harm can be done by the federal reserve and by the federal government. Nearly all economists from all schools of thought, ranging from Friedman to Bernanke, agree that the federal reserve was to blame was the Great Depression. The Fed is at fault in two ways. First, the overexpansion of money in the early part of the 1920's contributed to the stock market crash and recession in 1929 which got the ball rolling. (12) Second, the federal reserve contracted the money supply in the wake of the recession instead of keeping it stable and moderately increasing it annually.(13) This obviously worsened the recession significantly and turned it into an all out depression. The federal governments response under FDR made things worse by crowding out private consumption and investment, and by taking more and more money out of the private sector and putting it in the hands of the efficient public sector. The asinine spending projects of the New Deal prolonged the depression for about one whole decade by diverting money towards programs for which there was no real demand for. One example of this was the New Deal arts program that hired and comissioned 'artists' to create worthless paintings and murals. Does Abraxas really want to try to justify the government spending taxpayer dollars on frivolous things like art? (14)

Case 3: The Declining Value of the Dollar
Image
The graph above shows how the dollar has lost a significant amount of its value over the past century. This is troubling because one of the main purposes of money is to be a store of value. So, the question is why has the dollar lost much of its value over time? And, the answer is because of actions taken by the federal reserve. Increasing the money supply causes prices to increase, which means that the dollar loses some of its purchasing power because it can buy less. The Fed has increased the money supply by huge amounts and is currently injecting tons of cash into the banking system by keeping interest rates at 0%. Whenever the federal reserve attempts to combat a recession it adopts inflationary policies, and often these inflationary policies are advocated by hopelessly confused Keynesians like Paul Krugman. The declining value of the dollar shows how detrimental federal reserve policies are in regards to inflation. (15)(16)

Sources:
1) http://taxfoundation.org/article/what-e ... and-growth
2) http://www.cnbc.com/id/48120446
3) http://video.foxbusiness.com/v/28203748 ... ax-states/
4) http://www.cnbc.com/id/100757014
5) http://en.wikipedia.org/wiki/Growth_in_a_time_of_debt
6) http://www.nber.org/papers/w0847
7) http://en.wikipedia.org/wiki/List_of_re ... ted_States
8) http://en.wikipedia.org/wiki/Austrian_b ... cle_theory
9) http://mises.org/daily/3252
10)
11) http://www.forbes.com/sites/dougbandow/ ... -stimulus/
12) http://en.wikipedia.org/wiki/Great_depr ... ian_School
13) http://en.wikipedia.org/wiki/Great_depr ... Monetarist
14) http://www.ask.com/wiki/Federal_Art_Project
15) http://www.businessinsider.com/how-your ... nts-2012-2
16) http://www.forbes.com/sites/charleskadl ... dollar-33/
17) http://www.forbes.com/sites/robertwood/ ... llections/

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