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Monday, December 14, 2015

Negative vs Positive Liberty: An Analysis

"Negative liberty is the absence of obstacles, barriers or constraints. One has negative liberty to the extent that actions are available to one in this negative sense. Positive liberty is the possibility of acting — or the fact of acting — in such a way as to take control of one's life and realize one's fundamental purposes. While negative liberty is usually attributed to individual agents, positive liberty is sometimes attributed to collectivities, or to individuals considered primarily as members of given collectivities."~Stanford Encyclopedia of Philosophy
Here is a video from George Smith regarding the notions of Negative and Positive Liberty. The video provides historical examples on these two concepts. Click here to watch.

Here is an analysis from Isaiah Berlin regarding Positive and Negative Liberty. Click here to read.

Sunday, December 13, 2015

It's Not Just a Supply Issue: Oil Price Falls to 35 Dollars per Barrel



Key excerpt from, "It's Not Just a Supply Issue: Oil Price Falls to 35 Dollars per Barrel" :


"A year ago, the oil price was more than 30 dollars per barrel higher, and came in around 70 dollars, although by that point, the price had already tumbled from a price of 105 dollars that had been reached during mid-2014.
The 2014 prices were not as high as they seemed, given the effects of price inflation. If we make a  mild adjustment based on the official CPI data, we find that 2014's peak levels had really only been matching the prices we saw during the early 80s. "



Friday, December 11, 2015

CBO Estimates That Obamacare Will Shrink Labor Force

An excerpt from the article from Reason.com titled, "CBO Estimates that Obamacare Will Shrink the Labor Force by the Equivalent of 2 Million Jobs":
"The debate flared up again this week after the Congressional Budget Office (CBO) released a report estimating that the law would shrink America’s by the equivalent of about 2 million jobs over the next decade."

Piketty Is Wrong: Markets Don’t Concentrate Wealth

Key excerpt from the article titled, "Piketty Is Wrong: Markets Don’t Concentrate Wealth ":


"Thus, contrary to what Piketty and other egalitarians think, unlimited wealth concentration is technically impossible in a market economy. This is the reason why a “one big cartel” controlling all the economy never appeared on the free market, and this is the reason why wealth concentration will always be limited."

Thursday, December 10, 2015

Tach V’Tat: A Historical Example of Nationalism

Intro to the article, "Tach V’Tat":

"The years 1648 and 1649 represent a watershed in Jewish history. In Jewish tradition they are referred to as “Tach V’tat” (which are the Hebrew letters representing the numbers 408 and 409, which correspond to the years 1648 and 1649 on the non-Jewish calendar). One can even say that Tach V’tat marks the beginning of modern Jewish history. It is certainly the harbinger of enormous changes in and enormous destruction of the Jewish world."

This is an example of Nationalism, as typically a charismatic leader rises up, as in this case, it was Bogdan Chmielnicki. As a solider of fortune, he was highly loyal to the Russian Orthodox Church. This passion fueled this massacre of many Jews and Polish Roman Catholics,

Human Nature has not changed.

Wednesday, December 9, 2015

Gun Control in Nazi Germany

Key excerpt from "Gun Control in Nazi Germany":

"As has been well documented, Jews were methodically attacked, their homes, businesses, and synagogues ransacked and burned. Upward of 30,000 Jews were arrested. Any Jews resisting arrest were ordered shot on the spot. Attacks on the Jews were to be carried out by the SA, with no interference by police. Jews arrested were to be sent to concentration camps for up to 20 years. The pogrom was so thorough that nearly all age appropriate, Jewish adult males in Stuttgart had been arrested. With the population afraid and disarmed, Hitler could proceed with little worry about resistance. The Court reinforced that there was no judicial review needed for activities of the Gestapo."

“Capitalism” Is the Wrong Word!

I agree with the author of this article. The notion of "Capitalism" was coined by Karl Marx in his work "Das Kapital". This article, “Capitalism” Is the Wrong Word | Foundation for Economic Education", breaks down why this term should not be used to describe the process of voluntary free exchange.



Cheers,



Robert

Wednesday, December 2, 2015

How Money Disappears in a Fractional-Reserve Money System | Mises Daily

This is an excellent article by Dr. Frank Shostak. This article hits directly to the point about how Economics is not a quantitative science, but a qualitative science. This does not mean there is no place for math in the science of economics, it just means that human behavior simply is something that is difficult to quantify in terms of calculus.

The notion of raising or lowering the money supply and its direct relationship with prices comes from Irving Fisher's famous equation of exchange, as it is the foundation of Monetary theory. This theory is widely accepted in the world of economics, policy makers, and the like. Yet, it is not on solid footing, as Dr. Shostak proves here in this article.



How Money Disappears in a Fractional-Reserve Money System | Mises Daily

Monday, November 30, 2015

Excessive Profit Taxation

While it seems popular to speak out against companies that earn "excessive" profits, many are adding to the discussion by proposing additional taxation on firms that have this occur.  People who are in favor of this sort of taxation believe this will make things "fair" for the consumers since the corporations are earning "excessive profits" off the consumers.  How does this sort of measure impact firms and the economy? This article will explore this question.

Capital Formation of Firms

When a company is in a start up phase, capital and other input factors are organized. The founders of the firm must accumulate the capital to place in the new enterprise. This capital may come from their personal savings, or it may come from investors, or it may come a financial intermediary(e.g. Bank, insurance company, credit union, and etc). In all of these examples, someone had to defer consumption in the present, in order to use the capital in the future.  Once the capital is invested in the start up, it is used to acquire other input factors, capital equipment, and labor. 

What is profit?

Once the enterprises starts up for business, the objective is to make a profit. The firm must serve the clients, in hopes that clients will pay for the product or service. Those profits go to pay back the initial capital invested into the enterprise...net the natural interest rate.  The interest rate is simply the consumption time preference of the actor in the marketplace. Actors can consume now, or they may consume in the future. So, profit is simply the return on capital. 

Excessive profit tax: economic the impact

When the Government seeks to tax "excessive" profits on a firm, a set of consequences takes place. First of all, these taxes are not passed to the consumer. If the firms are charging the market price for their product, this is the equilibrium price. Consumers and firms agree upon that said price. Anything higher will cause consumers to seek out alternatives, or they will consumer fewer items of that product or service. Next, since firms can not simply raise the price of their goods or services, the sell fewer items in the marketplace. Economically speaking, the firms pay the cost for the tax. The tax is not "pushed forward", but pushed backwards. Since it is pushed backwards, this impacts the firms ability to make a profit, and this impacts the repayment of the capital invested into the firm. In short, the tax on "excessive profit", is simply a tax on capital...net the natural rate of interest.  This tax will eventually impact all capital markets. It will also shrink the number firms, and make it more costly for new firms to enter the marketplace. This impacts consumers as well. There will be fewer competing firms, and prices will not be competitive in those respective markets. 

Conclusion

Taxing the profits of the firm, "excessive" or not, has adverse impacts throughout the economy. It impacts the firm's ability to properly re-invest those profits back into the enterprise. Next, it acts as an additional economic cost on capital, as it can impact all capital markets. Lastly, it reduces the number firms in the marketplace. This hurts consumers, since they will not have the power of choice and benefit from more competition between firms. With more competition, consumers win each time. 


Friday, November 27, 2015

Economics Is About Scarcity, Property, and Relationships | Mises Daily

A fantastic essay on the simplicity of Economics.



Economics Is About Scarcity, Property, and Relationships | Mises Daily

$15/Hr Minimum Wage?

The Minimum Wage debate has gone to another level. Many fast food restaurant workers are making a push to have a "living wage" pushed to $15/hr. to gain more wealth. Is this an economic efficient objective?  This analysis will explore the answer to this question.


What is the Wage? 

The first step in the analysis that must be completed of the minimum wage rate, is defining the notion of the Wage rate. What is it?  The Wage rate is simply the price of labor between both parties of labor and the business owner. For example, the Business owner creates a position for his enterprise. Prospective laborers see the job posting, as the business owner provides a wage rate for prospective employees. The employee applies, and if he is offered the job, the employee is accepting the terms of the position at that respective wage rate. This is no different that someone purchasing an item at the local grocery store at the sales price. So, in short, the Wage rate is tantamount to a price.

What is Price Fixing?

When the Government, enforces a price fixing mandate, depending on how it is structured, several things can occur. In all of these scenarios, they are based on the Law of Demand. A quick review in layman's terms: If the price of the item is increased, the demand falls, if the price is lowered, the demand increases.

If the price fixing scheme is set above the agreed upon market price, a surplus can occur. This means that the price of the good or service is priced so high, that the market participants will not purchase the said good, thus leaving excess items of that good.  However, in the case of a shortage, this means that price is fixed well below the market price, and the demand has increased to the point that there is more demand than there are goods available to sell.

Price Fixing and Minimum Wage

With regards to minimum wage, government mandated price fixing, or wage fixing, simply raises the labor price above the agreed upon market price. As previously mentioned, as per the law of demand, as prices rise, and demand remains constant, a surplus is created. In this case of labor, a surplus of labor is created. This translates into higher unemployment for that specific labor class that is impacted by the minimum wage increase.

Why are these individuals pushing for the potential elimination of their positions? They assume that the business owner has an unlimited supply of capital and profits to pay the employees at the desired wage rate. However, this is not true. We are all restricted with the condition of scarcity.  The more the wage rate is increased, the larger the unemployment rate for that market segment.  Another consideration: The Business owner may lay off those higher wage employees. Or, the business owner may purchase capital equipment to do the same sort of output as these higher wage employees.

Conclusion 

Raising minimum wage acts as a price surplus on the "price" of labor, or wages. It creates a surplus of labor, as that surplus of labor translates into higher unemployment numbers for that said labor segment. Workers pushing for higher minimum wages will not benefit from this increase, as they could potentially be unemployed.

More Links on this topic of minimum wage:

From Ludwig von Mises, "Minimum Wage Rates"

Thursday, November 19, 2015

What will the Paris Attacks means for markets? | World Finance

Is an Interest Rate Hike Overdue? | Mises Wire

Is an Interest Rate Hike Overdue? | Mises Wire



"The conventional wisdom is that lower interest rates boost stock prices, and that one of the drivers of the healthy stock market since 2009 has been the Fed’s low interest rate policy. I don’t disagree with the conventional wisdom in general. Lower interest rates tend to raise asset prices. But in this case investors seem to believe the Fed maintained that low interest rate policy too long."

Wednesday, November 18, 2015

Democracy moves towards an Oligarchy

Many politicians remark that how "we must save our democracy", or "our democracy is the ideal".  In this analysis, I will demonstrate logically how it actually works against the citizens. In fact, democracy simply transfers the power of the individual to a dictatorship or an oligarchy.  Using logical economic analysis, I shall show why this is the case.

The Notion of Rational Ignorance

All of us have 24 hours in one day. We are busy with making a living, rearing our children, and enjoying life. Political issues, while important, do not rank high on our value scale. The average person does not have greater Economic benefit to pay a higher economic cost to deeply engage into the labyrinth of politics. In this case, these individuals are rationally ignorant.  Soccer moms find it more important on a daily basis to make sure their kids are in soccer practice, staying safe and the like. Fathers are focused on earning a living. Since we all live in a world with the scarcity of time, we prioritize our daily activities on an ordinal ranking that will give us the highest benefit to lowest benefit. Most of us obtain our insight on political matters from sound bites from the daily news. 

On the other hand, special interest groups are heavily invested in the political process. They study what bills are being proposed to be passed into laws. Many of these bills have a huge impact on these special interest groups' business. For example, sugar farmers are heavily invested in the political process. Their operations, investment and profits are directly impacted by the political process. In this case, they are rationally informed and involved. They will factor the economic cost of lobbying or "rent seeking" Law makers to ensure the best interest of their operation is considered when laws are being made.

Out of these two distinct groups, the former has a higher probability to not vote and get informed in all or most issues, as compared to the latter group.

Transfer votes to a Dictatorship or Oligarchy

Since many voters are "rationally ignorant", yet they still vote, the power of those votes are simply transferred to the politicians. As previously stated, the voter is not fully aware of the details of the pertinent issues, where as the special interest groups are. This leaves the power of the political process with political class and the special interest. This is a costly proposition, as theses two groups will pass laws that will benefit them, yet the rest of society covers the cost for these laws.  In short, the voters will pay for the costs of these laws, and the aforementioned groups, political class and special interest groups, will reap the benefits.  Via the voting both, the power is successfully transferred to the former group(s).

Going back to the farmers example: Farmers are subsidized by the Federal Government to support their operations, in exchange for the financial support and political support of those politicians who continue the various subsidies for the farmers. Who pays the cost of the subsidization? The citizens that are not vested in the process.  In economics, this is viewed as an inefficient transaction, and "Dead weight" losses are created. In short, the costs are dispersed throughout society and the market place: Concentrated benefits and dispersed costs. This aggregates the power to those who are in a position to distribute the benefits, at the expense of the tax payers.

The Tax payers vote for politicians that simply work for the special interest groups. Why? The politicians are seeking to stay in power, as this process requires money. The special interest groups are willing actors to pay the politicians provided the politicians pass laws that benefit the special interest groups. The transfer of Democracy to a dictatorship or oligarchy is complete.

Conclusion

Many politicians run on the notion of "getting the money out of politics", as this is an illusion. Politics is a business, as it requires the same factors of production, land, labor and capital, as any other business enterprise. The distinct difference is that it must use the rational ignorance of the average voter to vote into law things that benefit the political class and special interest, at the cost of the voters. This process also demonstrates how the Federal budget will never be balanced. What incentive is there for those who benefit directly to balance the budget? This process turns the democracy into a dictatorship or oligarchy. 

Thursday, November 5, 2015

Tragedy of the Commons: Public Ownership

Consider this quote from Economist Murray Rothbard, Phd:

"We all hear a great deal about 'public' ownership. Whenever the government owns property, it is referred to as publicly owned. When natural resources are sold or given to private enterprise, we learn that the public domain has been given away to narrow private interests. The inference is that when the government owned anything, we-all members of the public-own equal shares of that property. Contrast to this broad sweep the narrow, petty interests of mere private ownership."

In this analysis, the discussion of public vs private goods shall not be reviewed under a "good" vs "bad" framework, but through the framework of economics. This analysis will explore public goods vs private goods with the following: (1) How Capital is raised, (2) how these goods are economized via pricing and the profit and loss mechanism, and (3) how ownership is utilized with both private and public goods.

Capital

With Private Goods, goods are produced by Capitalists exercising the notion of private ownership to enhance their enterprise and make a profit. The Capital invested is raised voluntarily, as investors, banks, and the like mutual agree to invest in the enterprise. Investors seek to make a return on investment to enhance their overall livelihood.  If the enterprise cannot raise the capital needed to start up the business or maintain the enterprise, the firm may seek to shut down. The capitalist may need to reorganize his/her plans, or seek to start up another type of endeavor. The point here is that the "free market" determines if this project will be funded. 

Contrast that with a Public good. While, these goods are used by the public, the capital needed to create those goods is "unlimited". This means simply that the capital is not raised by force, but by the Government's ability to levy a tax on its constituents. While it is true that many Governments can raise capital via selling bonds and the like, the repayment of those bonds are underwritten by the current or future taxpayers, as this done by force also. There is no true "free market" mechanism that can provide feedback to the Government body to reject or take on the project. Some will state that the voters can vote for a project's creation via a ballot, but this is not a free market mechanism, as there is no profit a loss feedback on the project to allocate scarce resources.

Pricing and Profit/Loss

The use of prices, in the role of voluntary exchange is vital. Prices send signals to the participants in the market on how to allocate those goods and services.  This allows individuals to set their preference ranking according to their available resources. 
For business owners, the profit and loss system is vital. If a business turns a profit, it provides a signal for the business owner to carry on with the sale of that good. If there is a loss, the business operation is evaluated accordingly. If the losses continue, the business owner may discontinue the sale of that good, or he/she may close down the entire operation. 
On the other hand, the Government enterprise will use price to charge the patrons for the service. However, the Government will ignore the profit and loss feedback. The survival of the Government project is not predicated on profit and losses, but it's survival is predicated on political favors. This may occur dispute continued losses and deficits. Of course, these losses are subsidized by increasing taxes or borrowing more capital to "true up" those shortfalls. All of this is underwritten by the taxpayer.

Ownership

With a private enterprise, as previously mentioned, capital is raised voluntarily and via private means.  In most cases, the capital invested is accepted in exchange for some sort of "ownership" or "interest" in the enterprise. For example, if a company is taken "public" via an initial public offering, those stock shares are sold to investors. Those shares represent an ownership in the company. Another example is when investors pool their capital together to form a business entity(e.g LLC, Inc, LP, and the like) In these business entity forms, the investors have some sort of "ownership" in the enterprise. These examples represent true ownership in the business enterprise. 
With a Public Good, politicians claim that the "public" owns that said enterprise. Is this really the case? Do the citizens actually "own" or "stake a claim" of the Government owned enterprise? In review of the earlier section, Governments raise capital primarily by two means: Taxation and Debt. With regards to taxation, this is not a voluntary exchange transaction, but it is done by the force or Government fiat. There is no "ownership" given in exchange for this method. In fact, if taxes are not paid, dire consequences can occur. The other method that Governments seek to raise capital for the projects, is utilizing debt instruments, such as bonds.  With Bonds, there is no ownership claim on the Government enterprise. In fact, the repayments of the bonds are done via tax revenues. This is a contrast to a public enterprise. 

Conclusion

Based on these three categories, it is clear that Government run enterprises, or "Public Goods", are not market efficient.  Since these enterprises do not allow for voluntary exchange, with prices allocating scare resources to their highest uses, problems occur. Things are carried forward not by the notion of profit or loss, but by political favors. This is done at the expense of society. 

Video of Tragedy of the Commons: 






Saturday, October 24, 2015

How Currency Exchange Rates Are Determined

Key excerpt:

"Currency rates of exchange appear to be moving in response to so many factors that it makes it almost impossible to ascertain where the rate of exchange is likely to be headed.  Rather than paying attention to the multitude of variables, it is more sensible to focus on the essential variable.



As far as currency rate of exchange determination is concerned, this variable is the relative changes in the purchasing power of various monies. In short, it is the relative purchasing power of various monies that sets the underlying rate of exchange." 



Read more here: How Currency Exchange Rates Are Determined | Mises Wire

Thursday, October 22, 2015

Pro Sports Great, Just Not for the Local Economy-Mercatus Center

Pro Sports Great, Just Not for the Local Economy by Dennis Coates

If Forbes’ latest ranking of National Football League franchise values is any indication, the owners of the Oakland Raiders, San Diego Chargers and St. Louis Rams – all competing to move to the Los Angeles area – figure to find a goldmine here. At an estimated $4 billion, the Dallas Cowboys are the world’s most valuable sports team. Large-market teams round out the NFL’s value top five. An L.A. team would be poised to join that top tier.

As Forbes put it, “The bigger your domain, the greater the opportunity to cash in on the fantasy and reality of the NFL.”

Most people believe that pro football would also be a goldmine for Southern Californians – but the economic facts may not support this claim.

To attract or keep a team, cities typically offer perks like public subsidies for a new stadium or tax breaks. Rival stadium proposals in Carson and Inglewood rely on private funding but would likely involve some public costs. Conventional wisdom also says a sports-fueled economic boom will result and more than make up for these costs.

Think of the joke about a fellow looking for his car keys, crawling on his hands and knees under a streetlight. The punch line is that he is looking there, rather than by his car, where he dropped them, because the light is better. Supporters of subsidies usually look under the streetlight for the economic benefits – local income, employment and tax revenue – of stadiums, arenas and professional sports franchises.

But, as independent economists repeatedly point out, not everything that looks shiny under the streetlight is a set of car keys – and, if you really want to start the car, you may have to look elsewhere.

Few deny that sports facilities must be paid for. The issue is who should pay. Usually, but not always, owners argue that they need help for various reasons.

Whatever the reason, they ask the public for help. But the question for policymakers and for voters should be simpler: Will the investment produce a real return? Even when the private sector is funding the project entirely, as is arguably the case in Carson, the public should question whether transferring public land to the private sector for a stadium is the best use of that property.

I co-authored a study in 1999 with Brad Humphreys. It examined the sports environment in every city with at least one NBA, NFL or Major League Baseball franchise at some time from 1969-96. Our findings were clear: Professional sports had no positive impact on an area’s economy, and actually harmed residents’ per capita incomes.

I recently updated the data, added the NHL and Major League Soccer, and examined the full set of U.S. cities, rather than only those with a team. The analysis also benefits from the stadiums and arena-building boom of the ’90s.

The lesson for cities, unfortunately, is the same. The sports environment still has little effect on the financial resources of most people. For example, across all seasons and cities, sports contributes about 0.2 percent to the wage earnings of the typical worker, about $50 per year to someone earning $17,000 a year.

Now, as then, the data disprove the claim that a city can use stadium and arena construction, or the attraction or retention of a professional sports franchise, to enhance the income of its citizens.

There are valid reasons for supporting professional sports subsidies. Millions of people enjoy watching, reading about and discussing their team. For them, the enjoyment of following a team is undoubtedly greater than the costs they bear.

Good public policy, however, requires a comparison between the costs and benefits of supporting the franchise. In the economics of both sports and public policy, resources are scarce and must be put to their best use. Not all subsidies will make the cut.

Tuesday, October 20, 2015

Star Trek Is Wrong: There Will Always Be Scarcity | Mises Daily

Scarcity is a condition created by time. Humans must decide to prioritize their lives based on a time constraint. Something can be done now, as that would be a higher priority, as compared to doing it later. Read the rest of the article here:



Star Trek Is Wrong: There Will Always Be Scarcity | Mises Daily

Monday, October 19, 2015

Gary Shilling: Why Commodity Prices Continue to Fall

One explanation could lead to the notion of elasticity of demand. As prices rise, some buyers may seek alternatives to that particular good or service. As buyers stop buying those goods, the demand falls, causing the price of those goods to fall.

Key excerpt from the article:

“Supplies of almost every commodity are huge and growing,” writes Shilling in his latest Insight report. At the same time, demand is falling due to the slowing global economy, says Shilling, president of A. Gary Shilling & Co.

Read the rest here 

The Poor in the US Are Richer than the Middle Class in Much of Europe | Mises Wire

In this week's debate, Bernie Sanders claimed that the United States has the highest rate of childhood poverty. CBS reports that Sanders said: "We should not be the country that has the highest rate of childhood poverty of any major country and more wealth and income inequality than any other country,"



As even CBS notes, according to UNICEF, which is probably the source of Sanders's factoid, the US has lower childhood poverty rates than Greece, Spain, Mexico, Latvia, and Israel, all of which are OECD countries or regarded as peer countries. The US rate (32.2 percent) is also more or less equal to the rate in Turkey, Romania, Lithuania, and Iceland.





Read more here:



The Poor in the US Are Richer than the Middle Class in Much of Europe | Mises Wire

Wednesday, October 7, 2015

Tuesday, October 6, 2015

Can Trade be Balanced and Equal?

With the notion of free trade, many see the need to ensure that trade is "balanced" and it is "fair". Politicians will state that, "We need fair trade practices with [Fill in the blank country]" While these seem to be reasonable ideals, are they realistic? Are they practical? Can free trade be "unfair"?

What is Trade? 

Before exploring if free trade is "unfair", let us explore the notion of trade.  Free Trade is simply the exchange of goods and services between two parties, without coercion or restraint from outsiders.(e.g Government) For example, if I go to the store to purchase a can of black olives, I provide my dollars, in exchange, for the black olives on the store's shelf. This is an simple example of trade. This does not change in the aggregate, as the aggregate is simply a collection of the aforementioned "trades" in the marketplace. Also, countries do not engage in "trade", individuals in those respective countries engage in trade. Suppose I purchase a new Nissan 350Z, and it is made in Japan. I am not trading with Japan no more than Nissan is trading with the United States. It is a simple trade between Nissan and me. I purchase the 350z with cash, in exchange, for the 350Z.

Why does Trade take place? 

People seek to improve their position in life. Economists call this behavior: "Utility seeking behavior".  Humans seek to improve their position in life for their "selfish" desires, goals, dreams and aspirations. While engaging in that process, trade will occur.  Individuals, or actors, in the marketplace will trade goods of "lessor" value for goods that will improve their lot in life, or they have greater value.

Is Trade Equal?

Let us go back to the example of the black olives purchase from earlier in this analysis. Suppose the can of black olives is $5. In this exchange, I give my $5 to the store, and the store, in turn, gives me the can of black olives. From a bookkeeping and accounting standpoint, this trade is equal, as debits and credits balance: $5 debit to cash, $5 credit to Revenue for the store.

On the surface, this is an equal trade. All debits and credits equal, thus there is no trade surplus or deficit. This works in a similar fashion in the aggregate. Commentators and experts lament about having a "trade deficit" or "trade surplus". Their analysis typically is one sided. They only focus on one side or one variable in the equation. Staying with the black olive theme, the experts would state: "The Store sells more black olives as compared to Robert! There is a trade deficit! We must place tariffs on The Store's black olives."  But, is this trade really "equal"?

Is Trade Unequal? 

From an accounting/bookkeeping standpoint, trade is equal. However, Economics is not accounting. Accounting is about the explicit costs/benefits, Economic analysis is about qualitative "costs/benefits". Going back to our Black Olive example, on the surface, the trade is equal. $5 dollars for $5 worth of black olives. But, using Economic analysis, one must look at the value or "utility" ranking of these items. It is quite clear that the person with the $5 values the $5 less than he/she values acquiring the can of black olives. On the other side of the ledger, the store values the $5 more than the black olives, thus the sale of the black olives. Both parties value the black olives unequally, and they also value the $5 unequally. Thus, from an economic perspective, the trade is unequal. However, the trade is unequal simply because value is subjective. Each party values their respective item differently.  It is not truly something that can be quantified. The money/currency measurement is simply a method of accounting/bookkeeping.

Conclusion

Critics of international trade mistakenly believe that trade is unbalanced from an accounting perspective. It is not, as shown here in our analysis. From an economic perspective, it is subjective, making it unequal. Without trade, mankind can not progress. Free trade is the pith of the human existence. One person is an excellent farmer, and sells his fruit and veggies at the farmer's market to individuals who are not skilled at planting crops. All of us are blessed with skills that others do not have, making the trade unequal, but quite fair.





Monday, September 28, 2015

Flat Tax vs National Sales Tax: Which is better?

Tax Reform is a major topic during most Presidential elections. Politicians seek to capture more voters with their position on taxation. Of course, most individuals love to pay taxes! Well, most voters would love to reduce their tax liability. This desire opens the door for the opportunity for many politicians to pitch their tax reduction campaign pitch. The tax reduction campaign typically falls under two camps:  (1) The implementation of a Flat Income tax, or(2) the implementation of a National Sales Tax. The question remains: Which one is better?

Flat Income Tax or "Flat Tax"

The Flat Income Tax, simply stated, is the notion where there is one tax rate percentage. For example, if family earns $100,000 per year, and the flat tax was 5%, their tax liability would be $5,000. Proponents feel this tax is "fair".(this is not about the National Sales tax called the "Fair Tax, that shall be discussed later in this analysis) They feel this way simply due to the same tax rate is charged to all. Is this a good deal?

As with other taxes, it ultimately reduces the free market actor's ability to consumer or save. It matters not if the actor's rate is the same as others in the marketplace, the ultimate effect is the same: The individual has fewer dollars to spend or save. For business owners, the income tax reduces the business owner's ability to invest more into the enterprise. That flat percentage must go to the State first, as the lost opportunity cost of investing back into the business reduces the businesses chances for long term success.

National Sales Tax

The other type of tax reform proposal deals with the national sales tax. There are varieties of this sort of form of taxation, one of which, is known as the "Fair Tax". While this analysis does not dig into the details of the "Fair Tax", thus it is not a specific critique of the "Fair Tax" per se. Supporters of this sort of tax state that its superior to the income tax simply because there is no income tax! Yet, the National Sales tax is still a tax on income.

Consider this example: A business owner operates in a region that has a National Sales tax. This tax is taken at the point of sale, as this is how it is sold to the public. If a final sales price is $100, and the sales tax is 8%, or $8, the business owner actually keeps $92. In this case, it is a tax on income.

Other Consideration: Tax on Capital Gains

Capital Gains tax is another factor in this discussion. Capital Gains is when an asset is acquired, held for a certain period of time, then sold at a higher price. At that point, the sales proceeds, the gain(acquisition price net against the sales price), is taxed.

There are several issues regarding this form of taxation. First of all, the actor acquiring the asset, is using funds that have been taxed. So, once the asset is sold, it is taxed again, exposing the actor to double taxation. The preference would be for the actor to hold the asset longer than usual depending on the amount of tax applied at the time of the sale due to the possibility of double taxation. Secondly, it still is a tax on income, but accrued income. For example, if one purchases an asset for $100, and holds it for 10 years, and it grows in price to $1000, the gains is taxed. But, the tax is based on the accrued income for those 10 years to reach the $1000.  It is not taxed each year as the "value" of the asset grows. Thus, it is a form of income tax, but its not taxed on the income in the year it is actually earned.

Conclusion

Both the flat tax and the sales tax are taxes on income. The economic implications are, as it is with all sorts of taxation, on the original factors of production: Land, Labor and Capital. Both forms of taxes, to include taxes on Capital gains, adds additional costs on capital, making it difficult for those starting out to move up the socioeconomic ranks. 




Cafe Hayek: Where Labor Goes

An excellent blog entry from the brain trust at Cafe Hayek on the following topic: Where Labor Goes

Napoleon Hill: Success Principle-Going The Extra Mile

Donald Trump Officially Announces Universal Healthcare Plan - " Governme...

Friday, September 25, 2015

Jim Rohn - Walk away from the 90 percent

Inflation: What is it?

There is a common theme for the definition of inflation. This theme usually states that inflation is defined as "rising prices in goods and services". With that definition, economists, financial experts, and others, always advise their clients to "hedge against inflation". So, in short, they are concerned about the spending power of their client's money. Back to the definition of inflation: Is this really the definition? Is it precise?

Let us take the common definition again: "Inflation is the phenomenon of rising prices in goods and services." However, let us suppose that a gas station is short in its inventory on gas. They normally anticipate the delivery truck to come once per week, yet this week, the truck does not arrive. In this case, assuming the demand is the same, or it's increasing, the gas store owner will raise the price. Is this inflation? 
Yes, prices have increased, and yes, prices have been inflated. But, the prices are being inflated due to the law of supply and demand. This makes the common definition of inflation imprecise. 

What is Inflation?

The more precise definition is based on this example. Suppose the central bank increases the money supply or money stock. Those first in line to receive the money can acquire goods and services before others can pick up those same goods and services. In doing this action, the first recipients drive up demand, thus driving up the prices of those said goods and services. It should be noted that demand was not increased until the money supply or stock was increases. Therefore, the rise in prices occur as a result of the increase in the money supply.  So, is inflation really the result of an increase in prices, or is it simply a result of the increase in the money supply?  It can be concluded that inflation simply is the increase in the money supply, deflation is the decrease in the money supply. The results of these actions cause an increase in prices or a decrease, respectively.

Price level and Price Stability

Two terms that are tossed around by mainstream economists are: Price Level and Price stability. These terms are typically used with the notion of Inflation. Starting with Price level, many economists attempt to produce math functions that can and demonstrate the price level. As one ponders this concept, there are questions that have answers that usurp the logic of this "price level" concept. What is the actual "price level"? How is it determined? Why should it be at this stated level?

Human beings are actors in the marketplace in a constant pursuit of "happiness". And, in that pursuit, voluntary exchange takes place. At times, there are items that the actors value more than others, since all actors are restrained to make choices with scarce resources. If a vast majority of actors in the marketplace prefer to purchase Item (A), in contrast to Item (B), then the price of item (A) will rise, and subsequently, the price of Item (B) will drop. In short, with this example, there are two price levels!  At this point, economists will aggregate all the items, and determine the price level. This exercise is risible simply because all of the items are not homogeneous in nature. And, the actors all "value" those items different, as value is subjective. This makes the notion of price level highly fallacious.

The concept of Price Stability is equally as fallacious as the notion of obtaining a Price level. The actors in the marketplace all are seeking their respective goals and happiness. Their value scales are constantly changing. For example, an individual at one point in time may value purchasing gas, over the notion of purchasing a steak. This maybe true if the person just ate a steak! How can the price of Steak be "stable", if people's desire for steak constantly change? Same with the need for gasoline? Since value scales are changing constantly, the notion of price stability is a quixotic chase.

Conclusion

In closing, the mainstream definition of inflation does not incorporate the notion of the increase in the money supply and money stock. This leads many down the incorrect path of economic analysis due to the lack of specificity in the definition of inflation.  Inflation is simply the increase in the money stock, and prices rising can occur from that money stock increase.


Do Central Banks Drive The Interest Rate?

This article discusses the notion of the natural rate of interest. It is with popular belief that the Central banks drive and determine the interest rate. This is not true, as it is discussed here:  Mises Daily | Mises Institute

Corporate Taxes: Can they "help" Grow an Economy?

Social media gives budding Economists a forum to "flex" their intellectual muscle with the wits of others. Let us take this statement as an example, as it is discussing Bernie Sanders' notion of raising taxes on Corporations:


"Actually, Bernie shows a much better understanding of basic economics than most Americans. A high maximum tax rate forces corporations to reinvest in equipment, facilities, and people rather than give the money to the govt. That's how the economy boomed under Eisenhower in the 50s. It worked then, and it would work now."
Outside of the glaring use of the famous post hoc ergo prompter hoc fallacy(Cause and effect fallacy), let us break down the issues with this statement using economic analysis. But, before this happens, review the dialogue between myself and this gentleman:

My reply:

"Bernie does not have an excellent grasp of economics. 
A maximum tax rate forces corporations to take a reduction in their overall revenues. And, taxes are not simply passed onto the consumer. Public Finance Econ peer reviewed studies and research show the Corporations absorb the tax incidence or take on the tax liability. 
Taxes impair the corporation's ability to reinvest their profits, which is simply a return on capital net the natural rate of interest. In short, the tax revenues are impacting those original factors of production: Land, Labor and Capital. 
This would loom disastrous, as compared to the 1950s, simply because we are in a Global marketplace. China, Japan, Germany, India, Brazil, South Korea and the like were not emerging economic markets. Now, they are highly competitive for scarce resources. Since they are more competitive, why on earth would one propose to increase taxes on business owners, and ultimately capital and labor? This is a foolish proposition.
The elimination of corporate tax is the ideal scenario."

The gentleman's rejoinder:

"Sorry, Robert, that's not correct. You are presuming that the max tax rate would be automatically paid by all corporations, which it would not. The tax rate is graduated. Therefore, when a company reinvests it's profits, they pay less tax on the adjusted income - which is exactly what happened in the 50s. The reason to raise the tax rates is to force companies to actually act more competitive, since the US is still richer than all of its competition. Right now, they are reaping record financial windfalls simply by holding down worker salaries and hoarding the profits. Eliminating corporate taxes is the most absurd, disastrous thing you could do to any economy."


My rejoinder:

"Taxes have a negative impact on the economy. Since Govt is a economic parasite, it does not expand the economy, but shrinks capital markets, and subsequently, the econ output. 
Side note:
When you speak of the 1950s, pre Dr. Demming's help in Japan, you refer to the US as the lone industrial power, as those aforementioned countries were not on the map as economic competitors. So, your comparison is not in proper economic context. Once those countries emerged, they placed downward pressure on final retail price of goods and services. See Japan in the auto and electronic market in the 1980s. 
Raising taxes on domestic firms would make them less competitive in a global market place. Firms will simply seek to move their capital where they can yield the highest ROI on the original investment capital, net the natural rate of interest. For example, see all the capital moving "off shore" banks to minimize the tax liability, as the US has one of the highest tax rates in the world. 
Next, ALL taxes, no exception, reduce the company's ability to reinvest into its future. Profits, as they are ephemeral, are simply a return on the inital capital, net the natural rate of intest. Raising Taxes simply shrink the number of firms in the marketplace, yielding a monopoly or oligopoly structure. This structure yields market inefficiencies, as resources are wasted. This notion is called "Dead weight losses". This is due to the increased cost of entry for firms to enter a competitive marketplace. Please note that the more competition for the marketplace, this places downward pressure on the market price. Raising taxes simply reduces competition, as smaller firms are boxed out due to increased costs of higher taxes.
With Taxes, one must look at the lost opportunity cost. Suppose John has a widget with a sales price of $100 and expenses of $75. His profit, EBITDA, is $25. At this point, John must pay the taxes on that profit. This is $25 less that could be used to purchase more equipment. Since taxes are paid on the profit, this reduces his ROI, as the profit is simply a return on capital net the natural rate of interest. 
Corporation taxes, as per our analysis, reduces the capital markets, and makes the capital markets more stagnant. Capital is needed to fuel innovation, provide technology to assist the other economic resource, labor. 
Raising taxes presumes that there is an unlimited supply of resources, and actors in the marketplace have no restraint of scarcity or time. It matters not if they are progressively graded on the margin. The economic impact remains the same. 
A final note: Please look at the economic output post Civil War up to about 1917. Govt spending was a fraction of the economy, and it yielded the best econ output in the history of mankind."

There are several issues with this gentleman's position with regards to taxation.

First of all, it is based upon the false assumption that the economy will be doomed if taxes are not collected. Government can not exist unless it is funded by taxation or borrowing. Both methods require an extraction of resources from the "private" sector. Some sort of "free market" must exist for the Government to tax or sell debt to fund its operations. This action is not done voluntarily, as it is done by force, under the guise of altruism. From an ethical standpoint, many can argue this is legal plunder. See the writings of Frederic Bastiat  regarding taxation to see further detail along this line of thinking.  Since this action, taxation of the private sector, is done by force, it leaves the "private" sector with fewer resources to use to expand the economy. Actors in the "private" sector must give up their property, by force, to satisfy the Government taxation and spending efforts. The lost opportunity cost of the actors using the scarce resources to expand their goal seeking efforts is lost to the Government. Government, as history has demonstrated, is not a good steward of scarce resources.  The overall economic output suffers as a result of this action.

Secondly, this position assumes that the Government has a first claim to individual private property. If an actor in the "private" sector starts up an enterprise, his/her idea is the starting point of this business. This idea spawns all of the subsequent activity of the raising of capital, hiring of labor, and seeing the enterprise grow into reality. The profits made are simply a return on the initial capital investment of this enterprise, net the natural rate of interest.  If the Government has first claim to the profits, this does not allow for re-investment back into the enterprise. How does the Government get first claim to this enterprise, when the idea was created in the mind of the founder of the business? How does it make sense to  In short, there is no moral or ethical claim to this creator's private property.

Lastly, this position also falsely assumes that Government spending helps grow the economy. When the Government spends into the economy, it actually drives up demand, with its involvement in that said market. The price system is the best way to economize and push scarce resources to its most valued uses. Yet, with the Government, how does it determine where those resources are most valued? It is determined by the vote of the politicians, lobbied by special interest groups. The most efficient use of the price system to allocate scarce resources is via free voluntary exchange, not parliamentary vote. The latter method builds a oligopoly/monopoly market structure, as previously mentioned, it yields market inefficiencies. As a result of this action, society suffers.  Individual savings rates decline, prices are falsely elevated, resources are wasted, and much more happens when Government spends into the economy.

In conclusion, to think that the sands higher taxation of Corporations will destroy an economy is simply foolish. In fact, the opposite holds true: Government involvement in an economy will destroy it. History supports this notion.


Tuesday, September 22, 2015

Sales Taxes: Do Consumers Pay Them?

The popular belief with many mainstream economists, is the notion that a sales tax can be pushed forward to the consumers. In this analysis, I will show who actually pays the tax.

Consider the following example:
$100 price for shoes
$6 sales tax
$106 Total price paid by the customer.

In this example, most economists would state the customer "paid" the tax because the price paid was $106. However, this analysis is not complete. 

The business owner actually paid $6 to the taxing authority. Also, the final price($106) is the equilibrium price, as this is the agreed price between customer and business. The business owner earns fewer dollars, thanks to the sales tax. In short, the business owner "eats" the tax. 

Continuing on this line of reasoning, since the business owner receives fewer dollars due to the sales tax, this also reduced his profits. It should be noted that profit is simply the return on capital invested, net the natural rate of interest. Yes, the sales tax also alters the natural rate of interest, or the time preference of consumption by the business owner. Since the business owner has fewer profits to purchase more economic inputs, this alters his ability to buy things in the present, thus slowly usurping his operation.

Conclusion

The sales tax is not passed forward to the consumer. It is paid for by the business owner, and it impacts the nautural rate of interest. If it could be simply passed forward, consumers would just pay it! Of course, this is not true, as consumers have a limit on what they can spend. Sales Tax increases hurt the business owner's ability to re-invest into the factors of production: e.g. Land, labor and capital.

Thursday, September 17, 2015

Value: From Where does it come?

What is value? For centuries, many thinkers pondered this concept. Economists from Adam Smith, David Ricardo and many others attempted to answer the famous, "Diamond/Water" Paradox, as this was related to the notion of value. Why are diamonds more "valuable" than water? Yet, water is needed for the survival of humans? This sort of questioning was central to these thinkers process in attempting to define "value".

Fast forward into the 1800s, and the seminal work of Karl Marx, "Das Kapital".  Marx argued that the value of the end product, was based upon the value of the labor that was used to bring that product, or service, to "market".  While Marx was not the first one to propose this notion, as Ricardo and Adam Smith had a similar position, many followers of Marx strongly believed that labor defined the value of the end product. And, these followers also believed the "Capitalists" were exploiting the workers by not "sharing" in the profit of the workers labor. 

Price: Does it determine "value"? 

Many individuals take the position that the higher the item's price, this, in turn, means the product(service) is "valuable".  Consider this example: Suppose one purchases a Diamond for $10,000, and a bottle of water for $1.00. For human survival, is the diamond more "valuable" than the water? Of course not! Yet, the diamond has a higher price! With conventional thinking, or the way the previous thinkers opined, the diamond was more valuable. 

In short, price has little or nothing to do with value, per se.  The retail price sold also does not express the actual labor used to make the product. Let us consider this example: Suppose that a store has more than its supply of bottled water. The store decided to lower the price from $1.00, to 50 cents due to excess supply of bottle water.
Prices are simply a tool to communicate to parties involved in voluntary exchange to other things: scarcity and value relative to other resources. So, yes, it is related to value, but it does not express value soley.

The Marginalist Thinkers figure it out

Thinkers in the late 1800s began to re-examine the Diamond vs Water paradox, as it relates to the notion of value. Thinkers like the following: Stanley Jevons, Carl Menger and Leon Walras, worked independently and drew similar conclusions regarding value. It was determined that value was subjective, and the end product or service did not determine the price from the value of its inputs. Since value is subjective, it simply can not be quantified on prices alone.  It is all based on how we "rank" those items in order of preference.

Conclusion

Value is something that we as individuals subjectively rank, file and view in our minds. This is based on other items outside the scope of economic analysis. It drives deeper into the beliefs, morality, psyhcology and etc of us. 

David Stockman-Debt Markets Unstable and Tottering

The Drug War Makes Border Enforcement More Difficult

The Drug War Makes Border Enforcement More Difficult


Excerpt: "Drug profits give smugglers the money  to do what poverty-stricken immigrants can't: dig long, high-tech tunnels with lighting and ventilation systems. A border fence doesn't secure the border when immigrants -- and criminals -- can tunnel underneath it."

Wednesday, September 16, 2015

Walter Williams Explains the Free Market

Is Capitalism Moral?

New Video with economist Walter Williams! -> "Is Capitalism Moral?"Is capitalism moral or greedy? If it's based on greed and selfishness, what's the best alternative economic system? Perhaps socialism? And if capitalism is moral, what makes it so?Walter E. Williams - Townhall.com Columnist

Posted by PragerU on Monday, September 14, 2015

Tuesday, September 1, 2015

Savings vs Consumption

Consumption is neither good or bad. Ultimately, we will all consume.  However, it is when we consume that makes a difference. Also, in that choice, we delay some consumption things we acquire into the future, and that is called "Savings".  Savings is needed to "invest" into capital goods, education, technology, and the like, in order to make the future production grow.

This topic naturally opens up the door to the notion of the natural rate of interest. The natural rate of interest represents the time preference of consumption today, as compared to the consumption in the future. The Natural rate of interest is an important tool for entrepreneurs in the Capital Markets to accurately "price" out their services.

When interest rates are "price fixed" by the central banks, the same results happen as it does with other goods when Government mandated price fixing occurs: Shortages or surpluses take place in the marketplace(i.e recall the long gas lines in the 1970s )Individuals in the society can not valuate properly the prices, as it sends mixed signals on the allocation of those goods and services.

Prices act as messengers telling the individuals in the marketplace on how to allocate their individual preferences.  The result of this price fixing reveals in the drastic boom and bust economic cycles, as witnessed in 2008 in the Real Estate/Capital market.

In summary, Savings and consumption are both needed to grow an economy. Ultimately, it is production that drives the economy. Savings, if invested into those capital goods, can help make production more effective.


Sunday, August 30, 2015

Basic Economics of the Export-Import Bank of the United States

An excellent economic analysis on the Export-Import Bank done under the article titled, "Basic Economics of the Export-Import Bank of the United States | Mercatus"

Domestic firms seek to utilize a local Government Export-Import Bank to make international trade "fair", since, based on those domestic firms perception, the rules of the game are not titled in their favor. Yet, as it is with most things with Economics, the obvious answer is not always the ideal "solution".

Monday, August 24, 2015

Roland Fryer - Education in America (Must See)

Contra Wise-Job Market

The scholarly analysis of race has be done from scholars of all types. One of the most popular scholars of the analysis of Race is Tim Wise. Mr. Wise has dedicated a large portion of his research on "white privilege". "White Privilege" is the main reason why there is an inequality gap, as per Mr. Tim Wise, on the economic outcomes in the labor market between whites and blacks. Of course, in true scholarly fashion, he has empirical evidence to support his position.

In this brief article, I will focus on the statistical analysis and how it supports(or does not support) his premise. The article of focus is titled, Excuses, Excuses: How the Right Rationalizes Racial Inequality (Part I: Wages and the Job Market) 


Before I go forward in addressing Mr. Wise, there are a couple of points I would love to present to the reader:


1. Racism does exist. Yet, how it feels to the individual is subjective.

2. My analysis is limited to how Mr. Wise builds his argument, not proving or disprove that racism or "white privilege" exists. 

For starters, let's take this first quote from Mr. Wise:

"For example, the argument that racial wage gaps merely reflect different levels of experience and qualifications between whites and blacks are simply untenable, when one examines the data. Fact is, earnings gaps persist at all levels of education. According to Census data, whites with high school diplomas, college degrees or Master’s Degrees all earn approximately twenty percent more than their black counterparts. Even more striking, whites with professional degrees (such as medicine or law) earn, on average, thirty-one percent more than similar blacks and fifty-two percent more than similar Latinos (1). Even when levels of work experience are the same between blacks and whites, the racial wage gap remains between 10-20 percent (2)."


As per the census of 2011, only 6% of Blacks are in the STEM workforce. If only 11% of blacks are in the workforce, and represent 6% of the STEM workforce, it would only stand to reason that the income disparity would work against blacks. With regards to STEM wages after graduation, they earn $15k more than non stem majors. Couple that with the notion that there exist only 6% of Blacks in the STEM fields, this is one explanation of the income disparity.


Here is a question for Mr. Wise: How is this an example of "white privilege"? If Blacks are under represented in STEM, this is clearly a choice by youngsters on what type of college study in which to major. This is not a "zero sum" game as Wise attempts to infer.


Next, making the assumption that earnings for two individuals are supposed to equal is a un realistic position. Each individual has different skills, interests, educational levels and the like. If someone is a janitor, and the next person is a neurosurgeon, it is quite clear that their income will differ.


With this sort of analysis, Wise attempts to conflate the notion of qualitative analysis with quantitative analysis. How does he possibly conclude from this that there is "white privilege". What he is demonstrating is that the aggregate of choices between the races, with regards to college major and career choices, are demonstrating differences in outcome.


In short, the only real conclusion that Mr. Wise can draw from the analysis of this data is that both races, in the aggregate, have chosen different career paths. Based upon those choices, the incomes will differ based on market demand for those said professions in the labor market. Making a conclusion that this is "white privilege", based on these differences, is invalid.





St Louis Fed: QE was a Mistake?

This article here states that the St Louis Fed claims that the program of Quantitative Easing was a "mistake". Key excerpt here:

"Now, the very same St. Louis Fed (this time in the form of a white paper by the bank’s vice president Stephen D. Williamson), is out questioning the efficacy of QE when it comes to stoking inflation and boosting economic activity.

Williamson says the theory behind QE is “not well-developed”, and calls the evidence in support of Ben Bernanke’s views on the transmission mechanisms whereby asset purchases affect outcomes 'mixed at best.' "

Read the rest of the article here.

Pharmaceutical Prices, Patents and the FDA

This article from Mises Daily | Mises Institute, explores the economics of the issues surrounding bringing drugs from Research and development, approval from the FDA, and finally, to the marketplace. What are the economic impacts on the marketplace due to this process?

Sunday, August 16, 2015

Immigrants are sending billions home each year, and getting that money across borders has turned into a massive, entrenched industry


Key Excerpt from article titled, "Immigrants are sending billions home each year, and getting that money across borders..": 

"Globalization has made borders much more porous. Workers look abroad for better opportunities to earn money, which they can then send to their families back home.

But getting that money across borders isn't simple, which is why immigrants have been heavily dependent on remittance companies like Western Union, MoneyGram, and Ria.

The problem, though, is that the fees these companies charge are often very high, and substantially cut into workers' earnings. That's why digital-first companies are starting to seize on the opportunity in the remittance industry."




Adam Smith’s Criticism of Government: Knowledge

Here is an excellent analysis of Adam Smith's point about how Government's difficulty in attempting to "plan out" things in an economy.

Opening line of the article:

 "Adam Smith argued that politicians and bureaucrats lack both the information required to make good decisions and the incentives to become better informed."

Read the rest here.


Sunday, August 2, 2015

Farm Work is Dangerous in South Africa

These individuals that are murdering large amounts of farmers in South Africa are simply performing an act of economic destruction.

Key Excerpt from the article, Farm work is South Africa's 'most dangerous occupation':

"The number of farm murders rose to 67 in 2014 from 62 the previous year, Afriforum and the Transvaal Agricultural Union (TAU) said. There were 277 farm attacks in 2014, which the organisation believes is the highest figure since 1990.
The 132.2 murders on farms per 100,000 people is more than double the murder rate for policeman at 54.4 per 100,000 people, the unions added, and 32.2 per 100,000 for the country's population as a whole"

Monday, July 27, 2015

McDonald’s Announces It’s Answer to $15 an Hour Minimum Wage

As special interest groups seek to raise minimum wage on individual business owners, business owners will engage in the legendary trade off between the following: Capital and Labor.  Paul Samuelson Phd, the Nobel Prize winning Economist, covers this trade off in most of his Intermediate Microeconomics textbooks.  As Dr. Samuelson analyzed, if the cost of labor rises, the Business owner still must maintain the same level of output to keep his/her operation in business.  If this happens, the business owner may or will seek to acquire more capital equipment to produce the same output as the human labor provided.  Please note: This is only one potential trade off for the business owner, as there are others.

As special interest groups continue to push for an increase in the minimum wage rate, I predict more of this sort of trade off occurring. This is not the only outcome for the minimum wage increase, but this is one to consider.

McDonald’s Announces Its Answer to $15 an Hour Minimum Wage – Touch-Screen Cashiers

Friday, July 24, 2015

Book on Theory of Natural Rate of Interest

Books | Mises Institute



Giants of the Austrian world have been assembled for the task, along with a fresh new introduction by Jeffrey Herbener. Rothbard, Mises, Garrison, Kirzner and Fetter systematically provide the underpinnings of a theory that, as Israel Kirzner writes, “for almost a century a particular theory of interest has been again and again discussed, refuted, defended, ignored, forgotten, and rediscovered; somehow it has managed to survive.”

Stubhub vs Golden State Warriors: The Monopoly Game

In the article titled, "StubHub files Lawsuit against the Golden State Warriors", Stubhub claims the Warriors has monopoly power with regards to selling tickets.

Historical Ignorance-Walter Williams, Phd

Here is an article titled, "Historical Ignorance", by Walter Williams, Phd. It covers the Civil War and some of the misunderstanding surrounding the war. Here is a key excerpt:

"Both Northern Democratic and Republican Parties favored allowing the South to secede in peace. Just about every major Northern newspaper editorialized in favor of the South's right to secede. New York Tribune (Feb. 5, 1860): 'If tyranny and despotism justified the Revolution of 1776, then we do not see why it would not justify the secession of Five Millions of Southrons(sic_ from the Federal Union in 1861." Detroit Free Press (Feb. 19, 1861): "An attempt to subjugate the seceded states, even if successful, could produce nothing but evil -- evil unmitigated in character and appalling in content.' The New York Times (March 21, 1861): 'There is growing sentiment throughout the North in favor of letting the Gulf States go.' "


The second part, "Historical Ignorance II" is an equally important to read.  A key excerpt:

"Was President Abraham Lincoln really for outlawing slavery? Let's look at his words. In an 1858 letter, Lincoln said, 'I have declared a thousand times, and now repeat that, in my opinion neither the General Government, nor any other power outside of the slave states, can constitutionally or rightfully interfere with slaves or slavery where it already exists.' In a Springfield, Illinois, speech, he explained: 'My declarations upon this subject of Negro slavery may be misrepresented but cannot be misunderstood. I have said that I do not understand the Declaration (of Independence) to mean that all men were created equal in all respects.' Debating Sen. Stephen Douglas, Lincoln said, 'I am not, nor ever have been, in favor of making voters or jurors of Negroes nor of qualifying them to hold office nor to intermarry with white people; and I will say in addition to this that there is a physical difference between the white and black races, which I believe will forever forbid the two races living together on terms of social and political equality.' "

Thursday, July 23, 2015

Capitalist Soul Rises as Ho Chi Minh City Sheds Its Past

Excerpt from the article, "Capitalist Soul Rises as Ho Chi Minh City Sheds Its Past":



"Four decades after the victory of Communist forces, the soul of this city, still known locally as Saigon, seems firmly planted in the present. For the young and increasingly affluent, Saigon is a city that does not want to look back, loves having fun and perhaps most of all is voraciously capitalistic."

Being A Good Hayekian

Excerpt from the article, "Being A Good Hayekian"(reference to the great Economist, F.A. Hayek):

"I mentioned that Hayek is on the edge of the libertarian tradition, brushing shoulders with Edmund Burke, the great conservative thinker. The biggest difference between Burke and Hayek—apart from Hayek being a much more rigorous, systematic thinker—is that where Burke wants us to trust tradition because doing so usually works for the best, Hayek advises only that we don’t throw out all our traditions at once and try to start fresh, as ocurred, for example, during the French Revolution."

Tuesday, July 21, 2015

How a Labor Union Keeps Mixed Martial Arts Illegal in New York

Intro:

"This month, the Ultimate Fighting Championship (UFC) experienced one of its biggest Pay-Per-View events ever with “UFC 189,” live from Las Vegas, Nevada. Mixed Martial Arts (MMA) is widely considered to be the fastest growing sport in America and perhaps even the world. Thus, many different cities both inside and outside the United States have hosted MMA events. But in one state, New York, MMA remains illegal, and will likely remain that way for at least one more year. The sport is legal and regulated in the other 49 states."



Read the rest here.

How Cultural Marxism is Implemented

Recognising a Cultural Marxist

Friday, July 17, 2015

Freedom of Speech: How Is Offensive Speech Good For Society? | Learn Lib...

By the Numbers: Does Immigration Cause Crime?

"The alleged murder of Kate Steinle in San Francisco by illegal immigrant Juan Francisco Lopez-Sanchez has reignited the debate over the link between immigration and crime. Such debates often call for change in policy regarding the deportation or apprehension of illegal immigrants.

However, if policies should change, it should not be in reaction to a single tragic murder. It should be in response to careful research on whether immigrants actually boost the US crime rates.

With few exceptions, immigrants are less crime prone than natives or have no effect on crime rates. As described below, the research is fairly one-sided."





By the Numbers: Does Immigration Cause Crime?

Candidates Reagan & Bush-41 Discuss Illegal Immigration in 1980 Debate

Voluntary exchange, Trademarks and the Redskins

"Hail to the Redskins, Hail Victory, Hail for the Redskins, FIGHT FOR OLD DC! "

It pains me to write those lyrics, and it also pains me to discuss the Washington Redskins. As a die hard Dallas Cowboys fan, I share in the disdain for a divisional rival with my fellow Cowboys fans. However, this topic of the Washington Redskins' name is quite intriguing from an Economic perspective. The legal ramifications are well documented, and I will not address those issues in this here. I will simply address some simple economic "truths" as it deals with the Redskins, and trademarks as it pertains to private property rights.

In Economics, one learns that in voluntary exchange, two actors are in the process of exchanging one item that they see as lesser in value, for another item(s) that are perceived more valuable to the actors. How does this truth play out with the Washington Redskins?

It is well documented that the owner of the Washington Redskins, Daniel Synder, has stated emphatically, that he will "NEVER change" the Redskins name. I believe there is a price that the Redskins name will be changed.  If the name is going to be changed, that economic price will be paid as well. If those individuals that are seeking to have the named changed, via the legal process, they still will pay the economic price to have it removed. The value to have it changed must exceed the value that Mr. Synder has for the trademark. They will pay this price directly to Mr. Synder, or they will pay it indirectly to attorneys and other legal professionals via the legal process.

Those individuals who simply think that Mr. Synder will acquiesce to the opposition at a lower price, are simply foolish. If this is the case, then Mr. Synder does not "value" that trademark in high regard. However, the Washington Redskins have a very valuable franchise, and that trademark, holds a very high asset value for Mr. Synder. Removal of this trademark will not come cheaply. So, do the protesters have enough cash to have this logo removed? Time will tell.

Here is the article discussing the ruling here: "Federal Judge Orders Cancellation of Trademark Registrations" 

Monday, April 20, 2015

Unsustainable Marxist Economics

An Austrian Economist in France Speaks Out

An Austrian Economist in France Speaks Out





Key Excerpt:



"The purpose of economic science is to study how human societies work —  that is to say, the way human beings behave and interact with each other. However, it is undeniable that thinking precedes action. Man is endowed with reason, which means that each and every action is actually a thinking process above all. This point is particularly highlighted by the great Austrian economist Ludwig von Mises, whose magnum opus is titled Human Action."

Friday, April 3, 2015

How Liquidity Drives the Stock Market

Loose monetary policy is driving the stock market, as per Dr. Frank Shostak.  With the Fed keeping interest rates at record lows, coupled with programs like Operation twist(US Bond purchasing program), the monetary unit loses its value with every X+1 printed. Read "How Liquidity Drives the Stock Market"

Sunday, March 29, 2015

Payday Loans and Predatory Politicians

Payday Loans and Predatory Politicians



Excerpt:



"Populist politicians argue that they’re trying to “protect” poor people from “predatory” lenders. But what they’re really doing is taking away the last recourse -- from the already severely limited options -- for poor people in urgent financial need.
Before seeking to regulate payday lenders into submission — or oblivion — it’s important to ask: what’s the alternative?"



Saturday, March 28, 2015

Higher Minimum Wage Leaves Working Poor Without Childcare



Key Excerpt:



"So when its main expense (labor) increases by more than 36% overnight (from $9 to $12.25 per hour), Cold Hard Facts say: Increase Revenues or Decrease Expenses.
For a non-profit early childhood development center in Oakland which had recently garnered the highest rating in the county, the only way “out” is decreased costs. Parents of the 63 children cared for there—all working poor—pay little to nothing for the care provided five days a week, every week of the year. Because it is a nourishing environment—providing professional care, guided recreation, stories, socialization and pre-school instruction—it is by definition very labor intensive. And much of that labor is provided by minimum-wage teachers’ aids. The immediate, first-year budget shortfall to meet the mandated wage increase: $146,500."