Tag Archives: Economics

The Human Condition

Human Condition

From 538 – a site that until recently was a daily must read:

Do people order more-expensive food when they know they’re going to be splitting the check equally (e.g. three friends all give their credit cards for the waiter to split the tab)?

I think we know the answer – and the answer is:

In 2004, a study in The Economic Journal, a publication of the Royal Economic Society, looked at the behavior of Israeli students in different dining scenarios at a restaurant “with numerous delectable categories to encompass a wide range of tastes” (academic writing, eh?). The researchers told four groups of diners (always three men and three women) to split the bill equally among them. They told another four groups to pay for what they had ordered. Lastly, they told two lucky groups that they would get their meals for free.

The results were consistent with the economists’ hypotheses: Those who were getting a free meal spent the most (especially one cheeky person who, judging by this chart from the study, really went all out). Those who were splitting the bill spent less, and those who were paying individually spent the least — costs are in Israeli new shekels.

I’m not sure I have any insight into anything political here other than to suggest that I find most of the policies favored by the left to be “human condition” improvement programs.  That is to say, “we as a society should do better  by our fellow man” is reason enough to enact legislation.

Where I find church – the liberal finds government.

Minimum Wage Loss – Not A Progressive Bug But A Feature

Minimum Wage

It is well understood among economists that minimum wage laws drag employment.  There may be debate surrounding the net cost/benefit analysis, but that isn’t the point here.

I saw this over at Coyote Blog.

The point is that among the Left, the loss of jobs is a BENEFIT in and of itself.  Because you know who loses out when wages rise above productivity levels?  The least productive among us.

Imagine how horrified I was to learn that this was a feature:

Progressive economists, like their neoclassical critics, believed that binding minimum wages would cause job losses. However, the progressive economists also believed that the job loss induced by minimum wages was a social benefit, as it 212 Journal of Economic Perspectives performed the eugenic service ridding the labor force of the “unemployable.” Sidney and Beatrice Webb (1897 [1920], p. 785) put it plainly: “With regard to certain sections of the population [the “unemployable”], this unemployment is not a mark of social disease, but actually of social health.” “[O]f all ways of dealing with these unfortunate parasites,” Sidney Webb (1912, p. 992) opined in the Journal of Political Economy, “the most ruinous to the community is to allow them to unrestrainedly compete as wage earners.” A minimum wage was seen to operate eugenically through two channels: by deterring prospective immigrants (Henderson, 1900) and also by removing from employment the “unemployable,” who, thus identified, could be, for example, segregated in rural communities or sterilized.

The notion that minimum-wage induced disemployment is a social benefit distinguishes its progressive proponents from their neoclassical critics, such as Alfred Marshall (1897), Philip Wicksteed (1913), A. C. Pigou (1913) and John Bates Clark (1913), who regarded job loss as a social cost of minimum wages, not as a putative social benefit (Leonard, 2000).

Columbia’s Henry Rogers Seager, a leading progressive economist who served as president of the AEA in 1922, provides an example. Worthy wage-earners, Seager (1913a, p. 12) argued, need protection from the “wearing competition of the casual worker and the drifter” and from the other “unemployable” who unfairly drag down the wages of more deserving workers (1913b, pp. 82–83). The minimum wage protects deserving workers from the competition of the unfit by making it illegal to work for less. Seager (1913a, p. 9) wrote: “The operation of the minimum wage requirement would merely extend the definition of defectives to embrace all individuals, who even after having received special training, remain incapable of adequate self-support.” Seager (p. 10) made clear what should happen to those who, even after remedial training, could not earn the legal minimum: “If we are to maintain a race that is to be made of up of capable, efficient and independent individuals and family groups we must courageously cut off lines of heredity that have been proved to be undesirable by isolation or sterilization . . . .”


What Is Poverty And Minimum Wage

Minimum WageI am going to borrow liberally from the Coyote and he gives a shout out to Carpe Diem.  The debate concerning isn’t about making the lives of those suffering in poverty better – rather it is the “do gooders” crowd trying to impose their version of “fair” on others:

Note the household income per earner for the lowest quintile.  It equates to something over $14 an hour, well above minimum wage almost everywhere in the US and nearly as high as the $15 national minimum wage proposed as an anti-poverty program.

The problem with most poor households is not wage rate, it is getting full time work.  The household income per earner is nearly as high as the average income of the second quintile.  The problem is that most poor households do not have full-time earners.   The key stat is that only 16% worked full-time and only 30% had any sort of job at all.

Pay attention!  The key metric is not that those in poverty are being paid low wages, it’s that they don’t have jobs.  And raising the minimum wage only makes finding jobs harder.

Characteristics of Income

A Very Predictable Result Of Obamacare


Economic Law Of Gravity

The allocation of scare resources.

That’s economics as defined by Thomas Sowell.

And doctors are scare resources – people that have skills that are in demand.  And the demand results in a cost.  And if that fact is ignored – as is often the case in DC – trouble will ensue.

In this case, the trouble will be that people who have purchased an insurance plan are going too find out that their choice of doctors is limited, sometimes severely:

Some 70% of new plans under the health law offer relatively narrow networks compared with many current plans, according to a recent report by McKinsey & Co. The consulting firm found that plans with smaller choices of hospitals had significantly lower premiums than similar plans offering a broader choice.

And why are we facing this problem?

Because the new law is forcing insurance companies to insure everyone, independent of pre-existing conditions on top of prohibiting them from charging more for demographics that then to have higher medical bills.

The Impact of Obama's Health Care Reform

Obama was right.  The health care industry needed, and still does need, reform.  Many many aspects of the industry are languishing under bad laws, bad incentives and bad practices.  We all need to understand that and move forward in some form of meaningful reform.  And there are ways to do it.  And there are ways NOT to do it.

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