Armchair Economists, Unite!

[GenesisOne]

Judging by all this, I can safely say that we all learned something today (some more than others).


So, without further digression, I'd like to swing the debate back to what I had originally proposed before the whole debacle of hypothetical government cuts (still holding to a spirit of moderation). And that is:

Federal Minimum wage: should it stay or should it go?

The first thing that would have to happen is people take their stance. ("Yes, it should go" or "No, it should stay")

Once that's done, those in their respective stances can pick apart a couple of questions this moderator has provided.

For the "Yes" crowd:

- History has demonstrated that companies left unchecked will abuse their power (e.g. the Lawrence, Mass. textile mills). Would you agree or disagree that a minimum wage gives businesses a reasonable floor that should be paid for the labor of others, whether skilled or unskilled? Explain your answer (with evidence, if possible).

For the "No" crowd:

- With foreign countries hiring workers for far less than the current U.S. federal minimum wage, how would a minimum wage help U.S. companies to compete in the global market? Explain your answer (with evidence, if possible).
 

[Lennis]

http://cbo.gov/ftpdocs/115xx/doc11580/11580_Summary.pdf

This was extremely informative, and pretty much shot down my pessimistic stance on Social Security - at least in terms of a solution being possible.  Politically it's still difficult due to the Overton Window you described.  I learned something there, too.

If your revenue-based solution involves taxing only the rich, I can see why there is no political will to pursue it.  It is politically perilous.  $100,000 is no small chunk of change for most people.  An individual can live very comfortably with that kind of salary.  The highest income earners would have some justification in complaining why they shouldn't pay a share, too.

Either I am misunderstanding you here, or you miswrote something. It seems as though you are under the impression that the taxable income cap is $100,000 in actual taxes. That's not the case. Rather, the income a person earns is presently taxable up to about that amount. Thus, if you "earned" $64,802,000 in a given year, only the first $100,000 of it (give or take a few thousand) would be subject to the Social Security tax.

Yeah, I messed up there.  I was thinking of middle-class income earners making upwards of that amount.

Flat-taxes are not as equitable as they seem because dollars of income are subject to diminishing returns. The first $10,000 you earn is much more crucial to your basic human needs than the, say, 447th $10,000 you earn.

True, but I wasn't thinking of applying the flat rate to those below the poverty line.  Unless I'm mistaken, that line is somewhere north of $10,000.  Personally, I wouldn't apply the tax to anyone making less than $25,000 individually.

Going back to the first days of the Compendium, I have rubbed some people the wrong way with my occasionally-confrontational style. People you don't even remember used to sing the song you're singing now, about mud and ego and "Golly, J, you really ought to be a little more civil."  So bogus, that sentiment. So unworthy of me, and you. "Civility" is not the goal of debate, nor is it a means to the goal of debate.

I'll have to respectfully disagree with you there, though you couldn't have made your reasoning behind your decorum any more clear.  Let's just say that if I had your oratory gifts, I would be less confrontational about it, or at the very least be more subtle with my jabs if I thought they were deserved.  That's just my personality.  I dislike conflict, especially in matters pertaining to learning and greater understanding.  It brings to mind an unhappy memory from my early college days.

I had a confrontational professor in a critical thinking class back in the 1990's.  (One of the most important classes anyone can take.)  She was quite knowledgeable, but never treated any of her students with respect during discussions, whether we were right or wrong. (not that I'm accusing you of that)  I, among other students, conferred with her privately about these concerns.  She said in no uncertain terms that her actions were completely justified because she was the instructor and that we should concentrate on our studies.  Not long after, a friend of mine in the same class approached me claiming that the instructor threatened him with a grade reduction if I didn't back off.  I was never able to prove that this discussion took place, as my friend was thoroughly cowed by the threat, so there was no disciplinary action taken against the instructor.  Whatever her reasoning behind her behavior, it had a number of negative results; the first of which was that several students dropped the class; secondly, that all of us wrote scathing comments on her performance review; and thirdly, it was the straw that broke the camel's back on my college life.  I dropped out at the end of that semester.  Understand that critical thinking was one of the classes I was most looking forward to, and it disappointed on almost every level because of the blasted teacher.  Combine that with all of the other emotional issues I was having at the time, I just couldn't take it anymore.  You could rightly claim that I was a weakling who let other people and circumstances control me.  That isn't the point.  The point is it should never have come to that.  Good teachers don't lose students.  Good teachers find a way to foster learning without pandering to students or needlessly ridiculing them.  (For the record, I would go back to college in 2000 and graduate.)  I guess what I'm trying to say is that being confrontational can have consequences beyond the immediate scope of the argument.  You might even have good intellectual reasons for acting that way, but the consequences can still be there.  I think most of us at the Compendium have thick enough skins to not take things personally, but who are we to judge?  I think it's important to be intellectually honest, and to point out the lack of such when we see it, but if we lose friends or make enemies in the process, what do we really gain?

Of course, if your opponent is both ignorant and confrontational or intransigent, then the gloves should come off and the full power of your wit brought to bear against the villain.  I just don't see any villains here.

I'd be insufferable if I weren't usually right. But I also wouldn't be so aggressive, if I weren't usually right. Cause and effect, my good Lennis.

Indeed, but it is that which is making you insufferable in the eyes of some of us.  No offense.

http://www.youtube.com/watch?v=seo7YIAMdRA

Much thanks for that link.  I've never heard that piece.  It's bookmarked.

[FaustWolf]

Another article that would have fit in several different threads, but I'm putting it here...

County Commissioners in Maryland Cut Head Start funding by 50%, citing foreseen cost savings of stronger marriages

...because it strikes me as an instance of politicians being utterly out of touch, not only with the lives and needs of their average constituents, but also with the workings of an economic model they accept so readily. Yes, a lot of cost-cutting is going on across the board, but there are some cuts that simply aren't viable -- not if your goal is to promote a globally competitive citizenry. Head Start should be one of those. I sure hope they take those cut funds and use them to reward low-income couples with "strong marriages" because having a "strong marriage" isn't going to replace the salary the formerly working Mom or Dad otherwise would have made. Multi-income families are the rule nowadays, not the exception; it's not called "poor values", it's called "economic survival."

[Thought]

Some lovely graphics of the inequality of wealth in America, as well as its change over time: http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph

[FaustWolf]

Thought, thanks a ton for that! I'm hoping to make a term paper out of this subject this semester, now that I can finally do time series stuff.

If anyone's interested in digging further into the question of income and wealth distribution (in the United States at least) I'd recommend anything written or data collected by Emmanuel Saez.

[Lord J Esq]

Some lovely graphics of the inequality of wealth in America, as well as its change over time: http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph

I saw that today myself. I just have to roll my eyes about the "what income distribution actually is / what people think it is / where people want it to be" chart.

Here's a follow-up: Life-expectancy increases have been primarily among the wealthy, with ramifications for modifications to the Social Security retirement age:

http://www.cepr.net/documents/publications/ss-2010-10.pdf

[FaustWolf]

Kickass, kickass, kickass! An international income share databse. There's some really interesting stuff to be found within. Looks like US data is still the most thoroughly documented though.

[FaustWolf]

I'm reading an interesting article by Joe Stiglitz as I post this. Something he wrote really stuck out for me:

Those who have contributed great positive innovations to our society, from the pioneers of genetic understanding to the pioneers of the Information Age, have received a pittance compared with those responsible for the financial innovations that brought our global economy to the brink of ruin.


Wow, the statement should be confirmed with statistical analysis, but if this can be proven with numbers...damn.

Stiglitz also makes the claim that income and/or wealth inequality in the US is essentially greater now than during the 19th century, which seems like a major stretch IMO. It's gotten bad, but comparable to the 1920s judging from available data. Sadly it's hella difficult to find data that goes back far enough to measure what was going on at the time of the famed robber barons.

In other news, time series analysis of the Saez and Picketty data on income inequality in the US (I think I posted Emmanuel Saez' page in this thread awhile back) reveals a statistically significant negative correlation between income concentration and subsequent economic growth. The way I had to do this is admittedly somewhat wonky due to how limited the dataset is (taking care of stationarity and simultaneity bias leaves the researcher with a mere 75 observations or so right now, whereas finance buffs get to play with thousands of observations since they're usually studying stock market data). Still, the results are consistent with a fair body of literature on the subject, which is fascinating.

My thinking is that the results could have something to do with the velocity of money (rich people tend to save, so their income is invested or gets locked up in savings accounts and, from there, invested, rather than spent on goods and services directly). But maybe what it really boils down to is the wisdom of investment decisions from the standpoint of societal utility. Pay taxes that get spent on NASA or invest privately in companies that grow the Internet and it's a net boon for productivity; invest in companies that specialize in subprime mortgages, and...yeah.

[Kodokami]

Anybody watching (or watched, if reading this later) Obama's live chat on Facebook, and if so, what are your opinions on the topics covered? I'll see if the video has been recorded later so the rest of you who are interested can watch it.

[FaustWolf]

Kodo, was it a speech about cutting the national deficit? I caught a whiff of his televised speech on NPR, but I'm not sure what happened on Facebook. Doesn't look like anybody Youtubed it yet.


Another article on the phenomenon of unpaid internships, courtesy of The Economist.

[Kodokami]

Here it is, Faust.
[youtube]http://www.youtube.com/watch?v=3ypVArkbsn8[/youtube]

[Truthordeal]

For once I have something meaningful to contribute to this thread!

[youtube]http://www.youtube.com/watch?v=GTQnarzmTOc&feature=youtu.be[/youtube]

In short, it's a rap battle between John Keynes and Fred Hayek. About economics, no less!

[FaustWolf]

Darn, I'm not sure when I'm gonna have time to take in a report this huge, but it's really interesting to see the McKinsey institute taking the angle that it is in this. They tend to give a pretty balanced assessment on things as far as I've read.

http://www.mckinsey.com/mgi/publications/us_jobs/pdfs/MGI_us_jobs_full_report.pdf

[FaustWolf]

Fascinating article on the Swedish recovery here. The last bit requires a membership, but the first two pages are insightful enough in and of themselves.

EDIT: Bah, for some reason it's coming up that the entire article requires a membership. I'm just reproducing it here then.

STOCKHOLM — Almost every developed nation in the world was walloped by the financial crisis, their economies paralyzed, their prospects for the future muddied.

And then there’s Sweden, the rock star of the recovery.

This Scandinavian nation of 9 million people has accomplished what the United States, Britain and Japan can only dream of: Growing rapidly, creating jobs and gaining a competitive edge. The banks are lending, the housing market booming. The budget is balanced.

Sweden was far from immune to the global downturn of 2008-09. But unlike other countries, it is bouncing back. Its 5.5 percent growth rate last year trounces the 2.8 percent expansion in the United States and was stronger than any other developed nation in Europe. And compared with the United States, unemployment peaked lower (around 9 percent, compared with 10 percent) and has come down faster (it now stands near 7 percent, compared with 9 percent in the U.S.).

Some of the reasons for the Swedish success are as unique to the nation as its citizens’ predilection for Abba, pickled herring and minimalist furniture. But there are plenty of lessons for other countries as they struggle to find a pathway toward prosperity.

The overarching lesson the Swedes offer is this: When you have a financial crisis, and Sweden had a nasty one in the early 1990s, learn from it. Don’t simply muddle through and hope that growth will eventually return. Rather, address the underlying causes of the crisis to create an economic and financial system that will be more resilient when bad times return.

Here is what that means in practice. Call them Sweden’s five lessons for a crisis-stricken nation.

1. Keep your fiscal house in order when times are good, so you will have more room to maneuver when things are bad.

In 2007, before the recession, the U.S. government had a budget deficit equivalent to 3 percent of its economy, as did Britain. Sweden, meanwhile, had a 3.6 percent surplus.

So when the recession hit, that surplus gave its government a cushion in the downturn and it didn’t run up the huge debts that in other advanced nations have now created the risk of a future crisis. Sweden’s gross debt is set to reach 45 percent of the size of its economy this year, as the United States closes in on 100 percent.

This was a lesson Sweden learned from its early 1990s crisis, in which a collapse in commercial real estate and the banking sector was exacerbated when the budget deficit rose to such high levels that the country had trouble borrowing money and the value of its currency collapsed.

The nation set a goal of averaging a 1 percent budget surplus over time and held to it — which left the government with lots of flexibility to engage in deficit spending when the economy went south.

“If you don’t have a fiscal problem, you have more degree of freedom,” said Stefan Ingves, governor of Sweden’s central bank, the Riksbank, in an interview. “This time around, the issue was not ever even close to being about solvency.”

2. Fiscal stimulus can be more effective when it is automatic.

Sweden didn’t do much in terms of special, one-off efforts to spend money to combat the downturn. There was some extra infrastructure spending and a well-timed cut to income tax rates, but the most basic response to the government was to do what the nation’s social welfare system — lavish by American standards — always does: Provide income, health care and other services to people who are unemployed.

In the United States, the battle over whether to use government spending to cushion the blow of the downturn became a divisive one. Whether to try to stabilize the economy became one more battle in the longer term war over the proper role of government.

And because the $800 billion fiscal stimulus that Congress and the Obama administration enacted in early 2009 consisted mostly of special, one-time programs, it took months for many of them to begin pumping money into the economy, thus kicking in months or even years after the economy had collapsed, and the spending expired without regard to whether the need remained.

When spending to cushion economic blows happens as part of a more carefully designed set of programs established during good times, it can be ready to go quickly right when the economy turns, and can be designed to taper off when it makes sense economically, such as when the jobless rate has fallen, rather than on some arbitrary date. And that can be true even for a safety net that is smaller than Sweden’s.

3. Use monetary policy aggressively

The Federal Reserve has won both plaudits and criticism for responding aggressively to the financial crisis, pumping money into the financial system in epic fashion. But by one key measure, the Swedish central bank was even more aggressive.

Like the Fed, the Riksbank lowered its target short-term interest rate nearly to zero. But it also expanded the size of its balance sheet more than the Fed did relative to the size of its economy, flooding the financial system with even more cash during the height of the crisis.

In summer 2009, the Riksbank had assets on its balance sheet equivalent to more than 25 percent of the nation’s gross domestic product. For the Fed, that level never got much over 15 percent.

In 2009, the Riksbank even moved one key interest rate it manages below zero. Under this negative interest rate, banks that parked money at the central bank actually had to pay 0.25 percent for the privilege. That made them all the more eager to lend the money to one another rather than park it at the central bank, though in practice, Swedish officials and bankers said that the negative rate had more symbolic consequences than practical ones.

The impact of low rates on the economy, however, are clear.

“Interest rates fell very low, and households had more money available for consumption because their mortgage payments dropped,” said Lena Hagman, chief economist of Almega, an association of major employers in Sweden’s services sector.

The Riksbank had the flexibility to move so aggressively in large part because of changes it made in the wake of the early 1990s crisis. At the time, the nation had experienced years of double-digit inflation and the central bank lacked credibility on financial markets. At one point, it raised its target interest rate to a stunning 500 percent in a futile effort to maintain the value of the Swedish currency, the krona.

[tushantin]

This may or may not be the best place to post this. If not, please move the post elsewhere.

Apparently, RIM has been overconfident and blind to its marketing, development and innovation, which resulted in them losing market-share quick. Also, lack of teamwork. One brave employee, despite risks of reprisals, published an open letter pointing out how things could be improved, something which would obviously be frowned upon by the proud corporation as it has potential to devastate the company's reputation. How does this conclude? Well, take a look.

Ultimately, innovation isn't only about making money, but what the consumer really cares/wants.