Thursday, December 13, 2012

Sunday, December 02, 2012

Thursday, November 29, 2012

The U.S. is the OPEC of Sugar-OSEC

Don Boudreaux calls out Florida congressman Tom Rooney (R-FL) for arguing both for and against free trade.

Cafe Hayek — where orders emerge

Monday, November 26, 2012

Are We Better Off With GM Still Alive?

Depends on who "we" is. 

From the perspective of a benevolent dictator that is responsible for maximizing the happiness of all citizens the answer is fairly obvious: no.

If I am someone concerned with the happiness of manufacturing employees and am ok with establishing anti-market, anti-competitive, and extremely inefficient policies, then the answer is less obvious: I don't know, depends on what you can do for me.

A friend recently pointed out the upside of the GM bailout. "...instead of getting rid of tons of their employees when technology revolutionized manufacturing, they actually helped them."  The term "they" in this context refers to the architects of TARP, a program initially aimed at financial institutions but was expanded to include GM and perhaps other companies.  

A basic economics course hammers home to students the importance of acknowledging that society faces tradeoffs whenever a decision is made concerning economic policy.  What was the tradeoff with the GM bailout?  

Gains: GM workers benefited.  Their pensions, healthcare, salaries, etc were maintained.  Also, the country didn't have to worry about selling off GM brands to other companies in order to keep beloved brands alive.  You could also argue (though most economists won't) that it's great to keep low-level manufacturing jobs in the United States (it's not).  

Losses: First, we want technological advancement in this country, and in the world.  Even if it means displacement of workers with low tech skills.  Those that lose in this situation can be re-trained, their skills upgraded, etc.  The fact that this process may seem difficult should not lead to the conviction that production processes should never be improved through better use of technology, instead it should serve as an indictment of the lack of the U.S. education system's ability to adapt to needs.  The loss in this situation is that those low-end manufacturing jobs are SUPPOSED to be lost.  Every healthy economy sheds low-end jobs as new technologies emerge the same way that organisms shed deteriorated or damaged cells while replacing them with new and healthy ones.  Propping these jobs up only disguises the need for a more flexible work force and education system.  Further, it disguises the great disservice unions do when protecting their members from market forces.  You can only do it for a little while, eventually someone will have to pay.  In the GM bailout case, it is the taxpayer, which leads to the next loss.

TARP and the GM bailout made it clear that middle class taxpayers located in and around Detroit and that belonged to a union were more important to policymakers than those located elsewhere.  The bailout amounted to a transfer of wealth from taxpayers in the general U.S. to taxpayers working for the UAW union.  Lest you feel sorry for the UAW employees, GM reported that the average wage paid to an employee in 2006 was around $40.00/hr when you include overtime, wage premiums, vacation, and holiday pay.  That wage rate, full time, amounts to around $76,000 per year, which is high enough to put one squarely in the upper-middle class.  

"But", you say, "it acted as a stimulus!!!"  Fine.  It stimulated Detroit and kept GM cars in production.  This argument is tough to make.  First, it assumes that the money that will have to be taken from the taxpayers elsewhere in the country (don't forget, when you spend money, you have to actually collect it at some point) would not have been spent as productively as the government spent it by giving it to a failed automobile manufacturer.  Also, it assumes that the public will be better off having not purchased other cars available for consumption such as Hondas, Toyotas, Nissans, Chevys, and Fords etc.  This is clearly not the case.  The public would probably be better served to, in fact, buy non-GM vehicles.  You may disagree, but at the minimum, it's a wash.  And if one argues that it is better to buy American than foreign vehicles, then I'll save the haranguing you deserve for another post.

Lastly, why would the government want to establish the following precedent: private companies that demonstrate an inability to generate profits will be purchased by the government and have their non-profitable good or service subsidized by the American taxpayer?  They shouldn't want to.  Unless, their motives are incompatible with the principles of free-enterprise.

Wednesday, November 14, 2012

Can China Destroy Their Own Growth Prospects

I don't know...but that won't stop them from trying.

Recently, China's government has banned large-scale shipping freighters from entering Chinese waters.  Bad idea, for so many reasons.  HT to Don Boudreaux.  Article Here.

Sunday, November 11, 2012

Foodstamps Surge By Most In One Year

Zerohedge points out that the delay in foodstamp recipients may have been politically motivated.  In other news, the world exists.

Article Here

Friday, November 09, 2012

The Best Article on Health Care Ever

The article linked to below is the best article on health care ever written, according to some.

John Cochrane's article.

HT: Don Boudreaux of GMU.

Saturday, November 03, 2012

Paul Krugman Is Wrong

It's kind of cute, but pretty soon you realize that kitten wants to bite you...and you want it to stop hissing.

Cafe Hayek — where orders emerge

Friday, November 02, 2012

Vulgar Keynesianism and Its Flaws

It's a disservice to Keynes to call today's proponents of a particular brand of economics as "Keynesian."  Basically, it's a synonym for un-thorough, wrong, silly, naive, etc.

The article below is wonderful.  Bottom line: natural disasters do not make us better off in terms of real wealth or quality of life or standard of living.  They may improve some random economic aggregate like spending, but this is not an improvement over where we were pre-disaster.  There is no silver-lining, in economic terms, of natural disasters.  If there were, perhaps we should just run around destroying everything we can in order to rebuild it. If you think that's a good idea, then you might be a vulgar Keynesian.

Cafe Hayek — where orders emerge

Thursday, November 01, 2012

"How Can You Vote for Him!!??" Just Relax.

 Boudreaux lays out some good common sense on politicians.  My favorite part:
In this earlier post, I discussed some of the flaws in the Romney and Obama  economic “plans.” I put the word in quotes here and in that earlier post because they are not really plans. They’re marketing brochures. They’re romance to make you think that if either one is elected in the next four years, everything will be wonderful–low prices, lots of jobs, and a pony for everyone. Or two ponies.

Cafe Hayek — where orders emerge

Why It's OK to Let AHCA Die--We Can Do Better...Easily

John Cochrane, via Don Boudreaux with a hat tip to Tyler Cowen, explains why it isn't silly to trust in the private sector for solutions to health care problems.  He also explains why we should not confuse social charity for the homeless, mentally ill, etc with practical solutions to health care insurance problems.  See link below.

Cafe Hayek — where orders emerge

Monday, October 29, 2012

David Henderson Demonstrates Britain's Willingness to Watch People Die

Socialized Medicine Can Kill, David Henderson | EconLog | Library of Economics and Liberty

On Losing Arguments/Making Enemies

If you want to lose an argument/make an enemy, conduct yourself as follows.

@FabiusMaximus01: Hi I'm going to cite an article in The Economist magazine that uses a flawed measure of inequality to promote a narrative that supports redistribution of wealth policy.

@MikeDGarrison (the hero of this story): That article ignores existing redistribution of income in the form of social programs, educational subsidies, food stamps, medicaid, and any and all other forms of assistance the lower quintiles receive.  Also, as a share of overall consumption, the consumption of the poor has NOT diminished compared to the rich in roughly 40 years.

@FabiusMaximus01: 1) Analysts do not ignore the transfers of wealth.  2) The top 1% don't want to consume anymore, and the rest of us 99% can't afford to consume anymore because of how poor we are.  Also, the 1% invest their earnings which makes income inequality worse.  Muhaha, see what I did there.  I quoted an article and you responded to the article, but then I made the whole thing about the job of "analyst."  Now, I know that "analyst" is a term used to describe about 45% of all jobs on the planet, but I don't care, I'm just going to change the topic and make the discussion about "analysts" not what I actually mentioned in my initial tweet.  See what I did there?  See how great I am? 

@MikeDGarrison The article in The Economist made it clear that they were referring to shares of income.  Plus, my reference on consumption refers to an actual study by two economists.  Here is their article. 

@FabiusMaximus01: Hahahahahahaha, the WSJ?????  You actually read that silly filth?  They're propagandists, they represent the man!!!!  I get all of my econ information exclusively from Paul Krugman, Brad DeLong, and Nouriel Roubini!  I only need 140 characters to completely refute what two respected economists have to say.

@MikeDGarrison:  Ok, go ahead.

@FabiusMaximus01: Go ahead what?

@MikeDGarrison: Refute them.

@FabiusMaximus01: I did, I said that they wrote for the WSJ!

@MikeDGarrison: That's not a refutation.  That's like saying 2 + 2 does not equal 4 because the mathematician that figured it out was a Jew. 

@FabiusMaximus01: He probably know you can't trust Jews right?

@MikeDGarrison: We're done here.

Note: Some of the twitter exchanges may have been modified to reflect authorial intent.

Friday, October 26, 2012

The Tyranny of Utility

Dwight R. Lee has a good article reviewing Gilles Saint-Paul's book, "The Tyranny of Utility."

Basically, using "utility" as a measure of happiness, many politicians are trying to limit your freedom because it's in your best interest but you're too stupid to know it.

Most behavioral scientists and politicians probably underweight the disutility felt by people who know they're being controlled.

Wednesday, October 24, 2012

"You Lie. You Lie. You Lie Shamefully. You tell Koch lies!!!"

This exchange between Don Boudreaux and an anonymous opponent was mirthful.

See here.

Trade Deficits Are Fine

Why people fuss about running a trade deficit continues to baffle me.

Cafe Hayek — where orders emerge

John Taylor and Paul Krugman Combat

John Taylor, a potential Federal Reserve chairman if Romney is elected, has a great blog at Economics One.  Most recently, Taylor pointed out how slow the recovery from the 2007-2009 recession is relative to other post-financial crisis recoveries.  See his simple and easy to understand post about it here. 

Paul Krugman, in probably the least emotional and angry response he's ever written, sees the potential Taylor's argument has to make President Obama and liberal administration of the economy look bad and responds with an accessible criticism here.

Lastly, Taylor responds to Krugman's critique and one can clearly see that Taylor's original characterization of how weak and slow this recovery has been still stands.  See here

I greatly enjoyed the interchange between these economists and look forward to future bouts.  My favorite part was how level-headed and reasonable Krugman came across.  A welcome change from his standard behavior.

Thursday, October 11, 2012

Leaders and Followers

During the Presidential Debates on Domestic Policy, I live-tweeted some thoughts, and retweeted those of others'.  In short order, a former student shared his opinion on the differences in leadership skills between the two candidates.  He believed Barack Obama to be the better leader and would vote based on that.  Now, for the record, I disagree wholeheartedly.  But, for the purpose of laying out principles and examining them, suppose Obama is a fantastic leader.  Is leadership a good quality?

Points in favor of leadership as a positive quality.
1) You can convince others to take a certain course of action.
2) You can rally individuals around a cause.
3) You can bring individuals with differentiated interests and goals together to work toward an objective.

Points against leadership as a positive quality.
1) You can convince others to take a certain course of action.
2) You can rally individuals around a cause.
3) You can bring individuals with differentiated interests and goals together to work toward an objective.

Leadership is only positive when the goal of the leader leads to good consequences.  Leadership is awful, a tragedy, when the leader's goals lead to negative consequences.  Human history is filled with examples of morally repugnant men and women who possessed great leadership qualities.

I've never craved a leader to follow.  My twitter debate opponent made the points: "I prefer focus over ADD.  I've had indecisive leaders before and they suck."  I joked back and referenced that Hitler was very focused.  What a great leader he was.  Should we look back at Caesar, Stalin, or any of history's other dictators and view them favorably in light of their leadership skills?  No.  What we do instead is look at what a tragedy it was that enough people were willing to follow these leaders to allow them to carry out their disastrous policies and plans.

Is Obama an abhorrent tyrant comparable to Hitler?  No.  But his policies have negative consequences both intended and unintended.  Some people may find him charismatic and a strong leader, but I view these traits as negative, because I believe his goals are wrongheaded, based on empirically tested and failed ideologies, or purely punitive on a social-class that this country relies heavily on for funding its activities.

Wednesday, October 10, 2012

Growth Slowing, Jobs Growing?

There is a lot of confusion.  Democrats are excited about the jobs numbers.  Republicans are dubious.

Here are some facts:
1) The economic news from around the world is bad.  Most pundits and economists see growth slowing around the world and the possibility of a world recession increasing only three years after our previous recession.
2) For an economy to add jobs, it has to be growing.
3) For an economy to add enough jobs to decrease unemployment by a full half-percent, it has to be growing fast.
4) Our economy is not growing fast.

So, what's the scoop?  The BLS counts part-time workers as employed.  For every single person who works part time for a political campaign, and works even 1 hour per week at $7.50, that person no longer counts as unemployed.  Also, the Labor Force Participation Rate dropped to its highest rate since 1981.  When the LFPR goes up, unemployment looks better because people that are not participating in the labor force do not count as employed or unemployed. Note:

Unemployment% =        [Employed / (Employed + Unemployed)] 
When you decrease the denominator in a fraction, the value of the fraction increases. 

To understand why the American public is so skeptical, look at the following logic:
1) State and Local govt increased workers by the highest amount in 20 years.
2) Overall, 873,000 workers were added in September, the largest 1 month increase since 1983 when the economy was hot.
3) These numbers would be impressive even if we were in a strong expansionary phase.
4) We are in a weak expansion, very weak, and the world is bordering on recession.
5) Conclusion: Either one believes that the economy added one of the largest increases in jobs in the past quarter-century despite being moribund, slow, bad, etc.  Or, you believe there is an explanation that doesn't require you to suspend common-sense.  That other explanation is: there was a massive increase in part-time campaign workers and LFPR rose to a quarter-century high. 

The last sentence is not a right-wing conspiracy theory.  It is a sentence that every journalist covering economics should have written or uttered.  But, journalism isn't known for its strong academic credentials or fact checking skills, ironically.

Tuesday, October 09, 2012

The Latest Unemployment Numbers Demystified

John B. Taylor explains here why recent employment pessimism is not a conspiracy theory, but a good look at numbers and what they mean.  Which is what any journalist should be doing...which is why, kids, if you want to become a journalist, hold yourself to a very low standard, and vote Dem.  Otherwise, no one will hire you.

Monday, October 08, 2012

Does The Economist Magazine Have a Response

I enjoy The Economist, but their recent article on how great of a paradise Detroit is for artists, urban planners, entrepreneurs, and others seems rather silly in light of this.

Enter At Your Own Risk: Police Union Says ‘War-Like’ Detroit Is Unsafe For Visitors « CBS Detroit

Tuesday, October 02, 2012

What He Said

From Jon Jellema of UC Berkeley:

Class stratification produces division of labor and specialization by providing rules for the separation of the larger population into subpopulations based on culturally-specific determinations of superiority and inferiority. Regardless of whether values like honor or purity are eventually replaced by pecuniary success as the basis of class divisions, this division into subpopulations, once crystallized, encourages the transmission of group-specific skills, behaviors, and information. Not only does this facilitate specialization and the decentralized coordination of information relevant to production, but also the formation of group identity and the creation of markets for the wares or symbols associated with groups, all of which promote economic development.
 An interesting summary of the benefits of specialization of labor and information transfer within that specialization.  

Thursday, September 27, 2012

Income Inequality Not Unprecedented, Returning to 1920's and 1930's Levels

From George Mason University's Library of Econ and Liberty:
With their longer historical perspective, SOI statistics also show that inequality in the 1920s and 1930s was as high as it is today. Beginning in 1938, the income share of the top one-tenth of households fell from 43 percent to about 32 percent, where it remained until the deep blue-collar recession of the early 1980s. At that point, inequality began its return to the levels of the 1920s and early 1930s.

SOI stands for U.S. Treasury's Statistics of Income

If I Describe My Awful Idea Again, Maybe You'll Start to Like It...?

Via Ezekiel J. Emanuel, Neera Tanden, and Donald Berwick in their Wall Street Journal Article from Tuesday, September 25, 2012:
Instead of paying a fee for each service, providers should receive a fixed amount for a bundle of services or for all the care a patient needs.

The article, here is the link, is called The Democrats' Market-Friendly Health-Care Alternative.  After the title the three authors proceed to give a list of changes to healthcare that are the opposite of market friendly.

The quote above is noteworthy.  Imagine a doctor that knows he will get $10,000 for attending to a patient's care.  The patient comes, the doctor gets $10,000, and now the doctor starts to perform a variety of wellness checks, treatments for allergies, illnesses, or more serious conditions.  At what point does the doctor feel like he or she has done $10,000 worth of service?  It will depend on the doctor, of course.  But, with fixed fees every doctor has the incentive to get the maximum amount of return-on-investment.  That is, how can the doctor provide the least amount of care for that $10,000?  Is this evil?  Should we punish physicians?  No, it's human nature.  When you charge a flat fee you incentivize the doctor to find the most practical way to earn that $10,000 plus $10,000 from others, which means they will minimize their effort toward each patient, maximize the number of patients they have, and avoidi more complicated and sophisticated treatments in favor of easier ones.

When you remove fee for service, you lose track of the actual value of services.  If all services are included under an umbrella, the services begin to lose their discernible market value.  Doctors will say that they have provided $10,000 worth of service.  Patients will claim that the doctors avoid more advanced treatments to make greater profits.  The government will have two options.  First, they could try to control exactly what doctors do and how they provide service, at which point we're not really living in a free society.  Second, they could somehow try to determine the market value of each type of service provided by the doctor and then charge accordingly....which is what we have now.

Some may say, "This is a slippery slope."  If you believe that human beings rationally respond to incentives, then you cannot look at the proposed health-care system as providing anything other than a strong set of perverse incentives.

Monday, September 24, 2012

President of Chicago Teachers Union Provides Their Key Tenets (via WSJ)

Key Tenets:
1. Use time wisely.  A proposal is on the table that lengthens the school day.  Longer work day does not translate into more educated students.
2. Get teacher evaluation right and don't fixate on testing.
3. Don't close struggling schools, make them not struggle anymore.
4. Don't blame the teachers, it makes for poor morale.

My responses.
1.  Agreed.  Increasing the work day is pointless if that extra time goes to pursuing failed teaching methods and educating students on things that do not increase their chance of getting a job.
2.  This is tough.  You have to measure performance.  There are very few occupations on this planet that do not have some sort of inbuilt metric by which one's productivity is measured.  The public's suspicion will be instantly aroused if the new agreement does not require some sort of evaluation of teacher efficacy.
3.  We've been told over and over that the largest contributing factors to student performance is their home environment and other factors outside of the classroom.  If this is true, then you will not fix struggling schools because their struggle isn't related to the school.  If socioeconomic indicators all of the sudden start improving, then I'm sure the school's performance will follow.  Note: giving everyone a gillion dollars is not a solution.
4.  Teachers are often the scapegoats for really stupid government policy that creates a hash of incentives and completely distorts the market for education.  We have an army of students graduating every year with no marketable skills (as a result of edu, maybe they got it elsewhere) that have only been taught what they need to know to get into college or take the ACT.  For those students that don't go to college, they just have to hope that someone needs a person with no skill to come work for them.  Does the fault lie with teachers?  I don't think so, they're just doing what they're told: teach English, Simple Math, Some Classic Novels, Music and Art History, and Football to kids.  Then watch them graduate and not know how to use a screwdriver (I'm speaking from my experience, I never took shop).

One thing I do hold against teachers is their almost rabid defense of a system that makes their skills and passion nearly pointless.  No amount of care, passion, and knowledge can fix a system of broken incentives.

Sunday, September 23, 2012

How Much Do You Pay for One Year of Public Education?

If you do not know the answer, and for some reason you think that you should know, then you have a powerful mind that seeks answers.  Congrats.

The truth is, very few people know what the cash equivalent is of one year of education.  Proponents of vouchers, school choice, private schools, charters, etc, generally like the idea that every family receive the value of one year of education in a public school in the form of a certificate.  The family can then take that certificate, decide which school to send their child to and then give that certificate to the school.  The government would then pay the school the amount of the certificate.

Think of the following scenario.  The average cost of education one child for one year in Oklahoma is around $10,000 or so.  That's cheap, you say.  It seems that way.  But, in my first grade class in Broken Arrow, Oklahoma there were 32 students.  If each student cost about $10,000 to educate and if each student were issued the certificate for that amount, then technically the school I attended would receive $320,000 in one year (9 month period in the case of many public schools) to educate one 1st grade class.  The teacher was paid around 30-40k.  Where did the other $290,000 go?  To school lunches?  Music class?  Janitors?  Hall monitors?  Administrators?  Union dues?

There's a problem here.  I spent 90% of the time with my teacher who performed 90% of the services the school provided to me.  But, he or she received only 10 to 12% of the value of the service provided.

Friday, September 21, 2012

Do Teachers Affect Outcomes and are Evaluations Fair?

Adam Ozimek raises an interesting question.
Teachers often argue that factors affecting educational outcomes are exactly those factors that occur outside of school.  In other words, home life, parents' value of education, parents income, etc are greater predictors of educational attainment than anything teachers contribute.  Diane Ravitch, a strong proponent of teachers, takes this position now, but less than 10 years ago she was touting strict teacher evaluations, school choice, and No Child Left Behind.

Many studies in economics show that outcomes in lifetime earnings, education, and other socioeconomic factors are determined by parental outcomes in the same category.  Still other studies show that these things are primarily impacted by IQ (a measure of learning ability or talent).  So, if the biggest predictors of educational attainment are factors outside of school such has home life, IQ, parental income and education, and teachers are quick to point out that these factors are beyond anything they can control or negate, then why is the debate about teachers at all?  Higher salaries, better classrooms, stricter standards, teacher evaluations, etc are all irrelevant to the factors that teachers say matter most.

Ravitch says that the real goals should focus on jobs in the community, poverty reduction, hunger abatement, etc.  Then, maybe the students educational attainments will follow.  Now, we just need to give everyone a job, eliminate poverty, and feed everyone and make sure they don't make any bad decisions that hinder these goals.  In case you're new to my blog, I don't think this is possible in a free society since it would be impossible without just enslaving everyone and making their decisions for them.  Free societies allow people to make their own decisions and people with poor decision-making skills sometimes make bad decisions with negative consequences.

Thursday, September 20, 2012

Why Evolutionary Psychology Excites Me

Cafe Hayek — where orders emerge

Bad Investments and Hayek

Government interference in markets (like education) can cause malinvestment, overinvestment, in things like education (majors in disciplines that the labor market has little use for).
See the link.
Cafe Hayek — where orders emerge

Majors Matter

High school students intending to go to college are given advice that can usually be grouped into two categories.  First, follow your passion.  Second, follow the money.    The first piece of advice, the wording, the imagery conjured when you visualize someone following their passion, feels right.  It feels right to send an army of graduates into the labor force who are passionate about what they've learned and are eager to earn a living doing what they love.  The second piece of advice doesn't sound so nice.  Maybe, you read it and felt a little bit of disgust, you thought about people consumed by their materialistic wants, or maybe you just thought that following the money doesn't sound fun.

Consider the following two hypothetical post-graduation interviews.
Person 1: Derek
Major: Acoustic Guitar Performance
Minor: Music History
Question:  How has the job search gone after graduation.
Answer: Not too bad.  I've put together a pretty good resume and have sent it to several staffing agencies and most of them have responded.  I've had a few interviews but not in any type of job that I'd be willing to take.  I'm more interested in managing bands, or night clubs.  Getting a job at Riverwind would be pretty, you know, like a house band lead guitarist or something.  I've thought about going to grad school since that will increase my chances of getting a good job that might actually be interesting and related to my major.  But, I'd have to take the GRE and I hear there's math on it.  Math is not my thing.  At any rate, I've been working at Barnes and Noble since May to pay the bills.  It's a pretty good job, I like it.  There are a lot of people that work there that I went to school with.  A couple of them had similar majors.  My wife and I went to Branson last week.  We were going to go to Cancun again, but we're trying to save up until I get a job in my field.  They usually pay around 25-30k to start.  You like my wife's ring?  Thanks.  I had to pawn a couple of my guitars but I'll get new ones later, after I've started working in my field full time.

Person 2: Tyrell
Major: Finance
Minor: Accounting
Question: How has the job search gone after graduation.
Answer.  Not too bad.  I put together a resume and started sending it out to companies and a few staffing firms.  I've had a few interviews.  Not any of them actually involve being a CFO or managing wealth.  I went ahead and took a job at MiddleEarth finance.  I basically crunch numbers which isn't the most interesting job in the world.  But, they'll pay my tuition if I do an MBA, and get good grades, or they'll pay for me to take the CFA exam.  I think I'll go the CFA route.  They have fantastic careers and I've learned most of the skills already.  My wife and I just got back from Cancun.  We were going to go to Branson, but then thought we'd celebrate my new job.  It pays around 45k but they bump you up fast.  Oh, and I went out and got this (pulls out acoustic guitar).  I've always been passionate about music, and used to take guitar lessons.  I think I'll start taking them again, I can afford it.

Silly?  Maybe.  But investing in college is a human capital investment.  You are investing in an upgrade of your skills so that you will be able to sell your labor at a higher price than you would without those skills.  The government subsidization of college education has led to a massive increase in the number of majors available as colleges compete for student's money (most of which is debt).  However, the number of majors that actually pay off remain remarkably consistent.  See the link below.

Which Majors Yield Benjamin Piles

Tuesday, September 18, 2012

Why Suggest Private Schools as Solution to Educational Woes?

Public school teachers hate hearing about privatization as the solution to the decline and fall of American public education.  I would too if I were in their shoes.  It is important to distinguish between the privatization of public schools and privatizing education.

Privatizing public schools involves moving workers from a broken system and introducing them to a foreign atmosphere where all of the sudden they have time to actually teach and incentives to become experts in the subject that they teach.  It always strikes me as odd that a person with a doctorate in mathematics is not "qualified" to teach children how to count.  The usual objection is something along the lines of "But they haven't completed any courses on how to decorate the classroom, make a coloring book, insert a catheter, etc"  This is not a knock on teachers, but in general the people who best know how to communicate information about a subject are the ones who know the most about a subject.  So, moving public school teachers and the rest of that broken system into a private system would produce quite a mess.

Privatizing education is the more plausible route.  It involves allowing private schools to proliferate, not following a cookie cutter approach but allowing individuals with passion, drive, and initiative to experiment with different learning techniques and environments.  It involves letting parents choose where their children attend school, switching from low performing schools, or schools not suited to their child's needs, to more appropriate ones.

People deeply rooted in the public school system will most likely scoff at the ideas in the above paragraph.  "That's not possible.  There won't be a massive increase in private schools.  These amazing and innovative learning institutions will not appear out of nowhere.  The quality of private schools isn't under control, you'll end up with so many bad ones."

These are silly arguments.  When you unleash the power and creativity of the private sector to solve a problem and they have incentive to solve it, it gets solved.  These institutions would absolutely appear out of nowhere, they would utilize greater technology, focus on subjects actually in demand, and educate your children more quickly, efficiently, and thoroughly than anything you think possible.  The quality of private schools isn't under control?  That implies that the quality of public schools is under control, they aren't.  The public school's quality looks about like the neighborhood it's in.  If it's in a wealthy area, the school is nice.  If it is in a poor neighborhood, it isn't.  There are some exceptions to this I'm sure.  Do you want to know the difference between a public of poor quality and a private school of poor quality?  The private school eventually goes out of business.  The public school lasts forever unless an act of god (or congress) allows it to go out of existence.

It always strikes me as ironic that public school teachers with any talent and drive defend the public school system.  They tell you all about how passionate and caring they are, how talented they are, and then they defend the institution that restricts or destroys any opportunity they have to implement their unique and innovative ideas and they defend the system that divorces the relationship between their effort level, intelligence, and passion and their income level.

Monday, September 10, 2012

Teachers on Strike in Chicago

When I see the pictures of striking teachers in Chicago, I experience many emotions. 

A few points:
  • Chicago teachers rejected a 16% pay raise.  See here.
  • They have the highest average teacher salary in the nation.  See here. 
  • The average teacher in Chicago makes $76,000  per year before benefits.  See here. 
 The last point means that someone that teaches children how to color might be making as much as a chemical engineer.  Granted, not all teachers are overpaid, and not all teachers teach coloring.  The problems in education are vast.  But it is incredibly hard to feel sorry for the teachers in Chicago.

I agree with one analysis that says the strike is just a political maneuver designed to allow Rahm Emmanuel and President Obama come in, end the strike, get credit for being awesome.

A Mighty Quote

The following quote is from Ludwig Von Mises:  

Any advocate of socialistic measures is looked upon as the friend of the Good, the Noble, and the Moral, as a disinterested pioneer of necessary reforms, in short, as a man who unselfishly serves his own people and all humanity, and above all as a zealous and courageous seeker after truth. But let anyone measure Socialism by the standards of scientific reasoning, and he at once becomes a champion of the evil principle, a mercenary serving the egotistical interests of a class, a menace to the welfare of the community, an ignoramus outside the pale. For the most curious thing about this way of thinking is that it regards the question of whether Socialism or Capitalism will better serve the public welfare, as settled in advance -- to the effect, naturally, that Socialism is considered good and Capitalism as evil -- whereas in fact of course only by a scientific inquiry could the matter be decided. The results of economic investigations are met, not with arguments, but with …"moral pathos" …and on which Socialists and (Statists) always fall back, because they find no answer to the criticism to which science subjects their doctrines.
 Agreed.  Von Mises is eloquently stating a sentiment we often hear.  If Socialism was based on its intentions alone, then it would seem very nice.  But its results are usually the opposite of its goals.  When they want to help the poor, they tax the rich and run out of money for the poor.  When they want to build a just society, they have to rely on highly unjust means of enforcing unjust rules.  And so on.

Sunday, September 09, 2012

Watch these Rap Videos

Every MBA Econ class I teach is forced to watch these two great rap videos.  The lyrics are great.  The actors are pretty funny too.

Fear the Boom and the Bust


Fight of the Century

Both written by Russ Roberts from George Mason Univ and Francis Coppola from....I'm not sure.

Saturday, September 08, 2012

Two 16 Year Olds at Panera Bread

I love walking past a couple of sophomores in high school and overhearing a deep conversation about politics.  All I heard was, "All Republicans think that....." and I didn't hear the rest, but when you begin a sentence with "All x think..." the rest of the sentence will be wrong. 

This got me motivated to learnicate and edufy my friends on FB and Twitter.

To this end, here is a Garrett Jones book review of Paul Krugman's "End This Depression Now!"  My favorite sentence: "When you're disagreeing with Friedman, you're probably in the wrong. And sadly, when you disagree with Paul Krugman, you have a better than even chance of being right."

I know that I'm a moderate.  What "moderate" means is the subject of another post.  When I discuss anything related to economics with a liberal, the first thing they throw in my face is Paul Krugman.  I think most economists feel about Krugman the way that most ministers feel about the pastor of the Westboro Baptist Church.  They acknowledge the person, acknowledge that they have similar education and understanding of quite a bit of theology (except some really important points), but they completely disagree on its application in this world where real people's lives are affected by policy.

Maybe the analogy with the Westboro pastor is extreme, but after years of reading economists that I admire and respect opine on Krugman's latest red-faced tantrum on television or his NYT blog, and after hearing nice people on the left invoke his name in the same way they would a god, I cannot help but show some frustration.

Thursday, September 06, 2012

Favor Tax Cuts or Government Spending to Stimulate Economy

John Taylor lists here a few economists who argue that government economic policy has delayed economic recovery rather than help it along.

I agree.  First, our government, and most governments, are depressingly bad at designing economic policies conducive to economic growth.  In particular, the most recent bout of stimulative government spending went primarily to shoring up state finances since so many states found that their future obligations toward retired and retiring public servants were going to be hard, if not impossible, to meet.  How much extra money is a retiree going to spend when he/she finds out that the monthly pension they collect will still be coming?  Not much. 

You may argue that the backstopping of profligate state finances was necessary to prevent panic-stricken states from enacting austerity budgets.  But, you say, the next round will go toward "shovel-ready" projects like building roads and bridges (I'm starting to hate roads and bridges, by the way.  Now I just drive on the grass.)  Why is this seen as a good thing?  The rate of technological advancement promises to make many low-end manufacturing and labor jobs obsolete.  Why invest in labor and technology that will soon go by the wayside?  This promises to provide a very small bang for our government spending buck.  The government should instead focus on research and development of technologically advanced products and industries that improve technological advancement and promise future increased economic growth.

Simple, right?  Democrats generally favor government spending increases, and they are beholden to labor unions like the AFL-CIO, Teamsters, Teachers, et.c.  They have promises to keep, so they will have to continue to spend money on projects with less value and potential than what reason dictates.

Republicans tend to favor tax cuts (at least, their rhetoric does).  When taxes decrease, every individual receiving the tax cut has more income and they choose how to spend it or save it.  If they spend it, we get a clear signal about what products and services are in demand, a signal that the government cannot provide, and companies can respond by increasing their supply of products consumers actually want (this helps avoid misallocation of resources that lead to asset bubbles).  If they save it, then banks will lend out the savings to entrepreneurs and companies who are attempting to meet a demand they see in the economy.  Cutting taxes is more efficient, causing fewer distortions to the market.

Thursday, August 30, 2012

Why Journalists Should Have to Specialize in a Field

I follow Matt Yglesias on twitter.  I like to get the far left's perspective of things despite disagreeing with a lot of their positions.  Yglesias writes quite a bit on economics but so often he comes to simplistic conclusions.  So, what's happening?  Simply put, he's a leftist journalist that writes on economics related topics and uses simple Keynesian analysis to back up any policy that recommends more government power or control.  Granted, I haven't read every piece of his work so there may be a few gems that defy the trend.

In this link from Cafe Hayek, Don Boudreaux points out that Yglesias's analysis falls short when analyzing the stimulative effects of rebuilding after a hurricane.

Yglesias's shortcomings reinforce my feelings that journalists should pick a field they want to work in and specialize in that field by earning either a double major or a graduate degree.  One, this would reduce the supply of journalists and maybe increase their pay.  Two, the quality of journalism as a whole only has one direction to go: up.  I hope.  Requiring journalists to have some understanding of what they report on would improve the analysis coming out of our media outlets.

Monday, August 27, 2012

Why Should I Brush Your Teeth?

Bryan Caplan and Bill Dickens get into an argument over welfare.  See here.

This is really long, so I'll summarize.  At one point, Caplan says: Let me close by asking you a question I publicly asked Paul Krugman: Why are you so forgiving of people with irresponsible lifestyles, but so outraged by people who don't want to pay taxes to help people with irresponsible lifestyles?  This seems morally perverse.  If you're going to single anyone out for condemnation, it should be the person who behaves irresponsibly in the first place, not the complete stranger who asks, "How is this my fault?"

Dickens gives his response.  But, scroll down to the comments section and look for the powerful Thomas Sowell's comment.  Sowell points out a classic debate blunder (or maneuver if you're on the losing side).  Bryan Caplan asks a question that could be interpreted equivalently as "We should encourage people to brush their teeth so they don't need as much dental work." Dickens response is "People with bad teeth regret not having brushed them earlier in life." Sowell notes that Dickens doesn't even respond to Caplan's point.

At any rate, this requires some reading.  So, get comfy before diving in.

Thursday, August 23, 2012

We Seem Biased toward European Immigrants

Cafe Hayek — where orders emerge

These graphs show changing immigration trends.  Personally, I would like to see completely open immigration, as would most economists I suspect; at least, those not employed by specific groups that dislike immigration (unions).

Disability Increasing: I Assign Blame.

Russ Roberts on Disability

Russ Roberts shows that the number of workers as a percentage of overall employed workers is increasing.  I would imagine there is a connection to the amount of litigation faced by practitioners of medicine.  Many medical providers might feel that refusing to grant Total and Permanent Disability status to their patients is more trouble than it's worth.  This makes Workers Comp insurance more expensive for companies, increases their input costs, makes them raise prices on any manner of goods, reduces consumer surplus.

So what's the connection?  Fear of Litigation=>Doctors grant disability status=>Raises WC Premiums=>Raises cost of labor to companies=>Leads to higher prices for goods=>lowers quality of life for consumers.  So, we need tort reform.

Friday, August 10, 2012

Global Warming: I'll take two please.

Cafe Hayek — where orders emerge

Boudreaux makes an argument in the above referenced article that I've not heard.  To summarize: according to global warming experts, temperatures have risen over the past 250 years due to the industrial revolution and the emission of greenhouse gases.  The estimated total increase in global average temperatures is somewhere between a few and several degrees.  Compare this to a massive increase in human longevity, standard of living, education, rights extended to women, and health; not to mention the end of an ancient institution, slavery.  All of these positives were made possible by the industrial revolution.  Who, looking back, would say that they would prefer the earth to be a few degrees cooler even if it meant undoing all of human progress over the past 250 years? 

Thursday, August 09, 2012

The Myth of Overpopulation.

Cafe Hayek — where orders emerge

Boudreaux concisely refutes the idea that the earth is overcrowded.
1) More people are living longer and healthier lives than at any time in history.  So, overcrowding is not causing people to die early or lack nutrients (an argument that a specific location or country suffers from this issue is a different argument than global overcrowding).
2) The idea that overcrowding causes global warming is usually met with proposals to reduce the number of babies in the world.  But, babies and the elderly both cause CO2 emissions.  In fact, an elderly person with a car, home, etc imaginably produces much more.  So, why do we not see proposals to reduce the number of the elderly?  I can't imagine a satisfactory answer here.  Anyone want to try?

Friday, August 03, 2012

Response to A Follower

Here is a link to Benjy Sarlin's piece regarding the Romney Tax Plan (which doesn't exist in actuated form yet (but who does? Me? You? Alas!))  But, to get at the source, the Tax Policy Center is the place to go.

As for my response, here are some initial thoughts:

1) Income tax decrease across the board and eliminating loopholes is a good idea for any tax policy.  Loopholes funnel consumer income into things that they may not otherwise purchase without the tax benefit.  Decreasing the income tax, financed by getting rid of loopholes, should serve to allow consumers to reallocate their spending in a way that makes them better off in terms of welfare, even if they are no longer allowed to write off certain purchases. 

2) Any tax plan designed to address the budget deficit probably has to include government spending reductions and tax increases on the middle class.  There aren't enough wealthy people to only tax them and succeed in reducing the deficit to any great degree.  So an increase in taxes on the middle class is the result of too much government spending and they should be willing to vote for someone who acknowledges that it's time to pay for the government's past largesse.

3) For the first time since this data has been kept, the Congressional Budget Office has found that the middle class is a "net recipient of government largesse."  The middle class of one of the wealthiest nations on earth is now receiving handouts from the wealthier class.  The middle class does not need handouts.  Greg Mankiw notes (yes, he is an adviser for Mitt Romney, but 2+2=4 whether you worship at Paul Krugman's feet or not): "The most surprising fact to me was that the effective tax rate is negative for the middle quintile.  According to the CBO data, this number was +14 percent in 1979 (when the data begin) and remained positive through 2007.  It was negative 0.5 percent in 2008, and negative 5 percent in 2009.  That is, the middle class, having long been a net contributor to the funding of government, is now a net recipient of government largess."

4)  The Tax Policy Center that put together the proposals did so using pieced together emails and comments made on the campaign trail: " The Tax Policy Center (TPC) has completed a preliminary analysis of the Romney plan, based on information posted on the campaign website and email exchanges with campaign policy advisors. Because we have received no details on proposals to reduce tax preferences, the TPC analysis does not include those proposals."  In other words, no plan has been submitted, so far they are just going off of random bits of information put together here and there.

5) Lastly, as noted earlier, it is not a bad idea to get cut income taxes and finance it by getting rid of loopholes (tax expenditures).  Every time a middle class person fills out a tax return and takes a deduction they are enjoying a tax expenditure.  Yes, the wealthy have a lot, but so do the middle class.  These loopholes are very distortionary in that they twist the market for goods and services by placing incentives on purchasing some items and not others.  If you've ever said, or heard said, "I want to buy a home so that I can write off the blah, blah, blah."  Then you've seen these loopholes at work.  Get rid of as many of them as you can and just give people their money back so they can spend on what they choose.

6) Truly last.  Any argument that at its foundation rejects any tax policy because it reduces tax on the rich is a non-starter for me.  I think that when capital flows freely, it flows to the place where it earns its highest return.  Wealthy people tend to generate high returns.  That doesn't mean that the government can't collect revenue and construct safety nets for the poor.  The government tends to be very bad at this job and typically use this mission as a means to justify a lot of unnecessary and restrictive regulation far beyond its optimal scope.

Tuesday, July 24, 2012

Tuesday, July 17, 2012

Wealth Distribution (Redistribution) In the US

Perhaps the most illuminating quote from this post is this: "The negative 301 percent means that a typical family in the bottom quintile receives about $3 in transfer payments for every dollar earned."

But, the competition is tough from this quote: "the middle class, having long been a net contributor to the funding of government, is now a net recipient of government largess."

Wednesday, July 11, 2012

Perhaps Doctors, Lawyers, and PhD's Should Look Into Fighting Fires (bravely and nobly)

I respect firefighters and police officers.  But paying them the salary of a CEO is backfiring in California.  See this article, this article, and this article.

More.   More.  More.  More.  More.  And, by far the most important HERE!!!!!!!!!!

Here's an excerpt from the last by Steven Greenhut in the Wall Street Journal:
The study also found that lavish pay and benefit packages were a root cause of the city's problems. In Vallejo compensation packages for police captains top $300,000 a year and average $171,000 a year for firefighters. Regular public employees in the city can retire at age 55 with 81% of their final year's pay guaranteed. Police and fire officials can retire at age 50 with a pension that pays them 90% of their final year's salary every year for life and the lives of their spouses.

We could argue that firefighters and police officers are worth every penny they pay, or every raise they give themselves.  But, when a given city is paying up to 75% of its income on public servants, then very quickly that city finds itself near bankruptcy.

What is the answer?  Pay them according to their level of productivity.  Would this work?  What exactly do they produce?  Public safety is somewhat intangible (however it becomes real when your house is on fire or you're getting regulated upon).

Paying police officers and firefighters less is unpalatable to members of either political party.  I imagine there will be many more bankruptcies before a politician works up the courage to make the suggestion.

Thursday, July 05, 2012

Mankiw, Pigou, and You!! A Love Story (not really).

Greg Mankiw, the author of your text, posts fairly often on his blog about the Pigou Club (a group of economists and others that favor using tax policy to curb economic activity with negative externalities).  See this link here

The article gives some good food for thought.  Bauman and Ling Hsu do more than just argue that polluting industries should be taxed heavily, pointing out that the higher carbon taxes can finance lower corporate tax rates which is better for growth.

Monday, July 02, 2012

Beating the Dead Horse on Free Trade

More on free trade from Boudreaux.

I Beat a Regrettably Immortal Horse


No One Should Ever Argue that Free Trade Does More Harm than Good

...still argue that humans should not interact with each trade.  See Don Boudreaux's post What’s Central to the Case for Trade?

Trade comes naturally to children the first time they play together.  One child recognizes that the other child's toys could be enjoyable if only they were to gain access to the toys.  At first, the child follows a primitive notion and snatches the toy, until the parent (negating the need for years of game theoretic interaction) says "No, we share."  The children benefit from each others' toys without having to purchase the toys themselves.  They trade.  They gain.

Saturday, June 30, 2012

How to Discredit Yourself

This article by John Aziz illustrates why I do not trust economists like Paul Krugman, Brad DeLong, and a few others.

If you read their op-eds or non-academic articles you notice one theme (now, in your most solemn, mechanical yet snobbish voice (with nasal sounds, throat clearings, and heavy exhalations through the nose)), increase government spending on...insert any project you or your ill-informed drinking partner, next door neighbor, etc can think of. 

These economists will say anything to get the government to spend more money.  There is never a reason to spend less, never a reason to limit the power of labor over consumers.  Perhaps my least favorite attribute these individuals possess is their sense that no one on earth is anything...ever, except for them.  I used to think that about myself...when I was three. 

Friday, June 29, 2012

Preliminary Thoughts on Supreme Court Decisions

Put simply, I'm not sure what I feel about it.  I haven't had much time to analyze the details.  My initial reaction was "But the government didn't say it was a tax, they argued they have the right to mandate that the public purchase insurance under the commerce law."  So, I was pretty surprised by the decision, as were most people notwithstanding whether they lean left or right.

As a primer to learn more about the decision and the law, here is a link to Tyler Cowen.  He also links to several other comments.

More to come.

Thursday, June 28, 2012

Education and Option Value from Bryan Caplan

Education and Option Value: A Conversation With Virgil Storr

This conversation cheered my soul. I have a lot of issues/objections/whatever with/to education in the US.  Primarily, every day, it seems, I learn about a new field that I didn't even know existed.  And I say, "Wow, if I had any idea that a person could do this for a living I would have started from day one."

This isn't 100% the fault of our educational institutions.  But, who would have thought that a field like evolutionary psychology (link) existed?  I sure didn't.  I didn't hear about it until a few years ago.  Honestly, before the internet, people may have gone their whole lives without hearing about the field.

Our schools need to upgrade and move away from training students in language and arts.  The focus should be on skill development, career awareness, or just a flat out apprenticeship for people that know they want to work in computers.

Plenty would argue against this, saying kids are too young to make decisions.  Fine, then just develop their skills in areas that allow them access to the widest array of careers possible such as math, computer science, economics :), electronics, accounting (boring), law, anything besides literature, painting, speaking a random language, etc.

Wednesday, June 27, 2012

Ayn Rand vs. Evolutionary Psychology

Rand vs. Evolutionary Psychology: Part 1, Bryan Caplan | EconLog | Library of Economics and Liberty

Is it appropriate to say that you love something like Evolutionary Psychology?   It's probably fine, but it doesn't make much sense.  So, instead I'll say that I find the field informative in the way that makes me want to start school over and dedicate my life to the field...sometimes.  Since that's not an option, I'll just continue to use it to inform my beliefs about economics (broad category).

I also enjoyed reading Ayn Rand's Atlas Shrugged and The Fountainhead.  Some of her non-fiction resonated as well, most of what I've read actually.  So I hate to see Rand and Ev. Psych in conflict.

When the two fight, I'd have to side with Ev. Psych. 

To Frack or not to Frack

From Marginal Revolution's Alex Tabarrok, see here. 

Opponents of hydraulic fracturing often quote the contamination of groundwater as a worthy reason to stop the technique.  But, a simple cost-benefit analysis shows that fracking is worth around $100 billion to US consumers and the contamination of groundwater costs around $250 million.  In other words, fracking makes more than enough money for the US economy to pay for the contamination it causes 400 times over. 

The value to US consumers is certainly greater once you consider that "cleanliness" of natural gas versus other energy sources.

So, frack away.

Sunday, June 24, 2012

Numbers Don't Lie...people do.

One of ESPN's Sportscenter episodes from June 23, 2012 extolled the virtues of Title IX.  An anchor points out that some opponents of Title IX argue that it takes funds and participation away from male sports.  She then segued to male reporter who proceeded to cite numbers showing increased participation rates in both male and female sports.  The conclusion from the reporter and the anchor was that Title IX increased participation rates in sports for males AND females because numbers "don't lie."

We could follow the same logic.  Suppose there is a two parent household with one male child on whom they can spend $100/month.  Then, they have a second, female, child but their income remains the same.  Will they spend more than $100/month?  No, they can't afford it.  They must split their spending on each child.  The male gets $50/month as does the female.

The increase in male and female participation reflects the increase in popularity and profitability of collegiate sports.  There is no question that athletics departments with finite resources must take income away from the lowest revenue producing male sports and reallocate income toward the highest producing female sports.  Also, this reallocation reduces the number of scholarships for males but increases those available for females.

Bottom line: yes, diverting money from male sports and toward female sports does reduce the number of male sports and participants.  But, that IS acceptable because it provides opportunity for female athletes that wouldn't exist otherwise, or at least did not exist in the past.

ESPN should be confident that their audience understands this fact rather than presenting numbers, claiming that numbers don't lie, and then lying about what the numbers mean.

Sunday, January 08, 2012

Some Thoughts Between Me and a Few NYT's Economix Blog Readers

Here is the original link about Obama and the size of the government work force.

My First Response:
Crediting Obama for presiding over a decrease in the size of the public sector?

1) As mentioned, the majority of the public sector jobs reduction is from state and local governments.
2) This reduction is the result of....
A) Shrinking government revenues due to less economic activity.
B)The necessity of maintaining less than astronomical debt/revenue ratios in order to continue to finance state and local government activity through bond issues.
3) Your tone is adulatory, as if the president intended to reduce the public sector (I'm giving you the benefit of the doubt and assuming you sincerely admire the man for reducing the scope of government). If he did, then he spent over a trillion dollars to help the economy shed public sector jobs. It could have been done for a lot less, the cost of paying their unemployment benefits for example.

My Second Response:
Ross is not right. You fired your cashier bc you invested in a piece of advanced technology. Thus, you created demand for highly advanced technological goods. The person who made your advanced good gets paid much more than the cashier you fired and they spend a lot more. Yes, demand matters, but you were part of the demand for high end goods.

People who want to keep manufacturing, of the lower end type, in the United States miss a key point: low end means low productivity, low productivity means low income, low income cannot afford technologically advanced goods. Let the low productivity jobs leave this economy, let individuals or colleges or technical schools or whatever, find the next level of skills that will allow a person (cashier) to re-enter the workforce in a more productive capacity (point of sales station repair person). Then your cashier might have a chance in partaking of high end goods without assuming too much debt.

Third Response: Banty, think more clearly about the argument. No one claimed that low-level jobs would disappear, but the definition of low-level, low-skill, and low-investment jobs is dynamic (meaning it changes over time for you non-"phd level engineers" out there). Low-skill, low-investment, low-whatever jobs today are much more productive than their counterparts 25 years ago. In other words, many low-productivity jobs from 25 years ago no longer exist today, and many of the low-level jobs 25 years from now will seem highly technical and complicated compared to their contemporary counterparts.

The spectrum of jobs you describe has always existed, but the spectrum shifts along with technological advancement the same way that the bottom 20% of income earners shifts upward along with a society's overall level of wealth. No one would insist that a healthy distribution of wealth requires some people to make $1 a day, and no one would argue that a healthy labor force requires some people to still sew mittens by hand with sharpened wooden sticks. I've heard the argument before also, as a former barista, personal trainer (model....not really) and as a phd level economist. It makes sense to me.

Fourth Response: Obvious, the person in China makes components. Companies in advanced economies do not find it profitable to export the production of high-end technological goods to peasant economies like China, because the Chinese just can't do it. Any healthy economy engaged in trade outsources low productivity jobs as it creates higher productivity jobs. The less productive in society lose in this scenario, but there are training centers (including government funded ones) designed to upgrade their skills.

GKR, you didn't dispute anything I said. So which 75% is wrong. You just pointed out, I think, that an electrical engineer (or someone similar) has their work divided by 10,000 units. I'm not sure what that means. It sounds like you're saying that a cashier can make $1000, an electrical engineer can make 5*1000 = 5000, but then has to divide the 5000 by 10000. Then, 5000/10000 < 1000, so the electrical engineer makes less than the cashier?

Banty, check the math above before agreeing with GKR. Do not feel sorry for the cashie; by making sure that he or she always has a job as a cashier operating a piece of low-end technology, you essentially make sure that he or she always has a low-income and will never afford some of the neater gadgets a society puts out.