Every day, vast sums of capital wash up on our shores, buying bonds, condos, and companies. And every day, vast sums of capital flee our borders, destined for foreign stocks and bonds, oil fields, and factories. The massive flows are one of the distinguishing factors of our commercial culture, and a huge competitive advantage for the United States.
And yet sometimes misplaced hostility to foreigners, national-security paranoia, and plain-old protectionism can damage American consumers and leave domestic industries hidebound. That's exactly what is happening in the airline sector, where an incredibly foolish law has barred foreigners from taking over American air carriers.
Read more from the article "Air Heads: The stupid law that prevents foreigners from buying U.S. airlines" in Slate.
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Tuesday, January 2, 2007
Minimum-Wage, Minimum Workfoce?
George Mason economist Don Boudreaux suggests today in his blog Cafe Hayek that if it makes sense for the government to mandate an artificially high, above-market-clearing minimum wage for unskilled workers, then using the same logic, "why doesn’t the government require each employer to hire a minimum number of full-time employees?", say, maybe 4 full-time employees per firm, or, 1 full-time employee per firm for every $75,000 a firm earns annually in gross revenue?
Surely if the government "knows" what the correct wage is for unskilled workers, they would also "know" the correct minimum number of workers for each firm?
George Mason Law School dean emeritus Henry Manne summed it up pretty well today in the WSJ when he said (about a different issue): "Why do they (MP: politicians and busybodies) always concern themselves with successful businesses instead of founding their own?"
Surely if the government "knows" what the correct wage is for unskilled workers, they would also "know" the correct minimum number of workers for each firm?
George Mason Law School dean emeritus Henry Manne summed it up pretty well today in the WSJ when he said (about a different issue): "Why do they (MP: politicians and busybodies) always concern themselves with successful businesses instead of founding their own?"
Economic Freedom of the World
What difference does living in a country with economic freedom make for the average person compared to living in an economically unfree country? Well, let's start with twenty years greater life expectancy and then add higher income, lower unemployment, greater literacy, greater political freedom, higher economic growth, lower infant mortality, less corruption, better environmental quality, etc.In an annual report titled Economic Freedom of the World from the Cato Institute, co-authored by James Gwartney (author of our textbook for MGT 551), 130 countries were evaluated for economic freedom on an index scale from 1 (economicall unfree) to 10 (economically free). Economic freedom is then compared to various economic, health, political freedom variables.
- Nations in the top quartile of economic freedom have an average per-capita GDP of $24,402, compared to US$2,998 for those nations in the bottom quartile.
- The top quartile has an average per-capita economic growth rate of 2.1%, compared to minus 0.2% for the bottom quartile.
- Unemployment in the top quartile averages 5.9%, compared to 12.7% in the bottom quartile.
- Life expectancy is 77.8 years in the top quartile compared to 55.0 years in the bottom quartile.
- In nations of the top quartile, only 0.3% of children are in the labor force, compared to 19.3% in the least economically free nations.
- In nations of the top quartile, the average income of the poorest 10% of the population is $6,519, compared to $826 for those in the bottom quartile.
- Nations in the top quartile of economic freedom, have an average score of 1.8 for political rights on a scale of 1 to 7, where 1 marks the highest level of freedom and 7, the lowest level. The bottom quartile has an average score of 4.6.
Monday, January 1, 2007
Economic Forecast for 2007
The U.S. economy is poised to shake off the housing slump and regain momentum by the end of this year, and the credit goes to techies, bankers, chefs and shoppers, according to a Wall Street Journal survey of economists.
On average, the economists predict that inflation-adjusted GDP, a broad measure of economic activity, will grow at an annualized rate of 2.3% in the first half of 2007 (see chart above) and 2.8% in the second half. That's up from a sluggish 2% in the third quarter of 2006.
On average, the economists predict that inflation-adjusted GDP, a broad measure of economic activity, will grow at an annualized rate of 2.3% in the first half of 2007 (see chart above) and 2.8% in the second half. That's up from a sluggish 2% in the third quarter of 2006.
Quote of the Day
“A government big enough to give you everything you want is a government big enough to take from you everything you have.”
~President Gerald Ford, Address to Congress on August 12, 1974
~President Gerald Ford, Address to Congress on August 12, 1974
Application of Opportunity Cost at Wal-Mart
Think about shoplifting from the perspective of a giant retailer like Wal-Mart. What is the optimal policy for prosecuting shoplifters? Prosecute every shoplifter, regardless of age and the amount stolen? That's probably not an optimal policy, considering the monetary costs to Wal-Mart of prosecution for legal fees and for paying employees to appear in court; and the opportunity cost to Wal-Mart of prosecuting shoplifters, in terms of the time involved by employees apprehending shoplifters and holding them until police arrive, etc.
Unlike most other retailers, Wal-Mart used to follow a zero-tolerance, 100% prosecution policy for shoplifting, but switched last summer to a policy where it will no longer prosecute first-time shoplifters, unless they are between 18 and 65 and steal more than $25 worth of merchandise.
From a NY Times article, J. P. Suarez, who is in charge of asset protection at Wal-Mart, said it was no longer efficient to prosecute petty shoplifters. ''If I have somebody being paid $12 an hour processing a $5 theft, I have just lost money,'' he said. ''I have also lost the time to catch somebody stealing $100 or an organized group stealing $3,000.''
Unlike most other retailers, Wal-Mart used to follow a zero-tolerance, 100% prosecution policy for shoplifting, but switched last summer to a policy where it will no longer prosecute first-time shoplifters, unless they are between 18 and 65 and steal more than $25 worth of merchandise.
From a NY Times article, J. P. Suarez, who is in charge of asset protection at Wal-Mart, said it was no longer efficient to prosecute petty shoplifters. ''If I have somebody being paid $12 an hour processing a $5 theft, I have just lost money,'' he said. ''I have also lost the time to catch somebody stealing $100 or an organized group stealing $3,000.''
Pooling Our Collective Ignorance
How did Bill Gates get his fortune? Not by someone deciding how much Bill Gates was worth to "society," but by innumerable people around the world deciding whether what Microsoft offered them was worth what Microsoft charged.
What all those sales added up to -- Microsoft's income and Gates' fortune -- nobody decided. Nor is there any reason why they should have, even aside from the fact that nobody is qualified to make such a decision.
We can each decide for ourselves whether what Microsoft offers is worth it to us. That is all we are competent to decide -- and only for ourselves individually, when spending our own money.
The idea that we should pool our collective ignorance and then decide how much it is "fair" for Gates or anybody else to earn in total income is as ridiculous as it is dangerous, for it means arming politicians with the arbitrary power to decide everyone's economic fate.
From economist Thomas Sowell's latest column.
What all those sales added up to -- Microsoft's income and Gates' fortune -- nobody decided. Nor is there any reason why they should have, even aside from the fact that nobody is qualified to make such a decision.
We can each decide for ourselves whether what Microsoft offers is worth it to us. That is all we are competent to decide -- and only for ourselves individually, when spending our own money.
The idea that we should pool our collective ignorance and then decide how much it is "fair" for Gates or anybody else to earn in total income is as ridiculous as it is dangerous, for it means arming politicians with the arbitrary power to decide everyone's economic fate.
From economist Thomas Sowell's latest column.
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