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Assignment 3/4. Chapter 10: “Controlled Labor Markets” - PowerPoint PPT Presentation
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Assignment 3/4
Chapter 10: “Controlled Labor Markets”
Write a 350-word essay: President Obama is proposing to raise the federal minimum wage from $7.25/hour to $10.10/hour. Based on your reading of Dr. Sowell, what will happen if it’s enacted? Be specific and use his thinking… not your opinions!
AND
Sez who?The need for attribution!
Two tough questions we must ask
1. Is capitalism Christian?
Is capitalism Christian?
Remember consequences, not intent: rent control was supposed to help the poor
Is capitalism Christian?
Remember consequences, not intent: rent control was supposed to help the poor
The first thing communists and fascists do is eliminate or marginalize religion: Stalin, Lenin, Castro, Mao, Hitler
Is capitalism Christian?
Remember consequences, not intent: rent control was supposed to help the poor
The first thing communists and fascists do is eliminate or marginalize religion: Stalin, Lenin, Castro, Mao, Hitler
In socialism, the state becomes the religion
Is capitalism Christian? Remember consequences, not intent: rent
control was supposed to help the poor The first thing communists and fascists do is
eliminate or marginalize religion: Stalin, Lenin, Castro, Mao, Hitler
In socialism, the state becomes the religion Nowhere in the Bible do I see where it is the
duty of the state to care for the poor… it is the individual and especially the church
Is capitalism Christian?
Christians are the most generous people in the world… and most are capitalists
Is capitalism Christian?
Christians are the most generous people in the world… and most are capitalists
Christ’s teachings about caring for the poor are all about a changed heart… not about your money being taken by the state and given to others
Is capitalism Christian?
Christians are the most generous people in the world… and most are capitalists
Christ’s teaching about caring for the poor are all about a changed heart… not about your money being taken by the state and given to others
The Bible gives us no explicit economic system, but it seems clear to me capitalism is much more in line with Christianity than socialism or socialism-lite
Is capitalism Christian?
In no other economic system have so many people been lifted out of poverty into prosperity than capitalism
Karl Marx
“Religion is the sigh of the oppressed creature, the heart of a heartless world, just as it is the spirit of a spiritless situation. It is the opium of the people. The abolition of religion as the illusory happiness of the people is required for their real happiness.”
2. If I become rich, do I make others poor?
Zero-sum thinking
Refers to the idea that there is a winner and loser in all transactions, kind of like a tennis or boxing match
Zero-sum thinking
Refers to the idea that there is a winner and loser in all transactions, kind of like a tennis or boxing match
So if Bill Gates is rich, he must have taken that wealth from others
Zero-sum thinking
Refers to the idea that there is a winner and loser in all transactions, kind of like a tennis or boxing match
So if Bill Gates is rich, he must have taken that wealth from others
The economic pie is only so big, so government has to make sure we all get the same size slice… “fairness” and “social justice”
Zero-sum thinking
Does not recognize how much wealth Bill has created for others… e.g., the increased productivity from using Microsoft Office
Zero-sum thinking
Does not recognize how much wealth Bill has created for others… e.g., the increased productivity from using Microsoft Office
Free-market thinkers want the pie to grow bigger… rising tide floating all boats
Zero-sum thinking
Seen today in discussions of how rich are getting a larger share of the economy, and how CEO pay is now 354 times that of the average worker, versus 50 times in the 1960s
Zero-sum thinking
Seen today in discussions of how rich are getting a larger share of the economy, and how CEO pay is now 354 times that of the average worker, versus 50 times in the 1960s
Ignores the fact that the average worker is living much better than ever
Zero-sum thinking Seen today in discussions of how rich are
getting a larger share of the economy, and how CEO pay is now 354 times that of the average worker, versus 50 times in the 1960s
Ignores the fact that the average worker is living much better than ever
Used to argue against free markets and international trade, and for minimum wages, price controls, “paycheck fairness” act
Zero-sum thinking
Liberal economists in general want to make the pie more equal through government interventions and redistribution of wealth
Zero-sum thinking
Liberal economists in general want to make the pie more equal through government interventions and redistribution of wealth
Free-market economists in general want the pie to keep growing through the free market and supply and demand
Zero-sum thinking
Liberal economists want equality of outcomes… i.e., everyone makes about the same through government redistribution
Zero-sum thinking
Liberal economists want equality of outcomes… i.e., everyone makes about the same through government redistribution
Free-market economists want equality of opportunity… everyone has an equal chance to succeed
National output
Fallacy of composition
Fallacy of composition
The mistaken assumption that what applies to a part applies to the whole
Fallacy of composition
The mistaken assumption that what applies to a part applies to the whole
In economics, we’re looking at the economy in total… not any given individual, company or industry
Fallacy of composition
The mistaken assumption that what applies to a part applies to the whole
In economics, we’re looking at the economy in total… not any given individual, company or industry
We know that the economy is dynamic… some companies and industries must pass (typesetters, milkmen) so others can rise (app developers, organic bakers)
Fallacy of composition
Most common when government intervenes to “save jobs” such as the taxpayer bail out of GM and Chrysler
Fallacy of composition
Most common when government intervenes to “save jobs” such as the taxpayer bail out of GM and Chrysler
Said to “save” 1 million jobs… at a cost of $80 billion of taxpayer money, and locked in GM and Chrysler’s pension obligations and high fixed costs
Fallacy of composition
Most common when government intervenes to “save jobs” such as the taxpayer bail out of GM and Chrysler
Said to “save” 1 million jobs… at a cost of $80 billion of taxpayer money, and locked in GM and Chrysler’s pension obligations and high fixed costs
More important: what has been the cost to the rest of the economy in lost jobs and opportunities?
“Figures often beguile me, particularly when I have the arranging of them myself; in which case the remark attributed to Disraeli would often apply with justice and force: ‘There are three kinds of lies: lies, darn* lies and statistics.’"*Teacher’s edit
Measuring National Output
Measuring National Output More common measure is GDP: gross
domestic product
Gross Domestic Product
The sum total of all goods and services produced within a nation’s borders including by foreign nationals during a year
Gross Domestic Product
The sum total of all goods and services produced within a nation’s borders including by foreign nationals during a year
GDP is the preferred measurement of contemporary economists, used by the U.S. since 1992
The two main components of GDP
The two main components of GDP Private consumption and public
sector spending
The two main components of GDP Private consumption and public
sector spending In 2013, U.S. GDP was $16.8 trillion
What’s a trillion look like?Here’s $10,000 in $100 bills
And here’s $1 millionYou’re rich!
Here’s $100 millionFits on a standard pallet
Here’s $1 billionPretty impressive!
And here’s $1 trillionAbout the recent annual deficit…
The two main components of GDP Private consumption and public
sector spending In 2013, U.S. GDP was $16.8 trillion Private consumption was $11.5
trillion
Private consumption 2013: $3.9 trillion for goods $424 billion on autos $884 billion on food and beverages $362 billion on clothes $409 billion on gasoline and fuel $286 billion on furnishings
Private consumption 2013: $7.6 trillion for services $2 trillion on housing and utilities $1.9 trillion on health care $427 billion on recreation services $736 billion on food service and
accommodations $848 billion on insurance and
financial services
The two main components of GDP Private consumption and public
sector spending In 2013, U.S. GDP was $16.8 trillion Private consumption was $11.5
trillion Private investment was $2.7 trillion
Private investment 2013
$457 billion on structures $664 billion on information
processing equipment and software $218 billion on transportation
equipment
The two main components of GDP Private consumption and public
sector spending In 2013, U.S. GDP was $16.8 trillion Private consumption was $11.5
trillion Private investment was $2.7 trillion Government spending was $3.1
trillion
Government spending 2013 $770 billion on national defense $475 billion on nondefense $1.9 trillion on state and local
government spending
Hey, wait a minute!
Hey, wait a minute!
Problem 1: The totals add up to $17.3 trillion, not $16.8 trillion
Hey, wait a minute!
Problem 1: The totals add up to $17.3 trillion, not $16.8 trillion
Problem 2: The federal budget alone was $3.5 trillion in fiscal 2012-2013 (October 2013-September 2013)
Problem 1: the case is solved We need to subtract the trade deficit
from GDP: in 2013, the deficit was $497 billion. We balance!
Problem 2
Most of government spending is “transfer” payments for Social Security, welfare, health care. Does not count as part of GDP because it’s taking from one part of the economy and giving to the other… it’s not productive because it doesn’t produce anything
Problem 2
Most of government spending is “transfer” payments for Social Security, welfare, health care. Does not count as part of GDP because it’s taking from one part of the economy and giving to the other… it’s not productive because it doesn’t produce anything
Key corollary: Government does not produce wealth; it consumes it
Common GDP Formula
GDP = C + I + G + (X − M)C is consumptionI is gross investmentG is government spendingX is exportsM is imports
Top 5 GDP Nations
Top 5 GDP Nations, Per Capita
Assignment 3/25
Chapter 16: “Money and the banking system”
Assignment 3/25
Chapter 16: “Money and the banking system”
Then write a 350-word essay: Based on Dr. S’s teachings, why is a strong banking system essential to a prosperous society?