Tuesday, December 31, 2013

Mary Sennholz: Biographer, Scholar, and Friend

The December 2013 The Free Market includes a brief piece about Mary Sennholz co-authored by Jeff Herbener and myself. It is an introduction to an interview of Mrs. Sennholz that we conducted this past summer as part of the Ludwig von Mises Institute's Oral History Project.Our introduction begins on page 3. The audio interview is scheduled for release in 2014.

Saturday, December 28, 2013

Unemployment Benefits Subsidize Unemployment

One proverb that is often quoted by personal finance advisers warning people not to get taken in by the false economy of cheap but shabby products is you get what you pay for. Alas, the same is true in the realm of economic policy, especially when we consider government subsidies. As I explain in Foundations of Economics, subsidies are direct cash transfer payments from the government to citizens. A foundational economic principle as it applies to public policy is that we get more of whatever we subsidize.

This weekend's news is full of stories about 1.3 million Americans losing their emergency unemployment benefits today. This certainly will be a hardship for those who have been arranging their spending banking on receiving those benefits. That fact of the matter, however, is that we get more of what we subsidize. That is what the latest research indicates about unemployment benefits. Unemployment benefits tend to draw more people into the official labor force, so the are eligible for benefits and then encourage potential workers to delay their accepting employment by decreasing the opportunity cost of not working.

When North Carolina cut off emergency benefits last July, the State's unemployment rate declined noticeably faster than the official nation wide unemployment rate. J.P. Morgan Economist Michael Feroli reports the following:
In July, the North Carolina government decided to no longer offer extended benefits, even though the state still met the economic conditions to qualify for this federal program. Since July, the North Carolina unemployment rate has fallen 1.5%-points; in the same period the national unemployment rate has fallen 0.4%-point.

 This analysis is not an attempt to establish my cold-hearted, hard-nosed economist bona fides, but is instead simply reminding the reader of how things are. It is not charitable to allow people to be led astray by wishful thinking.

Wednesday, December 25, 2013

The Word Became Flesh

In the beginning was the Word, and the Word was with God, and the Word was God. He was in the beginning with God. All things were made through him, and without him was not any thing made that was made. In him was life, and the life was the light of men. The light shines in the darkness, and the darkness has not overcome it.

There was a man sent from God, whose name was John. He came as a witness, to bear witness about the light, that all might believe through him. He was not the light, but came to bear witness about the light.

The true light, which gives light to everyone, was coming into the world. He was in the world, and the world was made through him, yet the world did not know him. He came to his own, and his own people did not receive him. But to all who did receive him, who believed in his name, he gave the right to become children of God, who were born, not of blood nor of the will of the flesh nor of the will of man, but of God.

And the Word became flesh and dwelt among us, and we have seen his glory, glory as of the only Son from the Father, full of grace and truth. (John bore witness about him, and cried out, “This was he of whom I said, ‘He who comes after me ranks before me, because he was before me.’”) For from his fullness we have all received, grace upon grace. For the law was given through Moses; grace and truth came through Jesus Christ. No one has ever seen God; the only God, who is at the Father's side, he has made him known. 

(John 1:1-18, ESV)

On this Christmas Day, I invite you to meditate upon the unique magnitude of the advent of Christ, the Word becoming flesh. To this end I commend to you the essay "The Coming of Christ" by John Robbins.

Monday, December 23, 2013

It Was a Hundred Years Ago Today

That the national government created the Federal Reserve System. The results have been not kind to the dollar.

It helped facilitate the monetary inflation that led to higher prices after WW1, the sharp recession in 1920-21, the inflationary boom that resulted in America's Great Depression, and a 92% decline in the dollars purchasing power into the 21st Century; Not to mention overseeing the Great Recession of 2008. So much for price stability.

Today Christopher Westley has an insightful essay explaining why the monster was created.

Monday, December 9, 2013

Who Likes to Pay Doubly-High Prices?

Imagine paying $6.54 for a gallon of gasoline. Or $16 per pound for New York Strip Steaks--on sale. Or 8.9% for a thirty-year fixed-rate home mortgage?

That is what many fast food workers desire their employers to do. A few days ago, leftist groups staged a "strike" against fast food establishments, calling for doubling the federal minimum wage to $15 an hour. The same workers who will say that they cannot afford to buy various and sundry goods, such as Christmas gifts, for their families because their prices are too high given their income are lobbying the government to raise the prices their employers will legally have to pay for their services. They, of all people, should know that such a request is economically equivalent to asking their firm to reduce its purchases of their labor. They are, essentially, asking to be laid off.  Businesses that pay their workers more than they economically contribute to revenue will eventually go bankrupt, which is no plan for prosperity.

Economists have known for a very, very long time that if the state mandates a price above the market price, a surplus results. I devote an entire section of a chapter in my book Foundations of Economics to this very problem. A surplus in the labor market is unemployment. That is precisely what a $15 an hour minimum wage will produce. Unemployment--not prosperity.  That is why historically, the minimum wage has not been an effective means to reduce poverty. It has been an effective means of keeping the least productive, and therefore, most poor, workers out of the job market.

Meanwhile, Don Boudreaux raises some provocative questions regarding the ethics of the minimum wage.