31 Jan 2014

Further Thoughts on Schiff on the Daily Show

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Here at Mises Canada. Note, apparently they fixed their supply & demand graph in the video.

28 Responses to “Further Thoughts on Schiff on the Daily Show”

  1. Daniel Kuehn says:

    “Note, apparently they fixed their supply & demand graph in the video”

    Ken B was right – they edit stuff to make honest guys like us look stupid.

  2. Dan (DD5) says:

    About point #5.

    Sure, it is the “merciless” consumers who determine the entire array of prices on the market. But it’s not like the consumers can actually do anything about people earning minimum wage, that is, even if they really wanted to ,e.g., tell us how to shop so as to increase the wages of some people as oppose to others. Consumers only bid for consumers goods. From there, prices for factors are imputed backwards, but how should consumers be spending in order to raise their wages. I don’t see Schiff’s point (as you are making it out to be) to be valid. I think he is making the erroneous inflation argument. He could have said that unemployment caused by minimum wage means higher prices in the long run relative to no minimum wage, but that’s not what he is saying.

    • Matt M (Dude Where's My Freedom) says:

      Although you’re right that there are many minimum wage employees who work in the early stages of the production process, for whatever reason, nearly all of the focus on the current minimum-wage debate seems to be on front-line customer-facing employees, particularly those who work in fast food or in big box retail outlets (consider, some jurisdictions have attempted to pass laws raising the minimum wage for fast-food or big-box retail employees ONLY).

      So, for the employees that seem to be the primary focus of the media campaign to raise the minimum wage, there are a few things customers can do to increase their wages if they really wanted to. One is a direct transfer. Give the guy at the McDonalds counter an extra dollar. Maybe encourage him to share it with the fry cook (he probably won’t, but hey, you tried). Aside from that, consumers can intentionally make efforts to shop at establishments known for paying above the minimum wage. There’s always some trendy place, the CostCo vs Wal-Mart comparison comes up a lot. If customers demand high-quality customer service and are willing to pay higher prices, employers will pay extra to attract good employees.

      Or, we could realize that the problem isn’t really wages/income, but standard of living. In this case, giving to charities designed to help the poor is certainly a better option than raising the minimum wage, because minimum-wage earners aren’t really the poorest among us, and as Schiff (and others) point out, raising the minimum wage will just eliminate jobs and create even more of those people.

      What else can we do to help those who earn the minimum wage? Encourage them, and stop denigrating them would be a nice touch, too. Stop treating their jobs as if they are worthless, sub-human tasks. Encourage them to work hard every day, volunteer for the tough assignments, and really prove their value to their employers. This will put them in an increased bargaining position to demand higher wages, from their present employer, or perhaps from a different one. Teach them about markets and economics. Help them understand that high wages are not a gift that Barack Obama chooses to give to you, but something that comes about via a voluntary trade for mutual benefit, and that they have to increase their value to increase their wages.

      • Dan(DD5) says:

        “consumers can intentionally make efforts to shop at establishments known for paying above the minimum wage”

        They certainly can but they will harm, not help, minimum wage earners. If you just take the logical extreme of that, and boycott entirely such establishments, then what would happen? The equivalent of a minimum wage enforced by consumers, i.e., consumers discriminating against low skilled workers.

        Your point about charity, yes. But that’s all you can do.

        • Ben B says:

          In so far as producers recognize that there has been a major shift in consumer demand towards products made by above minimum wage employees, then wouldn’t other employers be incentivized to raise wages in order to avoid losing market share? Or to gain market share for that matter.

          • Dan(DD5) says:

            The only incentive they would have is to drop them altogether. It is no different than if you boycotted employers that hired short people. What would be the result? tall people become more valuable, not short people. A person’s wage is not arbitrary but determined by his DMVP.

            • Ben B says:

              Unless consumer demand shifts to include paying low skilled workers above minimum wage; this is what I meant. Then, low skilled workers DMVP actually increases.

    • Gamble says:

      I am not sure why the inflation argument is erroneous? First higher prices are not inflation so lets call it higher prices. If inputs cost go up, that has to come from somewhere. Reduced profit, higher prices, lower quality and quantity. SO now let us assume many business are owed by equity. These equity firms want what they want so they raise prices or jump to another investment. When they rise prices it is not just by the amount of labor cost, it is a multiple. Furthermore many business will be passing along these prices simultaneously so now we have multiplier that is nearly impossible to calculate. The only thing stopping this shock wave is true money supply. Well, we know what money supply has been doing.

      So now please explain how mandated labor cost increase does not cause higher prices? If not higher prices, then you must explain how this new labor price is funded? IT simply cannot appear as if in a vacuum or island.

      I have not even included Bobs argument prices go up because of reduced supply, that is another part of it.

      • Dan(DD5) says:

        If sellers could really pass on their costs to consumers in the form of higher prices, then they would have already done so, don’t you think? Any imposed costs will be absorbed by the wage earners. In the case of minimum wage, it will be simply low skilled workers that are priced out of the market. If later, consumers suffer from a relative loss of productivity due to a loss of labor, then they will pay [relatively] higher prices. But that’s not the result of sellers simply passing on the costs to consumers, but the result of relatively less goods produced.

        • Gamble says:

          Minimum wage increase makes it more likely to pass along cost because every business will try to do it at the same time, shortly after law takes effect. The consumer reacts differently than if only 1 business tries to pass along increased cost..

  3. Transformer says:

    Maybe the original supply and demand chart was drawn by a Post-Keynsian 🙂

  4. Cosmo Kramer says:

    RPM sweats liquid gold.

    “But hold on a second. Doesn’t that make Schiff’s point? Can’t we turn it around and say, “What do you critics have against kids and people with disabilities earning a decent income? Why do you just want to help the able-bodied workers? That’s sick!””

    • Matt M (Dude Where's My Freedom) says:

      Not sure that would work. I’m pretty sure the same people who want high minimum wages would attempt to “solve” that problem with affirmative action for disabled people (already exists to a certain extent in many government jobs at least, not sure about private sector), and government guaranteed universal employment.

      • Cosmo Kramer says:

        Interesting. I wonder if there is a transcript of a politician arguing for the subminimum wage for the mentally retarded.

        Pelosi is interviewed by Jan Hetfield and finds a way to legitimize unpaid internships.

        Who knows, consistency be damned…

  5. joe says:

    What about Schiff’s claim that there is no starvation in a capitalist economy?

    “People don’t go hungry in a capitalist economy. It’s socialism that creates, you know, scarcity, that creates famine. In a free market, there’s plenty of food for everybody – especially the poor.” – Peter Schiff

    Anyone want to defend this ridiculous assertion?

    • Gamble says:

      Most American people consume twice as many calories as necessary. Plenty of food here in America.

    • Cosmo Kramer says:

      The free market has actual solutions to remedy an empty stomach and a wet forehead.

      • John says:

        I do not know economics well, much less Austrian economics, but I enjoy reading this blog and the comments. I have two questions: some of the government action against poverty came about because people were in fact starving. In particular, Social Security was a reaction to the elderly quite literally dying in the streets. At the turn of the last century, during the height of the generally unregulated industrial revolution, starvation and poverty were very significant problems in the US. Is it that the country was poorer then generally, or that the market was not unregulated enough? Also, what do Austrians make of the studies showing that raising the minimum wage has little effect on loss of jobs or on prices. I know some economists discount these studies and they are not always consistent, but it does seem the expected effects of raising the minimum wage are not that apparent in reality. Is that analysis just wrong, or are other factors at work?

        • Cosmo Kramer says:

          Very few earn the minimum wage. Thus, a small increase on a small number of people has a generally small effect.

          You also must consider two paths. One path is leaving the minimum wage where it is, and one is raising it. IF we had a time machine we could measure the difference in prices, employment, etc, between the two paths. Economics is a lot more complex than raising the minimum wage and seeing what happens afterwards.

          I’d like to talk about poverty per your question….. but I really only have data from 1959 until present.

          In general though, standards of living have continually increased. Just consider what our impoverished citizens have compared today to what the “impoverished” citizens of 100 years ago. Same spelling, two different meanings.

      • Gamble says:

        We have a distribution problem, not a production problem.

        Or maybe have a takers problem?

        Or maybe we have a slacker problem?

        Or maybe we have an intervention problem?

        We certainly do not have a production problem. Matter a fact, the USDA and other interventionist policy’s create too much food.

    • Beard Face says:

      Given that we can sustain 7 billion people on the Earth at the same time, I’d say we have plenty of food. The Western countries are the most capitalist, and richest.

      • joe says:

        He did not merely claim that capitalism raises a nation’s standard of living. He said there is no scarcity under a free market economy. Scarcity is caused by socialism.

        “It’s socialism that creates, you know, scarcity, that creates famine. In a free market, there’s plenty of food for everybody – especially the poor.” – Peter Schiff

        The Bible says that scarcity comes from God’s curse on Adam for his sin (Genesis 3:17-19)

        “Cursed is the ground because of you; through painful toil you will eat of it all the days of your life. It will produce thorns and thistles for you, and you will eat the plants of the field. By the sweat of your brow you will eat your food until you return to the ground.”

        • Ken B says:

          Ergo socialism is a curse.

          • Matt G says:

            God’s curse. Perhaps He actually sent Jesus to reinforce the curse: “Woe to you who are rich”, giving handouts of loaves and fishes instead of teaching the importance of prices, etc.

            • Ken B says:

              The early followers were kinda communistic. Read Acts.

              God has left several curses. Christianity is, these days at least, not remotely the worst.

  6. Bitter Clinger says:

    Forty-five years ago I had an introductory econ course and remember having an issue with the supply-demand curves at that time. The teaching assistant patiently explained them to me and I remember “getting it’. I had to Wikipedia to refresh my memory to again “get it”. I mean, who the f*** puts the independent variable on the y axis and the dependent variable on the x axis? Are you people (economists) actually that stupid? Are you really that ignorant? Y=f(x) has been the convention in arithmetic (let alone mathematics) since Newton and Descartes. The purpose of mathematics (and the graphical representation) is not to hide but to enlighten. I followed on to Alfred Marshall who first explained (allegedly) Supply and Demand and was stuck by the quote: Use mathematics as shorthand language, rather than as an engine of inquiry. (2) Keep to them till you have done. (3) Translate into English. (4) Then illustrate by examples that are important in real life (5) Burn the mathematics. (6) If you can’t succeed in 4, burn 3. This I do often.”[4] There is no need to wonder why the world is so screwed up… this is the reason. Good luck guys.

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