Tag Archives: Economics

Economist Walter Williams explains how to not be poor

Economist Walter Williams
Economist Walter Williams

Here is his article on wealth and poverty on Creators.

First, there is no real poverty in the United States:

There is no material poverty in the U.S. Here are a few facts about people whom the Census Bureau labels as poor. Dr. Robert Rector and Rachel Sheffield, in their study “Understanding Poverty in the United States: Surprising Facts About America’s Poor”, report that 80 percent of poor households have air conditioning; nearly three-quarters have a car or truck, and 31 percent have two or more. Two-thirds have cable or satellite TV. Half have one or more computers. Forty-two percent own their homes. Poor Americans have more living space than the typical non-poor person in Sweden, France or the U.K. What we have in our nation are dependency and poverty of the spirit, with people making unwise choices and leading pathological lives aided and abetted by the welfare state.

Second, the “poverty” is not caused by racism, but by poor choices:

The Census Bureau pegs the poverty rate among blacks at 35 percent and among whites at 13 percent. The illegitimacy rate among blacks is 72 percent, and among whites it’s 30 percent. A statistic that one doesn’t hear much about is that the poverty rate among black married families has been in the single digits for more than two decades, currently at 8 percent. For married white families, it’s 5 percent. Now the politically incorrect questions: Whose fault is it to have children without the benefit of marriage and risk a life of dependency? Do people have free will, or are they governed by instincts?

There may be some pinhead sociologists who blame the weak black family structure on racial discrimination. But why was the black illegitimacy rate only 14 percent in 1940, and why, as Dr. Thomas Sowell reports, do we find that census data “going back a hundred years, when blacks were just one generation out of slavery … showed that a slightly higher percentage of black adults had married than white adults. This fact remained true in every census from 1890 to 1940”? Is anyone willing to advance the argument that the reason the illegitimacy rate among blacks was lower and marriage rates higher in earlier periods was there was less racial discrimination and greater opportunity?

Third, avoiding poverty is the result of good choices:

No one can blame a person if he starts out in life poor, because how one starts out is not his fault.

If he stays poor, he is to blame because it is his fault. Avoiding long-term poverty is not rocket science. First, graduate from high school. Second, get married before you have children, and stay married. Third, work at any kind of job, even one that starts out paying the minimum wage. And finally, avoid engaging in criminal behavior. It turns out that a married couple, each earning the minimum wage, would earn an annual combined income of $30,000. The Census Bureau poverty line for a family of two is $15,500, and for a family of four, it’s $23,000. By the way, no adult who starts out earning the minimum wage does so for very long.

Fourth, what stops people from making good choices is big government:

Since President Lyndon Johnson declared war on poverty, the nation has spent about $18 trillion at the federal, state and local levels of government on programs justified by the “need” to deal with some aspect of poverty. In a column of mine in 1995, I pointed out that at that time, the nation had spent $5.4 trillion on the War on Poverty, and with that princely sum, “you could purchase every U.S. factory, all manufacturing equipment, and every office building. With what’s left over, one could buy every airline, trucking company and our commercial maritime fleet. If you’re still in the shopping mood, you could also buy every television, radio and power company, plus every retail and wholesale store in the entire nation”. Today’s total of $18 trillion spent on poverty means you could purchase everything produced in our country each year and then some.

Walter Williams is one of my two favorite economists, the other being Thomas Sowell. By sheer coincidence, they both happen to have grown up poor, and they both happen to be black. They understand what causes poverty very well. I recommend their books to you if you want to understand economics.

New study: in 2017, minimum wage increases will cost 383,000 low income jobs

I have a key that will unlock a puzzling mystery
I have a key that will unlock a puzzling mystery

Is raising the minimum wage a good idea? Where would the money come from for the higher wages? Would job creators be able to afford to pay people more for the same level of productivity?

Investors Business Daily discusses a new study about the minimum wage increases that will take effect in 2017:

One of the most vexing economic issues today is the minimum wage. For many, the failure to raise the minimum wage to $15 or higher is a sign of our nation’s stinginess and an essential part of the fight for income equality. However, the truth, sad to say, is quite different, as a new study shows.

The study by the American Action Forum, a nonpartisan think tank led by former Congressional Budget Office Director Douglas Holtz-Eakin, looked at minimum-wage hikes scheduled to take effect in the coming years in 14 states and the nation’s capital and found they will “cost millions of jobs across the country and each lost job only leads to total wage earnings rising by a few thousand dollars.”

The reason is simple: When you raise the minimum wage of low-skilled, low-productivity labor — a group that disproportionately includes young minority males — you inevitably destroy jobs. No business will hire someone and pay him more than he’s worth.

So all those states might think they’re helping the downtrodden and the poor, and striking a blow for equality by mandating higher wages, but they’re doing just the opposite: Pricing many young people out of entry-level jobs.

The study estimates that minimum-wage hikes in just 2017 will kill off 383,000 low-end jobs. When phased in over a series of years, the losses become truly big: 2.6 million jobs. But wait, won’t the minimum-wage hike at least boost incomes?

Yes, but not much. For each job lost, earnings for the employees affected by the increase would go up just $6,900.

“While proposals to raise the minimum wage are well intended, it is important to consider the negative labor market consequences,” the report said. “A 10% increase in the real minimum wage is associated with a 0.3 to 0.5 percentage-point decline in the net job rate.”

What will happen when all of these young workers come out of high school and cannot find entry level jobs? Answer: they will have to get money through crime or black market or by collecting welfare. That’s how you earn money if you can’t get employment through legal means.

If we left the minimum wage low, they would be able to find entry level jobs and move up the ladder, perhaps by taking classes at night, like my parents did. My Dad was able to earn his Bachelor’s degree by working in a flower shop and as a security guard for minimal pay. Then he was able to find full-time work that allowed him to have another child, i.e. – me. My parents married first, got jobs, then had children later. But they relied on the availability of entry level jobs in order to work that plan through.

It’s very important to understand that not everyone who INTENDS to help the poor really ACHIEVES helping the poor. I really hope that Americans start to understand from disasters like Obamacare that you cannot let economic illiterates drive policy decisions. No matter how good the happy-talk sounds when read off of a teleprompter, there is no getting around the laws of economics.

Watch Ted Cruz debate Bernie Sanders on health care policy and repealing Obamacare

This debate happened on CNN earlier in the week. Thankfully, I was out traveling, so I actually had a TV to watch this in my hotel room.

Here is the full video:

It’s 90 minutes long. No commercials. This was basically a debate of similar substance to the William Lane Craig debates, where actual economic evidence was continuously produced in order to show who was telling the truth, and who was just trying to be popular by saying what people who are uneducated at economics want to hear. In short: there was a clear winner and loser in this debate, and it was clear all the way through, and was reinforced over and over every time evidence was produced. The person producing the evidence would turn his back on the camera, and return to his podium to get the evidence. That person won the debate by being grounded in reality.

Also, the questions were excellent, especially from the small business owners who were impacted by Obamacare. The moderators were biased towards Sanders, but not excessively.

For those who cannot watch, there is an article at the Daily Signal.

Full text:

In a prime-time debate on CNN this week, Sens. Bernie Sanders, I-Vt., and Ted Cruz, R-Texas, discussed “The Future of Obamacare” in America. Cruz, a leading critic of the law, used the moment to outline the law’s failures.

Here are four things Cruz said about Obamacare:

1) “Now, nobody thinks we’re done once Obamacare is repealed. Once Obamacare is repealed, we need commonsense reform that increases competition, that empowers patients, that gives you more choices, that puts you in charge of your health care, rather than empowering government bureaucrats to get in the way. And these have been commonsense ideas.”

2) “Indeed, I don’t know if the cameras can see this, but in 70 percent of the counties in America, on Obamacare exchanges, you have a choice of one or two health insurance plans, that’s it … It’s interesting. You look at this map, this also very much looks like the electoral map that elected Donald Trump. It’s really quite striking that the communities that have been hammered by this disaster of a law said enough already.”

During one of the more powerful moments in the debate, Cruz held up aHeritage Foundation chart showing viewers how many counties in the U.S. have access to only one or two insurers under Obamacare. Additionally, only 11 percent of counties have access to four or more insurance providers.

3) “Whenever you put government in charge of health care, what it means is they ration. They decide you get care and you don’t. I don’t think the government has any business telling you you’re not entitled to receive health care.”

The U.S. should not envy other health care systems, especially Canada and the United Kingdom, Cruz said. He referred to a governor from Canada who came to the U.S. specifically to have heart surgery.

4) “That’s why I think the answer is not more of Obamacare, more government control, more of what got us in this mess. Rather, the answer is empower you. Give you choices. Lower prices. Lower premiums. Lower deductibles. Empower you and put you back in charge of your health care.”

Obamacare is burdening Americans. The average deductible for a family on a bronze plan is $12,393, according to a HealthPocket analysis. According to aneHealth report, the average nationwide premium increase for individuals is 99 percent and 140 percent for families from 2013-2017.

I really recommend you watch this debate, because it these things were done on a weekly or monthly basis, then people would be able to think critically about what they are presented with from the mainstream media, Hollywood elites and liberal academics.

Thomas Sowell: does affirmative action help minorities to get ahead?

Economist Thomas Sowell
Economist Thomas Sowell – the best economist in the world

My favorite economist, Thomas Sowell has an article in Investors Business Daily that explains what affirmative action really does to minorities.

Excerpt:

Affirmative action is supposed to benefit black and other minority students admitted with lower academic qualifications than some white students who are rejected.

[…]Despite much media spin, the issue is not whether blacks in general should be admitted to higher-ranked or lower-ranked institutions.

The issue is whether a given black student, with given academic qualifications, should be admitted to a college or university where he would not be admitted if he were white.

Much research over the years has confirmed… that admitting black students to institutions for which their academic preparation is not sufficient can be making them worse off instead of better off.

I became painfully aware of this problem more than 40 years ago when I was teaching at Cornell University and discovered that half the black students there were on some form of academic probation.

These students were not stupid or uneducable. On the contrary, the average black student at Cornell at that time scored at the 75th percentile on scholastic tests. Their academic qualifications were better than those of three-quarters of all American students who took those tests.

Why were they in trouble at Cornell, then? Because the average Cornell student in the liberal arts college at that time scored at the 99th percentile. The classes taught there — including mine — moved at a speed geared to the verbal and mathematical level of the top one percent of American students.

The average white student would have been wiped out at Cornell. But the average white student was unlikely to be admitted to Cornell in the first place. Nor was a white student who scored at the 75th percentile.

That was a “favor” reserved for black students. This “favor” turned black students who would have been successful at most American colleges and universities into failures at Cornell.

None of this was peculiar to Cornell. Black students who scored at the 90th percentile in math had serious problems trying to keep up at MIT, where other students scored somewhere within the top 99th percentile.

Nearly one-fourth of these black students with stellar qualifications in math failed to graduate from MIT, and those who did graduate were concentrated in the bottom tenth of the class.

There were other fine engineering schools around the country where those same students could have learned more, when taught at a normal pace, than at a breakneck speed geared to students with extremely rare abilities in math.

[…]Mismatching students with educational institutions is a formula for needless failures.

The book “Mismatch” by Sander and Taylor is a first-rate study of the hard facts. It shows, for example, that the academic performances of black and Hispanic students rose substantially after affirmative action admissions policies were banned in the University of California system.

Instead of failing at Berkeley or UCLA, these minority students were now graduating from other UC campuses. They were graduating at a higher rate, with higher grades, and now more often in challenging fields like math, science and technology.

[…]Does the actual fate of minority students not matter to the left as much as their symbolic presence on a campus?

Now, you might ask yourself on what basis Sowell makes all these assertions, so here are a few of his academic publications about affirmative action, which are state-of-the-art:

Now, I was recently talking to a friend who has empirically false views on a number of topics. He is opposed to capital punishment, opposed to gun ownership, supports affirmative action, and so on. When I ask him why he believes these things, he doesn’t point to any evidence. I offered to give him studies showing that capital punishment has a deterrent effect on crime, that concealed carry laws reduce violent crime rates, that affirmative action laws harm minorities, etc.

If we really want to help minorities, we have to do what makes sense according the evidence. We have to aim to do good, not just feel good.

Is health care a right or a commodity?

I have a key that will unlock a puzzling mystery
I have a key that will unlock a puzzling mystery

Here is a splendid post about the economics of health care from Ben Shapiro, writing for National Review.

He responds to a view held by those on the radical left: people need health care, therefore health care is a right.

Excerpt:

The idea here seems to be that unless you declare medical care a right rather than a commodity, you are soulless — that as Marx might put it, necessity, rather than autonomy, creates rights.

This is foolhardy, both morally and practically.

Morally, you have no right to demand medical care of me. I may recognize your necessity and offer charity; my friends and I may choose to band together and fund your medical care. But your necessity does not change the basic math: Medical care is a service and a good provided by a third party. No matter how much I need bread, I do not have a right to steal your wallet or hold up the local bakery to obtain it. Theft may end up being my least immoral choice under the circumstances, but that does not make it a moral choice, or suggest that I have not violated your rights in pursuing my own needs.

But the left believes that declaring necessities rights somehow overcomes the individual rights of others. If you are sick, you now have the right to demand that my wife, who is a doctor, care for you. Is there any limit to this right? Do you have the right to demand that the medical system provide life-saving care forever, to the tune of millions of dollars of other people’s taxpayer dollars or services? How, exactly, can there be such a right without the government’s rationing care, using compulsion to force individuals to provide it, and confiscating mass sums of wealth to pay for it?

The answer: There can’t be. Rights that derive from individual need inevitably violate individual autonomy.

But there are ways to make a commodity less expensive, and of higher quality. It happens all the times in free markets, where innovators are rewarded with profits – just think of the people who sell smartphones.

More:

To make a commodity cheaper and better, two elements are necessary: profit incentive and freedom of labor. The government destroys both of these elements in the health-care industry. It decides medical reimbursement rates for millions of Americans, particularly poor Americans; this, in turn, creates an incentive for doctors not to take government-sponsored health insurance. It regulates how doctors deal with patients, the sorts of training doctors must undergo, and the sorts of insurance they must maintain; all of this convinces fewer Americans to become doctors. Undersupply of doctors generally and of doctors who will accept insurance specifically, along with overdemand stimulated by government-driven health-insurance coverage, leads to mass shortages. The result is an overreliance on emergency care, costs for which are distributed among government, hospitals, and insurance payers.

So, what’s the solution for poor people? Not to declare medical care a “right,” and certainly not to dismiss reliance on the market as perverse cruelty. Markets are the solution in medical care, just as they are in virtually every other area.

Treating medical care as a commodity means temporary shortages, and it means that some people will not get everything we would wish them to have. But that’s also true of government-sponsored medical care, as the most honest advocates will admit. And whereas government-sponsored medical care requires a top-down approach that violates individual liberties, generates overdemand, and quashes supply, markets prize individual liberties, reduce demand (you generally demand less of what you must pay for), and heighten supply through profit incentive.

It’s always a good idea to look at how health care is working in countries that do have single payer health care systems. Canada has a single-payer system. How is that working out?

The Fraser Institute issued a recent report on health care in Canada:

Waiting for treatment has become a defining characteristic of Canadian health care. In order to document the lengthy queues for visits to specialists and for diagnostic and surgical procedures in the country, the Fraser Institute has—for over two decades—surveyed specialist physicians across 12 specialties and 10 provinces.

This edition of Waiting Your Turn indicates that, overall, waiting times for medically necessary treatment have in-creased since last year. Specialist physicians surveyed report a median waiting time of 20.0 weeks between referral from a general practitioner and receipt of treatment—longer than the wait of 18.3 weeks reported in 2015. This year’s wait time—the longest ever recorded in this survey’s history—is 115% longer than in 1993, when it was just 9.3 weeks.

[…]It is estimated that, across the 10 provinces, the total number of procedures for which people are waiting in 2016 is 973,505. This means that, assuming that each person waits for only one procedure, 2.7% of Canadians are waiting for treatment in 2016.

[…]Patients also experience significant waiting times for various diagnostic technologies across the provinces. This year, Canadians could expect to wait 3.7 weeks for a computed tomography (CT) scan, 11.1 weeks for a magnetic resonance imaging (MRI) scan, and 4.0 weeks for an ultrasound.

Research has repeatedly indicated that wait times for medically necessary treatment are not benign inconveniences. Wait times can, and do, have serious consequences such as increased pain, suffering, and mental anguish. In certain instances, they can also result in poorer medical outcomes—transforming potentially reversible illnesses or injuries into chronic, irreversible conditions, or even permanent disabilities. In many instances, patients may also have to forgo their wages while they wait for treatment, resulting in an economic cost to the individuals themselves and the economy in general.

The typical cost of the single-payer health care system to a Canadian family is nearly $12,000.

Socialist Canada has been doing a lot of taxing and spending to try to fix this problem, but the problem is getting worse. And no wonder: when the government controls health care, it becomes a tool for buying votes. Abortions and sex changes are “health care” in Canada. Breast enlargements and IVF are “health care” in the UK. Of course, good luck getting treatment when you are in your old age and will not be voting much in the future : both Canada and the UK have euthanasia programs to get rid of elderly people who are no longer as useful to politicians as young people who still have lots of voting ahead of them.