Economic Recovery in America

[Admiral Yi]

How did we ever survive the 1960s, then, when the minimum wage was higher relative to inflation?

The 60's were the last hurrah of the American worker.  In the 70's we lost our dominant position in car making to well-made, cheaper Japanese imports, our dominant position in steel making to every developing country that thought national prestige demanded a domestic steel industry, and our once vibrant textile industry to every third world country with two old ladies who can sew.

Plus the Fed was running an easy money policy in the belief that low interest rates at a time of full employment was a cost-free method of boosting GDP.

The fact of the matter is that while wages have been virtually stagnant for the bottom 90% of workers over the last 40 years, the wages of minimum wage earners have declined in absolute terms by about 1/3. Why? And what sort of economic system sees this as not just "unavoidable" but actually beneficial?

The economic system that values total social utility.  Every price distortion introduces dead-weight loss.

[Ideologue]

I assume most of y'all are in favor of some sort of income redistribution?

If so, what form would you prefer?  Monthly check?  Refundable tax credit?  Make-work jobs for the unemployed and/or underemployed?  Housing vouchers? 

Who should get it?  What's the income cap?  24K for a single, 48 for a family of 4?  All 99%?

I'm not a huge fan of income redistribution, but I don't intend these questions ironically.  And I think with winner take all markets a reasonable case can be made for redistribution.

Oh yeah.

Well, first, there's a lot of "make work" jobs that would not just be digging holes and filling them back in.  Our infrastructure is garbage.  There is a lot of work to be done.  Also, there are land wars to be fought in Asia.

Housing vouchers and universal SNAP benefits would be pretty good, but student loans have proven to me, and to anyone with a functioning brain, that subsidization of a desired result, leaving the results to an unregulated market, only leads to parasitism, especially in a country that refuses to legislate economic crimes.  So put me down for monthly check for any individual making less than, say, $20k (families can go fuck themselves--we are too many).

But as the future encroaches upon the present?  The only long-term solution that would increase aggregate utility is a combination of dole, dieback, and democratic socialism, leading to security without work (which won't be there for most), a smaller population, and the eradication of gross inequality, which is poison to society and which we have seen is even bad for the economy qua economy.

[citizen k]

[fhdz]

How did we ever survive the 1960s, then, when the minimum wage was higher relative to inflation?

The 60's were the last hurrah of the American worker.  In the 70's we lost our dominant position in car making to well-made, cheaper Japanese imports, our dominant position in steel making to every developing country that thought national prestige demanded a domestic steel industry, and our once vibrant textile industry to every third world country with two old ladies who can sew.

So we're fucked, then.

The economic system that values total social utility.  Every price distortion introduces dead-weight loss.

Please explain further. I'm not sure how a system that values total social utility would have disappeared its middle class.

[Ed Anger]

(families can go fuck themselves--we are too many).

Fuck you too buddy.

[Phillip V]

The fact of the matter is that while wages have been virtually stagnant for the bottom 90% of workers over the last 40 years, the wages of minimum wage earners have declined in absolute terms by about 1/3. Why? And what sort of economic system sees this as not just "unavoidable" but actually beneficial?

Women.

[Ideologue]

(families can go fuck themselves--we are too many).

Fuck you too buddy.

MAH TAX DOLLARS

[fhdz]

That's quite a graph. I think I felt my heart sink into my stomach.

I guess I can see how some nationless billionaire nomad with an entirely global perspective on the economy might look at that graph and go "yep, that's hunky dorey!" but I can't imagine how any American with even a teaspoon of nationalism left in him would think that was okay.

[fhdz]

The fact of the matter is that while wages have been virtually stagnant for the bottom 90% of workers over the last 40 years, the wages of minimum wage earners have declined in absolute terms by about 1/3. Why? And what sort of economic system sees this as not just "unavoidable" but actually beneficial?

Women.

Do go on.

[Ideologue]

That's quite a graph. I think I felt my heart sink into my stomach.

I guess I can see how some nationless billionaire nomad with an entirely global perspective on the economy might look at that graph and go "yep, that's hunky dorey!"

But if you elected me, he couldn't.  Because drones.

[Phillip V]

The fact of the matter is that while wages have been virtually stagnant for the bottom 90% of workers over the last 40 years, the wages of minimum wage earners have declined in absolute terms by about 1/3. Why? And what sort of economic system sees this as not just "unavoidable" but actually beneficial?

Women.

Do go on.

They entered the workforce in large numbers, which lowered the "need" to raise wages.

[Admiral Yi]

Please explain further. I'm not sure how a system that values total social utility would have disappeared its middle class.

It's a little tough to do without a chalkboard. 

Basically, with a downward sloping demand curve (you're familiar with supply and demand curves, right?) and an upward sloping supply curve, the area under the demand curve and above the price line is consumer/buyer surplus utility and the area below the price line and above the demand curve is producer/seller surplus.  If you let the market determine price, at the intersection of supply and demand, you maximize total surplus.  That surplus is free happiness (or money in the case of the supplier).

The consumer side is easier to intuit.  Let's use Beeb, our resident Apple junkie as an example.  He would gladly pay $2,000 for the newest iPhone, he's jonesing that hard.  The fact that Apple sells them for only $500 (no idea on the real price) means that Beeb got $2000 worth of Appleitious consumer satsifaction for only $500.  He got $1,500 of surplus utility.

Mandating a price other than the market price means some of that surplus area is lost.

[derspiess]

That's quite a graph. I think I felt my heart sink into my stomach.

I guess I can see how some nationless billionaire nomad with an entirely global perspective on the economy might look at that graph and go "yep, that's hunky dorey!" but I can't imagine how any American with even a teaspoon of nationalism left in him would think that was okay.

The solution is obviously to open up the gates and import even more people from Mexico, like the Democrats and big business types want to do.

[The Minsky Moment]

Please explain further. I'm not sure how a system that values total social utility would have disappeared its middle class.

It's a little tough to do without a chalkboard. 

Basically, with a downward sloping demand curve (you're familiar with supply and demand curves, right?) and an upward sloping supply curve, the area under the demand curve and above the price line is consumer/buyer surplus utility and the area below the price line and above the demand curve is producer/seller surplus.  If you let the market determine price, at the intersection of supply and demand, you maximize total surplus.  That surplus is free happiness (or money in the case of the supplier).

The consumer side is easier to intuit.  Let's use Beeb, our resident Apple junkie as an example.  He would gladly pay $2,000 for the newest iPhone, he's jonesing that hard.  The fact that Apple sells them for only $500 (no idea on the real price) means that Beeb got $2000 worth of Appleitious consumer satsifaction for only $500.  He got $1,500 of surplus utility.

Mandating a price other than the market price means some of that surplus area is lost.

The question is what the labor demand curve looks like for low wage workers.

[Razgovory]

That's quite a graph. I think I felt my heart sink into my stomach.

I guess I can see how some nationless billionaire nomad with an entirely global perspective on the economy might look at that graph and go "yep, that's hunky dorey!" but I can't imagine how any American with even a teaspoon of nationalism left in him would think that was okay.

The solution is obviously to open up the gates and import even more people from Mexico, like the Democrats and big business types want to do.

A more effective way to find out what Democrats want to do is to actually ask them rather then listen to what Right wing blogs say that Democrats want to do.