I agree with Mark Thoma that liberalization of markets are not the causation of The Great Moderation. The Educational levels of Labor, plus the availability of packaged Skill programs for elements necessary to establish a business, have allowed Labor to create their own Jobs; if traditional Business programs fail to do so. ‘How To’ Studies can be accessed in library or online for completion of all forms of business organization, from writing a Prospectus for a loan to Cost Accounting for a Business. Many Small Business personnel even locate their own Advertising avenues, and do their own Withholding Accounting. Simply put: Small Business has learned to complete those aspects of Business organization which previously had to be outsourced to expensive Agents. This Cost-Cutting has undoubtedly doubled the Profit margins of small business, and made independent Job creation much safer.
Ecelectecon has a good Post on cartel theory, but misses a central point. The article would imagine that with 23 Players in the cartel, a reduction of Supply could be achieved. All are perfectly aware of the Prisoner’s Dilemma, and realize that few in the cartel will meet the agreed reduction. Now Maximization of Profits provides additional inputs to the game theory, and realization there are additional Profits to be made, by increasing Output to maintain the current Production level and Price. Eleven out of the 23 Producers are expected to maintain their Production schedules without change, and 7 can be expected to actually increase their Production schedules. None of the rest of the 23 can be expected to meet the quoted reduction. Welcome to real life cartel theory.
Brad DeLong tries to support both Minimum Wage and the EITC (Earned Income Tax Credit), stating both forms are relatively necessary for the reduction of Poverty. He points out, though, that the Minimum Wage is practically self-enforcing, while the EITC is very difficult to administer and doubtful in reaching the right people (recipients who manage to satisfy eligibility requirements likely do not list their professional help as Income). Brad states the IRS is better served by enforcing tax law on rich people–I agree wholeheartedly. The EITCs suffer a much greater defect as well: the inability to effectively track Income through multiple Jobs, a necessary criterion for any program designed to aid low-Income laborers. Minimum Wage increases pressure Incentive Wage increases throughout the lower Income structure, and thereby aid far more Workers than simply Those working for Minimum Wage. EITCs were a fancy academic idea sounding great on Paper, but unenforceable in practice. lgl
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