Polemic Prof. S. Plaut has asked the CEU Weekly to consider publishing his economics 101 for the Occupiers. Although we do not share his view point, we are committed to voice different perspectives. Besides publishing it in the hard copy, we have upload it here in case somebody wants to comment it. We encourage debate that fights the ideas but respect the person. ENJOY!
An Economic Primer for the “Occupiers”
By Prof. Steven Plaut (economics)
What with the “Occupy Wall Street” crowd besieging the United States, while their kith and kin all around the world are bellyaching against “capitalism” and against America, we thought we would provide a very brief refresher course for the “Occupiers” about the basic facts of life and the fundamentals of economic reality. Here goes:
- Nothing can be redistributed until it is produced.
- Things do not get produced all by themselves and do not produce themselves. Someone has to produce them.
- People do not produce things without incentives and rewards. They do not work, except for a handful of workaholics, unless they get rewarded for doing so.
- There is no evidence that redistribution of income to make it more "equitable" promotes economic growth and there is lots of empirical evidence that it deters growth.
- In general, growth is associated with increasing inequality, mainly because growth generates profits and raises income for some groups more than others. Suppressing the consequent growing inequality is the same thing as suppressing growth.
- Over time, the main factor that diminished the dimensions of poverty and its harshness in the West has been economic growth and not welfare programs.
- The main factor that produced dramatically greater safety in the workplace and dramatically lower rates of work-related hazards was worker mobility and competition among employers to attract employees and not governmental regulation of safety and hazards.
- Capitalist countries have the cleanest environments on the planet. Ex-Soviet countries have the most polluted and the most severely compromised environments.
- No society has ever eliminated poverty. Lots of societies have increased its dimensions and severity.
- No one really knows how to create income equality. Marginal increases in equality also carry marginal costs to society in terms of other things and are not necessarily justified on a cost-benefits basis.
- There are serious doubts as to whether income equality is desirable. Full income equality also means everyone equally has a pathetically low standard of impoverished living. The cave men had income equality.
- When income becomes too equitable, there are no incentives to work hard and take risks and innovate.
- "Democratizing" the economy just means imposing political agendas on economic players, and it deters growth. It turns profit into a political reward rather than a reward for efficiency and innovation and hard work and productivity. "Democratization" of the economy is anti-democratic.
- The claim that equality is necessary to foster growth is about as persuasive as a claim by a vegetarian that vegetarianism is necessary to foster growth. In other words, someone making such a claim really just thinks that equality is nice and is trying to market it under a false packaging as an instrument that produces growth.
- Keynes did not talk about "equality" at all except in passing. Do a google of his name with “income inequality” if you do not believe me.
- Keynes was not a closet socialist. He was concerned with other things.
- Scandinavian “socialism” is really just capitalism with high taxes used to finance a high level of welfare state services. Scandinavian countries have low levels of nationalization of capital and also of regulation of business.
- Scandinavian “socialism” has not eliminated poverty in Scandinavian countries. The poverty rates among non-Scandinavians living in those countries are rather high. Scandinavians themselves have low poverty rates regardless of the economic system under which they live or the country in which they live because they work hard and are educated.
- "Soak the rich" policies generate far, far less tax revenue than the “Occupiers” and their kin think. That is partly because there are far fewer “soakable” rich people than the Occupiers think, and they are already taxed so highly that raising their taxes further could actually produce LESS tax revenue, because of “Laffer Curve” style incentive effects, especially after the first year of soakingly high taxation.
- Those who whine that it is impossible to find a job in America will have to explain how it is that every single illegal immigrant in the US who does not even speak English manages to find a job.
- Americans who live below the poverty line live in larger homes, are more likely to own their home, are more likely to own cars and durable goods, and eat more protein than do Europeans and Japanese who are NOT below their own poverty lines. Many low-income Americans have Big Screen TV’s, DVD’s and even Jacuzzis.
- Low-income Americans weigh more than other Americans, have much higher obesity rates, and are hardly “hungry.” Over-eating is one of the most severe health problems in the United States.
- A large portion of “capital” in capitalist countries is owned by workers through pension programs and similar financial institutions.
- The “homeless” are by and large people with psychiatric problems and/or substance abuse problems and/or teenage runaways, and so American “homelessness” has little to do with income distribution. Even if income distribution were perfectly equitable, the homelessness rate would not change much, unless laws were changed making their institutionalization easier.
- The minimum wage creates unemployment and destroys jobs.
- Someone incapable of providing a labor service worth more than $5 an hour to employers will be out of a job if the law requires that he or she be paid $9 an hour.
- Low income people are better off when they are employed at $5 an hour than when they are unemployed while wages for the employed are $9 an hour.
- Unions create unemployment and reduce the number of people in unionized professions who are employed.
- Rent controls create housing shortages, raise the effective cost of housing for low-income people, produce massive quality deterioration in the housing stock, and may even contribute at the margin to homelessness because of the shortage in housing they create.
- People in Cuba earn $20 a month on average. Before communism Cuba was the richest country in Latin America. Now it is the poorest.
- Poor people in the US do not steal fishing boats to escape to Cuba. South Koreans do not steal boats to escape to North Korea.
- Wealthy people overseas with health problems come to the United States to get care. They do not go to Cuba.
- People all over the globe seeking high-quality university education come to the United States to get it. They do not go to North Korea or Cuba.
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