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Watch and enjoy as I skewer Boston University Economics Professor(seriously?) Laurence Kotlikoff.
Mike -- Great rant."How many ears must one man have before he can hear people cry?" --B. Dylan
Mike, I think you come across much better in these interviews than in your recent individual videos. Perhaps because you're talking to someone so it's more natural for you?Also, looking back at some of your earlier videos I noticed that you seemed a lot more natural and laid back in those, whereas in the new ones you sometimes seem a bit 'forced', if you know what I mean.My advice, for what it's worth, would be stick with the new format but go back to the more relaxed, natural approach of your earlier videos.My 2 centsCheers.
While watching this cringe inducing video, I was reminded of the following quote from Murray Rothbard:"It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance."With the insulting of Kotlikoff and the hysterical and erroneous run on sentences, I cannot help but conclude Norman is one of those people.Norman commits many economic fallacies in this video. I will go through them one by one:1. Confuses wealth with riches. It is NOT true that lower aggregate wage rates in the US are "bad" for wage earners or the US economy in general. Sufficiently lower wage rates would cure the US recession. With lower wage rates, business costs will be lower. Norman completely ignores this fact. With lower business costs, output prices for goods and services will fall virtually dollar for dollar. In addition, lower wage rates will almost certainly result in an increase in aggregate nominal demand for labor, as many investments postponed until that time, awaiting costs to fall, can finally be made. Alongside of this, the demand for capital goods will almost certainly rise as well, and THAT will nominally boost profitability throughout the economy. So not only will lower wage rates cure unemployment, it will increase output, increase standard of living of wage earners, and restore economic profitability throughout the economy. Our real terms of trade will increase. So much for the hysterical "We have to suppress our wages!"
2. Fallaciously insinuates that the only reason foreigners sell goods and services to the US is to hoard US currency, or to buy US bonds. He completely overlooks the fact that with more dollars in their possession, foreigners can buy more goods and services from the US. So when we import goods from their countries, they can import goods from our country. The fact that the dollars going to China ends up being used to buy US debt and to hoard US currency is a result of the Chinese government's laws. Yes, to the extent that the Chinese people are forced to remit all their US dollars to the PBOC, we Americans are getting a free ride on their tail. But in the long run this is hurting the US economy, for the same way giving a child an allowance to spend money into their adulthood is bad for the child. It gives incentives for us to not invest and produce more products for our own consumption in this country. By living off the Chinese in this way, we are dooming ourselves to a future where China finally stops sending their goods to us for dollars, and they no longer buy government debt and no longer hoard US dollars, but rather they use them to outbid Americans for goods and services and real wealth ends up being shipped to China's benefit.
3. Fallaciously asserts that a reduction in wage rates that is founded upon the principle of unchanged nominal demand for labor and increased supply of labor (as workers go back into the workforce at lower wage rates), will somehow "reduce the value of US currency", and that US dollars will be worth more if the state prints and spends more. This is the most ignorant claim out of all claims made in the video. Printing and spending more money will REDUCE the value of the currency, it won't increase it. This chart shows the US dollar index vis a vis other currencies. Our currency is now worth less than it has ever been. It is worth less than even the highly price inflationary and high unemployment 1970s era. Inflation reduces the value of currency. It doesn't increase it.
People don't have enough money to spend at the moment so the solution is to reduce people's incomes?
4. Non-economics related (well, nothing Norman said in the video is economics related), but what kind of a sociopath gleefully calls for the reintroduction of sedition laws in the US, and not only that, but to be imposed on anyone who doesn't join in the ignorant calls for more inflation? Has Norman not heard of the 1st amendment? He sounds like a raging communist who wants people to be put into prison for not clapping hard enough at Stalin's speeches.
y:People don't have enough money to spend at the moment so the solution is to reduce people's incomes?It's not that people "don't have enough money to spend"!! It's that the price of goods that exist are too high relative to their nominal incomes, and the prices of labor are too high relative to the nominal demand for labor. People can buy more stuff if goods prices fall, and more people can go back to work if wage rates fall.Lower prices for goods and for labor will INCREASE their standard of living.
Major_Freedom, Are you advocating expansionary austerity?
y:Tell me y, if people allegedly "don't have enough money to spend at the moment", despite the money supply being the highest it has ever been in US history, then you are insinuating that a final state of rest is possible in terms of people's desire to earn more money. But there is no such end state. There is no magical end point at which people will say "You know what, I am finally satisfied. I don't want any more money."Nobody says this, because what people want is not more money per se, they want more purchasing power, that is, they want more money while assuming prices will not rise by the same amount, because productivity growth exceeds or at least matches the rate of increase in money and spending.If I offered you the choice of working double the hours to earn double nominal income, but only if prices for everything you buy also double, then would you take that offer? Only a fool would. No, you want more money yes, but only if it represents more purchasing power. The ONLY source of purchasing power is goods and services, i.e. production.
Ryan Harris:Major_Freedom, Are you advocating expansionary austerity?No, I am correcting the errors committed in the video.
"People can buy more stuff if goods prices fall"Yes but you're saying that people's wages have to fall so that then the prices of goods can fall.If people's wages fall they're not going to spend more. So businesses will see a reduction in demand. Why will they choose to invest or hire more workers when their sales are falling? Because they know that in the future people will have even lower incomes?Why wouldn't they just keep waiting until all prices hit rock bottom, and unemployment is through the roof? How do people keep up their debt repayments with falling wages?
"If I offered you the choice of working double the hours to earn double nominal income, but only if prices for everything you buy also double, then would you take that offer?"I think you might be getting things a bit mixed up here.If people work double the hours, presumably their output will also double (all else being equal). So the increase in supply (output)should equal the increase in demand (wages). As such prices should not change.If people were suddenly paid twice the amount they were previously being paid to work the same number of hours (and to create the same level of output) then yes, prices would presumably go up. But that's not the scenario you've described above.
I should add that if people doubled their output, yet saved their additional income, then (all else being equal) the price of goods should fall (because supply doubles whilst demand remains the same)... ?
y:"People can buy more stuff if goods prices fall"Yes but you're saying that people's wages have to fall so that then the prices of goods can fall.Who cares? They can buy more stuff! Their REAL standard of living increases.If people's wages fall they're not going to spend more. So businesses will see a reduction in demand.You're ignoring the argument I am making and you're introducing an assertion of your own that is false.It doesn't matter that wage rates fall. Prices are lower too. So real wages does not fall. If people spend less in nominal terms, it is accompanied by a reduction in selling prices. It would be like making half the wages you used to make, but the prices for the things you buy are halved as well. You're not worse off!Why will they choose to invest or hire more workers when their sales are falling?REAL output will increase because with lower wage rates, selling costs and prices are lower, and not only that, but there can be more employment as well due to postponed investments finally being made after awaiting a fall in costs. With more people working, and with greater output, it doesn't hurt that nominal spending is lower, it doesn't hurt that prices are lower, it doesn't hurt that there is less money "spending." Each dollar is WORTH MORE.Because they know that in the future people will have even lower incomes?If they know people will earn lower incomes in the future, then they can just lower prices in the present.Why wouldn't they just keep waiting until all prices hit rock bottom, and unemployment is through the roof?Prices falling does not mean unemployment rising. It's the exact opposite. With wage rates falling to the market clearing level, unemployment FALLS.How do people keep up their debt repayments with falling wages?How can people keep up their debt repayments with ZERO wages? If people are unemployed due to wage rates not falling to the market clearing level, then some wages is better than no wages.For those employed, they cut back on their lavish debt financed consumption lifestyle, and only consume what they can afford. Consumer debt is in part a function of inflation. When money printing is loose, there is a greater incentive to take on debt to finance one's consumption. So with less inflation, there is less incentive to take on consumer debt. Not only that, but with less inflation, there is less money available for consumer lending."If I offered you the choice of working double the hours to earn double nominal income, but only if prices for everything you buy also double, then would you take that offer?"I think you might be getting things a bit mixed up here.You didn't answer the question.If people work double the hours, presumably their output will also double (all else being equal).All else is not equal, because the Fed won't let prices fall in half. They'll print more money. So I repeat, If I offered you the choice of working double the hours to earn double nominal income, but only if prices for everything you buy also double, then would you take that offer?
The point of my question is to find out whether or not you know what actually increases people's standard of living.Hint: It's not more money supply and more money incomes.
"The point of my question is to find out whether or not you know what actually increases people's standard of living."Standard of living is defined economically as averagereal gross domestic product (GDP) per capita. Increases in standard of living result from Innovation. Innovation increases output and reduces labor unit input required to produce it. That is, innovation increases growth and productivity. Innovation is the result of public investment in education, R&D, and infra structure as a foundation, and private productive investment builds on that by seeding exploration of options.
Tom Hickey:"The point of my question is to find out whether or not you know what actually increases people's standard of living."Standard of living is defined economically as averagereal gross domestic product (GDP) per capita.Definitions are conventions, but I will agree with the definition you provided.Increases in standard of living result from Innovation. Innovation increases output and reduces labor unit input required to produce it.Innovation is the economic function of entrepreneurs who search out for profitable investment opportunities. If their innovations are valuable, then they will be duplicated (by anyone in a society without IP laws, by the innovator only in a society with IP laws).Innovation cannot increase output on its own indefinitely. At some point, more capital is required. That is, innovation increases growth and productivity.Innovation is the result of public investment in education, R&D, and infra structure as a foundation, and private productive investment builds on that by seeding exploration of options.False. Innovation is the result of private investment in new technology, R&D, and capital accumulation. Public spending feeds on that and uses up resources produced in the private sector.You have the causality reversed, because you are ignoring who depends on who when it comes to resources and technology, that is, you are ignoring the law of opportunity costs. States do not produce anything. They depend on the private sector for every resource they consume and every resource they redirect by virtue of their printing, borrowing, taxing, and spending.To the extent that throughout the state's activity, the market chooses to utilize some of the resulting technology, it doesn't mean the state is the driver of innovation. The market process is the driver of innovation, and the sunk costs of state activity sometimes results in useful technology for consumer use.Countries with more economic freedom have more innovation, and countries with less economic freedom have less innovation.
INSEAD's Global Innovation Index, ranking of countries (2012):1. Switzerland2. Sweden3. Singapore4. Finland5. United Kingdom6. Netherlands7. Denmark8. Hong Kong9. Ireland10. United StatesHeritage Foundation's Economic Freedom Index, ranking of countries (2012):1. Hong Kong2. Singapore3. Australia4. New Zealand5. Switzerland6. Canada7. Chile8. Mauritius9. Ireland10. United States
btw Hong Kong has a public health service and a public education system. It also has minimum wage laws and social security. The Hong Kong government owns the freehold on all the land, and charges rent to all private leaseholders.
Hong Kong also has a public mass transit (metro) system.Nearly half of the population of Hong Kong lives in public housing.http://en.wikipedia.org/wiki/Public_housing_in_Hong_Kong#cite_note-census_housing-0http://en.wikipedia.org/wiki/Government_rent_in_Hong_Kong#Land_Tenure_in_Hong_Kong
"Singapore has a highly developed capitalist mixed economy; the state owns stakes in firms that comprise perhaps 60% of the GDP through entities such as the sovereign wealth fund Temasek."http://en.wikipedia.org/wiki/Economy_of_SingaporeThe government of Singapore owns the freehold on over 80% of the land.85% of Singapore's population lives in public housing.Singapore has a public education system and a public health system.
Anonymous:Hong Kong's MTR is privately owned and operated. It is not "public."Hong Kong also did not have minimum wage until May 2011. All their growth and relatively low unemployment (notwithstanding the Asian currency crisis) occurred without a minimum wage. It was under 4% all throughout the 1980s and 1990s until the currency crisis, after which unemployment peaked at 8.5%, but then went back down to under 4% again, until the 2008 financial crisis when it rose again to 5.5%.It's not the case that half of Hong Kong's population lives in public housing. They live in taxpayer subsidized apartments, and if you've ever visited Hong Kong, the taxpayer subsidized apartments are very, very, very small and run down, and some even live out of cages. But they have been growing at a high rate. Far higher than what the US has been growing at lately. However I'm not sure how much of it is artificial growth brought about by credit expansion.
You're right, the MTR was privatized in 2000. before that it was "public", and it was built by the government.Hong Kong has a minimum wage now.About half of Hong Kong's population lives in public housing.Much of which was built by the Hong Kong Housing Authority, a government agency, and the Hong Kong Housing Society, a non-profit organisation funded by government loans and subsidies.The country at the top of the heritage foundation's economic freedom index is one in which the government owns the freehold on all of the land (and collects rent on it), and in which half of the population live in government-provided housing.
Anonymous:You're right, the MTR was privatized in 2000. before that it was "public", and it was built by the government.And it's been more efficient ever since.Hong Kong has a minimum wage now.Expect unemployment to cease falling, or at least as quickly as it otherwise would have, or even increase, depending on what the free market minimum wage really is but cannot be observed since it is now illegal. Or, expect enough people to violate the law and prevent appreciable unemployment to result.About half of Hong Kong's population lives in public housing.They live in taxpayer subsidized apartments, and if you've ever visited Hong Kong, the taxpayer subsidized apartments are very, very, very small and run down, and some even live out of cages. The country at the top of the heritage foundation's economic freedom index is one in which the government owns the freehold on all of the land (and collects rent on it)So does every other country in the world, save Dubai and other countries without land taxes (but they have other regulations that make it less free)and in which half of the population live in government-provided housing.Government subsidized housing.Hong Kong can afford to put half the population in subsidized housing because there is so much economic freedom there that the productivity of others can support it.You have to look at the whole. You can't just look at the public housing and freehold on land and ignore the myriad of freedoms that don't exist in the US. The freedom index is an INDEX. It takes into account ALL regulations and governmental activity.
By your own definition, the country at the top of the heritage foundation's economic freedom index is socialist, if not communist.The government owns the land and charges rent on the land.50% of the population lives in public housing, however you choose to describe it.Btw, not that I think Hong Kong is a good model.
By your own definition, the country at the top of the heritage foundation's economic freedom index is socialist, if not communist.They have socialist policies yes, but it would be dishonest to call Hong Kong socialist, as if they are in the same league as North Korea.You're cherry picking two government policies while ignoring the economic freedoms that make Hong Kong one of the most economically free countries in the world. You have to look at the whole, not just "They have government subsidized housing and therefore they are socialist!"You are taking a dump on the meaning of socialism. The government owns the land and charges rent on the land.50% of the population lives in public housing, however you choose to describe it.The government charges land taxes here in the US. I don't have any numbers for the US, but there are people living in government subsidized housing here too.But Hong Kong has economic freedoms we don't have, and you can understand this by researching it. Better yet, by visiting it. Do you know how easy it is to open up a store in HK? Compared to the US, it is easy as cake.
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