assignment 3/4

Se-ries1

0

5

10

15

20

25

30

35

Column1Series 2Series 3

Assignment 3/4

Chapter 10: “Controlled Labor Markets”

Write a 350-word essay: President Obama is proposing to raise the federal minimum wage from $7.25/hour to $10.10/hour. Based on your reading of Dr. Sowell, what will happen if it’s enacted? Be specific and use his thinking… not your opinions!

AND

Sez who?The need for attribution!

Two tough questions we must ask

1. Is capitalism Christian?

Is capitalism Christian?

Remember consequences, not intent: rent control was supposed to help the poor



The first thing communists and fascists do is eliminate or marginalize religion: Stalin, Lenin, Castro, Mao, Hitler



The first thing communists and fascists do is eliminate or marginalize religion: Stalin, Lenin, Castro, Mao, Hitler

In socialism, the state becomes the religion

Is capitalism Christian? Remember consequences, not intent: rent

control was supposed to help the poor The first thing communists and fascists do is

eliminate or marginalize religion: Stalin, Lenin, Castro, Mao, Hitler

In socialism, the state becomes the religion Nowhere in the Bible do I see where it is the

duty of the state to care for the poor… it is the individual and especially the church


Christians are the most generous people in the world… and most are capitalists



Christ’s teachings about caring for the poor are all about a changed heart… not about your money being taken by the state and given to others



Christ’s teaching about caring for the poor are all about a changed heart… not about your money being taken by the state and given to others

The Bible gives us no explicit economic system, but it seems clear to me capitalism is much more in line with Christianity than socialism or socialism-lite


In no other economic system have so many people been lifted out of poverty into prosperity than capitalism

Karl Marx

“Religion is the sigh of the oppressed creature, the heart of a heartless world, just as it is the spirit of a spiritless situation. It is the opium of the people. The abolition of religion as the illusory happiness of the people is required for their real happiness.”

2. If I become rich, do I make others poor?

Zero-sum thinking

Refers to the idea that there is a winner and loser in all transactions, kind of like a tennis or boxing match

Zero-sum thinking


So if Bill Gates is rich, he must have taken that wealth from others

Zero-sum thinking


So if Bill Gates is rich, he must have taken that wealth from others

The economic pie is only so big, so government has to make sure we all get the same size slice… “fairness” and “social justice”

Zero-sum thinking

Does not recognize how much wealth Bill has created for others… e.g., the increased productivity from using Microsoft Office

Zero-sum thinking

Does not recognize how much wealth Bill has created for others… e.g., the increased productivity from using Microsoft Office

Free-market thinkers want the pie to grow bigger… rising tide floating all boats

Zero-sum thinking

Seen today in discussions of how rich are getting a larger share of the economy, and how CEO pay is now 354 times that of the average worker, versus 50 times in the 1960s

Zero-sum thinking

Seen today in discussions of how rich are getting a larger share of the economy, and how CEO pay is now 354 times that of the average worker, versus 50 times in the 1960s

Ignores the fact that the average worker is living much better than ever

Zero-sum thinking Seen today in discussions of how rich are

getting a larger share of the economy, and how CEO pay is now 354 times that of the average worker, versus 50 times in the 1960s

Ignores the fact that the average worker is living much better than ever

Used to argue against free markets and international trade, and for minimum wages, price controls, “paycheck fairness” act

Zero-sum thinking

Liberal economists in general want to make the pie more equal through government interventions and redistribution of wealth

Zero-sum thinking

Liberal economists in general want to make the pie more equal through government interventions and redistribution of wealth

Free-market economists in general want the pie to keep growing through the free market and supply and demand

Zero-sum thinking

Liberal economists want equality of outcomes… i.e., everyone makes about the same through government redistribution

Zero-sum thinking

Liberal economists want equality of outcomes… i.e., everyone makes about the same through government redistribution

Free-market economists want equality of opportunity… everyone has an equal chance to succeed

National output

Fallacy of composition


The mistaken assumption that what applies to a part applies to the whole



In economics, we’re looking at the economy in total… not any given individual, company or industry



In economics, we’re looking at the economy in total… not any given individual, company or industry

We know that the economy is dynamic… some companies and industries must pass (typesetters, milkmen) so others can rise (app developers, organic bakers)


Most common when government intervenes to “save jobs” such as the taxpayer bail out of GM and Chrysler



Said to “save” 1 million jobs… at a cost of $80 billion of taxpayer money, and locked in GM and Chrysler’s pension obligations and high fixed costs



Said to “save” 1 million jobs… at a cost of $80 billion of taxpayer money, and locked in GM and Chrysler’s pension obligations and high fixed costs

More important: what has been the cost to the rest of the economy in lost jobs and opportunities?

“Figures often beguile me, particularly when I have the arranging of them myself; in which case the remark attributed to Disraeli would often apply with justice and force: ‘There are three kinds of lies: lies, darn* lies and statistics.’"*Teacher’s edit

Measuring National Output

Measuring National Output More common measure is GDP: gross

domestic product

Gross Domestic Product

The sum total of all goods and services produced within a nation’s borders including by foreign nationals during a year

Gross Domestic Product

The sum total of all goods and services produced within a nation’s borders including by foreign nationals during a year

GDP is the preferred measurement of contemporary economists, used by the U.S. since 1992

The two main components of GDP

The two main components of GDP Private consumption and public

sector spending


sector spending In 2013, U.S. GDP was $16.8 trillion

What’s a trillion look like?Here’s $10,000 in $100 bills

And here’s $1 millionYou’re rich!

Here’s $100 millionFits on a standard pallet

Here’s $1 billionPretty impressive!

And here’s $1 trillionAbout the recent annual deficit…


sector spending In 2013, U.S. GDP was $16.8 trillion Private consumption was $11.5

trillion

Private consumption 2013: $3.9 trillion for goods $424 billion on autos $884 billion on food and beverages $362 billion on clothes $409 billion on gasoline and fuel $286 billion on furnishings

Private consumption 2013: $7.6 trillion for services $2 trillion on housing and utilities $1.9 trillion on health care $427 billion on recreation services $736 billion on food service and

accommodations $848 billion on insurance and

financial services



trillion Private investment was $2.7 trillion

Private investment 2013

$457 billion on structures $664 billion on information

processing equipment and software $218 billion on transportation

equipment



trillion Private investment was $2.7 trillion Government spending was $3.1

trillion

Government spending 2013 $770 billion on national defense $475 billion on nondefense $1.9 trillion on state and local

government spending

Hey, wait a minute!

Hey, wait a minute!

Problem 1: The totals add up to $17.3 trillion, not $16.8 trillion

Hey, wait a minute!

Problem 1: The totals add up to $17.3 trillion, not $16.8 trillion

Problem 2: The federal budget alone was $3.5 trillion in fiscal 2012-2013 (October 2013-September 2013)

Problem 1: the case is solved We need to subtract the trade deficit

from GDP: in 2013, the deficit was $497 billion. We balance!

Problem 2

Most of government spending is “transfer” payments for Social Security, welfare, health care. Does not count as part of GDP because it’s taking from one part of the economy and giving to the other… it’s not productive because it doesn’t produce anything

Problem 2

Most of government spending is “transfer” payments for Social Security, welfare, health care. Does not count as part of GDP because it’s taking from one part of the economy and giving to the other… it’s not productive because it doesn’t produce anything

Key corollary: Government does not produce wealth; it consumes it

Common GDP Formula

GDP = C + I + G + (X − M)C is consumptionI is gross investmentG is government spendingX is exportsM is imports

Top 5 GDP Nations

Top 5 GDP Nations, Per Capita

Assignment 3/25

Chapter 16: “Money and the banking system”

Assignment 3/25

Chapter 16: “Money and the banking system”

Then write a 350-word essay: Based on Dr. S’s teachings, why is a strong banking system essential to a prosperous society?

assignment 3/4

Documents

hitleris capitalism

churchis capitalism

pooris capitalism christian

generous people

hitlerin socialism

thing communists

boxing matchso

abolition of religion