Let them eat cake: a 2008 tale

Back in the late 18th Century in a once great power with overseas wars, economic might, and the defeat of their main rival for world influence taken down by a small nation there were a class of people who took from the treasury to enrich themselves. In this time, the poor were told that they should be happy being told how to behave by those in power, since the rich and powerful enjoyed the blessings of the almighty, or else they would also be wretched and poor like the factory workers. Even the elite of this time made patronizing remarks about the need for the poor to change their habits and sacrifice since times were so bad, such as telling starving Parisians to eat cake(a more expensive good) since they could not afford cheaper sustaining bread.

Fast forward to 2008 in the United States and see that history once again repeats itself. The most militarily and economically powerful nation is engulfed in two overseas wars, their main rival for world influence(the Soviet Union) was defeated just about a decade ago by upstarts in a tiny piece of land, and leeches in suits are draining the treasury to line their own pockets. In this modern time the churches of materialism(also known as megachurches) tell the faithful that wealth is a sign of being blessed and that those who are poor are not blessed. Now the aristocrats changed their titles from Marquess to Senior Executive, but the same dynamic holds true. Let me past this quote from a spokesmouth for welfare queen AIG to bring home the point:

Nicholas Ashooh, AIG's senior vice president of communication, acknowledges that the perception of his company has taken a hit.

"Oh, it's terrible, it's terrible," he told CBS News.

Ashooh said the retention program does not include anyone in the firm's financial products business, the tiny arm of the company that torpedoed AIG with its high-risk, bad loans.

"We know that this is not a popular thing. A lot of people just won't accept it, but if you think about it, it's a calculated decision to keep businesses intact so that we can sell them and pay back taxpayers what we owe them," he said.

The translation: we screwed up the world's financial system and are rewarding top executives but you should trust us with money that you worked hard for since we know what is best. If you let us take $115 billion and dole it to top management, who will probably leave anyhow, it's in your best interest. Oh, while you are at it, pay some interest for our largesse (bonds are not free money after all) and enjoy it. There's a Santayana saying that keeps getting stuck in my head right now.

Scandal:Government Oppression Keeps Down Entrepreneurial Governor

Today the forces of oppression and inefficiency have decided to interfere with the free transaction of goods and services by the enterprising salesman Rod Blagojevich. In his quest to attain the American dream, this young Serbian took advantage of the opportunities to finally take a piece of his pie by simply helping his fellow Americans advance in these most interesting times, who can fault that?

Instead of being greeted for his creative attempt at job creation, the government does that which it always does to free enterprise:stifling innovation. Instead of being allowed to trade his ground breaking method of transferring a seat between two consenting parties, the Forces of Business Inhibition arrested the great enterprising young man. They even claim that such enterprise is "a new low!" A new low! If only Milton Friedman himself in his diminutive glory could see the breathless efficiency with which the Serbian savant reduced barriers to entry in the US Senate market and created additional consumer surplus with each new commission seat appointed to his neighbors. The shame that Uncle Milty had to depart us before he could view in all of the glory as another immigrant's son displayed the heights achievable with the American Dream!

However, free marketers everywhere have stated hopefully that Mr. Blagojavich will not be touched by too many "invisible hands" in the state prison. Blagojevich states his innocence, claiming to be following in the footsteps of economic visionaries such as "Creative bond marketer Michael Milken, energy guru Kenneth Lay, and veteran stock valuator Scott Waksal."

Given the depth of knowledge that the governor has in the complicated world of political office efficiency, shouldn't he be admired for his prowess rather than pilloried?

Another free marketeer tucks tail and hides

Today it is with great joy that I announce the latest intellectual surrender by a free marketeer to the seductive power of government money. Ben Stein, apparently on a break from equating evolution with Nazism, has written a column about the need for a bailout. Try not to laugh as you read statements such a:s"

Amazingly, we can have whole fleets of C-130's fly to remote areas of Iraq and Afghanistan with pallets of hundred dollar bills piled from floor to ceiling. Then we can pass them out to warlords who make tea for our soldiers one hour and blow their guts out the next. We can send CIA operatives into Somalia and give millions, maybe hundreds of millions, to warlords to fight other killers.".

Hmm Mr. Stein, maybe you should have thought about that before groveling to Bush during his reelection? Of course this is the same guy who said that "Everything will be fine, just get back to work" in September. He also said that the economy is basically in fine shape in late October when the market melted down. It is always nice to see an ideologue forced to accept reality, though I am sure the second stocks have an uptick he will be back on the free markets, no regulation bandwagon.

PS. This is the same guy at an interview who stated that "science leads to killing."

Chicago:A Lesson in Why The Free Market is Not so Free

Over this weekend some union employees in a Chicago decided to stage a sit in at their factory after they were laid off and not given their severance or unused vacation. These workers were abruptly laid off and since the former company went into bankruptcy, the assets were handled by Bank of America. Bank of America decided that it had no obligation to pay the workers the debts their former company owed and gave a giant F@#$ you to the workers. Isn't it so great that labor and management can negotiate in the free exchange of labor for employment?

Oh wait, what I am seeing more and more frequently is a system of labor laws which lack any enforcement. As a result, workers are being denied their final earnings, being made to do thing outside of their contracts because they will be fired, and made to work above and beyond what they signed up for because they can be tossed on the swages, which are negative. In other words, as the worker produces more units, they are paid treets at any time. It is a sign of how naive and/or stupid the randoids/Milton Friedman followers are when they claim that labor can really equally enter negotiations with management on equal terms. If that were the case, then real wages would rise, especially given the continual rise in productivity. From that linked report from the Bureau of Labor Statistics shows that the change in output in all sectors of the economy is greater than the change in real hourlyless in this glorious economy. Here's a hint to why people are not buying anything, they are getting a pay cut every year they are getting no increase in wage to match inflation, and a decade plus of this will catch up in a comsumption driven economy.

Today's Economics Lesson: Why Oil Prices Are Dropping

Today comes news that oil prices are approaching $40/Bl and the US lost a half million jobs last month. This kind of negative news pushes the demand for energy down as people without work cut back on spending since they have no money coming in, which means supply is greater than demand. The price individuals are willing to pay for a good is below the market equilibrium at the previous price, so the result is underconsumption. If people are homeless long enough, the income change will cause the whole demand curve to shift down, which lowers the price for the good supplied.

In other words, people without the money for gas to drive will not drive. The only good news from this economic downturn is that many a petrodictator is going to be dropping a brick if prices get much lower. Their lavish spending while the population starves will catch up quickly.

Laid Off

Well, I just got laid off along with about 500 other people. I guess I can pursue my next career as a stand up economist.

Morality in Economics?

A read asked why I do not address any morality in discussing economic issues and the answer is simple, from a purely competitive standpoint there is no efficiency other than what clears the market. In other words, matching a buyer with a seller is the only right thing in the world and preventing equilibrium is the only wrong thing.

This is the view of the Austrian school and the Milton Friedman cult of personality. It believes that markets never fail and government stops free enterprise. They believe that everything is a matter of allowing the market to work and if you are not successful it is because you are lazy since everyone has the ability to trade their goods and services freely with anyone else in a free market. With their belief that the absence of government promotes freedom and prosperity, shouldn't they point to Somalia as the perfection of their ideology? It has had no government for nearly two decades and no barriers to entering the market. It should be a paradise!

This view is intellectually and morally shallow because it does not deal with the impact of externalities since the market will "take care of it." As anyone who has not had their head in the sand the past two years can attest, businesses do not self regulate. Companies in bankruptcy are flying executives to resorts while laying off workers and the balance sheet crumbles. Also, pollution is another area that market does not fix because the cost of pollution is borne by third parties more than by the producer. Without the right to not be sickened by pollution, individuals have no power to stop it. This is the purpose of government, to deal with the externalities that the market cannot address because the efficient level is not the societally efficient level.