Monday, June 25, 2012

"Externalities do not imply that a government can do better."

Part of a bigger essay on fairness and markets - worth the read (Bleedingheartlibertarians): 

Externalities do not imply that a government can do better.  Publicity does better than inspectors in restraining the alleged desire of businesspeople to poison their customers.  Efficiency is not the chief merit of a market economy: innovation is.  Rules arose in merchant courts and Quaker fixed prices long before governments started enforcing them.

Monday, June 18, 2012

The world needs more Wal-mart

Cowen: If you look at wheat and rice, there have been price spikes over the last five years and they’ve made food a lot harder for poor people to afford. The so-called “Green Revolution” has somewhat slowed down. This is an unreported story. Crop yields are stagnant. It isn’t a problem we can solve overnight but it’s really one of the biggest problems in the world. It hardly gets any publicity. But for poor people in India, the Middle East and parts of Africa, it really matters. 
Some of the problems are we don’t have enough trade. It could be either legal barriers or just costly to transport or trade things. If there could be a shortage of rice in one place, it actually not that easy to ship a lot of rice in there because of bad roads and so on. 
Arabic Knowledge@Wharton: So if countries worked on improving the transportation infrastructure, that would lower food prices in some parts of the world? 
Cowen: Exactly, that would do a lot to feed people. Again, it sounds much more mundane but it’s more important than what people in the food world usually talk about. 
Arabic Knowledge@Wharton: So when companies like Wal-Mart bring their logistics ability to Africa, it actually could be a good thing for the poor people of Africa? 
Cowen: It’s exactly what we need more of. Yes.

Tuesday, June 12, 2012

"Spain is not Uganda."

Heh.  "Discuss" (BBC).

Sunday, June 03, 2012

On minimum wage and the "race to the bottom"

Minimum wages make for great politics, bad economics. Despite hurting most those they are supposed to help, it seems unlikely that we will see their repeal anytime soon.  Andrew Coyne from the National Post:

Much popular thinking about the economy inclines to the former view. We grow richer, in effect, by overpaying each other, and overcharging each other in our turn. To leave the setting of wages to the market would, on this view, lead inevitably to a “race to the bottom.” Only by pegging wages above-market levels, whether directly in law, or by means of union representation, is there any hope even of maintaining such progress as has been achieved, let alone making further gains. 
But if the pop economics story were true, it would be hard to explain why anyone made more than the minimum wage — anyone, that is, who did not work in a union shop. In fact only about 5% of workers in Canada make the minimum, while just 16% of the private sector workforce now belongs to a union. 
Yet, far from stagnating, as the Star story claims, living standards in Canada have in fact been rising steadily for most of the last two decades: from 1993 to 2008, median family income grew by 21.5% after inflation. Incomes fell, it is true, in the previous decade, but for an obvious reason: the two bone-crunching recessions that began and ended it. When large numbers of people are earning no income — because they are unemployed — the median tends to lag a bit.
And similar stats are mirrored in the US according to John Stossel:
But without a minimum wage or union protection, wouldn't employers abuse workers? In a real free market, no, they can't. Because workers have choices. Employers have an incentive to maintain a good relationship with employees — one that keeps them reasonably loyal — because workers can quit and go work for a rival. 
If globalism leads to a "race to the bottom," why do 95 percent of American workers make more than minimum wage? It's not because companies are generous, but because competition forces them to offer higher wages to attract good workers. Companies may move jobs overseas to escape high U.S. wages (or U.S. taxes and regulations), but they clearly prefer to keep jobs here, close to their headquarters, suppliers and customers.