PeakTrader.com

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PeakTrader:

We need to make it easier, e.g. rolling back regulations, paperwork, and fees, for entrepreneurs to start-up businesses and succeed.

Unfortunately, there are too many destructive ideas, e.g. Obamacare, raising taxes & spending, getting rid of the Fed, legalizing drugs, banning the minimum wage, etc..

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Morganovich, I’ve shown you in the context of other economic models, besides the basic supply-demand model you keep citing, and don’t fully understand, why you’ve been wrong, including other partial equilibrium models, input-output models, optimization models, contemporaneous models, etc., along with the orthodox literature, which includes empirical models.

A simple example is a $1 increase in the minimum wage may reduce other production costs, e.g. turnover, by $0.50 and raise productivity $0.50. So, production costs are unchanged, while income rises $1. I gave you many other examples. However, you’ve shown, they were too difficult for you to comprehend.

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The higher minimum wage reduces turnover costs and attracts more productive workers.

Not every business owner can afford higher wages. I stated before (everything in economics fits together):

A rise in the minimum wage can increase real economic growth.

The higher wage attracts better workers, with higher reservation wages, to increase productivity.

Minimum wage workers have high marginal propensities to consume. So, a higher minimum wage increases consumption.

Only a portion of the higher minimum wage may be passed along in higher prices, because portions will be absorbed by “excess” wages of other workers and “excess” profits.

Weak or poorly managed firms will lose business or fail. However, stronger or better managed firms will gain their business, and also gain from the increased demand.

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An analogy to the last paragraph is not all baseball owners can afford to pay for talent. So, some teams fail.

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And, a weak firm is more likely to exploit its workers, because it has to.

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Morganovich, your statement isn’t supported by anything. It’s just an anti-government rant.

The U.S. has a structural problem, that has worsened for decades. The real minimum wage has declined. Americans increasingly refuse to work for minimum wage or even for less than $10 an hour.

Of course, there’s abundant labor from immigration, who are people willing to work for much less than they’re worth. However, because of low income, there’s low consumption, which is 70% of GDP.

And, there are massive idle resources, including capital (you may want to see the “Paradox of Thrift”)

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Ron, like I stated above, if you were a baseball owner, you couldn’t afford to pay for talent.

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You don’t realize when you disagree with me, you disagree with mainstream economics, i.e. the Scientific Method of NeoClassical Economics, along with the labor economics literature.

Also, you don’t realize Morganovich’s and your statements can’t be formed into an equation, because the variables would contradict each other rather than fit in n-dimensions.

Here’s a source of studies:

http://www.raisetheminimumwage.com/pages/job-loss

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People like Ron and Morganovich have simple and yet wrong answers for everything. They don’t realize an economy is dynamic.

Over the past few decades, the real minimum wage declined 25%, while real income doubled. Income = consumption + saving, and there’s an inverse relationship between profit and compensation.

As a percent of GDP, profit has soared, while compensation has declined, and the disparity between high income and low income workers has increased.

So, the trend has been top workers receive increasingly more for their work, while bottom workers receive increasingly less for their work.

Consequently, saving rises and consumption falls, resulting in a saving glut, while low income workers borrow, and build-up debt, to keep consuming.

Moreover, saving is stored in low risk investments, e.g. money market funds, Treasury bonds, gold, etc., rather than employed in high risk investments, like business start-ups.

The poverty level in 2011 for a family of three is $18,679. Someone making the minimum wage, at $7.25 an hour, working 40 hours a week for 52 weeks earns $15,080.

And, when the real minimum wage began falling below the poverty level, around 1980, the teen labor force participation rate also began falling.

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http://www.aei-ideas.org/2013/08/robert-samuelson-we-need-more-entrepreneurs-like-texas-oilman-and-father-of-fracking-george-p-mitchell/#comments

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PeakTrader:

A bubble is needed in a depression.

So, we can thank the Fed for creating a “wealth effect,” in the stock market, bond market, gold, etc..

Also, we can thank the Fed for lower interest rates, including mortgage rates.

When economic growth accelerates, to close the output gap, a wealth effect and low interest rates won’t be necessary.

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