The Truth about Savings and Consumption

We regularly hear how important consumer spending is for the economy. The story goes like this: the more consumers spend, the more money circulates in the economy, which stimulates healthy job growth and profits. If people could be encouraged to go out and spend a little more of their paycheck, we’d all be better off.

Keynes went as far as to say that individuals saving their money may actually be hurting the economy, as saving reduces “aggregate demand” and therefore company revenue. Sounds troubling, doesn’t it?

Fear not. You aren’t actually hurting anyone by filling up your piggy bank. In fact, savings help the economy, as they make lending to productive entrepreneurs possible. The consumption that we enjoy is only made possible by prior production.

And that production is only made possible by savings.

For more resources about the economics of saving versus consuming, visit http://www.fee.org/the_freeman/detail/savings-fuel-for-an-economic-engine#axzz2SdcFUHti

Buying a Ferrari isn’t progress. Buying a better Ferrari is progress. 

anarchei:

The Truth About The Minimum Wage

FEE:

People don’t like to think that anyone’s labor is worth less than the minimum wage. Someone might end up flipping burgers for $5.00 an hour. You might think the minimum wage is a way of paying some sort of dignity premium—hence language like “living wage.” People with such good intentions look at the direct beneficiaries of these policies, say, burger flippers now making $7.50 an hour. They pat themselves on the back. But they rarely count the invisible costs: willing human beings who never get hired in the first place.

“But $5.00 an hour is not enough to live on!,” they’ll say. For whom? A teenager living at home with his parents? An elderly person who wants simply to stay active? A single mom with three kids? A single woman sharing an apartment with 2 roommates? Of course, not all of these people could live off of $5.00 an hour. But some of them could given the opportunity. Concerns about those who couldn’t don’t justify minimum wages even if we ignored the invisible costs of the policy, which include reduced margins to businesses that might otherwise grow (and hire more people).

In other words, if you take off the bottom two rungs of the income ladder, many will never climb it. That’s the effect of the minimum wage. The more cynical side of me says that’s how many politicians and the overpaid teamsters want it.

See Also

• Philosophy
• Economics

What people forget is that there are plenty of people who work that don’t need to support anyone, not even themselves. Many of these people work because sitting at home is boring or because they would like some extra spending money or because they want to help make a difference in someone’s life and don’t necessarily need the money. 

A lot of these people live in a household that has other income earners that completely support and help sustain their lifestyles regardless if they work and contribute or not. 

The minimum wage already requires us to pay them a minimum wage determined by the price floor, increasing the minimum wage for others would also require us to pay these people more. 

The minimum wage isn’t for someone who is trying to support a family, it’s this grand illusion that politicians and union reps have constructed so that they can claim that they are doing something to help the people. 

I’ll save my stark commentary about unskilled low wage workers and starting a family for another time. 

(via anarcho-alowisney)