DougCardell.com

An Eclectic Economist Explains Evidentiary Economics

Economics based on evidence rather than ideology and ignorance.

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Dr. Doug Cardell - Economist

Welcome

Welcome! If you’re confused about economics, we feel your pain. Reading the news regarding the economy can seem like watching a tennis match between two perfectly matched opponents. The ball goes back and forth and back and forth and nothing ever gets resolved. This happens because the skilled players on both sides are basing their economic arguments and policy proposals on ideology and ignorance rather than following the evidence. This website will point out what the evidence indicates and set the record straight.

Brief Bio:

Dr. Doug Cardell is an economist and economic policy expert. He is a USAF veteran and has served as an aide to a Member of Congress, a corporate CEO, an award-winning educator, a consultant to the Arizona Department of Education in several capacities, and a Professor of Mathematics. His expertise includes economics, economic policy, mathematical modeling, and system dynamics modeling. He holds advanced degrees and certificates from the University of Arizona, the Massachusetts Institute of Technology, and the University of Phoenix, as well as a PhD in Economic Policy from Liberty University. His expertise in economics, both from a theoretical and practical standpoint, coupled with his expertise in mathematics and modeling, combined with his high success as an educator, make him uniquely qualified to explain economics and evaluate economic systems and ideas.

His articles, which you can access on the right side menu, tackle basic economic truth that is often ignored as well as current hot button issues. Every day we will feature one of these articles below. They all have a comments section and Dr. Cardell would love to read your thoughts about the articles.

Economic Myths #2

by Dr. Doug Cardell

This article is the second in the series debunking economic myths and misconceptions. The myth covered here appears in various forms, suggesting that the people would be much better off if the government set "fair prices." This misconception is rife with logical errors. It assumes that universally "fair prices" exist. It further assumes that setting prices at a "proper level" would be beneficial. Finally, it assumes that the government would be the best-qualified institution to set those prices. Let's address the latter first. It's easy to discuss government action, but it's much more difficult to discuss how government might perform that action. Should an act of Congress set prices, the President, the Secretary of Commerce, or a panel of "experts" chosen by some yet-to-be-determined process? Congress has an abysmal record in dealing with economic issues. One of Congress's primary responsibilities is to prepare a federal budget before April 15th each year. Congress has only completed this task four times in the past forty years. In that same period, Congress has put off the budget process with an extension of the current budget an average of 4.6 times per year. The most recent was the second year of G. W. Bush's first term in 2003. If Congress is incapable of producing a budget, how can one reasonably expect it would be able to agree on the pricing of thousands of consumer wages and prices? If we move on and examine the second premise, "setting proper prices" would be beneficial," it too fails. Setting "proper prices" attributes to those who would set the prices that there is some heretofore unknown method of establishing what a 'proper price" might be. Usually, those making this argument base the pricing of wages on what people need and the prices of goods on what people can afford to pay, but this is nonsense. If this were possible, the best thing to do would be to pay everyone a million dollars a year and make all goods free. Of course, where would the money come from to pay everyone a million dollars a year? Those promoting ideas like this expect the money to come from the government. Who will be willing to create and give all those goods away for free? Finally, we can address the central issue: whether universally 'fair prices' exist. They do not! Fair prices result from an implied negotiation between the buyer and the seller. The only 'fair' price for goods or labor is the price the buyer is willing to pay and the seller is willing to accept. Any exchange that takes place does so at a 'fair' price since the exchange would not have occurred if both parties did not agree, assuming neither party is subject to corruption, coercion, or force. This condition makes setting 'proper prices' by any entity, including the government, economic malfeasance. It takes the decision from the buyer and seller and sets a price by duress, coercion, or force. This price setting happens in nominally free economies. Sellers use it in the form of corrupt monopolistic price fixing. Unions use it to coerce employers to pay more than workers are willing to accept. The government uses force to enact wage and price controls by setting prices, such as setting a minimum wage. All of these actions contaminate the economy. They create imbalances that other parts of the system must correct. Price-fixing corrupt monopolies create black markets for goods with unfairly fixed prices. Unions coerce higher wages by strikes or threats of strikes, getting higher pay for current workers at the expense of fewer jobs in the future as the market adapts. The government's forcing employers to pay a minimum wage harms lower-skilled workers and drives outsourcing and automation. These imbalances occur because the free market is a fair market that will automatically and spontaneously correct imbalances to restore a fair market. Unfortunately, while the corrections result in a more equitable market, some individuals in the market suffer to compensate for the unfair actions that precipitated the correction. Consider the case of the International Ladies' Garment Workers' Union. After several successful union strikes, the rising labor costs led garment manufacturers to begin outsourcing to non-union states or foreign countries. The ILGWU responded with TV commercials from 1978-1981, produced by the Union with a jingle asking shoppers to look for the Union label. It didn't help; union employment continued to drop, and in 1982, the Union held the largest strike in New York City history. It led to far more outsourcing, and now, workers in non-union states or overseas make the vast majority of women's clothes for the US market. While the catchy jingle may have made consumers look for the label, it also led them to look at the price difference, and the consumers chose lower prices. In 1967, the ILGWU had 455,164 members, but the decade of outsourcing had begun, and a decade later, the membership had shrunk to 348,380. By 1992, the membership had fallen to 130,473, and the Union was no longer viable as an independent entity. In 1995, it merged with other unions to form the Union of Needletrades, Industrial and Textile Employees (UNITE), representing roughly 250,000 members. Unions fail to recognize that their results are temporary since the consumers always win in the long run. Union membership in the US is at an all-time low, with only 14.6 million members or 10.1% of the workforce. This decline is despite high-profile attempts to organize in several industries during the last couple of years. More than half of the current union membership are government employees who don't have to worry about those pesky consumers. Any entity, be it monopolies, unions, or the government, that attempts to set prices always generates unintended consequences, creating market imbalances that do far more harm than good. Economic myths and misconceptions, like the attempt to fix prices, always lead to disaster and never succeed in their intended purpose.

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