(Mish Talk) – “Free Money” experiments are underway in several places: Canada, California, and Finland.
“Living wage” advocates are elated.
Ongoing Free Money Experiments
The alleged studies are all fatally flawed because they do not scale. It’s one thing to give a few hundred people or a few thousand people free money, but it’s another thing to scale the experiment across an entire nation.
Huffington Post author Zi-Ann Lum proclaims A Canadian City Once Eliminated Poverty And Nearly Everyone Forgot About It.
The problem with superficial analysis by Lum and others is they only focus on half the equation. Yes, citizens of Dauphin benefited, but it was at the direct expense of everyone in all of Manitoba that had to contribute “free money” to the residents of Dauphin.
Were the same scheme available to everyone in Manitoba, the money would have had to come from all of Canada.
And for all Canadians, the money would have had to come from Martians.
Nonetheless, in spite of such obvious flaws, economic illiterates have latched on to the free money scheme.
Living Wage Idiocy
Reader Gary asks: Why does everyone deserve a “living wage”?
His own answer, widely believed, but easily rebutted follows: “Because without it the nation is weakened. Our nation is getting weaker. Automation will kill labor, but it will also kill capitalism. Without labor, you have no customers.”
1. If you pay people to do nothing, there will be masses of people doing nothing and getting paid for doing nothing.
2. The globe is already overpopulated with people doing nothing productive.
3. The necessary “living wage” would increase monthly, along with the number of people getting free benefits. Imagine giving everyone in Africa, India, and China a “living wage”.
4. People from Africa, the Mideast and anywhere else not getting a “living wage” will all want to migrate to places paying a living wage for doing nothing. Look no further than Syrian refugees all wanting to go to Germany and Sweden because those nations offered the most free benefits.
5. Any living wage experiment purported to have worked, didn’t. The experiments were flawed because they did not scale and will never scale.
The idea that the government needs to redistribute money to make things affordable is ridiculous in both theory and practice.
Thousands of affordable home programs, tuition programs, and Obamacare prove the ridiculousness of the concept.
If the Fed and governments would just get the hell out of the way, prices would naturally find the right level.
But no! The Fed does not want prices to go down, and when prices go up, economic illiterates scream for “living wages”, attacking a symptom of the problem.
The problem is not insufficient wages. The problem is fractional reserve lending coupled with a Fed hell-bent on creating inflation in a technologically deflationary world.
Misguided minimum wages hikes, public unions, and political corruption all exacerbate the problem.
Challenge to Keynesians
My Challenge to Keynesians “Prove Rising Prices Provide an Overall Economic Benefit” remains unaddressed.
The BIS did a study and found routine deflation was not any problem at all. For a discussion of the BIS study, please see Historical Perspective on CPI Deflations: How Damaging are They?
Anyone wishing to rebut my challenge to Keynesians also needs to address the detailed BIS study.
Meanwhile, economically illiterate writers bemoan deflation, as do most economists, central banks, and academia. The final irony in this ridiculous mix is central bank policies stimulate the massive wealth inequality all of the above rail about.
It would behoove “living wage” advocates to consider the possibility the real problem is central bank sponsored inflation, not a failure of government to provide a “living wage” to those doing nothing.