Economics

Problem of low wages not easily solved

It seems like an easy fix for social injustice: pass a law requiring employers to pay workers more than they would otherwise. Magically, everyone has more wealth. It would be nice if it were so easy and simple. Looking at only the immediate effects and listening to the rhetoric of some politicians and editorial writers, it would seem that a higher minimum wage is good. But considering all effects of a higher minimum wage reveals a different situation. As Milton Friedman writes in Capitalism and Freedom: Minimum wage laws are about as clear a case as one can find of…
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Remarks to Wichita City Council Regarding the AirTran Subsidy on July 11, 2006

Mr. Mayor, Members of the City Council: You may recall that I have spoken to this body in years past expressing my opposition to the AirTran subsidy. At that time we were told that the subsidy was intended to be a short-tem measure. Today, four years after the start of the subsidy, with state funding planned for the next five years, it looks as though it is a permanent fixture. Supporters of the subsidy have made a variety of claims in its support: that the subsidy and the accompanying Fair Fares program are responsible for $4.8 billion in economic impact,…
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The AirTran subsidy and its unseen effects

Writing from Natchez, Mississippi In a June 16, 2006 column, Wichita Eagle editorial writer Rhonda Holman again congratulates local and state government for its success in renewing the AirTran subsidy, and for getting the entire state of Kansas to help for it. We should take a moment to understand, however, that while the allure of the subsidy is undeniable, it may eventually extract a high price on Wichita. Currently, the legacy airlines provide service to Wichita and other small markets partly because they feel a duty to provide comprehensive, nationwide service. But that may be changing. In an article titled…
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As expected, price controls harm Wichita travelers

Writing from Tallahassee, Florida As reported in the Wichita Business Journal on May 12, 2005: "The average number of daily departures dropped to 45 in March 2006 from 54 in March 2005." The effect of the AirTran subsidy is to reduce the price of airfare to and from Wichita. That is its stated goal. If the subsidy did not work to reduce prices, we would be wasting our money. The fact is that the subsidy does work to reduce airfares to and from Wichita. It also does what any economist could predict: it reduces the supply of air transport to…
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The World Is Flat: A Brief History of the Twenty-first Century

The World Is Flat: A Brief History of the Twenty-first Century Thomas L. Friedman Farrar, Straus and Giroux, 2005 This interesting book explains in detail what many people already know: that advances in technology -- and in politics to some degree -- have made the world a smaller place. Not only have manufacturing jobs been moved overseas, but white-collar jobs such as accountant, computer programmer, radiologist, and many others can be done from anywhere in the world. Even a McDonald's restaurant is not immune. At a McDonald's drive-through in Cape Girardeau, Missouri, the person you speak to when ordering is…
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Economics In One Lesson, 50th Anniversary Edition

Economics In One Lesson, 50th Anniversary Edition Henry Hazlitt Laissez Faire Books, 1996 This book, first published in 1946, explains common fallacies (a false or mistaken idea) that are particularly common in the field of economics and public policy. At the very start of the book Mr. Hazlitt explains: Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousandfold by a factor that is insignificant in, say, physics, mathematics or medicine -- the special…
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The wonderful and frightening uncertainty of competition

Writing from Miami, Florida In a recent column by John Stossel (Competition Works) we find this paragraph: Take education. Bureaucrats like to say, you will go to this school, because we said so, and you will be taught according to this program, because we said so and we know best. Those of us with confidence in markets think you could do better deciding for yourself. Neither the bureaucrats nor the freedom lovers can judge what's in your interest better than you can. One big difference is, we know what we don't know, while they think they know everything. Competition. A…
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How a good column on the bad lottery fell apart

Writing from Miami, Florida A recent column in The Wichita Eagle by Randy Scholfield starts out fine, but falls apart near the end. ("Is the lottery the best bet for workers?" February 24, 2006, available at http://www.kansas.com/mld/kansas/news/columnists/randy_scholfield/13945602.htm.) Mr. Scholfield tells us how the lottery is not a very good bet. He references a survey that tells us how about half of us believe we have a better chance of obtaining a retirement nest egg through winning the lottery rather than by saving and investing. He then tells us that the large majority of those playing the lottery are poor and…
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The Undercover Economist

The Undercover Economist (Exposing Why the Rich Are Rich, The Poor Are Poor -- And Why You Can Never Buy a Decent Used Car) Tim Harford Oxford University Press: 2006 This is an enjoyable book that explains the basics of how economics works, which is to say, how the world works. Mr. Harford doesn't go into any technical detail at all, so there are no charts and graphs to decipher (although a very few are used for illustration), and there are no mathematical formulas. Mr. Harford seems to believe more than I do that government may need to step in…
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AirTran subsidy is harmful

(This is a longer version of my opinion piece that appeared in The Wichita Eagle last week.) From the beginning, we in the Wichita area have been told each year that the AirTran subsidy was intended as a temporary measure, that soon AirTran would be able to stand on its own, and there will be no need to continue the subsidy. Mayor Mayans said as much last year, and so did City Manager Kolb this year. But State Senator Carolyn McGinn, R-Sedgwick, on a recent television program, may have made a revealing slip when she referred to the AirTran subsidy…
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