Wednesday, January 11, 2006

Wages

Why aren't more economists entrepreneurs. Probably because we can't spell entrepreneur...

But really, it's a fair question. Perhaps entrepreneurs already get intuitively what economists sit around and philosophize on. Or, perhaps it is beacuse once we're all done drawing graphs we're too tired to do anything else. There's not much of a market for graphs.

I was reading an assignment for my Macro course by Bob McTeer from the Dallas Fed about wages. The assertion was made that all workers are paid an amount equal to their contributions. This is due to a tendency for the market to return to equilibrium (a purely theoretic state of existence according to Austrian Economists). I drew the following conclusions:
Workers are paid a wage equivalent to their contributions. True! However, most employees are giving away for free something they should be charging for. More should be in business for themselves but are unwilling to take the risk. Individual loss in wages (profits) is rent charged by the employer for managing various risks, such as taxes and insurance (variable costs) and leases and infrastructure (fixed costs). Unwillingness to manage one's own risk is akin to irresponsibility and paganism. Most low wage earners that don't seek more gainful employment don't do so because they believe it is the responsibility of the government to protect this aspect of their lives. So they don't own up to the responsibility.

Economists: I have a plan for us. We should read quacks. For every 4 scholarly books we read, we ought also to read 1 book by a quack. Start with Robert Kiosaki, the Rich Dad, Poor Dad guy, who has millions of followers getting rich. Then try Richard Maybury (whom this blog is inspired by) and his Uncle Eric books. Subscribe to his newsletter! It's full of wonderfully wacky, and quite relevant stuff.

Part of the disconnect between economists and normal people is that we get so distracted by the theory that we forget it is about money and the primary goal is for everyone to get as filthy rich as possible. By creating new wealth we will help alieviate suffering in this world.
JN

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