Tuesday, February 25, 2014

One Part, Now For The Rest

I both agree and disagree with some of the points of this article, but having just finished it I would like to make the point that “the masses” or those who are ignorant will often turn to “magic” as the cause of their problems. This is because they lack the basic understanding of the system and therefor try to ration out, often in error, what is happening.
As all good economics students know an increase in technology results in an shift in Supply. New technology lowers production costs and supply increases-shifts to the right and up. In this regard to the middle class vanishing, I will again reference, the milk delivery man, the come to your home TV repair man, technology evolved to the point where these positions were no longer demanded in society. Quantity Demand decreases, as a result price (wages) drop, and presto no more middle class.
The problem with this theory is that it is only looking at a fraction of the problem, yes we have identified one variable, but we do not yet know how important it is in effecting the rest of the system. The article also mentioned trade policies, but did not touch on what was to be done with them. Though I suspect that more tariffs will be put in place to “secure American Jobs” (a great example of masses “magic” fix)
Lastly, the real culprit (or is it) Policy. American’s in general live quite “high off the hog”, I can not help but wonder how much of the “lagging” behind those who have made it is a simple choice between consumption now and consumption later. I would throw out the theory that those who have chosen satisfy their demands now rather than invest in capital for the future compose a majority of these people.
The solution is not to take a dollar out of the rich man’s pocket and give it to the poor man, this does not result in economic growth, but a redistribution of the pie, nothing is gained. Rather the “middle, and lower” class should be making the effort to make new pie, and therefore increasing the pie overall. Motivation is something a great deal of Americans lack, and I make the Disney comparison to Donald Duck, a lazy laid back no work down on his luck character, vs. his uncle, Uncle Scrooge who started as a nobody Scottish popper and through hard work and intelligence, luck, and a great deal of persistence becomes the richest duck in the world. These are the traits that most American’s lack, there are success storys out there, and almost all of them have the common note of perseverance and motivation.

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