Archive | Economic Theory

McDonalds

$12/hour minimum wage?

Saving our economy is only a minimum wage hike away, according to James Galbraith. Galbraith is not the first to commit such a basic economic error, as we have pointed out. In Galbraith’s words: “Raise the U.S. minimum wage. By a lot — let’s say, to $12 an hour, from the current rate of $7.25.”…
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FinalPennies

Deflationphobia!

It seems hardly a day goes by when the financial press fails to warn us about the looming dangers of deflation, despite the fact that the last period of price deflation in the United States was during the mid-1800’s. In fact, the threat of deflation is extremely slight given Bernanke’s well-documented deflationphobia. This USA Today…
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End the Fed

MIT Economist, Former IMF Chief Engages Ron Paul on Banking and Makes an Interventionist Mistake

Ron Paul’s economic philosophy and book End the Fed got some crucial publicity and thoughtful debate on Saturday. Simon Johnson, MIT economist and former IMF chief-economist,  wrote in the New York Times economics blog that more people should take Dr. Paul seriously. Unfortunately he advises Dr. Paul promote some very anti-free market, and counter-productive measures.…
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Economy a little flat? Whip in some inflation!

Sometimes economists make analogies to make policies coherent. I find this by line particularly appetizing, imagining Bernanke as a soufflé chef trying to keep his light dessert fluffy. According to Menzie Chinn and Jeffry Frieden, the solution is just to whip in a little inflation to keep that soufflé/economy healthy. The basic idea they convey…
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Buy American

Buy American! Or Not.

We hear it all the time: “Buy American”. Indeed, presidential candidate Rick Santorum (who semi-won the Iowa caucuses last night) just received the endorsement of the Conservative Party USA because he apparently “understands that ‘Buy American’ is the key to reviving the US economy”. I am not going to guess as to Mr. Santorum’s motives…
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Monopoly Revisited

Monopoly Revisited

We’ve been having some profitable discussion on the threat of monopoly in a recent post.  In this post, I want to clarify a few things, and perhaps add some additional thoughts. We have established that is impossible to distinguish “competitive prices” from “monopoly prices” because we only observe the market price.  The “competitive price” is…
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