Libertarians often claim that unemployment rates will be much lower in a libertarian society. According to a friend, the perfect unemployment rate is 2%. He argued with the so-called Phillips curve. If it's lower, the employees will have power to push their wages up, thereby creating inflation. This will again make it harder to export goods abroad.
Is he right?
GilesStratton:Tell your friend that contrary to what he learned in his principles level macro class, nobody really takes the phillips curve seriously anymore.
I have to disagree with this Giles. The expectations augmented Phillips curve is a staple of modern theory. It's the pre 80's curve that has been rejected.
consequentialist.wordpress.com
Jake McCloskey:I have to disagree with this Giles. The expectations augmented Phillips curve is a staple of modern theory. It's the pre 80's curve that has been rejected.
Right, but the expectations augmented Phillips curve is neither here nor there with regards to the initial post. It's fairly well established the Phillips picked the information to fit the theory as opposed to vice versa.
"You don't need a weatherman to know which way the wind blows"
Bob Dylan
Fair enough Giles
The real problem is State restriction of the market. It's hard for displaced workers to form new businesses.
If I'm unemployed, I can't cook and sell food out of my home to earn extra money. That's illegal due to regulation of the food industry. I need a State-approved kitchen and a huge capital investment, in order to get permission from the State to sell food.
If I own a car, I can't work part-time driving a taxi for extra money. You need a State license to drive a taxi. In NYC, the supply of taxi medallion licenses is restricted by the State.
Nearly every industry is heavily regulated. It's hard for someone to enter with a part-time investment.
If it's hard for people to start new businesses, then that leads to higher unemployment.
I have my own blog at FSK's Guide to Reality. Let me know if you like it.
Numbers, numbers, numbers!
;-)
There is always something that I can do for you,and there is always something that you can do for me.
More people in such a circle - more work for everyone!
Where is unemployment...?
In other words - there is no other unemployment,than that *created by government restrictions*.
alimentarius: ivanfoofoo:pushing wages up doesn't create inflation, I've heard that a minimum wage will do so. Is that wrong?
ivanfoofoo:pushing wages up doesn't create inflation,
I've heard that a minimum wage will do so. Is that wrong?
How? Let's say a minimum wage actually does what the people who push it believe: i.e., actually increase wages without disemploying anyone. So people get more money. But where does the money come from? It's got to come from somewhere: if it's not coming fresh off the printing press -- i.e., if the money supply isn't being increased ("printing press" not to be taken literally; it isn't necessary to produce more physical banknotes to increase the money supply) -- then it must be taken away from somewhere else. And if it's taken away from somewhere, some prices must fall: whatever "inflation" occurs in certain consumer goods due to the minimum wage workers being paid more must be offset by "deflation" somewhere else. But "inflation" (in the mainstream view) is defined as an overall increase in prices, not a rise in some prices and a fall in others! So there's no inflation! Except, of course, that they actually measure inflation by choosing some particular set of prices and ignoring everything else, so it's perfectly possible that the prices they look at can increase! (Of course they can and do change the set of prices, and/or weightings, to get whatever result they want, too)
The only way to get "inflation" in the way they define it, other than as a measurement artifact, is for the money supply to increase (i.e., "inflation" in the Austrian sense).
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