I am going to take a side venture for a moment into what might be called real economics. In the 1930s, there were some new economic ideas introduced. “Normative economics” and “positive economics” are the names of these ideas. Normative could be said to deal in “what the writer thinks ‘should be.'” Positive economics deals in facts. Although normative would be desirable from the point of view of the author, it cannot gain a great deal of credibility unless it deals in fact rather than ‘maybe’ or opinion.
In the field of physics, from the point of view of the cat in the box, Schroedinger’s cat should come out alive every time. From the point of view of the box, it has no opinion. From the point of view of the observer it is pure gamble. There is a chance that the cat will be there and there is a chance that you will get a dead cat.
For the purpose of this ramble, I am going to endeavor to stay entirely in positive economics. I can assure you that normative can be pretty frothy. Economics is not a game of opinions, unless you over-complicate it in order to keep people from understanding.
As a country you have raw materials, you have a willingness to work and exchange among your population and you have the bright ideas of men. This is actual wealth. If men observe that others are getting along somehow by not working, they can be convinced that they should stop exchanging their goods and services and get in on this “making money by not exerting any effort or exchange” game.
It doesn’t work but it can happen if people get the idea that 10% of nothing is something.
Things that add to the cost of produced goods and services that add to the value of the goods or services are valuable. Things that add to the cost of goods and services that do not add value are inflationary. This is fact. A small business owner understands this as a fact. After the amount of profit is reduced to a point it is no longer worth his time to go to work.
I am not anti-union any more than I am anti-tax because there are many positive things that were done by exerting of pressure by a group of laborers to better their working conditions. Happy workers have more leisure time which can be profitably invested in petting cats and other important activities. Like thinking up easier ways to produce things. As an example a man named Owens, a worker in the glass blowing trade invented the automatic bottle making machine. This occurred around 1907. Have you seen an advertisement in the help wanted section for a glass blower lately?
The government should have some method of financing its operation and providing certain services to its people. Someone needs to be available to defend the border. I’ll pay to be able to sleep with both eyes shut and without fear of being invaded.
Thus to have a society there should be taxes and some labor union activity. On the other hand as the unions have grown they add cost, by way of dues to the items produced. They actually act to reduce the spendable wages of the worker by requiring union dues. By engaging in lobbying the government they can enforce payment to projects that the union rank and file itself may find objectionable. For so long as the members have enough to buy what they want and pursue their own desires and dreams, the union will be tolerated. Even if it pushes some projects that the majority does not want. The costs are passed on to consumers. The rank and file paying out a portion of their pay never sees the money that they are not taking in.
A government can also add in costs that are not wanted by similar means. And a government can be overturned by ignoring its constituents.
In 1953 the average weekly working wage was $63.76, in 2003 the average weekly working wage for the same production worker was $505.13. Now, as of 2011 the average weekly wage is $788.56.
Hamburger has risen in price between 1984 and 2011 from $1.29 – $2.77. In 1953 it was about .30 cents a pound.
Prices and the wages seem to have risen about equally. If you paid no union dues in 1953 but $200 a month in 2011, you would have a little less money to buy hamburger than you did 60 years ago.
There is an old economic rule known as Says Law: “When the producer has put the finishing hand to his product, he is most anxious to sell it immediately, lest its value should diminish in his hands. Nor is he less anxious to dispose of the money he may get for it; for the value of money is also perishable. But the only way of getting rid of money is in the purchase of some product or other. Thus the mere circumstance of creation of one product immediately opens a vent for other products.”
This is a simple idea. A person who produces a product wants and needs to exchange it for money and will then exchange the money for some other product.
If you grew up on Donald Duck cartoons you might have the idea that there are top hat wearing ducks somewhere who have huge vaults of cash and coin and who bathe in bathtubs full of cash and other silliness. This cartoon is probably imprinted in the memories of lots of children of the last 60 years. Scrooge McDuck was introduced in 1947 and became popular.
But according to Says Law, it is a false concept. I suspect that Say was right and the introduction of other new economic ideas took the subject far from its roots. The derivation of the word economics comes the from Greek word for ‘running a household.’ I have personally always believed in taking the big picture and reducing it to a single financial unit. A household or a hot dog stand can stand as an understandable example for those who want to grasp the whole subject.