The minimum wage.

                 Most proposals for changing the minimum wage entail either marginally raising or lowering it.  Some want it as high as fifteen dollars an hour while other want it as low as seven dollars and twenty five cents an hour.  When discussing it, very few challenge the very nature of it's existence.  People who want to raise the minimum wage are often portrayed as champions of the poor, while those who wish to lower are said to be helping the rich.  If one ignored the political rhetoric and focused objectively on the effects of a minimum wage, they would most likely come to realize that it is neither good for businesses nor workers.  As counter-intuitive as this sounds, the minimum wage that would help the poor the most would be zero dollars.  Unfortunately, the way to reduce poverty doesn't lie in the minimum wage and any attempt to use it to fight poverty will have very negative results.
                 It is a common belief that the minimum wage is necessary because workers are exploited by greedy businessmen who only care about themselves and will pay their workers as little as possible.  This core assumption of  those who support the minimum wage is totally false.  To believe this one has to fail to understand how prices are determined.  Suppose there are two businessmen, A and B.  Each is a greedy sociopath who only cares about themselves and would do whatever it takes to rake in another million dollars.  In the absence of the minimum wage, one might expect them to each pay their workers one cent an hour.  However, if person A payed their workers one cent an hour person B would pay their workers two cents an hour, and take all of the people who had previously worked for person A.  Thus person A would have to pay their workers three cents an hour.  The cycle continues until the workers are being payed the amount that they are really worth.
                Now one might expect that person A and person B would simply agree to both pay their workers one cent an hour.  While this might be true in this simplified example, in the real world their are hundreds of businesses competing for workers.  Even if conspiring would be possible with two people, it would surely be impossible with hundreds of people, each of whom generate more profit individually by paying workers the correct amount.  Thus, the greed of businessmen will benefit workers.  All through the power of the free market.
               Now let's consider this situation with a minimum wage.  Suppose there are one hundred workers each being payed ten dollars an hour.  In the absence of the minimum wage they will all work and be payed the amount that they are worth. However, if the government feels they are being paid too little, and sets the minimum wage at fifteen dollars an hour, they will all be unable to maintain their job.  If they are being payed ten dollars then they are worth ten dollars to the employer.  The employer will not hire them for fifteen dollars, because they are worth less than fifteen dollars.
                 If one wanted to give stimulate the wages of the poor, the best way to do it would be to simply give money to people who work and have incomes below a certain point.  As peoples incomes would grow, their benefits would decrease.  This would increase the wages of the poor, without distorting the free market.  Under the minimum wage an employer has to pay for the subsidy to the workers.  On the other hand, if the working poor were simply given money, the employer would not bear the cost of the increase in wages.  When the employer has to pay the subsidy to the wages of the worker, they are far less likely to hire the workers.  After all, people buy less of things that cost more.
               If the goal of the minimum wage is to supplement wages of the working poor, their are far better and more efficient ways of doing that.  However, the minimum wage simply feels moral.  It like many other programs ends up harming the people whom it is intended to help.  The minimum wage must be examined rationally for one to get a true understanding of it's effects.  It's effects are quite negative.  Despite this people still support this because they feel, irrationally that it is right or that it helps the poor.  Sadly good intentions make bad policy and harm many people. 

Social Security

           Amongst the vast plethora of government programs, the largest and most expensive program is social security.  It has been in place for a very long time, without enormous debate about whether it need exist in the first place.  Virtually nobody on the left and very few on the right want it's full privatization.  However privatization allows for both freedom of one to allocate their money and a greater economy.

           Social Security is a combination of three independent schemes.  First a distributive scheme, second the government running a public retirement plan, and third making investment in retirement mandatory.  None of these programs seem justifiable individually, much less collectively.

           The redistribution that social security  provides seems nearly impossible to justify.  It is systematically neither progressive nor regressive.  The redistribution is done randomly and has little to do with income.  The payroll tax which funds it is regressive for people only pay a tax on some of the money they get.  Also, people who have higher incomes generally tend to live longer.  People who live longer will receive more money from social security.  If one is in favor of the other two aspects of social security they need not be in favor of the erratic methods by which it is funded.

            The second part of social security is the government running a retirement plan.  The problem with this as with so many other government programs is it is quite inefficient.  As of 2017 in about the first half of the year, the interest rate of the S&P 500 has been 9.7 percent.  The average over the past 90 years is 9.8 percent.  Now adjusted for inflation this is closer to seven percent.  However the effective interest rate from social security was 3.2 percent in 2016, 3.4 percent in 2015, and 3.6 percent in 2014.  It's interest rate hasn't been anywhere near the interest rate of private retirement plans.  One would have to go back to the year 2000 to find a year when the social security interest rate was about equal to the average interest rate in the private market.  Government invariably ends up doing things badly when it tries to do them.  With the market interest rate so much higher then the interest rate provided by social security it seems inefficient for the government to have a retirement plan in the first place.  If one wanted investment to be mandatory but wanted to give people the choice of how they invest there is very basic way to implement this.  Simply give everyone a voucher which they can only spend on retirement.  This would allow the high interest rate of the free market but make sure everyone put money into retirement.  I am against this but it would be a way to partially privatize social security.  While I favor complete privatization it seems logical to only pseudo privatize it.
               The third and final aspect of social security is forcing everyone to invest in retirement.  One major problem with this is it forces everyone to invest the same amount of money.  Suppose someone who was fifty was diagnosed with cancer and was expected to live about five more years.   It would not make sense for that person to invest in retirement, for they will not be able to reap the rewards.  This particular instance is not very common.  What is much more common however are people who aren't very healthy and probably won't live very long.  If someone is expected to live to 70 it does not make sense for them to invest as much money in retirement as someone who is expected to live to 90.  Even if everyone were completely rational people would invest wildly different amounts in retirement.
                 I also have an objection to social security on principle.  The idea behind forcing everyone to invest a certain amount of money in retirement seems totally antagonistic to liberty.  If people are free they may do incredibly stupid things.  They may do things that harm them in the long run.  However, I believe that a person does not have the right to restrict the freedom of another unless the other is using their freedom to cause harm.  If a person invests in social security the only person who is harmed is the individual who did not invest.  For the same reason that I believe people should be allowed to smoke marijuana, I believe that people should be allowed not to invest in retirement.  Restricting the freedom of an individual for their own self interest is arrogant and noneffective. The person best equipped to spend the money of an individual is the individual them self.  Freedom should not be compromised by the whims of a social engineer.

              

https://www.cnbc.com/2017/06/18/the-sp-500-has-already-met-its-average-return-for-a-full-year.html

http://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp

https://www.ssa.gov/oact/progdata/intRates.html

My General Philosophy

Greetings and salutations.  My blog is about economic and political thought.  Due to my lack of omniscience I will sometimes change my mind.  However, I most likely will never change the core of my philosophy.
I am a fundamentally socially liberal person.  I believe people should be free to marry whomever they want or to do drugs.  While I do not approve of drug usage I believe that people should be free to do what they want to do as long as it doesn’t infringe upon the rights of others.  Liberty is enormously important and it’s sacrifice should be done only in the most dire situations.
On economic matters I am libertarian.  I am against the minimum wage, rent control, and tariffs.  It is my  belief that social security should be privatized and people should get healthcare “vouchers” which they can spend on any health insurance plan.  The free market is the most efficient system of producing and distributing goods.  Any attempt to stray from free enterprise has resulted in a weaker economy and has made people worse off.  Welfare programs such as Aid to Families with Dependent children or food stamps has made the people worse off whom it was intended to help and has caused vastly distorted incentives.
         I will justify my claims and attempt to use logic and reason to make my arguments.  Enjoy the blog.

My New Blog

Greetings.  I'm going to be posting on politics, economics, and other things of interest.  I hope you enjoy my blog.