Election 2016

Economic Myths of the Presidential Candidates

Politicians are mythmakers.

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Hillary Clinton: "Of course we want to raise the minimum wage!"

Donald Trump: If we trade with China, "they suck us dry … take everything. We get nothing!"

Bernie Sanders: "Ordinary Americans are working longer hours for lower wages."

But it's not true! Politicians are so ignorant about economics.

On his blog, Cafe Hayek, George Mason University professor Donald Boudreaux says his main job is showing students that much of what they believe about economics is wrong. I wish he taught presidential candidates.

Sen. Sanders simply gets facts wrong. Today Americans work fewer hours—down from about 2,000 hours per year to 1,800 over the past 60 years—and earn more. It's true that the rich got even richer, but the poor and middle class have done better, too, with about 40 percent higher salaries for the middle class and 48 percent more for the poor over the past 35 years. Politicians lie.

Donald Trump doesn't understand trade. Even if China "dumps" goods on America, we don't "get nothing"—we get the goods. As Trevor Woolley posted on my Facebook page, "The fact that the free market is based on consensual transaction means that no trade can decrease anyone's wellbeing."

Right. Since trade is voluntary, no trade happens unless both sides think they will gain. Trade may eliminate jobs in some industries, but it creates jobs elsewhere, more jobs, and creates wealth for the vast majority.

Helping some American companies by restricting foreign imports, as Donald Trump vows to do, sounds nice, but you can't restrict goods available to American consumers without reducing competition. Protected from competition, companies get lazier, less productive. They innovate less. Prices rise.

Hillary Clinton's minimum wage will help some workers, but overall, it should be obvious it's a job kille. If a minimum really could increase wages without harm, why are politicians so cheap? Let's have a $1,000 minimum wage! But it's just basic economics: If you increase the price of something, people buy less of it. That applies to workers hired, not just goods.

More myths:

  • Prices and wages are simply "set" by businesses.
  • The rich get richer at the expense of the poor.
  • Price increases after natural disasters are caused by "greed" and should be stopped by laws against "gouging."
  • Rent control makes housing affordable.
  • Business taxes are paid by business.
  • Supporters of free markets are "pro-business" and (hence) "anti-consumer."

These are simple notions about economics into which our brains lazily fall. But none is true.
For example, supporters of free markets (like me) don't necessarily support business. I won 19 Emmy awards criticizing businesses. Corporations can be enemies of free markets because they don't want competition. They routinely lobby politicians to squelch it.

Boudreaux says his students arrive on the first day of class thinking businesses just "set" prices and wages. But businesses can't do that. Companies lose customers if they price goods higher than competitors do.

Wages can't be set at will either. Sure, what boss wouldn't like to pay a workforce one dollar per year? But other companies need laborers too, and those that underpay lose good workers. So the bidding process continues endlessly—it's why the median household income in the U.S. is more than $50,000 a year. That wouldn't happen if bosses could just wake up and decide, "Let's pay workers less!"

The credit for good wages doesn't go to labor unions or politicians' passing a minimum wage, though they sure hog the credit. The credit goes to market competition and a growing economy. After all, 95 percent of workers earn more than minimum wage, and most jobs aren't unionized.

Politicians can't see the wonders that the market provides, but they somehow see everything government does as a blessing—taxes that cut into people's pay and regulations that make it more expensive to produce. They don't see that their well-intended "pro-consumer" rules raise prices and reduce choice.

I wish more Americans learned basic economics from economists like Boudreaux—or from me! At StosselintheClassroom.org, I offer teachers free videos that illustrate economic principles and debunk myths like the ones listed above.

Politicians, on the other hand, are lousy teachers.

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  1. Corporations ARE often enemies of free markets along with their partners corrupt politicians. Look at Clinton’s donor lists, those corporations aren’t supporting her because she’s standing up for the middle class. They’re supporting her because she, Willie and their spawn are for sale. They’re buying power over their competition.

    1. They support her because she will potentially have lots of power. Reduce the amount of power the government has and you reduce their potential for corruption.

      1. No! No! No! The obvious answer to corrupt and overreaching government is MOAR corrupt and overreaching government! Why do you hate the poor?

        /progderp

    2. So obviously the government needs more power so it can control the corporations that control it. If that doesn’t work, and that power ends up being wielded in favor of the corporations that control the government instead of being used to control the corporations that control the government, then obviously the government needs more power to control the corporations that control it. If that doesn’t work…

      1. Or just nationalize them. Look what wonders that did for Venezuela’s oil industry.

        1. when has venezuela ever done anything right? we’d have a smart, selfless american in charge

    3. One contributing factor to Ben Franklin’s wealth was that he held the printing contract for the Government.

      Halliburton clearly feed from the government trough. And Harry Truman was call the Senator from “Pendergast.” The rich get more rich by having rich folks in all levels of government give them money.

      There is an easy way to solve this problem, it is call transparency.

      During the early years of the Bush Admin, Chaney refused to be transparent. Chris Christie with Bridgegate refuses to be transparent.

      Another example is Net Neutrality. I want transparency. I don’t care if my ISP is slows down a specific content provider (like netflix) for any reason. They know their business model better than me. I don’t care as long as they tell me they are slowing it down. If I don’t know they are slowing it down, I can spend hours trying to figure out why that specific content provider is slow. I might think it is my computer or tv. They just need to be transparent.

      It would seem to me that as a Libertarian, I only want one regulation, as much transparency as possible in my marketplace and in my politicians.

  2. On his blog, Cafe Hayek, George Mason University professor Donald Boudreaux says his main job is showing students that much of what they believe about economics is wrong. I wish he taught presidential candidates.

    I don’t know if teaching economics to politicians will help. That seems to assume that they’re simply uneducated or ignorant, but I suspect they know that they’re spouting bullshit, and they’re a bunch of lying mendacious fucksticks who will say literally anything that they think will help them get elected.

    1. Of course, some of them are lying mendacious fucksticks AND ignorant. The two aren’t mutually exclusive.

    2. “The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”

      ? Thomas Sowell

      1. There is one particular talent that makes for a good politician, and Slick Willie is a good example, it is the ability to home in on the one thing that people most want to hear. Trump is doing that now, Bernie is doing that now, Clinton is trying and failing at it but people still support her anyway. I digress

        Anyway, if the crowd wants to hear that the physical realities of economics can be successfully manipulated by well meaning governments, that’s what the politician says. (S)he repeats this frequently to the point that (s)he becomes their own citation for the validity of the argument. That is politics. For reference, take a look at the one in five college women will be raped number. It was always a bullshit number not reflective of an actual condition, yet, Obama says it in public, now instead of citing the studies that say that HE is cited as a valued reference. Trusted leader speak, so must be true, have something to do with where choo-choo go, Mongo just pawn in big game of life.

        1. Democracy is a way for people who are unable to obtain something via honest trade to obtain it by force of government. As a libertarian I find that reality to be abhorrent, but most people see it as a feature.

          1. The amusing part, as a libertarian, is that the progressives refer to use of government’s force to attain wealth, “capitalism.” Failing to grasp the irony of course.

            1. All progressives understand is force. Everything is force. You need to eat so you go get a job. That means your employer forced you to work for them and you were forced to buy food. You need a car to get to work and back. That means your employer forced you to buy a car. All they know is force. Concepts like liberty and mutually beneficial trade simply to not compute because there is no force involved.

              1. Well said and thank you. I have been trying to frame that exact thought into a coherent statement for some time.

          2. The only “people” to benefit from democracy, (a much over valued mechanism,) are the politicians, who can kick the can down the road as long as they want, and when they cannot do it any longer, then they are “voted” out of office by a a parallel crew, who do exactly the same thing, following the exact same policy, with laws drafted by the exact same Washington wonks, who only know one way to “do” things: tax and spend. The advantage for the voters is nowt. The change in the wonks’ work is nowt. The advantage for the politicos is that they get away without being tarred and feathered, or, more appropriately, strung up on a lamp post.

            It’s called “progress.”

        2. science is so awesome though. there’s no way we couldnt give everyone free everything forever if we wanted to bad enough. it’s those damn selfish republicans

  3. Politicians are mythmakers.

    That’s not how you spell liars.

  4. I admire his attempt, but trying to teach simple math, logic, and economics to those who were raised by government schools is a hard row to hoe.

  5. I like how Stossel breaks it down Barney style. His delivery would be great for children’s television. Fox should have a children’s channel. Sgt Freedom protecting the country from Muslims at 8. Econ with Mr Stossel at 8:30.

    1. Can Sgt. Freedom have an incompetent fop of an officer who’s a know it all ?

  6. Yes, because Stossel is such an expert on myths. In an article entitled “The global warming myth?” he had some interesting thoughts:

    “It’s presumptuous to think humans’ impact matters so much in comparison to the frightening geologic history of the earth. And who is to say that last year’s temperature is the perfect optimum? Warmer may be better!”

    “The fundamentalist doom mongers also ignore scientists who say the effects of global warming may be benign. Harvard astrophysicist Sallie Baliunas said added CO2 in the atmosphere may actually benefit the world because more CO2 helps plants grow. Warmer winters would give farmers a longer harvest season, and might end the droughts in the Sahara Desert.”

    Then he went on to suggest climate science is all about money, sea levels might not rise, and hey, at the end of the day it all just might be beneficial.

    Here is the one myth we know for sure exists…Stossel knows what he is talking about.

    1. Link is at abcnews.go.com
      This site says link is too long to paste.

    2. By the way Stossel, 2015 is now in the record books as the hottest year on record, by far. Even Berkley Earth, who has been funded in the past by the Koch’s and who Judith Curry says she can trust, has said the same. And 2016 is expected to be even hotter.

      But it’s all good, right?

      1. How does Stossel’s suggestion that warmer may be better conflict in any way with the finding that 2015 was the warmest year on record?

        1. Well let me put it this way…since science is telling us that even a 2 degree rise in temperature is problematic, and right now we are headed to 4 maybe 6, and feedback loops might even make it worse than that, and since we in America live on the best climate (it’s why we are called the bread basket to the world) and we don’t live in Siberia where increase in temperatures might be good, it’s about as assanine a statement any one on this blog ever made.

          1. “science” is telling us, huh?

            1. Steve Science told Jack that. Steve is the derelict that lives in the piss soaked alley a block down from Jack’s.

        2. You and Stossel might want to look at this recent study on human impact on climate change events, such as melting glaciers (bad), wildfires (bad), changes to ecosystems (bad), and they found two thirds of them attributable to man made emissions.

          “With these tests, we can be much more confident in our calculations of how a 4?C world will differ from a 1.5?C world.”

          But hey, it’s science, and not a myth.

            1. Couple of points:
              1 that”science” was funded by uncle Sam. That to me is a bit of a red flag.

              2 in your reply to someone asking “How does Stossel’s suggestion that warmer may be better conflict in any way with the finding that 2015 was the warmest year on record?” You say science is telling us that 2 degree rise is problematic. The only source for this claim is a study that concludes that the majority of temp change is above coastal land? Do you see the illogic here?

              I don’t want to strawman you but if you are arguing that climate change is anthropogenic wouldn’t it be simpler to just explain what is causing this, or who is. My humble guess would be gov. Or gov. backed use of public land.

              Also do you agree that the earth has varied more than a few degrees in temperature and life has chugged right along without much issues?

              So if climate change is caused by humans and if we can see temps rising, why is that inherently a bad thing?

              1. Because evil corporations and Kochtopus!

      1. That is, we have had the “Little Ice Age,” which cooled things down a lot. Since then, the earth has warmed up: which is what you might expect, really. And if you go upstairs from the basement, you will end up at the top: which will be higher than when you were at the bottom. (Sorry to put this all in a very basic model, but the AGW alarmists seem to be all hot on models, and this is quite as good as their’s.)

        Question is, is there another flight of stairs ? To know the answer to that, you have to know what the architecture of the house is. We know there was a cellar, we just came out of it. Is there an upper floor, or several, or are we in a bungalow ? We cannot just see, because the lights are out – probably a fuse blown, what what ? – but if we knew why there is a cellar, (ask the Great Architect, perhaps ?) we might have some clue as to likely future altitude/temperature -but here we have a problem. The soi dissant “experts” on climate change have spent an awful lot of energy pretending that temperature over time has been flat or slowly declining, and now has shot up: suddenly, ‘cos of carbon dioxide. And for no other reason. But this does not supply us with a “Little Ice Age”. So comeon, fellows, make with a plausible climate model that includes more than the last 100 to 150 years. Iff you can do that,then we are prepared to look at your “projections,” but until then run away and play with the other infantil delinquents.

      2. You link: I just read it. All it says is that the overall global temperature has finally made it to one degree over 1890: that is, insofar as we “know” what the global surface temperature was in 1890.

        This is part I of a two part post. It was originally too long, (1659 characters) so to post it I had to cut it enough to bring it down under 1500 clicks. Done.

        Part II follows, but is timed as a little earlier. Apologies to readers for the inconvenience.

        1. Sorry, again. Typo: for “You link” read “Your link”.

          Then start at 11:19
          Finish with 11:13.

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    1. Ironically the perfect follow up the the broken record.

      1. Yeah, but a broken record is right twice…twice…wait a minute. That’s a clock.

        Never mind.

  8. “”The fact that the free market is based on consensual transaction means that no trade can decrease anyone’s wellbeing.”

    this is actually not true. free trade maximizes overall wellbeing. a voluntary transaction makes both the buyer and the seller better off. but that is not the same as saying it does not make ANYONE worse off.

    if you sell soda at the beach for $2 and i come in and sell it for $1.50 and take your customers, YOU are made worse off. your customers are better off. i am better off. other businesses that might get that additional dollar not spent on soda may be better off. but you are not.

    you have no right to claim damage or feel like you have been treated unjustly, but you are not better off. this is where you need to be careful when you speak economically.

    overall welfare is not the same as the welfare of each individual.

    what guys like trump are saying is that he wants to create an overall negative impact to help a special interest.

    it may cause harm to the consumer, but a tariff may help an individual producer, just not by as much as it harms other.

    just because it’s negative sum does not mean that no one benefits. ironically, it’s just another form of welfare. it’s really the exact same thing. tax society, cause a deadweight loss, but benefit some.

    it’s just another way to take $100 and use it to give $80 to people to buy their votes.

    this is what makes trump such a despicable hypocrite: he is precisely what he purports to hate.

    1. Devils advocate for trump: the second soda seller gets a 50 cent subsidy from China’s government.

      1. Both China and America would gain with free trade. China’s system isn’t exactly free trade and neither is ours.

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  10. Cafe Hayek
    Where Orders Emerge

    So dope.

  11. But I thought wealth is like an apple pie.

    If the Koch Bros get most of the apple pie, all I get are some crumbs.
    Bernie says he can fix that by making a bigger apple pie.

    That ain’t true?

    1. Bernie wants to take pie from the Kochs to give to you not build a bigger pie. Leftists don’t believe you can build a bigger pie.

      1. Progressives want the pie to be handed out by their government.

  12. “The fact that the free market is based on consensual transaction means that no trade can decrease anyone’s wellbeing.” Applies maybe to the parties to the trade, but not to others. Also, different parties have differential power to hold out for the best deal.

    A comparison of today with 60 years ago conflates a decade or so when wages were still growing with the flat wages of the last two or three. Personal hours worked doesn’t account for have two people supporting a household instead of one, but this also needs to account for the changing standard of living.

    Business income that goes to profit and executive wages by definition doesn’t go to workers, so they can be poorer relative to what they would get with a more equal distribution.

    But hey, don’t feel bad. You got a few things right!

    But hey, you

    1. “Business income that goes to profit and executive wages by definition doesn’t go to workers, so they can be poorer relative to what they would get with a more equal distribution”

      Define “more equal distribution”
      Would you be happier if business profit and executive wages were say 2% of what is paid in wages to the “workers” of a company?
      Why not advocate a minimum executive wage?
      The problem is clearly the “more equal distribution” of those pesky profits.
      This is the curse of the profitable.

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  16. Stossel makes the following statement, “For example, supporters of free markets (like me) don’t necessarily support business. I won 19 Emmy awards criticizing businesses. Corporations can be enemies of free markets because they don’t want competition. They routinely lobby politicians to squelch it.”

    Then he goes on to say, “The credit for good wages doesn’t go to labor unions or politicians’ passing a minimum wage, though they sure hog the credit. The credit goes to market competition and a growing economy.”

    It seems Stossel is saying that the answer to everything is competition. The problem is that we don’t have true, or what economists call “perfect competition,” because we don’t have enough information for competition work. Economists link “perfect competition” to “perfect information.”

    A free marketplace only works to control prices and wages if consumers and workers have all the information to make the best decision.

    Competition is only effective in yielding the positive results Stossel is talking about if the consumer and worker has enough information to make informed decisions. And International Corporations are ensuring that consumers and workers do not have “ALL” the information.

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