EC 201: Homework 4

Due Sunday at 11:45 p.m. on Alia. View the comments for Q&A.

Economic Myths

Nice description here of why the following statements are MYTHS:

1. The cost of living has steadily risen throughout the 20^th century, especially the last few decades
2. The 1980s were a decade of greed.
3. The rich are getting richer and the poor are getting poorer.
4. Wages have fallen in the last 20 years and the market is only creating bad jobs.
5. We are running out of various resources.

There are many more myths, of course, but the internet is only so big.

Lessons on Minimum Wage Causality

Hilary Clinton was on Jay Leno, and she tells this story about a 11 years old boy in Indianapolis (See 3:23 here):

... he said, "You know, my mom makes minimum wage and even though it went up, her hours were cut. So we're not making any more money. Can you help her?" You know, when somebody says something like that to you, it really does kind of energize me. I think, yeah, I can, I'm going to really try to help you, because this is wrong.

Watching her response, the causality appears to be lost on Clinton. The minimum wage caused the reduction in hours. Just as importantly, there is nothing that can be done about it. If I hold my iPod out over the floor and open my hand it will fall to the ground, and there is nothing Clinton can do about that either. Congress cannot pass a law changing the Laws of Demand any more than they can the Laws of Gravity. On a smaller note, I am concerned that a child so young is looking to politicians to solve their problems, especially when these particular politicians have no power over the situation, regardless of what they tell people.

HT: Cafe Hayek