Oh no. I knew that at the root of the failure of President Obama’s economic policies is a failure to understand fundamental economics.
You remember a few days ago when the Congressional Budget Office found that Obamacare will induce people to work fewer hours and quit their jobs because with the new benefit – basically a form of unearned salary from the government – it will be less sensible to work at all.
And so White House economic officials, who also have degrees in Spin Theory, took to the podium of the briefing room and the North Lawn of the White House to plow new economic ground – this could get them all the Nobel Prize – by declaring that disincentives to work are A GOOD THING!
You know, people now have “choices,” like they can stay at home and take care of children – while others who are supporting them work and ignore their children – or even somehow, though they couldn’t afford health care, scrape together enough money to start a business!
Well, you can only get to such illogical theories when you are having trouble with economics 101, as did White House National Economic Council Director the other day.
“I think that, you know, people are taught in Economics 101, that, you know, if price goes up, there must be a little less supply,” he said.
W w w w w w w w.
W w w w w w what? How do run the White House economics shop and even accidentally make such a mistake.
Below is a supply curve. It’s actually the second things you learn in Economics 101, after you learn the demand curve. It states that price goes up as supply goes up. That is, as demand increases, producers can make more stuff and charge more for it.
Here’s a supply curve.
As you can see, in the real world, outside the West Wing, the owners of Tony’s Pizzeria satisfy growing demand not by sweetly charging less, but by raising the price as much as they can possibly get away with it.
People will work harder – make more pizzas – for more money. But then, that’s a mystery to a White House that thinks, you didn’t build that.
Speaking of working harder for more money, Sperling also thinks that increasing the minimum wage will induce people to work less:
But they also know what it’s like to see a friend, a neighbor, where one spouse goes back to work, who would prefer maybe not to work. Maybe they’re working part-time just to supplement the family’s income. And they think, if that family member is making that sacrifice — spending less time with the child — then they should be making a decent living or be able to work less because they’re getting a decent wage.
Here’s the silliness capture by video cameras:
Wo wo wo wo woah.
Wo wo woah.
Higher wages are an incentive to work. Do these Obama folks have any idea how normal people’s brains work? The appetitive nature? The bedrock of economics?
This is something called called a labor supply curve. It shows that, at the lower level of wages we’re talking about at least, as wages increase, the amount of work performed rises.
Because if you pay people more they work more, not less.
Given the kind of thinking we’re hearing out of the White House, we can begin to understand why they believe open-ended government largesse is going to improve the economy.
Economics is at its heart about human nature. The White House doesn’t understand human nature. And so it doesn’t, whether its officials have PhD’s or not, understand economics either.
H/T to Dr. Tony Lima at Gonzoecon.com, who alerted me to Sperlings problems with the supply curve.