May 31, 2016
CEI recently released a pair of papers by Iain Murray and me about economic inequality. The first encourages activists to ask the right questions: think about flesh-and-blood people, not ratios. The second paper seeks to answer the right questions. Our main focus is on effective poverty reduction policies. But it is also important to know which policies don’t reduce poverty, so policy makers can avoid them. We mention two in our paper: minimum wage hikes and increased collective bargaining.
The arguments against both are similar: they have tradeoffs. Some workers benefit from a higher minimum wage, and many union members benefit from higher union wages. But their benefits come at a cost.
Workers pay for minimum wage increases in the form of reduced hours...
May 25, 2016
In serendipitous timing, the Institute of Economic Affairs in London released a new study this week entitled “Never Mind The Gap: Why we shouldn’t worry about inequality.” Authors Ryan Bourne and Christopher Snowden look at the facts and figures about inequality in the UK and conclude that “the trends do not conform to the story of unprecedented or spiraling inequality that are frequently implied in the media.”
They also point out that attempting to intervene in market functions to reduce inequality means accepting “more poverty or less wealth overall provided the distribution is more narrow,” which is the point Ryan Young and I also make in “...
May 25, 2016
Economic inequality is one of today’s defining issues. How to address it? Iain Murray and I offer an unconventional approach in a new two-part CEI study, released today. The first part frames the issue. The title sums it up well enough: People, Not Ratios: Why the Debate over Income Inequality Asks the Wrong Questions. The second part, The Rising Tide: Answering the Right Questions in the Inequality Debate, outlines a concrete policy agenda to make the poor better off.
Anti-poverty activists routinely fret about the ratio between a CEO’s salary and her lowest-paid employee’s, or how the top one percent’s ratio of national income compares to the bottom one percent’s. Instead of mathematical ratios, we encourage activists to focus on human beings. Again,...
May 11, 2016
Left-wing economist Thomas Piketty is treated like a “rock star” by many progressives for giving a veneer of legitimacy to the economic myths they cling to. But his false claims about economic history are refuted by readily available facts and figures (such as historical data you can find in the tables at the end of federal budgets submitted in recent years by presidents such as Obama).
Economist Robert Murphy recently debunked Piketty’s false assertions about the Great Depression. In his wrongly acclaimed book Capital in the Twenty-First Century, Piketty made the following...
April 27, 2016
The Financial Stability Oversight Council recently released its “Update on Review of Asset Management Products and Activities,” in which it questions “how certain asset management products and activities could pose potential risks to U.S. financial stability.”
One aspect of the report focuses on hedge funds’ use of leverage, and the purported increase in risk associated with an increase in leverage:
The relationship between a hedge fund’s level of leverage and risk, and whether that risk may have financial stability implications, is highly complex. Leverage is not a perfect proxy for risk, but there is ample evidence that the use of leverage, in combination with other factors, can...
April 15, 2016
This has been a good week for capitalist backbone. As Kim Strassel discusses in the Wall Street Journal today, we’ve seen two high profile cases of the CEOs of large, prominent company give spirited defenses to the role of their firms in society. General Electric’s Jeff Immelt and Verizon’s Lowell McAdam both hit back against the charge that their firms were “...
April 14, 2016
Another CEO of a big American company has spoken up about the charge that he and his employees are “destroying the moral fabric” of America. Lowell McAdam of Verizon, in a post at LinkedIn, answered the charges (also addressed recently by General Electric CEO Jeff Immelt) that his company doesn’t pay the appropriate amount of tax, doesn’t invest in the U.S., and, specifically in Verizon’s case, is trying to force inappropriate concessions on the unionized portion of its workforce.
Today – as we have over our...
April 11, 2016
Over at the Foundation for Economic Education, Iain Murray and I give a short preview of our two forthcoming CEI papers on income inequality and poverty relief.
In the first, “People, Not Ratios: Priorities, Please,” we argue that inequality in itself is not the problem — poverty is.
Piketty and Krugman’s focus on income inequality treats people like statistics. Instead, we should focus on individuals’ actual standards of living and on ways to empower them — as individuals — to improve their lot.
In the second paper, “Policies to Help the Poor,” we suggest a policy agenda to make poor and middle-class individuals better off in absolute terms.
Of course, the elimination of global...
April 7, 2016
General Electric CEO Jeff Immelt has an interesting op-ed today in the Washington Post, hitting back against charges that his company is “destroying the moral fabric” of the country with a culture of corporate greed. The thrust of Immelt’s response is that, unlike politicians, companies like GE “create wealth and jobs, instead of just calling for them in speeches.”
March 28, 2016
Virginia’s Dillon rule prevents cities and counties from regulating the employment practices of private businesses. That bars them from setting minimum wages higher than the state or federal minimum wage, or adding new protected classes of employees at businesses’ expense (through anti-bias ordinances). That is good for businesses, promotes freedom of contract, and prevents a confusing patchwork quilt of regulation that varies from city to city and county to county. It is also one reason why Virginia has a better than average business climate.
North Carolina has now enacted legislation giving businesses the same protection (see, e.g., Section 143-422.2(c)). Unfortunately, it is part of...