Hughesair (Inflection Point)

Retired physician and air taxi operator, science writer and part time assistant professor, these editorials cover a wide range of topics. Mostly non political, mostly true, I write more from a lifetime of experience and from research, more science than convention. Subjects cover medicine, Alaska aviation, economics, technology and an occasional book review. Globalization or Democracy documents the historical roots of Oligarchy, the road to colonialism and tyranny

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Location: Homer, Alaska, United States

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Sunday, December 12, 2010

Street Smart Economics

Economics 201


Sacred cows cause distortions to the market balance. For instance, minimum wage, arguably a sacred cow, causes a shift in jobs to cheap off shore labor. However, without minimum wage, there is no way most single parents can afford housing, heat & electricity, food, pediatric care, transportation and tax. Even with minimum wage, many single mothers find themselves with Medicaid, food stamps, unpaid bills and probably unfiled income tax returns.

The real problem stems from the outrageously high cost of living. I do not mean inflation. Unrestrained free market pricing of critical infrastructure raises the basic cost of living to the benefit of the privatized utility. Furthermore, a regressive federal, state and local sales tax adds to the burden of the minimum wage earner.

Lowering the basic cost of living to a level wherein the low wage earner can live modestly, would solve the unemployment problem, the welfare problem and probably ship fewer jobs overseas.

Obviously, the critical infrastructure, the necessities of living, fails to balance out in a free for all market. Unfortunately, the self-regulating supply and demand nature of a free market, does not work here because of the involuntary, unpredictable and often life or death nature of these basic needs. Again, as examples, let us consider:

• Seniors living alone who die from starvation;

• Who die from a heat wave or a cold spell;

• The homeless freezing in a tent or in a car;

• The man who can get a job in Memphis but cannot afford the commute;

• Alternatively, the ghetto gangs, young people who take to crime because there is no work and they cannot afford to go to school.

• Another example is the coronary patient with his wife at his bedside in the coronary care unit. The patient and his family are not going to argue over how many thousands of dollars it will cost for a by-pass, a stint or a balloon catheter. There is no market side resistance to price when faced with a life-threatening situation. The distorted transaction in the coronary care unit more resembles extortion than a free exchange. That distortion drives a never-ending spiral of increased costs and an endless number of ancillary businesses trying to get in on the deal – feeding at the trough, so to speak.

Faced with life threatening non-market challenges most will pay any price to survive. If they do not have the money, life is cheap.

Labor should be a free market, and it can be if we assure the necessities of life; this is humanity for heaven sakes, and it is not welfare. Historically, cheap energy and the railroad drove our economy to greatness. The economy thrived on cheap exploitable resources. Right now, that exploitable resource is globalization. As such, cheap labor abroad and cheap imported manufactured products exclude low paying American jobs.

Our critical infrastructures for basic costs of living extract far too high a price to the benefit of the high-income class at the expense of the jobless and the minimum wage earner. The entrepreneur can make a fortune in the free market, but he should not be free to do so with critical non-market necessities where self-regulation favors only the supply side. That entrepreneur will do better with a secure healthy readily available workforce. We regulate indiscriminately as a political action exercise in lobbying. As a result, there is far too much regulation of free market enterprise – the Digital Millennium Copyright Act as an example – and far too little regulation of the infrastructure.

Supporting and regulating the necessities such as electricity, food, water, sanitation, public health, transportation, education, medicine, banking, security and communication gives far greater relief to the lower income workers than minimum wage. Furthermore, cheap energy, cheap communication and free information offer the exploitable domestic resource that our economy presently lacks.

Police, fire, and the highway systems work well; with minimum waste, we take them for granted. All of the above systems, however, deserve the same consideration; they are vital to the security of our most vital asset, our human resource and the security of our country.

Failing the responsibility of providing critical low cost infrastructure, tears at the very fabric of our society. We have more young people in jail as a percentage of population than any other country in the world. Let us recognize sacred cows as political gimmicks, narcotics for the masses, but far more importantly get with the program of critical infrastructure. Include it all, no debate. Doing so will be a sustainable stimulus to the economy. We need to get it right.

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