Author Archives: Kyle Stephens

The Political System

Explaining the Second Amendment

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The Second Amendment to the United States Constitution reads as follows:

“A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.”

The story goes that the ‘Founding Fathers’ wrote this amendment to be placed in the ‘Bill of Rights’ as to ensure that the free people of the United States may take up arms against foreign invasion or against their own government, if the need so arises. If read properly, the amendment states that ‘A well regulated Militia’ and ‘the right of the people to keep and bear Arms’ are both not to be infringed. Many gun-control advocates point to the wording of this amendment and say: ‘HA! See? Even in your precious second amendment, it says well regulated!’ Quite frankly, this is either intellectual dishonesty or intellectual laziness.

The fact of the matter is that the wording of this amendment is very specific and was done so intentionally. The verb ‘well regulated’ modifies ‘Militia’, but does not modify ‘right of the people to keep and bear Arms’, or more specifically, ‘Arms.’ The phrase attached to the end of amendment then necessarily modifies both the first and second parts of the sentence, saying that neither the existence of a well regulated Militia or the right of the people to keep and bear Arms shall be infringed.

In the context of the rest of the Constitution, the existence of a well regulated militia pertains to the existence of militias that exist in peace time put forward by the states within the Union. The framers wished for militias to be well regulated as to ensure that they may be called upon during war time/invasion. Standing armies were never meant to exist, and technically, standing armies during peace time are not permitted under the Constitution. As shown in Article 1, Section 8 of the Constitution:

“The congress shall have the power to […]

To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water;

To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;

To provide and maintain a Navy;

To make Rules for the Government and Regulation of the land and naval Forces;

To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions;

To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the officers, and the Authority of training the Militia according to the discipline prescribed by Congress[]”

Here, one can see how the framers worded the power of the Congress to raise an army and limits Congress to appropriating money to the army for no longer than two years. Navies, however, are to be maintained by the Congress; this is the only military branch that is expressly allowed to be operating during peace time.

What is the most important part of Section 8 is the wording of Congress’ power over the Militia, in which the Congress may call forth the Militia to ‘suppress Insurrections and repel Invasions’ as well as organizing and training the Militia. The Militia that is being repeatedly referred to are the states’ militias, in which the power to appoint officers and training of the militias shall be reserved to the states respectively (as to be outlined by the Congress, again refer to Section 8 of Article 1).

Ah! We have finally reached our point. Kind of tricky, huh? The well regulated Militia being referred to in the Second Amendment (which is preceded by Article 1, Section 8) is, in fact, the collective Militia of the States. The Framers originally establish the existence of, and the regulations that coincide with, the Militias raised by the States which, in times of need, may be called upon by Congress to suppress insurrections and repel invasions. In writing the Second Amendment, the framers merely reiterate the fact that this collective Militia (the militias raised by the respective states of the Union) shall be well regulated per the guidelines referred to in Section 8. In the Second Amendment, the Framers make it clear that the existence of such a Militia shall not be infringed.

This whole issue about regulations and militias (which, admittedly, took quite some time to sort out) is separate from the right of the people to keep and bear arms. I would like to emphasize the dichotomy of the two. The well regulated Militia, AND the right of the people to keep and bear arms, are respectively modified by the phrase ‘shall not be infringed.’ Therefore, the modifier ‘well regulated’, which directly modifies its subject (Militia), does NOT apply to the right to keep and bear arms. Thus, as per the second amendment, the right to keep and bear Arms as well as the right to join a well regulated Militia shall not be infringed. 

Culture Wars

Questions About Abortion

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There has been an abortion story making its way around particular circles of the media lately. This story involves an abortion doctor by the name of Kermit Gosnell who has allegedly been performing late-term abortions and even infanticide under very dangerous conditions. The doctor purportedly “snipped the babies’ spinal chords after they were born and still breathing.” (Sifferlin) Gosnell and his assistants face imprisonment and are soon due for trial.

This particular case raises a great deal of questions and concerns for people on various sides (yes, there are more than just two sides the issue) of the issue of abortion. Some of the more familiar questions include: When does the fetus become a baby with rights? How far does the mother’s rights extend in relation to the fetus? What if the baby has been birthed already?

These are fair questions that are up for debate; however, there are a few questions that, historically, have lacked fair recognition and have oft been dismissed by the different sides of the issue. Two questions, in particular, are often never raised despite their implications:

1) What about the father’s rights? Shouldn’t he have a say in the abortion/lack thereof?

Here I’m operating on the premise of abortion still being legal. If a fetus can be terminated, why is it that only the mother has the say when it comes to the procedure? If a baby is born then the father is held legally responsible for the child, if he does not care for the child he’ll be forced to pay for child support. Yet the father has no say if the other course of action is to take place or not. Obviously cases like rape complicate the relationship between the mother and the father, in which the mother holds the implicit right (again, assuming abortion is legal) to decide the fate of the child.

On the other hand, in cases where the couple is married, or together, or what-have-you, it is inconsistent both in legal and moral consideration to claim that a father must provide for the mother and their child in whichever way, but that the mother has the sole right to decide whether or not the child is aborted. Indeed, there are arguments against the father having a say, such as when the mother believes the father is not acting in the best interest of the couple or family (but rather only in his own interest), that the man is simply not a capable father, and so on. Many of these arguments do have some merit. However, a hearty debate on the merits of a father’s rights is lacking in the abortion debate.

2) In a truly libertarian society (or any society, for that matter), how is it possible to keep people from getting abortions?

Many libertarians are split on the issue of abortion. Many argue that abortions are the negative right of the mother and therefore mothers are within reason when deciding whether or not to terminate a pregnancy. The other side to this argues that the child has rights too, and that those rights cannot be usurped. But an underlying issue that is often forgotten is how exactly people would be kept from getting abortions given a situation where there is no centralized state in which law can persuade people from or even physically prevent people from obtaining abortions.

Some libertarians and anarchists that advocate for a particular moral position argue that one could simply utilize peer pressure or market tools such as boycott to influence people’s behaviors. In this case, people who are morally opposed to abortions could simply deprive the person seeking an abortion (or the doctors who perform the procedures) of means that are necessary for carrying out the abortion. This could effectively ‘force the hand’ of the patients and doctors to change their behavior.

However, some of those wishing to terminate a pregnancy will go to great lengths in order to obtain an abortion (as in the case of Gosnell and clinics such as his). For ‘Pro-Life’ people, perhaps the best strategy that can be undertaken is one in which the focus is placed on assisting single parents and building supportive communities that families can turn to in times of need. Building support systems and safety nets (not government ones) may just convince people seeking abortions to rely on those forms of support instead.

Sifferlin, Alexandra. “Abortion Doctor’s Murder Trial Sparks Media Debate” Time. Time, n.d. Web. 18 Apr. 2013.

The Economy

Bitcoin Lessons

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Bitcoins have been one of the currencies of choice for those looking to ‘buck the system’, providing a way for libertarians, anarchists, and others to circumvent the global Central Banking cartel while simultaneously utilizing the free-market aspects of the internet to engage in trade.

However, on April 10th, 2013, Bitcoin holders saw the value of the virtual currency drop $100+ in dollar terms after climbing steadily for months from its $15 dollar value in January. (Boesler, “Bitcoin is Crashing”)

What caused this ‘crash’? How could a currency that is fixed in number terms gain and fall so dramatically? How can a near-‘Free Market (in reference to the internet) currency be subject to these things?

There are many aspects to the Bitcoin phenomena that can teach valuable lessons to libertarians.

Firstly, a firm/currency/good/service that is made available in the Free-Market or similar institutions such as the internet is not necessarily a perfect thing just because it is arrived at voluntarily or through the market. Many libertarians and anarchists tend to assume that any association or good that comes about through voluntary exchange in the Free-Market must automatically be good because of the efficiency of markets and lack of coercion. However, this is simply not the case: as for most things, there are always exceptions.

A man can work for the state and be a good man, and believe that he is doing good work. For example, many libertarians/anarchists might tend to think that all police officers are bad simply because they work for the state. This may be true with some officers but oftentimes it is not. If these same people worked in private security agencies under Free-Market conditions, the same libertarians would most likely approve of, and even look up to, these same men. It is important to separate the good from the bad in every market structure, mixed economy or not. Although the state does subsidize and allow for enhanced tyranny and corruption, it is simply dishonest and intellectually lazy to claim that it means that this is the case all of the time.

How does that relate to Bitcoins? Well, many libertarians and anarchists viewed Bitcoins favorably due to the fact that the state was not running the operation. This false assumption that Bitcoins were impervious to the same types of currency cycles that all other currencies go through (regardless of being centrally run or through the market) led many libertarians and anarchists to see their Bitcoin stocks implode within a day. (It is important to note that they still trade at a relatively high value, but a 50% fall in one day is obviously bad.)

Secondly, Bitcoins operate on a fixed amount, which is obviously quite different from the Federal Reserve’s elastic money supply. Elastic money supplies, contrary to what most libertarians believe, are not always a bad thing. Under free market circumstances, elastic money supplies would allow banks and currency holders to shift the amount of money in circulation to fit the demand for the medium of exchange in question as necessary. Banks that devalued their money too much would face currency holders abandoning ship; contrarily, banks that kept their money counts too low would not be meeting the demand of potential currency users, and therefore would need to adjust accordingly. Changes in population sizes or other structural changes in the economy would most certainly require different currencies and different currency amounts to suit the market.

That being said, currencies that are fixed in amount can serve as ‘safe’ currencies that check against and hold value for other currencies redeemable in it. For example, gold is relatively fixed in amount (fluctuations in gold supply are minor compared to most currencies that it used to be redeemable in.) For centuries, gold has served as a currency or commodity in which other currencies would measure against. Many markets accepted both gold and paper notes that could be redeemed for gold despite that one of the currencies was fixed and other, for the most part, was not.

Fixed currencies under freer markets can be god-sends and even hold whole economies together. However, markets dominated by central banking often move away from fixed currencies and commodities due to monopolized elastic currency heavily relying upon credit and debt expansion. Fixed amounts of gold do not serve monopolized currencies well due to the fact that there are no market checks on credit and the true demand for money.

The state, with a monopolized currency, is able to absorb power and property through money devaluation and debt enslavement. Under free market pretenses, elastic currencies would most likely not be able to lend out nearly as much money or devalue the currency to such a high degree as a monopolized institution could. Where a fixed currency in the free market may be able to give currency holders a way of keeping elastic currencies in check, it fails to keep up with the expansion of monopolized currency such as Federal Reserve notes.

Lastly, the Bitcoin boom and bust is clearly a market bubble. Some libertarians and anarchists forget that free markets are still subject to boom-and-bust cycles and that there would be tough times under the free market. So many of us have become accustomed to the state and its many failures and lack of success, almost to the point of blaming the state for everything wrong and praising the market for everything right. This is a dangerous way of thinking. Assuming that the market is always right can lead to downright apologism for free markets producing bad outcomes. Evidence does indicate that freer markets generally lead to higher standards of living; however, this does not mean that free markets (or free market entities) are always perfect.

References:

Boesler, Matthew. “Bitcoin Is Crashing.” Business Insider. N.p., 10 Apr. 2013. Web. 10 Apr. 2013.

Culture Wars, Liberty Movement

Gradualism: Good or Bad?

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Libertarians often find themselves caught between a rock and a hard place when it comes to the issue of achieving their end goals. With almost every issue that arises in the liberty community, you are sure to come across those who support slow and gradual change as well as those who push for the immediate end of the state. Who is right?

 An effective way of judging the success of ‘Gradualism’ is to look at when it is used to further agendas other than those held by libertarians. For example, one can look at the success of the left over the last century or so and see what ‘Gradualism’ has achieved them: Marxism permeates nearly every aspect of society, especially those aspects which libertarians have seen deteriorate (gun rights, private property rights, etc.) The ideas of state-socialism and the like have been taught in high schools as well as colleges and universities for multiple generations; as a result, people across the country (and the world) hold statist policies in high-esteem.

 Also, given the current political framework, it is important to take note of how laws and court precedent  have gradually changed over time, and almost never abruptly. When working within a static system, gradualism is usually the only recourse possible.

 Yet, there are many examples in which sudden (and sometimes even violent) changes in the social and political structures of a society have been successful. The most familiar example of such change is the American Revolution in which the colonies of what is now the United States freed themselves from the rule of Great Britain. Although the seeds of secession were sown many years prior to the Revolution, only was freedom achieved when the colonists were finally willing to use swift action against their oppressors to achieve their goals.

 Gradualism only works when it is warranted and when it can be assured that the main goal can be reached after a compromise or ‘gradual’ step. For example, in the recent debates about ‘marriage equality,’ libertarians found themselves split on whether they should advocate equal marriage licensing or abolishing marriage licensing all-together. Libertarians generally agreed that the end goal was ending licensing, but many disagreed on how that goal should be achieved. The proper course of action should have been to end marriage licensing, rather than ensure equal marriage licensing. Why? Well, if equal marriage licensing is instituted, it is likely that it will stay that way, with marriage licensing never being abolished. Those not as sympathetic to liberty as libertarians will be much less willing to work on ending licensing if their end goal is already achieved. For libertarians, the short-term compromise would not serve the purpose of extending the path to the final goal.

 However, there are instances in which ‘gradualism’ could be quite effective. One of the most beneficial forms of gradualism in which libertarians are currently succeeding in is the cultivation of libertarian ideals. From quasi-libertarian institutions such as the Republican Liberty Caucus and Cato to more ingrained think tanks such as the Ludwig Von Mises Institute, libertarians are enjoying great achievements and success, with libertarian ideals and values on the rise.

 Libertarians should employ gradualism only when it serves as a stepping stone to an assured goal; otherwise, they may fall into the trap of rigidity, in which compromises may prove to be binding. Moving in the same direction, whether it be quickly or slowly, is almost always a good thing, so long as the end goal is always in sight.

Uncategorized

It Was My Idea First!

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It’s My Idea!

The nature of property and what constitutes rightful claims to property defines many aspects of life – cultures with differing views on property will most certainly vary widely in belief systems, norms, social institutions, and so on. When it comes to Libertarianism, the guiding notion of what constitutes property is that property is the extension of the self and that one has a rightful claim to themselves. Libertarian views on property are quite similar to Locke’s theory of property in that physical property is created by mixing labor with land/resources (which in turn, can be bought and sold, including one’s own labor.) But, generally, Libertarians refute the notion that ideas and thoughts, otherwise known as ‘Intellectual Property’, are valid, and therefore no one has a rightful claim to such property.

The form of intellectual property I would like to discuss and defend is not the form of intellectual property that is upheld by the state and its laws; rather, the intellectual property I will be discussing deals with the literal ownership of one’s own ideas, regardless of the existence of a state or Intellectual Property laws.

Every action that someone engages in is a result of an idea or thought – a will to accomplish something, the drive to move or build, fix or destroy. No one could mix their labor with land or engage in trade, or do anything, for that matter,without their own thoughts and calculations guiding them and causing their physical body to act in accordance with their will. If one accepts the idea of property, in its general form, then they must then derive the root of physical property – and how physical property comes about.

All physical property comes about through the manifestation of ideas. Simply put, one must own their own ideas in order to own anything that those ideas accomplish or create. An idea or thought is what brings you to the market, what guides transactions, what brings about trade-and at the very bottom of all of this, creation itself. Creation of any physical property must come about through intangible thought processes. If no one owns their own thought processes, then who/what does?

For example, let us look at the case of a chair. For simplicity’s sake, this chair was fashioned with materials all owned and created by the owner, without anyone else mixing their labor with the chair or the resources. The chair, with its stiles and brackets, were all shaped by the labor of the owner. The wood, being necessary for the completion of the chair, was chopped down by the owner, whose sole intent was to create the chair. This chair did not come into existence on its own, nor did the tree shape itself into the chair without the labor of the owner; yet, the owner’s labor did not act on its own accord. The owner, for whatever reason, thought it necessary to have the chair, to chop down the tree, to whittle down the wood and to carve it into curves and fashion a seat for himself. The owner of the chair owned the idea to create the chair, and similarly owned the means (his body) to make the chair. Even if we change this scenario and say that another person told him to make the chair, then we can logically assume that the other person owned the idea to make the chair, despite the action being taken through the other. The idea must originate somewhere; moreover, the originator has the ability to hold onto the idea, save risking that idea being acted upon by someone else who thinks of the same or similar idea. When we look at the existence of the chair in reverse chronological order, then we can derive the nature of intellectual property and how all physical property is a result of the latter.

This form of intellectual property is not the form that (some) libertarians have come to abhor. The form of intellectual property that exists today comes is more often than not in the form of copyrights, patents, regulations, laws, etc. (many of the things that Libertarians dislike.) Therefore, it is only natural for Libertarians to dismiss this type of intellectual property without distinguishing this form of intellectual property from true intellectual property.

True intellectual property extends only insofar as the originator’s ability to act upon their idea in a timely fashion or efficient manner. Here enters what economists generally refer to as “the first to market.” If one is the first to market with an idea, then they are the ones who will benefit the most, and be accredited with the idea. Note, this DOES NOT MEAN that the state has a right to enforce a perpetual first-to-the-market condition, which is typically enforced by patents and the like. The originator of the idea has the ability to cover investment and start-up costs by being the first to market. The risk of losing this natural grace period should be enough to drive the originator to get to the market first and make enough on the idea or product as to cover the costs of putting the idea forward. After this grace period, however, the idea/product is obviously likened to imitation; however, this is a good thing. From an egotistical standpoint, the originator had earned their keep and has a legitimate claim to the original idea. From an altruistic viewpoint, the originator has created something that can be enjoyed by all, and be openly traded in the market. In this double-instance, all are satisfied, and there was no impediment to innovation nor was there any dead-weight loss in the economy on the whole.

Again, I want to clarify that Intellectual Property is obviously open to being copied, imitated, ‘stolen’, and so on. No property is permanent, nor do you have any say in property once it is sold to another person. Once the idea is manifested into something physical, buyers have the ability to acquire the product and make copies of it, or re-sell it, or give it away for free (in the free market, or freer markets.) All physical property is subject to this, wherein such property is derived from thoughts and ideas.

What happens with state intervention in this scenario is, essentially, the establishment of a monopoly. The originator would be able to extend this grace period of higher profits (and higher costs for the consumer) so long as the state enforces their monopoly. It is important to recognize that, in both cases, the originator does indeed own the idea for whatever product they set forth-the difference in the former cases opposed to the latter is that the state ensures that the originator can hold the price high for longer than what it would naturally be. This is the difference that many anti-IP Libertarians fail to see. The idea still originated with the person, and they still were the first to market. The latter case is the undesirable one, the case that unfairly utilizes force to upset the natural course of events, a course of events that would otherwise been beneficial to all. This is an important distinction that must be made. In both cases, Intellectual Property still exists; however, the state manipulates and distorts its true form. Originators of ideas do not have the sole claim to it for all of eternity, just as a land-owner would not own the land for all of time. In its true essence, Intellectual Property is simply the recognition that an originator has developed a unique and original idea; it is NOT the establishment of a monopoly on the idea.

The Economy

The Minimum Wage Fallacy

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How Obama’s Proposal Will Have Unintended Consequences

US President Barack Obama

In the recent State of the Union Address, President Obama proposed a new solution to the rising poverty rate: a $9/hr federally-mandated minimum wage.

The declaration garnered a positive response from the crowd, and the public in general. Surely, this will solve the issue of poverty, right?

What President Obama, Congress, Keynesian economists, and many others choose to ignore is what kind of implications a wage floor can have on the economy. To explain these ramifications, we must first delve into the economics of labor supply and demand.

The Supply and Demand for Labor

Labor, as well as everything else in the economy, is subject to the laws of supply and demand – that is, the demand for a good or a service, as well as the supply of such goods and services, will work towards market equilibrium, maximizing efficiency and setting a market price. The market price signals to businesses and consumers alike the actual costs of what is being made available, be it food, shelter, clothing, luxuries, and labor. What many Keynesian/Liberal economists will have you believe is that labor is somehow outside of these laws, and ergo it is not subject to these laws; yet, labor is a service, which a business must purchase for it to operate (just as a business may have to purchase the services of a carpenter or an electrician, the business must also purchase your labor from you, and it is calculated as a cost in the business’ spread sheet.) Just as all services have a market price, so does your labor.

Consequently, when a price floor is established in the labor market through the passage of minimum wage laws, excess supply of labor is created. Businesses are not willing to hire as many workers for a higher price, and thus, cut down on the number of laborers they “purchase” in the labor market. If, say, the market price is $5/hr for unskilled labor, and a minimum wage price-floor of $10/hr is instituted, then firms will only be able to hire half of the number of workers that they would otherwise employ. This example, albeit simple, is exactly the type of an effect any type of price-floor has on the economy. The business then faces a tough decision: Do they hire less workers? Do they fire some workers and keep costs the same, but lose production-capacity? Do they “eat the costs,” so to speak? Do they push off the costs onto the consumers?

How Adjusting For Inflation Won’t Work

There is a common argument made for the minimum wage that entails raising the base wage that workers must be paid in order for them to keep up with the rising costs of living (due to inflation.) At first, this sounds like the right thing to do: if the wage is increased at the same rate of inflation, then true costs will not rise, correct?

Wrong. Inflation is a tricky thing; it distorts the prices in a market, which act as signals to people and firms about the supply and demand for various goods and services. There are three inherent flaws in adjusting wages for rising inflation:

A) The way that the BLS calculates the Cost of Living Adjustment (C.O.L.A.) is flawed. The rise in prices that are monitored in the COLA are based upon a fixed basket of common goods, which composes the Consumer Price Index (CPI.) The issue with monitoring this same basket of fixed goods is that the various inflation rates of these products (apples may rise 33% opposed to bananas only rising 24%, for example) is that consumers typically substitute cheaper goods for goods whose prices rise significantly. Joe Consumer may consume less apples and consume more bananas, so he wouldn’t be spending nearly as much money as the CPI would make it out to be. This misleads government officials and distort Social Security payments and other forms of welfare all the time; one can make the assumption that the wage rate would follow the same path. It may be that the Government would overcompensate or under-compensate workers for their wage, because they would have no true way of knowing what the right wage-floor should be.

B) Different regions experience different prices. California is notorious for its high gas and housing prices, opposite of North Carolina, which has a relatively cheap cost of living compared to the Golden State (no pun intended.) Making a blanket minimum wage for the entire United States disregards these differences, and may pay Californians too little and pay workers in North Carolina too much (and by too much, I imply that workers who would otherwise have been employed in North Carolina would be out of the job while others are overcompensated.) As it was established before, absent of a price-floor for wages, these regions would have their own relative equilibrium wages, accounting for the relative supply and demand for labor in those places. Therefore, adjusting for average inflation across the United States will not account for the differences in prices in the various regions and markets.

C) Most importantly, adjusting the minimum wage subject to inflation rates does not account for how businesses interpret Revenues and Costs. Again, prices act as signals to firms and consumers about the relative supply and demand of goods and services in the market. Higher labor costs signal to firms that it is costly to hire workers and that it would be in their own self interest to scale back on their demand for labor (just as a consumer would scale back on their consumption of an expensive product, it works the same way.) Costs for a business are much like costs for a consumer in that they both interpret higher costs as a function of supply and demand, and not as a function of inflation of the money supply. Although inflation of the monetary base may be causing a higher asking price for labor, businesses will most likely view this as either a drop in the supply of labor or an increase in the demand for labor by other firms. This is how the business will interpret its costs. Where it gets interesting is in how businesses interpret their revenue. Inflation of the money supply will increase the amount of money chasing the amount of goods in the market-for businesses, it will appear as though demand for their products has actually increased, when in reality, it has actually stayed the same. The lag time it takes for businesses to increase their prices to match what they think is an increase in demand causes firms to interpret the higher revenues as just that-higher revenues-and not inflation of the prices due to an increase in the money supply. This creates the disconnect between wage rates and selling prices: the business will interpret its higher labor costs as an increased demand for labor in the market, while simultaneously interpreting the higher revenues as an increase in demand rather than inflation. Why is this important? Businesses will react to a minimum wage (even if it is adjusted for inflation) as a price floor, and not a shift in prices as a whole. This will cause an excess supply of labor, unless the new wage is precisely what the equilibrium price for labor would be absent of the regulation. Even is the latter is true, it still would not allow anyone to be hired below that level, however menial the task. These jobs would otherwise prove beneficial to the market, but are nixed in the name of fairness.

Who is Affected by Minimum Wage, and Why

Believe it or not, a minimum wage affects everyone. Although one may not experience the affects of a minimum wage directly, they will experience higher prices at the stores they patronize and the services they buy. No matter which path a businesses chooses, it is almost guaranteed that the prices of their product will rise. If the business decides to cut their work force, their production-capacity will fall, and thus the supply of the good or service they make available will be smaller, causing them to charge a higher price. If the business chooses to just “eat” the cost, then their profits will suffer, and they will have a harder time financing their businesses and increasing production in the future (which will most likely cause a rise in prices in order to finance any future business ventures.) Clearly, the imposition of a minimum wage on the labor market affects consumers and businesses alike.

But, what of the workers? How does a price-floor on labor affect them? Well, some workers will be better off, in that the lucky few who are allowed to stay under the payroll will see a definite boost to their income; however, these are the workers who are more efficient and offer their employers more production. Such workers would most likely be in line for pay increases anyways, given that they provide enough of a benefit to the business that they should be compensated for their added efficiency. What is not seen is the teenager or the unskilled worker who would be more willing to accept a lower wage in exchange for the ability to acquire useful skills and increase their own worthiness. These workers are dependent upon the availability of low-skill low-wage jobs that exist outside of a hampered market-these jobs lay the foundation from which their skills and their résumés are built upon.

The Vicious Cycle and the Actual Solution

Now, as one can see, the imposition of a price-floor on the labor market has some dastardly effects on prices and employment. The next step for the state, naturally, is to blame businesses and the market about the increased inefficiency, rather than recognizing the inherent flaws of the Minimum Wage. This brings many politicians to adopt even more radical policies or market alterations that further exacerbate the existing problems in the economy. No matter how it is spun, all workers will not be able to enjoy low prices and high wages. Where true economic improvements are made are in the increases in production capacities of firms that drive costs down and makes more available. Increasing labor costs for businesses by raising the minimum wage hampers their ability to increase their reinvestment. Many are unable to recognize this, and only think of the economy as a single pie that must be divvied up and spread around. If this was true, then the production capacity of cavemen in the early days of human history would be the same as today, since their would only be X amount of work and production that could take place. The truth is that work and production capacity is nearly limitless, and has to be improved upon with reinvestment and innovation. Where the focus should be placed is in the Federal Reserve and how the inflation of the monetary base is leading to many of the problems we are experiencing in the economy today.