Rand Paul, You Failed Econ 101. Supply, Demand and the Minimum Wage

[CaseyJones]

http://www.huffingtonpost.com/joe-driscoll/rand-paul-you-failed-econ_b_4719735.html

Econ 101

When you raise the price of something, the supply;

a.) decreases

b.) may stay the same

c.) increases

d.) it depends

e.) Rand Paul is wrong

In his January 28th interview with CNN's Wolf Blitzer, Rand Paul stated that, "If you increase the price of something, you get less of it." Really. Perhaps he learned this from his investment guru, and advisor to his father, Peter Schiff - whom I'm hoping will become a regular on Jon Stewart's The Daily Show - spouting the same nonsense to Samantha Bee in a must-see interview . Let's take the econ question at hand.

Much to the chagrin of efficient market theorists, who believe economics is a pure science and live in an abstract world, markets are often neither rational nor efficient. There are no laws of economics. In reality, economics falls somewhere between a social science and a liberal art. Let's plug housing between 2001 and 2008 into the above problem. As the prices of housing increased, supply increased, we got more houses.

Increasing prices can create new demand. As housing prices increased, we got more mortgage-backed securities (MBS), more collateralized debt obligations (CDOs), more synthetic MBS and CDOs at increasingly higher prices. We created homebuyers. During the same period, the average pay for Wall Street bankers rose substantially, but did we get fewer bankers? No. We got more bankers, many more bankers, and banking's share of GDP nearly doubled.

 

[angelatc]

In reality, economics falls somewhere between a social science and a liberal art. Let's plug housing between 2001 and 2008 into the above problem. As the prices of housing increased, supply increased, we got more houses.

OMFG. And then the article did the impossible. It even went downhill from there.

 

[phill4paul]

OMFG.

You understate.

 

[ctiger2]

If $10/hr is good then $1,000/hr better. What's wrong with $1,000/hr? Don't you care about the poor? We need income equality. Those greedy capitalists!

 

[jj-]

One of the most idiotic articles ever written.

 

[Deborah K]

 

[T.hill]

Peter Schiff should really try to get a follow up interview with Jon Stewart.

 

[Original_Intent]

As the prices of housing increased, supply increased, we got more houses.

That's right morons, and as the price of employees increases, the pool of available employees (aka "the unemployed") also increases.

FFS

 

[KingNothing]

"Much to the chagrin of efficient market theorists, who believe economics is a pure science and live in an abstract world, markets are often neither rational nor efficient. "

What an amazing statement. So, because markets are not completely rational nor are they completely efficient, they are NOT rational and they are NOT efficient.

There is absolutely no better mechanism for pricing than markets. Prices may swing wildly and be prone to fits of irrationality, but that does not mean markets are less rational than the whims of whichever control-freak thinks he has the answer to society economic woes.

 

[Pericles]

An increase in price increases supply and lowers demand. When demand is less than supply, somebody does not have his price met.

 

[heavenlyboy34]

"Much to the chagrin of efficient market theorists, who believe economics is a pure science and live in an abstract world, markets are often neither rational nor efficient. "

What an amazing statement. So, because markets are not completely rational nor are they completely efficient, they are NOT rational and they are NOT efficient.

There is absolutely no better mechanism for pricing than markets. Prices may swing wildly and be prone to fits of irrationality, but that does not mean markets are less rational than the whims of whichever control-freak thinks he has the answer to society economic woes.

Bingo. Winnar.

 

[Brian4Liberty]

Rand Paul stated that, "If you increase the price of something, you get less of it."

Of course they will spin and twist things. Typical media hit piece. God forbid they actually understand what he meant.

If you increase the price of something, you will be able to afford less of it, unless you can come up with the extra money to pay the extra cost. Pretty simple concept.

Could McDonalds buy cheaper beef, and make up the difference to still purchase the same amount of higher priced labor? Maybe. Then again, they are already using beef that was previously hardly fit for animal consumption. Their beef price is not going lower, unless they switch to Soylent Green.

 

[Brian4Liberty]

 

[eleganz]

They love it when you post their links for your friends to see, no matter how ridiculous you may think the content is.

 

[cajuncocoa]

LMAO....I always knew that Lefties were failures at microeconomics. Thank you, HuffPo for proving it.

 

[Brian4Liberty]

They love it when you post their links for your friends to see, no matter how ridiculous you may think the content is.

Probably. Subbed my tweet instead.

 

[ObiRandKenobi]

they write about rand for the clicks

 

[Crashland]

The author is just playing word games to make readers conclude the opposite of what is true. Artificially raising the price of something gives you a surplus. The object being measured is workers. And what happens when you have a surplus of workers? Oh yeah, that's unemployment. As in, the supply of workers is greater than the demand. But this guy would have you believe that a surplus of workers means more people working.

 

[whoisjohngalt]

It's horrid. The ridiculous examples equating general goods, water and coffee, to specific goods, bottled water and Starbucks coffee is where I couldn't take it anymore.

Ceteris paribus, it is an economic LAW that if you increase the price of a good, quantity of the good purchased will go down. It's supply and demand. Unless, of course, it's a perfectly price inelastic good. But I don't think they want to contend that labor is a Veblen or Giffin good?

I'm going to pretend to write an article on economics by trying to refute it's universally accepted foundation. Fuck Huffington Post, I'm glad I'm banned from commenting there.

 

[angelatc]

Peter Schiff should really try to get a follow up interview with Jon Stewart.

He was on Facebook a day or so ago encouraging people to demand that TDS release the entire interview.