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Why Wages Rise
Leather Binding on Spine and Corners with Golden Leaf Printing on round Spine (extra customization on request like complete leather, Golden Screen printing in Front, Color Leather, Colored book etc.) Reprinted in 2018 with the help of original edition published long back [1957]. This book is printed in black & white, sewing binding for longer life, Printed on high quality Paper, re-sized as per Current standards, professionally processed without changing its contents. As these are old books, we processed each page manually and make them readable but in some cases some pages which are blur or missing or black spots. If it is multi volume set, then it is only single volume, if you wish to order a specific or all the volumes you may contact us. We expect that you will understand our compulsion in these books. We found this book important for the readers who want to know more about our old treasure so we brought it back to the shelves. Hope you will like it and give your comments and suggestions. - English, Pages 130. EXTRA 10 DAYS APART FROM THE NORMAL SHIPPING PERIOD WILL BE REQUIRED FOR LEATHER BOUND BOOKS. COMPLETE LEATHER WILL COST YOU EXTRA US$ 25 APART FROM THE LEATHER BOUND BOOKS. {FOLIO EDITION IS ALSO AVAILABLE.} Complete Why wages rise. 1957 Harper, F. A. -.
124 pages, Paperback
First published January 1, 1957
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Displaying 1 - 11 of 11 reviews
September 20, 2019
Great refresher on the most fundamental of economics. The book suggests we should limit government and unions and let free markets rule, for an optimal economy and overall citizen welfare. I enjoyed this read.
May 6, 2013
I lied to Goodreads - I wasn't "currently reading" this book; I rushed through it in one day. Harper delivers on the title - he clearly explains why wages rise in terms that make as much sense now as they did when he wrote it in 1957.
This book, well understood and applied, could make the reader more productive overnight. In that sense it's one of the most important books ever written.
This book, well understood and applied, could make the reader more productive overnight. In that sense it's one of the most important books ever written.
September 21, 2022
Fabulous.
The first part is slow, but it lays a foundation.
Every idiot who calls for a "universal basic income" ought to read Harper's short book. (Lookin' at you, Zuckerberg).
"A political government is an agency we set up to govern ourselves. . . . The distinctive feature of the political governmental body is its monopoly status, its compulsory "sales" to every member of the society." p. 67
Inability to tell the true price of something when it is provided by a monopoly: "It seems certain, then, that the value of our present political government is completely uncertain for any one person
and, therefore, for all persons combined. We can't possibly know its worth, so long as a given service remains a monopoly that individuals are compelled to purchase. All we know, for any one item, is that it is still tolerated by a majority of the vocal citizens." p.69
Consider the cost of "governing ourselves" - In the 1950s: "The present cost of governing ourselves (cost of government) is about thirty-one times as much as it was a century ago, per person. . . . Or if we express it in terms of wages, the cost of governing ourselves a century ago took about three minutes of time out of each hour of work; now it takes nineteen minutes out of each hour of work." p. 69
"Suppose it were possible, in some way, to govern ourselves with the same proportion of our working time as prevailed a half century ago. Were this possible, the amount of income remaining to the worker for free choice in his spending — his pay after taxes — presumably could have risen at least twice as much as it has. Our increased capacity to produce, if allowed to operate to the full, could have doubled our increase in economic benefits." p. 70
"[P]erhaps the best way to get higher wages now would be to hire out to ourselves individually, so to speak, for more of the job of governing ourselves. That would mean more self-reliance, more self-control, and all the rest. In this way great savings could be made in the drain on our incomes, leaving that much more to spend on things of our choice and preference. This, in effect, is the same thing as a rise in wages. Those of us who labor for a living might well consider a completely new direction — a new objective — in our bargaining for wages. Since there is no more to be gotten from employers than the slow increase in productivity will allow, perhaps we should start directing our bargaining power at
government. Why not govern ourselves more, and thereby be able to keep more of what we are nominally paid? A dollar saved is a dollar earned." p.70-71
"The communists-socialists have a plan for society that goes like this: "From each according to his ability, to each according to his need."
This communal blueprint is appealing enough on the surface. Each of us wants to do the best he can according to his ability. And who among us doesn't yearn to have his needs fulfilled? So this slogan sounds like Heaven before the here after.
The barb in the bait lies concealed beneath the pleasant dreams of a Utopia. For the brutal discipline of reality rules over hopes that can't be hatched.
The catch is twofold. First, as a member of a communist socialist society you shall not be allowed the privilege of pursuing the release of your abilities at a task which seems best to you. A central authority will decide this for you and for everyone else. He will do this in order to keep a workable ratio between the persons on the stage and in the audience at the opera; in order to have passengers who will ride the trains instead of all being engineers; in order to have some one who will take care of the sewage, and the like. The Commissioner of Opportunities to Work will command you to work at the job of his choice, not yours. You may neither strike nor quit nor change to another job more suited — as
you see it — to your abilities." pp.72-73
"The second catch in this slogan is that your official allotment "according to need" will have no necessary relationship to your hopes and expectations. For it is the central authority, not you, who decides on your needs. . . . Under communism, the central authority decides whether it is bread or cake you "need." . . . All these "needs" will be decided with a cold, inhuman arbitrariness. Since the Commissar of the Peoples' Needs never met you — probably doesn't even know you exist — his decisions can't possibly come even close to your version of your needs.
And even though the Commissar chanced to know your wishes, his job is to ration acutely scarce things, labeling them "your needs." Production is low under such a system." pp.73-4
"A punster once remarked that life in a communist country means that everything not compulsory is forbidden. And in like manner, the communist-socialist slogan should probably be reworded as follows: "From each according to his ability, and keep from each what he does not need."
Complete and thorough communism has been rare in the world because it is a highly perishable system.
The less-than-complete patterns of communism which exist in various nations go by another name. They have become known as Welfare States.
We need not look afar to some foreign country or ancient society to find this communist policy in operation, in a lesser degree. We have it in our own nation, in widespread forms and instances." pp. 74-5
On fringe benefits: "To illustrate, let us say that for every dollar taken out of your income for a "fringe benefit" by someone else's idea of your need, you get something worth only 75 cents to you. Then it would have been worth one-third more to you to have gotten the dollar instead — for a dollar's worth of purchases as you appraise them. For anyone to speak of a loss of 25 cents out of the dollar as a benefit is a strange use of the word, indeed. Rather, it is a negative fringe benefit.
My dictionary says that the opposite of a benefit is a detriment. So instead of being a fringe benefit, these kinds of things are really fringe detriments. Even then, they are not on the fringe of your welfare; they are as much at the heart of your welfare as any other dollar of your pay." pp. 80-1
"A friend of mine speaks of them as little, corporate welfare states. And, to be sure, they are just that — if we mean by a welfare state the centrally controlled spending of the people's income for what those in control decide is the need of the people." p. 81
"And as a final point, these schemes of so-called fringe benefits often are a serious threat to our continued progress. Ostensibly their purpose is to reduce turnover of labor and stabilize employment. But they tend to freeze a worker in his job. He does not leave for a more productive job because he would then lose his seniority status and the "accumulated benefits" which he cannot take with him. So he keeps his "security," which the union or the company allows him to have only if he stays where he is. He does not follow opportunity where it leads. "Once a coal miner, always a coal miner," is its effect. This sort of freezing tends back toward the old European caste system, and could bring an end to the traditional American growth of welfare and increasing wages.
So "fringe benefits," rather than coming from pie in the sky, come out of wages — out of what could be paid as money wages. And furthermore, they comprise a serious threat to our progress." pp. 82-3
"One benefit we all seem to yearn for is idleness — all we can get of it. But do we, really?
If a thoroughly well person is hospitalized and forced to be inactive for a day or two, it is said that he would feel about as ill as one who has had an operation.
We want to be free of what we are currently obligated to do, in order to do something else for a change.
The truck driver wants leisure to get off the road; perhaps he wants to spend a few quiet days at home. But a telephone operator or a watch repairman yearns for leisure so he can get in a car and spin down the road.
The farmer wants leisure to go to the city. The city dweller wants it to go to the country.
The coal miner wants leisure for a plane trip. The plane pilot wants leisure to avoid one.
A hired ballplayer wants leisure away from the game so as to be able to get back home on his farm. The farmer wants leisure to play ball at the picnic.
Two persons might even pay a vacation expense direct to one another for reversing their regular activities." p. 85
"A hundred years ago in the United States, for instance, the "work year" was a little over 3,500 hours on the job, out of the total of 8,766 hours in a year. Practically all of great grandfather's leisure hours were needed for eating and sleeping.
With our present advanced productivity, one could probably maintain himself at the level of bare subsistence with the income from as few as 200 hours of work per year. This would provide an extremely humble existence, to be sure, without many things we have come to think of — falsely —
as absolute necessities.
We now work 2,000 hours, or a little less, per year rather than these minimal 200 hours. We do this in order to have many more economic things to enjoy, beyond the level of strict necessity." p. 86
"Moving on up the scale of working hours, a point is finally reached where more work and more things become less appealing than more leisure. So you begin to take a little more leisure. Eventually a point will be reached when almost all the next hour will go for leisure, because it finally comes to have more appeal than does greater material welfare." p. 87
"The "lazy" person likes leisure so much that only dire necessity or some sort of threat will cause him to bestir himself for much work, because of his high susceptibility to the lures of leisure. Some persons, on the other hand, have strong fortitude and rigidly discipline themselves to purposeful work. They will keep at their work far beyond the starvation level." p. 87
"Our incomes per year could have risen even further than they have up to now. But leisure has been chosen in preference to some of the luxurious living that would have been possible with more hours of work." . 88
"The change is what one might expect. The higher your material living, the more you will probably listen to the appealing call of leisure, taking more and more of your rising wage as the "wage of leisure." Or if you don't take more leisure, having become fixed in your habits of work, your children probably will adjust the family tree to the times." p. 88
On unionized unemployment: "Unemployment prevails where a person who wants to work for the wage an employer is willing to pay is prohibited from doing so by some outside power. So fewer hours than wage earners would prefer of their own free choice amounts to the same thing as forced unemployment." p. 91
"we can surely see how leisure may tend to erode both virtue and wisdom. We can surely see the danger of a serious leisure-disease developing among mankind, a disease which work formerly restrained. For work apparently has some sort of therapeutic quality so far as virtue is concerned. And its substitute under leisure seems not yet to have been found." pp. 93-4
"the shorter work week is an important cause of crime." . . . "Mental problems of all sorts, too, may in some important degree be the product of increasing leisure." p. 94
"Since wages are a price, they are subject to all the rules of prices and pricing, the same as anything else. All that has been said about the function of price applies to wages the same as to wheat. There is a point of equality at the free market price where the supply of labor and the demand for labor find a balance.
As wages are forced either above or below the free market point, there will be created either a surplus or a shortage of labor. And there will be less employment either above or below the free wage point — less labor traded — to the extent that higher wages discourage those who might want to employ help, whereas lower wages discourage people from wanting available jobs. In one direction from the free price, employers offer fewer and fewer jobs; in the other direction, fewer and fewer persons want jobs." p. 100
"If other employers want you at the price you are getting, or perhaps more, your price on your services is too low. If, on the other hand, nobody wants you at the price you ask, your price is too high." p. 101
"When wheat is priced above the free market level, the accumulation that is unsaleable at that price is called a surplus. When the comparable situation arises among the working force of a nation, we call it unemployment." p. 101
"if I don't want to work at the best price the highest bidder for my services is willing to offer me, I am merely preferring idleness to work. And if I thus prefer idleness to work, I am not really an unemployed person. My situation is best described by saying that employment is just not an object of my yearning, sufficient for me to merit the use of the label "unemployed." p. 102
"a decline of one per cent in wages would uncover new jobs for 3 or 4 per cent more work." p. 104
"At the free market wage of 100 (base scale) there is full employment — no unemployment. Everyone who really wants to work has a job.
Now assume that wages are to be forced above the free market level (moving leftward from 100, on the base scale). Employment declines — unemployment increases — at a rapid rate, according to the factor of three. Starting from whatever level one wants to consider, a one per cent rise in wages will reduce employment by 3 per cent.
Wages about 10 per cent above the free market price would mean unemployment of about one-fourth of the working force.
If wages were to go up about 26 per cent, it would unemploy about half the working force." p. 105
"But since there is full employment at the free market wage, reductions in wages from that point can
cause "negative unemployment" only under special conditions. New persons not normally in the working force may be pulled into jobs at a wage below the free market point if they can be induced to do so under the urgency of war, or something like that." p. 106
"if the price of work is too high, it causes a surplus of labor — 'unemployment.'" p. 107
"New jobs of all sorts are found when wages go down. But when wages go up beyond the free market point, some jobs close down completely and others close down part of the time." p. 107
"Even a child knows that the higher his wage the more will be his income — except that it isn't so. This would be true only if one could keep his job at the higher wage. If it were true that I could keep my job anyway, then an infinite wage would seem to be the ideal. The trouble is, however, that jobs are lost three times as fast as wages are raised." p. 108
Something every law firm manager should keep in mind is on pg. 108.
Too many good quotes to list here.
The first part is slow, but it lays a foundation.
Every idiot who calls for a "universal basic income" ought to read Harper's short book. (Lookin' at you, Zuckerberg).
"A political government is an agency we set up to govern ourselves. . . . The distinctive feature of the political governmental body is its monopoly status, its compulsory "sales" to every member of the society." p. 67
Inability to tell the true price of something when it is provided by a monopoly: "It seems certain, then, that the value of our present political government is completely uncertain for any one person
and, therefore, for all persons combined. We can't possibly know its worth, so long as a given service remains a monopoly that individuals are compelled to purchase. All we know, for any one item, is that it is still tolerated by a majority of the vocal citizens." p.69
Consider the cost of "governing ourselves" - In the 1950s: "The present cost of governing ourselves (cost of government) is about thirty-one times as much as it was a century ago, per person. . . . Or if we express it in terms of wages, the cost of governing ourselves a century ago took about three minutes of time out of each hour of work; now it takes nineteen minutes out of each hour of work." p. 69
"Suppose it were possible, in some way, to govern ourselves with the same proportion of our working time as prevailed a half century ago. Were this possible, the amount of income remaining to the worker for free choice in his spending — his pay after taxes — presumably could have risen at least twice as much as it has. Our increased capacity to produce, if allowed to operate to the full, could have doubled our increase in economic benefits." p. 70
"[P]erhaps the best way to get higher wages now would be to hire out to ourselves individually, so to speak, for more of the job of governing ourselves. That would mean more self-reliance, more self-control, and all the rest. In this way great savings could be made in the drain on our incomes, leaving that much more to spend on things of our choice and preference. This, in effect, is the same thing as a rise in wages. Those of us who labor for a living might well consider a completely new direction — a new objective — in our bargaining for wages. Since there is no more to be gotten from employers than the slow increase in productivity will allow, perhaps we should start directing our bargaining power at
government. Why not govern ourselves more, and thereby be able to keep more of what we are nominally paid? A dollar saved is a dollar earned." p.70-71
"The communists-socialists have a plan for society that goes like this: "From each according to his ability, to each according to his need."
This communal blueprint is appealing enough on the surface. Each of us wants to do the best he can according to his ability. And who among us doesn't yearn to have his needs fulfilled? So this slogan sounds like Heaven before the here after.
The barb in the bait lies concealed beneath the pleasant dreams of a Utopia. For the brutal discipline of reality rules over hopes that can't be hatched.
The catch is twofold. First, as a member of a communist socialist society you shall not be allowed the privilege of pursuing the release of your abilities at a task which seems best to you. A central authority will decide this for you and for everyone else. He will do this in order to keep a workable ratio between the persons on the stage and in the audience at the opera; in order to have passengers who will ride the trains instead of all being engineers; in order to have some one who will take care of the sewage, and the like. The Commissioner of Opportunities to Work will command you to work at the job of his choice, not yours. You may neither strike nor quit nor change to another job more suited — as
you see it — to your abilities." pp.72-73
"The second catch in this slogan is that your official allotment "according to need" will have no necessary relationship to your hopes and expectations. For it is the central authority, not you, who decides on your needs. . . . Under communism, the central authority decides whether it is bread or cake you "need." . . . All these "needs" will be decided with a cold, inhuman arbitrariness. Since the Commissar of the Peoples' Needs never met you — probably doesn't even know you exist — his decisions can't possibly come even close to your version of your needs.
And even though the Commissar chanced to know your wishes, his job is to ration acutely scarce things, labeling them "your needs." Production is low under such a system." pp.73-4
"A punster once remarked that life in a communist country means that everything not compulsory is forbidden. And in like manner, the communist-socialist slogan should probably be reworded as follows: "From each according to his ability, and keep from each what he does not need."
Complete and thorough communism has been rare in the world because it is a highly perishable system.
The less-than-complete patterns of communism which exist in various nations go by another name. They have become known as Welfare States.
We need not look afar to some foreign country or ancient society to find this communist policy in operation, in a lesser degree. We have it in our own nation, in widespread forms and instances." pp. 74-5
On fringe benefits: "To illustrate, let us say that for every dollar taken out of your income for a "fringe benefit" by someone else's idea of your need, you get something worth only 75 cents to you. Then it would have been worth one-third more to you to have gotten the dollar instead — for a dollar's worth of purchases as you appraise them. For anyone to speak of a loss of 25 cents out of the dollar as a benefit is a strange use of the word, indeed. Rather, it is a negative fringe benefit.
My dictionary says that the opposite of a benefit is a detriment. So instead of being a fringe benefit, these kinds of things are really fringe detriments. Even then, they are not on the fringe of your welfare; they are as much at the heart of your welfare as any other dollar of your pay." pp. 80-1
"A friend of mine speaks of them as little, corporate welfare states. And, to be sure, they are just that — if we mean by a welfare state the centrally controlled spending of the people's income for what those in control decide is the need of the people." p. 81
"And as a final point, these schemes of so-called fringe benefits often are a serious threat to our continued progress. Ostensibly their purpose is to reduce turnover of labor and stabilize employment. But they tend to freeze a worker in his job. He does not leave for a more productive job because he would then lose his seniority status and the "accumulated benefits" which he cannot take with him. So he keeps his "security," which the union or the company allows him to have only if he stays where he is. He does not follow opportunity where it leads. "Once a coal miner, always a coal miner," is its effect. This sort of freezing tends back toward the old European caste system, and could bring an end to the traditional American growth of welfare and increasing wages.
So "fringe benefits," rather than coming from pie in the sky, come out of wages — out of what could be paid as money wages. And furthermore, they comprise a serious threat to our progress." pp. 82-3
"One benefit we all seem to yearn for is idleness — all we can get of it. But do we, really?
If a thoroughly well person is hospitalized and forced to be inactive for a day or two, it is said that he would feel about as ill as one who has had an operation.
We want to be free of what we are currently obligated to do, in order to do something else for a change.
The truck driver wants leisure to get off the road; perhaps he wants to spend a few quiet days at home. But a telephone operator or a watch repairman yearns for leisure so he can get in a car and spin down the road.
The farmer wants leisure to go to the city. The city dweller wants it to go to the country.
The coal miner wants leisure for a plane trip. The plane pilot wants leisure to avoid one.
A hired ballplayer wants leisure away from the game so as to be able to get back home on his farm. The farmer wants leisure to play ball at the picnic.
Two persons might even pay a vacation expense direct to one another for reversing their regular activities." p. 85
"A hundred years ago in the United States, for instance, the "work year" was a little over 3,500 hours on the job, out of the total of 8,766 hours in a year. Practically all of great grandfather's leisure hours were needed for eating and sleeping.
With our present advanced productivity, one could probably maintain himself at the level of bare subsistence with the income from as few as 200 hours of work per year. This would provide an extremely humble existence, to be sure, without many things we have come to think of — falsely —
as absolute necessities.
We now work 2,000 hours, or a little less, per year rather than these minimal 200 hours. We do this in order to have many more economic things to enjoy, beyond the level of strict necessity." p. 86
"Moving on up the scale of working hours, a point is finally reached where more work and more things become less appealing than more leisure. So you begin to take a little more leisure. Eventually a point will be reached when almost all the next hour will go for leisure, because it finally comes to have more appeal than does greater material welfare." p. 87
"The "lazy" person likes leisure so much that only dire necessity or some sort of threat will cause him to bestir himself for much work, because of his high susceptibility to the lures of leisure. Some persons, on the other hand, have strong fortitude and rigidly discipline themselves to purposeful work. They will keep at their work far beyond the starvation level." p. 87
"Our incomes per year could have risen even further than they have up to now. But leisure has been chosen in preference to some of the luxurious living that would have been possible with more hours of work." . 88
"The change is what one might expect. The higher your material living, the more you will probably listen to the appealing call of leisure, taking more and more of your rising wage as the "wage of leisure." Or if you don't take more leisure, having become fixed in your habits of work, your children probably will adjust the family tree to the times." p. 88
On unionized unemployment: "Unemployment prevails where a person who wants to work for the wage an employer is willing to pay is prohibited from doing so by some outside power. So fewer hours than wage earners would prefer of their own free choice amounts to the same thing as forced unemployment." p. 91
"we can surely see how leisure may tend to erode both virtue and wisdom. We can surely see the danger of a serious leisure-disease developing among mankind, a disease which work formerly restrained. For work apparently has some sort of therapeutic quality so far as virtue is concerned. And its substitute under leisure seems not yet to have been found." pp. 93-4
"the shorter work week is an important cause of crime." . . . "Mental problems of all sorts, too, may in some important degree be the product of increasing leisure." p. 94
"Since wages are a price, they are subject to all the rules of prices and pricing, the same as anything else. All that has been said about the function of price applies to wages the same as to wheat. There is a point of equality at the free market price where the supply of labor and the demand for labor find a balance.
As wages are forced either above or below the free market point, there will be created either a surplus or a shortage of labor. And there will be less employment either above or below the free wage point — less labor traded — to the extent that higher wages discourage those who might want to employ help, whereas lower wages discourage people from wanting available jobs. In one direction from the free price, employers offer fewer and fewer jobs; in the other direction, fewer and fewer persons want jobs." p. 100
"If other employers want you at the price you are getting, or perhaps more, your price on your services is too low. If, on the other hand, nobody wants you at the price you ask, your price is too high." p. 101
"When wheat is priced above the free market level, the accumulation that is unsaleable at that price is called a surplus. When the comparable situation arises among the working force of a nation, we call it unemployment." p. 101
"if I don't want to work at the best price the highest bidder for my services is willing to offer me, I am merely preferring idleness to work. And if I thus prefer idleness to work, I am not really an unemployed person. My situation is best described by saying that employment is just not an object of my yearning, sufficient for me to merit the use of the label "unemployed." p. 102
"a decline of one per cent in wages would uncover new jobs for 3 or 4 per cent more work." p. 104
"At the free market wage of 100 (base scale) there is full employment — no unemployment. Everyone who really wants to work has a job.
Now assume that wages are to be forced above the free market level (moving leftward from 100, on the base scale). Employment declines — unemployment increases — at a rapid rate, according to the factor of three. Starting from whatever level one wants to consider, a one per cent rise in wages will reduce employment by 3 per cent.
Wages about 10 per cent above the free market price would mean unemployment of about one-fourth of the working force.
If wages were to go up about 26 per cent, it would unemploy about half the working force." p. 105
"But since there is full employment at the free market wage, reductions in wages from that point can
cause "negative unemployment" only under special conditions. New persons not normally in the working force may be pulled into jobs at a wage below the free market point if they can be induced to do so under the urgency of war, or something like that." p. 106
"if the price of work is too high, it causes a surplus of labor — 'unemployment.'" p. 107
"New jobs of all sorts are found when wages go down. But when wages go up beyond the free market point, some jobs close down completely and others close down part of the time." p. 107
"Even a child knows that the higher his wage the more will be his income — except that it isn't so. This would be true only if one could keep his job at the higher wage. If it were true that I could keep my job anyway, then an infinite wage would seem to be the ideal. The trouble is, however, that jobs are lost three times as fast as wages are raised." p. 108
Something every law firm manager should keep in mind is on pg. 108.
Too many good quotes to list here.
May 28, 2018
There are so many myths out there about economics and apparently they haven't changed since the 1950s. This book explains things really clearly and dispels those myths.
For instance, it points out that wages cannot meaningfully increase without an increase in production, since ultimately people can't buy more than all the things made, regardless of how much money they have. If everyone has more money but the pool of available products stays the same, money simply becomes less valuable - inflation. And "benefits" for workers are anything but. They are limitations inhibiting the choices of employer and employee alike. Any dollar spent on a "benefit" is a dollar the worker could have just received directly and spent as he saw fit. Holidays with pay are really just a way of spreading out when someone is paid for their work - ultimately the total amount they earn is proportional to the total amount of work they do.
This book also helped me understand the Great Depression finally and in pretty simple terms. I understood that tariffs were a bad idea. But otherwise, in terms of money, it used to confuse me. Milton Friedman seems to largely blame it on the Federal Reserve. But even if banks fail and that causes lots of deflation from a contraction of the money supply (since banks loan out much of their deposits artificially increasing the money supply), why shouldn't productive people be working? Why wouldn't people still trade? How could unemployment reach roughly 30%?
Well, if there are policies or structures which make it difficult or impossible for wages to go down, that could explain it. A sudden deflation makes existing nominal wages too high and then if the wages can't go down, you get a surplus of labour - unemployment. It's the same effect as what happens with a high minimum wage (MW). American Samoa had major problems around 2009 with some rapid MW increases resulting in massive unemployment and many major businesses closing down. Whether its due to deflation or MW increases, when wages are artificially above the supply-and-demand level, unemployment goes way up. It's understandable for deflation to cause temporary problems, since the value of a dollar becomes uncertain, but things should stabilise and the economy should adjust. Wages and prices in general need to be allowed to change freely.
You don't have to be an economics master to understand this book. It's clearly written with lots of good examples to get the points across. It sticks to simple and powerful economic principles avoiding any far-out theories. I think this book really helped reinforce my understanding of economics overall (even basic concepts like supply-and-demand became much clearer). In that way, it may be second only to Sowell's Basic Economics and perhaps Friedman's Free to Choose TV series in making economics easy to understand and relate to real life.
For instance, it points out that wages cannot meaningfully increase without an increase in production, since ultimately people can't buy more than all the things made, regardless of how much money they have. If everyone has more money but the pool of available products stays the same, money simply becomes less valuable - inflation. And "benefits" for workers are anything but. They are limitations inhibiting the choices of employer and employee alike. Any dollar spent on a "benefit" is a dollar the worker could have just received directly and spent as he saw fit. Holidays with pay are really just a way of spreading out when someone is paid for their work - ultimately the total amount they earn is proportional to the total amount of work they do.
This book also helped me understand the Great Depression finally and in pretty simple terms. I understood that tariffs were a bad idea. But otherwise, in terms of money, it used to confuse me. Milton Friedman seems to largely blame it on the Federal Reserve. But even if banks fail and that causes lots of deflation from a contraction of the money supply (since banks loan out much of their deposits artificially increasing the money supply), why shouldn't productive people be working? Why wouldn't people still trade? How could unemployment reach roughly 30%?
Well, if there are policies or structures which make it difficult or impossible for wages to go down, that could explain it. A sudden deflation makes existing nominal wages too high and then if the wages can't go down, you get a surplus of labour - unemployment. It's the same effect as what happens with a high minimum wage (MW). American Samoa had major problems around 2009 with some rapid MW increases resulting in massive unemployment and many major businesses closing down. Whether its due to deflation or MW increases, when wages are artificially above the supply-and-demand level, unemployment goes way up. It's understandable for deflation to cause temporary problems, since the value of a dollar becomes uncertain, but things should stabilise and the economy should adjust. Wages and prices in general need to be allowed to change freely.
You don't have to be an economics master to understand this book. It's clearly written with lots of good examples to get the points across. It sticks to simple and powerful economic principles avoiding any far-out theories. I think this book really helped reinforce my understanding of economics overall (even basic concepts like supply-and-demand became much clearer). In that way, it may be second only to Sowell's Basic Economics and perhaps Friedman's Free to Choose TV series in making economics easy to understand and relate to real life.
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May 13, 2020half read
July 17, 2022
An extraordinary book . Starts off with the simplest of examples of how society and wages evolve . A book so profound that I think it is mandatory reading every year .
November 6, 2023
Productivity, inflation. Artificial wage is like playing with dynamite.
December 13, 2024
Many concise and logical explanations help the reader understand the fundamentals. It’s dated… but I’d love this book if I was a rich capitalist needing to justify my privilege.
February 2, 2025
Great to revisit
1.) Wages are inextricably linked to production. Just as stock returns over time coincide with the return of the business that underlies it, wages reflect increases and decreases in productivity. This is one of the beauties of the capitalist system as theoretically wages can rise insofar as humans and tools do not reach their total potential/limit.
2.) Wages only have value equivalent to what can be purchased. It is important to remember money is a mechanism for facilitating exchange and thus wages should be thought of in terms of what one can buy. Every buyer needs a seller. If wages are at proper levels they will move in accordance with production however in a flawed system wages can be artificially lifted, causing short term excitement, but long term pain when one realizes their is little to exchange their paper for.
3.) One should not confuse the individual increase in a wage with an overall increase in prices. My wage going from $15 today to $20 next year is useless if I am still only able to afford the same value of goods for my money. Inflation is the product of too much money chasing too few goods causing prices to rise and buying power to drop. It occurs naturally due to unlimited wants outstripping production as well as intervention from the government.
4.) Only you know how best to spend you disposable income to maximize your life, any dollar to the government is a dollar you give to someone else to tell you how best to spend your money. This is not a knock at the government or taxation system so much as it just a reminder to always understand the relationship between your wallet and the gov.
1.) Wages are inextricably linked to production. Just as stock returns over time coincide with the return of the business that underlies it, wages reflect increases and decreases in productivity. This is one of the beauties of the capitalist system as theoretically wages can rise insofar as humans and tools do not reach their total potential/limit.
2.) Wages only have value equivalent to what can be purchased. It is important to remember money is a mechanism for facilitating exchange and thus wages should be thought of in terms of what one can buy. Every buyer needs a seller. If wages are at proper levels they will move in accordance with production however in a flawed system wages can be artificially lifted, causing short term excitement, but long term pain when one realizes their is little to exchange their paper for.
3.) One should not confuse the individual increase in a wage with an overall increase in prices. My wage going from $15 today to $20 next year is useless if I am still only able to afford the same value of goods for my money. Inflation is the product of too much money chasing too few goods causing prices to rise and buying power to drop. It occurs naturally due to unlimited wants outstripping production as well as intervention from the government.
4.) Only you know how best to spend you disposable income to maximize your life, any dollar to the government is a dollar you give to someone else to tell you how best to spend your money. This is not a knock at the government or taxation system so much as it just a reminder to always understand the relationship between your wallet and the gov.
December 10, 2015
Great book, easy to read, very explanatory.
September 16, 2016
Very conservative but has good basis in economic theory. Some parts (concerning inflation especially) are a little out dated and over-spoken, but overall worth a look through.
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