Sunday, December 31, 2006
Resolutions for Another New Year
Here is a piece I wrote almost exactly a year ago. It holds up pretty well.
Repeat After Me
By N. Gregory Mankiw
The Wall Street Journal, January 3, 2006
CAMBRIDGE, Mass. -- Now is a time when most of us sit back and reflect on the past year and on how to do better in the year ahead. Since I know, however, that economic policy makers inside the Beltway are often too busy for such introspection, my gift to them is a list of seven New Year's resolutions. Any senator, congressman or presidential wannabe is free to adopt them as his or her own. Just repeat after me:
� #1: This year I will be straight about the budget mess. I know that the federal budget is on an unsustainable path. I know that when the baby-boom generation retires and becomes eligible for Social Security and Medicare, all hell is going to break loose. I know that the choices aren't pretty -- either large cuts in promised benefits or taxes vastly higher than anything ever experienced in U.S. history. I am going to admit these facts to the American people, and I am going to say which choice I favor.
� #2: This year I will be unequivocal in my support of free trade. I am going to stop bashing the Chinese for offering bargains to American consumers. I am going to ask the Bush administration to revoke the textile quotas so Americans will find it easier to clothe their families. I am going to vote to repeal the antidumping laws, which only protect powerful domestic industries from foreign competition. I am going to admit that unilateral disarmament in the trade wars would make the U.S. a richer nation.
� #3: This year I will ask farmers to accept the free market. While I believe the government should provide a safety net for the truly needy, taxpayers shouldn't have to finance handouts to farmers, many of whom are wealthy. Farmers should meet the market test as much as anyone else. I will vote to repeal all federal subsidies to growers of corn, wheat, cotton, soybeans and rice. I will vote to allow unrestricted import of sugar. (See resolution no. 2.) I will tell Americans that eliminating our farm subsidies should not be a "concession" made in trade negotiations but a policy change that we affirmatively embrace.
� #4: This year I will admit that there are some good taxes. Everyone hates taxes, but the government needs to fund its operations, and some taxes can actually do some good in the process. I will tell the American people that a higher tax on gasoline is better at encouraging conservation than are heavy-handed CAFE regulations. It would not only encourage people to buy more fuel-efficient cars, but it would encourage them to drive less, such as by living closer to where they work. I will tell people that tolls are a good way to reduce traffic congestion -- and with new technologies they are getting easier to collect. I will advocate a carbon tax as the best way to control global warming. Because we may well need to raise more revenue (see resolution no. 1), I'll always be on the lookout for these good taxes.
� #5: This year I will not be tempted to bash the Fed. Ben Bernanke, soon to be the new chairman of the Federal Reserve, will not inherit Alan Greenspan's halo, and so may be a tempting target. But I will resist temptation. I know that the U.S. has an independent central bank for good reason. I know that sometimes the Fed needs to raise interest rates to fight inflation, even if it risks slowing growth in incomes and employment. I will let Mr. Bernanke and his colleagues do their job. Difficult as it is, I will hold my tongue.
� #6: This year I will vote to eliminate the penny. The purpose of the monetary system is to facilitate exchange, but I have to acknowledge that the penny no longer serves that purpose. When people start leaving a monetary unit at the cash register for the next customer, the unit is too small to be useful. I know that some people will be upset when their favorite aphorisms become anachronistic, but a nickel saved is also a nickel earned.
� #7: This year I will be modest about what government can do. I know that economic prosperity comes not from government programs but from entrepreneurial inspiration. Adam Smith was right when he said, "Little else is required to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice." As a government official, I am not going to promise more than I can deliver. I am going to focus my attention on these three goals -- peace, easy taxes, and a tolerable administration of justice -- and I am going to trust the creativity of the American people to do the rest.
Repeat After Me
By N. Gregory Mankiw
The Wall Street Journal, January 3, 2006
CAMBRIDGE, Mass. -- Now is a time when most of us sit back and reflect on the past year and on how to do better in the year ahead. Since I know, however, that economic policy makers inside the Beltway are often too busy for such introspection, my gift to them is a list of seven New Year's resolutions. Any senator, congressman or presidential wannabe is free to adopt them as his or her own. Just repeat after me:
� #1: This year I will be straight about the budget mess. I know that the federal budget is on an unsustainable path. I know that when the baby-boom generation retires and becomes eligible for Social Security and Medicare, all hell is going to break loose. I know that the choices aren't pretty -- either large cuts in promised benefits or taxes vastly higher than anything ever experienced in U.S. history. I am going to admit these facts to the American people, and I am going to say which choice I favor.
� #2: This year I will be unequivocal in my support of free trade. I am going to stop bashing the Chinese for offering bargains to American consumers. I am going to ask the Bush administration to revoke the textile quotas so Americans will find it easier to clothe their families. I am going to vote to repeal the antidumping laws, which only protect powerful domestic industries from foreign competition. I am going to admit that unilateral disarmament in the trade wars would make the U.S. a richer nation.
� #3: This year I will ask farmers to accept the free market. While I believe the government should provide a safety net for the truly needy, taxpayers shouldn't have to finance handouts to farmers, many of whom are wealthy. Farmers should meet the market test as much as anyone else. I will vote to repeal all federal subsidies to growers of corn, wheat, cotton, soybeans and rice. I will vote to allow unrestricted import of sugar. (See resolution no. 2.) I will tell Americans that eliminating our farm subsidies should not be a "concession" made in trade negotiations but a policy change that we affirmatively embrace.
� #4: This year I will admit that there are some good taxes. Everyone hates taxes, but the government needs to fund its operations, and some taxes can actually do some good in the process. I will tell the American people that a higher tax on gasoline is better at encouraging conservation than are heavy-handed CAFE regulations. It would not only encourage people to buy more fuel-efficient cars, but it would encourage them to drive less, such as by living closer to where they work. I will tell people that tolls are a good way to reduce traffic congestion -- and with new technologies they are getting easier to collect. I will advocate a carbon tax as the best way to control global warming. Because we may well need to raise more revenue (see resolution no. 1), I'll always be on the lookout for these good taxes.
� #5: This year I will not be tempted to bash the Fed. Ben Bernanke, soon to be the new chairman of the Federal Reserve, will not inherit Alan Greenspan's halo, and so may be a tempting target. But I will resist temptation. I know that the U.S. has an independent central bank for good reason. I know that sometimes the Fed needs to raise interest rates to fight inflation, even if it risks slowing growth in incomes and employment. I will let Mr. Bernanke and his colleagues do their job. Difficult as it is, I will hold my tongue.
� #6: This year I will vote to eliminate the penny. The purpose of the monetary system is to facilitate exchange, but I have to acknowledge that the penny no longer serves that purpose. When people start leaving a monetary unit at the cash register for the next customer, the unit is too small to be useful. I know that some people will be upset when their favorite aphorisms become anachronistic, but a nickel saved is also a nickel earned.
� #7: This year I will be modest about what government can do. I know that economic prosperity comes not from government programs but from entrepreneurial inspiration. Adam Smith was right when he said, "Little else is required to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice." As a government official, I am not going to promise more than I can deliver. I am going to focus my attention on these three goals -- peace, easy taxes, and a tolerable administration of justice -- and I am going to trust the creativity of the American people to do the rest.
Saturday, December 30, 2006
Ford sums up Hayek
I don't know if Gerald Ford ever read economist Friedrich Hayek's Road to Serfdom (or if he speechwriters did), but this Ford quotation strikes me as a good one-sentence summary of the book:
A government big enough to give you everything you want is a government big enough to take from you everything you have.
Chinese Competitors
Whenever I preach the benefits of unfettered international trade, I can count on a smart-aleck commenter saying something like, "Okay, Mankiw, let's see you compete in the world market against Chinese-made goods."
Well, it turns out, I already do.
Well, it turns out, I already do.
Friday, December 29, 2006
Drivers respond to incentives
An ec 10 student emails an article with evidence that higher gas prices induce more people to carpool:
A nice case study for the Pigou Club files.It would seem intuitive: If gasoline prices become painful enough, people will find ways to cope, such as car-pooling or using mass transit. Now there are statistics to buttress that assumption in at least one respect.
They come in a state Department of Transportation report completed only last month and based upon monitoring of the high-occupancy vehicle lanes on interstates 91, 84 and 384. Those 38 miles of HOV lanes are restricted to vehicles carrying two or more people, and the DOT surveys their usage every year in mid-September.
In 2005, with gas prices at $3.16 a gallon, daily use of the HOV lanes hit an all-time high, about 10,180 people during the morning rush hours.
For anyone who thought those high gasoline prices might lead people to change their commuting habits for the long term, however, the new numbers are disappointing. This September, a year later, with gas prices at $2.77 a gallon, daily usage plummeted to 2004 levels, 8,523 people during the morning rush. On I-91 southbound, 1,324 vehicles carried 3,854 people during the commute to work, representing decreases of 28 percent and 16 percent from the previous year.
"HOV usage does follow pretty closely with the gasoline per-gallon pricing," said Jim Andrini, a transportation supervising planner at the agency.
Preppy Rehearsal Dinner Dress
Wedding dress. Check.
Now it's time to move onto the rehearsal dinner dress. Because we�re getting married in a church, I wanted to keep this look PG. When I was in NYC a couple of months ago, I ran across this beautiful Diane Von Furstenberg number and fell in love.
What do yall think? I really like the blue gingham look. My mom thinks it�s a bit too casual, but I think it is such a cute design. I'm really into the whole preppy shirt dress look. Best of all, Intermix online has it on sale.
Now it's time to move onto the rehearsal dinner dress. Because we�re getting married in a church, I wanted to keep this look PG. When I was in NYC a couple of months ago, I ran across this beautiful Diane Von Furstenberg number and fell in love.
What do yall think? I really like the blue gingham look. My mom thinks it�s a bit too casual, but I think it is such a cute design. I'm really into the whole preppy shirt dress look. Best of all, Intermix online has it on sale.
Some Good Trade News
With populism seemingly winning out over liberal trade policy in the public debate of late, I am pleased to note some good news:
Here is a previous post on zeroing.In addition to the U.S. International Trade Commission deviating from its conventional script and revoking 15 longstanding antidumping measures on key steel products, the Office of the U.S. Trade Representative announced to Congress the administration�s decision to implement a critical change to the Commerce Department�s antidumping calculation methodology, which, if implemented in good faith, will likely reduce the incidence and disruptive impact of antidumping measures henceforth. In response to a series of rulings from the dispute settlement body of the World Trade Organization, which found a U.S. methodological practice known as �zeroing� to violate Article 2.4.2 of the WTO�s Antidumping Agreement, Commerce decided (albeit, grudgingly) to change it�s policy.
Thursday, December 28, 2006
NEW YORK POST - face hunter in the "75 things we loved about 2006"
Wow, they put this blog on their favourite-of-the-year list which have been published in the famous "page 6" of the December 28th issue.
Universal 401k Accounts
In today's NY Times, Tyler Cowen discusses proposals for universal 401k accounts, which "would pay poor people to save." My guess is that we will see a lot of discussion of this kind of proposal over the next couple of years.
Here is the question I am left with: Is this proposed policy the best way to redistribute income? That is, if Congress were to allocate a certain amount of additional funds to help the poor, would advocates of these accounts, such as Gene Sperling and Peter Orszag, prefer to spend the money on these saving incentives or on, say, an expansion of the Earned Income Tax Credit?
No doubt, they would say that they would prefer to do both. But that answer just brings us back to the old question of how much income redistribution the government should pursue. The more novel question, raised by these proposals, concerns the form of redistribution. That is, holding the amount of income redistribution constant, what is the optimal way to transfer resources to the poor?
Here is the question I am left with: Is this proposed policy the best way to redistribute income? That is, if Congress were to allocate a certain amount of additional funds to help the poor, would advocates of these accounts, such as Gene Sperling and Peter Orszag, prefer to spend the money on these saving incentives or on, say, an expansion of the Earned Income Tax Credit?
No doubt, they would say that they would prefer to do both. But that answer just brings us back to the old question of how much income redistribution the government should pursue. The more novel question, raised by these proposals, concerns the form of redistribution. That is, holding the amount of income redistribution constant, what is the optimal way to transfer resources to the poor?
New J. Crew Wedding Selection
Exciting news everyone! J. Crew has its infamous new spring/summer wedding collection posted here. I already have a few favorites:
There�s Anna, a perfect bridesmaid choice.
There�s Anna, a perfect bridesmaid choice.
Or Hannah would make a perfect rehearsal dinner dress. 
And the PERFECT preppy summer wedding dress is (drum roll please) Celeste. Look at how beautiful the large circles look on the fabric. It is prepptastic.
And the PERFECT preppy summer wedding dress is (drum roll please) Celeste. Look at how beautiful the large circles look on the fabric. It is prepptastic.
Wednesday, December 27, 2006
Milton and Rose
Here you can find a long interview with Milton and Rose Friedman, suitable for filling your holiday break.
Fear of Asia
His humility notwithstanding, Jay Matthews, the education columnist for the Washington Post, would have made a pretty good economist:
From today's Washington Post.I am not an international economist, to say the least. I had to struggle to get through Ec 1 my sophomore year of college. But I am a careful reader of the business and economic reporting of my newspaper, so I think I am qualified to ask two questions -- neither of which are answered in this report -- about those scary folk in south and east Asia.
Question one: Isn't the freedom and flexibility of American culture and politics, not the quality of our educational system, what has given us such power in the world? India appears to have adopted many of those freedoms and its people have a chance to be just as creative as we are. But I have spent much of my life studying China and I don't see any way that country is going to set its great culture free any time soon. The China brain drain will be in our favor until Beijing adopts democracy and human rights, and that will take a long time.
Question two: Even if both India and China do attain that potent blend of liberty and creativity, how exactly is that going to hurt Americans? Their economies are thriving because world commerce is losing its dependence on borders and tariffs, and the old way of thinking (accepted without question in this report) that if some poor countries get rich, then some rich countries, like us, are going to become poor. The experts on these issues that I find most persuasive point out that only countries cut off from the world economy, like North Korea, are declining, and that is because they are not globalized. Everyone else is discovering that the better off India and China and El Salvador and Tanzania become, the better off we all are. The more middle-class people overseas, the more customers there will be for the newest gizmos that our large and innovative middle-class country keeps coming up with.
Preppy Christmas Recap
Hope everyone had a great holiday!
I managed to balance spending time with my in-laws-to-be and my parents this year while pulling off a rather yummy Christmas eve dinner party. All in all a successful, yet not exactly relaxing, Christmas 2006.
A pic of the super cute lil sis and the super cute littler cousin. My sister and I are diggin red as an accent color this year.
The husband-to-be seemed very happy with his presents, especially the light up Tetris game that Santa so nicely tucked into his stocking. I think that he has beat his high score many times over in these last few days.
But, onto wedding fun. I MUST, MUST, MUST link to this hillarious site - Godawful Wedding Crap. If you want to laugh your butt off spend some time looking at this amazing selection of awful wedding products.
As the months to my wedding draw near, I have lots on my plate this week. I had my first meeting with my alterations lady yesterday, I am finalizing linen decisions this week and my mom has booked the venue for the bridesmaids tea party.
I also snagged the ivory version of my jcrew bridesmaids dresses on ebay, so I now have a getaway outfit that will last through the wedding after-party at a neighboring bar. All for the low, low price of 30 dollars!
I managed to balance spending time with my in-laws-to-be and my parents this year while pulling off a rather yummy Christmas eve dinner party. All in all a successful, yet not exactly relaxing, Christmas 2006.
A pic of the super cute lil sis and the super cute littler cousin. My sister and I are diggin red as an accent color this year.
The husband-to-be seemed very happy with his presents, especially the light up Tetris game that Santa so nicely tucked into his stocking. I think that he has beat his high score many times over in these last few days.
But, onto wedding fun. I MUST, MUST, MUST link to this hillarious site - Godawful Wedding Crap. If you want to laugh your butt off spend some time looking at this amazing selection of awful wedding products.
As the months to my wedding draw near, I have lots on my plate this week. I had my first meeting with my alterations lady yesterday, I am finalizing linen decisions this week and my mom has booked the venue for the bridesmaids tea party.
I also snagged the ivory version of my jcrew bridesmaids dresses on ebay, so I now have a getaway outfit that will last through the wedding after-party at a neighboring bar. All for the low, low price of 30 dollars!
Tragedy of the Bunnies
In the fall in ec 10, we studied the economics of common resources. Here is a game that illustrates the point.
Tuesday, December 26, 2006
Working at Cross Purposes
Consider this policy aimed to help workers at the bottom of the income distribution:
1. A wage subsidy for unskilled workers, paid for by
2. A tax on employers who hire unskilled workers.
Now, if you think like an economist, you might wonder about the logic of part 2 of this proposal. You might say, "A tax on the hiring of unskilled workers would discourage their employment, offsetting some of the benefits they would get from the wage subsidy. It would be better to finance the wage subsidy with a more general tax, rather than with a tax targeted specifically on employers of unskilled workers."
I agree. So why did I bring up this proposal? Because a policy essentially the same looks likely to become law, having been advocated by Congressional leaders and, recently at his news conference, President Bush. Haven't heard of it? It is called an increase in the minimum wage.
------
Update: A commenter asked about the technical equivalence of minimum wages with taxes and subsidies. I will leave this issue as an exercise for the reader, but here are some hints about how to think about it in a competitive labor market using supply and demand curves. Let w be the market wage, and let W be the target wage of policymakers. Draw supply and demand curves for labor such that the equilibrium wage in the absence of any policy is below W. Now suppose the government tells suppliers of labor: Whenever w is less than W, you are paid a subsidy equal to W-w. Similarly, it tells demanders of labor: Whenever w is less than W, you are charged a tax equal to W-w. Calculate quantity supplied and quantity demanded as a function of the market wage w. Graph the new supply and demand curves, and I believe the equivalence should be clear.
1. A wage subsidy for unskilled workers, paid for by
2. A tax on employers who hire unskilled workers.
Now, if you think like an economist, you might wonder about the logic of part 2 of this proposal. You might say, "A tax on the hiring of unskilled workers would discourage their employment, offsetting some of the benefits they would get from the wage subsidy. It would be better to finance the wage subsidy with a more general tax, rather than with a tax targeted specifically on employers of unskilled workers."
I agree. So why did I bring up this proposal? Because a policy essentially the same looks likely to become law, having been advocated by Congressional leaders and, recently at his news conference, President Bush. Haven't heard of it? It is called an increase in the minimum wage.
------
Update: A commenter asked about the technical equivalence of minimum wages with taxes and subsidies. I will leave this issue as an exercise for the reader, but here are some hints about how to think about it in a competitive labor market using supply and demand curves. Let w be the market wage, and let W be the target wage of policymakers. Draw supply and demand curves for labor such that the equilibrium wage in the absence of any policy is below W. Now suppose the government tells suppliers of labor: Whenever w is less than W, you are paid a subsidy equal to W-w. Similarly, it tells demanders of labor: Whenever w is less than W, you are charged a tax equal to W-w. Calculate quantity supplied and quantity demanded as a function of the market wage w. Graph the new supply and demand curves, and I believe the equivalence should be clear.
Monday, December 25, 2006
MEDIA LOVE US
Since last summer, it's like every media in the world wishes to treat of street style blogs. I get nearly one request a day. It's incredible. Here's a selection...
vogue.fr (France), December 06:
WWD (USA), December 06:
Blond Magazine (Germany), December 06:
Elle (Italy), November 06:
People (Sweden), November 06:
vogue.fr (France), December 06:
WWD (USA), December 06:
Blond Magazine (Germany), December 06:
Elle (Italy), November 06:
People (Sweden), November 06:
A Christmas Reading List
Here are some timely topics:
- A defense of Ebenezer Scrooge.
- The deadweight loss of Christmas.
- A targeted tax credit for Christmas presents.
Merry Christmas, everyone!
Sunday, December 24, 2006
JOYEUX NOEL
I wish you a Merry Christmas.
Jag �nskar dig en glad jul.
Les deseo a una feliz Navidad.
Ik wens u vrolijk Kerstmis.
Ich w�nsche Ihnen ein fr�hliches Weihnachten.
Vi desidero un Natale allegro.
Desejo-vos um feliz Natal.
I hope you are all going to get amazing new clothes today to create stunning outfits that I can capture soon on the street. See you around.
The Economics of Gifts
One more day for Christmas shopping. To help you out, here is a bit on the economics of gift-giving, stolen from my favorite economics textbook. It is based on the signalling theory of Michael Spence:
Case Study
Gifts as Signals
A man is debating what to give his girlfriend for her birthday. "I know," he says to himself, "I'll give her cash. After all, I don't know her tastes as well as she does, and with cash, she can buy anything she wants." But when he hands her the money, she is offended. Convinced he doesn't really love her, she breaks off the relationship.
What's the economics behind this story?
In some ways, gift giving is a strange custom. As the man in our story suggests, people typically know their own preferences better than others do, so we might expect everyone to prefer cash to in-kind transfers. If your employer substituted merchandise of his choosing for your paycheck, you would likely object to the means of payment. But your reaction is very different when someone who (you hope) loves you does the same thing.
One interpretation of gift giving is that it reflects asymmetric information and signaling. The man in our story has private information that the girlfriend would like to know: Does he really love her? Choosing a good gift for her is a signal of his love. Certainly, the act of picking out a gift, rather than giving cash, has the right characteristics to be a signal. It is costly (it takes time), and its cost depends on private information (how much he loves her). If he really loves her, choosing a good gift is easy because he is thinking about her all the time. If he doesn't love her, finding the right gift is more difficult. Thus, giving a gift that suits the girlfriend is one way for him to convey the private information of his love for her. Giving cash shows that he isn't even bothering to try.
The signaling theory of gift giving is consistent with another observation: People care most about the custom when the strength of affection is most in question. Thus, giving cash to a girlfriend or boyfriend is usually a bad move. But when college students receive a check from their parents, they are less often offended. The parents' love is less likely to be in doubt, so the recipient probably won't interpret the cash gift as a signal of lack of affection.
Case Study
Gifts as Signals
A man is debating what to give his girlfriend for her birthday. "I know," he says to himself, "I'll give her cash. After all, I don't know her tastes as well as she does, and with cash, she can buy anything she wants." But when he hands her the money, she is offended. Convinced he doesn't really love her, she breaks off the relationship.
What's the economics behind this story?
In some ways, gift giving is a strange custom. As the man in our story suggests, people typically know their own preferences better than others do, so we might expect everyone to prefer cash to in-kind transfers. If your employer substituted merchandise of his choosing for your paycheck, you would likely object to the means of payment. But your reaction is very different when someone who (you hope) loves you does the same thing.
One interpretation of gift giving is that it reflects asymmetric information and signaling. The man in our story has private information that the girlfriend would like to know: Does he really love her? Choosing a good gift for her is a signal of his love. Certainly, the act of picking out a gift, rather than giving cash, has the right characteristics to be a signal. It is costly (it takes time), and its cost depends on private information (how much he loves her). If he really loves her, choosing a good gift is easy because he is thinking about her all the time. If he doesn't love her, finding the right gift is more difficult. Thus, giving a gift that suits the girlfriend is one way for him to convey the private information of his love for her. Giving cash shows that he isn't even bothering to try.
The signaling theory of gift giving is consistent with another observation: People care most about the custom when the strength of affection is most in question. Thus, giving cash to a girlfriend or boyfriend is usually a bad move. But when college students receive a check from their parents, they are less often offended. The parents' love is less likely to be in doubt, so the recipient probably won't interpret the cash gift as a signal of lack of affection.
Saturday, December 23, 2006
What changed?
In today's Washington Post, Sen. Byron Dorgan and Rep. Sherrod Brown write about How Free Trade Hurts. Here is a telling passage:
I would give most credit to economic growth, which in turn is driven by technological progress, a market system, and a culture of entrepreneurship. As the economy grows, the demand for labor grows, and workers achieve better wages and working conditions.
Economic studies of unions, for example, find that unionized workers earn about 10 to 20 percent more by virtue of collective bargaining. By contrast, real wages and income per person over the past century have increased several hundred percent, thanks to advances in productivity.
Similarly, working conditions are poor in less developed countries today because productivity is low there. The key to improving lives in those nations is economic growth, not "worker activism, new laws and court decisions."
At the turn of the 20th century, child labor was common; working conditions were often abysmal; there were no enforced workplace health, safety or environmental requirements; no unemployment insurance; and no workers' compensation. Workers were attacked and killed for the sole reason that they wanted to form a union; there was no 40-hour week, minimum wage, job security, overtime pay or virtually any other limit on the exploitation of employees. America was split dramatically between the haves and have-nots. It was a harsh work world for many: nasty, brutish and, too often, short. Worker activism, new laws and court decisions changed all that during the past century.That last sentence is striking. There is no doubt that most Americans have seen dramatic improvements in living standards and workplace norms over the past century. But should we really give most of the credit to "worker activism, new laws and court decisions?" I don't think so.
I would give most credit to economic growth, which in turn is driven by technological progress, a market system, and a culture of entrepreneurship. As the economy grows, the demand for labor grows, and workers achieve better wages and working conditions.
Economic studies of unions, for example, find that unionized workers earn about 10 to 20 percent more by virtue of collective bargaining. By contrast, real wages and income per person over the past century have increased several hundred percent, thanks to advances in productivity.
Similarly, working conditions are poor in less developed countries today because productivity is low there. The key to improving lives in those nations is economic growth, not "worker activism, new laws and court decisions."
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