Economics studies the behavior and interactions of humans. It does not discover laws of nature any more than psychology does. This distinction is relevant because people in powerful positions often appeal to economic theories to justify their decisions. Here is a recent example thanks to Wikileaks:
The Haitian parliament unanimously passed legislation raising the minimum wage to 62 cents per hour (about $5 / day). Contractors that run textile factories for companies like Hanes, Fruit of the Loom, and Levi’s were very upset by this and fought against it. The US Embassy helped them, saying that the $5 per day minimum “did not take economic reality into account” (my emphasis).
Leave aside the fact that these people aren’t taking the human reality of living on $3 per day into account. They are heartless, they don’t care about the world’s poor, so far so obvious. But let’s examine how they try to justify their position. Here’s what the State Department said:
In Haiti, approximately 80 percent of the population is unemployed. …the US government is working with the government of Haiti and international partners to help create jobs, support economic growth, promote foreign direct investment that meets ILO labor standards in the apparel industry and invest in agriculture and beyond.
They are implying that raising the minimum wage would cause companies to hire fewer workers, thereby making unemployment even worse. Anyone who has taken introductory economics has seen the usual graphs and charts that accompany this argument.
So we see an example of people in power excusing their behavior, saying that they are essentially forced into it by “economic reality.” But our own beliefs and actions create that reality. In this example, we chose to subsidize a highly profitable industry and keep the price of our clothes artificially low instead of choosing to increase the wages of extremely impoverished and starving people by a pittance.
Because “economic reality” is our own creation, we have the power to change it. I can’t overemphasize how important this point is because it applies to almost every ethical issue we face as a society. The world’s poor and hungry are not chance victims of unchanging laws of nature, they are victims of a system that we actively and intentionally create and perpetuate.
![jonathan-cunningham:
Proponents of the Ryan plan claim that privatizing Medicare will decrease the costs, but the exact opposite has been demonstrated. The CBO sent Mr. Ryan a letter that included their findings, which demonstrate a 40% increase in costs [PDF] for an average 65 year old. Matt Yglesias goes into detail:
As I’ve been at paints to point out, the key consequence of privatization would be a steep increase in the per unit cost of health care services. Medicare is able to use its semi-monopsony status to drive down prices. If privatized the cost of treating the typical 65 year-old would increase by around 40 percent. Paul Ryan’s version of privatization then “saves” a tiny bit of money for the taxpayer by simply paying a much smaller share of the now much-higher bill. Then he promises to save large sums of money over the long term by ensuring that the share of the higher bill that the government covers will shrink drastically over time. This shrinkage in the value of the government health care coupon either won’t occur (in which case all privatization will do is increase costs) or else it will occur (in which case over 100% of the savings will come from people going without health care services they need) and in either case the consequences are scary.](http://24.media.tumblr.com/tumblr_lm49uynZVa1qa2rino1_400.jpg)
