two or three chickens in every pot

I often point out that money is not wealth.  Wealth can include anything of value, while money is just paper printed by government.  Most Americans don't see the difference, since money is readily converted to items of wealth.  Taking the difference for granted themselves, they rely on politicians, economists and bankers to worry about it.

But that reliance is risky, since it presumes that those who control the buying power of money are trustworthy.

Every day you wake up, and you go to your job and you start earning dollars.  You produce a certain amount, and on payday you plan to take your accumulated earnings into the market where you will buy value equal to what you've produced.

But suppose that while you are working for your dollars, somebody else is printing his.  When you take your dollars to market, you'll find that they don't go as far, because the imposter with unearned money has shown up to claim a share of what everyone else has produced -- even though he himself has produced nothing.

Suddenly, common citizens take an interest in the difference between money and true wealth.  You may not think about it often yourself, but that's a luxury.  In Zimbabwe, people are acutely aware of the difference.  When governments take to diluting the currency, workers have been known to take their paychecks to the market at lunchtime because by dinner the money won't buy as much.  And this is not just a third-world risk -- it happened in Germany, in the early 20th Century.

Real living standards are about the ratio between how hard and long people work, and how much they get to consume for their efforts -- not how much money they make.  One example I've seen repeatedly is how long the typical worker must work to earn a chicken.  It used to take hours to earn enough money to pay for one chicken -- now the average worker can buy two or three chickens with an hour's wages.  Individuals have become highly productive -- both the people who produce chickens, and the ones who buy them.

When over 90% of the economy was agricultural, you know that people were working to eat.  If you wanted to buy something, it was going to be an agricultural good.  And if you wanted to sell something, what the market demanded was agricultural goods.  But if the average worker can earn several chickens an hour, then his family's fed in the first day or two of each week.  That leaves a lot of earnings for other things, and not surprisingly, the majority of jobs in America today are not in agriculture or food production anymore.

My personal acid test of reason is the minimum wage.  It says one thing, but it does another.  If you support higher minimum wages, it's not because you want workers to have more money -- it's because you want them to have more chickens.  Yet actually raising the wage does not produce more poultry.  If you support policies that create more chickens, you're reasonable.  If you support policies that give people more money, you're a liberal.  (That's why liberal healthcare reform is more about giving people money to buy insurance than about lowering the price of care so that everyone can afford it.)

When I argue for a lower minimum wage, its supporters accuse me of wanting people to live on two or three dollars an hour.  I'm guilty as charged -- but only because I would also like to see chickens cost 59 cents each.

The truth is that there was a time when chickens did cost less than a dollar apiece.  But it also took a lot longer to earn that dollar then.  Even at several dollars per chicken, we still earn many more chickens per hour today.

If you could see it all in unadjusted dollars, that under-a-dollar chicken has been steadily dropping in price, costing only pennies today.  That's what the free market can accomplish.

But the "adjustment" in dollars -- the reason a chicken which now takes less time than ever before to earn still costs more dollars than ever before?  Well, that is entirely due to government.

And you have no idea how productive you really are, because you have no idea how much of your productivity is taken by government.  With unearned money. 

Comments

[Jonathan]

Well thought out and well explained. Thank you.

[David West]

Well done. We all want a better life for our children, but most people think a better life means that our children should make more money than we do. All of our technology should lower our cost of living - and that's what a better life is all about - lowering the cost of exercising our right to pursue happiness.