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Tuesday, November 15, 2005

Measuring demand

Using a free market system to assess demand for something assumes that everyone has equal oppurtuninty to money. The fact that not everyone has equal oppurtunity to money is obivious. I have a couple of friends who have graduated from college. They worked much harder than me in college and got better grades. Yet I will earn a higher salary when I graduate. Not because I worked hard in school or any other aspect of life, but simply because of natural and enviromental differences.
So you will ask do I think money should be taken from me and given to my friends. In many cases I would say yes. What they are doing is more important. So when I start making the money will I give it to them? Partly. If you have read the "All Government Employees are Overpaid" post then you already know that I do a lot to try to distribute the benefits of my advantages. I will probably continue to give more of my time then of my money, because I think it more beneficial that way.

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I agree the opportunity really is there for most people. Access to information is a limiting factor only if one does not know how to look for it. Its like the saying it takes money to make money... ok... it takes information to get information. Example Govt grants, scholarships etc... make college attendance easier, thus creating opportunity to earn money, but if I don't know how to get the info, and am unable to find out who knows about it, my opportunity seems more limited. The internet makes access to info much easier for people, thus reducing this problem thankfully. Also, the choices we make directly affects our ability to make money through normal channels. The example of the teacher v. the CEO is a good one. You value teaching more, thus you have chosen not to earn the money associated with CEO's, but you could still earn lots of money by starting a side business or eBay professionally etc... the options are only limited to your creativity. I have made the conscious decision not to become a doctor. So I bear the resposibility for not earning the wages of a doctor as well. No one but myself to blame, or thank for this choice. I choose or do not choose to have a child out of wedlock, and have support a family by quitting school etc... earning $5/hour at McDonalds. The children of such decisions could have less opportunity to the extent that they choose to be content with their circumstances. We no longer live in a bubble where all we know is our neighbors, access to self improvement is easily obtainable. The world is our oyster just waiting to be taken.

 
At 7:48 PM, Blogger randytsimmons said...

Markets tell you what demand is given the current distribution of income. If income were more evenly distributed then demand would change but we do not know by how much.

One of the more interesting studies ever done on the effects of a person's initial endowment of income was with siblings. Siblings have relatively the same initial endowment of income, education, upbringing, etc. but only about 19% of their lifetime income is explained by that initial endowment. That suggests that leveling the playing field so everyone has a relatively equal shot at wealth will not produce equal incomes. Humans are not equal--we have different desires, drives, willingness to sacrifice, risk preferences, and luck. Trying to equalize incomes does not recognize those differences. But that does not mean there should not bew some kind of safety net.

 
At 7:48 PM, Blogger randytsimmons said...

Markets tell you what demand is given the current distribution of income. If income were more evenly distributed then demand would change but we do not know by how much.

One of the more interesting studies ever done on the effects of a person's initial endowment of income was with siblings. Siblings have relatively the same initial endowment of income, education, upbringing, etc. but only about 19% of their lifetime income is explained by that initial endowment. That suggests that leveling the playing field so everyone has a relatively equal shot at wealth will not produce equal incomes. Humans are not equal--we have different desires, drives, willingness to sacrifice, risk preferences, and luck. Trying to equalize incomes does not recognize those differences. But that does not mean there should not bew some kind of safety net.

 
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