keeping the economy honest

My Economic Theory

I made this a separate page because it’s pretty dry stuff compared to the rest of the blog.  But this is what motivated me to start this blog…

My basic economic theory is that a person can only  get richer through one of two way;
1. Work longer hours (e.g. work 50 hours instead of 40 this week)
2. Invent a more efficient process (e.g. invent a new machine that lets me type a letter faster than writing one)

It’s nice to believe there’s no limit to how rich you can be, but in reality,  you can only get richer through the above two conditions because the amount of wealth is supposed be the reflection of one’s production in society.   When someone is rich without having done one of the two conditions, then I call he’s having a  Sweet Gig, and it happens because there’s a breakdown in free market or true competition.
For example, if a plumber makes $100,000 a year doing the average plumbing work on 40 hours/week, there will be people gladly to be in his shoes and enter his field as competition.  Someone might be willing to learn the same trade and do the same job for $90,000/ year and the next person would be willing to do it for $80,000/year… until someone says I can’t work for less than that, otherwise I’d rather be an electrician or something else.  So free market sets someone’s salary.  Of course, you don’t see overpaid plumbers(I know it’s relative and there’re exceptions), because in small businesses, barrier to competition is low and competition will ensure you’re paid what you’re worth.  But as the business model becomes bigger and more complex, free market becomes less involved.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: