In a recent Kaizen interview, Argentine entrepreneur Enrique Duhau discussed some of the challenges of doing business in a country with a politicized economy. I was reminded of Campante and Glaeser’s comparative study of Buenos Aires and Chicago, two cities that were very similar in the nineteenth century. They were similar in population size, with immigrants from all over, near great amounts of fertile land, and were important transportation hubs.
Yet, as Campante and Glaeser put it, “despite their initial similarities, Chicago was vastly more prosperous for most of the 20th century.” Why? Check out their paper at the NBER site: Filipe Campante, Edward L. Glaeser, “Yet Another Tale of Two Cities: Buenos Aires and Chicago”, NBER Working Paper No. 15104, Issued in June 2009.
“Regarding the minimum wage, here is some data for Western Europe:
“There are nine countries with a minimum wage (Belgium, Netherlands, Britain, Ireland, France, Spain, Portugal, Greece, Luxembourg). Their unemployment rates range from 5.9% in Luxembourg to 27.6% in Greece. The median country is France with 11.1% unemployment.
“There are nine countries with no minimum wage (Iceland, Norway, Sweden, Finland, Denmark, Austria, Germany, Italy, Switzerland). Five of the nine have a lower unemployment rate than Luxembourg, the best of the other group. The median country is Iceland, with a 5.5% unemployment rate. The biggest country in Europe is Germany. No minimum wage and 5.2% unemployment.”
Robert Lawson (Southern Methodist University), along with James Gwartney (Florida State University) and Joshua Hall (West Virginia University), is editor of the celebrated Economic Freedom of the World Index. The Index is one of the major achievements in social science research this generation, made possible by much better data and awesome computing power.
Professor Lawson spoke recently at Rockford University on the methodology, results, and policy implications of the Index. What country rates highest? How much has the USA declined in the last decade? Which countries are at the bottom of the list and why? Where do the BRIC countries (Brazil, Russia, India, China) stand? How does economic freedom correlate with democracy, human rights, and peaceful relations between nations? My follow-up 17-minute audio interview with him is here:
The thirteen arguments are:
1. Liberal capitalism increases freedom.
2. People work harder in liberal capitalist systems.
3. People work smarter under liberal capitalism.
4. Liberalism increases individuality and creativity.
5. Liberal capitalism increases the average standard of living.
6. The poor are better off under liberal capitalism.
7. Liberal capitalism generates more philanthropy.
8. More outstanding individuals flourish under liberal capitalism.
9. Liberalism’s individualism increases happiness.
10. Liberal capitalist societies are more interesting.
11. Tolerance increases under liberal capitalism.
12. Sexism and racism decrease under capitalism.
13. Liberal capitalism leads to international peace.
Rent control is a classic case of bad economics and bad ethics. The bad economics is ignorance of unintended consequences — in this case a price control that makes the initial problem worse. The bad ethics is the altruism that motivates both ignoring the economics and using political compulsion — in this case the willingness to help relatively poorer tenants by sacrificing relatively richer landlords.
Illinois State University professor Terry Noel’s 24-minute video lecture on “Management and Entrepreneurship.” Dr. Noel discusses the elements of management — planning, organizing, leading, controlling — including examples from Moses, Chinese warfare, Adam Smith, Eli Whitney, Frank and Lillian Gilbreth, Frederick Taylor, Michael Taylor and Jay Barney — and management’s connection to entrepreneurship, with discussion of David McLelland, Joseph Schumpeter, William Gartner, several myths of entrepreneurship, and why in the future entrepreneurial thinking will be crucial for everyone in business.