EconAir

Adam Smith - Our Founding Father ADAM SMITH VISITS A PIN FACTORY   Adam Smith’s description of a pin factory is on the first page of  The Wealth of Nations .  (Chapter 1 – “Of the Division of Labour”)  Drawings of pin factories of this period show workers using hand tools. Smith says the process can be broken down into 18 distinct steps, including packaging the pins. Smith mentions that pin factory workers were poorly paid, despite their high productivity.    Adam Smith says he visited a pin factory employing 10 men who produced 48,000 pins per day.  If each of the ten workers had done all the steps themselves, Smith says each worker could produce only 10 or 20 pins per day.  So the pin factory replaces 2,400 to 4,800 pin makers. The increase in labor productivity (output per person per day) is as high as 50 times that of individual pin makers.     This reduction in unit cost or average cost (AC) and the huge i...

    PRELIMINARY SUMMARY OF FISCAL YEAR 2025 BUDGET   The Congressional Budget Office (CBO) made their latest projection in January, 2025. The projected deficit in fiscal year 2025 will be around $1.8 trillion, the difference between about $5.2 trillion in revenue and $7.0 trillion in expenses. Interest on the national debt this year will be around $950 billion, over twice the interest expense in the fiscal year 2021 budget. By 2035, the CBO expects the  yearly  budget deficit to increase to $2.7 trillion.   Interest expense this year passed budgeted outlays for the military. It is about equal to Medicare, and also to total non-defense discretionary spending.   Leaving aside Social Security and Medicare, interest expense is about 20% of total budget outlays. Interest expense is about half the budget deficit.   The $1.8 trillion budget deficit is 6-7% of total GDP, or approximately 10% of consumer spending. Adding the $1 trillion trade deficit, w...

TARIFF AND TRADE POLICY:   HOW TO KNOW THAT TRUMP’S POLICIES ARE WORKING   Tens of thousands of American workers apply for new jobs sewing clothes in NYC’s revitalized garment district. They work 12 hours a day, 6 days a week for $144/week ($2/hour) with no benefits or pensions. The White House orders 10 million MAGA caps.   The U.S. begins producing pineapples and bananas in Hawaii again. Dole (pineapples) and United Fruit (Chiquita Banana) buy large tracts of land where pineapples and bananas were grown in the past. They also buy and demolish the luxury hotels and condo developments sitting on the land. The price of Hawaiian bananas is $10/pound. U.S. farmers apply for food stamps.   In the Christmas shopping season, the prices of Barbie dolls and Legos double. Parents experience sticker shock. Children beg and cry for Barbies and Legos. Parents give in. Children are abandoned on the doorsteps of grandparents living in The Villages. Grandparents organize and lobby ...