I think we all intuitively understand what has happened (at least the readers here). By doing lockdowns and creating an enormous climate of fear, the government destroyed a big portion of the supply curve.
Then, they attempted to solve the problem by WAY overstimulating the demand side, which actually created even more supply side destruction.
What? My theory is that many people received a lot of money from the government at all levels such that they no longer needed to be employed, nor to even work as hard to produce a product. For example, I know of many people who just chose to stay at home and do occasional side gigs rather than go back to work, because unemployment was "no questions asked." For a long time, the federal government was subsidizing state unemployment. I had prospective employees making more on the government dole than I could pay them. When there was no one available, I ended up just paying a lot more. This cycle continues today.
What people also don't realize is that all wages will eventually come back to equilibrium relative to each other. I always shake my head at these "$15 minimum wage" movements, because they never work. The chef will always want to make X times his rookie cook. The senior police detective will always want to make more than the rookie patrolman, and by a certain amount. The attorney will not condone making less than 5X what a paralegal makes (or whatever), or, what their doctor makes. Everyone thinks relatively, which is why inflation will always be a danger. Because labor is often the largest input into any product, inflation is always subject to whatever wage rates are doing.
Kudos to Milton Friedman for his ability to explain this (and to you, Mr. Carter) simply. It is a hard subject to truly grasp for non-economics people. Friedman reminds me a bit of Thomas Sowell.
I think we all intuitively understand what has happened (at least the readers here). By doing lockdowns and creating an enormous climate of fear, the government destroyed a big portion of the supply curve.
Then, they attempted to solve the problem by WAY overstimulating the demand side, which actually created even more supply side destruction.
What? My theory is that many people received a lot of money from the government at all levels such that they no longer needed to be employed, nor to even work as hard to produce a product. For example, I know of many people who just chose to stay at home and do occasional side gigs rather than go back to work, because unemployment was "no questions asked." For a long time, the federal government was subsidizing state unemployment. I had prospective employees making more on the government dole than I could pay them. When there was no one available, I ended up just paying a lot more. This cycle continues today.
What people also don't realize is that all wages will eventually come back to equilibrium relative to each other. I always shake my head at these "$15 minimum wage" movements, because they never work. The chef will always want to make X times his rookie cook. The senior police detective will always want to make more than the rookie patrolman, and by a certain amount. The attorney will not condone making less than 5X what a paralegal makes (or whatever), or, what their doctor makes. Everyone thinks relatively, which is why inflation will always be a danger. Because labor is often the largest input into any product, inflation is always subject to whatever wage rates are doing.
Kudos to Milton Friedman for his ability to explain this (and to you, Mr. Carter) simply. It is a hard subject to truly grasp for non-economics people. Friedman reminds me a bit of Thomas Sowell.
The video is great. You missed your calling as an economics professor :)