Thursday, January 19, 2012

Economics 101, Again!

Wealth is created when someone provides a product or service someone else is willing to pay for.

The price of a product or service must be greater than the cost to produce or provide that product or service.

Costs include the wages paid to employees. The wages are part of the cost and cannot exceed the value the employee creates.

Profit is what the producer (owner) of the product or service keeps after paying all of the costs; rent, manufacturing, research & development, packaging, shipping, marketing, and wages.

The money earned by individuals whether they are wages as an employee or profits as an owner or investor is their money.

The more cost the government adds to a product or service; taxes, regulation, minimum wage, etc… - reduces the ability to create more wealth and wages.

The less cost the government adds to a product or service the greater the likelihood wealth is created to create more wealth and wages. This cycle is the reason we are so wealthy.

If employees don’t think they are paid enough they have the right to leave and get a new wage or create their own product or service.

Employees do not have a right to the wealth created by the owner.

Jobs are not the goal of wealth creators, jobs are the result of a need for help in producing a product or service to make additional profit for the owner or investor.

People that believe someone’s success is the reason for their failure is the victim of their own lack of initiative. Blame, envy, jealousy, and social justice are not products or services. They are barriers to individual success.

Capitalism offers everyone an equal opportunity to succeed or fail. Failure is a natural result of bad ideas, management, and laziness. Government trying to limit failure actually escalates bigger failure.

Markets decide winners and losers. You as an individual are part of the market. Every choice you make in the marketplace has an impact on the success or failure of the market. Government interference limits your choices in the marketplace and by asking for fairness you are guaranteeing higher prices and less choice.

Taxes should not be used to re-distribute wealth. Re-distributing wealth reduces the incentive to create wealth and everyone loses.  

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