Supply and demand is not—repeat NOT—optional

Caracas, July 22 - Venezuela, a traditional coffee exporter that boasts one of the best cups of java in South America, may have to import coffee for the first time ever this year or face shortages, industry experts said. Producers say rising costs and prices fixed by the government have caused production to fall and illegal exports to rise. The government says poor climate and speculation by growers and roasters is to blame.

Venezuela is known to produce some of the best quality Arabica coffee anywhere and, unlike many countries in the region, traditionally consumed most of it itself. But more recently large quantities of coffee have been smuggled across the border to Colombia, where prices have been more than double the fixed 470 Bolivares ($218) per bag that producers are paid in Venezuela.

Perry remarks:

This story provides yet another example of how central planning and price controls always fail. The laws of supply and demand are not optional. Artifically fix a price below (above) the market-clearing price and you create a guaranteed shortage (surplus). Period.

Meanwhile, in the US, Michigan has the highest unemployment rate -- 15.2%. State leaders are looking for a solution. Here's what they've come up with:

A $10 minimum wage in Michigan is the centerpiece of a number of populist proposals unveiled Wednesday by the Democratic Party, which hopes to get some of the initiatives on next year's ballot...

Increasing the state's minimum wage from $7.40 an hour to $10 an hour would give Michigan the highest standard in the nation. Washington state has the highest rate at $8.55 an hour.

The initiative also would remove exceptions that allow employers to pay less than the minimum wage to some workers, such as restaurant wait staff.

Labor unions and Democrats were pushing a ballot plan to raise the minimum wage in 2006, but the Legislature approved an increase before it could go to voters. That measure gradually raised the minimum wage from $5.15 an hour to $7.40 an hour, which went into effect July 1, 2008.

Union officials see the minimum wage as a quality of life issue for hourly workers, but business groups say many employers, especially small businesses, can't afford another increase.

So the state is bleeding jobs, and Democrats' solution is to price-fix wages even higher so that hiring low-skill workers becomes even more expensive, resulting in a greater labor surplus—more unemployment. Unfuckingbelievable!

Any economist worth a dime will explain how the minimum wage reduces employment. But the Democratic Party and labor unions, they think they know better. Cough. Gag. Spittle.



(via Free Exchange)