Monday, July 18, 2005

burninating.

i am in a library. there is knowledge here. knowledge i do not possess. i want it all. so i found out how to pay attention in class. instead of trying to filter out stuff i dont already know, just try to ask questions about EVERYTHING. and then go and look it up later. like today in macro the face was like blahblahblah phillips curve. and i thought... hmmm... that whole natural unemployment thing? blown way out of proportion by the minimum wage making lots of people unemployed.

so like, inflation is often a result of wages that are unmatched by the value of production. to pay the wages unmatched by production, firms have to increase prices because the revenues at current price levels arent enough to pay for the labor. so lets say the firm hires someone who only produces five dollars worth an hour, but demands ten. the firm will have a five dollar product to sell, so five dollar revenue, but it will have ten dollars of wages to pay. so it has to raise the products price to ten to get enough money. then lets say the worker wants to go buy the product and gets his panties in a bundle because he realizes the price doubled. then he demands that the firm double his wages to compensate for the inflation. and blahblahblah. inflation up the wazoo.

so the phillips curve. unemployment is inversely related to inflation. with lower unemployment, higher inflation. why? well because to employ the part of the labor force that cant produce value equal to the purchasing power of the minimum wage, there has to be inflation.

how can i prove it? well i would have to look and see if there is any correlation between minimum wage and vertical transformations of the phillips curve. will i do that? no. because i am hungry and want to buy a 5 dollar bagel from a worker who will take 1 hour to make it and is paid 10 dollars an hour, thus creating the high inflation rates associated with lower unemployment levels on the phillips curve.