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To: pater tenebrarum who wrote (49817)	5/8/2000 4:55:00 PM
From: r.edwards	Read Replies (1) \| Respond to of 99985

In a free market, such supply/demand imbalances are self-correcting. When the price of broccoli goes up, farmers plant more next year and the price goes down again. Same with blue jeans or wages. High wages due to a shortage of some skill result in a flood of people into that field, or cause the adoption of new technologies that reduce the need for labor, and this causes a reduction in the rate of wage growth. Even rising wages don't cause "wage inflation" if the workers' productivity is rising faster than wage increases, or if they are switching to higher-paying jobs, which is the case today in virtually all sectors. Furthermore, a substantial part of the rise in wages is simply due to workers entering the much higher-paying jobs in the new Internet services, software and telecommunications sectors. We should all understand that job growth in the old, industrial sector of the economy has been zero for a decade. All job growth has been in the new sectors born of the Internet, and in services, both of which pay more than industrial sector jobs. Moving from low paying jobs to higher paying jobs is not inflationary, it's simply an improvement in standard of living. For most people outside government, this is fairly elementary. So wages are going up. Nearly everything else is going down. That's bad?! Someone who leaves a job at McDonald's flipping hamburgers (or leaves a buggy maker for one of the new-fangled, high tech motorcar companies like GM in 1910) while they finish their education or take training in something new, in order to take a sales job making twice as much money is not experiencing inflation, they are experiencing a higher standard of living. Sure, they contributed to a rise in wages. Is this "wage inflation"? Golly. Better raise interest rates and nip that in the bud. Can't have people making more money. That's inflationary! That most government and academic economists and policy makers don't seem to understand this should make us all wonder if maybe they need gravity explained to them.

To: pater tenebrarum who wrote (49817)	5/8/2000 4:58:00 PM
From: r.edwards	Read Replies (1) \| Respond to of 99985

For those of you who don't follow such things, there was an interesting piece this morning on CNBC about the government's measurement of productivity gains due to computers. Know how they measure it? By gains in computational power! Like, all computers are is giant adding machines. This is like measuring productivity gains after the invention of the printing press by measuring how many pages a press could print in an hour. Or calculating productivity gains from the telephone by measuring improvements in voice quality. By an overwhelming margin, the primary contribution computers make to productivity, of course, is through their connectivity. In the 1980s (and maybe still, who knows?), the government measured the value of software being shipped overseas, among other items used to calculate the trade deficit, by putting them on a scale and weighing them, then calculating their value as a plastic export. For nearly two decades, the government has recorded declining productivity in the banking industry, because of the loopy way they measure it. Clearly, ATMs and other advances have improved bank productivity enormously, but you wouldn't know it from government figures. This shows you just how clueless government bureaucrats are, and how dangerous it is to base any investments or other types of decision-making at all on government figures.