Microeconomics Course Project - Flawed Statements

Microeconomics Course Project

Eddie Crisp

February 8, 2016

Flawed Statements        

Everywhere one might look, whether it is television, radio, commercials, debates, or discussions on the internet; there will always be logical and illogical comments and statements made. The word logic is basically correct reasoning and it is the process by which statements are supported by adequate proof and are found reliable by evidence and testing. The opposite to that are logical fallacies which then lead to illogical statements. Logical fallacies are disguised as reasonable statements in order to manipulate and influence individuals into believing the statements and catering to people’s emotions rather than a person’s intellect. This paper will discuss several public illogical fallacies that have been made.

A debate that is often repeated in America is that immigration causes unemployment. It has been thought that immigrants who come over to America are willing to work for lower paid jobs creating unemployment for local people. However, studies like the Hamilton Project have found that immigrant workers increase the opportunities and incomes of Americans (Greenstone & Looney, 2012).  Many economists find that immigrants do not cause any substantial reduction in employment and wages of United States born citizens except with people that are low-educated. Generally, immigrants will work for less wages therefore increasing wages for more skilled and educated individuals. United States born citizens normally do not compete with immigrants for the same jobs. These immigrants help in supplementing and increasing productivity of the work of United States born employees.

An example of how immigrant workers help productivity would be that they can aid farmers to increase agricultural production. They can also help contractors to build new homes and businesses. This will affect employment opportunities and incomes for United States born workers. Businesses are able to open new stores and restaurants because of new immigrants. Immigrants increase the supply of labor as they also increase aggregate demand in the economy. They purchase more goods while creating additional demand in the economy, labor supply, and increase labor demand. After the recession in 2007, the economy has been slow to recover and many Americans remain unemployed (Greenstone & Looney, 2012). With this being said, the concerns about how immigrants affect the economic activity and labor market of America will remain a heavily debated issue by policymakers and economists.

The next fallacy to mention would be the term "trickle-down economics" or “trickle-down theory.” It is a political term which came out in the 1980’s used to give financial benefits to the wealthy and that the benefits of doing this would "trickle-down" through all the other sections in society (Pettinger, 2014). It is debated that cutting income tax for the wealthy will not just benefit high-earners, but it will also benefit everyone in the middle and lower classes. Other debates include that if high income earners see an increase in their income, that they will increase their spending which will create an additional demand in the economy which would create more jobs for people and higher wages or salaries for workers. Furthermore, some believe that increased profits for organizations may be reinvested into expanding productivity output which leads to higher growth, wages and incomes for everyone. Another argument states that lowering income taxes will increase the incentive for individuals to work which would then lead to higher productivity and economic growth (Pettinger, 2014).

The “trickle-down theory” has had its fair share of criticisms. Some economists and policymakers say that cutting taxes does not automatically increase incentives for people to work. They think that it would make better sense to aim income tax cuts and benefits at the individuals who really need it. Reducing taxes for the wealthy in hopes some may trickle down to the other levels of society is not always an efficient way of looking at things. High income earners are likely to save rather than to spend, therefore no funds would end up trickling down from a tax cut. This wealth increase would then lead to additional capital gains and income from assets which would lead to a higher level of wealth inequality (Pettinger, 2014). There will always be a debate on the trickle-down theory, but in the end wealth is normally earned and it does not just happen overnight. George Leef states that “Those who produce things that lots of people want become increasingly wealthy through trade, while those who produce things that few people want may lose the wealth they had” (Leef, 2013).