Before Paul Krugman the economist became Paul Krugman the uber-liberal pundit, he dismissed the illusion “that the price of labor — unlike that of gasoline, or Manhattan apartments — can be set based on considerations of justice, not supply and demand, without unpleasant side effects.”
Yet there is an even more fundamental issue. Anyone who believes that higher wages would be good policy is free to pay however much he desires to anyone he hires. Everyone also is able to contribute to groups which aid the lower-income and disadvantaged. Why should such people have the right to force everyone else to pay more? The minimum wage is the modern perversion of compassion into coercion: I believe there is a moral imperative for you to earn more, so I will force someone else to fork over the cash. I feel moral while sticking someone else with the bill.
John Cochrane shares some thoughts on income inequality and on the agitation for minimum-wage legislation. Cochrane ends his post by asking: “But why then is the minimum wage so high on the chattering-class agenda?” Alas, this “Progressively” fashionable policy is high not only on the agenda of the chattering class; it’s high also on the agenda even of some economists, several of whom are quite prominent.
While a counter-petition would undoubtedly contain signatures of many other economists, several of whom would be no less prominent than the most prominent names on the pro-minimum-wage petition, it’s sad that even a handful of members of my profession fall for the legislative hocus-pocus that is minimum-wage legislation. This fact is evidence that someone can remain innocent of the economic way of thinking even if he or she masters a great deal of modern economic method and language – method and language particularly prominent in those branches of economics that are really exercises in social engineering (and, hence, not economics at all, at least not economics of the sort done in the emergent-order tradition that includes Adam Smith and F.A. Hayek, and that we specialize in at GMU Econ).
A commenter (DWAnderson) on the Cochrane post above points us to a 2009 paper by Will Wilkinson on inequality. It is indeed an excellent paper. I’m chagrined that we at the Cafe haven’t posted this contribution by Will – until now.
Which head of government recently asked the following rhetorical questions: “How can we run a country if entrepreneurs don’t hire? And how can we redistribute if there’s no wealth?” Marty Mazorra has the answer.