Arnold Kling reviews Diane Coyle’s GDP. Here are Arnold’s concluding paragraphs:
As Coyle points out, an increase in the variety of goods also produces gains in welfare that are not included in GDP. Again, think about this from the standpoint of consumer surplus. If you and I go to a food court with many restaurants, then I will choose the meal that gives me the most consumer surplus, and you will choose the meal that gives you the most consumer surplus. Each of us will get more consumer surplus than if we had been forced to get food from the same restaurant.
Overall, one arrives at a mixed verdict on GDP. On the one hand, it is the best way that we have to measure economic capability. On the other hand, because it fails to account for consumer surplus, GDP statistics lead us to take an overly pessimistic view of the economy. There is no Great Stagnation. There is only a widening gap between the rate of economic improvement and our ability to measure that improvement.
In my most recent column in the Pittsburgh Tribune-Review I recall the time I was invited by the Bush II White House to be nominated for a position on the Council of Economic Advisors. I refused the invitation. A slice:
Third and most importantly, my conscience prevents me from taking such a position. I don’t judge others who took, or will take, such a post. But I could not have done the job that the administration invited me to do. That job is principally not to give economic advice. That job, instead, is to give credibility to political maneuvers.
Sure, on matters that aren’t politically charged, a president might sincerely seek and follow the advice of an academic “expert.” But being the U.S. president is a political job. And the chief talent and ultimate goal of all expert politicians is to win votes. At the end of the day, it’s the far-too-rare successful politician who will do what is right if doing what is right differs from what is most popular.
In the 30 seconds that I spent envisioning myself on the Council of Economic Advisers, I saw myself ricocheting between offering advice in private that would be ignored and being asked to defend in public many policies that I believe to be wrongheaded or even immoral. Such a job repulses me.
Richard Epstein isn’t fooled by minimum-wage hype. (HT Warren Smith) A slice:
Thus it is neither here nor there that the real value of the minimum wage peaked in 1968 and has declined since that time. If the minimum wage law is a structural mistake, then 1968 represents the low point in the cycle, not the high point. Indeed, it is worth noting that the most rapid decline in the real value of the minimum wage took place during the Reagan years, when labor markets continued to gain strength. The relevant baseline is not historic demands of the minimum wage law; it is what workers earn. We have very low labor market participation today. If an increased minimum wage will make it harder for low-skills persons, minorities, and teenagers to gain a toehold in the labor market, why support it?
Nor is the case for a higher minimum wage advanced by insisting, as the White House does, that “paying workers more can also improve motivation, morale, focus, and health, all of which can make workers more productive.” Indeed, these considerations cut exactly the opposite way. If increased wages alone increased productivity, there would be no need for federal intervention: Employers would have all the incentive they need to raise wages voluntarily. That is how markets work.
My colleague Bryan Caplan uses economics to explain why one familiar trope used against Wal-Mart has matters backwards. (Bryan does better here what I did less-well in this post from 2004.)