I don’t always agree with Richard Epstein, but I typically do.  He is, without doubt, one of the most articulate and significant classical liberals of our age.

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… is from page 267 of the late Ben Rogge’s 1971 essay “The Welfare State against the Negro,” as this essay is reprinted in A Maverick’s Defense of Freedom, the 2010 collection of Rogge’s essays that is edited by Dwight Lee:

Let me read you another one.  “Minimum wage rates: these often hurt those they are designed to help.  What good does it do a Negro youth to know that an employer must pay him $1.60 per hour if the fact that he must be paid that amount is what keeps him from getting a job?”  By the way, we need not just say Negro youth there; what good does it do any young person to know that an employer must pay him $1.60 if that is the fact that keeps him from getting the job at all?  Where is this statement from?  From the seventh edition of Economics by Paul Samuelson.

Paul Samuelson (1915-2009) – the first American to win the Nobel Prize in economics and a scholar embraced warmly by the political left – asked the most appropriate question about minimum wages.  This question, which is asked also by many others, has yet to be answered adequately.  It is usually ignored.  When it is not ignored, this question either is said to rest on a false premise (‘The best research show that the minimum wage casts no one out of a job!”) or is accused of being the wrong question (“The correct question is whether or not the losses suffered by those who, unfortunately, are rendered unemployable are outweighed by the gains enjoyed by those whose incomes rise as a result of the minimum wage.”).  Apart from the theoretically possible – but in the U.S. empirically preposterous – existence of monopsony power in the market for low-skilled workers (or the even more preposterous ‘efficiency-wage’ justification for minimum wages), minimum wages must shrink low-skilled workers’ employment options.  This shrinkage, moreover, almost certainly comes chiefly in the form of destroyed jobs (although it can, and surely does, occasionally come also in the form of worsened work conditions or fewer fringe benefits).

See this related EconLog post by David Henderson.

Proponents of the minimum wage are enemies of the least advantage people in society.  That most minimum-wage proponents do not realize the cruelty that their pet policy unleashes does not alter the reality.

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Some Links

by Don Boudreaux on September 23, 2016

in Media, Monetary Policy, Politics, Seen and Unseen, Taxes, Work

George Selgin writes eloquently on the importance of monetary-policy rules – and of the importance of understanding just what the Fed actually does.

Diana Furchtgott-Roth explains that the Obama administration’s new overtime-pay diktat will weaken the economy and harm many of the very workers that this diktat is ostensibly meant to help.  (The economic ignorance of people who insist that workers are helped, without unintended ill consequences, by politicians and bureaucrats unilaterally changing the terms of employment contracts is vast.  And it’s especially discouraging that many people with PhDs in economics are among those who are economically ignorant about this matter.)

Writing, in the Wall Street Journal, on this same diktat is Andy Puzder.

Alberto Mingardi questions Richard Epstein’s defense of the EU Commission’s attempt to raise Apple, Inc.’s tax burden.

Speaking of the greedy, grasping, grimy hand of the state, here’s my intrepid Mercatus Center colleague Veronique de Rugy.

Poetry by Bob Higgs.

Take an informative trip down memory lane with Jeffrey Tucker.

Walter Olson reports on how government agencies too often turn the press into their lackeys.

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… is from page 50 of Arnold Kling’s superb new book (2016), Specialization and Trade: A Re-introduction to Economics:

As outsiders, economists see some of the conditions in a market, but they omit other factors.  In that regard, economists are no different from other outsiders.  To the extent that there are outsiders who see a flaw in how the market serves consumers, those outsiders have the option of starting a business to address the problem.  That is what entrepreneurs do all the time, and they are the main engine of economic progress.

Yes.  And of course the same is true for entrepreneurs who see a flaw in how the market treats workers (and other resource suppliers).  These flaws are almost always profit opportunities to be seized.  Such seizing, in turn, not only yields deserved profits to the entrepreneurs who successfully carry out the seizing, it improves the well-being of consumers and of workers.

Real-world entrepreneurs act, and they do so with their own money and with money voluntarily entrusted to them by others.  In a contrast that could not be more stark, professors, pundits, and priests who see (or imagine) a flaw in how the market serves consumers and workers talk.  Their talk – which is always cheap – is meant to prompt politicians and bureaucrats to act.  But these actions are never done with the money of the professors, pundits, priests, politicians, or bureaucrats.  These actions are always done overwhelmingly at the expense of others.  Moreover, these state actions are, by their nature, never voluntary.  They always are the exercise of brute force deployed to satisfy cheap talkers – the exercise of brute force to try to turn reality into the visions and hallucinations of the cheap talkers.

The cheap talkers preen publicly about their self-declared goodness.  They pat themselves on their backs, and often dispense gaudy awards to each other for the alleged eloquence or ‘importance’ of their cheap talk, or for their alleged ‘courage’ (!) at spending other people’s money and using threats of violence to bend other, peaceful people to their wills.

Their hubris is boundless; their arrogance is insufferable; their ignorance is infinite.

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… is from page 50 of Arnold Kling’s excellent new book, Specialization and Trade: A Re-introduction to Economics (original emphasis):

What we should be comparing is not the existing market configuration with an ideal based on a simple model but the market process of error correction with the political process of error correction.

If the above sounds trivially true, it is – in a sense.  But in another sense it’s not trivially true, because many economists – including Nobel laureates such as Joseph Stiglitz, George Akerlof, Paul Krugman, and Robert Shiller – routinely compare grainy snapshots of real-world market situations with portraits of idealized, imagined political outcomes.  These economists then conclude that the market has failed and that, as a result, more power and resources must be turned over to state officials who will then apolitically and reliably transform those grainy snapshots into the beautiful, colorful, pleasing portraits imagined by these economists.

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My Minimum Wage Debate with Mike Konczal

by Don Boudreaux on September 22, 2016

in Data, Seen and Unseen, Video, Work

Here’s the just-released video of my debate last week, at the University of San Diego, with Mike Konczal on the minimum wage.  I’m honored to have been part of the inaugural event sponsored by Matt Zwolinski’s Center for Ethics, Economics and Public Policy.  I thank Matt for inviting me, and I thank Mike for being such a gracious debate opponent.

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A June 2001 Lecture In Dax, France

by Don Boudreaux on September 22, 2016

in Politics, Video

Libertarianism.org just put out this video of a talk that I gave 15 years ago in Dax, France.  The occasion was a celebration of the bicentenary of the birth of Frederic Bastiat.  I’d forgotten all about this talk and didn’t realize that it was taped.  (At the time I was still president of FEE, although only a few weeks away from assuming my new duties as Chairman of GMU Econ.)

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Optimistic About the Future

by Don Boudreaux on September 22, 2016

in Growth, Innovation, Video

Here’s the two-minute video that opened last evening’s annual Mercatus Center dinner at the Willard Hotel.  (I thank my talented Mercatus colleague Jeff Holmes, and the team he assembled, for making me appear to be at least semi-competent in front of a camera.  But it’s a camera trick!)

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Here’s a letter to the Washington Post:

George Will beautifully explains how trade creates prosperity: low-value-added jobs, such as those in South Carolina’s textile mills, have, because of trade, been replaced by higher-value-added jobs, such as those in that state’s booming tire-manufacturing plants (“Charleston’s port needs deepening. Can Congress do its job?” Sept. 22).

But in this election year that features so much hostility to trade, Mr. Will should not be surprised that Uncle Sam is dithering on dredging Charleston’s harbor.  In fact, given the candidates’ and the voters’ lethal embrace of protectionism, it’s more surprising that Uncle Sam isn’t now at work filling the harbor with boulders and mines.  Reducing the harbor’s physical accessibility, after all, is simply another means of achieving what many politicians of both parties promise to do with tariffs: raise Americans’ costs of trading with foreigners.

Or from a different perspective: why should government waste taxpayers’ dollars on the dredging of harbors if it plans to use tariffs to keep cargo ships from moving freely into and out of those harbors?

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

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Quotation of the Day…

by Don Boudreaux on September 22, 2016

in Myths and Fallacies, Seen and Unseen, Trade

… is from pages 512-513 of the final (2016) volume – Bourgeois Equality – of Deirdre McCloskey’s pioneering trilogy on the essence of bourgeois values, on their transmission, and on their essential role in modern life (original emphasis; link added):

Business schools, which focus naturally on the fortunes of the individual firm, teach that “competitiveness” is all.  They believe it follows that government, not price signals from the world economy, should choose winners.  The economists in the business schools have had hard time persuading their colleagues that the pattern of trade and specialization is determined, on the contrary, by “comparative advantage,” which has nothing to do with absolute advantage, and which professors of management and of history regularly mistake it for.  Pakistan exports clothing to the United States, the economists preach (without much effect on editorial boards and politicians), not because it is better per hour at making socks and sweaters but because it is comparatively better at them than at making jet airplanes and farm tractors.

Politicians, pundits, professors, and other people who lament that Americans produce too few goods of the likes of t-shirts, socks, sneakers, and bed linens thereby also lament that Americans produce too many goods and services of the likes of jumbo jets, gasoline, software engineering, and highly specialized medical care.

Of course, those who do this lamenting are unaware of the full extent of what they lament.  They are economically uninformed.  To be economically uninformed is, among other curses, to fail to understand that using trade restrictions to artificially shift more domestic workers and other resources into protected domestic industries is to artificially shift more domestic workers and other resources out of unprotected domestic industries – unprotected domestic industries in which those workers and resources would be more productive than they are in the protected industries into which those workers and resources are directed by the trade restrictions.

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