Quotation of the Day…

by Don Boudreaux on February 6, 2016

in Property Rights

… is from page 111 of the 1978 collection, edited by Eric Mack, of Auberon Herbert’s essays, The Right and Wrong of Compulsion by the State; specifically, it’s from Herbert’s March 1884 brilliant May 1894 Fortnightly Review essay, “A Politician In Sight of Haven”:

Our great effort at this moment should be to reconcile our people heartily to private property, whether in land or in any other thing … and to lead them to see that no nation can in any true sense be free which allows a government of the day to model and remodel that which touches a man’s life so nearly as his property.

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This Picture Is Worth 895 Words

by Don Boudreaux on February 5, 2016

in Seen and Unseen, Work

On his Facebook page (but, at least so far, not at his excellent blog, Carpe Diem) Mark Perry captures nicely the essence of part of my recent post on the morality and economics of the minimum wage.  Here’s Mark’s rendering of my point.

Screen Shot 2016-02-05 at 2.26.35 PM

Relatedly, I ask another question of people such as Thomas Hutcheson who believe that the minimum wage is justifiable on ethical (and economic) grounds if, despite causing some workers in subgroup X (for example, “low-skilled workers”) to be unemployed, it raises the aggregate income earned by workers in subgroup X: Does it matter to you that my white, completely healthy, drives-his-own-car, upper-middle-class, private-school-educated, born-and-raised-in-wealthy-American-suburbia teenage son likely is paid, because of the minimum wage, a higher wage at work if his wage premium is the result of a policy that causes a disproportionate number of minority, inner-city teens from poor families to be unemployed?  Do you think that if the minimum wage causes my son’s and 99 others like him to enjoy an aggregate increase in their collective annual income of, say $100,000 while at the same time this minimum wage causes, by shrinking the availability of jobs, the aggregate collective annual income of 100 inner-city minority teens to fall by only $95,000 that the minimum wage is shown by the data to be worthwhile economically and ethically, at least as far as this group of 200 low-skilled workers is concerned?

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Quotation of the Day…

by Don Boudreaux on February 5, 2016

in Other People's Money, Work

… is from page 214 of the 5th edition (2015) of Thomas Sowell’s Basic Economics:

White South African landlords likewise often rented to blacks in areas where only whites were legally allowed to live.

The cost of discrimination to the discriminators is crucial for understanding such behavior.  Employers who are spending other people’s money – government agencies or non-profit organizations, for example – are much less affected by the cost of discrimination.  In countries around the world, discrimination by government has been greater than discrimination by businesses operating in private, competitive markets. Understanding the basic economics of discrimination makes it easier to understand why blacks were starring on Broadway in the 1920s, at a time when they were not permitted to enlist in the U.S. Navy and were kept out of many civilian government jobs as well.  Broadway producers were not about to lose big money that they could make by hiring black entertainers who could attract big audiences, but the costs of government discrimination were paid by the taxpayers, whether they realized it or not.

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by Don Boudreaux on February 4, 2016

in Scientism, Work

The following originally appeared, in a slightly different form, as my response to a comment by Thomas Hutcheson on this post.  Mr. Hutcheson continues his insistence that minimum-wage opponents, such as myself, stop arguing as if the minimum wage is unambiguously bad and recognize that it involves trade-offs – trade-offs that, as a matter of fact (Mr. Hutcheson believes), might work out empirically in favor of, or against, the minimum wage.  Quoting Mr. Hutcheson: “But just as I wish to see proponents acknowledge that a tradeoff exists, I’d like to see opponents do the same.”


Trade-offs exist always.  No minimum-wage proponent has ever denied that some workers get higher wages because of the minimum wage.  What’s at issue here (other than the widespread denial – although not by Mr. Hutcheson – that low-skilled workers in fact suffer harm because of the minimum wage) is two things:

(1) the morality of the means of forcing this trade-off, and

(2) the fact that considering everyone in the economy – that is, considering the economy as a whole rather than lopping off from consideration the welfare of some people or groups who we arbitrarily choose to ignore – a minimum wage reduces economic prosperity.  It reduces total output (save under the most bizarre and unrealistic circumstances, such as in the face of widespread monopsony power, which, I take it Mr. Hutcheson agrees, quite sensibly, is too unrealistic to take seriously as a basis for policy).

As to (1), I ask Mr. Hutcheson again a question that I asked earlier in that comments threat: Do you believe that Jim Crow is potentially justifiable?  Jim Crow involved trade-offs.  Jim Crow restrictions caused some people’s wages and incomes to rise artificially by causing other people’s wages and incomes to fall artificially.  My guess is that Mr. Hutcheson would reject out of hand, as unacceptably immoral, a government policy that strips people of the right to work based on skin color even if it were shown with unassailable evidence that workers whose skin color is of the preferred shade experience rises in wages and incomes greater in total than are the total losses suffered by people with less agreeably colored skin.

If I am correct in my guess, why, I ask Mr. Hutcheson, do you think that the minimum wage is different?  The minimum wage, while not explicitly targetted to harm any particular ethnic group, does in fact disproportionately harm workers who are at the very bottom of the productivity ladder – workers who are assessed by employers to be the least likely among all workers to be worth the minimum wage.

See this link that Sam Grove offered in a comment on another post.  That research – which is quite empirical – shows that the workers who bear the brunt of the minimum-wage’s costs are the least productive among all workers.  Do you think it acceptable for governemnt policy to redistribute income and opportunity from the least productive workers in society to some subset of more productive workers if the gains to this favored subset are greater in total than are the losses in total to the disfavored group?

As for (2), as I wrote in an earlier post (that I now haven’t the time to locate), the only way to find – empirically or theoretically – that the gains from the minimum wage are higher than the losses is to arbitrarily exclude some people from the welfare calculus.  Because the minimum wage reduces total economic output, mean per-capital real income necessarily falls in the economy as a whole.  So only by saying “Oh, let’s examine the effects of the minimum wage only on the incomes of this particular subset of people (low-skilled workers)” is it possible (although not at all guaranteed) to find that the increase in the aggregate income of (X-Y) people in this subset was larger than the fall in the aggretate income of Y people in this subset.

Surely Mr. Hutcheson must see, though, that whatever quantitative measurements and comparisons you get by performing this exercise are driven not only by whatever redistributive effects are unleashed by the minimum wage but also by the specific, arbitrary way that you’ve chosen to define the relevant group whose aggregate welfare you examine.  But you, Mr. Hutcheson, tell me: how do you distinguish low-skilled workers who should be included in the group whose aggregate welfare we are to care about from workers who are to be excluded from that group?

At what hourly wage or annual income do you draw the line separating “people whose welfare counts for assessing the impact of the minimum wage” from “people whose welfare does not count for assessing the impact of the minimum wage”?  Would you draw the line at, say, workers who earn an hourly wage of $12 or less?  A wage of $16 or less?  A wage up to $21 (which is just shy of the average wage of all full-time production and non-supervisory workers in America)?  Change where you draw the line and you potentially change the results of your welfare calculus.  Change where you draw the line in a big way and you almost certainly change the results of your welfare calculus.  Change where you draw the line so that you include all people in the economy and you discover that the gains to the minimum-wage winners are smaller than are the losses suffered by the minimum-wage losers.

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In my selfless efforts to help believers in the reality of monopsony power do well while doing good, I not only remind them yet again of Mike Long’s generous offer of free-of-charge business advice, I myself now offer (also free of charge) a sure-fire idea for a profitable business that uses as its key input the talents of most of these monopsony-power believers: Put yourself in business, as a consultant, offering to identify those locales and industries where monopsony is real.  You yourself don’t have to open and dirty your hands by operating the likes of restaurants, lawn-care companies, or junk-removal services.  Instead, set up shop as “XYZ, Consultant, LLC.”  Advertise your professional skill at identifying places in the economy where existing firms are currently earning excess profits off of workers who are underpaid.  You would, in this way, do little more than what you currently do – namely, insist, based upon your theory-informed reading of the data, that monopsony power is real and relevant throughout the economy.

To make money, you’d charge entrepreneurs and companies – big, small, and middlin’ – a fee.  Various models for such fees are possible.  I don’t know which specific model would work best for you, or which one would eventually be discovered by the competitive market process to be the fee model that is optimal.  The simplest model is to charge by the hour.  You should not think this model to be far-fetched because you already obviously believe that other people – especially legislators, voters, pundits, and your students and readers – should believe your claims about monopsony power.  If these other people should believe your claims upon encountering the brilliance of your argument and the compelling nature of the data that you show to them, then there is every reason to suppose that executives at McDonald’s, Wal-Mart, and Padre Julio’s Lawn & Garden Service will believe your claims.  These business people have positive powerful incentives to pay careful attention to you and to reward you monetarily for helping them in their incessant quests to greedily earn more and more profits.

But, as I say, fee models other than by-the-hour are possible.  It will pay you to hire a business consultant who is expert in advising on such matters.

Now go forth!  You have no excuse.  If you are correct, the billionaire class and other capitalist exploiters will beat a path to your office door and shower you with big bucks for informing them of profit opportunities that they have yet to notice with sufficient clarity or certainty.  (Indeed, you don’t even need an actual business office.  You can dispense your lucrative consulting advice from your university office, from your favorite coffee shop, or from that bean-bag chair in your basement.)

There is now, truly, no – none, nada, nul’, zero, zilch – reason for you not to take this step that, by your own premises, will generate profits for those who exploit existing monopsony power.  Do it!  Make yourself rich and, in the process, make low-skilled workers better off.  The world awaits your action!

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Steve Horwitz explains that voting is not the only, and not even the most meaningful, way to participate politically.  A slice:

When we write a letter to the editor, share a story or a meme on social media, talk about US foreign policy with friends over a drink, or step into our classrooms to teach economics to college students, we are being political. Every time we engage in the conversation about what is wrong with the world we live in and how we might make it better, wealthier, more just, or more peaceful, we are being political.

Elections and voting are neither the most important elements of politics nor the sum total thereof. That’s too narrow a conception and one that even libertarians should reject. If anything, we understand correctly that voting might be the least important and least effective kind of political action.

Greg Mankiw ponders the best way to evaluate U.S. presidents’ economic records.  A slice:

While Mr. Carter was dealt a bad hand, the opposite is the case for Bill Clinton, who is often portrayed as an economic miracle worker. Without doubt, his eight years in office were good ones, with strong growth and declining unemployment. Yet the main driving force of this prosperity was not government policy but rather accelerating productivity from new information technologies together with the dot-com bubble.

Jacob Sullum, writing in the New York Post, rightly upbraids today’s Republicans for their hostility to immigrants.

George Selgin understandably trumpets his former student David Beckworth’s recent New York Times op-ed (an op-ed co-authored with Ramesh Ponnuru).

With his trademark good sense, Arnold Kling is put-off by E.J. Dionne’s and other “Progressives'” self-indulgent habit of praising themselves – praise which is not only selective, but often historically inaccurate.

Here’s Russ’s podcast with Timothy Taylor.

My Mercatus Center colleagues Stefanie Haeffele-Balch and Virgil Storr, writing in the Washington Post, explain the central and essential role of civil society – private, peaceful, voluntary cooperation among ordinary people, some acting commercially and some acting philanthropically or ‘neighborly’ – in our lives. A slice:

In circumstances such as the recent blizzard, community members must rely on one another during and after the storm. If communities are to quickly return to normalcy, our neighbors, who take on the roles of commercial and social entrepreneurs, must be given room to act, too.

This is true after every major storm or natural disaster, including Hurricanes Katrina and Sandy. In New Orleans, commercial entrepreneurs reopened grocery stores, gas stations and furniture stores to provide the goods needed for rebuilding. And in New York, churches and synagogues provided food, clothing and medical services to their neighbors. Although the story of recovery from Winter Storm Jonas is still being written, it shouldn’t surprise us that entrepreneurs play a major role.

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Quotation of the Day…

by Don Boudreaux on February 4, 2016

in Myths and Fallacies

… is from pages 206-207 of the 1978 collection, edited by Eric Mack, of Auberon Herbert’s essays, The Right and Wrong of Compulsion by the State; specifically, it’s from Herbert’s brilliant May 1894 Contemporary Review essay, “The Ethics of Dynamite”:

Next it was urged in defense of power that the part which falls to discontented minorities is to turn themselves into majorities.  The remedy has the slight defect of drawing upon an imagined future and ignoring a real present.  I am walking along a road, and some one stronger than I knocks me down and begins to cudgel me about the head.  I call to a passer-by to help me and to drag the villain off.  He stands, however, with his hands in his pockets, and cheerfully tells me that it is all right; that I ought not to object.  If I only practice the use of a cudgel myself with sufficient zeal for a month, or perhaps a year, I shall then be in a position to cudgel my assailant quite as effectively about the head as he is now cudgeling me.  I reply that I don’t believe in cudgeling heads, whether it is my head or the head of somebody else.  The passer-by, however, merely shrugs his shoulders, by way of telling me that it is idle to object to what is so excellent a custom, and one which is universally practiced in the district.  Thereupon I find nothing more to say, and have to endure my cudgeling as best I can.  Of course, the retort, however good as a bit of rhetoric, is of small value as regards its logic, for, in addition to the pleasant irony of telling an insignificant section, who are aggrieved, that they are presently to govern the country, there are many injuries which the majority of the future, however much it may approach to omnipotence, can with difficulty redress.  It can hardly unhang a man, or wipe out of existence the weeks he has spent in prison, or give back property that has been taken from him and spent, or build up some great voluntary institution which has been destroyed, or invent redress for restrictions placed upon the facilities of an individual during the best years of his life, or remove the twist it has given to national character by unwise and harsh measures.

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Six months have passed since I first shared here at the Cafe the generous offer of experienced and proven businessman Mike Long to give free business advice to anyone who, asserting that monopsony power is rampant in the American market for low-skilled labor, is willing to put his or her money where his or her mouth by starting a business to exploit this alleged profit opportunity.  Amazingly, people who are so confident in the existence of monopsony power that they are willing to risk the livelihoods of low-skilled workers by endorsing a minimum wage (which would, in the absence of monopsony power, propel many such workers into the unemployment ranks) are insufficiently confident in their assertions to put their own money and their own efforts behind their assertions.

In fact, of course, I’m not at all amazed.  (I would have been amazed had someone actually taken Mike up on his offer.)  I knew in my marrow that no such acceptances of Mike’s offer were on the horizon.  The reason is that I know academic types: they think so highly of their powers of ratiocination and of their data-processing prowess that they feel anointed to use their theories as guides for what is so antiseptically called “public policy” but what are, in fact, officious intrusions into the peaceful affairs and choices of others.  Yet despite academics’ (and politicians’ and pundits’) expressed cocksure certainty of the goodness of their plans to order others about, they really are mostly just reckless theorizers.  Were they truly and prudently serious about their assertions of reality, at least some of them would – on those many occasions when such assertions imply seizable profit opportunities – actually act to seize such profit opportunities.  But, as indicated by their refusal to launch businesses to hire all the underpaid workers who allegedly are abundant throughout the land, no such actions occur.

These professors (and pundits and politicians) talk cheaply.  They – cowards that they are – put at risk only the money and livelihoods of others.  Such arrogance-encrusted cravenness is appalling.

No one should be taken seriously whose stated rationale for government intervention implies the existence of seizable profit opportunities that, once seized, make the alleged problem shrink or disappear.  Only sneers, ridicule, and discredit should greet those – such as economists who assert the existence of monopsony power to justify minimum-wage legislation – who do nothing but advocate coercive intervention whenever the problem to be rectified by the proposed intervention is one that could be, and would be, instead rectified by the peaceful and voluntary actions in the market of those who propose the intervention.


Mike Long’s offer, by the way, remains open.  (For details, click on the link above.)  If you wish to take Mike up on the offer, contact me.  After I recover from my shock, I’ll be delighted to put you in touch with him.


I can’t help but share here again the final line of Thomas Sowell’s Knowledge and Decisions (1980):

Freedom is not simply the right of intellectuals to circulate their merchandise.  It is, above all, the right of ordinary people to find elbow room for themselves and a refuge from the rampaging presumptions of their “betters.”

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Bonus Quotation of the Day…

by Don Boudreaux on February 3, 2016

in Immigration, Myths and Fallacies

… is from page 90 of Jacob Vigdor’s informative article “The Civic and Cultural Assimilation of Immigrants to the United States,” which is Chapter 4 of the superb new collection (2015), edited by Ben Powell, The Economics of Immigration:

While there are reasons to think of contemporary migration from Spanish-speaking nations as distinct from earlier waves of immigration, evidence does not support the notion that this wave of migration poses a true threat to the institutions that withstood those earlier waves.  Basic indicators of assimilation, from naturalization to English ability, are if anything stronger than they were a century ago.  Moreover, just as earlier waves of migration came to an end once the sending countries had completed the demographic transition, there is evidence that the rate of migration from Mexico has exhibited what will be a permanent decline.

The worldview most conducive to supporting restrictions on immigration is one where the host country possesses finite wealth, and newcomers threaten to not only demand a share of that wealth but arrive in numbers sufficient to change the rules by which it is distributed.  This worldview is difficult to reconcile with a reality where human capital has supplanted natural resources and physical capital as the most important determinant of wealth.  It is even more difficult to reconcile with a reality where he civic institutions that incentivize the investments that produce capital are the very things that motive immigrants to arrive in the first place.

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College students can now apply for the Independent Institute’s 2016 Challenge of Liberty seminars.

In Econ Journal Watch, Mitchell Langbert discusses the leftist bias in the field of industrial relations.  In doing so, he documents the heroic effort of my GMU Econ colleague Jim Bennett to fight that bias, largely by starting, in 1980, the excellent Journal of Labor Research.

Here and here are two excellent recent posts by the promising young economist Jon Murphy.

The Mackinac Center’s Mike LaFaive reacts to a truly awful bumpersticker.

In my most recent column in the Pittsburgh Tribune-Review, I reflect on an inconsistency in political commentary.

Steve Landsburg (before the Iowa caucuses) offered sound advice to Ted Cruz.

George Will discusses the wisdom of slashing corporate taxes.

Larry McQuillan exposes the cronyism that infects Tesla Motors.

Ilya Somin, a GMU colleague over in the law school, remembers Frederick Douglass – including Douglass’s defense of Chinese immigration.  Here’s Douglass (as quoted by Ilya):

I submit that this question of Chinese immigration should be settled upon higher principles than those of a cold and selfish expediency.

There are such things in the world as human rights. They rest upon no conventional foundation, but are external, universal, and indestructible. Among these, is the right of locomotion; the right of migration; the right which belongs to no particular race, but belongs alike to all and to all alike.

It is the right you assert by staying here, and your fathers asserted by coming here. It is this great right that I assert for the Chinese and Japanese, and for all other varieties of men equally with yourselves, now and forever. I know of no rights of race superior to the rights of humanity, and when there is a supposed conflict between human and national rights, it is safe to go to the side of humanity. …

Not the least among the arguments whose consideration should dispose to welcome among us the peoples of all countries, nationalities and color, is the fact that all races and varieties of men are improvable. This is the grand distinguishing attribute of humanity and separates man from all other animals. …

The fact that the Chinese and other nations desire to come and do come, is a proof of their capacity for improvement and of their fitness to come…

Let the Chinaman come; he will help to augment the national wealth. He will help to develop our boundless resources; he will help to pay off our national debt. He will help to lighten the burden of national taxation.

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