Here are some questions for proponents of a legislated minimum wage:
- Suppose (not unreasonably) that poor people are disproportionately likely, compared to wealthier people, to own high-mileage used cars produced, say, between 1989 and 1995. And assume that the average price at which poor people sell each of these cars (when, say, they want to buy newer cars, or when they choose to rely more heavily upon public transportation) is $3,000. Do you support minimum-used-car-price legislation that prohibits the sale of any car at a price of less than $5,000? Do you believe that such legislation would make poor people richer? Would your answer change if the legislated minimum price for cars is $3,250 rather than $5,000? (I proposed a similar thought experiment back in June 2006.)
- Other than low-skilled labor, what other goods or services can you think of that warrant enormous amounts of empirical studies to determine the direction of the effect that mandated higher prices for those goods and services will have on the quantities of those goods and services that buyers wish to purchase? Or is low-skilled labor the only good or service that you can think of for which it is unscientific or mistaken to suppose that, all other things unchanged, the higher is the price that buyers must pay for this product, the fewer are the quantities of this product that buyers wish to purchase?
Asked differently: Is it unscientific for protectionists to reason that higher tariffs on imported steel or sugar or automobiles or shoes will reduce (from what they would otherwise be) the quantities of these things that buyers wish to purchase? Is it unscientific for nanny-state government officials to reason that higher taxes on cigarettes will lower the quantity demanded of cigarettes? Is it unscientific for opponents of immigration to propose, in hopes of reducing the employment of undocumented immigrants, higher penalties on firms that employ undocumented immigrants? Is it unscientific for proponents of rent-control to insist that, if the rents that tenants must pay for rental apartments rise, fewer people will be in the market to rent apartments? Are National Football League officials unscientific dolts when they assume that increasing the fines for helmet-to-helmet hits will reduce the frequency of such hits?
In the same way the Pilgrims were seeking more than material abundance, the digital economy’s fruits are not all measurable. Our digital world does not create a heaven on earth, but it does empower more people than ever before to express themselves more fully through work, commerce, art, science, community, and civic activism. It may not free oppressed nations, at least not immediately, but it does carry voices further and faster than before. It may not resolve persistent unemployment, but it does allow more people to pursue particular passions and match their talents with the world’s needs. It fuels the engine of knowledge creation and accumulation that we now believe is the basis of economic growth, not to mention the Aristotelian ideal.
… is from page 103 of the 1983 re-issue of Ludwig von Mises’s 1944 volume, Bureaucracy:
Bureaucratization is necessarily rigid because it involves the observation of established rules and practices. But in social life rigidity amounts to petrification and death. It is a very significant fact that stability and security are the most cherished slogans of present-day “reformers.” If primitive men had adopted the principle of stability, they would never have gained security; they would long since have been wiped out by beasts of prey and microbes.
Arindrajit Dube makes a strong case for minimum-wage legislation (“The Minimum We Can Do,” Nov. 30) – but it’s not strong enough. Here are two (of many) weaknesses in his case.
The first is Prof. Dube’s dismissal of David Neumark’s and William Wascher’s research – empirical research that consistently shows that higher minimum wages reduce low-skilled workers’ employment options. Prof. Dube claims that the higher unemployment that Neumark and Wascher attribute to minimum wages is in fact the result of long-run secular trends in the decline of low-wage employment – trends that are independent of minimum-wage legislation. But on pages 10-15 of the very paper by Neumark, Wascher, and J.M. Ian Salas* that Prof. Dube links to in his essay, these scholars explicitly do consider carefully the trends that Prof. Dube accuses them of ignoring. And they still find that minimum-wage legislation significantly shrinks the employment options of low-skilled workers.
The second weakness is Prof. Dube’s argument that “If McDonald’s is required to pay a higher wage, fewer of its workers will leave to take other jobs. This means fewer vacancies at McDonald’s, and it means other employers are more likely to fill their job openings from the ranks of the unemployed – both of which can help keep unemployment down.”
Forget that this argument undermines a pet assertion of minimum-wage proponents, namely, that employers have monopsony power over low-skilled workers. (Monopsonist employers do not routinely lose workers to other employers.) Instead recognize that Prof. Dube overlooks the fact that when the turnover rate of McDonald’s employees is high, then McDonald’s restaurants themselves “are more likely to fill their job openings from the ranks of the unemployed.” In other words, Prof. Dube’s conclusion that employment is buoyed when McDonald’s rate of worker turnover falls reflects his failure to recognize that, while a lower turnover rate at McDonald’s might indeed cause other employers to hire more new workers from the ranks of the unemployed, it will also cause McDonald’s to hire fewer such workers - thus offsetting the increased hiring by other employers.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
… is from page 123 of by GMU Econ colleague Tyler Cowen’s great 2002 book, Creative Destruction:
Often a brand name certifies creativity rather than uniformity or homogeneity….
Brand names allow artists to experiment with different styles, without fear of losing their “in” with the audience. Picasso changed styles many times, but buyers knew they were getting a Picasso. If we imagine a world where artworks are produced under true anonymity (i.e., with no brands), it is not obvious that quality and diversity would improve. The most successful artists, for instance, might try to re-create their greatest triumphs, so that the audience could identify the product as theirs. Brand names remove this fear of anonymity, by telling audiences when they should take a second look or when they should pay heed to a new style.
Branding is one of the many institutions that would not exist in the world of perfect knowledge, or of no asymmetric information, that still stands as the ideal against which too many economists compare reality.
Dana Milbank wants to “save America” by restoring military conscription (“Save America: Restore the Draft,” Nov. 30). Horrible idea.
While Americans’ values might be changing from those that ensure a civil and prosperous society, the problem isn’t that our values are becoming insufficiently martial or communitarian. The problem is that our values are becoming insufficiently bourgeois.
History is replete with societies that bestowed their greatest rewards and honors on warriors. Those societies also embraced slavery and suffered enduring poverty. The 20th-century witnessed infamous nation-wide experiments with subjugating the individual to the Collective. Those experiments resulted in genocide and enduring poverty. Humankind escaped such atrocities only when and where bourgeois virtues and pursuits – such as self-responsibility, minding one’s business, industriousness, and commercial enterprise – came to be held in high regard and widely practiced.
While bourgeois values and pursuits have long been, and remain, contemptible to too many professors, preachers, politicians, and pundits, the danger is that these values and pursuits are increasingly held in contempt again by the public. Conscription as endorsed by Mr. Milbank – premised on the anti-bourgeois superstition that the individual must be forcibly molded into a compliant subject by the supreme and mighty State – will only further erode those values that sustain a liberal and open society.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
… is from Thomas Sowell’s recent syndicated column, “Random Thoughts“; while I don’t agree with all that Sowell says in that column (Sowell remains, in my view, far too trusting of both the intentions and the abilities of U.S. politicians who deploy American military might abroad), he is spot-on insightful with this observation:
Those who want to “spread the wealth” almost invariably seek to concentrate the power. It happens too often, and in too many different countries around the world, to be a coincidence. Which is more dangerous, inequalities of wealth or concentrations of power?
This historical experience contains a lesson for health care. The problems highlighted in your report – a surge in health-care consumption along with a shortage of health-care resources – is a predictable result of turning health care into a common-property resource. Consumers have fewer incentives to consume it wisely while physicians and other health-care providers have fewer incentives to supply it in quantities sufficient to meet all of the demands for their services.
It sounds noble to many modern ears that health care should be supplied as a ‘right.’ It likewise sounded noble to the Pilgrims’ ears that food should be supplied as a ‘right.’ But noble intentions are no substitute for proper economic incentives. Just as the Pilgrims’ experiment with supplying food as a ‘right’ failed, so, too, will our effort to supply health care as a ‘right’ fail.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
The failure can be masked. Long waits for medical treatments, forgone innovation, arbitrary rules to ration medical-care resources – these and similarly unfortunate outcomes are either easily missed by those not looking for them or are blamed on forces other than the collectivization of health-care provision. But as I’ve said before here at the Cafe, free-riding is not transformed from a bug into a feature just because it is mandated by government.
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