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Quotation of the Day…

… is from page 3 of the 2nd (1985) edition of Deirdre McCloskey’s superb intermediate microeconomics textbook, The Applied Theory of Price:

Notice that the economist’s affirmative answers [to a series of questions about economic matters] are bipartisan, stepping on everyone’s toes.  Republican or Democrat, you can find an economist to insult your most cherished belief.  Furthermore, the answers are not mere matters of faith.  The economist could persuade the open-minded noneconomist that these economic propositions are true by the same method that an astronomer would use to persuade them that astronomical propositions are true: refined common sense, consistent reasoning, and ascertainable fact.

The economist faces the special obstacle that the people being persuaded are themselves economic bodies that have elaborate opinions of their own.  The Earth’s own opinion about the movement of heavenly bodies would probably be that they all move around the Earth itself in circles.  Untutored economic experience is a bad teacher of economics, just as the unaided eye is a bad teacher of astronomy.

Note that Deirdre refers to consistent reasoning.  The importance of consistency in reasoning is a chief and good reason why many economists (including me) have not jumped on the pro-minimum-wage bandwagon ridden today by some other economists.  There is simply no good reason to suppose that the market for low-skilled workers is such that higher prices for such workers consistently have effects that are inconsistent with the foundational tenets of economics.

Put differently, the economist who argues that raising the minimum wage does not reduce the employment options of low-skilled workers – but who also doesn’t hesitate to argue that higher taxes on imported steel will reduce the quantities demanded of such steel, that higher taxes on carbon emissions will reduce carbon emissions, and that stiffer penalties on tax evaders will reduce the amount of tax evasion – is not reasoning consistently.

Barring a very persuasive reason – backed by overwhelming empirical evidence – to believe that the market for low-skilled workers is consistently fundamentally different, in economically relevant ways, from the market for nearly everything else, the economist who argues that a rise in the minimum wage will not reduce the employment options open to low-skilled workers is being inconsistent and, hence, unscientific.*

This conclusion is not changed just because the economist can draw a pretty picture or tell a logically consistent tale showing the possibility that a higher minimum wage will not reduce the employment options of low-skilled workers.  (Of course the economist can perform such feats.  I learned to perform them when I was 19 years old.  It’s child’s play.)  Ditto if this economist presents some data that he or she offers in support of the proposition.  Such data prove nothing absent (1) a compelling theory for why in reality they show the startling outcome that they seem to show, and (2) overwhelming numbers of other empirical studies that consistently show the same thing.

To date, nothing close to (1) or (2) has been offered in support of the proposition that raising the minimum wage, even modestly, does not reduce the employment options of at least some of the workers that the minimum wage is supposedly meant to help.


* Note that the economist can still – without being inconsistent – argue in favor of the minimum wage on the grounds that the gains outweigh the losses, but this argument is different from the free-lunch-to-workers argument that asserts that raising the minimum wage doesn’t harm the very workers that it is ostensibly designed to help.

UPDATE: The prediction that the higher the minimum wage, ceteris paribus, the fewer are the employment options for low-skilled workers does not mean that only the number of jobs for such workers will decline.  It likely, in practice, does mean fewer jobs, but it also means fewer hours of paid work even for workers who find jobs or keep their jobs, lower fringe benefits, and worsened work conditions.  It is, indeed, possible (although I think unlikely) for a higher minimum wage to result only, say, in worsened work conditions without causing any reduction in the number of jobs for low-skilled workers.  The minimum wage, in this event, would still harm those workers.