Pollin and Wicks-Lim claim that an increased minimum wage will substantially reduce the costs of employee turnover, saving money that can now go to pay higher wages. The two fail to grapple with, much less refute, a devastating response to this idea from no less a liberal than the Nobel-winning economist and New York Times columnist Paul Krugman. In his review of Pollin’s 1998 book The Living Wage, Krugman wrote: “The obvious economist’s reply is, if paying higher wages is such a good idea, why aren’t companies doing it voluntarily?” (That question goes unaddressed in the current study.) Krugman continues, “But in any case there is a fundamental flaw in the argument: Surely the benefits of low turnover and high morale in your work force come not from paying a high wage, but from paying a high wage ‘compared with other companies’—and that is precisely what mandating an increase in the minimum wage for all companies cannot accomplish.”
My colleague Dick Wagner and GMU PhD candidate Vipin Veetil are not enthusiastic about NGDP targeting. Here’s the abstract of their superb new paper on the topict:
NGDP stabilization is the latest of a set of rules that a good number of theorists have claimed could serve as an effective instrument for a central bank to follow in its promotion of macro-level stabilization. This claim is a mirage that is created by inaptly theorizing the relationship between macro-level variables and micro-level interactions. Within that inapt theorization, macro observations are treated as being independent of micro-level interactions. In contrast, we treat the micro-macro relationship as ecological in character. We explain our claim by advancing a systems-theoretic or parts-to-whole framework for capturing interaction between micro-level action and macro-level observations. Within this alternative framework, there is interdependence between macro-level and micro-level theories. Once this interdependence is taken into account, it becomes possible to see how the pursuit of NGDP stabilization can impair micro-level coordination by chasing what is effectively a mirage.
I’m proud of my hometown of New Orleans for being the best place in the U.S. today for school choice. (I’m ashamed of my longtime home of Fairfax, VA, for being such a lousy place for school choice.)
Speaking of education…. If I were going to be in London on February 25th, I’d attend this lecture at the IEA by James Tooley.
Sandy Ikeda explains how land-use regulations hurt the poor.
Speaking of land use… My student Mark Lutter reflects on the future of proprietary cities.
Richard Ebeling reflects on the morality of capitalism.
