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Raising firms’ costs to employ people is never a recipe for increasing employment. It isn’t even a recipe for higher pay for the new workers who qualify under the rules but enter the workforce after the new rules are implemented.
Most firms aren’t actually sitting on piles of unspent cash that they could easily use to pay for overtime. As such, in the short term, when faced with higher costs, we can expect firms to look for ways to offset them, either by reducing the hours that employees work — so that fewer of them work more than 40 hours a week — or by using more part-time workers in place of full-time workers. In the long run, employers may mitigate the costs by reducing the base wages so that total compensation (base wages plus overtime pay) is again equal to what it was before the new rule implementation.
Gonzalo Schwarz argues that the universal basic income is a ‘solution’ in search of a problem [3].
Here’s Hayek’s November 1941 essay in Nature: “Planning, Science and Freedom [4].”
Pierre Lemieux riffs on the unbearable lightness of free trade [6]. A slice:
What we might call the unbearable lightness of free (international) trade comes not from serious objections against it; those don’t exist, even if some qualifications to it can be found. The unbearable lightness of free trade comes from the fact that it is, in the main public debates, defended for the wrong reasons. It is thus very fragile.
The fundamental reason why free trade is generally beneficial is that, at the international just like at the domestic level, it is simply an instance of economic freedom. Free trade is beneficial for the same reasons that, say, freedom to bid for the apartment of one’s choice or freedom of marriage are generally beneficial for individuals.
Alan Reynolds calls Trump’s trade war “a fiasco [7].”
My Mercatus Center colleague Dan Griswold reports that Americans’ freedom to trade declined in 2018 [8].
Richard Epstein celebrates the genius of the late Harold Demsetz [9]. A slice:
Overall, the genius of Harold Demsetz did not lie in his finding the definitive answer. It lay in his ability to ask the right questions and to spin a powerful theory for others to expand and criticize. This short essay cannot delve into his entire body of work, but I would be remiss not to mention Demsetz’s short 1968 masterpiece [10], Why Regulate Utilities?, which questioned the conventional case for regulating the rates charged by public utilities. Demsetz’s powerful point was that this costly administrative effort to control monopoly profits in the short run could compromise long-term innovation in dynamic markets. Similarly, his short 1983 essay [11], The Structure of Ownership and the Theory of the Firm, mounted a powerful attack on the hypothesis of the lawyer Adolph Berle and the economist Gardiner Means in their 1932 classic book [12] “The Modern Corporation and Private Property,” namely, that the separation of ownership and control in the modern corporation raised insuperable conflicts of interest between shareholders and management. In opposition, Demsetz argued that any decision by insiders to increase their own consumption out of firm assets would reduce the amount that they could command for the firm’s goods and services in product or labor markets.
It is a fair measure of his success that the major articles he wrote a half century ago remain essential reading today. Demsetz was one of the world’s most original economic thinkers, and he richly deserved the Nobel Prize that somehow eluded him.