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Quotation of the Day…

… is from page 645 of Armen Alchian’s and William Allen’s Universal Economics (2018; Jerry Jordan, ed.); this volume is an updated version of Alchian’s and Allen’s magnificent earlier textbook, University Economics (original emphasis):

The [minimum-wage] law specifies only the money wage component. The unintended consequence is that to get or retain jobs at the higher imposed wage rates, job applicants will tolerate less pleasant and stricter working conditions, less vacation, less insurance, less employer-supplied work clothing and tools, shorter coffee breaks, more intense labor, less job security, and more occasions of temporary layoff when demand is transiently low.

DBx: This perfect example of the economic way of thinking reminds us of a number of truths, including:

– Even if it all empirical studies that claim to find that minimum wages cause no decrease in the number of jobs for low-skilled workers are unassailably correct, this fact would do nothing to undermine the core ECON 101 argument that minimum wages worsen employment opportunities for low-skilled workers. The above partial list of non-wage adjustments to minimum wages make low-skilled workers worse off by worsening the non-wage aspects of their jobs. And no econometric study, no matter how sophisticated and advanced, can possibly identify and measure all non-wage aspects of jobs.

– People who know no economics but who think that they know enough about economics to comment on it often emit some criticism to this effect: “Economists think that all that matters in the real world is money!” In fact, good economists think no such thing. Good economists – as the above quotation attests – understand that human beings care about things other than money (and, indeed, that most human beings care ultimately only about things other than money; if you disbelieve me, read Adam Smith to learn what he understood to be the wealth of nations). And, therefore, good economists understand that because people care about things other than money, good economists understand that economic forces often change things other than money, and also that things other than money often cause people to change their actions.