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Fabulous article by Nicole Gelinas in the New York Post on the NYC Mayoral candidate’s proposal to increase tax rates on the rich to fund a longer school day for pre-K children. Read the whole thing but here are a couple of interesting facts:

De Blasio’s scheme is this: Hike income taxes by 13.8 percent on New Yorkers making above half a million dollars annually.

He’d use this bounty — $530 million a year — to pay for 38,177 pre-kindergarten students to go to school all day instead a half-day. He’d create 10,000 new pre-K slots, too.

The rest, $188 million, he’d spend on older kids’ after-school activities. After five years, de Blasio would let this tax surcharge lapse, and — he says — find another way to pay.

De Blasio’s plan has pushed him to frontrunner status in the Democratic primary.

But many voters don’t realize: We already spend $24.6 billion a year on education — 52.7 percent more, adjusted for inflation, than we did when Mayor Bloomberg took office nearly 12 years ago.

Wow. A 53% real increase. Those New York kids must be really smart now. And as Gelinas wisely points out. Obviously that increase wasn’t nearly enough. There appear to be about 1.1 million kids in NYC’s public schools. That’s about $22,000 per pupil. I’m sure every penny is wisely spent. So clearly, if you want to fund a longer pre-K day, you have to raise taxes, right?

And this:

In 2009, the top 1 percent of taxpayers (the 34,598 households making above $493,439 annually) paid 43.2 percent of city income taxes (they made 33.9 percent of income), according to the city’s Independent Budget Office. Each of these families paid an average $75,477.

The top 1% made 34% of the income but paid 43% of the taxes. If you listen to EconTalk you know that I think that the salaries in the financial sector (and for economists outside the financial sector) have been distorted by implicit subsidies. That’s part of the reason a mere 1% make 34% of the income. But note that they do pay 43% of the taxes. You’ll often hear how the rich have used their political power to lower their tax burden. Yes, some of the rich have a disproportionate share of political power. But their power must be pretty limited if they still pay 43% of the income taxes collected in New York City.

Read the whole article. Lots of good microeconomics.

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From time to time I encounter a blog post that is too important to include among others in my “Some Links” series.  Such posts deserve to be singled out and recommended without any dilution of any sort (even when, as is true today, I’ve no time to do other than to point to this post by George Selgin and say read it).  Read it carefully.  Read it carefully twice.  Perhaps thrice.  It’s that good.

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… is from page 387 of Lord Acton’s essay “The Influence of America,” which is reprinted in Essays in the Liberal Interpretation of History (William H. McNeill, ed., 1967); this essay – a lecture given by Acton at Cambridge University in the 1890s – was originally published posthumously in 1910 in Acton’s Lectures on the French Revolution:

The great inlet by which a colour for oppression has entered into the world is by one man’s pretending to determine concerning the happiness of another.

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Over at EconLib, Daniel Kuehn writes wisely and well about immigration.  A slice (it’s the heading for a sub-section of Daniel’s essay):

Undocumented immigrants are exactly the sort of people we should be welcoming

Over at EconLog, Bryan Caplan explains that open borders is a moderate position.

From Alex Tabarrok at Marginal Revolution:

In honor of labor day here are a number of resources on the most pro-labor policy in the world, open borders

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One of history’s greatest economists – certainly a top ten, and arguably a top five, economist of all time – died today.  Ronald H. Coase was less than four months shy of his 103rd birthday.  He wrote and published one of his classic papers (“The Nature of the Firm,” 1937) before my late mother was born.  More on Coase later.  Suffice it now to say that my ranking of Coase as one of the greatest economists of all time, as an elite among the elite, is not hyperbole.

Here’s Russ’s May 2012 EconTalk podcast with Coase.

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Bryan Caplan – who has a comparative advantage over most of us in such matters – ponders Tyler Cowen’s pondering of the principle of comparative advantage.

Perhaps I will later write an even longer and more ponderous post on Tyler’s take on comparative advantage.  But for now I content myself to say that, while I agree with much of what Tyler says, I believe that the thrust of Tyler’s post misses the essence of the principle.  That principle is – and has always seemed to me to be – one about the proper way to reckon costs.  To understand comparative advantage is to understand that costs, properly reckoned, are always opportunity costs.  To understand comparative advantage is to appreciate the reality that comparing how many baskets of broccoli Smith can produce in an hour or in a day or in a year compared to how many baskets of broccoli Jones can produce in the same amount of time does not tell us whether the cost of employing Smith to produce broccoli is higher or lower than is the cost of employing Jones to produce broccoli.  Another comparison is germane – namely, the (subjective) value of what Smith gives up to produce a basket of broccoli compared to the (subjective) value of what Jones gives up to produce a basket of broccoli.

It’s a misfortune that the principle of comparative advantage was introduced to the world in the context of an explanation of international trade.  Nothing about that principle is unique to specialization that emerges in response to expanded opportunities for individuals to trade internationally.  Generations of careless scholars – including generations of careless economists – have been mislead into supposing that today’s existing matrix of comparative advantage serves either the exclusive – or a hyper-disproportionately important – role in determining patterns of international trade.  In fact, today’s existing matrix of comparative advantage is

(1) not static; it changes over time;

(2) only one of the ‘forces’ working to determine, even in laissez-faire economies, prevailing patterns of specialization and trade;

(3) no more likely to produce ‘better’ patterns of specialization and trade than are other forces at work in free markets to determine patterns of specialization and trade; and

(4) always at work influencing patterns of specialization and trade intranationally no less and no more than it is at work internationally.

Of course, comparative advantage can be, and has been, explained to work not only ‘statically’ – that is, with a matrix of given and fixed opportunity costs for all producers – but also dynamically.  The latter might explain, for example, how Smith, who today has a comparative disadvantage relative to Jones at producing broccoli, gains a comparative advantage over Jones tomorrow at producing broccoli because Smith has a comparative advantage today and tomorrow over Jones at innovating – or at investing, or at ‘waiting,’ or at experimenting – in broccoli (or agricultural) production.  My favorite example: when I was 18 years old I certainly did not have a comparative advantage at teaching principles of microeconomics; now, as I approach my 55th birthday, I do have a comparative advantage at that task.  The reason, of course, is that I set out, starting when I was 18, to eventually gain such a comparative advantage.  The fact that I once bought instruction in economics principles but today produce and sell such instruction in no way violates the principle of comparative advantage.  All along, even when I was 18, I likely had a comparative advantage at preparing myself to gain a comparative advantage at teaching economics principles.

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… is from page 467 of the first edition of Zechariah Chafee’s Free Speech in the United States; it is quoted favorably on page 302 of the first edition of Arthur A. Ekirch, Jr.’s classic and indispensable 1955 volume, The Decline of American Liberalism:

The truth is that the precise language of a sedition law is like the inscription on a sword.  What matters is the existence of the weapon.  Once the sword is placed in the hands of the people in power, then, whatever it says, they will be able to reach and slash at almost any unpopular person who is speaking or writing anything that they consider objectionable criticism of their policies.

Most conservatives correctly understand that venality, egoism, interest-group pressures, and knowledge limitations nearly always combine to make government interventions into the domestic economy not only counterproductive but often dangerous.  I beg these conservatives to consider that these same forces are at work in the NSA, the CIA, the Pentagon, and all other ‘national defense’ agencies.

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… is from pages 354-355 of my colleague Larry White’s superb 2012 volume, The Clash of Economic Ideas (original emphasis):

How do we know individuals are willing to pay enough to cover the cost of a supposed public good?  When we do not see a good being produced, it need not be that transaction costs or free-rider problems are blocking something that ought to be done.  It could be that the good in question is not really worth producing in the eyes of those who would bear the cost.  We do not know which it is, and by the inbuilt logic of the construct we cannot know.

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Here’s a letter to Media Matters:

Samantha Wyatt criticized NPR for reporting that raising the minimum wage might increase unemployment among low-skilled workers (“NPR Pushes Myth That Raising Minimum Wage Would Kill Jobs,” Aug. 30).  According to Ms. Wyatt, “economic studies have concluded that raising the minimum wage has no effect on employment.”

She’s misinformed.  While there are indeed some studies showing no measurable negative effects of higher minimum wages on employment, many other studies find the opposite.  For instance, Texas A&M economists Jonathan Meer and Jeremy West recently concluded that “Using a long state-year panel on the population of private-sector employers in the United States, we find that the minimum wage reduces net job growth, primarily through its effect on job creation by expanding establishments.”*  And this study is hardly an outlier.  For Ms. Wyatt to suggest that economists have reached a consensus conclusion that minimum-wage legislation doesn’t reduce the job prospects of low-skilled workers is both wrong and irresponsible.

Empirically detecting the consequences of legislation, such as the minimum wage, that affects a relative small number of workers is inherently difficult – especially given that employment prospects are affected also by dozens of other forces simultaneously in play in the economy.  Theory cannot be abandoned.  And sound theory makes the burden of persuasion very heavy for those who insist that raising employers’ cost of hiring workers will have no negative effects on workers’ job prospects.  Contrary to Ms. Wyatt’s reckless insistence, the empirical record of the consequences of minimum-wage hikes doesn’t remotely begin to bear this burden.

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

* “Effects of the Minimum Wage on Employment Dynamics” (August 2013).

And never mind (as Bob Murphy points out) that the minimum-wage hike in question is a near-doubling of that wage – a hike far larger than those minimum-wage hikes that have been studied regularly.

….

Do this mental experiment: Suppose government formally prohibits employers as well as all law-enforcement officials from prosecuting or otherwise in any way retaliating against or punishing employees who pilfer small amounts (say, cash or merchandise worth $50 or less each week) from their employers.  Would there be a serious debate about whether or not this enforced policy would prompt employers to protect themselves from the likely increase in pilfering by employees?  And suppose that after such a policy had been in place for a number of years some studies find that, as predicted by textbook neoclassical microeconomic theory, the employment prospects of workers and wannabe workers are reduced while other studies find no such negative effect.  Would it be regarded as an instance of responsible journalism to look only at the latter studies and then insist, based upon these studies, that increased employee pilfering – enforced by government! – has no effect on workers’ employment prospects?