The Angry Economist

In a comment to a Marginal Revolution posting, Mike Huben says that the "destruction of jobs by minimum wages" (his scare quotes, not mine) is essentially unmeasurable. He adds "I'm leery of believing either of those conservative excuses. I'm much more likely to believe that the rich want to get good servants cheap."

I hope nobody thinks I'm taking advantage of Mike by asserting that he thinks minimum wage laws create no unemployment simply because said unemployment is essentially unmeasurable. And yet, the noise caused by a tree falling in a forest is essentially unmeasurable. Does that mean that trees never fall, or that, when falling, they make no noise? Far from it. We can see that trees have fallen and since we hear a great noise when one does fall, we must assume that trees that fall when we're not watching also make noise.

Thus, we have to assume that minimum wage laws cause unemployment even though the unemployment we observe in a society cannot be tracked back to the existance or passage of a minimum wage law. Or, at least, if we are to be honest people we must make this assumption.

Doc Searls links to George Lakoff's Whose Freedom?, Daniel Pinker's review trashing the book, and George's response. Sorry, Doc, but Pinker definitely won this argument. Just take positive rights (the right to something good) and negative rights (the right not to be subjected to something bad). George totally gets them wrong. Here's what he wrote:

In Whose Freedom?, I discuss the difference between freedom from and freedom to (page 30). Then, throughout the book, I show that both the progressive and conservative versions of freedom use both freedom from and freedom to. For example, progressives focus on freedom from want and fear, as well as from government spying on citizens and interfering with family medical decisions; they also favor freedom of access to opportunity and fulfillment in life (e.g., education and health care). Conservatives are concerned with freedom from government interference in the market (e.g., regulation) and they are concerned with freedom to use their property any way they want. In short, the old Isaiah Berlin claims about the distinction do not hold up.

Clearly George has no conception of the difference. The "freedom from want and fear" are both in fact the freedom to coerce somebody else into supplying resources to satisfy your wants, and coerce somebody else into protecting you. That's backwards. His "freedom of access to" is an attempt to wiggle out of saying "freedom to coerce others into supplying you with" (education and health care).

The "freedom to use their property" is in fact a freedom from interference. Again, he gets this totally backwards, and yet not only expects us to believe him, but he uses these as evidence that he understands the concept after Pinker says he doesn't. That's like (to use a metaphor) saying that you understand math, being challenged on it, and then saying "Oh yeah?? Well two plus two is five; anybody can see that I know math."

Doc calls it good reading. I call it painful reading, because George is making a fool of himself.

People who are not familiar with the operation of free markets object to the statement "the market allows for efficient allocation of resources". They look at their own life, or their friends' lives, and see all sorts of inefficiency. Efficient is relative, though. It should really go: "free markets provide the most efficient allocation of resources". The difficulty is that the problem is ineffably hard.

Ever tried to pack suitcases into a trunk? Now imagine 300,000,000 trunks and several times as many suitcases, where the drivers are moving the trunks around and the suitcases are changing size. The difficulty of the problem is beyond the imagination, much less any solution to it. The best solution is not going to be found in standardizing suitcases or stopping the drivers from moving. The best solution is to allow the drivers to choose the suitcases that best fit their trunks.

Today, somebody asked me what this meant: "Court thus concluded that places of public accommodation had no "right" to select guests as they saw fit, free from governmental regulation." ? I said "It means that a store-keeper has to subject himself to whatever whim politicians wish to impose on him." Then I noticed that Jim Crow laws and Anti-Discrimination laws are opposite sides of the same coin.

They both express the idea that the government can tell you who you must or must not associate with. I disagree with that. Just because you admit some or all people to your place of business doesn't mean that you should be forced to admit all or some people. It's unfortunate the the forces of good would be so willing to use the tool that the forces of evil used. I think it would be better if the forces of good would destroy the tool, lest it fall into the hands of evil.

Racism is evil; it used the tool of government coercion to force people to discriminate. Anti-racism is good; it used the tool of government coercion to force people not to discriminate. I'd prefer to see that tool destroyed, rather than used for good.

Private entities can still discriminate, or not discriminate. What is gone is the ability for good people to force everyone to be good, or for bad people to force everybody to be bad. Everybody agrees that it was bad when bad people were forcing everybody to be bad. Lots of people think that it's okay for good people to force everybody to be good. I think they're missing the fact that the idea of forcing everybody is the true danger. Just because the good people are in control now, that doesn't mean that they'll always be in control.

Sometimes discrimination is good. Suppose a black person wanted to hire only black people in her factory, to help give them a leg up? She couldn't do that; it would be illegal discrimination. Suppose a white person feels bad about slavery and wants to enact his own personal reparations program by paying black people more simply because they were black. (A black person might want go all cynical on me right now with a succinct "Ha!" Maybe they're right to be cynical, but we'll never know if a white person wanted to do that, because it would be illegal discrimination.)

If people can't be forced to discriminate (as Jim Crow laws did), and they can't be forced to not discriminate (as Anti-Discrimination laws do), then there will be some people who discriminate for evil, some people who discriminate for good, and some people who do not tolerate any kind of discrimination. I'd rather deal with that than a world where people accept that it's okay to force people to associate, or to force them to note associate.

Leftists want to treat the minimum wage as a magic bullet. Shoot it off, and it magically reduces poverty. The problem with any magic bullet, though, is that it comes down somewhere. With enough margic bullets, or by affecting enough people with the magic, it will hit somebody. Leftists try to claim that, because you can't ever find the bullet, that the bullet somehow disappears.

For a small enough minimum wage increase, you can't identify anyone whose employment got destroyed because their labor is no longer worth the minimum wage. You can't even pull out the loss of that job from all the other changes in the work force. But like the magic bullet, it has to land somewhere. If you can't identify the person who got hurt, did they not get hurt?

Could there be such a thing as too little unemployment? Leftists will say "Not for us, but maybe for businesses. They can only exploit workers when unemployment is high enough to force everybody to take the first job they can get no matter how lousy. From businesses perspective, there can definitely be too little unemployment."

If you accept the idea that there is a natural rate of unemployment, which results from the cultural amount of job-switching, the acceptance of unemployment, and people's expectations, then yes, a rate of unemployment lower than that would be a bad thing. It would mean that the economy is providing sufficient jobs, but that people don't feel that way. It could also mean that people are reluctant to stay unemployed for any period of time. They might be expecting bad times.

It could also be that people don't switch jobs too often, so that people take a new job because they're scarce. People might not switch because of benefits designed to retain employees; for example leave time, or sick days, or liberal sabatticals, or health insurance tied to employment.