The Latest from Cafe Hayek

(Don Boudreaux)

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In my latest column for the Pittsburgh Tribune-Review, I review some of minimum-wage’s negative consequences – for low-skilled workers – beyond (or, often, instead of) unemployment. A slice:

When government raises the minimum wage, employers can reduce the amount of nonwage benefits paid to employees. And so even workers who keep their jobs at the higher minimum wage might nevertheless be made worse off because of reductions in the value of their nonwage benefits.

A similar dynamic operates on the requirements side of jobs. Employers, obviously, expect their employees to produce enough to make their employment worthwhile for employers. And so if the minimum wage is raised, employers can work their employees harder.

Employers can become more strict in demanding that workers arrive on time and in punishing workers who leave work a few minutes early, or cracking down on personal texting, telephoning and emailing during work hours. This intensified strictness enables employers to get more output per hour from each worker.

In short, employers can respond to hikes in the minimum wage by employing fewer workers, cutting the value of workers’ fringe benefits or working employees harder. Most employers will use some combination of these three options. And to the extent that employers either cut the value of fringe benefits or work their employees harder, they will have less incentive to reduce the size of their workforce.

But make no mistake: Employers will adjust in one or more of these three ways — each of which makes workers worse off.

(Don Boudreaux)

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… is from page 396 of George Will’s splendid 2019 book, The Conservative Sensibility:

If you discount the importance of individuals and their utterances – their choices, and the rhetoric that justifies and elicits support for them – you discount the importance, and perhaps even the possibility, of democracy, a regime of persuasion.

(Don Boudreaux)

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Ages ago, as a grad student at NYU in the early 1980s, I took a course in Marxian (or was it called Marxist?) Economics from NYU Econ’s resident Marxist, Prof. James F. Becker. I enrolled in this course in order to give myself sufficient incentive actually to read Marx’s key works.

I recall very much liking Prof. Becker and his text, but finding – not to my surprise – Marx’s writings to be turgid, profoundly confused, and mostly downright absurd. I don’t remember the precise grade that I earned to pass the class, but if Marx’s labor theory of value were correct, then that grade damn well ought to have been an A+. Reading Marx was a struggle. It’s a task at which one must labor hard.

I am now again reading many of Marx’s ‘scientific’ economics writings (in preparation for a conference that I’ll attend next week). What a crock! Marx’s ramblings are far more ridiculous and difficult to penetrate than I’d recalled.

I’m astonished that Marx’s lumbering, thick, repetitive, and entirely inelegant prose somehow won for him any popularity beyond a tiny handful of crazed and semi-literate followers. Reading Marx is a figurative form of grinding red-hot embers into one’s eyes and trying to make sense, through the pain, of the resulting confused and distorted scene.

More than one person whose opinion and judgment I greatly respect insist that Marx, for all of his many mistakes, is nevertheless a thinker with some worthwhile ideas – a thinker worthy of careful study and respect. Well, if so, I’ve missed something. I’ve not come close to stumbling upon any original thought in Marx that is worth the ink used to record it onto paper. Nothing in the old fool’s oeuvre that I’ve read is remotely worthy of respect. It’s all, as far as I can tell, nonsense that is more difficult to digest than cement and with less intellectual nutritional value.

ARGGGHHHH!

(Don Boudreaux)

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… from page 117 of David Mamet’s 2011 book, The Secret Knowledge:

The Left’s current sentiment for the confiscation of benefits legally earned, but to them offensive, is Greed.

DBx: Unlike some economists and advocates of free markets, I do indeed believe that greed, as such, is bad; greed is not good. What is not bad – what is natural and unavoidable – is human self-interest. But self-interest isn’t greed. Self-interest is the sentiment highlighted by Adam Smith in An Inquiry Into the Nature and Causes of the Wealth of Nations as motivating butchers, brewers, and bakers – and, we might add, also book sellers, baseball players, bond traders, and everyone else earning a living in private markets – to improve their own lots in life by helping countless fellow human beings improve theirs.

In contrast to self-interest, greed is an anti-social sentiment. For you to be greedy is for you to demand more than you deserve – a demand that can be satisfied only by leaving other people with less than they deserve. We all, quite rightly, disapprove of greed and of greedy people.

How ironic, then, is the popular notion that business people who relentlessly work hard to satisfy consumers in order to earn more wealth – and who protest attempts to seize some of their wealth – are “greedy” (and, hence, deserving of our disapproval) while politicians, pundits, preachers, and professors who clamor to seize some of this wealth in order to give it to people who didn’t earn it are selfless public servants (and, hence, deserving of our admiration)?

For the likes of demagogues such as Bernie Sanders and Elizabeth Warren to call for the seizure of some of the wealth of very successful business people is loathsome, as are similar calls by academics such as Thomas Piketty, Emmanuel Saez, and Gabriel Zucman. But to then regard these and others who advocate the seizure and ‘redistribution’ of wealth as selfless public servants who fight greed is downright Orwellian.

(Don Boudreaux)

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(Don Boudreaux)

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Walter Olson is truly frightened by the ghoul that is Elizabeth Warren’s proposed tax on wealth.

My intrepid Mercatus Center colleague Veronique de Rugy reminds us that Milton Friedman was correct to argue that the burden of government is measured by how much it spends rather than by how much it rakes in as tax revenue during the current period.

Also from Veronique is this sensible call to end the ‘experiment’ with ‘renewable fuels.‘ A slice:

A recent Cato Institute report by Arthur Wardle highlights the impact of expanded land use for corn—with the increased application of nitrogen fertilizer leading to runoff that contributes to the hypoxic dead zone in the Gulf of Mexico and kills sea life—as evidence that “the research on the Renewable Fuels Standard is clear that it degrades the environment.” The Cato report also cites a meta-analysis, published in the American Journal of Agricultural Economics, of studies that modeled the life cycle greenhouse gas emission of ethanol versus gasoline and found a meager reduction of only 0.23 percent.

Vincent Geloso thoughtfully explores wealth inequality.

In Open Borders, Bryan Caplan and Zach Weinersmith talk about at least 127 different topics surrounding immigration.

George Will salutes baseball’s unwritten norms.

Megan McArdle reminds Californians that reality isn’t optional.

Deirdre McCloskey responds to a recent uninformed piece on her in First Things. A slice:

Mr. Schmitz read a little of the reissue in its twentieth year of Crossing: A Transgender Memoir, with its brief Afterword. The rest of my politics and scholarship he gets on the fly. He calls me throughout a “conservative,” which I have never called myself, though willing to chat politely with such folk. The error shows anyway the problem people have trying to force “classical” liberals like me onto the silly spectrum from left to right. The spectrum is only about in what direction a massive state is to enforce illiberal schemes, such as the left’s takeover of free speech (of which he accuses me) and of economic life; or the right’s takeover of bedroom behavior and of irritating foreigners.

(Don Boudreaux)

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Here’s a letter to the Palm Beach Post:

Editor:

For the sake of all low-skilled Floridians, let’s hope that the attempt to raise Florida’s minimum wage fails (“Florida $15 minimum wage drive gains enough signatures,” October 30). If this attempt succeeds, many of Florida’s poorest workers will be cast into the ranks of the unemployed.

The case, theoretical and empirical, against minimum wages is solid. It’s simply untrue that minimum wages help all low-skilled workers without harming any of them. But reviewing this case can be tedious. So here’s how I now summarize it to my students:

Suppose government were to mandate that everyone who gives money to buskers and other street entertainers may deposit into the entertainers’ open guitar cases or hats no sum less than $15. That is, while no one is obliged to give anything at all to these entertainers, each person who does give is legally obliged to ensure that each contribution is no less than the minimum required $15.

What will happen to the amount of income earned by buskers and other street entertainers? While it’s easy to fantasize that this income will rise – this intellectual feat can be performed by preschoolers – the answer obvious to adults is that this income will fall. Nearly everyone who finds it worthwhile to contribute on each occasion $1 or $5 will, with the minimum-contribution requirement in place, contribute nothing. They will not contribute the minimum mandated $15.

Although differences do separate employees from street entertainers, in this way they are identical to each other: government diktats can no more determine the total amounts that employers pay to workers than such diktats can determine the total amounts that pedestrians contribute to street entertainers. And just as attempts to compel pedestrians who contribute to contribute minimum amounts would backfire and harm the people meant to be helped, so too do attempts to compel employers to pay minimum wages backfire and harm the people meant to be helped.

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