from Cafe Hayek – Quotation of the Day on Minimum Wage
The ‘new’ minimum-wage research that commenced in earnest in the mid-1990s is highly appealing to non-economists, for it supports their economically uninformed understanding of markets in general and of prices in particular. This research is an instance of credentialed economists, in effect, assuring the economically ignorant man-in-the-street that he is indeed correct in his simplistic understanding of the economy, while all those economists who are forever warning about ‘the unseen’ and about unintended consequences are the wrong-headed and unscientific ones.
Because economics – good economics – is very much the science of making that which is unseen seen, economists, of all people, should be keenly aware that much of what occurs in an economy is difficult, and often practically impossible, to detect – difficult or impossible to detect not only with the naked ‘eye’ but also with even the best quantitative data. This fact is why the burden of proof should weigh especially heavily upon those who claim to find in the empirical data evidence that foundational principles of economics do not apply or or suspended in this or that particular market. And the weight of this burden of proof should only further increase if popular and political sentiment runs strongly against the conclusions of foundational economics (as it does in the case of the minimum wage).
Bottom line: the empirical evidence against the standard economic analysis of the minimum wage is relatively scant and questionable, and the theoretical reasons offered in support of this ‘new’ minimum-wage research are even more questionable. The case that minimum wages have no negative employment effects for low-skilled workers is about as plausible as is the case for homeopathy or healing with crystals.
from the Cato Policy Report, Deirdre McCloskey writes How Piketty Misses the Point:
What caused the Great Enrichment? It cannot be explained by the accumulation of capital, as the very name “capitalism” implies. Our riches were not made by piling brick upon brick, bachelor’s degree upon bachelor’s degree, bank balance upon bank balance, but by piling idea upon idea. The bricks, BAs, and bank balances were of course necessary. Oxygen is necessary for a fire. But it would be unenlightening to explain the Chicago Fire of 1871 by the presence of oxygen in the earth’s atmosphere.
The original and sustaining causes of the modern world were indeed ethical, not material. They were the widening adoption of two new ideas: the liberal economic idea of liberty for ordinary people and the democratic social idea of dignity for them. This, in turn, released human creativity from its ancient trammels. Radically creative destruction piled up ideas, such as the railways creatively destroying walking and the stage coaches, or electricity creatively destroying kerosene lighting and the hand washing of clothes, or universities creatively destroying literary ignorance and low productivity in agriculture. The Great Enrichment requires not accumulation of capital or the exploitation of workers but what I call the Bourgeois Deal. In the historical lottery the idea of an equalizing liberty and dignity was the winning ticket, and the bourgeoisie held it.
That even over the long run there remain some poor people does not mean the system is not working for the poor, so long as their condition is continuing to improve, as it is, and so long as the percentage of the des-perately poor is heading toward zero, as it is. That people still sometimes die in hospitals does not mean that medicine is to be replaced by witch doctors, so long as death rates are falling and so long as the death rate would not fall under the care of the witch doctors. It is a brave book Thomas Piketty has written. But it is mistaken.