Might I just say that this thread is awesome. Economics and global warming in one thread? If we can drag gun control and copyright in here too we will have a supercritical mass and this thread will go on for 9000 gloriously incoherent pages.
I think there are some pretty good experiments both controlled and natural in economics, specifically in micro and labor economics. There are some solid empirical studies that look at changes in labor force participation, hours work etc as a result of policies. You can also look at some controlled economic experiments to look at some labor/tax decisions.
Economics is a soft science b/c it will always have problems with omitted variables and sample selection. But it is more empirical than some are claiming.
Economics is a soft science b/c it will always have problems with omitted variables and sample selection. But it is more empirical than some are claiming.
I’ve had to admit in the past that there’s more empirical work than I realized going on. However that doesn’t really matter, for the purposes of this conversation, if the empirical work isn’t realizing practical results. I.e. can economics actually make meaningful predictions about real world outcomes. So far, economics has a really poor track record there.
Economics can offer us some insights and useful predictions, of course, but contrasting the generally large uncertainty of economics with the certainty that people put behind certain economic models/predictions shows that there’s a good deal of cognitive dissonance going on.
The comparison to climate science is not very flattering to economics. Not only because climate science actually gets a lot more testable and accurate results but also because there is a lot more dissent and criticism leveled at climate models that are generally far more solid than economic models that many take for granted.
I one hundred percent created this thread with that goal.
I’m right on the minimum wage as well, of course, but I’m not expecting anyone to actually change their mind just because I can point to about an hundred studies saying so. After all, gut feelings, political agendas and a few short term poorly designed surveys totally cancel out all that research!
But, really, the whole point of this thread is to soak up all the minimum wage arguments from the thread where house prices are used to determine political affiliation. That’s what I’m interested in, not this quagmire.
Anyway, have at!
I love it when these threads turn into my study vs. your study, proving once and for all that internet discourse is teh d0med.
Well, I think God gave us guns on the 7th day so we could shoot poor people and software pirates.
The minimum wage clearly increases unemployment. At the current setting, in the US anyway, the effect seems pretty minimal. Maybe they’ve gone too far in some of those European countries.
Has there been any changes in Obama’s position on the mininum wage? His main man Goolsbee on it before the economy fell over:
Personally, with my incredible evidence of having worked in the field and that’s about it, my latest theory is that all of the studies are “correct” but are looking at the wrong things because they can measure those. The low end of the wage market is all about immigration, employer abuse, unpaid hours, and pot-smoking losers; there’s so much shit going on that minimum wages are random noise unless they get really high, beyond a level ever seen here in the US.
As to why people still support the minimum wage, rather than replacing the entire thing with the EITC or the like: Primarily, I don’t trust our political system in the slightest when it comes to the poor. If we chucked out the minimum wage and went entirely EITC, I fully expect the next time the GOP came to power they’d eviscerate the program. Transfer payments are far more politically vulnerable than mandatory minimums. So having a much harder to remove backfill, hopefully indexed to inflation, is a non-optimum economically but safer politically idea.
As to how bad the unemployment impact is - if it screws the poor that much, you’d think they’d be less wildly in support of it, no?
As to why various studies by economists don’t overturn this - I don’t believe you discipline-captured-by-rich-people-and-the-establishment motherfuckers unless you bring strong evidence and a theory I can plausibly put through what I know of human nature. Which from what I’ve read, neither is available.
Oh, another thing: I really don’t give a shit what the teenage unemployment rate looks like. Them not working is a feature, not a bug.
Well, all of the studies are correct. Almost every single study has found that there was an immediate short term increase in the standards of living for affected employees without any significant change in employment numbers. And a lot of that has to do with employers, for one reason or another, not reacting immediately to a sufficiently small mandated wage change by reducing head count.
But what the two long term studies I linked (and countless others) found, is that employers don’t replace people who quit, and fewer new businesses start up – after all, the cost of labor is a pretty significant one in the operation of any business.
Even worse are the impacts on labor itself. The higher than equilibrium low end wages virtually guarantee that the employer holds all the power in determining benefits and hiring/firing decisions because, unless an incredibly pronounced boom is underway, there are plenty of equally qualified laborers available to take that position. Which ties into the comments you made about abuse and unpaid hours – since other workers are plentiful, employers can demand all sorts of things from the current crop.
Immigrants migrate here illegally to take advantage of the cost advantage they gain by working outside the system. Since many industries have a fair wage minimum that employees can be paid, locals are required by law not to compete on price terms with individuals whose only advantage is price. Again, the minimum wage is almost exclusively the driver here.
Stoners just like their pot. I’m not sure why you brought them up but gosh darn it you leave them alone!
As to why people still support the minimum wage, rather than replacing the entire thing with the EITC or the like: Primarily, I don’t trust our political system in the slightest when it comes to the poor. If we chucked out the minimum wage and went entirely EITC, I fully expect the next time the GOP came to power they’d eviscerate the program. Transfer payments are far more politically vulnerable than mandatory minimums. So having a much harder to remove backfill, hopefully indexed to inflation, is a non-optimum economically but safer politically idea.
I certainly agree with you that reasonable and well thought out transfer payments are far more effective and efficient than a minimum wage could ever be – but I disagree that even a well planned minimum wage can be effective. It’s far too damaging to the economy – and the individuals who make use of that economy – to b a viable tool.
Consider, for example, the impact of price floors on other markets. They inevitably distort market incentives, require subsidies all around, and create an unnecessary, and costly, surplus of the price controlled item.
I do disagree that Republicans would ever even consider actually working against a program whose sole purpose is the distribution of money. If the previous administration is any guide, Republicans are plenty willing to pass the hat around if it’ll get them a few more votes.
As to how bad the unemployment impact is - if it screws the poor that much, you’d think they’d be less wildly in support of it, no?
It’s no less incomprehensible than the poverty stricken and poorly educated voting Republican, or the disabled speaking out against the welfare state. In other words, I can’t explain half the things people do, but I do know that economic logic, as Kraaze made abundantly clear, isn’t always the predominant figure people use in determining whether or not a particular course of action is correct.
Economics has enormous predictive power compared to most other social sciences. It’s just that what it predicts often seems counter-intuitive, and isn’t always palatable to policymakers or the general public. Policymakers’ jobs are to present “solutions” to problems that economics often (not always, but often enough for it to be remarkable) would solve themselves quicker, and cheaper, than any proposed solutions could. Very often, with economic problems, the best option is to do nothing. But that’s useless for politicians, who need to be seen to be “doing something” about this or that problem.
The self-regulating abilities of human society are vastly understimated, because they’re not part of our intuitive (and partly long-term cultural) understanding - our “folk economics” (by analogy with “folk physics”, the sort of instinctive Newtonian sense we have of the world). We are attuned to live in relatively small groups, out in nature, etc., etc., and to have a sense of what’s fair and unfair, what will work and what won’t work, in that type of situation.
We have no intuitive concept of what happens when you have large networks of relative strangers interacting by means of abstract social rules (morality, property, etc.), so we pattern our understanding of the big picture on our innate understanding of the small picture (what’s fair in small groups of highly interdependent and non-redundant people who know each other very well) - and (unsurprisingly) we find economics counter-intuitive! But the imposition of that pattern is what causes all the trouble, the attempt to model the large-scale open society of relative strangers working under property rights and division of labour, on the small band (of mostly relatives) living off the land.
It is these self-regulating qualities that economics leads the way in understanding (and in fact economic thought inspired Darwin’s thinking somewhat) - but there are analogues in all areas of human life. The same freedom “works” in the general social arena too. To the social conservative, the notion that freedom “works” in the social arena is as baffling as the notion that freedom “works” in the economic arena is to the Left-liberal.
Yeah, all that self-regulating worked wonders in the financial sector. It’s literally awe inspiring what they’ve done.
There are plenty of ways to get suboptimal societal outcomes with models using the assumption of free markets. Market failures can also occur for all sorts of other reasons, such as gangsterism, cartels, corruption, a lack of clearly defined property rights, and the absence of a strong and independent judiciary.
It’s generally acknowledged that there is some optimal level of regulation that balances the inherent costs of maintaining said regulation with the advantages markets receive from this additional competitive impulse, and that the laissez faire model is generally inappropriate for discussion of reality outside of prisons – which, you’ll be interested to know, also tend to accumulate some rough and ready “institutions” for the purpose of settling disputes and maintaining property rights (of a sort).
Really, competitive markets are a far more realistic and useful goal than the nigh on utopian one of completely free markets.
Anyway, that’s my take on the matter.
I don’t think you understand what “predictive power” means. Show me economics successfully and consistently predicting real world outcomes. That is predictive power.
It is these self-regulating qualities that economics leads the way in understanding (and in fact economic thought inspired Darwin’s thinking somewhat) - but there are analogues in all areas of human life. The same freedom “works” in the general social arena too. To the social conservative, the notion that freedom “works” in the social arena is as baffling as the notion that freedom “works” in the economic arena is to the Left-liberal.
Get some new stereotypes. P.S. how’s that self-regulation working lately?
Not that I support a zero-regulation environment, but when it comes to the financial crisis it wasn’t so much the absence of regulation as the arbitraging of profits between a two tiered regulation system. Classical banks were covered by standard regulation and bore all the costs necessary to prevent them from engaging in undue risk – and as a reward, they could borrow cheaply. Meanwhile, the shadow banking sector had to pay a great deal for capital, but was able to generate outsize profits capable of handling those capital charges through much riskier investments – safer bets simply wouldn’t have paid the bills.
You obviously see where I’m going with this, right? Neither high nor low regulation markets have any inherent likeliness of implosion or otherwise (I can spell out why, but I’m fairly certain you don’t need that). But a system that allowed for arbitrage between the two virtually guaranteed it by giving low regulation “banks” a comparative advantage in risk taking, which they exploited to the detriment of us all.
Consider me simple, but what jobs are worth less than $7.25 an hour? Seriously. Anything less than that is abuse.
Honestly, I don’t know how you can say that. Banks with lower regulation would have just pursued the higher profits anyway. Deregulating all institutions so they both have the same advantages in risk trading wouldn’t have prevented the crisis. It would likely have expanded it. And really that’s what they did by removing the protections that allowed these businesses to put their fingers in each other’s pie. That’s how you spread financial STDs.
I’m not saying that. To put it another way, our current banks are very lightly regulated by comparison with those of the fifties and sixties. They’re regulated about the same as the banks of the 90s, but with Sarbanes-Oxley and without Glass Steagall. The banks of tomorrow might be more or less regulated.
The important bit is the ability to take money from a framework with lots of implicit supports that lower the cost of borrowing and transmit it to institutions with very little in the way of a formal regulatory structure that make risky decisions with it.
If banks and banklike entities existed under the aegis of the same packet of regulation, they’d have to pay the same prices for capital – prices that would, and do, rise based on the riskiness of an institution’s investments.
Aarbitrage allowed banklike entities to borrow like banks and spend like Caesars, not an arbitrary level of regulation.
That said, I’m greatly in favor of extending bank related duties and obligations to banklike entities.
If any of this is clearly gibberish, it’s because I’m tired and need to sleep.
That makes more sense to me. Thanks!
but minimum wage doesn’t go up every year, in fact inflation beats it, doesn’t it? so even if productivity doesn’t go up at all (mcdonald’s doesn’t find a faster way to make a burger, taco bell doesn’t shave half a second off drive in wait times), the worker cost is basically going down almost every year, assuming the company doesn’t give out a raise every year. is there an error in my thinking?
One of the core problems was that market utterly failed to do what it was supposed to do: correctly price real estate and certain financial instruments. The shenanigans that caused the crisis all had their foot in a faith that the market growth was stable that was held by almost the entire market and yet was 100% wrong.
The price of capital had little to do with anything. People were looking at risky investments that they expected to pay off nearly immediately and paid for them by massively over-leveraging.
But hey, you’ve got your narrative I can see. :-) Not surprising how it all ties up nicely and ignores the many, many market failures that we just saw.