Today in “What A Surprise!”

I know, I know. You’re all shocked:

This paper evaluates the wage, employment, and hours effects of the first and second phase-in of the Seattle Minimum Wage Ordinance, which raised the minimum wage from $9.47 to $11 per hour in 2015 and to $13 per hour in 2016. Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016. Evidence attributes more modest effects to the first wage increase. We estimate an effect of zero when analyzing employment in the restaurant industry at all wage levels, comparable to many prior studies.

Now, the study does come with some legitimate concerns about methodology. Among other things, it excluded workers who work with chains (which is about 40% of low-wage jobs) because that data is provided on a state, not a city, level. But the latest of multiple studies show that the Law of Supply and Demand does, in fact, apply to low-wage labor. And this does come from the very group the city commissioned to study the effect.

The thing I keep saying about the minimum wage is that it is literally gambling the lives of people on crackpot economic theory. To quote myself:

Here’s the thing: the Democrats are claiming, based on a grand total of one study that doesn’t say what they think it says, that we can raise the minimum wage without increasing unemployment. Let’s pretend that this point is up for debate and that we are, in effect, engaging in a massive gamble on the laws of economics. What is the downside risk if they’re wrong?

As I noted in my last post, long-term unemployment is one of the most damaging things that can happen to someone. It can repress earnings for a lifetime, it can affect health and happiness and, as we’ve seen in Europe, masses of unemployed young men can become a hotbed of crime and extremism. That’s the risk if they’re wrong.

The Democrats are gambling the futures of millions of people on this will-o-the-wisp idea that the Law of Supply and Demand is magically suspend for labor because … well, because the unions want it to be. If they’ve gambled wrong, they won’t be paying the price. Millions of poor people and minorities will. If the $15 wage causes mass unemployment, the effects will last for generations. It may not be reparable in our lifetime.

I’m glad the Democrats have a few pet economists who will tell them this is a low-risk bet. But it’s yet another illustration of how the Democrats “help” people by holding their heads underwater. I have no doubt that they think they are being compassionate. But gambling someone’s life on crackpot economic ideas is not compassion.

The last time we gambled our country on Left-Wing economic theory was when we deliberately inflated our currency in the 1960’s and 1970’s based on the idea that the Phillips Curve predicted it would end unemployment. We then ended up with both high inflation and high unemployment, which the Keynesians has assured us was mathematically impossible. It never ceases to amaze me how the Left will gamble so much on economic theory.

In The News

A few stories I’m following right now:

  • I’ve been critical of some of Trump’s cabinet choices. But my first impression of Mattis, the proposed Secretary of Defense, is positive. He opposes torture, supports a two-state solution for Israel, recognizes that the Iran deal is flawed but that tearing it up would be a mistake. His approach to Iraq was a big reason the surge worked and his musings show an active and sharp mind. He has been willing to praise or criticize politicians from both sides. Moreover, Trump said that one thing that impressed him was that Mattis opposes torture, which Trump ostensibly favors, and made a good argument against it. One of the big concerns with a President is that he will surround himself with Yes Men. Mattis is definitely not a Yes Man. He’s a good choice. But the thought process behind the pick is also encouraging.
  • Of course, he’s still thinking about Bolton for State, so it’s not all roses.
  • Trump sent out a tweet the other day saying that flag burning should be banned and come with a loss of citizenship. You can pretty much guess my response to this: I’m with Scalia.
  • Of course, Hillary Clinton her own damned self once co-sponsored an anti-flag burning bill. No matter what Trump does, let’s not lose sight of what the alternative was like.
  • Neither Obama nor Biden will attend Castro’s funeral. Good.
  • Trump’s deal to keep Carrier from shipping jobs to Mexico (actually, Pence’s deal) does not impress me. It’s a $7 million tax break specifically for Carrier to keep 1000 jobs in Indiana. It’s crony capitalism and an example of what we shouldn’t be doing. We have an entire economy run on backdoor tax breaks, regulatory holidays, subsidies and special dispensations. What we need to do is make America a better place for all businesses through comprehensive and universal regulatory and tax reform.
  • However, I suspect the Carrier deal is a preview of Trump’s Presidency. He’ll make a huge fuss about little things he does like saving a thousand jobs, to give the impression that he’s doing good (which, to be fair, all Presidents do). The real good will have to come from Congress, who have the power to unshackle our economy.

How the West Was Won

Deirdre McCloskey has an outstanding article in the WSJ this weekend asking how America and other countries got rich. I hate to quote as the whole thing is worth your time, but here’s a few choice selections:

Nothing like the Great Enrichment of the past two centuries had ever happened before. Doublings of income—mere 100% betterments in the human condition—had happened often, during the glory of Greece and the grandeur of Rome, in Song China and Mughal India. But people soon fell back to the miserable routine of Afghanistan’s income nowadays, $3 or worse. A revolutionary betterment of 10,000%, taking into account everything from canned goods to antidepressants, was out of the question. Until it happened.

McCloskey asks how this happened, dispenses with the usual explanations and focus on this:

What enriched the modern world wasn’t capital stolen from workers or capital virtuously saved, nor was it institutions for routinely accumulating it. Capital and the rule of law were necessary, of course, but so was a labor force and liquid water and the arrow of time.

The capital became productive because of ideas for betterment—ideas enacted by a country carpenter or a boy telegrapher or a teenage Seattle computer whiz. As Matt Ridley put it in his book “The Rational Optimist” (2010), what happened over the past two centuries is that “ideas started having sex.” The idea of a railroad was a coupling of high-pressure steam engines with cars running on coal-mining rails. The idea for a lawn mower coupled a miniature gasoline engine with a miniature mechanical reaper. And so on, through every imaginable sort of invention. The coupling of ideas in the heads of the common people yielded an explosion of betterments.

OK. But then why did that happen? Why did human ideas, which had been basically celibate for a hundred millennia, suddenly start “having sex”? Well, something we’ve been on about in these very pages:

The answer, in a word, is “liberty.” Liberated people, it turns out, are ingenious. Slaves, serfs, subordinated women, people frozen in a hierarchy of lords or bureaucrats are not. By certain accidents of European politics, having nothing to do with deep European virtue, more and more Europeans were liberated. From Luther’s reformation through the Dutch revolt against Spain after 1568 and England’s turmoil in the Civil War of the 1640s, down to the American and French revolutions, Europeans came to believe that common people should be liberated to have a go. You might call it: life, liberty and the pursuit of happiness.

To use another big concept, what came—slowly, imperfectly—was equality. It was not an equality of outcome, which might be labeled “French” in honor of Jean-Jacques Rousseau and Thomas Piketty. It was, so to speak, “Scottish,” in honor of David Hume and Adam Smith: equality before the law and equality of social dignity. It made people bold to pursue betterments on their own account. It was, as Smith put it, “allowing every man to pursue his own interest his own way, upon the liberal plan of equality, liberty and justice.”

I would particularly focus on freedom of speech and property rights. Freedom of speech allowed ideas to be communicated, now at literally the speed of light. And property rights removed the fear that communicating your ideas would deprive you of their benefits.

I’ve mentioned this before, but it’s worth rehashing: my dad did the War College in the 1980’s. He argued that classifying military technology to protect us from Soviet spies was actually a bad idea. Ideas flourish under communication; progress flourishes when ideas “have sex”. The freedom of the United States meant that we could publish our military tech secrets on the front page of Pravda and the Soviet Union would still not be able to keep up. We would always be steps ahead of them technologically because our people were free to develop and exploit those ideas while the Soviets were not. And since the Cold War ended, we’ve seen our technological progress only speed up.

Anyway, the article is worth your time. It’s inspiring. And it suggests that the way to get of our two-decade long economic doldrum is more freedom, not more regulation and redistribution.

Post-Scriptum: McCloskey, incidentally, is a trans woman. She had some great thoughts on the whole bathroom kerfuffle:

The bathroom “issue” is entirely phony. It has never been a problem. Anyway, if men wanted to sneak in (they don’t), they could always have done so, with or without North Carolina’s law. How is it to be enforced? DNA testing by the TSA at every bathroom door? Anyway, your house has a unisex bathroom, I presume, and in Europe they are not entirely uncommon—after all, the stalls have doors. Etc, etc. On both sides it is just a club to beat up the other side in the silly Cultural Wars, and to make people hate and disdain each other. Adam Smith would not have approved.

Again, the link is worth a clickthrough. Anything McCloskey writes, including grocery lists, is usually worth your time.

War of the Memes

This piece of crap has been spreading through my Facebook and Twitter feeds like a particularly aggressive form of gonorrhea.

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There’s a lot wrong here. First of all, Clinton raised taxes on everyone, not just the rich. Second, the Clinton economy was a product of Republican budget control, NAFTA (passed with Republican help) and the .com boom (enabled by lots of deregulation). Third, Bush cut taxes for everyone. But a spendthrift administration, a real estate bubble and horrible monetary policy from the Fed wrecked the economy anyway. Sorry, liberals, it’s just not that simple.

But, hey. Two can play this mindless meme game. Here’s mine. And it has the advantage of being a little more grounded in reality (click to embiggen).

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Monday Quick Hits

BLM Disses Dems; Makes Me Happy:

Last week, the Democratic Party expressed support for Black Lives Matter. Here is BLM’s heartening response:

A resolution signaling the Democratic National Committee’s endorsement that Black lives matter, in no way implies an endorsement of the DNC by the Black Lives Matter Network, nor was it done in consultation with us. We do not now, nor have we ever, endorsed or affiliated with the Democratic Party, or with any party. The Democratic Party, like the Republican and all political parties, have historically attempted to control or contain Black people’s efforts to liberate ourselves. True change requires real struggle, and that struggle will be in the streets and led by the people, not by a political party.

More specifically, the Black Lives Matter Network is clear that a resolution from the Democratic National Committee won’t bring the changes we seek. Resolutions without concrete change are just business as usual. Promises are not policies. We demand freedom for Black bodies, justice for Black lives, safety for Black communities, and rights for Black people. We demand action, not words, from those who purport to stand with us.

While the Black Lives Matter Network applauds political change towards making the world safer for Black life, our only endorsement goes to the protest movement we’ve built together with Black people nationwide — not the self-interested candidates, parties, or political machine seeking our vote.”

Again, I might take issue with some of the verbiage and emphasis. But they are forcing the Democratic Party to admit that they supported the militarization of police and the ramping up of criminal penalties. They are forcing the Democratic Party to face their long history of pandering to black votes while screwing black people. While we might disagree on policy, I applaud any movement that refuses to associate itself with a political party.

Speaking of Keynesianism:

Tyler Cowen reminds us that the growing sinkhole that is the Chinese economy was the subject of praise just a few years ago:

Remember back in 2009, and a bit thereafter (pdf), when so many people were praising China’s very activist, multi-trillion fiscal stimulus?

Yet some of us at the time insisted this would only push off and deepen China’s adjustment problems. There was already excess capacity and high debt and favored state-owned industries, and the stimulus was making all of those problems worse and only postponing a needed adjustment. The Chinese incipient contraction was based on structural problems, not a simple lack of aggregate demand.

How’s that debate going? While the final outcome remains uncertain, Austrian-like perspectives on China are looking pretty good these days.

Just as you go to war with the army you’ve got, so must a country conduct fiscal stimulus with the policy instruments it has. And most forms of Chinese fiscal stimulus make their imbalances worse rather than better. Yet dreams of fiscal stimulus as an answer to the macro problems on the table never die.

To the Keynesians — or, as I call them, the pseudoKeynesians — it is always time to spend money.

Was Segregation Made or Did it Just Happen?:

I’ve been sitting on this link for weeks but there’s not much I can add. It details how our inner city slums didn’t just happen. They were made and the men who made it were Democrats.

Hmm. I should pass that on the BLM folks.

Denali Denial

Obama officially reverted Mt. McKinley back to being named Denali. A few people are trying to whip up some outrage but I don’t see the point. Everyone in Alaska calls it Denali and Congress appears to have punted this kind of authority to the bureaucracy long ago.