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… is from page 190 of Jeffrey Clemens’s insightful 2024 paper “Minimum Wage Hikes Bring Tradeoffs Beyond Pay and Jobs,” which is chapter 15 in The War on Prices: How Popular Misconceptions About Inflation, Prices, and Value Create Bad Policy (Ryan A. Bourne, ed., 2024) (footnote deleted; link added):

Several recent studies have found evidence that minimum wage increases change hiring patterns, as higher-skilled workers tend to replace lower-skilled workers. A notable study in this vein involved an actual randomized experiment conducted on the Amazon Mechanical Turk marketplace (an online labor market) by the MIT Sloan School of Management economist John Horton. Horton’s study finds strong and clear evidence that higher minimum wage rates lead firms to shift their hiring away from low-productivity workers toward higher-productivity ones.

DBx: To steal an example from my late, great colleague Walter Williams: Suppose that government attempted to help sellers of used cars by imposing a minimum car price of $25,000. The result, of course, would not be that people owning used cars worth $15,000 or $20,000 would now fetch for each of these vehicles $25,000. The result instead would be that all cars worth less than $25,000 remain unsold, while the demand for higher-end used cars, as well as for new cars, rises. Such legislation would be loved by high-income people seeking to sell their three-year-old BMWs, as well as by new-car dealerships.

One other effect is worth mentioning: Some cars currently worth less than $25,000 would be upgraded by their owners – at, obviously, their owners’ expense – to make these vehicles worth at least $25,000.

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Here’s a letter to the Washington Post:

Editor:

Brian Deese apparently thinks that if a proposition is repeated often enough its truth is thereby established regardless of contradictory facts and logic (“China already manufactures too much. Now it wants to make more.” April 25). For example, Mr. Deese worries about the “hollowing out of our industrial base” – a worry that in recent years has been expressed bazillions of times, yet never with supporting evidence. So here’s a fact: America’s industrial capacity hit its all-time high in December 2016 and is today (March 2024) a mere 0.1 percent shy of that peak and ten percent larger than it was when China joined the WTO in 2001. So much for America’s industrial capacity suffering a “hollowing out.”

As for Mr. Deese’s logic, it’s il. He asserts that Beijing’s effort to expand Chinese exports “undermines other countries’ ability to maintain their own healthy industries.” This assertion rests on the faulty assumption that the maximum amount of worthwhile economic output that can be produced globally is fixed and, therefore, if one country expands its output it obliges other countries to reduce theirs. To see why this assumption is faulty, ask if we Americans would be enriched or harmed by the emergence of a Chinese Edison. It’s obvious that, if we trade freely with China, we’d be enriched. Nothing from our perspective as Americans is changed if the additional Chinese outputs offered for sale to us on attractive terms are made possible, not by a Chinese Edison, but by Beijing’s economic policies. Either way, we Americans get from China greater value for our exports and the opportunity to shift our production to even higher-valued outputs.

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

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John Lott points out some problems with recent statistics on crime. A slice:

Another reason crimes reported to the police are falling is that arrest rates are plummeting. If victims don’t believe criminals will be caught and punished, they won’t bother reporting them. According to the FBI, if you take the five years preceding Covid-19 (2015-19) and compare them with 2022, the percentage of violent crimes in all cities resulting in an arrest fell from 44% to 35%. Among cities with more than one million people (where violent crime disproportionately occurs), arrest rates over the same period plunged from 44% to 20%.

Philip Klein sensibly argues that “colleges need to nip any encampments in the bud.” A slice:

The strategy of campus organizers parallels that of Hamas. That is, they want to break the rules, ignore all warnings, and provoke a reaction that will produce images they can portray as an overreaction to elicit more sympathy for their cause.

Columbia administrators now face a crisis of their own making. They will inevitably have to dismantle the encampments and retake the university, which not only has become unsafe for Jewish students who don’t affirmatively renounce Israel, but practically speaking, would be disruptive to final exams and graduation ceremonies. But because the encampment is so large, they know that clearing it out will require a significant show of force that risks turning violent. They are terrified of scenes of clashes between students and NYPD officers. That’s why Minouche Shafik, the university president, keeps extending the deadline for the protesters to dismantle the encampment.

My intrepid Mercatus Center colleague, Veronique de Rugy, decries our “leaders'” now-regular abuse of emergency spending powers. Two slices:

Before I explain my objection to their behavior, I would like to make two points. The first one might be the most important: I don’t want you readers to get the impression that Congress is only irresponsible when using the emergency label to spend money. Congress is irresponsible all the time. Legislators have accumulated $34 trillion in debt without any real collective thinking about how to pay for it. The deficit is at 5.6 percent in a time when America is at peace and the economy is growing. They have done much of this deficit spending outside of the emergency process.

…..

Over at the Economic Policy Innovation Center, Paul Winfree and Brittany Madni explain that Congress and the president should have used the regular budget process to address several of the ongoing crises over the past months. Instead, Congress intentionally passed a $1.684 trillion appropriations bill and left the $95 billion to be funded as an “emergency” supplemental outside of the regular process and above and beyond the caps. Members of Congress now routinely refuse to subject themselves to budget caps that would require offsets of additional spending with real spending cuts and rescissions.

Art Carden asks if Caitlin Clark will be underpaid.

The Editorial Board of the Wall Street Journal criticizes the FTC’s attempt to ban noncompete clauses. A slice:

According to a U.S. Chamber of Commerce survey, 78% of responding employers said they provide additional compensation that spans the duration of an agreement or longer. Employers will pay workers less, and invest less in them, if workers can easily take the skills they acquire on the job elsewhere.

Richard McKenzie weighs in on the Biden administrations antitrust persecution of Apple.

Andrew Gillen reports on Biden’s most-recent effort to ‘forgive’ student loans.

Travis Fisher and Alex Nowrasteh offer a perspective different from that of Charles Kenny on climate change and globalization. A slice:

Based on real‐​world observations, the efficient level of CO2 emissions under a Pigouvian approach is not zero. Given the myriad productive uses of hydrocarbon‐​based energy and the demonstrated preference for the large and growing global consumption of it, the economically efficient level of CO2 emissions could be very high. Unfortunately, we may never know because the SCC—although indispensable in concept—is nearly impossible to nail down with any degree of scientific certainty. We do know, however, that low and moderate CO2 taxes like the one implemented in British Columbia have not significantly reduced CO2 emissions.

Jay Bhattacharya tweets:

The German language @Wikipedia site describes the @gbdeclaration as “anti- science”, a fringe view. Left unexplained is why German all cause excess deaths in the covid era is higher than Sweden’s.

Wikipedia’s neutral point of view policy is a joke.

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… is from page 181 of the late Richard Timberlake’s 1998 paper “Gold Standard Policy and Limited Government,” which is chapter 5 of Money and the Nation State (Kevin Dowd & Richard H. Timberlake, Jr., eds., 1998):

Commodity money evolved as naturally and as spontaneously as the wheel, the screw, the hydraulic press, the inclined plane, a national language, and common law. Its emergence was economic and natural, not political and contrived.

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The Wall Street Journal‘s Editorial Board decries the defining-down of free speech on campus. A slice:

Columbia’s anti-Israel encampment and protests have included physical intimidation of Jewish students and antisemitic declarations. In October 2023, 100 Columbia professors signed a letter defending students who had flooded the campus in support of Hamas’s “military action” on Oct. 7. Columbia has every right to restrict speech or actions that threaten other students.

Protesters also don’t have a “right” to assemble on school property to disrupt the functioning of the university or intimidate students on the way to class. Even at a public university, all these rules would constitute reasonable restrictions on the time, place and manner of speech.

Luther Ray Abel is right to harshly criticize the “ingrates at the ivy-laden gates.” A slice:

For all the disgust I feel for the views of these students — students who are wrong on the facts about Israel as well as wicked in their treatment of their Jewish peers who have nothing to do with that country a world away — I can’t help but pity them. The adults failed these students. No one loved these young people enough to tell them that they were making fools of themselves and to shut up, get back inside, and go to class. Worse, when a few adults finally did try to establish order and enforce consequences, the faculty rushed in to defend and coddle the agitators.

GMU Econ alum Jon Murphy explains why plagiarism matters – and, thus, why it must be fought.

Phil Gramm and Mike Solon reveal who pays corporate taxes. A slice:

In his call for Congress to repeal the 2017 tax cuts and increase corporate tax rates, President Biden asked: “Are we going to continue with an economy where the overwhelming share of the benefits go to big corporations and the very wealthy?” Rep. Richard Neal, ranking Democrat on the House Ways and Means Committee, said that extending the tax cuts will do nothing but fill “the pockets of venture capitalists and some business owners.” President Obama’s top economist, Austan Goolsbee, said that debates over who pays the corporate tax are “an argument about whether making corporations pay more income taxes would trickle down into lower workers’ wages.”

But as John Adams once said, facts are stubborn things. Seven years into the weakest recovery in postwar history, as the economy slumped toward a recession, the 2017 tax cuts and the Trump administration’s regulatory relief sent real median household income soaring by $5,220 in 2019. That’s 49% higher than the previous highest annual gain in 2015 and 11 times the average percentage gain over the previous 50 years. Real median income rose more in inflation-adjusted dollars in 2019 alone than during the entire Obama recovery from 2009-16. The poverty level plunged at the fastest rate since 1966, to the lowest level since the Census Bureau started collecting the data in 1959.

The lowest income quintile saw its average real income rise by 9.4% in 2019, the year after the tax cut took effect. The second quintile (7.4%), middle quintile (6.9%) and fourth quintile (7.8%) all experienced the largest annual income growth in more than a half-century, and the top quintile (7.2%) had its second-highest income growth. The poverty rate in 2019 was the lowest ever recorded for every category, including individuals, families, unmarried women, blacks, Hispanics and children.

Paul Schwennesen reports that the rich – and everyone else – are getting richer. A slice:

Percy Bysshe Shelley (whose wife Mary famously penned Frankenstein) is credited with first coining the aphorism “the rich get richer, the poor get poorer,” which was itself a riff on the Biblical parable of the talents in Matthew 25:29 which made much the same point. Leading a tumultuous life plagued by debts to many of his close ties within the English gentry, Shelley’s jaundiced view may say more about him than the situation at large in Georgian England. Indeed, by the mid-1800s, England was well on its way toward the phenomenal increases in wealth brought about by the Industrial Revolution and trade liberalization.

Economic historian R. M. Hartwell writes that, based on a number of factors, not only was average per capita income on the rise but that “the real wages of the majority of English workers were rising in the years 1800-1850.” The rich, in other words, were certainly getting richer, but so indeed were the poor. The widely held perception, however—a perception that helped popularize Shelley’s quip—was not so neatly aligned with facts. Large numbers of the working poor felt themselves shabbily treated in the unequal distribution of gains, and early socialists leapt to condemn what ought have to been more soberly recognized as a collective win.

John O. McGinnis sums up the state. A slice:

We know from studies that bureaucrats are very largely left-liberal Democrats. The bureaucracy holds views about the common good that are uncommon and distinctly uncongenial to the New Right.

Empowering the government to regulate big tech, for instance, may actually make it harder for conservatives to get out unorthodox views on social media. One reason that tech companies engage in content moderation at the behest of government is fear that government power will be used against them in the future if they do not comply. And the bureaucrats who control the day-to-day operation of that power are hostile to the New Right.

It is true that the bureaucracy is subject to political control, but that control is imperfect as political appointees must compromise with the bureaucracy to get things done. And thus, the bureaucracy has an enduring influence, even when (as will not always be the case in a two-party system) the President is sympathetic to the New Right.

Gary Galles cautions against underestimating the creative power of people operating in free markets.

My Mercatus Center colleague Tracy Miller explains that the DOJ’s antitrust persecution of Apple is bad for consumers. A slice:

First, we must understand the environment of economic competition that’s the background for this case and the players involved. Market competition is a dynamic process whereby firms seek to gain market share by continued efforts to improve the goods and services they offer, while keeping costs and prices down. If a firm does this well, its market share will likely increase, and the number of competitors may decrease. In technology platform markets, providing consumers with low-priced and high-quality goods and services that are continually being improved by innovation is best achieved by developing and offering a system of complementary products. Firms choose a business model based on what they discover about consumer preferences, often competing by emphasizing different mixes of benefits because of heterogeneity in consumer preferences. Some consumers prefer the more open ecosystem offered by Android phones, while other prefer the more closed iOS ecosystem. Consumers make tradeoffs between price, quality and other attributes such as data privacy.

John Stossel is correct: capitalism reduces racism.

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… is from page 227 of Deirdre McCloskey’s insightful 2024 paper “The Labor Theory of Value Is Mistaken,” which is chapter 18 in The War on Prices: How Popular Misconceptions About Inflation, Prices, and Value Create Bad Policy (Ryan A. Bourne, ed., 2024):

But, shockingly, against all this apparent common sense and ethical appeal, the labor theory of value is wholly mistaken as a matter of economics. It’s deeply screwy, scientifically, and evil in its ethics.

DBx: Oren Cass and other advocates of industrial policy that’s meant to sacrifice the welfare of individuals as spenders of the incomes they earn in order to protect (or resurrect) particular employment options and arrangements are proponents of the labor theory of value. Value, in the view of proponents of such industrial policy, inheres in the labor itself rather than in the output of the labor.

While this notion might appeal to clever sophomores, upon mature investigation it’s revealed as being – as Deirdre accurately describes it – screwy. How do we know it’s screwy? Easy! The very fact that Cass & Co. correctly understand that the only way to entice workers to hold the particular jobs industrial-policy proponents wish to protect (or to resurrect) is to have government coerce consumers to purchase the outputs of these particular workers.

Cass & Co. will protest, insisting that they, with their lawyerly training, realize what mere economists don’t – namely, that the market has no good way to reveal the actual, full value to workers themselves of holding particular kinds of jobs. But economists actually know more – much more – economics than do industrial-policy advocates. Economists know that the market does have a very good mechanism for revealing this value. It’s called a “labor market.” By refusing to work at wages low enough to maintain (or to resurrect) the particular kinds of jobs fancied by Oren Cass and other such proponents of industrial policy, workers themselves reveal that the value to them of these jobs is too low to justify maintaining (or resurrecting) these jobs. Workers, therefore, will hold such jobs only if other people are coerced into subsidizing them – thus the evilness of the labor theory of value in operation.

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Here’s a letter to the Wall Street Journal:

Editor:

Attempting to defend her agency’s ban on noncompete clauses, FTC Chairwoman Lina Khan proclaims that “robbing people of their economic liberty also robs them of all sorts of other freedoms” (“FTC Bans Noncompete Clauses That Restrict Job Switching,” April 23). Ms. Khan has mastered Newspeak. Noncompete clauses are contractual terms negotiated between employers and employees. Employers who offer noncompete clauses no more ‘rob’ employees who agree to these clauses of their economic liberties than do employees who offer, or agree to, these clauses rob employers who agree to these clauses of their liberties. As is true of all contracts, each party gives a concession to the other and receives in return a benefit that each believes to be worth the bargain.

Ms. Khan nevertheless is correct that robbing people of their economic liberties is a grievous offense. But in this case the chief bandit is none other than Ms. Khan, for it is she who is robbing employers and employees of the liberty to structure their economic affairs as they see fit.

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

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… is from page 2 of Douglas Irwin’s excellent 1996 monograph Three Simple Principles of Trade Policy:

Exports and imports are inherently interdependent, and any policy that reduces one will also reduce the other.

DBx: Doug here relates an elementary truth of economics – yet a truth overwhelmingly ignored by pundits and politicians. How many are the pundits and politicians in America who assert that the U.S. trade deficit can be reduced or even eliminated with higher tariffs and other barriers on American imports more onerous restrictions on Americans seeking to purchase foreign-made goods? How many are the pundits and politicians who support the ExIm Bank because they think it to be a means of increasing America’s exports relative to her imports?

When it comes to trade, most politicking and punditry (outside of too few publications such as the Wall Street Journal and Reason) is the intellectual equivalent of Cliff Clavin offering to Sam Malone and Norm Peterson his informed opinion on string theory. If most of today’s politicians and pundits who hold forth on questions of trade had any idea of just how silly and uninformed their ‘analyses’ are, they would be deeply embarrassed to be on record uttering, muttering, and writing what they utter, mutter, and write.

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The Editorial Board of the Wall Street Journal decries the ‘progressive’ monoculture on (especially ‘elite’) U.S. campuses – a monoculture that today is increasingly openly antisemitic. Two slices:

Many protesters on and near campus wear masks or kaffiyehs to disguise their identities. Students have to walk through a gauntlet to get to class. The protesters carry banners calling to “Honor the Martyrs of Palestine” and a sign pointing to pro-Israel counterprotesters as “al-Qasam’s next targets.” Al-Qassam is the military wing of Hamas. That’s a call to kill Jews.

…..

This crisis in liberal education has been decades in the making. These schools have sown the intolerance their students are demonstrating by putting identity and left-wing politics above the free exchange of ideas. A progressive faculty monoculture has fueled divisive narratives blaming the Middle East’s ills on colonialism and imperialism.

Antisemitism has too often been tolerated within Near Eastern Studies departments. On Oct. 8, 2023, Columbia professor Joseph Massad praised the “awesome” scenes of the Oct. 7 massacre “witnessed by millions of jubilant Arabs.” In 2018 Columbia professor Hamid Dabashi posted on Twitter (now X) that “Every dirty treacherous ugly and pernicious act happening in the world” could soon be traced to “the ugly name of Israel.”

The liberal elites who run these institutions seem to lack the moral self-confidence to stand up to these student bullies. College presidents have to take charge, restore order and protect Jewish students, or the trustees should fire them and find someone who will.

GMU Econ alum Alex Salter’s letter in today’s Wall Street Journal is spot-on:

Mr. Biden argues military aid to Israel and Ukraine would boost the U.S. economy by “buying American products made by American workers.” But using up resources won’t make us richer—especially when they’re spent on means of destruction.

Economists call this the Broken Window Fallacy. Physical destruction appears economically creative, since mobilizing the resources to repair the damage creates jobs and employment. This ignores opportunity cost: but for the destruction, there would be a different but no less valuable flow of economic activity.

The fallacy is even more forceful in the case of military spending. Now we’re consuming resources with the goal of destroying even more resources. If you’ve ever heard that World War II got us out of the Great Depression, you’ve encountered the fallacy in its most dangerous form.

Supporting Israel and Ukraine may be in the national interest. If so, it won’t be because of economics. The president’s proposals could make us freer. But they definitely won’t make us wealthier.

Prof. Alexander William Salter
Texas Tech, Rawls College of Business
Lubbock, Texas

“Why turn off lights for Earth Day when California is already growing dark?”

In the video here, Johan Norberg makes the case that the best economic system for the earth (and for humanity) is capitalism.

J.D. Tuccille writes that “Julian Simon was right: Ingenuity leads to abundance.”

Arnold Kling reflects on his excellent 2004 book, Learning Economics.

My Mercatus Center colleague Alden Abbott explains that “blocking the Nippon Steel acquisition [of U.S. Steel] through CFIUS would have serious negative implications for U.S. international economic policy.” A slice:

Moreover, the U.S. steel industry is very unconcentrated, with U.S. Steel holding a market share of just under 7% in revenue terms. The largest U.S. producer, Nucor, holds a roughly 13% share. What’s more, no U.S. company is among the world’s 10 largest crude steelmakers (seven of the 10 are Chinese). Nippon Steel is the third or fourth largest.

Because of U.S. tariffs and other company contractual commitments, only a very small portion of Nippon’s current market share can be attributed to the U.S. market. (Nippon is essentially absorbing U.S. Steel’s market share.) In essence, the Nippon Steel acquisition would have, at best, a minor (if not zero) effect on market concentration in the unconcentrated American market.

Based on that information, it is hard to envision what antitrust risks or theories of harm based on “increased concentration” (a major concern of the Biden administration) could be concocted.

Mike Munger is correct: “Competition can’t be perfect.” A slice:

If you’ve ever taken an intro economics class, you’ve heard of the idiotic concept of “perfect competition.” The idea is that no firm has any market power, and is forced to accept the “competitive” price. One sign that competition is “perfect” in this way is zero profits. Since if something is perfect, it must be desirable, a new generation of attorneys is attempting a wholesale takeover of antitrust enforcement. They are being led by advocates such as Lina Khan of the FTC, and Timothy Wu of Columbia Law School, who is hailed by some as the “architect” of the Biden administration’s competition policy.

GMU Econ alum Dominic Pino recommends Jay Nordlinger’s essay on the Nobel-laureate economist Vernon Smith.