Walter Williams explains why you should not worry about the trade deficit.
I wish politicians were as economically literate as Professor Williams. But they are not:
“Some politicians gripe about all the U.S. debt held by foreigners. Only a politician can have that kind of audacity. Guess who’s creating the debt instruments that foreigners hold? If you said it’s our profligate Congress, go to the head of the class. If foreigners didn’t purchase so much of our debt, we’d be worse off in terms of higher inflation and interest rates.”
Wishful thinkers advocating the minimum wage refuse to acknowledge that the empirical evidence does not support their claims. Here is the follow-up statement I sent to Albuquerque City Council today:
“Living Wage” Hurts the Poor
Subsequent to my statement of May 20, 2005 I have seen several more empirical claims that the living wage will not hurt the poor. These claims constitute voodoo economics in the extreme.
Many factors (such as tax climate, regulatory climate, education, local entrepreneurial opportunities, what is happening in other states and localities, what is happening in other countries, business cycles and so forth) in addition to the “living wage” determine whether a local economy expands or contracts. In order to tease out an economically sound estimate of the effect of the “living wage,” the empirical economist must account for all the factors. Empirical studies that purport to show that the “living wage” does not hurt the poor and perhaps even expands employment and helps the poor do not account for all factors.
Studies that do account for all factors show overwhelmingly that wage floors hurt the poor. And those hurt are the least effective interest group in society (minorities, low skilled, relatively uneducated). They have no voice in the matter. All many of them know is that there is no job available when they go looking. For them the legal living wage becomes ZERO.
An excellent summary of the history and all the empirical evidence of wage floors may be found in: David Neumark in his research summary “Raising Incomes by Mandating Wages.” It may be found online here.
There are lots of things we can do to help the poor. The “living wage” idea is not only ineffective; it is counterproductive.
Did you happen to see this response to John’s living wage column in today’s ABQ Journal? If you really want understanding check this eloquent critique of progressives/socialists like Ann Kass.
Excerpt (you should read the whole thing):
· Employment and Wages: If I was going to sell my old TV set on eBay, most people would not think to have the government tell me how much I should be willing to accept for the TV. For me, even $20 might be enough, if the TV was not being used and just taking up space in my house. Can you imagine government agents descending on me and saying – “I’m sorry, but people much smarter than you have decided that $20 is too little for you to accept for that TV. We would rather you get nothing than get too little.”
Well, that is exactly what happens with labor. The government that does not tell me how much to sell my TV for does tell me that I can’t sell my labor below a certain price. They would rather me not work at all than work for $4.50 an hour. The arrogance of this is startlingly clear in lesser developed countries.
Progressives do not like American factories appearing in third world countries, paying locals wages progressives feel are too low, and disrupting agrarian economies with which progressives were more comfortable. But these changes are all the sum of actions by individuals, so it is illustrative to think about what is going on in these countries at the individual level.
One morning, a rice farmer in southeast Asia might face a choice. He can continue a life of brutal, back-breaking labor from dawn to dusk for what is essentially subsistence earnings. He can continue to see a large number of his children die young from malnutrition and disease. He can continue a lifestyle so static, so devoid of opportunity for advancement, that it is nearly identical to the life led by his ancestors in the same spot a thousand years ago.
Or, he can go to the local Nike factory, work long hours (but certainly no longer than he worked in the field) for low pay (but certainly more than he was making subsistence farming) and take a shot at changing his life. And you know what, many men (and women) in his position choose the Nike factory. And progressives hate this. They distrust this choice. They distrust the change. And, at its heart, that is what opposition to globalization is all about – a deep seated conservatism that distrusts the decision-making of individuals and fears change, change that ironically might finally pull people out of untold generations of utter poverty.
Mason is on the front page of the Post today. GMU’s youngest (18) and oldest (77) graduates in history graduated today. Amir Azad is the youngest. According to the article, “Azad admires the work of Friedrich Hayek and others who, he says, place the individual above groups, systems and political ideology. He is translating several articles into Persian, so that they may be more widely read in the Middle East.”
Humbling and inspiring.
From Nobel Laureate James M. Buchanan in the Wall Street Journal:
“no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimum scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests. Fortunately, only a handful of economists are willing to throw over the teaching of two centuries; we have not yet become a bevy of camp-following whores.”