tag:blogger.com,1999:blog-2546602206734889307.post7196301435295411538..comments2024-03-28T04:29:22.717+00:00Comments on mainly macro: Views on the minimum wage show economics to be an inexact scienceMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-2546602206734889307.post-6562346613302478722019-05-12T23:08:33.690+00:002019-05-12T23:08:33.690+00:00"[T]he most well known of which was written b..."[T]he most well known of which was written by Card and Krueger in 1994, have suggested that employment shows no noticeable decline when a minimum wage is imposed or modestly increased"<br /><br />The problem with your statement is you don't define "modest". Krueger himself was on the record that $15 was not a modest increase for the entire U.S. The above picture might reflect some politics, but it is not so clear cut as you suggest.<br /><br />"Research suggests that a minimum wage set as high as $12 an hour will do more good than harm for low-wage workers, but a $15-an-hour national minimum wage would put us in uncharted waters, and risk undesirable and unintended consequences."<br /><br />Alan Krueger <br /><br />https://www.nytimes.com/2015/10/11/opinion/sunday/the-minimum-wage-how-much-is-too-much.html<br /><br />Note that Krueger made that statement 2015 which was the same year the survey you cite was given.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-18739267287700115722019-05-01T20:15:37.691+00:002019-05-01T20:15:37.691+00:00FWIW :-)
Scenario: Bottom 40% earners double w...FWIW :-)<br /><br />Scenario: Bottom 40% earners double wages (on average) through collective bargaining (some 50% more, most 100%, some 150%). Bottom 40% labor averages 15% of production costs. Doubling wages adds 15% to consumer prices – which bites off 15% of sales – before we factor in new sales from the newly flush 40%.<br /><br />Common sense dictates that bottom 40ers spend proportionately more of their income buying bottom 40er made products – and (what I call) the mid 59% spend proportionately less on 40er prods. Let’s make that spread 20/10%. (We won’t concern ourselves with the top 1% here.)<br /><br />85% of previous sales retained. Extra 10% sales from the doubled half of wages (with 15% fewer jobs) adds 8.5%. Sales retained = 93.5%. (Sales actually cascade up a bit from there as added jobs add jobs – but just a bit of eighth-grade math mind candy.)<br /><br />To make sure we are not picking a sweet spot scenario:<br /> -- 10% sales lost to higher prices – 20/10% spending spread – 90% + 9% = 99% sales retained.<br /> -- 15% sales lost to higher prices – 40/20% spending spread – 85% + 17% = 102% sales retained.<br /> -- 10% sales lost to higher prices – 40/20% spending spread – 90% + 18% = 108% sales retained. (Thinking Card and Krueger anyone?)Denis Drewhttps://www.blogger.com/profile/11833367196756465896noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-33406006121316938722019-04-28T23:04:19.385+00:002019-04-28T23:04:19.385+00:00The questions economists never seem to ask:
Do bu...The questions economists never seem to ask:<br /><br />Do businesses want their customers to have higher income or lower incomes?<br /><br />Which businesses want customers to have lower incomes?<br /><br />Which want more higher income customers?<br /><br />Dollar stores, payday lenders, etc probably want wages cut for lots of workers to increase their business.<br /><br />Luxury car and homes need their customer incomes to go up a lot. Eg, they want a college graduate to earn over $50, probably $100 an hour including benefits, not $10 an hour as food server or even $15 an hour packing and delivering for Amazon.<br /><br />The same can be said about living costs. Should living costs in a US State move toward the living costs of rural Africa or toward the living costs of urban US east and west coasts? If lower kiving costs spur growth, why is rural America losing population while population in California increasing. And Texas has higher living costs than the places most Texas immigrants came from: most Texas immigrants come from lower cost Mexico or rural plains and midwest States.mulphttps://www.blogger.com/profile/14149487211960071193noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-46073036299486313932019-04-20T21:56:05.728+00:002019-04-20T21:56:05.728+00:00Hi Simon,
Can you write a blog on the Job Guarant...Hi Simon,<br /><br />Can you write a blog on the Job Guarantee concept spend side auto-stabiliserAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-71188195401247510412019-04-20T20:29:35.887+00:002019-04-20T20:29:35.887+00:00Odd, in that there is an obvious alternative hypot...Odd, in that there is an obvious alternative hypothesis that wage bargaining between low-skilled would-be workers and employers is marked by such large asymmetries of knowledge and leverage that the result can be wages set below the market equilibrium. The third hypothesis is market collusion between employers to achieve the same result, facilitated by the much greater ease of organizing between employers than between poor workers. Why should economists assume that the real world markets are always closer to efficiency than to one of the many modes of failure?James Wimberleyhttps://www.blogger.com/profile/10039653150309817093noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-64264662479824329502019-04-20T13:28:16.616+00:002019-04-20T13:28:16.616+00:00Hi! I feel like one argument might be, to explain ...Hi! I feel like one argument might be, to explain why unemployment does not go down, is that most markets are oligopolies. Oligpolies can therefore absorb the rise in costs by cutting down on their profits, and they have an incentive to do so, so that they do noto spark price wars. Profits might also not go down by much (which will mean there is likely to be growth for large companies), because labour now takes less of a proportion of a firm's costs, given so many parts are automated. This is tied into empiricism, as I'm looking at economic outcomes under the current context, but there is some theory to explain, I think. Any thoughts?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-71831997751608829882019-04-20T10:35:54.703+00:002019-04-20T10:35:54.703+00:00Economics has not been conducted in the manner of ...Economics has not been conducted in the manner of a science, but rather as a branch of philosophy -- rigorous reasoning from a set of assumptions. Keynes wrote in the 'General Theory', "..if orthodox economics is at fault, the error is to be found not in the superstructure, which has been erected with great care for logical consistency, but in a lack of clearness and consistency in the premises". He always saw economics as a system of logic and was sceptical about the application of mathematics and econometrics to it; one could cite many other economists who would support that view.<br /><br />So if economist A and economist B come to different conclusions on a particular question, assuming no logical errors in their reasoning, it's simply because they differ in their starting assumptions. But where do the assumptions come from? Friedman famously said when challenged about the 'unrealism' of many of the assumptions of neoclassical economics that the realism of the assumptions wasn't important it was the results that counted -- this has been termed Friedman's instrumentalism. So, far from being a science, economics reduces to a belief system.<br /><br />In the case of the minimum wage, economists who believe that labour is just a commodity whose quantity is determined by price will believe that a minimum wage will reduce employment, other economists who believe that price is only one of many determinants of the level of employment are likely to disagree.<br /><br />All this could still change, in Keynes's day there was very little data and no computers, an empirical basis to economics was hard to imagine; but now, talk of an 'empirical turn' encourages me to think that a science of economics is still a possibility. Graeme Smithhttps://www.blogger.com/profile/16082567369599799978noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-68166558054326557642019-04-20T08:49:32.541+00:002019-04-20T08:49:32.541+00:00You say, correctly: "But because there are so...You say, correctly: "But because there are some contrary studies, that allows two things that distinguish economics from physical sciences."<br /><br />You then go on to identify those two things, both of which appear to expose weaknesses in those who practise economics rather than the 'science' itself. But surely it is exactly the possibility, even likelihood, that two equally rigorous and well-designed studies can produce divergent results that distinguishes economics from 'hard' sciences. Another way of putting it might be that replicability, a - if not the - cornerstone of the scientific method, cannot be assured in economics.<br /><br />The result is that the goal of demonstrating the 'hardness' of economics is doomed to failure, at least until we are able to set up comparable universes, with identical participants, to test alternate theories. This has driven 'higher' economic theory into the intellectual bottleneck (I hesitate to say dead end) of a branch of mathematically founded logic. Hence the desire to define ever more precisely the assumptions on which theories - and predictions - are based at the expense of real-world validity.<br /><br />It's a bit like theories of child-raising: we know that extremes (of physical discipline or complete complaisance) are unlikely to turn out well but any theory to guide us to the appropriate 'sweet spot' is more likely to reflect our own prejudices and preferences than to be informed by 'objective' reality.DavidShttps://www.blogger.com/profile/11679346381085854499noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-91678207610597894272019-04-20T07:07:24.181+00:002019-04-20T07:07:24.181+00:00Surely only ideologues expect Social Sciences to ...Surely only ideologues expect Social Sciences to produce cast-iron results conforming to theoretical predictions: there appears to be nothing wrong with the basic assumptions, they simply fail (and those failures are fairly obvious) to quantify other major variables affecting the principal variable.<br />Since replicable experiments to determine the values concerned are almost invariably unacceptable (pace: Josef Mengele) this situation is not likely to change until very large natural data sets are available and analysed.<br />Meanwhile we do ourselves a favour by acknowledging the role our own political inclinations play in determining attitudes to everything.AuSuivanthttps://www.blogger.com/profile/16288931572821965370noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-64562627010384535962019-04-19T13:59:56.110+00:002019-04-19T13:59:56.110+00:00What if unemployment is the wrong measure? affirm ...What if unemployment is the wrong measure? affirm like Amazon or McDonald's may be able to absorb a higher wage to the detriment of small businesses that cannot survive .mmcoskerhttps://www.blogger.com/profile/09340832287496890370noreply@blogger.com