July 23, 2009
Complements to my Third Cup of Coffee

1. I'm excited about this book from Harriet C. Frazier: Lynchings in Missouri, 1803-1981. I expect it to be a source of very useful data for a lot of projects I'm working on.

2. Radley Balko offers a challenge and gets into an instructive discussion, asking left-wing bloggers to state the upper limits on the amount of government involvement in the economy with which they are comfortable. He gets an interesting response from Citizen Jane: apparently, we're just supposed to trust President Obama, who is "a well-educated man with good communication skills," and his "teams of experts capable of addressing particular problems." I won't question President Obama's education, charisma, and communication skills, and I agree with Citizen Jane's broader point that we should generally "avoid pooling our ignorance and trying to micromanage what we don't understand" (which is sound advice for members of Congress trying to micromanage the financial system, the auto industry, and other areas). However, I disagree with the idea that we should just trust the President and the experts to do the right thing. There are cases in which expertise is necessary and warranted. In other cases, it is over-rated. With regard to what we do and do not understand, Hayek was correct about the importance of economics: "(t)he curious task of economics is to demonstrate to men how little they really know about what they imagine they can design." I suspect there's more common ground here than there appears to be at first glance.

3. I propose an alternative explanation: businesses that support higher minimum wages support them because higher minimum wages will hobble their competitors. Wal-Mart didn't endorse a higher minimum wage in 2005 because the company's executives woke up one morning with progressive social consciences. I suspect that something similar is at play here. In the post linked here Catherine Rampell argues that businesses don't always behave in the way that econ 101 predicts. I would argue that this is exactly what econ 101 predicts when businesses are responding to political rather than economic incentives. We'll find out in the Fall--I just added it to my Econ 101 notes.

4. Speaking of which, here's me on the minimum wage. I'm interested in the degree to which making certain labor market transactions illegal increases the relative returns to unscrupulousness. In the same way that the drug war has created international criminal empires, I would expect to see a strong relationship between labor market restrictions and "human trafficking," with all of the attendant costs that usually come with criminality. There are also a couple of paper ideas in all of this: welfare crowds out private charity to a certain degree. Do minimum wage laws have a similar effect? Do minimum wage laws increase demand for charitable services through their effect on employment while reducing the supply of charitable services? Is part of the reduction in supply (if there is one) due to charitable Atlases shrugging when they observe the continued implementation of destructive policies?

5. "Is this institution run by men, or gods?" Peter Klein explains why he didn't sign the Open Letter in support of Fed Independence.

With that, I think I've indulged my fascination with all things bright and shiny for today. My still-unwieldy paper on the economic history of the South will be my complement to cups of coffee 4 through n.

Posted by Art Carden at 10:04 AM in Misc.

Comments

Your second paragraph makes me think of science and technology, and how people tend to trust it too much. Just because a computer program tells you something does not mean it is true. As a professor of mathematics and computer science at a liberal arts institution, I view a good portion of my job is to help students learn how to know when to trust the information they are receiving, and when not to trust it. We must know enough to at least recognize when something sounds fishy.

Posted by: Will at July 23, 2009 10:33 AM

I don't understand the "they're wise and can make the decisions" idea. Does that mean we should go and see if he likes Coke or Pepsi and then just get rid of the other one? He chose the best soda, why waste resources on the other one? We should find out what cheese he likes, and eliminate all others. If we only have one cola and one cheese, think of all the advertising those companies would save, and the price of cheese and soda would fall!

Well... except there's no competition...

When does one size fits all ever fit anyone?

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