(Don Boudreaux) Here’s a letter to a college student who tells me that she was “shocked,” when while doing research for a debate on welfare policy, she encountered my blog posts on minimum wages.
Thanks for your e-mail.
You allege that my and other “neoliberals’” opposition to minimum wages “shows” our racism. You reach this conclusion by asserting that, because blacks generally are paid less than whites, “raising the minimum wage to $15 will raise more black than white incomes.” Therefore, you reason, opposition to raising the minimum wage must be rooted in racism.
Are you aware that most research on the effects of minimum-wage hikes shows that, while some workers do get higher hourly pay, some other workers lose employment? Pushing up employers’ costs of labor makes labor less desirable to employ. And so especially if you’re correct that “America as a nation is inherently racist,” then do you not worry that blacks will bear a disproportionately large share of these job losses? Might it then be said that support for minimum-wage hikes is evidence of racism?
I happen now to be re-reading a book that I recommend to you; it’s my late colleague Walter Williams’s 2011 volume, Race & Economics. In this book Walter presents ample documentation of the racist consequences of minimum wages, as well as of other smiley-face-wearing government interventions, such as statutes mandating equal-pay-for-equal-work. Walter shows also that blacks would now bear a disproportionate share of the unemployment caused by minimum wages even in the absence today of racism.
Ms. L___, you might in good faith disagree with the arguments, and question the data, that are presented in Walter’s book, in the paper linked above (and in those linked below), and in the mountains of other research that reveal minimum wages to be an enemy of blacks and other minorities. I would welcome your reaction to this research after you study some of it.
But even if you have no wish to communicate further with me about minimum wages, it’s in your own interest to carefully study this research. If you’re genuinely convinced that minimum wages are “one of society’s best antipoverty and pro-equity tools,” then you owe it to the groups whose welfare you champion to make yourself as informed as possible in order to be as effective as possible an advocate for minimum wages. You’ll want to know your opponents’ strongest arguments so that you’ll be prepared to counter these with your strongest arguments.
To learn your opponents’ strongest arguments against minimum wages, consult the works of scholars such as – to name only a few – Walter Williams, Thomas Sowell, David Neumark and William Wascher, Jeffrey Clemens, Jonathan Meer, and Richard Burkhauser.
You’ll greatly improve your prospects of swaying people to support minimum wages if, rather than accusing opponents of minimum wages of racism, you instead address the best arguments offered by these people and then do your best to explain why they are mistaken. If you’re correct about minimum wages, you should have no trouble doing so.
So let me support my claim by pointing to evidence that doesn’t appear in a study but that is as conclusive as evidence on such matters gets. The evidence is your own behavior – specifically, your failure to start a business that employs at least some among these legions of workers who you insist are today underpaid.
If you really believe that America is filled with legions of underpaid workers, you can make a sure fortune by taking a year or two away from school and starting, say, a chain of restaurants or lawn-care companies. Entry into these industries is easy. And with a large pool of underpaid workers currently toiling away at the likes of McDonald’s, Home Depot, and Aunt Myrtle’s Country Kitchen, you’ll easily be able to hire away these workers at wages above the exploitation wages they now earn yet still at levels that enable you to earn a handsome profit by employing each one.
You’ll grow rich as you raise the pay of the workers about whom you care so deeply. It’ll be a win-win.
But if you do not put your time, effort, and money where your mouth is, then I’m left with only one of two possible conclusions. Either you don’t really believe what you assert to be true, or – more likely – you haven’t thought with sufficient seriousness about the meaning and implications of your assertion. No third conclusion is plausible. (Note: The fact that your assertion is made also by some PhD-sporting economists doesn’t save you from my criticism here. Those economists’ failure to start firms that employ these allegedly underpaid workers means only that they, too, either don’t believe their assertions or that they haven’t thought seriously enough about what those assertions imply.)
The Texas blackouts are shaping up to be the costliest disaster in state history, and the loss of life remains unknown. People are justifiably very angry. And when people are angry, politicians look around for someone to blame. Many have trotted out their favorite villains for the occasion. Many on the right have picked Don Quixote’s old enemy, the windmill, while many on the left jumped at the chance to blame deregulation. Neither explanation really holds up. While it will be some time before all the specifics are known, what we do know doesn’t support any easy political narrative.
The central fact about the chain of events that led to the blackouts is deceptively simple: It got super cold.
The sheer size of the supply hole makes it hard to blame either wind or deregulation for the failure. While pictures of frozen wind turbines may be evocative, ERCOT’s forecasts do not rely on a large amount of wind to sustain the system—and wind ended up meeting those expectations. Some have argued that the low cost of wind power over the last decade has forced the retirement of more reliable power plants that could have helped make up the gap had they been there. I’ve addressed those arguments at length elsewhere; here I’ll add that many of the recently retired Texas plants were rendered unprofitable not by wind but by the fracking-induced fall in natural gas prices. And given how many thermal plants failed, it doesn’t seem plausible that having a few more of them would have made the difference.
Similarly, there is little reason to think that Texas’ competitive electric system is to blame. ERCOT’s most recent winter forecast included a worst-case scenario for the grid that roughly predicted the needed demand but underestimated the amount of generation that would be unusable by almost half. A more centralized or state-run electric system almost certainly would have relied on the same forecast and ended up in the same situation. In retrospect, it’s easy to blame generators for not doing more to protect their plants from cold. But if a plant had known that unprecedented cold was coming and had weatherized, it would now be reaping millions in benefits. The problem was not a lack of incentives but a lack of imagination.
Source: The Texas Blackout Blame Game
One of the notable features of 21st century life is that America’s blue states are failing and losing population, while red states are thriving and growing. This is blindingly obvious to anyone who travels around the country, or to those who have seen half of their friends move to Nashville. But today Stephen Moore’s Committee to Unleash Prosperity sent an email that shows the trend graphically:
[I]f progressive tax, spend, borrow, and regulate economic policies are so superior then why are all the big blue states collapsing economically/financially? The chart below shows the highest and lowest unemployment rate states at the end of 2020.
Click to enlarge:
It takes a special kind of partisanship not to recognize that liberalism has demonstrably failed.
Source: Red States Trounce Blue States
At the risk of understatement, I’m not a fan of the International Monetary Fund (IMF).
In recent years, the IMF has been using inequality as a justification for statist policies. Most recently, the lead bureaucrat at the IMF, Kristalina Georgieva, cited that issue as a reason for governments to impose higher taxes to fund bigger welfare states.
…inequality has become one of the most complex and vexing challenges in the global economy. Inequality of opportunity. Inequality across generations. Inequality between women and men. And, of course, inequality of income and wealth. …The good news is we have tools to address these issues… Progressive taxation is…
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Last week, I reported on two myths about socialism. My new video covers three more.
Myth No. 3: Socialism works if it’s “democratic.”
As the Democratic Socialists of America put it, “Society should be run democratically—to meet public needs, not to make profits for a few.”
Sounds nice. If socialists are elected, then we’ll have a more just society.
But Venezuela’s socialists were elected.
“They can start off democratically elected,” says economist Ben Powell, director of the Free Market Institute at Texas Tech, but “once they centralize control over the economy, it becomes impossible to ‘un-elect’ them.”
Hugo Chavez was elected but became an authoritarian who chose his successor, Nicolas Maduro. Maduro now gets “elected,” by having opponents arrested and “ordering state employees to vote for him or they lose their job,” says Powell.
“Socialism always becomes authoritarian?” I ask.
“Everywhere you try socialism, that’s what you get,” he replies. “It’s hard to exercise political freedom if you don’t have economic freedoms. If you’re dependent upon the state for your livelihood, you lose your ability to use your voice to oppose [the state] because you can be punished.
“They do in Scandinavian countries!” say socialism’s promoters.
That’s myth No. 4.
Scandinavia does have big welfare programs, but capitalism pays for them.
The socialists call Sweden socialist, but that’s just wrong. “Volvo is a private company,” says Powell. “Restaurants and hotels are privately owned. Markets organize the vast majority of Swedish economic activity.”
Sweden did once try socialism. The result was high taxes, inflation, and economic decline. It’s an example of how people in prosperous places often don’t know what made their lives better.
In 1950, Sweden was the world’s fourth-richest country. Then Sweden tried socialism. Suddenly, once industrious Swedes started taking sick days. Wealth creation stopped.
“Talent and capital stormed out of Sweden to escape taxes and red tape,” writes Swedish historian Johan Norberg. “Businesses moved headquarters and investments to more hospitable places. IKEA left for the Netherlands…Bjorn Borg and other sports stars fled to Monaco.”
Sweden recovered only when it ended its socialist experiment. They cut taxes, government spending, and sold state-owned businesses.
After economically ignorant politicians like Bernie Sanders called Scandinavia “socialist,” Denmark’s prime minister even came to America to say: “Denmark is far from a socialist planned economy. Denmark is a market economy.”
In fact, in rankings of economic freedom, Denmark ranks as more free market than the United States.
Myth No. 5: Socialism is completely different from fascism.
In Congress, Rep. Louie Gohmert (R–Texas) called Hitler a “socialist.” Rep. Steve Cohen (D–Tenn.) took offense, shouting, “It’s the Nazis that were terrible, not the socialists!”
But Nazis were “national socialists.” There are differences between fascism and socialism, but “both replace market decision-making with command and control,” says Powell. Fascism “leaves private ownership in nominal terms” but neither system allows individual freedom. “You lose…control over your own future. Only under capitalism do you have the freedom to say, ‘No.'”
Socialism appeals to people today because it promises “equality and social justice,” but look at its track record. In Russia, Cuba, North Korea, Nicaragua, Vietnam, and China, socialism has meant a loss of freedom.
Socialist experiments also failed in Israel, India, Great Britain, Afghanistan, Syria, Algeria, Cambodia, Somalia, etc. There are no socialist success stories.
Only capitalist countries create real wealth.
Source: Socialism Doesn’t Work
Christopher Snowdon has now done what he failed to do in his original attack on lockdown sceptics in Quillette: he has engaged with the main plank of the sceptics’ case. Our central argument, as I explained in my reply to his article, is that lockdowns cause more harm than they prevent. I cited the wealth of evidence that lockdowns are largely ineffective, as well as the equally voluminous evidence that they cause social and economic damage. And I did my best to show that while some of this harm might be a ‘pandemic effect’ rather than a ‘lockdown effect’, the non-pharmaceutical interventions (NPIs) that governments have made across the world have exacerbated this damage.
The idea that the alternative to lockdown is to do nothing – that sceptics’ just want to “let it rip” – is a familiar straw man in this debate, and not just when Piers Morgan gets on a tear. In one of the most influential papers produced by the modelling team at Imperial College – known colloquially as Flaxman et al and published on June 11th – the researchers argued that the lockdowns in 11 European countries, including the UK, saved 3.1 million lives. But that claim was based on the assumption that 95% of the populations of those countries would have been infected with COVID-19 in the absence of any NPIs. Setting aside the fact that pre-existing immunity to SARS-CoV-2 is almost certainly higher than 5%, it’s absurd to claim that people would have just carried on as normal in the face of a global pandemic if they hadn’t been ordered to change their behaviour by their governments. Indeed, this conception of democratic citizens – as mouth-breathing troglodytes who will march towards their own destruction without a benign state forcing them to act in their own best interests – is one Chris has objected to many times before.
No doubt Chris thinks this is a fatal concession on our part since if we acknowledge that voluntary social distancing measures work, how can we deny that involuntary measures work? Here, I think, Chris has misunderstood our argument. When we say that lockdowns are largely ineffective – largely, but not completely – we are not questioning the basic logic of germ theory. Rather, our contention is that the illiberal things governments across the world have done in an attempt to control the virus have not resulted in fewer people dying than if they’d taken a more liberal approach, i.e., one that respected our individual rights and our status as rational beings capable of carrying out our own risk assessments.
Source: Some Covid Links
As Democrats in Congress and the White House make the case for tax hikes this year, expect a lot of disinformation that will somehow escape the attention of Facebook and Twitter censors. In particular there will be voluminous and erroneous claims about the landmark 2017 Trump tax reform and its impact on wealthy filers. Therefore this is perhaps the perfect moment for a preemptive reality check.
The Internal Revenue Service (IRS) has released data on individual income taxes for tax year 2018, showing the number of taxpayers, adjusted gross income, and income tax shares by income percentiles. The new data shows how taxes changed in the first tax year after passage of the Tax Cuts and Jobs Act (TCJA) in December 2017.
The data shows that the U.S. individual income tax continued to be progressive, borne primarily by the highest income earners…
The share of reported income earned by the top 1 percent of taxpayers fell slightly, to 20.9 percent in 2018 from 21 percent in 2017. Their share of federal individual income taxes rose by 1.6 percentage points to 40.1 percent.
Since 2001, the share of federal income taxes paid by the top 1 percent increased from 33.2 percent to a new high of 40.1 percent in 2018.
In 2018, the top 50 percent of all taxpayers paid 97.1 percent of all individual income taxes, while the bottom 50 percent paid the remaining 2.9 percent.
The top 1 percent paid a greater share of individual income taxes (40.1 percent) than the bottom 90 percent combined (28.6 percent).In sum, the richest Americans took on more of the tax burden. Meanwhile, “average tax rates fell for taxpayers across all income groups,” adds Ms. York.
Source: How Trump Taxed the Rich
What if the coronavirus had spread, but had never been diagnosed or detected? Would life have been any different absent the discovery of what has caused a massive global panic among politicians?
It’s not an unreasonable question. Really, ask yourself what politicians and nail-biting media members would have done 100 years ago if the virus had revealed itself. Since work was a destination for realistically everyone, there’s no way there could have been lockdowns. People would have revolted.
As this column has long stated, the coronavirus is a rich man’s virus. It’s not just that the rich and generally well-to-do had portable jobs that mostly survived the mindless lockdowns, it’s not just that the break from reality we were forced to endure could have only happened in a rich country, it’s also the case that only in a country and world in which the elderly are truly old would the virus have any notable association with death. People live longer today, and they do because major healthcare advances born of wealth creation made living longer possible. We wouldn’t have noticed this virus 100 years ago. We weren’t rich enough.
Considering how connected China was and still is to the rest of the world, logic dictates that the virus was infecting people globally long before politicians panicked. In that case, it’s not surprising that estimates made about the number of infected Americans were always way too low. The virus is said to spread easily, even easier than the flu, and it once again started working its way around the world sometime in 2019.
Notable about its rapid spread is that life went on as it made its way around the world. As the closing months of 2019 make plain, people lived with the virus. What is most lethal to older people isn’t much noticed by those who aren’t old. A rapidly spreading virus was seemingly not much of a factor until politicians needlessly made it one.
Indeed, a virus most lethal to the very old has meek qualities when met by younger people. If they’re infected with it, all-too-many don’t find the symptoms worrisome enough that they actually get tested.
Bjorn Lomborg bucks the trend.
The new United Nations report is being talked about as though it portends the end of the world: To avoid catastrophe, we must instantly transform the entire economy no matter the costs.
This is unjustified. The Intergovernmental Panel on Climate Change (IPCC), in its latest major global analysis, estimated that the total impact of unmitigated climate change from extreme weather, changes in agriculture, rising sea levels and so on would be equivalent to reducing the average person’s income by between 0.2 and 2 percent in the 2070s. [Box 3.1, file page 95.]
Link to the IPCC report where this number may be found. It may be a made-up number, but neither Lomborg nor I made it up.
Assuming 3% annual income growth over 50 years (2020-2070) gives us a 438% increase in income. So cutting that by 2% means the average person would see only a 430% increase over half a century.