Let physicists play with a few models involving particles that can oscillate wildly between fear and greed; when they get a handle on that, they can give the economists a call.

And not just wildly, but randomly.

economists have known for centuries that the minimum wage increases unemployment? centuries? really??

A few years ago, a single study in the fast food industry gave an indication that minimum wage increase doesn't increase unemployment. According to critics, this was not a strong study, technically. Over the years, any number of studies have shown the opposite. However, this one mediocre study received more media coverage than all the others put together.

That is not balanced coverage.

When economists come up with something as cool as string theory, then they can complain.

If politicians were routinely advised on policy by physicists, I think it's pretty clear the results would be much improved.

We all know the old joke about how many opinions you get if you put ten economists in a room. All things considered, it seems to me they get treated reasonably well (if not always very accurately) by the media.

Nonsense Kevin. Supply-Side economics is constantly attacked by reporters in the liberal media and gets no respect even though it was proved true by the rapid revenue gains caused by the Reagan tax cuts in the early 80's.

Link

"Supply-siders asserted that cutting taxes on the wealthy -- and especially on savings and investment -- would help everyone, including the poor, by promoting economic growth."

"For many of us, this whole argument was always a highfalutin rationalization for giving the rich what they wanted, and often even more."

Ex Lib...I want to believe in you. Give me some leads on the studies that show min. wage increases cause increased unemployment that you have read.

This proves that the theoretical physicists are wrong. The universe has 12 dimensions, not just 11. The 12th dimension is occupied by right wing neonuts who believe that human constructs like the concept of the free market have more status as immutable universal laws than such trivialities as relativity, quantum mechanics, and - yes - evolution.

aa

On the economic front, it's true that most news reporting about the efficacy of the minimum wage is fairly balanced, but that's because there's solid economic evidence on both sides of the question.

I disagree. I challenge anyone to show me the data that an increase in the minimum wage has ever hurt the economy.

One of the key points that Hanson is missing is evidenced by another one of his quotes (from a discussion with Michael Mandel of businessweek): "P.S. Could we at least agree that a minimum wage of $200 an hour, if vigorously and broadly enforced, would have an devastating effect on employment, and on the economy?"

It isn't hard for an economist to predict that a sufficiently high minimum wage will have devastating effects on employment. No one seriously doubts that no matter how high you make the minimum wage, it won’t have any negative effect on unemployment. However, there is no universal law that says what the effect on employment of a small increase in the minimum wage will be. In particular, there is no reason why monotonicity must hold (monotonicity would mean that if a very large increase in the minimum wage will increase unemployment a lot, then any minimum wage increase must increase unemployment by some amount).

Even if monotonicity did hold, this still wouldn’t reveal how much an increase in the minimum wage increases unemployment. For that you need data, and there’s no a priori reason why the result would be the same in all places and situations. It’s just easier to come to conclusions when working with the laws of physics than it is in economics.

Whatever. They don't even have a real Nobel Prize.

The difference? Economics is like most social sciences, only scientific in the vaguest of ways. (Psychology springs to mind as the second-worst offender.)

In the past decade or so, both social disciplines have FINALLY started making the effort to be social sciences, precisely by having members of their profession learn relevant facts from fields like neuroscience.

The problem is, the political partisan economics hacks who make their anti-minimum wage pronouncements all stem from the pre-scientific era of economics. Since they're not scientists, they're fair game for making empirically unsupportable statements.

That said, string theory is NOT all it is cracked up to be, and more and more science journalists will take the kid gloves off soon enough.

Ex-liberal: That fast food study was actually pretty good. It's been criticized, but then followed up with other studies that have confirmed its results. Other economists have published further studies that also suggest minimal or no negative effects from an increas in the minimum wage. Historical evidence suggests the same thing.

However, there's also contrary evidence. It goes both ways, and there's simply no consensus. However, as near as I can tell nobody has presented any evidence for a seriously negative effect from a modest minimum wage increase. The worst anyone has done is argue for very modest unemployment effects, and even those are mostly among teenagers.

I'd like to see some evidence that the media is skeptical towards statements by economists. The debate in the media seems to me to vary in a very narrow range -- from the craptastic analysis by the likes of Thomas Friedman (the world is flat, globalization is always better for every single person) to wingnuts like Larry Kudlow (tax cuts always increase govt revenue, no matter what).

If it is the case that the media is skeptical about economics, is that surprising? To the extent that economics is a "science" it isn't true -- based as it has been on ideas that we know are fictions (rational economic man, perfect markets, etc.). Yet economists are in the position to make policy recommendations.

Economists making policy recommendations based on their "scientific" models is like physicists making recommendations on the wisdom of the Iraq war based on their knowledge of the properties of metal in the guns our troops are using.

This doesn't mean that economists shouldn't speak, or don't have more useful knowledge than the rest of the population, but that we shouldn't be surprised if economists get challenged when they make conclusions that go WAY beyond what their evidence and science supports.

I suspect that it is because economists make such a regular practice of going beyond their evidence that there is so much room for them to disagree with each other

Hmm, since no one has said it yet I will:

Assume a can-opener!

You should read the comments at the Becker-Posner blog, as most commentators are having it out with them because both of them are against raising the minimum wage to $7.25 and Posner at least, cited almost zero sources. I tell ya as a law student, I read Posner's opinions and analyze them but from a political standpoint he's falls into some wrong-headed supply side thinking alarmingly quickly.

You wanna know why people treat economists like idiots ?

Because if you win the nobel prize in Physics you have an idea that has withstood being torn down by brightest minds and in the world for years.

In Economics people regularly win the nobel prize with ideas that no-one is really sure are worth spitting on. You don't have to have an idea that works in economics, just something interesting.

Economics is so uninterested in testing their ideas in the real world that that they have become in the words of Galbraith "intellectually bankrupt". And its not because as they like to pretend, its impossible and unethical to do experiments in economics. Its not easy to do experiments in geology, geophysics, astronomy, paleontology and a hundred other sciences either, but somehow they have made a bit of progress. And you don't get adulation in those fields for ideas that are indistinguishable from BS too often.

When you get right down to it, economists do models and theory, and don't do experiments or FIELD WORK. If Physics worked the same way we'd still be refining models of the music of spheres, which is about where economics is today. The little bit that is done only highlights how tiny it is compared to fields which do real science.

To add to still working it out's above, the physics that wins Nobel prizes is not the empty-calories-for-thought that brings the crank quantum theorists out of the woodwork, as happened the other day on Kos, after a post by DarkSyde.
We can have fun with extra dimensions because we can be damn sure the universe won't be calling us on it anytime soon.

I think a better comparison is between economics and chemistry.

In both fields, results are often unpredictable, but a chemist can do thousands of small scale experiments and unequivocally determine what would happen in the future.

An economist may have a theory on the benefits of free trade, for ex., but there is no way he can perform a small scale mock up to test his theories, and there are so many uncontrollable variables, any observed results may be subject to opinionated analysis.

So we see liberal economists crediting Clinton with the 90's boom, and conservative economists telling us that the Reagan tax cuts were just kicking in. That is why one-armed economists were so valued by Harry Truman.

I know I shouldn't respond to Al but,...

Actually, after Reagan's big tax cut of 1981 he followed on with two massive tax increases in 1982 and 1983 (payroll tax). As a share of GDP the 1982 tax increase was larger than Clinton's of 1993. Reagan raised taxes four times just between 1982 and 1984. The Tax Reform Act of 1986 raised taxes on industry and cut taxes on the poor. I believe he also signed smaller tax increases each of the following years of his presidency.

It was easy for Reagan to increase tax revenues every year after his tax cut, he raised taxes.

Part of the success of physicists is that they deal with relatively simple regimes. This is not controversial. You attack problems you think you have a chance of solving. This is not an apology for economists but the problem of predicting the behavior of millions of people and corporations and all of their interactions is a far sight more complicated than calculating something like the energy states of a single hydrogen atom.

From my point of view the mimimum wage issue is not an economic argument but a moral one. Will an increase in the mimimum wage increase unemployment? Probably. But the small increases we're talking about would have little effect. Societies are judged by how they treat their lowest classes. You can't live on $5.15 an hour. The moral values of the right wing don't include compassion for the poor. What they're really concerned about is the profit margins of the wealthy.

Although I agree with trublu on the political side of the issue, I belive Kevin is wrong in his claim that the employment effects are unclear. This paper does a pretty good job in surveying the evidence.

Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research
by David Neumark, William Wascher #12663 (LS)
NBER Working Paper No. 12663
Issued in November 2006

---- Abstract -----
We review the burgeoning literature on the employment effects of minimum wages - in the United States and other countries - that was spurred by the "new minimum wage research" beginning in the early 1990's. The wide range of existing estimates makes it difficult for us to draw broad generalizations about the implications of the new minimum wage research. Clearly, no consensus now exists about the overall effects on low-skilled employment of an increase in the minimum wage. However, the oft-stated assertion that this recent research fails to support the traditional view that the minimum wage reduces the employment of low-skilled workers is clearly incorrect. The overwhelming majority of the studies surveyed in this paper give a relatively consistent (although not always statistically significant) indication of negative employment effects of minimum wages. In addition, among the papers we view as providing the most credible evidence, almost all point to negative employment effects. Moreover, the evidence tends to point to disemployment effects of minimum wages in the United States as well as many other countries. Two potentially more important conclusions emerge from our review. First, we see very few - if any - cases where a study provides convincing evidence of positive employment effects of minimum wages, especially from studies that focus on broader groups (rather than a narrow industry) for which the competitive model predicts disemployment effects. Second, when researchers focus on the least-skilled groups most likely to be adversely affected by minimum wages, we regard the evidence as relatively overwhelming that there are stronger disemployment effects for these groups.

Inflation is a a measurable phenomenon that most economists recognize, whether they be liberal or conservative. So why isn't the minimum wage indexed to the rate of inflation? Why isn't a constant dollar minumum wage that was appropriate 10 years ago for an economy with under 5% unemployment appropriate today?

Whenever the issue of raising the minimum wage comes up why do the poorest people get accused of fueling inflation and not the titans of industry and government who have driven up the cost of energy, housing, transportation and health care over the preceding years?

Furthermore, conservatives always ignore the full picture: minimum wage earners spend their money faster, creating immediate benefits for the economy, like more jobs. And these are largely American jobs -- not jobs for ski lift operators in St. Moritz.

Everyone on the the planet knows that a $100.00/hour minimum wage would cause significant unemployment. That an economist thinks he should be highly respected for pointing this out says a lot about the profession.

Everyone on the planet knows that a $0.01/hour minimum wage would cause no unemployment (as compared with no minimum wage). That an economist would still expect to be paid after spending a career ignoring this fact says even more about the profession.

We all know that raising a $0.01/hour minimum wage to $0.02 (doubling it, by God!) would not have any effect on unemployment. Thus it is NOT a continuously increasing function.

Because of this, it becomes a matter of considerable interest to most of us at what rate does it become an increasing function and how steep that curve is for -- say -- the first $5.00 of that function's increase. The fact that economists have not answered that question with any degree of reliability is the REAL reason economists are held in such low regard.

If Robin Hanson is capable of saying otherwise with a straight face AND he is an economist, I suspect the most productive use of his time would be the consideration of what HIS contribution to the low level of respect accorded to his profession by the media.

There are two aspects here: One is a discussion of the latest research (Card et al.). The other is the widespread opinion of professional economists. Of the latter group, I've read surveys which say that around 90% or more believe that increases in the minimum wage cause unemployment. And that consensus is indeed obscured by the Card-said/no-he's-wrong-approach to these issues.

"But if economists say, as they have for centuries, that a minimum wage raises unemployment, reporters treat them skeptically and feel they need to find a contrary quote to "balance" their story."

Because that is an obviously stupid and simplistic result. It is as true as saying that if you Kevin Drum, know after taking Physics 101, that if you push on a ball, it will move forward forever.

Economists claim to be physicists these days, but every physics class, immediately after talking about Newton's law, will say, THAT IS TRUE IN THE CASE OF NO FRICTION but we live in a world of friction.

Most Econ classes are taught in a frictionless world. Most economists never move themselves into a frictionful world. Economists (like Brad) think of themselves as Physicists, though they have no ability to run experiments to observe their behavior.

Economists are foolish and stupid people, that is, if they want others to believe them.

This is all ridiculous. As alluded to earlier, if we list biology, physics, chemistry and economics and ask which of these does not belong, we would have either unanimity or a method to cull out some ill-informed ideologues.

To even equate physics and economics at any level is intellectually dishonest or ingenuous (to be kind).

colorless green ideas -
Yes, really, they have known for centuries.
Marie Antoinette was a supply-side pioneer, you know.
You're probably more familiar with the public dissatisfaction regarding her seminal ideas, more proof of liberal media bias.

Every time the minimum wage has gone up, unemployment has soared, the economy has collapsed, more scary brown people have frightened my wittle Allykins, etc.

So the economists are only reporting on the history of reality. What else do you need?

Probably because physicists' ideas are based on experiment, and economists' ideas are basically pulled out of their asses.

The last AP story I read about the minimum wage only quoted rightwing sources. The story ended with the suggestion that most economists thought raising the minimum wage would increase unemployment.

When I checked that out a little, I found that numerous studies have been done and almost all economists think raising the minimum wage does not increase unemployment.

Sadly typical of the unfair and unbalanced reporting by the AP.

I'm reminded of a recent piece on To The Point discussing a book, Adam's Fallacy, that argued that Economics can lead to theological disputes. The essence of the argument seems to be that Economic research is focused on describing the world as it is, but is then used to describe the world as it ought to be. This translation is not valid. To stick with the minimum wage argument: even if increasing the minimum wage reduces employment (at the margin) that does not mean that we should not do that, it merely means that raising the minimum wage has consequences--is that really so surprising? A more interesting question is if the benefits that accrue to those people who benefit directly from a minimum wage increase outweigh the burden borne by those people who lose their jobs. Where is that research?

the problem for economists is believability:

Physics consists of theories proven in repeatable experients by actual facts and observations.

Economics consists of ideas agreed to by surveys.

see the difference.

Economics is closer to religion than science - its existence and ideas du jour, depend on acquiring believers.
.

When a counter-argument is given to string theory, that argument is given by another respected physicist.

When a counter-argument is given in respect to minimum wage, it is just as likely given by a politician (or some pundit) as by an economist.

Obviously Hanson knows very little about science and string theory. There are many who doubt string theory is even science. It is more akin to religion.

Then again Hanson does know about religion. He is, after all, an economist.

A more interesting question is if the benefits that accrue to those people who benefit directly from a minimum wage increase outweigh the burden borne by those people who lose their jobs. Where is that research?

Whoaa feller, hold on to your briches. Next you'll want to do a cost benefit analysis for all 6 billion people. Best to slow down and keep it simple. Pick a simple measure, say an equity market over a time period of 3 to 6 months. There will be plenty of time to complicate your model later.

Some interesting stats from today's Washington Post (Michael Rosenwald, "Who's Afraid of a Higher Minimum Wage"):

1. Only 520,000 workers nationwide earn the federal minimum wage of $5.15

2. Workers in most major metro areas already make more than the federal minimum wage and many already earn more than the new, proposed $7.25 minimum.

3. Right now there are about 132 million people in the US workforce total. About 10%, or 13 million of them would be affected by a raise in the minimum wage.

4. Of this 13 million, about 21 percent, or 2.73 million, are under age 20.

According to most economists and policy experts interviewed for this article, the employment and inflationary impacts of the proposed increase in the minimum wage to $7.25 is either irrelevent or miniscule.

So, why all the fuss? These dire unemployment warnings sound like recycled economic scare tactics jotted down on the back of an old Signatures luncheon napkin.

After all, NAFTA has already driven many of the minimum wage jobs to Mexico and from there on to China.

The general consensus among economist is that a 10% incrrease in the minimum wage causes a 1% increase in unemployment.

That means if you raise the minimum wage by 10%
99 people get a 10% raise and one individual loses their job.

So what we see is a wealth of economic studies that demonstrates that the job lose occurs.

But we see essentially no economic research about the impact of the 10% income growth for the other 99 individuals.

So what we have is cost-benefit analysis that shows the cost but at the same time ignores the benefits.

That is what is call balanced research and/or reporting.

The minimum wage debate is more emotion than reason.

From memory, the figures show that around 90% of those on the minimum wage are the 3rd ranked person in a household (i.e. a child of the parents ranked 1 & 2) and that within 12 months more than 80% have advanced to roles/salaries above the minimum wage.

What the minimum wage does is increase the barrier to entry of the young and particularly those that have not done so well academically.

heh

"Hmm, since no one has said it yet I will:
Assume a can-opener!" - MNPundit

I know a variant where the punchline is "Assume a ladder.' Same result.

Fewer than 10% of the American pubic has any exposure to economics in their educational background and that does indeed leave fertile ground for acceptance of flat-out crapola like the 'Laffer Curve' and other justifications for greedy to the point of pathological economic behavior.

"Of course I believe in the free enterprise, but in my system of free enterprise, the Democratic principle is that there never was, never has been, and never will be room for the ruthless exploitation of the many for the benefit of the few." - President Harry S. Truman

NOte: I've been beset by trolls using my handle - Kevin, please do something about this impersonation problem.

If increasing the minimum wage increases unemployment, then decreasing the minimum wage must decrease unemployment - sending the minimum wage to zero would result in full employment, no?

Bring back slavery!! It's good for the economy!!

Well, if economists want more respect, they can start by questioning their assumptions.

Does the universe have 4 dimensions, or more?

Why is the universe dominated by matter, and not antimatter, or a mix of both?

Are the laws of physics the same depending on position, on direction, on rotation, on velocity?

Etc., etc. The fundamentals (and some of them are very deep; I've left them off because they're hard to state accurately in layman terms) are given a lot of hard scrutiny. If you don't believe me, check for yourself: The Particle Data Book, the sections under "Searches" and "Tests of Conservation Laws".

Yes, these are (at least partly) open questions. But you don't get answers without asking questions, and economics seems to really be poisoned with dogmatic ideology.

The #2 item for economists to get respect is to make a theoretical prediction that is experimentally verified to...oh, I dunno..10 or 12 decimal places (cf. electron electromagnetic 'g' factor).

I'm not holding my breath, however.

Dear Robin Hanson,
Beacause the laws of physics and the laws of man have different standards and consiquences that require different responses.

Also the laws of man are notoriously corruptable by ideological interpretation and application such as you are doing in your comment on the minimum wage. And, a change in the laws of man can have a rapid effect on the welfare of millions of people as policy makers act on these new ideas. Economist have been proven wrong before and millions have suffered for it. Caution and skepticism is inherently called for.

If the laws of Physics are changed in the next month, we wont see food stamp programs being cancelled next year. Not so if we accept every libertarian economic incite as "truth"

Repectfully yours,
Nemesis.

Physics: predictions, regardless how weirdly phrased, that are ultimately testable by experiment. If not testable, generally looked down on by real physicists. Effects on the world if fancy theories are wrong: minimal. (If the fancy theories are right, you get atom bombs or transistors, but that's another issue entirely.)

Economics: predictions that are ultimately not testable except in highly attenuated form because of all the other things that aren't equal. Basic assumptions (such as rational self-interest and perfect information) known not to be true. Effects on the world if theories are wrong: millions of people thrown into poverty, other millions unjustly enriched.

I'm shocked, shocked that anyone could treat the pronouncements of any economist (or set of economists, even if their pronouncements are diametrically opposed) with anything but perfect reverence.

Wow, there sure are a lot of early risers around. Let me clarify three things:
1. I was only claiming that economists mostly agree that the effect of minimum wage on employment is non-positive. This is consistent with a small effect, and with a belief that a minimum wage is a good idea.
2. http://www.nber.org/papers/w12663 is a fine review of the data, which supports my claim.
3. I have a masters in physics and have published two physics articles in the last few years.

Effects on the world if fancy theories are wrong: minimal.

Come on, if people listened to bad physicists like they listened to bad economists we'd have all sorts of problems.

Many people wouldn't even survive "bullets fly backwards day"

Kevin Drum: However, as near as I can tell nobody has presented any evidence for a seriously negative effect from a modest minimum wage increase. The worst anyone has done is argue for very modest unemployment effects, and even those are mostly among teenagers.

Which teen-agers ar harmed? Mostly underclass teen-agers. Minimum wage keeps these kids out of the workforce, when a regular job would be terrific for their development.

BTW most minimum wage earners are 2nd or 3rd earners in families that are not poor. What good does the minimum wage do? Has anyone seen studies showing that raising the minimum wage does good.

Will any economist listening speak up and declare themselves as claiming that our best estimate of the total effect of a minimum wage is to raise employment?

Will any economist listening speak up and declare themselves as claiming that our best estimate of the total effect of a minimum wage is to raise employment?

Is that the intended effect of an increased minimum wage?

I don't really think that the minimum wage increase is all that necessary, but then again, I also think we should go back to the tax brackets of 1945-50. But whatever, economic discussions outside of keeping a balanced budget, like religion, are wastes of time and energy.

First assume a market operates in a vaccuum and add only the variables we want to study ... then extrapolate that to real world policies and wonder why things aren't working as intended.

"Although I agree with trublu on the political side of the issue, I belive Kevin is wrong in his claim that the employment effects are unclear. This paper does a pretty good job in surveying the evidence.

Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research
by David Neumark, William Wascher "

Well, Bill Bernanke doesn't think the debate is settled, and neither does Robert Solow.

http://www.epi.org/content.cfm/bp178

'Even Benjamin Bernanke... has noted that “economists disagree about …whether increases in the minimum wage reduce employment of low-wage workers”

Further, Neumark and Wascher are on the other side of the academic debate from Card, and have been for a decade. There's a critique of the Meumark's meta-analysis here:

http://www.epi.org/content.cfm/bp178

'Since their 2000 report, Neumark and Wascher have written minimum wage literature reviews to argue that the minimum wage has adverse employment effects (Neumark 2006; Neumark and Wascher 2006). In a forthcoming paper, they rehash their disputes with Card and Krueger and highlight 19 studies they deem “more reliable tests of employment effects”—the majority of which agree with Neumark and Washer’s own conclusions (the primary exception being one of the Card and Krueger studies). Ten of the studies are analyses of other countries, including Indonesia, Columbia, and Mexico. Of the eight U.S. studies they cite as agreeing with Neumark and Wascher’s conclusions, Neumark is an author of six of them. An objective criterion for selecting the 19 studies is not readily evident, although they are somewhat dismissive of the natural experiment approach (see discussion of Card and Krueger on p. 4).'

'With 22 states now having higher-than-federal minimum wages, if such wage levels did lead to job loss or other adverse economic effects, then there has been ample opportunity to observe them. In particular, if the elasticities being used in the Employment Policies Institute studies were true, we would have seen hundreds of thousands of jobs lost in recent years as state minimum wages have increased. Simply put, there is no evidence that the job losses predicted by these studies have ever materialized. If anything, over the past decade, state minimum wage increases have boosted the income of low-wage workers without causing negative economic effects.'

Urinated, the quotes you give are people who say it is not clear there is much of a negative effect on employment; they are not people saying the effect is positive.

Will any economist listening speak up and declare themselves as claiming that our best estimate of the total effect of a minimum wage is to raise employment?

Globally or nationally?

I'm not an economist but I'm pretty sure 99.9% of the money going to minimum wage earners goes directly back into the US economy. Raising the income level of upper management by the same total amount will result in significant direct international investment. That's the LouDobsian argument anyway.

It's somewhat silly to compare physics and economics. Physics is a science and economics isn't. It really is as simple as that.

It really is very simple. Raise the price of something and the demand for it goes down. The reason that the changes in employment are modest is because the increases in the minimum are also always modest. However, I am quite willing to support an experimental increase in the minimum to $15/hr. Then we can end this debate.

Also, Physics is a real science.. Economics isn't a real science. It doesn't study a natural occurance. It doesn't del in absolutes or hard set laws. Economics doesn't really have laws like gravity, it has laws like psychology. It can predict, sometimes and if you have nearly omniscient levels of information, what people will do 3 times out of 5.

The minimum wage thing is a glaring example. Economics have said that raising the minimum wage will lead to an increase in unemployment. We've raised the minimum wage very often at both a federal and state level. Yet these mass firings and lay-offs never coincide with increases in the minimum wage. If it did lead to unemployment, it could be demonstrated because we've raised the minimum wage several times... and we still can't prove anything. A person who doesn't already want to believe that minimum wage increases= unemployment has no reason to believe it does.

Physicists only needed on chain reaction to prove they knew what they were talking about. Economists predict things that never happen, and seem to be making shit up as they go along.

It really is very simple. Raise the price of something and the demand for it goes down.

Uh, Yancy, not necessarily. You might want to check out what economists mean by the elasticity of supply and the elasticity of demand.

re: $15.00/hour minimum wage, check out what economists mean by monotonicity.

Economics is a competition for finite resources, so it creates political factions based on how those resources will be distributed. Physics has no such problem.

If these economists were to jump up and down just as much to complain that the Stolper-Samuelson theory doesn't get adequate coverage in the press then I might be more prepared to listen.

Of course, to whining right-wingers who always see themselves as victims, any analysis that doesn't proclaim every single bit of scripted conservative dogma as the absolute truth is "biased".

So we get to do this one again. First, I would recommend everyone go to Dean Baker's site for further illumination.

And try this link:

http://en.wikipedia.org/wiki/Minimum_wage

It is a good summary, including Card and Krueger.

The last time this topic surfaced I went digging throught the literature and discovered that the original national minimum wage was a quarter in the '30s. It has been raised many times, forgive me for no link. Many state and local governments have minimum wages that exceed the federal level.

Minimum wages have literally been raised thousands of time in this country, affecting hundreds of millions of people. Theory says they should have had a negative effect on employment, but from what I have read the negative effects are, at best, extremely small, and often non-existent.

Given the very large number of data points over a very long duration one would think those opposed to minimum wage increases would have a slam dunk of an argument. They do not, not even close. From what I have read the employment situation +/- is all but a push.

And asking for someone to produce an opinion that it raises employment is just silly.

The measure of the value in increasing the minimum wage, like any economic policy, must be taken including the full range of results. People with more money in their pocket feel better and live better. They spend it and boost the economy. Sometimes that actually leads to more jobs. How's that for an assertion?

So, show me a measureable drop in GDP that can be attributed to a raise in the minimum wage and I might be more sympathetic to these arguments.

Anyone here read Jared Diamond's excellent 1987 Discover article, "Soft Sciences Are Often Harder Than Hard Sciences"? Seems pretty relevant to a comparison of how physics and economics are regarded.

Maybe it's because phsycisists don't have political ideologies that require them to argue that string theory is a fraud(or vice versa), whereas economists do and will say what they wish regardless of the actual evidence.

(1) As to the claim "Raise the price of something and the demand for it goes down," that is generally but not universally true. Sometimes people use price as a signal of quality. Sometimes goods are valued for the fact that others can't afford them. So it is an empirical question.

(2) I've never met anyone who favored the minimum wage because it *increases* employment. We favor it because it increases the returns to employment for the relatively poor. So if it doesn't *decrease* employment, or if the employment effect is trivial, it is a good idea.

(3) There is genuine disagreement among economists. From Wikipedia: "A 2003 survey by Dan Fuller and Doris Geide-Stevenson reports that 46% of academic economists in the US fully agreed with the statement, 'a minimum wage increases unemployment among young and unskilled workers', 28% partly agreed, and 27% disagreed."

(4) I am amazed at the animosity directed at economics from people who know only the slightest bit of it. It is easy to criticize a caricature of economics rather than economics.

Econophysics, physicists address economics,

http://www.physorg.com/news84123814.html

Jose Padilla,

The demand is not perfectly inelastic, which is what would be required for the demand to remain unchanged by price increases for a commodity. It is perfectly reasonable that elasticities are different for different commodities, but true inelasticity does not exist-you can't pay for something if you have nothing to pay with. Want can be inelastic, but one must have the means to have demand. For any large market, there will be consumers on the margin who cannot afford the increase, or for whom a substitute becomes economical, and their demand for the original commodity falls to zero.

As I wrote before, the past measured employment effects are drowned out by all the other factors involved because a small percentage of the employed population earns the minimum wage, many of whom are teenagers who may simply drop out of the work force altogether.

I realize it is uncomfortable to have to acknowledge that some are unemployed because of minimum wages, but it is far better to simply acknowledge this and start making argument for why minimum wage increases are still desirable despite this uncomfortable truth.

What's worse, economics deals with questions that often have important non-economic dimensions, which means that even when economists do agree on a "correct" answer, people may legitimately disagree with them for reasons of social justice, practicality, personal preference, or a hundred other things.

This is, at best, poorly phrased. Like any science, economics properly deals with questions of fact, on which disagreement on the basis of of personal preference (including "social justice" and likely most of the rest of the "hundred other things") is fallacious, and disagreement on the basis of practicality is nonsense.

Which policy choice is "correct", except in the context of given preferences, is not the province of either economics nor any other empirical science. The assumption that certain economic ideas (e.g., particular operationalizations of "efficiency") are policy ideals is outside the scope of economics as a science.

As to the original quote, the biggest problem I see—bigger by far than the rather optimistic presentation of how physics is presented in the popular media—is the outright lie that there is some kind o well-established, still-existing, multi-century consensus that minimum wages cause unemployment in the real world among economists.

"Supply-Side economics is constantly attacked by reporters in the liberal media and gets no respect even though it was proved true." ~Al

The notion that the sun goes around the earth, proved by simple observation every day, is also constantly attacked by reporters in the liberal media. Get pissed about that one, Al.

Physicists don't get cushy jobs at think-tanks as a reward for pushing theories that support policies that make their bosses richer.

Economics is nothing more than a thinly veiled propaganda effort pretending to be a fake science.

"Will any economist listening speak up and declare themselves as claiming that our best estimate of the total effect of a minimum wage is to raise employment?"

Professor Hanson, here you are not distinguishing between a point-estimate and a confidence interval. If you ask an economist about their best estimate for a parameter that is allowed to vary continuously, they should also tell you that their best estimate is correct with probability 0. For this reason, confidence intervals are a more accurate measure.

If your probability distribution over various outcomes is continuous (this is of course an assumption- there's no reason why it has to be this way), then a confidence interval that includes 0 should have essentially the same confidence-level as an identical confidence interval that includes some very small number greater than 0. So if a “continuous economist” has a 95% confidence interval for the effects of an increase in the minimum wage on unemployment and that confidence interval includes 0, then the economist’s estimate is consistent with an interval of slightly greater confidence level that includes some number slightly greater than 0.

Of course, slightly greater than 0, slightly less than 0, and 0 are all approximately the same, which goes to show that the sign itself isn't that important when the magnitude is small. Going back to your question, I think economists would all agree that their personal 95% confidence level does not consist entirely of positive numbers. But I am sure that there are also economists who would claim that their personal 95% confidence interval does not consist entirely of negative numbers.

By the way, raising attorneys' base rates to around $250 per hour hasn't put any lawyers out of work as far as i can tell.

And since when have administration economists become so concerned about America's minimum wage earners? Just in the last four weeks, it appears.

It's even worse in medical science. Have you noticed that not one single article about Litvinenko has included any quotes about how Polonium 210 might actually be good for you?

Currently the macro-physics side of the field has a universe which began at a point, expanded to many times its visible size in a fraction of a second, slowed down immediately, is currently speeding back up again and is mostly invisble to everything but the theory. All because the only possible reason for the intergalactic redshifting of the light spectrum can only be due to recessional velocity, even though they are perfectly willing to accept that gravity causes the opposite effect by what amounts to a lensing effect. I would like to be able to ask them one question: If space is expanding, why doesn't C increase along with it?
Which is to say that if you want someone to do your taxes and not have the IRS calling, stick with an economist.

From my point of view the mimimum wage issue is not an economic argument but a moral one. Posted by: trublu on December 4, 2006 at 5:13 AM | PERMALINK

One cannot serve two masters.
Economic issues are issues of prosperity.
Moral issues are issues of Obeying God's Law.
Using lies, the Republican Party has managed to build a coalition, by conning one group into siding with the other.

Will an increase in the mimimum wage increase unemployment? Probably. But the small increases we're talking about would have little effect.

Probably? Fact is - we have no fucking idea - because the economy is a very complex system - there does not exist enough computing power on the face of this 21st Century planet to accurately model the behavior of this system. There are factors here that are not being considered, and there are factors here that probably no person alive has any clue about.

But such complex systems can be abstracted and simplified to some degree to get a pretty good idea where things will head.

A simple "supply/demand" model on labor as a commodity is an over-abstraction that distorts the situation beyond absurdity.

It is not a well-known fact, but it is a fact that when you increase the minimum wage, these minimum wage earners immediately sock these extra earnings away in secret tax-sheltered swiss-bank accounts.

This means that this is a net drain on the economy, that money just disappears *poof!* and businesses have less money to work with, so they hire less people. Right?

Societies are judged by how they treat their lowest classes.

Judged by whom? God? And what exactly is this "lowest class"? The people who make $5.15 an hour? Or the people who lose their jobs because their former co-workers had to get a raise? Or the people who couldn't get a job even if there were no minimum wage?

And who shall God judge? The whole society, including those who couldn't even get a job if there were no minimum wage? Or just the top 5%? Or just the people who vote for politicians who don't support minimum wage increases?

My point?: This statement about "societies are judged. . .." is just hyperbole, and does not contribute to an intelligent debate on this subject.

You can't live on $5.15 an hour.

Oh, you most certainly can.
What was the hourly wage of Native Americans before the white-man came?

The moral values of the right wing don't include compassion for the poor. What they're really concerned about is the profit margins of the wealthy.

As I said before; Moral Values is a red-herring. It's irrelevant to a discussion on economics. It's not a certainty that one must sacrifice prosperity for morality. But one must at the very least be willing to make that sacrifice.

We must look at this problem in a purely pragmatic, mechanical way: Labor can be treated as a commodity, but that is a dishonest oversimplification, because human beings are not machines.

While there are exceptions, most economists are about at the stage of development that Aristotle was when he asserted, based on what was thought at the time to be sound reasoning, that men have more teeth than women. He could have looked into a bunch of random mouths and counted, but this was thought to be beneath him. Besides, since at the time most adults were missing some teeth, the data would be noisy, and maybe he had more teeth than his wife.

When a physicist finds that observations don't match theory, and this is repeated enough times to be sure that the observations aren't in error, she knows that the theory must be modified or discarded. Economists, on the other hand, typically close their eyes or attack the human beings for behaving "irrationally" (to an economist, "rational" behavior is behavior that agrees with economic theory, in which people seek to maximize value as an economist computes it).

Which is to say that if you want someone to do your taxes and not have the IRS calling, stick with an economist.
Posted by: brodix on December 4, 2006 at 12:35 PM | PERMALINK

Screw that noise. Give me a tax accountant.
An economist can't help me with that.

When I need something to blow some hot air, I'll switch on my air compressor.

Joel, point-estimates and confidence intervals are both valid ways to describe beliefs. You say "I am sure that there are also economists who would claim that their personal 95% confidence interval does not consist entirely of negative numbers"; I'd like to hear from such a person.

Given the level of hostility displayed here to economics, both absolutely and relative to physics, it would be very surprising if reporters did not treat economics claims very skeptically, and physics claims less so.

Isn't it strange? The same people who laugh at gypsy fortune-tellers take economists seriously.

Economics is now presented as though it were a hard science, like physics. Since it really does not account for human factors, except by means of incredible gyrations, economics has become an exchange of "he said-she said" to the general public.

And the economists that appear on TV simply seem to be finding excuses for why the learned predictions of yesterday never actually pan out.

otto wrote: "The other is the widespread opinion of professional economists. Of the latter group, I've read surveys which say that around 90% or more believe that increases in the minimum wage cause unemployment."

It's closer to 60% in recent surveys, if I recall correctly. It's been declining for several years now. Moreover, the question on the survey I saw was so vaguely worded that it was impossible to draw any significant conclusions.

I'd say there is a massive difference in the meaning to policy analysis of the questions:

Do minimum wages in general decrease employment by any amount, no matter how small?

and:

Do minimum wages as commonly implemented in developed nations and as proposed by the incoming US Democratic congress cause population-welfare significant employment decreases relative to the increased income they provide to low wage workers?

I suspect most economists would answer yes to the first question, and no to the second.

I beleive that reporters lazily tend to ask the first question when they mean the second, and reasonable economists (eg not right wing pundits) tend to answer the second question out of frustration of constantly being asked the wrong question.

I don't know which side of ignorance is more represented here -- ignorance about science or ignorance about economics. Let's consider one little bit about science to start with. Some physical constants have been measured to a precision of many decimal points. It is of interest whether the charge on the proton is exactly equal to the charge on the electron, and whether the speed of light varies, and so on, and ingenious researchers figured out ways to make their measurements more and more precise. But in everyday laboratory research, the results are much less precise for lots of reasons -- for one thing, you are just starting on a line of inquiry; for another, it may not be important to know some value to better than a factor of two, or perhaps ten percent. For another, your experimental capabilities may only be good to ten percent, or even two-hundred percent.

In everyday biochemistry, there are some measurements that can be very precise (weighing a sample, measuring the thickness of a microscopic section, finding the wavelength of maximum absorption, etc) and other measurements that are not so precise. For example, the binding coefficient of a hormone for its cell-surface receptor is determined using experimental variables that change over several orders of magnitude, and it is not uncommon for different labs to publish measurements that vary by a factor of two or more, and not unusual to find factors of five or so. That doesn't make these findings any less scientific, nor their practitioners less the scientist; it merely indicates that the practice of science involves experimental limitations just as it may involve theoretical limitations at any one time.

By the way, Newton spent a great deal of time analyzing and then predicting the movements of celestial bodies, thereby creating a framework by which later people could calculate and predict the observed movements of stars and planets through the sky. There is no evidence that Newton worked experimentally by changing the orbit of the moon, yet some of the postings here would, in effect, downgrade Newton's contribution as "unscientific" on this basis.

And finally, economics. Most of the limitations of economics discussed in various postings are or were suffered by astronomy and biochemistry to some extent at some time. There are practical limitations on doing experiments in the real world, yet they are done. The interest rate is varied, government spending is increased, etc, and data are accumulated. Yes, it is difficult to control variables quite so well as I can on the lab bench, but governments intervene and data are collected. One observation is that post-Keynes, the kind of crippling depression that paralyzed the U.S. and led to another world war in Europe has been avoided. The comparative affluence and stability of post-WWII economies correlates with various measures, and in particular with measures and techniques specified by Keynes. What seems to drive critics nuts is the inability of current techniques to promise steady growth without difficulty for ever and ever. Biochemistry can't help all of you lose weight without hunger or other side effects either, and it is still a science.

And finally, as several posters have mentioned, economics works in areas that involve moral questions, such as whether it is better to raise the wages of ten or twenty percent of the population while risking the loss of jobs by half a percent. This is a value judgement; the value of having a science of economics is that it can provide some guidance in terms of the parameters: We can be fairly certain that the proposed increase in the minimum wage will not result in immediate mass unemployment (whereas we could be fairly sure that some techniques government used to use might very well do so, as our experience of the 1930s demonstrated). One last point: right wing pundits such as Larry Elder like to say that something (like the minimum wage increase) is "just econ 101." As another pundit pointed out recently, econ 101 is generally a very oversimplified treatment in which wages are treated like other variables such as the cost of wheat vs barley, but econ 102 treats such questions at a more sophisticated level. Too bad Elder didn't take a few more classes.

"I realize it is uncomfortable to have to acknowledge that some are unemployed because of minimum wages, but it is far better to simply acknowledge this and start making argument for why minimum wage increases are still desirable despite this uncomfortable truth.

Posted by: Yancey Ward on December 4, 2006 at 11:42 AM"

Gee, we accept that 'free trade' causes job loss to individuals and we tell those individuals to get job training on their own nickle. We accept that outsourcing causes job loss, but we chalk it up to creative distruction and the invisible hand of the market. We accept that early retirement, union busting and benefit rollbacks are all part of America's need to stay competitive. We swallow huge dispalcements in the social fabric that benefit corporations but we quibble about a raise in wages that helps 99 people because one might lose a job.

Amazing how all of the same folks that told us to buck up and get some training when we lost good paying jobs are the same ones concerned about that one guy that becomes unemployed because of an increase in the minimum wage. Why is it I don't believe them?

kevin,

It's and entirely results based prejudice, and well deserved. Physicists make billion dollar requests and several years later produce CERN or some other such supercolider and then do lots of experiments and publish the results. Economists make billion dollar requests to help places like Russia and then several years later we see massive corruption which leads to the rise of Putin. Or in Boivia and Argentina we see people rioting for water or rioting for decent salaries.

If a physicist got millions or billions of dollars for elaborate experiments that then exploded into colossal messes, and the people responsible continued to have successful careers, physics would be looked at as the joke science that economics is.

Case in point Paul Krugman-advocating sensible policy for 6 years on many things an he is REVILED by fellow professional were as Paul Wolfowitz one of the architects of the current foreign policy disaster is now running the world bank. It's like asking why Noam Chomsky is more respected than Rush Limbaugh.

ex-liberal wrote: "A few years ago, a single study in the fast food industry gave an indication that minimum wage increase doesn't increase unemployment."

This is false. There have been numerous studies.

"According to critics, this was not a strong study, technically."

This is also false. You're talking about the Card-Krueger study of data from New Jersey after that state raised its minimum wage. Their analysis showed no effect on jobs from the raising of the minimum wage. The study was challenged by Neumark and Wascher, whose initial follow-up study reached the opposite conclusion. Card and Krueger were also criticized for their methodology in obtaining their data.

Case closed, right? Not quite. The Neumark-Wascher study was flawed because it depended on information from the fast food industry, an industry that was hardly unbiased in this matter. Card and Krueger also defended their methodologies, but ultimately decided that their time would be better spent in performing a study that answered their critics' objections.

So several years later, Card and Krueger published an update. This time, they had federal minimum wage data to include in their study since the federal minimum wage had been increased, an increase that affected Pennsylvania but not New Jersey. Using standard federal data this time, they reached the same conclusion, that there was no evidence that raising the minimum wage causes unemployment to rise in the sector most likely to be affected by that wage hike.

Card and Krueiger also reviewed the initial Neumark-Wascher study and found that the differences between that study and both the Card-Krueger studies came from a "small set of restaurants owned by a single franchisee." Removing that skewed data from Neumark-Wascher, they found agreement with their own studies.

Case closed, right? Not yet. Neumark and Wascher did a new study, this time using data not acquired directly from the industry, and this study found that there had been no statistical effect on employment as a result of the minimum wage hike.

Case closed.

patience: If a physicist got millions or billions of dollars for elaborate experiments that then exploded into colossal messes, and the people responsible continued to have successful careers, physics would be looked at as the joke science that economics is.

Being an economist means never having to say you were wrong - it was exogenous events.

Nat wrote: Minimum wages have literally been raised thousands of time in this country, affecting hundreds of millions of people. Theory says they should have had a negative effect on employment, but from what I have read the negative effects are, at best, extremely small, and often non-existent.

The black teen-age unemployment rate as of July was 31.6%. Minimum wage rates prevent significant numbers of poor blacks from getting a toe hold in the workforce.

When I was a liberal, we opposed measures that would hurt poor black people.

"Case closed."

Sorry, I should have been more precise. This is "case closed" only with respect to the criticism of the original Card-Krueger study, not "case closed" with respect to the entire debate about minimum wages.

ex-liberal wrote: "Minimum wage rates prevent significant numbers of poor blacks from getting a toe hold in the workforce."

Really? Then you should have no problem providing the evidence to support this assertion, right?

"When I was a liberal, we opposed measures that would hurt poor black people."

Well, personally I oppose bullshit arguments that are a) unsupported and b) classic logical fallacies. Have those changed since you were a "liberal," too?

ex-liberal on December 4, 2006 at 2:11 PM:

The black teen-age unemployment rate as of July was 31.6%.

Citeless, but I'll buy that. However, you haven't made any correlation between that stat and your next statement, ex-liberal:

Minimum wage rates prevent significant numbers of poor blacks from getting a toe hold in the workforce.

Cite? No?

Here's some for you then:

There is no evidence of job loss from the last minimum wage increase.

- A 1998 EPI study failed to find any systematic, significant job loss associated with the 1996-97 minimum wage increase. In fact, following the most recent increase in the minimum wage in 1996-97, the low-wage labor market performed better than it had in decades (e.g., lower unemployment rates, increased average hourly wages, increased family income, decreased poverty rates).

- Studies of the 1990-91 federal minimum wage increase, as well as studies by David Card and Alan Krueger of several state minimum wage increases, also found no measurable negative impact on employment.

- New economic models that look specifically at low-wage labor markets help explain why there is little evidence of job loss associated with minimum wage increases. These models recognize that employers may be able to absorb some of the costs of a wage increase through higher productivity, lower recruiting and training costs, decreased absenteeism, and increased worker morale.

- A recent Fiscal Policy Institute (FPI) study of state minimum wages found no evidence of negative employment effects on small businesses.

Much more at the link...Including that "$5.15 today is the equivalent of only $3.95 in 1995 — lower than the $4.25 minimum wage level before the 1996-97 increase."

When I was a liberal, we opposed measures that would hurt poor black people.

Yeah, you probably practiced more intellectual honesty back then as well.

Apologies for the off-topic post, but ex-lib's rhetoric isn't supported by evidence.

Paul B,

The way to close the debate is to simply and immediately triple the minimum wage on a trial basis. Then we can observe effects that can be differentiated from the normal cycles of the labor market.

Yancey Ward wrote: "The way to close the debate is to simply and immediately triple the minimum wage on a trial basis. Then we can observe effects that can be differentiated from the normal cycles of the labor market."

Since that will never happen, the debate will likely continue indefinitely. That raising the minimum wage has some effect on unemployment is undeniable. How much of an effect, and what other ripple effects there might be, is very much open to debate.

We may soon have more data, since Congressional Democrats have said that this is one of their priorities and it is very popular with the American people. It will be interesting to see if Bush vetoes it.

Considering how many states have higher minimum wages than the federal wage, this debate should be more advanced than it is. One has to wonder why there have not been more studies.

Yancey Ward: The way to close the debate is to simply and immediately triple the minimum wage on a trial basis.

Similarly, there are many useful pharmaceuticals that, if administered in 3x the recommended dose, can kill the patient. Heck, you can kill people by overdosing them with water. Does that mean I should stop drinking it, or would it be safer to assume the effect is non-linear?

grape_crush wrote: "Citeless, but I'll buy that."

The statistic is correct, although it's lower now. For the full breakdown, including more recent numbers, see this table.

Given the level of hostility displayed here to economics, both absolutely and relative to physics, it would be very surprising if reporters did not treat economics claims very skeptically, and physics claims less so.

Robin, Try some economics with less of the human element involved. Say oil economics in the face of severe and increasing resource constraints. No one is talking about that, except Kevin and a few others.

I started out at Stanford as an econ major, decided it was all bullshit and went to physics instead. Why? Economics actually probably does have some place in academia. But the first problem is though that there are so many confounding variables making its questionable economic assumptions and models very hard to verify (and yet they are still held in high esteem!)

This wouldn't be bad necessarily in itself; lots of sciences have to deal with complex cause-effect relationships. The bigger problem is that economic theories have immediate and direct political implications, and as a result you get hordes of people and funds working only to justify an already held ideology instead of arguing purely in the pursuit of scientific knowledge and willing to admit error. Hence you get people dishonestly suggesting stuff like "triple the minimum wage" to perform a verifiable experiment, even though that's analogous in the physics world to measuring a macroscopic sphere's velocity and position at the same time and declaring quantum mechanics invalid.

By the way, it's true that yes, economics has to deal with more variables. That doesn't mean it deserves more respect; it only deserves respect if it handles them realistically and scientifically. Just because coming up with a very finessed model takes lots of time and effort doesn't mean that the person who made it is at all a scientist. Next you'll have people who make intricate origami as a hobby demanding respect for their science in the academy. (Though incidentally I did read an interesting paper on group theory in origami a long while back. But that's slightly different from what I mean