Economics

"Democrats have lost their minds over the minimum wage"

Nice, brief answers to some of the strange claims recently advanced in favor of a higher minimum wage: minimum wage hikes will lead to productivity-boosting automation, minimum wage hikes helps firms make more money, and two others.

See also "The Left Lets the Veil Drop".

And of course, there's this: "California Labor Union That Fought for $15 Minimum Wage Now Wants an Exemption" and "The Minimum Wage Con".


"The Truth about Trade"

A fine article. Among the excellent points it makes is this one:

. . . there remains no evidence that imports are the primary driver of U.S. manufacturing-job losses, or that the U.S. manufacturing sector is actually in decline. In fact, American manufacturers began slowly and steadily shedding workers as a share of the U.S. work force in the late 1940s and in sheer numerical terms in 1979 — long before the North American Free Trade Agreement existed or Chinese imports were more than a rounding error in U.S. GDP. By contrast, the United States has gained about 54 million jobs since 1980, 30-plus million of which came after the creation of NAFTA and the World Trade Organization in the mid 1990s.

That point is echoed in "What the Presidential Candidates Get Wrong About Free Trade".

Neither trade agreements nor trade caused Rochester’s huge job losses. It was advances in technology, something no one can stop. But technology is the answer as well as the challenge. Investing in both education and research and development is the best hope to save the cities like Rochester, and it has made a lot of progress—creating a new economy around 22 colleges and universities that can and is bringing jobs back.

(See also "The Myth of Middle-Class Job Loss" by Stephen J. Rose. He worked for the Progressive Policy Institute and as an adviser to Robert Reich. Neither is known to be a member of the Vast Right-Wing Conspiracy.)

But perhaps a more important point, a point deserving far greater emphasis than it currently gets, is that in the long run, exports equal imports. So discouraging imports in the name of protecting jobs will discourage exports which will cost jobs. See, for example, "Exports Prop Up Local Economies" (5.5 years old but absolutely just as relevant today):

Columbus, population 40,000, is an export powerhouse thanks largely to diesel-engine maker Cummins Inc.,which has added 1,000 jobs there since 2003. Kingsport, population 44,000, is home toEastman Chemical Co., which is spending $1.3 billion to upgrade its sprawling chemical plant there on the strength of its global sales of plastics and fibers. And Waterloo, population 68,000, owes its healthy export economy to Deere & Co., which has announced its second major investment this year of its tractor plant there. . . . 

Foreign buyers are scouring the U.S. for everything from guitar strings and wine corks to used dump trucks and newsprint. The volume is so great that some inland trade hubs can't find enough metal shipping containers to load products headed overseas.

Or see "The great iPhone trade-off"::

A similar story seems to hold for jobs. Greg Linden, Jason Dedrick and Kenneth Kramer of the University of California, Irvine, look at the jobs created by the old faithful iPod. Their study reckons that the iPod accounted for almost 41,000 jobs worldwide in 2006, and only 30 of those were in manufacturing in the US. But the iPod supported more than 6,000 engineering or other professional jobs in the US – as well as almost 8,000 lower-paid jobs in the likes of retail and distribution. Linden and his colleagues reckon that US workers earned more than two-thirds of all the wages paid to workers in the iPod value chain.

It may well be that many US workers have been hurt by the forces of globalisation. But the iPhone and iPod show why the whole business is complex. Products that are made in China may actually be rewarding producers in Japan and California, and, of course, consumers across the world. It’s a curious paradox: the more pervasive globalisation becomes, the less we understand it by looking at trade statistics.


"Cultural Intelligence"

Arnold Kling:

Socialists and progressives who seek to remake society have typically claimed that their efforts have a scientific basis. Frequently, they accuse their conservative opponents of being anti-science. They dismiss the warnings of Burke, Hayek, and other conservative intellectuals who doubted the ability of the individual scientist-reformer to fully comprehend the social order he proposes to overthrow.

Ironically, there is a growing body of academic research that supports the conservative view of the social process. Thanks to work in a number of related fields, collected in some exceptionally important books published in just the past few years, it is becoming increasingly apparent that progress tends to arise from the evolution of decentralized trial-and-error processes more than from grand schemes launched by planners and revolutionaries.


"The Problem With Evidence-Based Policies"

A useful warning from an economist.

In economics, RCTs have been all the rage, especially in the field of international development, despite critiques by the Nobel laureate Angus Deaton, Lant Pritchett, andDani Rodrik, who have attacked the inflated claims of RCT’s proponents. One serious shortcoming is external validity. Lessons travel poorly: If an RCT finds out that giving micronutrients to children in Guatemala improves their learning, should you give micronutrients to Norwegian children?

Stuart Butler at Brookings supports the argument.

So does Dan Davies.

Related: "The politics of evidence-based policymaking".


"The Sock Queen of Alabama"

This is what the market is. This is what the market does.

Her parents were skeptical. They knew how hard it was to compete and how much money it would take to start a brand. They didn’t get the whole organic thing. Most of all, they didn’t want their oldest daughter to do something she’d soon regret or tire of.

“But it’s been everything except any of that,” her father said.

Her mother added: “She absolutely loves what she does. She’s on fire.”

I used to spend a few minutes in my MBA class talking about Fort Payne. Here's some good background. It provides an example of the proposition that in the long run, almost everyone wins from free trade. And here's an early 2011 look at Gina Locklear and her dad.