Wednesday, 2 June 2010

A simple point from a master writer

Donald Boudreaux’s letters to the editor are small masterpieces of economic proselytisation--like Bastiat in miniature. Here’s his latest to the New York Times (pinched from Cafe Hayek):

Dear Editor:

Suppose Uncle Sam orders you to raise by 41 percent the price you charge for subscriptions to your newspaper.  Would you be surprised to find a subsequent fall in the number of subscribers?  If you assigned a reporter to investigate the reasons for this decline in subscriptions, would you be impressed if that reporter files a story offering several possible explanations for the fall in subscriptions without, however, once mentioning the mandated 41 percent price hike?

Unless you answered “yes” to this last question, I wonder why you published Mickey Meece’s report on today’s record high teenage unemployment rate (“Job Outlook for Teenagers Worsens,” June 1).  Between 2007 and 2009, Uncle Sam ordered teenage workers (who are mostly unskilled) to raise the price they charge for their labor services by 41 percent.  (That is, the federal minimum-wage rose from $5.15 per hour in 2007 to its current level of $7.25 in 2009 – a 41 percent increase.)

Does it not strike you as more than passing strange for your reporter – assigned to help explain why teenagers today have an increasingly difficult time finding jobs – to ignore the fact that these teenagers are ordered by government to raise significantly the wages that they charge their employers?

Donald J. Boudreaux

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Anonymous Mark Hubbard said...

Yes, he's a great writer: I always look for his letters.

2 Jun 2010, 11:24:00  
Blogger twr said...

I guess it comes down to a difference of opinion on whether labour is a fungible commodity or not. The lefties obviously believe it isn't, but then again most of them have never had proper jobs so have little real world experience on which to base their opinions.

2 Jun 2010, 11:31:00  
Anonymous Falafulu Fisi said...

I pointed out to Darien Fenton on her blog post, Child workers in NZ – what to do? at RedAlert about Eric Crampton's series of articles on:

Minimum Wages

and Darien's reply to me was:

@Falafulu Fisi – I might have been more encouraged to read those right wing links if you hadn’t added the last bit about “twisted ideology”. I could give you as much research that argues the other way.

Very funny, that she didn't cite one single economic peer review publication that supports her views. I suspect that she has nothing. Perhaps she meant that she may have read an opinion somewhere on the internet or a newspaper article, etc, but internet/newspaper opinion is not peer review.

Eric also made a comment on that same blog post, but still Darien hasn't managed to cite her so called researches which argue the other way.

2 Jun 2010, 11:34:00  
Anonymous the drunken watchman said...

what does "fungible" mean?

2 Jun 2010, 13:18:00  
Anonymous the drunken watchman said...

I've always thought how wierd it is, in a 3rd world country, you pay the going rate directly to a maid to look after your kids to allow you to earn more.

In the 1st world, you go without the maid because you can't afford her due to the minimum wage laws, thereby forced to work less to earn more to pay the tax to pay the unemployment benefit to the otherwise would-have-been maid to sit on her bum.

Wierd, eh?

2 Jun 2010, 13:38:00  
Anonymous the drunken watchman said...

...and of course the girl on the "unemployment benefit" ends up with less than had she worked for you

2 Jun 2010, 14:31:00  
Blogger twr said...

It's essentially whether the good or service is replaceable with something else. So, if you like Mars bars, and the price triples, you can probably switch to Moros, because it's a fungible commodity. However if you have some rare disease, and there is only one drug that will keep you alive, that's not fungible, therefore if the price doubles you can't swap it out and have to keep buying it.

Labour is somewhere in between, and exactly where varies depending on the job. The lower paid ones tend to be more fungible. There is an anomaly whereby politcians are very fungible, but the salary is still high. Wonder why that is...

2 Jun 2010, 15:26:00  
Anonymous James said...

For those who don't have it heres a great link to 50 years of reaserch on the minimum wage...suck on that Fenton.

2 Jun 2010, 15:50:00  
Anonymous the drunken watchman said...


the fungibility of politicians ... and lawyers?

thanks for the definition, good word, I like it

2 Jun 2010, 15:57:00  
Anonymous Richard McGrath said...

@tdw said: what does "fungible" mean"?

I think it's something to do with athlete's foot.

2 Jun 2010, 18:06:00  
Blogger Mark said...

Yes, it's a great writer that can make his point so simply, and so convincingly.

3 Jun 2010, 09:25:00  

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