Wednesday, November 16, 2011

QUOTE OF THE DAY: Nobel Prize winner on minimum wage increases [updated]

_Quote4The inverse relationship between quantity demanded and price is the core
proposition in economic science, which embodies the presupposition that human
choice behavior is sufficiently rational to allow predictions to be made. Just as
no physicist would claim that "water runs uphill," no self-respecting economist
would claim that increases in the minimum wage increase employment.
Such a claim, if seriously advanced, becomes equivalent to a denial that there is
even minimal scientific content in economics, and that, in consequence, economists
can do nothing but write as advocates for ideological interests. Fortunately, only a
handful of economists are willing to throw over the teaching of two centuries; we
have not yet become a bevy of camp-following whores.”

                          - Nobel Prize winner James Buchanan

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3 Comments:

Anonymous Phil Sage said...

Whilst agreeing completely with the spirit of the comment, to be pedantic, recent advances in behavioural economics suggest that some perceived luxury goods will in fact sell more when at a higher price.

Somewhere in the distortions that have beneficiaries paid more than minimum wage once accommodation etc costs are built in there is a decent argument that increases in minimum wage will sufficiently reduce the disincentive to work that the quality of workers available at the minimum wage will increase and encourage employers to take on more staff.

That does not rebut the point of the argument, it just suggests that in this fucked up world we could increase both minimum wage and employment.

11/18/2011 07:10:00 am  
Blogger Shane Pleasance said...

I posit that government interference in employment matters is political, and has no basis in economics.

11/18/2011 07:49:00 am  
Anonymous Anonymous said...

The problem isn't the minimum wage - it's just that we need to get rid of both the minimum wage and the benefits that give an artificial floor to wages.

NZ's workers are still highly overpriced compared with Australia - let along China: any serious attempt to reform NZ's economy must detail with this urgently.

11/18/2011 08:36:00 am  

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