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Government Ruins the Dishwasher (Again) by Jeffrey A. Tucker

The regulatory assault on the dishwasher dates back at least a decade. For the most part, industry has gone along, perhaps grudgingly but also with a confidence that dishwashers would survive. Surely government rules wouldn’t finally make them useless.

But the latest regulatory push by the Department of Energy might have finally gone too far. The DoE says that loads of dishes can’t use more than 3.1 gallons. This amounts to a further intensification of “green” policies that are really just strategies to wreck the consumer experience.

The agency estimated that this would “save” 240 billion gallons of water over three decades. It would reduce energy consumption by 12 percent. It would save consumers $2 billion in utility bills.

But as with all such estimates, these projections have three critical problems.

First, saving money and resources is not always an absolute blessing if you have to give up the service for which the resources are used. Giving up indoor plumbing would certainly save water, just as banning the light bulb would save electricity. The purpose of resources is to use them to make our lives better.

Second, the price system is a far better guide to rational resource use than bureaucratic diktat. If the supply of water or electricity contracts, prices go up and consumers can make their own choices about how to respond. This is true with one proviso: There has to be a functioning market. This is not always true with public utilities.

Third, the bureaucrats rarely consider the possibility that people will respond to rationing by using resources in a different way. A low-flow toilet causes people to flush two and three times, a low-flow showerhead prompts people to take longer showers, and so on, with the end result of even more resource use.

What does breaking the dishwasher accomplish? It drives us back to filling sinks or just running water over dishes for 10 minutes until they are all clean, resulting in vastly more water use.

The Association of Home Appliance Manufacturers, which has quietly gone along with this nonsense all these years, has finally said no.

“At some point, they’re trying to squeeze blood from a stone that just doesn’t have any blood left in it,” said Rob McAver, the lead lobbyist.

The Association demonstrated to the regulators that the new standards do not clean the dishes. They further pointed out that this can only lead to more hand washing. The DoE now says it is revisiting the new standards to find a better solution.

All of this is rather preposterous, since dishwashers are already performing at a far lower level than they did decades ago. Even when I was growing up, they were getting better, not worse. You could put dirty dishes in, even with stuck-on egg and noodles, and they would come out perfectly clean.

I started noticing the change about five years ago. It was like one day to the next that the dishes started coming out with a gross-me-out film on the glasses. I thought it was my machine. So I bought a new one. The new one was even worse, and it broken within a year. Little by little, I started hand washing dishes first, just to make sure they are clean.

It turns out that this was happening all over the country. NPR actually discerned this trend and did a story about it. The actual source of the problem was not the machine or the user, but something that everyone had taken for granted for generations: the soap itself.

The issue here is phosphorous. The role of phosphorus in soap is critically important. It is not a cleaning agent itself but a natural chemical that unsticks the soap from fabrics and surfaces generally. You can easily see how this works by adding phosphorus to a sink full of suds. It attacks the soap and causes it to bundle up in tighter and heavier units, taking oil and dirt with it and pulling it down the drain. It is the thing that extracts the soap, making sure that it leaves surfaces.

Painters know that they absolutely must use phosphorous to prepare surfaces for painting. If they do not, they will be painting on a dirty, oily surface. This is why the only phosphorus you can now find at the hardware store is in the paint department (sold as Trisodium Phosphate). Otherwise, it is gone from all detergents that you use on clothes and dishes, which is a major reason why both fabrics and dishes are no longer as clean as they once were.

Why the war on phosphorous? It is also a fertilizer. When too much of it is dumped into rivers and lakes, algae growth takes over and kills off fish. The bulk of this comes from large-scale industrial farms in specific locations around the country. Regulators, however, took on the easy target of domestic soaps, and manufacturers faced pressure to remove it from their soaps.

Now it is impossible to get laundry or dish soap with phosphorous as part of the mix. If you want clean, you have to physically add your own by purchasing trisodium phosphate in the paint department and adding it to the mixture by hand.

Welcome to regulated America, where once fabulous consumer inventions like refrigerators, freezers, washing machines, and dishwashers have been reduced to a barely functioning state. The reasons are always the same: 1) phosphorous-free detergent, 2) a fetish with saving water, 3) weaker motors that use less electricity, 4) more tepid water due to low default settings on hot water heaters, and 5) reduced water pressure in general.

Put it all together and you have an array of products that no longer function in ways that make our lives better. There is an element of dystopia about this, especially given that these household appliances were first invented and widely deployed in postwar America. This was the country where women, in particular, first started to enjoy the “freedom from drudgery.” It was machines as much as ideology that began to enable women to cultivate professional lives outside the home.

No, we are not going to be forced back to washboards by the river anytime soon. But suddenly, the prospect of having to hand wash our dishes does indeed seem real. If the regulators really do get their way, functioning dishwashers could become like high-flow toilets: contraband to be snuck across borders and sold at a high black market prices.

It seems that the regulators can’t think of much to do these days besides ruining things we love.


Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World. Follow on Twitter and Like on Facebook.

New York Orders Fast-Food Workers Replaced With Robots, Kiosks, Mobile Apps by Daniel Bier

Well, they didn’t quite put it that way — the New York Times‘ headline read “New York panel recommends $15 minimum wage for fast-food workers” — but it amounts to the same thing.

A panel appointed by Gov. Andrew M. Cuomo recommended on Wednesday that the minimum wage be raised for employees of fast ­food chain restaurants throughout the state to $15 an hour over the next few years. Wages would be raised faster in New York City than in the rest of the state to account for the higher cost of living there.

The panel’s recommendations, which are expected to be put into effect by an order of the state’s acting commissioner of labor, represent a major triumph for the advocates who have rallied burger­ flippers and fry cooks to demand pay that covers their basic needs.

They argued that taxpayers were subsidizing the workforces of some multinational corporations, like McDonald’s, that were not paying enough to keep their workers from relying on food stamps and other welfare benefits.

The $15 wage would represent a raise of more than 70 percent for workers earning the state’s current minimum wage of $8.75 an hour. Advocates for low­ wage workers said they believed the mandate would quickly spur raises for employees in other industries across the state, and a jubilant Mr. Cuomo predicted that other states would follow his lead.

In other news, I ordered my lunch yesterday on my computer and picked it up from Panera Bread without ever talking to a person. Last night, I picked up a couple groceries and paid through the self-checkout lane. This morning, I ordered a latte on my Starbucks app, and it was waiting for me when I walked into the store. I’m thinking of going to a burger joint later, where I’ll tap out my order on a kiosk.

Of course, it’s not fair to blame the minimum wage exclusively for the increasingly widespread automation of service jobs. Ordering kiosks and mobile apps are becoming more popular as the technology becomes better, cheaper, and more popular. That will probably happen no matter what the price of labor is.

But the fact that the cost of not using technology — that is, an employee — is about to cost 70% more will give the entire New York fast-food industry a great big shove away from labor and towards machines. And since chain restaurants don’t just operate in New York, the investment in automation will spill into stores everywhere.

Who wins from this?

Unions and more experienced workers, at least in the short-run. Labor unions’ entire purpose is to push up wages for their members, which makes them more expensive and less attractive compared to non-union workers.

But if unions — like, say, the Service Employees International Union — can make all workers more expensive, it makes union labor look relatively better by comparison. They won’t have to compete against cheaper labor anymore (which is to say, less-skilled workers won’t be allowed to compete by underbidding them).

Why arbitrarily single out “fast food” for the hike?

First, it makes the fight politically easier because the unions only have to defeat one industry lobby, instead of every business that uses unskilled labor. Second, the SEIU, in particular, represents a lot of food workers and has for years been pushing to unionize the big fast-food chains.

Who loses?

First, businesses, especially those operating on thin margins. They’ll be staring at a 70% increase in labor costs, already typically one of the biggest expenses for restaurants.

Less experienced workers — especially unskilled immigrants and young people starting out in the job market — will also lose. Businesses will try to offset some of higher cost of labor by cutting hours or jobs, delaying or cancelling expansions, replacing labor with capital where they can, and replacing less skilled with more skilled workers where they can’t.

They’ll also try to raise prices to cover costs, so consumers lose, too — especially those who eat fast-food more often, have tighter budgets, and have food as a bigger share of their budgets: i.e., low and lower-middle income families.

The net effect this will be less employment, less production, and less consumption. The economy and especially less-advantaged people will be worse off for it.

Miscellaneous arguments:

  • CEO pay: The Times awkwardly shoehorns in the fact that McDonald’s chief executive made $7.5 million last year, presumably trying to suggest that he’s the reason its other 420,000 employees are paid so little. In case you’re wondering, redistributing his salary comes out to 5 cents per employee per day. And then McDonald’s has no CEO. Hurray?
  • Corporate Subsidy: The Times also uncritically repeats the incoherent claim that taxpayers are somehow “subsidizing” these “multinational corporations” because they don’t pay “enough to keep their workers from relying on food stamps and other welfare benefits.” This makes no sense at all.
  • No Big Deal: The economists who claim that raising the minimum wage won’t hurt employment that much always couch it with the caveat that the increase be “small” or “moderate.” By no stretch of the imagination is hiking the wage floor to $15 “moderate.” In New York, it’s a 70% increase; in states with the federal minimum of $7.25, it’s 107% increase.

Antony Davies has charted the relationship between the minimum wage as a share of the average wage and the unemployment rates for different workers over time.

There’s no connection between the minimum wage and unemployment for the college-educated, but for those with high school or less, there’s a strong positive correlation:

Notice that the chart axis stops at 45% of the average hourly wage: in more than three decades, the minimum wage has never gone higher. Today, according to BLS data, a $15 minimum wage would be 60% of the average hourly wage — the highest relative minimum wage ever. We are literally going into uncharted territory.

Daniel Bier

Daniel Bier is the editor of Anything Peaceful. He writes on issues relating to science, civil liberties, and economic freedom.

Is Michelle Obama a Brilliant Experimental Economist? by B.K. Marcus

A consensus is emerging among advocates of personal freedom and economic literacy that the Healthy, Hunger-Free Kids Act, passed in 2010 with the support of Michelle Obama, is a typical failure of the nanny state.

Reason’s Robby Soave writes, “Like so many other clumsy government attempts to make people healthier by forbidding the consumption of things they like, the initiative is a costly failure.”

But I’d rather imagine the first lady is conducting a sophisticated empirical test of economic theory. All she needs are a few more interventions to correct the “unintended consequences” of the 2010 law, and we’ll be swimming in data.

As Ludwig von Mises explained in “Middle-of-the-Road Policy Leads to Socialism,” each round of intervention into voluntary exchange leads to consequences the interventionists find undesirable. Over and over, the officials are confronted with a choice: undo the initial intervention or initiate the next round of laws and regulations in an attempt to undo the effects of the previous round. Rinse, lather, repeat.

Testifying before the House Subcommittee on Early Childhood, Elementary, and Secondary Education, school administrator John S. Payne from Hartford City, Indiana, told Congress about some of the supposedly unintended consequences in evidence at his area’s public schools.

“Perhaps the most colorful example in my district is that students have been caught bringing — and even selling — salt, pepper, and sugar in school to add taste to perceived bland and tasteless cafeteria food.”

“This ‘contraband’ economy,” says Payne, “is just one example of many that reinforce the call for flexibility” on the part of local government officials.

While laissez-faire liberals may call for the scrapping of government-managed school lunches altogether, and federalists might join Payne in advocating the efficacy of decentralized, local authority over dietary central planning from Washington, DC, those who care more about economic science than nutrition or freedom should look forward to the next several rounds of loophole-closing, ratcheting coercion, and other adjustments needed to isolate students from their remaining lunchtime alternatives.

Currently, according to Payne, some of the parents in his district are signing their children out in the middle of the school day and taking them out for a quick fast-food meal. Those without the option of escape simply choose to eat less during the day. “Whole-grain items and most of the broccoli end up in the trash,” Payne told the subcommittee.

While exit and abstention are of some interest to economic theorists, the real intellectual treat is in seeing what happens when an isolated and otherwise powerless community is reduced to black markets and barter.

In “The Economic Organisation of a POW Camp” in the November 1945 issue of Economica, former prisoner of war R.A. Radford described the economic laboratory of German prison camps:

POW camp provides a living example of a simple economy which might be used as an alternative to the Robinson Crusoe economy beloved by the text-books, and its simplicity renders the demonstration of certain economic hypotheses both amusing and instructive.

In Radford’s camp, everyone received the same rations from both the prison and the Red Cross. Some prisoners also received private parcels, but these were less reliable. At first, barter exchange among the prisoners made them all subjectively better off: the lactose-intolerant smoker will feel richer from trading his tinned milk for the nonsmoker’s cigarettes.

While those who weren’t hooked on tobacco were at first happy to trade their extra smokes for more appealing products, over time, “cigarettes rose from the status of a normal commodity to that of currency.”

This means that all goods could be exchanged directly for cigarettes. There was no longer any need to find another prisoner who both (1) had a surplus of exactly what you needed and (2) wanted just what you had in excess. Everything took on a “price” in cigarettes, eventually listed on “an Exchange and Mart notice board in every bungalow, where under the headings ‘name,’ ‘room number,’ ‘wanted’ and ‘offered’ sales and wants were advertised.”

The public and semi-permanent records of transactions led to cigarette prices being well known and thus tending to equality throughout the camp, although there were always opportunities for an astute trader to make a profit from arbitrage.

Cigarettes were the best money in the context of a POW camp. A good commodity money is valuable, countable, and fungible — divisible in such a way that it retains proportional value. A half an ounce of gold, for example, is worth about half the value of a full ounce of gold. Cutting a diamond in half is not only difficult; it could render two smaller stones whose combined value is far lower than the one you began with.

Cigarettes are somewhere in between gold and diamonds: a single cigarette isn’t as easily divisible, but a half carton probably trades for half the value of a full carton. And the cigarette itself plays the same role with its tobacco contents as coinage does with precious metals: it establishes a countable unit that makes trade more convenient and prices easier to establish and track. And in a POW camp, where the supply is limited and relatively predictable, price inflation isn’t a problem.

Today’s Hartford City schools have not yet developed the economic sophistication of Radford’s German stalag. Students smuggle in packets of salt, pepper, and sugar, and trade them directly for consumption. But if a few more rounds of intervention can reduce students’ lunch options, we can expect to see a new medium of exchange emerge. I’m betting on salt, which already has a long history as commodity money throughout the ancient world.

But if the nanny-state nutritionists are forced to back off and allow either more flexibility or more freedom, we will lose an excellent opportunity to study the evolution of basic monetary economics in a controlled setting.

Won’t someone please think of the science?

B.K. Marcus

B.K. Marcus is managing editor of the Freeman.

Hillary Staffers Can’t Afford New York’s Government-Controlled Housing Market by David Boaz

The New York Times reports:

For decades, idealistic twenty-somethings have shunned higher-paying and more permanent jobs for the altruism and adrenaline rush of working to get a candidate to the White House. But the staffers who have signed up for the Clinton campaign face a daunting obstacle: the New York City real estate market….

Mrs. Clinton’s campaign prides itself on living on the cheap and keeping salaries low, which is good for its own bottom line, but difficult for those who need to pay New York City rents….

When the campaign’s finance director, Dennis Cheng, reached out to New York donors [to put up staffers in their apartments], some of them seemed concerned with the prospective maze of campaign finance laws and with how providing upscale housing in New York City might be interpreted.

Here are some words that don’t appear in the article: rent control, regulation, zoning.

But those are among the reasons that housing is expensive in New York. As a Manhattan Institute report noted in 2002:

New York City and State have instituted policies that severely distort the dynamics of housing supply and demand. Only 30 percent of the city’s rental units, for instance, are subject to market prices.

These distortions — coupled with Rube-Goldbergian environmental and zoning regulations — have denied New York the kind of healthy housing market enjoyed by most other major cities.

And a report by Edward Glaeser and Joseph Gyourko for the Federal Reserve Board of New York Economic Policy Review suggests that “homes are expensive in high-cost areas primarily because of government regulation” that imposes “artificial limits on construction.”

As I’ve said in other contexts: This is the business you have chosen. If you want the government to control rents and impose regulatory costs on the building of housing, then you can expect to see less housing and thus more expensive housing. Welcome to your world, Hillary Clinton staffers.

This post first appeared at Cato.org.

Related: Jim Epstein notes that fully one third of Manhattan, and 33,000 buildings and 114 entire districts across the city, are “encased in a life-sized historical diorama,” unable to be modified or demolished thanks to the city’s “landmark preservation” law.


David Boaz

David Boaz is executive vice president of the Cato Institute. He is the editor of The Libertarian Reader, editor of The Cato Handbook for Policymakers, and author of The Politics of Freedom.

Driverless Money by George Selgin

Last week I was contemplating a post having to do with driverless cars when, wouldn’t you know it, I received word that the Bank of England had just started a new blog called Bank Underground, and the first substantive post on it had to do with — you guessed it — driverless cars.

As it turned out, I needn’t have worried that Bank Underground had stolen my fire. The post, you see, was written by some employees in the Bank of England’s General Insurance Supervision Division, whose concern was that driverless cars might be bad news for the insurance industry.

The problem, as the Bank of England’s experts see it, is that cars like the ones that Google plans to introduce in 2020 are much better drivers than we humans happen to be — so much better, according to research cited in the post, that “the entire basis of motor insurance, which mainly exists because people crash, could … be upended.”

Driverless cars, therefore, threaten to “wipe out traditional motor insurance.”

It is, of course, a great relief to know that the Bank of England’s experts are keeping a sharp eye out for such threats to the insurance industry. (I suppose they must be working as we speak on some plan for addressing the dire possibility — let us hope it never comes to this — that cancer and other diseases will eventually be eradicated.)

But my own interest in driverless cars is rather different. So far as I’m concerned, the advent of such cars should have us all wondering, not about the future of the insurance industry, but about the future of…the Bank of England, or rather of it and all other central banks.

If driverless cars can upend “the entire basis of motor insurance,” then surely, I should think, an automatic or “driverless” monetary system ought to be capable of upending “the entire basis of monetary policy,” as such policy is presently conducted.

And that, so far as I’m concerned, would be a jolly good thing.

Am I drifting into science fiction? Let’s put matters in perspective. Although experiments involving driverless or “autonomous” cars have been going on for decades, until as recently as one decade ago, the suggestion that such cars would soon be, not only safe enough to replace conventional ones, but far safer, would have struck many people as fantastic.

Consider for a moment the vast array of contingencies such a vehicle must be capable of taking into account in order to avoid accidents and get passengers to some desired destination. Besides having to determine correct routes, follow their many twists and turns, obey traffic signals, and parallel park, they have to be capable of evading all sorts of unpredictable hazards, including other errant vehicles, not to mention jaywalkers and such.

The relevant variables are, in fact, innumerable. Yet using a combination of devices tech wizards have managed to overcome almost every hurdle, and will soon have overcome the few that remain.

All of this would be impressive enough even if human beings were excellent drivers. In fact, they are often very poor drivers indeed, which means that driverless cars are capable, not only of being just as good, but of being far better —  90 percent better, to be precise, since that’s the percentage of all car accidents attributable to human error.

Human beings are bad drivers for all sorts of reasons. They have to perform other tasks that take their mind off the road; their vision is sometimes impaired; they misjudge their own driving capabilities or the workings of their machines; some are sometimes inclined to show off, while others are dangerously timid. Occasionally, instead of relying on their wits, they drive “under the influence.”

Central bankers, being human, suffer from similar human foibles. They are distracted by the back-seat ululations of commercial bankers, exporters, finance ministers, and union leaders, among others. Their vision is at the same time both cloudy and subject to myopia.

Finally, few if any are able to escape altogether the disorienting influence of politics. The history of central banking is, by and large, a history of accidents, if not of tragic accidents, stemming from these and other sorts of human error.

It should not be so difficult, then, to imagine that a “driverless” monetary system might spare humanity such accidents, by guiding monetary policy more responsibly than human beings are capable of doing.

How complicated a challenge is this? Is it really more complicated than that involved in, say, driving from San Francisco to New York? Central bankers themselves like to think so, of course — just as most of us still like to believe that we are better drivers than any computer.

But let’s be reasonable. At bottom central bankers, in their monetary policy deliberations, have to make a decision concerning one thing, and one thing only: should they acquire or sell assets, and how many, or should they do neither?

Unlike a car, which has numerous controls — a steering wheel, signal lights, brakes, and an accelerator — a central bank has basically one, consisting of the instrument with which it adjusts the rate at which assets flow into or out of its balance sheet. Pretty simple.

And the flow itself? Here, to be sure, things get more complicated. What “target” should the central bank have in mind in determining the flow? Should it consist of a single variable, like the inflation rate, or of two or more variables, like inflation and unemployment? But the apparent complexity is, in my humble opinion, a result of confusion on monetary economists’ part, rather than of any genuine trade-offs central bankers face.

As Scott Sumner has been indefatigably arguing for some years now (and as I myself have long maintained), sound monetary policy isn’t a matter of having either a constant rate of inflation or any particular level of either employment or real output. It’s a matter of securing a stable flow of spending, or Nominal GNP, while leaving it to the marketplace to determine how that flow breaks down into separate real output and inflation-rate components.

Scott would have NGDP grow at an annual rate of 4-5 percent; I would be more comfortable with a rate of 2-3 percent. But this number is far less important to the achievement of macroeconomic stability than a commitment to keeping the rate — whatever it happens to be — stable and, therefore, predictable.

So: one goal, and one control. That’s much simpler than driving from San Francisco to New York. Heck, it’s simpler than managing the twists and turns of San Franscisco’s Lombard Street.

And the technology? In principle, one could program a computer to manage the necessary asset purchases or sales. That idea itself is an old one, Milton Friedman having contemplated it almost forty years ago, when computers were still relatively rare.

What Friedman could not have imagined then was a protocol like the one that controls the supply of bitcoins, which has the distinct advantage of being, not only automatic, but tamper-proof: once set going, no-one can easily alter it. The advantage of a bitcoin-style driverless monetary system is that it is, not only capable of steering itself, but incapable of being hijacked.

The bitcoin protocol itself allows the stock of bitcoins to grow at a predetermined and ever-diminishing rate, so that the stock of bitcoins will cease to grow as it approaches a limit of 21 million coins.

But all sorts of protocols may be possible, including ones that would adjust a currency’s supply growth according to its velocity — that is, the rate at which the currency is being spent — so as to maintain a steady flow of spending, à la Sumner. The growth rate could even be made to depend on market-based indicators of the likely future value of NGDP.

This isn’t to say that there aren’t any challenges yet to be overcome in designing a reliable “driverless money.” For one thing, the monetary system as a whole has to be functioning properly: just as a driverless car won’t work if the steering linkage is broken, a driverless monetary system won’t work if it’s so badly tuned that banks end up just sitting on any fresh reserves that come their way.

My point is rather that there’s no good reason for supposing that such challenges are any more insuperable than those against which the designers of driverless cars have prevailed. If driverless car technology has managed to take on San Francisco’s Lombard Street, I see no reason why driverless money technology couldn’t eventually tackle London’s.

What’s more, there is every reason to believe that driverless money would, if given a chance, prove to be far more beneficial to mankind than driverless cars ever will.

For although bad drivers cause plenty of accidents, none has yet managed to wreck an entire economy, as reckless central bankers have sometimes done. If driverless monetary systems merely served to avoid the worst macroeconomic pileups, that alone would be reason enough to favor them.

But they can surely do much better than that. Who knows: perhaps the day will come when, thanks to improvements in driverless monetary technology, central bankers will find themselves with nothing better to do than worry about the future of the hedge fund industry.

Cross-posted from Alt-M.org and Cato.org.

George Selgin

LA Unions Demand Exemption from $15 Minimum Wage They Created by Daniel Bier

If there was ever any doubt that LA’s minimum wage hike was meant to help the labor unions at the expense of everyone else, I hope we can now put that idea to bed.

The LA Times reports,

Labor leaders, who were among the strongest supporters of the citywide minimum wage increase approved last week by the Los Angeles City Council, are advocating last-minute changes to the law that could create an exemption for companies with unionized workforces. . . .

Rusty Hicks, who heads the county Federation of Labor and helps lead the Raise the Wage coalition, said Tuesday night that companies with workers represented by unions should have leeway to negotiate a wage below that mandated by the law.

“With a collective bargaining agreement, a business owner and the employees negotiate an agreement that works for them both. The agreement allows each party to prioritize what is important to them,” Hicks said in a statement. “This provision gives the parties the option, the freedom, to negotiate that agreement. And that is a good thing.”

Unions want to give workers and business the option — the freedom! — to prioritize what’s important to them and negotiate their own pay! Isn’t that nice. But only if those workers are paying union dues, and only if those businesses are using union labor.

The minimum wage hike was always meant to make independent workers more expensive and make unions look better by comparison. But it’s a bold move for the unions to simply say, in one breath, “Everyone deserves a living wage! It’ll be good for everyone! Except us, thank you. We’ll set our own pay — and also, give a break to any businesses who agree to go back to union labor.”

More on this transparently corrupt policy of the minimum wage by FEE’s Jeffrey Tucker.


Daniel Bier

Daniel Bier is the editor of Anything Peaceful. He writes on issues relating to science, civil liberties, and economic freedom.

A Simple Question for Minimum Wage Advocates by Donald J. Boudreaux

I will return in a later post to the topic of my previous post, namely, the validity or (as I see it) invalidity of the argument that proposes a tolerance of locally set minimum-wage rates if not of nationally or super-nationally set rates.

I state, however, here and again my conclusion: Legislating minimum wages – that is, enacting a policy of caging people who insist on entering voluntarily into employment contracts on terms that political elites find objectionable – is no more attractive or justified or likely to succeed at helping low-skilled workers if the particular caging policy in question is enacted locally than if it is enacted nationally or globally.

In this short post, I ask a simple question of all advocates of minimum wages:

If enforcement of minimum-wage policies were carried out in practice by policing low-skilled workers rather than employers – if these policies were enforced by police officers monitoring workers and fining those workers who agreed to work at hourly wages below the legislated minimum – would you still support minimum wages?

Would you be good with police officers arresting those workers who, preferring to remain employed at sub-minimum wages rather than risk losing their current jobs (or risking having do endure worsened employment conditions), refuse to abide by the wage terms dictated by the legislature?

Would you think it an acceptable price to pay for your minimum-wage policy that armed police officers confine in cages low-skilled workers whose only offense is their persistence at taking jobs at wages below those dictated by the government?

If a minimum-wage policy is both economically justified and morally acceptable, you should have no problem with this manner of enforcement.

(You might still prefer, for obviously aesthetic reasons, enforcement leveled mainly at employers. But if the policy is to unleash government force to raise wages above those that would be otherwise agreed to on the market voluntarily between employers and workers, then you should agree that, if for some reason enforcement aimed at employers were impossible or too costly, enforcement aimed at workers is morally and economically acceptable.)

If, however, you do have a problem with minimum-wage regulations being enforced by targeting workers who violate the legislature’s dictated wage terms, then you might wish to think a bit more realistically and deeply about just what it is you advocate in the name of economic improvement or “social justice.”

This post first appeared at Cafe Hayek, where Don Boudreaux blogs with Russ Roberts.

Donald Boudreaux

Donald Boudreaux is a professor of economics at George Mason University, a former FEE president, and the author of Hypocrites and Half-Wits.

Los Angeles Pummels the Poor: A $15 an hour wage floor is a cruel and stupid policy by JEFFREY A. TUCKER

Does anyone on the Los Angeles City Council have a clue about what they have just done? It really is unclear whether reality matters in this legislative body. Rarely have we seen such jaw-dropping display of economic fallacy enacted into law.

The law under consideration here is a new wage floor of $15, phased in over five years. Why phased in? Why not do it now? Why not $30 or $150? Perhaps the implied reticence here illustrates just a bit of caution. Somewhere in the recesses of the councilors’ minds, they might have a lurking sense that there will be a price to pay for this.

Such doubt is wholly justified. Recall that the minimum wage was initially conceived as a method to exclude undesirables from the workforce. The hope, back in the time when eugenics was the rage, was that a wage floor would cause the “unemployable” to stop reproducing and die out in one generation.

Racism drove the policy, but it was hardly limited to that. The exterminationist ambition applied to anyone deemed unworthy of remunerative work.

“We have not reached the stage where we can proceed to chloroform them once and for all,” lamented the progressive economist Frank Taussig in his 1911 bookPrinciples of Economics. “What are the possibilities of employing at the prescribed wages all the healthy able-bodied who apply? The persons affected by such legislation would be those in the lowest economic and social group.”

Professor Taussig spoke for a generation of ruling-class intellectuals that had egregiously immoral visions of how to use government policy. But for all their evil intentions, at least they understood the basic economics of what they were doing. They knew what a wage floor excludes marginal workers, effectively dooming them to poverty — that’s precisely why they favored them.

Today, our situation seems reversed: an abundance of good intentions and a dearth of basic economic literacy. The mayor of LA, Eric Garcetti, was elated at the decision: “We’re leading the country; we’re not going to wait for Washington to lift Americans out of poverty.”

Leading the country, maybe, but where is another question. This is a policy that will, over time, lock millions out of the workforce and forces many businesses to cut their payrolls. Machines to replace workers will come at a premium. The remaining workers will be expected to become much more productive. Potential new business will face a higher bar than ever. Many enterprises will close or move.

As for the existing unemployed, they can forget it. Seriously. In fact, it is rather interesting that in all the hooplah about this change, there’s not been one word about the existing unemployed (officially, 7.5% of the city’s workforce). It’s as if everyone intuitively knows the truth here: this law will not help them at all, at least not if they want to work in the legal economy.

The underground economy, which is already massive in Los Angeles, will grow larger. New informal enterprises will pop up everywhere, doing a cash-only business. The long, brawny arm of the state will not be powerful enough to stop it. Sneaking around and hiding from the law is already a way of life for millions. Look for this tendency to become the dominant way of work for millions more.

All of this will happen, and yet the proponents of the minimum wage will still be in denial, for their commitment to the belief that laws can make wealth is doctrinal and essentially unfalsifiable.

As for those who know better, business owners all over the city pleaded for the Council not to do this. But their pleas fell on deaf ears. The Council had already been bought and paid for by the labor unions and interests that represent the already employed in Los Angeles. Such union rolls do not include the poor, the unemployed, or even many of the 50% of workers in the city who work for less than $15. They represent the working-class bourgeoisie: people rich enough to devote themselves to politics but do not actually own or run businesses.

Will such unions be helped by this law? Perhaps, a bit — but at whose expense? Those who work outside union protection.

This is a revealing insight into why unions have been so passionate about pushing for the minimum wage at all levels. Here is the truth you won’t read in the papers: a higher wage floor helps cartelize the labor market in their favor.

You can understand this by reflecting on your own employment. Let’s say that you earn $50,000 for a task that could possibly done by others for $25,000, and those people are submitting resumes. This is your situation, and it potentially applies to a dozen people in your workplace.

Let’s say you have the opportunity to enact a new policy for the firm: no one can be hired for less than $50,000 a year. Would this policy be good for you? In a perverse way, it would. Suddenly, nobody else, no matter how deserving, could underbid you or threaten your job. It’s a cruel way to go about padding your wallet, but it might work for a time.

Now imagine pushing this policy out to an entire city or an entire country. This would create an economic structure that (however temporarily) serves the interests of the politically connected at the expense of everyone else.

It certainly would not create wealth. It would not help the poor as a whole. And it would do nothing to create a dynamic and competitive marketplace. It would institutionalize stasis and cause innovation to stall and die.

The terrible effects are many and cascading, and much of the damage will be unseen in the form of business not formed, laborers not hired, efficiencies not realized. This is what the government of Los Angeles has done. It is a self-inflicted wound, performed in the name of health and well-being.

The City Council is cheering. So are the unions. So are the ghosts of the eugenists of the past who first fantasized about a labor force populated only by the kinds of people they approved.

As for everyone else, they will face a tougher road than ever.


Jeffrey A. Tucker

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.

Israel Puts Price Controls on Books, Sales Plummet

A lesson on the terrible consequences of price controls comes from Israel this week, the Blaze reports:

A new Israeli law controlling the price of books and mandating guaranteed minimum compensation for writers has had the complete opposite effect of what lawmakers had intended. . . .

Under the new law’s dictates, any new book that’s been on the shelf 18 months or less may not be discounted. During the same time period, Israeli authors are guaranteed to earn a minimum of 8 percent of the price of the first 6,000 books sold and 10 percent of all subsequent books sold, the Jerusalem Post explained last year.

The results were swift and predictable:

Publishers told Haaretz that the law “has upset the entire literary food chain” with sales of new book titles down between 40 and 60 percent and down 20 percent for books overall. . . . Booksellers say they’ve experienced a 25 percent drop in children’s book sales in just one year, according to Channel 2.

The combination of price controls on books and minimum wages for authors has had pronounced effects on new, young, and unestablished writers:

Publishers have been hesitant to bank on new writers under the government mandate, because they don’t want to take the financial risk on books they’re not allowed to put on sale. And from a consumer perspective, those looking for new books are less likely to drop some $25 on the debut novel of a writer they’ve never heard of.

“Almost the only way for unknown writers to become popular is to put their first book on sale, even to give it for free if possible, to publicize their name and get their audience and eventually make money from their writing,” [Boaz] Arad said. Thus the new law has been particularly devastating on new authors who can’t get their work to the public.

Arad, chief of the Ayn Rand Center-Israel, said that the parliament blithely ignored the fates of similar laws in Europe, telling the Blaze, “It’s no surprise that we face a book market struggling and suffering and it’s the most unbecoming situation for the ‘People of the Book.’”

Good intentions fail to trump the laws of supply and demand once again.

To “protect” authors, the government has driven off readers.

Read more coverage of the story here.

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