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Minimum Wage Laws Boosting Wages

TheEconomist said:
you can't stretch their operational costs ad infinitum before it becomes a problem.
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ad infinitum?????????? Usually cant stretch them at all because they are fighting to have a lower price than competition just to survive. America lost 20 million jobs, and a whole lot more, to China because wages matter even when they are small fraction of final price!!
 
James972 said:
1) then what is?
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The most fundamental concepts in economics are preferences and opportunity costs.

If you commit to a set of assumptions that are not entirely innocuous about preferences, you can represent them with a utility function;
and if you have a utility function and you commit to even more assumptions about the economic environment, then you can obtain a demand function.

Specifically, one very annoying thing about supply and demand is the price taking assumption. If you took ECON101, you actually encountered a model where the demand function exists, but the supply function does not: a monopoly. Formally, what you have is a reaction function in the very narrow game-theoretic sense of the term. If you saw monopolistic competition, you learn about what the fact that the "monopoly model" above can be exploited to talk about markets where goods aren't perfect substitutes for one another. You have demands, but not supply functions are not defined. If you read what I wrote almost a gazillion time in this thread, you also learned about search and matching models. In that case, neither the supply, nor the demand for labor exists. Wages are determined by a bargaining over the added value of production.

I'll go further: some very important research in economics is done about behavior that doesn't involve markets at all. The principal-agent problem attempts to describe the following conundrum: one set of people have to rely on another set of people to achieve some goal, but they aren't in a position to see everything that is going. Maybe it's costly to monitor them, maybe it's hard to distinguish bad luck for poor performance, but they can't corner them and force them to do what they want. The question is how do you structure the contract (or the institutions) so things don't go to absolute s*** all the time. That should sound an awful lot like thinking about checks and balances: the government is an agent, the people is a principal and they're playing a strategic game. That's perfectly sound economics, but we're not talking about supply, demand or even about markets.


It might sound like obvious to most people, but the reality is that we have deep theoretical and empirical reasons to think that people left to their own device sometimes fail to coordinate themselves perfectly. This means that ideal policies that coerce them might improve their lot by their own view of what is good, however it does not mean that policies in practice will be preferable to a lack of intervention because policies are designed, debated and enforced by interested parties.

I know, what a shock: reality is complicated.
 
James972 said:
The Depression only ended when FDR died. How did the New Deal not slow down recovery if there was no recovery but rather depression and world war?
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The NBER has an indicator of recession periods. Their definition is admittedly loose, but we have the benefit of having over 150 years of data where they applied the same method so it's consistent across time. It is also actually capturing something real because you can use other more precise definitions and things do not change much. You can use the Berns-and-Mitchel-inspired algorithm used by the OECD or estimate the latent states in a two-state Markov switching model as in James Hamilton's now famous paper on the subject. Have a look yourself: NBER recession Index. Clearly, recession periods sparked and fell during his tenure. So, what I gather is that people have such a loose definition of "depression" that they can stretch and contract it however they want and you dove right into that trap over ideological convenience.

More to the point, I talk about the impact of the policies on output growth. You cannot just "look" at the data and tell me what was the impact because the impact is the differential between what happened under the New Deal and what would have happened under the status quo. In other words, you need some credible way of reconstructing the expected value of the missing paths... You can use structural VARs with different identifying hypotheses, some variant of local projections à la Jorda or a full blown macroeconomic model. What you cannot do is just insert a convenient scenario for the state of the world that did not happen. I invoked previous estimates and theoretical work to argue we tend to find mild to moderate, though always positive effects to fiscal policy. What do you have besides your bias?


I'm sure you'd look so good on a stage trying to argue the depression ended in 1945 just before I show everyone graph with recession periods, periods of positive output growth, falling unemployment and growing business investments. Of all people you try to push, you pick the guy who a graduate degree... Really? I have to explain to you what supply and demand actually means, but you're going to lecture me about detailed applications of state-of-the-art econometrics and macroeconomic theory?

That's cute.
 
TheEconomist said:
I already pointed out earlier that empirical studies on the minimum wage largely comes down against the ECON101 story.
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I thought I might have missed an earlier missive of yours. Thanks for repeating it, and you other answers. It's great to have someone currently studying the discipline at a high level here at DP. I'm surprised you can find the time. Good luck with your studies. I know it can be a slog.
 
TheEconomist said:
I know, what a shock: reality is complicated.
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Complicated for you anyway which is why you're alternately for a commie like Obama and a capitalist like Sowell. One day you'll sort it all out. I don't really hold it against you . I assume to it is survival strategy in modern academia. Nuance allows you to hide. I am surprised they haven't smoked you out by now and gotten rid of you. Do you find them tolerant and open to free speech??
 
TheEconomist said:
Of all people you try to push, you pick the guy who a graduate degree...
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a graduate degree that left you befuddled somewhere between Obama and Sowell ie confused.
 
TheEconomist said:
What do you have besides your bias?


.
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Bias??? you mean the Great Depression was not the Great Depression?? The economy recovered in 1930
but they forgot to stop calling the period until 1945 the Great Depression?? Lets get this straight, the New Deal was the Great Depression!!

*Here's what Henry Morgenthau, FDR's Secretary of the Treasury (the man who desperately needed the New Deal to succeed as much as Roosevelt) said about the New Deal stimulus: "We have tried spending money.We are spending more than we ever have spent before and it does not work... We have never made good on our promises...I say after eight years of this administration we have just as much unemployment as when we started... And an enormous debt to boot!"

"The New Republic"( at the time a FDR greatest supporter") noted. In June 1939, the federal public works programs still supported almost 19 million people, nearly 15% of the population" [page 313]

In fact in 1939, unemployment was at 17%, and there were 11 million additional in stimulus make work welfare jobs. Today when the population is 2.5 times greater we have only 8 million unemployed. Conclusion: legislation to make Democrats illegal
is urgently needed
 
jpn said:
I thought I might have missed an earlier missive of yours. Thanks for repeating it, and you other answers. It's great to have someone currently studying the discipline at a high level here at DP. I'm surprised you can find the time. Good luck with your studies. I know it can be a slog.
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Thanks for the kind words.

Just to be clear, I am actually learning a lot by debating those issues on Debate Politics. By far the hardest part of economics is developping the capacity to move rapidly being highly technical and abstract ideas to intuitions about concrete problems. If you really want to stump a PhD student, you go after them with simple intuitions regarding the assumptions they make (theoretical, or statistical) or you ask them to explain to you their paper in 1 minute.


My first paper offers a large macroeconomic dataset. The contribution is that it's long to cope with changes made by statistical agencies and having the dataset available for everyone helps homogenize the research. Really, outside the US it is a pain in a**. My second paper compares machine learning methods with traditional methods from statistics and econometrics in a forecasting "horse race." The idea is that you shrink your dataset to simulate the information set you would have had to forecast in the past and it gives you an idea of how those models would have performed without the benefit of hindsight. The goal is to use the forecasting errors we generate to find out what makes machine learning perform well on macroeconomics data. In short, we compare different "tricks" introduced by computer science to find out which ones give you the biggest bang for your buck.

I am also working with one of my advisor on trying to figure out what is the best way to handle high persistance in the data when you want to study the response of a dynamic system to random perturbations, but it's very preliminary.
 
TheEconomist said:
Thanks for the kind words.

Just to be clear, I am actually learning a lot by debating those issues on Debate Politics. By far the hardest part of economics is developping the capacity to move rapidly being highly technical and abstract ideas to intuitions about concrete problems. If you really want to stump a PhD student, you go after them with simple intuitions regarding the assumptions they make (theoretical, or statistical) or you ask them to explain to you their paper in 1 minute.


My first paper offers a large macroeconomic dataset. The contribution is that it's long to cope with changes made by statistical agencies and having the dataset available for everyone helps homogenize the research. Really, outside the US it is a pain in a**. My second paper compares machine learning methods with traditional methods from statistics and econometrics in a forecasting "horse race." The idea is that you shrink your dataset to simulate the information set you would have had to forecast in the past and it gives you an idea of how those models would have performed without the benefit of hindsight. The goal is to use the forecasting errors we generate to find out what makes machine learning perform well on macroeconomics data. In short, we compare different "tricks" introduced by computer science to find out which ones give you the biggest bang for your buck.

I am also working with one of my advisor on trying to figure out what is the best way to handle high persistance in the data when you want to study the response of a dynamic system to random perturbations, but it's very preliminary.
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wow no wonder you cant decide between Obama and Sowell. Maybe someday you'll be a tenured professor and then be free to decide.
 
James972 said:
Bias??? you mean the Great Depression was not the Great Depression?? The economy recovered in 1930
but they forgot to stop calling the period until 1945 the Great Depression?? Lets get this straight, the New Deal was the Great Depression!!

*Here's what Henry Morgenthau, FDR's Secretary of the Treasury (the man who desperately needed the New Deal to succeed as much as Roosevelt) said about the New Deal stimulus: "We have tried spending money.We are spending more than we ever have spent before and it does not work... We have never made good on our promises...I say after eight years of this administration we have just as much unemployment as when we started... And an enormous debt to boot!"

"The New Republic"( at the time a FDR greatest supporter") noted. In June 1939, the federal public works programs still supported almost 19 million people, nearly 15% of the population" [page 313]

In fact in 1939, unemployment was at 17%, and there were 11 million additional in stimulus make work welfare jobs. Today when the population is 2.5 times greater we have only 8 million unemployed. Conclusion: legislation to make Democrats illegal
is urgently needed
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Either you're a complete idiot or you're arguing in plain bad faith.

First of all, do you know what is the "Great Depression"? It's not like people had a precise statistical definition that they applied and everyone involved could agree it is the period starting with the stock market crash in 1929 and ending with the war in 1945. The dates are not inferred from the data, but imposed by historians. Depending on your personal bent and the message you want to convey, you will have the Great Depression end in 1939 (the start of the war), in 1942 (when Americans enterred the war) or 1945 (when the war ended). If you think about when the GDP gets back in line with its previous peak, that would be 1939 in the United States, by the way. That's when unemployment started to plummet... It also dropped sharply, even though it was still high in the mid 1930s.

Second of all, what do you not understand about the fact that you cannot quote figures to make a case about causality? Do you have missing brain cells? The point I made would imply that, without the New Deal, things would have been slightly worse -- and that only applies to the extent that the deficit (totaled on all government levels) increased. I just applied results from the literature. If values were close to zero or that was a surplus, put a zero or reverse the sign. If you think you can see a problem with that just by looking at the data, I don't know what to say. I cannot explain econometrics to someone who confuses "would have been" and "have been."
 
James972 said:
(...) A graduate degree that left you befuddled somewhere between Obama and Sowell ie confused.
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James, I have only ever read you parrot partisan nonsense. You're every bit as much a perody of yourself as the complete lunatics who writes in gender studies -- and we could pull the same hoaxes on you as others have pulled on them. Nobody needs your input. We already know what you're going to say. You're going to fling crap around, pretend to know things you clearly don't understand and make some hyperbolic statement about conservativism using completely stupid expressions like "Republican capitalism."


Many people say stupid things every now and then, but I've never seen someone so pointless, dishonest and incapable of understanding what other people write.
 
TheEconomist said:
Paul Krugman happens to be a human being and, like everyone else, he is susceptible to the consequences of motivated reasoning. This prediction was a patently stupid commentary, but he did have the required integrity to retract that statement and to admit having made a big mistake. Everyone says stupid things every now and then, but not everyone will admit to it.

As for the credibility of Paul Krugman, it depends on what is concerned. I have read his column for years and I would say that his political commentaries are not peculiarly original. You don't need a genius to comment about the possibility that some self-described fiscal conservatives are spending very liberally outside of welfare programs or that some wealthy libertarians might be holding self-serving intellectual excuses for greed. It's very superficial and uninteresting. He might have changed since the time I cancelled my NY Times subscription back in 2016 or 2017, but that part of his work always felt boring. On the other hand, if you grab a column or a blog post where he's trying to explain macroeconomic theory, I can assure you that he is going a very good job. It's very hard to boil down contemporary macroeconomic theory and the related empirical research into a simple set of intuitions. Part of the difficulty lies in the general equilibrium aspect of the theories: they involve feed-backs and spill-over effects and everything happens sort of "together." That is something Paul Krugman does unusually well. It's in fact one reason why he published so many papers in top journals: he is a genius at boiling down complicated problems to their barest essence.

Most of his papers are great reads because he's absurdly good at it. Not a lot of people are that good, but if you want a few other names, John Cochrane is also very gifted. His book on Asset Pricing and his presidential address at the AFA were exceptionally good summaries of the puzzling features of financial data. Another great writer is Bryan Kelly. He doesn't comment like Cochrane or Krugman on politics, but he always has this crazy smart way to attack problems.

Going back to Krugman, to you, he might sound like a leftwing apologist of big government. But the truth is that all the comments he made about fiscal policy, monetary policy and unconventional tools of monetary policy in the 2008-2012 period were dumbed-down versions of key references in the macroeconomics literature. I know because I'm a PhD student in economics and read those papers . We're talking about interesting work by Eggertsson, Woodford, Christiano, Eichenbaum and himself published in the 2010-2011 window. His comments did reflect the growing concensus in the literature. Looking back,
you might have better counterarguments today, but they involved a lot of theoretical innovations and empirical research carried years later. The issues are still contentious matters today, as far as I can tell and, frankly, the guy has been consistent: it's not like he's writting one thing in journals in saying another on his blog.



A lot of people take way too extreme a position to make known what often are legitimate concerns. Of all the things he could say about a Nobel Prize in economics who still publishes in top journals, he took the extreme position that he is entirely unrealiable. You can have legitimate concerns about Krugman's capacity to summarize complicated issues on account that his comments on issues lying outside his expertise tend to be a lot less deeply thought out and tend to all lean in one predictable direction. But you really don't need to go as far as trying to paint him as some kind of joke to make that point. Limited usefulness in some fields is a much weaker assumption than complete uselessness everywhere.

Always go for the least binding assumptions you need. They appeal to more people and they're likelier to be roughly true in reality.
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One thing about economics, like with the weather, you won't be held accountable especially if you have a great bust or ass. Not see sure what sustained Krugman.....whats up with this child porn thing with him. Good luck with your studies.

Sent from my SM-G892A using Tapatalk
 
JPN, President Franklin Roosevelt was hated by those of the far right. To those of reduced political and social status, he was “a traitor to our class”. He was hated by those of the far left. More than any other individual, he prevented the transformation of basically capitalist USA, to become a basically socialist nation.

Yes, the National Recovery Act was pure socialistic example of government planned and micro-directed economy and the Supreme properly killed it before it could inflict serious economic harm upon us. Yes, FDR did seek to prevent the Supreme Court from finding legal faults with executive and legislative acts during his administrations. As a lawyer, FDR should have better appreciated the constitutional questions regarding the National Recovery Act and the need for independent courts. As a politician, he should have better appreciated our voters’ high regard for the U.S. Supreme Court.

I’m somewhat left of center but we apparently agree, due to FDR’s more excessive acts and the consequential reductions of his political powers during off-year elections, he was unable to more fully continue and expand upon his successful policies of public improvements and support for our nation’s infrastructures and for wage earners which were reflected by reductions and/or reversals of USA’s then current extents of economic depression.

This consequentially reduced his administrations’ abilities to induce congressional legislation that would have continued the pace of our nation’s economic recovery. Increased war production effectively accomplished the remainder of that recovery.

Respectfully, Supposn
 
TheEconomist said:
I already pointed out earlier that empirical studies on the minimum wage largely comes down against the ECON101 story.

One reason is that employment dynamics involves comparing a lot more than just wages and some measure of employment, be it the number of jobs or the number of hours worked, so employers might be spreading around their reactions. Another reason I gave is that the supply-and-demand model might not be peculiarly good at capturing important features of the labor market. It's also quite the weird conceptual framework to address the arguments of people who support minimum wage. Proponents of the minimum wage make a point about market power and bargaining capacity that the competitive framework kills by assumption and they aren't making an absurd point, so you need a more general setting to address these concerns. Another possibility is that you sometimes have a negative impact, but it's too small to be statistically significant.

My intuition is that you might have some slack to use a minimum wage to benefit workers at the expense of businesses if you want to do it. How much slack? Well, I have no idea. The only thing I know is that businesses are started and operated to turn a profit large enough to compensate for risks and you can't stretch their operational costs ad infinitum before it becomes a problem.
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I have been away from my computer (on vacation) and broke my tablet, so I have been relegated to reading and posting with my cell phone. I would have liked to respond to a number of your detailed posts, but that and character limitations prevent lengthy quotes. I appreciate the level of discussion you provide. This particular post captures most of my views on the subject succinctly, so I wanted to endorse it. In particular, I agree with your final conclusions.

I also wanted to make the following observations: I have often complained that the "supply and demand" model is problematic in labor discussions. Much of the MW discussion and literature is equivocal and limited. There are not really long enough or robust enough data sets to reach particular conclusions beyond the broadest-brushed suppositions. Frankly, in my view, the level of MW increase at issue here (which doesn't even reach the level in purchasing power of the 1968 standard) is generally so low, on an aggregate basis, as to be statistically insignificant, and really cannot be discerned in most data sets. The larger surveys of studies reach general conclusions based upon what I consider to be somewhat suspect use of data sets and endorsement of preconceived expectations. Finally, I think the certitude of findings is often grossly exaggerated in the popular and partisan press, usually for discernible reasons.
 
TheEconomist said:
James, I have only ever read you parrot partisan nonsense. You're every bit as much a perody of yourself as the complete lunatics who writes in gender studies -- and we could pull the same hoaxes on you as others have pulled on them. Nobody needs your input. We already know what you're going to say. You're going to fling crap around, pretend to know things you clearly don't understand and make some hyperbolic statement about conservativism using completely stupid expressions like "Republican capitalism."


Many people say stupid things every now and then, but I've never seen someone so pointless, dishonest and incapable of understanding what other people write.
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Welcome to the club, my friend. Our membership is growing.
 
James972 said:
how can 16 years of Depression and world war be net beneficial???????? Do you want another depression and world war for the net benefits??
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It wasn't the sixteen years of depression and world war that was beneficial, but the policies and resources the led to upgrading our relative third world economy into a first world economy.
 
James972 said:
China just switched to Chicago Republican capitalism and prevented another 60 million from slowly starving to death and eliminated 40% of the entire planets poverty. Now do you understand?
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Uh...Chinese companies are subsidized by the government, which manipulates their currency...

So....not true?
 
James972 said:
1) If he admitted that I'll pay you $10,000. Bet??

2) so you think the less capital job creators have the more jobs they can create?? In venture capital we say, "the more shots on goal the more ventures we score" How does taxing away our capital fund new ventures like Apple and Amazon?? Bezos said the most important $50,000 in is life was the $50,000 he needed to start Amazon. Do you understand now? IF you want to give job creators money rather than tax it away that would make sense. 1+1=2
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YouTube

Alan Greenspan: Big tax cuts a 'mistake.' Fix the debt first

His thoughts on tax cuts...

And then, on deregulation...

Greenspan Concedes Error on Regulation - The New York Times

How would you like to wire me the money?

The second half of your post is mostly incorrect...but you don't need me to explain that, Greenspan already did.
 
James972 said:
Obama was an anti business socialist with worst recovery in American History so how could he do anything but harm economy???????? Economy took the day Trump was elected. He is pro-business not anti business anti the economy. 1+1=2
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Actually, Obama was a corporatist.
 
KevinKohler said:
Actually, Obama was a corporatist.
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What many, many ideologues (on both sides) fail to understand is that FDR, Obama, and even Elizabeth Warren were/are fully committed to capitalist America. Being pragmatic and having idealistic goals are not mutually exclusive, and are, in fact, mutually reinforcing. National ambition and progressive ideas require a thriving economy. At the same time, the economy really doesn't "thrive" if everyone can't participate. Andrew Yang's "freedom dividend" plan isn't nuts, it is a serious concept backed by serious economists looking at the future of capitalism. Similarly, concepts like universal healthcare and a minimum wage are not anathema to thriving capitalism but enhance most markets. People, generally, need to get their collective heads out of their collective asses and realize that economics is not a zero-sum game. We really are all in this together.

The most important things for a thriving macroeconomy are universal participation (in a meaningful way) and reduction of frictions. Volatility is only a friend to speculators and economic leeches. The biggest friction is uncertainty. Set the rules and let's get on with the game. We'll sort it out and win together, with everyone sharing in our success.
 
NWRatCon said:
What many, many ideologues (on both sides) fail to understand is that FDR, Obama, and even Elizabeth Warren were/are fully committed to capitalist America. Being pragmatic and having idealistic goals are not mutually exclusive, and are, in fact, mutually reinforcing. National ambition and progressive ideas require a thriving economy. At the same time, the economy really doesn't "thrive" if everyone can't participate. Andrew Yang's "freedom dividend" plan isn't nuts, it is a serious concept backed by serious economists looking at the future of capitalism. Similarly, concepts like universal healthcare and a minimum wage are not anathema to thriving capitalism but enhance most markets. People, generally, need to get their collective heads out of their collective asses and realize that economics is not a zero-sum game. We really are all in this together.

The most important things for a thriving macroeconomy are universal participation (in a meaningful way) and reduction of frictions. Volatility is only a friend to speculators and economic leeches. The biggest friction is uncertainty. Set the rules and let's get on with the game. We'll sort it out and win together, with everyone sharing in our success.
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You used the word sharing.


SOCIALIST!!!

On a serious note, a question I consistently ask, is if machines do all the work, what are the humans going to do to get paid? Machines don't eat, buy houses or cars, they don't have kids, and they don't go to college. The answer I tend to get is a garbled combo about machine technicians (as if business owners would invest in machines just to break even dues to repair costs, lol), or even further gabbledeguck about the free market creating new avenues, because that's what happened with farmers a 100 years ago.

In other news, lots of truck drivers and cab drivers better firm up their 10 year plan, the future is looking pretty bleak for them.
 
KevinKohler said:
You used the word sharing.


SOCIALIST!!!

On a serious note, a question I consistently ask, is if machines do all the work, what are the humans going to do to get paid? Machines don't eat, buy houses or cars, they don't have kids, and they don't go to college. The answer I tend to get is a garbled combo about machine technicians (as if business owners would invest in machines just to break even dues to repair costs, lol), or even further gabbledeguck about the free market creating new avenues, because that's what happened with farmers a 100 years ago.

In other news, lots of truck drivers and cab drivers better firm up their 10 year plan, the future is looking pretty bleak for them.
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First, LOL.

Second, I admit it is very difficult to play futurist right now. The economy is going to look very different by the time my kids are my age.

BTW, I spent a few years as a trucker - primarily hot shot flatbed (I've had a very varied life). It will take longer for truckers to be phased out than one might think (given the infrastructure required to do so), but I can certainly envision that future - initially for long haul operations. I can see Tesla trucks going to Amazon hubs in my lifetime, but local delivery and short haul operations are too complex and varied. Someone will still need to get packages to the front porch for someone else to steal.
 
Can the right wing explain why wages are not naturally rising to meet supply in our market based economy?

CEO compensation has grown 940% since 1978
Typical worker compensation has risen only 12% during that time
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