Monday Smackdown/Hoisted from Others' Archives from Six -and-a-HalfYears Ago: Dan Drezner on Chuck Lane
Every time I try to get out, they drag me back in...
Now I am being told that nobody with any audience ever thought 15/hour in California was a really bad idea. So time to recall this:
Monday Smackdown/Hoisted from Others' Archives: A correspondent asks me for help: Chuck Lane is being used as an authority on the California's 15/hr by 2023 minimum wage proposal. And Chuck Lane says:
A hot concept in wonkdom these days is “evidence-based policymaking.”… Gov. Jerry Brown and the state’s labor leaders have announced legislation to raise the state’s minimum wage… to $15 per hour…. Whatever else might be said about this plan, it does not represent an exercise in evidence-based policymaking. To the contrary: There’s a total lack of evidence that the potential benefits would outweigh potential costs—and ample reason to worry they would not…
: Why I Don’t Need to Take Charles Lane Seriously: "The Washington Post’s Chuck Lane wrote an op-ed arguing in favor of Jeff Flake’s amendment...
...to cut National Science Foundation funding for political science. In fact, Lane raised the ante, arguing that NSF should stop funding all of the social sciences, full stop. Now, I can respect someone who tries to make the argument that the opportunity costs of funding the social sciences are big enough that this is where a budget cut should take place. It’s harder, however, to respect someone who:
- Doesn’t comprehend the differences between the natural sciences and social sciences;
- Is unaware that the social sciences are—increasingly—running experiments as well;
- Believes that because individual social scientists have normative preferences, the whole enterprise cannnot be objective (or, in other words, doesn’t understand the scientific enterprise at all);
- Fails to comprehend the economics of public goods;
- Hasn’t really thought through what would happen if all social science was privately funded.
Now, all columnists can have a bad day, so that’s fine. What I find intriguing, however, is that Lane’s response to criticism from political scientists to his essay can be summarized in one tweet: 'shorter my critics re poli sci funding: we want our money.' This is cute, but overlooks the fact that a lot of Lane’s poli sci critics—myself included—haven’t received a dime in NSF funding.
More disconcertingly, it’s intellectually lazy. Sources of funding do matter in public discourse, but they do not vitiate the logic contained in the arguments linked to above. This is simply Lane’s cheap and easy excuse for not engaging the substance of his critics’ arguments.
The hard-working folks here at the blog believe strongly in reciprocity, so Lane has done us a small favor—we no longer need to read Chuck Lane’s arguments all that carefully, or take him all that seriously, ever again.
Thanks, Chuck!!
Is he right?
On any individual issue, Chuck Lane could be right. But that is not the way to bet. In general, deciding to try to build a career on catering to the prejudices and bigotries of Marty Peretz is not a sign of good judgment. And, in my experience, Chuck Lane is no exception.
And in this case, if I follow Menzie Chinn and take an elasticity of employment with respect to the minimum wage of -0.2, when I crunch the numbers I get[1]:
- A likely reduction in employment of low wage workers in California of roughly 6%—200,000 out of 3,000,000 low-wage workers.
- A likely reduction in surplus from the low-wage labor market in California of $7.3125M/week.
- A likely transfer of surplus from consumers and employers to low-wage workers in California of $210.4M/week.
- This is a good thing—as long as:
- You think wealth in the hands of employers and consumers is less than 96.5% as worthwhile as income in the hands of low-wage workers...
- You think that nothing else major has been left out of the analysis...
It is possible that we will be unlucky—that the true elasticity of labor demand at the low end of the California labor market is not -0.2 but -0.6, in which case we have:
- A likely reduction in employment of low wage workers in California of roughly 6%—200,000 out of 3,000,000 low-wage workers.
- A likely reduction in surplus from the low-wage labor market in California of $65M/week.
- A likely transfer of remaining surplus from consumers and employers to low-wage workers in California of $100M/week.
- This is only a good thing if:
- You think wealth in the hands of employers and consumers is less than 62.5% as worthwhile as income in the hands of low-wage workers...
- You think that nothing else major has been left out of the analysis...
But it is at least as likely that raising the minimum wage will turn out to have no downsides at all—will offset market power on the side of employers and lead not to a reduction but an increase in low-wage employment—as that low-wage employment will turn out to have an elasticity of demand of -0.6 or below.
Not “a total lack of evidence that the potential benefits would outweigh potential costs”. Rather: substantial evidence that potential benefits would outweigh potential costs.
And what about Dylan Matthews’s claim that raising the minimum wage to $15/hr as of 2023 is a worse policy than:
expanding the EITC and funding it with a new tax on corporations. It could be a carbon tax or a payroll tax or a cash flow tax or a profits tax or a tax on capital income—whatever?
That is probably true: I am a big fan of the expanded EITC. I expanded the EITC. I would support cutting the California minimum wage below $15/hr in 2023 and making it up with an expanded EITC funded by a carbon tax. But that $15/hr in 2023 is not the best policy does not mean that it is not a good policy. You need to put not just a thumb but both elbows on the analytical scale to make it come out as a bad policy move.
——
[1] : 2016-03-28 Econ 1 Lecture: Slides 16-26
#highlighted #smackdown #hoistedfromthearchives #labormarket #journamalism #minimumwage
