Cilley’s non-economics

It must be nearing an election. Jackie Cilley is out with an opinion piece that is nothing but a self-congratulatory paean to herself and to social democracy. It is completely devoid of the economic consequences of the minimum wage, so it’s hard to rebut her argument--she doesn't have one! Let's see what we can point out.

Ad hominem and false class analysis

First, she is subtly making ad hominem attacks by claiming that the “voters in the bleachers [the proletariat?] are way ahead of the 1% in the skyboxes [the bourgeoisies?]” when it comes to the minimum wage. She relies on a non-existent class struggle. Many of the “99%” are also capitalists. Anyone who has a 401k, certificates of deposit, mutual funds, etc., is a capitalist. A single man is not just a laborer, or a capitalist, or an entrepreneur. Rather, these are concepts, roles that all of us play during our lives. 

The real class analysis is comes from the libertarian perspective: the class distinction is between those who are net tax receivers and net tax payers. This is not divided by income: big banksters who receive bailouts and the rich military industrial complex are in the same lass as those who rely completely on welfare and public relief. Whether you agree or disagree with the use of tax money in these cases does not diminish from the fact that this group contrasts completely with the hapless taxpayer.

Regardless, let’s grant Cilley her perceived class distinctions, and that the 99% are “good,” and the 1% “bad.” So what? An argument made by a bad person is not invalid because of the person’s badness. A KKK member might support free speech so that he can promote some racist propaganda. Does that make free speech law? Of course not. What Cilley is doing here is making an ad hominem attack: she is implying that the evil fat cats’ opposition to the minimum wage is wrong because they are evil fat cats. And, from the other side, she is implying that because 99% of the people are with her, the minimum wage is the good and correct policy. A moment’s thought would reveal that a majority vote does not make a policy good or moral. It just means that most people are wrong. [By the way, there are those for whom even the bleacher seats at Fenway are too expensive…maybe the bleacher voters are also evil.]

Theory of the minimum wage

She offers no argument on the logical consequences of the minimum wage. Let’s deal with the positive theory first, then talk about her likely counter claims.

First, in the absence of government intervention, a “wage” is the market price for labor. There is a supply of labor (from the laborers) and a demand for labor (from the employers). The going wage will tend towards that price such that the quantity supplied equals the quantity demanded. Suppose a minimum wage above this market price is imposed and enforced. It means that laborers are prohibited by law from offering their services for lower prices. Because supply schedules decrease with increasing price, and demand schedules increase with increasing price, a minimum wage means that there will be a higher supply of labor than a demand to obtain it. Translation: involuntary unemployment. This is like any other price fixing schemes: a price floor logically implies, all else equal, an unsold surplus of the good in question.

Now, given the market wage, one might think about ways to make it higher. In order to answer this, we must understand what determines the wage itself, the actual number. The answer is the (discounted) marginal value produce of the labor. This is technical jargon for the value that a laborer imputes to the ultimate consumer good. This is just how productive the person is: the more productive—as evaluated by consumer demands—the higher his wage. What determines productivity? For the vast majority, it is capital equipment: we are far more productive pushing buttons on a machine that makes tables than we are making tables by hand. So, if Jackie Cilley wants to raise wages, she should eliminate all taxes on capital and businesses. (Yeah, right!)

A common retort: "but minimum wage X was tried in area Y and it people’s wages rose and unemployment did not increase." Such “empirical data” are unconvincing because, unlike in a science lab, there is no way no control. It is a unique historical event, not a repeatable experiment. More simply, I can answer: "the positive results happened despite the minimum wage, not because of it, and the results would have been better had there been no government interference." There is no way out without a logically consistent theory. [Besides, you can scour the internet for stories of minimum wage laws increasing unemployment, like this one. Personally, one story about a loss of a job or reduced hours is enough to vitiate any claims that a minimum wage is helpful.]

Value judgments

Cilley also likes to sneak in her own value judgments. Where does this 99/1 division come from? Why not 98/2, or 90/10? Maybe Ms. Cilley divides it just so that she can claim she is with the majority. Cilley talks about how “millionaires [are] refusing to pay a reasonable wage.” What is “reasonable”? Is it whatever Cilley says? There is no objective criterion, and I submit that she is an stingy old 1%-er who refuses to pay laborers a reasonable $1000/hr.

Conclusion

Jackie Cilley has zero understanding of the minimum wage. She should listen to the wisdom of economist Murray Rothbard:

“It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”

Instead of supporting a policy that would harm the very people she claims to be helping, why not advocate reducing taxes so that people have more money in their pocket? Or, even better, end the monopoly of the Federal Reserve and revert back to sound money whose purchasing power doesn’t vanish simply by sitting in our pockets. These things probably don't buy as many votes.

Sanders, socialism, and straw men

"We are socialists," is what a recent opinion says.

The writer first asserts that it is fine if Bernie Sanders is a socialist. By itself, he is right. Too often, words like "socialism" are used as epithets to disparage. "He's a socialist; therefore, he is bad and must be wrong." This is usually an ad hominem attack, where the person making the argument is attacked instead of the argument itself. Plus five points.

However, the writer goes on to suggest that we benefit from socialism via, e.g., "socialist snow plows." He cites the litany of government "services" from which we allegedly benefit. There are many problems with this argument.

First, let us define socialism. Socialism is the public ownership of the means of production. Thus, if there is a government-run industry then, yes, it is socialist*. So, something like the VA system is socialist. The roads are socialist (ignoring the tiny fraction of private roads). Another five points for the writer.

Here's where the argument goes astray. The writer suggests that you can't oppose socialism if you utilize any tax-funded government activities.  This is wrong for a couple of reasons. The money is expropriated in the first place, and this is unethical. If a robber steals your wallet and then buys you some groceries with some of it, must you deny taking the goods in order to denounce the robber's actions?

More importantly, the writer suggests a false dilemma: either we have socialism or we don't have our roads plowed. This is a tired, centuries-old tired argument that Bastiat noted in "The Law" (emphasis added)

Socialism, like the ancient ideas from which it springs, confuses the distinction between government and society. As a result of this, every time we object to a thing being done by government, the socialists conclude that we object to its being done at all. We disapprove of state education. Then the socialists say that we are opposed to any education. We object to a state religion. Then the socialists say that we want no religion at all. We object to a state-enforced equality. Then they say that we are against equality. And so on, and so on. It is as if the socialists were to accuse us of not wanting persons to eat because we do not want the state to raise grain.

The writer doesn't consider the possibility that private property and voluntary trade can produce goods far better than any government. For-hire snow plows do a much better job at plowing/salting than DPW, and they do it much more efficiently. Minus 20 points.

Incidentally, the casual, snarky tone toward the end of opinion is a little odd, given that socialism is responsible for millions of death in the 20th century. Ha, ha, ha?

*Note that the technical details of ownership are irrelevant: a fascist system whereby the means of production are owned privately in name but are subject to a list of government regulations is also socialist, as Uncle Sam is still directing production.

"Logical fallacies" mentioned online

Here. Fascinating.

Unfortunately, the writer should understand straw man arguments and poisoning the well.