Subclinical economics

Aaaand the Washington Post is trying to boost its credibility with the Left, after being guilty of such horrible openmindedness and thoughtfulness as to hire people like Megan McArdle, by calling for an increase in the minimum wage.

Since 2009, the last time the national minimum wage was raised, there have been various and sundry studies about it, including a “very credible” 2017 study in Seattle saying that Seattle’s 2014 high increase in the M. W. hurt workers, which was so significant in its contribution to that field of study that the acolytes of Paul Krugman have been trying to talk down and blunt it ever since.

Now, there are lots of strong arguments against minimum wages.  They’re price-fixing for labor, people say.  They’re discriminatory against the kinds of businesses that employ minimum-wage workers.  They spur automation, which kills that sort of job entirely.  They hurt the poor that don’t have those jobs because they can no longer afford the new, higher prices of the product.

All of those arguments have a lot going for them.  But today I’m criticizing a different aspect of minimum wages: the science being used to try to justify them.   (Minimum wages need justification because labor is claimed to be an exception to the economic tenet that with most goods, price and demand vary inversely.  Price the good higher and the market demands less.)

Put briefly and bluntly, the data suck.  It’s the usual problems of social and economic scientific studies, which are that the data are usually limited in quantity and accuracy, and it’s sometimes a problem that they were often collected for other purposes, from what may have been an unrepresentative group of people, using assumptions and definitions other than those of the study.  This being the case, there is also usually no way for there to be a reliable control group.  This is a really major flaw, because significant political pressure is on this study from both sides.  Not only does it mean that there are a myriad of opportunities for biased scientists to p-hack (that is, to set the study’s parameters according to which ones appear to validate the conclusion that the scientist wants) but it provides opportunities for people that want to justify mild increases in the minimum wage, which used to be the only politically possible move anyway.  Look, they used to say, mild increases in the minimum wage don’t hurt the economy!  (Although nowadays, they substitute ad hominem attacks upon Republicans in lieu of the adjective.)

What wasn’t possible politically to say is that the data we have are too crude to be able to discern the lower levels of economic damage.  But it’s telling that the places where high minimum wages are being offered are places like Seattle, San Francisco and New York that have strong economies for reasons unrelated to industries with minimum wages.  Hey, let’s test a medicine’s effectiveness without regard to the age and overall health of the patient!

Medicine is actually a good area for economic metaphor, because of the parallels of the human body with the human economy in complexity and in our difficulty collecting data deep enough to really tell us what’s going on.  Many times when people have diseases, their experience of the diseases are “subclinical”, meaning that their symptoms are so mild that the person with the disease doesn’t feel them.  The damage of slight increases to minimum wages to strong economies are, similarly, subclinical.  Not Quite Seen, in the Bastiatic sense.  The damage they do to those economies is very real, but the number of dollars flowing into those cities from Silicon Valley, or Wall Street, simply swamp the already-crude information we have about that damage.  Prosperity skews the null hypothesis wildly.

The inefficiency of politics

I’ve been thinking a good deal about how inefficient the events of the past few years have made politics seem.

Brexit was a major example.  To try, finally, to quell the political movement that argued for leaving the European Union, they allowed people to express themselves directly on the question, quite certain that they knew the answer already.  Certainly they were shocked to discover the inefficiency of their information-gathering on how people felt when Leave won by a four-point gap.  But I think the inefficiency-discovering hasn’t ended.  I think there are undiscovered effects of our societal wealth upon politics.  Let me illustrate.

Back in January Megan McArdle wrote that the best solution to Brexit would be “leave, good and hard”, a reference to H. L. Mencken’s famous quote that “Democracy is the theory that the common people know what they want, and deserve to get it, good and hard”.  “For the record,” McArdle wrote, “I think the outcome of Brexit is likely to be quite unhappy for Britain and for the ‘Leave’ voters who expect it to improve their lives.”

But Henry Louis Mencken coined that saying over a century ago (in 1916’s A Little Book in C Major), when, to take a few major examples, food was a much higher percentage of a household’s budget and most people had no car (as opposed to today’s ponderings about whether we’ve reached “peak car”) or electronic entertainment.  Society was much less wealthy.  As I’ve also argued, it’s societal wealth– the number of hours needed to work to acquire the basics to live– that pushes people further up Maslow’s hierarchy of needs.  How much increase in the cost of living, then, is needed to lower them down again to the point where they suffer?  It’s rather surprising that McArdle, who is one of the rare observers of today’s world who can usually be counted on to ask, “How much?” and “When?” rather than merely “What?” did not ask them here.  She did not question the assumption of elite policy-setters that tariffs will cause the cost of living to increase so much that ordinary dwellers in the United Kingdom will a.) notice and b.) decide that on average, it wasn’t worth trading it for regaining control over their own borders and affairs.

They certainly might do both, though elites underestimated the degree to which the latter is a retail issue for people, not a luxury issue.  Where I differ from the columnist is that I see no reason to assume it.  Overall, politicians still don’t know about the majority of things that people care about, much less how much they care about each.  We are wallowing so much in a sea of billions of people, tens of billions of their degrees of opinion, and trillions of dollars, that no one has a very good idea what’s going on.  People vote with their feet, they vote with their pocketbooks, and the tiny minority who answer polling calls vote with their answers to prephrased questions, leaving politicians looking like anthropologists trying to use the archaeological record to figure out mating rituals among the ancient Aztecs.  And in turn, people don’t know or care about the vast majority of the actions that government takes, and you can’t argue to voters that they’ll miss something you’ve done that they hadn’t even realized existed.

How cheap things are explains a lot of this.  There’s a sort of marginal utility to cheapness, a point of diminishing returns past which the increase in the value people put on cheapness is lower and lower in terms of political significance.  This works in both directions of wealth.  The tariffs involved in Brexit and the trade hardball that Donald Trump has been playing with Mexico and China will cause the price of goods to rise, but it is going to take a while before people feel it enough to alter their political behavior.  Trash cans and thrift stores are alike swamped with secondhand but still perfectly useable goods.  These goods are like a folk heuristic for the cost of living; they’re a measure of slack in the economic line.  How many fewer cargo containers of cheap goods will the U.K. be able to afford before its citizens notice?  Maybe not that many, but how many before they value cheap things more than sovereignty and democracy?  Hopefully, politicians will be paying close attention to the answer to that question.

I know Darth Vader’s really got you annoyed, but remember if you kill him then you’ll be unemployed.

So, here we go again with another musing about the moving parts of that weird alloy of capitalism and socialism that we live in, modern Western democracy.

The Relationship Between Politics and Idealism

One thing which is rarely even mentioned, let alone discussed, is the relationship between politics and idealism.

The value of social and moral activists to political parties is of course partially the value of their votes.  But part of the value is that they supply idealistic clothing to disguise the naked fights over power and money.  Political parties cling to their justifications too long and too hard.  The Democrats have been fighting racism, sexism, et cetera for a long, long time– long enough for the struggle to shift from a process to a pillar of their identity, their worldview.  This is what happens with ideas that have enough juice.  The Left appears never to have considered what they would do if they actually achieved what they ostensibly wanted, which appears to be the case:  racism and sexism have never been rarer than they are today in America and Europe.  They’re far more common in the rest of the world.  True, the activists of the Democrats have come up with some new stablemates for these tired old nags, in the form of homophobia, transphobia and so on, but given the arguments about the terms, the relative scarcity of the pitiable people in question, and (unlike race and gender) the concealability of the defining characteristic in many cases, it’s doubtful that they’ll ever be the workhorses that race and sex were.

So.  Faced with the unpleasant fact that you won, and might no longer have that sweet political and identity-narrative juice going forward, what do you do?

Give them up?

The Democratic Party won’t permit that.

Any political party or politician (Republicans included) needs idealism not only for the activist energy and votes, but to disguise the uglier aspects of their party.  Poor Democrats require a veil over the fact that much of their proffered pitiability is little more than the intellectualization of greed of foolish people who are in the lower half of the distribution when it comes to talent, brains or capitalist ability, and/or in the upper half when it comes to spending money on lifestyle.  The unaffordability by the government of poor people’s greed must likewise be concealed.  They have to have obfuscation and obscurantism over the fact that the expedience of voting yourself money is an addiction which often never ends (and which, like addiction, requires more and more over time as the system acclimates).  Find new idealism, or fix the old?  Nah.  They’re too addicted to the “quicker, easier, more seductive” path of clinging to the old idealism, poorly fitting though it now is.

So if they can’t give stale idealism up or reform it, just as Christianity could not for so long, what can they do?

Only one thing.

Move the goalposts.  Redefine them.   Do the new definitions fit the real world poorly?  Scream and rage at those pointing it out, since righteousness has its own energy, cheap and corrosive though it is.

Ralph Waldo Emerson saw this sort of rot of idealism.  In his most famous essay he wrote,

“Well, most men have bound their eyes with one or another handkerchief, and attached themselves to some one of these communities of opinion. This conformity makes them not false in a few particulars, authors of a few lies, but false in all particulars. Their every truth is not quite true. Their two is not the real two, their four not the real four; so that every word they say chagrins us, and we know not where to begin to set them right. Meantime nature is not slow to equip us in the prison-uniform of the party to which we adhere. We come to wear one cut of face and figure, and acquire by degrees the gentlest asinine expression.”