Economics has generated various laws - a priori truths - that are unarguable. Demand curves slope downwards, always, everywhere. People act purposefully, without exception.
A curious case of economists' wisdom arises when people talk about a minimum wage. We know, as a matter of theoretical truth, that minimum wages increase unemployment. Depending on how you measure it, this can become obscured, but it is unarguable. There will be less working after a minimum wage then before.
That's not to say that some people don't benefit - those lucky enough to keep their jobs will - but it's a bad policy. Hence politicians need to abuse the ignorant with rhetorical gimmicks, for example referring to it as a living wage. I mean, who can argue against that! It implied we're advocating a "non-living" wage, or a "dead" wage...
I don't mind non-economists' being ignorant of economic arguments, but surely politicians should know the facts? Well, maybe they do know the effects of a minimum wage. Alex Tabarrok reveals that:
It's no surprise that progressives at the turn of the twentieth century supported minimum wages and restrictions on working hours and conditions. Isn't this what it means to be a progressive? Indeed, but what is more surprising is why the progressives advocated these laws. A first clue is that many advocated labor legislation "for women and for women only."
Progressives,..., were interested not in protecting women but in protecting men and the race. Their goal was to get women back into the home, where they belonged, instead of abandoning their eugenic duties and competing with men for work.
Unlike today's progressives, the originals understood that minimum wages for women would put women out of work - that was the point and the more unemployment of women the better!
And this is the interesting thing: pretty much every economist - the experts on this issue - knows that minimum wages are bad.
However, in 1996, in a study by Card and Krueger, an empirical claim was made that the introduction of a minimum wage in New Jersey did not reduce unemployment. Since that massive finding, the study was replicated and it's become known that the orginal survey asked the wrong question (they asked how many jobs had been lost, rather than how many hours had been reduced).
Isaac DiIanni has sent me the original responses from two exemplory economist's, following Card and Krueger's article. It's from the Wall Street Journal, 25th April 1996:
The inverse relationship between quantity demanded and price is the core proposition in economic science, which embodies the presupposition that human choice behavior is sufficiently rational to allow predictions to be made. Just as no physicist would claim that "water runs uphill," no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimal scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests. Fortunately, only a handful of economists are willing to throw over the teaching of two centuries; we have not yet become a bevy of camp-following whores.
James M. Buchanan, a 1986 Nobel laureate in economics, is a professor at George Mason University.
Years ago, economists used to believe there was no such thing as a free lunch. Some now seem to have found one, however, in the proposed increase in the minimum wage. Raising the minimum wage by law above its market determined equilibrium, they argue, actually costs nobody anything. (Or at worst, costs nobody very much because it's only a small, marginal increment, after all.) Is all this too good to be true? Damn right. But it sure plays well in the opinion polls. I tremble for my profession.
Merton H. Miller, a 1990 Nobel laureate in economics, is a professor emeritus at the University of Chicago.