Daily Clips: October 24th, 2016
Doomsayers keep getting it wrong on the minimum wage: Barry Ritholtz over at Bloomberg points out that minimum wage opponents have failed (again) at predicting the effects of a higher minimum wage. His reasoning behind why they got it so wrong is particularly acute, in my opinion:
Why did so many economists get this wrong? They looked at the micro and ignored the macro. In the basic model of supply and demand, an increase in the cost of something reduces demand. This may be true in an isolated laboratory setting. But when minimum wages went up in the real world, it affected not just the parties to that transaction, but the regional economy. By considering only the relationship between employer and employee, the dismal-science set was focusing too narrowly. The critics failed to consider the impact of lower-wage employees earning more money; these folks typically spends almost everything they earn, which means that when they’re paid more it goes right back into the local economy.
Down-ballot Democrats: With a little over two weeks to go before Election Day, President Obama is releasing “150 endorsements of Democratic candidates for state legislatures all across the country.”
Liberals compete for the soul of economics: Nick Hanauer’s love of complexity economics is highlighted in this piece.
Tweet of the day:
— Kyle Griffin (@kylegriffin1) October 24, 2016