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I vaguely recall people arguing, during the health care “debates” that the increased cost of health care puts American firms at a disadvantage and hurts American workers because health costs eat up so much of the firms’ labor costs – so pay is lower than it otherwise would be, and firms have to skimp on valuable things like job training, vacation, and other desirable working attributes. It was even thought that high health costs hurt American employment. Ignore for now whether any of that is true and ponder this:

Many people, including wealthy retailers, are arguing that not only do “we” have a moral obligation to force some employers to pay more for their workers than they do today via increases in the minimum wage, but that by putting more money in the pockets of workers and by reducing labor turnover, that increasing the minimum wage will not only not harmful, but actually “good” for the American economy.

Now, I CAN make an argument, an awkward one, about minimum wages being “good” but just keep in mind the first paragraph above when you start hearing things like this. As we like to say here, YCHIBW.

Have a great weekend.

Story is here. Note, too, that this is an “agreement” which means it will not actually be enforced. My prediction: emissions will fall despite this “agreement” not being enforced, and policymakers will take credit for the incredible progress “they’ve” made. But this is undeniably great news for Americans and energy poor people around the planet. We are going to get cheaper fossil fuels than otherwise AND we have Europeans subsidizing R&D into additional “green” energy sources. What could be better than that?

Friday “Funny”

If the income and wealth of every single American were to double over the next decade in REAL terms, then in a decade, the amount of measured poverty would remain unchanged. You’d also very likely see no change in inequality according to the way most people talk about it, i.e. “the income share of the top x% versus the income share of everyone else.” And we’d therefore “conclude” that economic growth doesn’t end poverty and that economic growth doesn’t alter inequality.

UPDATE: Edited to reflect comment two … my point was supposed to be that the gains to the rich would be larger than the gains to the poor, and out came what I wrote! The point remains of course.

I think the modern concern about stagnation is entirely overblown. I am not arguing that it is not real or not happening, just that I think “we” care too much about it. Here is the latest illustration of someone worrying about stagnation and looking for reasons to be optimistic:

Greg and Jill Henderson, founders of Hendo, have developed a real hoverboard. … It’s not exactly ready for, or usable on, concrete but everything has to start somewhere.

… There are different accounts here, with varying degrees of enthusiasm or lack thereof, I found this one useful.  Still, this is more progress than we were seeing a year ago.

At a crass level, you shouldn’t care about stagnation because, well, we’re all pretty darn rich. Concerns about stagnation in America are not about whether there is enough food to eat, but rather about whether our grandchildren will be able to fly their own private cars around. Now, I do exaggerate here. At a less crass level, I think overt worrying about whether we are stagnating or not may actually be self-fulfilling. Do I have a solid causal mechanism of where I go from “thinking about stagnation” leads to real stagnation? For starters, we sure do have a lot of people’s energy tied up in talking about whether we are at some sort of technical plateau, which means of course fewer people actually chopping away at their wood piles. I don’t think this effect is large. However, I DO think humans are a pessimistic lot, and I think talk of stagnation or a slowing of progress may change the culture of ideas back to something like it was prior to our growth explosion 200 years ago. The prevailing wisdom may just be, “well, we had a nice run, it’s over now, I better focus on making sure I preserve my little slice.” I do not think this is healthy. I also don’t think that is the way Cowen should be read or that this is his message, but I do think that this is how the message is going to be received.  Do you need evidence? Talk to any “E”nvironmentalist about the state of the planet today. They can’t possibly think the way they do by doing an objective evaluation of the state of the planet or more importantly our ability to deal with many alternative states of the planet.

Now, the reason I think there are legitimate concerns about stagnation is because of what this implies for poor people around the world. I think they DO need to see continued reductions in the costs of Americans’ lifestyles and an increased opportunity to trade with us and learn from us. So, if you care about global poverty, growth going forward should be an important concern. Another reason you might be concerned has to do with the nature of the political promises and theater in our own country. I don’t quite care for it, but if you believe that everyone is entitled to 26 weeks per year of paid vacation and that the government and enlightened retailers should set wages at very high levels, then man we better be hoping that the Incredible Magic Pixie Dust Machine gets invented, and gets invented fast. I don’t much care.


  1. Here is yet another paper computing “optimal” top marginal income tax rates. As I’ve said a zillion times, the term “optimal” implies a goal. And that goal is obviously not universally shared. Let me ask rhetorically, is the goal of a tax system to maximize revenues to the government? Now this paper actually comes up with a goal of maximizing social welfare, which is fancy econospeak for efficiency. Whether they are assuming magic political beans to get there I’ll leave for curious readers to decide.
  2. Traffic tickets DO seem to promote roadway safety. That one surprised me given my priors.
  3. Does gun ownership prevent violent crime? This is another paper to be added to the literature. Their answer: not only does it not prevent violent crime (among strangers) but it seems to make violence with non-strangers more likely. This one IS in alignment with my priors.
  4. This paper suggests that negative and smear political campaigning have NOT undermined public trust in government. That finding is all the more interesting given the general high levels of mistrust we DO have. So what is the reason? Who knows, I’m not interested in speculating now, but one consequence of that is that it seems people are far more resistant to public health initiatives than in the past, a perhaps frightening outcome? Or not? Again, I have my “theories” but they’re only worth discussing over beer.
  5. Here is another topic I am sympathetic with the left on: attempts to reduce voter fraud. As you know, there is a debate about voter ID laws and they are nominally instituted to make sure the people that DO vote are actually people that are eligible to vote. Now, as with much of the world today, the REAL arguments here are actually about something else. I personally do not have confidence that our elections are not rigged, nor do I really care that much at our current margins. However, THIS paper makes a VERY important point – that efforts to “do the right thing” and limit voter fraud inevitably have the unintended consequence of limiting access to voting by legitimate and eligible voters. Great! So now I look forward to the swarm of papers showing, conclusively, that doing something to regulate the environment or workplace or educational sectors MAY in fact promote more of the things you SAY you want, but also comes at a cost, perhaps even of a cleaner environment elsewhere, or safer or fairer workplace elsewhere. After all, this phenomenon can’t just ne limited to voting, right?
  6. You become less religious after your first experience with intercourse. I wish the same result applied to those experience bad economic policy for the first time. I think people become more “religious” after their preferred policies fail. Why the difference?

He writes today:

I learned a real lesson about politics from my brief involvement in this issue — which is, don’t ever become involved again.  I am still frankly reeling from the refusal of gay rights activists to work with our group because I and others involved did not hold other Left-wing opinions.  Until this time I had a fantasy that libertarians could make common cause with the Left on social issues and the Right on fiscal and commerce issues, but I saw how this was a pipe dream.

I think I still share the pipe dream but perhaps from the other direction. In other words, I think I can/have done a reasonably good job convincing some Team Reebok members that they should care about economics and how the economic way of thinking can help us all get more of what we want, and had always believed that building common ground about good economics and fiscal sanity might make them more amenable to thinking harder about issues that are important to me, such as the gay rights issue, increasing respect for immigrants, and a few others. But I sense that I should be equally depressed as Coyote, the only reason perhaps is that I’ve not yet gone out on a political limb like Coyote has.

What do you think?

Building off an earlier post, I want to continue to reemphasize my newfound support for banning fracking and anything that could be remotely as harmful as it. Why the reprise? Well, this past weekend our family spent a wonderful day touring around the Finger Lakes. The area is in our estimation one of the most underrated beautiful places east of the Mississippi, and it is getting better with the huge, and I mean huge, proliferation of wineries over the past 20 years since we have been part of the area.

That’s a vineyard overlooking Canandaigua Lake. There are hundreds and hundreds more spectacular scenes than this one. The area has gotten even better for us recently, with the rise of the small, local brewery – there must be 50 or more of them scattered around the lakes now, and when we were driving through Hector on the east side of Seneca Lake this weekend we even saw a new local distillery. And given the incredible fall weather we had, the crowds at every one of these places were impressive. In addition to the happy people and stunning views, we also saw tons and tons and tons of anti-fracking signs, and we saw tons of these signs too:

(my favorite part of the sign above is that a 2.0 earthquake is wholly insignificant, and does not damage and is felt by few if any people. Earthquakes of that scale are expected to occur about a million times per year around the globe. The earth has about 200 million square miles. My estimate of the size of the Finger Lakes region is that it runs from Rochester to just west of Oneida and is about 100 miles long and about 50 miles wide for a total 5,000 square miles in land area. Thus, the Finger Lakes make up 1/40,000th of the land area of the world. If earthquakes are evenly distributed around the planet (and they are not) then each parcel that is 200 square miles in area should experience one earthquake of this magnitude per year. And therefore the Finger Lakes should be experiencing TWO HUNDRED such occurrences like this per year. I am so sure that the bastions of sciency goodness made this clear to their supporters and when they say “we got a 2,0 earthquake right here in Seneca Lake, it is one MORE than we already should have expected given the natural occurrences of  such things, even as innocent as they are to begin with). Is there ANY place on earth, based on this data, where it’s “OK” to store anything underground? 

There is a proposal to build a gas storage facility in the Seneca Lake area, and the locals, particularly the wineries, seemed to have come out to strongly oppose the facility. I don’t actually want to weigh in on the specifics of “the debate.” Instead, I’d like to ask the paragons of sciency goodness for a little science. How much risk to human health and well-being is there from storing gas? I’m not even talking about the fracking itself, instead just storing it? OK, then move onto the fracking? What are the known risks to human health from escaped methane gas? What are the known risks to human health from fracking chemicals escalating from depths? What are the known risks from the micro-quakes that can be caused by parts of the fracking process? Indeed, you are going to spend a LOT of time looking for any real impacts on human health and well-being from any of that. What you WILL see are that there are risks from fracking because it is, like a lot of things, an industrial activity – requiring lots of trucks transporting people, water and chemicals, and of course the emissions that result from running generators particularly for the transport stations. Therefore, you can think of ANY industrial activity as generating the same concerns.

To make this more concrete, how are all of the people who visit wineries and breweries getting there? Are they flying on fairie wings that emit orange blossoms instead of CO2 and noxious emissions? How are all of the wine bottles shipped to distributors and restaurants and tasting rooms and liquor stores all over the Northeast? Are they shipped on huffalumps? If we want a “gas free Seneca” why are those forms of industrial activity OK but not the storage of gas in tunnels that are already there? Again, this is not to say that I want the storage to happen, this is merely to ask what is different about the industrial farming that the finger lakes have turned into and the arguments made about the gas?

Or what about the risks posed to the watershed? Turning the entire Finger Lakes into a hop farm, vineyard and corn farm obviously has serious implications for the water quality, and the more these areas are farmed, even if organically and sustainably, the greater the threats to soil erosion and agricultural runoff into our lakes. I am sure, yes sure, that the risks to water quality from those activities are far more serious than from gas. So why the different treatments? Is it simply because a grapevine is prettier than a salt-tunnel?

Finally, and most important, if we truly cared about the impact of our activities on human health and well-being, and I think we should, then it is stunning to me that we allow wineries and breweries not only to exist, but that we have tax dollars being used to support the “Finger Lakes Wine Trail” and the “Finger Lakes Beer Trail.” I’ll leave this as a little research exercise for all of my sciencey-good readers, but how many deaths occur in the United States each year as a result of over-consumption of alcohol? How many families are destroyed because one or both parents are abusers of alcohol? How many road traffic accidents each year are caused because a driver or pedestrian was intoxicated? How many billions of dollars of higher insurance fees and medical bills are required because people in America abuse alcohol? And how serious are those risks as compared to ANYTHING gas storage, or fracking, or just about ANY iudustrial activity has been demonstrated to cause? Go look at the data oh ye bastions and sciency-goodness and please do report back to me. I am quite familiar with it.

I am 100% on board with banning fracking and with not permitting the gas storage as long as you show me the known epidemiology of these things. And then, since we can agree that risks at the levels and magnitudes imposed by gas are truly unacceptable, I will march hand in hand, banner-in-banner, slogan-in-slogan with me comrades to make sure we eliminate ANY threat to the health and well-being of the people of the Finger Lakes and central and western New York that is as bad or worse than fracking and gas storage. It will be great fun setting fire to the thousands of acres of vineyards. It will be incredibly powerful and moving to watch the dismantling of the hundreds of tasting rooms, so that we can convert those into the schools and outpatient medical facilities that our communities have a right to. It will be truly inspiring to tear up the roads around the Finger Lakes so we can put an end to the scourge of the drunk driver and the emitting fuel vehicle so that people can enjoy the clean air and water that they truly have a right to. It will be a testament to human progress to remove the millions of tons of stainless steel embedded in fermentation tanks and brew kettles and hot liquor tanks and mash tuns and see them reforged into the mighty windmills that will end our need to have gas stored beneath our precious lakes. It will be a testament to human progress to  stop the hundreds of winemaking enthusiasts from their orgiastic travel to France and Germany and Italy where they learn about the stupid art of making people drunk and emit carbon ton after carbon ton from their journeys – they can now all be freed to be nurses and school-teachers. If only all of the people of the Finger Lakes were not blinded by their greed and the almightly dollar would they see the error of their ways and truly turn the area in the safe, bucolic, clean, free place that was god’s intention for it.

And don’t go starting to tell me that “wineries promote economic development!” After all, the clientele around the lake, and I’ve seen it for 20 years, is a wealthy one. Are you using the old dead voodoo idea of “trickle down” economics to argue that the expansion of the wine industry is good for everyone in the Finger Lakes? In whose pay are you? Are you cashing weekly paychecks from “Big Wine” to spout this propaganda? Do you really want to walk down this dreaded path? After all, no one likes cheap gas to warm a home. No one likes cheap gas to cook over. No one likes cheap gas to be used as a backup generating source to deal with the intermittency problems of wind and solar. After all, no one likes the cheap gas that helps us create the fertilizers that are vital for our successful agricultural system. Nope – it’s all bad, all the time.

So, what say ye?

What data would be sufficient to falsify your thesis? This question need be asked not just in the physical science, where observations about the world are where the theoretic rubber meetings the road, but also in the social sciences. When it comes to the hard sciences, you can imagine laying out conditions that would encourage you to rethink your thesis: for example, if at normal atmospheric pressures, water does not boil at 212 degrees Fahrenheit, you might begin to question your theory of the relationship between the states of water and its temperature. Now, the theory doesn’t have to be entirely wrong – it is certainly possible that your thermometer is not calibrated properly, it is certainly possible that in fact you are not at normal atmospheric pressures, and it is possible that the liquid in the pot is not entirely water – and these are all possible reasons why your observations do not match your theoretical predictions.

But, just arguing that the experimental design is a bit messed up is not sufficient to address the bigger point. Assuming that you have a perfect experimental design and perfect measuring implements, what data would you be required to see before you thought there were difficulties with your theory? Furthermore, in the presence of data that contradicts your theory, what do you do? Do you use your theory to construct models and simulations and argue that the simulation results are what matters and not the observations on the ground? Do you generalize your theory enough so that just about any outcome you observe would technically be consistent with it? That is not scientific behavior at all. To avoid being unscientific, in addition ex ante specifying what data would be sufficient to falsify your theory, you are also required to state what you would do should you encounter such observations? Is your theory sufficiently defined so that it actually can be subject to testing? And if not, can you admit that what we are doing is a little beyond the mantle of true science?

In the social sciences, you can see how this is important for questions like, “Is capitalism good for humanity?” Now, the word good has lots of possible meanings – but I tend to use it as, “raises the general material living standards of people.” In this case, I would be persuaded not just by the number of calories people have access to, or the amount of clothing in their closet – but with the indicators of well being such as overall health, longevity and cognitive capability. If you wished to persuade me that my thesis was wrong, I would offer up the data that shows me life expectancy falling, calories consumed falling and cognitive ability falling when we have private property and free exchange. We can agree to examine other data too – such as how much political violence there is under each system. But I imagine that even if the data seems to comport with my theory that this would not be sufficient for anti-capitalists, nor do I think that declining life expectancies under capitalism (it doesn’t happen by the way) would be sufficient to convince me that my theory is wrong.

This is insightful. First it tells me that if economics and the social sciences are a science, they are extremely complex and perhaps defy simple theorizing. Second, it’s that we probably are not a science, and that arguments about capitalism and socialism in fact are not about consequentialist outcomes but entirely about something else. Proponents slip easily from consequentialist concerns to rules-based concerns and this elusiveness again tells me that this is not at all scientific.

Which takes us to global warming. Again, since this is a modern university I am working at, we are not actually allowed to have real conversations, so buyer beware here. What data would the “global warming consensus” crowd require before they suggest their theories are false? Or at least to suggest their theories need to be augmented? I don’t think there is any. No need to recount the 17-18 year history of “the pause” here, it’s not persuasive to anyone – but CO2 concentrations are at an all time high and the climate theory would predict that the earth would have continued to warm right through this time, but it has not – and don’t go talking about the missing heat in the ocean, it’s not clear that it’s there. My point is simply that in the face of these observations I am not seeing much amended to the climate models in terms of their expectations of what the feedback effects are, and I certainly am not seeing any climate modeler say that “the observations are causing difficulties for us” … instead what I see is that when the observations are not in accordance to what scientisits are predicting, the climate community is telling us to INCREASE our reliance on models and not pay attention to what we see on the ground.

Again, none of this is to deny the “science” of global warming, whatever that happens to be. Rather, is it too much to ask folks who use their theory as a justification for ending the world as we know it, to present, ex ante, would sort of evidence they would like to see in order to encourage them to change their views and models, one way or the other? To see how unscientific we are being, just imagine instead of having global temps flatline for nearly two decades that they increased twice as fast as models predicted, what would the reaction of the scientific community have been? Would they then have admiitted that the science is complex, that their existing models were wrong and that we should pay attention to the hotter observations instead of their models?

Inquiring minds want to know.

Such a question is normally asked by me in an intermediate micro class to illustrate that basic economic tools can be useful for understanding the most pedestrian events of our everyday life. Indeed, I was all set to have my intro students grapple with this earth altering question as I wander into class today. But I won’t. Not today. Why? Two reasons. And both have to do with students taking the fun out of asking such questions.

(1) First, I like to ask questions like this not just because “economics is everywhere” but to paradoxically remind students that there is much more to life than applying rational benefit-cost thinking to every situation. Over the past few years, I have come to believe that my students now ONLY think of how to apply the rational benefit-cost idea to a situation and have totally ignored the countless hours of lectures and readings I try to give them on, “there’s more to life than that.” So, in thinking about holding open a door, sure it is a fun and useful exercise to ask what is “optimal” behavior if, for example, we are thinking about minimizing time spend in transport to and from places. You can even assume other goals. But the reason I wanted to talk about holding open doors is that I think this has very important insights for appreciating the complexity and challenges of economic development, and for how we live a good life. You see, I think it is important to live in a community where people at least share the sentiment that holding a door open is a decent gesture. It is a community that places the interests of others somewhere in your consideration. And even if door holding is not common, the sentiment is what I find to be important. I have argued and will continue to argue that unless we live in a place where metaphorical “door holding” is part of the culture, it is going to be preposterous to imagine that markets will work well there. It will be more preposterous to think that civil service and political representatives will actually work well too.

(2) But now students have layered quite a second reason to not ask the question. You see, by my sharing the sentiment that it is a decent thing to hold a door open for people, my sentiment and my act of doing so actually reveals an unconscious bias that I have. Now, I’ll remind you that I like to hold doors for men and women, boys and girls, old and young, but that doesn’t matter for the crowd of regular offendees. My gesture of holding a door is construed as a sign that I think some people are too weak or independent to open doors for themselves – in other words, my sentiment is actually belittling other people. I am not here to debate whether or not my act or sentiment in fact does this or whether it matters, only to state the obvious that this has also had a chilling effect on my behavior. I tend to hold far fewer doors on campus today than I did when I got here. And of course, I will not be asking my students about whether or not I should be holding doors open.

So, I do my best to avoid be sucked into the campus pity party. Sadly of course, I think I am going to be accused of committing additional acts of micro-aggression for not wanting to engage at all with any situation that may be construed as a micro-aggression. And please dear readers, do not feel any need to shower any pity on me, for neither am I deserving nor is it a useful sentiment. I merely state this as another reason why I am sitting on the sidelines.

Of course, NONE of this will persuade anyone, but I do think that they each lay out honestly and clearly what “the” debate is all about. Note that my posting does not equate to my sanctioning. And note, vis-a-vis the Sumner piece, that the word sanctioning has multiple meanings.

First, here are John Cochrane’s remarks at a memorial conference held for Gary Becker on the topic of inequality and why we care.

Second, here is Scott Sumner on Good Theft and Bad Theft.

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