Theme: Productivity

—“Would everyone’s salary increase if the minimum wage increased to $15/hour?”—

The difference between the major schools of economic thought, and the class and cultural biases that they position as ‘scientific’ are really just cherry picking favorite ‘goods’.

The schools of thought roughly correspond to class philosophies, just as all philosophies consist of class philosophies. And they describe a spectrum of increasing discretion from rule of law, to discretionary rule, to arbitrary rule.

1 – The Rule of Law School (not rule BY law, but rule OF law of reciprocity) (Conservative Constitutional – Where the constitution merely codifies the natural law of reciprocity so that it cannot be violated) is the Conservative (Anglo-Saxon). Meaning the rules of the game are the same for all, and attempts to build optimum normative COMMONS. Rather than increase consumption.

2 – The Discretionary Rule School (Chicago/Freshwater/classical liberal/Pragmatic/Libertarian) attempted to find means of insuring against shocks with the minimum interference in rule of law (and therefore planning).

3 – The Arbitrary Rule School (New York/Freshwater/Left-Social Democrat/Authoritarian) seeks the maximum consumption possible without collapsing the market, and has no interest

whatsoever in rule of law.

Economics can easily be used to justify “you get what you measure”, and there to advocate what you measure, and ignore or deride what you do not. And the 20th century will be seen (as Hayek predicted) as a period of social pseudoscience (the used the term ‘mysticism’) because of what some of us term ‘innumeracy’ or “pseudo-rationalism”, if not outright deception.

While it’s true that money is neutral, and all prices equilibrate over time. And that all benefits of the increases in minimum wages equilibrate over time. This is not necessarily true however, since an increase in minimum wages functions just like an increase in taxation – it affects everyone equally. Prices increase, and at least for some period of time, as the price increase works through the economy, the gains are real.

The public assumes that the increase comes out of owner’s pockets, but it comes out of increasing prices to customers. Which again, is a trade off between businesses and consumers of the goods of those businesses able to adjust prices. (My hometown of Seattle is still working through its experiment, and the data so far is mixed both directions.)

That the issue at hand is that it creates separate and divisive classes. Now, minimum wages can be used to intentionally create separate classes so that there is a clear line between those requiring subsidy (dependency upon the citizenry for support), and those who are self sufficient. Which decreases demand for universal redistribution and concentrates it. This has some benefit in that it tends to remove the underclasses from the job pool (as we see in Denmark). So that the man selling you tickets at the train station is competent, civil, and literate. As far as I know these are the only arguments we can make.

That minimum wage increases demand for family run businesses at the low end to skirt minimum wages and this tends to increase the number of ‘artificially small’ businesses that plague most of the world. The first world latin countries are notorious for having followed these policies and created two economies. the third world cannot produce organizations of scale for these reasons. And the social, economic, and political consequences of providing nepotistic rather than meritocratic organizations are profound.

That these small businesses, (as we see with asian-immigrant businesses in particular) because they incentivize nepotistic business, skirt both minimum wage laws and taxes (why they don’t accept credit cards).

That it raises the cost of entry into the market for businesses at the low end, and decreases the development of the primary means of obtaining financial independence: small business entrepreneurship. And worse, that small business entrepreneurs carry a disproportionate amount of the country’s economic risk – for which they are not compensated in tax leniency.

That it lowers the rate of rotation of people out of minimum wage jobs – the purpose of which is nothing other than to train entrants to participate in the economy. Minimum wage jobs function as paid apprenticeships, where in most of history, apprenticeship functioned as very near indentured servitude.

That while there is evidence that raising the minimum wage does put more money in people’s hands, it’s distortive to prices, and contrary to public moral and political intuition, we would be far better off with direct monetary redistribution than minimum wage increases – and that we are simply technologically backward in forcing businesses to act as agents.

That while there is evidence that raising the minimum wage does put more money in people’s hands – albeit with negative consequence – but that there is equal evidence that raising the minimum wage such that entry level (unskilled labor) is no longer a paid apprenticeship, that because the lifetime window for entry into the job market is fairly short, that we create permanently unemployable classes, and the economic, political, and social consequences of creating permanently unemployable classes. In america, as is the human standard, we have about three percent of the population that is unemployable because they are psychologically intolerable. We have an offensive percent of the population that consists of ex-convicts, we have imported a vast number of third worlders who caused employment displacement at the bottom (youth) and top (older citizens). This increases poverty among the young and old.

there is equal evidence that we create hazards with profound external consequences (longer term costs) in that we provide malincentives to immigrate, and each underclass person we immigrate plus the inflation necessary to create the illusion of employment, plus the capture in taxes of all wealth created by the addition of women to the workforce, plus the destruction of the family and expansion of households, explains where all our productivity has gone: to the subsidy of that which is bad for us. (Northern europe was eugenic for over a thousand years, and the church created dead capital everywhere. So when we imported northern europeans we were importing dead capital and putting it into motion. When we bring in the third world we are not bringing in capital that can be put into motion, but sunk normative political and economic costs. We have gone from importing middle classes (protestants), to importing working classes (catholics), to importing underclasses (third worlders).

That you get more of whatever you subsidize, and each school seeks to subsidize what they consider a good. Conservative – Families, Virtues, Commons, Excellences), Libertarian/Classical Liberal – Opportunities and Insurance. Leftist/Socialist/Social Democrat – Consumption. But we get more of whatever it is we solve for, which is whatever we measure, which includes the externalities we do not solve for. The only ‘honest’ left economist I’ve found is Karl Smith, and his (correct) presumption is that we are all gambling on futures. The conservatives gamble against risk and pushing costs down the timeline. The left gambles in favor of opportunity and to push costs down the timeline. And the Libertarian/Classical Liberal seeks to gamble only with what we can be sure we will obtain returns upon, without externalizing costs to the future.

At present, all of this is lost both inside the discipline, and outside of it. And the vox populi are just confused. As far as I know, the conservatives and classicals are right, and the left is the worst thing to happen to humanity since marx, who was the worst thing to happen to humanity since the Abrahamic counter-enlightenment.

You get what you measure, and cherry picking consumption is just pseudoscience, if not outright fraud.

If you haven’t been to France, outside of the center of Paris (like Vienna) where the very rich live, the Isle de’ France, is a donut shaped slum twenty miles across. Just like Los Angeles is largely a seventy mile long slum. Many french cities are as collapsed as Hartford, Baltimore, Detroit, St Louis, and Oakland – and europeans are much poorer in discretionary spending than we are in the first place – and it is spreading to Germany.

Our world is much larger (more populous) and economically diverse than the ancient world. So while the bronze age collapse ended all of the first generation of civilizations, and the Abrahamic age collapse ended the mediterranean civilizations but left china and india alone, in the current era, the Modern age, cities are collapsing one at a time, states one at a time, but almost as quickly as they did in prior eras. Russia collapsed in weeks. Rome largely collapsed in months but systematically over seventy years. And all civilizations collapse for the same reason: overconsumption without sufficient retained capital to adjust to and reorganize in the face of biological (Justinian Plague), Demographic (barbarian invasions), environmental (south american drought), and trade-route shocks (most of central eurasia).

The leftist looks at today and tomorrow, the libertarian his lifetime, and the conservative across the centuries.

And the markets for reciprocity under rule of law are the only possible means by which we calculate what is in our mutual intersets, rather than making pseudoscientific arguments to advance our class interests.

Curt Doolittle

The Propertarian Institute

Kiev, Ukraine

(repost)