The New Republic

Overall it's pretty bad, but aren't the standard-of-living and monopoly questions both inarguably correct?

- Simon Greenwood

June 8, 2010 at 5:27pm

Jon, You're simply wrong about the minimum wage. The Card/Krueger paper was one narrowly-crafted empirical study. And it didn't suggest that there was no link; instead, it suggested that in areas (company towns) or sectors (fast food) with monopsony labor power, the government could craft a modest minimum wage hike that would raise employment. However, these circumstances are the exception and not the rule: the vast majority of the economic literature suggests that on balance minimum wage hikes lower employment: http://www.amazon.com/Minimum-Wages-David-Neumark/dp/0262141027/ref=sr_1_1?ie=UTF8&s=books&qid=1276032456&sr=1-1

- primwallflow

June 8, 2010 at 5:41pm

The correct answer to the "standard of living" question depends on the meaning of "overall". I'm in a bar having a drink, and in comes Bill Gates. The "overall" standard of living of those in the bar has gone way up. My standard of living, not so much. The monopoly question is a trick question; in what market is there a "monopoly"? I suppose the market for skills possessed by Albert Pujols.

- rayward

June 8, 2010 at 5:47pm

This so-called study is based not on factual observations but ideology. Ideology is faith-based; not what we know is true but what we WANT to be true. If the empirical data doesn't support the conclusion, you change or create new data that does. Supply-side economics (if you can actually call it economics) is nothing more than a religion based on money. Besides the obvious epistemological errors, the WSJ also makes the same errors that they (wrongfully) accuse liberals/progressives of making....conflating opinion research with scientific research. Simon Greenwood....I would say in response to your comment that they don't define whose standard of living or the geographic location they're talking about nor do they even define "standard of living" itself. These are, again, very subjective terms that are interpreted differently depending upon who you are, where you live and how you live. In response to the monopoly question, it's not necessarily true that a large market share is the same as a monopoly. A monopoly is better defined as the behavior of the largest market share holders to stifle and drive out other competitors, not merely the fact that they are, existentially, the largest in that market. I'm sure we'll hear some convoluted, fact-free Randian nonsense from our little friend Dr. Irrational on this thread.

- desertdog

June 8, 2010 at 5:49pm

"Overall it's pretty bad, but aren't the standard-of-living and monopoly questions both inarguably correct?" Maybe the monopoly question, because that relies mainly on a definition of monopoly around which there is likely little debate. As for 'standard of living', though, I do not know whether it has a fairly precise meaning for economists, but for the rest of us it is ambiguous. There are innumerable measures which would suggest that the standard of living in today's world is diminished. Many liberals probably have those things in mind when asked a question of this sort.

- Fishpeddler

June 8, 2010 at 5:50pm

I will have a go at the other inane questions. Professional licensing leads to higher prices. What about unlicensed professionals practicing brain surgery leading to (heaven forbid!) a whole lot of malpractice claims, the usual suspect for the WSJ. Rent control. Don't live in NYC. Had to move to NJ because of the rent control in NYC. LDC ("third world", how long ago did anybody use that term) workers exploited. What you say Kemo Sabe? Free trade and unemployment. Not "overall" (that term again) as anybody familiar with "comparative advantage" will tell you. Except for the sap who loses his job moved overseas. To take advantage of comparative advantage.

- rayward

June 8, 2010 at 6:03pm

This study is just a nicely dressed push poll. It's total junk as research. If I can get enough people to belive something is true, then that makes it true. And of course, my hypothesis is accepted as fact to begin with. If you beleive my conclusion is true, you're informed. If you don't , you're uninformed. This is what Stephen Colbert calls "truthiness". As far as the minimum wage question, it may act to depress wages on a micro level, like a company town or a rural area. But on the macro level, minimum wage probably has the opposite effect since it puts more money in more people's hands that they can use to buy more goods and services, thus increasing demand, output and......employment.

- desertdog

June 8, 2010 at 7:16pm

I am waiting to see how badly leftists flunk the history of the Presidency of Ronald Reagan? Ronald Reagan was a gread president (unenlightened answer, disagree). He defeated the Soviet Union (unenlightened answer, disagree). He freed the hostages in Iran. (unenlightened answer, disagree) He ushered in an era of tremendous prosperity (unenlightened answer, disagree) Iran-Contra was much ado about nothing (unenlightened answer, disagree). By the way, here is a real true false question from some right wing dickhead: 7. Real family income increased each year from 1983 through 1990 in every income group (from the poorest fifth of households to the richest fifth), while median family income fell by 1.9 percent in 1993. Notice the selectivity. Reagan became President in Jan. 1981 and the economy went into free fall, Republicans only start counting after the recession turned the corner, likewise they stop in 1990 before the next Bush recession. And he only lists 1993 under Clinton, but ignores the rest. Such hacks. I teach reading workshops in Business English for the Spanish students, how to negotiate, marketing etc. so I am pretty familiar with all the basic tests that my students have. I gotta tell you, that test was f-ing garbage. Here is an economics question: Exploring Supply and Demand First decide if the change affects demand, supply, or both, then decide how the price and quantity will be affected. 1. If Jackie's income rises, what happens to her demand for airplane trips? If the income of most consumers of air travel rises (and air travel is a normal good), what will happen to the market equilibruim price P and quantity Q of this good? P Rises P Falls P Indeterminant Q Rises Q Falls Q Indeterminant Now, here is a typical answer for an exam question I got online: Let Macrosoft be firm 1, and Peach firm 2. a) profits for Macrosoft p 1 = (16 - x1 - x2 )x1, reaction function for Macrosoft from 16-2X1-X2=0 is X1 = 8 -X2/2 When it comes to this economics I flunk miserably.

- blackton

June 8, 2010 at 7:47pm

This post amused me because my long-time friend, Tom P., whose courses in philosophy and logic and ethics and religion I took 36 years ago in college, has said that many on the left could benefit from taking just one economics course. I have long quoted him on this. But he does not at all mean "liberals" when he refers to the left and economics, he means the Nation left. The minimum wage matter is particularly instructive. It is just dogma on the right that the minimum wage is a job-killer, but there is little-to-no evidence for this proposition. Anyone who has spent time on the intellectual right will know the name Walter Williams. He has inveighed against the minimum wage forever. It is an article of faith to him that the minimum wage is bad. On the other hand, rent control is no good and liberal economists widely recognize that. It is as if the designers of the survey questions regarded the answers as something equivalent to Euclidean postulates. Very strange.

- liberal reformer

June 8, 2010 at 9:03pm

Why do libertarians and conservatives lie and mislead so much? When you have an ideology that is for the most part very harmful to the vast majority, you can't argue based on the truth of it, not if you want to convince a majority of voters to support it. So you're just forced to lie and mislead for the cause. It's really very simple. Mainstream Democrats typically have the luxury of telling the truth and not misleading, because the truth typically makes their policies far more preferable to the vast majority than those of libertarians and Republicans. Republicans and libertarians just typically do not have this luxury. It's either lie and mislead about the implications of their economic policies and ideology or stand no chance of ever getting them enacted in a democracy.

- RHSerlin

June 8, 2010 at 9:46pm

Chait is clearly not smarter than a 5th grader. My perspective is that liberals are so bad at econ because most don't work in the private sector. To say that raising the price of labor doesn't decrease demand for labor is just stupid. To say that demand and supply and price don't affect markets (neo-classical econ) is really stupid. Even Krugman accepts neo-classical econ concepts -- it is not in debate. Check out some of his international trade books. Neo-classical econ does require some basic market transparency and doesn't work well for markets with heavy Gov interference (e.g., Mortgage market). Chait, and the mis-informed denizens here, make the authors points for them -- liberals just dont't get it

- mr_rationale

June 9, 2010 at 9:30am

I agree that the test was ridiculous, but I would not be surprised if a more rigorous study confirmed that liberals tend to know less about economic theory than conservatives. My own experience suggests that conservatives take more of an interest in such things, while liberals devote more energy to things like the arts, humanities, and not ruining the lives of others. Fortunately, there are plenty of liberals who DO study economics, and they regularly expose the myths promoted by conservative economists.

- Fishpeddler

June 9, 2010 at 10:05am

"To say that raising the price of labor doesn't decrease demand for labor is just stupid." Then call me stupid but in point of fact you have no clue. See if you can wrap you little brain around this. You can't have a consumer society if the workers earn next to nothing, they will have the demand but lack the material means to satisfy it. This is why India and China have remained so poor. (and don't give me bullshit about population, South Korea and Japan are far more crowded than China per square kilometer). Henry Ford realized if he paid his workers enough, they would turn around and buy his cars, which they did, their wages also produced a wealth effect throughout the city, as businesses sprung up to meet the newly stimulated demand of the more wealthy workers. In fact, the best thing about the wealth effect is that paying workers more leads to an increase for the demand of labor. Now, of course, this is within limits. The trick is to find the golden mean. Have workers be paid enough so that we can have a consumer driven society without paying them too much as to create competitive disadvantages. Republicans believe they can have a slave wage society, and yet still have a consumer based one. Talk about complete idiotic morons. Honestly, do you know nothing of American history? Obviously not.

- blackton

June 9, 2010 at 10:58am

Rationale is high-stepping again, without the facts to back him, as usual. Jonathan Chait is a million times smarter than is rationale, but since the latter is much less savvy than the average fifth grader, he does not and probably never will know this fact.

- liberal reformer

June 9, 2010 at 11:14am

rayward is onto something here. Take a look at exhibit 2 in this piece by GMO. That's earnings per hour stripped of stock options and bonuses from 1971 to 2004. Two guesses on where it's gone from 2004 to now, and the first doesn't count. Now, has the standard of living improved over the last 30 (or even 40) years? The answer will depend on what you do for a living. Furthermore, all of that does not take into account the myriad costs that don't go into GDP- things like the amount of hours Americans are expected to work in this day and age, the vacation they're permitted to take, increased load on our shared resources, (e.g. degradation of America's public spaces, increasingly tyrannical traffic and parking problems, the latter of which actually boosts GDP, etc.), the sense of community in American suburbs 30 years ago compared to now, etc. etc. If this 'study' had wanted to try to neutralize the effect of those considerations, which are very much part of what people think of when they think of standard of living- and rightly so- they would have used the term 'wealth' as opposed to standard of living. Of course, that wasn't quite the concern they had in mind. In any case, of the questions there, only the one referencing monopolies in any way comports to a true test of economic understanding. That conservatives and libertarians did better there is merely a reflection of one instance where their ideological leanings arrive them at the correct place. Had the questions regarded, oh, I don't know, basic principles of thermodynamics as applicable to climate scientists, I'd have no doubt conservatives would come out as exemplary dunce caps, if my blog experience is anything to go by. We've got a trend on our hands. First we get wingnut Ziegler with his opus, now this (also Zogby *wretch*). But hey, why waste our time with scientific inquiry when you already know all the answers and merely need the data to back it up? Pretty soon there will be liberal imitators and we will have, as though it were possible, attained a new low for the norm in American political discourse.

- I Majorajam

June 9, 2010 at 11:26am

Fishpeddler, I actually majored in not ruining the lives of others, but the job prospects were dim so I went to law school.

- jhildner

June 9, 2010 at 12:04pm

p.s. Fishpeddler, I think your comment is right on. Liberals may not in fact be as well-versed in economics as conservatives, and, I'll even go further to say that that's too bad. It's a good idea for liberals to have a solid basic understanding of the non-freeness of lunches, which is what economics is about -- what things cost (more than you think). But the political divide isn't between those who know what things cost and those who don't, which is a difficult though merely technical question. As Chait says, the political divide is a values divide. Beyond what things cost is the broader question of what things are *worth*. And this is where our conservative and libertarian friends run into trouble. To quote one of those artsy humanities types we liberals enjoy knowing about, they know the price of everything and the value of nothing.

- jhildner

June 9, 2010 at 12:14pm

mr_rationale, two words: anger management.

- timteeter

June 9, 2010 at 12:53pm