Yves here. It is really wrongheaded that the not-really-a-Nobel-prize in economics are never awarded posthumously. Alan Kruger clearly would have gotten one were he alive, and his suicide may have been at least partly due to the hostile treatment his peers gave to his and David Card’s work on minimum wages. Card even said he abandoned that line of inquiry because “he lost a lot of friends” as a result.
By Barkley Rosser, Professor of Economics at James Madison University in Harrisonburg, Virginia. Originally published at EconoSpeak
So the recipient are half of it to David Card for his 1994 study with the late Alan Krueger, who committed suicide not too long ago, on minimum wages, and how raising them might actually sometimes increase employment. The other half was split between Joshua Angrist and Guido Imbens for developing econometric techniques for studying natural experiments, such as differences in differences, with a 1992 paper on compulsory education by them cited. Card and Krueger also used this.
Anyway, I learned of the award on the radio this morning at 9 AM, CBS News, not a cockamamie outfit usually. The report stated (roughly) “Three American labor economists received the Nobel Prize for studies of immigration and its effects.” That was it, their names were not provided. As it is, Card has done some such studies, and when I began guessing who it might be, his name was on my list. But the others were David Autor and George Borjas, even though the latter’s studies on the subject disagree with the former’s such studies. But they committee has given contradictory awards before, e.g. Mydal and Hayek, not to mention Fama and Shiller. So, it was not out of the question.
But clearly they were way off on several counts. I know immigration is a hot issue, so any mention of that in the awards apparently got the attention, even though, heck, the minimum wage is also a pretty big and current issue. What can I say, but more evidence of further decline in the quality of media in general, not just the increasing insanity happening on a lot of social media. When the regular media cannot get simple things right, what hope is there for the social media?
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It’s astounding that the min wage in the US is $7.25/hr. and for some unknown to me reason it can’t be raised. Sad to see the malevolent lords of finance claim another victim. RIP Alan Krueger.
One wonders if there is a way to find out if any particular people had a particular hand in driving Mr. Krueger to suicide. If so, one wonders if there are any perfectly legal ways to target those particular people and make their lives so unbearable all within the letter of the law that they are driven to commit suicide.
There really should be justice for things like this.
If the media is mostly ignoring the ‘Dodgy Brothers’ Nobel prize for economics, is that really a loss? After all, it is more a platform to push the neoliberal agenda than a place of recognition of useful work. They were pushing the line with this year’s award that emigration has no effect on wages which is just a crock. The Pandemic, if nothing else, has revealed all those ‘advanced’ countries that depended on important cheap labour having to endure all sorts of chaos when the movement of such people came to a grinding stop.
The other reason for their work was their observation that raising worker’s wages did not in act crash an economy. Again, the past few months has seen this effect as the Great resignation has caused employers to actually off higher wages and only 10% more gratuitous cruelty and that is having a beneficial effect on the economy. Imagine their surprise.
Viewing numbers for the MSM have dropped off a cliff this year as so many people are waking up to their games and the only response that the main stream media has is to try to censor & ban all independent reporting. I say not only break up Google, Apple and Facebook but break up the MSM into several score smaller media organizations like it was in the pre-Clinton era.
Listen, anything at all that is empirically based would be a welcome relief from the rigid economic arrogance that we’ve been subject to since Adam Smith. Excuse whatever reporting — reporting is not the issue. The issue is that actual, real, lived human lives are ignored by economists — too messy — so valid advances, such as requiring Human Ecology education in order to give all of us half a chance in the U.S., are ignored. These guys are at least making progress. Now, if only they would enter households and ask women for the gory details of survival — maybe we can hope that’s the next step in the evolution of empirically researched economics.
How does this capitalism thing really work?
I’ve come up with a nice little equation that really helps.
What does the equation do?
The equation puts the rentiers back into the picture, who had been removed by the early neoclassical economists.
Disposable income = wages – (taxes + the cost of living)
Employees want more disposable income
Employers want to maximise profit by keeping wages as low as possible
The rentiers gains push up the cost of living.
Governments push up taxes to gain more revenue
You want to keep those two terms in the brackets down.
Yes, there is another term in the brackets with taxes.
Rising housing costs push up wages.
What is the minimum wage?
Let’s set disposable income to zero.
Minimum wage = taxes + the cost of living
If you want a low minimum wage, you need a low cost of living
What have those naughty old neoclassical economists been up to?
We got Ricardo’s Law of Comparative Advantage.
What went missing?
Ricardo was part of the new capitalist class, and the old landowning class were a huge problem with their rents that had to be paid both directly and through wages.
“The interest of the landlords is always opposed to the interest of every other class in the community” Ricardo 1815 / Classical Economist
What does our man on free trade, Ricardo, mean?
Disposable income = wages – (taxes + the cost of living)
Employees get their money from wages and the employers pay the cost of living through wages, reducing profit.
Employees get less disposable income after the landlords rent has gone.
Employers have to cover the landlord’s rents in wages reducing profit.
Ricardo is just talking about housing costs, employees all rented in those days.
Low housing costs work best for employers and employees.
Who pays?
It’s the right question, but we keep getting the wrong answer with neoclassical economics.
Employees get their money from wages and it is employers that are paying, via wages, reducing profit.
Capitalism actually works best with a low cost of living, but no one can see that with neoclassical economics.
It’s rentier economics, and it hides rentier activity in the economy.
Before I get pulled up on it
I just put some of Michael Hudson’s ideas into an equation.
The equation helps you to see how what he says affects employers too.
And we are poised to expand the conception of rentier to include not just FIRE’s insurance/protection rackets for homes, cars, healthcare, etc. but also the growing class of (often digital) intermediaries, like Amazon or Google who squeeze money out of 3rd party transactions, or provide services that shouldn’t be necessary in the first place.