Criticisms of the Seattle Minimum Wage Studies Miss the Mark

I recently did a write-up of two studies on the Seattle minimum wage increase. These studies threaten to overturn a lot of prior studies and prevailing attitudes about minimum wages. It's not likely that the "minimum wages have no ill effects" constituency would take this lying down. I wanted to see what I could find in terms of criticisms of this new research. I found this commentary by the Economic Policy Institute (EPI), written by Ben Zipperer and John Schmitt. Their initial summary:

The authors’ analysis, however, suffers from a number of data and methodological problems that bias the study in the direction of finding job loss, even where there may have been no job loss at all. One initial indicator of these problems is that the estimated employment losses in the Seattle study lie far outside even those generally suggested by mainstream critics of the minimum wage (see, for example, Neumark and Wascher [2008])—as the authors themselves acknowledge.

The authors of the Seattle study (Jardim et. al.) are very upfront about the limitations of their data set (details below). And there is a long discussion of why their results differ from previous results. In a nutshell, the new studies could accurately measure actual hours worked, while previous studies could only detect job losses. Also, the new studies could directly measure individuals’ wages, whereas prior studies had to settle for statistical aggregates (“teenage workers” or “restaurant workers”) that  have heterogeneous wages and thus dilute the impact of a minimum wage hike.

The first bullet point in the EPI piece:

The employment responses estimated by the authors are well outside the bounds of most published research, and indeed all of the research cited by the authors implies much smaller and even no employment changes in response to wage increases similar to those experienced so far in Seattle.

Once again, they explain why they get a different result. Intuitively, it makes sense that you’d see a bigger effect if you can measure hours worked instead of binary “employed/not employed.” It seems reasonable that it’s easier to cut hours than to actually lay off workers. Also, the study was able to actually measure wages. Like I said in my previous post, they were able to recover the standard effect sizes seen in the minimum wage literature when they looked at “restaurant workers” as a whole, instead of identifying low-wage workers according to their actual wages. This casts doubt on the prior minimum wage literature, not on the new study.

Second bullet point:

The study implausibly finds employment changes due to the minimum wage in parts of the labor market where there should have been none. The study’s own estimates inaccurately imply the minimum wage caused large gains in the number of jobs paying above $19.00 per hour and in the number of hours worked in those jobs—even though those jobs are well above the wage range where the $13.00 minimum wage should be having measurable effects.

This is a bizarre framing.  The study repeatedly cautions the reader that Seattle was undergoing an economic boom, which presumably was driving up high-wage employment. The authors of the study do not say or imply that increased employment above the $19/hour mark is due to the minimum wage. Only someone robotically interpreting their model to mean “everything after the minimum wage increase is caused by the minimum wage increase” would draw such a conclusion, and this would require ignoring the multiple warnings in the paper about Seattle’s booming economy. What’s stunning is that low-wage employment declined despite this boom in the labor market. See Figure 1: “Finding a Reasonable Threshold” and the discussion within the text of the paper in Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle. 

Here is some commentary from the paper:

While the preponderance of evidence suggests that a low-wage threshold slightly above the statutory minimum poses little risk of miscoding jobs as lost when they have actually been promoted to higher wage levels, in our preferred specifications we report findings based on a relatively conservative $19 threshold.

I'm reading this as saying that the disappearing jobs below the new minimum wage are mostly funneled into jobs slightly above the new minimum, insofar as they aren't completely lost. There's no way those disappearing jobs below the minimum wage were funneled into much higher wage categories.

Here is Figure 1 itself:

A few prominent features present themselves in this figure. "Hours Worked" at wages below the statutory minimum decline dramatically, as you can see at the left end of the graph. The dollar ranges just above the new statutory minimum increase substantially. (The EPI piece complains that they don't see a "spike" at the new statutory minimum. That seems nit-picky in light of this figure.) For the Synthetic Control (the two charts on the right), the right-most wages are variously positive and negative, significant and insignificant, implying no significant effect on total employment. The lines in the center of each bar are the standard errors; if the bar reaches beyond the standard errors, it's thought to be "statistically significant." The EPI piece insists that all categories above the $19/hour mark should be pooled for the sake of determining statistical significance. Fair enough. That seems like a subjective judgment. Interested readers can read the full paper and EPI piece to see if this is a valid criticism.  

Third bullet point from the EPI piece:

The study excludes an important group of workers, representing roughly 40 percent of the workforce: those working for employers with businesses in multiple locations. By omitting all multi-location businesses, such as chains, in Seattle, the authors bias their results toward showing job loss if there has been a shift in employment from small, single-location establishments toward larger firms with multiple locations.

The paper discusses this at length. Here’s some background. The authors tried to match employees to employers, and geocoded employers so they could decide if the employer was within Seattle city limits (affected by the minimum wage) or outside the city limits (not affected). Multi-site employers, with locations both inside and out, presented a challenge, because it wasn’t clear whether the employee was affected (worked within Seattle city limits) or not. Here’s a  quote from the Jardim et. al. paper:

Multi-location firms may respond differently to local minimum wage laws. On the one hand, firms with establishments inside and outside of the affected jurisdiction could  more easily absorb the added labor costs from their affected locations, and thus would have less incentive to respond by changing their labor demand. On the other hand, such firms would have an easier time relocating work to their existing sites outside of the affected jurisdiction, and thus might reduce labor demand more than single-location businesses. Survey evidence collected in Seattle at the time of the first minimum wage increase, and again one year later, increase suggests that multi-location firms were in fact more likely to plan and implement staff reductions. Our employment survey results may therefore be biased toward zero.

In other words, the authors of the study fully considered this, and they decided that it biased them toward finding a smaller employment effect than if they could accurately measure everyone’s exact location of work. Further down the page, the EPI piece acknowledges and discusses the author’s arguments. They don’t like the survey results and insist on some hard data demonstrating what multi-site employers actually do after a minimum wage hike. Fair enough, but it seems like Jardim et. al. went out of their way to address this limitation. Again, this seems like a mix of nit-picking and self-serving speculation on the part of the EPI. They also say:

A better approach would be to use the longitudinal nature of their data to see whether or not the Seattle minimum wage increase led low-wage workers to shift from single-site to multi-site employers in greater shares than was the case elsewhere in Washington, where the minimum wage remained constant.

Jardim et. al.’s second paper is a longitudinal analysis. It doesn’t directly address the question of shifting from multi-site to single-site employers, but it does suggest that workers in single-site locations benefit only modestly or not at all from the minimum wage increase. With the benefit of the second study, it's hard to argue that former single-site employees were massively upgrading their career prospects by transitioning to multi-site employers. The second study actually found a decline (of 8%) in job-turnover, making it harder to tell a "multi-site employers drove wages up" story. (The EPI piece was published before the second paper came out, so they didn't have the benefit of that analysis when it was written.) 

Back to the EPI piece:

We also note that another recent study of the Seattle labor market’s response so far to the minimum wage ordinance finds estimates of the employment effect in the restaurant sector that are in line with earlier research and concludes that to date the minimum wage increases have had no negative impact on employment.

Again, this misses a major theme of the Jardim et. al. paper: they were able to recreate these null-results in the restaurant sector using their data set. The paper is actually consistent with these previous findings if it imposes the limitations of other studies on its own data set.

The EPI piece looks to this observer like a mix of borderline-reasonable critiques and motivated reasoning. As far as I can tell, the results of the Jardim et. al. paper still stand.

If You Read This Blog On a Reader...

I must have accidentally hit "Publish" on my most recent post before it was actually done. If you read this blog via Feedly or some other blog reader, you may have seen a half-baked version of it. Apologies if you read that unfinished product and were taken aback by the abrupt ending. It looks like once I publish something, it's forever stuck that way on Feedly, even if I un-Publish it to finish it off or make edits.

Well, now it's fully-baked! So (assuming you aren't) feel free to give it another go.

Seattle Minimum Wage Studies

The recent decision by the government of Illinois to increase the minimum wage has renewed my interest in the topic. I've written on this a few times in the past. See here, here, here, here, here, and here. I've read Neumark and Wascher's book Minimum Wages, which was written in 2008. Enough interesting research has been published since 2008 that I thought I'd read a few papers on the topic.

Seattle recently introduced a minimum wage higher than the prevailing minimum wage in Washington state. Seattle's minimum wage changed from $9.47 to $11.00 on April 1, 2015 and from $11.00 to $13.00 on January 1, 2016, then to $15.00 on January 1, 2017. (Actually it varies by large vs. small employers, whether or not benefits are offered, whether or not employees receive tips, and it's indexed to inflation after $15.00.) Since Seattle had a higher minimum wage than the rest of Washington, this was a kind of natural experiment allowing us to test the effects of a minimum wage. Two excellent papers came out of this, both by the same group of researchers. (Two papers that I have read, anyway. If other papers have emerged from this episode, I haven't read them, so I can't attest to their excellence.) The first paper (first published, and the first I will discuss here) is called Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence From Seattle. (Here is a link to the abstract; you can find a full pdf of the working paper with a Google search.) The second paper is called Minimum Wage Increases and Individual Employment Trajectories.

I came across these papers because I had remembered reading a summary by Jonathan Meer in 2017, which he posted to Facebook. See what he said, quoted here in this Marginal Revolution post by Alex Tabarrok. Pretty damning. The minimum wage increase had some pretty bad consequences for Seattle. But my Google search for "Seattle Minimum Wage Study" kept turning up headlines implying that the news out of Seattle wasn't so bad. What gives?

The First Paper

I'll lead with the conclusion from the first paper. The minimum wage hike to $13/hour caused hours worked in low-wage jobs to fall by 9.4% (3.5 million hours per quarter). The number of jobs fell by 6.8% (5,000 jobs). Wages for low-wage workers only increased by 3.1%. Coupled with the loss in hours worked, the average low-wage worker netted a loss of $125 per month. The labor demand elasticity came out to -3.0, which is in stunning contrast to most minimum wage studies that find values in the -0.1 to -0.3 range (or sometimes zero or even positive, implausibly implying a minimum wage increases demand for labor!).

[A later revision of their paper found that the loss was $74 per month. I don't know if I should regard this as a "correction" to the original paper, or if I should instead view it as one of two perfectly valid alternative point estimates for different model specifications. Maybe they caved to some criticisms on the "working paper" version of the paper, the one with the $125/month estimate, and got talked down to a lower estimate for the publication version. It doesn't matter too much. Both are substantial losses for a low-wage worker. I'm happy to have a discussion using either one as the "true" estimate.]

 The underlying data set makes this study particularly credible. Washington's Employment Security Department collects data for administering unemployment insurance. Washington is one of four states that collects hours worked in addition to earnings, which allows them to calculate hourly wages. (Which are the other four? There is potential for future papers here.) In other words, someone with this data set knows everyone's wage, employment status, and hours worked at various points in time. They can identify who was actually affected by the minimum wage, because they know who earned less than or close to the new minimum. This is in contrast to other studies that use crude proxies for "affected by the minimum wage." Studies often look at employment in the restaurant industry as a whole, or teenagers as a whole, assuming that a large fraction of these workers are affected by a minimum wage increase. To the extent that these groups contain workers who earn well above the new minimum, measuring employment in these groups will dilute the true effect of the minimum wage on the workers actually impacted. In fact (and I think this is really cool) these researchers looked at "restaurant workers"in their data set, effectively imposing the limitations of other minimum wage studies on their own data set, and got results similar to those other studies. They are effectively saying: When I hobble my data set to be as restrictive as the data sets used in other minimum wage studies, I get very low effect sizes, too. But the data in its full detail and granularity tells a different story. This is really important. It casts doubt on a lot of prior work on the minimum wage and suggests that much more granular data gathering is required to study the matter. From the paper:

In summary, utilizing methods more consistent with prior literature allows us to almost perfectly replicate the conventional findings of no, or minor, employment effects. These methods reflect data limitations, however, that our analysis can circumvent. We conclude that the stark differences between our findings and most prior literature reflect in no small part the impact of data limitations on prior work.

There are a lot of other interesting technical details that I won't comment on too deeply here. Again, read the paper for the full details. They chose $19/hour as their threshold for "low-wage worker", and have a long exposition and many graphs justifying this threshold, plus some commentary on how their results are robust to choice of threshold. This was an interesting discussion. Who is "affected by the minimum wage?" You might be tempted to define this as "workers initially earning less than the new minimum wage." But those people are basically extinct after the new minimum wage goes into effect; if the new minimum wage is $13/hour, there are no longer any workers earning $12/hour. That doesn't mean they've all lost their jobs, nor does it mean they've all been bumped into the $13/hour bucket. Also, if you suddenly move everyone who is currently below $13/hour to the new statutory minimum, employers have to give at least a slight pay bump to people earning more than that to preserve merit/seniority differentials (this commonsense observation is consistent with the paper's findings). These researchers had to look at statistical aggregates to discover what was going on. If employment dropped in the "low-wage worker" category, that's a good sign that the minimum wage reduced employment for this group. And that's exactly what happened. (Their second paper actually follows individual low-wage workers over time, rather than bucketing the population into "low-wage" and other categories.)

There's also a long discussion about the appropriate control group. This is important. I think when most people read headline-news version of these studies, something like, "Minimum Wage Caused Seattle Wage-Earners to Lose $125 a Month", they think it's an objective fact being reported. As if someone's just listing off accounting entries from before and after the minimum wage hike, and discovering that total pay was lower afterwards. Economists need a control group to study these things. You have to compare "Seattle" to "King County excluding Seattle", or compare Seattle to several surrounding counties, or Seattle to some kind of synthetic-Seattle (other regions that have similar economic features and trends to Seattle but for the minimum wage hike). They actually test several of these options. They find that the two options using real geographic neighbors, "King County excluding Seattle" and three nearby counties (Snohomish, Kitsap, and Pierce Counties), don't work very well. They fail a "falsification test" (see paper for details). But the synthetic controls pass the falsification test. In my reading, this also casts doubt on some previous minimum wage literature, which compares a treatment region (say, a border county in a state that increases the minimum wage) to a contiguous control region (a county across the border, presumably not affected by the minimum wage increase). Reiterating: the "$125 a month" figure above isn't an objective fact. It's what actually happened in Seattle compared with what their model says should have happened in the absence of a minimum wage increase. From the paper:

Difference-in-difference specifications assume that the treated and control regions have the same trends in the absence of the policy (parallel trends assumption), and will generally fail to produce consistent treatment effect estimates if this assumption is not true. It is prudent to be especially cautious about the parallel trends assumption given that the greater Seattle region experienced rapid economic growth coming out of the Great Recession, and the pace of recovery could have varied  by sub-region. As we show below, our two difference-in-difference specifications fail a falsification test, which suggests diverging trends. 

This economic boom in Seattle is important. Both papers caution the reader multiple times that this economic boom might mean the results aren't generalizeable to other regions. Actually, some critics of the first study (invariably people who are pro-minimum wage) have implausibly claimed that the economic boom discredits the finding of large disemployment effects. If anything, and economic boom should make a region better poised to absorb a minimum wage increase. The critics say something to the effect that the economic boom raised all wages, which shifted everyone up the income distribution, so that's where all those low-wage workers and lost hours went. (See Ben Zipperer's comments in this NYT piece.) This doesn't make a lot of sense. I would expect an economic boom to generally raise everyone's position on the income distribution, but also to create more jobs at the low-end. And besides, the authors make clear that they tested several thresholds for defining low-wage work (landing on $19/hour), and that their results were pretty robust to these assumptions. It seems like this critique requires an implausibly large shift up the income distribution.

The Second Paper

As I hinted above, the second study, called Minimum Wage Increases and Individual Employment Trajectories, was longitudinal. It followed individuals over time, rather than following statistical categories (defined as above or below the $19/hour cut-off). It found that you could basically define two groups of low-wage workers: experienced and inexperienced. The paper actually explores ten deciles, ordered by increasing levels of experience, but the qualitative "experienced vs. inexperienced" categories work well to describe their findings. From the abstract:

On net, the minimum wage increase from $9.47 to as much as $13 per hour raised earnings by an average of $8-12 per week. The entirety of these gains accrued to workers with above-median experience at baseline; less-experienced workers saw no significant change to weekly pay. Approximately one-quarter of the earnings gains can be attributed to experienced workers making up for lost hours in Seattle with work outside the city limits. We associate the minimum wage with an 8% reduction in job turnover rates as well as a significant reduction in the rate of new entries into the workforce.

 So what's going on here? The first paper says that low-wage workers earned $125 (or $74) less per month due to lost hours, and the second paper says they earned $8-12 more per week. I was initially confused, because my Google searches were turning up headlines triumphantly declaring the Seattle experiment a victory for minimum wage supporters. But really, it's all there in the abstract. There is no contradiction here. There were significant reductions in new entrants. The less experienced half of low-wage workers didn't see significant gains or losses in their earnings. The more experienced half of low-wage workers saw a $19/week increase in their earnings. Some people seem to have "benefited" (in terms of sheer total earnings, if that's all we care about), for others it was pretty much a wash, and still others who weren't yet in the job market seem to have lost out. This is only a "success" if you don't count the people who would have entered the labor market but didn't (couldn't?).

Some people are claiming that the less experienced group in the second study are actually benefiting, because they are earning essentially the same income for fewer hours of work. That this is a "benefit" is not at all clear. We don't know how working conditions have changed in light of the new minimum. Maybe employers are instituting more draconian work protocols during working hours, then dismissing the workers when they're not needed. Whereas previously they might have paid a lower wage and kept the worker on the clock all day under a more relaxed schedule. Are workers having to clock out for non-peak hours, then clock back in later in the same day? Do they have to go somewhere in the meantime? Does this entail paying for gas and parking? Calling this a "win" for the low-experience group is incredibly naive. Doing so ignores the lessons of the study itself. You know those high-experience low-wage workers, the ones who benefited more from the wage increase? They were grouped according to total number of hours worked (specifically, hours worked in a reference quarter just prior to the minimum wage increase). Extra hours of work confer a benefit by pushing people into the "high-experience" category. If low-wage workers are seeing their hours cut, that probably means this pipeline has been slowed down. The best thing for people in this cohort is to earn lots of experience at whatever wage the market will offer. Conceivably, most of the benefits from that work are not the actual wages, but the basic job skills learned (things like showing up on time, following instructions, losing the bad attitude, etc.) that lead to higher wages in the following years. Those hours aren't just spent earning wages. They're spend building human capital.

Besides, let's concede that the "pro-" argument has changed significantly. Were minimum wage advocates saying to low-wage workers, "This new law won't affect your income, but it will give you back more free time."? No. That's not how these policies are sold on the political market. You often hear nonsense about how the new minimum will raise people's incomes and lift them out of poverty, offering them a "living wage." Minimum wage advocates who are chalking this one up as a "win" should acknowledge that the argument has changed rather dramatically, and that we got something very different from what was initially promised. By the way, while it's true that prior minimum wage studies often failed to find a negative impact on employment, it's just as true that those earlier minimum wage studies often failed to find a positive impact on earnings. Most minimum wage advocates only concern themselves with the first part. Well, if we're doing away with neoclassical economics (really, just the common-sense observation that when something costs more you buy less of it) and pretending we're slaves to theory-free naive empiricism, you have to take both parts of that research together. You have to admit the part about the benefits failing to manifest themselves. (See this table summarizing the literature from the book Minimum Wages, particularly the part about Income Distribution.)

There is a lot of narrative discussion in this paper on "the two models" of low-wage workers and the effects of minimum wages. One model is that low-wage work is an entry-level job, from which point workers gain skills and gradually move up to a higher-paid job. A minimum wage knocks out the lower rungs of this ladder, making it harder for job market entrants to get their start. The other model is that low-wage jobs are dead-end jobs, with workers permanently stuck at low levels of income. A minimum wage makes these permanent jobs pay a little more and allows these workers to earn a "living wage." The authors suggest that both models are true of some workers in some jobs, and that the study somewhat supports this dichotomy. The low-experience group, the one that didn't benefit, corresponds to the first model, while the high-experience group corresponds to the second model, in their telling. But some of the information in the paper undercuts the second model. From the paper ("This model" refers to a neoclassical theory of low-wage jobs and skill-building):

This model implies individual employed in low-wage jobs at any given point in time will likely mature out of that market within a short time period. Prior studies have supported this conclusion, finding that 50 to 70 percent of workers earning exactly the minimum wage transition to a higher hourly rate within a year.

So, of the 30 to 50 percent of workers who remain at the minimum wage for a given year, how many of those are a permanent underclass? Do 70% have a transition probability of 1, with the other 30% a transition probability of zero? Or is there just some random-but-reliable churn across the spectrum? Given this transition probability, plainly most of the people who have ever earned minimum wage eventually move on to higher paying jobs. So the "permanent underclass" theory of minimum wage workers doesn't make much sense. I'm sure that some fraction of these people remain minimum wage earners year after year, but it's a much smaller fraction than 30% or 50%.

The authors explain the superficially contradictory conclusions of their two papers (emphasis mine):

The results of this longitudinal analysis contrast strikingly with repeat cross-sectional analysis suggesting sharper reductions in hours worked in Seattle's low wage labor market in 2016 (Jardim et al, 2018a.).These findings could be compatible for multiple reasons. First, longitudinal analysis by necessity excludes workers who enter Seattle's low-wage workforce after the baseline period, or who never enter at all. Second, individual workers may be making up for lost work in Seattle by adding employment outside the city limits. Our decision to include all Washington state employment and earnings might mask steeper employment and hours declines inside the city.

 And:

Job seekers who lack any labor market experience in Washington are invisible to us, as they do not appear in administrative records. We can infer their trajectories by studying aggregate statistics on the number of new entrants into the Seattle low-wage labor market. 

Here is a figure from the paper showing how new entrants in the low-wage labor market declined in Seattle compared to the rest of Washington state:

To be clear, the second study, which is longitudinal, is not picking up any effect on new entrants in the low-wage labor market. The first study, which is measuring the effect on statistical aggregates (employees with wages under $19/hour), does pick up these effects. I think this explains the superficial "contradiction" between the two studies. I believe this figure and the discussion about new entrants reflects the influence of a recent paper by Jonathan Meer and Jeremy West, titled Effects of the Minimum Wage on Employment Dynamics. This paper concluded that disemployment effects are small (perhaps even zero) for workers who are already employed, but minimum wage increases slow the rate of growth of new jobs. There was much academic debate over this study, but the new studies from Seattle seem to back the Meer/West story.

What These New Studies Mean

Assuming these new studies are credible, I think there are some important lessons for minimum wage policy. What follows is my own commentary, drawing from sources beyond the paper. If I get something wrong here, it's not the fault of the authors of these two excellent papers. I will jump from topic to topic in the following paragraphs, so apologies if you experience some whip-lash reading them. First off...

The demand curve for low-wage labor slopes downward! Both studies find that the minimum wage caused a significant reduction in hours. If these results generalize, it settles a debate in the minimum wage literature. Some studies have found that the demand is completely inelastic (meaning increasing the minimum wage has no effect on demand for labor), or even that the elasticity is positive (meaning that increasing the minimum wage increases the demand for labor). This has led to some speculation that employers of low-wage labor hold monopsony power. "Monopsony" means single buyer, similar to a "monopoly" which is a single seller. Just as a monopolist can unilaterally raise prices, a monopsonist can unilaterally lower them. Economic theory tells us that a government imposed price floor (like the minimum wage) can cause a monopsonist to buy more than they would if they could use their unconstrained market power to set the price. (See this post by David Henderson for a brief explanation of this argument. In addition, any good introductory microeconomics text will explain this argument.) Some commentary on the minimum wage literature has suggested that the near-zero or positive elasticity of demand implies that monopsony power is rampant in the market for low-wage labor. I think common sense militates against the monopsony story. Even in small towns, the main strip is usually populated by several chain restaurants, all competing for low-wage workers. Even setting common sense aside, the Seattle studies discredit the monopsony story. The higher minimum wage reduced hours worked. The monopsony story would have predicted an increase in hours worked, assuming monopsonists were previously successful in keeping wages down. Apparently stories of low-wage employers keeping wages low with "market power" are vastly overblown.

These studies fundamentally change the academic debate. The debate on the minimum wage used to be about whether the effect on employment was statistically significant (though small), insignificant, or slightly positive. The effect on "hours worked" is substantial in both of the Seattle studies. The debate is no longer whether increasing the minimum wage reduces employment. Once again, both studies saw reduction in hours worked for all demographics. The new debate is about whether the reduction in hours worked are offset by the increased wages. For low-wage workers as a whole, the answer is "No."

These studies provide conservative estimates for what a minimum wage increase is likely to do. Seattle was particularly well situated to absorb a minimum wage increase. Seattle has high median incomes (median household income of $100,630 in 2017) compared to the rest of the United States ($59,039 in 2017) or Washington state ($70,979 in 2017). Those rich tech sector workers can afford the price increases that come with higher labor costs. That won't necessarily be true of the rest of the country. The same minimum wage increase in, say, Mississippi (with a median wage of $14.22), will almost certainly cause more disruption in the labor market. (Does anyone think all of these counties would be able to absorb a $15/hour minimum wage?) Also, as both papers caution repeatedly, Seattle was in the middle of an economic boom over the period when the new minimum wage went into effect. Two excerpts from the second paper:

Settle transitioned from a period of growth to a period of stasis or modest decline [in the low-wage labor market] once the minimum wage increase took affect, despite its booming economy. Washington state outside King County continues to see growth in the number of new entrants, stabilizing to a higher level in mid-2015.

...

As a final caveat, we emphasize that during the period under study Seattle was undergoing an exceptional economic boom driven by rapid expansion of its high-skilled workforce. This may have driven the wages of less-paid employees up relative to the remainder of Washington State where our matched controls reside.  

Some critics of these studies have claimed that Seattle's economic boom simply means the results aren't generalizeable elsewhere. The economic boom simply "contaminates" the study, so we have to throw it out. Nope. Seattle's boom means that these studies are a very conservative estimate of what an increase in the minimum wage would do elsewhere. The boom isn't just a contaminant, adding random noise to the study. It's a countervailing force pushing employment and quarterly pay up, while the treatment under study here is pushing those things down. We should take these results as a kind of lower-bound for what is likely to happen elsewhere. Say, in a state or city with a higher median wage, perhaps not undergoing an economic boom or indeed undergoing a decline. These studies should give pause to any local governments considering a similar move.

Some people might be surprised by how few hours these low-wage workers actually worked.

Approximately 93% of the control sample logged less than full-time full-quarter work (i.e. 520 hours) in the baseline period.

...

Less experienced workers worked 108.6 (142.2) hours during the baseline quarter for cohort 1 (2), while more experienced workers worked 367.1 (432.2) hours during he baseline quarter for cohort 1 (2).

These people mostly aren't working full-time jobs. The less-experienced group is only working 1/5 to 1/4 of a full-time job. The fabled full-time minimum wage worker isn't represented in this group. (Supposing one in ten of these "less experienced" workers works full-time (520 hours/quarter), that means the other nine-in-ten average out to only 63 hours a quarter. The "full-time minimum wage worker" archetype might be better represented in the more experienced group of workers, who work more hours on average.) What these people need are more hours of work, not higher wages. There seems to be this myth that everyone's trying equally hard, but "the rich" are richer simply by virtue of their higher salaries. Actually, if you look across income quantiles (splitting into five quintiles each containing 20% of households is common), households in the higher quantiles log more hours worked, more full-time workers, and so on. Hours matter more than wage rates. It's barking up the wrong tree to focus on getting slightly higher wages for these jobs (higher wages which are apparently offset by reductions in working hours).

All that said, I'm left with a feeling of "Meh, maybe it's not so bad." The fraction of workers who are affected by the minimum wage is very small. We're talking 2-3 percent of the population earning at or below the federal minimum wage, and the "or below..." includes restaurant workers whose tips generally bring them above the minimum wage. In Seattle, in 2014 quarter 2, 13.6% of workers were earning below $13/hour, and 31% were earning below $19/hour (the cutoff used to define "low-wage workers" in the study; I'm using numbers pulled from Table 3 of the first paper). So most workers are escaping the effects of existing minimum wages. Most would escape even substantial minimum wage increases. This is kind of hopeful. It means that the social engineers probably won't screw things up too badly. It's still a very bad policy, and the effect on inexperienced low-wage workers (particularly new entrants) is perverse. But it's not going to disrupt the economy as a whole. To preempt another argument about the minimum wage, some people talk about "inflation" caused by higher minimum wages, as in "The cost of labor goes up, so prices in general go up." If low-wage workers are a small fraction of the labor market, then prices probably won't rise very much. If a minor input of production (in this case low-wage labor) increases slightly in cost, the price increases passed on to consumers won't be very large. Even anti-minimum wage economists (like Don Boudreaux and Neumark and Wascher) will go out of the way to point out that the "inflation" argument against minimum wages is a fallacy. (It must be a common one, though. The book Scratch Beginnings makes this argument against raising the minimum wage, and I've heard it several times in casual conversation.)

The optimistic take here is that employers can adjust along many margins to absorb the effects of a minimum wage hike. They can demand more work out of fewer hours with stricter workplace protocols, insist on shorter breaks, lower their tolerance for slacking, make capital investments, and so on. They can trim fringe benefits. They can be more selective about whom to hire. (Jonathan Meer has a long discussion of the various margins along which employers can adjust to a minimum wage increase in this excellent podcast.) My "the glass is half full" take is that large numbers of people don't get suddenly cast into permanent unemployment. But I still think this is a bad policy. Workers and employers have come to a set of mutually agreeable terms about work hours, scheduling flexibility, work intensity, and fringe benefits like training, free parking, free meals, medical/dental insurance, and so on. The minimum wage goes up, and these employees are forced to take a different deal from the one that everyone previously agreed to. Minimum wage advocates are basically telling them, "I know you accepted lower monetary compensation in exchange for better working conditions and fringe benefits. Nope! I'm insisting you take more of your compensation in money in exchange for the fewer fringe benefits." They are effectively deciding they have the right to veto these agreements and give the workers the deal the social engineers think they should want. These other margins of adjustment can be hard to measure. If the two Seattle studies are credible, then even employment and compensation are hard to measure, even though we have government statistics on them. Read the paper and make a list of all the caveats they make about their data set, which is still superior to almost any other study's. To end on a sour note, I think the glass is more than half empty. Minimum wage increases are not casting millions of people into permanent unemployment, but they are making work less pleasant and less rewarding in a thousand little ways that are difficult or impossible to measure. So minimum wage advocates will always be able to claim the empirical high-ground, insisting that there's "no evidence" of ill effects. But we know that these painful adjustments are happening, because the kinds of businesses that employ low-wage workers subsist on slim profit margins. (Go look up profit margins by industry to see what I mean, or simply note the very high turnover rate in the restaurant industry.) They don't have giant piles of money sitting around such that they can simply absorb a cost increase. Call it speculative, but it's safe to infer that these businesses are adjusting along these other hard-to-measure dimensions.

My final thought is that maybe this really is "just one more study." (Even though it's two papers, it's effectively one big study.) It's a study of a single law passed in a single city over a few short years, so I shouldn't get too excited about it. Then again, it does seem to be the most detailed study with the richest data set. And recall that it was able to replicate the small-to-zero employment effect in the restaurant industry. My feeling is that this is an important pair of papers. It presents a road map for future research: start tracking hours worked in addition to earnings, and do so anywhere that a minimum wage increase is being considered.

Some Recent Minimum Wage Papers

I'm currently reading some recent papers on the minimum wage. Two of them are on Seattle's recent minimum wage increase: "Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence From Seattle" and "Minimum Wage Increases and Individual Employment Trajectories." I've already read those and am trying to organize my thoughts on them. The other is "Effect of the Minimum Wage on Employment Dynamics" by Jonathan Meer and Jeremy West. I'll try to write a post or two on what I've learned.

I started reading these papers because my home state of Illinois recently and ill-advisedly passed a minimum wage bill, which will increase the minimum wage to $15 an hour by 2025. I think this is a foolish decision. What I'm discovering is that I can't trust any of the commentary on this literature without reading the actual papers. Various news reports contradict each other, or they contradict the paper itself by flagrantly misreporting the conclusions or declining to report on the various caveats. I will try to include some examples of this behavior in a future post.

Don't trust anything I say, either. Read the papers themselves. I'll do my honest best to summarize, but there's no substitute for sitting down, reading the paper, scratching your noggin, and figuring out what it says.

Shaming the Enforcers

This isn't meant as a call to action. It's just a post about how effective a certain strategy would be.

Drug prohibition is a terrible policy. It's morally atrocious, and it is enormously costly in many dimensions. Unfortunately, policy changes too slowly. Laws that would never have gotten passed today are unfortunately locked in place by a sclerotic legal system. It is hard to get legislators to actually do their job, which is to analyse policy and change the law when the analysis shows it to be a failure. But there are less formal means of effectively changing the law. Sometimes de facto law can be changed without officially changing de jure law. It's a matter of changing prevailing attitudes and official behavior. It doesn't always require passing legislation.

One possible strategy is to shame the people who are actually carrying out the orders. If policy is bad, who better to start with than the individuals who are actively carrying it out? Often times these people have broad discretion. They can simply decide not to enforce the law, or not to enforce it too thoroughly, or to allocate spending, manpower, and other resources to other problems. Even if statues officially spell out resource allocation (or have some other mechanism for ensuring that enforcement happens) there is usually enough discretion to thwart bad orders from above. I'm thinking of when Bunny Colvin on The Wire effectively legalizes drugs in his district. Police and prosecutors at every level usually have the authority to ignore "crimes" that aren't real crimes and prioritize other problems. In fact, they are constantly doing so. Read Locked In by John Pfaff for a description of how prosecutorial discretion gets used in practice. Prosecutors will often negotiate with drug dealers and other criminals, presenting them with the full range of crimes that they might possibly be charged with. If the criminal decides to cooperate, the prosecutor might eliminate some of the charges. Pfaff gives the example of "making a gun disappear", as in declining to charge a drug dealer with possession of a firearm that might trigger a multi-decade minimum sentence. As horrible as those minimum sentencing laws are, they are often not invoked, and they don't tie the hands of prosecutors as much as the letter of the law implies.

(By the way, keep this in mind when someone in law enforcement tells you that "We don't decide which laws we get to enforce." I've gotten this response once or twice during a drug policy argument. It's a disingenuous response, and it comes from people who routinely ignore illegal activities of their informants and sometimes even of their colleagues. Law enforcement is inherently about making judgment calls and using discretion. Someone who talks a scared teenager into consenting to a search and busting him for a baggie of pot is making a deliberate decision to do something harmful. A prosecutor who brings charges against a low-level drug dealer is making a deliberate decision to ruin someone's life. These people are morally responsible for their actions. I don't see how they can hide behind this "the law compels it" defense, which for obvious reasons is sometimes called The Nuremberg Defense. Anyway, it's telling that they do this rather than actually defending the policy.)

If people are deliberately doing something that is both harmful and immoral, one way of dealing with them is to make them face some kind of public censure for it. A prosecutor who brings drug charges against someone is causing harm to his community. The community should respond by lowering his status, perhaps even declaring that the public has lost confidence in him and asking for his removal. Likewise, the police officers who, for example, storm into a residence and kill the occupants in a botched raid (perhaps against innocent people not even involved in the drug trade) should be subject to public shaming for acting contrary to the public's interest.

My concern is about how effective this would be and how it might backfire. One effect of a concerted effort to shame drug warriors is that conscientious cops and prosecutors might resign and we'd be left with public servants who lack scruples or who (and this might be even worse) are zealous true believers in the crusade against drugs. Obviously that would not be the intended outcome, and we could be left with a legal system that's worse than what we currently have, because it's even more infested with bad actors. If shaming has a large effect on who decides to join law enforcement, it could be counterproductive.

Another possibility to consider is blow-back. Cops and prosecutors do a lot of useful things, obviously, like dealing with actual bad guys and real crimes. They provide a useful public service (alongside the dubious ones), so they are view sympathetically by most of the public. (Seriously, props to anyone who can walk into a domestic violence scenario, where often the perpetrator and the victim don't want him there. Taking shit from people who don't want your help is a hard job.) Consider what happens if the shaming is not done thoughtfully. If some over-zealous member of the "shame the enforcers" movement makes too-general comments about law enforcement, it makes the movement in general less credible. It's hard to tread that thin line, where you're only in favor of heaping scorn on the bad actors but still supportive of good law enforcement. People don't want to be associated with the crazy "fire all pigs/abolish the police" coalition, so they dissociate themselves from anything that looks like it. (Why is it so easy to paint people as anti-cop? To divide the world into pro- and anti-law enforcement? Why is it so difficult to stake out the position that you're in favor of good law enforcement and against bad law enforcement? If you respect an institution such as law enforcement, doesn't that mean you want to see the bad actors expelled from it?) I've seen a large sampling of the various policy ideas and sloganeering by the Black Lives Matter movement. Some of it is serious policy recommendations, and some of it is emotional, over-the top "fuck the police" posturing. My impression is that the serious policy recommendations are being discredited by loud, intemperate fools. Blow-back is real.

This is how a movement shoots itself in the foot. Some very thoughtful activists might start a campaign to write long, well-constructed opinions about the actions of prosecutors. "We thought it unfortunate that District Attorney Such-and-such decided to bring charges against So-and-so for such a minor offense. The consequences for So-and-so's family will be devastating..." It is perfectly legitimate for members of the community to judge the actions of its officials in this way. But even if this is done in the most respectful way imaginable, some message-board cowboys will re-post it and say idiotic things about tarring and feathering the officials responsible, possibly even threatening violence. (I've seen instances of this, and Radley Balko, who ran a blog about police misconduct for many years, had to scold and sometimes ban people for doing this.) And guess which one the general public is going to react to: the respectable organizer penning thoughtful op eds, or the frothing-at-the-mouth lunatic who denounces all cops? I think this requires some kind of message discipline by the organizers: "We don't associate with this. We don't advocate violent overthrow of our legal system. We strongly encourage our supporters to repudiate these comments."

Even given those caveats, I think this is worth pursuing. Public opinion is ready for it. I was encouraged by this story about a Montana jury revolting over the government's attempt to bring "penny ante pot charges" against someone. This is from Montana, hardly the tip of the spear on pot legalization, and the story is from 2010. Attitudes toward pot legalization have become more favorable in the (very few!) years since. Even if people are nominally/culturally "against pot", most people see the official actions to actually enforce the law as unfair or wasteful. I think this is why public shaming has to be part of the equation. People give different answers to the "legalization" question when it's presented as an abstract matter of public policy versus when an actual human being is being set upon by the state. People are often disturbed by the actual tactics, the violent raids and underhanded tricks and borderline entrapment, required to actually enforce drug laws. (Tellingly, prosecutors and judges often conspire to prevent the defense from informing the jury of certain facts, like that the defendant was in compliance with state law or that the defendant faces a multi-decade sentence if convicted. Jury Nullification defenses, which inform the jury that they can vote for acquittal if the law is unconscionable, are usually prohibited by the judge. The state tries very hard to prevent human compassion from in any way affecting these cases.)

Maybe what I'm describing here isn't even a "public shaming campaign." Maybe it's simply a policy of better transparency. The community should know if its local police officers are busting kids for pot possession. The community should know if its the local prosecutor is bringing charges and triggering decades-long sentences for drug offenses. Such a community might fee like its tax dollars and law enforcement resources are being squandered or misused. It might decide that officially charging someone with a crime (versus ignoring them or simply confiscating the contraband and sending them on their way) is a waste of the community's resources. There's no need to be an absolute dick about it, and there's no need for neighbors to denounce each other. Let's just put it out in the open that we're doing these things. We are severely inconveniencing innocent motorists, even more severely inconveniencing "guilty" motorists, and destroying the lives of accused dealers. It seems like we should know the names of individuals in our community who are involved in these decisions, and maybe render a verdict on whether or not it's appropriate. Say, a constant news ticker of pointless possession arrests, or a frequently updated database of who brought charges against whom for what; these things might allow a community to better judge its public officials and realign local governments to reflect their true core values. If someone is doing tremendous harm in your name, using your tax dollars, it seems like you should have a say in whether or not that's appropriate.

The Cost of Healthcare Isn't the Price Tag, It's the Resources Used To Produce It

The cost of something isn't the nominal price.

Suppose we all set aside half of our nominal earnings and threw them into a black hole, then called it "health spending." I'm assuming away all the deadweight losses due to taxation and transaction costs associated with monitoring and accounting for this tribute: we all just spontaneously give up half our dollar incomes, perhaps burning them at the Altar of Health Care. (Or, to make it nearly costless, deleting digital currency at the Altar of Health Care.) If this ritual were strictly observed, it would not affect the real economy at all. It wouldn't mean Americans had less command over goods and services. The dollar would deflate, because we'd each have exactly half as many dollars chasing the same amount of goods and services. But some careless analyst who added up all expenditures on health care would wrongly conclude that health care consumes over half our income (the half of our income sacrificed to the Health Care Gods, plus any real spending on health care). I think that something similar is happening in the American economy. I think the very high spending on health care is something of an accounting illusion. (I'll say at the end why this might not be the case.) 

I recently came across this excellent article on healthcare costs (hat tip to Scott Alexander). I initially found the title off-putting, because I thought it implied a different argument from the one that the authors ultimately made. But then I was pleasantly surprised by the actual content.

After doing a review of the literature, the piece concludes that Americans spend fewer real resources on healthcare than their OECD counterparts:

In 2000 the US had fewer physicians per 1,000 population, physician visits per capita, and acute care beds per capita, as well as fewer hospital admissions per 1,000 population and acute care days per capita (data not shown), compared to the median OECD country. The US was still not devoting more real resources to health care than most other OECD countries in 2015 or 2016. At that time, the US had 26 percent fewer hospital beds per capita, 20 percent fewer practicing nurses, and 19 percent fewer  practicing physicians per capita, compared to the OECD median country. Because the US is still not devoting more real resources to medical care than the typical OECD country, we believe that the conclusion that “it’s the prices, stupid,” remains valid.

I don't know how clearly this comes across to most readers of the article, but let me say it clearly. If the United States is spending fewer real resources on healthcare, that means healthcare costs per GDP are lower in the US than in other OECD countries That's because the cost of something is the real resources used to produce it. The high prices are likely some kind of accounting illusion. 

I'm reminded of some work Robert Higgs did on the Great Depression. (This Econtalk gives a good discussion of his arguments.) It's widely believed that the wartime economy pulled us out of the depression, and some economists use aggregate economic data from that period to make this point. Higgs says, Hold up! This is an economy with price controls and other command-and-control features. The accounting numbers don't represent the true costs in this society. A binding price ceiling usually means the "cost" in dollars understates the true cost of producing it. What is the contribution to GDP of a tank, paid for with tax dollars, made with price-controlled labor and steel? You certainly couldn't estimate that by simply adding up accounting entries on purchased steel and wages paid. In calculating GDP, economists are careful not to "double-count". Something with a long production chain, where the intermediates change hands many times, can produce several accounting entries. If the intermediate goods get sold several times to several different entities in a supply chain, simply adding up all these transactions overstates the value of the final thing that gets produced. My understanding is that this problem get handled well when economists compute GDP. But what if all the prices are completely phony? What if none of those prices even remotely reflect the cost of resources used? A war-time economy, with high deadweight loss due to very high rates of taxation and rampant wage and price controls and other command-and-control features, does not have real prices. The sticker prices and accounting entries don't reflect the true value of resources used. 

In healthcare, prices are phony because the industry is dominated by third-party payments. Almost everyone pays the bulk of their health expenses through their insurer. We end up with a lot of nonsense prices. Hospitals set their list prices (when they even have them) very high, knowing they will negotiate them down when dealing with insurers or when treating a patient who is not able to pay. (Health care providers usually engage in price discrimination, charging lower prices to those with a lower ability to pay. Low-income people are typically not shut out by the high prices. Rather, providers treat them and charge a lower, more reasonable price, or charge them nothing at all. It's something of a myth that these people simply go without care and die in Dickensian poverty.) I don't think it's valid to simply add up the accounting entries and call it "health spending." If some of these prices are phony, not reflecting the actual cost of resources used, then adding them up gets a phony total. Some fraction of that total reflects real resources used, but some other (probably large) proportion of that total reflects a (purely nominal) sacrifice to the Health Care Gods. 

There is one obvious way that high prices combined with low real resource use still implies gross inefficiency. Suppose the high prices are largely due to supply-side limitations. There are too few doctors, because the AMA only accredits so many schools and creates positions for only so many new residents each year. Or the law mandates that only doctors can do certain procedures, even though a nurse or simply a trained technician could do he same procedure. (I was told by an EMT that ER staff sometimes ask them to intubate patients for them, because they do it all the time and they're very good at it. Surely there are other areas where a trained technician with a specialized skill could do something that would otherwise be done by a highly trained professional.) "Certificate of Need" laws allow hospitals to block competition. Surely it has to be admitted that there are supply restrictions and that these restrictions increase the price of healthcare. It's worse than just the higher prices, actually. Supply restrictions can lead to fighting about who gets to be a supplier, because those higher prices are so enticing. Society wastes resources fighting over who gets to be one of the chosen producers, rather than using those same resources on actual production. (E.g. doctors study harder to show how smart they are so they can get into med school and claim one of those coveted resident slots, rather than training to actually be doctors. Hospitals employ teams of lawyers to sue would-be competitors rather than spending those resources on actually producing better health outcomes.)  See the last three paragraphs of this article on the minimum wage for an explanation of deadweight loss. (The minimum wage article is describing a price floor rather than a supply restriction, but the principal is similar.)

If supply restrictions are important, it could mean that the United States spends too little on health care, even while the inflated prices imply we're spending too much. Part of the cost to society is the foregone value of resources that should be spend on health care but aren't, but this isn't even reflected in typical measures of health care costs that simply add up spending. But I don't know how important this story is. Someone should be getting really rich, according to this story. I believe American doctors earn modestly more than doctors in other nations, but my understanding is that it's hardly a notable difference. There doesn't seem to be any one group who is getting super rich at the expense of their fellow Americans. If you could identify such a group, it would revive the story that Americans spend more real resources on health care. The people who make enormous salaries and the companies who make abnormally high profits have larger command over goods and services in the real economy. So those phony-baloney high prices could imply a truly higher cost; those dollars are ultimately buying mansions and yachts and corporate jets and fancy cars for highly-paid healthcare providers. If this story is important, then it revives the "we spend too much on health care" story. (Those dollars sacrificed to the Health Care God don't simply evaporate; they end up being spent on real resources, which means a real cost is incurred.) The high prices represent monopoly power and economic rents, and the real resource cost shows up in the consumption of people earning those rents. But someone should be able to put their finger on exactly who is earning these rents.

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Resist the urge to think, "The sacrifice to the Health Care God is a real cost, because if I didn't have to pay it I'd have more money to spend on other things." That would be the fallacy of composition. If we're all paying the same inflated phony health care prices, there shouldn't be an effect on the real economy. Then again, if some people have a special privilege by which they manage to escape paying tribute to the Health Care God, real resources might be spent fighting over who gets to join the ranks of this elite group of rent-takers. Even if some of this is going on, it's probably still the case that phony prices overstate the true cost of healthcare in that economy.

If you haven't read it, Random Critical Analysis has a great post arguing that American health spending isn't unusual, and that GDP is a poor proxy for spending power. Using a different measure (AIC) America fits the trend of other OECD nations. It's a compelling argument, but I still think there are bad policies that make the health sector grossly inefficient. America isn't unique here, but I don't quite buy that American health spending is inevitably high due to some immutable law of social science. 

When You Do and Don't Have to Justify Your Choices

Sometimes you can make decisions and you don't have any obligation whatsoever to explain them to anyone else. Other times you have a strict obligation to justify your decisions. Which situation you are in depends strongly on whether your decision affects other people or not.

If you're walking down the aisle of a supermarket, you can place anything into your shopping cart. So long as you can pay for it, nobody gets to object. You affect other people by very slightly bidding up the price of food. But anyone who tries to object "You shouldn't get that food, because I want that food" is effectively doing the same to you. It's symmetric. Economists call these pecuniary externalities. When you buy something, you impose slightly higher costs on other buyers but slightly higher benefits on producers. It's a wash, and it doesn't make any sense to favor one buyer over another basically identical buyer, so we don't treat this like we treat other kinds of externalities (pollution, crime, etc.).  You can go on filling your cart with whatever you like, and there's no good reason for anyone to object.

Sometimes our decisions hurt other people. Notably, our political opinions and our choices of who we vote for impose policy on our neighbors. Given that, we're under some kind of moral obligation to explain ourselves. Of course, you have the right to your own opinions, in the sense that nobody can read your mind and convict you of thought-crime. Any attempt to actually enforce an "explain yourself or capitulate" policy would be intolerably authoritarian. (And besides, who wants to give any government the authority to decide what "the right answer" is to these kinds of questions?) What I'm describing is a moral obligation, not a practical or legal one. If your choices hurt other people, even if those choices are made entirely in your own head, acted upon in the secrecy of the voting booth, and protected by our laws, you have an obligation to give them some thought.

So I think people can legitimately decide things such as, "I like apples, so I'm going to buy more apples." without coming up with a philosophical justification. You can also decide, "I'm going to listen to a few Katy Perry songs" or "I'm going to drink a few beers tonight" or "I'm going to binge-watch the entire second season of The Punisher in a single weekend" without having to explain yourself to your neighbors or to society in general. (Sorry, enough about me anyway.) You can decide that you like these things, that it's just your opinion, that these are simply your own tastes, and nobody is harmed.

On the other hand, I don't think it's legitimate to think to yourself, "I don't think we should legalize marijuana. That's just my opinion, but I don't like it and will vote against it." You might legitimately argue that you've digested the literature and thought that marijuana causes more social harms than benefits, and that this justifies outlawing it and using state-sponsored violence to suppress the market. (Obviously I think such people have reached the wrong conclusion, but they've at least followed a legitimate process to get there.) I would applaud the person who at least made an honest effort at this, and I would scorn the person who doesn't even bother. The point here is that criminalizing marijuana entails deliberately harming certain people, and you have to justify a decision that causes someone harm. You don't get to flippantly say, "Let's sic armed men on people who do X, because it's just my opinion that we should do so."

There are a lot of laws that are in place because people use state power to enshrine their cultural or religious orientations. "I do/don't approve of marijuana" is a great divider between left-tribe and right-tribe. (Not as much in very recent years, but it has been.) And some policies aren't necessarily a left/right divider, but characterize prevailing attitudes. Drug laws in general are in place mostly because voters are answering the wrong question: "Do I personally approve of drug use?" The relevant question is actually, "Can we justify using violence to stop drug use?" It's similar with laws against gambling and prostitution and other vice laws. I would make a similar argument about people who want a "soak the rich" tax policy. Most of these people haven't made a careful calculation. They don't know how much "the rich" are paying now, they don't have a theory that computes the optimal amount, and they haven't compared the current actual to the modeled optimal and found it's too low. Mostly these people are emotionally responding "More!" to a vague question about how much the rich should pay in taxes. It's more a declaration one's membership to the Blue Tribe than it is a carefully considered result of an optimization problem. (I acknowledge that there are people who do the hard work and conclude that the rich should be taxed more. Those people are fulfilling their obligation to explain themselves, and I salute them. But I'll suggest they are a tiny fraction of total people calling for higher taxes on the rich.)

If your decisions and choices potentially harm other people, you have an obligation to explain your reasoning. If you support the use of state-sponsored violence to ban things or to confiscate wealth, I think this plainly qualifies as needing an explanation. People have very bad ideas about what good policy means. These ideas mostly sit quietly inside of people's skulls, compelling them to fill in the wrong bubbles on election day and giving moral support to the wrong politicians. These things need to be aired and exposed to the light of day. If there are compelling arguments, you're obligated to consider them, to come up with some kind of answer to them or perhaps even change your mind.

Entrepreneurial Workers and Bureaucratic Workers

There are two opposing strategies to a successful career in an office job: entrepreneurial and bureaucratic. (I owe this dichotomy to someone, but I can't figure out who at the moment. Arnold Kling? I can't seem to find which of his books or essay's I lifted this from.)

Bureaucrats are rules-lawyers and system-gamers. They insist on knowing exactly the rules by which they will be evaluated. They try to figure out the formula on which they will be compensated, and maximize the pay-out of that formula regardless of what's actually in everyone's long-term interests. They are incredulous when they learn that their managers had unstated expectations of them. They come at their jobs with a posture of "I did exactly what you told me to do," even when the job sometimes calls for some creativity. It's not necessarily a difference in drive or laziness that separates entrepreneurs from bureaucrats. A bureaucrat can be an absolute gunner, it's just that their effort is spent maximizing a formula payout rather than maximizing the value for their employer.

The entrepreneurial strategy is more creative and takes more ownership of the job. It acknowledges that various measures and checklists and processes are proxies for productivity and concerns itself with the underlying productivity that is the actual goal. If the boss is disappointed in their performance or decisions, they don't throw a contract or memo back in the boss's face and say, "See! That's what you told me to do!" They try to do better and maybe even feel bad for failing to anticipate the problem. People with an entrepreneurial stance to their careers take ownership. They spot things that need to be done and do them. They spot their own skill deficiencies and acquire those skills, not because someone told them to but because they see a real opportunity to create value. They do projects for other departments, not because those things were built into their job evaluations but because doing so solves a problem and creates value for the organization.

Obviously a company has to create the right kind of culture to encourage entrepreneurs and discourage bureaucratic system-gaming. People need to feel like their initiative will be noticed and rewarded. The value of those extra projects need to be noticed and appreciated by the right people. Otherwise even natural entrepreneurs may have their spirits crushed and either turn into min-maxing bureaucrats or (hopefully) leave the company.

I'm learning how hard it is to instill entrepreneurial motives in people. It's only very recently in my career that I've had people reporting directly to me. It's been quite a learning experience. They often do exactly what I told them to do, which is to say they hit some kind of road-block in which my literal instructions make no sense, but somehow proceed on anyway. (It's a statistical research job. The nature of the job is that we find surprises, so there's no way to specify everything that needs to be done ahead of time in full detail.)

Maybe this is a good analogy to the point I'm trying to make. I like to point out that computers literally and dutifully follow the instructions given to them, with no appreciation whatsoever for the intent of the user. Some humans learn these nasty habits from computers. We call them "programmers." Programmers often will get a list of "requirements" from the business people and program "the requirements" without any regard for the usefulness of the resulting software. If the business person says, "Wait, this isn't what I wanted. It doesn't solve my problem," the programmers might shove the list of requirements in their face and say "I did what you said." This is a toxic process. It should be a conversation between professionals who both want to solve a problem for their employer. It shouldn't be an adversarial process with legalistic appeals to contracts or "requirements" lists or request forms. The business people should be trying to understand how a logical, algorithmic process will actually work once programmed, and the programmers should be trying to understand the intent of the business people. A little bit of process is okay. We need rules and procedures. But too often, filling out the checklist becomes the goal, the thing that's being maximized. Sometimes the bureaucracy gets so stifling that it's impossible to get any work done. (BTW, I'm not picking on programmers here; I do a lot of programming myself. I'm just using them as an example.)