Bad Arguments For the Minimum Wage

Now, there are some really bad arguments for the minimum wage. There are people who don’t even acknowledge that it’s theoretically possible for the minimum wage to cause unemployment. It either doesn’t occur to them, or they pretend the very idea is absurd on its face when confronted with it, or they dismiss it as being numerically insignificant without evidence. My post won’t discuss these people, because they aren’t really serious.

There are some slightly better but still bad arguments for the minimum wage that actually come from people who are well-read and economically literate. These people argue that while economic theory does indeed predict that a minimum wage leads to unemployment for low-skilled workers, it doesn’t tell us how big the effect is. The effect may be big or small. It’s an empirical question. The empirical literature has many studies that show a small or even positive effect of the minimum wage on employment. Summarizing slightly, the argument here is that the costs of the minimum wage fail to materialize, so there’s nothing to worry about.

But hold on a second! Did you notice that something’s missing? Here we have advocates for a policy telling us that the costs fail to materialize. Okay, so what about the benefits? Aren’t there two sides to a ledger?  Doesn’t a “cost-benefit analysis” entail measuring the benefits, too?

It turns out there is an enormous literature on the effects of the minimum wage, and we have empirical studies on things other than the effect on unemployment. The book Minimum Wages by David Neumark and William L. Wascher is a thorough literature review on the economics of minimum wages. Attached is a summary table that appears near the end of their book.

Hopefully they wouldn’t mind me using it. (I’d be downright baffled if someone wrote a book intended to inform public policy but then suddenly got "copyright happy" when someone tried to share excerpts from it!) Notice that we fail to see the presumed benefits of the minimum wage. Under "Income distribution", it says, "For U.S. economy, clear conclusion that minimum wage effects range from no beneficial distributional effects to adverse effects, with no evidence of beneficial distributional effects." Based on the rhetoric marshaled in support of the minimum wage, you'd expect to see some sort of distributional impact. You'd hope to see a reduction in poverty or something like that. Based on the empirical literature, minimum wage proponents can claim no such benefit.

Also, notice that it isn’t at all a consensus that minimum wages don’t cause unemployment. They probably do. There are some studies that indicate otherwise, but they aren’t the majority of studies, and according to Neumark and Wascher they aren’t the majority of the best studies with the best data and methodologies. Measured elasticities are in the -0.1 to -0.3 range. A -0.1 elasticity means that a 10% increase in the minimum wage would result in a 1% drop in employment (for low skilled workers).

I have to point out a minor detail in this table. Notice under "Prices and profits" they say "...no appreciable impact on inflation." Just as there are bad arguments in favor of the minimum wage, there are bad arguments against it. One such goes something like: "Minimum wage will just cause inflation, which will eat away the entire benefit." This is a common lay argument, but almost no economist takes it seriously. It's important to note that Neumark and Wascher slay this fallacy. Lest you think they are just ideologues with axes to grind, witness here that they are debunking a bad argument in favor of their overall conclusion.

I’ve seen some of the back-and-forth on this issue. Proponents of the minimum wage will insist that the studies that show no unemployment effect are the best studies with the most cutting-edge statistical methods, and opponents will redo their studies with these sexy new methods and find that indeed there is an unemployment effect. This kind of back-and-forth is important, but rather than glom onto a few studies it might be more sensible to have a healthy agnosticism. Maybe, in some places at some particular times when some particular minimum wage increase happened, there was no effect on youth employment. That’s not shattering to my worldview. I’m happy to entertain the view that the effect of minimum wage on unemployment is too small to see in a lot of empirical studies. But that would hardly be the end of the debate. If we’re crafting policy in a state of radical uncertainty, that means the potential for enormous harm exists. You don’t just get to take your point estimate and assume it’s the sum total of all truth. There is uncertainty around that estimate, and if you underestimate the unemployment effects you will do enormous harm to the people least capable of absorbing it. And even if you somehow establish that there’s no unemployment effect and the error bars around your point estimate are infinitely narrow, you would still need to empirically demonstrate a benefit. The current state of the empirical literature doesn’t support any such benefit. No one can definitively say, “…and therefore the benefits of the minimum wage justify the costs.” This part of the argument is completely missing.

Idea for a Comedy Skit - the One Man Town

I once had this silly idea for a comedy skit in which there was a town inhabited by a single man who did every job in town. In the early morning he’s putting together the day’s newspaper, and a single copy rolls off the press. Perhaps he mutters something about the recent ruinous decline in sales. He delivers it to his door around 7 a.m. Another hand reaches down from off camera to deliver a fresh bottle of milk to his step. He steps outside to retrieve the paper and milk, then sits down to the breakfast table with his morning coffee. He unrolls the paper to see a headline, “Mayor Embroiled in Sex Scandal with Local Resident” and spits out his coffee. Yells angrily about the press being “fucking hyenas.” He steps outside to see “PERVERT” spray-painted across the front of his house and shakes his head. He pulls out his phone to call “the police” and tells them to “round up the usual suspects.”

I love this stuff. My best friends, the ones I find the most fun to hang out with, are good at riffing this kind of stuff. We take an absurd idea and add to it and it comes to life. Some people have a knack for it, others I’ve noticed have no patience for it. I’ve heard Christopher Hitchens refer to this trait as “a sense of the absurd” and identifies it as one of the best traits to find in a friend. I tend to agree.

Flaky Allies on Drug Legalization - Hippies and Other Anti-Market Leftists

Usually it’s a good thing when people who don’t share your values nevertheless agree with you on some policy position. You can at least form a winning coalition that can change policy in the right direction. But the disagreement can be toxic and lead to some policy proposals or changes that you aren’t on board with. I want to discuss a few bad argument that I hear from some advocates of drug legalization and explain why they're wrong.

Leftists and libertarians both tend to support drug legalization, or at least some form of drug reform. Not everyone on the left is in on this, but most young people I know are at least somewhat hip to it, and most of the “secular liberals” I knew in college were, too. But these broad groups of people give different reasons to support legalization.

For libertarians, it’s a basic moral principle that human beings own their bodies. Even if someone does commit self-harm, it’s within his/her right to do so, so long as they aren’t hurting somebody else. Libertarians also give practical arguments for legalizing drugs, such as that black markets create more violence and the wildly fluctuating drug purity that leads to overdose deaths and poisonings from drug adulterants. In this view, legal markets are peaceful, even if sometimes highly competitive. Market forces, such as the loss of repeat customers and the threat of lawsuits, discipline businesses to provide safe and high-quality products. Alleged lapses in this market discipline, rather than refuting the libertarian view, often demonstrate that such market forces are working. The disgraced company typically loses market share and faces large settlements to claimants for its wrongdoing. Part of the left’s worldview is that big businesses can just arbitrarily “have their way”, as if these market forces didn’t even exist.

It’s in failing to understand these market forces that leftists make flaky allies in this fight. In one breath they will condemn the government for banning a useful medicine with an excellent safety profile (cannabis), and in the next breath they will condemn pharmaceutical companies for “foisting” prescription painkillers on us. Opioids cause a few overdose deaths for sure, but they are a godsend to many people living with crippling chronic pain. Leftists desperately want to tell this anti-big-business narrative, which is a major piece of their worldview. So they end up betraying and undermining some of the better arguments for legalization. I recently saw this behavior in a video of people protesting the recent attempt to ban the pain-relieving substance kratom. Some kratom users were holding up signs blaming the pharmaceutical industry, and others were explaining how dangerous opioid painkillers are. (See the sign at 1:08 in the video, saying "Opiates Kill, Kratom Saves.") Hey, man, if kratom works for you that’s great. But consider that it might not work for somebody else, and that opioids are the only drugs that allow this person to function properly. Some of these legalization advocates are committing the same sin as the DEA. They are trying to prescribe and proscribe substances for every occasion, rather than giving people the freedom to choose which substances make them feel better. In doing so, they risk alienating or even demonizing some of their allies.

I have heard Tommy Chong deride Sudafed, an incredibly useful anti-cold medicine with a  very good safety profile, by saying (paraphrasing here): Yeah, you got a cold, why not just take some meth? (Here's the 6-second segment that I probably saw. Perhaps there's more context in the full video, but I think my summary is fair.) Forget for a second that the dangers of methamphetamine are grossly exaggerated, here we have Tommy Chong, a man at the tip of the legalization spear, deriding a safe and effective medication. To take another example, I had a hippie friend in grad school who argued that marijuana should stay illegal because it would become too “corporatized” if it were legalized. You’d end up with “the McDonaldization of cannabis”, to use a phrase I heard a few times in the run-up to California’s 2010 legalization initiative. In other words, it’s worth violently harassing dealers and users if we can stop a legitimate business from forming, because legal businesses control their customers (or something). This person was arguing that companies exert insidious control over their customers, addicting them not just to sugary snacks or tobacco in general, but to, say, “McDonalds French Fries” or “Marlboro cigarettes” in particular. It’s as if the customer has no free-will with which to say "No" to that particular product or even to choose a substitute. I thought it was a silly argument, and I said so at the time. This was well before I was a self-identified libertarian, but I already knew at the time that these kinds of mind-control conspiracy theories were nonsense. They certainly aren’t compelling enough to justify threats of violence and *actual* violence on a massive scale, as in our current policy, to deter drug suppliers.

A common refrain among legalization advocates is that marijuana, psilocybin, kratom, and other potential medicines are naturally occurring plants. A pharmaceutical company can’t patent it, so nobody will bother with expensive clinical trials. This argument is supposed to paint pharmaceutical companies as amoral, cynical avatars of capitalist excess. In reality, this argument is a critique of the FDA’s overly-restrictive approval process for new medicines. The libertarian fix to this problem is to eliminate the FDA’s power to deny access to medicine, such that any private company could sell these plants as medicine without the FDA’s approval.  The reluctance of pharmaceutical companies to do clinical trials would be a non-issue if such trials weren’t required by the FDA. We have two federal agencies that ban substances: the FDA and the DEA. Both cause serious problems. Both deny people useful medicine. Both impose policies that kill a lot of people. Unfortunately, left-wing drug reformers only seem to care about one of them. (Read this for a nice literature review outlining the incredible harm caused by the FDA. Long-ish, but well worth the time.)

I’d encourage some soul-searching by my fellow drug reformers on the left. Do you accept the notion of self-ownership or not? Is your body yours to pollute if you so choose? Or are you just using this as a convenient argument for those substances you’d like to see legalized? If you’ll concede that legalizing heroin will lead to a cleaner, safer legal supply, why does this argument not extend to other pharmaceuticals? Do you see how it makes little sense to limit harm by legalizing heroin if you're going to turn around and ban competitors to the Epipen or new anti-depressants? To those self-contradicting individuals who wish to “decriminalize” rather than to fully legalize drugs: Why is it okay to purchase and use a substance, but not to *sell* it? In the end the harm comes from the user, not the seller. It's convenient to blame the dealer as some kind of "profit-monger" or "death-merchant," but let's not forget that the addict is morally responsible for the harm he caused, and that most users don't end up having problems with their drug use. I think there is some facile anti-market, anti-business populism at work here. Leftists think that it’s intrinsically corrupting for money to change hands, and this assumption needs to be rethought. 

The Logic of the Hobbesian Trap

When I first read it, Steven Pinker’s description of the Hobbesian trap gave me chills. Violence isn’t just something that’s “innate” or “human nature” or the result of a violent culture. It’s implied by sheer logic, given just a few basic assumptions about how we operate. The logic of the Hobbesian trap applies to anything shaped by evolution. Any population of self-replicators with differential survival rates will experience it. The following passage is from Pinker's The Better Angels of Our Nature, and a similar discussion is given in his book The Blank Slate. For a little context, Pinker gives a passage from Hobbes listing three principal causes of quarrel: competition, diffidence, and glory:

The second cause of quarrel is diffidence, a word that in Hobbes’s time meant “fear” rather than “shyness.” The second cause is a consequence of the first: competition breeds fear. If you have reason to suspect that your neighbor is inclined to eliminate you from the competition by, say, killing you, then you will be inclined to protect yourself by eliminating him first in a preemptive strike. You might have this temptation even if you otherwise wouldn’t hurt a fly, as long as you are not willing to lie down and be killed. The tragedy is that your competitor has every reason to crank through the same calculation, even if he is the kind of person who wouldn’t hurt a fly. In fact, even if he *knew* that you started out with no aggressive designs on him, he might legitimately worry that you are tempted to neutralize him out of fear that he will neutralize you first, which gives you an incentive to neutralize him before that, ad infinitum. The political scientist Thomas Schelling offers the analogy of an armed homeowner who surprises an armed burglar, each being tempted to shoot the other to avoid being shot first. This paradox is sometimes called the Hobbesian trap, or in the arena of international relations, the security dilemma.

 

The book describes in great detail the behaviors of warring tribes of hunter-gatherers. Such tribes often feud with their neighbors. They often have pitched battles with each other, and they will pick off stray male members of a neighboring tribe who wander into the wrong territory. They even occasionally conduct extermination raids of neighboring villages, attempting to finish off a rival tribe down to the very last person. For a more first-hand account of the violent behavior of hunter-gatherers, read Jared Diamond’s “The Third Chimpanzee.” Hobbes wasn’t just arm-chair theorizing, and Pinker isn’t just working out the logic of an irrelevant hypothetical. The Hobbesian trap is an accurate description of why some cycles of violence happen. It accurately predicts that such cycles are hard to break.

There is hope. If the ambient levels of violence decline, the threat of being exterminated by your neighbors can become irrelevant, then even unthinkable. So neighboring villages no longer consider slaughtering each other preemptively. The cycles of violence can be broken. If some pacifying force (say international peacekeepers, or even a strong-man dictator who threatens warring factions) can reduce the overall levels of violence, it can start a virtuous cycle where violence declines because violence declines. If the threat of being exterminated by your neighbors is ruled out of the question, you no longer have any reason to exterminate them, and the warring tribes can escape the Hobbesian trap. The overall thesis of the book is that violence has declined, and Pinker discusses the many reasons why. This breaking out of the Hobbesain trap is an important piece of that puzzle. It probably explains the massive difference in homicide rates between hunter-gatherer societies (very shockingly high) and modern state societies (orders of magnitude lower).

For some more context, here is an excerpt from Hobbes himself (Leviathan) that kicks off Pinker’s discussion:

So that in the nature of man, we find three principal causes of quarrel. First, competition; secondly, diffidence; thirdly, glory. The first maketh men invade for gain; the second, for safety; and the third, for reputation. The firs use violence, to make themselves masters of other men’s persons, wives, children, and cattle; the second, to defend them; the third, for trifles, as a word, a smile, a different opinion, and any other sign of undervalue, either direct in their persons or by reflection in their kindred, their friends, their nation, their profession, or their name.

My Favorite Cobbler Recipe

Step 1: Bake a pie.

Step 2: Fuck it up.

Be careful not to confuse this with the “American Pie” cobbler recipe, which differs by exactly one word.

A Beautiful Passage from Governing the Commons

The following is from Governing the Commons by Elinor Ostrom. The book (and Ostrom’s body of research more broadly) is about how communities that own a common property govern it. Governance is not always supplied by an explicit “government”. Often the governance is a set of formal and informal rules and enforcement mechanisms agreed upon by the community, with little or no oversight by the state. Ostrom was one of the winners of the 2009 Nobel prize in economics, and to date is the only woman to have won the prize.

I love the following passage. It describes the communal rules in a Japanese mountain village. The common resource in question is the surrounding forest. The villagers need wood from the trees and other plants for various purposes. Nobody wants their neighbors to over-harvest the forest, but it's tempting to "cheat" and take more than one's fair share. Villages set official rules, along with specified fines for rule-breaking, and they hire detectives to enforce these rules. The following passages are from pages 68-69 of Governing the Commons. "Mountain opening day" refers to the day that the surrounding forest is officially open for harvest. Fines were often paid in sake to the detective who caught a rule-breaker. With that context, here's the passage:

Although the level of rule compliance was very high, violations certainly occurred. McKean reports several types of infractions. Impatience with waiting for mountain-opening day was one reason. In the period just before the official opening of the commons for harvesting a particular plant, the detectives expected-and found-a higher level of infractions and were able to keep themselves well supplied with sake.

A second reason for rule violations sometimes was genuine disagreement about the management decisions of a village headman. McKean illustrates this type of infraction in the following way:

“One former detective in Hirano, now a respected village elder, described how he had been patrolling a closed commons one day and came upon not one or two intruders but thirty, including some of the heads of leading households. It was not yet mountain-opening day, but they had entered the commons en masse to cut a particular type of pole used to build trellises to support garden vegetables raised on private plots. If they could not cut the poles soon enough, their entire vegetable crop might be lost and they believed tha the village headman had erred in setting opening day later than these crops required. (McKean 1986, P 565).”

 In that instance, fines were imposed, but they involved making a donation to the village school, rather than the usual payment of sake. In her conclusion, McKean stresses that the long-term success of these locally designed rule systems indicates “that it is not necessarily for regulation of the commons to be imposed coercively from the outside” (McKean 1986 p 571).

Emphasis mine. I absolutely love this. A rule of law exists. Everyone approves of this rule of law, but everyone appears to agree that the "law-makers" have erred. So everyone breaks the bad rule, but they also agree to pay a fine to preserve the reining order, which they all believe is necessary (if fallible). The enforcer must somehow preserve his moral authority. He can't demand his regular fine of sake, paid directly to him, from an entire village that has just repudiated his rule. But a fine must be paid by the villages to acknowledge their approval of the reigning order, so they donate to the village school instead.

Modern governments could take a lesson or two from this book. I'm trying to imagine how silly it would be for a central government in Tokyo to tell these villagers how to manage their common property. The knowledge necessary to manage these properties does not exist in Tokyo; it doesn't even exist locally until specific decisions are needed for a specific purpose. It's absurd to think we could simply codify rules for every possible circumstance and apply these rules as needed. I think federal and state governments need to take a hands-off approach to these kinds of local "common property management" problems. Locally, people need to do a better job of providing their own governance.

(In the passage, "McKean 1986" refers to the article "Management of Traditional Common Lands (Iriaichi) in Japan" in a publication called Proceedings of the Conference on Common Property Resource  Management.)

Why Is Ibogaine Illegal? Schedule One No Less?

Ibogaine is an African plant with hallucinogenic properties. I recently read about it in the excellent book Illegal Drugs by Paul Gahlinger. What’s especially galling about the Schedule I status of Ibogaine is that it shows some promise in the treatment of addiction. It’s potentially the solution to the drug problem, but it’s treated like it’s just another habit-forming substance.

After a dose of about 150 milligrams of the powdered root bark, the user might experience an increased sense of colors, similar to the effects of mescaline. With 300 milligrams, there is a slight nausea, dizziness, and a lack of muscular control or coordination. At one gram, there are hallucinations, which can last for days. The elimination half-life— the time it takes for half of the ibogaine to leave the body— is about 38 hours, suggesting that some effects can persist for a week or longer with a large dose.

Since ibogaine has a chemical structure similar to LSD (the ibogaine molecule contains the indole ring characteristic of many hallucinogens; see Chapter 6), the U.S. federal government classified ibogaine among substances analogous to LSD, and therefore made it illegal. Unlike LSD, however, ibogaine was never a recreational drug and it also shows promise as an anti-addictive medication. As research progresses, ibogaine may be rescheduled and marketed as a pharmaceutical.

So it never became a party drug. It’s not “fun.” Maybe it would if it were fully legalized, but it's hard to say. Some tribal medicines (ayahuasca, mescaline) never really caught on as recreational party drugs, and it seems like ibogaine could be in this category. 

Soon after its discovery, Europeans began to experiment with ibogaine and found that it was effective in curing addiction to opiates, cocaine, alcohol, amphetamines, and nicotine. Self-help groups claimed that ibogaine reduces withdrawal symptoms and helps addicts stay away from other drugs. Some addicts claim that even a single dose has reduced drug cravings for periods up to six months.

Even granting that we should probably doubt 19^th century medicine, this is kind of promising and should be explored further.

One of the first to explore this use was Howard Lotsof, a non-scientist businessman who discovered that he and his friends stopped abusing drugs after experimenting with ibogaine. In the 1960s, he founded a New York corporation, NDA International, Inc., to market Endabuse. He went on to develop a formal detoxification program and took out several patents, beginning in 1985 with his “Rapid method for interrupting the narcotic addiction syndrome.” In this program, one gram of ibogaine hydrochloride is taken by mouth, with effects lasting for about 30 hours. Following just this single treatment, it is claimed that the addict will no longer want to take heroin and show no perceptible signs of physical withdrawal.

Again, even with the possibility that this is pure snake-oil, testimonials are a good place to start. If this can help people kick their opioid, alcohol, or cocaine addictions, it is well worth exploring. No such exploration is possible with the Schedule I status, which severely restricts the ability of researchers to acquire the drug for legitimate medical trials. 

The effects of ibogaine are felt about 15 to 20 minutes after ingestion. A buzzing sound is often heard, perhaps in waves, and the skin may feel numb. After 25 to 30 minutes, objects appear to vibrate. There may be nausea. After about an hour, the first visions appear. Then peak intoxication follows, lasting two to four hours, during which the user can experience difficulty walking, dizziness, pain with bright lights, and out-of-body sensations. There may also be tremors, abnormal breathing, spasms in the legs, and seizures. Some users have diarrhea, teary eyes, salivation, and a runny nose.

To reiterate, this sounds like other kinds of tribal medicine (mescaline and ayahuasca for example). No fun, but definitely mind altering. 

Then there's this:

There is no documented withdrawal syndrome.

This helps us rule out the possibility of problematic habit-forming.

From the section titled “What to Do if There Is An Overdose?”

Ibogaine appears to be safe even in amounts that vastly exceed the normal dose. The greatest danger is in the paralysis that accompanies very high doses, but this is not properly considered an overdose, and resolves without adverse effects. There are unsubstantiated reports that excessive amounts of iboga ingestion have resulted in seizures, paralysis, and death by respiratory arrest.
…
The major concern is probably anxiety and apprehension from the long-lasting effects. An overdose should be managed by support in a manner similar to the treatment of hallucinogens (see LSD). For suspected overdose, atropine has been used to suppress all signs of ibogaine intoxication.

So basically there’s nothing to worry about except for the possibility of the user freaking out a little. This can be managed with a bit of reassurance, or possibly atropine for very extreme cases. With almost no deaths  or even significant side effects observed in all the world’s literature, this appears to be a pretty safe drug. 

For a more thorough literature review than I am willing to write here, please see this article at Erowid. Even if the anti-addictive powers of ibogaine turn out to be complete bunk, it's still very much worth exploring the possibility. 

Hopefully ibogaine is descheduled or *at least* put on a less restrictive schedule, given its impressive safety profile and promise as a treatment for addictions that are actually harmful. Hopefully the DEA stops preemptively banning anything that looks like it might be fun. I really don't understand what makes these drug warriors tick. They don't seem to care that their policies don't make sense. They aren't taking the entirety of American drug policy as a portfolio; it's as if they're doing a bunch of one-offs without considering the overall effect. Banning some substances might mean other, more dangerous substances become more attractive or relatively cost-effective. Lawmakers and the DEA need to consider these overall effects of drug policy. They need to stop treating bans on particular substances as if they are isolated decisions, as if they don't affect the outcomes of *other* decisions to ban other substances. Maybe if ibogaine were the only drug in the world, it might make sense to ban it. (I said "maybe"; I certainly don't think it would make sense.) But its ban needs to be assessed in context. The world also contains many potentially harmful substances: alcohol, tobacco, cocaine, heroin. If freely available ibogaine would reduce the use of these substances, then surely it should be freely available.