Economists as Camp-following Whores

“The inverse relationship between quantity demanded and price is the core proposition in economic science, which embodies the presupposition that human choice behavior is sufficiently relational to allow predictions to be made. Just as no physicist would claim that “water runs uphill,” no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimal scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests. Fortunately, only a handful of economists are willing to throw over the teachings of two centuries; we have not yet become a bevy of campfollowing whores. “

That’s a favorite quote from James M. Buchanan. He wrote that in the 1990s in response to a Wall Street Journal interview in which the disemployment effect of minimum wage legislation was questioned.

The theoretical case that minimum wage laws adversely affect low-skilled workers is as sound as anything else in economics. The empirical evidence is also as sound as the empirical evidence for “dog bites man.” What makes the news is when “man bites dog.” That exception does not invalidate the general case that dogs bite men.

The inverse relationship between quantity demanded and price is depicted as downward-sloping demand schedules. Demand slopes downward as certainly as water flows downhill. What justifies that claim? Because quantity demanded falls as the price rises. We know this from our own experience: we buy less when price goes up and buy more when price falls.

Granted, there are curiosities in price theory — Veblen goods (for which demand increases as the price increases, e.g. luxury goods), backward-bending supply curves, Giffen goods[1], et cetera.

Identifying curiosities and corner cases, and using them in support of ideologically-motivated policies is tantamount to joining a bevy of camp-following whores. Journalists often do. Economists? A few outliers do, and some even get recognized by the economics “Nobel” prize committee.

For a bit of context, read this March 2019 The Nation piece “Alan Krueger’s Radical Empiricism.” Note that I am not endorsing the content of the article; I’m just using it to provide context. And here’s a bit more context:

NOTES:

[1] Investopedia on giffen goods:

Giffen good are a rarity in economics because supply and demand for these goods is opposite of standard conventions. Giffen goods can be the result of multiple market variables including supply, demand, price, income, and substitution. All of these variables are central to the basic theories of supply and demand economics. Giffen goods cases study the effects of these variables on low income, non-luxury goods which result in an upward sloping demand curve.

See also their description of Veblen goods.

 

 

3 thoughts on “Economists as Camp-following Whores

  1. Raghuram Tuesday October 12, 2021 / 11:24 am

    The inverse relationship between quantity demanded and price is the core proposition in economic science.

    no self-respecting economist would claim that increases in the minimum wage increase employment.

    Of course, slave labor will always be in greater demand than wage labor, if it were legal. After all, the US southern states fought a civil war over this, despite overwhelming odds. Also, in 19th century UK, advocates for ideological interests, passionately preached the virtues of children laboring for 12 hours a day, so as to keep them away from mischief, before child labor was banned in the UK.

    The minimum wage law is intended to increase the costs of such “free” labor as teen/migrant/’volunteer’/prison/slave labor and therefore decrease the quantity demanded of such labor.

    BTW, current situation in the US:

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  2. keshavbedi Tuesday October 12, 2021 / 11:02 pm

    Buchanan wasn’t dogmatic on the issue. He himself admitted possibility of increased employment due to minimum wage in his 1954 textbook, written with others, ‘Prices, Income, and Public Policy’:

    “The adverse effects of minimum-wage legislation have been stressed so far, and these PROBABLY outweigh the beneficial results. On the other side, minimum-wage legislation undoubtedly prevents some employers from paying workers less than their marginal revenue product. This is especially apt to happen when workers do not “shop around” enough to be aware of alternative employment opportunities or if these alternatives are few or nonexistent. This is the monopsony case, discussed in Chapter 13. Under this sort of situation it is possible that the imposition of a minimum wage will make the firm hire more rather than fewer workers. For this effect to follow, however, the legal minimum wage would have to be placed between the wage rate actually being paid by the firm and the marginal revenue product of the labor employed.”

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    • Atanu Dey Wednesday October 13, 2021 / 8:47 am

      That point was explicitly made on twitter by Phil Magness which I linked to in my post above.

      Buchanan went on to point out that an industrywide or statewide minimum wage does not have that effect — it only works at the firm level. He wrote, “… the wage rate actually being paid by the firm …”

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