Economic Insanity

I doubt that anyone will be shocked if I say that Mr. Trump doesn’t know much about economic policy, or for that matter any kind of policy. He still seems to imagine, for example, that China is taking advantage of America by keeping its currency weak — which was true once upon a time, but bears no resemblance to current reality. ...
The Donald doesn’t know much, but Ted Cruz knows a lot that isn’t so. In a world in which gold bugs have been wrong every step of the way, repeatedly predicting runaway inflation that fails to materialize, he demands a gold standard to produce a “sound dollar.” He chose, as his senior economic adviser, Phil Gramm — an architect of financial deregulation who helped set the stage for the 2008 crisis, then dismissed warnings of recession when that crisis came, calling America a “nation of whiners.”

Mr. Cruz is, in other words, a man of firm economic convictions — convictions that are utterly divorced from reality and impervious to evidence, to a degree that’s unusual even among Republicans.
- Paul Krugman, The 8 A.M. Call, NYT, April 25, 2016

It's a basic principle of economics that if the price of something is increased, less will be purchased. Somehow many economists, along with less sophisticated people, manage to overlook this general law when considering the impact of raising the minimum wage.

A growing number of economists have found that many cities and states have considerable room to raise the minimum wage before employers meaningfully cut back on hiring.

Back in the real world, increasing the cost of employing people will accelerate substitution of machines for human workers:

Zane Tankel, chief executive and equity partner in a group that owns and operates several dozen Applebee’s restaurants in the New York City area, said replacing low-skilled workers with higher-skilled ones after the state’s recent minimum-wage increases is “not something that we try to do.”

Mr. Tankel argued that differences in the productivity of low-level workers in his industry are not very big. “It’s just a lot more money for the exact same job description,” he said. He is accelerating automation in his restaurants, including tablet devices for ordering certain items and payment, to offset the costs of the higher minimum.
- both quotes from Noam Scheiber, Higher Minimum Wage May Have Losers, NYT, Jan. 10, 2017

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