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Why is deadweight loss bad?

blueberry_crepe
Posts: 25
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10/19/2013 10:37:41 PM
Posted: 3 years ago
I don't fully understand why it is. I understand it in a graph, but I can't conceptualize it in real life. I mean a surplus people lose? What does that mean?
blueberry_crepe
Posts: 25
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10/19/2013 10:41:44 PM
Posted: 3 years ago
I found this, which makes it more understandable: http://marginalrevolution.com.... However, what if the government taxes it, making it 45$ What is the deadweight loss then? You take the trip, the government gains 5$ (keeping it simple for the sake of the question). Maybe you lose 5$ in consumer surplus, but the government gains it so I see no loss. But yet according to econ, there is one (since all taxes have some dwl). Pls explain.
darkkermit
Posts: 11,204
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10/20/2013 9:21:01 AM
Posted: 3 years ago
The value from government taxes is ignored in the model to simplify things. One doesn't necessary know what value they'll be, and isn't a main focus for calculating dedweight loss.
Open borders debate:
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CarefulNow
Posts: 780
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10/20/2013 11:25:19 AM
Posted: 3 years ago
At 10/19/2013 10:41:44 PM, blueberry_crepe wrote:
I found this, which makes it more understandable: http://marginalrevolution.com.... However, what if the government taxes it, making it 45$ What is the deadweight loss then? You take the trip, the government gains 5$ (keeping it simple for the sake of the question). Maybe you lose 5$ in consumer surplus, but the government gains it so I see no loss. But yet according to econ, there is one (since all taxes have some dwl). Pls explain.

All taxes (with the exception of natural resource, Veblen and Pigovian taxes) have aggregate dwl, not dwl for every potential exchange. Consumers' preferences vary. Some are willing to pay the tax, some are not, and some wouldn't even pay the market price. A $5 tax has less deadweight loss than a $20 tax, because those who value the ticket between $45 and $60 would pay the lower tax but not the higher. When the tax is actually paid, consumer surplus is not lost but merely transformed into government surplus. However, for those who value the ticket between $40 and $45 dollars, there is dwl equal to the number of such consumers times their average valuation of the ticket.
CarefulNow
Posts: 780
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10/20/2013 6:48:30 PM
Posted: 3 years ago
At 10/20/2013 11:25:19 AM, CarefulNow wrote:
At 10/19/2013 10:41:44 PM, blueberry_crepe wrote:
I found this, which makes it more understandable: http://marginalrevolution.com.... However, what if the government taxes it, making it 45$ What is the deadweight loss then? You take the trip, the government gains 5$ (keeping it simple for the sake of the question). Maybe you lose 5$ in consumer surplus, but the government gains it so I see no loss. But yet according to econ, there is one (since all taxes have some dwl). Pls explain.

All taxes (with the exception of natural resource, Veblen and Pigovian taxes) have aggregate dwl, not dwl for every potential exchange. Consumers' preferences vary. Some are willing to pay the tax, some are not, and some wouldn't even pay the market price. A $5 tax has less deadweight loss than a $20 tax, because those who value the ticket between $45 and $60 would pay the lower tax but not the higher. When the tax is actually paid, consumer surplus is not lost but merely transformed into government surplus. However, for those who value the ticket between $40 and $45 dollars, there is dwl equal to the number of such consumers times their average valuation of the ticket.

Sorry, the dwl is the number of lost consumers times the difference between their average valuation of the ticket and the cost of the ticket.
DanT
Posts: 5,693
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10/20/2013 7:07:49 PM
Posted: 3 years ago
At 10/19/2013 10:37:41 PM, blueberry_crepe wrote:
I don't fully understand why it is. I understand it in a graph, but I can't conceptualize it in real life. I mean a surplus people lose? What does that mean?

Deadweight loss is the cost to society caused by inefficiencies in the market. Market imperfections, such as sticky prices, minimum wage, taxation, subsidization, and so on, create market inefficiencies.

Take for example a minimum wage imposed above the real wage, thereby setting the nominal wage higher than the real wage. This difference in nominal and real wage creates a deadweight loss resulting in unemployment aka a labor surplus. Surpluses and shortages are dead weight losses.
"Chemical weapons are no different than any other types of weapons."~Lordknukle
DanT
Posts: 5,693
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10/20/2013 7:50:24 PM
Posted: 3 years ago
At 10/19/2013 10:41:44 PM, blueberry_crepe wrote:
I found this, which makes it more understandable: http://marginalrevolution.com.... However, what if the government taxes it, making it 45$ What is the deadweight loss then? You take the trip, the government gains 5$ (keeping it simple for the sake of the question). Maybe you lose 5$ in consumer surplus, but the government gains it so I see no loss. But yet according to econ, there is one (since all taxes have some dwl). Pls explain.

LAS = Yp
In other words, the Long run Aggregate supply = the potential Aggregate Output.
SAS = Yp + a x (P - Pe)
In other words, the difference between the short run aggregate supply and the Long run aggregate supply = a constant greater than 0 multiplied by the difference between the real price and the expected price. This is because the supply relies on contracts, such as wage contracts, and contracts between the retailer and the manufacturer. These contracts are not easily changed, and therefore are set according to the expected price level.

Y = f (K,L)
In other words, the aggregate output is a function of capital and labor. Let's say there is a decrease in doctors, but the hospitals savings, facilities, and equipment stay the same. This would cause a decrease in output, and the hospital would not be able to facilitate as many patients without losing quality. Now lets say the doctors stayed the same but equipment broke without getting replaced; the same effects would present itself in regards to the hospital's capacity to treat patients. Now lets say the number of doctors stayed the same but the level of medical advancements increased; the medical advancements would allow less doctors to treat more patients. according to the law of diminishing returns, you can only increase one of these factors to a certain point until you must increase the other. For example, if 10 doctors had to share 1 stethoscope, their is a wasteful number of doctors employed at the hospital, unless more stethoscopes can be purchased.

AD = C + I +G + NX
In other words, Aggregate Demand = Private Consumption + Investments + Government Spending + Net Exports.

When Government Spending increases Private Consumption + Investments decrease.
G = T + (dMB + dB)
Thus, Government Spending = Taxes + (the change in the monetary base aka (Cash + Reserves) + the change in Bonds aka government borrowing. Because it is illegal to add to the monetary base out of thin air, G = T + dB.

Investments is a function of the real interest rate. The real interest rate is the price of loanable funds; savings is the supply of loanable funds, and investments is the demand for loanable funds. Bonds and Investments have a negative relationship, because when the interest rate is high the price of bonds are low, and vice versa. That is why Bonds are a good investment when stocks are sh!t and stocks are a good investment when bonds are sh!t.

The real interest rate also has an effect on consumption, which is also a function of income - taxes. C = f(Y-T). Stocks and Consumption are both strengthen by low interest rates, while Bonds and Government spending are strengthen by high interest rates.
"Chemical weapons are no different than any other types of weapons."~Lordknukle
slo1
Posts: 4,361
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10/21/2013 7:53:14 AM
Posted: 3 years ago
At 10/19/2013 10:41:44 PM, blueberry_crepe wrote:
I found this, which makes it more understandable: http://marginalrevolution.com.... However, what if the government taxes it, making it 45$ What is the deadweight loss then? You take the trip, the government gains 5$ (keeping it simple for the sake of the question). Maybe you lose 5$ in consumer surplus, but the government gains it so I see no loss. But yet according to econ, there is one (since all taxes have some dwl). Pls explain.

Good question:

In the tax example you give there indeed is no lost of money as a whole. The loss is measured in the reduced demand caused by artificially raising the price via taxes.

The definition assumes a market equilibrium achieved in an unfettered market. While when you look at the definition it tends to be used as a propaganda opportunity to point out taxes and price controls, but any event which creates a market inefficiency can create a deadweight loss.

Pricing collusion, controlling a supply of an item, or natural disasters are examples of events that may create deadweight losses that you probably would not see in a text book.

While it is a very real phenomena, all the rhetoric around it assumes that a laissez fair unfettered market is the base line preference, all the while they could care less about deadweight loss that occurs in small town America US because all the Christian owned business shut down on Sunday and you have to buy emergency supplies at the convenience store.

ok I'm getting pissy now.
slo1
Posts: 4,361
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10/21/2013 9:35:32 AM
Posted: 3 years ago
I should also commend you for looking at the entire system as a whole. When you question the $ that the gov holds, you start looking at the value the gov might be able to provide with that $ that might exceed the deadweight loss in your example.

Taxes that are spent on roads or a new bridge may actually reduce operating costs for the bus company thus outweighing the reduced demand. Military, infrastructure, research grants, are many more areas have the potential to provide more value than the deadweight loss of tax collection to pay for those items.

Some people even argue that a min wage, while creating deadweight loss, might reduce gov dependency by reducing the moral hazard of making it more beneficial for those on the fringe to work versus not work. In effect I have less min wage jobs for the overall pool, but those who have them are not in a position where they need as much government assistance versus more min wage jobs but it is less value than getting gov assistance.

It is all very debatable, but again things like deadweight loss get to be classified as economic gospel and people ignore the entire system and prefer to argue on these utopian concepts such as completely unregulated markets.
CarefulNow
Posts: 780
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10/22/2013 10:31:47 AM
Posted: 3 years ago
At 10/21/2013 9:35:32 AM, slo1 wrote:
Some people even argue that a min wage, while creating deadweight loss, might reduce gov dependency by reducing the moral hazard of making it more beneficial for those on the fringe to work versus not work. In effect I have less min wage jobs for the overall pool, but those who have them are not in a position where they need as much government assistance versus more min wage jobs but it is less value than getting gov assistance.

Your point about moral hazard is ambiguous, but I don't see validity in it either way. If you mean that the reduction in the supply of jobs is compensated for by an increase in demand for them, that implies there was previously a glut of jobs, as if employers were keeping extra positions open all those years in patient anticipation of the unemployed having a reason to work. If, on the other hand, you mean that unemployment is somehow better (even if it's higher!) when it's the result of a lack of jobs instead of moral hazard, my only guess is that you may not know that victims of the former are more eligible for welfare, not less.

No, the empirical evidence that the MW does not cause unemployment is better explained by permitting the quality of the job to vary just like the quantity. Why would an employer offer the same job for the higher wage, when he could leverage the higher wage in order to extract more labor from the worker (euphemistically referred to as "morale" by liberals) and/or reduce his own non-wage contributions? Indeed, as inferior to the original (low-wage, low-expectation, high-benefit) contract as this may be to both employer and employee, it's more often than not preferable to the alternative (unemployment and idle capital).

As for supplementary government assistance, you could be right. Though an artificial wage increase will undoubtedly increase daycare needs, commuting costs, rents and prices of every kind, much of the burden will materialize in a way liberals are just as comfortable with as conservatives: a more energetic and tolerant wage-slave, needy only in the non-economic categories of dignity and decency.
slo1
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10/22/2013 10:41:07 AM
Posted: 3 years ago
At 10/22/2013 10:31:47 AM, CarefulNow wrote:
At 10/21/2013 9:35:32 AM, slo1 wrote:
Some people even argue that a min wage, while creating deadweight loss, might reduce gov dependency by reducing the moral hazard of making it more beneficial for those on the fringe to work versus not work. In effect I have less min wage jobs for the overall pool, but those who have them are not in a position where they need as much government assistance versus more min wage jobs but it is less value than getting gov assistance.

Your point about moral hazard is ambiguous, but I don't see validity in it either way. If you mean that the reduction in the supply of jobs is compensated for by an increase in demand for them, that implies there was previously a glut of jobs, as if employers were keeping extra positions open all those years in patient anticipation of the unemployed having a reason to work. If, on the other hand, you mean that unemployment is somehow better (even if it's higher!) when it's the result of a lack of jobs instead of moral hazard, my only guess is that you may not know that victims of the former are more eligible for welfare, not less.

No, the empirical evidence that the MW does not cause unemployment is better explained by permitting the quality of the job to vary just like the quantity. Why would an employer offer the same job for the higher wage, when he could leverage the higher wage in order to extract more labor from the worker (euphemistically referred to as "morale" by liberals) and/or reduce his own non-wage contributions? Indeed, as inferior to the original (low-wage, low-expectation, high-benefit) contract as this may be to both employer and employee, it's more often than not preferable to the alternative (unemployment and idle capital).

As for supplementary government assistance, you could be right. Though an artificial wage increase will undoubtedly increase daycare needs, commuting costs, rents and prices of every kind, much of the burden will materialize in a way liberals are just as comfortable with as conservatives: a more energetic and tolerant wage-slave, needy only in the non-economic categories of dignity and decency.

I don't even know what I said there. Let me try again. In the context where gov provides welfare the "moral hazard" is deciding not to get a job because it is more profitable to accept the gov hand out than it is to work a min wage job.

Some argue that the benefit to increasing the wage eliminates the "moral hazard" because it becomes more profitable to work at the increased wage than it is to accept the gov hand out. In effect I have less jobs but more people choosing to seek them and even though less people are working these jobs they are no longer working poor eligible for gov assistance.

Of course that assumes the context of welfare exists. Remove welfare and that argument goes out the window.
CarefulNow
Posts: 780
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10/22/2013 12:44:34 PM
Posted: 3 years ago
At 10/22/2013 10:41:07 AM, slo1 wrote:
Some argue that the benefit to increasing the wage eliminates the "moral hazard" because it becomes more profitable to work at the increased wage than it is to accept the gov hand out. In effect I have less jobs but more people choosing to seek them and even though less people are working these jobs they are no longer working poor eligible for gov assistance.

Could you link me to an economist who makes that argument? Because, again, it looks rather like two completely different arguments: one, that the increased incentive to work (based on what I believe is a false assumption that the job will not be transformed by the wage) will cancel out the decreased incentive to provide jobs; and two, that unemployment will increase, but that the resulting burden on the welfare state will be cancelled out by the reduced need of those who still have jobs.
slo1
Posts: 4,361
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10/22/2013 2:29:37 PM
Posted: 3 years ago
At 10/22/2013 12:44:34 PM, CarefulNow wrote:
At 10/22/2013 10:41:07 AM, slo1 wrote:
Some argue that the benefit to increasing the wage eliminates the "moral hazard" because it becomes more profitable to work at the increased wage than it is to accept the gov hand out. In effect I have less jobs but more people choosing to seek them and even though less people are working these jobs they are no longer working poor eligible for gov assistance.

Could you link me to an economist who makes that argument? Because, again, it looks rather like two completely different arguments: one, that the increased incentive to work (based on what I believe is a false assumption that the job will not be transformed by the wage) will cancel out the decreased incentive to provide jobs; and two, that unemployment will increase, but that the resulting burden on the welfare state will be cancelled out by the reduced need of those who still have jobs.

The saltwater guys. here is one
http://press.princeton.edu...

A little old by now, but it remains somewhat elusive to prove with data that reasonable min wage increases have huge negative effect, usually because there are much more prominent variables that over weight the small segment of workers making min wage.
CarefulNow
Posts: 780
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10/22/2013 4:26:29 PM
Posted: 3 years ago
At 10/22/2013 2:29:37 PM, slo1 wrote:
http://press.princeton.edu...

Could you link to where they claim increasing the minimum wage decreases moral hazard? Because I'm just not seeing anything like that in the abstract or the chapter headings. I've actually heard of this study before, and from what I understand all they're saying is that minimum wage increases don't significantly reduce unemployment, without submitting a theory as to why they don't reduce unemployment. My point was simply that the there is a perfectly good explanation, not in the reduction of moral hazard, but in what is euphemistically referred to as "morale". That is, the minimum wage doesn't incentivize people getting jobs, but rather incentivizes people who would have jobs anyway working harder, suffering more abuse, commuting farther, etc. It's thus a second best, the first best being the contract outlawed by the minimum wage statute and the worst being unemployment.
slo1
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10/24/2013 4:17:59 PM
Posted: 3 years ago
At 10/22/2013 4:26:29 PM, CarefulNow wrote:
At 10/22/2013 2:29:37 PM, slo1 wrote:
http://press.princeton.edu...

Could you link to where they claim increasing the minimum wage decreases moral hazard? Because I'm just not seeing anything like that in the abstract or the chapter headings. I've actually heard of this study before, and from what I understand all they're saying is that minimum wage increases don't significantly reduce unemployment, without submitting a theory as to why they don't reduce unemployment. My point was simply that the there is a perfectly good explanation, not in the reduction of moral hazard, but in what is euphemistically referred to as "morale". That is, the minimum wage doesn't incentivize people getting jobs, but rather incentivizes people who would have jobs anyway working harder, suffering more abuse, commuting farther, etc. It's thus a second best, the first best being the contract outlawed by the minimum wage statute and the worst being unemployment.

http://www.forbes.com...

Just google "raising min wage reduces welfare" and tons of stuff comes up. Check the above article it shows a study about welfare paying better than min wage in 35 states. Ironically I posted another study somewhere else that showed how many of those same states are producing more upward mobility versus the South East, which showed if you are poor you stay poor.
CarefulNow
Posts: 780
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10/25/2013 2:38:05 PM
Posted: 3 years ago
At 10/24/2013 4:17:59 PM, slo1 wrote:
Just google "raising min wage reduces welfare" and tons of stuff comes up. Check the above article it shows a study about welfare paying better than min wage in 35 states. Ironically I posted another study somewhere else that showed how many of those same states are producing more upward mobility versus the South East, which showed if you are poor you stay poor.

Not only are you repeating the methodology the Berkley study superseded (i.e. comparing whole states as opposed to border counties), but you're also substituting upward mobility for unemployment. Furthermore, the idea that raising the minimum wage would increase jobs by decreasing moral hazard suffers from a serious logical flaw, and that is the failure to consider that employers indirectly factor in welfare. In other words, if welfare, sunshine, or anything else is raising the value of leisure and thus reducing the relative value of work, employers will experience that as a reduced supply of labor adjust accordingly (i.e. raise the wage, if the labor is worth a higher wage, or slow production if not). So raising the minimum wage would, at best, only make official what perverse incentives have already made reality.
DanT
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10/25/2013 7:21:45 PM
Posted: 3 years ago
At 10/24/2013 4:17:59 PM, slo1 wrote:
At 10/22/2013 4:26:29 PM, CarefulNow wrote:
At 10/22/2013 2:29:37 PM, slo1 wrote:
http://press.princeton.edu...

Could you link to where they claim increasing the minimum wage decreases moral hazard? Because I'm just not seeing anything like that in the abstract or the chapter headings. I've actually heard of this study before, and from what I understand all they're saying is that minimum wage increases don't significantly reduce unemployment, without submitting a theory as to why they don't reduce unemployment. My point was simply that the there is a perfectly good explanation, not in the reduction of moral hazard, but in what is euphemistically referred to as "morale". That is, the minimum wage doesn't incentivize people getting jobs, but rather incentivizes people who would have jobs anyway working harder, suffering more abuse, commuting farther, etc. It's thus a second best, the first best being the contract outlawed by the minimum wage statute and the worst being unemployment.

http://www.forbes.com...

Just google "raising min wage reduces welfare" and tons of stuff comes up. Check the above article it shows a study about welfare paying better than min wage in 35 states. Ironically I posted another study somewhere else that showed how many of those same states are producing more upward mobility versus the South East, which showed if you are poor you stay poor.

Minimum wage reduces economic welfare, and increases social welfare. In economics welfare refers to prosperity, not to government programs designed to redistribute wealth.
"Chemical weapons are no different than any other types of weapons."~Lordknukle
TheHitchslap
Posts: 1,231
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10/27/2013 8:43:47 PM
Posted: 3 years ago
At 10/25/2013 7:21:45 PM, DanT wrote:
At 10/24/2013 4:17:59 PM, slo1 wrote:
At 10/22/2013 4:26:29 PM, CarefulNow wrote:
At 10/22/2013 2:29:37 PM, slo1 wrote:
http://press.princeton.edu...

Could you link to where they claim increasing the minimum wage decreases moral hazard? Because I'm just not seeing anything like that in the abstract or the chapter headings. I've actually heard of this study before, and from what I understand all they're saying is that minimum wage increases don't significantly reduce unemployment, without submitting a theory as to why they don't reduce unemployment. My point was simply that the there is a perfectly good explanation, not in the reduction of moral hazard, but in what is euphemistically referred to as "morale". That is, the minimum wage doesn't incentivize people getting jobs, but rather incentivizes people who would have jobs anyway working harder, suffering more abuse, commuting farther, etc. It's thus a second best, the first best being the contract outlawed by the minimum wage statute and the worst being unemployment.

http://www.forbes.com...

Just google "raising min wage reduces welfare" and tons of stuff comes up. Check the above article it shows a study about welfare paying better than min wage in 35 states. Ironically I posted another study somewhere else that showed how many of those same states are producing more upward mobility versus the South East, which showed if you are poor you stay poor.

Minimum wage reduces economic welfare, and increases social welfare.

It does not.
minimum wage raises have a direct causal relationship to improvements in the gini coefficent which is the same thing as economic welfare. When minimum wage increases, income inequality falls.

You're just employing the neoclassical economic assumptions.

In economics welfare refers to prosperity, not to government programs designed to redistribute wealth.
Thank you for voting!
DanT
Posts: 5,693
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10/27/2013 9:57:33 PM
Posted: 3 years ago
At 10/27/2013 8:43:47 PM, TheHitchslap wrote:
At 10/25/2013 7:21:45 PM, DanT wrote:
At 10/24/2013 4:17:59 PM, slo1 wrote:
At 10/22/2013 4:26:29 PM, CarefulNow wrote:
At 10/22/2013 2:29:37 PM, slo1 wrote:
http://press.princeton.edu...

Could you link to where they claim increasing the minimum wage decreases moral hazard? Because I'm just not seeing anything like that in the abstract or the chapter headings. I've actually heard of this study before, and from what I understand all they're saying is that minimum wage increases don't significantly reduce unemployment, without submitting a theory as to why they don't reduce unemployment. My point was simply that the there is a perfectly good explanation, not in the reduction of moral hazard, but in what is euphemistically referred to as "morale". That is, the minimum wage doesn't incentivize people getting jobs, but rather incentivizes people who would have jobs anyway working harder, suffering more abuse, commuting farther, etc. It's thus a second best, the first best being the contract outlawed by the minimum wage statute and the worst being unemployment.

http://www.forbes.com...

Just google "raising min wage reduces welfare" and tons of stuff comes up. Check the above article it shows a study about welfare paying better than min wage in 35 states. Ironically I posted another study somewhere else that showed how many of those same states are producing more upward mobility versus the South East, which showed if you are poor you stay poor.

Minimum wage reduces economic welfare, and increases social welfare.

It does not.
minimum wage raises have a direct causal relationship to improvements in the gini coefficent which is the same thing as economic welfare. When minimum wage increases, income inequality falls.

You're just employing the neoclassical economic assumptions.

In economics welfare refers to prosperity, not to government programs designed to redistribute wealth.
The historical data provided by the bureau of labor statistics says otherwise.
"Chemical weapons are no different than any other types of weapons."~Lordknukle
CarefulNow
Posts: 780
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10/28/2013 2:33:53 AM
Posted: 3 years ago
At 10/27/2013 8:43:47 PM, TheHitchslap wrote:
minimum wage raises have a direct causal relationship to improvements in the gini coefficent which is the same thing as economic welfare. When minimum wage increases, income inequality falls.

Income is only one side of the exchange (the other being labor) and only one part of welfare (another being leisure). Treat labor and leisure not as black and white, but as orientations; there is relatively onerous (often euphemized "motivated") work, relatively leisurely work, and finally work that one either isn't paid for or would do even if one weren't paid. And consider that some work, such as training and commuting, is not subject to minimum wage laws (indeed, it may cost the worker money as well as time) but is every bit as critical to income, and thus every bit as paid, as the work that is (e.g. an hour commute to and from an 8-hour, $8 an hour shift makes it $6.40 an hour). Proponents of minimum wage laws variously ignore these hidden costs and, because of the conservative work ethic they share with their opponents, mistake them for benefits.
TheHitchslap
Posts: 1,231
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10/28/2013 10:34:55 AM
Posted: 3 years ago
At 10/27/2013 9:57:33 PM, DanT wrote:
At 10/27/2013 8:43:47 PM, TheHitchslap wrote:
At 10/25/2013 7:21:45 PM, DanT wrote:
At 10/24/2013 4:17:59 PM, slo1 wrote:
At 10/22/2013 4:26:29 PM, CarefulNow wrote:
At 10/22/2013 2:29:37 PM, slo1 wrote:
http://press.princeton.edu...

Could you link to where they claim increasing the minimum wage decreases moral hazard? Because I'm just not seeing anything like that in the abstract or the chapter headings. I've actually heard of this study before, and from what I understand all they're saying is that minimum wage increases don't significantly reduce unemployment, without submitting a theory as to why they don't reduce unemployment. My point was simply that the there is a perfectly good explanation, not in the reduction of moral hazard, but in what is euphemistically referred to as "morale". That is, the minimum wage doesn't incentivize people getting jobs, but rather incentivizes people who would have jobs anyway working harder, suffering more abuse, commuting farther, etc. It's thus a second best, the first best being the contract outlawed by the minimum wage statute and the worst being unemployment.

http://www.forbes.com...

Just google "raising min wage reduces welfare" and tons of stuff comes up. Check the above article it shows a study about welfare paying better than min wage in 35 states. Ironically I posted another study somewhere else that showed how many of those same states are producing more upward mobility versus the South East, which showed if you are poor you stay poor.

Minimum wage reduces economic welfare, and increases social welfare.

It does not.
minimum wage raises have a direct causal relationship to improvements in the gini coefficent which is the same thing as economic welfare. When minimum wage increases, income inequality falls.

You're just employing the neoclassical economic assumptions.

In economics welfare refers to prosperity, not to government programs designed to redistribute wealth.
The historical data provided by the bureau of labor statistics says otherwise.

Where? I'm looking all I can find are 1) characteristics of minimum wage workers, and 2) welfare reform data.
Thank you for voting!
DanT
Posts: 5,693
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10/28/2013 6:01:36 PM
Posted: 3 years ago
At 10/28/2013 10:34:55 AM, TheHitchslap wrote:
At 10/27/2013 9:57:33 PM, DanT wrote:
At 10/27/2013 8:43:47 PM, TheHitchslap wrote:
At 10/25/2013 7:21:45 PM, DanT wrote:
At 10/24/2013 4:17:59 PM, slo1 wrote:
At 10/22/2013 4:26:29 PM, CarefulNow wrote:
At 10/22/2013 2:29:37 PM, slo1 wrote:
http://press.princeton.edu...

Could you link to where they claim increasing the minimum wage decreases moral hazard? Because I'm just not seeing anything like that in the abstract or the chapter headings. I've actually heard of this study before, and from what I understand all they're saying is that minimum wage increases don't significantly reduce unemployment, without submitting a theory as to why they don't reduce unemployment. My point was simply that the there is a perfectly good explanation, not in the reduction of moral hazard, but in what is euphemistically referred to as "morale". That is, the minimum wage doesn't incentivize people getting jobs, but rather incentivizes people who would have jobs anyway working harder, suffering more abuse, commuting farther, etc. It's thus a second best, the first best being the contract outlawed by the minimum wage statute and the worst being unemployment.

http://www.forbes.com...

Just google "raising min wage reduces welfare" and tons of stuff comes up. Check the above article it shows a study about welfare paying better than min wage in 35 states. Ironically I posted another study somewhere else that showed how many of those same states are producing more upward mobility versus the South East, which showed if you are poor you stay poor.

Minimum wage reduces economic welfare, and increases social welfare.

It does not.
minimum wage raises have a direct causal relationship to improvements in the gini coefficent which is the same thing as economic welfare. When minimum wage increases, income inequality falls.

You're just employing the neoclassical economic assumptions.

In economics welfare refers to prosperity, not to government programs designed to redistribute wealth.
The historical data provided by the bureau of labor statistics says otherwise.

Where? I'm looking all I can find are 1) characteristics of minimum wage workers, and 2) welfare reform data.

According to the statistics provided the quantity of labor (employment) negatively correlates with the real minimum wage. As the real minimum wage increases the employment decreases, and unemployment goes up. Furthermore, the labor supply (the labor force) is extremely inelastic in regards to changes in the real minimum wage, while the quantity of labor (employment) is extremely elastic, thus indicating that the demand for labor (employers) is extremely elastic in regards to the real minimum wage.
"Chemical weapons are no different than any other types of weapons."~Lordknukle
DanT
Posts: 5,693
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10/28/2013 6:07:59 PM
Posted: 3 years ago
At 10/28/2013 6:01:36 PM, DanT wrote:
At 10/28/2013 10:34:55 AM, TheHitchslap wrote:
At 10/27/2013 9:57:33 PM, DanT wrote:
At 10/27/2013 8:43:47 PM, TheHitchslap wrote:
At 10/25/2013 7:21:45 PM, DanT wrote:
At 10/24/2013 4:17:59 PM, slo1 wrote:
At 10/22/2013 4:26:29 PM, CarefulNow wrote:
At 10/22/2013 2:29:37 PM, slo1 wrote:
http://press.princeton.edu...

Could you link to where they claim increasing the minimum wage decreases moral hazard? Because I'm just not seeing anything like that in the abstract or the chapter headings. I've actually heard of this study before, and from what I understand all they're saying is that minimum wage increases don't significantly reduce unemployment, without submitting a theory as to why they don't reduce unemployment. My point was simply that the there is a perfectly good explanation, not in the reduction of moral hazard, but in what is euphemistically referred to as "morale". That is, the minimum wage doesn't incentivize people getting jobs, but rather incentivizes people who would have jobs anyway working harder, suffering more abuse, commuting farther, etc. It's thus a second best, the first best being the contract outlawed by the minimum wage statute and the worst being unemployment.

http://www.forbes.com...

Just google "raising min wage reduces welfare" and tons of stuff comes up. Check the above article it shows a study about welfare paying better than min wage in 35 states. Ironically I posted another study somewhere else that showed how many of those same states are producing more upward mobility versus the South East, which showed if you are poor you stay poor.

Minimum wage reduces economic welfare, and increases social welfare.

It does not.
minimum wage raises have a direct causal relationship to improvements in the gini coefficent which is the same thing as economic welfare. When minimum wage increases, income inequality falls.

You're just employing the neoclassical economic assumptions.

In economics welfare refers to prosperity, not to government programs designed to redistribute wealth.
The historical data provided by the bureau of labor statistics says otherwise.

Where? I'm looking all I can find are 1) characteristics of minimum wage workers, and 2) welfare reform data.

According to the statistics provided the quantity of labor (employment) negatively correlates with the real minimum wage. As the real minimum wage increases the employment decreases, and unemployment goes up. Furthermore, the labor supply (the labor force) is extremely inelastic in regards to changes in the real minimum wage, while the quantity of labor (employment) is extremely elastic, thus indicating that the demand for labor (employers) is extremely elastic in regards to the real minimum wage.
Here I plotted it out in excel using the data from 1996 to 2012
http://www.debate.org...
"Chemical weapons are no different than any other types of weapons."~Lordknukle
CarefulNow
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10/28/2013 6:53:44 PM
Posted: 3 years ago
At 10/28/2013 6:07:59 PM, DanT wrote:
http://www.debate.org...

First of all, that's probably the most scientifically insignificant thing I've ever seen; the ways in which the aforementioned Berkley study's methodology is superior to yours would exceed the character limit. Secondly, Hitchslap was talking about income, not employment.
DanT
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10/28/2013 7:14:47 PM
Posted: 3 years ago
At 10/28/2013 6:53:44 PM, CarefulNow wrote:
At 10/28/2013 6:07:59 PM, DanT wrote:
http://www.debate.org...

First of all, that's probably the most scientifically insignificant thing I've ever seen; the ways in which the aforementioned Berkley study's methodology is superior to yours would exceed the character limit.
Using occam's razor my methodology is superior, because I made the least assumptions. I simply plotted the data and derived linear relationships. I made 0 assumptions.
I don't know any scientist who would say "the facts point to result A, but result B is more scientific because there are more steps involved"
That is like claiming;
"A = 1 and B = 2, so A+B= 3" is less scientific than "A = 1 and B = 2, so 2 cubed 1 rounded to the nearest 10 = A +B"
Secondly, Hitchslap was talking about income, not employment.

So he ignores the unemployed? The unemployed is the deadweight loss resulting from the increase in minimum wage. Of course minimum wage will increase the pay for jobs preformed, and it will also increase the KSAs required to obtain that job. If the lower paid employees require more valuable KSAs, it would cause their superiors to require more valuable KSAs as well. In addition to that, the superior's pay would have to be increased so the superiors don't make the same as their subordinates; otherwise employees will opt for the inferior job that pays the same as the superior job, and the only ones applying for the superior jobs would be people with a Napoleon complex.
"Chemical weapons are no different than any other types of weapons."~Lordknukle
CarefulNow
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10/28/2013 10:01:40 PM
Posted: 3 years ago
At 10/28/2013 7:14:47 PM, DanT wrote:
Using occam's razor my methodology is superior, because I made the least assumptions. I simply plotted the data and derived linear relationships. I made 0 assumptions.

Except the assumption that correlation equals causality. The complexity of the Berkley methodology is not due to assumptions, it's due to controls for possible confounding factors; failure to control for possible confounding factors is equivalent to assuming they do not exist. There were of course changes in myriad variables between 1996 and 2012, including changes far more significant than the modest change in the real minimum wage caused by inflation. Many of those variables are of course global. To control for those without identifying them, you must compare the change in US employment to changes in countries with different changes in real minimum wages during the same time period. However, countries also differ in myriad ways, which is why the Berkley study instead compared pairs of border counties, one with one change in minimum wage and one with another.

So he ignores the unemployed? The unemployed is the deadweight loss resulting from the increase in minimum wage. Of course minimum wage will increase the pay for jobs preformed, and it will also increase the KSAs required to obtain that job.

Not to mention duration of unpaid labor (e.g. commuting), intensity, onerousness, etc. I agree. But evidently there is no significant unemployment effect, meaning that either these alternative ways to increase the marginal utility of labor predominate or the market is not as perfectly competitive as you assume.
TheHitchslap
Posts: 1,231
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10/29/2013 9:39:53 AM
Posted: 3 years ago
At 10/28/2013 6:07:59 PM, DanT wrote:
At 10/28/2013 6:01:36 PM, DanT wrote:
At 10/28/2013 10:34:55 AM, TheHitchslap wrote:
At 10/27/2013 9:57:33 PM, DanT wrote:
At 10/27/2013 8:43:47 PM, TheHitchslap wrote:
At 10/25/2013 7:21:45 PM, DanT wrote:
At 10/24/2013 4:17:59 PM, slo1 wrote:
At 10/22/2013 4:26:29 PM, CarefulNow wrote:
At 10/22/2013 2:29:37 PM, slo1 wrote:
http://press.princeton.edu...

Could you link to where they claim increasing the minimum wage decreases moral hazard? Because I'm just not seeing anything like that in the abstract or the chapter headings. I've actually heard of this study before, and from what I understand all they're saying is that minimum wage increases don't significantly reduce unemployment, without submitting a theory as to why they don't reduce unemployment. My point was simply that the there is a perfectly good explanation, not in the reduction of moral hazard, but in what is euphemistically referred to as "morale". That is, the minimum wage doesn't incentivize people getting jobs, but rather incentivizes people who would have jobs anyway working harder, suffering more abuse, commuting farther, etc. It's thus a second best, the first best being the contract outlawed by the minimum wage statute and the worst being unemployment.

http://www.forbes.com...

Just google "raising min wage reduces welfare" and tons of stuff comes up. Check the above article it shows a study about welfare paying better than min wage in 35 states. Ironically I posted another study somewhere else that showed how many of those same states are producing more upward mobility versus the South East, which showed if you are poor you stay poor.

Minimum wage reduces economic welfare, and increases social welfare.

It does not.
minimum wage raises have a direct causal relationship to improvements in the gini coefficent which is the same thing as economic welfare. When minimum wage increases, income inequality falls.

You're just employing the neoclassical economic assumptions.

In economics welfare refers to prosperity, not to government programs designed to redistribute wealth.
The historical data provided by the bureau of labor statistics says otherwise.

Where? I'm looking all I can find are 1) characteristics of minimum wage workers, and 2) welfare reform data.

According to the statistics provided the quantity of labor (employment) negatively correlates with the real minimum wage. As the real minimum wage increases the employment decreases, and unemployment goes up. Furthermore, the labor supply (the labor force) is extremely inelastic in regards to changes in the real minimum wage, while the quantity of labor (employment) is extremely elastic, thus indicating that the demand for labor (employers) is extremely elastic in regards to the real minimum wage.
Here I plotted it out in excel using the data from 1996 to 2012
http://www.debate.org...

Okay so I was unable to find the statistics, but I can at least see what your doing. And you're making a huge mistake. Simply looking at the employment numbers at the time of minimum wage increases does not show correlation. You have to eliminate other factors that would contribute to employment issues (such as business cycles for instance) before you can come to that conclusion.

Actually, you've even proven my point; you're making neoclassical assumptions when interpreting the data, which is part of your problem. In order to justify a loss of jobs with minimum wage at this point you have to presuppose the concepts of supply and demand (which has it's own problems, such as making a huge generality over precision, and ideology over observation), coupled it with taking the context of events out of their environments (most minimum wage increases happen when recessions are around to get out of it, not the other way around), and the ignorance of publication biases when considering studies. Card and Kruger did several on these which were produced showing that minimum wage actually does work, and the reason why more information against minimum wage is present is due to business interests peddling them.

Besides, by any measure of the stick, when you look at minimum wage and it's ability to keep money in the economically alienated, it's worked. We have several measuring units to go by, from the Gini Coefficent to the Atkins Index. See here:

http://are.berkeley.edu...
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