Sunday, April 03, 2016

Free lunches

The free lunch fantasy is a favorite among politicians. It often garners enough support from voters to tip an election. The Santa Claus fantasy works on kids until (approximately) the age of five but the free lunch fantasy seems to work on enough people (voters) of all ages.

It is interesting that the LA Times occasionally broaches the idea that the money will have to come from somewhere -- including higher retail prices and fewer low-skilled people hired. "Some restaurants face pressure to trim menus and staffs under California's wage hike." There will be price hikes for those who shop at low-price outlets and job cuts for those with the fewest prospects.

TV talking heads have noted the interesting labor market "experiment". What will be the effects of the biggest minimum wage boost ever? We hear this a lot. Is not federalism supposed to be an opportunity for competing sub-national units to experiment and innovate? Are not the states supposed to be the "laboratories of democracy" in the words of Supreme Court Justice Louis Brandeis?

That abstraction supposes state officials seeking the best economic outcomes for their state, not the class warfare fantasies of those who run so many state legislatures. And, as David Henderson reminds us, "Don't Experiment on Non-Volunteers." Their lives are not a free lunch for the social engineers -- or for the posturing class warriors.

This NY Times op-ed predicts that there will be more gainers than losers. But who gains and who loses? Among the losers may be those who most need to break into the world of work. Social engineering is so hard.