Category Archives: Introductory Economics

The Minimum Wage Debate

Posted on by

Clearly, the debate left things unsettled, because the protagonists are still arguing. [update: Betsey Stevenson contributes noise to the debate.]

The point that I would like to hear shouted from the rooftops is that the minimum wage in the United States is just barely effective. We teach in freshman economics that a price floor is only binding if it is above the equilibrium price. But looking at the number of workers covered by the minimum wage is small, and knowing that the vast majority of unemployed workers are not clamoring for minimum-wage jobs, I would say that you should draw your labor supply and demand diagram with the minimum wage just epsilon above the market equilibrium. It should be hard to see the effect of the minimum wage on employment in your diagram, and it should be hard to see the effect in the real world.

In that sense, Elizabeth Warren is right–if you really want to have an effective minimum wage, it needs to be a lot higher. That is what the debate should focus on, in my opinion. What would happen if we raised the minimum wage by $5 an hour or more? In that case, if somebody wants to try to argue that the effect on employment would be negligible, good luck to them.

AEA Conference Highlights On Line

Posted on by

Tyler Cowen speaks on a panel on media and economics. He gives a very optimistic take, based on the availability of blogs, Twitter, and online education.

The fact that the panel is online is an example of what he is talking about. It is one of five highly-rated panels from the recent American Economic Association conference. All of them are self-recommending.

I have only been to the AEA meetings once or twice since graduate school. A few economists really love it. They get a sort of “high” from the crowd. I do not. For me, folk dancing with a large crowd is fun, but milling around a hotel with economists is not.

So using these videos to attend the AEA meetings virtually is a win-win for me.

Recycling Incentives

Posted on by

Timothy Taylor writes,

If we want people to be serious about recycling, having a policy of 5-10 cents for returning cans and bottles is likely to be a more effective tools than curbside recycling.

He points out that beverage companies are the bootleggers in the bootleggers-and-baptists coalition in favor of curbside recycling, because communities often use curbside recycling does not raise the cost of distributing beverages in bottles. For economics teachers, this is a three-fer: the concept of externality (how large is the externality created by putting bottles into garbage?), the use of prices to incent behavior, and public choice theory.