You know, I’ve been keeping a list of those who need to take a ride in the tumbrels, but all the challenge and fun is going out of it. The scoundrels keep standing up and proudly volunteering! Take Peter Schiff, please — he just blithely walked into an interview for the Daily Show and started talking out of his ass — what fun is it to get a confession out of the parasites when they think they’re gloating?
Is there a video up there?
Yes, Daily Show. I know they’re weird. The link also takes you direct to their site.
Schiff is complaining about being bushwhacked by the Daily Show here: http://www.marketoracle.co.uk/Article44232.html
No one in a capitalist society goes hungry?
I…just…I am astounded that he actually went out there and said that. Fine, not everyone has grown up being exposed to abject poverty and malnutrition. But if you’re going to go out there and try to portray yourself as somehow knowledgeable about economics, you should have a vague grasp of reality.
Oh god. From Jason’s link:
Poor thing. Forgot the “politically correct term” that he obviously sooooo wanted to use, because right-wingers love political correctness! And the evil filthy librul didn’t even help him, and tricked him into not being politically correct! How underhanded! How cruel!
He then goes on to yell at The Daily Show for being willing to offend people by airing his non-PC blunder, and also defends, at length, his idea that the mentally handicapped should be paid $2 an hour (despite complaining that Sam Bee suggested that figure to him as some sort of trap).
The party of personal responsibility sure hates being responsible for the things they say.
He doesn’t seem to know what ‘supply and demand’ actually means.
I suppose letting them talk uninterrupted is a form of entrapment.
Sure.
You don’t understand Gibbertarianspeak.
Hungry people in capitalist societies aren’t really…people. They are moochers, parasites, Democrats, and untermenchen, subhumans. See, it’s no problem if they starve to death.
Peter Schiff is a kook. IIRC, he is one of those who has been predicting an economic collapse for the last few decades. A permabear. He has been right before but in the same way that a stopped clock is right, twice a day.
It’s true! That’s exactly how global capitalism works!
About those interns…
I always thought the “free market” answer to “$2 per hour wages” was “unionize and strike”. The problem is that in such a broad and diverse industry such as fast food with easily replacable basic staff , its hard to see any protests be universal enough to actually hurt the companies.
Good luck to the protesters though…
Raising the minimum wage is the systematic solution, which removes the need for endless strikes and protests and misery and poverty.
Make video autoplay go away, PZ, please!
He’s one of those who predicted hyper-inflation as a response to Fed policy and stimulus in the wake of the Great Recession, putting him in such revered company as Glenn Beck and Ron Paul. As far as I know, this massively wrong prediction has not caused him to admit any fault or reassess his beliefs. The negative consequences are reserved for those foolish enough to have invested money in his funds.
Yea, Peter Schiff is a known advocate for the economic doom cult of Austrian Economics. He rose into prominence when he correctly predicted the housing bubble. Because if you predict doom everywhere eventually you are right.
The way he equated people and their job is absolutely disturbing.
It is not: in a “free market,” employers are free to fire striking workers and replace them. Striking only gives unions leverage if the strike actually shuts down the employer, but that is only possible if the law forbids the employer simply replacing the striking workers.
They did a good job of exposing Schiff as a tool. Raising the minimum wage by itself does fall short of an actual fix, though. If employers respond by passing costs on to customers, for example, then we end up with price inflation that may or may not leave the minimum-wage workers exactly where they started–or even worse off. If employers respond by replacing workers with automation, then those particular workers end up unemployed, which certainly makes them worse off.
I haven’t double-checked any of these claims, but have read that the shift from using elevator operators to fully-automated elevators occurred when the automated elevators became cheaper than paying an operator, which was fueled partly by increases in wages for the elevator operators, and partly by decreases in the cost of equipment; the replacement occurred over years as part of building maintenance. Similarly, gas stations switched to self-service–not necessarily in response to minimum wages specifically, but to the overall cost of running a full-service station. This did not occur in New Jersey, because self-service stations are illegal there.
The ultimate solution requires a combination of wage floors, price ceilings, and laws protecting jobs by forbidding the use of automation, self-service, and other alternatives to paid labor.
That said, small changes in the minimum wage do not necessarily necessitate all of these measures. Increasing the minimum wage from $7.25 to $7.50 or $8.00 is unlikely to result in McDonalds installing burger-making robots or closing down. Increasing it to $14.50 is likely to have some sort of dramatic effect. The effect of increasing it to $11.00, as proposed by one of the interviewees on the video, would be hard to predict a priori. Closing stores? Using fewer workers? Doubling the price of cheeseburgers? Robots? No changes at all? Some combination of all of those?
So if they’re purely driven by profit, why wouldn’t they already be working with the fewest amount of workers they can?
Same with raising prices. Presumably, why wouldn’t they just raise prices now?
Although my real problem with your post is that you are thinking entirely supply-sided. You have not considered the possibility that people will be getting paid more and therefore can afford more burgers. The fact is that supply-side is not having any problems right now. Companies are making massive profits, and minimum wage increases will simply eat into those.
However, people having a better wage will probably do a dent in the severe lack of aggregate demand on the market right now. We are currently in a situation where raising the minimum wage would probably lower the employment rate (if anything at all) because people will be able to afford more things.
While a sudden increase to $15, which is what many are demanding and probably is where it ought to be, would probably cause some changes, I think it’s interesting that we’re talking about fast food in general here and McDonald’s in particular. I never used to go to McDonald’s, but my kids were exposed to the virus and I’m not going to tell them we’ll never go, so I now occasionally find myself in McDonald’s. When you order a drink at McDonald’s now there is a machine that plops the right sized cup into a little cup conveyor belt and when it arrives under the nozzle it is filled with the appropriate beverage. All the employee does is hand it to you. Burger making robots? The ordering touchscreens we’ve also been hearing about? Yes, as soon as those are cost effective they’ll go into place to replace workers, just like the ones who’ve already been replaced by the coke-bot. That might happen faster with a higher minimum wage, but not much. When the capital cost of those machines, and the likelihood of losing sales to customers upset by them, reaches affordability is far more dependent on technological factors than wage increases. We can keep people not getting enough money to eat and pay rent and stave it off a few years at best. But McDonald’s will eliminate every employee they can eliminate as soon as they can eliminate them regardless of what they’re paying them. Except the executives and the people in marketing.
And doubling the price of a cheeseburger? I expect they wouldn’t need to have a price increase nearly that drastic. Given the number of burgers they sell every day, a few cents, far less than would really impact any customers, is all it would take.
Closing stores? McDonald’s? Any store that’s selling burgers is going to stay open. They’re already paying higher minimum wages in many states, so is there a state that has no McDonald’s? They’re paying higher real estate costs in many places, but they’ve still got stores. There’s a store in Times Square, what’s that costing them? They’re not going to close down stores.
though a law forbidding employers from hiring replacement workers is a very favorable law for workers and unionization it not as favorable as no law forbidding strikes and unions nor not having government agents in the form of police or military breaking picket lines and worker demonstrations.
I think most unions would be fine with having the government take a more neutral stand of just enforcing the peace between both the sides rather then in taking the side of the employers as has been done historically and some will make the case that it is being done now. It is being advocated by one political party explicitly daily that organized labor is bad..
uncle frogy
raven @#8
Maybe it’s a 24-hour clock, so he’s right only once a day.
The theory is that raising the minimum wage will lower employment because of basic supply and demand — you raise the price of something and demand goes down. However, the empirical evidence for this is decidedly mixed as far as I know. We’ve had times of full employment with a minimum wage higher than it is now.
What’s probably going on is that there is a range of wages below which people won’t work and above which employers won’t hire anyone. Because of power imbalances between low-skilled workers and employers, the wage ends up being toward the bottom end of this range. What the minimum wage typically does is move it toward the higher end, so it can eat into business margins a bit without hurting employment. But if you were to raise it too high, employers would eventually respond by not hiring.
All of which is probably neither here nor there as far as a douche like Schiff is concerned. He’s just rationalizing the self-interest of his economic class.
doublereed
Certainly not: if they’re purely driven by profit, then they will do what maximizes profit. Profit is revenue minus cost. Reducing workers reduces cost–but you don’t reduce workers in a vacuum. Using fewer workers means doing something differently, such as more automation, or a less labor-intensive process that uses different ingredients, etc.
So in the 1960s, for example, computers were much more expensive than programmers, so profit-minded companies hired lots of programmers, and expected them to use their labor to reduce the demand for computer resources. For example, programmers were expected to hand-execute their code, with paper and pencil, to confirm that it was correct, before wasting valuable computer resources trying to execute them.
What a profit-driven business will do is mostly a function of the economic landscape in which they’re operating. They will seek the lowest costs, but that means identifying whatever resources are cheapest at this moment, and using less of the expensive and more of the cheap. In lots of cases, labor is cheaper than robots, or titanium, or whatever.
That’s the right question. Why not? Why don’t they charge $10 for a cheeseburger today? The answer is that if you’d pay it, they’d charge it. If they’re not charging it, then they have some reason to doubt that they’d sell enough at the higher price to make at least what they’re making now. Nevertheless, raising prices is one way to offset costs. It is often ineffective, for precisely the reason just described–in which case, if costs exceed what they can charge, they will lose money and must eventually close down.
I did not disregard that possibility, although I didn’t mention it. It is indeed among the very many possibilities, and I make no pretense of predicting the outcome of any particular change to the minimum wage (or anything else). My comment was on the much more general point that lots of complex things happen in an economy when you twiddle one of the parameters, and you should expect that you will need to twiddle other parameters as well before the solution will work as desired.
Area Man
Absolutely! Pretty much all economic activity is possible only because of the spread. Haggling establishes a price somewhere between my lowest ask and your highest bid, but any price in that range would most likely have led to a completed transaction. Raising the minimum wage does exactly as advertised–raising workers’ living standard by paring corporate profits–when the new minimum is still under the employer’s maximum bid. (That doesn’t mean they won’t look for ways to increase profits still more, by changing processes, or staffing, or equipment, etc., of course. Greedy capitalists will continue to be greedy capitalists after all.)
Businesses that actually can’t afford the higher wage will be forced to do something differently, or go out of business. This is one reason that Walmart has actually issued cynical calls for increasing the minimum wage: they can afford to, and in many cases already do, pay more than the current minimum wage, but they know that their “mom and pop” competitors have much narrower margins. A modest increase in the minimum wage would leave Walmart unaffected, but would put some at least of their competition out of business. I.e., they called for a higher minimum wage not because they give a shit about the workers, but because it serves their capitalist interests.
gussnarp,
Note that I mentioned four possibilities, not because any of them is particularly likely, but as fairly random examples of the extreme range of options available to businesses, to illustrate the difficulty predicting the effect on any one business. It’s not very interesting to debate whether burgers will go from $1.29 to $1.30, or to $2.58, since I wasn’t making the slightest effort to predict the actual affect of a $11 minimum wage. The opposite: I was observing that the exact effect is unpredictable. Specifically, that I can’t begin to guess whether the workers will simply start making $11, or whether some will lose their jobs, necessitating further (equally hard to predict) measures to secure the living standard of the displaced workers. An extremely high minimum wage would certainly require other supporting legislation; a very small one would not; and in-between ones would fall, well, in between.
As for closing stores as a possibility, though, I remember when Starbucks closed 600 stores in 2008. That’s not surprising: many locales can’t support $5 coffee without a booming economy. McDonalds is more recession-proof than Starbucks, but I would not claim to no stores would close. Their overall profit margin is about 19%, which is ample, but individual stores will vary quite a bit. I was not suggesting that McDonalds corporation would go out of business.
And interestingly, the minimum wage has been raised before! It has been higher, in absolute buying power relative to the rest of the economy, than it is now! In other places in the world, these things have also happened! Funny how just looking at when it’s happened before might help.
carlie
Lovely! Someone seems to think they’ve caught someone attempting to argue against the minimum wage! And responded with the best kind of sarcasm–the kind with exclamation marks! Because they’re so clever! *golf clap*
You clearly didn’t read what I wrote with comprehension. First, I’m not arguing against the minimum wage, nor against raising it. Second, I made it very clear that the magnitude of the increase is very relevant to its possible effects. Third, I noted that the increase that was recommended was a 51% increase, from $7.25 to $11, and clearly stated that I can’t actually say whether, for the purposes of this discussion, that really counts as a “large” increase or not. The highest minimum wage in US history was a little over $10/hr in inflation-adjusted dollars, which would make $11 the new highest minimum wage in US history–but only by a smallish margin.
But thanks for your clever cleverness. I feel schooled good and proper now.
A Masked Avenger@25:
Uh, after spamming the thread to tell everyone how wrong they are it doesn’t seem to me you’re in a great position to get upset about stuff like this.
Bullcrap.
This is another of those annoyingly obtuse bumper sticker slogans that serves as right-wing “thought” these days. Sure, no one would accept a job that paid $0.01/hr, but the lengths that people go to to try to survive with a minimum wage – working multiple jobs, trying to keep a 20 year old car running, sharing tiny apartments with multiple families – shows that in practical terms there isn’t such a thing as a natural floor for wages. And the monstrous wages and bonuses paid to Wall Street CEOs – even those who have lost millions of dollars and/or committed crimes – shows that there isn’t a practical ceiling either.
In nearly all businesses that pay minimum wage, labor costs are NOT the biggest budget item. Rent, utilities, materials, and in many cases advertising, usually dwarf payroll expenses. It’s only because management knows they can squeeze the workforce with little risk of pushback that payroll is the go-to for trying to increase profitability.
I had a video store for ten years with a workforce of around six, plus my partner and me. I know whereof I speak. We always paid more than minimum wage, and if we had reduced wages to the minimum it would have made only the tiniest change to our bottom line. Only ivory-tower economists and heartless bastards think that todays minimum wage does not need to be significantly increased.
Dafuq? I wasn’t “telling everyone how wrong they are.” Perhaps I’m a terrible communicator, if that’s what you’re getting out of my comments. I certainly don’t think everyone is wrong, so it wouldn’t make sense to tell them that they are. Perhaps, like carlie, you suspect I’m making an argument against the minimum wage (while pretending otherwise, because I think I’m so clever)?
Folks support a minimum wage. Me too. =8)-DX described it as “the systematic solution,” and I offered the ever-so-slight disagreement that it, by itself, is not “the” solution, because (1) a fairly significant 51% increase is needed to reach the poverty line at $11/hr, and (2) while the effects of that specific increase can’t easily be predicted, it is not implausible that there will be effects that necessitate other measures in addition to the minimum wage itself.f
If that’s somehow deeply controversial, then I’m surprised: I didn’t expect that it would be. I certainly don’t see it as disagreeing with “everyone,” or even a large number of posters here. And if “everyone” did disagree, I wouldn’t conclude that they were therefore wrong.
Whatever.
I didn’t think you had severely disagreed with you. I just think you focused too much on the supply-side, when currently we’re having severe problems with the demand-side.
Um – I pointed out in the next few sentences that this wasn’t really applicable to fast-food – unions make more sense in specialised fields without easily replacable workers. But you sound as if unions were not “free market”. I’d say they’re just about as freemarket as you can get – if the government doesn’t regulate unions, these are exactly the kind of thing to expect – groups of people manipulating the market through common action (just like shareholders, monopolies, price-fixing).
“Free market” actually means corporations are free to do whatever they like, even if their actions are clearly unethical, but workers are restrained in many ways.
Some “free market” economists still promote the idea that the self-interest of CEOs and of corporations (assuming corporations are people and are therefore capable of self-interest), that self-interest and the need to survive will rein in unethical behavior. This is not true in many cases. CEOs like Jamie Dimon are perfectly willing to screw the corporation they work for if it means they can still rake in the big bucks. Jamie Dimon is largely responsible for the $20 billion (billion!) fine recently levied against JP Morgan Chase for bad behavior. Jamie Dimon was not fired, nor prosecuted. He was given a 74% raise. Dimon’s focus on shorter term income for himself is, therefore, logically justified.
That’s what you get with few regulations, with regulations that are not enforced, with a political system unduly influenced by fucktons of corporate money. That’s what you get in a free free market.
http://www.rollingstone.com/politics/blogs/taibblog/jamie-dimons-raise-proves-u-s-regulatory-strategy-is-a-joke-20140130
A Masked Avenger and Area Man get it right on target here on the economics, though I don’t think Schiff is “just rationalizing the self-interest of his economic class” (Area Man #20) -he has always sounded like a sincere libertarian to me, not just some rich guy.
Someone already did the math on that. They could “double” the pay for every single employee, across the board, including the CEO, and due to the volume of sales already being made, **without even including the number of new customers that higher wages would produce**, require a cost increase of the bloody burger of something like 5 cents.
They won’t do it because, as near as I can tell, a whole generation of fools have learned **all** of their economic theory and market planning from the same sort of idiots as the clown in the video, so the very idea that more money in the hands of the buyers means more sales just doesn’t F-ing compute, at all, with them.
Whenever someone says “in the real world” from now on, I’m going to mentally replace it with “rationalizing the self-interest of my economic class”.
I’ve posted this link in minimum wage discussions before. For some reason, it is always ignored. Maybe the old-ish chart at the top of the page puts people off? Anyway, the bottom line is that comparisons have been done that show that raising the minimum wage does not significantly affect employment in some cases, and in other cases raising the minimum wages definitely does not increase unemployment.
And here is a more recent study, though still several years old:
http://www.irle.berkeley.edu/workingpapers/157-07.pdf
Emphasis mine.
Whoops, forgot one of my links in comment #35:
http://www.uvm.edu/~vlrs/doc/min_wage.htm
This is the Card and Krueger link.
Jesus Christ. If you had understood what I wrote, you’d note that it was an explanation for why the minimum wage (unless set very high) isn’t likely to negatively affect employment. It’s an argument that right-wingers implicitly reject.
35 Lynna, OM
Well Lynna, I was going to ‘ignore’ your post (actually, just not reply to it) because… I have nothing to add to it. Yes, most studies show that raising the minimum wage does not in fact have a large impact on employment, if it has any impact at all. I completely agree, and I suppose most of the other commenters as well.
32 Enopoletus Harding
Since you have identified as libertarian before, and now say Schiff sounds like a libertarian, do you agree with him?
Here’s an article that tries to peel back the knee-jerk, overly-simplified right-wing objections to raising the minimum wage. Salon link. Yes, there are other reasons, real reasons, the right-wing has for keeping the minimum wage low. Not good reasons, but gut-level idealogical reasons.
And here is Rand Paul blithely regurgitating the many-times debunked libertarian line:
Well, to be fair, all Austrian-school theoretical economic models show this. Unfortunately for them, no actual empirical studies support this. Which means their model sucks and is wrong, but hey still cling to it like ideologically-puffed-up monkeys.
These aren’t mutually exclusive. While I think that libertarians sometimes have useful things to say, much of what passes for libertarianism is class warfare dressed up as a political philosophy. Schiff’s brand of libertarianism is at the more coo-coo end of the spectrum, so if anything I might give him a pass because he’s a hyper-ideologue, but his supply-side beliefs concerning the Great Recession (we need lower taxes, fewer regulations, lower wages, etc.!) are just the stated interests of the business elite.
=8)-DX
I agree that collective bargaining is as free market as it gets. Collective bargaining isn’t always enough, though: if workers are easily replaced, then the employer has to be prevented from simply going ahead and replacing them. This requires some sort of measure be taken–whether it’s blockading the business, or threatening some kind of consequence on the employer. Whether those measures are taken by the union itself, or by the law, it represents a deviation from the free market.
Lynna, OM:
Depends whether you’re talking about definitions, or practical outcomes. Republicans appear to define “free market” as carte blanche for corporations; and even if they don’t, that’s the practical outcome of their policies.
As an Austrian/libertarian, Schiff wouldn’t use that definition. They define the “free market” as the totality of voluntary economic interactions, meaning those in which neither side was acting under threat of force. They define force as physical force only, so they would not count psychological coercion, and nor would they count poverty itself as a coercive element in the interaction, so there’s plenty of room to dispute the usefulness of their definition. But in principle at least, they believe that corporations should be held accountable for fraud, theft, physical bullying, etc.
They have no direct objection to anything that isn’t physical force, however. They would tell you that libertarianism is a legal, not an ethical, philosophy. So drug dealing, pornography, prostitution, businesses facilitating adultery, publication of hate literature or creationist textbooks, etc., would all be just fine. They also have no coherent answer to sexual harassment, as long as physical force or threat weren’t involved. Making continued employment contingent on having sex with one’s boss, for example, does not appear to violate any specific libertarian principle. Libertarians might condemn these things, but they would not outlaw them.
A Masked Avenger wrote:
That assumes that labour is the primary factor in determining cost, and that all labour being used in the production of that item is being paid minimum wage. A $3.75 raise at minimum wage sounds very impressive as a 51% hike, but at four times minimum wage, it’s a mere 13% increase. You might end up making fast food less affordable for the working poor, but housing, transportation or education much more affordable.
=8)-DX wrote:
Absent of regulations that would prohibit union busting, this is true. However, specialised labour employees always had a certain amount of leverage to dictate wages to employers, rather than having employment terms dictated to them. Those who would currently benefit most from unionization are also the ones who would most easily be defeated by union busting (i.e. the fast food workers and other ‘unskilled’ trades).
It’s not so much that they’re wrong; after all, supply and demand isn’t a nice idea. It’s the law. It’s that depending on the elasticity of demand, small or even large changes in the price can have negligible effects on the demand. Raising the minimum wage by $0.01 will have no discernible affect on employment, just as raising the price of a cheeseburger by $0.01 will have negligible impact, if any, on demand. Raising the price of cheeseburgers to $20, or the minimum wage to $50, would likely have a dramatic effect. I can’t say that with certainty, however: raising the price of heroin from $35/gm to $120/gm would probably have little effect on the demand.
I think Area Man does a nice job of sketching one reason for this: the bid/ask spread. There’s a range of wage rates at which the business can still be profitable. Increases that don’t drive wages outside that range will generally be accepted as a fact of life, just like any other type of cost increase.
Almost as if no one ever considered it when forming their stupid system.
And apparently he thinks that exploiting the disabled is just fine.
Libertarian Man: I don’t want to be hurt so use of force is right out
Woman: What about coercive rape or sexual harassment
Libertarian Man: well we’ll just have to allow that as it’s not force
POC: What about racial discrimination
Libertarian Man: well we’ll just have to allow that as it’s not force
Disabled Person: How can I survive if I don’t have any assurance people will accomidate either my access to resources or job?
Libertarian Man: well we’ll just have to allow that as it’s not force
Queer: What about people keeping people like me from getting housing forcing us onto the street?
Libertarian Man: well we’ll just have to allow that as it’s not force
But we can’t have violence right?
Libertarian Man: No that would harm me a lot.
No he is in fact quite egalitarian. He believes everyone should be exploited so he’s treating the disabled the same as every other peasent
A Masked Avenger, my problem with you is that you implied many times that there is no way to predict what will happen if the minimum wage is raised. In fact, there is a way – you look at parallel situations in history and see what happened then.
If liberturds and/or their apologists ever did that, they would no longer be liberturds and/or their apologists. Ignorance is sloganeering bliss.
“If we eliminate the minimum wage law, people will be free to take jobs at whatever wage they are able to get.”
Yeah, and if we eliminate clean water laws, people will be free to drink water at whatever toxicity they are able to get!
Nothing about what they want, though.
(Thanks for posting this, PZ, now I can comment on it without looking like I’m a week late.)
I once lived in a town that was in a scenic/recreational part of the country, but not highly popular with the rich. A lot of young people moved there for the relatively low-rent access to fun places. They took any job they could get, at any wages, and quit when ski season started. Wages were low all over town, and business suffered, since nobody had spare money to spend. (I remember passing up chances to go out to eat, simply because I had no money. Dollar drinks sound cheap, but when you earn four dollars a hour, it ain’t fun to piss money away.) Anyhow, the area was in a permanent recession, just because wages were low.
Henry Ford paid his workers well, and they bought his cars.
Conspicuous consumption, if you remember that, was partly the people earning high wages buying lots of stuff from the kinds of businesses they worked for. They plowed most of their money right back into the economy. Us poor people spend ALL our money right away, we save fuck-all, and we can really get the economy moving …. if we get paid.
This is of course bullshit.
Oh Libertarians….you make me giggle
Do you think McDonald’s is keeping their prices low as a sort of charitable donation to the public?
Of course not. If they could get away with charging more, they would already be charging more.
@llamaherder,
Considering the rhetoric I’ve seen used about “job creators”, I wouldn’t be surprised if people thought that. There certainly is some kind of belief that the wealthy create jobs out of the goodness of their heart instead of because of necessity.
Yeah, I am sure that the times they already *have* raised the costs where terrible for them, and that the fact that all of their customers are, collectively, making the same shitty wages as their own employees has ***nothing at all*** to do with this.
Want to try the, “Some mathematical models, done up by the same ‘economic experts’ that insisted that there was no housing bubble, or crash looming, say that raising minimum wages will be a disaster, so it makes sense to ignore actually empirical evidence from the real world on the subject, which implies the dead opposite!”, argument next?
See, this is the problem with economic models. They all suck. We have improved climate models, as a result of there being “limited numbers” of variables, to the point where we can be almost certain, within 5-6 days of the general result. Economic models keep changing, because there are hundreds of obvious variables, but no real understanding of how they interact, and every single bloody time some new product comes out, or new technology changes how businesses do things, or banking is accomplished, it throws another variable into the mix. The result is that the bloody fools who are making these claims about minimum wage effects, while ignoring local, historical, never mind global data, on real world situations, in “all” countries, is the equivalent of releasing a billion quantum butterflies into a black box, then trying to read tea leaves to predict the outcome.
The models work, as long as a) no exigent, un-tracked, variables change in unexpected ways, and b) the system continues to behave predictably. The last bit being the bloody funniest one – or model predicts things well, so long as its actually predicting things well, then all bets are suddenly off.
Heck, one of the famous, “I correctly predicted the housing bubble.”, jokers, which everyone is currently listening to, is, as I understand, kind of noted for making predictions of the same sort that some of the better “psychics” manage – he predicted so many bloody things, that at least some of them had to be either partly, or completely accurate. A result with means jack all, when he, this time was right, outside of the context of all the times he ***got it wrong***.
If anyone wants to take exception to this description of the state of economic models, they have only to show where one exists that hasn’t failed, horribly, and had to be changed, radically, to adjust for unexpected errors, and which can predict, say, something as simple as 50% of the stock prices, for the next 10 minutes, without getting more than half of them wrong, never mind the economy, over the next 5 months. I am willing to bet that you won’t find one that “honest” statistics experts say is accurate, as apposed to, say, a banker, who have a terrible habit of misapplying the wrong models, to the wrong things, but will, never the less tell you that they are ***only*** useful for those specific categories they use them for, and then, only because they haven’t completely failed, at least.. recently.
But, in any case, the “on the ground” data contradicts the models, which keep having to be reworked, every time they prove to be missing some critical factor, and, again, the honest ones will tell you they don’t even know what all those factors are, so.. we are going to believe a completely “untested” model, instead of historical data… Yeah, right!!!
I don’t understand this sentence.
This is aggravated by the fact that you’re Kagehi, which means I have “no” way of “guessing” what you “might” mean by using “quotation marks”.
David Marjanović,
I going to guess that Kagehi meant weather where they wrote climate and they’re trying to say that weather predictions have moved from 1-2 days out to 5-6 or more because of improved models. Those weather models are based on a relatively small-ish (e.g. limited) number of variables (pressure, temperature, humidity, local geography, etc) + some differential equations and a bunch of hefty computers to do the interplay for a fine mesh grid. I think they’re trying to contrast this with economic models which generally seem to be crap because the parameter space of variables is way larger, the interplay and coupling is much more complicated, we have very poor measures of those parameters and people … well, people are people, and don’t always act in rational or even model-able fashion. I think that was the intended jist of their comment … but perhaps I’m being charitable.
Now your This is aggravated by the fact that you’re Kagehi… confuses me; perhaps I don’t know what a “Kagehi” is other than a pseudonym used by a a commentator — is there prior history that I don’t remember?
Dead right dontpanic. That is what I meant. Mind, people can be predicted, if, again, you narrow the variables, such as, say.. modeling what they might do on the road, or when fleeing a fire, even if some actions might be irrational. Economic models… tend to use 4-5 variables, then assume that one or more of them are somehow completely decoupled from interaction with each other, or unknowns, and then try to predict the outcome. Every time they come up with such a model, instead of getting better at modeling, they just switch out a few variables, to ‘fix’ it, then if it seems to work, keep using it until it breaks on them. In every case where it has broken it has turned out to be those so called “constants” that it breaks in, and, more often than not, the replacement, or adjustment, needed is a wild guess, because they can’t figure out what made their supposed constant wander wildly off course. They sometimes think they know, because they find some big, major, seemingly important, mass of money that moved in the system as it fractured, and assume that this mass of changes *is* the new variable they need to be paying attention to, but.. again, its a block box, with thousands of butterflies in it, and the are modifying the model based on, “A big wind.”, which might never happen again, because all the real variable, soon after, all wander off in random directions.
I am sure its possible to model it, if you can stop it bloody changing long enough to nail down the variables properly, then stop them from changing on you, neither of which is likely. For very general trends, you might get good results. If you only apply them to what they are intended for, you might get lucky and nothing will suddenly change on you for a few decades. If you are willing to use the model as a guideline, but change your opinion of the matter, when things stop working as predicted, or something significant changes, then.. you might do OK. But, the people using these models are trying to predict everything from GDP to whether or not their IBM stock will go up or down in the next 24 hours.
As for his jab at me. I tend to post in enough places that its hard to keep track of where you can use html, and where you can’t, or what happens if you add ** around things, so.. I have a habit, which I try to avoid, if I remember, of using “” not just as a sort of loose overstrike (i.e., defamation of the term), or as a quoted statement, but, sometimes, as a sort of emphasis instead. Some people seem to be unable to figure out, from context, whether or not I am trying to make a statement about how little I value the term, or if I am trying to make it a focus of attention. I consider it, personally, to be either people being too bloody picky, or, alternatively, a definite sign, since it should be possible, from context, to tell which is intended, of a bloody huge lack of reading comprehension.
But, again, I try, when I realize I am doing it, to avoid offending them, since it seems to disturb and confuse them so much.