5 questions for Mark Jamison on Big Tech and antitrust

From James Pethokoukis of AEI. 

"America’s biggest tech companies have revolutionized work, entertainment, and just about every aspect of life. But some in Washington are raising concerns about Big Tech, hoping to make the tech sector more competitive using antitrust. Mark Jamison joined me on a recent episode of Political Economy to discuss calls for antitrust action against America’s biggest technology companies.

Mark is the director and Gunter Professor of the Public Utility Research Center at the University of Florida’s Warrington College of Business and a nonresident senior fellow at AEI.

Below is an abbreviated transcript of our conversation. You can read our full discussion here. You can also subscribe to my podcast on Apple Podcasts or Stitcher, or download the podcast on Ricochet.

Pethokoukis: The critics of Big Tech would argue that antitrust, as it’s currently conceived, isn’t working. How has antitrust changed from the immediate post-war period to the way it is now?

Jamison: When we first started antitrust, if you look at the political rhetoric, it’s the rhetoric you will see on any particular issue: There are evil entities in the world, and our political heroes are going to correct that. Antitrust then was given a lot of energy by Louis Brandeis, who had a bias against anything large. And later, what people call the Chicago School stepped in and said, “Well, if you’re going to have antitrust, it really should be about consumers.”

This is what we call the consumer welfare standard, which over time became adopted. It’s the basic idea that if a government is going to say a merger shouldn’t be allowed, or to take on a particular business practice, their focus should be on, “Does the business practice harm consumers?” But today, we see people who would really like to go back to the idea that big is bad. They want to loosen the intellectual standards upon which we’ve built our antitrust policies for a number of decades now.

Are Big Tech’s critics saying the consumer welfare standard needs to be broadened? Or do they think that it doesn’t even work on its own terms?

The primary argument is that it’s too narrow. So you’ll see people arguing that we should be protecting competition, whatever that means, or we should be protecting competitors. We know what that means, and we know that can take us down the road Europe is on, where you’re protecting companies that aren’t serving customers very well.

What you see from people who argue that today’s antitrust is failing us are studies that try to show that companies today are bigger than they used to be and that this is a failing of antitrust. But it’s a tautological argument. It’s arguing that, “Well, since we now have bigger companies, that means antitrust has failed and therefore antitrust should attack big companies.” They’ve simply gone in a circle. They’ve not shown that customers are harmed. It’s simply showing that the standard they would like to have (“big is bad”) is not being addressed under current laws, which is exactly right.

Via Twenty20

Some people look at Google and say, “Everybody I know uses Google search. They’re dominating the market. How can that not be a case for government action?”

So there are two things there. First, if you look at how consumers view Google versus the rivals, the consumers rank Google much higher in terms of satisfaction than they do the rivals. And so this really is consumer choice. Google is as large as it is because you and I use Google instead of perhaps Bing or Yahoo.

The other thing to keep in mind: In these kinds of markets, we don’t really want someone to be another Google. What we really want is someone to create the next ecosystem and the next generation of products. The real excitement is in what’s going to replace these particular companies’ services.

Should I be bothered that, for instance, Facebook owns three big social media companies: Facebook, Instagram, and WhatsApp?

You would look at it as a problem if you had a large Instagram, a large Facebook, and a large WhatsApp proposing to merge. What we had was a startup called Instagram that had a really cool idea. And Facebook said, “We can make that a successful business.” Similarly, WhatsApp did not have a real revenue-generating model, but Facebook did.

There are basically three steps to making a successful company: One, you have to have the idea; two, you have to turn that idea into a product; and three, you have to turn it into a business which has the marketing, the cashflow management, working with investors, legal issues, etc.

Being purchased by someone who has a successful business model is a really good future for a lot of people who have bright ideas and can actually engineer a product but don’t want to become someone who’s in charge of large operations. They need a future where they can take what they’ve created, sell it, and then go create another future.

Are today’s Big Tech leaders so big, so much a part of our lives, or worth so much money that they aren’t vulnerable in a way Yahoo or MySpace were?

As we’ve looked at the companies that have fallen along the wayside, they are all companies that were in a service area that some of today’s tech companies are in, and today’s tech companies just did it better. What we actually do see in these current companies is a very dynamic system — one where it’s fairly easy for them to be set up to fail.

One thing I try to point out to people: If you look at the AlphaGo artificial intelligence that beat the world champion Go player, the AlphaGo computer burns about 170 kilowatts of electricity. The human mind playing Go consumes about 1/50,000 of a percent of that much electricity. So there’s a lot more to intelligence than what we’re doing today, but these companies are tied up in today’s artificial intelligence. And as soon as someone says, “Oh, I can do that better,” that opens the door to create the next ecosystem."

Happy 109th birthday to Dr. Milton Friedman!

From Mark J. Perry.

"An important event takes place tomorrow that is recognized annually on CD. Every year on July 31 we celebrate the birthday of Milton Friedman — he was born on that day in 1912 and would have been 109 years old this year. Unfortunately, Milton died on November 16, 2006, when he was 94 years old. In an editorial in the Wall Street Journal following Professor Friedman’s death, they reported his loss with the same tribute Milton used when Ronald Reagan died, saying “few people in human history have contributed more to the achievement of human freedom.” In honor of his legacy and birthday this week, here are 20 of my favorite Milton Friedman quotes, along with a bonus video and some special birthday graphics:

1. There is nothing as permanent as a temporary government program.

2. Many well-meaning people favor legal minimum-wage rates in the mistaken belief that they help the poor. These people confuse wage rates with wage income. It has always been a mystery to me to understand why a youngster is better off unemployed at $15 an hour than employed at $7.25 (updated). The rise in the legal minimum-wage rate is a monument to the power of superficial thinking.

3. First of all, the government doesn’t have any responsibility to the poor. People have responsibility. This building doesn’t have responsibility. You and I have responsibility. People have responsibility. Second, the question is how can we as people exercise our responsibility to our fellow-man most effectively? That’s the problem. So far as poverty is concerned, there has never been a more effective machine for eliminating poverty than the free enterprise system and the free market. The period in which you had the greatest improvement in the lot of the ordinary man was the period of the 19^th and early 20^th century.

4. In the international trade area, the language is almost always about how we must export, and what’s really good is an industry that produces exports, and if we buy from abroad and import, that’s bad. But surely that’s upside-down. What we send abroad, we can’t eat, we can’t wear, we can’t use for our houses. On the other hand, the goods and services we import, they provide us with TV sets we can watch, with automobiles we can drive, with all sorts of nice things for us to use.

When people talk about a favorable balance of trade, what is that term taken to mean? It’s taken to mean that we export more than we import. But from the point of view of our economic well-being and our standard of living, that’s an unfavorable balance. That means we’re sending out more goods and getting fewer in return. Each of you in your private household would know better than that. You don’t regard it as a favorable balance when you have to send out more goods to get less coming in. It’s favorable when you can get more by sending out less.

5. There is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.

6. I’m in favor of legalizing drugs. According to my values system, if people want to kill themselves, they have every right to do so. Most of the harm that comes from drugs is because they are illegal.

7. Nobody spends somebody else’s money as carefully as he spends his own. Nobody uses somebody else’s resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property.

8. The government solution to a problem is usually as bad as the problem.

9. The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy.

10. The high rate of unemployment among teenagers, and especially black teenagers is both a scandal and a serious source of social unrest. Yet it is largely a result of minimum wage laws. We regard the minimum wage law as one of the most, if not the most, anti-black laws on the statute books.

11. Industrial progress, mechanical improvement, all of the great wonders of the modern era have meant relatively little to the wealthy. The rich in Ancient Greece would have benefited hardly at all from modern plumbing: running servants replaced running water. Television and radio? The patricians of Rome could enjoy the leading musicians and actors in their home, could have the leading actors as domestic retainers. Ready-to-wear clothing, supermarkets — all these and many other modern developments would have added little to their life. The great achievements of Western capitalism have redounded primarily to the benefit of the ordinary person. These achievements have made available to the masses conveniences and amenities that were previously the exclusive prerogative of the rich and powerful.

12. President Kennedy said, “Ask not what your country can do for you — ask what you can do for your country.”… Neither half of that statement expresses a relation between the citizen and his government that is worthy of the ideals of free men in a free society. “What your country can do for you” implies that the government is the patron, the citizen the ward. “What you can do for your country” assumes that the government is the master, and the citizen the servant.

13. If you look at the drug war from a purely economic point of view, the role of the government is to protect the drug cartel. That’s literally true.

14. “Fair” is in the eye of the beholder; “free” is the verdict of the market. The word “free” is used three times in the Declaration of Independence and once in the First Amendment to the Constitution, along with “freedom.” The word “fair” is not used in either of our founding documents.

15. What most people really object to when they object to a free market is that it is so hard for them to shape it to their own will. The market gives people what the people want instead of what other people think they ought to want. At the bottom of many criticisms of the market economy is really a lack of belief in freedom itself.

16. The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way. In the only cases in which the masses have escaped from grinding poverty, the only cases in recorded history are where they’ve had capitalism and largely free trade. If you want to know where the masses are worst off, it’s exactly in the kinds of societies that depart from that, so that the record of history is absolutely crystal clear: that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.

17. The problem of social organization is how to set up an arrangement under which greed will do the least harm; capitalism is that kind of a system.

18. With some notable exceptions, businessmen favor free enterprise in general but are opposed to it when it comes to themselves.

19. If you and your fellow citizens continue on moving more and more in the direction of socialism, not only inspired through your drug prohibition but through your socialization of schools, the socialization of medicine, the regulation of industry, I see for my granddaughter the equivalent of Soviet communism three years ago. (Note: This was from a 1991 interview with Milton Friedman.)

20. The government has no more right to tell me what goes into my mouth [including illegal drugs] than it has to tell me what comes out of my mouth.

Happy Birthday Milton Friedman!

Bonus 1 (video below): In his 1979 appearance on the Phil Donahue Show, Milton Friedman demonstrates his quick wit and intellect when he schools Donahue on greed, self-interest, and the superiority of the free enterprise system over socialism.

Bonus 2: You’ll find a great collection here of more than 30 Milton Friedman videos (the “Milton Friedman Speaks” lectures) on a variety of topics including “What is America?”, “Is Capitalism Humane?”, free trade, energy policy, the role of government in a free society, education and vouchers, the rights of workers, consumer protection, equality and freedom, and the future of our society.

Bonus 3: Hosted by the Hoover Institution, the Collected Works of Milton Friedman website contains more than 1,500 digital items by and about economist, Nobel Prize winner, and Hoover fellow Milton Friedman. The site features hundreds of Friedman’s articles, op-eds, speeches, lectures, television appearances, and more.

Bonus 4: Below are some graphics created by graphic designer Olivier Ballou to honor Friedman’s birthday:

"

The Flawed Arguments for a Civilian Climate Corps

By Jack Elbaum of CEI.

"When President Franklin Delano Roosevelt took office in 1933, he was faced with a massive economic crisis. To combat it, he embarked on a plan unprecedented in scale to mobilize the federal government through public works programs, welfare expansion, and financial reform. 

One of the most celebrated public works programs implemented as part of FDR’s New Deal was the Civilian Conservation Corps (CCC), which aimed to give unskilled young men the opportunity to work on projects such as “the prevention of forest fires … plant pest and disease control, the construction, maintenance and repair of paths, trails and fire-lanes in the national parks and national forests and such other work.” After nine years of operation—in which over 3 million men were enrolled in total—the CCC was discontinued in 1942. 

Almost 90 years after the program was first implemented, there is now a growing movement to revive the CCC—endorsed by President Joe Biden, along with several Democrats in Congress, and refashioned as the Civilian Climate Corps—to address the effects of climate change and mass unemployment as a consequence of the COVID-19 pandemic. And polling suggests that there is a demand for such a revival. In fact, half of voters under 45 say that they would consider joining the CCC if given the opportunity.

In this series of blog posts, I will argue that it would be misguided to implement a new CCC despite its popularity. A review of the effects of such public works programs on unemployment—as well as an understanding of basic economic principles—makes it clear that reviving the CCC would be imprudent. Moreover, the justifications provided for a new CCC do not hold up to the facts when examined carefully. 

***

The CCC has long been considered one of the most successful New Deal programs. People often cite the fact the CCC planted 3 billion trees, constructed over 3,000 fire lookout towers, and gave jobs for young men during a time of economic calamity in order to justify their support. But did the CCC—along with the many other public works programs put in place by FDR—actually accomplish their primary goal of abating unemployment?

The answer is No.

In March 1933, the month FDR took office, the unemployment rate was 25.3 percent. Over the next few years, his administration would implement New Deal programs that were supposed to stimulate the economy, dramatically reduce unemployment, and effectively end the Depression. But by the start of 1936, unemployment had yet to go below 15 percent. And, by June of 1938, unemployment spiked again and hit 20 percent. Even at the end of 1939, unemployment was still above 15 percent. 

One could make the case that because unemployment reached the worst of the Depression in 1933, the New Deal generally—and certain public works programs, such as the CCC, in particular—succeeded to some extent. But the fact unemployment stayed as high as it did for as long as it did is that narrative’s fatal flaw. Very few people would suggest that programs put in place to combat unemployment, but that ended with an unemployment rate above 15 percent for about seven years—with only one short period where it dipped under—should be classified as a success. 

***

The reason for the failure is straightforward and can be explained by basic economics. An article from the Foundation for Economic Education explains:

Even though the programs may “create” jobs for some workers, the resources to pay for the programs must be extracted from the private sector. Taxing the private sector reduces its ability to create jobs, so, at best, government jobs programs can only alter the composition of employment, not the total volume. More government jobs are created, but at the expense of fewer private-sector jobs.

In other words, for every dollar that the government spends, that is a dollar not used in the private sector to generate economic activity. The piece goes on to explain that the popularity of these various programs “stems from the fact that the jobs ‘created’ are highly visible, whereas the jobs lost are difficult to identify as being caused by the programs.”

This is clear when one considers the CCC. It is true that it put over 3 million men to work over the nine years of its existence—and those jobs were highly visible. But what went unseen were the potential jobs lost by taking money out of the private sector, where economic efficiency is often paramount.

And so, in the end, despite whatever kind of nostalgia the CCC and other public works programs conjure up for people who romanticize the days of the New Deal, the truth is that they were simply not an effective means of reducing unemployment. Rather, it hamstrung the private sector by depriving it of the capital necessary to promote economic growth.

In the following posts, I will carefully examine the present-day justifications for a new CCC. While the arguments for it sound plausible on the surface, a deeper dive suggests that they are not accurate."

The F.D.A. has to go much, much faster

See Welcome to the Club by Alex Tabarrok.

"Ashish Jha, dean of the School of Public Health at Brown University, has had it with the FDA:

Nearly all public-health authorities in the country are urging people to get vaccines. We see the incredible results that the vaccines have had and how many lives they’re saving, and still the F.D.A. has not offered full, permanent approval of the vaccine. President Biden suggested it might take several more months. How do you understand that, or how can that be defended, if it can be?

I find it incredibly puzzling what exactly the F.D.A. is doing. The F.D.A. says that it typically takes them six months or sometimes as much as a year to fully approve a new product. And, generally, we appreciate that. There are two components to that. One is that they want to see a large amount of data, and they want to go through that carefully, and I think that’s essential. Then the second is that there’s a process, which can take a while. This is a global emergency, and while all of us want to make sure that the F.D.A. does its job, most of us also feel that just operating on standard procedures may not be the right thing to do here, and that there are things that can be sped up. Just as with the development of vaccines, we didn’t cut any corners. We did all the steps, but we did it much, much faster. The F.D.A. has to go much, much faster.

The other thing about the data—the amount of data that the vaccines have generated, the number of people who’ve been vaccinated, and the scrutiny that the data has received. I mean, my goodness, this data has been scrutinized and looked over more than—

I’d imagine it’s more than any data in modern history, right?

Any therapy, any vaccine ever. These are the most highly scrutinized medical products we have ever had, and I don’t understand what the F.D.A. is doing.

I don’t disagree, of course, and I’m pleased that Jha and others like Eric Topol are becoming frustrated with FDA delay. But take it from an OG, the FDA is doing what it has always done. What has changed isn’t the FDA but that more people are paying attention now that they have something personal at stake.

I am reminded of this story from 2016:

Mary Pazdur had exhausted the usual drugs for ovarian cancer, and with her tumors growing and her condition deteriorating, her last hope seemed to be an experimental compound that had yet to be approved by federal regulators.

So she appealed to the Food and Drug Administration, whose oncology chief for the last 16 years, Dr. Richard Pazdur, has been a man denounced by many cancer patient advocates as a slow, obstructionist bureaucrat.

He was also Mary’s husband.

…When asked specifically how his wife’s illness had changed his work at the F.D.A., Dr. Pazdur said he was intent on making decisions more quickly.

“I have a much greater sense of urgency these days,” Dr. Pazdur, 63, said in an interview. “I have been on a jihad to streamline the review process and get things out the door faster. I have evolved from regulator to regulator-advocate.”

I do hope that when the pandemic is over we don’t forget that for patients with life-threatening diseases it’s always been an emergency."

What Does the Unpublished Evidence Cited by the CDC's New Face Mask Guidance Actually Show?

The agency says it found high viral loads in vaccinated people infected by the coronavirus, but the significance of those results is unclear.

Jacob Sullum of Reason.

"Two and a half months ago, when the Centers for Disease Control and Prevention (CDC) began telling people vaccinated against COVID-19 that they generally did not need to wear face masks in public places, CDC Director Rochelle Walensky said the new advice was based on two factors. First, vaccinated people were rarely infected by the coronavirus; second, such "breakthrough" infections typically involved relatively low viral loads, meaning that vaccinated carriers were less likely to transmit the virus.

When the CDC changed its advice again this week, telling vaccinated people to resume wearing masks if they live in "areas of substantial or high transmission," Walensky alluded to evidence that casts doubt on the second point, at least as it relates to the especially contagious delta variant that now accounts for the vast majority of newly identified cases in the United States. But the CDC has not yet published that evidence, leaving unanswered questions about what it actually shows and its relevance to the role vaccinated people might be playing in the current case surge.

"Emerging evidence suggests that fully vaccinated persons who do become infected with the Delta variant are at risk for transmitting it to others," the CDC says in a Morbidity and Mortality Weekly Report article published on Tuesday. The article cites "unpublished data" from the CDC COVID-19 Response Team. An unnamed "federal official knowledgeable about the research" told The Washington Post the results will be "published imminently."

Walensky described the CDC's reasoning in an interview with SiriusXM Doctor Radio on Tuesday. She noted that in May, the last time the CDC revised its mask advice, the alpha variant of the coronavirus accounted for most COVID-19 cases, while the delta variant was involved in "about 1 percent." At that point, she said, "we had evidence both of the vaccine was working against alpha and preventing severe disease and death, but also that if you happen to be one of those very few breakthrough infections, there was very little evidence that you could actually give it to someone else." Specifically, "the virus that would be circulating in your nasal pharynx was actually a very low level of virus."

Today the delta variant accounts for about 83 percent of new U.S. cases. "We know and have known that the amount of virus in your nasal pharynx when you're infected and unvaccinated with delta is much more than it was with alpha," Walensky said. "Over the last several weeks," she added, the CDC's "outbreak investigations" in "many different places in the United States" have found that vaccinated people with breakthrough delta infections "have the same amount of virus as the unvaccinated people." That evidence "is very much leading us to believe that it is probably the case that those vaccinated breakthrough infections, rare as they might be, have the potential to infect others."

Walensky also alluded to data from other countries. "Studies from India with vaccines not authorized for use in the United States have noted relatively high viral loads and larger cluster sizes associated with infections with Delta, regardless of vaccination status," the CDC's new guidance says. It cites a preprint study of breakthrough infections in vaccinated Indian health care workers that found "higher respiratory viral loads compared to nondelta infections." That study described the "respiratory viral loads" as "significant" but did not say they were comparable to those seen in unvaccinated carriers. The senior author of that study, microbiologist Ravindra Gupta, told the Post the ability of vaccinated people with breakthrough infections to transmit the virus has not been "formally measured in a rigorous way," although he agreed with the CDC's new mask advice.

"They're making a claim that people with delta who are vaccinated and unvaccinated have similar levels of viral load, but nobody knows what that means," Gregg Gonsalves, an associate professor at the Yale School of Public Health, told the Post. "It's meaningless unless we see the data."

One question is whether a high viral load in the nose is a good measure of infectivity. According to the Post, Emory University biostatistician Natalie Dean "remains unconvinced a high viral load in the nose truly means that vaccinated and unvaccinated people are equally as likely to spread the virus, although she acknowledged there is an ongoing debate about the issue." Dean "thinks the amount of virus in the throat or lungs could be important and might differ between people who are vaccinated and those who are not."

An Israeli study of 1,497 fully vaccinated health care workers, reported yesterday in The New England Journal of Medicine, identified 39 breakthrough infections, the vast majority of which were mild or asymptomatic. Three-quarters of those subjects "had a high viral load…at some point during their infection." Yet "no secondary infections were documented."

Anthony Fauci, the Biden administration's top COVID-19 adviser, concedes that the practical significance of the CDC's recent (and so far unseen) findings remains unclear. But he says "you can make a reasonable assumption that vaccinated people can transmit the virus just like unvaccinated people can."

The CDC still describes breakthrough infections as "rare," although it has stopped keeping track of cases with minimal or moderate symptoms, focusing instead on hospitalizations and deaths. As of July 19, it had counted 5,601 hospitalizations and 1,141 deaths involving vaccinated Americans. Those cases represent a tiny fraction of all COVID-19 hospital admissions and deaths: The U.S. at that point was seeing more than 3,500 hospitalizations per day and had recorded a total of more than 260,000 deaths since the beginning of this year. Vaccinated people, in other words, accounted for less than 0.5 percent of COVID-19 deaths during that period. Based on data from January through May 2021, the CDC found that less than 3 percent of hospitalizations involved patients who had been fully vaccinated.

What about infections that don't result in hospitalization or death? "Multiple studies from the United States and other countries have demonstrated that a two-dose COVID-19 mRNA vaccination series [such as the Pfizer and Moderna vaccines] is highly effective against SARS-CoV-2 infection," the CDC says, "including both symptomatic and asymptomatic infections," caused by "ancestral and variant strains." It adds that "early evidence for the Johnson & Johnson/Janssen vaccine also demonstrates effectiveness against COVID-19 in real-world conditions."

In those studies, mRNA vaccines generally reduced the risk of infection by 86 percent to 99 percent, except for one outlier (a Danish study of people in long-term care facilities) that put the effectiveness of the Pfizer vaccine at 64 percent. A U.S. study of people who had received the Johnson & Johnson vaccine found a risk reduction of 77 percent.

What does that mean in terms of absolute risk? In one U.S. study of adults who had received the Pfizer or Moderna vaccines, the incidence of positive COVID-19 tests among fully vaccinated subjects was 0.048 per 1,000 person-days, compared to 0.43 per 1,000 person-days among the unvaccinated controls, yielding an effectiveness rate of 89 percent. In other words, unvaccinated people were nearly nine times as likely to be infected. A study of U.S. health care workers put the incidence of infection at 1.38 per 1,000 person-days when the subjects were unvaccinated, compared to 0.04 per 1,000 person-days when they were fully vaccinated, yielding an effectiveness rate of 97 percent. In other words, unvaccinated people were more than 30 times as likely to be infected.

The CDC notes emerging evidence that vaccines are less effective at preventing infection by the delta variant but are similarly effective at preventing delta cases serious enough to require hospitalization:

For the Delta variant, recent studies from England and Scotland have noted reduced effectiveness of the Pfizer-BioNTech vaccine against confirmed infection (79%) and symptomatic infection (88%), compared with Alpha (92% and 93%, respectively). During two recent rounds of a national population survey in England when Delta was the dominant stain, 2-dose vaccine effectiveness against PCR-confirmed infection was 72% and 73%, respectively. A study from Canada demonstrated 87% effectiveness against symptomatic illness ≥7 days after receipt of the Pfizer-BioNTech vaccine. Press releasesexternal icon from Israel have noted further decreased effectiveness of vaccines against infection and illness caused by Delta; these differences may in part reflect differences in study methodology, but more technical information is needed to allow full interpretation. Notably, in the United Kingdom, Canada, and Israel, vaccine effectiveness against hospitalization related to Delta was 93%–100% and comparable to that observed with Alpha.

In short, vaccines still provide excellent protection against hospitalization and death. And while the delta variant may reduce their protection against infection, that risk is still much lower among vaccinated people than it is among unvaccinated people. In the CDC's view, that low risk, coupled with the unpublished evidence it has collected regarding viral loads in vaccinated people infected by the delta variant, is enough to justify its new face mask recommendation. The agency's guidance strives to defend that position without seeming to denigrate the value of vaccination.

"COVID-19 vaccines currently authorized in the United States have been shown to be effective against SARS-CoV-2 infections, including asymptomatic and symptomatic infection, severe disease, and death," the CDC says. "These findings, along with the early evidence for reduced viral load in vaccinated people who develop COVID-19, suggest that any associated transmission risk is likely to be substantially reduced in vaccinated people. While vaccine effectiveness against emerging SARS-CoV-2 variants remains under investigation, available evidence suggests that the COVID-19 vaccines presently authorized in the United States offer protection against known emerging variants, including the Delta variant, particularly against hospitalization and death."

At the same time, the CDC says, "data suggest lower vaccine effectiveness against confirmed illness and symptomatic disease caused by the Beta, Gamma, and Delta variants compared with the ancestral strain and Alpha variant." It notes that "the risks of SARS-CoV-2 infection in fully vaccinated people cannot be completely eliminated where community transmission of the virus is widespread." Hence "vaccinated people can still become infected and spread the virus to others."

These observations, which combine a low risk of infection with a mostly speculative risk of transmission, do not mean that the benefit of resuming general masking, or of requiring all K–12 students to wear masks this fall, outweigh the cost. That is especially true when you consider the message these highly risk-averse precautions send to people who are deciding whether to be vaccinated.

Florida Gov. Ron DeSantis, a Republican who never required face masks but urged residents to "consider" wearing them inside businesses, warns that telling vaccinated people to wear masks undermines attempts to boost the vaccination rate, which promise a much bigger public health payoff if they are successful. "I get a little bit frustrated when I see some of these jurisdictions saying, 'Even if you're healthy and vaccinated, you must wear a mask because we're seeing increased cases,'" DeSantis said last week. "Understand what [message that] is sending to people who aren't vaccinated: It's telling them that the vaccines don't work. I think that's the worst message that you can send to people at this time.""

Biden Rejects Open Trade at a U.S. Factory Dependent on It

By Scott Lincicome of Cato.

"Reuters reports that President Biden today will travel to a Mack Trucks plant in Pennsylvania to announce more restrictive “Buy American” rules for federal contracts — a centerpiece of his administration’s “worker‐​centric” trade policy and broader embrace of U.S. industrial policy:

The new rules.. would expand existing “Buy American” provisions, which apply to about a third of the $600 billion in goods and services the federal government buys each year.

If approved, they would raise the minimum U.S. content for manufactured goods from 55% to 60% immediately, and then to 65% in 2024 and 75% in 2029.

“This proposal will strengthen procurement as a tool to strategically shape markets and accelerate innovation,” a senior administration official said. “The future of our economy depends on continuing to make smart investments, giving our workers and companies the tools they need to compete.”

As I explain in a new working paper on U.S. industrial policy (and as Cato scholars have explained for decades), “Buy American” rules are just another form of protectionism: they’ve been found, for example, to act as a barrier to entering the U.S. market and to raise domestic prices in the same way that a tariff does. Special provisions in the rules, moreover, make them a particularly‐​generous handout for the U.S. steel industry (to steel consumers’ clear detriment). The restrictions also encourage foreign retaliation against U.S. exporters, and, far from improving federal projects, routinely confound them (via higher prices, more paperwork, project delays, etc.). Indeed, according to one recent (and quite relevant for today’s purposes) study, “Buy American” restrictions tied to federal transportation subsidies raised the price of domestically‐​produced transit buses and discouraged the purchase of more efficient foreign‐​made buses, thus lowering the quality and use of public transit (frequency and coverage), increasing traffic congestion, and harming the environment.

Still, the White House’s decision to announce these new rules at a unionized truck manufacturer in an important swing state makes some superficial sense: Mack Trucks is a U.S.-based manufacturer, after all, and thus might benefit from government restrictions on foreign competition — restrictions that President Biden has unfortunately championed. Indeed, just today Biden’s Commerce Secretary, Gina Raimondo, told Bloomberg that President Trump’s steel, aluminum and other tariffs have been “very effective” in helping boost domestic steel production — repeating her initial (and wrong) take from a few months ago.

However, like most protectionist logic, the view that Mack Trucks and many other U.S. manufacturers would clearly benefit from a robust White House embrace of economic nationalism falls apart under the slightest scrutiny. In particular, Mack is foreign‐​owned and reliant on imports (emphasis mine):

[T]he Trump administration finds itself in an intensifying trade war with other countries, including Europe — a battle putting pressure on the company that assembled the truck that Trump had so much fun in 15 months ago.

That’s because Mack Trucks, which assembles its heavy‐​duty rigs in Lower Macungie Township and is owned by Sweden’s Volvo Group, uses treated steel from Europe in its production process, spokesman Christopher Heffner confirmed. He wouldn’t disclose what specifically the imported steel is used for, citing competitive reasons.

The Trump administration’s tariffs on European steel and aluminum mean Mack is paying 25 percent more for that treated steel, and Heffner noted the company is unaware of an appropriate American‐​made substitute.

In addition, Heffner said, Mack already buys a large amount of U.S.-produced steel, but those prices, too, are at risk of rising because, as a result of the tariffs, American steel‐​makers won’t be competing with lower‐​cost imports.

“Depending on how this issue evolves, being a U.S. manufacturer could become a competitive disadvantage,” Heffner said.…

Today, U.S. tariffs on European steel remain in place, even as domestic steel prices have skyrocketed (to U.S. manufacturers’ serious detriment).

But it’s not just imported steel on which Mack Trucks relies: Trade Partnership’s Dan Anthony notes, for example, that “[a]ccording to the [Panjiva supply chain database], Mack Trucks in Allentown was the consignee for 77 import shipments with nearly 900 tons of auto parts from suppliers in 11 countries….between July 1 and July 22.” In this regard, Mack is apparently following the standard practice of most automakers in the United States by augmenting its substantial production and employment here with imported parts and raw materials (not to mention foreign investment).

Given these additional facts, it seems odd that the president will today reject on “competitiveness” grounds the very things that made his host company truly competitive in the first place.

Maybe someone should ask Mack Trucks about that."

Are Non-Compete Clauses Legitimate? Yes.

By Walter Block.

"What exactly, is a non-compete clause? It appears, typically, in a labor contract. In view of the wages and working conditions and other benefits the employer will be bestowing on the employee, the latter agrees that for the duration of his employment there, and if and when his relationship with the firm is later severed, he will not compete with his employer. This is usually stipulated for two years or so afterward, although the noncompete duration may vary. The fear on the part of the company is that the employee will either set up on his own as a competitor, or work for a different firm in the same industry. He will have the benefit of his first employer’s trade secrets, ways of doing business, etc. The employee, presumably, is paid a bit extra for agreeing to limit himself in this manner.

Why then, is there any opposition to contracts of this sort? What is the case against them?

First, a little history.

In 2016, the Obama Administration determined that these agreements were not in the public interest. With the help of his pen and telephone this former president issued in April of that year an Executive Order, “Steps to Increase Competition and Better Inform Consumers and Workers to Support Continued Growth of the American Economy”. This was followed up in March 2016 by a Treasury Department report, “Non-Compete Contracts: Economic Effects and Policy Implication”. Hard on the heels of that came another White House report, in May 2016, “Non-Compete Agreements: Analysis of the Usage, Potential Issues, and State Responses.” This was followed by yet another October 2016 White House report, “State Call to Action on Non-Compete Agreements.”

What were the justifications of this plethora of attacks on these agreed upon contracts?

First, it was charged, the welfare of workers was decreased, because they had fewer options with them than without them. Well, superficially, this is indeed true: they cannot compete for a given time period. However, they were paid for this restriction on what they would otherwise be free to do, presumably with a higher wage. The employees are also precluded from outright stealing from the company, and this, too, curtails their freedom. Not all limitations are illicit.

Second, they these stipulations are accused of artificially restricting competition. This is indeed correct, if by “competition” we mean, literally, numbers of competitors. Each such agreement reduces that number by exactly one. But these contracts are part and parcel of the competitive system. They were reached because of competition among employers for employees, and of the latter for the former. Mergers, too, as well as bankruptcies, decrease the number of firms still in operation. Shall we prevent them by law also? Hardly.

A third criticism is that non-compete contracts hamper economic efficiency. But this, too, is difficult to accept. Suppose they were entirely outlawed. Then, firms would be loath to share with their employees trade secrets, formulae, methods of doing business, etc. that could later be used against them. If this would not stultify progress, inhibit innovation, then nothing would. Non-compete clauses help guard against such an eventuality.

Another supposed flaw is that these pacts limit mobility. Of course they do. But we do not want infinite mobility, wherein workers switch jobs every millisecond. Rather, if we want economic development, we need optimal mobility. It would appear we could locate closer to that ideal on the basis of freely agreed upon contractual arrangements rather than by precluding options.

Then there is the charge of depressing wages. This is perhaps the weakest of all the counter-arguments, in that first, remuneration will tend to rise, not fall, other things equal, when employees give up a bargaining chip. Second, wages depend upon productivity, and this will increase, not decrease, if firms do not fear sharing information with members of their teams.

It has also been bruited about that these institutional arrangements are particularly onerous for minority group members, and thus constitute an instance of systematic racism. But this too is difficult to accept, since this demographic tends to be lower on the industrial jobs pyramid. If these clauses hurt workers, which they do not, minorities would thus be the least vulnerable to them, not the most.

---

Walter E. Block is Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics at Loyola University New Orleans"

The U.S. Is Not Responsible for Cuba’s Poverty — Communism Is

If we truly want what’s best for Cubans, we must identify the true cause of Cuba’s suffering.

By Jon Miltimore of FEE. Excerpts:

"Yes, the embargo has indeed harmed Cuba’s economy — that’s the point. But it is important to understand that it’s not the primary cause of the poverty in Cuba, which maintains robust trade relationships with nations around the globe. Data from the Observatory of Economic Complexity show that Cuba exported $1.2 billion worth of goods in 2019. The country’s primary exports were tobacco (23 percent), sugar (17.5 percent), and liquor (8 percent), as well as commodities such as nickel and zinc. Its top imports were food — poultry, wheat, corn, soybeans, and milk — and its primary trade partners were China, Spain, the Netherlands, and Germany.

While the U.S. embargo might sting, Cuba can still freely avail itself of the global marketplace — and it does.

The true cause of Cuba’s economic plight is its communist system. This should come as little surprise. An abundance of research shows a strong connection between prosperity and economic freedom. In a 2018 metastudy that examined 92 scholarly studies on the relationship between economic growth and economic freedom, 93.5 percent of them found a positive correlation.

Cuba, of course, is one of the least free countries in the world.

According to the Heritage Foundation, the communist state ranks 175th in the world for economic freedom — one spot above Venezuela. There are poorer countries in the Western Hemisphere than Cuba — nearby Haiti, which also has a long history of socialism, is one of the poorest countries in the world — but not many. This was not always the case.

As noted above, prior to Castro’s takeover, Cuba was one of the wealthiest countries in the Western Hemisphere. That all changed under Castro. The failures of communism in Cuba were tragic, but also familiar. The 20th century was littered with failed communist states, a fact that was widely understood and uncontroversial until recently.

As someone once put it, “communism was a great system for making people equally poor — in fact, there was no better system in the world for that than communism. Capitalism made people unequally rich.”

Were these the words of Milton Friedman, Ronald Reagan, William F. Buckley Jr., or George Will? No. They were the words of New York Times columnist Thomas Friedman, who wrote them in his bestselling 2005 book The World Is Flat.

As it happens, lifting the embargo on Cuba might be wise for both humanitarian and strategic reasons. But the notion that the U.S. embargo is what crippled Cuba’s economy makes a convenient narrative for apologists of Cuba’s economic system. It is patently untrue.

If we truly want what’s best for Cubans, we must identify the true cause of Cuba’s suffering."

Is it true that "State withdrawals from pandemic-era unemployment programs aren’t speeding up the job recovery?"

See States cutting unemployment benefits didn’t get people back to work, study finds by Greg Iacurci of CNBC. Excerpts:

"State withdrawals from pandemic-era unemployment programs aren’t speeding up the job recovery, according to a new analysis."

"Census Bureau data suggests recipients didn’t rush to find jobs in the weeks following the first batch of state withdrawals"

"Big deviations from economists’ projections the last few months hint the labor market isn’t functioning the way it did pre-pandemic, according to Stan Veuger, a senior fellow at the American Enterprise Institute, a right-leaning think tank."

"Expanded unemployment benefits likely led at least some people to stay home instead of look for work, he said.

But many other effects likely play a role as well, said Veuger. He cited that Covid health risks remain; school schedules may make it difficult for parents to find steady work; workers who relocated may not yet have moved back; and decimated industries will likely a take a while to rebuild."

"there are a few reasons to wait for more data before drawing conclusions about state unemployment policies, Veuger said.

For example, Dube’s analysis doesn’t control for differences in each state’s job market. The states that ended federal benefits early also tend to be the ones that re-opened from Covid lockdowns early; therefore, job-finding may be lower relative to other states if some of the more easily restored jobs have already been taken, Veuger said."

To Stop Climate Change Americans Must Cut Energy Use by 90 Percent, Live in 640 Square Feet, and Fly Only Once Every 3 Years, Says Study

Researchers admit there are absolutely no current examples of low-energy societies providing a decent living standard for their citizens.

By Ronald Bailey.

"In order to save the planet from catastrophic climate change, Americans will have to cut their energy use by more than 90 percent and families of four should live in housing no larger than 640 square feet. That's at least according to a team of European researchers led by University of Leeds sustainability researcher Jefim Vogel. In their new study, "Socio-economic conditions for satisfying human needs at low energy use," in Global Environmental Change, they calculate that public transportation should account for most travel. Travel should, in any case, be limited to between 3,000 to 10,000 miles per person annually.

Vogel and his colleagues set themselves the goal of figuring out how to "provide sufficient need satisfaction at much lower, ecologically sustainable levels of energy use." Referencing earlier sustainability studies they argue that human needs are sufficiently satisfied when each person has access to the energy equivalent of 7,500 kilowatt-hours (kWh) of electricity per capita. That is about how much energy the average Bolivian uses. Currently, Americans use about 80,000 kWh annually per capita. With respect to transportation and physical mobility, the average person would be limited to using the energy equivalent of 16–40 gallons of gasoline per year. People are assumed to take one short- to medium-haul airplane trip every three years or so.

In addition, food consumption per capita would vary depending on age and other conditions, but the average would be 2,100 calories per day. While just over 10 percent of the world's people are unfortunately still undernourished, the Food and Agriculture Organization reports that the daily global average food supply now stands at just under 3,000 calories per person. Each individual is allocated a new clothing allowance of nine pounds per year, and clothes may be washed 20 times annually. The good news is that everyone over age 10 is permitted a mobile phone and each household can have a laptop.

How do Vogel and his colleagues arrive at their conclusions? First, they assert that "globally, large reductions in energy use are required to limit global warming to 1.5°C."  The 1.5°C temperature increase limit they cite derives from the 2015 Paris Agreement in which signatories agreed to hold "the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels."

To achieve that goal, the researchers focus on what they call provisioning factors, which are intermediary institutions that people use to satisfy their needs. Provisioning factors that affect the amount of energy a society uses include public service, public health coverage, access to electricity and clean fuels, democratic quality, income equality, economic growth, and extractivism. These provisioning factors are the basis for providing sufficient human needs such as nourishment, drinking water, sanitation access, basic education, and a minimum income, all of which help secure the basic need of healthy life expectancy.

Vogel et al.

In order to stay below the 1.5°C temperature increase threshold, they cite earlier research that calculated that the average person should be limited to using annually as little as 18 gigajoules (equivalent to 136 gallons of gasoline or 5,000 kWh) of total energy, but allocated more generously for their study a cap of 27 gigajoules (equivalent to 204 gallons of gasoline or 7,500 kWh) annually. They then checked to see if any country in the world had met their definition of decent living standards using that amount of energy per capita. "No country in the world accomplishes that—not even close," admitted Vogel in an accompanying press release.

Vogel and his colleagues are undaunted by the fact that there are absolutely no examples of low-energy societies providing decent living standards—as defined by the researchers themselves—for their citizens. So they proceed to jigger the various provisioning factors until they find that what is really needed is a "more fundamental transformation of the political-economic regime." That fundamental transformation includes free government-provided high-quality public services in areas such as health, education, and public transport.

"We also found that a fairer income distribution is crucial for achieving decent living standards at low energy use," said co-author Daniel O'Neill, from Leeds' School of Earth and Environment. "To reduce existing income disparities, governments could raise minimum wages, provide a Universal Basic Income, and introduce a maximum income level. We also need much higher taxes on high incomes, and lower taxes on low incomes."

Two things that humanity for sure doesn't need according to the study are economic growth or the continued extraction of natural resources such as oil, coal, gas, or minerals. Vogel concluded: "In short, we need to abandon economic growth in affluent countries, scale back resource extraction, and prioritize public services, basic infrastructures and fair income distributions everywhere." He added, "In my view, the most promising and integral vision for the required transformation is the idea of degrowth—it is an idea whose time has come."

The researchers' assertion that "large reductions in energy use are required" is actually a non sequitur because it is not energy use per se that is contributing to man-made global warming, but the emissions of carbon dioxide associated with the burning of fossil fuels. In fact, when they set their 27-gigajoule per capita threshold, they specifically ruled out "speculative" technological progress. However, transitioning to no-carbon energy sources such as nuclear, wind, and solar power would solve the problem without forcing humanity to go on the ridiculously strict energy diet they call for.

Founder of the ecomodernist Breakthrough Institute Ted Nordhaus was correct when he argued, "The utopian dreams of those who wish to radically reorganize the world to stop climate change are not a plausible global future." The far better course for addressing the problem of climate change (and many others) is for humanity to aim for a high-energy planet. Instead of energy abstinence and degrowth, ecomodernists call for a "massive expansion of energy systems, primarily carried out in the rapidly urbanizing global South, in combination with the rapid acceleration of clean energy innovation."

Developing a high-energy planet will spur economic growth and innovation, helping to provide for all of the human needs that concern Vogel and his colleagues. Instead of trying to force Americans to live on the amount of energy currently available to Bolivians, the goal should be to enable people in energy-starved poor countries to gain access to energy supplies currently enjoyed by average Americans."

Prices Have Work To Do, Even in Pandemics

By Art Carden.

"Prices,” said the economist Benjamin Anderson, “have work to do. Prices should be free to tell the truth.” With Covid cases rising, places like Los Angeles reinstating outdoor mask mandates, and social media bursting with even more indignation than usual about Those People who refuse to wear a mask (or Those People who refuse to leave the house without a mask), it’s time to take a couple of deep breaths and explore the work prices would do if they weren’t actively suppressed.

The important question, as Thomas Sowell explains in his magisterial Knowledge and Decisions, is not “What is to be decided?” Rather, it is “How are decisions to be made, and by whom?” When I first typed this, I wrote “How is the decision to be made,” but then I stopped myself and rewrote because treating the pandemic as if there is One Big Decision to be made–and one Great Mind to make it–is a fundamental mistake. We cannot specify literally everything that could possibly happen, assign probabilities to everything, and then choose the “best” of our nearly infinite options. 

People make innumerable decisions based on decentralized knowledge about preferences and possibilities that a single mind or select committee of minds cannot, in principle, have. That this knowledge gets aggregated into prices, norms, and customs that then confront decision-makers as data is an unappreciated marvel.

“The Science,” in this light, is informative but not decisive. It can highlight particular aspects of some of the trade-offs people face, but it can’t tell people which trade-offs to accept and which trade-offs to avoid. Minimizing the risk to our health and safety is just one among many worthy goals that have to be traded off against one another. Importantly, scientific observers cannot have all the knowledge of what F.A. Hayek called “the particular circumstances of time and place” people need to make wise decisions consistent with their own values.

“But there are externalities, which means markets fail to generate the socially optimal outcome!” There absolutely are, and asking students if they got a flu shot and then talking about spillover benefits from vaccination is one of the standard ways I teach the concept. Then we go on to talk about cooperative and coercive solutions. An educational institution, for example, might require proof of vaccination before enrollment or give a discount to students who have been vaccinated. The NFL has a pretty extreme policy in place: players who break Covid protocols will be fined almost $15,000 per offense.

Freeing the markets for health and life insurance would help, too. Replacing political calculation with actuarial calculation would pull together the relevant information about risks and repackage it as higher or lower insurance premiums. If the vaccines are as dangerous as some people on Facebook think they are, we would see higher insurance premiums for the vaccinated. If the vaccine is pretty safe and pretty effective, we would see lower insurance premiums for the vaccinated.

We can expect the same thing in markets for schooling, food, and other goods. A restaurant might add “no mask” to its “no shirt, no shoes, no service” policy. Customers voting with their own money will tell them whether or not they approve of the policy, and whether or not they are making money or losing it will send them a pretty easy-to-interpret message. Insurance markets obviously wouldn’t get it right all the time, but I would expect them to do a lot better than internet conspiracy theorists (or pundits) who don’t have nearly as much skin in the game. Your imagination can run wild with scary “what-if” scenarios, but as Alex Tabarrok explained, “A Bet is a Tax on BS.” People think twice about acting on hysterical predictions when it’s costly.

As much as it flatters our conceit to think otherwise, we cannot plan other people’s lives or predict what will happen in fine-grained detail. This is a rhetorical handicap, especially given that people have very strong medical and political imaginations but very weak commercial imaginations. It’s easy to believe people won’t do “the right thing” unless they are forced to. It is a lot harder to accept that there isn’t a well-defined, discoverable “right thing” independent of the unarticulated social consensus reflected in norms, prices, and other practices. Just because you don’t know exactly how people will solve a problem doesn’t mean that they won’t, however. Elinor Ostrom’s work provides a lot of examples of how solutions to collective action problems bubble up from the bottom without having to be imposed from the top down.

At just about every step of the way, governments have suppressed prices and put limits on people’s ability to come up with creative ways to solve the problems the pandemic poses. The “failure” hasn’t been the failure of otherwise-unregulated market prices to fully reflect all the relevant costs and benefits of vaccination, serving restaurant meals, or what have you. It has been the government’s failure to not let market prices work at all and instead address the pandemic with command-and-control policies that have created shortages, thwarted innovation, and distributed vaccines based not on what will most internalize the spillover benefits of vaccination but based on political considerations about who should enjoy the private benefits of vaccination. The problem isn’t that the prices are telling the wrong story. It’s that the prices largely aren’t telling any story at all because they are being actively suppressed."

Concentration increases are positively correlated to productivity and real output growth, uncorrelated with price changes

By Sharat Ganapati. 

"Abstract

American industries have grown more concentrated over the last 40 years. In the absence of productivity innovation, this should lead to price hikes and output reductions, decreasing consumer welfare. With US census data from 1972 to 2012, I use price data to disentangle revenue from output. Industry-level estimates show that concentration increases are positively correlated to productivity and real output growth, uncorrelated with price changes and overall payroll, and negatively correlated with labor's revenue share. I rationalize these results in a simple model of competition. Productive industries (with growing oligopolists) expand real output and hold down prices, raising consumer welfare, while maintaining or reducing their workforces, lowering labor's share of output.

Citation

Ganapati, Sharat. 2021. "Growing Oligopolies, Prices, Output, and Productivity." American Economic Journal: Microeconomics, 13 (3): 309-27. DOI: 10.1257/mic.20190029"

We Just Got Proof That Uber Has Saved Thousands of Lives

The ride-sharing service is more than just convenient, a new study finds

By Brad Polumbo of FEE. Excerpts:

"new research illustrates that ride-sharing services like Uber are more than just convenient—they have literally saved thousands of lives. 

A study by two economists at the University of California, Berkeley examined the impact that Uber, specifically, has had on alcohol-related traffic deaths and total traffic deaths in the US. They sought to investigate a simple question. By providing people with a safe, convenient, and relatively inexpensive alternative means of transportation, would Uber reduce drunk driving and traffic deaths? 

According to their findings, the answer is a resounding yes.

Uber has reduced alcohol-related traffic fatalities by 6.1 percent, the study finds, which equates to roughly 214 lives in 2019. Similarly, Uber reduced overall traffic deaths by 4 percent, likely by reducing other forms of dangerous driving such as driving while very tired. This equates to 494 lives saved in 2019. (And that’s just Uber: To understand the full life-saving impact of ride-sharing technology, we would have to factor in competitors like Lyft, too). 

Extrapolating this data across multiple years, we’re left with the inescapable conclusion that Uber has saved thousands of American lives. This life-saving effect translates to $2.3 to $5.4 billion in economic benefits for consumers. 

However, there’s a bigger takeaway here than the simple fact that ride-sharing services are awesome. These heart-warming results are another reminder that the lawful pursuit of profit in a free market is not actually a bad thing, but rather, leads profit-seekers to help all of society.

Progressive politicians and left-leaning critics have routinely bashed Uber as a “greedy” and “exploitative” company, and otherwise campaigned for its regulation and restriction. It is, of course, true that the people who run Uber and other ride-sharing services want to make money. That’s why they went into business. But pursuing profit doesn’t mean a company is working against the public’s interest.  

The reality of Uber offers a stark contrast. It shows us how a company desiring large profits in a free market must meet a pressing societal need and uplift millions of others. Indeed, this new study finds that the life-sharing benefits Uber has achieved for society alone likely match the profits the company has received through its enterprise. 

And Uber is hardly an exception on this front. As economist Donald J. Boudreaux explained, studies show that “producers, on average, capture a mere 2.2 percent of the total benefits of their successful introduction into markets of technological advances. A whopping 97.8 percent of those benefits are enjoyed by [consumers].”"

More Evidence That Prescription Drug Monitoring Programs Might Increase Overdose Deaths

By Jeffrey A. Singer Cato.

"At a Cato Institute policy forum in October 2019, Columbia University public health researcher David Fink presented data showing that Prescription Drug Monitoring Programs (PDMPs), designed to surveil opioid prescribing by health care practitioners to their patients in pain, have no appreciable effect on the fatal or non‐​fatal opioid overdose rate, but may have the unintended consequence of increasing overdoses from heroin. I have cited his work, along with the work of others, that draw similar conclusions.

Now researchers at Indiana University are providing even more evidence that PDMPs, along with prescription limit laws and other interventions, “may have the unintended consequence of motivating those with opioid use disorders to access the illicit drug market, potentially increasing overdose mortality.”

Their research, published in JAMA on February 12, 2021, was a cross‐​sectional study that utilized overdose mortality data from the National Vital Statistics System, and claims data from 23 million commercially insured patients provided by the Optum Clinformatics Data Mart Database (a large de‐​identified database) for the years 2007 through 2018.

In the discussion of their findings, the authors made note of what they called the opioid paradox:

Recent trends in the US opioid epidemic present a paradox: opioid overdose mortality has continued to increase despite declines in opioid prescriptions since 2012. The opioid paradox may arise from the success—not failure—of state interventions to control opioid prescriptions… We found that supply‐​controlling policies were associated with a reduction in the amount of prescription opioid misuse and the number of overdose deaths attributable to natural opioids as well as an increase in the number of patients receiving MAT drugs. In tandem, the significant increase of overdose deaths from synthetic opioids [e.g., fentanyl], heroin, and cocaine after the enactment of PDMP access, pain clinic laws, and naloxone access laws suggests that current drug policies may have the unintended consequence of motivating opioid users to switch to illicit drugs.

This validates arguments I have made here and here.

Meanwhile, PDMPs and other measures aimed at reducing the number of opioids practitioners prescribe have had a devastating impact on patients.

Researchers at the University of Pittsburgh reported that drug overdoses from licit and illicit drugs have been increasing at an exponential rate since at least the late 1970s—well before the creation of OxyContin in 1996—with different drugs predominating among the overdoses at different times. They concluded, “The opioid crisis may be part of a larger, longer‐​term process” and speculated that “Sociological and psychological ‘pull’ forces may be operative to accelerate demand, such as despair, loss of purpose, and dissolution of communities.”

Regardless of how sociological and psychological “pull forces” might factor into increases in non‐​medical drug use, the driving force behind fatal and non‐​fatal overdoses is drug prohibition via the dangerous black market it spawned. Now there’s more evidence that PDMPs and other supply‐​side interventions make matters worse by driving more people to that underground market."

The Case against a $15 Federal Minimum Wage: Q&A

By Ryan Bourne of Cato. 

"1. President Biden and the Democrats in Congress have proposed gradually increasing the federal minimum wage to $15 per hour by 2025, with the stated intention to raise the pay of low wage workers. Sounds like great news for the low‐​paid, doesn’t it?

An old saying from economist Thomas Sowell is that “there are no solutions, only trade‐​offs.” That is as true about the minimum wage as anything else. The Congressional Budget Office summarizes the mainstream economic consensus on the effects of the Democrats’ proposed aggressive major minimum wage hike fairly well — and I don’t think the trade‐​off is worth it.

Yes, for those workers affected who are lucky enough to maintain their jobs, hours, and existing perks, an enforced minimum wage hike — through raising hourly wage rates — will increase their overall compensation. The CBO estimates that 0.9 million people will be taken out of poverty as a result. But a consequence of raising the mandatory wage floor that aggressively, the CBO predicts, will be that 1.4 million fewer workers will be in employment.

That’s because if you raise the wage rate that companies have to pay by government diktat, businesses will tend to only hire people whose productivity can command that rate, reducing job opportunities or hours available to young, inexperienced, or poorly educated workers.

But even in situations where companies do not cut employment directly in response, a minimum wage hike is not an “unalloyed good.” Unless we suspect that there are a ton of businesses out there currently forgoing free money from getting more productive workers by paying more, then the profit‐​seeking businesses affected will respond by adjusting to the higher wage in some way. This may come in the form of laying off workers, reducing their hours, curbing future hiring, trimming non‐​wage benefits, sweating workers harder, reducing scheduling flexibility, raising prices on customers, or even closing the business entirely.

All these reactions can evidently harm at least some of the low‐​wage workers that a federal minimum wage increase seeks to help. There is, quite simply, no free lunch with minimum wage hikes. What’s more, the first step on this path to a $15 federal minimum wage will occur at the worst possible time: during a global pandemic that has partially or fully shuttered prominent low‐​wage industries.

2. Are you sure all that is right? I thought that I’d read that the newest evidence suggested minimum wages didn’t cost jobs.

Liberal economists, such as Paul Krugman, often claim that “There’s just no evidence that raising the minimum wage costs jobs, at least when the starting point is as low as it is in modern America.” But that is not a fair reflection of the academic literature.

In a recent working paper, economists David Neumark and Peter Shirley assembled the entire set of papers that examine the impact of minimum wage hikes on employment outcomes at the subnational level in the U.S. since 1992. Their overview of the results was clear: the overwhelming majority of studies showed a negative effect on employment of minimum wage hikes (79.3 percent of them). That impact was stronger for teens, young adults, and less‐​educated workers.

It’s true that studies which assess the impact of the minimum wage on individual industries, usually restaurants or retail, have been less likely to find negative impacts. But this can reflect employers substituting low‐​skilled workers for higher‐​skilled workers, which still harms the employment prospects of the lowest‐​skilled. Neumark and Shirley summarize their findings by saying: “our evidence indicates that concluding that the body of research evidence fails to find disemployment effects [job or hour cuts] of minimum wages requires discarding or ignoring most of the evidence.”

Indeed, in a Cato Policy Analysis analyzing the overall body of recent research, economist Jeff Clemens concluded that the “new conventional wisdom misreads the totality of recent evidence for the negative effects of minimum wages. Several strands of research arrive regularly at the conclusion that high minimum wages reduce opportunities for disadvantaged individuals.”

He highlights how results on specific historical episodes show a negative effect of minimum wages on jobs. His own research with Michael Wither examining the impact of the federal minimum wage hike during the Great Recession found that states where the minimum wage hike “bound” saw employment among minimum wage workers decline more strongly, costing hundreds of thousands of low‐​wage jobs. In other words, in states where the state minimum wage was not already higher than the new federal level, there was significantly higher job loss from the wage hike.

Yes, a significant minority of studies, particularly those assessing the impact of modest minimum wage hikes in growing economies, find little overall impact on jobs. And it’s true a lot of results hinge on methodological choices, such as timeframes examined and how one defines the counterfactual — that is, what control groups are used to judge the impact of the policy. This and the fact that data is often incomplete, with researchers not having full access to data on worker hours, productivity, and benefits, means it is impossible to fully observe all the margins through which companies might adjust. So it is unsurprising to hear controversies and disagreements.

That’s what made a paper by economist John Horton so interesting. He analyzed an online labor market in which firms contract with workers for tasks including programming, data entry, and graphic design. In contrast with other papers, Horton identified an opportunity to deploy a randomized controlled trial to study the effects of minimum wage increases. As the designer of the study, he could impose differences in firms’ minimum wage requirements through random assignment.

His results were clear: firms make significant shifts in the workers they employ when they are required to pay higher wages. They move away from the least skilled workers and toward workers who demonstrate higher productivity on past jobs. High minimum wage rates thus reduce the employment opportunities of workers who are less productive.

So, yes, there is plenty of evidence that high minimum wage rates reduce employment for groups of low‐​wage workers. Though economists are perhaps less sure on the scale of these impacts on jobs than they were 20 years’ ago, a recent IGM Survey found that 50 percent still agreed with a statement that said “A federal minimum wage of $15 per hour would lower employment for low‐​wage workers in many states,” against just 16 percent who disagreed (34 percent were uncertain).

3. You mentioned that now might be a particularly bad time for raising the federal minimum wage. When low‐​wage workers are suffering through the pandemic, wouldn’t it be the perfect time to try to boost their incomes through raising wage rates?

Workers in industries hard‐​hit by COVID-19 are obviously suffering right now. That is why Congress has passed extensive relief packages, including emergency supplements to unemployment insurance, support to small businesses and specific industries, and sending checks to most households. But the underlying difficulties these industries are facing shows why now might be a particularly risky time for raising the federal minimum wage to $15 per hour, even if the initial jump in 2021 is only to $9.50 per hour.

COVID-19 reduces the demand for workers across sectors requiring in‐​person interaction. Firms require fewer worker hours to staff in‐​person services, because consumers are less willing to attend venues with an elevated risk of catching COVID-19, and because government mandates have forcibly closed or restricted certain venues. On top of this, due to explicit regulation or consumer demands for them, lots of venues such as restaurants are having to impose social distancing requirements too, including table spacing or more regular cleaning. Such requirements make the operations less efficient, reducing the productivity of these industries’ workers.

These factors would be expected to reduce underlying market wages (notwithstanding that the occupational risk of COVID-19 itself may also reduce the supply of workers willing to work in certain sectors). How far above the market wage minimum wage rates are set matters, however, in terms of the scale of the negative effects on jobs or hours. If market wages have fallen, then a minimum wage hike to $9.50 now is likely to result in a greater impact on employment than in a “normal” economy, manifested through greater job losses and fewer hours worked.

This is particularly likely because other ways businesses could potentially adjust to increased hourly wage floors are less relevant right now: businesses in most affected sectors do not have profit margins to eat into, they can’t easily raise prices given consumers are arguably more sensitive to price changes, and the absence of customers makes it difficult to think of obvious ways of making their workers more productive.

A Bureau of Labor Statistics analysis from April 2020 confirmed that occupations with lower wages are more common in the worst affected sectors of the economy from COVID-19, including restaurants and bars, travel and transportation, entertainment, and personal services. Three‐​fifths of workers who earn at or below the federal minimum wage, for example — those likely to be directly affected — are employed in the leisure and hospitality industry, almost entirely in restaurants and food services. So, the workers where an aggressive increase in the minimum wage to $15 per hour in the coming years will bite hardest are employed by those businesses suffering most from the pandemic.

There’s another reason why a recovery from a recession may be a particularly bad time to hike the federal minimum wage. As noted, economists Jeffrey Clemens and Michael Wither estimated that states experiencing the largest rise in the wage floor lost several hundred thousand more low‐​wage jobs than they otherwise would have when the minimum wage was hiked after the financial crisis. One reason for this is likely to be “dynamic adjustment.” During economic expansions, fewer firms are dying and the focus is on ramping up production to meet high demand rather than cost‐​cutting. But when we experience a large shock, this often generates an unusually pronounced/​sharp cycle of firm death and birth. Businesses with old production technologies will disappear and be replaced by the new, capital/​technology intensive firms. A minimum wage hike increases the risk of exit for these older firms which are heavily labor dependent, because it is a policy that raises hourly labor costs.

4. A lot of places have increased local and state minimum wages already. What can we learn from their experiences?

Yes, 29 states have higher minimum wage rates than the federal minimum, and a host of (mainly higher productivity) cities and localities have much higher statutory wage floors still. New York City, for example, has a $15 minimum wage, and the minimum wage is $16.69 in Seattle, Washington. Economist Ernie Tedeschi estimated back in 2019 that, as a result of recent aggressive increases and the weight of the population living under different wage floors, the average effective minimum wage across the whole United States was already $11.80 per hour back then.

Studies attempt to exploit this variation between states to isolate the impact of minimum wages on jobs or hours. Evidence on the effects of these increases have been mixed. Those areas that have seen small increases in minimum wages from low levels do not appear to have seen large, direct employment impacts, especially when implemented in a strong economy. But it is important to remember that a $15 federal minimum wage will be extremely high relative to median hourly wage rates in some lower productivity parts of the country. That means the evidence that gives us the best indication on what to expect comes from places that have raised wage floors to very high levels.

In 2014, Seattle city leaders voted to increase its minimum wage to $15 per hour by 2022 in steps. Researchers at the University of Washington have used the state’s unemployment insurance database to assess the impact of the first two rate increases on jobs, hours and earnings, comparing outcomes to what would have happened via tracking a weighted‐​average of other Washington regions with similar employment trends prior to the ordinance.

Their results were striking. The increase from $9.47 to $11 in 2015 resulted in no significant change in labor market outcomes. But the increase to $13 reduced overall hours worked by 6.9 percent. Employers both cut back on the number of low‐​wage employees and the hours they worked relative to the control region.

So big were the measured effects on jobs and hours that, even though the minimum wage hike raised wage rates significantly, low‐​wage workers as a cohort were worse off. Subsequent work by the Seattle team found evidence that employment fell only a little, if at all, for workers with prior experience in low‐​wage jobs, however. This suggests that employment declined primarily because of reductions in hiring rather than increases in firing — a finding that echoes economists Jonathan Meer and Jeremy West’s work on the longer‐​term consequences of minimum wage increases.

The original Seattle study also showed why other types of research may underestimate the impact of minimum wage hikes on jobs. A rival paper found no negative effects of the minimum wage hikes in Seattle when examining food service employment, for example. The University of Washington study replicated this finding by examining restaurant employment alone. But they found large negative effects on employment when focusing exclusively on low‐​wage restaurant employment (those earning less than $19 per hour). This suggests Seattle’s minimum wage increase shifted employment from lower‐​wage to higher‐​wage restaurant workers. The results for restaurants in both studies suggest that examining the restaurant sector alone as a guide to impact of minimum wages, as many studies do, can hide bigger economy‐​wide negative impacts on employment levels across all sectors.

In interpreting all this evidence to think about the Democrats’ proposal, we have to bear two things in mind. First, economists believe the level of the minimum wage still matters, and that the larger the “bite” of minimum wage (its level against median earnings), the more deleterious the impact on employment prospects is likely to be. Second, that notwithstanding, a very high minimum wage can still have big relative consequences on lower productivity workers within a state, even if the aggregate impact in some places appears small.

To put it another way: a $15 federal minimum wage would likely have a much bigger impact on Mississippi, where a $15 wage rate is currently around 100 percent of median hourly wages, than New York, where it is 66.8 percent. Even within Mississippi, it’s likely to have bigger impacts on job prospects in certain industries.

A crude, blanket high minimum wage across the whole country is therefore incredibly risky. As economist Tyler Cowen has written, even if you think the trade‐​offs of having a relatively high wage floor are worth it, economics would suggest setting them at the local level, given this huge divergence in productivity levels across the country.

5. OK, but a lot of economists seem convinced that minimum wage hikes will not have the sorts of negative effects you outline, even with a $15 federal minimum wage. How do they explain this?

There are two broad reasons why some economists support aggressive federal minimum wage hikes. The first is a standard “market failure” argument — the idea that lots of low wage labor markets are characterized by businesses having power over workers that can depress wages, which a skillfully set minimum wage can help correct. In this view, minimum wage hikes might enhance economic efficiency. The second is that minimum wage hikes represent a good distributional social policy. That is, they have desirable social consequences, such as in reducing poverty, that outweigh any impact on employment or worker’s experiences that worsen inefficiency.

Let’s take the efficiency‐​monopsony argument here, because this is extremely fashionable. Proponents of minimum wage hikes highlight that some minimum wage studies show few job losses from minimum wage hikes and therefore need a theory to explain this result. One theoretical explanation is that many low‐​wage labor markets are characterized by a degree of monopsony power — a situation where one employer has significant market power to determine wages for the sector. In this scenario, we might not see significant job losses even if a higher minimum wage rate is implemented.

In a monopsony model, employers have the power to set overall hourly compensation rates below market rates and they tend to employ fewer people than they would in a competitive labor market as a result. That’s because the businesses’ labor market power enables it to pay lower wages when it hires fewer workers, such that the benefit from lower labor costs outweighs the cost of foregone output and rev​enues​.In theory then, if such a market exists, a minimum wage that is carefully set so that the wage rate is closer to what we would see in a competitive market can bring the double‐​dividend of higher hourly wages and more employment.

But is such a theory a credible justification for believing a $15 federal minimum wage wouldn’t have significant negative consequences for the U.S.? It seems unlikely.

First, low‐​wage occupations are often in highly competitive product markets. Previous Bureau of Labor Statistics research has identified “food service; housekeeping; low‐​level healthcare positions, such as nursing assistants; and low‐​level retail positions, such as cashiers” as the most prominent low‐​wage industries. Few would argue businesses in these industries have enduring market power in the markets for their products or services. Yet if they do not, then any monopsony power they have in labor markets would be competed away through lower output prices, meaning the monopsonist would not be making significant profits from this labor market power. A minimum wage hike in this scenario would therefore risk causing some businesses to become unprofitable even with monopsony power, causing offsetting job losses through business failures.

Second, very few studies find that minimum wage hikes increase employment, which is what we should expect to see if a monopsonists’ wage rate was being corrected by skillfully set minimum wage policies. David Neumark and Peter Shirley’s literature review on the state‐​level impacts of U.S. minimum wage hikes has found that just 5.8 percent of studies actually found positive effects of minimum wage hikes on employment. Indeed, academic economists don’t seem to buy the widespread monopsony argument: they overwhelmingly reject the idea that a $15 minimum wage would increase economic output significantly.

Third, all this suggests that, rather than being a free lunch, companies adjust to the minimum wage hike in other ways. The monopsony model, remember, says that companies have the power to keep overall compensation rates below competitive levels. But the minimum wage only affects hourly wage rates. Firms might adjust employee benefits or other aspects of the workers’ overall compensation package to compensate for the higher wage rate. In a review of recent research for the Journal of Economic Perspectives, Jeffrey Clemens discusses a substantial body of evidence on this and other margins along which firms can adjust (more on that later). In markets with monopsony power that are in non‐​competitive markets, theory predicts that businesses will tend to pass on the higher compensation costs to customers in the form of higher prices. This is indeed what Peter Harasztosi and Attila Lindner found when they examined the impact of a large increase in the minimum wage in Hungary.

Finally, and perhaps most importantly, even if monopsony power did exist in certain markets, it would differ in degree by location and industry. The level at which the minimum wage was set would therefore matter a great deal, lending itself to favoring policy at the very local level. It would be incredibly convenient if a $15 federal minimum wage could perfectly correct for the monopsony power of businesses in all sectors and locations. A crude application of a $15 minimum wage across all states and regions would instead likely raise the level of the minimum wage beyond the level associated with competitive markets in many areas and industries. Again, this would lead to the usual reduction in worker demand in lots of places.

6. Wow, that all seems very theoretical. If monopsony can’t explain why some companies do not reduce hours or jobs in the face of a minimum wage hike, then what does?

Well, in reality, every company affected by a minimum wage hike will react to it differently depending on their specific situation. But in the absence of some costless productivity free lunch, businesses will have to find some other “channel of adjustment” if they don’t cut jobs or hours, many of which might still be damaging for workers.

What might these entail? One possibility, as mentioned, is that some companies will pass some or all of the cost of the higher wage onto consumers in the form of higher prices. Previous research from Jonathan Wadsworth in the UK has found that prices of “take‐​away foods, canteen meals, hotel services and domestic services” increased significantly more quickly in the four years after the country’s minimum wage increase than prices in non‐​minimum wage sectors. A recent study by two Princeton economists examining how McDonald’s reacted to minimum wage hikes found evidence “consistent with near‐​full price pass through of minimum wages in McDonald’s restaurants.” This chimes with research by Sylvia Allegretto and Michael Reich on a wage hike in San Jose, California, which estimated that almost all of the cost of a minimum wage hike there was passed on by restaurants to consumers.

Not every business or industry will react this way, of course. University of Washington research into the impact of the Seattle minimum wage hikes found no such uplift in food prices from supermarkets and that child‐​care centers adjusted both demand for labor and fees. But when assessing the net impact of a minimum wage increase, one must also consider that consumers might face higher prices, and that poorer consumers will be impacted by price increases disproportionately in some sectors. Jacking up the price of takeaway food, hospitality services, and others clearly means that a minimum wage increase is not an unalloyed good for low‐​income households.

We know that poorer households, for example, spend a far larger proportion of their budgets on food. And we also know that many of those who do benefit from the federal minimum wage hike will not be poor: those earning the federal minimum wage are much more likely to be under‐​25 and part‐​time workers than the rest of the working labor force, for example. So, considering who bears the higher prices and who benefits from the wage increase, minimum wage hikes are likely to be less progressive than we might expect.

Some companies may decide, of course, that, at least in the very short‐​term, it is best to try to tough it out by bearing the higher labor costs on their bottom line. But that’s not economically costless at the societal level either. Weaker profits will increase the likelihood of firm deaths, risking jobs if companies die. A study of Yelp data, for example, found that minimum wage increases in San Francisco predict increases in exit among restaurants that are lower rated. What’s more, lower profit rates in certain sectors will discourage business start‐​ups and entry into them, reducing future job opportunities, or else consumer welfare. Again, there is no free lunch.

Given businesses are not charities, it is more likely that businesses will adjust in other ways, such that the pay uplift for workers is offset by other changes to their compensation or work conditions. Non‐​wage aspects of jobs, as Clemens outlines, such as the convenience of schedules, security of work hours, health insurance quality, retirement benefits, payments‐​in‐​kind, and workplace conditions, are important determinants of how much workers value jobs. There are theoretically a whole host of margins that businesses could toy with to recoup some of the increased labor costs.

The economic literature on these adjustments is less advanced. But some initial studies highlight its potential importance. Analyses of more recent minimum wage changes tend to find negative effects of minimum wage hikes in terms of the generosity of employer‐​funded health insurance, for example. Evidence from the UK suggests successive minimum wage hikes have seen companies in labor‐​intensive industries putting affected workers onto contracts that do not guarantee hours so that companies can better control their labor costs. There have been examples around the world of fast‐​food outlets stripping staff of free food benefits after major minimum wage hikes too, one of a number of other ways businesses might change non‐​cash compensation.

Now, quite often minimum wage proponents respond to these potential trade‐​offs by claiming that firms can adjust to minimum wage hikes by “raising productivity.” But unless the change in the law suddenly made companies realize that they were leaving free money lying around beforehand, then “raising productivity” is not costless.

Boosting productivity might require replacing inexperienced low‐​skilled employees with more experienced, higher productivity employees, or else making longer‐​term investments in labor‐​saving machines. This comes with search, turnover and investment costs in the short‐​term and reduces opportunities for low‐​skilled workers in the longer‐​term.

We know this can have a scarring effect on young workers, who lose entry‐​level job opportunities that provide basic skills and habits, including punctuality, and dealing with customers and colleagues. David Neumark and Olena Nizalova found that, even in their late 20s, workers who had been exposed to high minimum wages when they were younger worked less and earned less. This effect was especially strong for black Americans.

“Improving productivity” might instead entail putting pressure on workers to produce more during their contracted hours. This impact was noted as early as 1915, when workers’ experience following a minimum wage increase was described as “…constant pressure from their supervisors to work harder; they are told the sales of their departments must increase to make up for the extra amount the firm must pay in wages.”

More recently, a Financial Times article on the impact of the rising minimum wage in the UK found that fruit picking had intensified a lot since the minimum was introduced there. It said “the harvest [used to be] brought in by students, Welsh miners after the strike and ‘local ladies from Ledbury’ who wanted summer cash…‘the slow ones could just be slow and nobody minded.’” Now, there’s training and pressure, with people being told “’…through the day, you’ve got to get faster, you’ve got to hit the target of however many units it is….it’s a mental and physical discipline.’”

This is important. Minimum wage proponents often talk about the promise of high productivity as if it is a win‐​win for workers and businesses. By raising the minimum wage rate, it is claimed, firms will benefit from reduced staff turnover, with happier and more productive employees. But if this were a net benefit to the firm, wouldn’t they be raising wage rates already?

That some firms do raise wage rates voluntarily, and observe benefits, does not mean you can generalize that effect to the whole economy. Nor, indeed, is it clear why it is assumed that reducing turnover at an economy‐​wide level would be good for overall productivity. The higher wage for low‐​skilled workers might reduce the incentive, on the margin, to leave the company, seek promotion, or invest in human capital, especially if one consequence is a reduction in the gap between low‐​wage earners and those higher up the income scale. This could actually reduce economy‐​wide measured productivity over time.

Recently, people have added a new argument: talking up the minimum wage as a macroeconomic tool. $15 minimum wage proponents sometimes claim that low‐​paid workers’ higher propensity to spend additional earnings means minimum wage hikes boost demand and raise the level of GDP, boosting economic output through a consumption effect. But this ignores contractionary impacts from lower profits reducing investment, higher prices reducing other spending or reduced employment opportunities cutting some people’s incomes. Standard economic theories suggest that, overall, tightening the impact of a price floor like this is likely to reduce overall output. An overwhelming majority of economists (69% to 4%) disagree with the idea that a $15 minimum wage would substantially boost output.

7. OK, you’ve mentioned the importance of the link between productivity and the wage rate a few times. But didn’t I read that while productivity has continued rising over the past five decades, the minimum wage has failed to keep up? Isn’t there a case for increasing the minimum wage to make up for this lost ground?

Economy‐​wide labor productivity has undoubtedly risen faster than federal minimum wage rates over the last fifty years. But it’s a huge leap to suggest this shows employers are somehow exploiting workers and paying them below what their productivity commands.

The mistake here is to consider productivity gains among all workers as if these reflect what should have happened to hourly wage rates for minimum wage workers alone. After all, different industries experience different productivity growth rates over time.

Sadly, a productivity growth series solely for minimum wage workers is not available. But just look at the long‐​term data for the food services industry. The Bureau of Labor Statistics data series from 1987 to 2017 shows that labor productivity in the food service sector rose by an average of just 0.4 percent per year (with unit labor costs increasing by 3.2 percent per year) over those three decades.

If the minimum wage had been pegged to this productivity measure, it would have increased by 13 percent in real terms — from $7.16 in 1987 (2017 dollars) to $8.06 in 2017. The actual 2017 federal minimum was, of course, $7.25 in 2017 and state minimums in much of the country were much higher than $8.06. Using this productivity series and start date then, many state minimum wages, and almost certainly a $15 federal minimum wage by 2025, would be far higher than justified by food service productivity improvements since 1987.

This does not prove, of course, that all workers are paid at their productivity levels, nor does it tell us what the “right” level of the minimum wage should be in each market. But it does show the danger of making spurious comparisons between economy‐​wide productivity and minimum wage rates. Pegging minimum wage rates to aggregate productivity trends might lead us to deliver much higher wage floors than justified by the productivity of workers in certain sectors, causing significant job losses or the other downsides to workers that we’ve already outlined.

8. So let’s say you are right that the $15 federal minimum wage is not great economics in terms of efficiency. You said a lot of economists favor minimum wage hikes on the grounds of social policy. No firm should pay wages that leave people in poverty, should they?

Well, President Biden’s goal that nobody working full time should live in poverty is a laudable ambition. But even though, as the CBO suggests, we’d probably expect a big minimum wage hike to reduce poverty somewhat, it’s a more of a blunt instrument than you’d imagine.

First of all, one consequence of federal minimum wage hikes can be job or hours loss for low‐​wage workers, as we’ve seen, which can create poverty. Second, a lot of people who earn the federal minimum wage or just above it are not poor, or will not be poor in the longer term (think of working students, or second‐​earners in relatively affluent households working part‐​time).

Meanwhile a lot of the price increases resulting from pass‐​through of the minimum wage costs will be on products that the poor buy disproportionately or which might affect them most harshly — imagine what a big rise in child‐​care costs would have on poorer parents’ labor market opportunities, for example.

A full picture on the distributional aspects of the minimum wage would need to take this all into account rather than just looking at the impact on earnings for those who maintain their jobs or hours. This is a classic case of there being a clear “seen” (the minimum wage increase) that we’d expect might reduce poverty, but with a significant “unseen” (the adjustments to hours, worker benefits, price, and more) that could increase poverty.

As has been alluded to already, who bears the cost of an increase in the federal minimum wage will be affected by a vast range of business and region‐​specific factors. But, in principle, putting the full costs of meeting any societal anti‐​poverty ambition onto the shoulders of some combination of the employers of the low‐​wage workers, those who consume their products, or other low‐​paid workers seems misguided. Especially because there are other anti‐​poverty policies — not least undoing the damage of regressive government regulations — that could reduce poverty without some of these negative effects.

To circle back to Biden’s anti‐​poverty mantra, a lot of Democrats talk about the federal minimum wage as if policymakers or employers have a duty to set a wage floor such that each and every worker, often in very different circumstances, can live comfortably. But companies pay workers for the job they do, not some arbitrary figure based on how many children someone has, their housing costs, food bills, and more.

Every family’s situation is different and what matters in covering their living expenses are households’ overall incomes, not just hourly pay rates. A government that was serious about an anti‐​poverty agenda then would focus on improving productivity growth to raise wages, eliminate regulations that inflate the cost‐​of‐​living, and then have government support families who really fall through the gaps, but explicitly raising the funds through taxation and then targeting those in need."