Matthew Yglesias is surprised that most economists favor raising the minimum wage:
Matthew Yglesias: What do economists think about the minimum wage?: “A survey of economists by the Initiative on Global Markets…
…at the University of Chicago’s Booth School of Business found they supported a minimum-wage increase. They weren’t sure, however, whether increases would create unemployment. Most said that, on balance, the benefits exceeded the costs…
But why should he be surprised?
Most economists are card-carrying utilitarians who believe in the declining marginal utility of wealth. Thus pro-poor redistribution is a good thing until the bucket gets sufficiently leaky. And the overwhelming evidence is that at current relative levels of the minimum wage the bucket is not very leaky, and might not even be leaky at all.
So where is the source of his surprise?
One possibility is that Matthew has spent too much time listening to bad right-wing economists who are even worse philosophers–people who say things like: “We are economists, We talk only about efficiency, and so we talk about what maximizes real income per capita. If you want to introduce some other consideration and maximize something other than real income per capita, well then you are introducing interpersonal value comparisons into the problem and you should consult the philosopher or theologian. But we should agree at the start that it is maximizing real income per capita that is the efficient outcome.”
The problem with this, of course, is that maximizing real income per capita does take a stand, and a very fictional your stand, on interpersonal value comparisons. To maximize real income per capita is to assert that each dollar at the margin–no matter how rich is the person that goes to–has the same effect on marginal utility, has the same effect on the greatest good of the greatest number. If we were, instead of maximizing real income per capita, to go about maximizing the geometric mean of real income we would be taking another stand: that utility was logarithmic in real income, so that each doubling of real income had the same effect on the greatest good of the greatest number no matter who that doubling went to or how rich they already were.
Both maximizing real income per capita and maximizing the geometric mean of real income are wrong, are not what we really want to do. We have feelings of desert that enter into the question. Our intuitions about how marginal utility declines with wealth are fuzzy and surely do not follow the same logarithmic curve everywhere. And we do allow for what philosophers parody as “utility monsters”–that some people would enjoy or derive more benefit than others from at least some thing.
But if one wants a neutral place to start, it is surely less obnoxious to start from maximizing the geometric mean of real income than from maximizing real income per capita. And once one starts from there you need a very large disemployment effect–one that we simply see strong evidence against at the current level of the minimum wage–for an increase in the minimum wage to flunk any sensible benefit-cost calculation.