Tuesday, January 12, 2016

Makes sense...

How about government-mandated ‘living temperature laws’? Sound absurd? Well, so are minimum (‘living’) wage laws

Mark J. Perry

In an excellent post at the Cafe Hayek blog, Don Boudreaux makes a cogent and convincing case that government-mandated price controls like minimum wage laws are damaging to the economy and society because they: a) misrepresent reality and spread false information (i.e. “lies”) about economic conditions, b) are a form of government censorship and the economic equivalent of fraudulent reporting, and c) inflict economic damage on society that make us all less prosperous. Here’s a slightly shortened version of Don’s argument (my emphasis):

Price controls – any government-imposed price controls, be they price ceilings (such as prohibitions on so-called “price gouging” in the aftermaths of natural disasters) or price floors (such as minimum wages) – blind us to the full range of reality that we would see and respond to absent such controls. Price controls distort and restrict our vision. They misrepresent reality. They spread lies about the relative values that buyers attach to different goods and services and about the relative sacrifices that suppliers must make to exchange different goods and services with buyers.

Price controls are a form of government censorship of people’s ability to communicate to each other information about economic reality. Price controls are the economic equivalent of fraudulent reporting – the economic equivalent of arrogant, idiotic, and brutish government officials ordering newspapers and magazines and websites to report that X occurred when in fact X did not occur, and also of such government officials threatening to cage or kill journalists who report truthfully that Y occurred.

People who support government-imposed price controls believe that society is made more prosperous, harmonious, or fair by institutionalized deceptions.

Don’s discussion of the adverse effects of government price controls (i.e. “government lies”) reminded me of a similar argument that I’ve made several times before on CD pointing out the damaging defects of government price controls by comparing them to government temperature controls. Here’s an updated version of my government temperature control analysis that last appeared on CD in October 2013. I make reference to pending Congressional legislation (H.R. 1010) that would increase the federal minimum wage to $10.10 per hour from its current $7.25 (“The Fair Minimum Wage Act”).

Q: Couldn’t the government intervene in the market for temperature-reading equipment to counteract “excessively low” winter temperatures or “excessively high” summer temperatures, just like federal, state and city governments intervene in the labor market for unskilled and limited-experience workers to counteract “excessively low” wages for those workers (or intervene to outlaw “excessively high” prices following natural disasters)? Let me explain.

In Defense of the Minimum Wage Law:

Unskilled and limited-experience workers are at the mercy of greedy, cold-hearted, ruthless, profit-seeking employers, and minimum wage workers getting paid just $7.25 an hour do not even earn enough to pay the bills, much less aspire to the American Dream. Without some kind of government intervention in the unskilled labor market, employers will ruthlessly exploit unskilled workers, and pay them unacceptably low wages that undermine our economy.

To counteract this injustice in the labor market for unskilled workers, our collective sense of fairness and justice demands legislation that will force employers to pay a minimum wage of $10.10 per hour following the passage of the Fair Minimum Wage Act (or to $15 an hour if the “Fight for 15” movement and its advocates like Bernie Sander and the NY Times editorial board are successful). Wages below that minimum are unconscionably low and are actually “immoral” according to one of bill’s original co-sponsors, and will be outlawed by the federal minimum wage legislation, with violations subject to penalties, fines and possible jail time for any employer paying hourly wages below the government-mandated minimum wage of $10.10.

In Defense of the Minimum Temperature Law (or Living Temperature Laws):

Even though this winter is relatively mild so far in the US, the thousands of cold weather-related deaths that take place annually in the UK, the US and elsewhere firmly establish that we are at the mercy of a very cruel, ruthless, merciless, cold-hearted, and uncaring force: Mother Nature.

Something must be done about this unacceptable situation. Without some kind of government intervention in the market for low temperature readings being registered on existing thermometers and thermostats, Mother Nature will continually and ruthlessly expose the elderly in the UK, America and other cold climate countries to harsh winter conditions of unconscionably low temperatures. Who among us wouldn’t agree that these excessively low winter temperatures are unfair, unreasonable, unjust and even immoral?

To counteract this inherent cold weather injustice and Mother Nature’s ongoing lack of concern for cold Brits and Americans, our collective sense of fairness and justice requires legislation that will force all thermostats and thermometers sold in the United Kingdom and the United States to have a minimum, reasonable and fair temperature reading of let’s say 0 degrees Fahrenheit. As part of a newly proposed “Fair Minimum Wage Temperature Act of 2016” for the US, all existing thermometers and thermostats in homes, offices, and businesses should be immediately replaced with new temperature-reading equipment with a minimum reading of 0 degrees Fahrenheit.

Any temperatures below that minimum (e.g. -10 degrees F. or -20 degrees F.) are considered to be unfair, immoral and unconscionably low, and will be illegal and outlawed by the Fair Minimum Temperature Act of 2016, with violations subject to penalties, fines and possible jail time for thermostat manufacturers continuing to sell thermostats with temperature readings below the government-mandated minimum temperature. Further, all news and weather reports, all TV and radio stations, and all newspapers and websites are immediately prohibited from quoting any temperatures below the federally mandated minimum of 0 degrees F.

If successful this winter, subsequent legislation for a “Fair Maximum Temperature Act of 2016” should be considered for summer months, e.g. a maximum allowable temperature reading of 85 degrees Fahrenheit on all thermostats to control Mother Nature’s unfair “temperature gouging” and “temperature scalping” during the hot summer months, frequently leading to weather-related deaths. Let’s all rally around “Living Temperature Laws” to promote more comfortable living in America.

Bottom Line: If the proposed Minimum/Maximum Temperature Laws seem ridiculous, that’s because they are totally ridiculous. And so is the Minimum Wage Law.Unfair Government Mandate Preventing Thousands of Unskilled Workers from Finding a Job. Forcing employers to pay an unskilled worker $10.10 per hour (or $12 as proposed by Hillary Clinton and $15 an hour as is currently being proposed by Bernie Sanders and the NY Times, among others) won’t change the reality that many of those workers are actually only worth $7 or $8 per hour in the labor market. The artificially high minimum wage causes distortions and inefficiencies in the unskilled labor market because the minimum wage does not accurately and truthfully reflect many workers’ true productivity, and it’s like creating a government-mandated fantasy world (or government censorship and lies, according to Don above). A disconnect is created between the true measure (e.g. $7 per hour) and an artificial, government-mandated measure ($10.10, $12 or $15 an hour), of a worker’s value or productivity.

Likewise, imposing minimum and maximum temperature laws (“living temperature laws”) would create a government-mandated fantasy world about weather conditions, with a disconnect between the true temperature (e.g. -20 degrees or 100 degrees F) and an artificial government-mandated minimum or maximum temperature (0 degrees or 85 degrees F). And just like the minimum wage law creates distortions and havoc in the labor market, so would the minimum temperature law create havoc for Americans, because thermostats would be conveying inaccurate measures of the true temperature when it is extremely cold or hot.

When it comes to the weather, what we want is the most precise measure possible of the temperature, and we get those readings from accurate thermostats and thermometers, not from artificial, fantasy readings from instruments regulated by government-mandated minimum or maximum (“living”) temperature laws. When it comes to maximizing the efficiency of the labor market, what we want are accurate, truthful and precise measures of worker productivity, and we get those from market wages, not from artificial, government-mandated minimum (“living”) wage laws.

Economic Conclusion: There are really only ever two choices: a) market-determined prices and wages that reflect accurate, up-to-date, honest, and truthful information about conditions of supply and demand (think of frequent changes in the market price for a barrel of oil as one example), or b) government-mandated prices and wages that reflect dishonest, deceptive, untruthful, fraudulent, inaccurate, false and distorted information about market conditions (e.g. a worker whose productive labor value is worth only $5 an hour to an employer who now cannot be paid less than $10.50 or $15 an hour). Likewise, there are only two choices: a) accurately determined temperature readings from reliable temperature-measuring instruments, or b) inaccurate, deceptive and fraudulent temperature readings from temperature-reading instruments that have been limited and distorted by government fiat.

Q: For those who agree that government-mandated temperature control laws would be a total disaster, how then is it possible for you to support government-mandated price and wage controls?


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