Archives: 06/2017

Minimum Wage: The Plural of Anecdote…

…is data, as the late UC-Berkeley political scientist Ray Wolfinger once said.

David Boaz used Wolfinger’s quote when emailing me this short note from the Economic Policy Journal’s website about the apparent harmful effects on employment of Washington state’s recent minimum wage increase. A snippet:

As we were seated, I couldn’t help but notice that there were no busboys in sight—waitresses and the manager were busy clearing and cleaning tables. There were no young people in sight either, only employees in their late-20s and up.

I waited for the manager to man the checkout register and couldn’t pass up a brief economic discussion. I commented that I’m from out of state (Idaho, where the minimum wage is the federally mandated $7.25/hr) and couldn’t help but notice the impact that Washington’s minimum wage ($11/hr) was having on his restaurant.

Well-intended proponents of higher minimum wages will likely dismiss this note using the far-more-common but very wrong misquotation that “the plural of anecdote isn’t data.” More sophisticated proponents will go further and cite David Card and Alan Kreuger’s 1994 American Economic Review paper on the apparent beneficial effects on employment of a minimum wage increase on fast-food restaurant employment in the Philadelphia metropolitan area in the early 1990s.

Thing is, there has been an awful lot more empirical research on the effects of minimum wage increases than this one paper by Card and Kreuger. The overwhelming balance of that research has found harmful employment effects, falling mainly on an especially disadvantaged population: young black males. In a review of this academic literature, economists David Neumark and William Wascher find:

Nearly two-thirds [of the 102 analyses they reviewed] give a relatively consistent (although by no means always statistically significant) indication of negative employment effects of minimum wages while only eight give a relatively consistent indication of positive employment effects. … [Further, of the 33 analyses we] view as providing the most credible evidence; 28 (85 percent) of these point to negative employment effects. Moreover, when researchers focus on the least-skilled groups most likely to be adversely affected by minimum wages, the evidence for disemployment effects seems especially strong. … We view the literature—when read broadly and critically—as largely solidifying the conventional view that minimum wages reduce employment among low-skilled workers.

The plural of anecdote, indeed.

For more on minimum wage research, see this Cato Policy Analysis by former U.S. deputy assistant labor secretary Mark Wilson. Or this brilliant little Cato Handbook on Policy chapter.

In Education, Democracy Is the Threat

When people hear “democracy,” they tend to get warm, fuzzy feelings. As the Century Foundation’s Richard Kahlenberg writes in an article that, among other things, portrays private school choice as a threat to democracy, “public education…was also meant to instill a love of liberal democracy: a respect for the separation of powers, for a free press and free religious exercise, and for the rights of political minorities.” The fundamental, ironic problem is that both democracy and democratically controlled public schooling are inherently at odds with the individual rights, and even separation of powers, that Kahlenberg says democracy and public schools are supposed to protect.

Let’s be clear what “democracy” means: the people collectively, rather than a single ruler or small group of rulers, make decisions for the group. We typically think of this as being done by voting, with the majority getting its way.

Certainly, it is preferable for all people to have a say in decisions that will be imposed on them than to have a dictator impose things unilaterally. But there is nothing about letting all people have a vote on imposition that protects freedom. Indeed, in a pure democracy, as long as the majority decides something, no individual rights are protected at all. The will of the majority is all that matters.

We’ve seen basic rights and equality under the law perpetually and unavoidably violated by democratically controlled public schooling. It cannot be otherwise: At its core, a single system of government schools—be it a district, state, or federal system—can never serve all, diverse people equally. It must make decisions about whose values, histories, and culture will and will not be taught, as well as what students can wear, what they can say, and what they can do, in order to function.

Public schooling since the days of Horace Mann has found it impossible to uphold religious freedom and equality. Mann himself was constantly assailed by people who felt that by trying to make public schools essentially lowest-common-denominator Protestant institutions, he was throwing out religion or making the schools de facto Unitarian (his denomination). Mann, in response, promised that the Protestant Bible would always be used in public schools. Indeed, Protestantism was often thought essential to being a good American, including supportive of democracy, which meant that if the public schools were to serve their civic purpose they could not treat religious minorities equally, especially Roman Catholics, who were suspected of taking their political orders from the Pope in Rome.

Today, after more than a century of even deadly conflict over religion, the public schools are no longer de facto Protestant, but instead may legally have no connection that could appear to be advancing religion, right down, often, to speeches by individual students at events such as graduation ceremonies or athletic contests. This inherently renders religious people second-class citizens—any values are fair game in public schools except for theirs—while also curbing basic expression rights.

Of course, the inherent inequality of public schooling is not restricted to religion. In a public school a teacher, committee, school board, or other government actor must decide what aspects of history will be taught or literature read. This requires that government elevate some peoples’ speech and perspectives, while deeming others’ essentially unworthy. As a result, we have perpetual battles that tear at the social fabric over which books—The Bluest Eye, The Adventures of Huckleberry Finn, The Absolutely True Diary of a Part-Time Indian—should or should not be read in class or over whose history should be taught, and the losers are rendered unequal under the law.

On State Court Jurisdiction, SCOTUS Holds the Line

While it’s apt to get lost in news coverage of this morning’s bigger rulings, a moment should be set aside to applaud today’s solid 8-1 Supreme Court decision in Bristol-Myers Squibb, together with the related 8-0 outcome from May 30 in the case of BNSF v. Tyrrell. Both cases arose from state courts’ attempts to grab jurisdiction over out-of-state corporations for purposes of hearing lawsuits arising from out-of-state conduct affecting out-of-state complainants. And in both instances—with only Justice Sonia Sotomayor still balking—the Justices made clear that some states’ wish to act as nationwide regulators does not allow them to stretch the constitutional limits on their jurisdiction that far. 

For background on the cases, see our April post. We wondered then whether the consensus of Justices displayed in the benchmark 2014 Daimler case would endure rather than be splintered, and the answer was yes, it did and has. Justice Sotomayor, sticking to a once popular position, is still convinced that if states want to do a certain amount of long-arm collaring of cases involving interstate businesses that arose elsewhere and might fit conveniently into their docket, well, that’s fair enough for government work. That led her to file a lone separate partial concurrence in BNSF, as against a majority opinion written by Justice Ruth Ginsburg (who has authored much of the Court’s modern jurisprudence in this area) and an outright dissent in today’s decision in Squibb, authored by Justice Samuel Alito. To no one’s surprise, new Justice Neil Gorsuch joined the majority in both cases.

Many commenters will inevitably group these cases with last month’s 8-0 decision in the patent venue case of TC Heartland v. Kraft Foods, which I described as “a landmark win for defendants in patent litigation—and, on a practical level, for fairer ground rules in procedure.” To be sure, the underlying legal materials were completely different; TC Heartland involved the interpretation of wording in a federal statute. What united the three cases with Daimler is that the contemporary Court is keenly aware of the danger that the tactical use of forum-shopping will eclipse the merits in many categories of high-stakes litigation, turning potentially losing cases into winners through the chance to file them in a more friendly court.

That insight might prove significant at a time when forum-shopping has come to play a prominent role in high-profile ideological litigation—with conservatives running to file suit in the Fifth Circuit, liberals in the Ninth.

Supreme Court to Slants: Rock On!

In a unanimous judgment that splintered on its reasoning, the Supreme Court correctly held that the “disparagement clause” of the Lanham Act (the federal trademark law) violated the Constitution. The ruling boils down to the simple point that bureaucrats shouldn’t be deciding what’s “disparaging.”

Trademarks, even ones that may offend many people—of which plenty are registered by the Patent and Trademark Office (PTO)—are private speech, which the First Amendment prevents the government from censoring. As Justice Samuel Alito put it in a part of the opinion that all the justices joined (except Neil Gorsuch, who didn’t participate in the case), “If the federal registration of a trademark makes the mark government speech, the Federal Government is babbling prodigiously and incoherently.”

At this point, the Court split. Justice Alito, joined by Chief Justice Roberts and Justices Thomas and Breyer, explained why trademarks don’t constitute a subsidy or other type of government program (within which the government can regulate speech), and that the “disparagement clause” doesn’t even survive the more deferential scrutiny that courts give “commercial” speech. The remaining four justices, led by Justice Anthony Kennedy, would’ve ended the discussion after finding that the PTO here is engaging in viewpoint discrimination among private speech. The end of his opinion is worth quoting in full:

A law that can be directed against speech found offensive to some portion of the public can be turned against minority and dissenting views to the detriment of all. The First Amendment does not entrust that power to the government’s benevolence. Instead, our reliance must be on the substantial safeguards of free and open discussion in a democratic society.

Fundamentally, this somewhat unusual case brought by an Asian-American electronic-rock band shows that government can’t make you choose among your rights. The Lanham Act’s disparagement clause placed an unconstitutional condition on those who consider the use of an edgy or taboo phrase to be part of their brand: either change your name or be denied the right to use it effectively. Whether you’re a musician, a politician, or a sports team—the Washington Redskins’ moniker will now be safe—it’s civil society (consumers, voters, fans) who should decide whether you’re being too offensive for polite company.

For more, see my previous writings here and here—and of course reading Cato’s “funny brief” is all the sweeter after this ruling.

Jeff Sessions Misunderstands Drugs and Crime

Attorney General Jeff Sessions writes in Sunday’s Washington Post:

Drug trafficking is an inherently violent business. If you want to collect a drug debt, you can’t, and don’t, file a lawsuit in court. You collect it by the barrel of a gun. 

Sessions correctly understands a major source of crime in the drug distribution business: people with a complaint can’t go to court. But he jumps to the conclusion that “Drug trafficking is an inherently violent business.” This is a classic non sequitur. It’s hard to imagine that he actually doesn’t understand the problem. He is, after all, a law school graduate. How can he not understand the connection between drugs and crime? Prohibitionists talk of “drug-related crime” and suggest that drugs cause people to lose control and commit violence. Sessions gets closer to the truth in the opening of his op-ed. He goes wrong with the word “inherently.” Selling marijuana, cocaine, and heroin is not “inherently” more violent than selling alcohol, tobacco, or potatoes. 

Most “drug-related crime” is actually prohibition-related crime. The drug laws raise the price of drugs and cause addicts to have to commit crimes to pay for a habit that would be easily affordable if it were legal. And more dramatically, as Sessions notes, rival drug dealers murder each other–and innocent bystanders–in order to protect and expand their markets. 

Homicide rates 1910-1944

We saw the same phenomenon during the prohibition of alcohol in the 1920s. Alcohol trafficking is not an inherently violent business. But when you remove legal manufacturers, distributors, and bars from the picture, and people still want alcohol, then the business becomes criminal. As the figure at right (drawn from a Cato study of alcohol prohibition and based on U.S. Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1970 [Washington: Government Printing Office, 1975], part 1, p. 414) shows, homicide rates climbed during Prohibition, 1920-33, and fell every year after the repeal of prohibition. 

Tobacco has not (yet) been prohibited in the United States. But as a Cato study of the New York cigarette market showed in 2003, high taxes can have similar effects:

Over the decades, a series of studies by federal, state, and city officials has found that high taxes have created a thriving illegal market for cigarettes in the city. That market has diverted billions of dollars from legitimate businesses and governments to criminals.

Perhaps worse than the diversion of money has been the crime associated with the city’s illegal cigarette market. Smalltime crooks and organized crime have engaged in murder, kidnapping, and armed robbery to earn and protect their illicit profits. Such crime has exposed average citizens, such as truck drivers and retail store clerks, to violence.

Again, to use Sessions’s language, cigarette trafficking is not an inherently violent business. But drive it underground, and you will get criminality and violence. 

Sessions’s premise is wrong. Drug trafficking (meaning, in this case, the trafficking of certain drugs made illegal under our controlled substances laws) is not an inherently violent business. The distribution of illegal substances tends to produce violence. Because Sessions’s premise is wrong, his conclusion–a stepped-up drug war, with more arrests, longer sentences, and more people in jail–is wrong. A better course is outlined in the Cato Handbook for Policymakers.

 

Brexit Talks Get Underway

The negotiations on the UK exiting the EU start today. Here’s the BBC:

Brexit Secretary David Davis will call for “a deal like no other in history” as he heads into talks with the EU.

Subjects for the negotiations, which officially start in Brussels later, include the status of expats, the UK’s “divorce bill” and the Northern Ireland border.

Mr Davis said there was a “long road ahead” but predicted a “deep and special partnership”.

The UK is set to leave the EU by the end of March 2019.

Day one of the negotiations will start at about 11:00 BST at European Commission buildings in Brussels.

Mr Davis and the EU’s chief negotiator Michel Barnier, a former French foreign minister and EU commissioner, will give a joint press conference at the end of the day. 

I’ve sensed some growing concerns about how well these talks might go, and the recent UK general election only made things worse. It’s not clear to me that the politicians who are in charge here can make this a success. Time will tell.

If you are looking for something positive related to Brexit, however, once the UK does leave the EU the personnel situation on the technical side of things is looking good. On Friday, the UK Department of International Trade announced that it had hired Crawford Falconer as the Chief Trade Negotiation Advisor. From the announcement: 

Together with his team Crawford will:

  • develop and negotiate free trade agreements and market access deals with non-EU countries
  • negotiate plurilateral trade deals on specific sectors or products
  • make the department a ‘centre of excellence’ for negotiation and British trade
  • support the UK’s membership of the World Trade Organization (WTO).

Falconer is not a household name, but he is someone that I am very familiar with. I had just been reading his latest co-authored work. He was one of the judges (technically, a “panelist”) on a WTO dispute panel that ruled earlier this month on whether the U.S. has complied with a previous ruling related to the subsidies it provides to Boeing. He has also acted as a judge in 14 other GATT/WTO decisions.

Now, you may say, international adjudication is all well and good, but how about trade negotiations? Does he have any experience there? In fact, he does. He is a dual UK/New Zealand citizen and has been negotiating for New Zealand for many years. He was New Zealand’s Ambassador to the WTO in Geneva from 2005-2008 (and during that time, in his personal capacity, he chaired the Doha Round negotiations on agriculture and cotton). His LinkedIn page has more on his professional background.

There is still a long way to go before we get to the point of the UK negotiating free trade deals of its own. But once we do get there, its trade policy team is in pretty good hands.

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The Consensus in Favor of BRAC

Today a broad coalition of more than 40 different scholars from over 30 different think tanks and academic institutions have issued a letter calling on the relevant House and Senate committees to grant the Pentagon authority to reduce excess military infrastructure. Simply, we need another Base Realignment and Closure (BRAC) round. The full letter can be found here.

All of the signatories, myself included, signed as individuals, not as representatives of their respective institutions. But the breadth and depth of the coalition reflected in their affiliations, from the Center for American Progress and Peace Action to Americans for Tax Reform and FreedomWorks, shows just how much support exists for a process that has helped the military to deal with its excess overhead in five rounds beginning in the late 1980s through the mid-2000s, and that could do so fairly again.

The letter stresses points that I have made elsewhere (e.g. here, here and here). The Pentagon has repeatedly requested authority to close unneeded or underutilized bases. It estimates its capacity exceeds its needs by over 20 percent, and that is true even if the U.S. military remains at its current size, or grows modestly. The Obama administration asked Congress to approve BRAC, as has the Trump administration.

The objections to BRAC focus too narrowly on the economic harms that can come to communities affected by a base closure, without seeing the opportunities created when underutilized property is made available to redevelopment. There is pain. No one disputes that. But it is possible for communities to recover from a base closure, some have done so very quickly, and most emerge with a stronger, more diversified economic base after a military base is closed.

We conclude:

BRAC has proven to be a fair and efficient process for making the difficult but necessary decisions related to the configuration of our military’s infrastructure. In the absence of a BRAC, defense communities are hurting. Although members of Congress have blocked base closures with the intent of helping these communities, they are actually making the problem worse. The time to act is now. Congress should grant our military the authority to eliminate waste, and ensure that vital defense resources flow to where they are most needed.

Read the full letter.