Who Could Have Seen That Coming?
Several recent news stories report information that was hardly surprising to anyone who has studied economics or read Cato at Liberty. We talk a lot about unintended or unanticipated consequences around here, but in these cases the consequences were anticipated and even predicted by a lot of people.
First, consider this front-page story from the Washington Post on Monday:
The [fast-food] industry could be ready for another jolt as a ballot initiative to raise the minimum wage to $15 an hour nears in the District and as other campaigns to boost wages gain traction around the country. About 30 percent of the restaurant industry’s costs come from salaries, so burger-flipping robots — or at least super-fast ovens that expedite the process — become that much more cost-competitive if the current federal minimum wage of $7.25 an hour is doubled....
Many chains are already at work looking for ingenious ways to take humans out of the picture, threatening workers in an industry that employs 2.4 million wait staffers, nearly 3 million cooks and food preparers and many of the nation’s 3.3 million cashiers....
The labor-saving technology that has so far been rolled out most extensively — kiosk and tablet-based ordering — could be used to replace cashiers and the part of the wait staff’s job that involves taking orders and bringing checks.
Who could have predicted that? Well, Cato vice president Jim Dorn in his 2014 testimony to the Maryland legislature. Or Bill Gates around the same time.
Then there's this all-too-typical AP story out of California:
California lawmakers from both parties are calling for more stringent oversight of a clean jobs initiative after an Associated Press report found that a fraction of the promised jobs have been created.
The report also found that the state has no comprehensive list to show much work has been done or energy saved, three years after voters approved a ballot measure to raise taxes on corporations and generate clean-energy jobs....
The AP reported that three years after voters passed Proposition 39, money is trickling in at a slower-than-anticipated rate, and more than half of the $297 million given to schools so far has gone to consultants and energy auditors.
Well, you might have seen that coming if you'd read Cato's 2011 book The False Promise of Green Energy. Or Thomas Hemphill and Mark Perry in 2012. Or Dan Mitchell in 2008 on government job creation. Or indeed Henry Hazlitt in 1946.
And finally this recent study from the Federal Reserve finding, as reported by Bloomberg:
The surging cost of U.S. college tuition has an unlikely culprit: the generosity of the government’s student-aid program, a report by the Federal Reserve Bank of New York said.
Increases in federal loans, meant to help students cope with rising costs, are quickly eaten up by schools in higher prices, wrote David O. Lucca, Karen Shen and Taylor Nadauld.
Private colleges raise their tuition 65 cents for every dollar increase in federal subsidized loans and 55 cents for Pell grants given to low-income students, according to the report. College tuition has outstripped U.S. inflation for decades.
Who would have guessed? Certainly not Hillary Clinton. But Gary Wolfram, author of this 2005 Cato study, understood what was going on. So did Neal McCluskey in 2009 and Jason Bedrick in 2012 and Steven Pearlstein in 2004. Clinton and other political leaders may not read the Cato website diligently. But you'd think they'd have seen Pearlstein's article in the, um, widely read Washington Post.
Understanding basic economics can make it fairly easy to predict the results of price floors, price ceilings, subsidies, job creation schemes, and other efforts in economic discoordination. It's too bad that the widespread availability of economic knowledge doesn't seem to do much to improve public policy.
