Sunday, March 8, 2009

Oh Boy, Obama Plans to Nominate Alan B. Krueger as Assistant Secretary of Treasury, Economic Policy

Alan B. Krueger is co-author with David Card of Myth and Measurement. Somehow in this book, they manage to throw overboard the law of supply and demand, to reach the conclusion that "the claim, that a higher minimum wage cuts jobs, lacks support."

At one point, they report among a number of "main empirical findings" that (page 3):

Increases in the minimum wage also generate a "ripple effect", leading to pay raises for workers who previously earned wages above the minimum wage.
It is difficult to understand how Card and Krueger can even be considered economists with such beliefs. If one does not believe in the law of supply and demand for the labor market, can one believe in the law of supply and demand, at all, for any market?

As if to prove that they are not only attacking mainstream economic thinking in their book, but have advanced problems with Austrian economists, Card and Krueger specifically go out of their way to state that they are,"[b]orrowing from the natural sciences" their method of research.

Of course, Nobel Prize winning Austrian economist F.A. Hayek in his brilliant book, The Counter-Revolution of Science , demolished the notion that the methodology of the natural sciences could be used in the field of economics. He returned to this most important topic in his Nobel Lecture:

It seems to me that this failure of the economists to guide policy more successfully is closely connected with their propensity to imitate as closely as possible the procedures of the brilliantly successful physical sciences — an attempt which in our field may lead to outright error. It is an approach which has come to be described as the "scientistic" attitude — an attitude which, as I defined it some thirty years ago, "is decidedly unscientific in the true sense of the word, since it involves a mechanical and uncritical application of habits of thought to fields different from those in which they have been formed." I want today to begin by explaining how some of the gravest errors of recent economic policy are a direct consequence of this scientistic error.
In short, President Obama is about to nominate to the Treasury, for Undersecretary, Economic Policy, an "economist" who doesn't believe in the law of supply and demand, and appears not to have a clue as to the proper methods of investigation for the world of economics.

Ladies and gentlemen, this nomination is a disaster. I fear the policies that will come out of Treasury.


  1. The really weird part is that you are surprised.

    What did you expect? Seriously.

    I think we are now entering the stage of Yugoslavian economics. Let the fun begin.

  2. Milton Friedman used to say, the real minimum wage is zero. Governments can't change that, but they can increase the number of people of the real minimum wage by raising their legislated minimum.

    Don't like Friedman? Well check out what Swedish social democrat economist Gunnar Myrdal said about the minimum wage in his 1944 "An American Dilemma".

    Here is a synopsis from a recent academic appreciation of Myrdal.

    "The minimum wage and minimum standards for working conditions improved the desirability of the low-end jobs to a point that white workers were interested in doing them. With white business owners preferring white workers, black workers were pushed into unemployment."

    The real significance of Krueger? It's evidence the administration might simply not be interested in resolving the economic crisis at all. The crisis is an opportunity for advancing their political agenda. If the crisis did not exist the agenda would remain the same, only the rationalizations would be changed.

  3. If this sort of idiocy makes it into policy then the recession will still be with us in ten years time. The frightening thing is I dont think people will wake up to the supidity of all this. rather they will happily accept the Democrat's claims that it is all Bush's fault, even 5 or 7 years from now.

    Just because one person starts a bush fire doesn't excuse the next person in line deliberately pouring 800 trillion gallons of petrol/gasoline onto the fire ....

    In the UK the British government has said little about the minimum wage to date in all this. That said the moment when the PM or another leading cabinet member announces an increase in the minimum wage to protect the less well of from the worst of the recession/depression cannot be far away ...