Don Boudreaux of Cafe Hayek reprinted an e-mail from University of Chicago law professor Todd Henderson.
Do note that Chicago is considered to be a conservative university with a conservative law school.
And applaud Henderson for (finally) making a connection that economists trumpet routinely:
… I was struck by the paradox in the proposed remedies for these two problems by politicians. The first problem is income inequality, and the remedy is to set minimum contract terms. The second problem is externalities from carbon protection, and the remedy is to tax output levels. In both cases, the solution is to raise firm costs. The assumption driving the policy prescription for a Pigovian tax on carbon is the idea that higher costs will spur innovation in ways of reducing carbon output. Of course, that private firms subjected to higher costs will innovate in ways to reduce those costs is precisely the problem with minimum wage legislation, as you point out. This is an obvious point, but my mind never made the connection before.
Ummm … yeah. Increase the costs to firms of using carbon and they’ll innovate ways to avoid using carbon. Increase the costs to firms to use labor and they’ll innovate ways to avoid using labor.
It isn’t that hard.
What’s hard is that most people are innocently unaware of how blinkered their view of practical economics actually is.