Bad Economic Studies to Support Bad Economic Policies

The politicization of science irks me to the bottom of my little black soul. Recently two “studies” (the quotation marks a clear sign of derision) have been making the social media rounds and they deserve fisking. I wish I had someone with a background in macro-economics to fisk the bad economic portion, but I will fisk the methodology portion here and let you dear reader, to assess whether or not such “studies” using such obviously bad methodology should even require an economic counter argument.

First up, with a rather click bait headline: “None of the world’s top industries would be profitable if they paid for the natural capital they use”  http://grist.org/business-technology/none-of-the-worlds-top-industries-would-be-profitable-if-they-paid-for-the-natural-capital-they-use/

The argument made by that study is that somehow future estimates of potential impacts, assigns some arbitrary cost value to them, and then hints that those existential costs should be realized in concrete costs now. Simply put, this is bullshit of the finest order. Did the past steal from the future to create their GDP? Was your grandfather a “future resources thief” by being a coal miner or industrial worker? No. But were there costs created then that are still being paid for today? Yes. But even more important, who has a better life, you or your grandfather? If you didn’t answer “you” then you are a very small minority of people.

Future costs can be predicted for things like repaying a loan, or building a new facility, or even taxes. Future costs cannot be predicted for things like “climate change” because we do not know what sort of actual costs they are going to be? Will it be a higher electrical bill for cooling? Or from heating? Or will we see a longer growing season for food? Or shorter? We honestly don’t know and can’t reasonably predict cost changes based on that.

As a reminder of the difficulty in predicting the impacts of “anthropogenic climate change” we were supposed to be able to tie up our boats to the Washington Monument by now (a prediction made by the ever wrong Paul Ehrlich back in 1990) and yet Washington DC remains only a political swamp to be drained. Estimating future costs is best done by actually waiting for those costs to show up and become “present costs” rather than trying to avoid a future that is likely to be avoided by the natural course of human progress. With the beachfront property in Florida still commanding premium prices, I’d say that the market isn’t to worried about Paul Ehrlich’s prediction of using the Washington Monument as a mooring point, and so it stands to reason that even less concrete numbers for potential future costs associated with “natural capital” are not supportable as an argument for changing present costs.

Now, the methodology to link “natural capital” to a present cost is to show that things are getting worse, for example air quality decreasing (wait, it’s getting better? http://thehill.com/policy/energy-environment/329455-lung-association-us-air-quality-improving) and human lifespan decreasing (wait, everything good on that front too? http://www.slate.com/articles/health_and_science/medical_examiner/2016/12/life_expectancy_is_still_increasing.html) then you can make the argument with confidence that the present impacts will continue into the future and therefor with confidence predict future costs.

Next Up, also with a click bait headline: “Raise Wages, Kill Jobs? Seven Decades of Historical Data Find No Correlation Between Minimum Wage Increases and Employment Levels.” http://www.nelp.org/content/uploads/NELP-Data-Brief-Raise-Wages-Kill-Jobs-No-Correlation.pdf

Of course they don’t find what they aren’t looking for, no one ever does. They simply looked at whether there were more jobs or less jobs in the year following a federal minimum wage hike. They even included a very nice graph on page seven of their report that showed rather nicely that when the economy is growing a federal minimum wage hike is followed by more jobs, and in a recession a minimum wage hike is followed by fewer jobs. For those who actually care about historical context, raising minimum wage so that “real wages” keep pace with inflation means that the true cost of fed min wage hikes in a growing economy can mitigate the impact somewhat, and in a contracting economy inflation can’t mitigate the impact of a fed min wage hike.

But what they don’t actually analyze is what the “rate of change” in job growth or job loss is based on fed min wage hikes. If job growth is at X percent before a min wage hike, and it is at anything less than X percent after a min wage hike, there is a non zero chance that the decrease in job growth is a direct result of the fed min wage hike (essentially the delta between real costs in inflation and higher true costs of employees). This rather obvious lack of rigor in the study methodology is the same type of “woo pseudo science” that I expect from the “alternative medicine” crowd with claims like, “I had Lupus, but by eating this one weird fruit….”

Secondly, and even more importantly, 31 States in the US have minimum wage laws that are HIGHER than the fed min wage. So comparing the total national employment across industries is utterly useless as we already know that in 62% of states the fed min wage will have absolutely NO IMPACT. Source for state minimum wage number from a much more rigorous report on the effects of increasing the federal minimum wage: http://www.frbsf.org/economic-research/publications/economic-letter/2015/december/effects-of-minimum-wage-on-employment/

But, you can lie with statistics, and the uninformed now have more “studies” (and I use that term with great derision here because their methodologies were shoddy, they didn’t control for confounding factors, and only people who have enough factual context and experience working in or with research will be able to point out how ridiculously weak these reports are. However, expect the social justice warriors to latch on to them, as the SJW crowd doesn’t care if anything is true or not, only if it advances an agenda or not.

I just wish they wouldn’t drag science down into the level of Lysenkoism in order to try to bully people into supporting their agenda. But when “winning at all costs” is the only consideration, morals and ethics were just going to hold you back anyway.

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