Other Consequences of Minimum Wage Laws

In addition to creating unemployment, MW also reduces society’s productive efficiency. This is because some of the gains from the trades of the labor of the employees for the money of the employers that do not take place due to minimum wage legislation would have gone to the businessmen. The work that would have furthered productive activities does not happen. Business efficiency is reduced, and consumers are harmed with higher prices or lower quality and quantity of products or both.

In other words, just as some workers become jobless or employerless, some businesses become workerless. There is thus double damage dealt. Therefore, for example, the firms that are located in a state without MW have a competitive advantage over firms located in states with MW.

It might be objected that given MW, some lose, yet others gain (such as union members or big business), and we cannot compare utilities. In order to do so, loving personal relationships are required: the beloved is another self, etc. Economists can’t do it, however. And yet, besides institutional unemployment as an effect of MW among the poor, production declines, consumers are harmed, real wages go down, and efficiency is lowered.

Who cares about efficiency, you ask, given that minimum wage diminishes it by such a small amount? Well, once we agree to sacrifice efficiency for some vague emotional satisfaction, there is no stopping it. Why not have inflation and government-enforced monopolies and price and rent controls and mandatory “consumer protection” and public projects? All these benefit some and harm others. Efficiency, as a measure of the ideality of a system, is what makes possible an ever increasing standard of living. Interventionism sabotages this process. In the long run it makes everyone worse off. Finally, in a reductio, why not have full-blown socialism? The tiny clique of the power elite will win, being the owners of millions of slaves, but everyone else will lose. Why aren’t the people supporting the MW concerned about the welfare of the future Politburo members who under capitalism right now may be mere average workers or low-level bureaucrats?

So, once you stop caring about efficiency and utilitarianism which uses it to make policy proposals, you’ve given up the whole game. It’s all or nothing. It’s laissez-faire or it’s social death.

So, the impossibility of formally comparing utilities between persons is no obstacle to an economist’s ability to evaluate policies.

Deterrence Theory of Punishment

C.S. Lewis argues that deterrence is woefully inadequate as the (sole) justification for punishment. It “removes from Punishment the concept of Desert. But the concept of Desert is the only connecting link between punishment and justice. It is only as deserved or undeserved that a sentence can be just or unjust.”

Now first of all, we are dealing with the problem of the reasoning the judge must employ to determine the punishment. We all agree presumably that establishing guilt or innocence is the task of the jury, and that is “objective.” We are looking for the justification of a definite punishment after the jury has unequivocally delivered a guilty verdict. The question is not whether a person is guilty which we assume has been settled but how or to what extent and how to respond to his guilt.

So, then. Desert. Justice. Fine words, these. Did it occur to Lewis to answer the following question: Who are we (society or the judge) to style ourselves righteous avengers? Who will dare to throw the first stone? Lewis replies that

the judge who did it was a person trained in jurisprudence; trained, that is, in a science which deals with rights and duties, and which, in origin at least, was consciously accepting guidance from the Law of Nature, and from Scripture. … the propriety of the penal code, being a moral question, is a question on which every man has the right to an opinion, not because he follows this or that profession, but because he is simply a man, a rational animal enjoying the Natural Light.

… in so doing, self-evidently contradicting himself. If a judge needs to be “trained,” then he is no longer an “every man.”

Second, empirically, punishments motivated by deterrence are most of the time far less severe than those motivated by retribution. Mises writes, for example:

The age of capitalism has abolished all vestiges of slavery and serfdom. It has put an end to cruel punishments and has reduced the penalty for crimes to the minimum indispensable for discouraging offenders. It has done away with torture and other objectionable methods of dealing with suspects and lawbreakers. It has repealed all privileges and promulgated equality of all men under the law. It has transformed the subjects of tyranny into free citizens. (Money, Method, and the Market Process, Ch. 21)

Compare the results achieved by these ‘shopkeepers’ ethics’ with the achievements of Christianity! Christianity has acquiesced in slavery and polygamy, has practically canonized war, has, in the name of the Lord, burnt heretics and devastated countries. The much abused ‘shopkeepers’ have abolished slavery and serfdom, made woman the companion of man with equal rights, proclaimed equality before the law and the freedom of thought and opinion, declared war on war, abolished torture, and mitigated the cruelty of punishment. What cultural force can boast of similar achievements? (Socialism, 440-1)

(In fairness to Christianity, I will correct Mises that Christianity is grace that builds on the nature of Capitalism. Christianity did as well as it could with what it was given. Once capitalism was invented, the natures of individuals and society have been strengthened beyond measure, and with such help, Christianity could reach far nobler goals than before.)

Third, retributive punishments seem to require commensurability of offense and penalty. Why does stealing a car deserve exactly 5 years in prison, no more and no less? I’d understand if stealing a car worth $20k meant that the thief would have two of his own cars, if worth no more than $40k, confiscated. Must we then compare (dis)utilities interpersonally? The same amount of suffering that Smith inflicted on Jones (or twice that) will be in turn inflicted on Smith. How are we supposed to manage this calculation?

It is certainly true that deterrence is faced with a calculation problem of an even greater, far greater in fact, magnitude. But at least we call a spade a spade and explicitly recognize it as the chief challenge posed by the theory. The point is that retributionism is not exempt from the unenviable task of reading the criminal’s mind and heart.

Fourth, the prohibition of cruel and unusual punishments is explicitly contrary to retributionism. For if the criminal tortured his victims, then retributionism must allow that he himself will be tortured, and more severely at that. Would Lewis have denied even this provision of the (very utilitarian) US Constitution? Or does the criminal really “incur the hate and sadism of the judge, the policeman, and the ever lynch-thirsty mob”? (Mises, Liberalism, 58)

Fifth, the judge acts within the law. Say, the law specifies 5-15 years in prison for stealing a car. We might say that the offender “deserves” this much. But the whole point of the leeway for the judge after he is handed down a guilty verdict is to take into account deterrence, rehabilitation, and even condemnation. Sometimes he is justified to throw the book at the criminal. Other times he needs to be more lenient. In short, judges must be wise and judge aright. The retributionist seems to reduce complex justice to vengeance graspable by his “every man.” But not every man qualifies to be a judge.

Sixth, framing an innocent man and using that as a deterrent is a red herring. This is so obviously against the longer-term interests of the government as to be an implausible strategy. If even one such act becomes public knowledge (and it will), then criminals will no longer have any reason to fear the state which, as they can clearly see, does not discriminate between the law-abiding and lawbreakers. Arbitrarily picking innocent people to frame to deter others fails on utilitarian grounds in any realistic society.

Seventh, Lewis is worried about people being “sacrificed to society.” But people are sacrificed to society every day. The inventor of the new mousetrap puts the vested interest, the producer of old inferior mousetraps, out of business. Why, the old guy would wring his hands, is his income being sacrificed on the altar of consumer sovereignty? Well, because the society in which such things are permitted is the happiest of all. QED, TS, etc. If you obey the law, then you will be the person enjoying the consequences of the “sacrifices” of other people. On average, you’ll gain more happiness that you lose. Even when standing behind some veil of ignorance while designing society, it makes sense to choose that society where the combined happiness of its members is greatest; this way, your chances of being incarnated as a happy person are maximized.

In any case, the judge breaks no law by upping the criminal’s punishment for the sake of society. He is totally free to select any number of years in prison from 5 to 15 in our earlier example.

Finally, let’s consider one of Rothbard’s objections. He quotes Armstrong:

[W]hy stop at the minimum, why not be on the safe side and penalize him [the criminal] in some pretty spectacular way — wouldn’t that be more likely to deter others? Let him be whipped to death, publicly of course, for a parking offense; that would certainly deter me from parking on the spot reserved for the Vice-Chancellor! (The Ethics of Liberty, 93n)

First of all, even if the punishment for parking in the wrong spot is death, it is not guaranteed to deter everyone. A person might forget or choose to defy the law for whatever reason. Utilitarianism will not permit sentencing even one such person to death as a result. This is because the criminal’s well-being, too, is taken into account during sentencing. The criminal remains a member of society whose happiness the judge tries to maximize.

Second, deterrence considers not an isolated offense but the judicial system as a whole. Thus, David Friedman writes:

You live in a state where the most severe criminal punbishment is life imprisonment. Someone proposes that since armed robbery is a very serious crime, armed robbers should get a life sentence. …

An economist points out that if the punishments for armed robbery and for armed robbery plus murder are the same, the additional punishment for the murder is zero — and asks whether you really want to make is in the interest of robbers to murder their victims. (Law’s Order, 8)

When you look at the whole legal network, if may not make any sense from the purely utilitarian standpoint to punish crazily or haphazardly.

I am not saying that deterrence is a perfectly serviceable theory of punishment when considered in isolation from the other three. But it is at least equal to them and demands to be given its due.

Deterrence: Friedman

Let me just continue with Friedman for a minute here. (I really should read his book in full.) On the next page he goes:

… law in the United States and similar systems requires a high standard of proof (“beyond a reasonable doubt”) in a criminal case but only a low standard (“preponderance of the evidence”) in a civil case. Why? The answer cannot simply be that we are more careful with criminal convictions because the penalties are bigger. A damage judgment of a million dollars, after all, is a considerably more severe punishment for most of us than a week in jail.

Economics suggests a simple explanation. The typical result of losing a lawsuit is a cash payment from the defendant to the plaintiff. The result of being convicted of a crime may well be imprisonment or execution.

A high error rate in civil cases means that sometimes I lose a case I should have won and pay you some money and sometimes you lose a case you should have won and pay me some money. On average, the punishment itself imposes no net cost; it is simply a transfer.

A high error rate in criminal cases means that sometimes I get hanged for a murder I didn’t commit and sometimes you get hanged for a murder you didn’t commit. In the criminal case, unlike the civil case, one man’s loss is not another man’s gain.

Punishment is mostly net cost rather than transfer, so it makes sense to be a good deal more careful about imposing it. (Law’s Order, 9-10)

If one is so staunchly utilitarian as Friedman is trying to be, then he should really go hardcore. It is not true that a criminal punishment has no benefits. For one, it helps to reinforce the deterrent stimulus to the rest of the populace.

Let it be that people think the acquitted person is innocent, though in fact, unbeknownst to all (including the jury and judge), he is guilty; or think the guilty man got what was coming to him, though in truth someone else committed the crime. Similarly, everyone is equally strongly convinced that the civil case was decided correctly and did not “lose faith in the system” because of an obviously perverse outcome.

In such a case, it is not true that an error in the criminal case is worse than an error in a civil case from the utilitarian point of view. A man who got hanged for a murder he did not commit (but such that everyone is convinced of his tremendous guilt) was sacrificed for the sake of society, and presumably, if the judge’s decision was well-calculated, society benefited more in terms of criminal acts deterred than the criminal was harmed. Therefore, overall, errors in criminal trials are no more net costs than errors in civil trials.

Unbound Regulationism

The reason for the massive amount of regulation of every aspect of private business in today’s economy can be traced to undue reliance by intellectuals on utilitarian reasoning to the almost complete exclusion of natural rights thinking.

Utilitarianism holds, not incorrectly, that private property in the means of production is a tool, a means to an end. It has no value apart from its service to society and consumers in particular. Mises, for example, is quite guilty of this type of adamant stubbornness:

But the teachings of utilitarian philosophy and classical economics have nothing at all to do with the doctrine of natural right. With them the only point that matters is social utility. (HA, 175)

From this point of view one may describe the objective of social cooperation as the realization of the greatest happiness of the greatest number. Hardly anybody would venture to object to this definition of the most desirable state of affairs and to contend that it is not a good thing to see as many people as possible as happy as possible. All the attacks directed against the Bentham formula have centered around ambiguities or misunderstandings concerning the notion of happiness; they have not affected the postulate that the good, whatever it may be, should be imparted to the greatest number. (833-4)

Thus the owners of the material factors of production and the entrepreneurs are virtually mandataries or trustees of the consumers, revocably appointed by an election daily repeated. (271)

Profit-seeking business is subject to the sovereignty of the consumers. (299)

Private property [in the means of production] is a human device. It is not sacred. (683)

These are all true, but care must be exercised when addressing non-economists with such propositions. For regulationism argues that businessmen have no rights other than those that conscript them into public service. Therefore, any regulation issued by the state can claim to fix some market failure or protect consumers or in general steer production into pro-social avenues and in so doing be innocent until proven guilty.

It falls to libertarians then to analyze every single regulation issued by the organs and dispassionately to seek to figure out whether this particular decree is or is not utilitarian. Without bringing to bear any general principles, each regulation must be carefully judged on its own merits.

I submit that there are not enough economists in the world to do that successfully. Hence, most regulations are acquitted by default. And that’s just wrong.

Mugging: A Puzzle

Self-defense during a mugging is often justified because the victim was uncertain as to the intentions of the criminal.

“Will he kill me even if I give him my wallet? What if he gets upset and shoots because I only have $20? What if he decides that I’d be able to identify him? What if he’s just crazy?”

Suppose now that you are somehow 100% certain that if you surrender your money, then the mugger definitely will not kill you; and just as certain that if you resist, then he will try to kill you.

Then if you resist, either he kills you or you kill him. Either way, a “killing” will occur. On the other hand, if you submit, then only a “stealing” will occur. But any utilitarian will tell you that a killing is worse than a mere act of theft. If only consequences matter, isn’t it your moral and perhaps even legal duty to part with your cash?

This argument is both invalid and unsound.

It is invalid, because think of the message this kind of “social contract” will send to potential future muggers. “Oh, so all I have to do to get loot with no danger to me whatsoever is to convince my victim that if he gives me all he’s got, then I’ll definitely spare his life? I’m sure ways of doing so can be devised.” This’ll make mugging a much more attractive profession, sharply upping the crime levels. And why stop there? A guy with a shotgun orders you to squeal like a pig. Isn’t “someone got killed” still a situation inferior to a “someone got raped in the ass” or even “someone got severely maimed / paralyzed”? A utilitarian must take these points into account.

It is unsound, because the victim is deontologically and according to common-sense morality (rather than perhaps the highly controversial utilitarianism) within his rights to choose the course of action. He is permitted to submit, and he is permitted to resist. If he chooses the latter, then we have a straightforward shooting in self-defense. Instead of “stealing” vs. “killing,” we need to compare “unjust stealing” and “justifiable killing.”

Golden Rule: Counterexamples

1. Say, I build a better mousetrap and put my competitor and producer of old mousetraps out of business. It is asked, “If you were him, would you like to be treated this way?” I would say, “No,” so the GR treats my greater efficiency as immoral when in fact it is perfectly licit and even praiseworthy (benefits the consumers, abides by utilitarianism, etc.).

In fact, the GR seems to condemn any competition whatsoever. If I win, I can always be asked how I would feel if someone else had won, to which I’d answer, e.g., “upset,” which means that it would be wrong to seek victory, such as in sports, business, within a company competing with other employees, even war, and so on.

This make no sense and is a false positive.

2. Regarding the positive version of the GR: suppose I am giving my girlfriend a box of candy. I myself don’t like candy. Does it mean that I shouldn’t give candy to her?

Again, the GR works only on the highest level of generality: I want others to “do good” to me; hence, I ought to do good to them. But each person’s good is unique.

Different understanding of what is good is not limited to narrow happiness but apply to virtue, as well. Let Smith be a good person, and Jones, bad. It is good for Smith to learn to fly a plane, say, for fun. But that would only be a distraction for Jones who, before having fun, needs to find virtue, both self- and other-regarding. “Bad” people have no right to seek narrow happiness; they need to self-correct first.

Thus, Smith cannot look at his own desires in assisting Jones.

3. Suppose I hate X and wish him harm but also am afraid if him. This is clearly evil by any standard.

But if I were asked, “How would you like it if he hated and feared you?” I might reply “Awesome! It’s downright cool to have an enemy who is intimidated by me. Let him hate so long as he fears, etc.”

4. Let it be that Moriarty is trying to deceive Holmes. Despicable, right? When demanded that he do unto Holmes as he’d have Holmes do unto him, Moriarty replies that he’d relish the chance to match wits with the detective. Again, a false negative.

5. Again, suppose a person has enlisted in the army, knowing that he would be expected to abide by the rule that “if a grenade is thrown into your trench AND the lives of more than 10 soldiers are at stake AND you are closest to the grenade, then you must jump on the grenade and sacrifice yourself to save the rest.” This is a good rule, because any soldier would have a 1/10 chance to die but 9/10 chance to be saved by another in this manner.

This is exactly what happens, except that our person cowardly runs away. Bad all around, right? But when asked, “How would like it if another failed in his duty to jump on the grenade and save you?” he replies “Are you kidding? Who wouldn’t run away! It’s perfectly reasonable.” Another miss (i.e., immoral conduct sanctioned).

6. There cannot be a society in which the strong do not oppress the meek. I was born one of the meek, so I suffer; but if I were strong, I’d oppress others without a second thought, for that is the way of the world. Here, GR seems to fail to get off the ground.

Golden Rule: Further Subtleties

What of crazy desires? I’d have other people worship me as a god. Hence, as per the GR, I ought to worship them as gods.

Here the “reverse” GR (RGR) can be of help. I’d rather not worship any man as a god. Hence, I am OK with other people’s not worshipping me.

One is free to pick either the GR or the RGR as a guide. For crazy desires, the RGR will serve as a reality check and be chosen for self-interested reasons.

Even here, a counterexample to RGR, as pointed out below, is that it would be “cool” if others worshipped me; therefore, I must worship them.

This is another false positive.

The case of the judge. A judge sentencing a criminal is applying the GR to his own conduct. If the situations were reversed, he’d like the judge to pardon him. Hence, he ought to pardon the criminal.

The GR is N/A, because the judge is not permitted to pardon at will. The reasoning “Smith would like Jones to do his homework; hence, Smith ought to do Jones’ homework” is invalid for the same reason: one is not permitted to do another’s homework.

Moreover, more than the criminal’s welfare is at stake. Just as with the mousetrap example, more than 2 people, society as a whole in fact, are involved. The GR falters in such situations.

Again, Smith has a choice between A and B. If he chooses A, then Jones will be happy; if he choose B, then Robinson will. Which one of these two is the “other” with whom Smith must practice his role reversal?

The GR as an anti-hypocrisy principle. Suppose I am a utilitarian. But I am not privileged relative to anyone else. Then I must not disclaim my own doctrine the moment my good is slated to be sacrificed for the greater good of others.

The GR as natural law. We have natural rights by virtue of belonging to the species Homo sapiens. This way we escape the problem of people’s different personalities and tastes.

“You shall not steal” is addressed to all humans. And the GR makes this commandment particularly poignant.

Surely, I would not want to be a victim of a violent crime. Then I ought not to violate the rights of others.

A Couple of Moral Dilemmas

There is a natural duty not to murder, but there is also another natural duty to rescue people from life-threatening situations, especially if getting into one is not the person’s fault, and if you are in a position to execute the rescue successfully.

I am not saying that the government can punish a person for failing to rescue anyone, so it is a moral not legal duty.

There could be many other caveats here, but let’s agree that in appropriate circumstances, there is a natural duty to rescue.

Long story short, dilemma #1. You own ten hearts that can save the lives of 10 patients needing heart transplants. However, if you withhold the hearts, these patients will die, and their kidneys will be used to save the lives of 20 patients needing kidney transplants. Assume no other hearts of kidneys are available. What do you do?

Dilemma #2. An evil colonel has 20 prisoners. He has arranged them in two sets of 10 in front of you and says: “If you personally right now take this gun and kill every person in one set, then the other set, i.e., the other ten prisoners, will go free. If you refuse to kill, then I’ll personally and right now kill all 20 of them.” Again, what do you do?

Imagine that the prisoners are women and children, to make the problem more heartbreaking.

This is similar to the dilemma posed in the movie Dark Knight. Two ships are immobilized at sea. Bombs are planted in each one. The people in ship 1 are given a remote control activating which will destroy ship 2, and vice versa for the people in ship 2. Joker stipulated additionally that if both ships are alive after 12:00 hits, then both ships will be destroyed; otherwise the surviving ship is spared.

Notice that these are not utilitarian dilemmas, because in both cases we are dealing with survival which is prior to pleasure. You can’t get any utility when you’re dead. If one survives, then no further actions are specified; this person will go and live his life and indeed, seek future happiness however he sees fit. Whether he goes to heaven or whether it would have been better if he had died during the resolution of the dilemma is his own business.

These are, however, consequentialist dilemmas, insofar as we have two natural duties (not to kill; to rescue) in serious conflict with no apparent way to decide which duty prevails on absolutist grounds, yet picking one yields better consequences (again, in terms of lives saved though not happiness imparted) than the other.

Thus, for the evil colonel problem, killing 10 men will make you a murderer, but you save 10 lives. Refusing to kill means that you wash your hands of the whole affair, but you have to live with the thought that, had you done otherwise, 10 lives would have been spared. Similarly, better consequences will result if any one ship destroys the other; but that’d again make the people in the first ship murderers. Neither is a pretty choice.

Be sure to play with the numbers to test your answers; for example, what if the colonel had 2 million prisoners? Would you still not kill the 10?

Moral Dilemma: “Evil Warden”

Here is another one. I admit I’m not the author of it and picked it up off of some commenter on a Yahoo! article. I think I wasn’t perverse enough to come up with a monster like that.

Dilemma #3. An evil prison warden locks 10 people in a single cell and throws a single knife onto the floor. He then announces that he will come back in 3 hours, and if there are more than 1 person alive, then all of them he will immediately kill.

If, however, there is 1 and only 1 left alive, then that one person will go home.

(In the original Yahoo post, the survivor actually would find respite for only one day, after which time he’d end up in yet another cell with 9 more new prisoners and would have to fight again. But I’ll spare you the endless horror.)

What should the prisoners do? The incentive to them is to fight until only one man is left standing. This way, each person has a small chance of victory and thereby survival. So, we’d see A go for the knife and stab B; then C would punch him and get ahold of the knife himself and cut D’s throat; and so forth until in this literal war of all against all only one remains.

Or should they, as one, be noble and ignore the knife and just surrender and wait there for the inevitable death at the hands of the evil warden just 3 hours later?