I agree I think this second part isn’t intuitive to most people. I was using intuitive somewhat loosely to mean based on intuitions the person making the argument has.
You write that “Many people find these arguments very intuitively appealing”, but I struggle to think of three people that would agree with that intuition.
The reason I bring this up is not just pedanty. I was pretty sympathetic to your argument until I got to the examples, but a lot of them seemed to involve a bit of motte-and-bailey. In many cases I can either come up with a version that I agree is intuitive, or one that is clearly false, but not both.
For another example, your minimum wage example combined multiple claims:
Having a minimum wage will increase unemployment rates.
Employers hire workers up until the point that the marginal revenue generated by each worker equals the marginal cost of hiring workers.
If the wage workers have to be paid goes up then unemployment will go up because marginal productivity is diminishing in the number of workers.
I agree that the conjunction is literally false, because 2) is not an accurate description of hiring manager thought processes, 1) is clearly false if that minimum wage is very very low, and 3) is false in some ranges for monopsony models. But 2) and 3) could be a reasonable approximation for many purposes, and I was not under the impression that the core claim, 1), had been disproven in an economically meaningful way. Recent research like the 2019 Dube QJE paper suggest that historically US minimum wage increases haven’t increased unemployment, but others like Clemens and Strain (2021) or Neumark and Shirley (2021) suggest they did increase unemployment.
I completely stand by the minimum wage one, this was the standard model of how labour markets worked until like the shapiro-Stiglitz model (I think) and is still the standard model for how input markets work, and if you’re writing a general equilibrium model you’ll probably still have wage = marginal product of labour.
This comment does not sound like ‘completely standing by’ to me! If a $15/hour US minimum wage, which is the relevant current policy proposal, reduces employment, that means the intuition is correct.
I think the IGM poll is weak evidence for you here. Lets look at some quotes from the guys who didn’t agree that increasing the minimum wage would substantially increase unemployment (e.g. ostensibly disagreed with the intuition):
Evidence is that it would be lower by perhaps 1 − 2 %. Lots of margins for adjustments.
Lower, probably; substantially lower, not clear at all.
Empirical studies disagree on the sign of the effect. Few of those concluding in favor of negative are consistent with “substantially.”
I don’t think the evidence supports the bold prediction that employment will be substantially lower. Not impossible, but no strong evidence.
Empirical evidence suggests the effects on employment would be modest.
Lower, yes. “Substantially”? Not clear. For small changes in min wage, there are small changes in employment. But this is a big change.
In many cases, these people either 1) believe there would be unemployment, but are getting hung up on ‘substantial’, or 2) think there will be other adjustments (e.g. reduction in non-wage benefits). I think the headline result here is somewhat misleading—at that is before any adjustment for the partisan bias issue. If my intuition was that increasing the minimum wae would increase unemployment, and the people who ostensibly disagree with me think it would only cause 780,000[1] people to lose their jobs, I would consider myself vindicated.
I haven’t read that 2019 Dube review, though I’m guessing it’s similar to the other 2019 Dube review I posted. But as I noted in the grandparent, there is serious work on the other side since (e.g. the two 2021 papers).
This discussion seems a bit of a side-track to your main point. These are just examples to illustrate that intuition is often wrong—you’re not focused on the minimum wage per se. Potentially it could have been better if you had chosen more uncontroversial examples to avoid these kinds of discussions.
Maybe, I meant to pick examples where I thought the consensus of economists was clear (in my mind it’s very clearly the consensus that having a low minimum wage has no employment effects.)
If you want to make a point about science, or rationality, then my advice is to not choose a domain from contemporary politics if you can possibly avoid it. If your point is inherently about politics, then talk about Louis XVI during the French Revolution. Politics is an important domain to which we should individually apply our rationality—but it’s a terrible domain in which to learn rationality, or discuss rationality, unless all the discussants are already rational.
I agree I think this second part isn’t intuitive to most people. I was using intuitive somewhat loosely to mean based on intuitions the person making the argument has.
You write that “Many people find these arguments very intuitively appealing”, but I struggle to think of three people that would agree with that intuition.
The reason I bring this up is not just pedanty. I was pretty sympathetic to your argument until I got to the examples, but a lot of them seemed to involve a bit of motte-and-bailey. In many cases I can either come up with a version that I agree is intuitive, or one that is clearly false, but not both.
For another example, your minimum wage example combined multiple claims:
Having a minimum wage will increase unemployment rates.
Employers hire workers up until the point that the marginal revenue generated by each worker equals the marginal cost of hiring workers.
If the wage workers have to be paid goes up then unemployment will go up because marginal productivity is diminishing in the number of workers.
I agree that the conjunction is literally false, because 2) is not an accurate description of hiring manager thought processes, 1) is clearly false if that minimum wage is very very low, and 3) is false in some ranges for monopsony models. But 2) and 3) could be a reasonable approximation for many purposes, and I was not under the impression that the core claim, 1), had been disproven in an economically meaningful way. Recent research like the 2019 Dube QJE paper suggest that historically US minimum wage increases haven’t increased unemployment, but others like Clemens and Strain (2021) or Neumark and Shirley (2021) suggest they did increase unemployment.
I completely stand by the minimum wage one, this was the standard model of how labour markets worked until like the shapiro-Stiglitz model (I think) and is still the standard model for how input markets work, and if you’re writing a general equilibrium model you’ll probably still have wage = marginal product of labour.
Meta-analysis find that minimum wage doesn’t increase unemployment until about 60% of median wage https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/844350/impacts_of_minimum_wages_review_of_the_international_evidence_Arindrajit_Dube_web.pdf, and most economists don’t agree that a even a $15 an hour minium wage would lead to substantial unemployment (although many are uncertain) https://www.igmchicago.org/surveys/15-minimum-wage/
This comment does not sound like ‘completely standing by’ to me! If a $15/hour US minimum wage, which is the relevant current policy proposal, reduces employment, that means the intuition is correct.
I think the IGM poll is weak evidence for you here. Lets look at some quotes from the guys who didn’t agree that increasing the minimum wage would substantially increase unemployment (e.g. ostensibly disagreed with the intuition):
In many cases, these people either 1) believe there would be unemployment, but are getting hung up on ‘substantial’, or 2) think there will be other adjustments (e.g. reduction in non-wage benefits). I think the headline result here is somewhat misleading—at that is before any adjustment for the partisan bias issue. If my intuition was that increasing the minimum wae would increase unemployment, and the people who ostensibly disagree with me think it would only cause 780,000[1] people to lose their jobs, I would consider myself vindicated.
I haven’t read that 2019 Dube review, though I’m guessing it’s similar to the other 2019 Dube review I posted. But as I noted in the grandparent, there is serious work on the other side since (e.g. the two 2021 papers).
52m people on under $15/hour according to Oxfam * 1.5% according to Nordhaus, who voted ‘disagree’
This discussion seems a bit of a side-track to your main point. These are just examples to illustrate that intuition is often wrong—you’re not focused on the minimum wage per se. Potentially it could have been better if you had chosen more uncontroversial examples to avoid these kinds of discussions.
Maybe, I meant to pick examples where I thought the consensus of economists was clear (in my mind it’s very clearly the consensus that having a low minimum wage has no employment effects.)
Fwiw I think this is good advice.