03 July 2011

"The power of holding two contradictory beliefs in one's mind simultaneously, and accepting both of them"

Cafe Hayek | Don Boudreaux | An Empirical Question

How many people today – especially professional pundits, professors, and politicians – believe simultaneously in both of the following propositions: (1) raising taxes on imports reduces the amount of importing activity significantly enough to cause noticeable increases in activities that are substitutes for importing (such as producing more of the high-tariffed goods domestically); and (2) raising taxes on incomes does not reduce the amount of income-earning activity significantly enough to cause noticeable increases in activities that are substitutes for income-earning activity (such as taking more leisure)?
Future work: re-do the same empirical study, but replace (1) with people who believe raising the price of beer or plastic shopping bags or gasoline will incentivize people to consume less of those things, and (2) with people who simultanesouly believe raising the price of low productivity labor in the form of increased minimum required wages does not incentivize buyers to consume less of such labor.*


* Count the "Center for American Progress" in group #2:

The Center for American Progress, often called the think tank for the Obama White House, recently recommended another increase in the minimum wage to $8.25 an hour. Though the U.S. unemployment rate is 9.1%, the thinkers assert that a rising wage would "stimulate economic growth to the tune of 50,000 new jobs."

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