Hacker News Reader

Comment by candiodari | Hacker News Reader

Here's a lesson from a finance course that I thought was thoroughly non-obvious: all change happens at the margin. For instance, interest rate changes cause real estate appreciation or crashes by changing the decision of buyers that are just on the cusp of being able to afford a home or not.

This is not a 100% rule, just 5 or 6 nines.

View on HN

Such as with the $15 minimum wage - it's the marginal businesses that will shut down, and the people with marginal job skills who will be shut out of the job market.

In a toy economy that's definitely true, but the empirical results are mixed in the real world, where there are lots of complicated dynamics.

Any business that buys inventory at $15 and sells it for $10 is going to go out of business. What complicated dynamic would change that?

(Yes, I know that often businesses miscalculate the value of an employee, and it may have other sources of profit that cover the losses, etc., but it doesn't change the reality that the profit motive will squeeze such things out.)

People are not inventory.

Thanks for saying that! Its common for folks to play what I call 'dot to dot' where they draw a thin line from one action to some chain of results. They say "I proved its a bad idea!" Its like sketching in 3 or four lines in a dot-to-dot puzzle and saying "See! Its a dog!" when it might be the Sistine chapel.

Thinks are complicated. All the dot-to-dot statements are somewhat true, but they're all going on at the same time. Higher minimum wage means more spendable cash, which means more small businesses see an uptick in sales, so more profit. See! I can do it too.

Uh huh. There are multiple lines to be drawn.

Deadweight losses are the inevitable leftovers of decreased efficiency after they have been drawn.

https://en.m.wikipedia.org/wiki/Deadweight_loss

Reply on news.ycombinator.com