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Revisiting Piketty’s Summary of the U.S. Minimum Wage

Summary:
The good news is that one person responded to my labor of love (i.e. my long comment) on Scott Alexander’s post on Piketty. The bad news is that the guy’s response contained stuff like this: If that’s the worst, most partisan error in Piketty, then I’m not too concerned. If anything I’m more concerned about you, Bob Murphy. You’ve dismissed a 696 page book on a single, minor historical detail that was corrected in the second edition (contrary to your assertion). The only out-and-out error in Piketty’s above statement is the attribution of multiple minimum wage increases to Obama when he signed none*, and this was duly corrected in his 2nd edition.  and tl;dr Piketty got it essentially right. You characterize the question as “not hard”, but it is only easy if you

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The good news is that one person responded to my labor of love (i.e. my long comment) on Scott Alexander’s post on Piketty. The bad news is that the guy’s response contained stuff like this:

If that’s the worst, most partisan error in Piketty, then I’m not too concerned. If anything I’m more concerned about you, Bob Murphy. You’ve dismissed a 696 page book on a single, minor historical detail that was corrected in the second edition (contrary to your assertion).

The only out-and-out error in Piketty’s above statement is the attribution of multiple minimum wage increases to Obama when he signed none*, and this was duly corrected in his 2nd edition. 

and

tl;dr Piketty got it essentially right. You characterize the question as “not hard”, but it is only easy if you simplify minimum wage history down to which presidents signed off on increases. When you consider length of delay between increases, party control of congress during increases and between increases, and inflation effects it becomes clear that Democrats are pro-labor legislation. Which shouldn’t be surprising really. Everyone knows Democrats are pro-labor and Republicans are pro-capital.

I wrote a response to him in turn (and thanks to David R. Henderson for reviewing a draft of it for clarity and calmness in tone). So of course feel free to go read the whole exchange at Scott Alexander’s site for the gory details.

However, what I want to do here is revisit Piketty’s narrative. When I first read it, it was so totally bonkers that I couldn’t make heads or tails of it. (But again, as Phil and I stress throughout our paper, the “typos” we kept identifying all seemed coincidentally to favor Piketty’s narrative. It wasn’t like his cat jumped on the keyboard occasionally when Piketty wasn’t looking–unless it was a progressive feline.)

But now that this guy on Scott Alexander’s blog reviewed my particular claims and tells me there was a slight thing that may have been a bit off, which Piketty duly corrected in the 2nd edition, I read the whole thing again with fresh eyes. And now I think I see why Piketty believes he ironed out any difficulties with the 1st edition, even though (to my eyes) he didn’t even address the 4 most glaring problems.

The real kicker here is that if I’m right, I think it makes Piketty’s treatment FAR WORSE and should make us not touch anything in his book with a ten-foot pole.

So I’m curious to hear your thoughts on whether I’m right in my analysis, and in my related judgment.

*    *    *

For convenience let me reproduce Piketty’s 1st edition summary, and then give the actual history of the U.S. minimum wage:

PIKETTY 1st edition: “From 1980 to 1990, under the presidents Ronald Reagan and George H. W. Bush, the federal minimum wage remained stuck at $3.35, which led to a significant decrease in purchasing power when inflation is factored in. It then rose to $5.25 under Bill Clinton in the 1990s and was frozen at that level under George W. Bush before
being increased several times by Barack Obama after 2008” (2014b, p. 309).

ACTUAL MINIMUM WAGE HISTORY:

Date……………..Minimum Wage………..President in Office
January 1, 1980…..$3.10…………………Jimmy Carter
January 1, 1981…..$3.35…………………Jimmy Carter
April 1, 1990……….$3.80…………………George H. W. Bush
April 1, 1991……….$4.25…………………George H. W. Bush
October 1, 1996……$4.75…………………Bill Clinton
September 1, 1997..$5.15………………..Bill Clinton
July 24, 2007……….$5.85…………………George W. Bush
July 24, 2008……….$6.55…………………George W. Bush
July 24, 2009……….$7.25…………………Barack Obama

Now in his 2nd edition, the only change I saw Piketty make is acknowledged to have fixed all genuine mistakes by my hostile critic. Here’s how that guy put it at Scott Alexander’s blog:

The only out-and-out error in Piketty’s above statement is the attribution of multiple minimum wage increases to Obama when he signed none*, and this was duly corrected in his 2nd edition. Changing “frozen at that level under George W. Bush before being increased several times by Barack Obama after 2008” to “frozen at that level until legislation passed under George W. Bush led to an increase under Obama” is arguably a typo if you squint your eyes, though I would prefer to call it a minor detail.

So in this light, let me make two observations:

  1. There is still the (presumably genuine typo) of saying Clinton raised it to $5.25 when in fact it was $5.15. Again, that mistake helps Clinton, but let’s assume it is a genuine typo. This one just shows Piketty is sloppy. (The mistake survives into the 2nd edition.)
  2. Apparently both Piketty and my hostile critic are fine with looking at the above table of dates and describing it like this: “From 1980 to 1990, under the presidents Ronald Reagan and George H. W. Bush, the federal minimum wage remained stuck at $3.35, which led to a significant decrease in purchasing power when inflation is factored in. It then rose to $5.[1]5 under Bill Clinton in the 1990s…”

Just look at the table and look at that quoted sentence (where I’ve patched the erroneous $5.25 with the correct $5.15) to see now, why Piketty/my critic think it’s fine. If we are really sloppy on the front end and start with the minimum wage in 1981 and say it held in 1980, then it is indeed a true statement that the minimum wage remained stuck at $3.35 from 1980 [sic] to 1990 (specifically up to March 31, 1990) and it is indeed true that during this period (if we start counting inside 1980 after the November election and consider that he was president-elect) Ronald Reagan and George H.W. Bush were in office.

Next, one could see how a person might say it is indeed a true statement to say that the minimum wage then rose to $5.15 under Bill Clinton in the 1990s.

I realize some of you may not care about this stuff, but I want you to really SEE what these guys are doing with the facts vs. the narrative. If Piketty really is doing what he apparently is doing (and which, for sure, my hostile critic agrees with), then the above treatment is, I think, the most misleading, dishonest historical summary I’ve ever seen that one could claim is not technically lying. His technique of ending in 1990 in order to avoid mentioning the two increases under George H. W. Bush exhibits the precision of a surgeon.

(To be clear, I’m not myself admitting it isn’t false. As I said at Scott Alexander’s blog in response: “The only way you can say Piketty’s summary is correct here, is if you also endorse the following statement, “Reagan remained fixed in the White House, until it was then occupied by Bill Clinton.””

So in conclusion, this whole revisitation makes me adjust my previous weight on the possibilities that Piketty was merely sloppy to “he is intentionally deceptive.” But I grant I’m biased, so I’m curious to hear your thoughts.

Robert Murphy
Christian, Austrian economist, and libertarian theorist. Research Prof at Texas Tech and author of *Choice*. Paul Krugman's worst nightmare.

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