Irrationality and the Minimum Wage

I have found that the hardest point to get across to students is the many adverse consequences of price controls, primarily because of their attachment to the idea of the minimum wage. Bryan Caplan has the best rejoinder I have ever read for this criticism from students:

What happens when my outraged students reach the "Salary Requirements" line on job applications? They could ask for a million dollars a year, but they don't. When their future rides on it, students honor the economic truism that labor demand slopes down.

The rest of the book is excellent, but would have been worth the read for that statement alone. Raising the wage, ceteris paribus, lowers employment.

McMillionaires

In an excellent article on the fastfood industry, George Will makes a statement about the McDonalds franchise system that shocked me for a second before I realized that it should have been obvious that this would be true:

McDonald's exemplifies the role of small businesses in Americans' upward mobility. The company is largely a confederation of small businesses: 85 percent of its U.S. restaurants -- average annual sales, $2.2 million -- are owned by franchisees. McDonald's has made more millionaires, and especially black and Hispanic millionaires, than any other economic entity ever, anywhere.

I would bet that many of the McMillionaires started out with McJobs.

The Negative Externalities of Blondes

Blondes apparently make men dumber. What are the policy implications?

1. Place a tax on blond hairs, encouraging women to dye their hair another color.
2. Pay subsidies to men who are frequently surrounded by blond women. (Economists will probably point to endogeneity problems outside the laboratory.)
3. Regulation: Ban blond hair. Inevitably deal with the problem of defining the color.
4. Assign property rights over women's hair color to either women or men.

Feel free to post your own suggested policies to the comments below. This is all tounge-in-cheek of course. I would also argue the existence of an adverse effect on male intelligence suggests there is a positive externality occurring on men, one which might swamp the adverse effect on intelligence. (Hat Tip: Division of Labour)

Capitalization and Naked Twister

An article on CNN.com details the dispute in Duncanville, Texas, a suburb of Dallas that illustrates several important points about local government that we have discussed over the last two days of class. The issue is one of the homes frequently hosts "swinger" events that draws a significant number of patrons and drawn the ire of the other locals.

Retiree Jack Martin, who lives a block behind Trulock's home, said he's concerned that the parties will reduce the value of his property.

As discussed in class, homeowners concern for the value of their property drives local government behavior, and that can be clearly seen from the points in the article. The local government officials are carefully trying to toe the line on this issue by repeatedly saying they are not interested in intervening in the private life (a signal that would hurt property values), but rather trying to prevent the nuisance of noise, traffic, and parking problems occurring in the area on the nights of these events (which also hurt property values).

Final Exam & Final Homework

The Final Exam is Thursday, December 12th, from 3:00-5:00. The review sheet explains the details of the exam.

The Last Homework was due Friday, December 7th in class. I e-mailed those who have turned it in already the solutions. If you do not plan on turning the assignment in late, e-mail me and I will send it to you.