Generally, people share common goals. Most of us want: poor people to enjoy higher standards of living, greater traffic safety, fewer wars and more world peace, greater racial harmony, cleaner air and water, and less crime.

Despite the fact that people have common goals, more often than not, we see them grouped into contentious factions, fighting tooth and nail to promote differing government policies in the name of achieving those commonly held goals. Often the policies may be unproductive and often have the unintended consequence of sabotaging the goal. Almost always the conflict is centered around the means to achieve goals rather than the goals themselves.

A good example of conflict surrounding means is found in the periodic debates over minimum wage and tariffs. Many people profess concern for the welfare of low-skilled workers. To achieve their goal, one group adamantly demands that Congress legislate higher minimum wages. Another group professing the identical concern, are just as adamant in demanding that Congress not legislate higher minimum wages. Similarly, one group of advocates for greater employment opportunities might lobby Congress for higher tariffs and stricter quotas on foreign imports. Another group of people sharing the identical goal will fight against tariffs and quotas and lobby for fewer trade restrictions.

How is it that people who share identical goals come to advocate polar opposite policies? One possible explanation is that they are dishonest and simply promoting their personal interests. Their political strategy is to express concern for the unskilled and greater employment opportunities simply as a ruse to conceal their true agenda: higher wages, profits and monopoly wealth. The more interesting question is why do people, who are assumed to be honest, intelligent, selfless and not motivated by a hidden agenda, arrive at polar opposite policy proposals as a means to achieve commonly shared goals, that may indeed produce polar opposite results?

Part of the answer is that they share different visions of how the world works. Consider the effects of different visions by going back to a time prior to Pythagoras' and Ptolemy's proofs that the earth was round. Imagine two honest and intelligent people in 1000 B.C. One person's initial premise is that the earth is flat. Based upon that premise, he would argue strenuously it is not possible to sail west from Greece and reach the Orient. The other person, whose initial premise is that the world is round, would argue just as strenuously that it is possible to reach the Orient by sailing west from Greece.

Given the initial premise made by either person, the conclusion reached (one can or cannot reach the Orient by sailing west from Greece) is internally consistent and logical. After all, if the world is flat, one would sail right off the edge, and into the abyss, before reaching the Orient. On the other hand, if the earth is round, the trip can be safely made. Incidentally, before one condemns the flat earth vision it should be noted that, while inaccurate, it was nonetheless useful, providing reliable navigation over relatively short distances.

Of course, the flat-earth vision was ultimately laid to rest by people actually circumnavigating the globe. Also, scientific evidence and simple empiricism weighted in to settle the debate. People saw that the shadow of the earth on the moon during eclipses was round and they also saw that the mast of a ship, approaching from the sea, is visible before the hull. The false vision about the shape of the earth was demolished by falsifying its premise - not by questioning the internal consistency of the arguments based on that premise. Often the underlying premises supporting the conclusions of some arguments are so baseless they are deliberately left unstated. In these cases, they must be teased out by questions such as: for that conclusion to hold, what assumptions are being made about human behavior?

Consider the minimum wage debate. Assuming that both proponents and opponents of higher minimum wages are guided solely by an honest concern for low-wage, low-skilled workers, what is the initial premise made by those who favor increases in the minimum wage versus that made by opponents? If one's initial premise (stated or not) is that employers need a certain number of employees to do a particular job, the logic behind increasing the minimum wage law as a means to raise incomes of low-skilled workers is internally consistent. The effect of a higher minimum wage would be that of workers having higher wages and employers having fewer profits.

Opponents of higher minimum wages have a different initial premise. They assume that employers are responsive to changes in labor costs. They believe that there are alternative methods to accomplish a particular task as opposed to the view that it takes a fixed number of workers. Employer responses to higher labor costs might include: substitution of capital for labor (automation), employment of self-service techniques (such as self-service gas stations), relocation to a country that has cheaper labor, use of disposable utensils instead of washable ones, fewer theater ushers, and automatic elevators. These and many other substitutes allow employers to economize on labor usage and produce lower employment opportunities for low-skilled workers.

The vision that higher mandated wages (that exceed productivity) produce no employment effects also assumes that investors are insensitive to the company's profits and/or customers are insensitive to higher product prices. Neither is likely to be the case. If companies are required to pay higher mandated wages, and make no response, they will see their profits decline relative to companies who do respond. In turn investors will see a reduction in their return on equity and will likely move (sell their stock in the company) their capital elsewhere.

The company might try to forestall declining profits by at tempting to recover higher labor costs by raising product prices. However, consumers are not insensitive to higher prices. They will seek cheaper priced substitutes, thereby reducing the company's sales. In the wake of higher minimum wages, surviving companies will be those who have found ways to economize on labor usage.

The premise that employers are not responsive to changes in the cost of labor is what economists call a zero elasticity of response. Put another way, changes in the independent variable (wages) have no effect on the dependent variable (the number of workers hired). There is little evidence that people are insensitive to price changes whether it be changes in taxes, gas prices, food prices, labor prices or any other price. The issue is not whether people change their behavior when relative prices rise or fall; it is always how soon and the magnitude of the change. Thus, with minimum wage increases, it is not an issue of whether firms will economize on labor usage, it is how much they will economize and who bears the burden of that economizing.

Thus, it is easy to see how two groups of honest and caring people with the same concern for low-skilled, low-wage workers can advocate polar opposite policies. They simply have different visions of how the world works. Convincing people how the world really works, in the hopes of promoting better policies, requires examination and falsification of false visions and premises - a yeoman's task.

Walter E. Williams
Ideas on Libery, October 1999
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