Minimum wage law starts with, say, the first approximation was a good intent.
In other words, the idea is, here are these poor people and they're making a salary below which the critic wouldn't want to live, or at which the critic wouldn't want to live,
and too bad these people have to work for a dollar an hour or whatever the amount is,
and therefore something should be done to help them, and the therefore consists of passing a law saying from now on nobody's allowed to work at, say, less than X amount per hour,
$1.50 an hour, $2.00 an hour, whatever.
There are several problems of this looked at philosophically.
One is that if you want to help people who are making less than $1.50 an hour,
it seems rather peculiar way of doing it to start off by saying,
thou shalt not work at less than $1.50 an hour,
or thou shalt not employ other people below a certain amount,
because what happens if, assuming the law is obeyed,
what happens if the employer takes you at your word
and doesn't employ you at less than $1.50 an hour,
and there you are on the beach, getting zero per hour?
The law is a purely prohibitive law. All it says is, we make it illegal for anybody to work at or anybody to be hired at less than a certain amount.
Okay, so what happens if you're not hired at that amount? Period. Presumably the fact that the person was working, say, at a dollar an hour meant that he preferred working at a dollar an hour because there was no income whatsoever.
And yet he is now being deprived of this choice because now the government is saying, you cannot be hired for this amount.
In the beneficent structure of government intervention to help all sorts of people, the consequences of many of these actions are overlooked.
If you say, we want to help these poor people, these marginal workers, as we call them, if you outlaw their being hired at what the marginal amount, the net result might well be and will be, but they won't be hired at all.
What you're doing in effect, you put wage rates on the y-axis, put quantity of labor hours purchased on the x-axis, which is versus our old supply-demand diagram, and you have a demand curve for labor falling, a supply curve for labor rising, the intersection point of the free market wage rate, the government puts this minimum wage law above the free market point, if it puts it below it, of course, it's simply inapplicable, it's rhetoric.
In other words, if the government passed a law tomorrow saying it's illegal the pain of death, torture and whatever to employ anybody for less than 10 cents an hour, it's not going to have much of an impact. There's very few people being employed at 10 cents an hour.
So we have the minimum price control line above the equilibrium point. In this case it's wage control, but the principles are the same.
In the case of the farm prices, farm production, the set of soybean prices or wheat or whatever above the market level,
you say nobody should be allowed to buy or sell wheat below that, you set up a situation where the supply of wheat is greater than the demand for wheat and you have an unsold surplus.
In the case of wheat, the government buys the wheat and stores it unused in various warehouses.
The taxpayers and consumers lose because of this.
In the case of labor, supply of workers at the higher amount of such-and-such is the
supply line.
The man for labor is now lower, lower the supply, we have now a gap created by the minimum
wage law, an unsold surplus of labor, also known as unemployment.
When you talk about unemployment, by the way, distrust all economists, this is sort of a
general rule, not just for wages, for anything else, distrust all economists, never talk
Let's talk about the price system, and you find this through many establishment economists,
Keynesian and so forth, that there were all sorts of elaborate models, but somehow the
actual guts of the system get left out.
Same way with unemployment.
It's sense for us to talk about unemployment without talking about at what price, at what
wage are you talking about.
For example, if a businessman is selling furniture, say tables, and he says he's wailing about
unsold surplus, he can't sell at a surplus, he's charging $10,000 for a table, the guy
The solution then is to work with the price until they can sell the inventory.
It's the same way here in the labor market.
Anybody can be unemployed if you raise your wage rate high enough.
If I let it be known to everyone in sundry that I will not work for less than a million dollars a year, I'll meet my high standards by not working at all.
So talking about unemployment is senseless without saying unemployment at what wage rate are you talking about.
If I brought my wage rate down considerably, I could probably be employed as I am now.
There's a sad case of a quaint long-standing, who was a free-market economist, who writes
about minimum wage laws quite intelligently, yet in his own personal life has applied this
peculiar principle.
Fifteen years ago, he decided that he was worth a certain amount.
He would not take a job for less than that, and that was pretty high, those of us who
knew him was considerably above his marginal productivity, as a result of which he has
In other words, you render yourself unemployed by upping your wage rate, your minimum wage rate.
In the case of the minimum wage law, it's the government that does it for us, or for the marginal workers.
People who become surplus, in other words, the unemployed people who become unemployed, are the very people whom the government is supposed to be helping.
If you jack up the minimum wage law, say to $1.60 an hour, the guys who will be unemployed will not be the $10 an hour people, they're in great shape.
The marginal workers, the ones who are getting about, say, $1.50 an hour, will be tossed
out of employment.
It's a beautiful case of negative feedback.
What happens is, of course, is the supply curve of labor being pushed to the left, in
other words, the supply curve of labor being restricted, and people who continue working
are really benefit from this because their competition is being excluded from the market,
which leads us to believe that perhaps one of the reasons why organized trade union movement
is always very much in favor of minimum wage, almost the higher the better, because if you keep jacking up the minimum wage to $1.60 an hour, $2, $2.20, $3, etc., you're kicking out marginal workers from the labor market.
They're not available to compete with existing union members with seniority and so forth.
As a matter of fact, much of the social legislation in the past 50 years can be looked at for 70 years as a result of this kind of pressure.
and pressure, both for businessmen and unions, keep out competition, in the case of labor,
it's the union movement, keeping out immigration, for example.
AFL, which was the trade union federation in the 1920s, was the major lobbyist responsible
for keeping out immigrants, for changing the United States from a free immigration system,
which it was since the 1770s, to a very tightly controlled situation, a quota system and all
the rest of it.
This is brought about by AFL, which is a supply curve of labor to the left, raise the wage
rates of those who were lucky enough to be emigrants before 1920.
Just as licenses restrict people into the medical profession or to the photography business
or whatever, immigration laws keep out foreign laborers to compete with existing residents,
and minimum wage laws do a similar thing in an indirect way by rendering people unemployed.
In general, I urge everybody to look at government measures, not in terms of the public welfare, the common good and all the rest of it.
Not in terms of tragic failures to achieve this.
Of course it is.
The government is doing all sorts of stuff, seemingly for the public interest, the common good, the general welfare,
all of which are usually inimical to all these things, if we can even define them.
But to look at government in a very different light is a conscious agency for doing all sorts of monopolizing, cartelizing, restrictive things.
In other words, the government is not that dumb.
For example, compulsory attendance laws and keeping kids in school for umpteen years keep
an enormous number of kids off the labor market.
So instead of kids working, they're forced to go to public schools or high schools and
being kept off the labor force, the quality of the education they get, as we now know,
is pretty bad.
So the public schools perform a custodial function of keeping kids off the labor force
and all sorts of other measures, for example, urging everybody to get an AED, urging everybody
and so on.
We have this kind of deliberate restrictionist policy in the labor market, the child labor
legislation and we look upon it in a different light, instead of being a bountiful legislation
to help kids, what it really is is a legislation to keep kids off the labor market.
Back in the early 19th century, it was considered a great boon for the kids to be on the labor market, because they were working instead of starving at home.
Almost nobody felt that the kids were being exploited if they were working in a textile factory.
It's only later on, looking at it from the point of view of a much more affluent society, when you don't have to have kids working in the factories,
we look upon all of this with horror. But at the time, it was considered a great argument for factories.
One argument the protectionists used, the free traders were never able to really meet.
The protectionists say cotton factories are a great thing. We should deliberately subsidize them or restrict them in imports so that we can employ more kids in the factories.
And the free traders never answer by saying you're a bunch of monsters and you're a favor of hiring kids. They have to concede it's a good thing that the kid's working.
Anyway, now we have a complete reverse of this, where kids are being excluded from the labor market by all sorts of legal measures, in addition to compulsory tenants but also child labor laws.
The true historian looks at measures of government like this. First he says qui bono, who benefits
from government measure. You look around, you find the unions benefit from child labor
laws or minimum wage laws or immigration restrictions. But then you don't stop there. You see, this
is a sort of unsound conspiracy view of history. There's a rational conspiracy view of history
as an irrational sort of sloppy conspiracy theory history. The sloppy view only says
The true conspiracy theorist, the rational conspiracy theorist, and then he looks more
deeply and looks at who caused these measures, who brought them about, who lobbied for them,
who keeps lobbying for them, and by God, he finds it's the labor union.
This confirms it, this makes him a scholar instead of a hopped up paranoid, so scholarship
is essentially confirming your early paranoia, to a deeper factual analysis when we get to
monopoly and so forth, the same way the Rockefellers in oil or whatever.
It's not enough to say the Rockefellers always benefit from every government measure.
You have to go into detail to find out if they really lobbied for it.
You find, I guess, indeed they did, and then that wraps it up.
You see, the thing about the minimum wage people, they resist this.
And that is to say, all right, if you say that the minimum wage laws don't create unemployment,
And the minimum wage people have indeed been fairly intelligent in limiting the minimum
wage to only disemploying a certain amount instead of disemploying everybody.
They're limiting this.
As a matter of fact, I saw an interesting journal article a year or so ago, trying to
analyze the minimum wage advocates, concluding that, well, what they do is they keep the
minimum wage low enough so as not to disemploy the majority of the labor force.
You start disemploying, say, 51% of the labor force, and it's getting kind of hairy, losing
your constituency.
If, on the other hand, you only disemploy 10, 20, 30, not so bad.
So there's a certain psychological or political limit, I should say, on the minimum wage laws.
But in theory, of course, the minimum wage advocates don't acknowledge this.
They don't sit down and say, yeah, you're right.
It might lead to some unemployment. They just sort of stop at $1.60, $2.20, whatever.
Something in their gut must tell them that there's something wrong with pushing it higher.
Of course, what's wrong is you're disemploying people, and if you're disemploying people at $10 an hour,
and also be disappointing people with two dollars except less. What you're doing is
the majority of labor forces oppressing the minority, the disadvantaged, the
marginal workers, the very ones that everybody's weeping about, these are the
people who are being put on the beach, are being disemployed by the so-called liberal
humanitarian action, the minimum wage laws. Interestingly enough, I've had
conversations with intelligent minimum wage advocates, you go through a
little bit of this and they will acknowledge they're going on to a higher
The second line of defense for minimum wage laws is, okay, you're right, they do
disemploy people, but it's a good thing because people shouldn't be forced to, in quotes,
work at this demeaning wage.
It's better for them to be on welfare, it's better for them to be unemployed and living
on welfare, and then to be working at less than $5 an hour, or whatever the rate is.
And here we reach a kind of a moral impasse.
What do you do with people like that?
Well, I'll leave it to your imagination.
In other words, really, down deep in there, exactly, we'll acknowledge this fact. We really don't care about it. We're almost in favor of it.
There are various examples of this. Even in the George Stiegler, I think, one of his early editions of The Theory of Price,
talks about what happened during the 1930s when the first federal minimum wage law came in.
I think it was 40 cents an hour, and that sounds very low. But for the 1930s, it wasn't that low.
We have to consider the prices of whatever it is, triple or something, since then.
There were quite a few people who were making, say, $0.30 an hour, who were disemployed by the $0.40 minimum.
And Casey Yeh was the clam diggers, this cannery road pipe, in John Steinbeck's novel, were out there clamming in California.
And the thing is, the clambers were making $0.30 an hour, which sounds horrible, but the point was, they went out there, it was mostly Mexican-American clambers.
Many of them had a large, I realize this is a stereotype, but still it's true, many of them had a large family.
And so all of them went out there, the husband, the wife and the eight kids would go out in the clam boat, and they all clam for 30 cents an hour,
the result of which was a fairly decent income for the whole family.
The 40 cent minimum wage came in and disemployed the whole group because the 40 cents didn't pay for the canners, etc., to hire them for the clamming,
so they all became unemployed and Steinbeck came around and wrote heart-rending stories about the unemployment and cannery row and so forth,
Not, of course, realizing this was due not to capitalism, but to the minimum wage law, even at 40 cents.
There are other cases of this in the minimum wage law.
For example, the minimum wage law is often exempt various industries.
Coverly, they exempt the low-wage industry, like restaurants, agriculture, etc., etc.
And they do it not because of the evil political influence of the agri-business or the restaurant business,
because they're not that powerful anyway.
They do it because they realize deep in their gut that if they extend it as quickly to everybody,
It'll be unemployed. You have a vast amount of unemployment in agriculture and restaurant business sector.
They do it very gingerly and sort of step-by-step.
In other words, just enough to disemploy a few people and not everybody.
Disemploy a minority.
Once in a while, you have sort of case studies and they extend minimum wage laws and suddenly everybody's out of work.
New York Times had an article, I don't know, four or five years ago, it was about
when minimum wage laws were finally extended to cotton plantations in, I think it was Mississippi.
There's a whole front page article, because even the New York Times at this point can understand the relationship between minimum wages and unemployment, because it was immediate, it was clear, it was sort of immediate feedback.
All of a sudden on January the 1st, whatever the date was, minimum wage was suddenly extended to the previously exempt industry, cotton plantations, and bingo, 10,000 cotton plantation workers are out of work.
It was a very quick and obvious kind of situation, even in the times when they could grasp this.
I don't think they extended it to the rest of their philosophy or anything, or even to the rest of their ideas on minimum wage laws,
but at least for this particular point they could grasp this.
What happens to these 10,000 people? Either they go on welfare in Mississippi or they come up to New York, go on welfare or work.
But the point is that being unemployed from what they wanted to do, would have preferred doing,
rather than schlep up to New York and looking for work here.
So we have this situation constantly. The minimum wage laws are constantly causing this unemployment.
Another case, again, this sort of exemption kind of case, where it's again very clear, it was a few years ago also,
when minimum wage laws were extended in the crab packing industry.
Crab packing is a situation where, particularly in North Carolina, crab packing is a marginal industry.
Reason being, North Carolina is a very peculiar state because there's no port.
In most southern states, for example, have a big port somewhere, Charleston or Savannah or whatever, but in North Carolina, there's no real port. All the big cities are inland. Of course, crab packing has to be done on the coast.
So there's a high transportation cost to get the crabs, to pack the crabs and ship it to the major centers of consumption.
Because of this, North Carolina crab packing firms are the most marginal in the whole crab packing industry.
Well, sure enough, some few years ago, minimum wage laws were extended to the crab-packing and bingo, a whole bunch of North Carolina crab-packing firms go bankrupt and a whole bunch of North Carolina crab-packing employees are rendered unemployed.
Tens of thousands because of this. Again, we had a kind of immediate situation, which is fairly evident.
Talk about unemployment. Who are going to be these marginal workers? Are they going to be the least skilled workers?
Why are they at least skilled? This is a philosophic point each economist need not get into. Less educated, maybe a less skilled period, maybe it's their culture, whatever it happens to be, at this point happen to be at least skilled.
Teenagers, for example, are usually less skilled than adults because they're just starting out in sort of an apprentice situation. Negroes, for various reasons, are less skilled than white workers.
So we would expect then, if a minimum wage law comes in, to disemploy more highly and more proportionately, one teenage workers and two negro workers,
and either whites or adults, and we will see how this works in a minute.
Before getting to the figures, I should also talk about unemployment rates. Unemployment is defined as, in a numerator, you have a number of people seeking work.
Obviously not working at the present time, and in the denominator you have those working
plus those seeking work.
The denominator is called the labor force.
The labor force, in other words, the number of people who both have jobs and are looking
for a job.
So this is the number of unemployed divided by the labor force, this gives you the unemployment
percentage, which we read every month, you know, 5.5% or whatever happens to be, this
gives you the ratio.
How do you know who's seeking work?
Well, that's, of course, a very difficult problem.
It calls for all sorts of higher radiosynation, empirical investigation.
We don't really know. It's a very tricky kind of thing.
But at least, presumably, in looking at changes in the unemployment rate over a few years,
you can sort of say, well, it may be fairly accurate.
But it's a problem. No question about that.
Statisticians are in very bad shape here.
On one hand, it can be people who are not working who don't want to work.
On the other hand, there are people who might not be seeking work because they're so discouraged
The minimum wage who pays, that's the title.
There are lots of other studies, incidentally, on minimum wages, all of which confirm the
theory, illustrate theory, I should say.
But the Freeman-Broser thing, I think, is the most dramatic, as far as I know.
Nobody's really attempted to refuse it.
It's just a very, very, very, very, very, very, very, very, very, very, very, very,
very, very, very, very, very, very, very, very, very, very, very, very, very, very,
The Federal Minimum Wage Law, Federal Minimum Wage Rate, The Percentage of Negro Teenage Unemployment and White Teenage Unemployment
I should say again about unemployment rate.
We see a lot of juggling with the rate,
but usually it was considered full employment.
In other words, it's a situation where you consider
everything is sort of hunky-dory.
Full employment used to be something like 3%.
For one thing, you have to have a certain percentage,
even if you have a very booming economy
and no problem in labor,
people, especially in the United States,
people will be leaving work and going somewhere else,
leaving occupations or shifting to something else.
They move from New York to California.
All this takes some time.
During this time period, they're unemployed officially.
This unemployment is called frictional unemployment.
It means that this is part of a friction of moving
from one place to the other.
This frictional unemployment rate is considerably about 3%.
In England, it's something like 1% or 2%
because in England, first of all, people don't move very much.
And second of all, if they have to move,
they haven't got very far to go.
Small country.
In the United States, however, it's a big, huge place.
And if you move from Massachusetts to California,
you're, it's a long undertaking.
and the whole, the whole frictional process of quitting and readjusting and finding another job, all that stuff.
Three percent. Recession rate. Well, that's kind of difficult. That's what you mean by recession.
The sort of recession rate is something like six to seven percent or five to seven or whatever.
Let's call that a recession in employment.
The thing is they've been redefining full employment recently because the employment rate used to be considered three percent.
And everything is great, right? So this is one way of doing it. If you can't solve a problem, you redefine it out of existence.
Recession rate, let's say 6-7%, a really depression rate, a really hot shot rate of, say, 10% unemployment.
That's really a rough rate, which we might be getting to fairly soon, I think, if the government messes up the energy crisis as it has been doing.
doing, and then you have the 1929 rate, the really super depression rate, which continued
approximately from 1929 to approximately 1940 when the government got us out of the
depression manufacturing a huge world war.
In that situation, we have unemployment rates of, say, 25 percent, that's a really rough
one, 20 to 25 percent.
See, one way the government gets you out of unemployment through a war, if there are ten
million unemployed, let's say, you draft the ten million to the army, then you've got no
Minimum Wage Laws is one great way of overcoming minimum wage laws, that's inflation.
In other words, if suddenly the government jacks up the minimum wage to $5 an hour, let's
say, half the population might be unemployed, the way to overcome this was one way to repeal
the law.
A crappier way to overcome it is by inflating so much that $5 doesn't mean anything, it's
about the equivalent of a dollar, and you wipe out unemployment that way.
The crappier way of doing it.
Before 1949, the Negro teenage unemployment rate was something like 8%, and the white
The unemployment rate was 8%. Teenage unemployment rate might tend to be larger, less mobile, etc.
You still have, 8% is fairly large already if you're looking at the sort of recession level,
but fill-in-the-wall wasn't too drastic, and the rate was the same for Negro and whites.
And the interesting thing there is we now talk, economists now talk about the Negro-white teenage unemployment gap
as if it's some sort of God-given phenomenon. But before 1949 it wasn't.
The unemployment rate was the same for whites and negro teenagers.
Okay, then comes the first big jacking up of the minimum wage rate, 75 cents an hour, in 1949-50.
It takes about six months for the economy to rev up and adjust to this stuff.
Within about six months, by God, we suddenly have the white rate goes up to about 11 percent, depression level.
The negro rate goes up to 14 percent, which is a lot higher.
This is the beginning of the famous gap.
The Negro-White-Teenage-Unemployment Gap is a function of Minimal Wage Law. It comes in with a 1949 change in the law.
Then comes, unfortunately for most of us, fortunately, however, for the unemployed labor force,
then comes the Korean War. Big boom, big draft, inflation and so forth. Korean War comes in.
1950 to 1953, and the thing sinks back. It goes back to eight and eight.
We're back to eight and eight. Everybody forgets about the Negro-White unemployment gap.
And everything's hotty-totty except we're killing Koreans and they're killing us and so on and so on.
On the minimum wage front, everything's great.
The white rate goes up from 10% to 14%, which is bad enough.
The Negro teenage rate, however, makes this big dramatic breakthrough leap to 24%.
So, now we have a Negro teenage unemployment rate at 24% super depression level, 1929 depression level, which might have some correlation between that and Negro rioting going on later, certainly not implausible under that.
You have one quarter of the teenage population seeking work and not getting it, and that might cause a certain amount of edginess in the population.
And this continues from then on. The point is, we now reach a big new plateau of minimum wage unemployment structure.
Here we have the big Negro-white unemployment gap, which continues forever from then on.
It's a permanent part of the American heritage.
And we have a very high teenage Negro unemployment ratio, which also continues to the permanent part of the American heritage.
And that's it. And it was almost as if the diabolical hand was at work, because then from then on, Freeman and Rosen show that
every time the unemployment rate would dip a little bit, Congress would jack up the minimum wage again.
In 1966, Freeman and Rosen wrote their article to point this out and say, look, this is what's
been happening.
And they were then debating a great new breakthrough in minimum wage, which is to raise the minimum
wage of $1.65 an hour from $1.25, I think, that we're ahead of reach by these little
And Friedman warned, went down and testified before Congress and warned that if you do this, if you raise the minimum wage rate to $1.60 an hour, you're going to have 33% unemployment, teenage negro unemployment.
And they all said he was crazy, he was ridiculous, no relation whatsoever between minimum wage and employment. Sure enough they put it in, and sure enough within a year or two, teenage negro unemployment rate was up to about 33, 34, 35, where it remains to this day.
So, we have 35% unemployment. Now, according to Brozen, who I have personal contact with,
the rate is really much higher, because it includes the seeking work part. A lot of teenage
negroes are discouraged, are really seeking work and are discouraged because there's no
point in seeking it, no point in going down to the office and whatever and trying to find
a job. To include all that in, the rate is something like 60%. So, you have to have this
The second line of defense of the advocates of minimum wage as well, they don't deserve
There are also more sinister forces at work. I've already mentioned labor unions, restricting
the supply curve of labor, pushing it to the left. For example, in the Friedman-Brosen pamphlet,
Senator Javits, a speech that he made in the mid-60s, before Congress or the Senate, defending
a higher minimum wage.
And what he said was, we can't allow the product of cheap labor to come up from the
South, where wage laws are lower, to interfere with or outcompete our heroic textile manufacturers
in New York and so forth.
And here we touch on another important nub of the situation, which is the use of imposing
In this situation, we have a kind of a regional thing in the United States where the North
has been industrialized much faster than the South.
As a result of that, since the marginal productivity of Northern workers has been higher than Southern
workers because of the increased capital investment, Northern wage rates have been generally higher
than Southern wage rates.
The result of this situation in a free market is a two-fold tendency toward equilibrating,
a long-run equilibrating of this situation.
One through southern workers moving to the north and taking advantage of the higher wage
rates and thereby tending to raise wage rates in the south and lower them in the north and
bring them into equilibrium, and secondly the tendency of northern employers and northern
capital to move to the north or the south to take advantage of the lower wage rates
there.
This tends toward industrializing the south.
This is a general and long run tendency.
This general and long run tendency is particularly important, unfortunately, in those industries in the North, which are marginal anyway, which are inefficient, obsolescent, and so forth, such as textiles, such as printing, etc.
We can do much better by going out to the South, having a much better labor pool, cheaper land prices, and so forth, and so on.
So, we have a situation where indeed the printers, southern printers and southern textile manufacturers can have some peace.
and Northern.
What the Northern manufacturers would like to do, what they love to do, is to have a
tariff line at the Potomac, a high tariff barrier, because they can use the same bloody
arguments that they do against Chinese and Japanese labor and African and so forth.
We are forced to compete with these terrible low-wage employers, except in this case it's
within the United States.
So the point is, it's the same sort of argument.
The fact that there's no national boundary between us is really not important.
The Northern manufacturers have turned to a subtler device, the inefficient one, which
In other words, you're imposing higher costs on everybody, supposedly, yet most of the
people being hit are the southern competitors.
As I say, Javits spelled this out blatantly in this speech.
What we have here is an unholy alliance between liberal humanitarians, I don't know what they're
doing.
We have a lot of CIO people who know very well what they're doing, and inefficient Northern manufacturers also know what they're doing.
These latter two forces are being largely responsible for the money and the muscle in the lobbying for the increased minimum wage.
So we have, once again, as in many other things, we have an unholy alliance between really headedness and sinister interest,
both working hand in hand to the disadvantage of the rest of the population.
There's a very good paperback book by Stewart and somebody on the economic effects of minimum wage laws, which goes into lengthy analysis.
One of the things they found out, for example, is the result of minimum wage laws in the textile industry and other industries has been an increased concentration in the industry.
In other words, to particularly bankrupt the smaller employers who can't afford to pay a higher wage rate.
Another sinister interest at work here is larger firms within the same industry have to put hobbles on the competition of the smaller competitors, drive them out of business or quasi-bank problems.
This is true of social legislation in general.
That, I think, covers the minimum wage.
I also want to wrap up the whole labor sphere, the whole population question.
There are fans in population. There's a lot of population hysteria now. The thing is I'm at this point old enough to remember population hysteria in the opposite direction.
When I was growing up in the late 30s and early 40s, there was lots of population hysteria, except it was the reverse of the present one.
The idea then was too few babies being born. In France, for example, the birth rate has fallen considerably for the last previous 20 years.
They were talking about racial suicide or national suicide in front of the French population. There would be no Frenchmen left in 50 years.
and also all these countries needed a lot of people a lot of young physically fit young men are going to the army and get shot and the source of that cannon fodder would dry up
that was a terrible thing so there's a big intellectual and cultural push for a larger population and as I say the population hysteria then was in that direction
Right now, last few years, of course, the fashion is just the opposite. So anytime a
baby gets born, there's practically almost a bonfire lit outside the test. And we have
a zero population growth group, etc., etc. But we have, I think, a very similar kind
of irrationality in part of both forces. One of the points is, in general, in an economic
analysis of population is that usually you've got about the population that you need in
in the sense that the population, the quantity of population is usually about what, in the long run, about what's needed, about what's best for the capital structure and the degree of market, the division of labor, and all the rest of it.
And so what's overpopulation in one area might be, or in the same area, might be underpopulation in very different circumstances and vice versa.
For example, you all know about the evil Sparta.
Sparta was the first case of community population control. It was a rather rigorous case. It
was a case, even our current big ZPGP will might walk a wee bit of the Spartan method.
First of all, you have to remember the Spartans had no Fifth Amendment and no Bill of Rights
or any of that stuff. So they went all out. The Spartan situation, the Spartans in ancient
Greece, any new Spartan baby would immediately be put out in the woods at night for 24 hours
by itself. If it died, then it was too bad. It showed it was unfit for the rigors of Spartan life.
And if it lived, then it was accepted into the community and raised. This was a primitive method of population control as before on modern techniques.
The reason why the Spartans did that is not because they were total monsters,
but because they were somehow anti-baby in some philosophic sense. The reason they did it was very simple.
They were living in a static society. There was no free market, to say the least.
When you have a caste kind of system, you have a non-free system, a pre-industrial society or a post-industrial society which is so controlled and restrictive, they can't do much.
And so the Spartans did it up because they were philosophically anti-baby because they were driven to it by these economic considerations.
On the other hand, Athens didn't have to do it because Athens was a flourishing market kind of economy and they were highly commercialized.
It didn't suffer from any kind of overpopulation question.
So, again, what the optimum population is depends very much on what's going on in the whole system.
For example, the North American continent, when Columbus discovered America,
the North American continent, including Mexico and Canada and the United States,
had approximately a million Indians total. It's very difficult to figure out.
Say a million Indians is about it. These million Indians were not exactly living in an affluent state.
If there had been 10% more Indians, they all might have starved. They were in a very limited kind of system.
But the million Indians are just about the right population for the economic terms for the whole land area of the North American continent.
Now, of course, we have something like 400 million living in the same place area where a million Indians have lived,
all of whom are living in a much higher living standard, even the poorest American and Canadian, a much higher living standard than the average Indian.
And without too much trouble, the reason being, of course, the difference in increased capital investment, the productivity, the whole market economy which comes into the picture.
So 400 million Indians back in 1490 would have been a holy mess, an unholy mess, I can say, with everybody killing each other for a few pieces of food that were left.
400 million people now are in fairly good shape.
So again, the population is not sort of an absolute from outside. It depends on the economics of it, it depends on what's going on with the capital investment, with the whole standard of living, the production system and so forth.
You can't really isolate one from the other.
To give you an example of our population right now, even not just talking about the Indians,
countries with a very high population density, probably the highest population density is say Holland, at least one of the highest.
Holland has an enormous number of people per square mile, yet they have a very high standard of living.
Japan has a very high population density, has a high standard of living, growing.
Hong Kong has a huge population density, an enormous number of people, practically no resources at all, has a very high standard of living.
On the other hand, there are many very poor areas in the world which have a very low population
density. Many parts of South America have very few people in it. A few Indians living
on practically nothing. Here you have a situation of very low population and low standard living.
Many parts of Africa have very few people in it too. See, our image of the teeming masses
in underdeveloped countries is really mostly in Asia. But when you get to Africa and South
America, they have a very different kind of situation. Even in Asia, as I say, you have
In Hong Kong, we're doing very well. Also in China, which is technically highly populated at least, most of the population is in the coastal areas. Inland, you have very few people. There's really no correlation between population density and living standards.
Within the United States, the ZPG-therics have reached a hysterical combination, just
to the point, by some kind of tragic irony or whatever, or non-tragic irony, just to
the point where the population growth is decreasing, it's leveling off.
In other words, in the last few years, we've had a big leveling off in the birth rate,
and which will presumably continue, helped a lot of ZPG people, but certainly a trend
which started before ZPG will continue on after, because for various reasons, economic
and Culture, etc. Birthrate is leveling off very rapidly and we'll get to a ZPG point
in a couple of years at this rate. It's sort of typical, characteristic. The high point
of ZPG hysteria comes to the point where the ZPG goal is being achieved anyway. Basic reasons
for this, fairly simply, the first thing that happens when you industrialize, this is what
happened in Western Europe, it's what happened in the underdeveloped countries in the 20th
century, the first thing that happens vis-a-vis population is they cut the death rate. Lots
In the 19th century England, you had a big increase in population, the same way in many
20th century developed countries, and what has always happened up to a mile, which seems
The thing that seems to be fair, a bit fair to happen in the future, is as the economy
develops, as the standard of living goes up, each family decides to cut their birth rate
because they don't want to have eight families at risk.
For one thing, if you have eight kids in a farm situation, rural farm situation, it's
usually an economic asset because each kid at the age of, there's no child labor laws
on the farms, each kid at the age of five or something is not milking the cow or whatever
else.
And so kids are usually in that economic asset for the farmer, but as you urbanize and as
As you must realize, this isn't true, as I mentioned before about the keeping child labor out and child labor laws, even so, even without that, I presume that kids will very often be in that economic liability for the parent for a long time, if not forever.
So kids in urban America now are really consumption goods rather than investment, rather than a factor of production. As the kid gets older and goes off on his own, he doesn't plow back much money that the parent offers anyway.
The kids, as far as the parents are concerned, have a net economic liability. It might be a great psychic asset, but economically there's a liability, so as a result of which, and it doesn't take a great genius to realize this, you have big cuts in the birth rate and few, whereas as the economy develops and industrializes and urbanizes, the birth rate tends to fall quite dramatically.
I can tell, even though this is journalistic, in my own family, my grandparents, great-grandparents, had about eight kids, eight kids from both sides, and my grandparents had less than that, and the present generation has like one kid apiece of that, or two.
So there's a big falling off in birth rates as the people start living go up. I presume this will continue.
So you have an initial cut in the death rate. This causes a big increase in population.
In the United States, everything appears to be too crowded and books have been written.
Jacques Ellel, for example, who is an interesting phenomenon.
L.L. is a French reactionary, the deepest dye, reactionary in the truest sense, he's
a Calvinist nut, wants to go back before the industrial era and go back to everybody weaving
his own boots and all that sort of stuff.
He hates technology with a purple passion, so he has made great cause with the new left,
which has very different reasons to hate technology, and I was thinking of L.L. as being some sort
of a new leftist, and they should only know.
At any rate, L.L. talks about the good old days, the glorious old days, the middle ages,
in the United States, the 1970 census showed that from 1960 to 1970 there was an absolute
for All in Population for, I think, one third of the counties in the United States.
Decline in population. That's just a leveling off of growth.
You have a lot of ghost towns out there.
The Middle West and the Southwest, if you've seen the movie Last Picture Show,
you see the depressing picture of the total collapse, a gradual collapse of this town.
People leave, people go to the big city, and so forth and so on.
An absolute decline in a lot of population.
Also, there's a lot of land out there with no people on it in the West.
You might ask the question, who wants to go there?
That's a different question altogether.
The point is, lots of land, lots of empty spaces.
Even the inner cities have not really increased in population.
New York City has remained the same total population for about 30, 40 years now.
The same seven million.
And we haven't increased at all.
The thing which has increased in the United States, the population which has increased, is the suburbs.
No question about that.
But aside from the suburbs, there really has been no population growth worth speaking about.
and the total itself is leveling off.
The reason why we think it's more crowded is that people are too affluent.
As people standard living a lot, they zip around a lot.
They go to Europe, they go on vacationing and so forth and so on.
They make themselves visible, which they weren't before.
See, the medieval peasants here in the hut with the late pigs wasn't visible to anybody,
except for whoever happened to wander in.
Since there were no roads in those days, that wasn't very likely.
So you have a situation where things seem more crowded,
But it's not because of population growth, it's because people are better off and they
start to zip around a lot more.
And they come into the big city, they do all sorts of things which make things appear crowded.
I don't know what solution there is to that, this crowding thing, it boils down to either
going off to the hills of Montana and becoming a hermit, which is one solution, or killing
all these people, which is not a very libertarian solution, also not very practical, or hoping
In any case, the strains and crowding of a more affluent society becomes very helpful
in the economic sense to think in terms of, again, not population as an absolute but relatively
to the economy.
Look at this diagram, one more diagram to inflict.
In this diagram we have standard of living or growth per person, I mean product per person on the y-axis, and number of people on the x-axis.
And if we had no people at all, and if a great new play came out and wiped all of us out tonight, wiped the whole world out tonight, there won't be no production anymore.
So we started at the origin point.
And we keep growing up. In other words, what we have is, as we keep increasing the number of people, we increase the production per capita.
And so finally you reach a point where it reaches a maximum, and then levels will often start declining.
This is the standard of living again.
Now picture this maximum point, by the way, is called in economics the optimum point.
In other words, at this point, this is the optimum population.
The maximum population would be the zero that's on the x-axis to get up to this maximum standard
of living production.
Now the thing is, I don't like the term optimum, it's very unfortunate because it implies ethical
and ethical imprimatur.
It doesn't really have to do it all, it simply means maximum population and maximum standard
of living per person.
It doesn't necessarily have to be the ethical and moral optimum because it could very well
So people could say, well, I'd rather have more kids in the family and take a slight reduction in output, have five kids instead of two and have a 10% income cut.
Certainly not immoral for them to do this. So optimal population simply means really maximum population point per head for any level of population.
For every country, every economy, every capital structure, every technological picture, there'll be some different kind of, some different point.
The point is, again, for the Indians, it was far to the left of the United States.
The Indian population, let's say, was a million, for us it might be, who knows, more like 400
million.
Picture half the country dying tonight from some plague.
Let's say half the United States died in a plague tonight.
Let's cut the labor force factor here on the chart.
This would mean that we have a lot of factories and a lot of productive equipment lying idle.
This would cut the output per capita.
We simply wouldn't have the people to man all this stuff, which keeps the whole production system, the capital system together.
On the other hand, if we suddenly, Angel Gabriel came down and doubled the population overnight and cloned us all sort of magically.
You know, it's magic cloning with something that would be two Rothbards and so on and so on.
We have double the population, then we have again a problem because we have too many people per the machines or per the work for them to do,
and the production per capita would go down.
So we know pretty well if we either double the population overnight or halve it overnight,
We'd be below the optimum population point.
We don't know really what the optimum population is.
Point is, even the statisticians can't really tell us.
But we know conceptually, and we know pretty much
that the economy will tend to be, in the long run,
more or less what the optimum is,
at least not too far on either side of it.
You see, if you take the population growth,
you don't account for these trends.
You simply extrapolate the trend automatically,
as many of these statisticians do.
You'll wind up with 10 billion people
per square foot in the year 2200, or whatever the nonsense is.
The point I'm trying to say is that the economist looks upon a population problem with benign neglect, to use the term which is used in other areas, figuring a little subtle about the right way, stop bellyaching about it.
One of the reasons about the ZPG thing that's happened is because in the first two decades,
in the 1920s and 1930s, the first two decades after World War I, the birthrate in the United
States fell pretty dramatically.
There was a sort of continuing fall in the birthrate and the population rate in terms
of also, the rate of population growth was falling.
We were going to get to a, we were getting to a ZPG kind of situation for various reasons,
the growth of affluence, the fact that women were becoming more career oriented and so
and so forth and so on. And the whole culture had changed, the idea that the function of the family
doesn't necessarily have as many babies as possible, etc. So things were going on pretty well
for the ZPG types. When bingo comes World War II, and then we had a sudden shift,
an obviously one-shot kind of shift
in cultural values,
and the veterans came back in World War II, there was a big impetus for
baby things, an enormous shift back to the old idea that
The place for women is in the home, they're hanging up curtains and producing lots of babies.
That's presumably a reaction to the war, the fact that everybody was upset that they were going to die in the war and they wanted a sense of immortality and they were rootless and all that.
And the result of this was sort of a temporary 10-20 year baby boom and baby-oriented culture, we had for quite a while.
And I interpret the whole ZPG thing as sort of an hysterical shift back to what was, what had been the trend anyway before 1945 and probably continue to be anyway.
Anyway.
And so we're getting back now to essentially the affluent sort of more women working and
so forth and so on, which we were getting anyway in the 20s and 30s, which we're now
kind of coming back to.
Well, I think that's basically all I have to say about populations.