Macroeconomics

From what I gather from economists, the deep solution to combating poverty and equality is a negative income tax (or variant of). Rather than transfer money from employers of minimum wage jobs to employees who have minimum wage jobs, a negative income tax transfers money from all tax payers to all people who are poor. This makes a negative income tax both fairer and less distortionary than a minimum wage.

Roughly half of economists agree (though it varies according to the survey) with the above story, and as such, are against a minimum wage. The other half believe the story, while correct, is incomplete, and complicating real world factors open up the possibility that a minimum wage could be somewhat effective in certain scenarios. Daniel Klein conducted a survey of economists' opinions on minimum wages here, where these were the most common reasons given in favor of a minimum wage:

A. Equalizing an imbalance in bargaining skills (i.e., bargaining experience, articulateness, confidence)
B. Inducing employers with monopsony power to increase employment by their firm.
C. Inducing a transfer from employers to (generally less well off) workers, albeit with possible small disemployment effects.
D. Coordinating the low-wage labor market by making it common knowledge that jobs pay at least $7.25.

Economists against a minimum wage contest each of these points, and furthermore, accuse their economic opponents of politically and ideologically motivated opinion forming. In some cases, the opponents do not even deny it, one describing a minimum wage as "A low cost demonstration of concern for low wage workers that causes little damage. Elicits a buy-in by low wage workers to the polity". Critical commentary here, here, here, and here.

As a non-economist, it seems plausible that a minimum wage might have a small positive benefit in certain scenarios. The evidence is however underwhelming (it echoes to me of climate skeptics who say CO2 won't actually cause warming due to a complicating effect like a negative feedback - when in doubt I put my money on the simpler explanation). The larger point really seems to be the effect of a minimum wage is at best quite small, which is part of the reason its effect has been difficult to empirically measure. Those who tout the minimum wage most strongly, which are the politicians and union leaders, are clearly after securing political points rather than a real solution to poverty and inequality.

A final note: before I researched this I assumed there was an economic consensus on this issue, and in fact, according to Harvard's Greg Mankiw here, 79% of economists agree that "A minimum wage increases unemployment among young and unskilled workers", which is why Greg includes it in his list of top 14 public issues that economists agree on. However, he says here that "One issue that fails to generate consensus is the minimum wage: 37.7 percent want it increased, while 46.8 percent want it eliminated.". While these statements might be logically compatible, they leave non-economists like myself a bit baffled. No wonder the public end up believing whatever the influencers want to tell them.

I view with suspicion the fact that Osama Bin Laden is the second person listed under disagree.

Capitalism is evil. Ask your priest.

Like all price floors it creates a surplus; it necessarily creates unemployment. I don't know how much, but it can't be helping.

To the best of my knowledge, Ben Bernanke was the single greatest actor in mitigating the effects of the recession. He did what Ben Strong would have done.

Yes. Wealth. Cultural diffusion. Major driver of development.

A core reason capitalism works is that it's based on a predominantly selfish view of human nature that meshes nicely with evolutionary psychology, while its alternatives are based on romantic notions of human nature that people like to signal but do not live up to (ironically also for evo-psych reasons).

If we accept people act primarily out of self interest, and we want to maximize everyone's self interest, then the best system will empower each person. The alternatives require that the individuals whom comprise the bureaucratic power structure tasked with wealth allocation will resist the temptation to act in accordance with their nature.

It has been much more successful at creating wealth, promoting innovation, and raising the world's standard of living than any of its predecessors and the non-market-based alternatives that have been tried. However, as I don't believe in natural rights or hold any deontological values that inherently require unrestrained free markets, my preferences regarding economic policy are based on outcomes (measured by utility to humans; metrics like GDP might correlate somewhat to that, but they are not the same measure, and the end goal (very roughly speaking) is maximizing how happy people are with their lives and with the world); therefore, I support commercial regulation and social programs exactly insofar as they result in greater happiness than a pure market economy would.

Not that I would make a blanket statement that "x amount of regulation and wealth redistribution is good", even if I don't claim to know the value of x; it's not a matter of finding some specific "balance", but of trying individual programs and seeing what helps. In general, mixed economies seem to be viable and effective, e.g. in European social democracies.

Capitalism is about as good as any other system, whether it be Socialism, Communism, or anything of the sort. All of them usually result in an oligarchy gaining all the power or all the money and imposing their power on everyone else to, in turn, increase their power/money.

Sure, capitalism as modernly employed in the countries that define it is a terrible system. But so is Socialism. And so is Juche. The only countries that experience some success are those who try to achieve a balance between the two supposed "extremes" of economy. There is no right system. It's the balancing of tendencies according to the times what creates working politics.

The best strategy (that the government is actually capable of implementing) for government spending is to not try to optimize its effects on the economy, but to only try optimize for purchasing, at the best available prices, the goods and services the government needs to fulfill its functions.

The politician's syllogism both frightens and amuses me.

To rephrase the question, what is better:

1) Lower taxes, keep government spending constant.
2) Keep taxes constant, increase government spending.

My intuition is '1' is the best, because it's less distortionary. So why does '2' occur? Perhaps it's the "Politician's syllogism":

We must do something
This is something
Therefore, we must do this.

From Yes, Minister, here.

Money is a tool for facilitating transfer of economic goods. It is not wealth itself, but a representation of wealth. Government spending, whether funded by taxation, inflation, or borrowing against future taxation or inflation, reduces the connection between money and wealth. The government spending effectively steals buying power from those who produced the wealth, and uses it to demand different economic goods that are actually worth less to the economy. Government spending destroys the connection between what people want and what the economy produces. It is a drain on the economy and will prolong recessions. Worry less about money and more about wealth.

Removing barriers to Pareto improvements is generally a good thing, though one should acknowledge the issues that giving people more opportunities to make unwise decisions is not really helping them (though it is dangerous to presume you are more wise than them about what decisions they should make), of transition costs in adjusting to changing relative advantages, and that uneven "free trade", where capital faces fewer legal barriers to changing countries than labor, can create an imbalance of power.

We may need to reword this question or add another. The problem is that the Economist and Alan Greenspan supported the bailout, but only reluctantly, due to the fact they think the taxpayer didn't get a good a deal as they could have had the government acted earlier.

Need the economist's opinion here.

More related questions are needed:

Linking to the LTCM debacle (Long Term Capital Management).
Linking to a question about derivatives (which have been described by many including Warren Buffet as "Financial Weapons of Mass Destruction".

Another issue here: while financial issues have a huge effect on people's lives, the seed of the problems can be extremely obscure and frankly boring for the public to digest. The quotes to the answers here suffer from being indigestible. We need to get some quotes in this area that are as sexy as Sarah Palin but still logical (Warren Buffet is very good at explaining things to the public). (P.S. I'm not bashing Sarah here - she's doing what she needs to as a politician to appeal to her audience).