Tyler Cowen and Minimum Wage Debates

• Context: Tyler Cowen, an economist, is known for steelmanning arguments in economic debates, particularly around controversial topics like the minimum wage.
• Example: When discussing the effects of raising the minimum wage in his Bloomberg Opinion column, Cowen steelmans the argument in favor of it. Even though he might lean towards the view that raising the minimum wage could lead to job losses, he acknowledges the strongest arguments for it: higher wages can lift people out of poverty, reduce income inequality, and potentially increase worker productivity. By steelmanning this perspective, Cowen ensures that his critique of the minimum wage is balanced, well-considered, and addresses the best arguments from the opposing side. 

“The Democratic Party has before it a choice between two economic policies: a big increase in the federal minimum wage, to $15 an hour from $7.25; and a per-child cash benefit of several thousand dollars a year. The decision will have major implications, for the future of both the party and the U.S. economy. The cash benefit is clearly the better option.

One problem with the minimum wage hike is that it is not clear how many people are harmed and how many low-skilled workers will lose their jobs, especially in poorer, lower-wage states such as Mississippi, where $15 is the median hourly wage. Advocates point to papers suggesting that minimum wage hikes do not boost unemployment, yet a recent survey suggests that the preponderance of the research shows job losses.

Why then push so hard for a policy with such murky outcomes? It would raise the wages of many workers, destroy the jobs of some low-skilled workers, and perhaps lower the hours and thus pay of many other workers.

The burden of the minimum wage is unclear as well. Perhaps it leads to higher retail prices, although many proponents suggest it comes largely out of business profits. This too is unclear, and again raises questions about the wisdom of pushing so hard for such a non-transparent set of reallocations and transfers.

In contrast, consider the plan for cash grants to families with children. Under one proposed plan, these grants would be between $3,000 and $3,600 a year, depending on the age of the child.

The benefits here are obvious and transparent, namely that families are better off when they have more money. Perhaps some families would use that money in self-destructive ways, but this basic view — that more money increases the chance for better outcomes — is not really contested.”

Scott Alexander on Universal Basic Income (UBI)

• Context: Scott Alexander, a psychiatrist and popular blogger at Astral Codex Ten, frequently employs steelmanning in his essays to explore complex social and economic issues.
• Example: In one of his posts, Alexander explores the concept of Universal Basic Income (UBI). Even though he has reservations about UBI, he steelmans the argument for it by acknowledging that UBI could simplify welfare systems, reduce poverty, and provide a safety net in an increasingly automated economy. He also considers the best counterarguments, such as the risk of inflation or the challenge of funding UBI. By presenting both sides in their strongest forms, Alexander creates a more nuanced and comprehensive analysis of the issue.

“Isn’t basic income supposed to be universal? Yes, but most serious proposals accept that it will be gradually reabsorbed as higher taxes. People below some income gain money on net, people above the income lose money on net, and there’s some break-even point. I’m proposing the break-even point is somewhere between the poverty line and the top 1% – not in an abrupt way that forms a welfare cliff, but gradually according to the normal progressive tax system, and at a level so that we can imagine it abstractly as transferring money from the top to the bottom, with everyone else ending up about equally well-off, or getting gains and losses that cancel out.

This ignores the concern that higher taxes would stifle the economy, and the concern that the promise of a UBI would make more people quit their jobs and fall into the income stratum that benefits. But it also ignores the hope that lifting everyone out of poverty would obviate some welfare programs, or improve education, or bring other economic benefits. I don’t want to claim to be able to calculate all of these considerations, but order of magnitude estimate, we could give out a UBI sufficient to end poverty with a medium-sized tax increase.”