Minimum wage and the kludgeocracy

In this week’s EconTalk episode, host Russ Roberts talks with Steven Teles about the kludgeocracy. Teles wrote about the idea of a kludgeocracy in a Fall 2013 article in National Affairs. Some excerpts from the article:

If anything, we have arrived at a form of government with no ideological justification whatsoever. . . .

Understanding, describing, and addressing this problem of complexity and incoherence is the next great American political challenge. . . . For lack of a better alternative, the problem of complexity might best be termed the challenge of “kludgeocracy.”

A “kludge” is defined by the Oxford English Dictionary as “an ill-assorted collection of parts assembled to fulfill a particular purpose . . . a clumsy but temporarily effective solution to a particular fault or problem.” The term comes out of the world of computer programming, where a kludge is an inelegant patch put in place to solve an unexpected problem and designed to be backward-compatible with the rest of an existing system. . . .

“Clumsy but temporarily effective” also describes much of American public policy today. . . .

The most insidious feature of kludgeocracy is the hidden, indirect, and frequently corrupt distribution of its costs. . . .

Pursuing public goals through regulation and litigation does not eliminate the costs of government, but it does make it hard for citizens to see the costs of public action, which appear in the prices of goods and services rather than on the government’s books.

One part of the EconTalk episode that I found particularly interesting was about the minimum wage:

Teles: We ought to actually think about loosening up on the one form of government that we actually know best how to measure and control, which is taxing and spending, while putting more constraints on these other forms of government that we haven’t actually figured out how to control. Or even understand.

Roberts: Yeah. Another example would be the minimum wage, which is–economists debate whether it reduces jobs or not, which I find shocking. But it’s a fact; we don’t agree. And the alternatives are things like increase the earned income tax credit, or paying some kind of wage subsidy. But those come out of budget, so it’s much more attractive for politicians to just mandate that the private sector pay more. And it’s a tax. It’s a hidden tax. To me, most of the tax falls on people who lose their jobs or won’t find jobs or won’t get training because of this tax. It’s clearly–even if you think government should do something to help low-wage people, this is not one of the best ways to do it.

Teles: Right. And again, I think this is one of the ironies that the piece tries to put out, is that the only form of government that we actually know–literally down to the penny, we know exactly how much government is spending. We know exactly how much it is taxing. That’s all in the Federal budget; you can take a look at it. You think about the system of private litigation–the estimates people have of how much is being distributed through private litigation, just think about disability, the American Disabilities Act. People have incredibly wide ranges of a sense of how much we are actually spending through the American Disabilities Act. People have almost no sense of what the actual distributive effects are–who is actually benefiting from that form of regulation. That’s true of most of the places where we’ve tried to deal with some social problem through litigation as opposed to through other mechanisms. The same thing is true of regulation of which the minimum wage is one; we know exactly how much the Earned Income Tax Credit is costing us, but the estimates of who is actually paying the minimum wage and where, and what the incidence of it is, those are all pretty complicated and therefore hard to get people to actually focus on.

Roberts: Yeah, and it’s really hard to tell somebody: You don’t have a job because of this. Because you can’t show it. It’s not necessarily true. And so the people who would normally be against it don’t realize that it’s affecting them necessarily.

Teles: Right.

EconTalk, by the way, is a weekly podcast — I highly recommend it.