The Pinnacle Weblog

The Heritage Foundation

August 18, 2008

Gettng Government Out of the Way

By Edwin J. Feulner, Ph.D.

My commentary and opinion:

I used to love it when comedians, pretending to be Ronald Reagan during a presidential debate, would use that characteristic, good-natured line of Reagan’s, “Well…There you go again.” He would use that as an opening to refute a misstatement or misinterpretation of something he had said.

You see, in my lifetime, we’ve done things like raise the minimum wage. True to form, it does have an effect on the economic situation of Americans. They lose jobs. Companies can’t hire more people. Business is not like the government. It can’t just print more money and has to run efficiently to derive a profit. To all of you in Congress who voted for increasing the minimum wage (twice in 2007), well…there you go again.

You have invoked the law of unintended consequences. The Concise Encyclopedia of Economics in an article by Rob Norton defines the law. It is that actions of people-and especially of government-always have effects that are unanticipated or “unintended”. One Google search for this law yielded 426,000 results. After quickly scanning the first dozen or so pages one can see the word “government” on each page. This is a sure sign of the level of economic illiteracy among the elected and the electorate.  Norton writes, “Economists and other social scientists have heeded its power for centuries; for just as long, politicians and popular opinion have largely ignored it.”

As Ed Feulner points out in his Heritage article, teen unemployment (read as minimum wage workers) has increased the most of any age group. “The jobless rate for teenagers in now 20.3 percent.”

Then he goes on to explain why:

“This makes sense. If government orders employers to pay unskilled, inexperienced workers more, they’ll simply hire fewer of those workers. And teenagers tend to be the people who fill minimum-wage jobs.”

Why can’t politicians grasp this concept?  Why do otherwise clear thinkers elect representatives who vote for such legislation?

Although the concept dates back to Adam Smith (1723-1790), sociologist Robert K. Merton brought the concept into the twentieth century in a 1936 paper. He listed five possible causes of unanticipated consequences:

1. Ignorance (It is impossible to anticipate everything, thereby leading to incomplete analysis)
2. Error (Incorrect analysis of the problem or following habits that worked in the past but may not apply to the current situation)
3. Immediate interest, which may override long-term interests
4. Basic values may require or prohibit certain actions even ifthe long-term result might be unfavorable (these long-term consequences may eventually cause changes in basic values)
5. Self-defeating prophecy (Fear of some consequence drives people to find solutions before the problem occurs, thus the non-occurrence of the problem is unanticipated)

Feulner, student of the Reagan school of optimism, closes with: “Today’s rising unemployment is one problem we’ll solve, as long as we keep encouraging our entrepreneurs — and keep government out of their way.”

That is the challenge facing America. Government is again too big, just as when President Reagan was elected. As Reagan said back then, “The nine most terrifying words in the English language are,’I'm from the government and I’m here to help’.”

Let’s elect folks that believe in America, that want it to continue leading this remarkable march of human progress known as the United States of America. “If you’re afraid of the future, then get out of the way, stand aside. The people of this country are ready to move again.” Ronald Reagan

For more in-depth information on the minimum wage go to http://www.heritage.org/Research/Labor/minimumwage.cfm.