Martin Feldman, a Harvard professor of economics and former advisor to President Reagan, is against a hike in the minimum wage. One of his arguments:
When low-skill labor becomes more expensive, employers have a greater incentive to mechanize or outsource their work.
He — like most economists — ignores the point that an increase in the minimum wage, by forcing employers to reexamine familiar practices, will increase innovation. (I have seen non-economists make this point.)
How you can hope to understand economics without understanding innovation is beyond me. I realize that economics is a job — that academic economists try to write papers that make incremental improvements in understanding and innovation is not always important. Yet the whole profession seems stuck in a world where it is okay to ignore innovation and okay to try to increase productivity yet not acknowledge that productivity and innovation are often at odds. (For example, almost all foreign aid programs ignore innovation.) I have never heard or read an economist make this simple and obvious point. The situation reminds me of a friend of mine. When she was in first grade, she had a lot of pennies. Now and then she would spend some. She knew how to add but not subtract, so after she spent some she had to count them all again. At least she got the right answer eventually. Economists, not understanding the effect of Policy X on innovation, really cannot predict the effects of any policy that affects innovation.
It isn’t just economists. Epidemiologists seem stuck in a world where it is okay to ignore the immune system. They act as if the immune system does not exist, except perhaps when someone asks them why smoking is so bad and they reply “maybe it reduces immune function”. Statistics professors seem stuck in a world where it is okay to ignore the question of how to generate an idea worth testing, except to grant that making graphs is helpful.
Psychology professors, at least the ones who do experiments, are also stuck that world. With few exceptions, they have no idea how to generate ideas plausible enough to be worth testing. You can read a thousand psychology textbooks and ten thousand psychology papers and end up knowing no more about how to do that than when you started. It is a methodological question, yes, but maybe you have to be a psychology professor to grasp how disabling it is to not have a good way to generate ideas (ideas plausible enough to be worth the cost of testing). It is like having a car — psychology professors know a lot about how to do experiments to test ideas — but no fuel.
Something is making a lot of very smart very capable people ignore the obvious. I have a theory of why these vast areas of ignorance — easily noticed, yet rarely acknowledged — exist. It is because science is slow and difficult and suffered great damage.) Distant observers, including granting agencies, university administrators, journalists and the general public, have a hard time telling the difference between real climbing and pretend climbing.