After reading the conventional, libertarian account of the minimum wage, for the umpteenth time, at Reason recently, I put on my skeptic’s cap and wrote a rebuttal rather than a “me too”. Ronald Bailey describes the conventional wisdom here.

I respect Bailey a lot and habitually read his work at Reason, particularly his work on climate change, so I have no vendetta, but as a self-appointed representative of “left libertarians”, I address critics of libertarianism on the conventional “left” sympathetically. We’re approaching a time when the less propertied, particularly the young, will again see the state primarily as their foe rather than their champion, as they have historically, and we need to formulate more arguments for them and fewer for prospective patrons of libertarian think tanks.

The state has always been a foe of the less propertied, rather than their champion, but states wage an endless propaganda campaign seeking to persuade practically everyone that it is their champion, and this campaign has been particularly effective with the less propertied since the rise of Marxism and other state socialist systems in the 19th century and their political success in the 20th century. Of course, in practice, socialist states don’t oppose propertied interests as much they seek to replace one class of privileged proprietors with another, but their rhetoric rarely concedes this point.

Critics of modern libertarianism claim, sometimes justifiably, that libertarians focus too much on rent seeking by the poor at the expense of the rich, while in reality (and in much historical, libertarian thought), rent seeking primarily benefits the rich at the expense of the less rich. In historical socialism (which incorporated much historical libertarianism before the turn of the 20th century), the rent seeking rich benefit at the expense of the working class. A landed nobility or crony capitalists benefit at the expense of untitled laborers for example.

Early American libertarians like Lysander Spooner and Benjamin Tucker clearly believe so. Even the Marxist “capitalist” is not the Lockean proprietor that libertarians imagine, and the Marxist “capitalism” is not a synonym for free markets, rather than markets dominated by constituents of the state, as modern libertarians often suppose.

Bailey’s argument against a minimum wage commits a fallacy common in economic arguments, namely the “all else equal” fallacy. Economic arguments often commit this fallacy, because economies are very complex. Formulating economics without the “all else equal” assumption is practically impossible.

The “magical thinking” in Bailey’s account assumes that a minimum wage can defeat the Law of Demand, but Bailey’s Law of Demand itself incorporates the “all else equal” assumption, and this assumption is false, so Bailey is no less guilty of magical thinking than proponents of a minimum wage that he claims to rebut.

The Law of Demand states that demand for a good falls as the price of the good rises, all else being equal. The Law seems reasonable enough except that all else is practically never equal. The law assumes for example that the marginal value of all goods is equal, that people will consume less of a good with a rising price rather than consume less of another good in order to continue consuming the pricier good at the same level.

Bailey specifically discusses the demand for fast food workers when the minimum wage rises. Raising the price of fast food does not imply a decrease in demand for fast food, or for laborers providing fast food, because the marginal value of all goods is not the same. If the price of food rises, people may respond by driving less, if marginal eating is more valuable than marginal driving. Ultimately, raising the price of food drives the demand for everything else down until we consume food and little else, for obvious reasons.

If markets are not ideally free, if many higher incomes are a consequence of statutory rents and other market constraints while lower wages are correspondingly depressed (on balance) by these constraints, then raising the minimum wage may shift more consumption away from the produce of higher income earners and less away from the produce of minimum wage earners.

Opponents of a minimum wage often assume that raising the wage encourages employers of minimum wage labor to invest more in automation replacing the labor, but an increase could instead encourage more investment in automation replacing more expensive labor. The marginal cost of automating more expensive labor may be lower, so a new equilibrium need not employ less labor at the minimum wage. It may employ less labor at higher wages.

Markets are not ideally free. The shift in consumption patterns is not immediate, but a higher minimum wage can ultimately increase the consumption of minimum wage workers without persistently decreasing demand for their labor, and plenty of studies on the other side of this debate reach this conclusion.

Libertarians need not favor a minimum wage, but we should argue primarily against countless market constraints enriching the state’s most influential constituents. Meanwhile, minimum wage earners may not be libertarians, and they will not wait for other reforms before joining their wealthier counterparts in the rent seeking game. Anyone who thinks that minimum wage workers are more influential than other constituents earning far more is out of touch with reality.

Ron Paul advocates cutting the warfare state before cutting the welfare state for good reason. Lockheed-Martin employs far more skilled, scarce and costly labor than McDonalds. Cutting the warfare state drives down the wages of accountants, engineers and skilled machinists far more than it drives down the wages of fast food cooks and cashiers, but more importantly, it frees all of this labor to find a place in the economy producing more valuable goods. A cook at Chick-fil-A earning the minimum wage may already produce goods more valuable than an engineer earning six figures at Lockheed-Martin, and we don’t know what this cook would earn in an ideally free market, so focusing on the cook rather than the engineer seems absurd.

If we want to employ fallacious economic assumptions, let’s employ them against the richest beneficiaries of rent seeking first. We’ll have plenty of time for the poorest after the richest lose their benefits, if that ever happens, and in the meantime, the poorest are relatively ineffectual rent seekers anyway. They rarely seek rents actively at all. What passes for their rent seeking is often a political class pacifying them with bread and circuses.