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An Open Letter to Mayor Bloomberg

Mises Daily: Monday, August 22, 2011 by

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Dear Mayor Bloomberg:

I read with interest that you (and fellow billionaire George Soros) are going to contribute millions of your own fortunes to supplement the tax dollars New York City's government will spend because "blacks and Latinos are not fully sharing in the promise of American freedom."

Yet rather than spending your own money — and that of the taxpayers — on retraining probation officers, posting job recruitment signs in government housing projects, and the other ideas mentioned in the New York Times article, you should consider much more effective ways to help young black and Latino men. As an added bonus, the following proposals would actually reduce government expenditures:

  • Stop enforcing drug laws against nonviolent individuals. Regardless of one's views on the morality of using currently illicit drugs such as marijuana and cocaine, most economists recognize that government prohibitions on this behavior lead to higher street prices, more overdoses, and gang warfare. I lay out the basic economics in chapter 20 of my textbook Lessons for the Young Economist.

    Suffice it to say, de facto legalization (as much as you can do at the city level) of drugs would very quickly transform the "blighted" areas so in need of help. As the price of heroin, cocaine, marijuana, etc., crashed down to their true market levels, being a drug dealer would be no more glamorous or profitable (in monetary terms) than being an alcohol dealer. There would be no incentive to use violence to capture market share, and thus drive-by shootings would virtually disappear. Remember that Al Capone and other gangsters killed each other over bootleg liquor distribution in the 1920s and early 1930s. Yet since Prohibition has ended, nobody gets shot for opening up a liquor store on the wrong street corner.

  • Stop forcing/subsidizing kids to go to school. As a former college professor, I can personally attest that it doesn't do anybody any favors when classes consist of some students who really want to be there versus others who are there for a checkbox (or worse, because they will get arrested if they skip class). If there's a teenager who doesn't want to read To Kill a Mockingbird or learn how plants use photosynthesis, don't use guys with guns to force him to sit in classrooms against his will. His presence in the classroom will make it harder to teach the other students, who have a better home situation (where the parents stress the importance of a well-rounded education). If you let this teenager leave school and get a job, he may someday mature and see the value in these "higher" things. At that point, he can go back to school, or learn all sorts of things using the Internet and other self-study techniques. In the meantime, rather than sitting in incarceration for years on end, being bored out of his mind and causing trouble with his like-minded friends, he will be learning useful job skills and contributing to society.

  • Don't prosecute business owners for paying less than the minimum wage. I realize there's only so much you can do as mayor; you can't stop the feds from cracking down on people. (However, you should read Tom Woods's work on nullification.) Even so, the minimum wage is the most important factor I (and many other economists) would cite in order to explain why the black-teen unemployment rate is about 50 percent!

    This particular issue is pretty straightforward. Most business owners aren't looking to give out charity in their operation. (They can write checks to various groups in their personal lives, if they are altruistic.) The only reason they will hire a worker and pay him, say, $8 an hour, is if (all things considered) the worker adds at least that much to the bottom line.

    For various reasons — and these might include historical bigotry, inferior school systems, unfavorable home environments, etc. — the very demographics you and George Soros are targeting tend to have low productivity in many standard jobs. Simply put, lots of these kids won't be able to generate $7.25 per hour (the current minimum wage) in additional profits (not counting the expenses of adding them to the payroll) anytime soon after joining a company. A business owner would be throwing money away by hiring them, and that's why these kids have such a hard time finding a job.

    Yes, yes, it's certainly true that you could try "worker training programs" administered by the government to give such kids better skills and make them more appealing to employers. But ask your staff to give you an assessment of the historical success of these programs. I think you'd find that if you let these kids get their foot in the door with a real job — as opposed to a taxpayer-funded training program — they'd gain valuable experience and learn actual skills very quickly.

    The new employees who actually had initiative and just "needed a break" would soon demonstrate their character and would get raises once the employer could separate the wheat from the chaff. The problem is, right now it's against the law for an employer to cast a wide net and hire a bunch of job applicants, in order to see which ones show up consistently for at least three months, which ones know how to work a cash register and be courteous to customers, etc. It's cheaper and safer to keep a smaller workforce and spend money on automating operations — that's why fast-food joints can now crank out meals with just a few employees.

  • Cut spending and taxes. Besides the specific recommendations listed above, in general you can foster more economic opportunities for New Yorkers by getting the government out of the way. To that end, cut expenditures and taxes as much as possible. By allowing business owners to keep a larger share of their income, you will encourage them to locate in New York City and take advantage of its amenities. Coupled with the above suggestions, tax cuts would help New York become an engine of job creation.

There are plenty of things you can do as mayor that will actually help the "at-risk" residents of New York. Although it is admirable that you are putting up your own money, economic analysis shows that your "solutions" will not work. The so-called root causes of crime and poverty in urban areas today can be tied to destructive government policies.

Critics would no doubt warn you that my above suggestions are horrible, and that they would create a New York where poor teens have ready access to drugs yet can't get a good education and can't find a good job. Just realize that this perfectly describes the system we have right now.

Sincerely,

Robert P. Murphy