Many of you have been asking this question.  Robert Waldmann reports:

…what about Card and Krueger. Empirical estimates of the effect of the minimum wage on employment suggest that the effect is very small. One famous study by Card and Krueger showed a positive effect of an increase in the minimum wage. The logic used by Card and Krueger to understand how this could happen suggests that things are different now.

Their logic is basically that firms can choose to pay a low wage and have a high quit rate and take a long time to fill vacancies or pay a high wage and have fewer quits and fill vacancies more quickly. If they are forced to pay the higher wage, their desired level of employment will be lower, but that level is the sum of employment plus vacant jobs. A binding minimum wage can reduce the number of vacant jobs by more than it reduces the sum of employment plus vacant jobs. Thus more employment.

I think this is not relevant to the current situation. There are very few vacant jobs. Quit rates are low. According to their logic, the effect of the minimum wage on employment depends on the unemployment rate. The evidence of a small effect is almost all from periods of unemployment far below 10%. I don't think it is relevant to the current situation.

Waldmann makes other excellent points in his post, which is on the minimum wage more generally.  I would add that there are many good critiques of the original study and the most plausible belief is still the traditional result, namely that minimum wage laws have a (slight) negative effect on employment.

Many bloggers are commenting on Bernanke's response to Brad DeLong's question about whether the Fed should target three percent price inflation to stimulate aggregate demand and lower unemployment.  I'll offer two points:

1. We no longer have an independent central bank in this country, at least not for the time being.  There is no particular reason to think current monetary policy is Bernanke's personal decision, most of all because he is up for reappointment.  He may well know better and arguably his remarks signal as such.

2. I still favor a two percent target (three would be fine too) for the rate of price inflation today.  But it matters when we implement such a policy.  The longer we wait, the more we miss out on its potential benefits.  For instance it's easier for AD-robust market conditions to signal to employers not to lay off workers than it is for market conditions to signal that workers should be rehired.  The longer we wait, the more the inflation (and its expectation) loses its potency.

Furthermore nominal wages adjust sooner or later, even if the downward ride is a bumpy one with some negative cumulative spirals along the way.  I don't personally think we are close to the point where three percent is a bad target but that's a guesstimate rather than based on hard science about the state of the labor market this spring.  In any case three percent will become a bad idea at some point and we need to start asking ourselves when, no matter how good an idea it was a year ago.

According to Katz, payment for driving on the route will be based on a fluctuating fee depending on the levels of traffic – the more traffic, the higher the fee. While ministry officials say that the minimum toll for traveling on the route would be NIS 5, the maximum price is still unclear. In any case, the drivers will only know the price of the toll shortly before deciding to use it. According to the plans, a modifiable electronic sign 1.25 km before the onramp will display the price drivers will be charged depending on the levels of traffic.

Here is more and I thank Adrian Lucardi for the pointer.  The road owner is supposed to guarantee an ongoing speed of 70 kph or better.

1)  A fall in wages
increases the incentive to hire (call this the substitution effect) but it
decreases the income of people who already have jobs and this in turn
decreases their spending and other people’s income (call this the macro income effect).  In essence, Krugman and others are arguing that the macro
income effect can dominate under certain situations.  See Tyler (here and here) and Scott Sumner (Whom I cannot resist quoting–"no respected macroeconomic theory has ever been so decisively refuted
by the data as the theory that high wage policies can actually help the
economy during a Depression") on this point.  I, however, will ignore this debate and take it as given that this is possible.

Now one reason that people are talking about
a cut in the minimum wage in this context is that it follows exactly the two-part logic given above.  But bear in mind that the real policy choice
we have is to cut the payroll tax and cutting the payroll tax increases the
incentive to hire and increases the income of people who already have jobs.

2)  The idea of the
liquidity trap with its notion of lack of movement, inactivity and firms which "just aren't hiring" is hard to reconcile
with the fact that millions of new jobs are being created every month.  I have said this before but I should have shouted it from the rooftops because this error is very common.

Casey Mulligan's post, on the liquidity trap argument, is spot on.  Here's another simple thought experiment.  Let's say that, for reasons of technology, currency disappeared.  All transactions would be made with POS or cell phones, backed by interest-bearing assets, in one form or another.  You might think that's unlikely today but it's at least possible in the future.  In any case, it's a thought experiment.

In this world there would no longer be a trade-off between currency and interest-bearing assets, as we find in traditional Keynesian models.  There would be no substitution out of one and into the other and there would be no swapping of currency for interest-bearing assets.

What would the macroeconomics of this world be like?  Would the AD curve slope upwards?  Would increases in employment be contractionary?  No and no.  It would only be slightly different from our current world, a point Kroszner and I made in our book Explorations in the New Monetary Economics.  It just doesn't matter that much if you pay for your retail transactions by leaving a five on the counter or by using a credit or debit card backed by interest-bearing assets.

Liquidity trap arguments are themselves a kind of trap.  The theorist finds one situation where the traditional marginal equality between various rates of return is disrupted and people stand at a corner for one of their portfolio positions, namely cash vs. interest-bearing assets.  The model then has consistency requirements, in the form of interrelated mathematical equations, which "spread" the counterintuitive results across the entire economy.  But that's assuming the model is a more powerful description of reality than it actually is.  It's better to side with common sense instead.

Addendum: Arnold Kling offers related comments.