Is this a extremely good joke? Because the capital structure theory and the whole austrian bussiness cycle theory is based on long-term vs short term.
This is exactly my opinion of non-austrian economist. They always find a way to justify intervention in the market, regardless of evidence. I guess it goes both ways.
In reality both positions are just prejudices, since ideology always influences decisions (and I always laugh when someone says they dont have ideology). For what I have read of your posts here you have a superiority sense derived that you use what is called “mainstream economics”.
How much competition is an issue of data. I am suggesting that use of the labor supply is always rivalrous, even if a snapshot of a certain geographical area only shows one (or a few) employers, and therefore a cartel of employers cannot survive. Further, I am suggesting that your description of events is only valid with a phantom target of perfect competition to compare current wage rates against. Since there is never perfect competition, nor is there a non-entrepreneurial way to discover a higher wage rate that doesn’t reduce employment, nor is there an aggregate way to make interpersonal utility comparisons such that you can say that any other prevailing wage rate is superior, the answer would be no; law cannot set wage rates with the expectation of increasing employment.
Then I don’t understand why it was brought up. It seems irrelevant…unless you’re using economics to inform a policy recommendation. But you wouldn’t be caught doing that, would you?
How much competition is an issue of data. I am suggesting that use of the labor supply is always rivalrous, even if a snapshot of a certain geographical area only shows one (or a few) employers, and therefore a cartel of employers cannot survive.
I agree it is an issue of data. And it certainly seems possible to me to imagine a situation where competition from other employers was sufficiently low to enable a very large local employer to nagotiate wage rates below what would exist in a competitive market (for example, if the costs of searching for a new job are very high, if labor mobility was very low, if barriers to entry are very high, etc).
So we cannot simply assume that competition will always bid up wages without looking for more information.
Further, I am suggesting that your description of events is only valid with a phantom target of perfect competition to compare current wage rates against. Since there is never perfect competition, nor is there a non-entrepreneurial way to discover a higher wage rate that doesn’t reduce employment, nor is there an aggregate way to make interpersonal utility comparisons such that you can say that any other prevailing wage rate is superior, the answer would be no; law cannot set wage rates with the expectation of increasing employment.
That is a very different question.
It seems very possible to me that law makers in the hypothetical scenario I outlined could, by pure chance, pick a minimum wage that increased employment. Is it likely that they will? No (at least partly for some of the reasons you describe). And thats one reason I typically don’t buy arguments for increasing the minimum wage based on this argument (such as those offered by Paul Krugman a few years ago). But my personal feelings on this matter should be irrelevant (though its clear that they aren’t for this discussion).
Then I don’t understand why it was brought up. It seems irrelevant…unless you’re using economics to inform a policy recommendation. But you wouldn’t be caught doing that, would you?
Its called being fair to your intellectual opponents. Even if I don’t support minimum wage laws, I can certainly see why other smart, honest people would. And since I was only discussing minimum wage laws in the abstract (and not my views specifically), I felt that noting their complaints along the way was worthwhile.
Someone earlier said that I have a “superiority complex”. I don’t know if that’s true, but I do know that I can admit that good and intelligent people can come to different conclusions than I have on this and other issues–not because they are ignorant, but because they are either making different assumptions or have different value judgements. Honestly, I think that might make the most humble man in this thread (though I guess a truly humble person probably wouldn’t brag about their humility. ).
First, I was merely refuting the passage I quoted. You made a case for minimum wage laws that took a snapshot of market processes and only considered short-run effects. The fact that neoclassical method is static (partial and general equilibria analysis) has nothing to do with my alleged “political ideology.” But it is true that the Austrian economist does not try to manage the economy or engineer society; he merely studies the way they operate. Any argument that supports price floors in the labor market is inherently political.
I didn’t respond to your other comments because, well, I did not read them. Again, I was merely refuting your initial position.
There are only two kinds of economics: good economics and bad economics. Supporting minimum wage laws = bad economics.
^ if you believe you were refuting the position, then you did not understand it.
as i noted, you did not acknowledge the role that barriers to entry and search costs could play in the market process. Specifically that if barriers to entry are great enough they could prevent the introduction of new employers to the area or search costs are so high as to retard labor mobility. If this is the case, then it is possible for a minimum wage law in that area to increase employment and create an efficiency improvement (you can argue all you want about how unlikely you think it would be for the government to pick the right wage, but the possibility exists).
but even if you insisted that minimum wage laws typically reduced efficiency and employment, that still doesn’t imply “minimum wage laws = bad economics”. minimum wage laws are not economics at all, they are policy. and who ever said that the aim of all policy was to maximize efficiency? any mainstream micro textbook worth its salt will stress that efficiency is but one concern in policy adoption. i think you are having a hard time separating politics from economics and that is a bad sign.
anyways it is obvious we don’t need to continue this conversation further. you already have the answers (governments always fail to allocate resources efficiently, markets always succeed) and you are so confident in them you deliberately ignored the majority of my post (“well, I did not read them” and I am the one with a superiority complex). i have no problem talking with people that disagree with me, but why would I want to be the gooseberry in a one-person conversation??? I will let you holler into the libertarian echo chamber. there are many other interesting conversations on this board.
Yes, with a powerful enough imagination, one can certainly envisage a combination of highly unlikely circumstances (by highly unlikely, I mean practically impossible) that would make a price floor in the labor market both effective and appropriate. The same way that one could, at least conceivably, imagine playing tennis under water. And I didn’t respond to your barriers-to-entry and search-costs hallucination because, again, I did not read it. I was merely refuting the argument you made in the initial post, namely that imperfect competition may suppress wages below the marginal product of labor. If I read your other comments, then I would have responded by saying that the government cannot pick the “appropriate” wage, or the “appropriate” rental rates for NYC real estate, or the “appropriate” price of gasoline, because it lacks the necessary mechanisms to do so. This is what markets are for.
That was my point precisely:
Only bad economics could ever justify such a horrific “policy recommendation.”
How many times are you going to pull the “you’re just too ideological” card? If you want to debate the government’s ability to set market clearing prices then fine, if not, move on.
Excellent! I am glad we can end this conversation on a note of agreement so it was not a total waste of time.
But just a quick note. What you call “hallucinations” most people would call “assumptions”. Whether you assume search-costs or barriers-to-entry are high or low will influence the outcomes you expect from the market. Stating these assumptions explicitly is just good economics.
This shouldn’t be confused with good rhetorical politics, where stressing the conclusions you support and that your constituents favor (“governments should never/always do X”) will probably win you more points than slowly describing the assumptions that led you to that conclusion. These could be considered “ideological” arguments and might be why I “pulled that card”.
This is a baseless accusation. You do not know me, and you don’t know why I hold the positions that I hold. Either way, stating that government interventionism is inherently self-defeating is not a political position; it is sound economics. The fact that you have a “criteria for government intervention” makes your position political (not mine). Again, I’m wholly uninterested in social engineering.
I dealt with this:
Again, I understand that it is possible to imagine the occurrence of certain impossible events, such as playing tennis underwater.
so you don’t want to talk about the economics of the situation, you want to talk about the discussion we had 4 weeks ago? yah thats how i want to spend my lunch hour.
look. i was responding explicitly to a M Green’s post, which stated “Ceteris paribus, enforcing a minimum wage above a market wage results in unemployment. Obviously, it is rarely the case that all other things are held constant.” The purpose of my post was to expand on / correct his post and note cases where these conclusions may not be true (primarily, in his post he neglects to mention his implicit assumption that we are dealing with a competitive market with low search costs).
below you will find my response to m. green. and i don’t see a hint of me advocating for a minimum wage. the only thing i said that i can see that was not strictly about economics was where i noted that even though dynamic market forces may eliminate monoposonies and lower search costs in the long run, it still leaves people in the short term with lower wages than they could have earned if their employer didn’t have as much market power. but that is a simple implication of the economic argument. and even though i do honestly feel sorry for those people, i don’t see at all how it can be taken as an argument for the minimum wage. i mean, if i said it was a pity market prices are so high that not everyone can enjoy champagne for breakfast, would you accuse me of wanting to set a price ceiling on imported wine?
honestly esuric.
now this is far more than i intended to write. I am happy with where the discussion ended and i am not going to get back into it. if you want to think i actually supported minimum wages but abandoned that position when faced with the power of your logic, then i can only congratulate you on your fine performance. you have helped me see the light and i am grateful.
"^ labor markets are not perfect.
if you have a situation where there is only one major employer in your area (factory towns say), then the employer could potentially nagotiate wages below those that would result from a more comepetitive labor market. this implies that setting a minimum wage above that amount could actually INCREASE employment and in a net welfare improvement.
similar logic could be applied in situtations where you have multiple employers but high costs for job search. the fact that its costly to search for a job could give an employer enough market power to nagotiate rates below competitve rates, implying that welfare could be improved through a minimum wage.
now, one could argue “oh well, eventually the market will solve those problems. how many factory towns are left?? and look at monster.com!! thats reducing job search!” which I think makes sense. but i doubt those arguments serve much comfort those people that have to suffer the conditions in the mean time.
in any case, i think the op’s point stands. life is more complicated than micro 101. and minimum wages need not always result in unemployment (in either theory or practice)."
Awesome posts student. I’m a full blown AnCap and often disagree with you but your argumentation style is commendable and refreshing (you do come off as arrogant sometimes but in the grand scheme of things it’s easy to overlook).
Keep posting in this forum please.