Reply to Yudkowsky

Being pro-market is a lot like being pro-democracy: you don’t necessarily have to like the results of the process, but you do need to accept their legitimacy. “Anti-democracy” would be a fair description of someone who says “I’m not anti-democracy, I just think the wrong people keep getting elected and the Army needs to intervene to put the right people in office.”

Many on the Left are explicitly anti-capitalism. How accurately they represent the median (or mean) of the Left is arguable.

When Yudkowski says “Ask them and they’ll *tell you*: They don’t *hate* markets. They just think that the prices and outcomes aren’t fair, and that tribal action is required for everyone to get together and decide that the prices and outcomes should be fairer” He is describing me, although using somewhat different terms than I would.

I realize I am on the left and that people like me are a subset of the entire group that you call “left”. People like me look at semi-capitalist societies and see many, many market imperfections in the first place and figure correcting them can lead to better outcomes. And that usually the way to correct them requires interference in the market by something- often the government. Which we at least hope is democratically elected to consider the needs of all its people. This isn’t “anti-market” it is anti those market outcomes that occur because the market is skewed and is leading to results that are not optimal as decided by the citizens in their collective decisions about how they want their economy to perform in accordance with their moral and ethical standards.

Libertarians are totally in favor of having fair rules and norms governing the market. What we’re not in favor of is tweaking the rules and norms until the market delivers a specific outcome.

We have rules like “people should be allowed to buy and sell property they own at any mutually agreed price with any consenting partner”, and “bobody should be force to buy or sell anything they don’t want to”, and “people should be allowed to own the product of their labor”, and “nobody should be forced to work or hire someone for free or at a price they didn’t agree to”, and “the government should adjudicate disputes and enforce contracts in civil courts”. Things like that. What is unfair about those rules? Here we have a set of rules and norms that are universally applicable to everyone without judgement of their race, or religion, or socioeconomic class. So how is it that the outcomes of a system in which every transaction is voluntary suddenly becomes unfair because you don’t like the result?

There is no real power imbalance. Making someone an offer that is more attractive than saying “no” is not equivalent to putting a gun to someone’s head. Employers in this country cannot compel anyone to accept a job. Businesses cannot compel other to buy or sell from them (unless they are health insurers, apparently!). That is what “power” means – not making someone an offer that is better than anyone else’s.

By your logic , it’s impossible for a rich person to ever make anyone a “fair” offer because just by virtue of having more money they automatically have the power to magically coerce others into taking something that the other party thinks is a bad deal.

Some issues with the anti-market hypothesis:
Liberals favor fewer immigration restrictions.
Liberals favor fewer marijuana sales restrictions.
Liberals favor fewer copyright restrictions.

Liberals are opposed to extreme wealth, but this should not be confused with being anti-market. What matters for most people when it comes to policy is which tribe they see themselves as a part of. I think this includes most libertarians. Libertarians simply chose an unusual tribe.

@Meade

There are definitely power imbalances and it’s not just between two people making a deal, but in access to to sellers and buyers as well and the dividends that come with access. For instance, If I have $20,000 sitting around I can put it into a high yield bank account, but if I don’t already have that I’m stuck with a low yield savings account. If I can afford a Tesla, there was recently a deal for free fueling at their charging stations, but if I can only afford an old used car, I’m stuck with buying gas for an inefficient car that will likely also cost more in maintenance. If I inherited a million dollars, I can risk half of it starting a new business, if I’m from a low income family I would have to beg for a high interest loan and if anything goes wrong at all, I could become homeless.

The markets a wealthy person has access to are inherently different and more advantageous than those available to the poor. It’s not that someone is putting a gun to the poor person’s head to make them take the low pay job, it’s that there aren’t any other options (what are the options without a relatively expensive degree?). And it’s not that, from an equilibrium curve point of view, a price isn’t fair, it’s that the buying power of the wealthy skews that equilibrium price up (housing In safe, convenient areas). There are so many things that are easier and more profitable for the wealthy and so much harder and costlier for the poor that it pushes them further and further apart.

And I don’t necessarily have an answer, but I do know that just accepting systemic inequality and ‘have-nots’ as a necessary byproduct of the invisible hand of the free market is too high a cost for me.

@David Condon:

“Some issues with the anti-market hypothesis:
(…)
Liberals favor fewer copyright restrictions.”

If this is true (and I don’t know if it is – “liberals” have strong ties to Hollywood, after all), it is not a the “anti-market hypothesis”: intellectual property put in the market things that, without it, it will be free (free as in “free beer”).

If you want a good counter-example, cap-and-trade will be good (a policy who creates a market where there was none, and who is supported for most of the center-left; but even in this case, much of the hard left is suspicious of the cap-and-trade, and specially because of the “-and-trade”)

“But if the haves do really well for themselves in a market, why wouldn’t they also do really well for themselves in the absence of a market?”

The argument is that, in the political process, everybody has 1 vote, while in the market the “haves” have more “votes”.

>The argument is that, in the political process, everybody has 1 vote, while in the market the “haves” have more “votes”.

And what does that vote get the downtrodden? Would you say that the police do a good job of respecting the civil rights of poor and minorities? Would you say that the quality of schools and bus routes are the same in poor neighborhoods as they are in more affluent suburban areas? Does this 1 vote get the IRS to fix a billing mistake as fast as your bank?

The haves in effect get more than one vote in the political process, too. You can’t make the haves weaker by giving them *more power* which is what the political process is.

So maybe there are arguments for the political process (protip: there are), but power disparity isn’t one of them.

For instance, If I have $20,000 sitting around I can put it into a high yield bank account, but if I don’t already have that I’m stuck with a low yield savings account. If I can afford a Tesla, there was recently a deal for free fueling at their charging stations, but if I can only afford an old used car, I’m stuck with buying gas for an inefficient car that will likely also cost more in maintenance. If I inherited a million dollars, I can risk half of it starting a new business, if I’m from a low income family I would have to beg for a high interest loan and if anything goes wrong at all, I could become homeless.

None of those things are what I would call “power imbalances”. A power imbalance means one party to a transaction wields power over the other and thereby can coerce them to accept a deal they don’t want. In all of those examples, there is a consensual fair exchange of value between both parties. The fact that there are third parties who can’t afford to make the same deal has nothing to to with whether it’s fair for Tesla to sell you a car and not someone else.

It may be unfair in some sense that people start off with different advantages, but that’s a completely different thing than saying that market transactions are unfair because one party to a transaction has power over the other. It’s not the “market” that is unfair – the market is just responding to extant facts on the ground.

people who need to feed themselves cannot fairly be said to be free to walk away from a job if that is what they need to acquire the means to feed themselves.

This isn’t the 18th century. Nobody is on the verge of starvation unless they take a minimum wage job. And the overwhelming majority of market interactions that the left deems in need of intervention don’t involve life-or-death choices. Look at “net neutrality” for instance – nobody is going to die because their ISP prioritized video packets.

@Chris, you realize that libertarians do favor rules like bans on slavery right? When we talk about a “free market” we’re talking about a market where all transactions are voluntary – i.e. there cannot be any forced labor.
We’ve already got rules that forbid people from forcing people into market transactions they don’t want to be in. If there are other forms of coercion then we can address those to remove the coercion. What you want to do is to add an additional layer of coercion at the government level, instead of addressing it by making market transactions at the root level freer and less coercive?

Chris, thanks for clarifying your concerns about markets in such excellent detail and eloquence.

However, please allow me to push back in the spirit of creating a useful and mutually beneficial dialogue…

First, I fail to see how the least advantaged are harmed by giving them the freedom to cooperate in an economic exchange (and mutually voluntary interactions are pretty much always intended to be cooperative). Indeed, I think they are more likely to get a disproportionate share of the subjective value. A starving person gains more from a loaf of bread than a billionaire gets from a third mansion. IOW, you seem to be making two mistakes at once, you seem to be evaluating value as an objective thing AND not recognizing that the more disadvantaged a person is the more they are likely to gain and gain disproportionately by cooperating with those with higher skills. To put this in concrete terms, a gardener benefits infinitely more by living around scientists, brain surgeons and Bill Gates than they benefit by living around gardeners. Seriously, the disadvantaged are likely the most advantaged by free markets.

Second, but related, I fail to see how you are defining “power.” There are two types of power which I am familiar with in anthropology — dominance and prestige. Dominance is using intimidation or force or deception to benefit the aggressor at the expense of the victim. Prestige though is power used (usually) in a proactive and mutually beneficial method. A person with higher skills, more knowledge, or capital, for example becomes more desirable as an economic partner. This certainly does self amplify rewards to cooperation, with the most prestigious gaining the most demand for their cooperative services. But it also socially encourages and rewards people to change themselves into more prestigious individuals by developing education and skills, working harder in more socially desirable fields, saving up capital and so forth. Power imbalances in the latter are not defects of markets when properly understood, they are necessary, even critical features, leading not just to arms races for prosocial prestige, but division of labor and creative destruction.

Prestige power is not something we should be worried about. It is something we should actively encourage. We want arms races for prestige with socially beneficial consequences — inventors racing to invent better products, capitalists racing to take these consumer solutions to more people (and becoming billionaires if successful), uneducated kids focusing their education and career development into challenging and socially desired fields (as indicated in part by the money they can make in that field).

Third, nobody is arguing here for free market anarchism. The argument is for effective rules and enforcement mechanisms which allow mutually voluntary economic interactions without severe negative externalities to flourish. Markets do not exist in an institutional vacuum and pretending they do is sloppy thinking by advocates as well as critics of markets. What we are clearly arguing against is willy-nilly micromanagement of markets by people who don’t have a clue how the complex adaptive system works. And yes, this is pretty much everyone who tries to meddle with them.

Related to this is the need to supplement market outcomes with non market mechanisms such as taxes, welfare programs and charity. The disagreement between pro and anti market teams is often that the anti group is trying to manipulate markets to accomplish things which are better handled by non market mechanisms. Classical liberals and progressives may agree with the need for effective social safety nets, but the former are more likely to see the unintended consequences of those not understanding markets trying to force employers to pay for the safety net via a higher minimum wage.

I look forward to your reply….

@Hazel:

I agree Chris’ slavery example is particularly bad. Of course you can’t be both in favor of the market and in favor of slavery. Or at least you can only be in favor of both if you define blacks as subhuman animals without rights, which falls apart on any empirical observation. At most you could say that belief in the free market requires additional conditions for liberty, such as extending rights to all classes and races of people.

Chris’ point about politics always being present is beside the point. I could just as easily say the market will always be there, e.g. in the Soviet Union, where much of the official economy was centrally organized, you had a thriving black market in which people found ways to actual trade what they wanted. Of course, being illegal resulted in all sorts of distortions, e.g. the costs of bribing or evading law enforcement were added to the expected costs of transactions. The point is what is our ideal? My ideal is the complete elimination of politics as a separate sphere of activity from economics, owing to the essentially involuntary nature of political action versus economic action. That this ideal will probably not be achieved may be relevant at some point in the discussion, but not when we’re trying to explain why the market is what actually results in maximal respect for individual rights and maximal prosperity for people as a whole.

One problem I see with the left-liberal critique of the market is that they don’t make that traditional distinction between “deserving” and “undeserving” poor. If you want my moral sympathy or empathy, you need to show that someone’s poverty is undeserved and that therefore some redistribution of wealth is justified. It’s not enough just to point out that somebody is poorer than another person. Is he poor despite having worked hard and saved all his life? Or has he been lazy or profligate? If the former, I might see a case for redistribution; if the latter, I see no case.

The trouble is that you can generally always do a bit more to improve your own condition. So if you show me someone who has worked a minimum wage job for years, then yes he has been working, but why has he not made an effort to acquire more skills in order to compete in better-paying jobs? Especially these days it is easy to acquire new skills for free through the internet, e.g. Khan Academy or Code Academy.

The hard truth for many liberals is that a lot of the poor have really put themselves in that situation. Even if they did not get a head start, you can still often see ways in which they might have saved a bit more or worked a bit harder at their jobs or in school in order to get that competitive edge. You really need to exclude those kinds of people and show me examples of those who did the absolute best they could and still failed to make a living. Then we can talk about redistribution.

Swami @2:36, thank you for your thoughtful reply. I don’t disagree with most of what you say there.

As far as the labor market, you are correct that when there are multiple options to gain an income it becomes more of an even negotiation between the employee and employer. This is one reason for the market distorting institution called public schooling in the US. An education is one way to provide a citizen with multiple options as to how to achieve an income.

Even so, there remains the necessity that one party in the labor market often needs very much to strike a deal, while the other party generally is in a situation to wait. My argument is that there is a distortion in that market that tends to reduce an individual’s bargaining power versus a potential employer. That particular individual may have many, many options, but the existence of others who don’t share that fortune will none the less reduce that individual’s ability to strike a more favorable deal.

I have no doubt my argument could have been framed more clearly, and I’m sure there are others that could provide a better explanation of it. But thank you for taking the time to read it and reply so intelligently.

Jerry,

I don’t think it is a realistic assumption to assume millions of employers (including the potential option of self employment) can result in a large deviance from paying based on marginal productivity over the long haul. The system dynamics of a contestable market work against any long term imbalance.

If employers were to systematically offer less due to some bargaining advantage in a domain, then that would drive up returns, which would attract more capital, which would reduce bargaining employer power. At the same time, lower wages would drive prospective workers to better fields, again improving employee bargaining power. IOW, the bargaining power objection kind of ignores that the lion’s share of the power comes out of supply and demand.

Swami @7:44. I guess you have pinned down where we disagree on how just one market, of many, actually works then. You state- “If employers were to systematically offer less due to some bargaining advantage in a domain, then that would drive up returns, which would attract more capital, which would reduce bargaining employer power. At the same time, lower wages would drive prospective workers to better fields, again improving employee bargaining power.”

This is quite an extraordinary assumption-actually, an entire chain of assumptions, all based on the idea that the labor market actually works the way you think it does. This chain of events occur in some kind of timely manner that allows someone to pay their rent, for instance?

Well I will put it to you this way- the person accepting a job that pays 8 dollars an hour does not have millions of potential employers around who are ready to compete for their services every day in a manner that could provide a steady income even at that low rate. If that is your theory then it does not come even close to reality. Ditch it.

@Meade

With respect to the power imbalance, there is clearly a buying power imbalance between both parties of the exchange and the third party. If you were that third party, your only option would be to look elsewhere, or offer a “better deal” to compete with someone else that gets a better deal based on their level of wealth (and not necessarily even the use of that wealth, just its existence or its use in a separate transaction, in many instances). The power imbalance is that there are extreme downsides to being poor in that all of my interactions place my needs at a higher demand (I need them more to be able to sustain or progress my life), all while increasing the supply of people like me (there are way more poor people than wealthy, skewing the supply curve in any labor transaction.) In these cases, despite a lack of coercion, the market transaction is only fair if you narrow your focus and ignore the causes of the supply and demand positions. A person can make a thousand “fair” transactions, but if each of them has a higher demand based on their lack of options in the larger market, then it’s hard to call that a fair market. And I disagree that a market can’t be unfair because it’s just responding to facts. By that rule, market transactions can’t be unfair (assuming a lack of coercion), but the market itself includes those facts on the ground and the actors within it; it can most certainly be unfair, unless you are looking at a purely theoretical market.

Also, this isn’t the 18th century, you are correct, but to state that nobody is malnourished is nonsense. A large portion of people are not able to fully interact within the market (children, elderly, sick, mentally ill) and are constantly facing actual starvation without charity and government programs. I think this is one of those times where the right doesn’t really understand the facts of the situation for a huge number of people. You personally may not be threatened with starvation or malnourishment or even know someone who is, but millions of people in the US face it every day, and will for their entire lives.

You’re note on net-neutrality is a strange one to use. Net-Neutrality is stopping a group of near monopoly companies in one market sector from dominating a separate, but related market sector. This is the kind of thing that a Libertarian should be all about because it’s an abuse of a monopoly to artificially increase the costs within that market, driving out competition and increasing costs for consumers. All net-neutrality is saying is that a company can’t charge another customer more for use of its infrastructure than it charges itself for the use. It’s only an issue because the companies that own the (government funded and protected) monopoly on the network want to use that monopoly to control another market.

@Chris,
I’m trying to draw a distinction between situations where one party has power over the other and so can coerce an exchange the other party does not like, and situations where a third party just happens to be a more attractive exchange partner, because they have better skills or more money. Those are two different situations. The exchange is clearly unfair in the first case, but it is not at all obviously so in the latter. The fact that other people offer better skills or more money isn’t unfair to you. The fact that there’s a large supply of unskilled labor isn’t unfair to the unskilled laborer. These are matters of objective merit. Whether you like or not, the difference in merit exists – it’s not something made up by society, like racism, or imposed by force. If you’re an unskilled laborer, it’s a fact that you’re just not as objectively qualified for some jobs than others. It’s not unfair for the employer to hire a more qualified person. If there’s an oversupply of unskilled labor, it’s just a reality that your labor isn’t that valuable to others. It’s not unfair that your labor isn’t worth more than $8.

On net neutrality, this is actual a perfect example of what I’ve mentioned elsewhere. The libertarian approach is to ask “why is the market doing this”, and then correct the underlying issue – in this case, local cable monopolies, which were historically created by local governments. Your response seems to be “well we can’t get rid of the local cable monopolies (no idea why), so instead we’re just going to force them act like how we imagine they might act if they weren’t monopolies” (based on some sort of fantasy of what you think consumers would demand if there were). Actually, I don’t think consumers would give two hoots about net neutrality, what they really want is better customer service and lower prices. And they want their video streaming to be uninterrupted, which net neutrality would make more difficult.

@Jonathan Gress-Wright

Your entire “undeserved” versus “deserved” poor is so incredibly condescending and not at all related to reality. My counter argument would be: would you say the same about the undeserved wealthy and the deserved wealthy? Are you in favor of reducing the wealth of those that just happened to be born into it, or got it from luck or unethical means? And really, there is so much research that shows that poor people aren’t typically poor because they “deserve” it, they are poor because they were born that way, live in unhealthy and dangerous environments, have reduced access to early education and can’t afford higher education (even if they somehow excel in the low quality early education), and will likely never have access to a job in which they can save up a significant amount of money. On top of this, if they do excel and try any risk, such as starting a business, and then don’t succeed (and many businesses don’t succeed, for a variety of reasons, independent of wealth status), they have lost everything they saved and have no real safety net to get them back on their feet and able to try again. The poor pay dearly for mistakes while the middle and upper classes do not. The “deserved” wealthy are usually wealthy because they kept trying things until they made it; poor people don’t have this luxury. You may look at a poor person and say “look, they quit school to join a gang” and I see someone who didn’t have the advantage of a stable home, lives in a neighborhood where safety is reliant on joining a gang, and really may actually be making the smartest market choice available, as modern gangs often act as corporations with increased pay with time. Is the gang member deserved or undeserved poor? What was their better option?

These aren’t edge conditions either, these are vast numbers of the poor. They do their best with the limited resources allowed, and sure, some are terrible people, but so are many wealthy people. The market has never been great at justifying wealth based on personal character. The myth of the employee that starts at the bottom and works hard to climb their way up is just that, a myth. In reality, they don’t move up in the company 99% of the time because they don’t have the skills to perform the jobs higher up. There is no mailroom training that is going to compete with a masters in science to work in a lab.

@Gress-Wright

No really, I think you have an unrealistic view of poverty. See the link below for a quickly found overview of research on the topic. Unless you consider being born into poverty to make you “deserved” poor, then a large percentage of poor people don’t really “deserve” it. Did you know that on average it takes 5 to 6 generations to move up the ladder, if people move up at all?

Research

Also, your example of Chinese immigrants versus African Americans is extremely flawed. First, you hear about black crime more largely because there is a huge population in comparison to Chinese Americans. Further, most of the Chinese immigrants in our history came here willingly as opposed to the ancestors of African Americans who came as slaves and were then freed into a society that still considered them sub-human property and have only in the last generation or two really made any headway in rights. It’s a little hard to make a comparison between those two groups. Add to this that there are a great number of Chinese Americans that have not escaped poverty (15.8% of the Chinese population in America and 2 million Asian Americans total). You are taking the stereotype of the hardworking, successful Asian as fact for an entire population.

I don’t know how typical my response is for the left, but I do believe that redistribution is important to ensure that we don’t leave people behind or doom entire populations to poverty. I think it’s less harmful to shift a dollar from the wealthy to the poor than it is to leave the status quo. I’m up for debate on how that distribution occurs (which methods are most effective at reducing poverty or achieving other goals) but I don’t believe that relying on Charity (which is fickle, faddish, selective and limited in scope). If the market was taking care people or even allowing them the opportunity to rise above their situation by anything other than luck or crime, then I would fine with it being unregulated. It’s not performing that role, largely because that isn’t its purpose.

@Chris:

I’m not sure whether your problem is with the distinction between deserving and undeserving or with the supposed implication that all poor people deserve to be poor. You seem to be arguing that every poor person is by definition deserving, which I think can be easily refuted. Now maybe you’re saying most poor people are deserving of redistribution, which might be true but I don’t believe it and I think you’d have a hard time demonstrating it to my satisfaction. But even if that’s true, do you admit that, if a poor person were genuinely responsible for his own poverty, he would not be morally entitled to receive forcibly redistributed wealth in the way a deserving poor person would be?

> You are taking the stereotype of the hardworking, successful Asian as fact for an entire population.

Of course I’m talking about population averages. There are many successful blacks and there are certainly poor or criminal Asians, including Chinese. But that Chinese on average do better socioeconomically than blacks is I think pretty solidly established. So you have to ask why some groups tend to escape poverty more than others. I think if your only explanation is that one group was enslaved over 150 years ago, you don’t have a good explanation. For example, you might look at whether blacks starting to advance at a similar rate to other groups once legal restrictions were lifted, but they seem to lag behind as a group. There’s also good evidence that blacks were advancing FASTER before the Great Society welfare programs were instituted (see research of black economists Thomas Sowell and Walter Williams).

I think you’re basically misunderstanding me, though. I am not interested in judging the poor because they are poor; I’m saying that, if you want to use violence to redistribute wealth, you need to pass a higher bar than just pointing at inequality. I don’t think you appreciate the moral problems with forced redistribution; you seem to think it is the moral equivalent of voluntary charity and that all you have to do is demonstrate some need and you have made the case for redistribution. I’m saying that may be sufficient to persuade me that a rich person ought to give the poor person some money, but to persuade me that it justifies violence is something else.

For example, let’s say you’re poor but you work very hard and save up and forgo many conveniences and luxuries in order to get ahead. Your neighbor doesn’t make the same effort and is still poor. Now some bureaucrat or politician looks at your wealth and decides that it’s not “fair” that you have so much more than your poor neighbor and forces you to share. Morally I think it’s outrageous that you are essentially being punished for having worked hard and saved so much, while the other guy is rewarded for having made less effort. But if you wanted to spare some of your wealth to help your neighbor, I would have no problem with it, even if I believed he might have worked a bit harder.

Now if you had been born into wealth and never had to work, I would concede that the case for redistributing your wealth by force is stronger (though probably not strong enough to convince me that forced redistribution is justified). The problem is that welfare programs do a bad job distinguishing the deserving from the undeserving; they often don’t even make the effort. E.g. Medicare entitles anyone over 65 to free medical care, regardless of how much they’ve worked or saved.

One last note: many redistribution programs end up being regressive despite progressive intentions, which I think even you might have a problem with. Social Security and Medicare are again examples of this. With SS, for instance, you get the same annuity even if you started work later in life, as many middle class people do, since they spent the first earning years in college.

@Gress-Wright

I am arguing with your assumption that a large portion of poor people “deserve” to be poor (large enough for you to make it an issue). I would also argue that it’s really easy to judge from higher up the wealth bracket. You have no real idea what it’s like to be those people. You have no idea what environment they grew up in, what they’ve gone through, why they haven’t achieved great success. Are we to arbitrate the worth of each poor person to determine if they deserve help or not? How could that process possibly work? Are we to do the same for the wealthy as well to see if they deserve to have a good life? And as a society are we okay with saying anyone, good or bad, deserves the conditions that some poor people live in?

In the end though, I don’t think it’s wise or helpful to even try to determine who’s “deserving” of any fate. Again, there are plenty of wealthy people I think are terrible human beings, but I’m not arguing that we should distribute their wealth based on how they earned it. I’m arguing that we should redistribute wealth because the wealthy don’t need as much as they have and the poor desperately need more to survive and be productive members of society. My ideal is a world where people aren’t constantly living on the edge of financial ruin and where the smart and motivated can achieve a greater life for themselves. Not only do I think everyone deserves this, I think our society would be a better, more productive one if it were true. Right now this ideal doesn’t apply to a huge (majority?) of people and I’m not okay with that. I’m not okay with that, not because I’m emotional, but because I’m empathetic to the lives of others that are less fortunate than myself. I’m from a wealth bracket in which I know I have had times where I’ve been a few mistakes away from poverty and fully understand that we don’t always have power over our situation; the people who believe they do usually inherited enough of a safety net to have made a few mistakes and taken a few risks that others less well off then themselves could not have made.

Jerry,

Yes I’m aware of these vague value statements about fairness but they don’t actually say anything with regard to what I’m asking about market rules. Saying something along the lines of— markets do not necessarily produce the best results for society— doesn’t really address my point. I’m talking about economic transactions and exchange here. What it seems that you’re doing in my most charitable reading steering your point away from this economic area and into areas in which society organizes itself around different institutions. I have a hard time seeing how matters that we handle through economic exchange of goods and services As a means to manage and distributes scarce resources to satisfy needs is better handled in a different way other than markets.

I think others have pointed this out already, but let me give it a try.

It has been alleged that employers have a power advantage over employees because the employee needs a job to survive and the employer can wait. (I find the ability of an employer to wait plausible, especially if we are considering hiring an additional member of a large existing team of employees. The employer is doing OK with the current work force.) Therefore, the employee cannot hold out for a better bargain but must accept what is offered.

So, suppose our worker is compelled to accept an unfairly low wage in order to avoid the alternative of unemployment and starvation.

What happens next? The employee can now look for alternative employment. No longer facing unemployment and starvation if he does not accept a job in a hurry, he rather is eeking out a living at the assumed unfair low wage and can easily “hold out” for a better wage with an alternative employer.

Of course, there may be no real “bargaining” to it. Alternative employers simply offer more in order to obtain applications from our worker and others like him. The worker takes the new job because it pays better.

This entire scenario of the unemployed worker who must have work right away or starve and the employer who can hold out is simply inapplicable to most employment transactions.

The vast majority of new hires are by employers who hire a worker who is already employed elsewhere who then quits with his old employer.

These sorts of quits are very common and avoiding having one’s employees quit in this way is the prime self-interested motivation for employers to improve wages and working conditions.

By paying more, an employer obtains additional employees whose output generates additional profit. Failure to pay more results in the loss of employees, reduced production, lower profit, and in the extreme, losses and even bankruptcy.

It is tough on the poor old employer. He must pay more and more or else go out of business.

Of course, rising wages and improvied working conditions requires lots of new hires–or really, a demand for labor growing more rapidly than the supply.

When the demand for labor grows more slowly, or even falls, then new hires drop off as do quits. When business aren’t hiring, there is no reason to quit the current job. The result is increased unemployment and perhaps even reduced employment.

Sure enough, in this situation, the workers have no bargaining power and may be forced to accept lower wages.

Which is exactly what needs to happen. The lower wages will result in an increase in the quantity of labor demanded bringing the problem of slow hires and few quits and high unemployment to an end. The process is self correcting. When wages are at the property level, firms will again find the need to compete for workers by enticing the employees of other firms to quit.

Of course, better yet would be for the demand for labor to reverse any decline and grow more rapidly. But if that cannot be managed, the lower wages that firms could force employees to accept is the next best option.

Unfortunately, when the weak bargaining power theory holds sway, then wages can be pushed up too high. Or more often, the process of labor surpluses leading to lower wages, or even slower growth in wages, slows to a near stop. The quantity of labor demanded is less than supply. Hires are weak. Quitting to obtain a better job becomes much less common. And there just are not enough jobs.

This fanciful tale of the worker not having bargaining power because they must take what they can get or remain unemployment becomes a self-fulfilling fantasy when it infects labor market policy.

If wages are too high, then yes, there is little or now bargaining power for workers. Good.

If wages are too low, then on the contrary, employers compete to obtain workers. Not necessarily for the unemployed workers but rather enticing employees of other firms to quit and come work for them.

I find Brown’s response puzzling.

I make no assumption that there is an alternative to working for some employer or other.

The reason labor markets work tolerably well for workers is that employees are not tied to one particular employer. They can quit.

I expressly made the argument that even if a worker takes a job with an unfairly low wage because they need income immediately and cannot hold out for a better deal, they can, while working for that employer look for another job.

The number of quits is something like 36 million per year. These aren’t mostly people who are leaving the labor force. They are people who are leaving one job and going to another. Hires are more like 60 million per year. The number of people employed right now is 153 million.

Leaving one job and taking another is important.

And I don’t think labor markets in the U.S. have been in surplus for the last 40 years. They were in major surplus in 2008 and have only very gradually recovered.

But that isn’t the normal situation.

Anyway, if wages were too low, they would be in shortage.

The notion that workers have to have money right away and can’t wait around doing nothing until an employer offers them a fair wage is irrelevant.

They can work at a perhaps unfair wage now and get a job with another employer.