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Basic Economics by Thomas Sowell

> Most of us hate even to think of having to make such choices. Indeed, as we have already seen, some middle-class Americans are distressed at having to make much milder choices and trade-offs. But life does not ask what we want. It presents us with options. Economics is just one of the ways of trying to make the most of those options.

Life doesn't just present us with options. Life presents us with *situations* and we use our minds to think about what our options are. And which situations we face is not random, it's something we have a lot of control over.


Anonymous at 10:24 AM on August 30, 2018 | #10953 | reply | quote

*Basic Economics* by Thomas Sowell:

> the inherent reality is that there are not nearly enough beach-front homes to go around and prices simply convey that underlying reality.

It's not the fault of *prices* that there aren't enough beach-front homes for everyone. A good point. The same thing applies to iPhone X's.


Anonymous at 10:27 AM on August 30, 2018 | #10954 | reply | quote

*Basic Economics* by Thomas Sowell:

> While a free market economic system is sometimes called a profit system, it is really a profit-and-loss system-and the losses are equally important for the efficiency of the economy, because they tell the manufacturers what to stop producing. *Without really knowing why* consumers like one set of features rather than another, producers *automatically* produce more of what earns a profit and less of what is losing money. That amounts to producing what the consumers want and stopping the production of what they don't want. [emphasis added]

People don't act "automatically".

And companies put lots of thought into why consumers prefer some things and not others. Companies create understanding of what consumers want, and why. They don't want to create random products and then stop selling the losers. No company does that. All companies have ideas about which products will or won't sell, and they get corrected by the market (poor sales) as a *last resort*.


Anonymous at 10:37 AM on August 30, 2018 | #10955 | reply | quote

*Basic Economics* by Thomas Sowell:

> Prices coordinate the use of resources, so that only that amount is used for one thing which is equal in value to what it is worth to others in other uses.

Terrible sentence. Confusing writing. It splits "that amount" from the "which is..." clause which explains what amount he's talking about.


Anonymous at 10:41 AM on August 30, 2018 | #10956 | reply | quote

*Basic Economics* by Thomas Sowell:

> Once we recognize that, we can then compare how economic systems which use prices to *force* people to share scarce resources among themselves differ in efficiency from economic systems which determine such things by having kings, politicians or bureaucrats issues orders saying who can get how much of what. [emphasis added]

wtf, why would he call prices "force"? and he does it while contrasting them to kings who actually use force.


Anonymous at 11:02 AM on August 30, 2018 | #10957 | reply | quote

*Basic Economics* by Thomas Sowell:

> During the brief era of glasnost (openness) and perestroika (restructuring) . in the last years of the Soviet Union, two Soviet economists named Nikolai Shmelev and Vladimir Popov wrote a book giving a very candid account of how their economy worked and this book was later translated into English.

> As Shmelev and Popov put it, production enterprises in the U.S.S.R. "always ask for more than they need" in the way of raw materials, equipment, and other resources used in production. "They take everything they can get, regardless of how much they actually need, and don't worry about economizing on materials," according to these economists. "After all, nobody 'at the top' knows exactly what the real requirements are," so "squandering" makes , sense. Among the resources that get squandered are workers. These economists reported that "from 5 to 15 percent of the workers in the majority of enterprises are surplus and are kept 'just in case.' The consequence was that far more resources were used to produce a given amount of output in the Soviet economy as compared to a price-coordinated economic system, such as that in the United States. Citing official Soviet statistics, the Soviet economists lamented:

> According to the calculations of the Soviet Institute of World Economy and International Relations, we use 1.5 times more materials and 2.1 times more energy per unit of national income than the United States. . . . We use 2.4 times more metal per unit of national income than the U.S. This correlation is apparent even without special calculations: we produce and consume 1.5 to 2 times more steel and cement than the United States, but we lag behind by at least half in production of items derived from them. . . . Recently, in Soviet industry the consumption of electrical energy exceeded the American level, but the volume of industrial output in the U.S.S.R. is-by the most generous estimates-only 80 percent of the American level.

> The Soviet Union did not lack for resources, but was in fact one of the most richly endowed nations on earth-if not the most richly endowed.


Anonymous at 11:14 AM on August 30, 2018 | #10958 | reply | quote

I posted this research done on healthcare efficiency:

http://www.who.int/healthinfo/paper30.pdf

On discord, it was not the best location to do it and we lost track, or rather I lost track of most of the conversation.

Anyway, Curi rejected the research and I don't think I have a grasp as to why. I am a psychologist and to me research is king so I can see many fundamental disagreements happening because of that, so I am hoping to see if I can iron some of those out.

Always a pleasure.


Andy at 11:02 AM on September 2, 2018 | #10988 | reply | quote

> Anyway, Curi rejected the research and I don't think I have a grasp as to why. I am a psychologist and to me research is king so I can see many fundamental disagreements happening because of that, so I am hoping to see if I can iron some of those out.

If "research is king," what do you do when multiple pieces of research disagree? What do you do when different people think the same research says different things about reality? What do you do when different people think the same research says the same things about reality but disagree about what should be done about it?

My guess is, you'll think of some methods to resolve those situations. Those methods are philosophy.


PAS at 11:21 AM on September 2, 2018 | #10989 | reply | quote

#10988 Have you read the link yourself and critically analyzed it for flaws? I asked a similar question on discord and didn't yet get to the point of reading or commenting on this specific paper, so I haven't rejected it (I did, earlier, say I think lots of papers in this genre are bad and left-biased.)

Also before looking at the paper I tried to ask this question but I haven't gotten an answer yet:

> so before we talk about health care in other countries, would you agree the US system is absolutely nothing like a free market, and that obamacare made it much worse than it was before?

Also, related: (free market) economics offers logical reasoning which applies quite broadly. In some ways, it's highly falsifiable – any event that happens in a way which *contradicts* economic logic would refute it. And it makes many broad claims, e.g. it has claims about all societies so you don't need to get data from a specific type of society to find a counter-example. If you can point out any economic claim (preferably with a quote from an economist) and then a specific fact which contradicts it, please go ahead. The paper above doesn't appear to be attempting to do that. At a glance, it doesn't appear to be making a claim that a specific idea of (free market) economic logic is contradicted by a particular fact.

The reason (free market) economics is generally hard to refute with facts is that it's extremely careful about what claims it makes. If it can't work a point out logically, it refrains from making a claim. Economists do their best to say things that will never be refuted by any real world facts – to figure out logical truths that *are not incorrect*. Because of the style, most serious economics debates are about logic. I think the best way to find a mistake in economics is to to look for a logical flaw because you'll never find any facts to contradict the non-flawed economic logic.

Note that there are rival schools of economics, so if you try to refute a claim it's possible I'll disown it as not from my school of economics (as exemplified by Mises). E.g. I sure won't be defending Keynesian or Marxist claims!


curi at 11:25 AM on September 2, 2018 | #10990 | reply | quote

>If "research is king," what do you do when multiple pieces of research disagree? What do you do when different people think the same research says different things about reality? What do you do when different people think the same research says the same things about reality but disagree about what should be done about it?

>My guess is, you'll think of some methods to resolve those situations. Those methods are philosophy.

Yes. The method on which it is done would be how I differentiate which research I would choose to go with.

Things like Transparency, is it reproducible, Sample size.

There are useful sites like this one who are a: an international initiative that seeks to improve the reliability and value of published health research literature by promoting transparent and accurate reporting and wider use of robust reporting guidelines.

http://www.equator-network.org/

Also in general I have a hierarchy of research, if that makes any sense. When looking at health studies For example from:

1. Research done with repeated double blind clinical trials

2. Multiple studies where at least there is double-blind and placebo control.

3. Single double-blind study or multiple cohort studies

4. Uncontrolled or observational studies only

So for example, Fish oil and the reduction of Triglycerides has multiple robust Rank 1 studies.

While Vitamin E shows some rank 2 level studies. And Vitamin B1 has shown some reduction in uncontrolled studies.

There's more to it and some information on how to best decide on research can be found on this paper:

https://www.nature.com/articles/s41562-016-0021


Andy at 11:45 AM on September 2, 2018 | #10991 | reply | quote

Andy thinks he's citing nonpartisan research. That paper is from WHO. Organizations like that often have leftist ideas clearly stated on their own website. Let's check:

http://www.who.int/about/mission/en/

> Constitution of the World Health Organization: Principles

> 1. Health is a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity.

> 2. The enjoyment of the highest attainable standard of health is one of the fundamental rights of every human being without distinction of race, religion, political belief, economic or social condition.

> 3. The health of all peoples is fundamental to the attainment of peace and security and is dependent on the fullest co-operation of individuals and States.

> 4. The achievement of any State in the promotion and protection of health is of value to all.

> 5. Unequal development in different countries in the promotion of health and control of diseases, especially communicable disease, is a common danger.

> 6. Healthy development of the child is of basic importance; the ability to live harmoniously in a changing total environment is essential to such development.

> 7. The extension to all peoples of the benefits of medical, psychological and related knowledge is essential to the fullest attainment of health.

> 8. Informed opinion and active co-operation on the part of the public are of the utmost importance in the improvement of the health of the people.

> 9. Governments have a responsibility for the health of their peoples which can be fulfilled only by the provision of adequate health and social measures.

I added the numbering to make them easier to refer to.

Andy, do you think those are all nonpartisan principles? If not, could you say which ones you think are nonpartisan and which are leftist (or rightist or something else)? And do you see any other problems?


Dagny at 11:52 AM on September 2, 2018 | #10992 | reply | quote

> #10988 Have you read the link yourself and critically analyzed it for flaws? I asked a similar question on discord and didn't yet get to the point of reading or commenting on this specific paper, so I haven't rejected it (I did, earlier, say I think lots of papers in this genre are bad and left-biased.)

Oh there's a lot of potential issues with this time of research. There is no standard Objective measure of healthcare that everyone agrees on.

> Also before looking at the paper I tried to ask this question but I haven't gotten an answer yet:

>> so before we talk about health care in other countries, would you agree the US system is absolutely nothing like a free market, and that obamacare made it much worse than it was before?

I don't know. Like I don't know the way obamacare works. I know I used Obamacare for while when unemployed or rather I was working for myself... and it was quite expensive. But I got good quality care, though certain tests I needed were rejected. I have insurance through an employers now and it's much better.

> Also, related: (free market) economics offers logical reasoning which applies quite broadly. In some ways, it's highly falsifiable – any event that happens in a way which *contradicts* economic logic would refute it. And it makes many broad claims, e.g. it has claims about all societies so you don't need to get data from a specific type of society to find a counter-example. If you can point out any economic claim (preferably with a quote from an economist) and then a specific fact which contradicts it, please go ahead. The paper above doesn't appear to be attempting to do that. At a glance, it doesn't appear to be making a claim that a specific idea of (free market) economic logic is contradicted by a particular fact.

The paper is just ranking based on their framework the efficiency of healthcare of 191 countries. In many of the higher ranking countries you'll find free market economies, or freer.

> The reason (free market) economics is generally hard to refute with facts is that it's extremely careful about what claims it makes. If it can't work a point out logically, it refrains from making a claim. Economists do their best to say things that will never be refuted by any real world facts – to figure out logical truths that *are not incorrect*. Because of the style, most serious economics debates are about logic. I think the best way to find a mistake in economics is to to look for a logical flaw because you'll never find any facts to contradict the non-flawed economic logic.

I am out of my depth when it comes to Economics. It's also hard to tell what is what, I can find a paper signed by 500 economists that say raising the minimum wage is good, and a paper that also has 500 economists saying that raising the minimum wage is bad. It's a world I am not eager to dive into.

> Note that there are rival schools of economics, so if you try to refute a claim it's possible I'll disown it as not from my school of economics (as exemplified by Mises). E.g. I sure won't be defending Keynesian or Marxist claims!

I feel like Marxist claims have been refuted by the evidence at this point. Every single time it gets implemented anywhere, nothing but horror follows suit.

How do you decide what is good and bad research?


Andy at 12:21 PM on September 2, 2018 | #10993 | reply | quote

> I am out of my depth when it comes to Economics. It's also hard to tell what is what, I can find a paper signed by 500 economists that say raising the minimum wage is good, and a paper that also has 500 economists saying that raising the minimum wage is bad. It's a world I am not eager to dive into.

You want worlds where there aren't disagreements? Or what? To understand economics, like everything else, you must consider what the arguments are and judge them with your own mind. There's no avoiding that in other intellectual fields either.

Minimum wage isn't very hard to understand. It's actually a pleasant issue, IMO, because of how clear cut, logical and decisive the answers are. It's not a squishy issue where there's all kinds of room for reasonable people to disagree. It's been figured out, and the answers are simple and accessible.


Anonymous at 12:26 PM on September 2, 2018 | #10994 | reply | quote

Andy, have you read the link yourself and critically analyzed it for flaws?

> The paper is just ranking based on their framework the efficiency of healthcare of 191 countries. In many of the higher ranking countries you'll find free market economies, or freer.

So it doesn't dispute or contradict the economic logic which explains that government intervention in healthcare makes things worse?


curi at 12:28 PM on September 2, 2018 | #10995 | reply | quote

Sure I'll try and point out what I think is non-partisan.

> Andy thinks he's citing nonpartisan research. That paper is from WHO. Organizations like that often have leftist ideas clearly stated on their own website. Let's check:

> http://www.who.int/about/mission/en/

>> Constitution of the World Health Organization: Principles

>> 1. Health is a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity.

Yes I think this is non-partisan. I think we can agree that just because you're not fighting an infection at the moment, doesn't mean you're healthy.

>> 2. The enjoyment of the highest attainable standard of health is one of the fundamental rights of every human being without distinction of race, religion, political belief, economic or social condition.

I am not sure. This might be a left leaning idea. That health is a fundamental right of every human being. I hope it is not though!

>> 3. The health of all peoples is fundamental to the attainment of peace and security and is dependent on the fullest co-operation of individuals and States.

I can't imagine you'd have a peaceful society if a large portion of the population doesn't have access to healthcare. I can see this being partisan but I hope it is not either.

>> 4. The achievement of any State in the promotion and protection of health is of value to all.

Promotion and health is a value to all is non-partisan, I think we can agree that we all value.

>> 5. Unequal development in different countries in the promotion of health and control of diseases, especially communicable disease, is a common danger.

I don't think this is partisan either.

>> 6. Healthy development of the child is of basic importance; the ability to live harmoniously in a changing total environment is essential to such development.

Non partisan either.

>> 7. The extension to all peoples of the benefits of medical, psychological and related knowledge is essential to the fullest attainment of health.

Probably a left leaning ideology but again I wish it was non-partisan.

>> 8. Informed opinion and active co-operation on the part of the public are of the utmost importance in the improvement of the health of the people.

This doesn't appear partisan to me.

>> 9. Governments have a responsibility for the health of their peoples which can be fulfilled only by the provision of adequate health and social measures.

I think people on the right don't think the government is responsible for the health of their people. So this one I'd say is partisan.

> I added the numbering to make them easier to refer to.

> Andy, do you think those are all nonpartisan principles? If not, could you say which ones you think are nonpartisan and which are leftist (or rightist or something else)? And do you see any other problems?

Yup did it. Thank you for organizing it.


Andy at 12:29 PM on September 2, 2018 | #10996 | reply | quote

>You want worlds where there aren't disagreements? Or what? To understand economics, like everything else, you must consider what the arguments are and judge them with your own mind. There's no avoiding that in other intellectual fields either.

Not necessarily. But I do wish it was more scientific, in a way that experts could at least agree on something as basic as minimum wage. They don't seem to. Seems like a total mess to me.

>Minimum wage isn't very hard to understand. It's actually a pleasant issue, IMO, because of how clear cut, logical and decisive the answers are. It's not a squishy issue where there's all kinds of room for reasonable people to disagree. It's been figured out, and the answers are simple and accessible.

I don't have an opinion on minimum wage because I don't know what the outcomes of raising the minimum wage are. I recall someone giving me a giant study, when I asked about this in a progressive forum, that looked at raising the minimum wage of some city in california turned out to have good outcomes but I can't find it. I am posting a request on that same progressive forum asking for it again.


Andy at 12:40 PM on September 2, 2018 | #10997 | reply | quote

>So it doesn't dispute or contradict the economic logic which explains that government intervention in healthcare makes things worse?

I don't think it refutes it or strengthens it. It is just a ranking. It includes both egalitarian countries and free market as well.


Andy at 12:42 PM on September 2, 2018 | #10998 | reply | quote

1 is partisan because it counts "social well-being" as health. That means they are trying to count *leftist ideas about how to organize society* as "health", and include such things in their research. For example, access to free government education is considered a social well-being issue by the left, as are government retirement plans like social security. It's also problematic in a non-partisan way because it tries to make "health" way too broad.

2 is a direct contradiction of the (classical) liberal concept of rights. It's part of a current political struggle over the issue of what counts as a right. One way it's commonly debated is about whether there are only "negative" rights like not being punched, or there are also "positive" rights like to be provided with food, healthcare or education. Leftists try to dramatically broaden what counts as a "right", both to advocate for more government services and to undermine and dilute the concept of rights.

3 includes a viewpoint (which contradicts the classical liberal view) on how to achieve peace, which is a political issue. It also hints that they believe that Joe must "cooperate" in the achievement of Bob's health, or else Joe is a threat to peace. It also suggests a role for government in this which is not the night watchman state.

4 is partisan because of its attitude to states. It says the achievements *of States, in areas that liberalism says states should not act in*, are valuable to all. Whereas liberalism says that state action in those areas harms people (both generally and also specifically regarding medical outcomes).

I don't view 5-8 as partisan. I don't see the issue with sharing knowledge (7).

9 is the most blatantly partisan. And it doesn't just advocate government provided healthcare(!), it also advocates government provided "social measures" (e.g. public schools, unemployment insurance, minimum wage laws, homeless shelters, food stamps, probably psychiatric prisons too).

My conclusion is that you are not able to reliably detect partisan, leftist, or otherwise anti-liberal ideas, even when your guard is up and you're looking for them. Fair? And I think the underlying issue is you don't know enough about what liberalism says, including what it says about healthcare. From that situation, I don't think you should jump into trying to debate the matter and advance claims. I think you should instead try to find out what the other side thinks, and why, and then evaluate it yourself (you might actually agree, or in the alternative you would then be able to know what sort of counter-arguments would be important). What do you think?


Dagny at 12:47 PM on September 2, 2018 | #10999 | reply | quote

> Not necessarily. But I do wish it was more scientific, in a way that experts could at least agree on something as basic as minimum wage. They don't seem to. Seems like a total mess to me.

Which fields do you think are full of experts agreeing on the basics? Even physics is full of controversy about basic issues.

> I don't think it refutes it or strengthens it. It is just a ranking. It includes both egalitarian countries and free market as well.

Why are you bringing the paper up? What's your claim?

> I don't have an opinion on minimum wage because I don't know what the outcomes of raising the minimum wage are. I recall someone giving me a giant study, when I asked about this in a progressive forum, that looked at raising the minimum wage of some city in california turned out to have good outcomes but I can't find it. I am posting a request on that same progressive forum asking for it again.

There is no way to settle this issue with studies because they are never adequately controlled.

However, it's easy to settle by learning the logical reasoning. If you would read and think, instead of looking for research, you'd find it's simple and convincing.


Anonymous at 12:51 PM on September 2, 2018 | #11000 | reply | quote

Andy, have you read the link yourself and critically analyzed it for flaws?

You seem to be intentionally ignoring this question? You twice responded to other things from the same comment. If you think there's something wrong with the question, could you say what? I think it's a reasonable question. In general, I don't want to look at other people's cites that they haven't read and critically analyzed themselves.


curi at 1:08 PM on September 2, 2018 | #11001 | reply | quote

>My conclusion is that you are not able to reliably detect partisan, leftist, or otherwise anti-liberal ideas, even when your guard is up and you're looking for them. Fair? And I think the underlying issue is you don't know enough about what liberalism says, including what it says about healthcare. From that situation, I don't think you should jump into trying to debate the matter and advance claims. I think you should instead try to find out what the other side thinks, and why, and then evaluate it yourself (you might actually agree, or in the alternative you would then be able to know what sort of counter-arguments would be important). What do you think?

That seems fair to me.

But I don't know if I was debating or putting forward any claims. This all bore out of a conversation on we had on discord in where I said, "I am a fan of the scandinavian models due to their outcomes." A lot of back and forth but eventually the crux was the disagreement on whether an outcome is reliable or not, which is when I posted this study and it was rejected. Discord became more difficult to maneuver and keep track of the conversation so I was told to put it here. And here we are.


Andy at 1:12 PM on September 2, 2018 | #11002 | reply | quote

> the crux was the disagreement on whether an outcome is reliable or not

Having been on discord, I don't know what you're talking about.

I think the crux of the disagreement is: *government intervention in healthcare causes worse outcomes than the free market*. It makes things worse, not better. It doesn't help.

You disagree. Is the study meant to be relevant to this? I guess the authors intend it to be relevant to this, but actually it's not very relevant.


Anonymous at 1:16 PM on September 2, 2018 | #11003 | reply | quote

>A lot of back and forth but eventually the crux was the disagreement on whether an outcome is reliable or not

There was an important disagreement on epistemology.

From the discord:

curi Today at 2:36 PM

you haven't answered my initial questions, and the right way to think about this stuff is by understanding economics and liberal reasoning, not by research

the research is broadly all bad b/c it's not even the right way to try to understand the issue

HeuristicWorld (Andy) Today at 2:37 PM

I have to disagree with that

Real world > theory

curi Today at 2:37 PM

you have to understand concepts and use your mind in order to understand the real world. it's impossible to analyze the real world without theories, as Popper taught us

theories have to come first

JustinCEO Today at 2:38 PM

the research is based on a theory of what variables are relevant in order to judge healthcare quality

and also theories on how to measure them

HeuristicWorld (Andy)

That's just the fundamental difference between us then, As a Psychologist I trust in the scientific process, Philosphy is great but where is the evidence

curi Today at 2:43 PM

if you disagree with the logic economics, you need logical arguments. economics isn't an empirical science.

if you found anything IRL that actually contradicted part of economics, that would be important, but you have not presented any evidence contradicting any claim of economics.

HeuristicWorld (Andy) Today at 2:44 PM

I am more interested in empirical evidence of how things actually ARE vs how they could be in a hypothetical utopian world


Guilherme at 2:03 PM on September 2, 2018 | #11004 | reply | quote

> I am more interested in empirical evidence of how things actually ARE vs how they could be in a hypothetical utopian world

I don't think you have a detached interest in how things actually ARE.

I think you want how things actually ARE to help make decisions and take positions. Should I do A or B? Should the government do X or Y?

But as soon as you do that, you are out of the realm where empirical evidence on its own can answer. You have to introduce values and logic and methods and philosophy to get to A or B, X or Y.

Which you, necessarily, do. The problem is that you don't think about them explicitly. You think you're just following evidence, when you're really introducing a ton of other stuff without explicitly thinking about what it is (and whether it's any good).

Characterizing thinking about the other stuff explicitly as a hypothetical utopian world is a straw man. You need that stuff to do anything useful in the real world like make a decision or take a position on what government policy should be.


PAS at 2:28 PM on September 2, 2018 | #11005 | reply | quote

It was more of a misunderstanding.

Curi was saying that you can't understand data without having some explanation about how the system you are taken the data from works. Andy somehow thought that Curi was denying reality was important.


Guilherme at 2:31 PM on September 2, 2018 | #11006 | reply | quote

curi Today at 2:47 PM

nor about whether you are aware you're taking an opposite position to BoI

HeuristicWorld (Andy)Today at 2:47 PM

lol

If BOI and Popper say that you ignore the data and real life outcomes then I guess I am rejecting it.That's literally what I value about the scientific method, not the theories. Testable and falsifiable claims.

I somehow doubt that's what they are claiming


Anonymous at 2:39 PM on September 2, 2018 | #11007 | reply | quote

I think what I said was an elaboration on that.

For example, set aside problems with the studies for a moment and suppose we could do a proper study and it showed that the per capita income in Sweden is $30k with a standard deviation of $5k and in the US it's $40k with a standard deviation of $15k. And that the government at all levels spends 60% of GDP in Sweden and 40% of GDP in the US.

That would be some fine empirical data. But so what? Do those particular figures matter more than other figures we might imagine and study? Do they mean the US government should spend more or less of GDP? Do they mean that Sweden is better or worse off than the US? Should I try to move to Sweden?

No matter how well its done, an empirical study can't answer those questions by itself.

I'm not saying those questions are unanswerable. People can and do answer them. You just can't get to the answers with "research is king". You either get there by sneaking in assumptions about values and methods and explanations, or you get there by explicitly considering values and methods and explanations.


PAS at 2:46 PM on September 2, 2018 | #11008 | reply | quote

Right but what I had said initially was I am a fan of the scandinavian model.

>HeuristicWorld (Andy)Yesterday at 9:50 PM

Based on the metrics done. It seems they have the best level of healthcare, education, life expectancy. I know they are having issues with immigration but I don't think that's due to their economic system. Or maybe it is. I am very uninformed.

oh and happiness

>JustinCEOYesterday at 9:53 PM

so you're looking at some metrics and you think the socialist element in their policy causes the metric outcomes you like. why?

>HeuristicWorld (Andy)Yesterday at 9:54 PM

I don't know if that's what is the cause of the outcomes. I am just basing everything entirely on the outcomes.

It gets hard to follow the discord at this point because there was 3 different conversations going on at the same time but Justin said that Happiness measurements are trash and I said I am not so sure about that. Then I asked Justin what makes the outcomes of scandinavian countries good

>i think these Nordic model countries already had smart western people in them before they started large scale wealth redistribution. and they have still retained enough capitalism. and that's enough to do really well

>HeuristicWorld (Andy)Yesterday at 10:08 PM

I see well that's a hypothesis. You think they are not successful because of the model but because of the people. They were able to accumulate enough wealth to distribute etc...

Would this be refuted if they are still generating massive wealth presently?

>JustinCEOYesterday at 10:09 PM

i'm not saying they stored up a bunch wealth in advance to do socialism, i'm saying they're not dumb enough to totally kill the golden goose... altho even in SWEDEN it looks like they may be moving away from nordic model some

if latest polls are to be believed...

>ok right but it seems like you're implying that the generation of this golden goose was done in the past. So their current model would be detrimental to the golden goose. Am I getting you correctly?

>JustinCEOYesterday at 10:12 PM

interferences with capitalism are bad in general but capitalism is robust enough to tolerate a lot of interference and still create tons of wealth

>HeuristicWorld (Andy)Yesterday at 10:14 PM >interferences with capitalism are bad in general but capitalism is robust enough to tolerate a lot of interference and still create tons of wealth

>so that would mean that the model is feasible then right? if it can still generate tons of wealth while maintaining the egalitarian outcomes.

This is where I'd like to focus on for a moment if we can.

If their system is capable of generating tons of wealth and have good egalitarian outcomes simultaneously, doesn't that mean at least that the system is feasible? What am I missing?


Andy at 3:27 PM on September 2, 2018 | #11009 | reply | quote

I really messed up the formatting on that last post.


Andy at 3:28 PM on September 2, 2018 | #11010 | reply | quote

I'm not aware of any minimum wage researcher who had no opinion and then looked at the data to try to figure out what opinion to have. They all – on both sides – seem to first have *economic theories* which tell them what the answer is. They already think they know the answer before they do the research. And I don't blame them for that. Some are Marxists, some are liberals – would they be better researchers if they were so ignorant of such matters that they had not formed opinions?

Marxist and capitalist economics both have reasoning which tells you about what the effectives of minimum wage laws will be.

Also note: all research could do, at best, is convince someone that their understanding of economics is incorrect in some way. But emprical facts can never tell them what what their logical thinking about economics is wrong or how to change it.

No matter what the research, I would never abandon economic thinking. If I had to abandon my current beliefs about economics (due to empirical contradiction), I would attempt to create new ones. One *needs* beliefs about how to correctly logic and reason about economics in order to think about economic issues and reach any conclusions about anything. Data doesn't speak for itself and doesn't tell you what ideas are right, it only gets referred to by ideas (including criticisms).


Anonymous at 3:30 PM on September 2, 2018 | #11011 | reply | quote

Attempting to Fix Formatting

> HeuristicWorld (Andy)Yesterday at 9:50 PM > Based on the metrics done. It seems they have the best level of healthcare, education, life expectancy. I know they are having issues with immigration but I don't think that's due to their economic system. Or maybe it is. I am very uninformed. > oh and happiness > >JustinCEOYesterday at 9:53 PM > so you're looking at some metrics and you think the socialist element in their policy causes the metric outcomes you like. why? > >HeuristicWorld (Andy)Yesterday at 9:54 PM > I don't know if that's what is the cause of the outcomes. I am just basing everything entirely on the outcomes.

It gets hard to follow the discord at this point because there was 3 different conversations going on at the same time but Justin said that Happiness measurements are trash and I said I am not so sure about that. Then I asked Justin what makes the outcomes of scandinavian countries good

> >i think these Nordic model countries already had smart western people in them before they started large scale wealth redistribution. and they have still retained enough capitalism. and that's enough to do really well

>HeuristicWorld (Andy)Yesterday at 10:08 PM > I see well that's a hypothesis. You think they are not successful because of the model but because of the people. They were able to accumulate enough wealth to distribute etc... > Would this be refuted if they are still generating massive wealth presently?

>JustinCEOYesterday at 10:09 PM > i'm not saying they stored up a bunch wealth in advance to do socialism, i'm saying they're not dumb enough to totally kill the golden goose... altho even in SWEDEN it looks like they may be moving away from nordic model some > if latest polls are to be believed...

>ok right but it seems like you're implying that the generation of this golden goose was done in the past. So their current model would be detrimental to the golden goose. Am I getting you correctly?

>JustinCEOYesterday at 10:12 PM > interferences with capitalism are bad in general but capitalism is robust enough to tolerate a lot of interference and still create tons of wealth

>HeuristicWorld (Andy)Yesterday at 10:14 PM >so that would mean that the model is feasible then right? if it can still generate tons of wealth while maintaining the egalitarian outcomes.

This is where I'd like to focus on for a moment if we can. If their system is capable of generating tons of wealth and have good egalitarian outcomes simultaneously, doesn't that mean at least that the system is feasible? What am I missing?


Andy at 3:41 PM on September 2, 2018 | #11012 | reply | quote

> If their system is capable of generating tons of wealth and have good egalitarian outcomes simultaneously, doesn't that mean at least that the system is feasible? What am I missing?

You think that you can sacrifice (other people's) wealth in favor of other things. But what you're essentially doing is *using physical force* to *force* people to donate to a (government run) charity of your choice (a pro-egalitarian one) that they do not want to donate to. The method by which you're sacrificing total wealth is by using *violence* against people who disagree with you, which seems OK to you because, like a mafia boss, you see that even an indirect threat is usually enough to get obedience, so you (or more precisely, the government agents implementing things you're defending) don't have to actually say "do this or else i will shoot you", let alone shoot people, very often.

On top of that, you haven't specified just what these "good egalitarian outcomes" are and what policies will lead to them. I have doubts about how good they are, how egalitarian they are, and whether they will in fact be the outcomes of the policies.


Anonymous at 3:43 PM on September 2, 2018 | #11013 | reply | quote

> You think that you can sacrifice (other people's) wealth in favor of other things. But what you're essentially doing is *using physical force* to *force* people to donate to a (government run) charity of your choice (a pro-egalitarian one) that they do not want to donate to. The method by which you're sacrificing total wealth is by using *violence* against people who disagree with you, which seems OK to you because, like a mafia boss, you see that even an indirect threat is usually enough to get obedience, so you (or more precisely, the government agents implementing things you're defending) don't have to actually say "do this or else i will shoot you", let alone shoot people, very often.

I'd only consider it violence if everyone disagreed with that system. If people are agreeing with it I would not consider it violence.

>On top of that, you haven't specified just what these "good egalitarian outcomes" are and what policies will lead to them. I have doubts about how good they are, how egalitarian they are, and whether they will in fact be the outcomes of the policies.

Yes I did actually on the top of the post. I'll copy again:

>> Based on the metrics done. It seems they have the best level of healthcare, education, life expectancy. I know they are having issues with immigration but I don't think that's due to their economic system. Or maybe it is. I am very uninformed. > oh and happiness >


Andy at 4:01 PM on September 2, 2018 | #11014 | reply | quote

>I don't have an opinion on minimum wage because I don't know what the outcomes of raising the minimum wage are. I recall someone giving me a giant study, when I asked about this in a progressive forum,

https://mises.org/library/how-minimum-wage-laws-increase-poverty

Here is an **explanation** about minimum wage that Elliot linked on discord:

>Raising the minimum wage is a formula for causing unemployment among the least-skilled members of society. The higher wages are, the higher costs of production are. The higher costs of production are, the higher prices are. The higher prices are, the smaller are the quantities of goods and services demanded and the number of workers employed in producing them.


guilherme neto at 4:02 PM on September 2, 2018 | #11015 | reply | quote

It's not violence to take Joe's money from him, by threat of violence (and actual violence of he resists), because Sue and Bill agree with what you're doing? That doesn't make sense.

You don't respect an individual's own mind or dissent?

>> Based on the metrics done. It seems they have the best level of healthcare, education, life expectancy. I know they are having issues with immigration but I don't think that's due to their economic system. Or maybe it is. I am very uninformed. > oh and happiness >

None of those things are specific policies or specific outcomes (you didn't define good education).


Anonymous at 4:03 PM on September 2, 2018 | #11016 | reply | quote

>It's not violence to take Joe's money from him, by threat of violence (and actual violence of he resists), because Sue and Bill agree with what you're doing? That doesn't make sense.

That's like saying everytime I donate to charity, violence was committed against me. I don't really buy that argument.

>None of those things are specific policies or specific outcomes (you didn't define good education).

Well would you agree that some countries have better education systems than others?


Andy at 4:07 PM on September 2, 2018 | #11017 | reply | quote

#11017 Every time you donate to charity *voluntarily*, there was no violence. Every time you donate to a charity that you do not want to donate to, because I threatened that armed men would take the money or put you in jail if you didn't, that was violence.

> Well would you agree that some countries have better education systems than others?

Sure.


Anonymous at 4:08 PM on September 2, 2018 | #11018 | reply | quote

> #11017 Every time you donate to charity *voluntarily*, there was no violence. Every time you donate to a charity that you do not want to donate to, because I threatened that armed men would take the money or put you in jail if you didn't, that was violence.

Right. I feel like that's the contract that the nordic countries have entered in. They voluntarily give part of their income. Otherwise, would they not move ? People seem to be voting with their feet and moving there and not away.

> Sure.

So are you aware of any ranking system that you agree with on the methods that tells us which countries are better than others etc...?


Anonymous at 4:10 PM on September 2, 2018 | #11019 | reply | quote

> Right. I feel like that's the contract that the nordic countries have entered in.

It's not a valid "contract" unless each individual signs it or otherwise personally, individually consents. That is not how the word "contract" works. It's something else.

You are badly wrong to call something voluntary because e.g. 60% of people want it. For the 40% who don't want it, it's involuntary and non-contractual, and their compliance is achieved through (threat of) violence.

> Otherwise, would they not move ?

1) The world is full of major restrictions on moving to other countries. We don't have free immigration.

2) Moving internationally also costs money and requires certain life skills – that's problematic for many people. And then most people would have to find a new job, which is a serious difficulty for many careers, and they would lose income in the mean time. Plus the antiliberal policies of their current country make it harder for them to save money to do this, and also harm the exchange rate with other countries.

3) Move where? All countries do this kind of thing (or worse). Sure some countries do it to a lesser extent, but there is no way to move and get the full benefits of avoiding this kind of antiliberal policy, they can only get the portion of the benefits that constitute the difference between how antiliberal their current and new country are.

> So are you aware of any ranking system that you agree with on the methods that tells us which countries are better than others etc...?

No. But figuring out how to evaluate this is your problem, not mine, since you're the one making positive claims relating to your evaluations.


Anonymous at 4:18 PM on September 2, 2018 | #11020 | reply | quote

Minimum Wage & Economic Thinking

I wrote some scattered thoughts on minimum wage on the discord chat, pasting here:

some scattered thoughts on econ stuff

you need to think about econ in terms of logic and principle because of the complexity of IRL economic life, politics, etc.

there's always lots of stuff happening simultaneously

e.g. in the same time period you could have

1) a sustained period of nationwide economic growth

2) a national policy of deregulation

3) a national policy of more restrictive immigration

4) a local policy of a minimum wage increase

and say wages rose over this time period

what caused the rise?

well if you're a min wage advocate you might say #4

there was a min wage increase and then wages rose!!

QED??

govt passing a minimum wage increase and then wages rising without an increase in unemployment is an outcome compatible with free market theory. cuz e.g. if the govt minimum wage is below the lowest rate people are willing to pay for labor, then the govt minimum wage won't actually cause any big issues. it's kinda irrelevant (though its a bad sign for that society that the govt is willing to pass those kinda laws, but leave that to the side or now)(edited)

this outcome (of a minimum wage increase that has no negative economic consequences) tends not to happen IRL for various reasons but it's possible

but what definitely does happen is people looking at some data and seeing some positive wage trend and thinking that a minimum wage law helped somehow

esp if they're willing to pay selective attention to stats and ignore other stuff

"oh wages went up, min wage worked!" (ignores increased unemployment)

"oh wages went up, min wage worked!" (ignores local economic boom driving wage increase)

"oh wages went up, min wage worked!" (fraudulent unemployment stats which literally don't count long term unemployed people hide the negative economic consequences)

btw the min wage is really nasty cuz it literally prohibits people from selling their labor below a certain price. which means if someone can't do work above a certain hourly rate the govt is literally forcing them into poverty and dependency. lefties apparently call this policy one of "dignity" :thinking:

cuz ultimately unless you're gonna force employers to hire people or have the govt hire everyone who is unemployed to do govt-makework or something like that

the minimum wage remains zero regardless of the stupid govt laws on the books

cuz people can just not hire someone

and then they're getting paid 0


JustinCEO at 2:50 AM on September 3, 2018 | #11021 | reply | quote

Doesn't take into account at all that a person will try to exploit those who are desperate and pay them much less than they are worth. Minimum wage raising raises all boats.


Anonymous at 11:06 AM on September 3, 2018 | #11023 | reply | quote

#11023 This is a Marxist view which has been refuted. Do you want to learn about this? Do you want reading recommendations? Will you follow up and try to discuss this to a conclusion?


curi at 11:08 AM on September 3, 2018 | #11025 | reply | quote

Continuing from discord, trying to discuss minimum wage with Andy and resolve the issue (as I claim is achievable). Please begin by reading:

1) Economics in One Lesson, chapter 18, "Minimum Wage Laws". (5 pages)

2) short Reisman article: https://mises.org/library/how-minimum-wage-laws-increase-poverty

3) https://www.amazon.com/dp/B07GN8WJB1/?tag=curi04-20 (i've emailed Andy a free copy, b/c Reisman gave it to me to distribute). part 1, sections 11, 12, and 16. If you're particularly enjoying what you're reading, read part 1, sections 14 and 15 too. (Or if you particularly dislike what you're reading, just stop early and say what the issue is.)

google turns up a free copy with iffy quality, so you may want to find a better one. https://fee.org/media/14946/economicsinonelesson.pdf


curi at 2:30 PM on September 3, 2018 | #11029 | reply | quote

#11029 I didn't mean to post that. It's actually done, but the last paragraph should be in section (1) instead of (3).


curi at 2:32 PM on September 3, 2018 | #11030 | reply | quote

This might be a better quality of 1)

http://library1.ga/_ads/29C604C88353C01CA835D6DEBCA6DBE7


Andy at 2:39 PM on September 3, 2018 | #11031 | reply | quote

#11031 Its an epub version. If you click on GET it starts the download.

Anyway, I am looking forward to this. We'll see if we can gain some ground.


Andy at 2:41 PM on September 3, 2018 | #11032 | reply | quote

https://www.amazon.com/dp/B07GN8WJB1/?tag=curi04-20

1.11 is *The Irrelevance of “Worker Need” and “Employer Greed” in the Determination of Wages*

This is a longer section, but highly relevant to minimum wage laws because it's about how the price of labor is determined.

1.12 says:

> a drop in wage rates to the full employment point need not imply a drop in the average worker’s standard of living.

that's important for seeing how the capitalist approach doesn't harm people (and actually benefits them).

1.16 is *Fallacy of the Marxists’/Socialists’ Belief that to Benefit from the Means of Production, People Need to Own Them*

The point here is that workers are already benefitting from the means of production owned by businessmen, and do not need any kind of special help (like ownership. or also minimum wage laws, or laws requiring nicer working conditions) to benefit from the means of production (rather than be exploited).

The other ones i mentioned, 1.14 and 1.15 are about laws requiring better working conditions, which are a pretty similar kinda thing to minimum wage laws, but not the same thing.


curi at 2:44 PM on September 3, 2018 | #11033 | reply | quote

From Chapter 18 of Economics in One lesson, something that is bothering me

"The first thing that happens, for example, when a law is passed that no one shall be paid less than $106 for a forty-hour week is that no one who is not worth $106 a week to an employer will be employed at all...

The only exception to this occurs when a group of workers is receiving a wage actually below its market share worth"

So one of the things that this is assuming is that people are getting paid what they are worth by the market. I don't think a place like Amazon is paying people what they are worth presumably, or they wouldn't have to go on welfare if working full time for one the richest companies in the planet.


Andy at 4:42 PM on September 3, 2018 | #11034 | reply | quote

> So one of the things that this is assuming is that people are getting paid what they are worth by the market.

It doesn't assume that. It says there are two cases: where they are and where they aren't.

Set that aside for the moment and just interpret each statement as discussing the one case or the other, as appropriate. How wages are set by free markets is covered in section 1.11 of (3).


curi at 4:47 PM on September 3, 2018 | #11035 | reply | quote

I thought I sent this already but I guess it didn't go through.

While I am reading your recommendations, do you mind checking this out and tell me what you think?

http://ftp.iza.org/dp1072.pdf


Andy at 5:01 PM on September 3, 2018 | #11036 | reply | quote

#11036 It's irrelevant. It doesn't address the economic logic with logical arguments, nor does it attempt to state a piece of (alleged) economic logic and then point out a contradicting empirical fact. It's not engaging with the (free market) literature, instead it's taking very complex situations and saying basically "we did X and later we observed Y" while ignoring that 1) correlation isn't causation; and 2) that we also did A, B, C, D, E, F and G at the same time. (Well, it's actually a survey of other research like that, rather than doing it directly.)


curi at 5:08 PM on September 3, 2018 | #11037 | reply | quote

> It's not engaging with the (free market) literature

It's also, in the same way, not engaging with the Marxist or Keynesian literature or other schools of thought.


curi at 5:11 PM on September 3, 2018 | #11038 | reply | quote

Have you seen the FAQ from the economics Subreddit?

https://www.reddit.com/r/Economics/wiki/faq_minwage


Andy at 5:39 PM on September 3, 2018 | #11039 | reply | quote

#11039 It says:

> With so many potential caveats based on theoretical choices

it said this after listing only two caveats plus 3 mere bullet points. and one of the two caveats was a claim that employers might pay above-market wages voluntarily, relative to a simplified model which ignored some factors. ok, so what? sounds like a reason there is *less* need for minimum wage laws! they claimed it would cause unemployment, without details, and seemed to think makes minimum wage laws ok b/c (without any details) they seem to think something like that both factors (the above-market wages and the minimum wage laws) cause the *same* unemployment, so minimum wage doesn't cause additional unemployment.

as to the other caveat, monopsony ("in which a single buyer substantially controls the market as the major purchaser of goods and services" from their link), that is simply not the labor market situation. there is no single buyer who purchases most of the labor of workers.

so they are mistaken to give up on logical analysis and turn to empirical research. instead they should try to think through the small number of caveats (or read the books of the economists who have already done that).

i think you will find it most informative to ignore material like this, for now, and focus on understanding the free market view.


curi at 5:51 PM on September 3, 2018 | #11040 | reply | quote

>i think you will find it most informative to ignore material like this, for now, and focus on understanding the free market view.

Ok. I had started this thread to get informed from the other side which is why is where I was getting this material from:

https://www.reddit.com/r/thedavidpakmanshow/comments/9co038/do_we_have_good_data_on_minimum_wage_and_its/


Andy at 6:23 PM on September 3, 2018 | #11041 | reply | quote

I don't think I am fully understanding this section:

> Marx begins his analysis of the alleged exploitation of labor under capitalism with a distinction between the fundamental economic character of the ages that preceded capitalism and the fundamental economic character of capitalism. The distinction he makes is between two sorts of the circulation of money from hand to hand. The one sort, he calls “simple circulation.” It supposedly characterized economic conditions prior to capitalism. (“Simple circulation,” it should be noted, is actually the same state of affairs that Adam Smith described in The Wealth of Nations as “the original state of things.”) > Under simple circulation, manual workers produce commodities, designated by “C,” sell them for money, designated by “M,” and then use the money earned to buy other commodities, also designated by “C.” Thus, simple circulation is the sequence C-M-C. Under simple circulation, there is allegedly no exploitation of labor. The workers—the wage earners—receive the full proceeds brought in by the sale of their products. These sales proceeds are viewed as indistinguishable from wage payments, as though they were in fact wage payments. This is because, following the practice of Adam Smith, all income due to the performance of labor is assumed to be wages. To say it once more, in simple circulation all income earned in producing commodities for sale is regarded as wages. Smith provides the clearest possible example of this view when he writes, “In some parts of Scotland a few poor people make a trade of gathering, along the sea-shore, those little variegated stones commonly known by the name of Scotch Pebbles. The price which is paid to them by the stone cutter is altogether the wages of their labour; neither rent nor profit make any part of it.” > The exploitation of labor begins, according to Marx, only with the coming of capitalists and “capitalistic circulation.” Here the starting point is an outlay of money by the capitalists to pay wages and buy previously produced commodities in such forms as materials and tools and, ultimately, also machines and factory buildings. These outlays of money are for the purpose of producing commodities that are to be sold in the market, hopefully, in the view of the capitalist, for a larger sum of money than he has expended in producing them. Thus, capitalistic circulation is represented by the sequence M-C-M or, more precisely, by the sequence M-C- M′, with M′ used to represent the second M as being larger than the first and thus the sequence as a whole as showing a profit


Andy at 7:05 PM on September 3, 2018 | #11042 | reply | quote

#11041 the best way to start with fields, in general, is by finding out what the main *intellectual* sides think. in this case, that's liberalism and marxism, and maybe a few others. the empirical research and economics reddit faq aren't very helpful with that. (you need some intellectual framework before you analyze data.)


Anonymous at 7:13 PM on September 3, 2018 | #11043 | reply | quote

#11042 M-C-M' describes the business process. it means you spend money (M) on raw materials, labor, and other inputs to production. in that way, you create and then sell commodities (C), and then get revenue (M') at a later time from the sales. In this case, the amount of profit is M' minus M.

C-M-C means you produce and sell commodities, get money, and use it to buy commodities. The profit in this case is M. You can think of this as a self-employed person working for themselves, so they have no wages, just sales revenues. And they didn't invest any money into production, only their own labor, so all of their sales revenues are profits (cuz they are a small business with no expenses).

If that doesn't clear things up, please specify what part you're having an issue with.


curi at 11:34 PM on September 3, 2018 | #11044 | reply | quote

Tucker's Marxist Analysis of Amazon, Walmart, Uber

JustinCEO wrote on discord, regarding Tucker Carlson's attack on business:

>>>Both amazon and the worker take the existence of the govt handouts as a given and thus calculate around that

>>Only for jobs with wage close to the line of govt handouts, right?

> as far as whether to take/offer those particular jobs yeah. though there are calculations involved that affect the business enterprise as a whole

>like amazon will calculate what its profit is based on being able to offer a certain wage (including govt subsidies) and have people work those jobs

This is Marxist nonsense. Welfare/handouts that you get whether you have a job or not (or get more of without a job) *reduce the supply of labor* and therefore *raise* wages. The reason you and Tucker think it lowers wages is because you, in some way, believe in the Marxian exploitation theory – you think wages are determined in relation to minimum subsistence or some substitute for it like minimum acceptable modern life. Tucker is pretty clear on this when he suggests that the businesses would have to pay people enough to eat if the government wasn't giving out food stamps. No, *wages are determined by supply and demand*. Handouts lower the demand for wage income, thus making employers bid up the price of labor in order to exclude the marginal employers from the market and avoid a labor shortage.


Dagny at 9:19 AM on September 4, 2018 | #11046 | reply | quote

I'm trying to remain open to this information and I am continuing to read what you gave me. But just... Any way you spin it, a company as successful as Amazon paying their full time employees as badly as the fact that they need to go on welfare to me is simply unacceptable. I'm willing to change my mind on the "why" they choose to pay them so poorly, but I doubt I'll be be okay with the fact that they DO pay them that poorly.


Andy at 11:01 AM on September 4, 2018 | #11047 | reply | quote

> JustinCEO wrote on discord, regarding Tucker Carlson's attack on business:

>>>> Both amazon and the worker take the existence of the govt handouts as a given and thus calculate around that

>>> Only for jobs with wage close to the line of govt handouts, right?

>> as far as whether to take/offer those particular jobs yeah. though there are calculations involved that affect the business enterprise as a whole

>> like amazon will calculate what its profit is based on being able to offer a certain wage (including govt subsidies) and have people work those jobs

> Welfare/handouts that you get whether you have a job or not (or get more of without a job)

So here's the issue I think.

Lots of handouts/govt subsidies these days essentially require lengthy periods of (low-wage) employment, or an active ongoing job search, or have work requirements (where you can only get the handout for a limited time if you're unemployed but way longer/forever if you are employed but below the income cutoff)

Some examples of things that heavily incentive being employed like this off the top of my head:

1. Earned income tax credit

2. Various low income housing subsidies/set-asides

3. Food stamps (exact rules depending on state I think)

There's more I think.

> *reduce the supply of labor* and therefore *raise* wages.

Yes a straight handout that you get regardless of employment status or get more of without a job does reduce the supply of labor and raise wages. I agree. So like e.g. more old school style welfare programs without meaningful work requirements or basic income would have that effect.

>The reason you and Tucker think it lowers wages is because you, in some way, believe in the Marxian exploitation theory – you think wages are determined in relation to minimum subsistence or some substitute for it like minimum acceptable modern life.

I do not subscribe to this doctrine of Marxian exploitation theory.

I think amazon has to compete for labor with other businesses and with people's preference for doing non-labor activities. And if the govt gives people in a certain income band some kinda subsidy, that's going to allow amazon to pay a lower wage than they otherwise would have given the subsidy.

I offer this as a simple example: imagine if the US govt said "If you are a single person and earn between 30-40k a year at a full time job working 2000 hours or more a year, we'll give you a $100k grant for a house." (ignore the budgetary feasibility of this). Will this increase or decrease the supply of labour at the 30-40k price point? I think increase. Will Amazon be more or less able to find people willing to work for $15-$20/hr an hour? I think easier.

Lots of welfare in the US these days works more along this kind of "work-incentivizing" principle than on the principle of a straight handout. (In my understanding, this is largely due to Republican efforts over the years).

A straight handout would incentivize staying home, reducing the supply of labor and increasing wages since you now need to compete with the govt which is "bidding" for people to stay home.

A handout for doing work incentives more marginal labor to come into the market (since the guy who would be only able to earn say $15/hr can earn more with the subsidy, so that makes it more worth his while). And if a policy like in my toy example about the $100k grant was announced, Amazon would reasonably take notice and reasonably expect there to be more people willing to sell their labor at $15-$20/hr. None of this analysis involves Marxist exploitation theory that I can see.


Anonymous at 11:11 AM on September 4, 2018 | #11048 | reply | quote

#11047 We can all agree it'd be nice if people made more money (that corresponded to a real increase in their standard of living, not just because the government doubled the amount of money in existence). But before being upset about problems in the world, it's important to understand *what is at fault*, and which policies will make the situation better or worse. The capitalist view on minimum wage is that *it harms most of the people it's intended to help* – that is, it's counter productive. Another capitalist view is that poverty is not caused by capitalism and *preceded* capitalism. Poverty was *inherited* by capitalism, and capitalism has done a lot to fix it but unfortunately has not fully fixed it yet – and is being heavily hampered from fixing it by the New Deal and other economic interventionist policies. Understanding some economics helps clarify these matters.

If economics works how I think, then it means the correct solutions to problems like these are different than if economics works a different way. So it's important to set aside the world's current problems for a bit and try to understand the right way to think about these kinds of problems first.


curi at 11:31 AM on September 4, 2018 | #11050 | reply | quote

#11048 Do you agree that Tucker has made any Marxist error? If so, did you miss it before or you didn't think it was worth mentioning or what?


Dagny at 11:36 AM on September 4, 2018 | #11051 | reply | quote

> #11048 Do you agree that Tucker has made any Marxist error? If so, did you miss it before or you didn't think it was worth mentioning or what?

at the moment i wrote my initial stuff i was focused on replying to the discord chat participant and not on directly engaging with the Tucker stuff.

i hadn't even watched most of the tucker vid until now. having seen it, i found it anti-capitalist. the whole bit about how those rich dudes should say "thank you" to taxpayers was gross. as if the successful business owners owe the govt/people thanks for confiscating and destroying wealth. disgusting.

btw I find it interesting that people get mad about workers qualifying for e.g. food stamps while working for big businesses, but not that big businesses make money directly off the food stamps. like amazon accepts EBT. bezos is wealthy. why not complain about that? but way fewer people complain about amazon charging food stamps recipients "too much" then they do about amazon paying food stamp recipients "too little." I guess part of it is cuz prices for goods aren't wrapped up in mistaken ideas about dignity etc in the same that prices for labor are. if amazon charges "too much" for a box of cheerios people think of that as just a bad deal. if they pay "too little" for labor that's a crime against the dignity of the poor and a representation of the institutional injustice at the heart of the capitalist system!!


Anonymous at 2:21 PM on September 4, 2018 | #11053 | reply | quote

#11053 People do complain that amazon accepts food stamps and profits from those sales. did you google up any articles before claiming they don't? here's one which claims it's a tax payer subsidy when a store like Amazon sells something that is paid for with food stamps. https://theintercept.com/2018/04/19/amazon-snap-subsidies-warehousing-wages/

And you didn't answer this question: Do you agree that Tucker has made any Marxist error?


Dagny at 3:36 PM on September 4, 2018 | #11054 | reply | quote

> And you didn't answer this question: Do you agree that Tucker has made any Marxist error?

yes i agree. i saw Tucker's error initially as just more generally anti-big-business/wealthy people and not specifically Marxism. but the idea that amazon would necessarily pay its workers enough to eat if not for food stamps does seem Marxist.


Anonymous at 4:31 PM on September 4, 2018 | #11055 | reply | quote

#11048 Have you or anyone else done any kind of detailed analysis of the different kinds of welfare and how much effect they have?

Note that lots of companies don't want to hire people who don't want to be there. Food stamps has some looking-for-work kinda requirements (that you can get out of if you want to), but I wouldn't expect Amazon to be one of the places that takes workers who are only there b/c they would be denied welfare if they refused a job. Amazon warehouses are *also* complained about, in other articles, for the fast paced work – so I don't think Amazon hires the dregs of society, I think they hire reasonably hard working people.

So there are companies who get to hire someone at a low wage because they made the offer and the person was required to accept the job offer or else lose food stamps. But, without looking it up, I am skeptical that Amazon is one of those companies.

If you want to say Amazon is gaining from various welfare programs, I think you should do serious analysis of which ones and by what mechanisms.

PS Part of the reason Amazon has employees on food stamps is they don't want to kick you off food stamps the moment you make enough money to feed yourself. They intentionally set the limits to get more than $0 from food stamps high enough to try to lessen the impact of a welfare cliff where you instantly lose all government help when you get a job. So the leftist propaganda articles are totally wrong to assume that a person getting food stamp money would be unable to feed themselves without the government's help. The government intentionally provides food stamps to people that it knows could afford their own food. I checked and it's possible to get food stamps while making over 50k (they lower the amount the closer you get to the cap, but the complaints about people on food stamps ignore what amount of money they are getting from food stamps). After looking at food stamp requirements a bit, I'm convinced there are tons of eligible Amazon employees who don't apply.


Dagny at 4:42 PM on September 4, 2018 | #11056 | reply | quote

> #11048 Have you or anyone else done any kind of detailed analysis of the different kinds of welfare and how much effect they have?

I haven't. I bet there's research vaguely on the general topic area but I don't know of any offhand that's any good.

> Note that lots of companies don't want to hire people who don't want to be there. Food stamps has some looking-for-work kinda requirements (that you can get out of if you want to), but I wouldn't expect Amazon to be one of the places that takes workers who are only there b/c they would be denied welfare if they refused a job.

Would Amazon have to itself directly hire the most marginal employee(s) brought into the labor market by the govt "workfare" in order to get any benefit?

Toy example: Imagine a labor market where people work at Amazon warehouse or Dollar Tree store. Amazon has higher hiring standards than Dollar Tree and pays a bit more. But some people who could work at Amazon choose Dollar Tree instead for various reasons (its more chill, they like interacting with customers, its closer to their kid's school, whatever).

Govt implements a workfare program. More marginal labor comes on the market. Dollar Tree is the hirer of last resort in this example, so it hires some of the new labor and can pay a lower wage. Some of the Amazon-work-capable Dollar Tree employees reconsider their employment situation and apply at Amazon cuz the new Dollar Tree wage is too low for them. So now Amazon faces an expanded labor pool and can pay a lower wage too.

>Amazon warehouses are *also* complained about, in other articles, for the fast paced work – so I don't think Amazon hires the dregs of society, I think they hire reasonably hard working people.

> So there are companies who get to hire someone at a low wage because they made the offer and the person was required to accept the job offer or else lose food stamps. But, without looking it up, I am skeptical that Amazon is one of those companies.

Interesting.

What about when Amazon does mass seasonal hiring? Do you think they can be picky and only hire pretty high quality people?

I saw an article that said they hired 15k people in Britain alone seasonally and this was a few years ago. That seemed like a lot to me and that's just one country. So it seems to me that they'd be hiring from the general market for unskilled labor.

> If you want to say Amazon is gaining from various welfare programs, I think you should do serious analysis of which ones and by what mechanisms.

Do you disagree with the point about a govt subsidy for people who work bringing more labor into the market? Or do you think Amazon's high standards in hiring policies cause it to not be benefitted?

> PS Part of the reason Amazon has employees on food stamps is they don't want to kick you off food stamps the moment you make enough money to feed yourself. They intentionally set the limits to get more than $0 from food stamps high enough to try to lessen the impact of a welfare cliff where you instantly lose all government help when you get a job. So the leftist propaganda articles are totally wrong to assume that a person getting food stamp money would be unable to feed themselves without the government's help. The government intentionally provides food stamps to people that it knows could afford their own food. I checked and it's possible to get food stamps while making over 50k (they lower the amount the closer you get to the cap, but the complaints about people on food stamps ignore what amount of money they are getting from food stamps). After looking at food stamp requirements a bit, I'm convinced there are tons of eligible Amazon employees who don't apply.

100% agree with all of this paragraph.


Anonymous at 6:47 PM on September 4, 2018 | #11057 | reply | quote

> Continuing from discord, trying to discuss minimum wage with Andy and resolve the issue (as I claim is achievable). Please begin by reading:

> 1) Economics in One Lesson, chapter 18, "Minimum Wage Laws". (5 pages)

> 2) short Reisman article: https://mises.org/library/how-minimum-wage-laws-increase-poverty

> 3) https://www.amazon.com/dp/B07GN8WJB1/?tag=curi04-20 (i've emailed Andy a free copy, b/c Reisman gave it to me to distribute). part 1, sections 11, 12, and 16. If you're particularly enjoying what you're reading, read part 1, sections 14 and 15 too. (Or if you particularly dislike what you're reading, just stop early and say what the issue is.)

> google turns up a free copy with iffy quality, so you may want to find a better one. https://fee.org/media/14946/economicsinonelesson.pdf

Done. I don't know how much I've fully understood but I've gone through what you suggested.


Andy at 7:14 PM on September 4, 2018 | #11058 | reply | quote

I might as well think out loud about what I read there.

I think it makes sense logically but it is a theory and I don't know how it would work in practice. It assumes for example that a company could not afford to pay someone poorly because competition would make it unaffordable.

But what about in situations where there is no competition, going back to Amazon here. Being the only game in town I feel like the theory doesn't hold when employees have almost no choice.

Also, if employees are paid based on productivity, why has an increase in productivity not yielded an increase in pay in a similar manner:

https://www.epi.org/productivity-pay-gap/

So that's where I stand for now.


Andy at 8:14 PM on September 4, 2018 | #11059 | reply | quote

#11058 OK my first question is if you found any parts you think are *false*. Did you identify any incorrect logical reasoning? Any factual claims which are contradicted by facts? Any mistaken assumptions?

Note that I don't believe there is any statement which assumes that, at all places/times/situations (including the situation in regards to government interference in the economy, including even socialism), there is plenty of competition of employers. Merely analyzing what happens in certain types of situations does not constitute an assumption that all situations are like that.

Also: correct logic *always* works in practice. If logic tells us "If A, B, C, D, E and F, then X" then either that will work in practice 100% of the time, or there is a logical error. Do you disagree?

Regarding the alleged productivity and pay gap, one of the many potential issues is how they accounted for inflation. If their correction for inflation was incorrect, then their conclusion would be incorrect. Note that inflation is quite hard to measure accurately. Another broad category of issue is that, in various ways, government interference in the economy has been increasing and screwing up pricing (including of labor) to a greater extent than before. An example of something that lowers wages is any regulation that makes it harder to start a business or adds any downside to hiring someone. Another big issue is how they measured productivity, which sounds even harder to measure than inflation. But, again, I think it's better to begin with logical analysis first.


curi at 9:37 PM on September 4, 2018 | #11060 | reply | quote

> Would Amazon have to itself directly hire the most marginal employee(s) brought into the labor market by the govt "workfare" in order to get any benefit?

No.

> Do you disagree with the point about a govt subsidy for people who work bringing more labor into the market? Or do you think Amazon's high standards in hiring policies cause it to not be benefitted?

By default, handouts raise wages rather than reducing wages. You seem to agree. (Whereas the Marxist view is that handouts lower the amount of pay needed for a worker to reach minimum subsistence, and thereby reduce wages, because Marxists do not believe that wages are set by supply and demand.)

Some handouts have work requirements which typically have lots of exceptions (so if you really want to avoid work and still get the benefits, you often can), and which often provide considerably more direct benefit to some employers than others (and i suspect amazon of being in the less direct benefit category, and i doubt amazon's seasonal hiring is especially compatible with how the government rules are set up that are trying to get people into long term work). Broadly, yes, handouts that are tied to having to work are capable of lowering rather than raising wages.

I'm not convinced that, *on the whole*, welfare policies lower the wages of amazon employees. I still suspect they may raise them.

This comes with the caveat that we're only looking at the consequences of the handouts as if they grew on trees (without causing any inflation), rather than coming from economy-harming taxes. Overall the government clearly lowers wages with its economic interventionism, but looking narrowly only at the consequences of handing out various welfare, you and Tucker have not convinced me that currently the welfare programs in existence in the US lower wages on average (either in the economy as a whole, or for what Amazon pays its US employees.) Since the default effect of welfare is to raise wages by lowering the demand for wage income, I suspect that raising wages is also the overall, average effect (even though, as you say, some pieces of welfare do work the other way due to their special rules – i'm just not convinced those are the majority of the effect.)

> So it seems to me that they'd be hiring from the general market for unskilled labor.

Yes but that doesn't mean they are taking the people who will only work if told they'd be denied food stamps for refusing. You can hire from the general market for unskilled labor and still read resumes and screen people some.

If someone comes in (in the late afternoon, in sloppy clothes) and says "hey, can you sign this government form that says i applied to work here, so that i can keep getting welfare? and btw here's my [crumpled] resume." would you hire them? there exist companies that would hire that person, but it's certainly possible to hire unskilled labor but not want to hire that particular person. my guess is amazon wouldn't want that guy in their warehouse, who clearly doesn't want the job, even during the busy season. even if amazon could hire that guy for e.g. 20% less, he'd probably work 30% slower while having an elevated rate of sending the wrong items to customers or causing other problems...


Dagny at 10:38 PM on September 4, 2018 | #11061 | reply | quote

> OK my first question is if you found any parts you think are *false*. Did you identify any incorrect logical reasoning? Any factual claims which are contradicted by facts? Any mistaken assumptions?

I don't know if exactly false but for example I am not entirely convinced that people are paid by their productivity. Just imagine being a business owner, if my entire goal is to make as much profit, which correct me if I'm wrong is the most common goal of most business, I am going to pay the least possible amount to my employees.

> Also: correct logic *always* works in practice. If logic tells us "If A, B, C, D, E and F, then X" then either that will work in practice 100% of the time, or there is a logical error. Do you disagree?

I do not disagree. However, with Economics as in Psychology, we're working with people and multiple known and unaccounted for variables. I don't know how you can possible account for all the variables in a theoretical framework.

> Regarding the alleged productivity and pay gap, one of the many potential issues is how they accounted for inflation. If their correction for inflation was incorrect, then their conclusion would be incorrect. Note that inflation is quite hard to measure accurately. Another broad category of issue is that, in various ways, government interference in the economy has been increasing and screwing up pricing (including of labor) to a greater extent than before. An example of something that lowers wages is any regulation that makes it harder to start a business or adds any downside to hiring someone. Another big issue is how they measured productivity, which sounds even harder to measure than inflation. But, again, I think it's better to begin with logical analysis first.

I feel like the difference is so staggering that even if you error corrected for inflation you'd still find evidence that I would consider a contradiction to the claims made about productivity and wages.

Actually, I have no idea. That last paragraph is a guess.


Andy at 7:26 AM on September 5, 2018 | #11062 | reply | quote

> I don't know if exactly false but for example I am not entirely convinced that people are paid by their productivity. Just imagine being a business owner, if my entire goal is to make as much profit, which correct me if I'm wrong is the most common goal of most business, I am going to pay the least possible amount to my employees.

It said people are paid by supply and demand, not by productivity. (Demand and productivity are related to each other). It said wages are set in an auction and it's in the interests of business owners to set wages high enough to avoid a labor shortage (shortage = demand exceeds supply at current price, so buyers aren't able to buy what they want to buy). Does that make sense to you?

Reisman explained that, when business owners follow their self-interest, they will outbid other buyers of what they want to buy. That is the least they can pay, because if they pay less then they won't be able to hire those workers. On the high side, they will (approximately) stop bidding if the price of labor reaches the point that their profits would drop below the average rate of profit in the economic system.

Understanding how prices are set is one of the key issues here, including, especially, how they are set in an idealized hypothetical. Then one can look at how real situations change pricing. The starting point of understanding free market pricing is that the price of labor is set to create full employment with no labor shortage – no more and no less. Full employment is where all the supply is being used, and no labor shortage means there is no unsatisfied demand at the current price.

---

Regarding inflation, I guess you're unfamiliar with the numbers, so you don't know the ballpark of the size of the correction they made. Here's an inflation calculator. I don't know what they used but these kinds of numbers are common.

https://www.usinflationcalculator.com

It says inflation from 1973 to 2017 was 452.1%

The EPI link claims real hourly compensation went up 12.4% during that time period.

If inflation was actually lower, it could dramatically change their results, since they think around 97% of the increase in wages was inflation and therefore doesn't count.

In other words, in dollars, someone's wage could have gone from $10/hr to $62/hr and they might report that as a 12.4% increase in wages (after accounting for inflation).


curi at 10:08 AM on September 5, 2018 | #11063 | reply | quote

Inflation Calculations

I've looked at inflation calculations before and found serious over-estimation problems.

How do you judge inflation? Unfortunately it's hard to get clear answers from the government about how much it inflates the money supply, and some government policies are less straightforward than just printing a specific amount of new money.

So you can look at the price of X in the past, and the price of X now, and you see how much it went up. But it's not so easy. There's some big problems:

1) For many goods, the ones being sold today are different than in the past. A new model of X is better than an old model of X. This applies to cars, computers, and much more. So in order to estimate inflation you'd need to know how much better the new models are. If the price doubled, but the new models are 50% better than the old models, then inflation is 33% (over the whole time period. you might want to divide by the number of years in question). It's 33% b/c you'd expect the price to go from $1 to $1.50 from the 50% quality improvement, but the actual price is $2 which is 33% more than $1.50. But how do you accurately judge how much better a new model of something is? That's really hard, especially when technology has improved significantly, as it has for computers and cars. Some research I've seen basically just ignores that the new goods are better than the old goods (while using less technological products where that's more plausible).

2) Maybe market conditions in a particular industry changed, which caused price changes. So you want to look at the change in prices for a representative sample of goods from all industries. But which goods make up a representative sample? How do you do that? And it's extra hard because a representative sample of goods from all industries today, and in the past, would be different, but we need to compare equivalent goods from the two different times.

3) Market conditions in general could have changed – maybe e.g. prices went up b/c of a cultural change where people are less interested in hard work, so less is being produced than before. It's hard to check for and account for such possibilities. So what I've seen is the research mostly just ignores this since they can't deal with it.

Why do I suspect inflation is often overestimated? Because I've seen apples to oranges comparisons where the "same" good at different times is not the same, and in pretty much all cases the modern good is better than the old good, not worse, so ignoring the difference tends to overestimate inflation (it attributes the increase in price from the improved quality, which is ignored, to inflation).


curi at 11:38 AM on September 5, 2018 | #11064 | reply | quote

> It said people are paid by supply and demand, not by productivity. (Demand and productivity are related to each other). It said wages are set in an auction and it's in the interests of business owners to set wages high enough to avoid a labor shortage (shortage = demand exceeds supply at current price, so buyers aren't able to buy what they want to buy). Does that make sense to you?

It makes sense to me as long as there is competition.


Andy at 2:03 PM on September 5, 2018 | #11066 | reply | quote

#11066 Do you agree that, in general, in most of the US, there is competition of businessmen for workers? Do you see lack of competition as a special exception that comes up sometimes, or as a common situation?


curi at 2:05 PM on September 5, 2018 | #11067 | reply | quote

> #11066 Do you agree that, in general, in most of the US, there is competition of businessmen for workers? Do you see lack of competition as a special exception that comes up sometimes, or as a common situation?

I don't know to be honest. I believe I saw that Walmart is the largest employer in the USA. I don't think there is a lot of competition in that department. I can even see them making a deal with their next largest competitor like Target making a deal to keep labor prices low. All guesses though.


Anonymous at 2:14 PM on September 5, 2018 | #11068 | reply | quote

> I believe I saw that Walmart is the largest employer in the USA. I don't think there is a lot of competition in that department.

There is target, sears, CVS, walgreens, ikea, safeway, trader joe's, costco, etc...? And many of those workers could also work in construction, in a wide variety of retail stores or restaurants, as bus or uber drivers, and many other things, right?

> I can even see them making a deal with their next largest competitor like Target making a deal to keep labor prices low.

I believe that is illegal and would be hard to hide, and I don't think that's the standard, common thing that happens in the US. Further, it wouldn't work because Walmart and Target (and several other large employers), combined, still only do a small fraction of hiring. In the US, Walmart hires around 1.5 million workers out of a total workforce of around 126 million.


curi at 2:23 PM on September 5, 2018 | #11069 | reply | quote

>There is target, sears, CVS, walgreens, ikea, safeway, trader joe's, costco, etc...? And many of those workers could also work in construction, in a wide variety of retail stores or restaurants, as bus or uber drivers, and many other things, right?

Well it does depend on where you are right? Some areas won't have all those options.

As far as Uber, for example. Most Uber drivers (I drove Uber myself for a while) will actually lose money doing it. If you take into account (which I did) the amount spent on gas, and car maintenance, and you add mileage depreciation. For example, I ended up breaking even so I stopped doing that.

People are not normally going to do that I don't think. Go through those calculations.

Just thinking through the Gig economy there. There's some competition with Lyft, but you're not going to get nearly as many rides via Lyft and the prices are identical.

Actually, I am glad you brought up the ridesharing business because I think this is a great example of theory in practice. Almost no barrier to entry, no regulation for the most part, workers lose money or break even in the process. The only exception are those who work 60+ hours. In those scenarios you're almost always better off finding a job that pays minimum wage.


Andy at 2:35 PM on September 5, 2018 | #11070 | reply | quote

#11070 But the owner of Uber is making off with insane amounts of money, and they are only responsible for the application. The workers provide the labor and the parts (their own cars).


Andy at 2:36 PM on September 5, 2018 | #11071 | reply | quote

> Well it does depend on where you are right? Some areas won't have all those options.

Most areas of the US have many employment options, right? That's why I asked about what the common situation is (whether there is competition of businessmen for labor) or not.

> Almost no barrier to entry, no regulation for the most part,

I don't know why you think ridesharing is unregulated. There are many news stories about regulations which keep it out of cities or otherwise affect it.

> But the owner of Uber is making off with insane amounts of money, and they are only responsible for the application. The workers provide the labor and the parts (their own cars).

You seem to believe in the Marxian exploitation theory. But let's try to focus on the logic of economics (my question in the first section of this comment).


curi at 2:41 PM on September 5, 2018 | #11072 | reply | quote

>> Well it does depend on where you are right? Some areas won't have all those options.

> Most areas of the US have many employment options, right? That's why I asked about what the common situation is (whether there is competition of businessmen for labor) or not.

Yeah I would say that most areas have employment options.

>> Almost no barrier to entry, no regulation for the most part,

> I don't know why you think ridesharing is unregulated. There are many news stories about regulations which keep it out of cities or otherwise affect it.

Ridesharing is very much unregulated. Some cities like Austin tried to fight them off but ultimately had to give in. We're talking about in general here right? In general the only barrier to entry to work for Uber is having a license and a car.

>> But the owner of Uber is making off with insane amounts of money, and they are only responsible for the application. The workers provide the labor and the parts (their own cars).

> You seem to believe in the Marxian exploitation theory. But let's try to focus on the logic of economics (my question in the first section of this comment).

Maybe. Still this is a good scenario of an unregulated economic business model in which the workers are providing the tools and labor and getting paid less than minimum wage. It does take advantage of the fact that they aren't doing the calculation of money spent on gas/maintenance and care depreciation.

Maybe you don't like the word exploitation but this is a very raw deal for the worker. They are getting paid less than minimum wage in this scenario, it doesn't seem to be improving on its own.


Anonymous at 2:49 PM on September 5, 2018 | #11073 | reply | quote

#11073 was me.


Andy at 2:50 PM on September 5, 2018 | #11074 | reply | quote

> Yeah I would say that most areas have employment options.

OK, so we can agree there is competition by businessmen for workers in the US in general, as the typical situation? And that therefore our initial expectation should be that wages will be set by supply and demand, like an auction where employers bid against each other. Right?

And so, then, what will a federal minimum wage law do, which affects the whole country rather than just some specific locations or industries?

PS FYI even in a case where there is only one employer available, he can't just pay workers $1/hour. The reason is he has to compete against two things. First, workers can work for themselves instead of for him, and can thereby produce more than $1/hour. Second, workers can become businessmen themselves, and it's rather easy to run a business successfully and make a profit when the price of labor is very low. Only a higher price of labor will make it harder for others to start businesses and outbid the current employer for workers. Wages will still, even with no competition of other businessmen, not be set in relation to minimum subsistence, but in relation to these two types of potential competition. But what if no one has the initiative to start a new business, and someone is not able to be self-employed and produce minimum subsistence? Then, OK, an employer might actually offer him a minimum subsistence wage. What will he think of that? He will be thrilled that this employer exist and has saved him from death by starvation, which would have been his fate without the help of this businessman.


curi at 2:56 PM on September 5, 2018 | #11075 | reply | quote

> OK, so we can agree there is competition by businessmen for workers in the US in general, as the typical situation? And that therefore our initial expectation should be that wages will be set by supply and demand, like an auction where employers bid against each other. Right?

Yes in theory but if we look at the Ridesharing economy something is not fitting the theory there.

> And so, then, what will a federal minimum wage law do, which affects the whole country rather than just some specific locations or industries?

I guess in theory, Well it would make it so employers can't underbid for labor but it will also make it so that certain labor that is worth less than the minimum wage would be unhirable, or hirable at less profit by the business.


Andy at 3:08 PM on September 5, 2018 | #11076 | reply | quote

#11076 You need to understand the theory better before trying to analyze a case like ridesharing.

> I guess in theory, Well it would make it so employers can't underbid for labor

Could they underbid for labor without minimum wage? Wouldn't that just mean being outbid and losing labor to other employers?

> but it will also make it so that certain labor that is worth less than the minimum wage would be unhirable, or hirable at less profit by the business.

If the labor is worth less than the minimum wage, then in general it not be hirable at all – the business would take a loss by hiring it. Right?

So the basic effect of this minimum wage law would be to cause unemployment and to reduce production (which hurts everyone, including high wage workers), right? Meanwhile a small minority of lucky workers will have their wages increased a little – but they could very easily be worse off, too, because there are fewer good and services being produced for them to buy.


curi at 3:14 PM on September 5, 2018 | #11077 | reply | quote

> #11076 You need to understand the theory better before trying to analyze a case like ridesharing.

Ok

>> I guess in theory, Well it would make it so employers can't underbid for labor

> Could they underbid for labor without minimum wage? Wouldn't that just mean being outbid and losing labor to other employers?

Yes I suppose that would be the case.

>> but it will also make it so that certain labor that is worth less than the minimum wage would be unhirable, or hirable at less profit by the business.

> If the labor is worth less than the minimum wage, then in general it not be hirable at all – the business would take a loss by hiring it. Right?

Well hold on if, if the business can afford to pay them above that minimum wage and make a profit (but smaller) then no they would not take a loss - wait so that. Some people would be unhirable by smaller businesses who can't afford to pay them minimum wage prices.

Hmm. I think this would mean some people are going to be unhirable and some businesses are going to go out of business because they can't hire those people.

> So the basic effect of this minimum wage law would be to cause unemployment and to reduce production (which hurts everyone, including high wage workers), right? Meanwhile a small minority of lucky workers will have their wages increased a little – but they could very easily be worse off, too, because there are fewer good and services being produced for them to buy.

In theory yes. I think logic follows that this would be the case.


Andy at 3:21 PM on September 5, 2018 | #11078 | reply | quote

> Well hold on if, if the business can afford to pay them above that minimum wage and make a profit (but smaller) then no they would not take a loss

Either they are worth more than the minimum wage to the business, or else the business would take a loss on hiring them relative to not hiring them. Businesses will not hire people (unless forced to) who produce less value for the business than they cost the business, even if they would still be profitable overall due to their other activities. Doing that would be charity (which some people might voluntarily do, but let's focus on the economic logic of what self-interested actors do).

Make sense?

> Hmm. I think this would mean some people are going to be unhirable and some businesses are going to go out of business because they can't hire those people.

Yes.

> I think logic follows that this would be the case.

Great. Do you also understand how the free market pricing of labor creates full employment?

If the price of labor is too high (as minimum wage laws force), then there is inadequate demand for labor at that wage rate, and some people are unemployed. But the free market doesn't do that, on its own, because self-interested businessmen would prefer to pay lower wages and hire more people.

And if the price of labor is too low, then there is a labor shortage so self-interested businessmen bid it back up.

So the market price for labor is the same price that provides full employment. Do you agree? That's why a government law changing the price of labor causes problems. It's making the price not be this equilibrium of full employment. Either government intervention causes unemployment (if the price is too high due to a price floor) or labor shortages (if it's a price ceiling which is too low). Labor shortages are bad too (we could go into why they suck, but it's maybe unnecessary because no one is advocating maximum wages for workers in general, though some people do advocate it for some positions like CEO).


curi at 3:30 PM on September 5, 2018 | #11079 | reply | quote

>> Well hold on if, if the business can afford to pay them above that minimum wage and make a profit (but smaller) then no they would not take a loss

> Either they are worth more than the minimum wage to the business, or else the business would take a loss on hiring them relative to not hiring them. Businesses will not hire people (unless forced to) who produce less value for the business than they cost the business, even if they would still be profitable overall due to their other activities. Doing that would be charity (which some people might voluntarily do, but let's focus on the economic logic of what self-interested actors do).

> Make sense?

Yes but This would require transparency I am not sure is possible I think. Both the employer and the employee need to know what the value of a particular labor market is, As an employee I would have to know what everyone doing my job is getting paid no?

>> I think logic follows that this would be the case.

> Great. Do you also understand how the free market pricing of labor creates full employment?

> If the price of labor is too high (as minimum wage laws force), then there is inadequate demand for labor at that wage rate, and some people are unemployed. But the free market doesn't do that, on its own, because self-interested businessmen would prefer to pay lower wages and hire more people.

> And if the price of labor is too low, then there is a labor shortage so self-interested businessmen bid it back up.

Yes in theory this would be the case assuming no interference and sufficient knowledge.

> So the market price for labor is the same price that provides full employment. Do you agree?

Yes with some assumptions I am not entirely sure are possible.

>That's why a government law changing the price of labor causes problems. It's making the price not be this equilibrium of full employment. Either government intervention causes unemployment (if the price is too high due to a price floor) or labor shortages (if it's a price ceiling which is too low). Labor shortages are bad too (we could go into why they suck, but it's maybe unnecessary because no one is advocating maximum wages for workers in general, though some people do advocate it for some positions like CEO).

Yes if the theory is correct then this would also be correct.


Anonymous at 3:43 PM on September 5, 2018 | #11080 | reply | quote

> Yes but This would require transparency I am not sure is possible I think. Both the employer and the employee need to know what the value of a particular labor market is, As an employee I would have to know what everyone doing my job is getting paid no?

If you suspect an employer is lowballing you with a salary offer, you can ask other workers what they're paid (this info is now publicly available online in many cases), and/or you can apply for multiple jobs. However, this is often unnecessary because the people doing the hiring have a pretty good idea of what the market price is and have a corporate policy to make fair offers because otherwise they would lose out on potential employees who apply at other businesses and get a better offer elsewhere.

The employer also needs to estimate in advance how much value an employee can bring to the table. This can be hard for new businesses doing new things, so mistakes get made, but for established businesses they have a pretty good idea of how much additional sales they can generate by e.g. hiring another guy to do a particular task in their factory. It's harder with knowledge workers because the quality of their work varies much more than with non-knowledge workers. Even with non-knowledge workers, some are more diligent than others, which is hard to communicate during the hiring process, so they may need to negotiate for a raise after proving their worth.

So I think this can – and often does – work out fine to a reasonable approximation. I'm also aware that many people in software are underpaid due to bad salary negotiation skills and some other errors. I think that's generally less of a problem in lower skilled work where wages are more standardized, but it does affect those workers too (women being less effective at salary negotiation on average is, sadly, one of the causes of the gender pay gap – but that is different than sexism). People who want to solve this problem would be well advised to consult resources like https://www.iwillteachyoutoberich.com but many of them choose not to and consequently make less money than they could.

> Yes with some assumptions I am not entirely sure are possible.

Setting aside the world today, do you think the assumptions are *approximately* possible, or that nothing very similar could be possible IRL in any human society?


curi at 3:53 PM on September 5, 2018 | #11081 | reply | quote

>Setting aside the world today, do you think the assumptions are *approximately* possible, or that nothing very similar could be possible IRL in any human society?

No I think anything is possible barring the laws of physics interfering. So yes it is certainly possible, don't know how probable, but certainly possible.


Andy at 3:56 PM on September 5, 2018 | #11082 | reply | quote

#11082 Ok and do you agree about the first part of #11081 ?


curi at 3:59 PM on September 5, 2018 | #11083 | reply | quote

#11083 Yes


Andy at 4:03 PM on September 5, 2018 | #11084 | reply | quote

OK, great. I think we should go through a more detailed scenario to review the economics more and see if we're on the same page yet. I am currently making educational content related to Reisman's book, (mostly videos), so I'm pasting below a scenario with questions. Please take your time thinking it through and considering the questions carefully.

After that, if it goes well, I expect that the next step could be to consider some kinds of reasons (like circumstances being different in some way) that minimum wage would have a different effect than the one we discussed above about it causing unemployment and lowering production. I have in mind theoretical reasons or simplified, hypothetical examples, not real world cases. That way we can try to focus on one factor at a time and its consequences.

# Scenario

Let's examine a hypothetical scenario. There are 20 businesses. They currently have no employees, but they have the factory floor space and tools to hire up to 100 workers each (and they won't expand). There are 800 workers available to take jobs. All work is unskilled – any worker can do any job. All jobs have the same number of hours and equally good working conditions. Workers must make $25/hour or more to have a good standard of living in the society, and $1/hour or more for minimum subsistence. The average rate of profit is 5%/year, so any use of capital with a lower return is inefficient and the capital could be more gainfully used elsewhere (basically you'd be better off investing in stocks and bonds rather than in the business). The business owners take salaries so that we don't need to worry about any return for their work, all profits of a business are a return on capital.

As a further simplification, the rate of return on capital from each business is unaffected by the number of workers employed, it only depends on the hourly wage paid – but, nevertheless, each business wants to hire as many workers as possible (up to 100 max) as long as the hourly wage is low enough to get 5%/year profit or more. Additionally, the capital in the businesses is totally liquid – it can instantly be converted into stocks and bonds, or back into a business, for free. Also, everyone lives in the same town and has the same commute to every business, and every worker knows about the job openings at every business, and every business knows about all the available workers.

All the workers are equally productive, but the businesses are not equally productive. Some businesses use workers and capital in better ways to create more valuable products. We'll rank them from 1-20. The best one, #1, can pay workers up to $100/hour and still make a profit of 5%/year on the capital invested in the business. The #2 business can only pay $95/hour, at most, in order to have a profit of 5% or more. The #3 business can only pay $90/hour for workers or else its capital would be better invested in stocks and bonds. And it keeps going down by $5/hour for each business, until the 20th business can only pay up to $5/hour for labor and still make a 5% profit per year.

All the employers are selfish and greedy individually, but they don't form a cartel or a conspiracy of employers, they just act in their own interests without coordinating with other employers. They try to pay the lowest wages they can and to maximize their profits. And the workers try to get the best wages they can, but they don't unionize, they just act as individuals.

# Questions

What optimally happens in a free market, and why? How many workers are hired by which businesses, and what are their wages? What is the unemployment rate? In what ways does *worker need* matter (like the minimum wages needed for a good standard of living, or for minimum subsistence)? In what ways does employer greed matter?

A new business is created. It's able to offer wages of up to $25/hour for up to 100 workers. What affect does this have on wage rates and how many workers work at each business?

Another new business is created. This businessman invented a really great new product which is easy to make. He's able to offer wages of up to $500/hour for up to 100 workers while still making a 5% return on his capital or higher. What affect does this have on wage rates and how many workers work at each business?

What happens if another 200 workers enter or exit the situation?

What if the #1 business expanded in size and could now hire up to 400 workers instead of 100? What if the #20 business also expanded to be able to hire up to 400 workers?

In the original scenario, what happens if the government passes a minimum wage law of $25/hour? What about a minimum wage law of $80/hour?


curi at 4:08 PM on September 5, 2018 | #11085 | reply | quote

> What optimally happens in a free market, and why? How many workers are hired by which businesses, and what are their wages? What is the unemployment rate? In what ways does *worker need* matter (like the minimum wages needed for a good standard of living, or for minimum subsistence)? In what ways does employer greed matter?

I guess in theory. Ok the available positions are 2000. 800 people total. The least effective business can pay $5/hour so presumably every business is going to try to pay that much. Since there is a shortage of workers then the incentive is for each business to try to to pay more than the other business in order to run at full capacity. If every worker is able to know how much each business is paying for presumably the #1 business would keep raising wages until it hits 100 workers. This could happen well before they hit the Maximum of $100/hour. If this was done in the style of an auction, then business #1 would be able to hire 100 people first once they outbid everyone else.

Assuming transparency and no additional labor eventually only 8 Business would be able to thrive in this environment and the remaining 12 will have to shut down or figure out a way to offer workers more than they can pay them... I won't speculate on how they could.

> A new business is created. It's able to offer wages of up to $25/hour for up to 100 workers. What affect does this have on wage rates and how many workers work at each business?

They would not be able to hire anyone because the top 8 businesses have all the labor. So this new business would go out of business.

> Another new business is created. This businessman invented a really great new product which is easy to make. He's able to offer wages of up to $500/hour for up to 100 workers while still making a 5% return on his capital or higher. What affect does this have on wage rates and how many workers work at each business?

This business would be able to hire 100 workers for $101 an hour and now what was the top 8th business prior would go out of business presumably.

> What happens if another 200 workers enter or exit the situation?

If 200 workers enter the scenario the top 9th and 10th business would go into business and pay these guys the max they can. if 200 would leave. Rank 8 and 7 would go out of business

> What if the #1 business expanded in size and could now hire up to 400 workers instead of 100?

They would hire an additional 300 workers, making business 8-7-6 go out of business.

>What if the #20 business also expanded to be able to hire up to 400 workers?

Rank 20 can't pay their workers enough to keep them, being able to hire 2x presumably means they could pay the initial 100 2x the wages, but it still below 8th rank business.

> In the original scenario, what happens if the government passes a minimum wage law of $25/hour?

Nothing. The top 8 business are paying them already more because there is a labor shortage.

> What about a minimum wage law of $80/hour?

I think let see. Business 6-8 Would go out of business because they can't afford to pay them that much. 300 of the workers would be unemployed.


Andy at 4:43 PM on September 5, 2018 | #11086 | reply | quote

Can you figure out, specifically, which businesses would hire the 800 workers and what wages each business would pay each worker that it hires?

> Business 6-8 Would go out of business because they can't afford to pay them that much. 300 of the workers would be unemployed.

Yes.

> Nothing. The top 8 business are paying them already more because there is a labor shortage.

Yes, except your terminology is not the way economists talk. In economist jargon, a shortage refers to a situation where there isn't enough of something available at the current price to satisfy the demand. If all the workers are hired at wages which are higher than the other 12 businesses would want to pay, then there's no additional demand for labor and therefore no "shortage".

Shortages are avoidable, and contrast with scarcity, which is unavoidable and means that there isn't unlimited of something. Scarcity means there's more demand at a price of $0 or more than the supply. For example, beachfront homes are scarce (more people would take them for free than the number of beachfront homes that exist), but if the prices of beachfront homes are high enough then there may not be a shortage (everyone who wants to buy one at the current price may have one). It's the same with bread: it's scarce, but there isn't a shortage – i can reliably go to the store and buy bread at the market price, rather than finding the shelves empty.


curi at 4:50 PM on September 5, 2018 | #11087 | reply | quote

>Can you figure out, specifically, which businesses would hire the 800 workers and what wages each business would pay each worker that it hires?

Assuming full transparency

Rank 1 Business would pay $96/hour Rank 2 $95 3$90 4.$85

80

75

70

65


Anonymous at 4:55 PM on September 5, 2018 | #11088 | reply | quote

#11088 This is incorrect.

The top 8 businesses would all pay $61/hour (or $60.01 if you want to use cents and the numbers are exact to the penny), because at that price the bottom 12 businesses will drop out of the market – they aren't willing to hire anyone at that price. The #1 business doesn't need to pay more than $61/hr to get 100 workers. Businesses only have to pay just enough to lower the demand for labor enough to avoid a labor shortage. The top business doesn't need to pay $96/hr b/c it doesn't need to exclude the #2 business from hiring people.

Make sense?


curi at 5:00 PM on September 5, 2018 | #11089 | reply | quote

> This is incorrect. > The top 8 businesses would all pay $61/hour (or $60.01 if you want to use cents and the numbers are exact to the penny), because at that price the bottom 12 businesses will drop out of the market – they aren't willing to hire anyone at that price. The #1 business doesn't need to pay more than $61/hr to get 100 workers. Businesses only have to pay just enough to lower the demand for labor enough to avoid a labor shortage. The top business doesn't need to pay $96/hr b/c it doesn't need to exclude the #2 business from hiring people. > Make sense?

Right yes that makes way more sense. as long as the pay a little more than the 9th. They will always have 100 workers and since the 800 workers are all equally skilled rank 1-8 don't really need to incentivize over the others.


Andy at 5:04 PM on September 5, 2018 | #11090 | reply | quote

#11090 Great. Can you try some of the questions again then?

With the new $500/hr max bid business, what does the wage rage become for everyone?

With 200 workers entering or leaving, what is the effect on wages?

When the #1 business expands to 400 workers instead of 100, what is the effect on wages?


curi at 5:07 PM on September 5, 2018 | #11091 | reply | quote

> #11090 Great. Can you try some of the questions again then?

> With the new $500/hr max bid business, what does the wage rage become for everyone?

What do you mean? Like maximum amount someone can bid for labor or a new business that can afford to pay that much

> With 200 workers entering or leaving, what is the effect on wages?

if 200 enter workers enter the scenario. The wages will all decrease for business 1-8, 9 and 10 will go into business and all get paid: $50.01

if 200 people leave the scenario. Business 7 and 8 are shut down and 1-6 pay everyone: $70.01

> When the #1 business expands to 400 workers instead of 100, what is the effect on wages?

Business 5,6,7,8 will go out of business and 1-4 pay everyone $80.01


Anonymous at 5:14 PM on September 5, 2018 | #11092 | reply | quote

#11092

> What do you mean? Like maximum amount someone can bid for labor or a new business that can afford to pay that much

I meant the example above:

>> Another new business is created. This businessman invented a really great new product which is easy to make. He's able to offer wages of up to $500/hour for up to 100 workers while still making a 5% return on his capital or higher. What affect does this have on wage rates and how many workers work at each business?

Then what do wages become?

---

The rest are correct except expanding to 400 workers means 300 additional workers, so your math is a little off, but I think you get the concept.


curi at 5:16 PM on September 5, 2018 | #11093 | reply | quote

> Another new business is created. This businessman invented a really great new product which is easy to make. He's able to offer wages of up to $500/hour for up to 100 workers while still making a 5% return on his capital or higher. What affect does this have on wage rates and how many workers work at each business?

This new business would make previous rank 8 go out of business and the new top 8 business would pay everyone: $65.01


Anonymous at 5:21 PM on September 5, 2018 | #11094 | reply | quote

#11094 Yes. OK, backing up I had a concern about this:

>> What if the #20 business also expanded to be able to hire up to 400 workers?

> Rank 20 can't pay their workers enough to keep them, being able to hire 2x presumably means they could pay the initial 100 2x the wages, but it still below 8th rank business.

The math is off (400 workers is 4x) but that's minor. Let's just say it was 200 workers.

The issue is that ability for a business to expand (hire more workers at the same wages) and ability to pay higher wages are *very different*.

Expanding to more workers requires having more machinery or tools or office space or being able to buy additional supplies of iron or CPUs or other components from one's suppliers (or finding new suppliers).

Raising the max wages a business is willing to offer requires being able to generate more sales revenue per worker.

Being able to hire double the people does not mean it could hire half the people at double the wages. It needs the production of the additional people to bring in more sales revenue to be able to afford them.

When a business expands, the basic idea is it hires people to make more stuff it can sell. It's in a position to hire someone at $50/hr who can produce 5 widgets per hour using $10 of capital goods (materials and also wear and tear on machinery and tools), and it can sell widgets for more a bit more than $12 (enough to have a good enough rate of profit on the investment in the capital goods that worker is using). That way, the worker is paying for himself (5 widgets sold for $12 each is $60, enough to pay for his hour of work plus the capital goods he used during that hour) plus a bit extra. But if a business can afford to hire new people like that, it does *not* mean it could pay its existing employees more (unless they were somehow going to start producing twice as much...).

Make sense?


curi at 5:28 PM on September 5, 2018 | #11095 | reply | quote

#11095 Yes


Andy at 5:31 PM on September 5, 2018 | #11096 | reply | quote

#11096 Great. I think the scenario went well.

So, next step, I suggest you try to come up with ways the this kind of economic logic would not apply. What kind of situations would change things, and then what would the effects be?

Try to come up with *one factor* at a time, so it'll be easier to analyze what effects it has.

Try to come up with factors which would somehow make a minimum wage law have a good outcome, if you can. We could discuss other kinds of factors instead if you want.

You can look at real world scenarios or research for inspiration, if you think they're useful. But then try to figure out what the factors are which are causing the issues, and then bring up one of them at a time in a simplified scenario like the one we've just talked about or another simple scenario.

If you get stuck, you could give a real world example and I could help you figure out what some of the factors in it are. But I think it'd be best if you could come up with some yourself since the goal is to address *your* objections to the laissez faire capitalist view.


curi at 5:35 PM on September 5, 2018 | #11097 | reply | quote

Oh also I forgot. About the $80 minimum wage law in the scenario, I'll paste some of my answer about it:

A minimum wage of $80/hour would cause 300 workers to be unemployed. Only 5 businesses are able to pay $80/hour or more and remain profitable, so they will hire 500 workers for $80/hour and the other 300 workers will be prevented from having jobs. The higher wages ($80/our instead of $61/hour) will not necessarily benefit the workers who do get jobs, because there are less goods being produced for them to buy. The amount of labor has fallen by 3/8ths, so production falls by something in that ballpark (somewhat less because it's the most productive jobs that are still filled), while their wages have increased by just under 2/8ths, and anyway the other buyers of consumer's goods, which they must outbid to get products, also had the same increase in wages. When everyone has their wages increased in the same way, without any change in the supply of goods to buy, then prices rise accordingly.


curi at 5:42 PM on September 5, 2018 | #11098 | reply | quote

#11098 Also, on top of that, as Reisman would point out, the employed workers may have to pay taxes to provide some welfare for the 300 people who are prevented from working.


curi at 5:48 PM on September 5, 2018 | #11099 | reply | quote

>So, next step, I suggest you try to come up with ways the this kind of economic logic would not apply. What kind of situations would change things, and then what would the effects be?

>Try to come up with *one factor* at a time, so it'll be easier to analyze what effects it has.

Let's see. A situation in where the supply of labor is much higher and the companies available 1 or 2. Situations in where a company can go through constantly rotating labor because what they are getting paid is below subsistence or it costs them money (i.e Uber, Pyramid Schemes). So small, almost nonexistent competition, a large supply of labor and no regulations.


Anonymous at 9:01 AM on September 6, 2018 | #11100 | reply | quote

The first factor I see is much higher supply of labor. So I'll start there. Take the scenario with 20 companies but raise the number of workers from 800 to 500,000. What happens?

Wages drop to, let's say, $1/hr, and 2000 people are hired. We could set wages considerably higher if we suppose people have options like being self-employed, starting a business, or moving to another town, and any of those options could be more attractive than $1/hr wages (which are minimum subsistence). But for now let's just say $1/hr. And there are 498,000 people who are unemployed. Prices fall since demand for products has fallen (in terms of money – people are only willing to pay low prices for stuff cuz that's all they have). But, whatever prices are, and whatever may be taxed and used for welfare, the production of the 2000 employed people is not able to do a good job of supporting the 498,000 unemployed people.

So, question: Will a minimum wage law help with this situation? What will its effects be?

I think what would actually help is mainly more capitalism – businesses expanding, new businesses being created, people being self-employed. A minimum wage law will not encourage this – it will make business expansions and new businesses more difficult because it's easier to start a business that can pay up to $2/hr for labor than one that can pay a minimum wage of $5/hr for labor. And a minimum wage law that applied to self-employment – you can't be self-employed unless you can make $5/hr or more for yourself – would also be bad for similar reasons.


curi at 10:31 AM on September 6, 2018 | #11101 | reply | quote

The thing is that there really isn't competition in these new economies. It seems like it's just a matter of who are the first movers and what is popular. There really is not a competition to Uber, Facebook, YouTube.


Andy at 8:04 PM on September 6, 2018 | #11102 | reply | quote

I should mention that I don't think the solution is minimum wage for these issues. I am just thinking about some IRL scenarios in where there is a disconnect from the theory presented.


Andy at 9:14 PM on September 6, 2018 | #11103 | reply | quote

There absolutely is competition for Uber, Facebook, and YouTube. The issue is they are (now, but not originally) winning by a lot. And they reason they're winning is not just about being first movers, e.g. Facebook was preceded by My Space. Also some of the competitors are doing pretty well today, like Tumblr, Snapchat, Twitter – they are successful companies despite being smaller than Facebook.

It seems like you don't want to work through things logically, one factor at a time? You didn't answer the question about the consequences of minimum wage in the previous scenario (way more workers than jobs). Nor did you begin trying to analyze a new scenario (changed to have fewer businesses) using economic logic. I suggest continuing with that approach.


curi at 9:28 PM on September 6, 2018 | #11104 | reply | quote

Oh I get a little scattered sometimes. No I was in agreement with you about the scenario of low competition. I can't think, based on the logic we laid out, of a way that creating an artificial minimum wage would not end up screwing those that need it the most in the end.

I was hoping to start analyzing some scenarios in where the empirical data shows the opposite of what the theory suggests and see if it's the theory or if I am missing something.

Unless, you want to keep working with more scenarios I am enjoying the exercise either way.


Andy at 9:32 PM on September 6, 2018 | #11105 | reply | quote

OK let's try this. Say there's only one company, the other 19 disappear. It's the one that can pay up to $50/hr and still make enough profit. It hires 100 people, and 700 people have no jobs.

*Maybe* the following happens: The wages it pays are $1/hr, and a minimum wage law set at up to $50/hr would help the workers. The minimum wage law wouldn't increase production (same amount of stuff to go around if they are the only town in existence), but it'd give them more money to buy things produced by other workers from other towns.

So then do you think minimum wage would be good, or do you see problems with it? Either way, do you have any ideas besides minimum wage for what things would help in this scenario? And what things besides minimum wage could increase wages above $1/hr?


curi at 9:42 PM on September 6, 2018 | #11106 | reply | quote

> OK let's try this. Say there's only one company, the other 19 disappear. It's the one that can pay up to $50/hr and still make enough profit. It hires 100 people, and 700 people have no jobs.

> *Maybe* the following happens: The wages it pays are $1/hr, and a minimum wage law set at up to $50/hr would help the workers. The minimum wage law wouldn't increase production (same amount of stuff to go around if they are the only town in existence), but it'd give them more money to buy things produced by other workers from other towns.

> So then do you think minimum wage would be good, or do you see problems with it? Either way, do you have any ideas besides minimum wage for what things would help in this scenario? And what things besides minimum wage could increase wages above $1/hr?

Ok well I would think that this minimum wage would be good assuming that:

-The workers or someone can't create their own company that pays better

-Moving out of that area is impractical or impossible

-This is the only source of income

But the minimum wage would interfere if a new company wants to move in and hire another 100 workers but can only do it for less than $50. So if i see that company 1 is only paying $1/hour, I'd be willing to start a business even though I am inefficient and pay idk lets say $12/hour. This would be impossible for me if a minimum wage exists.

Some better options. If at all possible make it so new business can enter the scenario to create more wealth and jobs.

Maybe create an incentive for the business to pay their workers more. Perhaps a tax on a certain level of profit that would encourage the business to instead give that money to their employees.

Nothing particularly optimal but that wouldnt help the other 900. I guess some sort of charity system to have the 900 not die of starvation. Dunno how.


Andy at 9:59 PM on September 6, 2018 | #11107 | reply | quote

> But the minimum wage would interfere if a new company wants to move in and hire another 100 workers but can only do it for less than $50. So if i see that company 1 is only paying $1/hour, I'd be willing to start a business even though I am inefficient and pay idk lets say $12/hour. This would be impossible for me if a minimum wage exists.

Yes! The situation has too few companies to hire people. And higher the minimum wage is, the more potential companies it prevents from forming. Even a minimum wage of $2/hr (which doesn't appear very harmful to the company that could pay up to $50/hr) could prevent a company from forming that could have paid people minimum subsistence or more.

A higher minimum wage also makes it more difficult for existing companies to expand. The company that currently can hire 100 people for up to $50/hour might be able to come up with some way to use more workers less efficiently than the first 100, but still more efficiently than nothing. Maybe they could expand by getting another building that's more expensive, and which is further away from their suppliers of some hard-to-transport components or machinery. Maybe the consumers don't want more of what they're making, but they could start a new product line which isn't as good, but it's way better than nothing. Maybe they can't find enough great managers to hire more workers efficiently, but they can find some additional managers by lowering their standards and using mediocre managers. Then, due to the higher rent, the inferior location, the inferior secondary product line, the worse managers, or whatever else ... they might be able to expand and hire more workers but only at $20/hr or less, not $50/hr.

> Nothing particularly optimal but that wouldnt help the other 900. I guess some sort of charity system to have the 900 not die of starvation. Dunno how.

Charity won't do a good job of helping the 700 unemployed workers much unless it's coming from something outside the system – a different industry that uses a different type of workers (like programmers, and the people we've been talking about can't do that), or production at a different town. Because if the charity has to come from the 100 with jobs, there just isn't going to be enough production to go around, regardless of what wages are.

So what they really need is to be productive somehow, whether that's by some people starting new businesses or by people figuring out productive things they can do on their own (e.g. hunting, farming, picking wild berries, gathering or chopping firewood, weaving baskets, fishing, sewing, etc. or it could be stuff like art or poetry or writing books if there are markets elsewhere that want those things, though i'm guessing there isn't much market for those things in this very badly off town).

Also, the one business is making things a lot better than if it didn't exist, even if it pays $1/hr. That's a lot better than $0/hr. If people seriously can't do anything productive without the help of the one and only person who is capable of being a businessman, they should be extremely thankful he exists and provides them with jobs on any terms.

---

Agree about these things?


curi at 10:22 PM on September 6, 2018 | #11108 | reply | quote

So far so good. Yes.


Andy at 10:24 PM on September 6, 2018 | #11109 | reply | quote

OK so I guess you don't think a minimum wage is good in these scenarios, right? But you still think it might be good for Uber drivers and some other cases? If so, what are some other aspects of the Uber situation (or Walmart or whatever) that you think could be relevant?

Also, there are ways we could expand the hypothetical scenario, e.g. by having 3 different industries and some workers can only work in one industry and some are multi-talented. Maybe you can already imagine how those changes to the scenario won't make minimum wage turn out good.

We already somewhat covered the situation of some of some workers being potential businessmen. That's basically the same as having the 12 businesses that don't or can't exist at the $61/hour price of labor, but would form with a lower price of labor. It's typical for there to be lots of potential businessmen if the price of labor gets low enough, so it dropping to $1/hr would require a very poor society with little technology or resources, or one that just got ravaged by a war last week, or something else that is unlike the situation anywhere in the US.


curi at 10:34 PM on September 6, 2018 | #11110 | reply | quote

> OK so I guess you don't think a minimum wage is good in these scenarios, right? But you still think it might be good for Uber drivers and some other cases? If so, what are some other aspects of the Uber situation (or Walmart or whatever) that you think could be relevant?

I don't think a minimum wage on Uber is going to fix the problem there. Hypothetically more competition would help but the barrier to entry at this point seems quite high. I mean Lyft is their next competitor and they are nowhere near as popular. I don't know what could be done in this scenario to be honest.

I will answer the other 2 paragraphs when I am less tired. I am heading out for the day.


Anonymous at 11:01 PM on September 6, 2018 | #11111 | reply | quote

> Also, there are ways we could expand the hypothetical scenario, e.g. by having 3 different industries and some workers can only work in one industry and some are multi-talented. Maybe you can already imagine how those changes to the scenario won't make minimum wage turn out good.

> We already somewhat covered the situation of some of some workers being potential businessmen. That's basically the same as having the 12 businesses that don't or can't exist at the $61/hour price of labor, but would form with a lower price of labor. It's typical for there to be lots of potential businessmen if the price of labor gets low enough, so it dropping to $1/hr would require a very poor society with little technology or resources, or one that just got ravaged by a war last week, or something else that is unlike the situation anywhere in the US.

I don't think I disagree there.

I think I am fairly convinced by the logic of this Theory. I am still uncomfortable with adopting it because the empirical evidence seems to contradict what we would expect if the theory was correct. So the possibility that the theory is not accounting for something crucial that I can't imagine at the moment still exists.


Andy at 9:14 AM on September 7, 2018 | #11112 | reply | quote

#11112 There are many crucial IRL factors we haven't talked about so far, like the 500,000 ways our governments have come up with to prevent the formation of new businesses and make existing businesses have much lower max $/hr they can pay.

Going through some of the common sorts of government regulation, and what kinda harm they do, could be informative. It's not like humanity just exited our thousands of years of extreme poverty. The industrial revolution was long enough ago that things could be significantly better by now compared to how they are. Did you read the extra couple Reisman sections about laws to improve working conditions? If not, I'd suggest that now.

> I don't think a minimum wage on Uber is going to fix the problem there. Hypothetically more competition would help but the barrier to entry at this point seems quite high. I mean Lyft is their next competitor and they are nowhere near as popular. I don't know what could be done in this scenario to be honest.

I think it's important to get something clear in your mind. Uber competes in two different ways. It competes for customers and for employees. Which is the one that concerns you?

As a *customer* of Uber, I have other options: Lyft, taxis, the bus and other public transit, walking, biking, rental cars (including newer stuff like zipcar), getting a friend to give me a ride, doing more stuff online (facetime, getting things delivered) instead of traveling places, or owning my own car. So there's a lot of options for Uber to compete with. Lyft is not the only major competitor here. I've got options, and Uber didn't take any options away from me (except I think maybe it did lower the availability of taxis, cuz it basically does the same thing at a lower price). If Uber doubled their prices, as a customer I'd use them less and use alternatives more – I wouldn't just be stuck paying the higher prices.

As a potential *employee* of Uber, I have many other options for less skilled work. I could work at McDonalds, Walmart, FedEx, etc. Lyft is not the only major competitor here, either.


curi at 10:20 AM on September 7, 2018 | #11114 | reply | quote

Indeed and that's why it has such a high turnover rate. The people who enter these deals get screwed, the Uber CEO keeps getting richer and as soon as the employee realizes that they are getting screwed and leaves, no problem for the business another 10 will join. We see something similar with companies like Amazon, we see that they take advantage of their employers to the point that they need to be on welfare.

There is a lack of fairness that is undeniable. Now I am no longer convinced that a minimum wage would be a solution theoretically, though the evidence seems to be pointing in against that.

I like the Uber example because it shows that unregulated, not unionized, no benefits etc... business model can benefit a few while taking advantage of the ones in need.


Andy at 1:07 PM on September 7, 2018 | #11118 | reply | quote

The primary reason that people drive for Uber is that it helps people relative to not driving for Uber, in their opinion. That's why many Uber drivers stick around. They consider it a better option than their alternatives. You think they are stupid, but you're mistaken to judge these people in this way. Some may be mistaken. If you wish to help them, you could sell them a guide to help them understand the issues better, or give it away charitably. If a large number of people are making a large mistake, there is room for you to help them at a substantial profit. But I think you just wish the situation were better (that people had better options), which is different than driving for Uber being a mistake.

You may think people can't math, but lots of these people don't have much savings either, so if Uber wasn't paying their rent, gas and grocery bills they would in fact quit (for the full time drivers – a lot of people appreciate the part time work and flexible hours, which they only do because they see it's enabling them to buy things they would not otherwise have been able to buy).

The secondary reason people drive for Uber is there aren't enough jobs due to many thousands of anti-capitalist government policies that are preventing full employment – like the minimum wage. The overall economic situation would be dramatically improved by changes to government.

The main purposes of *unions* are to push for higher wages and better working conditions, so they work a lot like minimum wage laws. Similarly, regulations requiring Uber give out benefits would simply lower salaries by the cost of the benefits and not help workers – unless you also use a minimum wage law in order to prevent the lowering of salaries (or unless you exempt Uber's competitors from having to give benefits, so Uber can't lower salaries and stay competitive).

What regulations do you think would be good to have regarding Uber?


curi at 3:34 PM on September 7, 2018 | #11119 | reply | quote

https://www.businessinsider.com/uber-leaked-finances-accounts-revenues-profits-2017-2

> repeatedly, leaks of Uber's financial data have shown the company carrying huge losses.

Uber doesn't seem to be exploiting workers with huge profit margins, as you imagine. (If they were, presumably lyft would outcompete them by offer better wages and accepting more modest profit margins.) If you forced them to pay drivers more, they'd probably have to raise their prices accordingly or go out of business. So what you'd do is harm all the consumers who purchase uber rides, and you'd also reduce the demand for uber (by not letting them charge prices that will attract lots of customers) and thereby also end up hurting uber drivers too.


curi at 3:43 PM on September 7, 2018 | #11120 | reply | quote

https://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver-part-one-understanding-ubers-bleak-operating-economics.html

> Published financial data shows that Uber is losing more money than any startup in history and that its ability to capture customers and drivers from incumbent operators is entirely due to $2 billion in annual investor subsidies.

In other words, some rich investors are pouring tons of money into Uber, which mostly goes to subsidizing a mix of 1) cheap rides for customers; and 2) driver pay.

> for the year ending September 2015, Uber had GAAP losses of $2 billion on revenue of $1.4 billion, a negative 143% profit margin.

Jesus.

If you want to say Travis Kalanick got rich by scamming foolish investors ... maybe, the jury is still out on that. I wouldn't care very much if he did. When rich people make bad financial decisions, that's totally on them. (As opposed to bitcoin which has been scamming lots of foolish regular people, which is an awful shame.) I have nothing against rich people, I just think they should be held responsible for what they do with their money and that they have the resources that they shouldn't be making excuses for bad decisions, and if they do make bad decisions they shouldn't be rich (large wealth should be in the hands of people who make good financial decisions). I think it's fine when foolish rich people become less rich (they were the wrong people to control a fortune), but i don't like to see foolish middle or lower class people becoming worse off (foolish people who do productive work can totally still merit having a regular amount of wealth).


curi at 3:53 PM on September 7, 2018 | #11121 | reply | quote

https://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver-part-one-understanding-ubers-bleak-operating-economics.html

> There have been hundreds of articles claiming that Uber has produced wonderful benefits, but none of these benefits increase consumer welfare because they depended on billions in subsidies.

To the extent Uber's losses were foolish rich people transferring their money to the people who ride in Uber, that sounds like a public benefit to me which increased consumer welfare by giving them cheap transportation. That's like unintentional charity.


curi at 3:57 PM on September 7, 2018 | #11122 | reply | quote

> The primary reason that people drive for Uber is that it helps people relative to not driving for Uber, in their opinion. That's why many Uber drivers stick around. They consider it a better option than their alternatives. You think they are stupid, but you're mistaken to judge these people in this way. Some may be mistaken. If you wish to help them, you could sell them a guide to help them understand the issues better, or give it away charitably. If a large number of people are making a large mistake, there is room for you to help them at a substantial profit. But I think you just wish the situation were better (that people had better options), which is different than driving for Uber being a mistake.

That's not a bad idea I should try to put up something out there to help people realize if they are making or losing money by driving for Uber. Would at least help someone out there.

But overall I do wish there were better options.

> You may think people can't math, but lots of these people don't have much savings either, so if Uber wasn't paying their rent, gas and grocery bills they would in fact quit (for the full time drivers – a lot of people appreciate the part time work and flexible hours, which they only do because they see it's enabling them to buy things they would not otherwise have been able to buy).

I understand that.

> The secondary reason people drive for Uber is there aren't enough jobs due to many thousands of anti-capitalist government policies that are preventing full employment – like the minimum wage. The overall economic situation would be dramatically improved by changes to government.

Yes and I am willing to explore those policies etc...

> The main purposes of *unions* are to push for higher wages and better working conditions, so they work a lot like minimum wage laws. Similarly, regulations requiring Uber give out benefits would simply lower salaries by the cost of the benefits and not help workers – unless you also use a minimum wage law in order to prevent the lowering of salaries (or unless you exempt Uber's competitors from having to give benefits, so Uber can't lower salaries and stay competitive).

> What regulations do you think would be good to have regarding Uber?

I honestly don't know. I don't know if there is a way to incentivize a company to after they are making a certain profit start reinvesting in their employees somehow. It is hard for me to see a minimum wage working anymore.

Something is definitely fucked with Uber though like, it just does not even make any sense.


Anonymous at 5:24 PM on September 7, 2018 | #11123 | reply | quote

> https://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver-part-one-understanding-ubers-bleak-operating-economics.html

>> Published financial data shows that Uber is losing more money than any startup in history and that its ability to capture customers and drivers from incumbent operators is entirely due to $2 billion in annual investor subsidies.

> In other words, some rich investors are pouring tons of money into Uber, which mostly goes to subsidizing a mix of 1) cheap rides for customers; and 2) driver pay.

>> for the year ending September 2015, Uber had GAAP losses of $2 billion on revenue of $1.4 billion, a negative 143% profit margin.

> Jesus.

> If you want to say Travis Kalanick got rich by scamming foolish investors ... maybe, the jury is still out on that. I wouldn't care very much if he did. When rich people make bad financial decisions, that's totally on them. (As opposed to bitcoin which has been scamming lots of foolish regular people, which is an awful shame.) I have nothing against rich people, I just think they should be held responsible for what they do with their money and that they have the resources that they shouldn't be making excuses for bad decisions, and if they do make bad decisions they shouldn't be rich (large wealth should be in the hands of people who make good financial decisions). I think it's fine when foolish rich people become less rich (they were the wrong people to control a fortune), but i don't like to see foolish middle or lower class people becoming worse off (foolish people who do productive work can totally still merit having a regular amount of wealth).

Oh. This might explain some of the fuckery about Uber.


Andy at 5:25 PM on September 7, 2018 | #11124 | reply | quote

> I honestly don't know. I don't know if there is a way to incentivize a company to after they are making a certain profit start reinvesting in their employees somehow. It is hard for me to see a minimum wage working anymore.

In general, it's bad to want money to go to people who didn't earn that money. If an employee for FooCorp is totally interchangeable with an employee somewhere else, he shouldn't earn extra money just because the CEO of FooCorp is brilliant.


curi at 5:31 PM on September 7, 2018 | #11125 | reply | quote

>> I honestly don't know. I don't know if there is a way to incentivize a company to after they are making a certain profit start reinvesting in their employees somehow. It is hard for me to see a minimum wage working anymore.

> In general, it's bad to want money to go to people who didn't earn that money. If an employee for FooCorp is totally interchangeable with an employee somewhere else, he shouldn't earn extra money just because the CEO of FooCorp is brilliant.

Surely there is a way to help, problems are soluble right?

I think the CEO of 80,000 hours just maxes out at 30Grand a year and donates the rest to effective charities.

Bill gates does a lot of philanthropic work, but not every Billionaire is like Bill Gates. But he has made a tremendous positive impact.

Also if we get more money in the hands of people who need to spend it, would that not boost the economy (not to mention raising education standards etc..) more than say a Billionaire buying his third Yacht?

I agree that we should reward brilliance (and discourage rent seekers) but you know the cure for Cancer could be in the brain of a young man whose parents might not be able to keep a roof over their heads.


Andy at 5:45 PM on September 7, 2018 | #11126 | reply | quote

If you want high profits to be curtailed, you're taking away the incentive to make risky career decisions to try to achieve high profits, and the incentive for investors to invest in those kinds of companies. Also, there's no way to achieve it other than by persuading people with words, or by using force. And you're not going to be able to persuade the brilliant CEO/founder/majority-owner of FooCorp that his workers who do job X exactly as well as the workers at BarCorp should be given extra money when there are far more worthy *charity* causes that he could instead direct money to. He will consider a better charity or non-charity uses.


curi at 5:47 PM on September 7, 2018 | #11127 | reply | quote

Yeah I don't think force would help.

I don't want to discourage risk takers, as a lot of our biggest gains worldwide were at the back of some incredibly risky endevours. Though some of the riskiest huge projects were government funded like the Space program, and we have benefited enormously from that.

I guess I am wondering why most Economists, including my professor don't think that the answer is capitalism, and that the whole trickle down idea is a myth.

Why is increasing the spending power of the lower classes not good for everyone?


Andy at 6:06 PM on September 7, 2018 | #11128 | reply | quote

> Surely there is a way to help, problems are soluble right?

There are lots of ways to help people, including at a profit. Furthermore, there are lots of ways to prioritize where to direct help. In general, *productive expenditures* make everyone richer in the long run, whereas charity typically is used for consumption in the short term. And the people who invest in the future are, largely, rich people and businessmen, so it's important they have money to do more of that.

Bill Gates has used his money poorly, he has bad philosophy and doesn't know how to be effective with charity, which is typical (he's not especially bad). A common way money is used badly is as a bandaid for problems caused by underlying political problems that need to be solved or else you're just pouring water (money) into a leaky bucket (bad system).

> Also if we get more money in the hands of people who need to spend it, would that not boost the economy

This is the broken window fallacy – it's focusing on how the window repair guy will get money and ignoring that the money would otherwise be used for something else.

> more than say a Billionaire buying his third Yacht?

Apart from what they give away to charity, billionaires spend the vast majority of the of their money on *capital goods*, not consumer's goods like bread or yachts. A billionaire buying his third yacht is an anti-capitalist straw man with far more application to actors and sports stars than to CEOs and founders.

> I agree that we should reward brilliance (and discourage rent seekers) but you know the cure for Cancer could be in the brain of a young man whose parents might not be able to keep a roof over their heads.

Charity to help the best and brightest is my favorite kind (and Rand's), though I think current scholarship programs largely do a poor job of identifying who to help or figuring out good ways to help them. Poverty is not the primary thing that screws up the potential of the smartest people in the US. It's that they despair after they discover all their teachers, parents and peers are irrational, nasty and dishonest. (Or, before that, it's that their parents hurt them during the first few years of their lives.)


curi at 6:24 PM on September 7, 2018 | #11129 | reply | quote

> Why is increasing the spending power of the lower classes not good for everyone?

Because, broadly, they aren't the best and brightest, and they would spend it on consumption expenditures instead of future-oriented investments. The masses would own most of the companies pretty quickly if they saved more money and bought stocks, but as it is they buy more plasma TVs and alcohol than that, and so businessmen – and to a significant extent the middle class too[1] – do a lot of the investing.

> Though some of the riskiest huge projects were government funded like the Space program, and we have benefited enormously from that.

We could have benefitted much more if it had been done privately, and it's unclear to me that we did benefit from the NASA's tax funding relative to what could have been done with that wealth instead but wasn't.

> I guess I am wondering why most Economists, including my professor don't think that the answer is capitalism, and that the whole trickle down idea is a myth.

Because of their extreme ignorance and, in the cases of the leaders of the left, dishonesty and malice. The world is full of bad ideas and few people doing much about them.

[1] It's the capitalism of a previous small minority businessmen who gave up sone consumption to invest in the future that has created enough wealth for many middle class people now to be comfortable enough to save and invest a significant amount.


curi at 6:29 PM on September 7, 2018 | #11130 | reply | quote

> and it's unclear to me that we did benefit from the NASA's tax funding relative to what could have been done with that wealth instead but wasn't.

We had fantastic benefits from the Space program such as MRI's and CatScans for example. GPS, home insulation, smoke detectors, heart pump technology. The list is quite long.

Do you think something as risky with no guarantee of pay off could be privately funded? I have a hard time wrapping my ahead around that happening. This was not a profitable venture, and the incredibly progress made in science and technology was not immediately felt.

Makes me think of the Columbus voyage.


Andy at 10:20 PM on September 10, 2018 | #11137 | reply | quote

> We had fantastic benefits from the Space program such as MRI's and CatScans for example. GPS, home insulation, smoke detectors, heart pump technology. The list is quite long.

I agree there were major upsides. That is not, however, a comparison to potential upsides from other uses of the money, other organizations of society, etc.

> Do you think something as risky with no guarantee of pay off could be privately funded?

yes


Anonymous at 10:40 PM on September 10, 2018 | #11138 | reply | quote

Andy, are you satisfied about minimum wage? Convinced? Done with the topic?

If not, got further questions and objections?

If so, do you see how not everything is about research and sometimes logic and math are goods tool? And got any ideas about what's going on with the pro-minimum-wage "experts" or want to find out?


curi at 2:08 PM on September 12, 2018 | #11141 | reply | quote

#11061 this article seemed relevant to our discussion especially second paragraph

> “So, we know that a sizable number of minimum-wage earners are not in need of a wage that can support a household. But what of the minimum-wage earners who are? We are told repeatedly that minimum wage is not a living wage, so why are not more minimum wage earners simply starving to death? In reality workers earn two wages: one from their employer and one from the state. For example, someone making the current full-time minimum wage earns $15,000 per year, but they are also eligible for additional government benefits that bring their total remuneration to approximately $35,000 per year if they are childless, or up to $52,000 year if they have children.5 In fact, earning more does not necessarily help one wean himself off this state sponsored support. As wages rise assistance can often decline so precipitously that even earning $1 more can mean a loss of thousands of dollars in aid. This creates a disincentive for the worker to improve and earn more; the perverse incentive here is that we are rewarding the very thing we are trying to eliminate (low wages). These wage subsidies serve only to pervert the normal incentives present in an exchange between employer and employee. Both the employer and the employee are aware of the subsidies, so each is willing to offer less and accept less rather than demand more and offer more.

> At first blush one might conclude the employer is making out like a bandit. But there is no free lunch — the subsidies have to come from somewhere. Taxes fund these subsidies. So the employer is not necessarily paying less if its taxes fund the very subsidies its employees are receiving. In fact many employers pay more on net. All employers pay taxes, but only some receive the benefit of subsidized wages. This is a net redistribution from one class of company to another. In essence we are forcing high wage companies to pay low wage companies to keep their wages low.”

> Welfare, Minimum Wages, and Unemployment | Gregory Morin

> https://mises.org/library/welfare-minimum-wages-and-unemployment

> via Instapaper


Anonymous at 3:58 PM on September 12, 2018 | #11142 | reply | quote

#11142 There are tons of related issues, and they aren't all about welfare. If you have stocks to sell that have gone up in value, you will be taxed more for this if you have higher income, so there's an incentive there to work less (perhaps temporarily for a limited amount of stock, but long term if you have a lot of stock that gained a lot of value). Or call it a lowered incentive to work more if you want to, but it matters.


Anonymous at 4:16 PM on September 12, 2018 | #11143 | reply | quote

> Andy, are you satisfied about minimum wage? Convinced? Done with the topic?

> If not, got further questions and objections?

> If so, do you see how not everything is about research and sometimes logic and math are goods tool? And got any ideas about what's going on with the pro-minimum-wage "experts" or want to find out?

I think I am convinced. I don't think I have the knowledge to refute most of the links I've given you though. So I'd like to find out.


Andy at 12:03 AM on September 13, 2018 | #11147 | reply | quote

#11147 Pick a link and say what you can refute and what part you can't.


curi at 12:22 AM on September 13, 2018 | #11149 | reply | quote

Well I guess we can start with this one:

http://www.sole-jole.org/17722.pdf

To be honest I don't understand the Math involved in this study. I never heard of a Bunching Estimator and when I look at the methodology I might as well be reading something in a foreign language.


Andy at 11:16 AM on September 13, 2018 | #11154 | reply | quote

#11154 It reads like a foreign language because it's not meant to be understood. If it was understood, people would see it's flaws. It's meant to be dealt with in ways like these:

1) People can accept the conclusions on authority.

2) Activists can cite it and use it as conversational ammo.

3) Someone can translate it to layman's terms.

The translations typically lose most of the details and come out something like this:

https://www.vox.com/cards/minimum-wage-explained/does-the-minimum-wage-cause-unemployment

There are a lack of translations somewhere in the middle: understandable by intelligent laymen while still being substantial, serious content. (This sort of translation is one of the things IDW speakers are very good at either presenting or appearing to present. Correctly or not, having done adequate expert research or not, they do speak of sophisticated ideas while using words that laymen can follow.)

---

In addition to not really trying to be understood, the paper doesn't engage with the literature (by Mises and his predecessors and successors), which it allegedly refutes. It's not trying to help you see where logical economic thinking went wrong. It doesn't explain that. Why not? Because it can't. The authors have no answers to such things. And they don't want to think about it. They don't want to say "That's weird. Our empirical research seems to be in contradiction to logic. We better investigate. Until we figure out the logical mistake in liberal, capitalist economics, we must also be aware that our research could be mistaken. There must be a mistake somewhere and until we find it we don't know what it is."

That project – figuring out where the mistake is (since when ideas contradict there's always at least one mistake) – is the way to make progress. It's the way to pursue truth seeking. The paper authors don't help you with it. They don't want to. They leave that to you because truth seeking isn't what they are doing. They don't aim to do their research, or write their papers, in a way which particularly facilitates truth seeking. This is partly because, if they made truth seeking easier, they would more easily be revealed as intellectual imposters who are mistaken. So they neglect to lay out, step by step, which parts of liberal-capitalist economic logic they think is correct and which parts they suspect of being mistaken and why and how they think the correct and incorrect parts may be separated despite their apparent logical connections. Besides, they can't do that because they are ignorant of liberal-capitalist economics – and they want to stay that way (ignorant), and their peers and employers pressure them to say that way.

---

The paper is basically meaningless because it neglects thousands of *uncontrolled factors*. What it's basically saying (even if it were true) is, "We found that, empirically, *in a set of circumstances we looked at*, some small minimum wage increases didn't increase unemployment by a large amount." I read little of it, but roughly it's saying something in that ballpark. This tells you nothing about what the effects of minimum wage would be in other circumstances, nor does it tell you how stable current circumstances are, nor which aspects of the analyze circumstances are the crucial ones. They think their findings are robust across many circumstances. Let's suppose so. It'd still bet he case that changing one or two key factors would totally change what happens. And they have no idea which factors are key factors, and are doing nothing to find out. Maybe the moment a certain type of government regulation or welfare was abolished, minimum wage would instantly become massively harmful. Who knows? They don't know. And, refraining from logical, economic thinking, they have no way to find out or contribute anything. (I'm extremely doubtful of their actual findings, but the point is that even if they were right it'd still be pretty damn useless. It's the same issue as correlation studies in general: even if the correlation holds today, the study doesn't tell you what changes in circumstances would make the correlation stop holding.)


curi at 12:29 PM on September 13, 2018 | #11155 | reply | quote

#11155 Two more points I'll mention quickly.

1) We already have unemployment. We clearly don't have a liberal-capitalist system in place – at most we have something which partially resembles it. So it'd be really important to figure out what is causing our existing unemployment before trying to analyze the effect of minimum wage on unemployment. One of the many things that could happen is unemployment could stay the same because the existing causes are reduced, but minimum wage is increased – we could shift the causes of unemployment to be less of the prior causes and more from minimum wage, with no change in the number of unemployed people. That is one of the many things that requires thought and analysis before one can reach a conclusion. And more generally, it's hopeless to get anywhere with these matters without a concept of what the existing causes of unemployment are. Like, an Austrian economist might think *existing* minimum wage laws are involved with existing unemployment, but would also be able to come up with many other issues. And what is the intellectual counter-position of the study authors? They are doing this kind of empirical research to dodge intellectual debate and conceptual thinking, so it's counter-productive trash.

2) Measuring unemployment is hard and common stats about it are awful quality. They do things like stop counting someone as unemployed if they gave up on getting a job and haven't been looking for a job for 6 months (IIRC, offhand).


curi at 12:36 PM on September 13, 2018 | #11156 | reply | quote

#11156 These people claim their economic policies aren't causing unemployment, while also being well aware that *we have unemployment*. Measuring the amount of unemployment may be hard, but it's uncontroversial that there are quite a few unemployed people who want to work. Do they not realize that *something* must be causing this unemployment? Do they just think unemployment is natural and inevitable, in total contradiction to the logic of how the price of labor is set by supply and demand in a free market? A person who thinks unemployment is inevitable and to be expected and accepted ... is a bad person to do a study on whether minimum wage causes unemployment.


Dagny at 12:45 PM on September 13, 2018 | #11157 | reply | quote

Ok playing devil's advocate here:

Even if the measure of unemployment is flawed. Would the base change still no matter. So let's say that unemployment is at 10% before the minimum wage increase. It then remains at 10% post minimum wage increase.


Andy at 2:44 PM on September 13, 2018 | #11159 | reply | quote

> Even if the measure of unemployment is flawed. Would the base change still no matter. So let's say that unemployment is at 10% before the minimum wage increase. It then remains at 10% post minimum wage increase.

Suppose that were true – that for some reason, in current circumstances, minimum wage laws (that are semi-low limits) don't cause much additional unemployment. It would tell you nothing about which factors made it true, and nothing about what changes to society (which might happen any day now) would make it stop being true.


Anonymous at 2:57 PM on September 13, 2018 | #11160 | reply | quote

I am a little worried that your theory might not be falsifiable.


Andy at 8:13 PM on September 13, 2018 | #11163 | reply | quote

*Logic and philosophy are not empirically falsifiable and are not supposed to be.* Not everything is a scientific issue, and no issues are pure science (making scientific claims always involves some philosophy of science, too).


Dagny at 11:41 PM on September 13, 2018 | #11165 | reply | quote

So how do we error correct in the light of new information?


Andy at 1:52 PM on September 14, 2018 | #11168 | reply | quote

#11168 With criticisms, as always. Whether or not the criticisms mention data, criticism is always the method of making intellectual progress.


Dagny at 2:23 PM on September 14, 2018 | #11169 | reply | quote

If your current ideas (logic, explanations, etc) don't enable you to understand what's going on in an empirical situation, that you have more to learn and investigate. It can be a sign of a problem or at least an opportunity to understand more. But not fully understanding an empirical situation cannot refute any particular logical theory. To refute a logical theory requires a logical argument, (which could be inspired by a particular situation). Sometimes when you investigate a situation more, you find out why your original logic was correct and learn about what kinds of factors screw things up that you didn't notice right away; sometimes you learn you had major misconceptions before; it can go either way and the data can't decide that.


curi at 2:27 PM on September 14, 2018 | #11170 | reply | quote

https://twitter.com/JonathanTurley/status/1041900047800123393

> Venezuela’s Maduro Orders 3,500 Percent Increase in Minimum Wage … 40 Percent of Businesses Close


Anonymous at 9:32 PM on September 17, 2018 | #11199 | reply | quote

Current time-slice principles of justice

> Most persons do not accept current time-slice principles as constituting the whole story about the distributive shares. They think it relevant in assessing the justice of a situation to consider not only the distribution it embodies, but also how that distribution came about. If some persons are in prison for murder or war crimes, we do not say that to assess the justice of the distribution in society we must look only at what this persona has, and that person has, and that persona has...at the current time. We think it relevant to ask whether something did something so that he *deserved* to be punished, deserved to have a lower share. Most will agree to the relevance of further information. Consider also desired things. > One traditional socialist view is that workers are entitled to the product and full fruits of their labor; they have earned it; a distribution is unjust if it does not give the workers what they are entitled to. Such entitlements are based upon some past history. No socialist holding this view would find it comforting to be told that because the actual distribution "A" happens to coincide structurally with the one he desires "D", "A" there for is no less just than "D"; it differs only in that the "parasitic" owners of capital receive under "A" what the workers are entitled to under "D" and the workers receive under "A" what the owners are entitled to under "D", namely very little. > This socialist rightly, in my view, holds onto the notions of earning, producing, entitlement, desert, and so fort, and he rejects current time-slice principles that look only to the structure of the resulting set of holdings. > His mistakes lies in his views of what entitlement arise out of what sorts of productive processes.


RN at 11:06 AM on September 20, 2018 | #11218 | reply | quote

What do you think?

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