mck@ratex.UUCP (Daniel Kian Mc Kiernan) (03/21/85)
Lines marked '>>>' and '>' are from Baba; lines marked '>>' were mine. >>>It is not the same thing to demonstrate that minimum wage laws and unions >>>contribute to unemployment as it is to demonstrate that there will be >>>no unemployment in the absence of these factors. >> >>Unemployment is cause by restrictions which keep the wage-rate above >>supply-and-demand equilibrium (another non-vacuous tautology); a Free >>Economy has no such restrictions. > >Unemployment is also caused by circumstances in which the labor supply >rises above the "demand" (or, conversely, the demand drops). People have >an annoying tendency to come in discrete units, and there is per-unit >overhead to employing a worker. If an enterprise requires 1000 workers >and there are 1500 people needing work, the equilibrium wage rate may be >low, but the enterprise still needs only to employ 1000. The other 500 >are free to believe that the free economy will soon allow the enterprise >to grow and hire them, but they are no less unemployed for it. [In the following discussion, in keeping with economic convention, price will be treated as on the vertical axis, and quantity as on the horizontal axis.] Employers demand a particular amount of labor (say, the 1000 workers of your example) AT A PARTICULAR WAGE RATE; workers are willing to supply a particular amount of labor (say, the 15000 workers of your example) AT A PARTICULAR WAGE RATE. When there is unemployment (a surplus supply of labor), employers and the unemployed act to bid down the wage rate (unless prohibitted from doing so). As the wage rate is bid down, more jobs come into existence (unless the demand curve is vertical) as it becomes worth it to pay people for doing things which were not worth the higher wage; as the wage rate is bid down, some workers leave the job market (unless the supply curve is vertical) as they decide that other activities (household production, development of human capital, leisure, &c) are more desirable given the lower wage; this continues until supply and demand (job-seekers and jobs) are in equilibrium (the hypothetical case where both the supply curve and the demand curve are vertical thru-out the relevant range involves transfinite impossibilities). NO GROWTH OF GNP IS NECESSARY TO ELIMINATE UNEMPLOYMENT (however, allowing the wage to settle at equilibrium will result in a subsequent growth of GNP, which will eventually cause the equilibrium wage to increase). >>> I pointed out one of >>>the other factors in the equation that your article ignored. >> >>I ignored it because it isn't a factor; technology may make people >>dependent on subsidies for survival, but it does NOT create unemployment. > >Who will pay these subsidies in a Free Economy? Whoever wants to. In fact, if you feel strongly about it, you're free to organize a private unemployment insurance program (as have the LDSs of Salt Lake City). >>> I instead posted >>>a quote from Norbert Wiener in support of the notion that, given the >>>potential of technology and the nature of our economic system, the >>>equilibrium wage should *ultimately* do precisely that (drop below >>>the survival level). >> >>You're not giving enough attention to bio-technology. Automota will move >>forward; so will humankind. > >This seems to say that your belief that there will be no unemployment in a >free economy is predicated on a belief in the ability to improve the value of >human labor faster than the value of capital. Not at all (see the above discussion on the bidding down and up of the wage rate). It does indicate my beliefs about future levels of the equilibrium wage rate. > What happens in a free >economy if things go the other way, as they have in the past? It would mean that wage rates would not be as high as they otherwise might. This does not mean that they would decline, however, in that a growth in the value of capital does not imply a decline in the value of labor. As promised, DKMcK