mck@ratex.UUCP (Daniel Kian Mc Kiernan) (02/10/85)
Lines begun with a '>>' are from gam (sorry, but I don't know who gam is). Lines begun with a '>' are from Mike Kelly. >>The point is not to show that unions are "bad", but that if unions >>insist on establishing minimum-wage requirements (when the minimum >>wage is above equalibrium), the consequences are that some people >>will be unemployed. >> >>This is a fact, not economic theory. > >The consequences are such only if capital is allowed to >define economic fact. Unemployment is a political problem, not an >economic fact. That it remains is evidence of lack of >political will to solve it. Well, you're partly right, but mostly wrong. Unemployment is both a political problem and an economic fact (how could a fact of our economy not be economic?). We can indeed eliminate unemployment by political action, but we cannot legislate fundamental economic law. Eliminating minimum wage laws, preventing unions from forcibly interfering with workers who try to bid-down the wage-rate, changing subsidy structures, et cetera, would do away with all but frictional unemployment (frictional unemployment is simply that unemployment which results because people entering the job market do not INSTANTLY find and accept jobs). On the other hand, unemployment could be eliminated by simply seizing the means of production and giving everybody a job. But just as minimum-wage laws have consequences that most of their proponents fail to see, this dictatorial full employment will cause some pretty nasty things. The performance of an economy is directly linked to how well reward corresponds to MVP (marginal value product). Now, Libertarians reject a coerced patterning of distribution, and thus cannot be in favor of forcing a maximal correspondence of reward to MVP; most Libertarians would like to see charitable acts; and most Libertarians believe that parents have enforceable obligations to their children (altho, admittedly, some Libertarians have developed the very peculiar idea that children are just short adults, and that when a child becomes unwanted it is a trespasser). Nevertheless, the Free Economy comes very close to maximizing the correspondence between reward and MVP (the only way to get closer is to ban charity et cetera). Minimum wage laws, et cetera, induce unemployment because employers try to hire that number of workers where the price of labor equals MVP. To force hiring past this point will mean a further break-down of correspondence. In short order this will translate into a decline in real wages (nominal wages may remain the same, but won't buy as much). The centrally planned economies of the world have poor correspondence between reward and MVP, one of the reasons being their full unemployment and fixed wage policies, which is why their workers work harder but receive less. And, tho they have controlled internal markets, they nevertheless can take advantage of market processes by adjusting domestic prices to correspond to prices in the free-er world (which they end up doing on a regular basis; and even this doesn't work too well in that: 1) the prices of the free-er world are not pure market prices and 2) domestic conditions are not identical to, say, American conditions, so that American prices are not truly appropriate). If the free-er world goes to central planning, it won't have any market to mimic, and things will rapidly get screwed-up (which is a euphemistic way of saying that millions will starve etc). Back later, Mc Kiernan Please ignore the previous disclaimer.