Saturday, August 21, 2010

Quote of the Day: Free Market is a Bathroom Scale

"The free market is not an ideology or a creed or something we're supposed to take on faith, it's a measurement. It's a bathroom scale. I may hate what I see when I step on the bathroom scale, but I can't pass a law saying I weigh 160 pounds. Authoritarian governments think they can pass that law—a law to change the measurement of things."

~P.J. O'Rourke quoted in today's WSJ

Exhibit A: The minimum wage law.  A teenager with no work experience steps on a "bathroom scale" that accurately and truthfully measures the market value of  unskilled labor, and the scale says "$5.00 per hour."  Politicians pass minimum wage legislation to rig the "bathroom scale" of labor value to instead produce an inaccurate, false inflated reading of "$7.25 per hour."  And they then seem puzzled that more than one out of every four teenagers who is looking for a job is unable to find one, but that's what happens when you "rig" the "bathroom scale."      

23 Comments:

At 8/21/2010 7:59 AM, Blogger juandos said...

I know I've seen P.J. O'Rourke's use of the 'bathroom scale' parable before...

What will destroy our country and us is not the financial crisis but the fact that liberals think the free market is some kind of sect or cult, which conservatives have asked Americans to take on faith. That's not what the free market is. The free market is just a measurement, a device to tell us what people are willing to pay for any given thing at any given moment. The free market is a bathroom scale. You may hate what you see when you step on the scale. "Jeeze, 230 pounds!" But you can't pass a law making yourself weigh 185. Liberals think you can. And voters--all the voters, right up to the tippy-top corner office of Goldman Sachs--think so too

 
At 8/21/2010 8:16 AM, Blogger Junkyard_hawg1985 said...

Great Quote, Great Example with the teenager.

 
At 8/21/2010 12:25 PM, Blogger Marko said...

Price controls are always bad and distort the market. That is true of any resource, including labor. That is why the government shouldn't set minimum wages or allow price fixing of labor by unions, which would as currently constituted be violations of anti-trust and price collusion laws if they weren't otherwise protected by the federal government.

 
At 8/21/2010 1:24 PM, Blogger PeakTrader said...

Um...let's see...$5 hour times 40 equals $200. After taxes, $165?

Just about enough to cover half of a cheap apartment in San Francisco.

I'm sure it'll be a wonderful job, e.g. placing stickers on envelopes.

With bunk beds, you can get five Vietnamese in there and pay them $2 hour.

An 18-year old would be better off at a Marine barracks in Iraq.

 
At 8/21/2010 5:47 PM, Blogger cluemeister said...

I think the plan all along has been to start with "minimum wage" (achieved), and then move onto "livable wage". That goal has not been reached

The only success they have had in this area is the "prevailing wage" in government work, which artificially increases the costs of projects.

 
At 8/22/2010 6:47 AM, Blogger Richard said...

Peak,

Right. He can afford a much better apartment with no income and no job.

If someone is willing to work for $5 an hour, who are you to say he is not allowed to?

 
At 8/22/2010 9:43 AM, Blogger PeakTrader said...

Richard, why should there be any standards?

 
At 8/22/2010 9:52 AM, Blogger VangelV said...

Um...let's see...$5 hour times 40 equals $200. After taxes, $165?

You are assuming that the individual will not learn any skills that are worth $5.00 an hour and that because of that s/he will be stuck at that level for a long time. But that is not how the real world works. Once skills are learned employees become more valuable to their current employers and to other employers that might be willing to offer more money.

Government should not meddle in the labour market by forcing kids who have no skills or experience to stay out of the job market because they are unable to accept an appropriate wage.

 
At 8/22/2010 10:27 AM, Blogger PeakTrader said...

VangelV, so, people should work for less than a subsistance wage, until they acquire needed skills?

Who knows how long that'll take.

What about workers who don't have parents or government to subsidize them?

 
At 8/22/2010 10:45 AM, Blogger Jason said...

Peak Trader,

There is a saying: 50% of something is better than 100% of nothing.

I would hire an additional 5 staff tomorrow if I could pay a student a wage rate that reflects their productivity - $7.50 per hour rather than the min wage of $10.25 per hour (Ontario, Canada).

I am sure students who are out of work are really happy that their peers got jobs and they didn't.

 
At 8/22/2010 11:07 AM, Blogger VangelV said...

VangelV, so, people should work for less than a subsistance wage, until they acquire needed skills?

I don't know about most people but I worked for very little money to acquired experience when I was twelve.

Who knows how long that'll take.

It took me a few months before I got enough raises to go above the prevailing minimum wage amount. Within a year I was earning about twice the minimum wage rate as were most people with sufficient experience, a marketable skill set, and a record of being dependent and hard working.

What about workers who don't have parents or government to subsidize them?

I think that both of them have charity to fall back on. Why would you prevent kids from getting jobs for the few adults who don't have parents to look after them while they are gaining experience?

You have to learn to think critically rather than just respond emotionally.

 
At 8/22/2010 11:30 AM, Blogger juandos said...

"What about workers who don't have parents or government to subsidize them?"...

Why not let those who think these classes of folks need subsidies do the subsidizing?

After all the majority of extorted tax dollars are wasted on entitlements here in the US...

 
At 8/22/2010 11:35 AM, Blogger PeakTrader said...

Jason says: "...50% of something is better than 100% of nothing."

So, $2.50 an hour is better than nothing.

VangelV,

One example is not very scientific. I doubt most workers will double their wages in a year.

So, parents or charities should subsidize workers, until they earn more than a subsistance wage.

 
At 8/22/2010 12:13 PM, Blogger VangelV said...

One example is not very scientific. I doubt most workers will double their wages in a year.

I am not talking about most workers. I am talking about workers who enter the labour force without marketable skills or experience. Kids need to learn what is expected when they are working and while learning they are of little value to employers. Once they have acquired the skills then they can start to get raises that will get them to the compensation rate that is appropriate for their skill levels.

That is the way the real world works.

So, parents or charities should subsidize workers, until they earn more than a subsistance wage.

That is what most of our parents did. They were not interested in my income when I was a teenager. They simply wanted me to learn what it took to hold a job and to learn skills that increased my value to employers. My earnings went towards the purchase of books, stereo equipment, records, etc. I used some of my earnings to purchase a fence that we installed around the property and to buy them furniture for the living room. All that was possible because teenagers live at home and have little in the way of expenses. It is better to have them learn marketable skills when they are young and don't need high pay than to create an unskilled underclass because the labour laws prevented them from getting jobs in the first place.

 
At 8/22/2010 12:15 PM, Blogger Richard said...

Peak,

How does working for $5.00 (or $2.00 or $1.00) violate a 'standard', other than one set arbitrarily based on what someone thinks a 'subsistence' wage should be?

A person willing to work for less is kept from doing so by your definition of standard. What gives you the right to force them to accept the option of not working vs. having the right to work or not to work for a wage offered them? If someone thinks they can get a better offer, they are free to do so. If someone thinks they can't, you would prevent them from doing so. What sort of standard is that?

As for subsidizing those working for less than the minimum wage - please explain how they are not subsidized when kept from working at wage they are willing to accept?

 
At 8/22/2010 12:45 PM, Blogger PeakTrader said...

VangelV, you're talking about an investment (to eventually gain the required experience to earn above a subsistance wage). However, investments don't always pan-out and not everyone can afford it (through subsidies).

Richard, why impose safety standards (or any labor standard)? Isn't it better to exploit those who are desperate for jobs instead?

 
At 8/22/2010 5:48 PM, Blogger Jason said...

Peak Trader:

I don't know, ask they guy who might accept $2.50/hr.

Why do you support state coercion when it demonstrably harms young, inexperienced workers?

And what about a high minimum wage incenting young workers to quit school?

Your reasoning appears to be based in an alternate reality.

 
At 8/22/2010 6:20 PM, Blogger PeakTrader said...

Jason says: "Why do you support state coercion when it demonstrably harms young, inexperienced workers?"

How do you know it doesn't help more "young, inexperienced workers" than it harms, and helps older, experienced workers even more?

Nonetheless, it seems to make more sense if firms paid workers what they're worth, rather than being subsidized by parents, government, or charities.

 
At 8/22/2010 6:26 PM, Blogger Paul said...

"Um...let's see...$5 hour times 40 equals $200. After taxes, $165?"

So why stop at 40? I've had a full time job and sometimes 2 part-time jobs at various points in my life. Even now I work a full-time job, and have a part-time business. You have to do what it takes.

 
At 8/22/2010 7:04 PM, Blogger VangelV said...

VangelV, you're talking about an investment (to eventually gain the required experience to earn above a subsistance wage). However, investments don't always pan-out and not everyone can afford it (through subsidies).

You are not addressing the issue. People who are willing to work for a price that is not acceptable to you or me should still be able to take the job that would teach them the skills and experience that they want to acquire.

Richard, why impose safety standards (or any labor standard)? Isn't it better to exploit those who are desperate for jobs instead?

Arbitrary standards should not be imposed. If an employer and his workers think that 5" kickplates on work stands are sufficient the government should not stop work because they are not 5.25" high as per some new regulatory standard.

 
At 8/22/2010 7:06 PM, Blogger VangelV said...

Your reasoning appears to be based in an alternate reality.

Yes it does.

 
At 8/22/2010 7:43 PM, Blogger PeakTrader said...

When you don't have to pay for housing, food, clothing, etc., a $5 an hour job may be great.

Why not hire a more productive poor Third World immigrant, who is willing to sleep in a car and eat fast food?

Why should Americans work two or three jobs to cover their most basic costs of living?

 
At 8/22/2010 8:58 PM, Blogger VangelV said...

Why not hire a more productive poor Third World immigrant, who is willing to sleep in a car and eat fast food?

Because you can't pay less than what the productive worker is worth for long. If you have a capable third world immigrant and pay him too little you can be sure that he will go elsewhere for more money. Minimum wage is only a way to keep the unproductive out of the work force and people who have marketable skills are not effected by it.

Why should Americans work two or three jobs to cover their most basic costs of living?

Productive Americans do not have to work two or three jobs to cover their basic needs. They get paid more than enough to acquire shelter, food, clothing, and transportation. It is only those unskilled workers who lack experience and are unproductive that have trouble making ends meet or the well paid who live well above their means.

The latter case is not a part of this discussion. The former is but not in the way that you want it to be. Many people have few skills because they were not able to acquire them in a labour force in which minimum wage laws prohibited them from acquiring skills and experience. Now some of them are stuck in a life where they have trouble making ends meet because they never got the chance to get much needed experience thanks to people who shared the same ideas as you do.

 

Post a Comment

Links to this post:

Create a Link

<< Home