Factual Free-Market Fairness
Deidre McCloskey defends the free market and makes the important point that "Efficiency is not the chief merit of a market economy: innovation is," along with providing many examples of "government failure" and "unintended consequences," here's a sample:
"In the 19th and 20th centuries ordinary
Europeans were hurt, not helped, by their colonial empires. Economic
growth in Russia was slowed, not accelerated, by Soviet central
planning. American Progressive regulation and its European
anticipations protected monopolies of transportation like railways and
protected monopolies of retailing like High-Street shops and protected
monopolies of professional services like medicine, not the consumers.
“Protective” legislation in the United States and “family-wage”
legislation in Europe subordinated women. State-armed psychiatrists in
America jailed homosexuals, and in Russia jailed democrats. Some of the
New Deal prevented rather than aided America’s recovery from the Great
Depression.
Unions raised wages for plumbers and auto workers but reduced wages
for the non-unionized. Minimum wages protected union jobs but made the
poor unemployable. Building codes sometimes kept buildings from falling
or burning down but always gave steady work to well-connected
carpenters and electricians and made housing more expensive for the
poor. Zoning and planning permission has protected rich landlords
rather than helping the poor. Rent control makes the poor and the
mentally ill unhousable, because no one will build inexpensive housing
when it is forced by law to be expensive. The sane and the already-rich
get the rent-controlled apartments and the fancy townhouses in
once-poor neighborhoods.
Regulation of electricity hurt householders by raising electricity
costs, as did the ban on nuclear power. The Securities Exchange
Commission did not help small investors. Federal deposit insurance made
banks careless with depositors’ money. The conservation movement in
the Western U. S. enriched ranchers who used federal lands for grazing
and enriched lumber companies who used federal lands for clear cutting.
American and other attempts at prohibiting trade in recreational drugs
resulted in higher drug consumption and the destruction of inner cities
and the incarcerations of millions of young men. Governments have
outlawed needle exchanges and condom advertising, and denied the
existence of AIDS."
HT: Morgan Frank
93 Comments:
Proof please, because just saying something is true does not make it so.
Well, that is a nice listing of the failures of government, but it says nothing about the failures of the "free market".
Yes, democrats were jailed in the USSR, but so were homosexuals. Homosexuality was criminalized by Stalin and remained illegal until after the collapse of the Soviet Union. Worse than jail, they were forced into the Gulag. This is what the alternative to free markets looks like in practice.
hydra-
you are missing the point. no one is claiming that markets are perfect or never fail. the claim is that government is far, far worse and much less able to self correct, determine proper incentives, or even measure outcomes.
the argument that "markets fail and therefore we need government" is fatally flawed for this reason. governments fail more often and more horribly. that is why we need markets. trying to demand that markets be perfect completely misses the point. they do not have to be perfect, just better and the case for that is pretty unassailable.
Terrific as this piece is, it will be irrelevant to those that still want to raise the minimum wage, impose more governmental controls or such.
The world is not perfect - and so in every instance of what supposedly is a "free market" someone can find some fault with it - and say "See? This one person knew this other person and got rich" - All the while ignoring the larger impact free markets have
Keynesians will continue to believe that the way to prosperity is through the printing presses - no matter how much data argues against it. The predictions made prior to the US stimulus(stimuli) turned out to be wrong - and today we are told it was because it was NOT LARGE enough - they will find some explanation as to why their models were wrong.
If we argue that minimum wage hurts the poor, the minorities it may be intended to protect - their argument will be that the policies are not enforced and there are greedy people etc etc - that is, no amount of argument will work.
It is and always be an issue of philosophy - the "left" today will not change no matter what - and the "right" is fine with imposing THEIR own views on matters that THEY consider important - using GOVERNMENT when it suits them.
krishnan-
that seems to be the pervasive logical flaw the big government crowd attempts to sell over and over: somehting did not work perfectly, so we must regulate/intervene/interfere as though an economy is somehow perfectible.
they make the perfect the enemy of the good.
the fallacy built into it is that government is effective at redressing economic issues. it's nearly always worse. even if it were not so at first, it rapidly would become so as the loss from regulation is flexibility, adaptivity, and innovation.
it's a really odd disconnect in internal thinking. on the one hand, such folks berate markets for not being perfect, but then they never even look at what government does and apply a like standard. i suspect this is because they do not care and are predominantly interested no in justice or efficiency as they claim, but rather in getting the fruits of the labor of others and advantaging themselves without creating value.
Steve, Hyrda, etc...
What you don't seem to understand is the one major difference between imperfect markets and imperfect government. There is no governmental competition.
Anyone (yes, even you...well...) can compete with anyone in a free market until the government makes competing with the established and well connected nearly impossible through "entry fees" and unreasonable regulation.
I actually envy people like you... so comfortable being told what to do.
Well, that is a nice listing of the failures of government, but it says nothing about the failures of the "free market".
Please enlighten us with examples of such failure and the consequences of that failure. After you do that please compare those consequences to the consequences of the failure of government planning.
See the difference?
I actually envy people like you... so comfortable being told what to do.
I doubt that you do. Do you envy the cows that you see out in the pasture?
Vange,
Sadly, yes. Somedays I really do wish I could just turn it all off....or at least have the ability to live in a place where the other cows didn't have the ability to screw up my pasture.
Let me try to make this simple by picking one of the items listed. Where is your proof (facts) that "Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized.?
Please someone show me proof and not some made up theory to fit your view of the world.
Well, that's a well-established fact. There have been numerous papers published on this topic. I'm sure if you go into Google Scholar and search "union wages" you'll come up with some quickly.
I shouldn't have used the word "fact." What that post should say is a "well-established relationship."
Sadly, yes. Somedays I really do wish I could just turn it all off....or at least have the ability to live in a place where the other cows didn't have the ability to screw up my pasture.
Somehow I get the feeling that you know better. One day the farmer decides that there are too many cows and that a few have to go. I do not think that you want the chance that you are going to be one of them.
Well, that's a well-established fact. There have been numerous papers published on this topic. I'm sure if you go into Google Scholar and search "union wages" you'll come up with some quickly.
Well that settles it. Not. I can find anything by googling it, but just because its on the internet does not make it a fact. For example; If I googled Reagan and tax increases, I would get results showing Reagan raised taxes several times and we all know Reagan never once raised taxes. OK, bad example, but you get the point.
Also, this posting is called "Factual Free-Market Fairness". So I am still waiting!!!
This comment has been removed by the author.
"Well that settles it. Not. I can find anything by googling it, but just because its on the internet does not make it a fact."
While that's absolutely true, I guess the problem isn't so much finding something, as finding something you will admit is factual.
"Let me try to make this simple by picking one of the items listed. Where is your proof (facts) that "Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized.""
Surely even you can understand that all real wages cannot be raised without an increase in productivity.
I can find anything by googling it
Alright. I'll try to remember to do a search tonight and post anything that I find for you.
[J]ust because its on the internet does not make it a fact.
Absolutely right. That's why I referred you to Google Scholar, which searches academic papers. I didn't want to direct you to some nutjob conspiracy website, but point you to the academics.
the claim is that government is far, far worse and much less able to self correct, determine proper incentives, or even measure outcomes.
================================
I do not believe that claim is proven, considering the vast size of government, its many responsibilities, and its many advantages over private enterprise.
If it is unable to self correct, whose fault is that? It is "Our" government after all. Of course there is government competition: we are about to witness billions being spent to get control of it.
However I agree with your last point: we do a lousy job of requiring government to measure outcomes in order to revise policies. One reason for that, of course, is that we have already "decided " for ourselves what the right policies ought to be, regardless of the evidence.
As for your claim that "no one is claiming that markets are perfect or never fail", I think that is pretty laughable considering many of the comments on this site. consider VangeIV's challenge: "Please enlighten us with examples of such failure and the consequences of that failure."
I don't think there are very many here who seek ways to determine the proper balance between government and "free and fair" markets, but only wish to denigrate government and promote the market - at any cost.
"consider VangeIV's challenge: "Please enlighten us with examples of such failure and the consequences of that failure."
I don't believe he is claiming there aren't any, he may be questioning whether you actually know what you're talking about.
I do not believe that claim is proven, considering the vast size of government, its many responsibilities, and its many advantages over private enterprise.
What 'advantages' would government have over private enterprise other than its ability to use force and to print money? And what 'responsibilities' does government have?
As for your claim that "no one is claiming that markets are perfect or never fail", I think that is pretty laughable considering many of the comments on this site. consider VangeIV's challenge: "Please enlighten us with examples of such failure and the consequences of that failure."
I note that you have failed to come up with an example. I can point to thousands of failures within government because anything that it does is usually substandard so I get many things to choose from. You have few such choices because most examples that you can come up with are failures of meddling in which government usually had a part to play.
I don't believe he is claiming there aren't any, he may be questioning whether you actually know what you're talking about.
Humans being imperfect there will always be errors. The thing to remember is that such errors tend to be localized and limited as long as government allows markets to work. At worst you get a sharp contraction followed by a liquidation that sets the foundation for a recovery. Compare that to the depressions that governments have caused by encouraging credit inflation and preventing the necessary liquidation after bubbles have popped. Look to history and you see that the most destructive periods have been caused by governments. The decline of Western Civilization was triggered by World War I, an entirely government driven conflict, not private industry. It was not Coca Cola that imprisoned Japanese Americans during WWII; it was the government. And Exxon did not claim that Saddam had WMDs. That was GWB and the US government that he was leading.
Governments are dangerous because they have little competition to restrain them within the territories that they rule. The power held by the political class corrupts it and leads to political decisions designed to maintain power, not to help individuals live their lives in the best way possible. As the man said, our friends on the left and right are two wings of the same bird of prey and are harmful to honest citizens who wish to be left alone to live their lives as they choose. We should stop pandering to them and be very clear about the principles involved.
By the way Ron, I do not know if you are aware of Jeff's Riggenbach's piece on JRR Tolkien. It is clearly worth hearing. My son has noticed that many people seem to realize the error of their ways in trying a middle way, no pun intended, and as they grow older turn to the only morally justified political philosophy. He had me order a book of Tolkien letters so that he can use it for an essay that he is planning. He has also noticed that Joseph Campbell is not exactly what the Left makes him out to be.
It isn't all that different. Someday, someone is going to decide that you have to go.
Government has economy of scale, low borrowing costs, and the ability and the requirement that it take a longer view than private enterprise can.
An essential aspect of free enterprise is deciding when to go belly up or sell out. In that, at least, it has a decided advantage over government.
And yes, government prints money, but even government is constrained from printing all it wants
You just explained why I did not bother to come up with any examples: your mind is made up.
Recently, there was huge noise about spacex being the first private company to do a link up in space.
Big deal. It was paid for with a billion dollar contract. From government. Just like every other space exercise. The only difference is who took the risk.
Previous flights were cost plus, and government took the risk. After decades of development at government cost, private enterprise is finally bold enough to stick its toe in the water.
Even then, the cexcex contract is big enough that if they lose a flight or two, the risk is covered.
And preventing the necessary liquidation after bubbles have popped.
UMM, why are there bubbles except for market failures?
Even given government interference, the market knows what the rules are, and yet it still manages to screw up.
Consider a wind farm developer. Wind is free, except for wind rights. His costs are capital and maintenance. Same in CA As TX.
Except for regulation. Putting a wind farm in CA is a nightmare, in Texas it is easy. Not onlybecause of TX government, but because in the panhandle there is not much else happening.
When there is a wind farm bubble, where will it hit fist, CA or TX?
it and leads to political decisions designed to maintain power, not to help individuals live their lives in the best way possible.
But isn't that because we have learned over and over that when individuals lead their individual lives the best way possible, that it leads to a tragedy of the Commons?
If everything was owned and had proper title, that would be different
Alright vange, ow I'm confused. In one paragraph the left and right are two wings of the same bird of prey. In the next paragraph those who seek the middle way eventually see their error.
The only morally justified political philosophy? REALLY? A moral philosophy, it seems to me, would have to be apolitical.
"UMM, why are there bubbles except for market failures?
Even given government interference, the market knows what the rules are, and yet it still manages to screw up."
Incentives matter. You should really learn some economics so you wouldn't write such nonsense. You are embarrassing yourself..
"You just explained why I did not bother to come up with any examples: your mind is made up."
Hydra cops out and admits he has no answer.
V: "By the way Ron, I do not know if you are aware of Jeff's Riggenbach's piece on JRR Tolkien."
No I wasn't. Thanks for the link.
Government has...the ability and the requirement that it take a longer view than private enterprise can.
No...no it does not. Especially not in a democracy. Dictatorship, possibly, but not in a democracy.
Your space example proves nothing. Just because government does something does not mean it does it better than private enterprise. Could it not be that private enterprise would not do space travel on a large scale because gov't hogged all the necessary resources?
UMM, why are there bubbles except for market failures?
Even given government interference, the market knows what the rules are, and yet it still manages to screw up.
Half true, but one needs to keep in mind incentives, as Ron mentioned. If bad rules are passed, the bubbles are easily created. They absolutely can develop on their own, that's for sure. But if the bubbles happen regardless (or sometimes because of) government, then that is not an argument for government intervention. It's an argument against it. After all, why burden taxpayers with businesses mistakes?
But isn't that because we have learned over and over that when individuals lead their individual lives the best way possible, that it leads to a tragedy of the Commons?
Absolutely not. You are confusing two separate things (using mixed metaphors, to use an English term).
In a nutshell: self-interest (as you say, each individual leading his life the best), leads to greater results than anyone had intended. By the baker wanting to make money, none of us go hungry.
The Tragedy of the Commons is a parable that shows when the benefits of an action are localized but its costs are socialized, then more of the resource is consumed, leading to its depletion. In other words, When the costs and benefits are not properly aligned, it leads to shortages.
It isn't all that different. Someday, someone is going to decide that you have to go.
Ahh, the voice of fear raises up again. In a free society there is choice, not dependence on bureaucrats who have to steal from some to give tho others. Real men and women are not afraid of freedom and do not love serfdom as you do.
Government has economy of scale, low borrowing costs, and the ability and the requirement that it take a longer view than private enterprise can.
Government can't plan and is driven by political goals. Have you seen how much real costs diverge from the projected costs of programs when those programs were being promoted by legislatures? Any company in the real world that is off by as much as government is and keeps having cost overruns would be out of business in a competitive environment.
An essential aspect of free enterprise is deciding when to go belly up or sell out. In that, at least, it has a decided advantage over government.
No. Few companies go belly up voluntarily. The marketplace is not kind to losers and muddled thinkers because it is driven by consumer choices that are based on self interest. We benefit not because humans are perfect but because the marketplace allows ideas to compete and innovation to take place. Government rewards compliance to established rules, not innovations that break them.
And yes, government prints money, but even government is constrained from printing all it wants.
Tell that to the Mexicans who have seen their currency destroyed several times over the last half century, to the Serbs who had several quantillion per cent inflation, or Europeans today. Or turn on the financial channels and see how many of the establishment mouthpieces are begging the Fed for more printing.
You just explained why I did not bother to come up with any examples: your mind is made up.
How convenient; pretend that people won't look at your example so that you do not have to provide one. In reality it is easy to see that the failures of government are easy to find but those of the market are difficult to find.
Recently, there was huge noise about spacex being the first private company to do a link up in space.
Big deal. It was paid for with a billion dollar contract. From government. Just like every other space exercise. The only difference is who took the risk.
No. The big difference is the costs involved. The government came up with a very expensive and very unsafe system that killed people who used it. But it still wanted a way to get people up in space without spending a great deal. What it could not do effectively was done by a private company. There is nothing wrong with that and if the market supports further activity there will be more companies fighting for space related business. We have already seen plans to mine asteroids and have seen plans to take private individuals into space. If these ventures succeed we will benefit from them. If they are not investors will lose their own money as they should.
Previous flights were cost plus, and government took the risk. After decades of development at government cost, private enterprise is finally bold enough to stick its toe in the water.
That is not true. There was not a big market for some of the activities done by private industry now because government did not compete for the business. It simply paid what it took to get people and equipment into space by itself even if private companies could do it cheaper.
And note that this is not exactly new. Private companies have been putting up satellites in space for quite some time.
Note that you just gave me an example of a government failure, the shuttle program, that needed private industry to step in and bail it out. That was not difficult because there are many such programs to choose from. But where are the market failure examples that I asked you to give in order to support your claims.
UMM, why are there bubbles except for market failures?
No. Bubbles are created when there is a credit expansion that is driven by governments. The housing bubble could not take place without the actions of Congress, which passed the CRA, guaranteed the borrowing of the GSEs, and the Fed, which flooded the system in the aftermath of the tech bubble collapse. That tech bubble was driven by the Fed's injection of liquidity in the aftermath of the Mexican Crisis and the anticipation of Y2K. It did not help that the government chose to bail out the counter-parties in the LTCM fiasco. Whenever markets react to a huge injection of liquidity the thing to keep in mind is that the bubble is CAUSED by that injection of money and credit and that is not a 'market failure.'
And let us note that the players were not wrong to participate in the housing bubble. A broker could make more in two years than the average middle class worker could in a lifetime. And when the end came you could make a bet that the government would bail out the losers if it could.
Even given government interference, the market knows what the rules are, and yet it still manages to screw up.
The 'market' is just people who react to conditions. It is not screwing up if I make $200 million in two years only to risk losing my job the following year because I helped break the system. In fact, if I am in a privileged position to work for a large company that is deemed important by the politicians that depend on industry contributions I can make a reasonable assumption that I will keep my job as the bad bets are made good by the taxpayer.
Consider a wind farm developer. Wind is free, except for wind rights. His costs are capital and maintenance. Same in CA As TX.
Except for regulation. Putting a wind farm in CA is a nightmare, in Texas it is easy. Not onlybecause of TX government, but because in the panhandle there is not much else happening.
When there is a wind farm bubble, where will it hit fist, CA or TX?
The only reason there would be a wind bubble in the first place is because government has chosen to use subsidies and mandates. Wind energy is an example of government failure that has little to do with the market.
But isn't that because we have learned over and over that when individuals lead their individual lives the best way possible, that it leads to a tragedy of the Commons?
I don't argue for the Commons where anyone can do any damage and take what s/he wants. I argue for private property rights, which avoid the 'Tragedy of the Commons'.
Alright vange, ow I'm confused. In one paragraph the left and right are two wings of the same bird of prey. In the next paragraph those who seek the middle way eventually see their error.
Why are you confused? Both the left and the right argue that individual liberty should be limited. The compromise between the two leads to a loss of liberty. The only moral position is to reject both and their compromise position and to support liberty in all spheres.
The only morally justified political philosophy? REALLY? A moral philosophy, it seems to me, would have to be apolitical.
We live in a real world where there is a structure and institutions that determine how individuals deal with each other. The system should be moral and on that front both the left and the right fail miserably.
Even given incentives, what is the incentive to screw up? Just because the drinks are free, do you get drunk at a cocktail party?
Both the left and the right fail.....
OK, we agree on that. But it doesn't explain your claim that there is only one moral political philosophy.
I'm confused because in one paragraph you say the left and right are wrong, and on the next paragraph you abandon the middle.
For the one moral political philosophy, whatever that is.
Even given incentives, what is the incentive to screw up? Just because the drinks are free, do you get drunk at a cocktail party?
What do you mean screw up? If I earn $20 million is three years selling crappy paper that will ruin my company I am not screwing up. I am simply responding to incentives. Let us note that so is everyone else in the company that is in a similar position. It certainly beats earning $100K a year for the next 30 years and retiring with a gold watch.
Note that without the Fed's credit expansion, government regulations that mandate lending to people with bad credit histories, and a system of government sponsored entities I would not be able to earn those $20 millions by selling dangerous products to banks that have to be bailed out.
Note that the failure was not mine or the marketplace but of the government. And that the big loser is the taxpayer and the gullible public that fell for the hype.
OK, we agree on that. But it doesn't explain your claim that there is only one moral political philosophy.
There is only one. It is the philosophy that recognizes our natural rights. Both the left and right, and their compromise positions, violate those rights.
I'm confused because in one paragraph you say the left and right are wrong, and on the next paragraph you abandon the middle.
For the one moral political philosophy, whatever that is.
Your confusion is obvious. Try educating yourself.
If I earn $20 million is three years selling crappy paper that will ruin my company I am not screwing up.
==========================
Well, OK then. You just proved the market is never wrong.
Are yu talking about your company, or the company you work for?
If it is your company, I'd say that ruining it is a screw up.
If it is the company you work for, then your supervisors screwed up by offering bad incentives.
On the other hand, it is perfectly reasonable from a business perspective to open a business, make a bunch of money, and then close the business before it fails.
That is na option that business has that govenrment pretty much doesn't have, and that is why governmnt has both the ability and the obligation to take a longer view. Hence the space example.
Granted, it does not "prove" anything, but the fact remains that the first satellite was not only a government initiative, it was a Soviet one.
In the science world, one contrary example is sufficient to disprove (or alter) a theory. I understand there are many economic theories, some of which I was taught in grad school. But my observation is that the theories don't always play well in practice.
I am not copping out, but I am not chasing an answer for a rhetorical question. Since your answer is always going to be this might not not have happened without government interference, there is no point in my providing examples, that will be countered by a "what if".
The fact remains that all of the money earned from GPS, communications, and mapping satellites was hugely subsidized by a long term prior government investment.
You avoided the wind farm argument. The federal incentives are the same regardless, so that is not a discriminator. The issue is whether a bubble might happen first in CA, which is heavily regulated, or TX, which is not.
Note that the failure was not mine or the marketplace but of the government.
=================================
I know, nothing is ever my fault, either.
I guess all you who hate all things government and unions gave up on the "Where is your proof (facts) that "Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized.?"
I not surprised you never posted proof, because we all know you not have any proof.
Well, OK then. You just proved the market is never wrong.
Are yu talking about your company, or the company you work for?
I am talking about your confusion. What you consider market failure is the market's response to incentives provided by the government. The fact that the taxpayers were screwed is not the fault of the people who followed the incentives but by the people that provided those incentives; the politicians who chose to meddle in the markets in the first place.
If it is your company, I'd say that ruining it is a screw up.
Not necessarily. If the company only had the potential to earn $10 million over two decades while operating in the free market, running it into the ground in three years while earning $50 million is still a big win.
If it is the company you work for, then your supervisors screwed up by offering bad incentives.
Not at all. They respond to the same incentives and earned much more than they could have in the free market. They took advantage of the government's 'good intentions' and got rich even as the incentives screwed the general taxpayer and ordinary people.
In case you missed it, that is my argument. When politicians set up incentives the people that can take advantage of them most directly often turn out to be the big winners. (Unless they are total idiots and do not know that they are in the bubble that they are creating.) To avoid the damage you need the free market to work as it is supposed to.
I know, nothing is ever my fault, either.
You use the word failure in a way it is not intended. If I make $20 million while ruining a company while my free market earning potential is only $3 million during my entire working career I do not fail from the company's downfall. And neither did my bosses, who also made many multiples of their lifetime potential earnings in a short period of time. The people who failed are the ordinary employees who did not have a compensation system that made them rich, the investors, and the taxpayers.
I guess all you who hate all things government and unions gave up on the "Where is your proof (facts) that "Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized.?"
You are kidding right? Let us go over the logic and see if it falls apart.
Unions only care about their members. They strike against employers and have used violence against replacements who would do the job for less money even if it is far more than those replacements were making previously. If unionization worked to the benefit of workers there would be more unions. The fact that private sector unionization has been falling for decades tells us all that we need to know.
We do not need to look further than the latest UAW contract to see how unions sold out future workers for their membership. Note that new hires get paid less money for doing exactly the same work as the unionized workers. Note that competence and reliability do not matter because there is no way for the new workers to get similar compensation as the established workers who helped drive GM and Chrysler into bankruptcy.
"If it is your company, I'd say that ruining it is a screw up."
If I fail to do what I intended to do, I have screwed up.
If I intended to run a successful company that I could leave to my grandchildren, and it is out of business in 3 years, then I have screwed up. If I intended to make $20M and then burn all my bridges, then I have succeeded.
Jon M: "Your space example proves nothing. Just because government does something does not mean it does it better than private enterprise. Could it not be that private enterprise would not do space travel on a large scale because gov't hogged all the necessary resources?"
One of those resources being the authority to dictate who can and who cannot shoot things into space.
"Even given incentives, what is the incentive to screw up? Just because the drinks are free, do you get drunk at a cocktail party?"
"If you subsidize something you will get more of it."
Do you not understand that saying?
Screwing up - getting drunk at a cocktail party - happens at the margin.
"On the other hand, it is perfectly reasonable from a business perspective to open a business, make a bunch of money, and then close the business before it fails."
There is nothing reasonable about rejecting income before you are forced to do so.
VangelV said...
I guess all you who hate all things government and unions gave up on the "Where is your proof (facts) that "Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized.?"
You are kidding right? Let us go over the logic and see if it falls apart.
Unions only care about their members. They strike against employers and have used violence against replacements who would do the job for less money even if it is far more than those replacements were making previously. If unionization worked to the benefit of workers there would be more unions. The fact that private sector unionization has been falling for decades tells us all that we need to know.
We do not need to look further than the latest UAW contract to see how unions sold out future workers for their membership. Note that new hires get paid less money for doing exactly the same work as the unionized workers. Note that competence and reliability do not matter because there is no way for the new workers to get similar compensation as the established workers who helped drive GM and Chrysler into bankruptcy
Nice anti-union diatribe, but even the simplest minds would agree your anti-union diatribe is not proof that "Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized.?"
I am still waiting...
"am not copping out, but I am not chasing an answer for a rhetorical question. Since your answer is always going to be this might not not have happened without government interference, there is no point in my providing examples, that will be countered by a "what if"."
Why not find an example that doesn't involve government interference to prove your point? There are pure market failures, but they are hard to find. Try it.
By the way, even the Tulipmania episode in 1636-7 had government fingerprints on it.
Nice anti-union diatribe, but even the simplest minds would agree your anti-union diatribe is not proof that "Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized.?"
I am still waiting...
I provided the evidence. When a union strikes others would love to step in and take those jobs because they usually pay much more than what the individuals are getting elsewhere. But they are not permitted to do so because the unions use force and their friends in the political sphere to prevent such people from getting those jobs. When Obama signs a directive that all bidders on government contracts have to have PLA agreements he prevents non-unionized employers from taking part in the process, which explains why Los Angeles's Eastside Reservoir project, Boston's Big Dig, Safeco field, and the San Francisco airport had such huge cost overruns.
You are suffering from the Broken Window Fallacy, which is common among both the left and right economic commentators and the general public. That explains why such idiotic policies and ideas still have any support and why it takes a crisis to make people finally see the light. Recent elections have shown that voters have either figured things out or are so pissed off that they are turning on the public sector unions who have fleeced them for so long. Sadly, it is probably too late to save the economic system and the US is likely to go the way of Greece, Spain, and France. Fortunately, the parasites, charlatans, and naive fools will get what they deserve and we will finally have a liquidation that will allow a real recovery to take place.
"I not surprised you never posted proof, because we all know you not have any proof."
It only takes a reasonable level of understanding of basic economics and an application of common sense to understand that at any given time, as I stated before, all real wages cannot go up without an increase in productivity. If some workers are paid more for little or no increase in productivity, then others will get no increase or smaller increases, or even lose their jobs.
It's hard to quantify something that doesn't happen, and it appears that's what you are asking for.
Surely it's enough to understand that if you raise the price of something, there will be less of it demanded.
Do you, on the other hand, have *proof* that an unjustified increase in union pay doesn't have a negative effect on non union wages?
If not the left the right or the middle, You don't leave much.
I don't see that recognizing our natural rights is a political philosophy. A moral one maybe, but I don't see politics in there.
Getting drunk because the booze is free happens at the margins, but it is enough to spoil the party for everyone.
That is why It is not tolerated.
Wrong. What business school did you go to? One of the most important and most difficult decisions in business is to know when to fold before you lose everything.
Watch what happens to Nokia, RIM, and maybe HP. Or all the farmers that depend on the Ogalla aquifer.
A successful shutdown is different from ruining your business.
It is not all that hard to get a launch license. What is hard is finding a quarter billion to launch with, and a way to make it pay.
The key word here is unjustified.
By your argument unjustified pay increases are unsustainable whether they are union or management.
If not the left the right or the middle, You don't leave much.
But it does leave something important. Can you spot it?
I don't see that recognizing our natural rights is a political philosophy. A moral one maybe, but I don't see politics in there.
We disagree.
I not surprised you never posted proof, because we all know you not have any proof.
Sorry about that Steve! I had forgotten about that!
I would suggest Union Wages, Temporary Layoffs, and Seniority by GM Grossman JOSR, 1983
This paper is a good start, plus has discussions of other pages.
Something on the developing world
That should be enough to get you started, I think. Sorry I forgot!
Steve-
You can also look up any basic labor economics textbook and see the same relationship.
Do you, on the other hand, have *proof* that an unjustified increase in union pay doesn't have a negative effect on non union wages?
Not making any claims one way or the other. I am simply asking those who say they have the facts that prove"Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized" to present those facts.
VangelV your anti-union diatribes at best are untested theories. You do understand the difference between a fact and a theory? Right?
The fact claimed here is "reduced wages for the non-unionized." The key word in this so called fact statement is "reduced"
This should be easy for you, but I am still waiting...
Jon Murphy I will take at look at your link and get back to you.
Jon Murphy
I tried your link but could not access the article. Maybe you can post the part with the facts that show the Unions reduce non-union wages.
Thanks
Steve-
I'll try. It may be gated, which means excluding university credentials, you'd not be able to access anything past a preview. Let me see if I can find a way around it.
Jon
I just read your second link (Something on the developing world) and I cannot find any place in the article that presents facts that show Unions reduces wages of non-union workers.
If I missed it, please feel free to post it.
Thanks
I looked, but I can't figure out a way around the gate for the first link. You don't have any affiliation to a university (student, alumni, faculty), do you? They may be able to provide a resource for you to get around the gate.
As for the second, you really should read the whole book. It gets into the math and theory behind it. However, for just a quick look, just check out the conclusion. It talks about the wage difference in Mexico verses developed nations (at the time of publication). Plus, I think it ends with a good discussion on whether or not unions are a good thing.
This comment has been removed by the author.
Jon
I read the conclusion and it did talk about a wage gap,and stated unions raised wages, but nothing about Unions reducing wages of non union workers. So can you point to a place in the article which shows the facts that Unions reduce wages of the the non-union workers.
The fact claimed in this post is that unions reduce wages for the non-unionized.
So I am asking for facts that prove unions reduced wages for the non-unionized and not the just a wage gap fact.
Thanks
"Getting drunk because the drinkbooze is free happens at the margins, but it is enough to spoil the party for everyone.
That is why It is not tolerated."
Why are you changing the subject?
That your example. Didn't you understand what point you were trying to make?
Steve-
You can also look up any basic labor economics textbook and see the same relationship.
Sorry my friend but I do not think that Steve will be satisfied by anything other than a rigorous study that uses empirical evidence and has a level of certainty that approaches what you typically see in the hard sciences. Of course, the fact that no such study is possible in the social sciences is conveniently ignored and we will still hear the incoherent and illogical statements typical from the left. Expect to get some deconstructionist games in which our pal assumes that we spend a great amount of time thinking about every word that is used and that there are no omitted words or muddled statements that are not as clear as we could have made them. You will then see the typical lefty attempt to move the conversation away from the essential core towards tangents that are convenient but not meaningful.
VangelV said...
Sorry my friend but I do not think that Steve will be satisfied by anything other than a rigorous study that uses empirical evidence and has a level of certainty that approaches what you typically see in the hard sciences. Of course, the fact that no such study is possible in the social sciences is conveniently ignored and we will still hear the incoherent and illogical statements typical from the left. Expect to get some deconstructionist games in which our pal assumes that we spend a great amount of time thinking about every word that is used and that there are no omitted words or muddled statements that are not as clear as we could have made them. You will then see the typical lefty attempt to move the conversation away from the essential core towards tangents that are convenient but not meaningful.
VangelV I must say you are very good at diatribes, but not so good at answering this simple question: Where is your proof (facts) that "Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized?
VangelV I must say you are very good at diatribes, but not so good at answering this simple question: Where is your proof (facts) that "Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized?
There is no empirical 'proof' of the kind that I would accept in any paper written on the subject of labour or in any of the social 'sciences'. There is no way to isolate and control all factors and come up with the simple relationship.
That is the reason why some of us pointed out the logic to you. Now you may choose to ignore the logic and play the games that are engaging in but will not change the facts. Unionization has failed miserably in the US because most of the companies that had unions could not compete with those that did not. It was not wages that was the problem but the lack of flexibility and the inability to fire lousy performers. This is why the most heavily unionized sectors in the US shed the unions or moved their operations to areas that were more productive.
A perfect example is Europe. Union rules, minimum wage laws, and pro-labour laws that make layoffs difficult have discouraged hiring of young workers to the point where some countries have a 50% youth unemployment rate. The productive classes can no longer carry the tax burden and most of these countries are in trouble. The US is not far behind because its own giveaways to unionized workers and well-connected corporations and special interest groups have made it difficult to grow the economy by enough to offset the increased liabilities.
VangelV said
There is no empirical 'proof' of the kind that I would accept in any paper written on the subject of labour or in any of the social 'sciences'. There is no way to isolate and control all factors and come up with the simple relationship.
That is the reason why some of us pointed out the logic to you. Now you may choose to ignore the logic and play the games that are engaging in but will not change the facts. Unionization has failed miserably in the US because most of the companies that had unions could not compete with those that did not. It was not wages that was the problem but the lack of flexibility and the inability to fire lousy performers. This is why the most heavily unionized sectors in the US shed the unions or moved their operations to areas that were more productive.
A perfect example is Europe. Union rules, minimum wage laws, and pro-labour laws that make layoffs difficult have discouraged hiring of young workers to the point where some countries have a 50% youth unemployment rate. The productive classes can no longer carry the tax burden and most of these countries are in trouble. The US is not far behind because its own giveaways to unionized workers and well-connected corporations and special interest groups have made it difficult to grow the economy by enough to offset the increased liabilities.
Another good Diatribe, are you ready to admit the so called fact Unions cause Non-unions to wages decrease isn't a fact and just a theory based on your world view?
If yes, I am done. If no please present the facts that prove "Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized.
Like I said before I am still waiting...
The whole point of a union is to raise wages above the market level, and that's exactly what "good," effective unions like the UAW, or public employee unions, have done - raise compensation above the market level.
So I think it would be accurate to say that union wages are higher than non-union wages, holding other variables constant.
That seems indisputable.
Mark J. Perry said...
The whole point of a union is to raise wages above the market level, and that's exactly what "good," effective unions like the UAW, or public employee unions, have done - raise compensation above the market level.
So I think it would be accurate to say that union wages are higher than non-union wages, holding other variables constant.
I agree.
Another good Diatribe, are you ready to admit the so called fact Unions cause Non-unions to wages decrease isn't a fact and just a theory based on your world view?
If yes, I am done. If no please present the facts that prove "Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized.
Like I said before I am still waiting...
I think that we are having two one-way conversations. You refuse to accept the logical position because you are looking for empirical evidence where none is possible. I know that Mark and some of the neo-Keynesians who read this site object but I do not believe that it is possible to have any convincing empirical evidence on this for the obvious reasons stated many times in our previous arguments about methodology.
I think that Mark is right when he says that unions use force to increase wages above the market rate (companies would not increase wages above the market rate voluntarily) and note that in order to compete companies often demand cost cuts from vendors, who are often non-unionized. Those vendors pay their workers less than they would have received had unions not used force to get their above market settlements.
VangelV said...
I think that we are having two one-way conversations. You refuse to accept the logical position because you are looking for empirical evidence where none is possible. I know that Mark and some of the neo-Keynesians who read this site object but I do not believe that it is possible to have any convincing empirical evidence on this for the obvious reasons stated many times in our previous arguments about methodology.
I think that Mark is right when he says that unions use force to increase wages above the market rate (companies would not increase wages above the market rate voluntarily) and note that in order to compete companies often demand cost cuts from vendors, who are often non-unionized. Those vendors pay their workers less than they would have received had unions not used force to get their above market settlements.
At least the above statement isn't a diatribe.
Also we agree with Mark's statement; "The whole point of a union is to raise wages above the market level, and that's exactly what "good," effective unions like the UAW, or public employee unions, have done - raise compensation above the market level.
So I think it would be accurate to say that union wages are higher than non-union wages, holding other variables constant.
But you have not provided any facts for your so called factual logical position; "Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized." Without empirical evidence or facts that statement is at best nothing more than unproven theory and more likely just anti-union red herring attack.
You refuse to accept the logical position because you are looking for empirical evidence where none is possible.
================================
No, I just refuse to respond to an arguement that depends on the idea that "if government wasn't involved things would be better."
Big business has had its share of problems and it has caused its share of problems.
So has governmnet.
I think both of them can be improved, while you seem to think that business is blameless and government is hopeless.
I think a union is a business, like any other business, and it should be free to offer its services to those who wish to avail themselves. Like any other business, unions can go overboard.
But the argument about productivity ought to be independent of the union argument: Vikram Pandit is the 1`5th highest paid US executive, and Citigroup shares tanked by 92% under his watch.
"The whole point of a union is to raise wages above the market level" was that still true historically when the market level meant child labor and starvation wages? Some people would argue that there is no real incentive for manaegement to pay at the market level, and every incentive to pay below that level. Thepurpose of the unions is to keep that dialogue honest.
Unions seem to provide that incentive since employers in non union areas are willing to pay near union wages just to keep them out.
Brazil just passed Great Britain as the fifthe largest economy, and Brazil was wrested from the military primarily by a union uprising. It is not like unions have done NOTHING good, after all, the weekend was a union invention.
companies would not increase wages above the market rate voluntarily
===============================
Precisely, and there is no meor incentive for them to pay the market rate voluntarily, either.
Incentives matter.
As for using force, what do you suppose the body count is comparing compary management deaths to unionists deaths?
Unions ahve done some crazy things,and so has management.
But if every worker walks out and says they will only work for account temps, mantech, or Tempman: if you want us to work for you, go talk to them, then that should be thari choice.
Management is organized and there si no reason labor should be organized to play on an even field.
There is no reason why someone like Sherry Hunt should have to go it alone to get management to do the right thing.
"Precisely, and there is no meor incentive for them to pay the market rate voluntarily, either."
Do you know what the term "market rate" actually means?
"I think a union is a business, like any other business, and it should be free to offer its services to those who wish to avail themselves."
Of course. And those who are offered union services should be free to decline it.
"But the argument about productivity ought to be independent of the union argument:"
Why is that? Unions often demand higher pay without higher productivity. They seem related.
"Vikram Pandit is the 1`5th highest paid US executive, and Citigroup shares tanked by 92% under his watch."
LOL There you go, telling companies they're overpaying their employees. Do you think you're qualified? And in any case what business is it of yours? Perhaps the owners should decide that.
"But if every worker walks out and says they will only work for account temps, mantech, or Tempman: if you want us to work for you, go talk to them, then that should be thari choice."
Of course it should. I'm glad to see you are in favor of choice.
In times when there are more jobs than workers, that could be a winning strategy. When there are more workers than jobs, maybe not so much.
Both employers and employees should have completely free choice to negotiate whatever agreement they want.
But you have not provided any facts for your so called factual logical position; "Unions raised wages for plumbers and auto workers but reduced wages for the non-unionized." Without empirical evidence or facts that statement is at best nothing more than unproven theory and more likely just anti-union red herring attack.
The statement is logical. There is no evidence possible because you CAN'T HOLD OTHER THINGS CONSTANT in the real world. All of the statements on both sides of this argument are not empirically based but are statements of logic. The fact that you have trouble following it while you try to imply that there is empirical evidence to support your views does not change the reality.
No, I just refuse to respond to an arguement that depends on the idea that "if government wasn't involved things would be better."
As I said, the logic and history lead us to make that conclusion. We know that the economies that are freest have performed the best. If big government and central planning were the solution it would have been the US, not the USSR that collapsed sooner. People would not have been escaping from East Germany to West Germany but the other way around. The North Koreans preventing their people from escaping to South Korea or China; they would be trying to keep the Chinese and South Korean workers out. And Cubans would not be risking their lives on tiny boats trying to escape to the United States.
Big business has had its share of problems and it has caused its share of problems.
So has governmnet.
Government can use force to get you to do what you do not want to. Big business has no such power and can only try to convince you to buy its products. Even a fool like you can see the difference.
I think both of them can be improved, while you seem to think that business is blameless and government is hopeless.
You don't pay much attention. I think that many businesses do many things wrong. In a free market those businesses would be bankrupt or taken out very quickly because the market does not forgive bad judgement as governments do. The argument is about the freedom to engage in VOLUNTARY TRANSACTIONS. Period. It is not about utility, social goals, collective guilt, or wherever our friends on the right or left usually want to take it.
I think a union is a business, like any other business, and it should be free to offer its services to those who wish to avail themselves. Like any other business, unions can go overboard.
I fully agree. It should OFFER its services. But the consumers should be able to reject those services. If I want to work for GM I should be free to reject the union agreement and make one of my own. Companies that do not like what the union is offering should be able to hire employees who are willing to accept different terms. Everything should be voluntary, which means the absence of force.
But the argument about productivity ought to be independent of the union argument: Vikram Pandit is the 1`5th highest paid US executive, and Citigroup shares tanked by 92% under his watch.
Citi does not operate in a free market. It should have failed because it was badly run, just like most of the Wall Street firms. The companies that you think I support would be bankrupt in the environment that I actually support because they do not serve customers or their own investors. They simply use the government regulations and guarantees to enrich a small group of executives and a limited number of employees while they screw the taxpayers.
But unions clearly reduce productivity because they limit the company's ability to respond to changes in the marketplace and protect ineffective workers who are not productive.
"The whole point of a union is to raise wages above the market level" was that still true historically when the market level meant child labor and starvation wages? Some people would argue that there is no real incentive for manaegement to pay at the market level, and every incentive to pay below that level. Thepurpose of the unions is to keep that dialogue honest.
Companies compete for workers just like workers compete for jobs. The market rate is what you get. Companies that try to pay less than market lose workers. Companies that try to pay more than market lose customers.
Do you know what the term "market rate" actually means?
The evidence shows that s/he does not.
"The statement is logical. There is no evidence possible because you CAN'T HOLD OTHER THINGS CONSTANT in the real world. All of the statements on both sides of this argument are not empirically based but are statements of logic. The fact that you have trouble following it while you try to imply that there is empirical evidence to support your views does not change the reality."
Your friend is playing a game. Logic isn't required.
As King Arthur said to the Black Knight I say to you, VangelV, "All right, we'll call it a draw"
For your viewing pleasure:
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