Friday, June 08, 2012

How Sweatshops Help The Poor Escape Poverty


Here's a new Learn Liberty video featuring Professor Matt Zwolinski from the University of San Diego.

Update:


64 Comments:

At 6/08/2012 6:46 PM, Blogger John Sullivan said...

Interesting video. I think I'll show this to my diaconate cohort... it would make a great theological reflection piece.

 
At 6/08/2012 7:20 PM, Blogger PeakTrader said...

Labor is in a huge bargaining disadvantage when the choice is being exploited or starving.

The hidden downside of Santa's little helpers
The Irish Times
December 21, 2002

"An investigation into the price of a Mattel Barbie doll, half of which is made in China, found that of the $10 retail price, $8 goes to transportation, marketing, retailing, wholesale and profit for Mattel.

Of the remaining $2, $1 is shared by the management and transportation in Hong Kong, and 65 cents is shared by the raw materials from Taiwan, Japan, the US and Saudi Arabia. The remaining 35 cents is earned by producers in China for providing factory sites, labour and electricity.

Toy factories hire the least-skilled workers...Sixty per cent are young women between 17 and 23 years old who live cramped in company dormitories, 15 to a room, earning just 30 cents an hour and often inhaling spray paints, glue fumes and toxic dust."

 
At 6/08/2012 8:19 PM, Blogger PeakTrader said...

Rather than "neglect," we can all do something about it, e.g. doubling the $0.25 labor cost share and raise the price a quarter, to $10.25, or reduce management's $1 share by a quarter and keep the price at $10, etc.

How many consumers are willing to pay $0.02 extra for dolphin-safe tuna?

 
At 6/08/2012 8:39 PM, Blogger PeakTrader said...

Of course, we can also cut a sales tax, e.g. 8% (or $0.80) to 5.5% (or $0.55).

 
At 6/08/2012 8:47 PM, Blogger PeakTrader said...

An 8% sales tax on $10.25 is $0.82 for a total of $11.07.

 
At 6/08/2012 10:46 PM, Blogger Hydra said...

Oh, please, this is insulting. That guy actually has a PhD?

By the same token a worker will only take a sweatshop job if it is better than his alternatives, a sweatshop operator will only stay in business as a sweatshop if it is better than his alternatives: paying a reasonable wage.

 
At 6/09/2012 12:08 AM, Blogger Hydra said...

"It was pure capitalism at work and it proved deadly. On May 31, 2011, a driver for Charlotte-based Sky Express was apparently so tired and so pressed by his hard-charging dispatcher that he literally fell asleep at the wheel. His bus flipped on Interstate 95 south of Fredericksburg killing four and injuring 50. Just two and a half months earlier, another fatigued driver carrying passengers from a Connecticut casino to New York’s Chinatown crashed in the Bronx, killing 15.

After a year-long probe, the U.S. Department of Transportation has shut down 26 business entities in five states associated with the “Chinatown” bus system. The carriers, federal regulators claim, racked up numerous safety violations, including using drivers without commercial licenses, requiring them to drive excessive hours and not maintaining equipment. Once challenged, the firms “evaded enforcement by ‘reincarnating’ into other forms, according to DOT."

===============================


Mobile sweatshops.

Yep, those sweatshops can close down, if they can find some better job to do.... but if this one is more lucrative, say hey.

 
At 6/09/2012 1:39 AM, Blogger yamahaeleven said...

I will hazard an hypothesis that those objecting to this video have done little productive work in their lives.

 
At 6/09/2012 2:15 AM, Blogger Ron H. said...

Peak

"Toy factories hire the least-skilled workers...Sixty per cent are young women between 17 and 23 years old who live cramped in company dormitories, 15 to a room, earning just 30 cents an hour and often inhaling spray paints, glue fumes and toxic dust."

Yes - they hire the least skilled workers, because those are the least skilled jobs.

Did you actually watch the video?

You could certainly improve their condition by opening a toy factory nearby that paid $10/hr and hiring them away from their current slavemaster.

Or, you could arrange to choose the factory you hate most, and arrange to pay each worker an additional amopunt out of your own pocket.

"Rather than "neglect," we can all do something about it, e.g. doubling the $0.25 labor cost share and raise the price a quarter, to $10.25, or reduce management's $1 share by a quarter and keep the price at $10, etc."

No "we" can't. I have no control over prices except to buy or not buy. I can't pay factory workers more, as they don't work for me, and I have no control over management "$1 share", whatever that means. Are you referring to management salaries, or stockholder dividends, or what?

You are writing like an economic illiterate. I expect better from you. Snap out of it!

 
At 6/09/2012 2:21 AM, Blogger Ron H. said...

yamahaeleven: "I will hazard an hypothesis that those objecting to this video have done little productive work in their lives."

That's a good one.

At the very least, they missed some important days in econ 101.

 
At 6/09/2012 2:22 AM, Blogger Ron H. said...

Peak

How would cutting sales tax help sweatshop workers?

 
At 6/09/2012 2:46 AM, Blogger PeakTrader said...

Ron, I already know you don't believe in labor standards, including low standards, and labor is expendable, particularly using the most ignorant and unfortunate in society.

 
At 6/09/2012 3:40 AM, Blogger Ron H. said...

Peak,

You didn't offer a solution to the plight of sweatshop workers, and you can't argue against economic reality.

Those poor folks have very few options, and all of them are bad. You seem upset about them choosing what, for them, is their best option.

You have frequently claimed that you shop for bargains, so it's hard to believe you are, at the same time, interested in paying more for things, in hopes that those poor workers will receive that extra money.

 
At 6/09/2012 6:24 AM, Blogger Larry G said...

Well the guy makes a valid point IMHO.

Not sure we have a working definition of "sweatshop" though.

and finally... are there specific laws that outlaw sweatshops?

Even minimum-wage is not universally applied and the equation itself is not just wages - it's wages and work.

You could get 100K a year for a job that requires 16 hours a day of manual labor.

is that a "sweatshop"?

 
At 6/09/2012 8:33 AM, Blogger juandos said...

"Rather than "neglect," we can all do something about it, e.g. doubling the $0.25 labor cost share and raise..."...

Why should we pt?

There's no upside for me for instance...

"How many consumers are willing to pay $0.02 extra for dolphin-safe tuna?"...

All the dumb ones...

Not that many people are in a sweat because a can of tuna might have a little bit of Flipper inside them...

 
At 6/09/2012 8:37 AM, Blogger juandos said...

"After a year-long probe, the U.S. Department of Transportation has shut down 26 business entities in five states associated with the “Chinatown” bus system"...

Nice bit of nanny state socialism there hydra, now a whole lot of people are out of work and some may now actually be leeching of the taxpayers via the so called 'safety nets'...

 
At 6/09/2012 8:48 AM, Blogger Krishnan said...

Videos like this have no impact on the liberals of today - since they look at the world differently. They truly do not believe in the market place and the signals sent by prices, Since the world is not perfect by any means, they use exceptions to conclude as to why the market does not work or how the price information is unfair and so on - they will ignore the overall impact true free markets and undistorted price information has had on overall human welfare and wealth.

"I am sure consumers will be willing to pay 25 cents more for an object that costs say $10" (Sure, but that is missing the point)

"See what happened to these buses - people were killed because they charged low fares" (Perhaps - but expensive buses have also crashed)

"It is immoral to pay anyone less than a minimum wage" (What is the minimum wage for say South Africa? Are you happy with $57/week? Really? Why not insist on $10/hour?)

"We must provide everyone with a living wage" (What is that? - Are we to pay an unskilled high school drop out whatever he/she demands so he/she can live comfortably?)

"We cannot allow companies to get away with doing whatever they want" (Are employees stupid to remain enslaved to an employer? Yes, there are stupid people - but this is indeed a problem CREATED by regulations and not a free market)

By attempting to prevent discrimination in the marketplace, the least able and poor are the ones most affected by these do-gooders - Even if they are confronted by incontrovertible data (I know, that is not easy) - they will not change their central tune "It is wrong to pay someone so little" (or some thing like that)

 
At 6/09/2012 10:14 AM, Blogger FGH said...

Thank you for boldly presenting this video. Sadly,I have seen that the most rabid sweatshop critics are often paid employees of charitiable organizations that haul in millions of dollars in revenues from "Poverty Racket". Very similar to the "Racist Racket" run by the likes of Al Sharpton and Jesse Jackson in the U.S. Another example is the "Cancer Racket" fostered by the American Cancer Society. These groups have a vested interest in promoting the very socio-economic problems they claim to oppose. The fact that sweatshops lift people from poverty is a threat to their organizational survival. Once again, just follow the money trail. Of course you'll never see this discussed in most of the "mainstream" media which is why CNN, NY TImes and the like are dying on the vine.

 
At 6/09/2012 10:53 AM, Blogger Buddy R Pacifico said...

I watched the video and was open to an alternate voice on sweatshops.

The basic assumption of the video is choice for the sweatshop worker. To work, or not work. To work in the sweatshop or farm the land. The sweatshop, or even lesser wages and conditions.

What about an economy where government, communist or dictatorial, has control of the means of production and the land?

There are no choices if the government states you will work in a sweatshop that is controlled by the ruling elite.

Some sweatshops exist where the employees are political prisoners.

Brutal hard work should not be discouraged, but there has to be other choices for employment; and the ability for workers to organise, speak openly of and protest conditions they are working in.

 
At 6/09/2012 11:59 AM, Blogger Methinks said...

Some sweatshops exist where the employees are political prisoners.

Yep. We had those in my home country in the form Gulags and anyone who was not a political prisoner often found himself in another form of slave labour on collective farms. Slave labour for the Socialist (on its way to the Utopia of Communist) state. Of course, these people had no choice. They were compelled by the Socialist state to toil in the Gulag or the Kolkhoz.

Yet, there was no hue and cry about that from the very same people who passionately oppose the choice of the poor to work in sweatshops.

I can only conclude that these folks don't really give two craps about the plight of the poor. They seem to be repulsed by them, in fact. They have no problem with enserfing and enslaving the poor (or anyone except themselves, really). What they really have a problem with is allowing the poor a choice if the available choices don't rise to the level of their arbitrary and impossible standards. Which, of course, is just another way of saying that these bleeding-heart intellectuals are passionate only about disempowering the most disadvantaged by robbing them of their last pitiful options.

 
At 6/09/2012 3:27 PM, Blogger Ron H. said...

Buddy

"There are no choices if the government states you will work in a sweatshop that is controlled by the ruling elite. "

I don't think anyone here condones forced labor. I think the point is that sweatshop workers have few options, and all of them are poor. Working in a toy factory in miserable conditions may be their best option. They have chosen it. Most of the actions we can take in our moral outrage, will deprive them of that option. I don't think they would thank us.

 
At 6/09/2012 5:44 PM, Blogger Hydra said...

What about the system which slows and condones that as their best option?

Is a subsistence farmer with a few goats and chickens and vegetables really wokese off than a factory worker who buys his eggs and has enough left over for a radio? Especially if the factory conditions are killing him?

 
At 6/09/2012 5:47 PM, Blogger Hydra said...

I don't object to the video. I object to rationalization passing as logic. This Guy should be a TA, not a PhD.

 
At 6/09/2012 5:51 PM, Blogger PeakTrader said...

Ron, ideally, I'd like to see firms come up with their own solutions.

Unfortunately, in reality, there are too many people like you (as we see in this comments section), who don't even recognize a problem.

In a competitive market without standards, when one firm cuts corners, others have to cut corners to stay competitive.

So, you may end up eating a hot dog with a $0.25 worker's finger in it.

 
At 6/09/2012 5:55 PM, Blogger Hydra said...

The whole point of sweatshops is to keep the poor in poverty, while maximizing profits for the owner.

Granted, in low margin operationsl there may be no profit for the owner, absent sweat shop conditions. Which is exactly why the sweat shop operator would not be doing this if he had any better options.

The author has presented a compelling argument as to why an unbridled free market leads to a race to the bottom.

 
At 6/09/2012 8:09 PM, Blogger Methinks said...

Peak, were you high when you wrote that last comment?

 
At 6/09/2012 8:15 PM, Blogger Methinks said...

This comment has been removed by the author.

 
At 6/09/2012 8:17 PM, Blogger Methinks said...

And were you getting high with hydra?

Because you both seem to be under the impression that always choosing your best available option means that you are worse off.

 
At 6/09/2012 8:27 PM, Blogger Methinks said...

In your case, Peak, you clearly believe that the law of supply and demand suspends operations in the labour market and that robbing the most impoverished of options is somehow beneficial to them.

What you advocate is criminal and it really does keep the poor impoverished and desperate. Having seen for myself how these people in third world countries and how much they benefit from what you describe as conditions unacceptable for you, I am overcome with the desire to force you to live their lives for a year. You wouldn't last a day.

 
At 6/09/2012 8:27 PM, Blogger Methinks said...

This comment has been removed by the author.

 
At 6/10/2012 12:49 AM, Blogger liberal_slayer said...

Hydra says "The author has presented a compelling argument as to why an unbridled free market leads to a race to the bottom." What planet do you live on?

Free markets results in the the most efficient producer winning the most business and this does not mean cutting corners and delivering an inferior product it's the exact opposite. I can not believe how many people have this silly idea that free markets lead a worsening outcome. As I said what planet are you from? The freest markets deliver the best quality goods at the lowest prices the gov't controlled markets provide the worst results. Free market competition means a company has to compete for the consumers dollar and not rely on a gov't enforced monopoly or tax policy to distort prices and restrict options.

Once you realize that workers are also in a market place for their labor you will understand that they also have power over their lives where they can shop there services around to the highest bidder (new employer). And a good worker will always be valued and his income will rise, not fall, and he will join the race to the top.

 
At 6/10/2012 1:24 AM, Blogger Ron H. said...

"Unfortunately, in reality, there are too many people like you (as we see in this comments section), who don't even recognize a problem."


OK, Peak, what IS the problem, and what do you recommend as a solution? Please don't repeat that silliness about paying higher prices or changing the tax rate.

 
At 6/10/2012 2:25 AM, Blogger PeakTrader said...

Methinks, I guess, your idea of hard work is doing boring and repetitive work, until you develop a severe case of carpal tunnel syndrome and then replaced with a new worker.

 
At 6/10/2012 2:27 AM, Blogger Ken said...

Hydra,

The whole point of sweatshops is to keep the poor in poverty....

The author has presented a compelling argument as to why an unbridled free market leads to a race to the bottom.


All your comment did was make a compelling argument about how little you understand about free markets.

 
At 6/10/2012 2:40 AM, Blogger PeakTrader said...

Liberal_slayer says: "Free markets results in the the most efficient producer winning the most business and this does not mean cutting corners and delivering an inferior product it's the exact opposite."

And, you'll buy the lowest priced hot dog and believe it's just as good as the slightly higher priced hot dog.

 
At 6/10/2012 7:13 AM, Blogger Larry G said...

there is not a country (or place) in the world that operates truly free markets where "competition" produces the highest quality for the lowest price.

there are employers who would have employees work in dangerous conditions to save money, increase profits, that in turn will maim or kill the workers who then will have no means at all to make a living.

there is a reason why industrialized country have regulations for workplaces and there is a reason why industrialized countries perform better economically than 3rd world/developing world countries.

 
At 6/10/2012 7:34 AM, Blogger ondra said...

ideally, I'd like to see firms come up with their own solutions.

Solutions to...what? Why should firms try to solve the problem, that the workers don't have other opportunities? They are actually trying to solve it - they give them some opportunity... you think it's too little?

Rather than "neglect," we can all do something about it, e.g. doubling the $0.25 labor cost share and raise the price a quarter, to $10.25, or reduce management's $1 share by a quarter and keep the price at $10, etc.

Somebody built a factory and pays them more than they were getting elsewhere. You think they should pay even more. Why?

 
At 6/10/2012 7:38 AM, Blogger ondra said...

there is a reason why industrialized country have regulations for workplaces and there is a reason why industrialized countries perform better economically than 3rd world/developing world countries.

The reason why industrializaed country have regulation of workplace could be explained by public choice theory fairly well.

The reason why industrialized countries perform bettern than 3rd world countries is because they have less corruption, better rule of law, freer ways to do enterpreneurship and they have had it for the last many many years.

Just wondering what these 2 have in common... well, maybe that lowering economic effiency by regulating workplaces is easier done in countries where people aren't hungry? Because if you did that in 3rd world country, the effects would be too visible?

 
At 6/10/2012 7:59 AM, Blogger Larry G said...

" The reason why industrializaed country have regulation of workplace could be explained by public choice theory fairly well."

what is the reason why EVERY SINGLE industrialized country have regulation?

"The reason why industrialized countries perform bettern than 3rd world countries is because they have less corruption, better rule of law, freer ways to do enterpreneurship and they have had it for the last many many years."

are the reasons why industrialized countries do better mutually exclusive to why 3rd world, developing world do worse?

"Just wondering what these 2 have in common... well, maybe that lowering economic effiency by regulating workplaces is easier done in countries where people aren't hungry? Because if you did that in 3rd world country, the effects would be too visible? "

"more hungry"? if the industrialized countries are ALREADY better off as workers and economically... and, in theory, weaker, vulnerable because of their increased regulations... WHY don't the 3rd world/developing countries ...just clean their clocks economically and end up with superior economies? Is it a "feature" or a "bug" that 3rd world/developing world have these other "faults" like "corruption" and less "rule of law"?

bonus question: how does "rule of law" differ from regulation?

 
At 6/10/2012 8:44 AM, Blogger ondra said...

what is the reason why EVERY SINGLE industrialized country have regulation?

Public choice. Most industrialized countries are democracies; as countries get wealthier and inefficiencies from such regulation gets less visible, you would expect bigger groups (here usually the unios, or workers-as-a-voting block) to get a voice and be able to force some regulation through the democratic process.

"are the reasons why industrialized countries do better mutually exclusive to why 3rd world, developing world do worse?"

I don't quite understand your question. If something is a reason for 'be better off', it cannot simultaneously be a reason for 'being worse off'. However, correlation is not causation - and I don't see why labour regulation should be the 'cause' of progress.

if the industrialized countries are ALREADY better off as workers and economically... and, in theory, weaker, vulnerable because of their increased regulations.

Taxing you 50% is going to you much less harm if you make $100.000 a year than if you make $1000 a year.

WHY don't the 3rd world/developing countries ...just clean their clocks economically and end up with superior economies?

Because it's a hard thing to do.

how does "rule of law" differ from regulation?

Very much; "regulation" (as used by economists) is used for a class of laws that forbids voluntary cooperation. "Rule of law" is adherence to certain rules.

There can be no regulation, yet you can have rule of law - stipulation that contracts should be kept is not "regulation"; forbidding you to work for 4$/hour is a regulation - both is law.

 
At 6/10/2012 9:02 AM, Blogger Larry G said...

"Public choice. Most industrialized countries are democracies; as countries get wealthier and inefficiencies from such regulation gets less visible, you would expect bigger groups (here usually the unios, or workers-as-a-voting block) to get a voice and be able to force some regulation through the democratic process."

public choice has to be a voting MAJORITY, right?

"I don't quite understand your question. If something is a reason for 'be better off', it cannot simultaneously be a reason for 'being worse off'. However, correlation is not causation - and I don't see why labour regulation should be the 'cause' of progress."

re: mutually exclusive - rule of law... regulations..
if 3rd world are worse off because of less "rule of law".. does that mean that the industrialized countries are uniformly better off because they have 'rule of law'? It's a nebulous concept as a phrase anyhow.

"Taxing you 50% is going to you much less harm if you make $100.000 a year than if you make $1000 a year."

what does that have to do with regulation and rule of law?

WHY don't the 3rd world/developing countries ...just clean their clocks economically and end up with superior economies?

Because it's a hard thing to do."

how so? Did the industrialized countries start from that point?

how does "rule of law" differ from regulation?

Very much; "regulation" (as used by economists) is used for a class of laws that forbids voluntary cooperation. "Rule of law" is adherence to certain rules.

There can be no regulation, yet you can have rule of law - stipulation that contracts should be kept is not "regulation"; forbidding you to work for 4$/hour is a regulation - both is law."

isn't the involvement of govt in the definition and enforcement of contracts - law and regulation?

doesn't govt have to specify the legal constructs of such contracts and provide a mechanism for enforcing them?

I just find it less than forthright to claim, at the same time, that 3rd world is 3rd world because they have weak rule of law and industrialized democracies are "better" because they do have "rule of law" and yet we say it is not "regulation". It seems to me that, at best, it's a play on words.

Yes.. there are different kinds and forms of regulation but regulation is any act of government to regulate an activity and that can range from contract law to safety standards in the work place.

but let's presume that, we can more explicitly define and delineate what they are and are not and stipulate that we recognize what is "good" and what is "not" then why is it that virtually all 3rd world countries have the same kinds of deficits and all industrialized countries do not.

certainly.. in the world ...as laboratories of innovation in many areas of free market and govt, not a single one has come up with a superior competitive economic model to industrialized govts?

all 3rd world have the same deficits and all industrialized have the same advantages?

that's a pattern.... there has to be something in common , right?

 
At 6/10/2012 9:29 AM, Blogger VangelV said...

Funny how so many 'conservatives' are just as high on tariffs as a solution as the left. Where is the difference?

 
At 6/10/2012 9:33 AM, Blogger ondra said...

public choice has to be a voting MAJORITY, right?

Not sure what you mean, but a different answer to "why industrialized nations have labour regulation" is of course - because they voted for it. So what?

if 3rd world are worse off because of less "rule of law".. does that mean that the industrialized countries are uniformly better off because they have 'rule of law'? It's a nebulous concept as a phrase anyhow.

"Rule of law" was just one factor I mentioned - and there are many factors I didn't mention. Still, I would phrase it as "necesarry condition", not "sufficing condition".

"what does that have to do with regulation and rule of law? "

Bad effects from regulation will be more visible in poor countries than rich countries.

how so? Did the industrialized countries start from that point?

Yes, (except some lucky, usually oil-realted-exceptions) the today-industrialized countries started their economic growth by having a friendly institutional framework.

doesn't govt have to specify the legal constructs of such contracts and provide a mechanism for enforcing them?

Yes; and that's not a regulation; regulation - as used by economists - is not EVERY law; it's a law that forbids voluntary cooperation.

I just find it less than forthright to claim, at the same time, that 3rd world is 3rd world because they have weak rule of law and industrialized democracies are "better" because they do have "rule of law" and yet we say it is not "regulation". It seems to me that, at best, it's a play on words.

To repeat it, not every law can be called "regulation". Let's put a definition of regulation into your paragraph:

I just find it less than forthright to claim, at the same time, that 3rd world is 3rd world because they have weak rule of law and industrialized democracies are "better" because they do have "rule of law" and yet we say it is not "prohibiting voluntary cooperation". It seems to me that, at best, it's a play on words.

Do you think that saying 'rule of law' is not equal to 'prohibiting voluntary cooperation' is just a play on words?

Yes.. there are different kinds and forms of regulation but regulation is any act of government to regulate an activity and that can range from contract law to safety standards in the work place.

No, regulation - as used by economists - is meant specifically as a prhobition of voluntary cooperation. If you are to criticize economists point of view - you should use THEIR definitions, not yours - because if you don't, you are just making a strawman argument.

 
At 6/10/2012 10:08 AM, Blogger Methinks said...

Peak, it has obviously escaped your notice that we can all be replaced. If the performance of my firm drops, I will likely lose my investors. I will be replaced in their portfolio with another investment.

I'm not sure what carpel tunnel has to do with anything except a desperate attempt to inadequately defend your indefensible position. Carpel tunnel certainly isn't such a crippling condition that it prevents one from finding alternative employment. We all take certain risks. My worsening eyesight is hastened by years of staring at banks of computer screens filled with tiny flashing numbers. Oh, woe is me.

 
At 6/10/2012 10:11 AM, Blogger Methinks said...

This comment has been removed by the author.

 
At 6/10/2012 10:16 AM, Blogger Methinks said...

And, Peak, you do so conveniently ignore that even if a worker is replaced because he is unable to do the same job as a result of developing carpel tunnel, that worker is still better off than he or she would have been breaking his/her back in subsistence farming or working in prostitution. These are often the alternatives to working in factories and risking developing carpel tunnel. Nobody ever talks about how much more physically demanding and dangerous the alternative is.

Nor, of course, are you aware (despite your supposed advanced degrees in economics) that if companies are forced to pay more per worker, they are forced to hire fewer workers, which means more of the poor will be forced into things like prostitution. Nothing as horrible as a little carpel tunnel could ever come of that, eh. Peak?

 
At 6/10/2012 10:43 AM, Blogger Larry G said...

"Not sure what you mean, but a different answer to "why industrialized nations have labour regulation" is of course - because they voted for it. So what?"

not one or two... ALL of them... why ALL of them? why not one or two that took a different path and as a result did better?


"if 3rd world are worse off because of less "rule of law".. does that mean that the industrialized countries are uniformly better off because they have 'rule of law'? It's a nebulous concept as a phrase anyhow.

"Rule of law" was just one factor I mentioned - and there are many factors I didn't mention. Still, I would phrase it as "necesarry condition", not "sufficing condition"."

yes... but ALL of those factors seem to be common to ALL the countries .... i.e. all industrialized have the SAME factors and all 3rd world have their SAME factors.

there are no counter examples on either the industrialized nor the 3rd world side.



"what does that have to do with regulation and rule of law? "

"Bad effects from regulation will be more visible in poor countries than rich countries."

explain..

"how so? Did the industrialized countries start from that point?

Yes, (except some lucky, usually oil-realted-exceptions) the today-industrialized countries started their economic growth by having a friendly institutional framework. "

which ones....specifically that you say are 3rd world... have prospered as a direct result of less regulation?

"doesn't govt have to specify the legal constructs of such contracts and provide a mechanism for enforcing them?

Yes; and that's not a regulation; regulation - as used by economists - is not EVERY law; it's a law that forbids voluntary cooperation."

huh? does the law not "regulate" ?


"To repeat it, not every law can be called "regulation". Let's put a definition of regulation into your paragraph:

I just find it less than forthright to claim, at the same time, that 3rd world is 3rd world because they have weak rule of law and industrialized democracies are "better" because they do have "rule of law" and yet we say it is not "prohibiting voluntary cooperation". It seems to me that, at best, it's a play on words.

Do you think that saying 'rule of law' is not equal to 'prohibiting voluntary cooperation' is just a play on words?"

does "rule of law" pertain to government specification of the rules of contracts?

"Yes.. there are different kinds and forms of regulation but regulation is any act of government to regulate an activity and that can range from contract law to safety standards in the work place.

No, regulation - as used by economists - is meant specifically as a prhobition of voluntary cooperation. If you are to criticize economists point of view - you should use THEIR definitions, not yours - because if you don't, you are just making a strawman argument."

NOT in THIS BLOG, guy. Not in the Mark Perry posts NOR in the comments.

besides.. how do you draw the law from a political/legal perspective even if you are restricting the context... HOW do you IMPLEMENT it in law (or NOT)?

 
At 6/10/2012 11:34 AM, Blogger ondra said...

not one or two... ALL of them... why ALL of them? why not one or two that took a different path and as a result did better?

Bryan Caplan's rational ignorance, labour union history, public choice theories explain this quite well for me. Do you find such explanation lacking?

yes... but ALL of those factors seem to be common to ALL the countries .... i.e. all industrialized have the SAME factors and all 3rd world have their SAME factors.

Does it mean all factors are causes and no factors are results? Why do you think labour laws are a _cause_ of wealth instead of a result of wealth and democratic institutions?

"Bad effects from regulation will be more visible in poor countries than rich countries."
explain..


If a regulation causes additional costs 500$ per worker per year, an economy where workers earn $40.000 wouldn't probably notice it. In a state, where the wage of a worker is $1000 a year, this would probably cause significant unemployment and reduction in wages.

which ones....specifically that you say are 3rd world... have prospered as a direct result of less regulation?
China.

huh? does the law not "regulate" ?

That's irrelevant question. If you are criticizing economists support of 'unregulated market', you should critize what they say (i.e. market where all voluntary action is allowed), not what you say (market without rules).

does "rule of law" pertain to government specification of the rules of contracts?

Claiming that "without rules, there wouldn't be economic progress" (as I did) does not mean "any rules will allow economic progress". And I would say that specifing "how a contracts should be formulated so that it could be enforced in court" is very far from "forbidding certain contracts"(regulating) - you seem to suggest that these 2 are equal.

No, regulation - as used by economists - is meant specifically as a prhobition of voluntary cooperation. If you are to criticize economists point of view - you should use THEIR definitions, not yours - because if you don't, you are just making a strawman argument."

NOT in THIS BLOG, guy. Not in the Mark Perry posts NOR in the comments.


Well, then let's ask Mr. Perry, what is his understanding of the word "unregulated" in the "unregulated market" term. It can be either "without any rules" or something along "not forbidding voluntary exchange/cooperation". Wanna bet?

besides.. how do you draw the law from a political/legal perspective even if you are restricting the context... HOW do you IMPLEMENT it in law (or NOT)?

I don't understand your question. There are many laws that are not 'regulation' in the economic sense. What's the problem?

 
At 6/10/2012 11:50 AM, Blogger Larry G said...

"Bad effects from regulation will be more visible in poor countries than rich countries."
explain..

If a regulation causes additional costs 500$ per worker per year, an economy where workers earn $40.000 wouldn't probably notice it. In a state, where the wage of a worker is $1000 a year, this would probably cause significant unemployment and reduction in wages."

if the calculation of the true cost of the regulation is correct... often it's a cost/benefit where workers benefit.


which ones....specifically that you say are 3rd world... have prospered as a direct result of less regulation?
China.

agree but that's MUCH MORE GOVERNMENT, right? Isn't that a SOCIALIST govt playing the Capitalist game?


"huh? does the law not "regulate" ?

That's irrelevant question. If you are criticizing economists support of 'unregulated market', you should critize what they say (i.e. market where all voluntary action is allowed), not what you say (market without rules). "

it's not irrelevant if you are asserting that regulation is different from law in terms of it's effects on the economy.

would you say that in China it's about "voluntary action"?

"does "rule of law" pertain to government specification of the rules of contracts?

Claiming that "without rules, there wouldn't be economic progress" (as I did) does not mean "any rules will allow economic progress". And I would say that specifing "how a contracts should be formulated so that it could be enforced in court" is very far from "forbidding certain contracts"(regulating) - you seem to suggest that these 2 are equal."

nope. I AM saying that in EVERY industrialized country they seem to be almost exactly alike..and in ever 3rd world country.. the lack the very things that are present in ALL of the industrialized nations.

"No, regulation - as used by economists - is meant specifically as a prhobition of voluntary cooperation. If you are to criticize economists point of view - you should use THEIR definitions, not yours - because if you don't, you are just making a strawman argument."

not if their definitions involve changing laws and regulations that are defined in a different way.

NOT in THIS BLOG, guy. Not in the Mark Perry posts NOR in the comments.

"Well, then let's ask Mr. Perry, what is his understanding of the word "unregulated" in the "unregulated market" term. It can be either "without any rules" or something along "not forbidding voluntary exchange/cooperation". Wanna bet?"

It argues monolithically and ideologically without recognizing nor acknowledging that "free" (not nation-state directed, China) 3rd world countries have the same things in common - missing that all industrialized countries have in common - implemented.

Regulation is a common aspect of ALL industrialized economies (including China)... and missing from 3rd world countries with inferior economies but the Perry/Libertarian doctrine suggests that there are "other" reasons why the 3rd world countries do not prosper - a all-encompassing nation "coincidence".

I think it is much more than a "coincidence"

I think regulation is part and parcel of a strong economy.



besides.. how do you draw the law from a political/legal perspective even if you are restricting the context... HOW do you IMPLEMENT it in law (or NOT)?

I don't understand your question. There are many laws that are not 'regulation' in the economic sense. What's the problem?

 
At 6/10/2012 12:48 PM, Blogger ondra said...

often it's a cost/benefit where workers benefit.

Only if you have in mind some particular market failure; otherwise not. It seems to me somewhat ridiculous to claim that the whole labour market is one giant market failure... Are you aware that all such regulation mostly ends up reducing the worker's compensation?

agree but that's MUCH MORE GOVERNMENT, right? Isn't that a SOCIALIST govt playing the Capitalist game?

You specifically asked which country did prospered as a direct result of less regulation. China is a starking example - they even experimented with this in the 90's by trying it in some areas only. And considering the 'capitalist game' - yes, in many areas they play it significantly better (i.e. less regulation), than we do.

would you say that in China it's about "voluntary action"?

Yes; and significantly more than 20 years ago.

it's not irrelevant if you are asserting that regulation is different from law in terms of it's effects on the economy.

??? I'm not asserting that (actually, I have no idea what effect on economy has 'a law'...doesn't it depend on 'the law'?) What I am asserting is that the term 'regulation' means specifically 'outlawing voluntary transactions' in the economic context; the fact that the word 'regulate' as used by you or lawyers or whoever in different context is used more broadly seems to me quite irrelevant to the question of 'unregulated markets'.

I AM saying that in EVERY industrialized country they seem to be almost exactly alike..and in ever 3rd world country.. the lack the very things that are present in ALL of the industrialized nations.

Great, so you are actually not asserting that labour market regulation has anything to do with the wealth of the industrialized nations?

I think it is much more than a "coincidence"

So do I - why do you find the explanation "democracy+wealth generates hosts of public choice problems, e.g. labour regaultion" satisfying?

 
At 6/10/2012 1:11 PM, Blogger Larry G said...

"often it's a cost/benefit where workers benefit.

Only if you have in mind some particular market failure; otherwise not. It seems to me somewhat ridiculous to claim that the whole labour market is one giant market failure... Are you aware that all such regulation mostly ends up reducing the worker's compensation?"

let me thank you first for debating instead of name calling... very refreshing!

well. I'm not claiming the entire market is a failure. I'm claiming that the reality does not match the ideology. If regulation was so bad and so debilitating...the industrialized nations would go to ruin and the 3rd world would become the top competitors...


"agree but that's MUCH MORE GOVERNMENT, right? Isn't that a SOCIALIST govt playing the Capitalist game?

You specifically asked which country did prospered as a direct result of less regulation. China is a starking example - they even experimented with this in the 90's by trying it in some areas only. And considering the 'capitalist game' - yes, in many areas they play it significantly better (i.e. less regulation), than we do."

China is one big dictatorial regulated state...no? They "regulate" on steroids.. right?


"would you say that in China it's about "voluntary action"?

Yes; and significantly more than 20 years ago."

you'll have to educate me. I see them as not for the free man at all....


"it's not irrelevant if you are asserting that regulation is different from law in terms of it's effects on the economy.

??? I'm not asserting that (actually, I have no idea what effect on economy has 'a law'...doesn't it depend on 'the law'?) What I am asserting is that the term 'regulation' means specifically 'outlawing voluntary transactions' in the economic context; the fact that the word 'regulate' as used by you or lawyers or whoever in different context is used more broadly seems to me quite irrelevant to the question of 'unregulated markets'."

when one property owner takes advantage of/abuses another.. regulation "happens". right? the central question is what does "voluntary" really mean? Does it mean that someone can sell you an adulterated food that can harm you and you "voluntarily" buy it because you do not "know"?

is that a kind of "voluntary transaction" that should be unregulated?


"I AM saying that in EVERY industrialized country they seem to be almost exactly alike..and in ever 3rd world country.. the lack the very things that are present in ALL of the industrialized nations.

Great, so you are actually not asserting that labour market regulation has anything to do with the wealth of the industrialized nations?"

I'm just saying that there is a very high correlation.

I think it is much more than a "coincidence"

"So do I - why do you find the explanation "democracy+wealth generates hosts of public choice problems, e.g. labour regaultion" satisfying? "

"satisfying"? hmmmm....

I react to the idea that any/all regulation is "harmful" to a vibrant and free market economy.

I think "rule of law" is de-facto regulation and that it takes other forms beyond "contract law" and that it benefits an economy (and has the potential to harm it also).

We might have too much regulation and some needs to be rolled back..but if we rolled it back to what most 3rd world countries have - I believe we'd become 3rd world ourselves.

 
At 6/10/2012 1:43 PM, Blogger ondra said...

If regulation was so bad and so debilitating...the industrialized nations would go to ruin and the 3rd world would become the top competitors...

Usain Bolt would be faster than me even if he ate junk food and I was on an athletic diet. I just wonder if it 'proves' that eating junk food is good for fast running?

Isn't saying that labour market is mostly not a market failure tantamount to saying that most labour regulation makes economy (and often workers) worse off?

China is one big dictatorial regulated state...no? They "regulate" on steroids.. right?

They certainly have less regulation than they had 20 years ago; and I wasn't in China, but my friends who were there told me that in many areas they are more capitalistic than we are. And considering they do have sweat-shops there, I would say it kind of proves they have less work-related regulation than we have....don't you think?

when one property owner takes advantage of/abuses another.. regulation "happens". right? the central question is what does "voluntary" really mean? Does it mean that someone can sell you an adulterated food that can harm you and you "voluntarily" buy it because you do not "know"?

No; and you know that I am not talking about that and you know that economists do not mean this when they speak about unregulated markets. What they do mean is minimum wage laws, working-time laws, in EU laws mandating 2-year guarantee, laws mandating work safety etc. As opposed to laws defining a "standard" allowing both sides to agree on something different.

"satisfying"? hmmmm.... Sorry,I meant 'not satisfying'. Anyway, you don't find it satisfying? Why not, it looks to me quite plausible.

I react to the idea that any/all regulation is "harmful" to a vibrant and free market economy.

I think "rule of law" is de-facto regulation and that it takes other forms beyond "contract law" and that it benefits an economy (and has the potential to harm it also).


Either you are arguing strawman - because nobody is saying that 'there should be no laws' - or, you are arguing that:

I think "rule of law" is de-facto forbidding people to voluntarily cooperate and that it benefits the economy...

I thought "rule of law" is meant to ensure an environment, where people can voluntarily cooperate. Not to forbid people from cooperating...

I just wonder what's controversial on the idea that 'forbidding people to voluntarily cooperate usually does not benefit the economy', as you seem so emphatically suggest. Could you explain?

 
At 6/10/2012 2:00 PM, Blogger Larry G said...

"If regulation was so bad and so debilitating...the industrialized nations would go to ruin and the 3rd world would become the top competitors...

Usain Bolt would be faster than me even if he ate junk food and I was on an athletic diet. I just wonder if it 'proves' that eating junk food is good for fast running?"

what if there were 10 of him and 10 of you and the same was STILL true?

"Isn't saying that labour market is mostly not a market failure tantamount to saying that most labour regulation makes economy (and often workers) worse off?"

if 100 countries have strong labor regulations and 100 countries have weak and you rank them what would the results show?


"China is one big dictatorial regulated state...no? They "regulate" on steroids.. right?

They certainly have less regulation than they had 20 years ago; and I wasn't in China, but my friends who were there told me that in many areas they are more capitalistic than we are. And considering they do have sweat-shops there, I would say it kind of proves they have less work-related regulation than we have....don't you think?"

I'll agree my perception is they have more sweat shops.

"when one property owner takes advantage of/abuses another.. regulation "happens". right? the central question is what does "voluntary" really mean? Does it mean that someone can sell you an adulterated food that can harm you and you "voluntarily" buy it because you do not "know"?

No; and you know that I am not talking about that and you know that economists do not mean this when they speak about unregulated markets. What they do mean is minimum wage laws, working-time laws, in EU laws mandating 2-year guarantee, laws mandating work safety etc. As opposed to laws defining a "standard" allowing both sides to agree on something different."

okay..let's differentiate .... you're apparently okay with SOME KINDS of regulation but NOT work regulation?


"satisfying"? hmmmm.... Sorry,I meant 'not satisfying'. Anyway, you don't find it satisfying? Why not, it looks to me quite plausible.


I react to the idea that any/all regulation is "harmful" to a vibrant and free market economy.

"I think "rule of law" is de-facto regulation and that it takes other forms beyond "contract law" and that it benefits an economy (and has the potential to harm it also).

Either you are arguing strawman - because nobody is saying that 'there should be no laws' - or, you are arguing that:

I think "rule of law" is de-facto forbidding people to voluntarily cooperate and that it benefits the economy...

I thought "rule of law" is meant to ensure an environment, where people can voluntarily cooperate. Not to forbid people from cooperating...

I just wonder what's controversial on the idea that 'forbidding people to voluntarily cooperate usually does not benefit the economy', as you seem so emphatically suggest. Could you explain? "

are you including or not including voluntary transactions that involve one party being harmed but no disclosure?

if an employer has unsafe conditions and a worker is disabled for life - and too poor to seek redress in the courts.....then what?

who protects that worker or gets him compensation?

do you consider someone selling you something that can harm you but not disclosing that fact to be something that should be regulated?

If 10 people die from e coli and the company declares bankruptcy... who is responsible for the families who got harmed?

 
At 6/10/2012 3:40 PM, Blogger ondra said...

what if there were 10 of him and 10 of you and the same was STILL true?

if 100 countries have strong labor regulations and 100 countries have weak and you rank them what would the results show?

If you take 10 atheletes eating junk food and 10 computer geeks eating athletic diet - how would you rank the relevancy of such rank to 'effect of junk food on speed'? Would 'irrelevant' be the right word?

okay..let's differentiate .... you're apparently okay with SOME KINDS of regulation but NOT work regulation?

No, I'm not okay with regulation. If it isn't prohibiting people from voluntarily cooperating, it's not regulation - and I may as well agree with that.

are you including or not including voluntary transactions that involve one party being harmed but no disclosure?

Depends on 'reasonable expectations'. I don't object agains law defining reasonable expectations.

if an employer has unsafe conditions and a worker is disabled for life - and too poor to seek redress in the courts.....then what?

Maybe you should start reforming (state-provided?) court system? Do you suggest that since the state-provided court system doesn't offer protection, the 'wealthy' and 'powerful' should get more power over the life of the worker by regulating his life?

do you consider someone selling you something that can harm you but not disclosing that fact to be something that should be regulated?

No; because in reasonable law systems you would be liable anyway. If I knowlingly lend you a car with broken brakes and I don't tell you, I am liable (probably with attempted murder) even if there is no regulation saying "thou may not lend broken car".

If 10 people die from e coli and the company declares bankruptcy... who is responsible for the families who got harmed?

Isn't this just a problem of liability? You can sue the people, or the contract can stipulate some undertaker... actually there is a multitude of ways to solve such a problem - without needing to actually forbid people from vuluntarily cooperating.

What surprises me is how we got from "the law should not allow the employee and employer to agree on wage less than X" to "the law should protect me from fraud". The sweat-shop workers are aware of their wage;they are very likely aware of the risks associated with their work; yet you say the state should forbid them to contract with their employee on such risky work with such remunaration - by giving examples of defrauded workers? Somehow it seems to me to be a non-sequitur...

 
At 6/10/2012 4:01 PM, Blogger ondra said...

To give a fairly interesting example: working in mines was always dangerous; in the 19th century there wasvirtually no work regulation. Peoplewere dying in mines - however, the miners themselves set up a kind of 'insurance scheme/fund' whereby if a miner dies, his family was paid from this fund. The employerwas not liable for this type of accidents.

The family was paid. The miners had higher wage. It was likely economically more efficient because of ability to monitor the behaviour and incentives.

 
At 6/10/2012 4:30 PM, Blogger Larry G said...

"If you take 10 atheletes eating junk food and 10 computer geeks eating athletic diet - how would you rank the relevancy of such rank to 'effect of junk food on speed'? Would 'irrelevant' be the right word?"

"relevant" is the argument that countries with less regulations should do better economically.

but we have no good examples apparently because of "other factors" for all the current examples.

so what is the relevance of the original claim that less regs are "better"?


"okay..let's differentiate .... you're apparently okay with SOME KINDS of regulation but NOT work regulation?

No, I'm not okay with regulation. If it isn't prohibiting people from voluntarily cooperating, it's not regulation - and I may as well agree with that."

okay.. so it's a CLASSIFICATION issue where some regulations restrict wrongly and others do not? are those others also bad?

"Depends on 'reasonable expectations'. I don't object agains law defining reasonable expectations."

now how do you make or not a law based on that criteria? "reasonable" is one of those words that people including judges and legislators do not share a common definition.

"if an employer has unsafe conditions and a worker is disabled for life - and too poor to seek redress in the courts.....then what?

Maybe you should start reforming (state-provided?) court system? Do you suggest that since the state-provided court system doesn't offer protection, the 'wealthy' and 'powerful' should get more power over the life of the worker by regulating his life?"

well the worker sees it as a protection that they themselves cannot afford to have on their own. no? Isn't it the workers that seek those protections?

"do you consider someone selling you something that can harm you but not disclosing that fact to be something that should be regulated?

No; because in reasonable law systems you would be liable anyway. If I knowlingly lend you a car with broken brakes and I don't tell you, I am liable (probably with attempted murder) even if there is no regulation saying "thou may not lend broken car"."

If I sell you bad food and you do not know it caused the death of your child until later or you cannot afford to hire enough talent to definitely prove it against a team of corporate lawyers ?

I'm specifically asking about the forced disclosure of the contents of something that you buy that could harm you.

Should the law require disclosure?

 
At 6/10/2012 4:30 PM, Blogger Larry G said...

"If 10 people die from e coli and the company declares bankruptcy... who is responsible for the families who got harmed?

Isn't this just a problem of liability? You can sue the people, or the contract can stipulate some undertaker... actually there is a multitude of ways to solve such a problem - without needing to actually forbid people from vuluntarily cooperating."

even if the offending company goes bankrupt and no compensation is forthcoming?

" What surprises me is how we got from "the law should not allow the employee and employer to agree on wage less than X" to "the law should protect me from fraud". The sweat-shop workers are aware of their wage;they are very likely aware of the risks associated with their work; yet you say the state should forbid them to contract with their employee on such risky work with such remunaration - by giving examples of defrauded workers? Somehow it seems to me to be a non-sequitur... "

why would you assume that someone with a minimal education and knowledge of industrial processes would be aware of the dangers?

Don't we have a long and voluminous record of people getting maimed and injured in unsafe manufacturing before the laws came about?

what I'm giving you examples of is real life issues that often inspired regulation - after the fact (as opposed to passing regs that were not known to be needed).

"To give a fairly interesting example: working in mines was always dangerous; in the 19th century there wasvirtually no work regulation. Peoplewere dying in mines - however, the miners themselves set up a kind of 'insurance scheme/fund' whereby if a miner dies, his family was paid from this fund. The employerwas not liable for this type of accidents."

no liable but clearly responsible because they made changes... in response...

"The family was paid. The miners had higher wage. It was likely economically more efficient because of ability to monitor the behaviour and incentives."

I missed the part about how the miners get higher wages? Why did they get them?

miners cannot put fresh air into a mine or buy their own methane monitors, or build rescue systems....

are you saying that these things should be the responsibility of the miners?

do you know how many people would agree with you on the merits and support any efforts to do away with regulations that require the company to do these things - with the justification that it's the workers responsibility?

 
At 6/10/2012 9:20 PM, Blogger Ken said...

Larry G,

if 100 countries have strong labor regulations and 100 countries have weak and you rank them what would the results show?

What do you think it shows? Have you done this ranking? I think it's fairly clear that freer labor markets, i.e., less regulation, result in better economic outcomes.

 
At 6/10/2012 9:23 PM, Blogger Ken said...

Larry G,

For example, communist East Germany vs. relatively free markets West Germany in the 20th century is as close to a controlled experiment as you'll ever get. Additionally, after the fall of communism, the after math is astonishing and miraculous.

 
At 6/10/2012 10:05 PM, Blogger Larry G said...

here you go Ken:

http://www.heritage.org/index/default

tell me how many 3rd world countries are in the top 20

 
At 6/11/2012 8:56 AM, Blogger Ken said...

Larry G,

tell me how many 3rd world countries are in the top 20

Tell me how many 3rd world countries have free markets or are more free than 1st world countries.

 
At 6/11/2012 8:58 AM, Blogger Ken said...

Larry G,

The Heritage link shows very clearly that freedom and free (well freer) markets result in better outcomes. The top ten on that list of economic freedom list are some of the richest nations on earth.

 
At 6/11/2012 9:17 AM, Blogger Larry G said...

" Tell me how many 3rd world countries have free markets or are more free than 1st world countries"

but that's the EXACT premise!

that the industrialized countries have far more regulations - too many regulations that "hurt" the economy and should be repealed.

3rd world countries are not near as "advanced" when it comes to regulations.

without those regulations, they exist in a better condition to grow their economies - in theory.

so what the data show is that the most regulated countries have the best economies and there are hardly any countries with less regulations that actually perform better.

and the countries with the LEAST regulations are actually the worst performers.

so why is the theory that cutting regulation will improve the economy if there is no data in the entire world to back it up?

 
At 6/11/2012 6:38 PM, Blogger Ron H. said...

"but that's the EXACT premise!"

You are assuming correlation is causation: a common error. But, if there WAS causation, it appears you have it backwards.

 

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