Keynesian vs austrian debates leading up to the resession.

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Covered it. 2 Actual choices, one with a high risk of failure. There's not genuine choice.

Do you still dispute that an employer is at an advantageous position when discussing the terms of an employment contract?

 

Your position is based on what you think the price should be rather than what the price actually is.

 

Actually I'm wondering why this is an important point for you to prove.

So let's say, for the sake of the discussion, that what you say is true and that the employer is at an advantageous position. Now what?

 

Nonsense. Its based on productivity of labour. An idea you'd understand if you knew supply & demand theory. Again, given you used the term 'equilibrium wage', we know that you don't know what you're talking about

 

You think that a workers wage should somehow be related to the productivity of labor. As I said, you think the wage should be something other than what it actually is.

 

Well then you've acknowledged that coercion exists in the negotiation for a wage and therefore acknowledged yet again that labor isn't like any other good or service.

 

I don't acknowledge that an advantage is the same as coercion. But, for the sake of argument, let's say it is.

So this then disproves my initial claim that the market for labor is like any other market. Now what? Let's see where this leads.

 

It's just important to acknowledge, otherwise the fact that workers don't get paid as much as they produce doesn't make sense, they ought to just move around, find another job until the market forces wages up to match their productivity. Employers should compete for quality employees to the point that wages should match productivity minus capital investment.

Competition ought to be the all healing salve that forces us to equilibrium, no?

 

I'm not sure I agree with your premise that employers have an advantage. I definitely don't agree that such an advantage constitutes coercion, unless we have very different notions of what the word coercion means. So I'm afraid I'm not ready to acknowledge it yet, but I will consider what you've said.

That makes sense.

Okay.

 

Seems hard to make a case otherwise.

Laborers willingly accept a wage that is below what their value is to their employer. Would a person ever accept this condition if they had an option?

It was a pleasure either way.

 

I have merely understood what supply and demand informs us and what the 'equilibrium wage' entails. Your inconsistency is merely the result of not understanding supply and demand. That's not necessarily a problem, but its nighty awkward when your whole argument has been about the importance of supplky and demand.

 

Dean Baker is a Keynesian who predicted the housing bubble. There are others.

Nick Beams also predicted trouble and he is a Marxist.

Austrians are not the only ones.

 

During booms, the employee is in a sellers market, how many dot.com millionaires were there?

During a bust, the employer is in a buyers market.

The problem is many employees let their employer chart their career. Employees need to take control of their own career. Also, too many employees don't appreciate the signaling benefits an education provides. Contrary to popular opinion, "unskilled" is a choice.

Money is not a motivator - you couldn't doulble your productivity if I doubled your pay. But, if I cut your pay by 10%, you will respond in kind.

That said, lets say employers are paying 15% less than the employee is worth. One company could offer employees 10% more (5% less than they are worth), and let all their competitors employees what their wages are. Competitor employees apply, and the best are picked off. Competitor productivity, and market share, goes down. The higher paying company takes up the slack.

Or, the competitors increase wages to match.

 

Willingly isn't the right vocab. However, it is possible to model a 'willing' acceptance of underpayment. It would require embedding cognitive dissonance within wage preferences. Thus, if wage underpayment occurred due to say job search frictions- to avoid the costs associated with feeling a failure- the worker would reduce her subjective productivity and that would then impact on her subsequent on-the-job search.

 

Those weren't employees paid a wage, they were entrepreneurs, the evolution of the internet did a remarkable job of lowering the barriers to entry and reducing the risk associated with starting your own business. Not really analogous.

It always depends on the job, low wage, low skill jobs employees are basically homogeneous and even in the best of times the risk of unemployment is still there. The converse is true for very high skilled jobs, where regardless of the current business environment they can bid for higher wages since their skills are in higher demand.

I think the problem is a lack of information (no idea what everyone else is getting paid for this job) combined with the desire to not move about constantly (you can't jump up and move to any job that is willing to pay more).

It most certainly is up until a certain point, with diminishing returns of course.

Doesn't work out that way in practice, especially with low wage jobs where the person performing the task is easily replaceable, so he's not competing with someone else working someone else, but rather with the person who isn't employed at all.

You're right and I contradicted myself in that sentence. If there was choice, you could choose willingly.

But since you've piqued my interest about it being a willing exchange; it could be a case where the laborer exchanges zero liability and access to group benefits in exchange for a lower wage.

 

Many were employees hired by those entrepreneurs. The difference is they were given stock options on top of a salary.

As I said above - Contrary to popular opinion, "unskilled" is a choice.

Information is out there, in the form of career advice books, EE Times puts out an annual salary review based on position, years of experience and education.

Could it be because people don't move that they are under paid? If a company can give raises that don't track market price, and can get away with it, is that their fault, or the employees? Would you fault the company if they changed suppliers to save money?

Like it or not, we are all entrepreneurs. The only difference between a business owner, and their employee is the customer.

Before Econtalk, I read managment books, and subscribed to an audio business book service. There is little evidence that increasing wages effects productivity. But, let someone think they are underpaid.....

 

Then you most certainly aren't an employee. You're a co-owner...

No one is a product of their environment? Chances are, if you are born to poor, uneducated parents -- you'll grow up to be a poor, uneducated parent. Social mobility here ain't what it used to be.

Most low skilled jobs won't appear in those publications and further, the folks that seek those types of jobs are more than likely unaware of their existence.

There is a correlation between home ownership and underpayment.

And this is still ok with you, when the issue is completely systemic? Underpayment is the norm, there's some reasonable explanations for why, but that it's the case is indisputable.

Nonsense, the biggest difference is who's bearing the risk and liability.

 

You haven't received stock options from your companies? I received them from 3, and was not a co-owner of any.

That is the employer's fault? Why has social mobility decreased?

It is obvioulsy OK with the bulk of the employees.

How would you fix it?

Someone that doesn't take responsibility for their own career suffers no risk?

 

There is some valuable Austrian output. Anyone adopting a pluralist approach to economics will acknowledge that. However, most of those using the Austrian tag are just right wing crackpots. They'll find, for example, orthodox economics unappealing as it refuses to be theoretically stunted (i.e. conclusions will necessarily lead to an understanding of the naivety of the laissez-faire ideology)

 

Of course I have, what do you think stock is? You're purchasing or given partial ownership.

This isn't a blame game, just an acknowledgement of the reality of things.

That's not an easy question at all, education and sub-cultures that don't value it is part of the problem. That higher education has more to do with certification than education is another part of the problem. Discrimination plays some role. It's really complex and I'm not sure I have a satisfactory answer.

Because there's no genuine choice.

I'm not entirely sure it needs to be fixed. I do think everyone would benefit if more firms were worker owned because the incentives of the worker would be inline with those of his employers, I'm not sure how you'd encourage that though.

We were talking about the difference between an owner and an employ. The biggest difference is liability in so far as the company is concerned. If it goes belly up or commits some attrocity, the owner bear the brunt of it, the worker walks away unscathed.

 

Not sure why you replied to me. I have never written off Austrians completely. To be frank, I am not an expert on political economy. But I have seen that Austrian economics is divergent from the other schools. And have read enough about it to be skeptical about some people who espouse it on the internet.

 

You might want to consider doing so

 

Why is that? You said that they still offer some valuable output. That doesn't sound like you have wrote them off completely.

 

Its knowing the nature of that useful content. Hayek's stuff, originally focused on the socialist calculation debate, can be understood by just referring to firm organisation theory.

 

Goods are the product of labor. You might as well say that the producer or distributor of the widget doesn't want to produce or distribute it other places. A good is the product of a servioe--frozen labor. They follow the same economic laws, and they also follow the moral laws in that a person has the same right to a good he's produced that he does over his labor--no more or less.