So, what's wrong with Libertarianism?

Discussion in 'Off-Topic' started by Tahuti, Jul 7, 2013.

  1. Tahuti

    Tahuti Writing Deity

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    States are not bad in providing welfare because they are states, and so naturally suck at doing so. In fact - if I'm not mistaken - the Canadian health care system is run that way: The federal government mandates that the provinces implement universal health care.


    Problem is that high wages are never good in their own sake. It must be able to buy you something. Until that, it's something symbolic: Very nice, but with no benefits.
     
  2. Cutlass

    Cutlass The Man Who Wasn't There.

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    American states suck at welfare for a number of reasons. 1) 49 of the states are mandated to do so in their state constitutions. They are required to balance budgets, yet when the economy goes weak, that means taxes go weak, and more people are dependent on welfare of one form or another. The states cannot pay for that, as they cannot borrow the money. And so they will, under the best of circumstances, fail. And every person will be worse off because of that. 2) the states are much weaker on liberty issues than the feds. For this reason they are much weaker on the welfare that they are willing to pay out. They pay lower benefits, and they place more restrictions on the benefits they do pay. So it is a net loss to both the taxpayer and the welfare recipient to have the states involved, because much more money will be paid to bureaucrats, and less to the needy. 3) States compete in a race to the bottom to harm the needy as severely as possible to provide subsidies to the rich.



    High wages are always good in their own sake. That's just economics. High wages means high productivity. The ability to hire low wage workers for low productivity jobs allows employers to keep productivity low, and that means that the whole of the nation is poorer, because the average productivity of workers will be lower. If employers have to pay higher wages, they will raise productivity to offset that. More wealth will be created.
     
  3. peter grimes

    peter grimes ... Retired Moderator

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    You're very, and dangerously, wrong here. Ever heard of ALEC? Or the Chamber of Commerce? Both lobby very strongly at the state level for favorable regulations, then cry "States Rights!!!1!" when the federal government tries to clean up the mess.

    Unfortunately, corporations know that a "divide and conquer" strategy works very well here.
     
  4. Part_Time_Civer

    Part_Time_Civer Warlord

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    So the reason I'm wrong is...just because? We aint six years old anymore right?
     
  5. Tahuti

    Tahuti Writing Deity

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    High productivity leads to high wages, not the other way around. Of course, you can eliminate low wage workers' participation, which will statistically increase wages and will increase productivity, but that's just an example of cream-skinning.

    Much more lobbying money ends up in the hands of the federal government's politicians than local ones. It isn't that lobbying at state level is non-existent, but a multinational corporation with presence in every state will find federal lobbying much more rewarding.
     
  6. Mise

    Mise isle of lucy

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    Well, that was a much more succinct way of criticising Cutlass's main theory on labour policy than what I've been trying to do! :goodjob:
     
  7. Traitorfish

    Traitorfish The Tighnahulish Kid

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    You're wrong because you're not arguing from the historical record. Even if what you were saying is accurate, you'd still be wrong, because you basically made it up.
     
  8. Cutlass

    Cutlass The Man Who Wasn't There.

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    Wrong. High productivity does not cause high wages. That is the biggest failure in understanding labor economics out there.

    The bargaining power of labor causes high wages, and that is the only thing which causes high wages. Labor productivity of US labor is up about 75% since the middle 1970s. Wages are not up at all. There is no connection between rising productivity and rising wages. Believing that there is means that you have failed to understand what is going on.

    Why has wages not risen with productivity? Simply put, employers don't have to. They make more profit if they can keep all the productivity gains for themselves. And so, whenever possible, they do.

    Now, the opposite, high wages cause high productivity, that has to be true. Because employers cannot afford rising wages without rising productivity. And since the employer is always in control of the productivity, when faced with higher costs they offset those costs.

    The economic theory of substitution is well known and well accepted. When the costs of something go up, economic actors look for substitutes for it. With labor, that substitute is capital. With capital, that substitute is labor. So a very basic and uncontroversial economic theory tells you that if labor is dear and capital is cheap, capital will be substituted for labor. But if capital is dear and labor is cheap, labor will be substituted for capital.

    What that means is that low wages cause low productivity, and high wages cause high productivity. Because business operators are following their own best interest.

    Basic economic theory also tells you that supply and demand tells you what will be paid for any good or service. And so if labor is in surplus, the price of it will be low.

    http://www.nytimes.com/2006/08/28/b...44a0&ei=5090&partner=rssuserland&emc=rss&_r=0

    http://www.huffingtonpost.com/2011/03/18/wages-productivity-report_n_837814.html

    http://www.economica.ca/ew07_2p1.htm
     
  9. Mise

    Mise isle of lucy

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    I was referring to the 2nd sentence of his post, which I think is exactly what you're doing if you artificially increase wages.
     
  10. Cutlass

    Cutlass The Man Who Wasn't There.

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    The idea that low wages just forces workers out of jobs is, at best, disputable. You also can't forget the forest of the marco for the trees of the micro: Higher wages means more consumer demand, which means more demand for labor.
     
  11. Mise

    Mise isle of lucy

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    Your whole argument depends on replacing labour with capital!
     
  12. Tahuti

    Tahuti Writing Deity

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    The simple fact that wages "fail" to rise, doesn't disprove the assertion that higher productivity leads to higher wages. In fact, there may be economic forces that work against the rise that otherwise would have happened. The great decoupling happened around the same time as the collapse of Bretton Woods, so I wouldn't be surprised at all if it had something to do with that.
     
  13. Mise

    Mise isle of lucy

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    It also happened after the Civil Rights Act and Women's Lib. Damn those newly liberated blacks and women, flooding the labour market, dragging down the white man's rightful wages, keeping the white man down...
     
  14. Traitorfish

    Traitorfish The Tighnahulish Kid

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    So we're revising the claim to "rising productivity causes rising wages, unless it doesn't"?
     
  15. Mise

    Mise isle of lucy

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    In the same way that smoking causes cancer, unless it doesn't.
     
  16. Traitorfish

    Traitorfish The Tighnahulish Kid

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    Well, that's a different claim altogether, isn't it? Productivity is no longer the primary driver of wage-increases, as Kaiserguard seemed to imply, but one factor among many. It tells us that increased productivity might encourage the growth of wages, but it does not tell us that it will do so, or that it is necessary to do so. Potentially, productivity may increase while wages fall and wages may rise as productivity decreases, and you'll find historical examples of both.
     
  17. Cutlass

    Cutlass The Man Who Wasn't There.

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    And at the same time creating demand for more labor by creating more demand for the product of labor. Don't forget the macro effects. Aggregate Demand is the ruling force in market economics.



    Actually, that is exactly what it did. if rising productivity caused higher wages, then the outcomes that the world has seen over the past 40 years could not have happened!

    The very fact that this has not happened is proof that your theory is wrong. When the real world rejects the theory, the theory must be discarded.



    That has nothing to do with it. Breton Woods was discarded because it was causing greater poverty, higher unemployment, and lower wages, globally, if not in the US, than would have been true otherwise. Discarding BW would, if anything, have the opposite result of what you are talking about.


    What you are failing to understand is that there is nothing about rising productivity which in any way forces or pressures the employer to raise wages. There is no incentive for the employer to raise wages. In fact, the opposite is true: The employer has the incentive to keep wages as low as possible. And there are few circumstances when that is not true. Employers do not raise wages out of the goodness of their hearts. Employers raise wages when compelled to, or when they believe that it is in their best interest to do so for whatever other reason.

    This is why there is no actual connection between productivity and wages. If the workers lack the bargaining power, or government backing, to push their employer for higher wages, it simply is not going to happen, no matter what happens to their productivity.



    Exactly.

    It always works, except when it doesn't. For reasons.
     
  18. Tahuti

    Tahuti Writing Deity

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    There is a connection between productivity and wages. However, it is not the only thing that determines wages. Inflation (whether monetary or by supply shocks) will aversely affect wages. And right now, inflation is quite an influential factor, much more so than when wages were still almost solely affected by productivity.

    Bretton Woods collapsed because of Vietnam. To finance the war, the US printed massive amounts of Dollars which were still had to be kept at parity. Germany left Bretton Woods, and subsequently it became untenable.

    I was afraid you were going to post a comment like this. Unlike the Civil Rights Act and Women's Lib, there are actually decent reasons to believe the fall Bretton Woods may be a possible factor in the great decoupling. Bretton Woods kept inflation low, and banks careful. This in turn may have kept bargaining power of employees on par, as wages did not face inflationary pressure.

    Exactly. But before the 1970s or so, productivity and wages were fairly intertwined, and it was only with the closing of the gold window and the subsequent inflation that it went away. Of course, something akin to the gold window should not be installed again, for that would be unfeasible, but there may be decent alternatives, like tighter reserve requirements.
     
  19. Cutlass

    Cutlass The Man Who Wasn't There.

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    There hasn't been any inflation in the US in 30 years. The inflation of the 1970s actually left nearly all of the working population of the country far better off than they would have been otherwise. But since the early 80s there hasn't been any inflation. And the excessive anti-inflation tight money policies have been a significant contributor to labor's poor condition over that time period.



    It was untenable despite the Vietnam War. The world demand for money had outstripped the world supply of gold. Keeping BW would have meant forcing much greater poverty on the world's people.




    There's been less inflation in the last 30 years than there was in the 30 years before BW collapsed. You keep blaming something which does not exist.




    Again, what inflation are you talking about?



    For inflation to be the culprit over the last 30 years, there would have to have been, you know, inflation over the past 30 years. But the inflation we have actually had has been no worse than the inflation we had under BW, except in the period of roughly 1973-1983. And during those years the actual cause of the inflation was the price of oil.
     
  20. Mise

    Mise isle of lucy

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    I don't see how I can't replace appropriate words in that with "smoking" and "cancer" and not come out with a statement that makes just as much sense. Kaiserguard was objecting to Cutlass's claim that higher wages caused productivity increases; he said that, actually, it was the other way around: productivity caused higher wages. This is analogous to someone saying that cancer causes smoking, and objecting by saying that, actually, smoking causes cancer. Cutlass's response was to point out that, in recent history, productivity rises have not lead to wage rises. This is like saying that not all people who smoke get cancer; it is true, but it's not a valid objection. Smoking does cause cancer, even if there are other factors that determine whether someone will get cancer. Everything you have said in your above post is perfectly consistent with what Kaiserguard is saying and I have no problem with any part of it.

    In short, I don't think it's a different claim altogether.

    Except that if there are fewer people in employment, because they have been replaced by capital, you would expect aggregate demand to go down. There is no reason to assume that this fall in aggregate demand due to higher unemployment will be offset substantially, much less entirely, by a rise in aggregate demand due to higher wages at the other end. That the higher wages for the lucky people who have not been or cannot be replaced by robots/computers/etc will trickle down and create demand for more labour at the bottom end. There's no reason for me to believe this at all. It's just a narrative.

    The comment that I agreed with Kaiserguard on was that you can trivially increase productivity by pricing low wage workers out of the market, and your plan is to do just that.
     

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