So, what's wrong with Libertarianism?

[Cutlass]

Except that if there are fewer people in employment, because they have been replaced by capital, you would expect aggregate demand to go down.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.

Productivity rises gradually. It doesn't happen all at once. If wages rise with productivity, then AD also rises. And that means that businesses expand to sell to that higher AD. That expanding of business makes jobs for those people who are displaced by capital. It is a dynamic process. There are always some people being displaced, but the overall numbers (or percentage of the workforce) that is displaced at any one time doesn't grow. So to say that just puts people out of work, and so that makes the productivity numbers look artificially good just doesn't match with the past 150 years or so of industrial history. Because if that was true, almost everyone would be unemployed by this time. After all, one person now produces as much as maybe 100 people 150 years ago.

The new sales opportunities of the greater consumer purchasing power is what makes industrialization possible. Without it the best you can hope for is the boom and bust cycle that the 19th century is noted for, as productivity outstrips demand, and then many of the producers go bankrupt. Rising wages offset that, and stabilize the system. What we are going through now is the consequences of wages being too low for too long. And in the long run everyone will be poorer because wages stayed low.

It's not "just narrative" it's the history of the developed world over the past 150-200 years. If there is not a match between purchasing power and productivity, then there has to be a massive crash. This is complicated because most markets now are global. But the Great Recession drags and drags because no one has the purchasing power to put people back to work. And that is true because wages are too low. And wages are too low, because there is in fact no connection between wages and productivity. The actual connection is between wages and the bargaining strength of labor. And that is very weak right now.

My plan does not price the lowest labor out of the market. At least not to any significant degree. Places with higher minimum wages do not have higher long term unemployment.

http://www.slate.com/blogs/moneybox...age_1960s_higher_wages_less_unemployment.html

http://www.juancole.com/2013/02/beggaring-employment-infographics.html

ABSTRACT
This paper examines the impact of minimum wages on unemployment duration. We
utilize the Displaced Worker Survey to estimate the effects of minimum wages on unemployment duration, while controlling for individual characteristics and state effects that may be correlated with the value of the minimum wage. The empirical results suggest that minimum wages have differential impacts on unemployment duration for unemployment insurance recipients and non-recipients, but there are no overall increases in unemployment duration associated with higher minimum wages. In fact, higher minimum wages are associated with shorter unemployment durations for insurance recipients; for non-recipients, there is less evidence of a statistically significant relationship. These results are robust to changes in specification and different measures designed to capture the binding nature of a state minimum
wage.

http://www.irle.berkeley.edu/events/spring07/pedace/pedace.pdf

 

[Mise]

Your plan depends on pricing low wage workers out of the market! It depends on artificially raising the price of labour sufficiently high that employers will replace it with capital, thus increasing productivity. If employers don't replace labour with capital, then productivity doesn't rise, and none of the rest of your plan even matters. You say there's no connection between wages and productivity, but your plan depends on there being a connection between wages and productivity! Man, I feel like I'm in some weird vortex where things you say in one sentence disappear in the next...

 

[Cutlass]

Some jobs are lost to raising productivity. Other jobs are created by rising opportunity. You can't just look at one side of the ledger.

 

[Mise]

I know, I'm aware of that - my point is that you haven't given me a reason to believe that the "raise" side will outweigh the "loss" side. I mean, you've just said that, in the past, replacing labour with capital increases jobs overall. But, in the past, those productivity rises were caused primarily by better/more use of technology or outsourcing to lower wage countries, not simply by artificially raising wages, reducing hours, etc. You say that higher min wages don't increase unemployment, but there's no evidence that they simultaneously increase productivity as well.

I don't see the point in proposing higher min wages or fewer working hours or better working conditions based on the economic argument. To me, the economic argument is clear: those things tend to be a drag on the economy. They have a cost associated with them, in terms of lower GDP growth or lower tax revenues or whatever. But that's not why we do them. We don't institute a minimum wage because it raises GDP, we institute it because it raises standards of living. We don't limit working hours because it's good for the economy, we do it because we want to prevent workers from being exploited. We don't regulate working conditions because it's good for productivity, we regulate working conditions because it's good for workers.

This whole argument completely misses the point of liberalism. We do these things not because there's money to be made in doing them. We do these things because they're the right thing to do. We don't need an economic argument to do those things: the moral imperative is abundantly clear.

 

[Cutlass]

We argue in our book Macroeconomics Beyond the NAIRU that the NAIRU doctrine is wrong because it is a partial, not a general, theory. Specifically, wages are treated as mere costs to producers. In NAIRU, higher real-wage claims necessarily reduce firms’ profitability and hence, if firms want to protect profits (needed for investment and growth), higher wages must lead to higher prices and ultimately run-away inflation. The only way to stop this process is to have an increase in “natural unemployment”, which curbs workers’ wage claims.

What is missing from this NAIRU thinking is that wages provide macroeconomic benefits in terms of higher labor productivity growth and more rapid technological progress.

This happens for three reasons. First, higher wages raise demand and this increases profits as well as investments. And new investments, embodying the latest, most productive technologies, in turn raise productivity. Second, growth raises productivity directly, because it makes possible a further deepening of the division of labor and greater learning-by-doing by firms. Third, higher wages induce firms to step up the pace of labor-saving technological progress. The bottom line is that higher wages raise demand, promote technological progress, and increase labor productivity, thereby offsetting at least part (and perhaps all) of the negative impact of higher wages on profits.

http://ineteconomics.org/blog/insti...sed-inequality-damaging-innovation-and-growth

I'm not the only one who thinks this way. Mise, you're thinking is in line with the conventional wisdom of the past generation. But it's a paradigm that has failed, and failed badly, in the real world.

In our general approach, there is no conflict between growth and egalitarianism – the trade-off is fictitious, not a natural state of affairs.

The reason is that labor productivity growth is higher in economies that have more regulated and coordinated industrial relations systems. The explanation for this is that the more co-operative the social relations of production are, the more strongly workers will reciprocate by providing higher productivity – which is good for profitability and investment.

For the OECD countries, we find that the net impact of regulation is actually to reduce unemployment. High structural unemployment in the OECD cannot therefore be blamed on “excessive” regulation (as in NAIRU doctrine), but must be blamed on the slowdown of demand growth and structurally higher real interest rates.

This point is illustrated best by Europe’s heavily regulated, egalitarian, and open Nordic countries, which manage to combine growth, technological dynamism, and low unemployment. Most other OECD countries, in contrast, have been paying the price of rising inequality (in the last two decades) for no good reason.

A fairer capitalism is definitely possible. NAIRU-based economics is an obstruction to more sensible, cooperative, and egalitarian macro-management of our economies. And it has to change if economics is to revive its earlier sense of purpose and worthiness, which it has lost over the past three decades.

 

[Mise]

I don't really care about blog posts, Cutlass. I care about, like, numbers and stuff. Evidence. I care about literature reviews and academic consensus. What you're saying is not uncontroversial, and there are good reasons to think that it won't work. And the bits that aren't controversial are trivially achieved in the way Kaiserguard described. Right now, it's just a narrative, and linking me to another narrative written by somebody else doesn't do much to convince me otherwise.

Especially when the narrative actually says: "thereby offsetting at least part (and perhaps all) of the negative impact of higher wages on profits". Like, "at least part" and "(perhaps)" isn't exactly something I'd bet the bank on.

Sent from a phone, apols for any mistakes.

 

[Cutlass]

Well the "consensus" has clearly failed, and we are all the poorer because of it.

 

[Part_Time_Civer]

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.

That's not a fair way of reasoning. You should (in my opinion) at least indicate which part of my argument is wrong and why (for instance: "premise 1 is wrong because ....", or "conclusion 2 is wrong because premise 1 + premise 2 cannot lead to..."). If you make a general statement about my argument as a whole like "you just made it up" then I can't take your response seriously.

 

[Pangur Bán]

Libertarianism is just an intellectualization of rhetorical attacks on certain aspects of government regulation common in Anglo-American political life. It is silly as an intellectual movement because it is predicated on the idea that 'government' should withdraw from things which only exist because of it, like the 'free market', 'private property', and so forth. Teach anthropology at US high schools and you'd kill the movement stone dead.

 

[Part_Time_Civer]

And if a market is coercive, then it is not free. Labor is always a coercive market, because labor has no choice but to work.

A market can be coercive and free at the same time according to wikipedia's definition (and according to mine): http://en.wikipedia.org/wiki/Free_market

 

[Cutlass]

A market can be coercive and free at the same time according to wikipedia's definition (and according to mine): http://en.wikipedia.org/wiki/Free_market

You put a gun to someone's head, and you call it a "free market". The person who has a gun to their head disagrees. Who has the better case?

 

[dutchfire]

The man with the gun?

 

[peter grimes]

No, the gun manufacturer who is sitting on the Board of Directors of. NRA.

 

[Traitorfish]

That's not a fair way of reasoning. You should (in my opinion) at least indicate which part of my argument is wrong and why (for instance: "premise 1 is wrong because ....", or "conclusion 2 is wrong because premise 1 + premise 2 cannot lead to..."). If you make a general statement about my argument as a whole like "you just made it up" then I can't take your response seriously.

Then don't make stuff up.

 

[ParkCungHee]

I think I can provide a counter argument that will satisfactorily stay within the confines of formal logic he's requested.

If I am posting this, than Part_Time_Civer's argument is False.
I am posting this.
Ergo, Part_Time_Civer's argument is False.

I'm satisfied that this conclusion follow's very logically from my premises.

 

[Tahuti]

Libertarianism is just an intellectualization of rhetorical attacks on certain aspects of government regulation common in Anglo-American political life. It is silly as an intellectual movement because it is predicated on the idea that 'government' should withdraw from things which only exist because of it, like the 'free market', 'private property', and so forth. Teach anthropology at US high schools and you'd kill the movement stone dead.

That's only true for anarcho-capitalism. You can still believe free markets and private property exists thanks to the state, and be a Libertarian of the small-gov't variety.

I do agree anarchocapitalism is totally off anthropologically. Case in point: Ancaps say taxes are unjustified because of private property rights. Bring in Thomas Hobbes and turn the argument upside down and claim the State has property rights over their sovereign territory.

 

[Cheezy the Wiz]

That's only true for anarcho-capitalism. You can still believe free markets and private property exists thanks to the state, and be a Libertarian of the small-gov't variety.

I do agree anarchocapitalism is totally off anthropologically. Case in point: Ancaps say taxes are unjustified because of private property rights. Bring in Thomas Hobbes and turn the argument upside down and claim the State has property rights over their sovereign territory.

But the point remains that, Libertarians have no issue with granting the state a truly insane amount of power, so long as that power is directed towards maintaining free markets and capitalism. Which really makes them no different from normal classical liberals, save for their particular vigor in keeping the government out of other things not capitalism-maintenance-related.

 

[sophie]

But the point remains that, Libertarians have no issue with granting the state a truly insane amount of power, so long as that power is directed towards maintaining free markets and capitalism. Which really makes them no different from normal classical liberals, save for their particular vigor in keeping the government out of other things not capitalism-maintenance-related.

But couldn't you use those qualifiers to argue for various "socialistic" policies like healthcare, welfare, and government-pension programs?

 

[Hygro]

Your plan depends on pricing low wage workers out of the market! It depends on artificially raising the price of labour sufficiently high that employers will replace it with capital, thus increasing productivity. If employers don't replace labour with capital, then productivity doesn't rise, and none of the rest of your plan even matters. You say there's no connection between wages and productivity, but your plan depends on there being a connection between wages and productivity! Man, I feel like I'm in some weird vortex where things you say in one sentence disappear in the next...

the causal mechanism of getting capitalists to invest in capital is not rising wage costs....

 

[Pangur Bán]

That's only true for anarcho-capitalism. You can still believe free markets and private property exists thanks to the state, and be a Libertarian of the small-gov't variety.

I do agree anarchocapitalism is totally off anthropologically. Case in point: Ancaps say taxes are unjustified because of private property rights. Bring in Thomas Hobbes and turn the argument upside down and claim the State has property rights over their sovereign territory.

I wouldn't distinguish those. Libertarianism is a popular intellectualization of anti-government sentiment which itself emanates from various rich guys wanting to free themselves from the rules and taxes that could otherwise limit their power and wealth. It's a mistake to take the effects of intellectualization seriously or make the latter primary in importance. Indeed making people think the origins of the movement lie in philosophical discourse rather than self-serving interest is pernicious and serves those interests by disguising them.