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The argument that because no market is the theoretical, textbook prefect market means we can ignore market forces and supply and demand is dubious.

• frgtpsswrdlame 9y ago
  That's not what I'm saying. Our understanding of supply and demand is shaped by the model we place them in. In this case if your understanding of supply and demand is that regardless of any of the 5 factors I listed above, supply and demand will converge to a pretty equilibrium like two lines on a graph with only two lines then you're wrong. And if you look at the empirical evidence and it strongly contradicts what your model says should happen then your model needs an update. In this case the perfectly competitive model is absolutely the wrong way to understand the labor market. The paper I linked mentions a dynamic monopsony model and also 11 different channels through which adjustment is possible. Basically the market is lots and lots of different forces (not just supply and demand) all originating from (not always rational) people, in this case we need a model which more accurately models this. If you'd like to read more about how the proliferation of the basic supply and demand model has really hurt the layman's understanding of the economy there's a great book that came out recently called "Economism." Here's a short article which can give you a bird's eye view: https://www.theatlantic.com/business/archive/2017/01/economism-and-the-minimum-wage/513155/ https://www.theatlantic.com/business/archive/2017/01/economi...