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> I'm not aware of any definition of "free market" which supposes that all players have equal leverage. bog standard microeconomics 101 uses as an assumption t

> I'm not aware of any definition of "free market" which supposes that all players have equal leverage. bog standard microeconomics 101 uses as an assumption that no player can thru individual choices affect prices in the market, i.e. all players do have equal leverage, zero. "free market" has more than one usage, but economics's conclusions are valid only if the assumptions are met.

throwaway894345 6y ago
Fair enough; we're using 'leverage' differently. I didn't realize it had a formal economic definition. Never the less, my point stands: that employers can afford to wait for a given worker's labor prices to come down to the market price for their labor is affirmative evidence that the labor market is free whereas the OP considers this evidence that the labor market is unfree.
- avmich 6y ago
  Unpacking this: > employers can afford to wait for a given worker's labor prices to come down So employers can wait. > is affirmative evidence that the labor market is free For employers. > whereas the OP considers this evidence that the labor market is unfree For employees - they can't wait (that much), see above.
  - dnautics 6y ago
    if you could wave a magic wand and create a system for deciding labour allocation: Let's keep it simple: You must harry potter sorting hat people into, some salaries in the real world in parentheses: instagram influencer, video game tester, poet laureate, astrophysicist, molecular biologist (~35k USD), code monkey (~80-200k USD), oil rig worker (~80k USD+), road paver, garbage collector (~70-100k USD+), lyft driver (~40k USD -- though I made 50k doing that), and farmer (< ~20k USD)... How would you do it, and how "free" would it be, and what is your operational definition of "free"?
  - xphos 6y ago
    I think this is a question about timescales. Employers especially larger ones can afford to wait much longer than any singular employee. People break union lines because future better pay is not worth starving to death today. The average minimum wage American cannot afford to miss 1 paycheck without serious economic trouble.
  - throwaway894345 6y ago
    Sounds like you define "free market" such that all parties have equal wealth, or at least equal runway to wait for a better price. Per my original comment, I'm not familiar with this definition.
- WalterBright 6y ago
  > employers can afford to wait for a given worker's labor prices to come down to the market price for their labor That seriously underestimates the cost of a business being idle. Ample evidence for that is the devastation wreaked on businesses from the recent lockdowns.
  - dredmorbius 6y ago
    The lockdowns are (incidentally, effectively) a case of collective action. It's not a case of one worker withdrawing from the market, but all workers. Individually, with any positive level of unemployment, any one worker's nonparticipation is mooted by a ready waiting pool of available workers. Eventually the hold-out gets hungry. Or starves. Blacklists operate similarly: businesses can afford the exclusion, the (unorganised) excluded cannot. [I]n every part of Europe, twenty workmen serve under a master for one that is independent... What are the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little as possible. The former are disposed to combine in order to raise, the latter in order to lower the wages of labour. It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily; and the law, besides, authorizes, or at least does not prohibit their combinations, while it prohibits those of the workmen.... -- Adam Smith, Wealth of Nations, 1776 https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/Chapter_8 https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/...
    - WalterBright 6y ago
      If that were true, every job I've had would be at minimum wage. But I tended to be well-paid, despite being at the bottom of the organizational pyramids. As for blacklists, there are solutions. Blacklisted people can join together and start their own enterprises. One of the nice things about a free market is you can't stop people from doing that.
      - 6y ago
dnautics 6y ago
> no player can thru individual choices affect prices in the market That might be Econ 101 with fully continuous utility curves, and realized price equilbria, but anyone who has traded on a market knows that as soon as most bids are fulfilled it causes a dislocation of the price, so in reality the opposite is true: all individual choices affect prices in the market. There is an old concept that rolls through bernanke, krugman, keynes, marx, smith, and aristotle (you're in very smart company if you make this mistake), that somehow prices represent an equivalence class of values. That's a very mistaken view of the world and also, in a perverse way, considering the progressive bona fides of some of those smart people, reflects an illiberal fetishization of the power of money and numericism.
- LudwigNagasena 6y ago
  > prices represent an equivalence class of values What do you mean by that?
  - dnautics 6y ago
    there is this pervasive assumption in economic theory that if two things have the same price they have the same value in some global sense. To make an obvious example: If you are allergic to peanuts, then the value of a peanut to you is quite extremely different to the value of that same peanut to someone else. This is unaffected by the price of the peanut.
    - whatshisface 6y ago
      If I'm allergic to peanuts and the price of peanuts is $100/pound, the value of a pound of peanuts to me is still $100... because I can sell them and buy something I'm not allergic to.
      - munk-a 6y ago
        There are a lot of assumptions required to have that statement be sensical including a lack of transaction fees (including, just, effort - you're assuming the time it takes for you to arrange the purchase and resale is without value) and extreme price stability. 100$ worth of peanuts isn't worthless to someone with a peanut allergy but it is certainly worth less than it is to someone without since to the person with an allergy the only value of peanuts is as a bartering currency.
dredmorbius 6y ago
Keep in mind that "free market" and "perfect competition", whilst commonly used interchangably, are in fact distinct terms. Few standard economic texts even mention "free market" whilst "perfect competition" is a standard microeconomic term (along with monopoly/monopsony and oligopoly/oligopsony), referring almost entirely to marginal value analysis, price/quantity behaviours, allocations of producer/consumer surplus, and deadweight losses. "Free market" is a political term regarding the level of government regulation. Neither "free market" nor "competitive market" adequately describe all (or even significant) levels of power differentials between economic (and social) actors.
- littlestymaar 6y ago
  > Keep in mind that "free market" and "perfect competition", whilst commonly used interchangably, are in fact distinct terms. But the author used a “textbook” result that is only true in case of perfect competition, so he must be talking about perfect competition right?
  - dredmorbius 6y ago
    I did consider rooting my comment higher up the thread. But the points I was addressing were most appropriate here. Point remains that "free market" is a loaded and political term.
socialdemocrat 6y ago
A lot of the analysis and conclusions economists make are based on these kinds of assumptions. That is how they concluded in the past that minimum wage was a bad thing or many of them was against labour unions. Although Adam Smith grasped this better than many modern economists and was hence a strong supporter of Labour Unions. Of course Smith had not gotten his brain poisoned by excessive reliance on overly mathematical models of the economy.
- john-shaffer 6y ago
  > Adam Smith... was hence a strong supporter of Labour Unions. Do you have a source for this? I can't find anything but SEO junk.

throwaway894345 6y ago

Fair enough; we're using 'leverage' differently. I didn't realize it had a formal economic definition. Never the less, my point stands: that employers can afford to wait for a given worker's labor prices to come down to the market price for their labor is affirmative evidence that the labor market is free whereas the OP considers this evidence that the labor market is unfree.

avmich 6y ago
Unpacking this: > employers can afford to wait for a given worker's labor prices to come down So employers can wait. > is affirmative evidence that the labor market is free For employers. > whereas the OP considers this evidence that the labor market is unfree For employees - they can't wait (that much), see above.
- dnautics 6y ago
  if you could wave a magic wand and create a system for deciding labour allocation: Let's keep it simple: You must harry potter sorting hat people into, some salaries in the real world in parentheses: instagram influencer, video game tester, poet laureate, astrophysicist, molecular biologist (~35k USD), code monkey (~80-200k USD), oil rig worker (~80k USD+), road paver, garbage collector (~70-100k USD+), lyft driver (~40k USD -- though I made 50k doing that), and farmer (< ~20k USD)... How would you do it, and how "free" would it be, and what is your operational definition of "free"?
- xphos 6y ago
  I think this is a question about timescales. Employers especially larger ones can afford to wait much longer than any singular employee. People break union lines because future better pay is not worth starving to death today. The average minimum wage American cannot afford to miss 1 paycheck without serious economic trouble.
- throwaway894345 6y ago
  Sounds like you define "free market" such that all parties have equal wealth, or at least equal runway to wait for a better price. Per my original comment, I'm not familiar with this definition.
WalterBright 6y ago
> employers can afford to wait for a given worker's labor prices to come down to the market price for their labor That seriously underestimates the cost of a business being idle. Ample evidence for that is the devastation wreaked on businesses from the recent lockdowns.
- dredmorbius 6y ago
  The lockdowns are (incidentally, effectively) a case of collective action. It's not a case of one worker withdrawing from the market, but all workers. Individually, with any positive level of unemployment, any one worker's nonparticipation is mooted by a ready waiting pool of available workers. Eventually the hold-out gets hungry. Or starves. Blacklists operate similarly: businesses can afford the exclusion, the (unorganised) excluded cannot. [I]n every part of Europe, twenty workmen serve under a master for one that is independent... What are the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little as possible. The former are disposed to combine in order to raise, the latter in order to lower the wages of labour. It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily; and the law, besides, authorizes, or at least does not prohibit their combinations, while it prohibits those of the workmen.... -- Adam Smith, Wealth of Nations, 1776 https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/Chapter_8 https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/...
  - WalterBright 6y ago
    If that were true, every job I've had would be at minimum wage. But I tended to be well-paid, despite being at the bottom of the organizational pyramids. As for blacklists, there are solutions. Blacklisted people can join together and start their own enterprises. One of the nice things about a free market is you can't stop people from doing that.
    - 6y ago

dnautics 6y ago

> no player can thru individual choices affect prices in the market That might be Econ 101 with fully continuous utility curves, and realized price equilbria, but anyone who has traded on a market knows that as soon as most bids are fulfilled it causes a dislocation of the price, so in reality the opposite is true: all individual choices affect prices in the market. There is an old concept that rolls through bernanke, krugman, keynes, marx, smith, and aristotle (you're in very smart company if you make this mistake), that somehow prices represent an equivalence class of values. That's a very mistaken view of the world and also, in a perverse way, considering the progressive bona fides of some of those smart people, reflects an illiberal fetishization of the power of money and numericism.

LudwigNagasena 6y ago
> prices represent an equivalence class of values What do you mean by that?
- dnautics 6y ago
  there is this pervasive assumption in economic theory that if two things have the same price they have the same value in some global sense. To make an obvious example: If you are allergic to peanuts, then the value of a peanut to you is quite extremely different to the value of that same peanut to someone else. This is unaffected by the price of the peanut.
  - whatshisface 6y ago
    If I'm allergic to peanuts and the price of peanuts is $100/pound, the value of a pound of peanuts to me is still $100... because I can sell them and buy something I'm not allergic to.
    - munk-a 6y ago
      There are a lot of assumptions required to have that statement be sensical including a lack of transaction fees (including, just, effort - you're assuming the time it takes for you to arrange the purchase and resale is without value) and extreme price stability. 100$ worth of peanuts isn't worthless to someone with a peanut allergy but it is certainly worth less than it is to someone without since to the person with an allergy the only value of peanuts is as a bartering currency.

dredmorbius 6y ago

Keep in mind that "free market" and "perfect competition", whilst commonly used interchangably, are in fact distinct terms. Few standard economic texts even mention "free market" whilst "perfect competition" is a standard microeconomic term (along with monopoly/monopsony and oligopoly/oligopsony), referring almost entirely to marginal value analysis, price/quantity behaviours, allocations of producer/consumer surplus, and deadweight losses. "Free market" is a political term regarding the level of government regulation. Neither "free market" nor "competitive market" adequately describe all (or even significant) levels of power differentials between economic (and social) actors.

littlestymaar 6y ago
> Keep in mind that "free market" and "perfect competition", whilst commonly used interchangably, are in fact distinct terms. But the author used a “textbook” result that is only true in case of perfect competition, so he must be talking about perfect competition right?
- dredmorbius 6y ago
  I did consider rooting my comment higher up the thread. But the points I was addressing were most appropriate here. Point remains that "free market" is a loaded and political term.

socialdemocrat 6y ago

A lot of the analysis and conclusions economists make are based on these kinds of assumptions. That is how they concluded in the past that minimum wage was a bad thing or many of them was against labour unions. Although Adam Smith grasped this better than many modern economists and was hence a strong supporter of Labour Unions. Of course Smith had not gotten his brain poisoned by excessive reliance on overly mathematical models of the economy.

john-shaffer 6y ago
> Adam Smith... was hence a strong supporter of Labour Unions. Do you have a source for this? I can't find anything but SEO junk.