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No, it is making decisions based on information you aren't considering. Poor people are making economic decisions not to come out ahead but to mitigate their l

No, it is making decisions based on information you aren't considering. Poor people are making economic decisions not to come out ahead but to mitigate their losses. They aren't doing this because they want to, it is because it is the best decision they can make given their constraints. For example, they can either sell their time for minimum wage, far less than the value they create, or they can starve or go homeless. The person they are selling their time to knows that the alternative to taking the deal on the table is pain or death -- that the poor person cannot walk away from the bargaining table without making themselves worse off. So they are free to ignore the value those people create and, instead, offer the least amount possible for the poor person to avoid the fate they'd suffer if the walk away from the deal. In a word, exploitation. So, the poor person makes a deal that looks terrible to people who have the luxury of being able to walk away from a potential trade with no loss. People that must be enticed, that must leave the table with more than they brought, people who are on an upward spiral, who do not generally have to make a deal or face loss. People who are used to all parties leaving the table with more value. They are, as much as any human can, making the best decisions they can in their situation. Are there people that are simply too dumb to figure out what is best for themselves? Yes, but that number isn't anywhere close to the 45 million people we have living below the poverty line in the US.

csentropy 11y ago
Minimum wage is an artifact of economic folly. If you are voluntarily selling your labor, it means that you are getting the best value for it. If you could get more for your labor, you would. If no one else wants your labor, it means that the price you get is the most for your labor. It does not mean that that is all you will "ever" get. It just means that is all you can get until you can figure out a way to be more productive and be paid more for your labor.
- dragonwriter 11y ago
  > If you are voluntarily selling your labor, it means that you are getting the best value for it. If you assume (as do most Econ 101 models) that humans are pure rational actors in the sense of the rational choice model, which there is considerable empirical evidence that they are not. And also assume that the market for purchase of the kind of labor that the subject is selling is perfectly competitive on the buyer-of-labor side, rather than distorted by monopsony or oligopsony (which may be more frequently true than the former assumption -- though subtle collusion make it false even when it seems to be true superficially -- but certainly is not universally true.) [The second condition is necessary because if it fails, minimum price regulation will change the best price, since in the absence of competition, the purchaser of labor can do so at artificially depressed prices.]
  - csentropy 11y ago
    Assuming humans are "rational actors" according to a third person's definition of rationality is the biggest flaw in the theory you mentioned. Rationality is not amenable to interpersonal comparisons. What looks rational to me depends on my wants, needs, desires, orders of preferences and is impossible for you to deduce in an y objective way. That is the problem with most econ 101 models.
  - clavalle 11y ago
    Perfectly rational actors are not strictly necessary. Often it is enough to assume people will act in their own best interest as best they can in aggregate more often than not.
    - dragonwriter 11y ago
      Perfectly rational actors are necessary for the claim that was made. The kind of aggregate best-effort utility maximization you offer is not sufficient for the blanket universal claim made upthread, which requires that every (not the average) voluntary labor exchange is inherently for optimal (not best-effort given the laborers current information) value.
      - clavalle 11y ago
        Which is the more reasonable assumption, then: that people will choose an option that will leave them worse off or better off assuming viable and known alternatives? Is it not worth asking why they would choose less for themselves? And, if so, doesn't the act of asking why suggest that we assume there must be an explanation that makes sense? Or do we assume that one out of eight human beings are simply not as rational as the rest of us? I don't know. I wouldn't let the requirement for perfection completely override the reasonable. The alternative is that there is an underclass of irrational human beings. I think we'd be living in a much different world if that were the case.
        JoeAltmaier 11y ago
        Absolutely folks are not rational. The entire existence of the 'payday loan' industry proves that. Rationality is also subjective. What you'd do, with your safety net and well-off family and house with no mortgage, is entirely different from what someone one check from homelessness may choose to do. And it may look irrational.
- clavalle 11y ago
  > If you are voluntarily selling your labor, it means that you are getting the best value for it. I hold a gun to the head of someone you love. I tell you you will deliver something or I will kill them. You start to negotiate for how much you will be paid for your labor...do you think you will get the best value for your labor, overall? Or will you simply prevent the loss of life of your loved one? You'd likely just be happy to prevent that grievous loss. The poor are under the same terms except instead of a gun it is starvation or homelessness that is the threat to themselves or their loved ones. This is just the simplest and most apropo example of misbehaved transactions. Not all voluntary transactions result in the best value for each party. You are correct that they would get more for their labor if they could but the deviant nature of the transaction keeps it from being a value trade and creates, instead, a struggle to lose the least amount they can -- a destruction of value for that party but, if mitigated, the best possible destruction of value from their point of view. It is not a healthy part of the system. Think of a protection racket -- are those people getting the best value? Or simply getting the least amount of destruction of value given the circumstances? Those two things are not the same.
pdeuchler 11y ago
>>> "Poor people are making economic decisions not to come out ahead but to mitigate their losses" It's not just those below the poverty line, all of humanity does this... even the rich. But where did I say they are dumb? I know some incredibly smart people that are horribly off financially. I also didn't say they were the only ones with poor decision making skills. Sometimes the situation is a product of their upbringing or environment, sometimes it is because of willful ignorance or willing risk. Please don't think I'm denying that for the most part lower socio-economic classes are more liable to be exploited. I understand how class mobility has become increasingly difficult in recent times. I believe in a minimum wage. But ignoring an important facet of the issue because it's uncomfortable isn't going to get you any closer to solving the causes of the problem. Besides, the good news is you can teach financial literacy and decision making.
- clavalle 11y ago
  >It's not just those below the poverty line, all of humanity does this... even the rich. No they don't. If that were true no net value would ever be created. I mean, there are instances where it is true even for the rich (insurance, for example) but most decisions, especially the larger ones, are based on getting something of more value to them than what they are trading. And they are hardly ever bargaining for their life, the ultimate loss, as poor people do routinely.

csentropy 11y ago

Minimum wage is an artifact of economic folly. If you are voluntarily selling your labor, it means that you are getting the best value for it. If you could get more for your labor, you would. If no one else wants your labor, it means that the price you get is the most for your labor. It does not mean that that is all you will "ever" get. It just means that is all you can get until you can figure out a way to be more productive and be paid more for your labor.

dragonwriter 11y ago
> If you are voluntarily selling your labor, it means that you are getting the best value for it. If you assume (as do most Econ 101 models) that humans are pure rational actors in the sense of the rational choice model, which there is considerable empirical evidence that they are not. And also assume that the market for purchase of the kind of labor that the subject is selling is perfectly competitive on the buyer-of-labor side, rather than distorted by monopsony or oligopsony (which may be more frequently true than the former assumption -- though subtle collusion make it false even when it seems to be true superficially -- but certainly is not universally true.) [The second condition is necessary because if it fails, minimum price regulation will change the best price, since in the absence of competition, the purchaser of labor can do so at artificially depressed prices.]
- csentropy 11y ago
  Assuming humans are "rational actors" according to a third person's definition of rationality is the biggest flaw in the theory you mentioned. Rationality is not amenable to interpersonal comparisons. What looks rational to me depends on my wants, needs, desires, orders of preferences and is impossible for you to deduce in an y objective way. That is the problem with most econ 101 models.
- clavalle 11y ago
  Perfectly rational actors are not strictly necessary. Often it is enough to assume people will act in their own best interest as best they can in aggregate more often than not.
  - dragonwriter 11y ago
    Perfectly rational actors are necessary for the claim that was made. The kind of aggregate best-effort utility maximization you offer is not sufficient for the blanket universal claim made upthread, which requires that every (not the average) voluntary labor exchange is inherently for optimal (not best-effort given the laborers current information) value.
    - clavalle 11y ago
      Which is the more reasonable assumption, then: that people will choose an option that will leave them worse off or better off assuming viable and known alternatives? Is it not worth asking why they would choose less for themselves? And, if so, doesn't the act of asking why suggest that we assume there must be an explanation that makes sense? Or do we assume that one out of eight human beings are simply not as rational as the rest of us? I don't know. I wouldn't let the requirement for perfection completely override the reasonable. The alternative is that there is an underclass of irrational human beings. I think we'd be living in a much different world if that were the case.
      - JoeAltmaier 11y ago
        Absolutely folks are not rational. The entire existence of the 'payday loan' industry proves that. Rationality is also subjective. What you'd do, with your safety net and well-off family and house with no mortgage, is entirely different from what someone one check from homelessness may choose to do. And it may look irrational.
clavalle 11y ago
> If you are voluntarily selling your labor, it means that you are getting the best value for it. I hold a gun to the head of someone you love. I tell you you will deliver something or I will kill them. You start to negotiate for how much you will be paid for your labor...do you think you will get the best value for your labor, overall? Or will you simply prevent the loss of life of your loved one? You'd likely just be happy to prevent that grievous loss. The poor are under the same terms except instead of a gun it is starvation or homelessness that is the threat to themselves or their loved ones. This is just the simplest and most apropo example of misbehaved transactions. Not all voluntary transactions result in the best value for each party. You are correct that they would get more for their labor if they could but the deviant nature of the transaction keeps it from being a value trade and creates, instead, a struggle to lose the least amount they can -- a destruction of value for that party but, if mitigated, the best possible destruction of value from their point of view. It is not a healthy part of the system. Think of a protection racket -- are those people getting the best value? Or simply getting the least amount of destruction of value given the circumstances? Those two things are not the same.

pdeuchler 11y ago

>>> "Poor people are making economic decisions not to come out ahead but to mitigate their losses" It's not just those below the poverty line, all of humanity does this... even the rich. But where did I say they are dumb? I know some incredibly smart people that are horribly off financially. I also didn't say they were the only ones with poor decision making skills. Sometimes the situation is a product of their upbringing or environment, sometimes it is because of willful ignorance or willing risk. Please don't think I'm denying that for the most part lower socio-economic classes are more liable to be exploited. I understand how class mobility has become increasingly difficult in recent times. I believe in a minimum wage. But ignoring an important facet of the issue because it's uncomfortable isn't going to get you any closer to solving the causes of the problem. Besides, the good news is you can teach financial literacy and decision making.

clavalle 11y ago
>It's not just those below the poverty line, all of humanity does this... even the rich. No they don't. If that were true no net value would ever be created. I mean, there are instances where it is true even for the rich (insurance, for example) but most decisions, especially the larger ones, are based on getting something of more value to them than what they are trading. And they are hardly ever bargaining for their life, the ultimate loss, as poor people do routinely.