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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

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
        >Absolutely folks are not rational. The entire existence of the 'payday loan' industry proves that. Not necessarily. It can also mean that there are fates worse than dealing with usury. Car break down that you need for your job and you need $1200 bucks and you have $27 that's supposed to pay for your groceries for the next week? A payday loan starts to look like a very good option considering the consequences of not taking that deal. >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. Which is my point. Even though what that person that is one short paycheck from homeless does may look irrational, it likely is not considering the information they have and the choices available to them. When someone is making decisions with what amounts to a gun to their head, those decisions are going to look irrational to those that don't consider the gun. Many people see the decisions the poor make and say "Oh, well I would have just negotiated based on my value to the business rather than settling for minimum wage." Which is a good response and perfectly valid if you can walk away from a deal with no negative repercussions. But the poor are negotiating with a gun to their head. They either have to take the deal or go hungry or homeless or not pay for their medication or what have you. Their decision is rational when all of the information is taken into account. It just looks irrational to people who generally don't have to deal with negative utility when they walk away from a given deal. As a society I think we should strive to minimize how many of these life and death or pain on the line financial decisions people have to make. I'd like to see us strive for a nation where no one is negotiating for their life. I'd like everyone to have the freedom to walk away from a deal that doesn't create value for them. Simple as that. It will be better for everyone because it removes value destroying distortions.
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.

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
        >Absolutely folks are not rational. The entire existence of the 'payday loan' industry proves that. Not necessarily. It can also mean that there are fates worse than dealing with usury. Car break down that you need for your job and you need $1200 bucks and you have $27 that's supposed to pay for your groceries for the next week? A payday loan starts to look like a very good option considering the consequences of not taking that deal. >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. Which is my point. Even though what that person that is one short paycheck from homeless does may look irrational, it likely is not considering the information they have and the choices available to them. When someone is making decisions with what amounts to a gun to their head, those decisions are going to look irrational to those that don't consider the gun. Many people see the decisions the poor make and say "Oh, well I would have just negotiated based on my value to the business rather than settling for minimum wage." Which is a good response and perfectly valid if you can walk away from a deal with no negative repercussions. But the poor are negotiating with a gun to their head. They either have to take the deal or go hungry or homeless or not pay for their medication or what have you. Their decision is rational when all of the information is taken into account. It just looks irrational to people who generally don't have to deal with negative utility when they walk away from a given deal. As a society I think we should strive to minimize how many of these life and death or pain on the line financial decisions people have to make. I'd like to see us strive for a nation where no one is negotiating for their life. I'd like everyone to have the freedom to walk away from a deal that doesn't create value for them. Simple as that. It will be better for everyone because it removes value destroying distortions.

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.