Wisconsin Takes A Stand For Fiscal Sanity

[KrazyHorse]

The problem with using some economic models to predict behavior is that they assume people will act reasonably. However, people don't and we end up in recessions and so on. The models are nice in theory, but are not enough to formulate policy on alone.

1) I have no idea why you think that people "acting irrationally" are what causes recessions, unless the people you're thinking of are the voting members of the Federal Reserve board
2) People DON'T NEED TO DO CALCULATIONS to end up ACTING "rationally" in aggregate. And appealing to some kind of failure of a "model" (which this barely even qualifies as) is ridiculous unless you can demonstrate some kind of massive departure from precisely the behavior you expect

There is no "power imbalance" between employers and employees causing a market failure. There is only government failure in protecting the right of people to form labor cartels to the detriment of the rest of us (and to overall economic efficiency)

[notyoueither]

If people can join together in a joint stock company to exploit a market, resource or what have you... what is the problem with workers joining in a union to address issues with those joint stock companies?

[KrazyHorse]

My point is that in a non-union, unregulated system, the employer holds more leverage over wages than the employee and in a unionized, unregulated system, the employee does.

In other words, you're happy to start making up concepts that centuries of economic investigation have found no evidence of in order to justify your priors. I understand.

I think we both agree on the definition of fair ("the employee will basically be paid his or her marginal product").

Glad to hear it. Now explain to me why companies systematically choose to restrict their own output below profit-maximizing levels simply to **** their employees.

For example, I don't think a governor who cuts taxes for the wealthy and then cuts wages for public workers to pay for those taxes is being fair. Nor an executive who fires employees, while giving himself a raise is being fair.

This is the most muddle-headed thing I've ever seen you post. You have managed to go straight from "fair is when people are paid their marginal product" (a statement about LEVELS of compensation) to "fair is when one group of people is protected against their employer choosing to offer them less to continue working than they were previously making" (a statement about CHANGES to compensation).

Yes, but then the investment in your own capitol is wasted.

And in the example you gave of a company hiring fewer or less productive workers then their institutional and physical capital is wasted. What is your point?

[KrazyHorse]

If people can join together in a joint stock company to exploit a market, resource or what have you... what is the problem with workers joining in a union to address issues with those joint stock companies?

I have already explained to DaShi the difference between a union and a cooperative. A cooperative negotiates as a block, but cannot compel its counterparty to only negotiate with it. A union represents a monopoly for the labor a firm requires. A firm does not represent a monopsony for the the labor of its employees.

Note that the union is not a perfect monopoly, but it does raise substantial (and usually insurmountable) barriers to competition.

[KrazyHorse]

If there were a situation where 10% of the people who want to buy bread couldn't find a provider at any given time, I think supermarkets would be in a very good bargaining position.

Do you really believe that all of the people currently listed as unemployed could not find jobs in very short order if they were willing to accept any full time position? Note that this is not a normative prescription; it would be irrational for many of them to do so.

[KrazyHorse]

No, not really.

A person would not be able to afford even a cheap apartment and live independently on minimum wage.

What nonsense. I survived on approximately full-time minimum wage for the first couple of years of graduate school. I had enough money to own a car (1992 Toyota Camry) and eat at restaurants and drink at bars 1-2 nights a week.

[KrazyHorse]

Unlike some people here, I don't think that having earned X in one year gives me any right to expect X the next. By the way, if you REALLY want some transactions costs, here's what would happen if I were to choose to leave my current employer:

1) If it was m months since comp day I would lose ~(1+m)/12 of my annual bonus (which forms the bulk of my compensation)
2) I would lose 2 years' worth of deferred compensation (in the form of restricted stock units), which could be anywhere from 20% to 100% of annual bonus
3) If I did not have another job starting immediately I would lose my status in the US and be forced to leave within 10 days

Yet somehow with all these costs, I'm still pretty comfortable with the claim that I'm basically getting my marginal product.

[notyoueither]

I have already explained to DaShi the difference between a union and a cooperative. A cooperative negotiates as a block, but cannot compel its counterparty to only negotiate with it. A union represents a monopoly for the labor a firm requires. A firm does not represent a monopsony for the the labor of its employees.

Note that the union is not a perfect monopoly, but it does raise substantial (and usually insurmountable) barriers to competition.

These days it seems the corporations are willing to move production if the unions price themselves out of the market.

Where is the monopoly if assembly for a given model of car can be moved to Mexico?

[KrazyHorse]

nye, that is a long-term proposition (to force somebody to move countries simply to avoid unionization!). Unions can prevent competition for decades at a time. Not to mention the fact that physical capital doesn't transfer that easily. Unionization to some extent expropriates the holders of immovable physical capital most effectively.

By the way, the unionization rate in private businesses has been decimated in part because they are no longer able to enforce their monopoly as effectively. Only organizations that aren't subject to price discipline (e.g. governments) and some small number of other standouts still have a highly unionized workforce.

[KrazyHorse]

The most repugnant part of all of this is that public sector unions mostly cover middle-class workers so that they can continue to be overpaid and offer substandard services to the public. The money that goes to them due to our failure to rein in their extraordinary political influence is money that could easily be used to help people who actually need it, namely the 70-80% (?) of the population that earns less than the average schoolteacher.

[notyoueither]

I agree that public sector unions need some curbing. I'm just not certain that a curb-stomping is a good thing.

[notyoueither]

nye, that is a long-term proposition (to force somebody to move countries simply to avoid unionization!). Unions can prevent competition for decades at a time. Not to mention the fact that physical capital doesn't transfer that easily. Unionization to some extent expropriates the holders of immovable physical capital most effectively.

By the way, the unionization rate in private businesses has been decimated in part because they are no longer able to enforce their monopoly as effectively. Only organizations that aren't subject to price discipline (e.g. governments) and some small number of other standouts still have a highly unionized workforce.

It can also be a long term proposition for people to retrain themselves to seek new employment. Or, they could be too old and not be attractive to any new employer. Labour mobility is not as easy as some would have us believe.

Sauce for the goose is sauce for the gander?

[notyoueither]

The most repugnant part of all of this is that public sector unions mostly cover middle-class workers so that they can continue to be overpaid and offer substandard services to the public. The money that goes to them due to our failure to rein in their extraordinary political influence is money that could easily be used to help people who actually need it, namely the 70-80% (?) of the population that earns less than the average schoolteacher.

They also bid up the price of labour for private enterprise, no?

Given the stagnation of middleclass incomes over the last many years (I could be mistakren, but that's what I recall) that can't be a bad thing.

In fact, it might be argued that the public at large has an interest in creating a more highly paid public workforce to help inflate both the private sector and consumer spending. *ducks*

[KrazyHorse]

It can also be a long term proposition for people to retrain themselves to seek new employment. Or, they could be too old and not be attractive to any new employer. Labour mobility is not as easy as some would have us believe.

Sauce for the goose is sauce for the gander?

Err...what the **** sort of analysis are you doing in which you've decided to equate:

1) a change in underlying demand for certain skills

with

2) an enormously distortive privilege granted by legislation creating monopolies for suppliers of labor

???

I suspect it is some kind of naive fairness argument.

[notyoueither]

That being said, I do not agree with being unable to fire incompetent staff. I do not agree with the aversion to performance testing. Anything can be measured. In the case of teachers, you compare their performance given the quality of their students. Duh!

You could legislate against seniority or tenure and you could legislate performance testing and pay based on performance without stripping unions of collective bargaining rights.