Voluntary Exchange or Exploitation?
Minimum wage is being discussed everywhere. At the Federal, State, and even city levels. To examine exactly what 'minimum wage' means, we first need to abstract it to its economic context. We need to pull out our 'Economics 101' book. We have at least three classifications of behavior can be called economic behavior. We have production, consumption, and exchange.
Production is any behavior that creates a commodity or service, that is, raises the want-satisfying capacity of something. We have factory that assembles electronic components and offers them to retailers for sale. Production also includes changing the spatial characteristics of the produced goods. What good is a bushel of ripe tomatoes sitting in California if someone from Wisconsin? The middleman or wholesaler changes the spatial characteristics of the tomatoes by moving them to where people have the capacity to enjoy them if they so choose to purchase thereby raising the want-satisfying capacity.
Consumption is easy. Consumption is simply the reduction of the want-satisfying capacity of something. When I eat a pizza, I reduce its want-satisfying capacity. When I rent a movie, I reduce its capacity to satisfy wants.
Exchange, which wages compromise, is a bit more intricate. The misunderstanding of exchange leads to ample perturbation and devilment. The essence of exchange is the transfer of title. Here's the essence of what happens when I buy a gallon of orange juice from my grocer. I tell him that I hold title to these three dollars and he holds title to the juice. Then, I offer: If you transfer your title to that gallon of juice, I will transfer title to these three dollars. Whenever there's voluntary exchange, the only clear conclusion that a third party can make is that both parties, in their opinion, perceived themselves as better off as a result of the exchange; otherwise, they wouldn't have exchanged. I was free to keep my three dollars, and the grocer was free to keep his orange juice.
If you think it's obvious that both parties benefit from voluntary exchange, then how come we hear the decree from the left about worker exploitation? If you were to offer me a wage of $4 an hour, I'm free to either accept or reject your offer. So what can be concluded if I'm seen working for you at $4 an hour? One clear conclusion is that I must have seen myself as being better off taking your offer than my next best alternative. All other alternatives were less valuable, or else why would I have accepted the $4 offer? How appropriate is it to say that you're exploiting me when you've given me my best offer?
While people might characterize $4 an hour as exploitation, they wouldn't say the same about $50 an hour. Therefore, for the most part, when people use the term exploitation in reference to voluntary exchange, they simply disagree with the price. If we equate price disagreement with exploitation, then exploitation is everywhere. For example, I not only disagree with my salary, I also disagree with the price of a Rolls Royce.
To force and twist the want-satisfying capacity of labor does nothing but raise prices of products. If labor costs rise, product prices will rise. An employer has two options, raise prices or use fewer workers. If the prices are too high, the consumer will shop elsewhere. If prices remain the same, the employer will have to use less workers. There you have it.
Cross Posted by In the Know @ On the Borderline
Production is any behavior that creates a commodity or service, that is, raises the want-satisfying capacity of something. We have factory that assembles electronic components and offers them to retailers for sale. Production also includes changing the spatial characteristics of the produced goods. What good is a bushel of ripe tomatoes sitting in California if someone from Wisconsin? The middleman or wholesaler changes the spatial characteristics of the tomatoes by moving them to where people have the capacity to enjoy them if they so choose to purchase thereby raising the want-satisfying capacity.
Consumption is easy. Consumption is simply the reduction of the want-satisfying capacity of something. When I eat a pizza, I reduce its want-satisfying capacity. When I rent a movie, I reduce its capacity to satisfy wants.
Exchange, which wages compromise, is a bit more intricate. The misunderstanding of exchange leads to ample perturbation and devilment. The essence of exchange is the transfer of title. Here's the essence of what happens when I buy a gallon of orange juice from my grocer. I tell him that I hold title to these three dollars and he holds title to the juice. Then, I offer: If you transfer your title to that gallon of juice, I will transfer title to these three dollars. Whenever there's voluntary exchange, the only clear conclusion that a third party can make is that both parties, in their opinion, perceived themselves as better off as a result of the exchange; otherwise, they wouldn't have exchanged. I was free to keep my three dollars, and the grocer was free to keep his orange juice.
If you think it's obvious that both parties benefit from voluntary exchange, then how come we hear the decree from the left about worker exploitation? If you were to offer me a wage of $4 an hour, I'm free to either accept or reject your offer. So what can be concluded if I'm seen working for you at $4 an hour? One clear conclusion is that I must have seen myself as being better off taking your offer than my next best alternative. All other alternatives were less valuable, or else why would I have accepted the $4 offer? How appropriate is it to say that you're exploiting me when you've given me my best offer?
While people might characterize $4 an hour as exploitation, they wouldn't say the same about $50 an hour. Therefore, for the most part, when people use the term exploitation in reference to voluntary exchange, they simply disagree with the price. If we equate price disagreement with exploitation, then exploitation is everywhere. For example, I not only disagree with my salary, I also disagree with the price of a Rolls Royce.
To force and twist the want-satisfying capacity of labor does nothing but raise prices of products. If labor costs rise, product prices will rise. An employer has two options, raise prices or use fewer workers. If the prices are too high, the consumer will shop elsewhere. If prices remain the same, the employer will have to use less workers. There you have it.
Cross Posted by In the Know @ On the Borderline
posted by Anonymous @ 10:17 AM
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