Bryan Caplan’s final paragraph in this, his most recent post on ZMP, nicely captures my own strong priors.  Are a few years of recession really sufficient reason to begin to believe that human labor has become – and will indefinitely remain – unprecedentedly inflexible?  Are we to think that entrepreneurs have finally exhausted their capacity to creatively figure out ways to profitably employ the vast majority of adult human beings willing to work?  Scientifically on this matter one should never say “never,” but I suspect that George Terborgh’s skepticism of claims of “economic maturity” is no less justified and appropriate today as it was when he first expressed it 66 years ago.

Here’s the great Jim DeLong – writing in 1998 for Reason – on the shortage of transplantable human organs.

My column in the October 2011 issue of President & CEO was composed during hurricane Irene’s final hours of lashing the U.S. northeast.  Media commentary on Irene inspired me to focus on the distinction between creative destruction and destructive destruction.

Blunt – but it exposes an uncomfortable truth often unwelcomed by enthusiasts for collective decision-making in democratic societies.  (HT Reuvain Borchardt)

Andy Morriss sheds white light on the black underbelly of “green” subsidies.

I carelessly forgot to mention this happy fact when it first became a reality: George Selgin’s Good Money is now available in paperback!

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{ 63 comments }

Daniel Kuehn November 22, 2011 at 1:26 pm

I’m trying to think of examples of people who are enthusiastic about non-constitutional democracy, but I’m coming up blank. Can you think of anyone?

Often the “constitutional” part is left implicit, but that’s no reason to suggest it’s non-existent. Some people just don’t think that much about it but if you asked them why majority voting to kill Bob wouldn’t be OK, they’d discuss something like a constitutional limitation on democracy.

Don Boudreaux November 22, 2011 at 1:51 pm

Voting to take more of rich Bob’s money might be constitutional, but it’s still the majority exercising its political might at the expense of someone whose property rights are violated in the process.

Jon Murphy November 22, 2011 at 1:59 pm

Is a crime that is still committed under the guise of the state still a crime? Is a war just simply because Congress says so? Are warentless searches ok just because a judge says so?

I understand your point, Dan, but I must agree with Don. The fundamental problem with any form of government, from totalitarian to democracy, is that the government can impose its will on members. This is not an argument against democracy, but for limited government. If we want to protect the Bob’s of the world, we must have a strong constitutionally limited government (meaning that the constitution limiting the government, not the government itself, is strong); one that cannot dominate in ANY area of life.

vidyohs November 22, 2011 at 9:50 pm

I think you should all consider how the entire meaning of democracy was fatally and eternally flawed when Mao Se Dong et. al. chose to name the new nation they formed The People’s Democratic Republic of China.

Naming it such was a bad enough a joke on humanity, but when the USA driveby media and looney left took the name and used it in reference to Mao and his gang, as well as other communist thug countries, it carried the insult to democracy to its natural excess.

I guess according to Mayor Daley of Chicago, “democracy as well as the constitution is what the cop on the beat says it is.”

Daniel Kuehn November 22, 2011 at 2:04 pm

Watch it Don, or someone’s going to try to do a reductio on you and paint you as either a totalitarian or an anarchist or both. No democratic decision is safe.

You rightly don’t think property rights are granted by the state – they can emerge spontaneously. But this spontaneous emergence, too, is not unanimous and therefore subject to exactly the same criticism (the only reason why I can claim the right to my property is that hundreds of millions of people ratify my claim – perhaps against the opposition of a minority).

Right – obviously – but the comic was ridiculing unalloyed majoritarian, and I was just musing that I don’t know a single person that is enthusiastic about such a thing.

Randy November 22, 2011 at 2:29 pm

Daniel,
See the comment from Max Fraser that I posted below. He seems quite willing to believe that whatever the majority decides is “just”.

Daniel Kuehn November 22, 2011 at 2:43 pm

Meh – I think you’re trying to draw way too much out of sloganeering.

I’d bet a lot of money if you get him to get specific about what that jibberish means it will be a constitutional democratic order. Maybe not YOUR constitutional democratic order, but I doubt it would be majoritarian democracy.

Daniel Kuehn November 22, 2011 at 2:49 pm

Perhaps I should put it this way – if you said to him “OK Max – if the majority votes for pepper spraying students would you be OK with that?”.

My bet is he would say “no”.

When people say they support democracy, what they almost always mean is that they support constitutional democracy.

Justin P November 22, 2011 at 3:04 pm

What makes you so sure everyone thinks like you?
Your always complaining about people painting Keynesians with a broad brush, but your doing the same here.

Justin P November 22, 2011 at 3:05 pm

The above comment is directed at Dan.

Fred November 22, 2011 at 3:07 pm

When people say they support democracy, what they almost always mean is that they support constitutional democracy.

Except when the pesky constitution is in conflict with what the democratic majority wants. Then it’s just a piece of paper written by rich, white, slave owners.

Daniel Kuehn November 22, 2011 at 3:09 pm

Justin P -
I don’t think people think like me necessarily. I’m guessing Max Fraser wants to see a lot less constitutional limitations on government than me. But I do think they think more like I think they think than I think they think like Randy thinks they think.

Sam Grove November 22, 2011 at 3:26 pm

There are people who support democracy only as long as they see it as a means to their own ends. When it becomes a means to other people’s ends, they often have a change of heart.

Justin P November 22, 2011 at 3:44 pm

Dan, I hope you’re right but it’s still just an assumption, unless you have any evidence?

Daniel Kuehn November 22, 2011 at 4:23 pm

Well I imagine none of us are ever going to get evidence on this one… I feel pretty solid on this, though :)

Daniel Kuehn November 22, 2011 at 4:24 pm

What am I talking about – of course we can get evidence. I’ll email the guy right now and let you know if he responds.

Daniel Kuehn November 22, 2011 at 4:30 pm

Can’t find his email easily but I left a comment – it’s not one of those posts with a million comments, so we ‘ll see if there’s any response.

Randy November 22, 2011 at 4:42 pm

Be sure to ask him what the hell he means by “an economic order without profit”… other than a null value that is.

vikingvista November 22, 2011 at 2:32 pm

Hundreds of millions of people don’t even know you exist, and most of those who do don’t even think about your property. The security of individual rights is much more dispersed than you imagine.

Greg G November 22, 2011 at 5:51 pm

I’ve seen a lot of cartoonish caricatures of constitutional democracy here but it stands to reason that you can’t beat an actual cartoon for doing that job.

I_am_a_lead_pencil November 23, 2011 at 3:21 pm

But this spontaneous emergence, too, is not unanimous and therefore subject to exactly the same criticism (the only reason why I can claim the right to my property is that hundreds of millions of people ratify my claim – perhaps against the opposition of a minority).

Good “law” (including property law) is stable across time and varying cultures. Its existence has little to do with majoritarian arbitrary whims. Even minority dissenters appeal to the “law” if you take the clothes off their backs.

Tom C November 22, 2011 at 1:49 pm

Entrepreneurs, musicians and artists will always find a new perspective.

Creativity is the antithesis of bureaucracy.

Jon Murphy November 22, 2011 at 1:53 pm

It is interesting that is who the bureaucrats go after first.

Greg Webb, librarian clowns, et al November 22, 2011 at 1:57 pm

“Are we to think that entrepreneurs have finally exhausted their capacity to creatively figure out ways to profitably employ the vast majority of adult human beings willing to work?”

Entrepreneurs, and certainly investors, would prefer to make money without the hassle of employees. It is only because an entrepreneur needs help that they will employ people. Entrepreneurs try to think creatively how they can do without employees, or how they can pay them as little as possible. This race to the bottom is allowed until the present foul capitalist system in most countries.

Why are some people entrepreneurs and others wage slaves? This is crux of the matter. Entrepreneurs get the prestige and most of the money. Therefore, it is desirable, in general, to be the employer rather than the employed. How can this be accomplished? You can work on your own solutions.

I believe that with the collapsing worldwide economy, that work should be become scarce everywhere. Who understands scarcity better than an economist? There is an immoral aspect to work because it generally interferes with one’s happiness. Who, in general, is happier someone who inherits a million dollars or someone who scrapes by on Walmart’s wages? Therefore, we should endeavor (any entrepreneurs out there willing to try?) to create more millionaires out of thin air rather than try to “creatively employ willing workers,” which is a tired myth that you foul librarians perpetuate. Think outside the box. Thinking is in short supply around here as well.

Jon Murphy November 22, 2011 at 2:08 pm

There are many aspects of this argument to pick apart, but rather than have all the fun, I’ll save some for Greg Webb and Methinks and anyone else who’s looking for some cheap entertainment this afternoon.

So, I’ll tackle this:

“There is an immoral aspect to work because it generally interferes with one’s happiness.”

Why does work interfere with one’s happiness? Doesn’t it facilitate it? When I work, I get paid. That money goes to pay my rent, maintain my car, buy my CDs and books, take me to the movies, enable me to take the girlfriend out on dates, go visit my family, all the stuff that brings me happiness. If I wasn’t working, I’d be much less happy. I’d be worrying about car payments, rent, food, etc.

Ok, who’s up next? This one has 9 other glaring things we can tackle.

Greg Webb, librarian clowns, et al November 22, 2011 at 2:14 pm

You don’t understand that time is most precious commodity of all. Time spent working is time subtracted from your brief life. Why do the idle rich crave their posh leisure time? So that their life can be spent NOT working, and living it up instead. You work to support the lifestyles of the rich and famous. You are a slave and a fool. You’re a fool because you don’t realize that you are a slave who is wasting his life. As you grow old and infirm from your obesity, you may get the message. I doubt it though.

Jon Murphy November 22, 2011 at 2:17 pm

Total’s now up to 12. C’mon people, plenty to go around!

Randy November 22, 2011 at 2:42 pm

Actually, whoever you are, I tend to agree with you that I am a fool. If I had it to do over again I would be an entrepreneur. I would take the risk. Working for a salary has been easy and safe, and not particularly profitable. But it was my choice. I have no one to blame… Well, that’s not exactly true. I do blame the exploitive politicians for taking their cut up front, and for forcing me to pay for the things that they want me to buy. But I certainly don’t blame the folks who hired me – that is, the folks who took the risk.

Greg Webb November 22, 2011 at 3:30 pm

Why are some people entrepreneurs and others wage slaves? This is crux of the matter.

Entrepreneurs choose to take the risk of losing their time and capital investment is starting up a new business. Others choose not to take the risk of losing their time or any funds necessary to start up a new business. Most new businesses fail, and most entrepreneurs work long, hard hours to satisfy consumers in order that their business may business succeed. People who choose to work for an entrepreneur are not slaves. They could have chosen to work for themselves or others.

Jon Murphy November 22, 2011 at 3:37 pm

Thank you Greg! Alright, who’s up next? Everybody plays, everybody wins!

J Cuttance November 22, 2011 at 4:15 pm

“Entrepreneurs, and certainly investors, would prefer to make money without the hassle of employees.”

What?? As soon as people possibly can, they get others to do the work their business entails, so they can concentrate on getting more business.

They might also end up employing specialists in getting more business – salespeople I think they’re called.

Jon Murphy November 22, 2011 at 4:16 pm

Great work, J!

J Cuttance November 22, 2011 at 4:17 pm

and and and “the hassle of employees”

Employees are largely only a “hassle” to the extent that regulations make them that way.

JWH November 22, 2011 at 9:52 pm

As a small business owner for a portion of my career I take issue with your assessment of employers attitudes to employees. After training an employee, after they have developed relationships with the companies customers and competitors, the last thing I wanted is for them to leave. I paid them as much as I could afford, gave them as much of what they wanted as I could. Often by sacrificing pay, time off and piece of mind for myself. if it got tight I took a pay cut first. Not all small business people are like this but certainly many are. If I had an employee that was making money, I did not want to let them go. If an employee was not making money for the firm, they had to go because they were not only hurting me but everyone who was depending on a pay check from the group.

vidyohs November 22, 2011 at 9:57 pm

“Entrepreneurs try to think creatively how they can do without employees, or how they can pay them as little as possible. This race to the bottom is allowed until the present foul capitalist system in most countries.”

There is nothing unknown in that statement, and there is nothing evil in it either. It is as natural as breathing. What is wrong with your statement is the implication that the entrepreneur will have it all his way in negotiating pay for an employee.

In the USA we do have the freedom of contract and agreeing on a wage is indeed a negotiated contract. If an entrepreneur has a need for labor of a particular nature, he will have to hire someone who has the knowledge, skill, and experience he needs. Freedom of contract guarantees that the entrepreneur will not have it all his own way in the negotiations. While the entrepreneur is dealing to get an employee at the cheapest rate possible, the potential employee is negotiating to get the highest rate possible.

The result will be satisfactory to both of them or else the potential hire walks and the entrepreneur continues to look for an employee.

Nothing but pure unadultrated free enterprise in that scenario, God bless CAPITALISM!

Dan J November 22, 2011 at 10:49 pm

Amen! May we get less GOVT hindrance and freer markets.

Josh November 23, 2011 at 10:50 am

right but if I am selling water in a desert I can charge a thirsty man whatever I like, certainly one person is at an advantage over the other, likewise if I am offering a job any job in this environment I am really only restrained by the minimun wage.

Jon Murphy November 23, 2011 at 11:00 am

Not really. In the desert, you cannot charge any price you’d like. You can only charge as much as the man is willing and able to pay. If he only has $3 on him, the highest price you can go is $3. Otherwise, you walk away empty handed.

Likewise, the lowest you can hire someone is at the wage they are willing and able to work. If you offer a man $10,000/yr, but it costs him $20,000/ yr to commute and live, he will not accept the wage and you’ll both walk away empty handed.

That’s the power of the market.

Greg Webb, librarian clowns, et al November 24, 2011 at 7:21 am

When you lose your present, low-paying job, and can’t find a new one. Don’t come crawling to me. I’ll kick you to the curb.

vidyohs November 24, 2011 at 9:55 pm

Very good Jon. When I saw his comment I was going to make the exact same point but read your reply and saw you hit the nail on the head. Very succinct and true.

Some folks never get the understanding that asking for something is no guarantee that you will get it.

Roger McKinney November 22, 2011 at 2:04 pm

It will be seen then how misleading a premature combination of these separate demand-schedules into one general investment demand-schedule may become in a world where labour (and existing equipment) is not homogeneous, but often very specific to .particular purposes, and where, therefore, an increase in the demand for one kind of labour of \vhich there is no more available can in no way offset a decrease in the demand for other kinds of labour of which there is still an unemployed reserve. PII 12

Roger McKinney November 23, 2011 at 5:14 pm

Sorry. That was a Hayek quote.

Roger McKinney November 22, 2011 at 2:04 pm

Caplan is able to maintain his faith in the ability of reduced wages to increase employment because he aggregates in such a way that he hides the real working of the economy. It is definitely true that lower wages increase employment, all other things being equal. But if lower wages don’t reduce unemployment, then all other things aren’t equal and continuing to reduce wages won’t ever have the desired effect. There may be a demand for more diesel mechanics, but that does not mean that companies looking for diesel mechanics will hire carpenters just because they are cheaper. For carpenters to get jobs as diesel mechanics they will have to be retrained and they will have to relocate to towns where companies are hiring diesel mechanics. All of that takes time.

Darren November 23, 2011 at 5:50 pm

All of that takes time.

This is what I see missing from many arguments and analyses (pretty much everyplace). So many seem to come at it with the assumption that retraining, bankruptcy, retooling, starting up a new business, etc., are done practically in real-time.

Randy November 22, 2011 at 2:20 pm

Speaking of “Blunt”… This from Max Fraser in The Nation…

” Protests and marches bring attention to our movement, but also define what our movement is fighting for: an economic order built on equality not profits; a political order built on popular justice not private self-interest; a fuller and freer democracy, not only in the political process itself but over the economic resources that we all depend upon to live.”

In other words, they want to vote on how to distribute what others earn. I don’t think he’s thought this through… What, for example, is an economic order without profits? I’m thinking its what programmers refer to as a null value.

Darren November 23, 2011 at 5:51 pm

What, for example, is an economic order without profits?

Just my thoughts while I was reading that quote. How could any “economic order” not built on profits work?

Roger McKinney November 24, 2011 at 10:34 pm

Exactly! The chief problem with mainstream econ is that it is timeless. Everything happens instantly. The second problem is the lack of heterogeneous capital.

Jon Murphy November 24, 2011 at 10:37 pm

Remember what “profits” mean in an economic sense. It’s not about money, but the benefits (monetary and non-monetary) exceeding the costs (monetary and non-monetary).

Randy November 22, 2011 at 2:23 pm

Re; Are we to think that entrepreneurs have finally exhausted their capacity to creatively figure out ways to profitably employ the vast majority of adult human beings willing to work?

No, but perhaps we have reached a point where a significant part of the population finds it less costly to vote for a political redistribution system than to work at finding new ways to create something of value.

Jon Murphy November 22, 2011 at 2:29 pm

It’s always easier to say “somebody owes me” than “I need to do it myself.”

Fred November 22, 2011 at 2:49 pm

Are we to think that governments have finally erected sufficient barriers to entrepreneurial activity that no amount of creativity can possibly employ the vast majority of human beings willing to work?

Jon Murphy November 22, 2011 at 2:50 pm

Nah. They haven’t banned risk-taking yet.

Fred November 22, 2011 at 2:59 pm

It’s not too far off. Take a risk and fail, then you fall into the social safety net. Using that logic someone may attempt to ban risk taking since it puts a potential burden on the state.

Jon Murphy November 22, 2011 at 3:01 pm

Or, if you fail your employees will be out a job, they ban any risk taking activities. Only state-approved management styles, capital, and technology.

Fred November 22, 2011 at 3:04 pm

It can’t fail if government is in charge.

Josh November 23, 2011 at 10:46 am

Or maybe just not at historical first world wages/living standards considering the increasingly global competition labor faces.

Frank33328 November 22, 2011 at 3:40 pm

A question from a non-economist: Does ANY commodity EVER have ZMP? Whatever the answer, I would think that the special commodity “labor” probably follows the same rule and for the same reason.

Jon Murphy November 22, 2011 at 3:48 pm

A couple of points Frank:

Labor is not a commodity. It’s a resource. This distinction is important: Resources (land, labor, capital, and entrepreneurship) provide returns (rent, wages, interest, and profit, respectively). Commodities are used by resources to make an output. So a resource cannot have MP, nevermind ZMP.

Jon Murphy November 22, 2011 at 5:06 pm

Sorry, that should read “A commodity cannot have MP, never mind ZMP.”

Roger McKinney November 23, 2011 at 5:18 pm

Labor is a commodity, but no commodity has ZMP. Labor has MP only in relation to specific employers. Labor could have very high MP for some employers, ZMP for others and negative MP for still other all at the same time.

It doesn’t make sense to speak of ZMP with respect to labor or commodities. MP is relative to the combination of the laborer and the company he approaches for a job. A diesel mechanic has ZMP for cabinet maker and a carpenter has ZMP for a diesel repair company. But a diesel mechanic will have very high MP for the diesel repair company.

Ryan Vann November 22, 2011 at 5:13 pm

“Except when the pesky constitution is in conflict with what the democratic majority wants. Then it’s just a piece of paper written by rich, white, slave owners.

Get with the program man. Nowadays, when the Consitution presents an obstacle, it is a breathing living document that the awesome founders had the foresight to draft in loose adaptable language.

SaulOhio November 23, 2011 at 5:19 am

When will “Good Money” be available on Kindle?

Josh November 23, 2011 at 10:42 am

Actually the role of horses changed dramaticly with the industrial revolution. Im sure their population growth was quickly halted with the adoption of the internal combustion engine. Maybe technological change will change the economy faster than entrepreneurs will be able to put human resources to work, or at least use them productively enough to hold earnings steady. Perhaps the luddites were just ahead of their time.

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