On page 167 of his 2013 book, Debtors’ Prison, Robert Kuttner writes
Markets are, by definition, hardly reliable.
This comment by Kuttner is so remarkable that it leads off my review in Barron’s of his book (published here just beneath Bill Easterly’s review of The Idealist).
As Kuttner sees the world…. By definition markets are hardly reliable. Markets are not judged unreliable because experience shows them to be so. Markets are not judged unreliable even because some theory shows them to be so. No. Markets are unreliable by definition. It’s part of the essence of markets to be unreliable.
If scholars such as Herbert Simon and Jonathan Haidt – channeling David Hume – are correct (and I believe that they are), our priors (“passions”) play a disproportionately huge role in determining what we ‘see’ in reality. And if Deirdre McCloskey is correct (and I believe that she is), the way that we talk, the words that we use, not only reveals how we perceive reality but also affects the way that we and our fellow conversationalists perceive reality (in part by crafting our priors).
So I’ll ask some rhetorical (!) questions: What does this one sentence from Kuttner’s new book reveal about Kuttner’s priors? And how does such talk as this (“Markets are, by definition, hardly reliable”) affect the way that Kuttner and Kuttner’s readers – at least those readers not inoculated against such anti-marketism – perceive reality? With such an incurably negative view of markets as this one, Kuttner can hardly be expected to look at reality and see in that reality anything other than markets, wherever they operate, misfiring and screwing things up for ordinary men and women. (Also – although this possibility is not as clear as the one I just mentioned – Kuttner might well be led by this strong prior against markets to suppose that whenever he sees evidence that some social institution works unreliably, the source of that unreliability is markets.)
And here’s a suggestion while I’m kinda, sorta on the subject: We economists who understand not only the futility, but also the harm inflicted on many low-skilled workers, of legislated attempts to raise the monetary incomes of low-skilled workers by preventing those workers from agreeing to work at wages below whatever minimum is dictated by the government should stop calling such legislation “the minimum wage.” Such language suggests that the legislated “minimum wage” is, in fact, the minimum wage that all workers in a political jurisdiction will be paid. That suggestion, of course, is mistaken. The true minimum wage (as many people point out) is $0 per hour – or, even, less if the value of the foregone opportunities to gain valuable on-the-job experience is factored in among the consequences of government forcibly preventing low-skilled workers from working at whatever wages they, individually, choose to work at – of government forcibly preventing someone from holding a job if that person cannot persuade an employer to pay him or her an hourly wage at least equal to the government-dictated minimum.
Looked at a bit differently: by speaking of “the minimum wage” we convey the mistaken impression that government can arbitrarily dictate the actual terms of employment without any negative consequences borne by the workers who are the ostensible objects of government’s misguided goodwill.