The flip-side of the scarcity proposition, one that economists and others usually ignore, is that limitless consumption desires, relative to productive resources, means the number of tasks for people to do is also limitless. Jobs aren’t scarce! They are limitless as sure as consumption desires relative to productive resources are limitless. The notion that there is a fixed number of tasks or jobs to do at any point in time is bogus. Ditto for the notion that job opportunities can fall. A community’s economic ladder always has more rungs to climb.
Tim Worstall rightly describes Jason Furman’s and Alan Krueger’s recent Wall Street Journal essay alleging widespread monopsony power over labor as “one of the more depressing pieces of economic analysis” – ‘depressing’ because Furman’s and Krueger’s essay is an example of especially sloppy and bad economics. (But note that Tim too readily accepts the common story of company towns. I direct him, and other readers, to the work of Price Fishback mentioned in the previous post.)
Speaking of labor markets and baseless assertions of the reality of monopsony power, here’s David Henderson’s fourth and final installment in his excellent takedown of a recent Council of Economic Advisors’ report. The following is from David’s concluding paragraph:
When I graded for an undergraduate labor economics course taught by the late George Hilton at UCLA, he had a question on an exam based on the famous 1956 Journal of Political Economy article by the late Simon Rottenberg, “The Baseball Players’ Labor Market.”…. Part (c) of the question was, and I remember this almost word for word: “In light of your answer to part (b), how widespread is monopsony likely to be in labor markets in the United States?” What Hilton and I (the grader) were looking for was: “Not very effective because even in a highly specialized labor market with few employers and, moreover, a collusive agreement among employers that is legally enforced, wage rates are well above most workers’ opportunity costs. So when there is no legal collusion, and when workers are less specialized so there are many employers competing for them, monopsony is likely to be unimportant.” The CEA has given very little reason to change that assessment.
Auditioning for the title of panderer in chief during this election cycle are two potential masters. On one side, you have Hillary Clinton constantly offering “free” stuff, such as college tuition. On the other side, you have Donald Trump promising to protect Michigan’s cars, Idaho’s potatoes, Harley-Davidson in Wisconsin, Caterpillar in Illinois and corn-based ethanol in Iowa. But nothing beats Trump’s contention that there is a “war on the American farmer” requiring his help to end. The truth is that if there’s a war on anyone, it’s on taxpayers and individual freedom.