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Pardon My Repetition

On Facebook, Michael Tontchev responds to my challenge to Daniel Kuehn to put his money and effort where his mouth is.  Specifically, as I’ve written here many times, my challenge is this: if Mr. Kuehn (or anyone else) really believes that monopsony power is prevalent enough in reality to enable minimum-wage legislation to work as minimum-wage champions suppose it to work, then Mr. Kuehn believes that reality is filled with profit opportunities.  So I challenge Mr. Kuehn personally to seize these opportunities.  In doing so, if he’s correct, he’ll do well by doing good.

Mr. Tontchev’s response is this:

I mean, I doubt Daniel can up and create a widget factory out of the blue. Identifying a problem doesn’t mean you have the know-how or resources to solve it…

I agree with Mr. Tontchev’s response.  I, too, doubt that Mr. Kuehn has the ability to launch and manage a business profitably.  My expression of doubt about Mr. Kuehn’s practical abilities is no insult.  I myself have no such ability, and most of my friends and colleagues are equally bereft of such ability.  Exceptions, however, do exist – on which more in a moment.

It does not, however, follow from Mr. Tontchev’s correct point that therefore those who identify any problem in reality ought to be taken seriously as government-policy advisors.  If the problem identified is one that implies the existence of profit opportunities, then by all means let’s hear evidence of the existence of such a problem, but, with equal fervor, let’s also resist leaping from that identification to the conclusion that government interference is justified.

The point, of course, of asking Mr. Kuehn to put his money where his mouth is when he alleges that monopsony power is widespread in the American labor market is not really to get him to do so.  Asking Mr. Kuehn to do so is a means of prompting others to ask themselves “If the alleged profit opportunities really are out there, why hasn’t anyone come by to seize them?  And, even if there’s a good answer to that question, why should we expect that no one will come along in the future to seize the alleged profits?”

Remember, people such as Mr. Kuehn advise the use of government coercion to force others to change their behaviors.  Before we accept such advice, some standard of persuasion must be met.  I believe that that standard ought to be very high given that the advice in this case rests on a claim that implies the existence of profit opportunities.  The question cannot be avoided: why do such opportunities continue to exist in such volume as to justify the unleashing of government coercion – coercion that, its own champions admit, will harm the very people it’s designed to help if the belief about the existence of monopsony power is incorrect?

And so I, and economists such as myself, see someone such as Mr. Kuehn insisting on the widespread existence of such profit opportunities, while I, and economists such as myself, can see no good reason to believe that such opportunities exist.  The only good test remaining, before we put at risk the livelihoods of many low-skilled workers, is to insist that Mr. Kuehn give the most credible evidence possible of the sincerity of his belief – namely, to put his own money and skin where his mouth is.  If he refuses to put his own money where his mouth is, we might conclude that it’s merely because he’s got no talent for practical business.  But in that case why should we conclude that such a person ought to be entrusted to offer policy advice to the government?  After all, obviously no private entrepreneur or business is buying his policy advice.

The real-world is filled with market imperfections – that is to say, with profit opportunities.  All but the most routine of business activities are responses to the discovery of heretofore unrecognized opportunities for profit (that is, what are in effect market failures).  The market process itself is one huge and complex orgy of entrepreneurs noticing ways that the market today fails to satisfy human wants as well as those wants can be satisfied.  In other words, entrepreneurs identify problems.  But unlike the typical academic or politician, entrepreneurs, to use Mr. Tontchev’s words, do “up and create a widget factory out of the blue.”

Such identification of market failures, and actions to ‘correct’ them, occur daily.  They happen all the time.  So if private entrepreneurs can and do do it with their own skin, why should Mr. Kuehn be excused from meeting the same standard?  Why should we trust him, who puts nothing at stake, to guide the unleashing of the coercive powers of the state?

I mentioned above that I do have a handful of friends who are in fact talented enough to operate businesses in the real world.  One is Lyle Albaugh.  He’s a successful businessman in the retail-clothing trade.  Three years ago, when his oldest daughter was applying for admission to various U.S. colleges, Lyle noticed an imperfection in the college-admissions process.  In this imperfection, he noticed a profit opportunity.  So what did Lyle do?  He didn’t write position papers and referred-journal articles advocating government coercion.  No.  He’s trying to start a private business that will improve the college-admissions process – one that students and colleges will pay for and, in the process, earn Lyle a handsome profit.  Maybe Lyle’s effort will succeed; maybe not.  But Lyle is putting his money and effort where his mouth is.  That’s deeply admirable.  That’s what responsible and creative and productive people do.  And it’s because of people such as Lyle that the market process continues to work despite the countless intrusions inflicted on it by meddlesome academics, talking heads, and politicians.