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Here’s an e-mail to a Café Hayek reader:
Mr. B__t:
Thanks for your e-mail.
In response to my criticism of Prof. Eric Posner [2] for not putting his money where his mouth is when he asserts the widespread existence of monopsony power in labor markets, you write:
I’ve always found this [response] to be underwhelming. Even if someone accepted the validity of the economic way of thinking, couldn’t someone say using that way of thinking “I agree with you that billions could be made if I invested in this area. However, I’m not interested in doing so and would rather continue in academic research because it makes me happy” or “I find it morally objectionable to invest funds in this particular area, so there is no benefit that can accrue to me by investing in this area” or “I find the benefits to continuing in academic research to be greater than investing in that area to make billions of dollars” or any other variation of these responses?
Of course someone such as Prof. Posner can legitimately wish to remain in academia rather than put his money and sweat on the line in business. I myself am a thoroughgoing academic, as excessively risk-averse as I am utterly unskilled in practical affairs, and as fond of issuing idle philosophical speculations as I am allergic to exposing my body and brain to the grind of commercial enterprise.
What Prof. Posner can not legitimately do, however, is to use his assertion about the alleged availability in the real world of yet-to-be-seized profit opportunities to justify government forcing other people to behave as if his assertion is true. If he’s unwilling – for whatever reason – to put his money where his mouth is, he has no business calling on government to put our money where his mouth is. And were government to intervene as Prof. Posner advises, it would indeed be putting our money where his mouth is.
But my reason for regularly asking persons such as Prof. Posner, and others who make similar assertions, to put their money where their mouths are is not really to persuade them to leave academia and start businesses. Their likelihood of failing in such endeavors is as high as my own – which is to say, nearly 100 percent. Instead, my reason is to reveal that persons such as Prof. Posner do not understand the full implications of their assertions.
If his assertion about monopsony power is correct, it implies that entrepreneurs who do have commercial skills, and who are willing to put these skills to profitable use, stand to profit handsomely by acting on this information about the market that Prof. Posner asserts to be accurate. Yet if no actual entrepreneurs seize the profit opportunities that persons such as Prof. Posner allege to be both real and widespread, only one of two conclusions is possible: Either every entrepreneur alive mysteriously refuses to credit the accurate, profit-laden information that Prof. Posner helpfully unveils to the public, or Prof. Posner’s information isn’t credible – at least not credible enough to serve as the basis for justifying government intervention.
Which of these two conclusions do you think is the more plausible?
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030