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Argument Against Market-Anarchism? (transitional costs & human suffering)

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Nitroadict Posted: Mon, Jun 16 2008 3:53 AM

I post this here since I don't think I've seen this argument on here before, so I thought it might be interesting to post.  Also, I could not think of an immediate response.

What sparked my interest in possible debate was the first post:


...market-anarchism is, at best, an easy placebo rather actual improvement.


This made me role my eyes, as nothing further was given to explain this statement, until their second reply:


I suppose the easiest place to begin is: Market anarchism permits transitional costs to be paid in human suffering. There isn't even a floor to the amount of human suffering market anarchism permits.


This is obviously going into economics, somewhat, and that is an area where I have yet to do the crucial reading for. 

However, his "point" about a floor being required to prevent human suffering sounded terribly flimsy & made me hesitant to pursue the conversation further, as it seemed more to do with economics than the political theory of anarchism(s) itself / themselves. 

I initally thought I was arguing with someone else who had views of anarchism, but it sounds like I might've come across a socialist with anarchistic misconceptions. 

I was wondering if anyone else ecnountered a similar argument against market-anarchism, perhaps in a more succinct & elegantly worded form?  I wouldn't be surprised if I'm missing out on something here, in any case.  


"Look at me, I'm quoting another user to show how wrong I think they are, out of arrogance of my own position. Wait, this is my own quote, oh shi-" ~ Nitroadict

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Solredime replied on Mon, Jun 16 2008 6:06 AM

That sounds ot me like the typical "government must prevent society from falling into chaos" argument. If a monopoly on force didn't exist, there would be no "floor" to the suffering.

I'm pretty sure this is easily countered by pointing out that the government, by its nature as a monopolist, creates the floor-less environment in the first place. Competition is what prevents people from abusing consumers. Competition in law and order would prevent abuses of authority. Thus, creating a natural "floor" to human suffering. The government, in the absense of such restraint, can perform all sorts of atrocities, such as genocides. All you have to then do is point him to the countless historical examples.

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Solomon replied on Mon, Jun 16 2008 6:38 AM

 

Nitroadict:

I suppose the easiest place to begin is: Market anarchism permits transitional costs to be paid in human suffering. There isn't even a floor to the amount of human suffering market anarchism permits.

 

I was wondering if anyone else ecnountered a similar argument against market-anarchism, perhaps in a more succinct & elegantly worded form?

All (or at least a whole phylum of) statists use this argument in some way or another, though it's usually heard in more particular forms: just price theorists with a maximum allowable price, environmentalists with a maximum allowable average global temperature, &c.

Anyway, the notion is obviously false on its face (if, say, 20,000 Mega-Hitlers is the proposed maximum amount of suffering permissible in the world without necessitating denying people their rights, why would this be the case?  why was 5000 Mega-Hitlers so great? it may very well have been too low) and is very reminiscent of the protectionist mentality, though I'm not sure of the exact connection. 

Edit: I would say that what is more telling about this critic than his belief in the ethical necessity of 'drawing the line somewhere before the universe explodes' is his statement with incredulity that "market anarchism permits transitional costs to be paid in human suffering", as if nothing had a cost, or that there were some natural distinction between paying for something with money and (consensually) paying for it with an arm and a leg.  This is, as you mentioned, a very socialistic tendency.

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Skyhooker replied on Mon, Jun 16 2008 9:12 AM

Nitroadict:



I suppose the easiest place to begin is: Market anarchism permits transitional costs to be paid in human suffering. There isn't even a floor to the amount of human suffering market anarchism permits.

 

Maybe it's just that I'm not especially well-versed in the vocabulary of economics, but when he speaks of "transitional costs," what does that mean?  Transition between what and what?  Thanks.

 

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This is obviously going into economics, somewhat, and that is an area where I have yet to do the crucial reading for. 

More like, it's going into illogic somewhat - it makes no sense.

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 Gosh, don't you know? Anarchism would cause those evil capitalists to enslave all normal people and starve to death poor children who are not fit enough to work!

LOL

You simply have to point out that government intervention always harms the economy. All forms of government intervention prevent the most efficient allocation of resources: i.e. tariffs, quotas, all taxes, regulation. However, some forms of government intervention (i.e. minimum wage laws, enforced union monopolies, welfare) also prevent full employment from occurring (remember to mention that this does not include frictional and voluntary unemployment).

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You simply have to point out that government intervention always harms the economy.

No, you can't simply point that out, because that's a statement of faith, not of fact.  It also ignores that he's probably dealing with value judgments that your definition of "efficiency" doesn't take into account.

I'm not sure what the original author intended to say, especially because of the term "transitional costs".  But referring to setting a floor for human suffering makes me wonder if he's talking about the government preventing market forces from allowing something to fall below a certain standard.

Market forces will cause some things to fall below standards set by government.  It's not because all capitalists are "evil", although some are.  It's because in some cases, economic incentives will work out so that standards do fall, especially where there is an information imbalance.

One good example is workplace safety.  Running a safe operation is almost always more expensive than running an unsafe operation, at least in the short term.  If all accidents are fully paid for by the employer, then safe operations tend to work out to be cheaper in the long run.  But when employers are focused on the short term, which they often are to satisfy investors, or because they act like something with a small chance of happening isn't going to happen (praxeologists should study psychology to understand that many humans do act this way), then they have a clear incentive to cut corners on safety.  Then they can outcompete safer competitors on price.  Consumers, even if we assume that they all do have the best interests of workers at heart, would have a very difficult time influencing workplace safety practices because they would have very little information about the workplace safety practices, not to mention that they probably wouldn't know what safe practices are in most cases.

The other players in this scenario are the workers.  There probably are many workers who have a good idea about safe practices, but there are many who won't, especially young workers or workers new to the industry.  In any event, the unsafe workplace only needs to find enough workers who don't know or care enough about workplace safety when compared to other matters (like putting food on the table or getting a foothold in the industry) that they will take jobs with the unsafe employers.  This creates a downward pressure on other employers, and you get more and more workers who end up taking jobs with unsafe employers.

Another factor that needs to be addressed is whether the costs of accidents really will be internalised.  Employers are going to internalise costs like lost production time and property damage.  It's questionable how much worker injuries will be internalised.  It's easy to say that, theoretically, if the employer is responsible then it will have to bear the full costs of the worker's injury, including medical and lost wages.  In practice, it's way harder.  Workers will have to prove that the accident was the employer's fault and that they weren't contributorily negligent.  This takes time and money, and many of the workers won't have the resources to fight this sort of battle to begin with.

So as an alternative to this race to the bottom, most people are happy to impose minimum safety standards on workplaces.  Government isn't stopping employers from exceeding these standards, and some do exceed them, though for many, market pressures, laziness, incompetence, and human psychology make them just meet or fall below the standards, at least until regulators fine them.

A similar situation to workplace safety is consumer safety.  A good example is the airline industry, where consumers really have very little understanding about the differences between a safe airline and an unsafe one.  Again, there are competitive pressures which make many small airlines fall below reasonable safety standards (the large international carriers tend to be pretty good because they are more heavily regulated, they've been in business for a lot longer, and they have more financial and human resources to deal with safety), and most consumers really have very little idea about how to judge if an airline is safe or not.  I've spoken with several pilots who are in the situation of the worker in the first example, and they've openly said that they've accepted jobs with unsafe employers because there aren't that many jobs to go around with safe employers, and that this is extremely common in the industry.  They're at least informed and can make a decision balancing the risks against the benefits.  The flying public is not.

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wombatron replied on Tue, Jun 17 2008 1:03 AM

 

No, you can't simply point that out, because that's a statement of faith, not of fact.  It also ignores that he's probably dealing with value judgments that your definition of "efficiency" doesn't take into account.

It is not a "statement of faith" that government intervention harms the economy.  It is demonstrable theoretically and observable historically.  Mises, Rothbard, Hoppe, et al, have devoted thousands of pages to showing how interventionism ultimately harms everyone.

Also, government regulations, especially safety regualations, do not help anyone.  At best, they provide the illusion of safety, and they impose sometimes massive costs on businesses, especially small ones.

Market anarchist, Linux geek, aspiring Perl hacker, and student of the neo-Aristotelians, the classical individualist anarchists, and the Austrian school.

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Worker costs WOULD be internalized. Theoretically speaking, if you're an employer, is it beneficial for you to hire and train a new worker every week just so you can replace another injured worker? Is it profitable to make your workers work longer hours to take the place of an injured worker? Is it profitable to risk the chance of a union forming and strikes occurring for greater worker safety?

As for consumer safety: when you buy a cheap product, you more than know that it is possibly dangerous. You're taking the risk into your own hands when you buy a cheap product you don't know much about. The difference between a true market economy and a regulated economy is that in a market economy you have the CHOICE between a cheap high-risk product and a more expensive low-risk product while in a regulated economy you can't take the gamble and can only choose the expensive low-risk product.

wombatron:

It is not a "statement of faith" that government intervention harms the economy.  It is demonstrable theoretically and observable historically.  Mises, Rothbard, Hoppe, et al, have devoted thousands of pages to showing how interventionism ultimately harms everyone.

Also, government regulations, especially safety regualations, do not help anyone.  At best, they provide the illusion of safety, and they impose sometimes massive costs on businesses, especially small ones.

 

Exactly. 

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Statists just like imagining that government decrees actually mean something, other than being arbitrary nonsense foisted upon the public whether it likes it or not, and further assume there is no other way to handle problems than the state. I wish this theory of perfect government intervention would die out, along with statism in general.

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gussosa replied on Tue, Jun 17 2008 12:50 PM

Callisthenes:

You simply have to point out that government intervention always harms the economy.

No, you can't simply point that out, because that's a statement of faith, not of fact.  It also ignores that he's probably dealing with value judgments that your definition of "efficiency" doesn't take into account.

I'm not sure what the original author intended to say, especially because of the term "transitional costs".  But referring to setting a floor for human suffering makes me wonder if he's talking about the government preventing market forces from allowing something to fall below a certain standard.

***** ******* *****

***** ******* *****

***** ******* *****

  The flying public is not.

 


I have to take my hat off for you. You almost got me for a minute. Really. No offense intended.

Nice talk, pal.

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macsnafu replied on Tue, Jun 17 2008 1:35 PM

Callisthenes:

So as an alternative to this race to the bottom, most people are happy to impose minimum safety standards on workplaces.  Government isn't stopping employers from exceeding these standards, and some do exceed them, though for many, market pressures, laziness, incompetence, and human psychology make them just meet or fall below the standards, at least until regulators fine them.

 

 This assumes that government regulation is some kind of minimm standard, that said standard is reasonable, and that it can be changed to adapting circumstances.  All three assumptions are unwarranted.  Also, if "most people" are indeed happy to have minimum standards, then the "race to the bottom" doesn't really exist, since they can always create such standards and encourage businesses to meet them through private certification or some other mechanism.

The airline industry is heavily regulated, and never more so since 9/11.  If the flying public is uninformed of the risks in the airline industry, I would think that the regulations had something to do with that ("national security" and other such nonsense), unless you can specifically show that such regulations are not restricting the dessemination of such information.

 

 

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wombatron:
It is demonstrable theoretically and observable historically.  Mises, Rothbard, Hoppe, et al, have devoted thousands of pages to showing how interventionism ultimately harms everyone.

Yes, just as I demonstrated theoretically, and as I have observed historically, government intervention in some areas can be beneficial.  The problem in these sorts of situations is that no theory dealing with human action, the economy, and government action can be proven according to the rules of formal logic.  Everything is argument, and different arguments will convince different people, especially when they have different experiences. 

Also, government regulations, especially safety regualations, do not help anyone.  At best, they provide the illusion of safety, and they impose sometimes massive costs on businesses, especially small ones.
 

Do you want to try to address some of the points I made about the incentives?  Do you want to look at the airline industry as an example, and small regional operators in particular?  Do you want to compare safety records between nations that seriously enforce their regulations and those nations that just have them on the books, if that?  "Government" isn't the same thing everywhere.

 

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krazy kaju:
Worker costs WOULD be internalized. Theoretically speaking, if you're an employer, is it beneficial for you to hire and train a new worker every week just so you can replace another injured worker? Is it profitable to make your workers work longer hours to take the place of an injured worker? Is it profitable to risk the chance of a union forming and strikes occurring for greater worker safety?

Theoretically speaking, your assumptions aren't going to be correct depending on the industry we're talking about and the availability of workers.  There's plenty of menial labour available that doesn't require much training, and these also tend to be the jobs that are the most dangerous.  Since most people can do these jobs, there's a lot of competition for them, and workers can't pressure employers to raise safety standards.  Unions require the power of the state or 100% support from the workers to ensure that strikes are effective.

As for consumer safety: when you buy a cheap product, you more than know that it is possibly dangerous. You're taking the risk into your own hands when you buy a cheap product you don't know much about. The difference between a true market economy and a regulated economy is that in a market economy you have the CHOICE between a cheap high-risk product and a more expensive low-risk product while in a regulated economy you can't take the gamble and can only choose the expensive low-risk product.

Why don't you try dealing with the example I used instead of assuming that the only thing I'm talking about is products that you "more than know are possibly dangerous"?

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macsnafu:
 This assumes that government regulation is some kind of minimm standard, that said standard is reasonable, and that it can be changed to adapting circumstances.  All three assumptions are unwarranted.

I never said that every time government does anything that those assumptions are going to bear out.  It is possible for stupid standards to be put in place.  But we shouldn't throw out all standards just because some aren't ideal.  There are many regulations that set a minimum standard, in the sense that they can be exceeded.  There are many regulations that are reasonable.  There are many regulations that can be adapted to changing circumstances.

Also, if "most people" are indeed happy to have minimum standards, then the "race to the bottom" doesn't really exist, since they can always create such standards and encourage businesses to meet them through private certification or some other mechanism.

That sounds nice in theory, but I have my doubts about the success of that method in many circumstances.  People are great with cognitive dissonance, including things like believing there should be safety standards, but buying from companies that don't meet those standards.

The airline industry is heavily regulated, and never more so since 9/11.  If the flying public is uninformed of the risks in the airline industry, I would think that the regulations had something to do with that ("national security" and other such nonsense), unless you can specifically show that such regulations are not restricting the dessemination of such information.

Airline safety (i.e. things like maintenance, training, operational planning etc.) and airline security (national defence, terrorism, etc.) are entirely different things.  The screening process that you have to go through at large airports is unrelated to what I'm talking about, which is oversight of the actual aviation bits of an airline operation.  As for your claiming that the flying public is uninformed because of regulations, the burden would usually fall to the one making that claim to prove it, rather than the other way around.

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Callisthenes:
Unions require the power of the state or 100% support from the workers to ensure that strikes are effective.

Or get enough people talking about it to influence the buying public's preferences.

"Three workers died to build your house"

How many people are even going to think about crossing that picket line and go shop for their 'dream home'?

There was a Daily Article a while back talking about the sick cow scandal going on. All the meat packing houses that sold to the public had high standards when it came to animal cruelty because of animal rights groups influencing the buying decisions of the people who find cows mighty tasty. Then you get to a company that almost exclusively sells to the government, cows are being 'mistreated' and standards are not being followed even though the client of said company is the one who sets the standards.

You can make your own decision on which cource of action is more effective.

Even better, the FAA getting all tough and grounding hundreds of airplanes because a wiring bundle has zip ties that are spaced at 5" instead of 3" as a direct response to getting a serious smackdown in the Court of Public Opinion. Not a single failure or even a frayed wire was found but they 'looked tough' in a 'trying time' to an agency entrusted to ensuring the safety of the flying public.

The government provides Bread and Circuses for the most part but when the Outraged Public gets on the warpath things get done muy rápido.

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Theoretically speaking, your assumptions aren't going to be correct depending on the industry we're talking about and the availability of workers.

Yeah they will.

There's plenty of menial labour available that doesn't require much training, and these also tend to be the jobs that are the most dangerous.

Thank you, Captain Obvious, for pointing out that intellectual high skill labor is safer than low skill labor. I thought pencil pushing was dangerous.

 Since most people can do these jobs, there's a lot of competition for them, and workers can't pressure employers to raise safety standards.

So you're saying it's profitable for employers to run dangerous operations that can permanently remove their workers from work? Hiring in itself is a costly operation. Besides, high unemployment, which is required for the kind of situation you're describing, can only exist in a country that has excessive regulation and taxation that reduces the demand for labor artificially.

Unions require the power of the state or 100% support from the workers to ensure that strikes are effective.

No they don't. Unions require state power to be able to create artificially rigid wages that lead to disasters like the Great Depression.

Why don't you try dealing with the example I used instead of assuming that the only thing I'm talking about is products that you "more than know are possibly dangerous"?

The same principles apply to your example of airlines. People know that cheap airlines are more dangerous, yet they still take the higher risk.

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macsnafu replied on Wed, Jun 18 2008 4:08 PM

Callisthenes:
People are great with cognitive dissonance, including things like believing there should be safety standards, but buying from companies that don't meet those standards.
 

So you believe that people always buy the cheapest products and services?  Reality doesn't bear that out.  Many companies offer products and services that are higher than the lowest possible price, and don't seem to go out of business.  Cheap shoes can be had for $10, yet there are plenty of shoes that sell higher, sometimes considerably higher. There are plenty of restaurants that are NOT fast food places, and have pricey menus.  I was looking at telephones the other day, and they run from less than $10 to well over $100.  If some people only buy the lowest prices, that merely proves that those particular people don't believe in the value of certain standards, or possibly that they suffer from this particular cognitive dissonance. 

But that is all from the consumer perspective.  Workplace safety is more of an employee issue, and employers that let their safety slide will have trouble keeping better employees.  Only the worst or more desperate employees will continue to work under highly unsafe conditions. 

 

Callisthenes:
Airline safety (i.e. things like maintenance, training, operational planning etc.) and airline security (national defence, terrorism, etc.) are entirely different things.  The screening process that you have to go through at large airports is unrelated to what I'm talking about, which is oversight of the actual aviation bits of an airline operation. 

Airline employee unions, pilot's licensing, air traffic controls, governmental controls over flight pricing and routes, aircraft maintenance regulations, local government control over airports, etc.  Not to mention the usual regs about corporations, employees, taxation, and financial matters.  The airline industry is highly regulated.

 

 

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gussosa replied on Wed, Jun 18 2008 5:27 PM

At least in the case of Uruguay, the public airline is the worst of all. PLUNA doesn't comply even with the minimum standards set by the own government.

And so we should trust the government?

A friend who is responsible for maintenance at PLUNA told me this anecdote. He was in Dutchland, taking a plane for a special maintenance work contracted with KLM. There, one of the KLM mechanics approached him to ask for the safety pins that are used to lock the wheels and avoid the plane from bouncing dangerously when it is parked and a fast wind hits the wings. The Chief Mechanic of PLUNA (second in charge to my firend) answered right away: "We don't use that stuff". The KLM looked at them as if he was catathonic and my riend looked to his subordinate in the "Why the hell don't you shut up?" way. The KLM technician went back to the hangar without saying anything.

Later, when they were coming back to Uruguay, the same technician approached my friend and told him whispering "I left a set of those locking pins on-board, just in case you ever want to try them". My friend said thanks to him but that was all.

Another friend, who was inventory manager in PLUNA, discovered hundreds of thousands of dollars in unclaimed spare parts. Those were spares that PLUNA bought but nobody ever went to pick them up until my friend took the time to do it by herself, in her spare time.

By the way, it is the only airline I know of where you get through the whole anti-terrorist screening process and once they serve the food, they give you some pretty sharp stainless steel knives and forks.

 

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Anonymous Coward:
How many people are even going to think about crossing that picket line and go shop for their 'dream home'?

Plenty.  Construction workers die all the time, and I've never seen it have an effect on the marketability of the building.  Have you?

You can make your own decision on which cource of action is more effective.

In that case it sounds like a problem of standards not being enforced.  I agree that that's a problem.  It's impossible to conclude from that that enforcing standards is a bad thing.

Even better, the FAA getting all tough and grounding hundreds of airplanes because a wiring bundle has zip ties that are spaced at 5" instead of 3" as a direct response to getting a serious smackdown in the Court of Public Opinion. Not a single failure or even a frayed wire was found but they 'looked tough' in a 'trying time' to an agency entrusted to ensuring the safety of the flying public.

Wait, so now you're saying that when the FAA responds to public opinion, it's a bad thing?  And this is the same public that you believe are going to make sure airlines are safe through their purchasing decisions?  The FAA generally does a very good job of enforcing safety regulations.  Sometimes they go overboard.  Sometimes they fail to enforce necessary regulations.  Some of their regulations aren't the most reasonable they could be.  That there are problems with the system doesn't mean that everything will be better if there's no regulation at all.

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 So you're saying it's profitable for employers to run dangerous operations that can permanently remove their workers from work? Hiring in itself is a costly operation. Besides, high unemployment, which is required for the kind of situation you're describing, can only exist in a country that has excessive regulation and taxation that reduces the demand for labor artificially.

If you read my first post, you'd understand how it can be profitable for employers to spend less on safety and remain profitable.  Hiring is a costly operation when it's necessary for you to find good applicants.  Not so much when anyone can do the job.  I hesitate to point that out for fear of being called Captain Obvious again, but it seems that you need it to be pointed out for you.  And to say that high unemployment can only exist in a country with "excessive" regulation is absurd.  Unemployment can occur for any number of reasons, including natural disasters, loss of demand for certain products, violence, technological improvement, etc.

No they don't. Unions require state power to be able to create artificially rigid wages that lead to disasters like the Great Depression.

Wow.  Way to stay on point.  To address the argument that you didn't bother to make, the problem with unions when they don't have state backing is that workers can be fired and they have to resort to violence to ensure that scabs don't work.  Unless they have enough support (internally and from non-union members who could replace them), they're not going to be successful at shutting down the employer.

People know that cheap airlines are more dangerous, yet they still take the higher risk.

How do people know that cheap airlines are more dangerous?  Anyone who flies regularly knows that the pricing for national airline tickets works in a way that two people on the same flight in the same class of seating may have entirely different amounts for the exact same amount of safety.  There's less variation in the pricing for commuters and air taxis, but it's certainly not obvious to the average consumer that safety is the sole determinant of price (which it isn't).  When people take the cheaper ticket, they're rarely thinking "I know that this company makes its pilots try to do VFR landings when conditions are below minima because it saves them fuel money, but I'll accept that risk" because they have absolutely no idea that that's happening.  And most probably wouldn't even understand what I mean by that if they were told.  There's an information imbalance which makes your assumptions about consumer decisions completely invalid.

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macsnafu:
So you believe that people always buy the cheapest products and services?

Not at all, but it is a very important factor.  Obviously other things that consumers know about, like image and service reputation play a role too.  Things that they don't know about don't play a role.  When there's an information imbalance, as there almost always will be when it comes to the safety practices of an employer, consumers aren't going to be influenced by those factors that they don't know about.

But that is all from the consumer perspective.  Workplace safety is more of an employee issue, and employers that let their safety slide will have trouble keeping better employees.  Only the worst or more desperate employees will continue to work under highly unsafe conditions.

You're right that they'll have trouble keeping better employees.  That doesn't mean that the market will ensure that safety standards are as high as they would be if they're enforced by government.  I know of safe airline companies that have stopped flying certain routes because they weren't profitable.  And the reason the routes weren't profitable is not one of the following:  government regulation made them too expensive to fly; people didn't want to fly the route; the company was poorly managed.  The reason the routes weren't profitable is that unsafe airlines could afford to undersell the good airlines because they didn't spend the money on maintenance, training, pilot rest time, etc. that they should have. 

 

Airline employee unions, pilot's licensing, air traffic controls, governmental controls over flight pricing and routes, aircraft maintenance regulations, local government control over airports, etc.  Not to mention the usual regs about corporations, employees, taxation, and financial matters.  The airline industry is highly regulated. 
 

Of course the airline industry is heavily regulated in the US.  That's one of the reasons why the US has one of the best aviation safety records worldwide.

 

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gussosa:
And so we should trust the government?
 

 You shouldn't trust government just because it's government.  It takes hard work to make government do its job properly, but that doesn't mean it can't or shouldn't be done.  Uruguay isn't exactly a model nation when it comes to aviation regulation, so no, I wouldn't trust the government there on aviation as it's currently being run.

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Callisthenes:
Wait, so now you're saying that when the FAA responds to public opinion, it's a bad thing?

Umm...no.

What I was saying is that the Court of Public Opinion is a powerful motivator as can be seen by the FAA going 'overboard'.

The very fact that 'standards get enforced' very, very diligently when the public is in an uproar as opposed to when a few expendable workers die here and there without anything changing also shows this to be true.

What makes you think the State is the only body that can effectively enforce standards anyway?

One would think that some entity that has a direct financial incentive in the matter would be more interested in making sure their liabilities were limited like the companies that insure the property or activity in question. All state regulations and inspections really do is to externalize the costs of maintaining standards for the insurance companies and businesses involved.

Or mortgage companies that require a home inspection to verify that the building is up to standards before they will give you a dime to purchase it.

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Callisthenes:
The reason the routes weren't profitable is that unsafe airlines could afford to undersell the good airlines because they didn't spend the money on maintenance, training, pilot rest time, etc. that they should have.

What, like Jet Blue?

How are they doing these days?

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gussosa replied on Thu, Jun 19 2008 9:11 AM

Thank you.

So we should deregulate things but just in 3rd World countries like mine?

Thanks, I hope my polliticians listen to you. We would really get an edge over the rest of the countries!!!

Now, jokes away. Your problem is believing that the "the system has flaws but it is the best available". The very reason why the system has flaws is because it is wrong.

The same happens with taxes. People argue in favour of "more progressive" taxes or exemptions for unprivileged groups (doesn't it hear contradictory?) while the very reason why tax systems screw things is because taxes are wrong.

You are trying to remodel a house that lacks foundations.

 

Pity the theory which sets itself up in opposition to the mind!

Carl Von Clausewitz

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gussosa replied on Thu, Jun 19 2008 9:35 AM

For years I have been cherishing the idea of an independent laboratory to certify the quality of food and beverages. It is a reality that "hygiene inspectors" start working  only the year before Town Hall elections. They get some people in jail, appear in the news and the public opinion says "our Mayor is working for us".

Anonymous Coward:
What makes you think the State is the only body that can effectively enforce standards anyway?

Seeing the success of "ISO certified", "ASME certified" and other private seals of quality, I believe that one or more companies offering private seals of hygiene would work a lot better. The customer in the supermarket would have the opportuinity to choose between a pack of rice with no seal and one certified by SGS (the most important company in grain quality control). The general tendency in the market is to always offer more for the same price, as it is easier and cheaper to compete that way. So you would choose between 50 cents for unqualified rice or 50 cents for the SGS certified rice. In the worst case, the low quality producers would have to lower their prices, and their products become available to many more people in larger quantities.

Someone could say: "You intend to feed the poor with crap". And I answer, "I intend to feed the poor", making aside any other argument. They are starving right now, but when the cheap rice millers feel the pressure of the market they (the poor) will have cheaper food availble at the same quality they intended to buy before.

Would you tell to a starving Sudanese, "No, I won't give you any hamburgers because they have too much cholesterol"?

Why hasn't any lab offered this inspection service yet? Maybe nobody told them the idea. I have told the idea to some friends in Chemical and Food Engineering, but they are no entrepreneurs, not even close.

Pity the theory which sets itself up in opposition to the mind!

Carl Von Clausewitz

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Of course the airline industry is heavily regulated in the US.  That's one of the reasons why the US has one of the best aviation safety records worldwide.

You've neither proved nor demonstrated the government even knows where the appropriate level of security is, or that its standards are not arbitrary. Economists posit governments can do all sorts of things - they can, and they usually have unintended consequences and fail to achieve even their stated goals - which is to say nothing of how those goals are chosen.

That doesn't mean that the market will ensure that safety standards are as high as they would be if they're enforced by government.

Tough luck. It is up to the consumer, consumers associations and insurers to find these things out, and decide what level of safety they want or not. Mandating "high standards" means little.

-Jon

Freedom of markets is positively correlated with the degree of evolution in any society...

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You're arguing that firms will improve security because of the costs of hiring a replacement or because the consumers care... That's non-sense. Why do firms even pay his workers? They could just feed them to make sure they have enough energy for the next day. Look, the reason why firms provide safety, promise job security, some even provide leisure and stuff like that is to reduce the wage of workers. A worker will not be willing to build some huge, tall building for the same price as for building a one-floor house. A worker is not going to work with antrax for the same price he would be willing to work to create aspirinis. In order to attract workers for a lower price, companies point to their record and may have certifications and whatever, to lure people to take those jobs for a lower price they otherwise would be willing to.

Similarly, airlines would attract customers with a higher price with safety value. Why did people voted for a government agency to regulate airplances in the first place? Because they care about their safety. Why don't people care about safety when buying a ticket? Because there is a government agency that promises safety. If it didn't exist, airports or airlines would be certified by some private agencies. There is all kinds of volunteer certifications through the various industries. These certifications agencies have a lot to lose if they mess up and an airplane crashes or is hi-jacked -- unlike the monopoly government agency -- therefore, you can bet your ass you'd be a lot more safe with these pro-profit agencies. People feel warm about government caring about them while ignoring their very lousy record, just because they are a democracy or non-profit or something organization...

EDIT: one way that airplanes could show their confidence in their safety is by promising some big insurance in case of problems. If all the bad pubilicity and a lot of other pressures weren't enough, this would surely make them check very well for any safety breach.

Equality before the law and material equality are not only different but are in conflict with each other; and we can achieve either one or the other, but not both at the same time. -- F. A. Hayek in The Constitution of Liberty

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MacFall replied on Mon, Jun 23 2008 7:45 PM

Labor is necessary for production. Labor has disutility to the laborer; i.e., human suffering.

ALL future improvements upon the human condition require "human suffering" in the present.

Natch.

Pro Christo et Libertate integre!

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It seems to me that Callisthenes has some valid points.  There is definitely a sweet spot where safety, wage rates, and labor markets converge.  Greater safety standards should mean larger labor markets, and thus, lower wages.  Conversely, poor standards means smaller markets, higher wages.  Safety standards are more likely to be fixed costs, while labor costs (especially at the lower skill levels) are generally variable costs.  The greater investment spending is to consumption, the better able businesses are to hurdle fixed costs to improve safety and be more profitable in the long-term.

The problem is that markets don't necessarily optimize for the long-term.  This is especially true when the market is fueled more by artificial credit for investment than genuine credit.  As Mises has shown, artificial credit cannot change the investment to consumption ratios of the market.  Making investments as though the ratios are changed will simply lead to massive malinvestment.  Additionally, the main selling point of artificial credit and inflationary monetary systems is the money illusion.  This leads the lesser educated to believe that they are receiving more money in real terms than they actually are.  This is one of the largest reasons why unskilled workers are the most harmed by such policies.  Their prices increase faster than their wages.  While minimum wage law prevents us from seeing the complete effects of such a policy, we can at least notice that minimum wage decreased in real terms for nearly a decade prior to the last increase without increasing unemployment significantly.  (Of course, I'm using government-defined unemployment, which may be subsidized or voluntary unemployment rather than real unemployment.)  Rather, if lower-skilled workers were given a better monetary policy, they would be able to save and invest more of their earnings, which would allow greater opportunity, in choice of workplace and products (and in choosing to labor for income or to invest for income).

Many economic problems are ones of time-scales.  Why do people invest in Ponzi schemes?  Why did wildcat banks exist?  Such practices promise quick wealth for both parties, at the expense of massive risk.  I think it is immoral to prevent people from entering into such actions, but it is virtuous to simply spread information about the risks.  Stupidity can only be fought by knowledge of consequence.  Whether this is directly or indirectly learned is up to the individual actor.  Yet, it is HIGHLY IMMORAL AND ECONOMICALLY PERVERSE to hold the wise and innocent responsible for the bad decisions of others.

Anyway, it is easy to freeze frame moments of time and say IF.  But we really can't know.  We can't test two different policies in the real world, for the same market, at the same period of time.  We can't say that some decision that wasn't made would have been problem-free or even better than what was chosen, except in theory.

When we talk about regulation, we often simply think that no regulation is simply the government not bothering to do its job.  Our theoretical assumption is that the only difference in the market is the actions of the regulators.  This is too shallow of an analysis.  The government has collected the taxes that pay the regulators.  The market no longer has these funds at its disposal.  This is a market distortion.  If those taxes weren't collected, would they be invested or spent on consumption?  Maybe they'd better safety standards; maybe they'd make them worse.  There is an endless stream of complexity to suggest consequences from a few simple decisions.  Yet, we can still average-out the market, especially over long periods of time.

I am convinced that government regulation has three problems that prevent if from being beneficial in general, in the long-term.

One, it is inefficient.  The money must be taxed away.  I can't tell you if this means more or less money for this or that class and what they'll do with it.  Our tax structure is tied into so many things, with so many exemptions, and then there's tax evasion.  What I do know is that it deprives the market of power.  I think the free actions of concerned parties will create better prosperity than some planned economy.  In that safety regulations are performed by politically-protected bureaucrats paid by involuntary taxes, I would assume that their regulations are out of sync with the market's expectations for safety standards, especially given the size and scope of government.  Further, I would assume that these regulations are unevenly enforced between competitive businesses.  All these factors mean scarce resources are being allocated in a manner that does not serve the market's desires (if one business is given monopolistic privilege, this is certainly not in the general market's favor).  This simply means there is inefficiency.  Even a small amount of inefficiency can be very consequential in the long-run.  The greater the inefficiency (between the cost of government regulation and market regulation), the less the desirable effects of the regulation will be performed, while the greater the costs (in the productivity of the economy) will be.

Second, passing responsibilities off to others creates moral hazard, promoting continued ignorance and poor market decisions.  If the market refuses to identify unsafe products at some point in time, it does so at its own risk.  If the market ends up displeased with its decisions, it will not continue them.  At an individual level, this means those who choose poorly will either die off (either literally or in terms of market power), constantly being subject to greater and greater risks and costs (such as you described in the costs of trying to hold a business liable for damages...and in medical/quality-of-life costs).  The long-term effect of allowing workers to work in unsafe environments and the market to buy unsafe products is the gradual lessening of such choices.  In the absence of government regulation, there may be some small terrible outcomes; but from what I understand, every large-scale economic or social problem caused by "the free market" actually stemmed from unseen consequences of other government policies, which had distorted the market away from being free.  My point here can be compared to welfare, which has shown no indication of reducing societal need, but rather has increased it.  In other words, if the problem is the combination of freedom with stupidity, we are better off keeping the freedom and letting the stupidity harm itself out of existence, then the other way around.  The more likely people are to resort to stupid actions, the more likely they will be able to perform them, even in the face of prohibition.

Third, prosperity builds prosperity.  If the absence of government regulations leads to greater economic activity, production, and more investment opportunity, it seems that several things will happen.  Workers will be more productive, having greater access to capital resources.  This will increase their wages.  This gives laborers more leverage to accept lower wages in a safer environment.  Also, this allows for greater competitive enterprise, in both capital and consumer goods industry.  This reduces cost.  In the long-run, a highly productive economy will eliminate the problems altogether, constantly improving both safety and production costs.  Both government-regulated and free-market can get to this point, but I would wager the free market gets there quickest without any large problems in human suffering or oppression.

 

I tend to see trends where liberals (Democrats) argue for more regulation, especially when some regulation is removed and problems occur.  But the problems aren't society-wide issues.  Enron and Worldcom, for instance, were not indicative of the entire stock market.  Regulation tends to make them more general problems.  Sarbannes-Oxley has taken the possible pain stemming from criminal actions of specific actors and turned it into real pain spread across the entire public corporate sector.  Liberals fail to realize that regulation MUST prohibit the market from doing "good" activity.  Besides the distortions and inequalities in competitive opportunity it creates, the mere fact that it requires taxation to fund necessitates that the market cannot perform some productive, mutually-beneficial activities.  Often, regulation leads simply to greater problems, then greater regulation, and so on, until you spend vast amounts of effort prohibiting desirable behavior...then when the market "fails," a proposal to nationalize industry comes about.  If regulation had no cost, and only prevented bad decisions, it wouldn't be hard to rally behind, even if it does indeed limit economic freedom.  But it could still have negative consequences if it allows economic ignorance to flourish.

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If you guys want to read some on how/why the free market promotes work safety, do some googling on compensating differential. (curiously, you may also want to google for google labs to see what they do to attract great minds for cheaper than their margin productivity and to also make them work some more than they would otherwise be willing to.)

Equality before the law and material equality are not only different but are in conflict with each other; and we can achieve either one or the other, but not both at the same time. -- F. A. Hayek in The Constitution of Liberty

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