why do we have unemployment?
... just as the State has no money of its own, so it has no power of its own - Albert Jay Nock
"it only becomes semantics once the Marxist/Keynesian claims that there is involuntary unemployment - due to "friction" in employment supply/demand and "sticky" labor prices - are refuted... then all of a sudden, the whole debate becomes one of semantics. It's not just semantics so long as we're talking about sticky wages... but the moment someone points out that, in an unhampered market for labor there is no such thing as a "labor shortage" or "labor surplus","
But of course wages are at least slightly sticky. Even if it only took 24 hours for wages to adjust downwards there would still be involuntary unemployment at that time. Unless what you're saying is that this does not constitute involuntary unemployment.
From the Mises Made Easier Glossary:
Unemployment, catallactic. Unemployment due to the voluntary decision of those unemployed. Given the prevailing market conditions and the personal situations of the unemployed, they prefer not to accept the pay, place, type or other terms of employment open to them. They remain unemployed either because they prefer leisure or because they believe that by waiting they can obtain employment they consider more satisfactory than that available to them at the moment. HA. 579,598-602.
Unemployment, catallactic. Unemployment due to the voluntary decision of those unemployed. Given the prevailing market conditions and the personal situations of the unemployed, they prefer not to accept the pay, place, type or other terms of employment open to them. They remain unemployed either because they prefer leisure or because they believe that by waiting they can obtain employment they consider more satisfactory than that available to them at the moment.
Unemployment, frictional. Term sometimes used for certain forms of "Unemployment, catallactic" (q.v.). The term is used by some when the unemployment is assumed to be the result of difficulties in matching job openings and applicants due to certain "frictions" such as lack of information or differences as to skills, training or geographical locations. Mises dislikes all such metaphorical terms which falsely imply a similarity between the automatic movements of mechanics and the individual choices involved in all human actions. HA. 600.
Unemployment, frictional. Term sometimes used for certain forms of "Unemployment, catallactic" (q.v.). The term is used by some when the unemployment is assumed to be the result of difficulties in matching job openings and applicants due to certain "frictions" such as lack of information or differences as to skills, training or geographical locations. Mises dislikes all such metaphorical terms which falsely imply a similarity between the automatic movements of mechanics and the individual choices involved in all human actions.
Unemployment, institutional. Unemployment due to interferences with free market conditions rather than the voluntary decisions of those unemployed. Such interferences include all attempts to raise wage rates above the flexible rates which in a free market tend to adjust the supply of every type of labor to the demand for it. Such interferences are usually the result of so-called "pro-labor" legislation, although they may also be the result of custom, union activity or fear of violence. HA. 600,615,769-79,789-93; OG. 105; PF. 10-14; also PLG. 120-39, 239-46.
Unemployment, institutional. Unemployment due to interferences with free market conditions rather than the voluntary decisions of those unemployed. Such interferences include all attempts to raise wage rates above the flexible rates which in a free market tend to adjust the supply of every type of labor to the demand for it. Such interferences are usually the result of so-called "pro-labor" legislation, although they may also be the result of custom, union activity or fear of violence.
Unemployment, technological. Unemployment erroneously attributed to the introduction of improved methods of production, such as the use of more efficient capital equipment (tools, machinery, "automation," etc.). As long as unused, or not fully utilized, natural resources exist, there are always opportunities for additional employment in an unhampered market economy. HA. 136-37,774.
Unemployment, technological. Unemployment erroneously attributed to the introduction of improved methods of production, such as the use of more efficient capital equipment (tools, machinery, "automation," etc.). As long as unused, or not fully utilized, natural resources exist, there are always opportunities for additional employment in an unhampered market economy.
The price of widgets is the price at which widgets clear the market (sell, that is, change hands)... it has nothing to do with 24 hours or any arbitrary time period between sales of widgets. If a widget-owner chooses to hold out on the market, speculating that the price of widgets will rise to a price more to his liking, that is his choice. Labor is no different.
Here in the Western US, you will frequently see Mexican men hanging around certain parking lots during the day. Some of these men are illegals but most of them are not... they are simply day-laborers waiting around for work in the manner that has been traditional for thousands of years... go to an open market area and wait for an employer to show up, needing hands. Jump on the truck (or wagon, or whatever) and go. The time spent waiting for a sale is no different than the time the grocer waits between sales of oranges.
The question remains why employers are not the ones waiting in the open market for laborers to show up... there are some structural reasons why, in the market for manual labor, this is rarely if ever the case (differences in time-preference, family inheritance and even genetic endowment, etc.) and there are some political structures that make matters worse for both manual laborers and employers of manual labor. The narrative of the rich employer exploiting the poor manual laborers is, of course, the foundation of all the distortions we see in the modern job market since at least the time of Marx. The whole thing is a tragedy of errors, an absurdity.
Clayton -
"The time spent waiting for a sale is no different than the time the grocer waits between sales of oranges."
And in this time are the oranges not unsold?
They could be sold virtually instantly if the price were low enough.
EmbraceLiberty,
I agree that the mere possibility of underbidding is not enough to oppose the theoretical idea of involuntary unemployment in the free market. To do that, a second element is necessary. But, regarding the first element, I would emphasize that it is of great weight—greater than you seem to assume. Indeed, I think most employers would be willing to hire a man they hate, providing this later claims a sufficiently low wage. Moreover, you’re not obliged to stay in the same firm; you may also apply for another job and underbid the usual wage over there.
Now, the second element, this one which makes me reject the idea of free market involuntary unemployment, is that an employment contract is a two-party affair—any contract requires the consent of two parties. So, to take the example mentioned by Hoppe in Clayton’s paper, if you apply to be appointed President of Harvard, and if you refuse to take any other job, would you say that you’re involuntary employed? I think it would be meaningless. To talk about involuntary unemployment implies to have two parties ready to sign a labor contract and something which prevents them from making it.
Of course, unemployment insurance would exist in a free market. And (voluntary) speculative/frictional unemployment would also exist. Hutt observes it should not be a good idea to forbid any frictional unemployment, because it’s often valuable to take some time to find the job where your marginal shall be the highest. Now, the point is that state insurance distorts the free market trade-off of the unemployed.
If ever you’re interested, I wrote a small article of this topic (partly in French).
On the frictional unemployment front: Despite the fact that they show up on the statistics, W.H, Hutt pointed that workers who are searching for work are in fact employing their labour.
Also, Clayton, are you really saying that prices would be perfectly flexible if it weren't for government intervention in the market?
What prices are perfectly flexible?? The point is that there is no reason to treat "labor" differently from any other good - "it" has a supply, a demand, and a price at which it clears based on these factors. I say "it" because the word "labor" is dangerously misleading, implying a homogeneity which simply is not the case. Not only is every kind of labor (i.e. labor skill/experience) a different good, but there is significant variation in quality even within a particular labor specialty. In fact, the variation is really so great that it's probably best to view each unit of labor (each individual) as a distinct, heterogeneous good. This is why you have to take an interview to get a job, or why many self-employed rely heavily on word-of-mouth and reputation for new business.
The entire modern way of thinking about labor is just crapola from top to bottom.
Clayton is thread killa!!!11!1!1
Clayton: What prices are perfectly flexible?? The point is that there is no reason to treat "labor" differently from any other good - "it" has a supply, a demand, and a price at which it clears.
What prices are perfectly flexible?? The point is that there is no reason to treat "labor" differently from any other good - "it" has a supply, a demand, and a price at which it clears.
There are reason to think that it is more difficult for the prices of labour to adjust than other goods, such as time contracts, unions, productiveity effects of cutting wages, etc. But it seems to me that the issue isn't really labour, it's money. Money isn't just like any other good in that it doesn't have "a" market or "a" price, making adjustments in the price level, particularly downards, slow and difficult and until it can markets (including the labour market) will be unable to clear.
Also, it's late and I think I just made about a million spelling and gramma mistakes, sorry...
Clayton: There is no - zero - involuntary unemployment in a free market. Clayton -
There is no - zero - involuntary unemployment in a free market.
Are you saying that in a free market everyone who wants to be employed is employed?
I'm sorry:
are you asking what a prax definition of unemployment would look like
or something along the lines of "why does unemployment in the US exist"
Or something along the lines of how a "neoclassical" would look at unemployment compared to an austrian?
"As in a kaleidoscope, the constellation of forces operating in the system as a whole is ever changing." - Ludwig Lachmann
"When A Man Dies A World Goes Out of Existence" - GLS Shackle
Clayton says no unemployment in a free market. Absurd. Why I mostly stay off this forum. The many unique aspects about the functioning of the land market is ignored. Land exists prior to human action and decision making and a whole branch of economics can be deduced from it. I've read plenty of economic text books on three factor production and the circumstances surounding the ability/inability of land factors to absorb capital and labor factors. I am not going to present my full range of arguments here because in a few months time you've all forgotten because you want to believe in your own delusions about full employment in a free market.
Land owners have first claim on production. Land owners in the end demand to much of the economic output because they can do it. Factor income distribution shifts towards land owners. In the end choking off the economy. Crisis. No human action or foresight can prevent it. Unless altruism on behalf of the land owners is taken as premise.
Minor political measures could counteract depression and I am sure many earlier Austrians would have approved. Natural right tards have damaged economic thinking with their ideology of perfect market.
The poster above either needs to learn reading comprehension or is a liar.