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Wages and libertarianism

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Buzz Killington Posted: Tue, Mar 12 2013 8:52 PM

Libertarians assert that in a free market, people tend to get paid their marginal revenue product. This is hilariously silly. How the hell do you even calculate marginal revenue product?

And don't give me this "the employers will calculate it" garbage - even if the employers of a given labor pool do calculate the marginal revenue product of that pool, the competing employers won't have any way of determining that pool's marginal revenue product.

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gotlucky replied on Tue, Mar 12 2013 9:34 PM

Are you claiming that employers don't know what price they are willing to pay for an employee's labor?

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How the hell do you even calculate marginal revenue product?

MRP

"The Fed does not make predictions. It makes forecasts..." - Mustang19
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Are you claiming that employers don't know what price they are willing to pay for an employee's labor?

I'm claiming that the competing employers are incapable of figuring out the MRP of already employed labor.

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Meistro replied on Tue, Mar 12 2013 10:18 PM

Do employees get paid their MRPV?  Or is that the upper bound of what they can get paid?  I would think that an employer could measure, without undue difficulty, how much an employee contributes to the production process.  In some cases it might be easy... you can see that the employee has delievered x number of newspapers or mopped x% of the store.  

 

... just as the State has no money of its own, so it has no power of its own - Albert Jay Nock

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gotlucky replied on Tue, Mar 12 2013 10:30 PM

I would think that the employers that can't calculate the upper bound correctly would tend to be the one's that fail. After all, businesses do fail in a free market. I'm just not sure what the issue is with the OP. Economists != entrepreneurs. Theory and practice are different skillsets.

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Wheylous replied on Tue, Mar 12 2013 11:14 PM

They don't need to, really. The price mechanism does it for them.

As to how prices work, there is a convenient new article on LibertyHQ explaining half the picture of price formation:

Why doesn't milk cost $20?

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