Economics Questions

Re: Unemployment

Smiling Dave — Wed, 13 Jan 2010 13:50:54 GMT

Bodia:

Are you joking?

Of course, we talk about unhampered market. Don't you think, Chicago economist are so stupid to tell that in regulated economy all unemployment is also voluntary? They aren't.

But Huerta de Soto argues that on unhampered market there will be involuntary unemployment:

...Actually the real market stays in a constant condition of disbalance, and even if there are no institional restrictions (laws on wages minimum, interference of trade unions and so forth), it is quite possible that many people who would be glad to work on certain businessmen (аnd they with pleasure would employ them), remain the unemployed, and they cannot meet these businessmen and if they and are crossed will not manage to use mutually advantageous opportunity to conclude the agreement for hiring - simply owing to defect of enterprise vigilance.

You are right, of course.

However, I reserve the right to suspect the human race in general of stupidity. See http://www.darwinawards.com/

Re: Unemployment

Bogdan — Wed, 13 Jan 2010 13:32:21 GMT

"Unemployment in the unhampered market is always voluntary."

Key word here is unhampered. Which our economy is anything but. I could have plenty of jobs but I need diplomas, licences, union membership and sometimes a change in the lawbooks [drug dealer] to get them.

Are you joking?

Of course, we talk about unhampered market. Don't you think, Chicago economist are so stupid to tell that in regulated economy all unemployment is also voluntary? They aren't.

But Huerta de Soto argues that on unhampered market there will be involuntary unemployment:

...Actually the real market stays in a constant condition of disbalance, and even if there are no institional restrictions (laws on wages minimum, interference of trade unions and so forth), it is quite possible that many people who would be glad to work on certain businessmen (аnd they with pleasure would employ them), remain the unemployed, and they cannot meet these businessmen and if they and are crossed will not manage to use mutually advantageous opportunity to conclude the agreement for hiring - simply owing to defect of enterprise vigilance.

Re: Unemployment

Smiling Dave — Wed, 13 Jan 2010 12:20:50 GMT

"Unemployment in the unhampered market is always voluntary."

Key word here is unhampered. Which our economy is anything but. I could have plenty of jobs but I need diplomas, licences, union membership and sometimes a change in the lawbooks [drug dealer] to get them.

Re: Unemployment

Bogdan — Wed, 13 Jan 2010 11:01:56 GMT

Normal 0 false false false RU X-NONE X-NONE MicrosoftInternetExplorer4

I’ve found same as mine view on unemployment not from Chicago school:

If a job-seeker cannot obtain the position he prefers, he must look for another kind of job. If he cannot find an employer ready to pay him as much as he would like to earn, he must abate his pretensions. If he refuses, he will not get any job. He remains unemployed.

What causes unemployment is the fact that--contrary to the above-mentioned doctrine of the worker's inability to wait--those eager to earn wages can and do wait. A job-seeker who does not want to wait will always get a job in the unhampered market economy in which there is always unused capacity of natural resources and very often also unused capacity of produced factors of production. It is only necessary for him either to reduce the amount of pay he is asking for or to alter his occupation or his place of work.

…

Unemployment in the unhampered market is always voluntary. In the eyes of the unemployed man, unemployment is the minor of two evils between which he has to choose. The structure of the market may sometimes cause wage rates to drop. But, on the unhampered market, there is always for each type of labor a rate at which all those eager to work can get a job. The final wage rate is that rate at which all job-seekers get jobs and all employers as many workers as they want to hire. Its height is determined by the marginal productivity of each type of work.

- Ludwig von Mises, Human Action

So, the view of Huerta de Soto isn’t common in Austrian school.

Re: Unemployment

Stranger — Wed, 13 Jan 2010 03:14:30 GMT

Bodia:

Stranger:

That temp job will not exist unless there is capital, because the productivity of labor without capital is zero. In that case, an unemployed person may well find itself trapped, and have to rely on charity to subsist.

As I said before there is a lot of unused capital or capital, which can be used more effectively with additional labor.

No there isn't, that's what a recession is.

Re: Unemployment

Bogdan — Tue, 12 Jan 2010 18:32:42 GMT

Jonathan M. F. Catalán:

How is different to what I said? Note the difference between "voluntary" and "involuntary". To say that not all unemployment is voluntary is to say that there exists involuntary unemployment. So, my interpretation stands.

My mistake, in that case.

Jonathan M. F. Catalán:

Bodia:

I mean: the consequence of that market does not operate on perfect information is not forced unemployment, but the real rate of wage, which is different from optimal real wage (equilibrium).

I think there is a misunderstanding in Huerta de Soto's terminology; see below.

But here is no misunderstanding, but very different views.

Re: Unemployment

Jonathan M. F. Catalán — Tue, 12 Jan 2010 18:24:46 GMT

Bodia:

I mean: the consequence of that market does not operate on perfect information is not forced unemployment, but the real rate of wage, which is different from optimal real wage (equilibrium).

I think there is a misunderstanding in Huerta de Soto's terminology; see below.

Huerta de Soto clearly said: To think, as Chicago theorists do, that all unemployment is "voluntary" is extremely unrealistic.

How is different to what I said? Note the difference between "voluntary" and "involuntary". To say that not all unemployment is voluntary is to say that there exists involuntary unemployment. So, my interpretation stands.

Re: Unemployment

Bogdan — Tue, 12 Jan 2010 18:18:58 GMT

Stranger:

That temp job will not exist unless there is capital, because the productivity of labor without capital is zero. In that case, an unemployed person may well find itself trapped, and have to rely on charity to subsist.

As I said before there is a lot of unused capital or capital, which can be used more effectively with additional labor.

Re: Unemployment

Bogdan — Tue, 12 Jan 2010 18:16:09 GMT

Jonathan M. F. Catalán:

I'm not sure what you mean when you say that the "lack of information is imaged by .. different wages".

I mean: the consequence of that market does not operate on perfect information is not forced unemployment, but the real rate of wage, which is different from optimal real wage (equilibrium).

Jonathan M. F. Catalán:

In any case, Huerta de Soto's argument (which I believe to be correct) is that involuntary unemployment will exist when a firm fires on worker, and that worker remains involuntarily unemployed because he is not aware of other job options in existance, even if they might exist. The involuntary unemployment can last two hours, or four days or a year. What Huerta de Soto is really arguing against is the long-run equilibrium models employed by the Chicago School.

Huerta de Soto clearly said: To think, as Chicago theorists do, that all unemployment is "voluntary" is extremely unrealistic.

Re: Unemployment

Stranger — Tue, 12 Jan 2010 18:12:57 GMT

Bodia:

Stranger:

10$ a month doesn't even buy transportation to commute. It doesn't even buy food to live at my home.

So what? Whom does it concern? I think, there are people in pure countries, who live for that money.

Somebody can accept temporary job for a lower wage (not necessary so low), while searching better place.

That temp job will not exist unless there is capital, because the productivity of labor without capital is zero. In that case, an unemployed person may well find itself trapped, and have to rely on charity to subsist.

Re: Unemployment

Jonathan M. F. Catalán — Tue, 12 Jan 2010 18:01:09 GMT

Bodia:

Of course, market does not operate on perfect information, and so it is nonsensical to believe that over the long-run the economy runs at equilibrium. But it doesn't mean that unemployment can be forced. As i said before, that lack of information is imaged by a different wages. Every hired person also can look for another, better job.

I'm not sure what you mean when you say that the "lack of information is imaged by .. different wages". In any case, Huerta de Soto's argument (which I believe to be correct) is that involuntary unemployment will exist when a firm fires on worker, and that worker remains involuntarily unemployed because he is not aware of other job options in existance, even if they might exist. The involuntary unemployment can last two hours, or four days or a year. What Huerta de Soto is really arguing against is the long-run equilibrium models employed by the Chicago School.

Re: Unemployment

Bogdan — Tue, 12 Jan 2010 17:43:14 GMT

Stranger:

10$ a month doesn't even buy transportation to commute. It doesn't even buy food to live at my home.

So what? Whom does it concern? I think, there are people in pure countries, who live for that money.

Somebody can accept temporary job for a lower wage (not necessary so low), while searching better place.

Re: Unemployment

Stranger — Tue, 12 Jan 2010 17:04:22 GMT

Bodia:

Stranger:

Labor has to be combined with capital to be employed. You can't become a taxi driver if there are no taxis, or a general worker if there are no tools.

So long as the capital markets are in disequilibrium, so will the labor market. The marginal value of labor may well be zero.

Theoretically, there can be extreme situation, when it will be hard to find use for very cheap labor. But in the real world there are always unused resources, or resources, which can be used more effectively, if the cheap labor will be added. For example, will you hire some person for $10/month?

10$ a month doesn't even buy transportation to commute. It doesn't even buy food to live at my home.

Re: Unemployment

Bogdan — Tue, 12 Jan 2010 15:40:08 GMT

Jonathan M. F. Catalán:

It seems that my first guess was correct, then. What Prof. Huerta de Soto is saying is that the market does not operate on perfect information, and so it is nonsensical to believe that over the long-run the economy runs at equilibrium.

Of course, market does not operate on perfect information, and so it is nonsensical to believe that over the long-run the economy runs at equilibrium. But it doesn't mean that unemployment can be forced. As i said before, that lack of information is imaged by a different wages. Every hired person also can look for another, better job.

Re: Unemployment

Bogdan — Tue, 12 Jan 2010 15:35:47 GMT

Stranger:

Labor has to be combined with capital to be employed. You can't become a taxi driver if there are no taxis, or a general worker if there are no tools.

So long as the capital markets are in disequilibrium, so will the labor market. The marginal value of labor may well be zero.

Theoretically, there can be extreme situation, when it will be hard to find use for very cheap labor. But in the real world there are always unused resources, or resources, which can be used more effectively, if the cheap labor will be added. For example, will you hire some person for $10/month?