Economics Questions

Re: why do we have unemployment?

shackleford — Fri, 22 Mar 2013 23:50:30 GMT

ToxicAssets:

why do we have unemployment?

Actually, the question should be inverted. Why do we have employment?

Having job means to sacrifice one's leisure time, where one could be doing whatever was in his possible range of options, to do some specific task.

And this is usually done in exchange for payments that increase or maintain the range of possibilities of consumption.

But it can also be done to acquire skills or respect or status or power or any other indirect gains from having an occupation.

The concept of full-employment is deceitful. It is a practical impossibility to be fully employed, meaning that everybody has a point where the tradeoff between longer hours and getting paid more is no longer viable, if anything due to the law of diminishing returns.

And somebody will remain unemployed if he cannot find opportunities where the proposed trade-off is acceptable.

This might happen because he is already wealthy or has little ambitions that can be attained by a regular job.

Or this might happen because he's waiting better opportunities that might appear.

Or this might happen because he is so unskilled or unstable that nobody is willing or able to offer him any employment opportunity and he is not able to generate income by himself.

Often this happens because the minimum wage law set the bar too high for unskilled labor.

Wrong. You don't automatically have leisure time. You work because you need to survive. Either you hunt and gather your own food or you perform some other function at least as valuable and buy your subsistence. Your standard of living is increased when your productivity increases where you can afford to have leisure time.

Re: why do we have unemployment?

ToxicAssets — Fri, 22 Mar 2013 14:50:45 GMT

why do we have unemployment?

Actually, the question should be inverted. Why do we have employment?

Having job means to sacrifice one's leisure time, where one could be doing whatever was in his possible range of options, to do some specific task.

And this is usually done in exchange for payments that increase or maintain the range of possibilities of consumption.

But it can also be done to acquire skills or respect or status or power or any other indirect gains from having an occupation.

The concept of full-employment is deceitful. It is a practical impossibility to be fully employed, meaning that everybody has a point where the tradeoff between longer hours and getting paid more is no longer viable, if anything due to the law of diminishing returns.

And somebody will remain unemployed if he cannot find opportunities where the proposed trade-off is acceptable.

This might happen because he is already wealthy or has little ambitions that can be attained by a regular job.

Or this might happen because he's waiting better opportunities that might appear.

Or this might happen because he is so unskilled or unstable that nobody is willing or able to offer him any employment opportunity and he is not able to generate income by himself.

Often this happens because the minimum wage law set the bar too high for unskilled labor.

Re: why do we have unemployment?

mickanomics — Sun, 03 Mar 2013 15:53:57 GMT

Here's my 2cents on the original question.

http://mickanomics.blogspot.co.uk/2013/03/economists-prove-that-earth-is-flat.html

Re: why do we have unemployment?

Clayton — Wed, 27 Feb 2013 23:53:50 GMT

Clayton says no unemployment in a free market.

I said no such thing.

Clayton -

Re: why do we have unemployment?

gotlucky — Wed, 27 Feb 2013 22:54:59 GMT

The poster above either needs to learn reading comprehension or is a liar.

Re: why do we have unemployment?

Vichys Tool — Wed, 27 Feb 2013 22:49:32 GMT

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.

Re: why do we have unemployment?

vive la insurrection — Wed, 27 Feb 2013 01:49:31 GMT

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?

Re: why do we have unemployment?

shackleford — Wed, 27 Feb 2013 01:02:48 GMT

Clayton:

There is no - zero - involuntary unemployment in a free market.

Clayton -

Are you saying that in a free market everyone who wants to be employed is employed?

Re: why do we have unemployment?

Evilsceptic — Wed, 27 Feb 2013 00:32:24 GMT

Also, it's late and I think I just made about a million spelling and gramma mistakes, sorry...

Re: why do we have unemployment?

Evilsceptic — Wed, 27 Feb 2013 00:30:00 GMT

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.

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.

Re: why do we have unemployment?

Malachi — Tue, 26 Feb 2013 00:01:37 GMT

Clayton is thread killa!!!11!1!1

Re: why do we have unemployment?

Clayton — Mon, 25 Feb 2013 23:49:30 GMT

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 -

Re: why do we have unemployment?

Evilsceptic — Mon, 25 Feb 2013 23:13:05 GMT

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?

Re: why do we have unemployment?

Raoul — Mon, 25 Feb 2013 23:07:20 GMT

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).

Re: why do we have unemployment?

dude6935 — Mon, 25 Feb 2013 22:59:16 GMT

They could be sold virtually instantly if the price were low enough.