joefromchicago wrote: Let's say that Employer has a job that Worker is willing to perform for $3.00 an hour, while a machine would do the job for $5.00 an hour. Employer, taking some intangible (or, to put it more precisely, non-monetary) factors into consideration, decides to use the machine instead of hiring Worker. An economist would say either: (1) that the real cost of hiring Worker is more than $5.00/hour, or (2) that the real cost of the machine is less than $3.00/hour.
There are other possibilities; for example: (3) Competitor, a capitalist in the same market as Employer, also has a job that worker is willing to do at $3.00/hour. Because Worker's contribution to his bottom line is worth, say, $6.00/hour to him, he offers Worker a job for, say, $5.10/hour. Competitor's offer leaves Employer with no worker to hire, so Employer has to make do with a machine. Another possibility is (4) Employer's and Worker's country has a generous welfare state, where welfare payments (plus the non-monetary pleasure of leisure) are more attractive to Worker than a job at $5.00/hour. (That's the situation in Germany for some low-skilled workers.) Worker would settle for a $3/hour job if he had to -- but he doesn't have to. Instead, he has two more attractive opportunities, and he is choosing the most attractive among them.
Moreover, the economist could make refutable predictions. Either scenarios (3) and (4) are much more common than scenarios (1) and (2), or Employer and Competitor will soon loose market share to other players, who are neither machine-loving nerds nor a haters of workers. Those are refutable hypotheses, and it has turned out that hypotheses like these have withstood empirical testing pretty well.
joefromchicago wrote: Of course, the only reason that the economist would say that is because, without resorting to the fiction of the "real" cost, Employer's decision would be inexplicable. That's why most people find economists baffling.
No. The reason economists say that is because that's how they define their terms. Most economics 101 books make a point of stating that accounting costs aren't the same as economic costs, and that economics is a science of economic cost, which by definition include non-monetary costs and benefits. The economist then observes that Employer leases the machine at $5/hour, still willing to lease it at $6.50/hour, but hires the $3/hour worker when the machine costs $6.51/hour. Given his definitions, he concludes that leasing the machine gives Employer economic benefits of $6.50, $3.50 or which are not accounting benefits.
Most sciences are baffling to those who don't try to understand their terminology first. Jurisprudence is one of them, as I found out to my embarrassment when I re-read some of our constitutional law discussions from a year ago. Economics is another.
joefromchicago wrote:Thomas wrote:It could be anywhere between zero and the market wage -- and because the worker is jobless by his employer's choice, not his own choice, there is no way to know with any greater precision.
I think you miss my point. You can't blame minimum wage laws for causing poverty if the people are deprived of jobs that pay a poverty wage. Minimum wage laws only increase poverty if they eliminate jobs that would have provided a wage equal to or greater than the level needed to stay above the poverty line.
Oh, I did get that point. But except for some statisticians, poverty is a matter of degree, not a boolean variable. And my couterpoint to your point was this a) we know the worker benefits from that job, or else he wouldn't have decided to take it. So we know that taking that job away from him makes him at least somewhat worse off. b) The worker doesn't benefit more than the wage he is getting (unless you count intangible benefits). So the market wage is a reasonable upper bound of what the worker is losing when you take his job. But the core of my reply to your point is: We know that the job makes the worker
somewhat better off, or he wouldn't take it; so we know we make the worker at least
somewhat worse off by taking his job away. This does increase poverty.
