ELI12: how do libertarians want wages to work?

post by TekhneMakre · 2021-06-24T07:00:02.206Z · LW · GW · 58 comments

This is a question post.

[ETA: apparently my actual question got completely lost in translation. Thanks to the people who tried to answer. I think it has something to do with having said "libertarians" when my question isn't really about libertarianism.]
[Disclaimer: this post was written hastily and barely edited.]

I don't get how anyone things employer-employee relations are supposed to work. Libertariants have some opinions.

I think the idea is, we have no minimum wages, no mandatory unions, etc.; and then employers and workers bargain over wages by making offers to hire or be hired at a given wage. If workers employed by a firm F are unhappy with their wages, then some other firm F' could poach them by offering higher wages. Since F is afraid of that, F will have already offered higher wages.

But like, how does bargaining work? It seems like there's all sorts of parameters that might make a really big difference to the outcome of a negotiation like this, and I don't have clarity on what those are and how they affect the outcome. Do other people have opinions about employer-worker based on beliefs about those questions, or what?

[Some more disorganized thoughts follow, but the above is the basic question.]

Humans need a steady stream of food and shelter, or they become less productive (often permanently). That means that if the boss Bob has enough wealth to outlast his worker's stores of nutrients, he can basically pay them just the absolute minimum so that they can still work.

An argument goes like: the minimum wage law only harms people. If you remove the law, then more trades would happen, which are always good (or good in expectation, or in aggregate across a given class of people, or something) for both parties. But this just seems false? Without the minimum wage law, lots of people would probably be paid significantly less. Or maybe that's untrue? If it is true, it seems like there's an attractor where managers have all the wealth, and everyone else is paid just enough to keep them able to work. That's supposed to be not an attractor, because a slightly more generous manager could easily poach employees. But how does that break the equilibrium? Seems like the generous manager is just losing a bit of money. They could have their pick of employees; is that supposed to be a crux of the argument? That seems to just imply an exploitative equilibrium, but with more desirable workers getting a slightly better but still exploitative deal. (Exploitative, meaning that the managers are actively trying to keep the workers desperate for their next paycheck.)

Maybe I'm confused about the equilibrium reasoning because there's two "forces" pushing in opposite directions: a manager wants to threaten employees with lowering wages, and threaten other managers with raising wages (hence poaching the best workers). Is there standard wisdom about how these things are supposed to play out, e.g. with an evolutionary equilibrium model?


It seems like unions and minimum wages are a form of bargaining, using the government as a way to overcome coordination problems given the cognitive costs of doing distributed game theory. Why isn't that considered by libertarians to be a legitimate (i.e., reasonably endorsed as part of a globally coherent notion of justice) form of bargaining / decision-making? Is it about the use of government force? But don't libertarians endorse private property rights and other rights, which are also enforced by collective agreement?

Answers

answer by Dagon · 2021-06-24T14:39:15.214Z · LW(p) · GW(p)

Just to get it out of the way: groups don't have ideas or opinions.  Individuals do, and some self-identified groups share many, but rarely all and rarely levels as the identified individuals do.  This is true even for traditional groups like "liberals", but even more so for disorganized ones like "libertarians" or "rationalists".  You can find the US Libertarian Party platform at https://www.lp.org/platform/, but the vast majority of people who admit to libertarian leaning that I know of explicitly separate the libertarian belief cluster from the Libertarian party. 

The general idea (with many variations) is that it mostly works as today, just with far more individual freedom to have exceptions, and less government enforcement of specific equilibria.  Unions may still exist, but they're voluntary organizations to help employees coordinate their negotiations.  The minimum wage isn't enforced, but it probably still exists as a norm for "the lowest you should expect to pay a competent adult".  

The ultimate private property is yourself, and it's offensive to be told that you can't charge between $0 and some arbitrary number for your time.  ESPECIALLY if the ways you can spend your time (due to preference, availability, or ability) are worth just under that, in which case you're being told that you can't work at all.

comment by TekhneMakre · 2021-06-24T15:03:46.105Z · LW(p) · GW(p)

Thanks.

answer by waveman · 2021-06-24T09:05:07.292Z · LW(p) · GW(p)

You don't mention which libertarian works you consulted in forming your views on the topic. A very accessible introduction is "What it means to be a libertarian" by Charles Murray.

This point of view is very old e.g. the early Daoist works have libertarian threads. So you don't have to imagine what libertarians think, and they have been thinking hard about the issues for a long time. 

One thing that surprises many people is the enthusiastic support among many libertarians for collective action and for cooperative organisations. The caveat being that they are not mandated by overbearing people with guns.

Another thing that often surprises is the realization of how well people are able to coordinate among themselves without too many people who are from the government and here to help.

comment by TekhneMakre · 2021-06-24T12:46:34.138Z · LW(p) · GW(p)

[shortening of another comment] I'm wondering how people think that wage negotiations would work out in a libertarian world, and in particular whether there are arguments that the results would be Just or good or something. Rather than e.g. the wealthiest purchasing and then enforcing a monopoly on violent force, or the workers doing the same.

Replies from: TekhneMakre
comment by TekhneMakre · 2021-06-24T13:34:51.410Z · LW(p) · GW(p)

I'm not saying the libertarian world is worse. I'm asking what it looks like because it seems to get more at the question of how these negotiations could, would, and should work, instead of being hopelessly obscured by non-libertarian shenanigans.

answer by jmh · 2021-06-24T21:15:05.016Z · LW(p) · GW(p)

Not at all related to any libertarian or other political view point.

There's a huge literature for labor economics that will have a lot of theory on wages and employee-employer market workings.

Some of the more simple approaches is to assume wages and labor services are no different from any other price and service/good setting.  You can add another layer here related to reservation wage which then puts the floor in. One might argue that some market failure situation exists that makes the reservation wage fail to bind market wages so government imposed minimum wage should be set to the appropriate reservation wage level. (Note, I am not aware of anyone actually making that argument but think one would find bits or even all of that in much of the literature.)

I think perhaps a more interesting line might be something of a mixed model where one analyzes the internal compensation/pay policies for the employer as a distributive problem rather than the allocative problem that often seems to underlie wage models. Then across the industry/sector you would see something of a market wage observed but the formation would be driven by something a bit different than the standard econ 101 type story. I'm also not aware of any model like this but would expect that at least some of the labor econ literature at least implicitly includes it.

comment by TekhneMakre · 2021-06-24T22:51:39.024Z · LW(p) · GW(p)

Thanks! Yeah, IIUC (...and I don't...) I'm attending a lot to the distributive aspect of labor relations (hence talking about bargaining), maybe I'll read Rawls. And I'm interested in the equilibria that come from different ways of dealing with distributive justice.

Replies from: jmh
comment by jmh · 2021-06-25T20:01:54.747Z · LW(p) · GW(p)

If you've not read Hirshmann's Exit, Voice and Loyalty  I would add that to list of reading.

Perhaps another contextual box to put the question into might also be some of the theory of the firm literature -- particularly for the large corporations to what extent are they as much market internally as external market participants. Not sure if there would be anything to glean from the internal transfer pricing literature but to the extent wages can be modeled as other prices some light might be present.

Replies from: TekhneMakre
comment by TekhneMakre · 2021-06-25T20:26:37.634Z · LW(p) · GW(p)

Great, thank you!

answer by Matthew Barnett · 2021-06-24T20:15:47.663Z · LW(p) · GW(p)

It seems like unions and minimum wages are a form of bargaining, using the government as a way to overcome coordination problems given the cognitive costs of doing distributed game theory. Why isn't that considered by libertarians to be a legitimate (i.e., reasonably endorsed as part of a globally coherent notion of justice) form of bargaining / decision-making?

As for myself, the question is not "Is this a legitimate coordination mechanism?" but rather "Does this coordination mechanism effectively solve coordination problems?" In other words, rather than viewing government as some sort of privileged system that solves all the problems in the private market, we can view it from the same perspective that we view systems in the private market. We can do this through the lens of game theory: model the government as being composed of a bunch of different economic agents who each try to achieve their own goals in light of the incentive structures in government, and then ask whether the aggregate behavior of these agents adds up to something we prefer to alternatives.

When we start getting specific about what we mean by governance, then the flaws in using government as a device for collective action become more apparent. The flaws in first past the post representative democracy are fairly well known, but I'll repeat some arguments here:

  1. Given typical election margins, the expected selfish value of voting is very small. Therefore, voters have very little incentive to be informed about which candidates might benefit them.
  2. Candidate media coverage is a very powerful lever for getting politicians elected. Therefore, rich special interests can sway elections to their desired ends by paying for targeted media coverage.
  3. If a candidate wins by even a single vote, they win 100% of the effective power of the office for their term. Therefore, minority interests are given almost no weight during democratic deliberations, unless those interests could plausibly lead to the incumbent losing a future election (for example, by people in the majority being sympathetic to minority interests).
  4. First past the post voting doesn't take into account the intensity of preferences. For example, the weak interests of 9 voters who are OK with locking up marijuana smokers outweigh the strong interest of the 1 voter who doesn't want to be locked up themselves.

Given these flaws in the way democracy actually functions (as opposed to the way people poetically imagine democracy), there's no guarantee that coordinating through it will actually lead to outcomes that maximize utility, like happiness or preference satisfaction. By contrast, libertarians generally share the intuition that market structures usually do a better job at solving coordination problems than government (and sometimes back it up with results like the fundamental theorems of welfare economics).

comment by TekhneMakre · 2021-06-24T23:39:43.265Z · LW(p) · GW(p)

Ok, so the fundamental theorems are sort of relevant to my question. My question asks for a combination of reasoning like in those theorems, with empirical information about parameters like bounded reasoning, imperfect information, mortal agents, agents with complicated boundaries, etc. AFAIK in those conditions, there could be weird attractors that mean dumb-seeming stuff like government actually makes sense. I'm pretty confident that we could describe a coherent world that's vastly superior just by changing the (hypothetical) government away from our actual one. What I'm asking about is the forces that have to be contended with to make that work.

Replies from: matthew-barnett
comment by Matthew Barnett (matthew-barnett) · 2021-06-24T23:52:34.161Z · LW(p) · GW(p)

My question asks for a combination of reasoning like in those theorems, with empirical information about parameters like bounded reasoning, imperfect information, mortal agents, agents with complicated boundaries, etc. AFAIK in those conditions, there could be weird attractors that mean dumb-seeming stuff like government actually makes sense.

That seems like a tall order. Instead of making very general assumptions about agents (which limits the usefulness of mathematical results), it would probably make more sense in this context to talk about empirical analysis. We can ask questions like, do societies that use democratic governments to solve certain types of coordination problems X, generally do better across some metric Y? Economists have been studying problems like this for centuries.

I'm pretty confident that we could describe a coherent world that's vastly superior just by changing the (hypothetical) government away from our actual one.

Sure. The field of mechanism design tries to build hypothetical economic systems that would work better than the ones we currently have.

Replies from: TekhneMakre
comment by TekhneMakre · 2021-06-25T01:03:05.913Z · LW(p) · GW(p)

> Economists have been studying problems like this for centuries.

Great. So my question is, what if any are the arguments "that market structures usually do a better job at solving coordination problems than government". E.g. by giving an equilibrium analysis of a spherical-cow version of the most sweatshop-inducing realistic assumptions that shows that the market nevertheless doesn't produce sweatshops.

answer by romeostevensit · 2021-06-24T09:15:43.942Z · LW(p) · GW(p)

The basic idea is that without gov forcing out competition via monopoly the market provides arbitration services.

comment by TekhneMakre · 2021-06-24T12:44:49.678Z · LW(p) · GW(p)

Ok, so that's a good argument that government monopoly is less good, in a global sense, than a system with more competition for services. My question is, what would happen in such a world? It might be globally better but locally worse because e.g. it reveals the actual issues in labor relations, rather than covering them up with unsustainable compromises born of an ongoing political conflict that just confuses the issue. I'm wondering how people think that wage negotiations would work out in such a world, and in particular whether there are arguments that the results would be Just or good or something. Rather than e.g. the wealthiest purchasing and then enforcing a monopoly on violent force, or the workers doing the same.

answer by Dave Lindbergh · 2021-06-24T18:12:05.860Z · LW(p) · GW(p)

I'm amazed you only have 4 answers so far.

The bog-standard classical (and, yes, "libertarian") answer is that wages work exactly the same as all other prices - prices for candy bars, gasoline, houses, lawn mowing services, plumbers, and milk.

That's to say, supply and demand (sellers and buyers) set prices, same as with everything else. If buyers don't like the price, they shop around some more, settle for a lower-quality "product" that's cheaper, or offer more to get what they want. If sellers don't like what's on offer, they look for another buyer who'll pay more, try to improve the "product", or settle for what buyers are willing to pay.

Generally speaking, price controls (a minimum wage is a price floor on labor) make things worse for pretty much everybody - laws that make mutually-advantageous trades illegal are generally a bad idea. Plenty of countries don't have any minimum wage (last I checked, those included Denmark, Iceland, Norway, and Sweden - all pretty decent places to live).

There's a whole academic field dedicated to studying and understanding this called "economics".

comment by TAG · 2021-06-24T18:30:01.443Z · LW(p) · GW(p)

Realistically, wages aren't like other prices because they are "sticky" in both directions. Employers will rarely offer a substantial increase to the remuneration of someone they've already got, and also won't reduce the salary of anyone with seniority , even if they have declined in productivity.

Wages are also unlike other prices , because there is a natural minimum wage, an amount below which you can't literally survive on.

Replies from: TekhneMakre, ChristianKl, Dagon, dave-lindbergh
comment by TekhneMakre · 2021-06-24T22:54:33.776Z · LW(p) · GW(p)

Exactly. And if you can't survive, you stop participating in the market. Which means that reasoning based on equilibria of immortal agents may or may not apply. And it seems plausible that in fact, in practice, employers basically threaten workers with starvation as a negotiating tactic.

Replies from: TAG
comment by TAG · 2021-06-25T00:28:20.156Z · LW(p) · GW(p)

...but only because things are rigged to favour employers. Employment is almost always a buyers market, but everybody sees that as a fact of nature. In the rare periods during which workers can bargain up their wages, that's the demon of inflation...

comment by ChristianKl · 2021-06-24T18:40:37.560Z · LW(p) · GW(p)

There's no natural minimum wage as not all money a person earns comes from a specific job.

People happen to work for other motivation then money as well. Some people take up jobs to increase there skills.

I remember from a YC talk that not paying the founders minimum wage in the beginning is often a source of legal issues.

Replies from: TAG
comment by TAG · 2021-06-24T18:55:57.313Z · LW(p) · GW(p)

If a job takes up all the time you have available to work,there's a natural minimum wage. Otherwise you are saying that two half jobs can add up to one job, which is true but uninteresting. In terms of hourly rates , there's a natural minimum hourly rate, whether you get it from one job or two or three.

Replies from: ChristianKl
comment by ChristianKl · 2021-06-24T19:59:21.523Z · LW(p) · GW(p)

In reality many people have relationships with other people that allow them to live even if they don't earn enough money to feed themselves.

Replies from: TAG
comment by TAG · 2021-06-24T20:23:02.766Z · LW(p) · GW(p)

Yes, but not everyone. You're basically giving up on the idea that everyone has a right to life...a practical right to life. Libertarianism isn't the best system if a few low-productivity manage to survive, because almost any other system does better regarding low productivity people. What are you trying to maximise? What are your values, and why are they the true values?

Replies from: ChristianKl
comment by ChristianKl · 2021-06-24T20:58:26.257Z · LW(p) · GW(p)

What you write sounds like you mix questions about whats true very much with question of what you think should happen.

Replies from: TAG
comment by TAG · 2021-06-26T15:08:34.182Z · LW(p) · GW(p)

Of course. Politics is downstream of ethics. So is economics, more surreptitiously. An economist can tell you how to get more of what you value, but shouldn't be telling you what to value.

comment by Dagon · 2021-06-24T18:53:12.434Z · LW(p) · GW(p)

Those things seem like they apply to many types of trade.  

Most prices are sticky - neither producers nor consumers tend to change very much, except by changing the product (different brand, features, etc. analogous to changing jobs or employees).  And there's no natural minimum wage any more than there's a natural maximum cost of a carrot - the proof is that $0 is the wage for many activities, and a significant subset of any population currently seems to still be alive with no legible (minimum-wage-applicable) job at all.

Replies from: TAG
comment by TAG · 2021-06-24T19:09:28.942Z · LW(p) · GW(p)

Most prices are sticky

Wages are stickier

$0 is the wage for many activities, and a significant subset of any population currently seems to still be alive with no legible (minimum-wage-applicable) job at all

Since it is impossible to live with no income, they have an income. Since they are not generating an income, they are getting money from somewhere else. That can only be a voluntary transfer, from charity/family, or an involuntary transfer from the tax-and-welfare system.

Libertarianism strongly opposes the tax-and-welfare system, so low productivity people would have to find private charity in libertopia. If you are below a certain level of productivity, you cannot sustain yourself in libertopia by getting a job, even if jobs are more available in libertopia, because the libertarian wage is what you are worth to an employer, not what you need to survive.

Replies from: Dagon
comment by Dagon · 2021-06-24T22:00:38.020Z · LW(p) · GW(p)

Libertarianism strongly opposes the tax-and-welfare system

I don't think this is true, though it may not be false either - I haven't surveyed formally, and I don't think Libertarianism is coherent enough to make such statements.  

The lowercase-l libertarians I know (and was once, though I currently identify as "other") are quite mixed on what to do about the small or not-so-small portion of humanity that can't fully take care of themselves.  I know of literally none who advocate for starvation.  They're pretty universally against the insane complexity of the current tax-and-welfare system which picks and chooses based on arcane and unsupportable divisions.  But there's a lot of interest in UBI or much simpler and non-judgmental subsidies, paid for by simple tax regimes.  

Replies from: TAG
comment by TAG · 2021-06-25T18:01:08.126Z · LW(p) · GW(p)

The ones I know are exactly the people who say taxation is slavery.

Replies from: Viliam
comment by Viliam · 2021-06-25T21:24:31.530Z · LW(p) · GW(p)

Perhaps you are both right... in the sense that most libertarians do not want to see people starve... but would oppose any forceful coordination e.g. via taxation... and would fail to coordinate otherwise... so at the end, many people would starve, and many non-starving people would say "this is horrible and I don't want this, but I don't have enough money to solve this problem alone, so currently my priority is to get more rich, and after I become a trillionaire then I will be able to address the problem of starvation".

Replies from: TAG
comment by TAG · 2021-06-26T15:14:46.101Z · LW(p) · GW(p)

Big-L libertarianism is axiomatic. If the primary axiom is that everything is voluntary, everything else, including the right to life, has to shuffle down.

Replies from: Viliam
comment by Viliam · 2021-06-26T20:42:52.097Z · LW(p) · GW(p)

Voluntariness is a nice applause light, but calling it an "axiom" I am not sure if that even makes sense logically.

If I desire to steal your property, but you threaten to shoot me, so I give up... does it make sense to say that I voluntarily decided to not steal your property? Because if you extend the definition of "voluntary" to include things done under threat of death, then if I threaten to shoot you unless you give me your property, and you don't want to die so you give it to me, then under the extended definition you also gave me your property "voluntarily".

As far as I know, the usual definition is "do not initiate violence", and even that has a lot of gray area around what "initiate" and "violence" mean exactly. If I create negative externalities (for example my factory polutes the air), at which moment does it become a violence? Are smokers violently attacking other people by their smoke? Sick people by breathing? Is it violence to violate someone's intellectual right? (Some libertarians say "obviously yes", others say "obviously no".) Is lying a violence? Is libel? Without exact definition of violence you also can't have an exact definition of initiation, because if one party does something that is maybe-violence-maybe-not-violence, and the other party responds by clear violence, which one of them was the "initiator" of violence?

tl;dr -- most libertarians way overestimate the axiomatizability of libertarianism

comment by Dave Lindbergh (dave-lindbergh) · 2021-06-24T19:08:02.258Z · LW(p) · GW(p)

Lots of other prices are "sticky" like that. It's a psychological thing - nothing special about wages.

The question was about wages, not how to survive. Lots of people who earn wages don't live on them. Lots of people don't sell their labor at all. Children, disabled people, retired people, people in business, etc. don't live on wages. 

How to get enough money to live is an entirely separate question from how "wages work". There are lots of other ways to survive that don't involve wages - making and selling things, telling stories and writing books, gifts from family or friends or charitable organizations, making art, receiving grants, spending money previously saved or invested, welfare payments from governments, etc., etc. (A lot of talk lately about "Universal Basic Income", too.)

Really "how wages work" and "how to get money to survive" are two entirely disconnected subjects. Mixing them together only leads to confusion (and I'm sorry to say, misery).

Replies from: TekhneMakre
comment by TekhneMakre · 2021-06-24T22:59:00.969Z · LW(p) · GW(p)

My question is specifically about the game theory of employee/employer relations, with wages as a key example, not generally "how to get enough money to survive". But of course the need to survive affects that game theory, right? Because, for example, equilibrium reasoning assumes agents with a comparable ability to coordinate (whereas managers are fewer than workers), and it assumes immortal agents (which humans aren't).

Replies from: dave-lindbergh
comment by Dave Lindbergh (dave-lindbergh) · 2021-06-25T00:26:18.438Z · LW(p) · GW(p)

Managers are fewer than workers but there are thousands of firms in every country (as well as millions of workers) so in either case we're well into the law of large numbers. There's no practical way for thousands of entities to form stable cartels (without government backing).

If you worry about employers in a city forming a cartel to keep wages low, shouldn't you worry even more about supermarkets doing the same to keep grocery prices high? There are a lot fewer supermarkets than firms that employ workers.

And all other prices are set by dealings between mortal entities.

I don't think there are good reasons to treat worker-employer relations as any different than seller-buyer relations for any other goods or services.

I think you're complicating things needlessly by treating the labor market as different from all other markets - cartels and unions are the same thing. Scabs and those who undermine cartels are the same thing. Price controls are price controls. 

In general price caps (say, rent control) are bad because they cause shortages, blunt incentives to provide more supply and improve quality, and prevent people from buying things at prices they're willing to pay. Price floors (say, minimum wages) are bad because they create gluts (unemployment), reduce incentives to create jobs, and prevent people from selling stuff at prices they're willing to accept (esp. the labor of the least-skilled workers).

In general. There's nothing terribly different about the labor market vs. other markets.

Replies from: TekhneMakre
comment by TekhneMakre · 2021-06-25T03:35:16.944Z · LW(p) · GW(p)

> so in either case we're well into the law of large numbers.

True. But this doesn't help with the part where a manager can outlast a given worker in a negotiation-war. Say a manager has 10 employees. Given a manager, an employee makes 10 widgets per year. Right now, the manager takes 1 widget from each employee per year. A person needs 7 widgets/year to survive. So the manager goes to the first employee and says, okay, now I'm going to take 2 widgets / year from you. Should the employee quit? They'll have costs to look for another job, and maybe will have to move, and maybe they won't even find a job that pays more than 8 widgets / year. Should they bargain, holding out for 9 widgets/year? The manager is already getting 9 widgets /year from the other employees. The employee, though, is starting to starve.

You're saying that other managers will bid for the employee. They might... but I don't see why it's true in general that the managers bidding against each other for employees overpowers the incentive to lower wages. Do you? Can you give an argument, e.g. a toy example? Do you want to make a claim like "most businesses have conditions where managers can't 'exploit' workers" for some appropriate value of "exploit"? For example, it seems like if managers can only manage up to 10 employees (e.g. because it's hard to manage), then things are bad for the employees. Unless they can coordinate. But coordination might be hard in some cases. We could say, that's not stable because there could just be more managers... but is that right? It could be a general fact, but I don't see why, and I'm asking for arguments.


>I don't think are good reasons to treat worker-employer relations as any different than seller-buyer relations for any other goods or services.

Yeah this really doesn't make sense to me. Can you expand? Are you saying that you expect the equilibration dynamics to output "roughly the same" result, or "roughly the correct" result, or "roughly the best feasible" result, in most / all markets? Why would that be? It seems like parameters of the market, like asymmetric information, difficulty of collusion for different parties, cognitive costs of computing relevant stuff, transition costs between different options, iterative dynamics (e.g. starving to death, Matthew effect), etc. would make the equilibration look different in different markets, maybe drastically different, and maybe drastically bad / unjust / suboptimal.

>In general price caps....

Ok... but I'm not particularly arguing for any of that. I'm trying to understand what your (/people's) models of how these things actually go. I wouldn't guess that you'd agree with the very strong claim "a bunch of individuals making local causal best-responses produces trades that are optimal for long-term flourishing of humankind", but I don't know specifically how your models differ from that.

comment by TekhneMakre · 2021-06-25T15:15:30.313Z · LW(p) · GW(p)

It seems like all the countries you named have gvt enforced worker's rights, and strong gvt support for the unemployed (as well as strong non-gvt collective bargaining). That seems like a big factor to me in determining the wage equilibria, and isn't a standard part of the libertarian model, right? So my question is, what are the principles underlying what determines these equilibria.

answer by Leafcraft · 2021-06-24T07:28:57.886Z · LW(p) · GW(p)

There's a few countries without minimum wage laws that have way better average wages than the US and many others, I believe this fact already invalidates some of your observations. 

For libertarians workers unions would be ok, as long as they're not government sponsored (they're a type of private government), while government intervention is pretty much always seen as bad since they are not considered a legitimate way to solve market issues (wages are a market issue)

comment by player_03 · 2021-06-24T09:07:11.287Z · LW(p) · GW(p)

I don't think it invalidates the claim that "Without the minimum wage law, lots of people would probably be paid significantly less." (I believe that's one of the claims you were referring to. Let me know if I misinterpreted your post.)

I don't have a whole lot of time to research economies around the world, but I checked out a couple sources with varying perspectives (two struck me as neutral, two as libertarian). One of the libertarian ones made no effort to understand or explain the phenomenon, but all three others agreed that these countries rely on strong unions to keep wages up.

IMO, that means you're both partially right. As you said, some countries can and do function without minimum wages - it's clearly possible. But as the original poster said, if a country has minimum wage laws, removing those laws will in fact tend to reduce wages.

Some countries without minimum wages still have well-paid workers. Other countries without minimum wages have sweatshops. I think that market forces push towards the "sweatshop" end of the scale (for the reasons described by the original poster), and unions are one of the biggest things pushing back.

Replies from: TekhneMakre, Leafcraft
comment by TekhneMakre · 2021-06-24T13:36:47.762Z · LW(p) · GW(p)

I'm curious if you have independent reasons for thinking that market forces push towards sweatshop-like relations. It's not obvious to me either way.

comment by Leafcraft · 2021-06-24T21:28:39.278Z · LW(p) · GW(p)

"if a country has minimum wage laws, removing those laws will in fact tend to reduce wages."

You say so, but you don't justify that statement in any way. When the poster wrote: "Without the minimum wage law, lots of people would probably be paid significantly less."

I assumed they meant that the lack of MWL would push to sweatshop like conditions, my observation proves that it is not ture. The reverse (MWL pushes away from sweatshop like conditions) can also be proven false, as there are plenty of countries with bad economies and MWL where people live in miserable conditions. 

comment by TekhneMakre · 2021-06-24T13:39:08.813Z · LW(p) · GW(p)

Why is government intervention not legitimate? Is that judgement grounded in a model of how labor relations would work with or without various kinds of intervention? (It doesn't have to be. E.g. "intervention should be presumed bad because third parties have bad incentives from the 1st and 2nd parties's perspectives" is a solid argument; and it's not based on "here's how wage negotiations will go in a world without gvt monopoly on threats of force".)

Replies from: dave-lindbergh, Leafcraft, TekhneMakre
comment by Dave Lindbergh (dave-lindbergh) · 2021-06-24T19:26:44.099Z · LW(p) · GW(p)

Government intervention is generally considered a bad idea (I won't say "not legitimate") because the intervention is usually laws that stop people from making the deals they want to make, which usually is bad for all parties involved - if they didn't think the deal was better than no deal, they wouldn't want to make it.

But I suppose there might be other government interventions that would be OK (for example providing information about competing offers, or offering education, etc.).

Replies from: TekhneMakre, jmh
comment by TekhneMakre · 2021-06-24T21:50:46.061Z · LW(p) · GW(p)

The idea is that government is a tool for enforcing a group decision. If at any given time half of workers are holding out for higher wages and half are scabs, then the managers are always fed and can always starve out the striking workers. So the striking workers want to use violent threats to prevent other workers from breaking the strike, i.e. making a deal they want to make with the managers. And this enforcement can be formalized / sublated into government, both as specific negotiating outcomes (wage, working conditions) and as process (unions given some power by government-enforced law, I assume?). (In practice this might be very far from what actually ends up happening. And I'm not particularly in favor of gvt. But I can see the game-theoretic use, and I think this is the historical origin of unions and wage laws and worker's rights... or maybe it's not?)

If our libertarianism implies no monopoly on force, then unions can still prevent trades between willing parties. If it implies enforcing no use of force at all, then it seems like we've severely limited the ability of workers to bargain, relative to the "state of nature". Maybe unions would regrow without being founded on threats of violence? But this seems surprising; it seems like it would require a high degree of game-theoretic fluency.

comment by jmh · 2021-06-25T20:21:13.966Z · LW(p) · GW(p)

But it seems very little government intervention into any economic activity or relationship is really dominated by the wishes or needs of those directly involved. Most seems related to external impact -- parties outside the direct exchange.

comment by Leafcraft · 2021-06-24T21:15:17.543Z · LW(p) · GW(p)

Libertarians see government intervention as bad because, to them, it is a self-interested third party, and as such, will make decisions that benefit itself mostly.

Many Libertarians believe in self ownership and therefore think government power is illegitimate and that they can't make decisions for others.

comment by TekhneMakre · 2021-06-24T13:39:41.750Z · LW(p) · GW(p)

I'm asking because I'm curious how labor relations work.

Replies from: Leafcraft
comment by Leafcraft · 2021-06-24T21:36:49.589Z · LW(p) · GW(p)

Probably: private unions for a category of jobs would do collective bargaining agreements with employers (if necessary). In all other cases, people would just negotiate their work value.

Replies from: TekhneMakre
comment by TekhneMakre · 2021-06-24T22:03:53.448Z · LW(p) · GW(p)

Is there a clear argument that this would not result in most workers being paid just enough to not starve? (Or would you endorse that happening, if that's the result of the negotiations? Or something else?) The "sweatshop" attractor seems to exist, naively. The argument being: local incentives for managers push towards slave wages; transition costs of switching jobs are high enough that more generous managers can't just poach all the workers, and in the long run less generous managers make more money.


This argument only straightforwardly works for some extreme simplifications. E.g. I'm imagining that all the workers are playing their CDT best response, and all the managers are doing something more complicated that involves starving out workers. I don't get whether other people are making different simplifying assumptions that apply things will be fine, or what.

Replies from: Leafcraft
comment by Leafcraft · 2021-06-25T08:31:42.383Z · LW(p) · GW(p)

Mind if I ask you why are you so interested in arguments? I already provided empirical evidence of the opposite of what you suggest, doesn't that beat any opposing argument?

I can easily flip your argument around: In a free market workers can ask for whatever pay they want, since they want to be paid as much as possible for as little work as possible, eventually the owners will be left with very little profit, just enough to survive. 

What makes this argument wrong and yours correct is not evident to me; both are disproved by empirical evidence.

Replies from: TekhneMakre
comment by TekhneMakre · 2021-06-25T15:09:04.302Z · LW(p) · GW(p)

Because the world is complicated and there could be a lot of factors determining the equilibria, and I'm looking for insights that cover many actual and possible cases. (Also, I don't think you named any countries? Someone else named some countries, but it seems like at least some of them have heavy gvt-enforced worker's rights and gvt unemployment benefits, which does not seem like what you're imagining.)

Replies from: Leafcraft
comment by Leafcraft · 2021-06-26T15:19:12.936Z · LW(p) · GW(p)

I didn't mention any country because you didn't ask for any. Anyway, it seems we aren't having a very productive conversation so I'm gonna stop here.

have a good day

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comment by Mer -F (mer-f) · 2021-06-24T17:31:30.033Z · LW(p) · GW(p)

It's worth considering the wages/worker exploitation angle from top down too, because that's where the deck gets stacked, against both capital and labor.

We can spotlight symptoms of undervalued workers and debate ways this undervaluing may be, potentially, ameliorated e.g. by imposing a minimum wage. But while government is a de facto enforcer for monopolistic interests AGAINST the free market, arguing for more libertarian or a more socialist approach to wages is pishing into the wind.

We're not at the point where arguments over libertarian or socialist or free market capitalist matter. All the sociopolitical arguments are moot while unaccountable oligarchy monopolizes the market and our government polices their monopoly with exclusive recourse to violent enforcement.

Replies from: TekhneMakre
comment by TekhneMakre · 2021-06-24T22:05:55.624Z · LW(p) · GW(p)

>We're not at the point where arguments over libertarian or socialist or free market capitalist matter.

Yeah, I think I agree with what you're saying. I'm trying to understand the hypothetical ideal-er situation (as a mathematical / scientific puzzle that touches on lots of stuff).

Replies from: mer-f
comment by Mer -F (mer-f) · 2021-07-21T18:11:35.483Z · LW(p) · GW(p)

Fair enough!

comment by TekhneMakre · 2021-06-24T07:06:01.405Z · LW(p) · GW(p)

When an employee agrees to work for a manager, that's also sort of a move in a coordination game with the manager for them to specialize as worker and manager. That's a cooperative game. How does that interact with the adversarialness?

Replies from: TekhneMakre
comment by TekhneMakre · 2021-06-24T07:11:05.010Z · LW(p) · GW(p)

And part of that move, is that you give up your potential to learn to survive by finding food in the untamed forest. Which was supposed to be your BATNA.