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Subj: Re: How isn't it?
Posted: Thu Dec 27, 2007 at 01:36:13 am EST
Reply Subj: Re: How isn't it?
Posted: Wed Dec 26, 2007 at 11:09:57 pm EST
First off, let me say that much of what I previously posted is straight out of an economics book, or other educational source.
> > A free market is where ideal equilibriums are reached between buyers and sellers without interference from outside sources.
> Omar knows what a free market is, by definition - so well, in fact, that he's able to point out that unions don't violate their spirit. A union is not an 'outside' source - they're a corporation of sellers, and their product is labor. The company is the buy of that labor - so there are no 'outside sources', here. (Or maybe I'm just point out that 'outside source' is incredibly relative...)
The spirit of the free market insists on contracts with the individual, not contracts with the group. Like I have stated previously, a free market is just an idea, like true democracy, that can never be realized, or at least never will be.
Tell me to which of these statements you disagree, if any:
1) The free market hates the unnatural distortion of equilibriums.
2) Unions unnaturally distort the wage equilibrium.
One of the constraints on free-market capitalism is the power of trade unions.
> > Wage equilibriums are not reached for various reasons, such as minimum wage laws, efficiency wages, and unions.
> ...just as 'equilibrium' is relative. In fact, I'd go so far as to say that it's entirely meaningless - there never is an equilibrium. Or else the market wouldn't fluctuate from minute to minute, would it?
Equilibrium isn't relative, its more like ideal. You are right, it is constantly changing, but at any given moment we can define it. Your salary is a wage equilibrium. It is the amount that your company (the buyer) is willing to pay you (the seller). You have both agreed on that price, If you wanted more, your company would not hire you. If your company wanted to pay you less, you would not accept.
> > A union is a worker association that bargains with employers over wages. They often raise wages above the level that would prevail without a union.
> And companies will often offer wages that are below the market-average when a union isn't there to protect them. So why isn't that destabilizing the equilibrium?
I don't think Below-Equilibrium wages are even possible, because it would have to be defined as a worker choosing to accept a wage that he would not take. And then the worker would just choose not to work. An equlibrium wage is where the buyer and seller agree to a wage. If if the wage is below what the worker wants, he would just not work.
I would guess the only way a below equilibrium wage would be possible is if the worker had a long term contract and couldn't get out of it, and he never agree to his current wage otherwise. So I guess that could be applicable to up and coming pro athletes.
On the other hand, if the wage is above the wage equilibrium, the company would still have to hire the worker due to minimum wage laws, government interference, etc.
> > For a believer of the free market of capitalist, basically, anything that limits the number of players in an economy is bad.
> So what do you think of monopolies? They're the logical extension of a free market system without controls.
Personally, I'm against them. But I never said that the market should be 100% free.
But in a free market, its really impossible to have a monopoly because new competition would enter. Remember, in a free market, there are no barriers to entry like start up costs. As I have stated, a free market is against anything that limits the number of players in a market. Monopolies and unions both limit the players.
In a free market, monopolies would only exist if having another company in the same industry would make both companies not profitable.
> > They artificially restrict supply of a product (labor). Unions manipulate the supply, and the free market hates manipulation.
> There's actually no reason that Nintendo has had a Wii shortage for the past year - except that they've been carefully controlling the production numbers so as to keep demand at a high level. And it seems to be working. So why doesn't the market hate this sort of manipulation? Or are you just being arbitrary with your application of the rhetoric?
Remember, the free market is just an idea. In a free market, Nintendo would increase the price of the Wiis to its equilibrium level, decreasing demand.
Let me repeat, we do not have a free market.
> > well, companies are seen as single entities/players, not as an association.
> 'Seen', sure, thought not in actuality - but by that logic, unions in negotiation with corporations are also functionally single entities.
We aren't talking about in actuality though, we are talking about in an ideal free market system.
In a free market, a union will restrict the movement of the wage equilibrium. A free market loves movement of and adjustment to any equilibrium.
A free market is based on individuals doing what is best for them as individuals.
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