Why No Jobs?

August 9, 2010

by Jerry O’Driscoll  

In today’s (Monday, August 9th) Wall Street Journal, a small business owner provides the calculations on why he is not hiring. He takes his median employee, changes her name, and explains why he must spend $74,000 to provide her with an after-tax salary of $44,000 plus $12,000 in benefits. The risks of higher taxes and mandates are on the upside. And, yes, Obamacare is already adding to his healthcare costs.

Sometimes commonsense economics trumps high theory.  Firms aren’t hiring because it isn’t cost effective.   The owner could hire more people and expand his business, but it isn’t cost effective.

What would you do to alter the calculation in favor of more employment?

57 Responses to “Why No Jobs?”

  1. chidemkurdas Says:

    The WSJ piece really throws light on the unemployment problem. You know this is happening but to see the numbers for one small business is an eye opener. Then there is the uncertainty of how much the new medical entitlements will add to payroll taxes.

    Remarkable, isn’t it, that at a time when payroll taxes are already a major barrier to job creation, politicians chose to increase the imposition!

  2. Bill Stepp Says:

    It’s a great article, one that Krugman, DeLong and other Big Government types should read.
    BGers seem to lack commonsense. They should spend some time out of academia and in the real world. Oh, I forgot, Krugman did a bit of work for Enron. What was he doing–burnishing its reputation a bit before it could go in for the big score?

    To answer your question, I’d start by abolishing the income tax, both federal and state(s). That would lower the cost of employing workers quite a lot.

  3. JP Koning Says:

    I read this blog post not an hour after reading a relevant quote in W.H. Hutt’s “A Rehabilitation of Say’s Law”:

    “Unemployment disequilibrium envisaged as an enduring condition of part of the potential labor force merely means that there are wage-rates determined by sheer inertia, legal enactment, official edict or private duress at levels above the market-clearing “equilibrium” for labor’s inputs—the intersection of the relevant demand and supply schedules, while the laid-off resources (men and complementary assets), cheapened for other uses, have not yet found sub-optimal employments, i.e., not yet been absorbed into the next best utilizations. But in all cases of lasting divergencies from the equilibrium (whether above or below), quantities actually transacted (supplies and hence demands) are caused to contract. That is, all disequilibria cause some resources (men and assets) to become idle or idling in the short run; and, if the disequilibria are enduring, they cause the diversion of resources into less productive utilization (sub-optimal employment) in the long run. The vital reality implied by Say’s law is that every relaxation of the constraints through which market pressures to equilibrium are resisted (e.g., as by costs and prices imposed by law, collusion or duress) renders larger outputs profitably producible and hence makes larger non-competing outputs profitable.”

  4. Troy Camplin Says:

    That’s an amazing number. Could you imagine the strength of the economy, the wealth that would be created, if employees received the entirety of what they would be paid? It sure would make a huge difference in my life if my wife and I earned all that we could be earning.

  5. Dave Pullin Says:

    That’s an amazing number. Could you imagine the strength of the economy, the wealth that would be created, if employees received nothing at all?

    Discuss.

  6. Troy Camplin Says:

    What an idiotic statement.

    There is no equivalence between employees receiving everything they could earn and the direct and indirect ways in which government causes waste in the economy (including outright theft through taxes).

  7. Mark S Says:

    The boss provides $74k. The employee gets $44K immediately, $12k sooner or later ( that is what “benefits” pay for), and $18k indirectly (isn’t that what taxes go to?).
    Without such a system how would Mr. Tramplin get to work, get protection from criminals or invaders, have his aged parents have income, etc?
    There is no such thing as a free lunch. Not only that you have to plan for tomorrow’s illness (there’s them benefits) and tomorrow’s hurricane (there’s them taxes).

  8. Dave Pullin Says:

    I’m all for reducing waste .. but as Mark S says not all difference we are talking about is waste.

    The post says:
    “Firms aren’t hiring because it isn’t cost effective. The owner could hire more people and expand his business, but it isn’t cost effective.”

    Reducing the cost of hiring people – whether its direct cost, benefits, or indirect costs, means reducing what the employee gets (now, later, or indirectly).

    The statement “See how much wealth could be created by reducing what employees earn for creating it” needs some serious thought.

  9. Efinancial Says:

    Mark S and Dave Pulllin – Here’s a serious thought: when value is extracted from someone by force it is theft, and no matter what it is spent on it is a complete and utter waste! This has nothing to do with TANSTAAFL and everything to do with the fact that value is subjective.

  10. Dave Pullin Says:

    Efinancial: If I interpret you correctly you are saying that all taxes are theft, and it is impossible for government to do anything of value.

    Yet you say ‘value is subjective’ – meaning the value that you place on something is different from the value others place on the same thing.

    Which means the value of ‘0’ that you place on what government does is just one person’s subjective valuation. Others — Mark S, perhaps – place non-zero value on at least some things that government do – police protection, say.

    So what’s your serious position? Are you saying that the police should not exist, or that they should be paid only by those who want to pay for them?

    I assume, for example, you were in favor of the Public Option in Health Insurance, because that allows only the people want the option to have it and pay for it. Right?

  11. Troy Camplin Says:

    TANSTAAFL as an argument for statism? That’s a new one. Efinancial is right, of course.

    And may I suggest to Mark and Dave that just because you don’t have the imagination and creativity to figure out how something could work, that doesn’t make me stupid.

  12. Bill Stepp Says:

    To Dave Pullin and Mark S:

    On the market, a good or service is demanded by a buyer aka a consumer. There’s no split between payment and receipt of service.
    With the criminal entity known as the State (or cekatS), the State extracts money by force from tax”payers” (euphemistically known as taxes, but should be known as theft), then launders it through the cekatS.
    The looted money is spent on a myriad of goods and services, many of which are actually produced by the private sector. (You might have noticed that roads are actually filled and paved by private firms.) There is an inherent split between payment for the service (what payment?) and receipt of the service.
    Most things government produces are “free,” in the sense that there is no explicit charge for them. Instead the taxpayer gets looted.
    Just yesterday the NY Times ran a wayback story about how Mayor William Gaynor abolished bridge tolls. Typical statist vote-mongering lout.
    If roads were privately produced, you can bet your last nickel that users would pay an explicit charge for them. Instead we get government-supplied horrible roads.

  13. Greg Hill Says:

    The employer in the WSJ piece doesn’t find it profitable to hire additional workers at an annual cost of $74,000 (including taxes)because, [it’s important to add] he doesn’t believe he can sell enough additional output at prices that will cover this, and other, costs.

    It’s not implausible to suppose that this very same employer was willing to pay $74,000 a few years ago when demand for his product was strong. Perhaps the businessman has been around for awhile and even hired workers when he had to pay the higher, Clinton-era taxes. The unemployment rate was certainly lower then.
    Maybe demand has something to do with it.

    If you cut taxes and government expenditures by the same amount, the after-tax labor costs will be lower, but, leaving aside second order effects, demand will be lower too. It’s unclear whether you get more employment or not.

  14. Roger Koppl Says:

    Mark S and Dave Pullin are right to point out that the state provides services that must weighed against the costs of taxation. We may say it’s all terribly immoral, but the economic argument is there nevertheless. (Others may challenge the morality of gambling, prostitution,or “drugs,” but they are economic goods nevertheless.) I tend to think state services are provided inefficiently for all the usual reasons, but that claim does not overturn the economic point make by Mark S and Dave Pullin.

    To say that we can imagine a functional system without, say, a state monopoly in security services (police) does not provide us with a practical *design* for the competitive provision of such services. If we had had a magic wand to prevent the state from existing, then, perhaps, a functional private market in security services would have evolved. But the state did exist, the market did not evolve, and we can only guess what the private security market might have looked like without the state. To get there from here would seem to require a design process of the sort Vernon Smith and his co-workers have hammered out.

    Getting back to Jerry’s question: The (impossible) ideal would be some sort of lump-sum tax, so that employers and employees experience a zero marginal cost of state services when contracting with each other. Jerry is asking how to better approximate that ideal. I wish I had a good suggestion! Well, in the short run it might help to have some sort of corporate income-tax credit or lower the employer’s (nominal) share of FICA taxes. I don’t have a suggestion for the long-run beyond general notion that we should be “more free market.”

  15. Current Says:

    I don’t want to get into the messy dispute between consequentialist libertarians and Rothbardian anarchists. Anyway, I fall in the first category, I don’t see anything wrong with paying taxes for the police.

    I think Greg Hill makes a good point above. If the margin cost of employing more staff has not changed between then and now then that cost can’t really be blamed for the high level of unemployment compared to a few years ago. But, if the cost has changed then that’s a different matter. What we really need is a comparison, how much was that $75K figure in 2006?

  16. Gene Callahan Says:

    “when value is extracted from someone by force it is theft,”

    If, as you say, value is subjective, it certainly cannot be “extracted”! I think what you mean, instead of “value,” is “money.” And its only theft if the money is not owed, right? So the real question is, “Do we have involuntary obligations to society?”

    “and no matter what it is spent on it is a complete and utter waste! This has nothing to do with TANSTAAFL and everything to do with the fact that value is subjective.”

    Absurd. Theft is wrong because it’s not the thief’s money, not because he wastes it once he gets it. He may, in fact, spend it on something less “wasteful” (but, of course, if value is subjective, I don’t see how you can call anything wasteful except “wasteful to you”) than the original owner. Perhaps the victim was going to buy the dose of heroin that would kill him, and the thief used it to endow a chair in Austrian economics.

  17. Gene Callahan Says:

    “With the criminal entity known as the State (or cekatS), the State extracts money by force from tax”payers” (euphemistically known as taxes)”

    Bill, I walked in to a grocery store the other day to engage in one of those purely voluntary transactions free marketers like to tout. I sat down and started eating some of the food. There were prices listed in the aisles, but I was certain that these were just suggestions — all this market stuff is purely voluntary, you know? Can you imagine what happened next? A big guy came and threw me out of the store! It turns out these “voluntary,” free market transactions are backed by force as well!

    I note this not because I am a Communist who thinks food should be free, but to point out that every form of social organization is peaceful as long as you play by its rules and turns violent once you don’t. Rothbardtopia is no different in this regard than the current system.


  18. Gene knows better. “Voluntary” and “use of force” are opposites only for a pacifist. Gene was violating his contract with the food provider and hence he (Gene) had initiated force against the other.

    Roger always sums things up well. If government’s actually provided public goods, however, we could all have an interesting discussion about its proper role. But most of what government aactually does is forcibly transfer income from one group to another (the producers and the poachers, some might say).

  19. Gene Callahan Says:

    “Gene knows better. “Voluntary” and “use of force” are opposites only for a pacifist. Gene was violating his contract with the food provider and hence he (Gene) had initiated force against the other.”

    No, Jerry, I do not “know better.” In fact, I thought I “knew better” a few years ago, and then realized I was doing just what, say, a Marxist does — defining things so as to make my political preferences appear as logical truths.

    I never signed any contract with the food vendor, and therefore the exact same maneuver is available to someone who wants to justify taxes: The person not paying taxes has violated their contract with the government and hence has initiated force. Of course there is no explicit contract the taxpayer has with the government, but so what: if you can invoke an implicit contract I have with the food vendor, the “taxes-sure-aren’t-theft” spokesperson surely is entitled to use the same tactic, right?


  20. Gene,

    You stole his food. No written contract is required. There are legal rules evolved over centuries that clarify in advance what is owed to each other in such a situation. Not to mention personal morality and common sense.

    I personally find the social contract theory a stretch and not analagous to the situation you posed. But I leave it to others to debate that topic.

    In your story, you’re a thief no matter what one’s theory of the state. (And you’re a thief in a communist society, too. There you’d be stealing from the people.)

  21. Gene Callahan Says:

    “You stole his food. No written contract is required. There are legal rules evolved over centuries that clarify in advance what is owed to each other in such a situation.”

    And the non-taxpayer failed to pay her taxes. No written contract is required. There are legal rules evolved over centuries that clarify in advance what a taxpayer owes to the state in such a situation.

    “In your story, you’re a thief no matter what one’s theory of the state.”

    Nonsense. In a tribal society in which food was taken to be a commons it would be the guy preventing me from taking what I needed who was “initiating force,” and similarly in a Communist society after the “withering away of the state,” where, per Marx, if I need the food it is mine. And Aquinas argued that if I or my family were starving, taking the food would not constitute theft, and it would be unjust for the shopkeeper to use violence against me.

    In any case, I find it strange that you now repudiate the contract interpretation of the situation as if it was a bad idea I brought to play here, in that it was you who introduced a “contract” between me and the grocer only a couple of comments ago!

  22. Bill Stepp Says:

    Gene,
    IANAL, but I am pretty sure any lawyer (or first-year law student) would side with Jerry on this. You have an implicit contract with the owner of the store, which even the People’s Republic of New York, Brooklyn division–I think that’s where you are–would recognize.
    The fact that the contract is backed up, in a sense, by the monopoly protection racket- cekatS, which has more firepower than you do (alas) and is willing to use it under certain circumstances, doesn’t change this.

  23. Othyem Says:

    Is this REALLY more complicated than tacit and explicit consent? I don’t think it is…

  24. Gene Callahan Says:

    “IANAL, but I am pretty sure any lawyer (or first-year law student) would side with Jerry on this. You have an implicit contract with the owner of the store…”

    Bill, why do you call this “siding with Jerry”? Did I deny somewhere that, in this legal system, I have an implicit contract with the grocery store owner? You are noting a contention with which I agree and saying that this point proves I am wrong and Jerry is right!

    I just point out that, per the very same legal system, I have undertaken, by choosing to remain living in the US, an implicit contract with the government, which requires me to pay taxes. So, if we are looking at this from a legal positivist point of view, taxes certainly are not “theft” — the person who is trying to avoid paying them has broken an implicit contract, and it is she who has “initiated force.”

  25. Gene Callahan Says:

    “The fact that the contract is backed up, in a sense, by the monopoly protection racket- cekatS, which has more firepower than you do (alas) and is willing to use it under certain circumstances…”

    Well, Bill, any contract better be backed by someone or some group of ones with more firepower than the (potential) violator or it ain’t worth much!

  26. Othyem Says:

    Gene,

    You find nothing circular in this? I’m sure you’re familiar with the argument. The requirement that we pay taxes presupposes the government is legitimate to begin with.

  27. Gene Callahan Says:

    “The requirement that we pay taxes presupposes the government is legitimate to begin with.”

    Yes, it does. And the statement that taxes are theft presupposes the government is illegitimate to begin with. It certainly can’t be used, as many try to do with it, to show that the government is illegitimate.

    And, of course, the requirement that I pay for the mango I ate in the grocer scenario above presupposes that private property is legitimate to begin with.

    (I suppose someone will now say, “So, Gene thinks private property is illegitimate!” That’s not my point, which is, instead, that one cannot argue against some legal regime by stating “It employs coercion!” ALL legal regimes do, even the one in Rothbardistan, or they wouldn’t be legal regimes. (They just be suggestions.) But a lot of ignore this fact and engage in the rhetorical flourishes we saw efinancial using above, which just amount to empty propaganda. Perhaps we should prefer Rothbardistan to what we have, but if so it’s not because the State “rests on coercion”!

  28. Gene Callahan Says:

    Should have been: “But a lot of PEOPLE ignore this fact…”

  29. Gene Callahan Says:

    “They just be suggestions” should, of course, be “They’d just be suggestions.” I’m probably too sleepy right now to be posting.

  30. Bill Stepp Says:

    Gene,

    I don’t believe in social contract theory. Neither do any other libertarians, I don’t think.
    I don’t have an implicit contract to abide by the cekatS’s regs and rules, and to “pay” taxes to it. I “pay” taxes, because it has vastly superior firepower; and, having been in a jail run by the cekatS once on a trumped up but standard issue charge, I don’t want a repeat. (Try defending yourself from an attacker with your fists in the PRoNY, and you’ll experience what passes for Kafkaesque “justice” here, as I did.)

  31. Othyem Says:

    The argument that the state isn’t legitimate doesn’t turn on the assumption of taxation; rather it turns on our consent, and the state’s lack thereof. Of course the state can tax me if I enter into an explicit or implicit agreement with it and these are part of the terms. Obviously, most of us have never explicitly agreed to be governed, which leaves implicit consent as the focus of the battle. And, in my opinion, I haven’t heard a compelling or convincing argument from those quarters yet.

  32. Gene Callahan Says:

    “I don’t believe in social contract theory.”

    I’m not discussing what you believe in. I am pointing out that the logical structure of Jerry’s argument for my implicit contract with the grocer is the same as the logical structure of a citizen having an implicit contract with the state to pay taxes.

    “Neither do any other libertarians, I don’t think.”

    Buchanan and Tullock?

    “I don’t have an implicit contract to abide by the cekatS’s regs and rules, and to “pay” taxes to it.”

    Well, Bill, the proverbial first-year-law student you invoked “against” me earlier (when you were actually arguing my point) would not side with you here! And if you are free to reject the legal consensus that you DO have such an implicit contract with the state, why isn’t a Marxist free to reject the implicit contract the legal system says he has with the grocer, and “steal” as much as he can get away with?

  33. Gene Callahan Says:

    “Obviously, most of us have never explicitly agreed to be governed…”

    Just as most of us never explicitly agreed to the institution of private property, or the syntax of our language, or most other things about social life. If we don’t have to obey rules to which we did not consent, why should I give any brief to the grocer’s claim that he “owns” the food of “his” that I was eating?

    “Obviously, most of us have never explicitly agreed to be governed, which leaves implicit consent as the focus of the battle.”

    Only if one denies one can have obligations to which one did not consent.

  34. Troy Camplin Says:

    Gene is making a valid point here. Practically all the rules we live by are rules we did not explicitly agree to. Only if you ascribe to the Continental rationalist tradition can you believe that we can or should only live by such explicitly-constructed rules (this is the error of constructivism). Thus this is insufficient for the argument for private property, against theft, etc. More, as Gene is hinting towards, “ought” was once the past tense of “to owe” (no longer, since the 17th C.), which points to the fact that “ought” implies obligation. What do we owe to our culture, etc., because of all we have been provided, even if we didn’t “explicitly agree” to them? This certainly complicates things.

    All in all, though, we need much better defenses of free markets, private property, etc. than constructivism (which, as Hayek pointed out, actually leads us toward socialism).

  35. Othyem Says:

    Gene Callahan: “I am pointing out that the logical structure of Jerry’s argument for my implicit contract with the grocer is the same as the logical structure of a citizen having an implicit contract with the state to pay taxes.”

    How so? One involves an *act* of consenting(entering into the grocery store and everything that comes with that), the other does not. Consenting is an act and both types of consent naturally involve an act–however that act can be a silent, unactionable one, such as remaining quiet when a vote of approval is called for. I never recall tacitly consenting to anything. And the argument from enjoyment (that is, the benefits I receive) is a weak one.

    I wish I could stay and defend this post, but I’m off to work.


  36. To Gene’s point:

    The elements of a contract are present in the grocery example, and they are absent in social contract theory. Repeated assertations that the two cases have “the same logical structure” (whatever that is) does not make your proposition convincing, much less true.

    You are not convincing anyone who is not
    already in agreement with you. Bringing in Marx and the withering away of the state only weakens your case.

    Continue if you like, but I’m moving on.

  37. Gene Callahan Says:

    Thanks, Troy.

    Othyem: “One involves an *act* of consenting (entering into the grocery store and everything that comes with that)”

    Remaining in the US is also an *act*. And everything that comes with that.

  38. Othyem Says:

    Sure it’s an act if someone was specifically asked whether he preferred to stay here or not and therefore to be subject to this government’s rule. But where does this government come off saying this AT ALL? It presupposes the very legitimacy we are questioning.

    The most you’ll ever be able to prove with this Hobbesian line of reasoning is that A state is justified. You’ll have a much harder time showing that THIS state (or any other) is justified.

  39. Gene Callahan Says:

    “But where does this government come off saying this AT ALL? It presupposes the very legitimacy we are questioning.”

    Of course it does. I’ve already agreed with you on that. Just like the grocer asking me for money presupposes the very legitimacy the Marxist is questioning.

    “The most you’ll ever be able to prove with this Hobbesian line of reasoning is that A state is justified. You’ll have a much harder time showing that THIS state (or any other) is justified.”

    But I’m not trying to show that any state at all is justified. I’m criticising the line of reasoning I saw efinancial using above, that’s all.

  40. Gene Callahan Says:

    “The elements of a contract are present in the grocery example, and they are absent in social contract theory.”

    So you say. The vast majority of Americans and, specifically, legal theorists, don’t agree with you. That doesn’t make them right and you wrong, but it does make the line of argument you are taking ineffective for…

    “You are not convincing anyone who is not already in agreement with you.”

    That’s kind of my point about the “taxation is theft” argument — it is only convincing to someone who ALREADY believes the State is illegitimate.

    In this thread, just to make it clear, I am NOT arguing that:
    * the State is legitimate;
    * private property is illegitimate; or
    * Marxism is sensible.

    (Among other things.)

    All I am doing is attempting to show why a particular line of argument (which I saw efinancial employing) is only effective for people who already agree with its conclusions.

    What a anarchist needs to do to convince people seriously thinking through these matters is demonstrate that a workable social order is possible without anything resembling sovereign government. That having been done, THEN the “taxation is theft” argument can go through, because the necessity of a sovereign to human social life (without which we would all perish) is disproved. IF, in fact, a government is necessary for social order, THEN, it seems clear to me, being asked to contribute to its maintenance would be a true obligation, and not “theft.”

    So, if anarchists read me correctly, I’m doing them a favor, and forcing them to devise an argument that will actually be convincing.

  41. Efinancial Says:

    Bravo, sorry I missed the development of this thread but it was off to work for me. I do agree with GC that the taxation is theft argument is only convincing to those who agree with its conclusions. Yes, I admit I was preaching to the choir. Looking for kindred souls. That is all that anyone can do.

    I do not agree that those who do not agree with the “conclusions” could be persuaded otherwise. Anyone that believes a “sovereign” is necessary for “human social life” is not going to be disuaded by a rational argument.

  42. Gene Callahan Says:

    efinancial, let me just comment that:

    1) If your rejection of any attempt to persuade anyone who does not already agree with you is sound, then the anarchist project is hopeless; and
    2) Hobbes was a supremely “rational” social theorist, who put forward entirely “rational” arguments for his belief in the necessity of the leviathan. If you are not willing to at least engage Hobbes, than your claim to be staking out the “rational high ground” is very suspect.

  43. Mario Rizzo Says:

    I thought that the original post was simply about employment in the recession.


  44. Mario,

    My thought exactly. There is a good post this morning on the jobs picture at CP.


  45. […] am actually very sympathetic to Gene’s arguments in the comments on this thread, but I think he goes too far. If we accept his argument below, watch what we are able to do […]

  46. Seth Says:

    “The employer in the WSJ piece doesn’t find it profitable to hire additional workers at an annual cost of $74,000 (including taxes)because, [it’s important to add] he doesn’t believe he can sell enough additional output at prices that will cover this, and other, costs.” -Greg Hill

    That’s not what I read. I read that Fleischer is reluctant to commit to a cost that had the added uncertainty of government action.

    From the article: “As much as I might want to hire new salespeople, engineers and marketing staff in an effort to grow, I would be increasing my company’s vulnerability to government decisions to raise taxes, to policies that make health insurance more expensive, and to the difficulties of this economic environment.”

  47. Seth Says:

    “Bill, I walked in to a grocery store the other day to engage in one of those purely voluntary transactions free marketers like to tout. I sat down and started eating some of the food. There were prices listed in the aisles, but I was certain that these were just suggestions — all this market stuff is purely voluntary, you know? Can you imagine what happened next? A big guy came and threw me out of the store! It turns out these “voluntary,” free market transactions are backed by force as well!” -Gene Callahan

    That’s a straw man.

    No free market supporter I know uses “voluntary” to mean one side of the transaction dictates the terms. They are quite clear about “mutually voluntary” transactions – both sides agree to the terms or either side can walk away.

    When you took the food by overriding the terms by which the store would have voluntarily traded with you, you initiated the use of force. They responded. That does not mean that free market transactions are backed by force. That means that forceful transactions are responded to with force.

  48. Impairment Says:

    This discussion is becoming a bit too theoretical. Have a look at the numbers: the shopkeeper has to pay $74.000 so that the employee will receive $56.000 including benefits. In countries like Austria, Germany or Sweden he would have to pay about $125.000 to $135.000 in order to provide the employee with the same net income.
    So, if no one opposes the state, you will end up with a system like that where payroll costs consist mainly of taxes and fees.
    Of course, employees receive services in exchange for that money. But if you believe that private companies can provide for these better than public institutions then this system seems to be highly wasteful at least.
    This is the way the U.S. are going to go unless someone opposes these developments.
    And if you talk about social contracts as justification of taxes: a “social contract” can be constructed theoretically. But still it is a very weird type of contract, implicitly including a very weird definition of “voluntary”. If you do not like taxes you may leave – go to Somalia or Antarctica for example. You could argue that all the German soldiers who invaded Poland 71 years ago were personally responsible for that war because they actually had the choice. They could join the army or go to the gallows. Invading Poland was their voluntary decision then, wasn´t it?

  49. Dave Pullin Says:

    The arguments about what is really a voluntary decision are important. Seth is right that Gene Callahan’s example is a straw man – a very weak straw man, but it is easy to identify situations where businesses present decisions to consumers where consumers do not have a real choice. The alternative may not be as bad as Impairment’s gallows, but they don’t need to be for it to be coercion.

    For example, now that one company has bought up all the cable companies, and is charging a monopoly rent, do I have a choice? I could go to Somalia (do they have cable?). I could start my own cable company? (Would the bank lend me money to do it?) I could start my own bank. Would investors invest in my company which wouldn’t be making monopoly profits. … do I have any real choice?

    “But if you believe that private companies can provide for these better than public institutions …” you could go Somalia. That’s not a real choice.

    But if you believe that government can provide certain services such as real health insurance that public companies don’t provide … you could go to Sweden. That’s not a real choice either.

    These are not real choices.

    It seems strange to me that both ‘free marketeers’ and ‘Libertarians’ that post here, argue for policies in the name of freedom and choice, whose consequences are are choices that are only “theoretically voluntary”.

    Even the core proposition of ‘free marketeers’ and ‘Libertarians’ seems to come with the “no choice” stick. “If we had our way the world/government/America would be like this, and if you didn’t like it you could leave. If you think unfettered greed leads to bad results, go to Somalia. If you don’t like OUR definition of freedom, you are free to leave our world.”

    Are there no solutions that lead to real choices — to *actual* voluntary decisions, instead of only *theoretically* voluntary decisions?

  50. Seth Says:

    “but it is easy to identify situations where businesses present decisions to consumers where consumers do not have a real choice”
    -Dave Pullin

    That’s equivocation or conflation. You’re confusing the voluntary choice one has to do business or not with having, based on your own personal preferences, what you consider to be acceptable alternatives.

    Even if you did have the “choice” of only one cable company (though I can choose between two cable companies, several satellite TV options, along with several programming rental services such as Netflix, Blockbuster, etc.), you always have the choice whether to pay for cable or not. Nobody forces you to pay for it. That’s what we mean by voluntary.

  51. Dave Pullin Says:

    Seth, you make my point quite well. Yes of course I don’t HAVE to buy cable, but the cable company has deliberately acted to ensure that if I do buy cable, I HAVE to buy from them. And if they can, they will buy the satellite TV company too, but I don’t HAVE to buy TV at all.

    No matter how much choice a business deliberately eliminates, in order to AVOID competition on product and price, it’s OK with you.

    Let me give another example, of “voluntary” decisions.

    I go on vacation, having carefully planned my trip and shopped around for acceptable deals, and voluntarily agreed to them.

    When I arrive at the destination airport and rent a car, I am presented with a contract with tons of fine print, and a “Airport Rental Location Use Charge” added to the rental charge. Of course I don’t have to agree to the contract or pay the fee … as long as I don’t mind canceling the rest of the vacation.

    It’s easy for a business to maneuver itself so that customer have no practical alternative but to accept a “voluntary” agreement .. and they go out of their way to do so.

    But I’m sure you feel that’s OK, because you, personally, don’t care that businesses eliminate your choices and leave you only impractical alternatives. … but point is that other people DO care. They would not choose such a situation.

    Why is it that you espouse freedom of choice, but not other people having freedom of choice?

  52. Troy Camplin Says:

    I can’t choose to step off the Empire State building and fly! I have no real choices! I can’t choose to live underwater like a fish and breathe from gills! I have no choices! I can’t choose to rape any woman I want to have! I hav eno choices! I can’t choose to kill anybody who pisses me off! I have no choices! I can’t have a million dolalrs whenever I want it! I have no choices!

    These are the complaints of an infant who doesn’t understand how the real world works. In the real world, people have to choose among what is actually possible. Grow up and have an adult conversation.

  53. Dave Pullin Says:

    Troy, I’m not sure who you are arguing against, but I am not arguing for choices that defy the laws of physics or economics. I am arguing for choices that are perfectly possible – indeed economically desirable – such as choice among businesses who are forced to compete for business. These choices are regularly denied in a “laisez faire market” – where competition is replaced by power and choice replaced by de facto coercion.

    It is ironic that “Libertarian” policies do not lead to liberty, nor “Free market” policies lead to free markets or economic efficiency.

  54. Troy Camplin Says:

    Yes, you are. Your ignorance of economics, libertarianism, free markets, and competition is profound. That is why my examples were dead-on accurate to what you were saying. You are objecting to absurdities and straw men.

  55. Seth Says:

    Dave P. – I didn’t make your point.

    “No matter how much choice a business deliberately eliminates, in order to AVOID competition on product and price, it’s OK with you.”

    Not true. I’m not in favor of choice arbitrarily limited through government coercion, which is the case with cable companies. However, even that hasn’t prevented acceptable substitutes from cropping up. Just one example, I’ve been catching up on lots of good cable series this summer with Blockbuster Online service. Personally, I wish my cable company offered a comparable service that could download to my DVR, but they don’t yet.

    I currently have the choice of two cable providers (owned by different companies), two or more satellite providers (owned by different companies) and soon, I imagine I’ll be able to pipe a lot content right off the Net.

    I don’t know of any instances where choice has been significantly reduced for extended periods of time through market actions. If you can think of any, please share.

    Is that vacation problem a hypothetical? I haven’t had that happen to me in my travels. The travel resources I use to pre-book such things are usually pretty upfront about all costs.

    I certainly believe there are scams out there, but the beauty with the free market is that those don’t last long. It’s hard to generate goodwill, referrals and repeat business when take advantage.

    I hate to take up more space on these gentlemens’ fine blog. If you’d like to discuss further with me, feel free to click on my name. That will take you to my blog.

  56. Dave Pullin Says:

    Hi Seth, I’m against coercion too .. by anyone, not just government (although there are cases when government coercion is necessary).

    My whole point is that coercion-by-businesses exists too. They don’t use force (typically sub-contracting the use of force to the state – “call the police!”), and there’s always some kind of excuse “you have a choice” … but it’s not a real choice. May be there is also an excuse that says something sometime in history was done by government, and so may be the state is to blame. (I’m not sure why the cable company’s de facto monopoly results from state action).

    There are myriads of examples of how companies do this. I buy a DVD .. when did I voluntary choose to watch a load of ads? When did I choose to give up control of my DVD player to the DVD’s programming so I can’t skip over stuff I don’t want to watch?
    I buy a movie ticket; did I voluntarily agree to sit through 15 minutes of commercials? When did I agree to my mail box being a dump of useless third class mail, or my email-box for spam? (of course I could choose not to buy a DVD, movie ticket, mail box, or email-box).

    My vacation/car rental example is real. “Add on mandatory fees” abound, “Voluntary” terms and conditions, in circumstances where you have no real chance to refuse, are common practice. (Heh, my own business does it too!)

    In theory companies compete on everything, but in practice they don’t. Some times competition operates perversely. If one company gets away with an “Add on mandatory fee” competition often drives others to do the same. (In this case, it’s competition for investment. If one car rental can get away with a dodgy practice that increases profits, all the others have to match).

    Do banks really compete on “Privacy Policies”? Every one has the same (which takes 18 pages of fine print to say ‘you have no privacy’). They can write anything they like and get away with it (because 99% of people don’t understand it even if they read it), because no one has a real choice (except, of course, I don’t have to have a bank account).

    The entire credit card industry became dependent on people “voluntarily” agreeing to terms and fees that they did not understand and that no sane person would agree to if they did understand.

    So my point is that coercion-by-business exists, and it is a problem. Excusing it does not make it go away. Saying that “you have a choice” when the choice is impractical because it was deliberately made so by the business, doesn’t make it go away.

    ps. I found your blog but not a place to enter the discussion. Besides I can get a whole lot more people to disagree with me here🙂


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