Tuesday, September 8, 2015

A Surplus Of One-Armed Workers

Comment on: A minimum wage fable


Homestar Runner kinda ruined this fable for me because the first thing that came to my mind was that a one-armed worker would have the heart of a champion.

Unlike scottd... I have absolutely no problem with fables.  I'm all about making economic concepts infinitely more accessible.  But I'm not quite sure if your fable really illuminates the problem.

When kids are in school they have to decide whether they want one or two arms.  It requires a lot more effort to acquire two arms.   The question is... is it worth the effort?  A minimum wage makes it less worth the effort to acquire two arms.

The same is true of adults with only one arm.  Why bother making the effort to acquire a second arm if having only one arm can provide an adequately comfortable existence?

And then there are the one-armed workers in Mexico.  Is it worth it for them to risk their lives crossing the border?  The higher wages that one-armed workers are paid in America gives the impression that the US is suffering from a shortage of one-armed workers.  But if the US was truly suffering from a shortage of one-armed workers... then why would it be necessary to mandate higher wages?

As anybody who has complained about price-gouging should know... shortages mean higher prices... not lower prices.   If we were truly suffering from a shortage of one-armed workers... then people would be clamoring for there to be a ceiling on wages paid to one-armed workers.

When labor advocates argue for higher minimum wages for one-armed workers they are arguing that the natural wages would be way too low.  But by arguing that natural wages would be way too low... the labor advocates are inadvertently acknowledging that the US actually has too many one-armed workers.  But the only reason that the US is suffering from a surplus of one-armed workers is because government intervention has prevented the natural wage from doing its fundamentally important job of accurately and clearly communicating that the US already has more than enough one-armed workers.

If we eliminated minimum wages... then the low natural wages would have two logical consequences...

1. Kids would have more incentive to acquire two arms.  Adults with one arm would also have more incentive to acquire a second arm.  One-armed workers would also have more incentive to go to other countries.  One-armed workers in other countries would have less incentive to come to the US.

2. Existing business owners would have more incentive to hire one-armed workers.  The higher profits that the business owners earned would provide entrepreneurs with more incentive to start businesses that employed one-armed workers.

The supply and demand responses to the decrease in the wages paid to one-armed workers would quickly solve the problem of America's surplus of one-armed workers.

What really needs to be illuminated is how market prices help ensure, via incentives, that surpluses and shortages are only temporary in nature.  If liberals understood the point of prices and incentives then they would understand the problem with arbitrarily changing them.  They would understand that their good-intentioned interventions invariably have very negative consequences.

Personally, in order to help make the point of market signals more accessible... I've tried using the bat signal (value signals), Garbage In, Garbage Out (GIGO) and accurate vs inaccurate treasure maps.

Ideally there should be a short and entertaining animated video on market signals that even kids could easily understand.  As far as I know such a video doesn't already exist!  Talk about market failure!  

Ideally there would be some organization dedicated to things like say, for example... expanding liberty, increasing individual opportunity and strengthening free enterprise.  Creating a short animated video dedicated to illustrating the point of market signals would be right up the alley of this purely hypothetical institution!


I couldn't help but wonder what the story line might be for a short animated video about market signals.  The bat signal would probably be entertaining... but I'm guessing that it's proprietary.

What about the treasure map idea?  A kid finds a treasure map... and then... what?  And then some sneaky creature somehow alters the treasure map?

For some reason the Noid came to mind.  Do you remember the Noid?

When I googled for the Noid I discovered what happened to him... How Domino's Pizza Lost Its Mascot.  It's a darkly humorous story.

The Noid as an example doesn't exactly work for the animated video because he's intentionally malicious.  Liberals aren't intentionally malicious.  They simply fail to understand the problem with arbitrarily changing market signals.

But I do enjoy the thought of the video having some good-intentioned creature called the "Krug".  Any resemblance to any real person... or Nobel economist... would be entirely coincidental!  heh

Why would the Krug change the location of the treasure on the map?  Maybe because the "X" on the map is too far away?   Krug is a little vague on how treasure maps work.  So he somehow moves the "X" on the map somewhere closer to where the kid lives.  The kid somehow doesn't realize that the "X" on the map has been moved and wastes an entire day digging holes in the wrong location.

Anyways... there's room for improvement... to say the least.

See also:  Workers: Beggars or Choosers?

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