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Sender: Lawrence Chickering
Subject: Re: Do we see our theories more clearly than we see reality?
Date: Mon, May 26, 2014
Msg: 101021

Dear Steve,

I am struggling to understand your meaning here. In large part I think this is because you seem to be hailing different 'realities' that in fact conflict.

In the third graf you implicitly twit the theory that since labor is paid for marginal value, it is 'wrong' (your word) to interfere with the free operation of the labor market. [Unfortunately, you fail to say what you mean by 'wrong' here -- morally wrong? Or economically inefficient?] 'People,' you say, disapprovingly, 'should be paid what they are "worth" in the impersonal calculus of the market.' It is too bad you don't explore what happens when governments try to force employers to pay people what they are 'not worth'.

These thoughts typically introduce arguments that employers should pay more. But you don't go there; you then go in the opposite direction in your discussion of Poland and Russia, where impersonal markets were forcing employers to pay more than they wanted to. So, the employers (aristocrats) in Russia did what free market economists from Adam Smith to Milton Friedman say they always do: they try to get the state to override the market and -- in this case -- declare workers slaves of the people who employ them. Slavery often causes misery, and that, you say, was the case in Russia.

Not so, you say, in Poland, where the state was 'more friendly' to the workers -- and, you might also have said, to the market, which was forcing employers to pay more, with happier results.

You draw from these examples a conclusion that totally conflicts with the Russia and Poland examples. Today, you say implicitly, markets lack the power they had in pre-industrial Russia and Poland to push wages up and force employers who want to have workers to pay them. Now -- with no explanation (a new theory, trumping 'reality'?) -- employers have power to ignore markets and pay low wages. This, you say, is the story of the 1980s, when our government behaved like Russia; the rich got richer and the poor got poorer. This an add causal claim since the 1980s toward the end was a time when unemployment rates declined to historically low levels, way below the level considered the natural unemployment rate (a rate sustainable without inflation).

Appealing to reality is where everyone wants to be. Unfortunately, some peoples' realities are other peoples' myths. Your analysis is grounded entirely in confused theory and has nothing to do with reality.

This is an enormously complicated subject, on which there is a huge literature. It cannot be addressed satisfactorily with a handful of throwaway lines. There are, however, important things to be said about government interference with labor markets.

Typically, the interference takes the form of trying through minimum wage laws to force employers to pay above-market wages. I saw somewhere that Elizabeth Warren, a favorite of 'progressives', wants to raise the federal minimum wage to $20/hour. If this can really be accomplished without unintended consequences, why only $20? Why not $30? Or $50?

Sadly, there are consequences; and they are not pretty for the poorest workers, who get priced out of the labor market. The real minimum wage, as Friedman used to like to say, is not the official minimum; it is zero, the wage people are paid when they are unemployed. The group hardest hit by increases in the law is black teenagers, which explains why advocates of increases often include a provision for exempting them from the law. What about other groups, who are told, in effect: if your labor is not worth at least $x/hour, we will make it iillegal for you to work!

Edward Banfield forty years ago, in his book, The Unheavenly City, wrote eloquently (and, for me, movingly) about informal minimum wages, which also discriminate against the poorest and least skilled. When employers resolve to pay above-market wages, they tend to hire -- this is empirically documented; it is not a theory -- more skilled people than they need, discriminating against the least skilled. Nobel Laureate Gary Becker, who died recently, did important work on how government interference with labor markets has been used to encourage racial and other forms of non-wage discrimination (in South Africa, under apartheid, for example).

Banfield's analysis highlighted an element of real tragedy here, wherein people with the best intentions end up hurting the poorest people, in effect pushing them out of the labor market. (Think of how many people today have just given up looking for a job and left the labor market, concealing the real unemployment rate, which is much higher than the official, published rate).

What way can anyone see out of this tragedy? A major problem, of course, lies with the hand-wringing objective focus of our discussions. The problem, at the deepest level, is rooted in our tendency, which we deny but is nevertheless everywhere, to measure the success of a life in terms of wealth. This crude (I would say 'grotesque') measure is important everywhere people are disempowered. In my experience in a wide variety of settings both in the U.S. and in the poorest parts of developing countries, it is not true where people are empowered, engaging each other in common purposes. With such empowerment -- I have seen it in public housing projects in the U.S. and in my education work in the most traditional and male-dominated cultures in rural India -- people engage each other as human and value each other, absolutely indifferent to the larger preoccupation with income distribution.

We are so far from there, at least in 2014 America. What is exciting about this transpartisan listserve is that it is one of the few places one can speak about reality in a way that is not just another myth.

Lawry Chickering Educate Girls Globally Author: Beyond Left and Right (1993) and coauthor (with James S. Turner) Voice of the People: The Transpartisan Imperative in American Life (2008)

On May 22, 2014, at 17:56, Steven H Johnson wrote:

> Hi everyone - > > I've just been reading several days of posts and am impressed by the high-level conversations bouncing back and forth among us. Here's my two cents for this evening.... > > > I am often struck by the ease with which our value systems and our theory systems confine and distort our abilities to sense what's really happening. > > There's a theory that tells us that labor is paid according to its marginal value, and therefore it's wrong to interfere with free operation of the labor market. Theory creates a powerful norm: People should be paid what they are "worth" in the impersonal calculus of the market. > > And if we indeed "see" the world according to that theory, and we act according to that norm, it will feel real. > > There's an alternative story to be told about the same situation. Frances Fukuyama sums it up in his extraordinary book, The Origins of Political Order, when he talks about pre-industrial Poland and pre-industrial Russia. In both regions, there were three main actors - the aristocracy, the peasantry, and the state. > > In Russia the state sided with the aristocracy and the lives of the peasants became more and more miserable. In order to make sure that peasants wouldn't flee, and thus raise the price of labor, the aristocracy prevailed on the state to tie the peasants to the estates where they lived. > > In Poland, says Fukuyama, the state was more friendly to the peasantry and Poland's evolved in a healthier direction. > > To bring this same point up to the present, an alternative way of telling the story is to observe that the labor market is shaped by two forces, not just one - it is shaped by a distribution of power, and by a distribution of talent. Furthermore, it's the distribution of power that determines whether the aristocracy receives a gigantic share of the pie, or just a substantial share of the pie. Then, with that larger issue determined, the nation's salary and wage structure shakes out as a market for talent. > > Tell that story - and I think we will come closer to understanding the reality of the society in which we live. In the 1980s, our national government became a little bit less like Poland's - in Fukuyama's telling - and a little bit more like Russia's. And with that power shift, the size of the pie headed to the top got larger, while the size of the pie headed to the bottom got smaller. > > What's intriguing is that conservatives seem to think it's against the rules to see the world in these terms. We are not supposed to entertain the idea that power makes a difference. Why? Is it because "markets" aren't culpable, they just are? While governments can be culpable, and if culpable, their actions can be changed? Why is the theory of markets treated as a given, rather than as an hypothesis? > > As I say, when our value systems and our theory systems are very deeply held, they can get in the way of our capacity to see reality in its all its fullness. That becomes a serious social weakness when it prevents us from being able to see corruption. If we cannot see corruption, we won't act on it, and if we don't act on it, it won't go away. > > Steve Johnson > > > Steven Howard Johnson - Civic Futurist > 410-562-0361 > Book in Progress: Thoughtful Patriotism > > > To unsubscribe from the TRANSPARTISAN list, click the following link: > >

A. Lawrence Chickering Founder and President, Educate Girls Globally (EGG) 1485 Main St., Ste 103c St. Helena, CA 94574 415.235.6628 email:


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