| >>The idea that Amazon is going to stop hiring workers if they get more pee breaks... that's just not how markets work. If Amazon could afford to let those workers go, it would have done it already. They will hire fewer workers.. there will be fewer profitable business ventures when the cost of one of the inputs to production increases. In some case, it's true that higher wages will reduce profits, instead of reducing the number of jobs available, but that is not a good thing. High profit margins encourage greater investment. Take N95 masks for instance. If there is a shortage, any one producing them will raise prices and earn a huge profit. Now let's say a progressive politician is elected and decides that those profits should be reallocated to the workers producing the N95 masks, so imposes an industry-specific minimum wage for N95 mask creators. Now profit margins decline for producing N95 mask makers, and N95 mask maker employees earn more. What's lost is the massive influx of investment capital that high profit margins would otherwise have elicited, that would have raised N95 mask supply, which would have made the masks more affordable and plentiful. Price controls don't work to increase net welfare. They reduce social welfare for reasons Economics explains in depth. Prices are a collectively generated signal produced from a complex network of interlocking exchanges that are based on a vast array of localized calculations. They are the product of a super collective intelligence that tells us where economic resources should be allocated. >>It's not just wrong because reality is more complicated and in practice the simplistic models don't always bare out Basic supply and demand theory tells us that the minimum wage, to the extent that it has an effect, harms wage growth. In the absence of the ability to conduct controlled experiments to prove definitively its effect one way or another, we should opt to trust basic economy theory. There are a bunch of outlier situations in which artificial price bounds might theoretically not create economic deadweight losses, but it's nowhere as simple as "the economy doesn't conform to a simplistic model therefore a price floor is good". It's entirely possible for price controls to still create losses while the market is not perfectly competitive. |
Why isn't Amazon hiring fewer workers right now? Is the board wasting money on workers that it doesn't need? If Amazon could hit the shipping volumes it needs to hit with 50% of the current workforce, then it would be hiring ~50% of the current workforce -- if that's not the case, then somebody in the company that's making hiring decisions needs to be fired.
> Price controls don't work to increase net welfare.
A) no one is talking about price controls on final products, they're talking about price increases on one of the inputs.
B) on the subject of wages and worker prices, minimum wage increases have been shown on multiple occasions to increase net welfare. We can debate the theory, but we can also just look at reality and say, "we've tried this before, and when handled correctly, it works."
> Prices are a collectively generated signal produced from a complex network of interlocking exchanges that are based on a vast array of localized calculations.
I would be on board with your argument if the original comment starting this thread didn't boil down to "costs go up, prices go up". You're not talking about a complex signal at that point, you're talking about basic economic principles, and basic economic principles is that in Capitalism, price is what people will pay, not what a product costs to produce.
Even your N95 example shows this point. Why did prices go up for N95 masks? Not primarily because of costs of production, primarily because demand changed. The basic principle economic principle is demand, not costs of production.
If you want to step away from those basic principles and talk about the complicated realities of what people will invest, and how safe they feel, and the size of the payout influencing investment enthusiasm, and so on -- then fine, that's reasonable, but the complicated reality is also that economic experts have looked at minimum wage increases, weighed up all of the complicated inputs that go into final product prices, and regularly concluded in multiple studies that minimum wages don't consistently increase prices or decrease market investment.
> It's entirely possible for price controls to still create losses while the market is not perfectly competitive.
Possible, but definitely not guaranteed.
> but it's nowhere as simple as "the economy doesn't conform to a simplistic model therefore a price floor is good".
Agreed, but "the economy doesn't conform to a simplistic model therefore a price floor is good" is much closer to reality than saying "the economy does conform to simplistic models, therefore a price floor is always bad." You're arguing that the simplistic model isn't applicable, in a thread that was started with you arguing that the simple model was that price and material/wage costs would always move in the same direction. That's just not true, it's both an oversimplification and just bad economic theory.