[rsj_hn]

> You can't have both of the situations above hold. They are in conflict.?

They are not in conflict at all, this is what the basic welfare theorems of economics say.

It's just that #2 and #1 are impossible to achieve because it requires perfect information about each person and each job, and a unified labor market, which just isn't realistic, as information has a cost and labor markets are fragmented.

In the real world, we are lucky to get some aspects of both #1 and #2, in the sense that people do search for jobs best suited for them, but imperfectly, and employers do search for workers best suited for each job, but imperfectly, and you kinda meet in the middle. If you want, you can call "meritocracy" the freedom of the employer to hire the best worker available, but I'm not sure of a snappy phrase to describe the freedom of the worker to search for the best job available. Maybe someone came up with a label for that. But really they are flipsides of a process that leads to an optimum, they are not two opposing forces where one makes the other impossible. It is like buying and selling, the supply curve does not make the demand curve impossible; both curves meet at an optimum price which is where supply and demand meet. If you mess with either the demand curve or the supply curve, you do not end up at the optimum price, you end up losing welfare somehow.

Obviously anything that can reduce frictions helps you get closer to the meeting of 1 and 2. For example, greater availability of job boards and pay transparency, working condition transparency to get information about available jobs to workers, or things like more accurate information about worker skills and talents to employers (e.g. meaningfulness of degrees play a role here as do rigorous interviews). Really both worker and employer are facing a murky question trying to figure out "how good is the other side here?". Both need as much information as possible.

It is the costliness of information that keeps us away from 1 and 2 simultaneously.

[perl4ever]

>They are not in conflict at all

Yes they are. Imagine World War II. The best person to dig a particular ditch might be Alan Turing. But that's completely different from the best job for Alan Turing being digging that ditch.

>both curves meet at an optimum price which is where supply and demand meet

I think that optimum and equilibrium are different things and a single price cannot be optimum even if it is the equilibrium.

Is this stuff at all familiar?

https://en.wikipedia.org/wiki/Economic_surplus

[rsj_hn]

> Yes they are. Imagine World War II. The best person to dig a particular ditch might be Alan Turing. But that's completely different from the best job for Alan Turing being digging that ditch.

No, Alan Turing would be pretty bad at digging ditches, and there would be many people who could do the job just as well or not better than he.

So in that environment, the code breaker team needs someone, and the ditch digging team needs someone, and if it turns out that Alan is in the ditch and Joe doing an awful job breaking codes, then the code breaking team will try to fire Joe and hire Alan, and the ditch digging team wont mind switching Joe for Alan. Thus this swap is a pareto improving trade, and there are no pareto improving trades in equilibrium, therefore no equilibrium process would settle on Alan in the ditch and Joe breaking codes.

So look, this is an actual body of science and math that you can't just dismiss without understanding and thinking about. There are legitimate criticisms of welfare theorems -- the ones I outlined, namely around lack of perfect information -- does the code breaking team know how good Alan is at breaking codes? Does Alan know there is a job opening other than ditch digging? Etc. It is all about information, but to just pretend that the welfare theorems don't exist because you haven't thought of them or they don't seem intuitively "true" to you is neither a good avenue of exploration nor of debate. These are, after all, theorems. You attack theorems by attacking their hypotheses, not by "disagreeing" with them or just asserting that they are false.

> I think that optimum and equilibrium are different things and a single price cannot be optimum even if it is the equilibrium.

This is, mathematically, false. But it's also irrelevant because there is not one price, there is a single price vector. Alan and Joe don't earn the same wage. The budget of the ditch project and code breaking project are also not the same.

[perl4ever]

>No, Alan Turing would be pretty bad at digging ditches

It's a contrived example that illustrates something general. It could still be true - maybe Turing would have some insight that let him do half as much labor. But whether it's actually true for him is irrelevant.

Let's say the manager of a McDonald's started out making hamburgers and does it better than any of the other employees, but doesn't normally do it any more, unless there's a crisis and they have to fill in when nobody else is available. Or some software engineer at Google would be better at processing data for litigation purposes than anyone in that industry, yet they outsource the work.