We win with markets

Paul Rubin made a great point in his Wall Street Journal op-ed (thanks to Don Boudreaux, Cafe Hayek, for pointing to it).

Economists should point out that what makes markets thrive is cooperation, while competition plays a supporting role. This might help the perception of markets. As an example:

…we might say that a poor person has been outcompeted in the market. Or we might say that a poor person cannot successfully cooperate with others because he lacks valuable skills and has little to sell.

Again, the words matter because viewing the circumstance in terms of competition could lead to penalizing those who are viewed as outcompeting him, even though they did nothing wrong. It might even lead to banning certain terms in transactions—with minimum-wage laws, for instance—that make it even more difficult for the poor person to cooperate. The cooperative metaphor, by contrast, would suggest that the solution is increasing the skills of the poor person, giving him something to sell on the market.

Unfortunately, Rubin would still need to convince many other economists that minimum wage laws make it more difficult for the poor person to cooperate.

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2 thoughts on “We win with markets

  1. “The cooperative metaphor, by contrast, would suggest that the solution is increasing the skills of the poor person, giving him something to sell on the market.”

    Isn’t the competitiveness of the market and the incentive to succeed supposed to encourage the poor person to increase their skills? If the cooperative solution is to increase the skills of the poor person, on whose lap does that solution fall (assuming we are cooperating)?

    • Good question.

      If one believes that work experience is one of the best ways to increase skills, then a good solution is to reduce or eliminate the minimum wage so more people who are being outcompeted at a higher wage will have the opportunity to develop those skills at a lower wage.

      Even if one doesn’t believe that, and instead, feels the desire to intervene and would like to come up with ways to add valuable skills to low-skill workers so they will be attractive to employers, I’ll give you some credit. I don’t think it’s optimal or realistic and could still be a gigantic money pit, but that’s better thinking than believing you can help by arbitrarily raising their wage and making them less competitive. You are now, at least, understanding that there’s a connection between wage and productivity and increasing productivity is a better way to increase wage.

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