MD: All economists confuse the “proper” Medium of Exchange” process with some kind of manipulation of the economy. That’s just what they think their job is … their focus is … their expertise is … their destiny is. And they are all flat out wrong.
Money simply enables traders to effect their trading promises over time and space. Trading “is” the economy and trading over time and space is a huge part of trading (simple barter exchange in the here-and-now being the rest … unless you consider government counterfeiting) … and it is the only instance where money is created. Money is just the record of these in-process trading promises. It doesn’t exist before the promise nor after delivery for any instance of a trading promise spanning time and space. Thus, it cannot and will not inflate or deflate. And it is always in free supply. No economist needed!
If a trader (and we are all traders … with different levels of responsible behavior) can see clear to delivering on a promise over time and space, he does so of his own volition. He is free to create money to carry out his promise. If he fails (defaults), the orphaned money is reclaimed immediately by an interest collection of like amount.
Manipulation of the money process is “always” counterproductive. It should never be allowed … and with a “proper” MOE process, it cannot be accommodated … so “is” never allowed. Let’s see what kind of manipulation is being studied in this instance.
The article:
My Mercatus Center colleague Jayme Lemke (who earned her PhD in economics from George Mason University) published last year in the journal Public Choice a very nice piece of research titled “Interjurisdictional competition and the Married Women’s Property Acts.” (This article won the 2017 Gordon Tullock Prize.)
MD: Georg Mason University is a “hotbed” for Mises Monkery. It is kind of the USA abby for the religion.
In this article, Jayme explains the timing during the 19th century of U.S. states modernizing their property law – specifically, modernizing this law to enable married women to own, use, and alienate property no differently than could men and unmarried women. This timing, Jayme shows, is explained by the intensity with which state leaders wished to increase their states’ populations. A state whose leaders could personally enjoy some significant gains if that state’s population increased was more likely to modernize its property law than a state whose leaders stood to gain less from a population increase. (My summary here of Jayme’s thesis and of her principal finding do not do justice to her paper. Do read it yourself. It’s excellent.)
MD: The state (and the money changers that institute it) are notorious for co-opting the trading process … for their own self interest. In trading there is no gender. It is human specific in the animal kingdom, but other than that, all traders are equal (until the money changers … and the states … and the leaders they institute dictate otherwise).
One of the passages in Jayme’s paper that I found to be especially interesting and germane is the following on pages 302-303:
“[O]ne of the practices first implemented by [Massachusetts textile-mill owner Francis Cabot] Lowell and later copied by other industrialists was the active recruitment of young women. Lowell would pay recruiters to go out into the rural areas of Massachusetts, New Hampshire, and Vermont to find female workers…. The model developed by Lowell came to be copied by aspiring industrialists across the Northeast, and beyond.”
MD: And if he could have recruited dogs or pigs or horses to be productive in his mills he would have done that. When you need to expand your labor force, you pull out all the stops. When you have the luxury of picking and choosing your labor force, you impose all the stops you think are appropriate. And it seems to be a male/female thing. Women creating enterprises have a tendency to employ women over men. And it is a race thing. Proprietors from India operating convenience stores seem to exclusively use Indians to run their stores. This isn’t rocket science. It’s about ease and predictability of control.
More than 150 years ago – when transportation and communication were primitive by the standards of the early 21st century – competition nevertheless drove industrialists to spend significant resources to recruit, from distant places, low-skilled workers. If profit-hungry industrialists went to such lengths in mid-19th-century America to locate and hire workers from jobs (then, mostly on farms) that paid those workers less than they could earn working for the recruiting industrialists, what sound reason is there to suppose that employers of low-skilled workers in America today generally possess anything that can, without laughing, be called “monopsony power” of such workers? Answer: none.
MD: But that’s only half the story. Those workers left the farms because the industrialists offered them a better life than they had on the farm. But most of the industrial managers didn’t have to be scrupulous … so they were not scrupulous. Once they had control of those transplanted workers, they took advantage of them … because they could. That just seems to be human nature. The farmers did the same thing with their hired hands (in some cases making them total slaves).
Those who assert the existence of such monopsony power do so either because they mistakenly believe that such power exists whenever any employer faces a supply of labor that is less than perfectly elastic (that is, whenever an employer would quickly lose all of his workers of a given sort if that employer cut the pay of those workers by as little as one cent per hour), or because they ignore the active efforts of employers to find and recruit low-skilled workers.
MD: Well duh! That’s called a mature market. The grocery business has been running on razor thin margins for decades … as has the oil business.
Low-skilled worker Jones currently in job X need not himself have much gumption or stomach for actively searching out new and better employment if employers offering better-paying jobs Y and Z take steps actively to recruit Jones and other such workers. And employers have every incentive to do such recruiting if and when there are pools of workers who are currently paid less than the value of those workers’ marginal products were those workers instead employed by the recruiting employers.
MD: When it comes to workers … and also to money, the HUL (Hour of Unskilled Labor) becomes the proper unit of measure. It never changes over time and space. It always trades for the same size hole in the ground.
And when it comes to labor, that’s as low as the scale goes … it doesn’t really ever become less than unskilled (unless you consider the case where they hire the handicapped … and supplement their lower than unskilled worth with government subsidies). Once you reach the HUL lower limit (or force it with something like a minimum wage adjustment), you move into the realm of the robot. Automation removes the need for human labor in that task altogether.
Economists seem to want to turn that which is natural into something they can manipulate … to make it rocket science. Interestingly, economists, like artists (excepting a tiny number of rock stars) work outside the domain of supply and demand. They cannot command the prices they charge for their services without government and corporate subsidies. They just aren’t needed in society. Unfortunately, when they are engaged, they become complete counterproductive and manipulative pests. They are all pulling in different directions at the same time … with greater and greater diligence and noise. Show any science that is pulling in all possible different directions as is the claimed science of economics … and politics for that matter. They are not science.