The Institute (協会)

W.O.O.T.

I find it hard to get excited about much, or think about much, without considering economics anymore. A - did I tell you (I may have done so here, not sure) that I got the fellowship that GMU was offering? Econ masters, free tuition, free laptop, $25k stipend/year.

and...funny that I'm using "free" in reference to an economics degree...

...after an underinformed proponent of 'sweatshop reform' says "well, it's just not fair...these corporations can afford to pay them more, look at how much money they make!!" is to say:

"well...we could mandate that nike pay a u.s. minimum wage to workers. would you like that?"

"i guess...I wish it was more, but that's better than what's there now."

"you just lost every single person in that factory their job, because now nike will not only likely shut THAT factory down, they will build no MORE factories to employ OTHER workers. way to go. now please stop talking about that which you do not understand."

and...that's on econlib. Econtalk is the (equally awesome, and worth every second of your listening time) free podcast available at the (related, but different) www.econtalk.org. I'd personally recommend anything including Mike Munger or Don Boudreaux as the guests....Munger's discussion on recycling punctures yet another foolish crusade that well-meaning but ignorant christians get tied up in often.

Recycling is not a good idea, but sweatshops are. (remember...you can't say everything when you say anything...)

Great article Anthony. Great example of how americans always try to solve a problem from an analogous western perspective.

Econ Talk is great! I also enjoyed the recycling episode...the "opportunity cost" episode would probably also be a good one to check out.

Another great source for a Christian's role/perspective on international economics is my prof. Brian Fikkert. Check out the stuff he's written for Public Justice Report: http://www.cpjustice.org/search/node/fikkert

I get pretty emotional (i.e. ANGRY) about the sweatshop thing precisely because of the damage activists have done by getting them shut down, as you posted here. Child prostitution, hunger, and more are far worse than the poor working conditions many have to deal with. Thanks for posting this.

Good stuff, and I certainly understand/agree with the macroeconomics here.

I would ask though, how much of the sweatshop conditions are justified through the "its better than the alternative" argument. You know, a kick in the knee is better than a kick in the crotch...

That is more of a human rights issue than an economics issue, I suppose, but profit maximization and respecting people's dignity need not be mutually exclusive. Thoughts, friends?

This article is dead-on...but Anthony - don't pick on Bono. He's actually a big advocate of advancing better entrepreneurial practices to fight poverty, rather than just decrying business people. He and his wife started a clothing company as a model.

For the record, I am ok with making Kathie Lee cry.

Make the world a better place, punch naive, emotive, socialists in the face.

HOW is it a kick in the knee? because it's not as nice as america? You can't just wave a magic wand and make it better there, especially for the poorest. These are glorious, glorious things, these "sweatshops", because they give people an opportunity to gain modern skills that can be used in better/nicer/higher paying jobs as their skills increase. Any attempting to 'fix' the job into a nicer situation will simply increase the quality of the employee that they can attract, and price out the poorest/lowest skill individuals.

shawn, it might be better to let us in on to whom you are responding with the "knee" thing.

sorry...that "knee" was directed to Chas' "a kick in the knee is better than a kick in the crotch," as a way to question the "it's better than the alternative" argument.

So, he was calling a "sweatshop" a 'kick in the knee,' vs. the 'kick in the crotch' of prostitution, etc.

I'm not so concerned about wages, but about working conditions (is this what you're talking about Chas?). Sometimes people who work in sweatshops don't get proper safety equipment, don't get breaks to use the restroom or eat a meal. But I suppose this would be more under the topic of sweatshop reform as opposed to sweatshop existence. I have also read reports that in some situations people become somewhat "enslaved" in their job, in the sense that they are unable to quit even if they want to. I read about a group that quit at a shrimp-processing plant (although I don't know if this qualifies as a "sweatshop")--although it was kind of described as running away. The management hunted them down, dragged them back, and then beat them in front of all the other workers.

Jamie, working conditions are a part of compensation, as are wages. I believe that you're not attempting to be, but you're being arrogant and paternalistic in saying what conditions people should be able to work under, until you bring up the point of enslavement (essentially). So long as people are free to determine whether they want to work in a location or not, neither you nor I have a right to tell them that they can not have this job because it's not "safe enough". Safety has a cost, and the poorest are willing to take the risk in order to move above their poverty, that they might become wealthy enough to afford relative safety.

Again, you can't wave a magic wand, much as you and I would both love for situations to be perfect everywhere. Our working conditions as americans/westerners are not incidental to the fact of our immense wealth and productivity. As people move into the middle class, they begin to demand more comfortable working conditions in lieu of increased pay, at least up to a certain percentage. When someone is in abject poverty, they are, and should remain, free to choose that they will gladly take a job that does not include bathroom break time, safety guards on saw blades, or other 'mandated safety regulations'.

Have you ever tried to use a table saw with a safety guard on it? It's a pain in the ass, and no serious woodworker uses them, but they're OSHA required to be included on the saw...which raises the price of the saw. While that price raise is inconsequential to you and I in our wealth, that cost increase will affect someone on the margin, and it is hideous for you to demand that they be given safety guards, because the consequence/cost of that safety guard is their job.

There's a story about Bono in Scotland, where he stops right in the middle of a concert, and the lights shut off, and the entire audience is in total darkness. Bono tells the audience to listen. After 3 seconds, Bono claps his hands. 3 seconds later he claps his hands again.

He continues this for a minute, and the audience doesn't know whether to clap along or what, and Bono says, "Everytime I clap my hands, a child in Africa dies."

From the front of the auditorium someone yells, "Well stop clappin yer hands then, ya evil bastard!"

I love that story... I don't care what snopes.com says.

Well, it looks like I touched a few nerves, didn't I! Jamie, you are correct. I was talking entirely about working conditions, and not wages. And I'm not even expecting USA-caliber, OSHA mandated, safety rails and hardhats everywhere conditions. Rather, I think that people use the deplorable conditions in many third world countries to justify treating "sweatshop" employees worse than they should. The issue is not wages, or equaling working conditions in developed nations, it is about respecting your employees, treating them with dignity, and not playing to the lowest common denominator just because you can.

Again, I am not against sweatshops, I understand the economics behind them, but I do have a problem with exploiting people, regardless of where they live.

chas: you used a word..."should"...quantify that. And then tell me how increases in costs would not have a subsequent decrease in demand.

in fact, given that they (multinationals) are paying them (third world employees) WAY more than the next best alternative, as well as providing much nicer conditions, I'd say that they're paying them much more than they "should."

Shawn: I believe the quantity of "should" is $1.95. kidding.

If you read what I wrote, and not what you think I wrote, you will see it has nothing to do with wages!

Reconsider and ask again, or shoot me an email.

you think improved working conditions does not constitute increased compensation?

I would consider it compensation in a broad, non-monetary "fringe benefit" sort of way, yes. but that is not considered "pay" (your term from a previous post) any more than I get "paid" in casual days or air conditioned offices. (try to "pay" your mortgage with casual days!)

we're splitting hairs here, and have deviated from my original concept, the underlying human rights issues that exist in sweatshops, regardless of their economic benefit to all involved (company, employee, consumer).

Cheers!

that's my point. we're not splitting hairs. You're attempting to increase compensation, but you don't realize it, and I'm saying that that increase is going to have a negative affect on the individuals on the margin.

You can choose not to talk about it, but realize that you don't understand the situation: your well meaning ignorance of the economics of the situation is exactly what should cause you to want to read some economics if you want to continue the discussion. If you don't, and just want to say "companies are exploiting people" and walk away, that's fine, but realize that you're not adding anything to the discussion, and if implemented your feel-goodism would actually harm the people you're trying to help.

Again: increase costs, and you will decrease demand. What you are asking for is an increase in the cost of labor, which will always and everywhere result in a decreased demand for labor. A decreased demand for labor results in less of the poorest and lowest skilled getting a chance to get on the ladder of opportunity, because your good intentions are raising the ladder above their reach.

I'm torn on this one. On one side, I work with people who go to Thailand, and the consistent story I hear (from the men) when they go out for a drink after work is to be approached with "you want Thai girl?". (sometimes, when they say no, they hear "you want Thai BOY?") The ugliness of prostitution there and elsewhere is a thing of horror, and we're right to promote alternatives that keep people out of that.

On the other hand, there is sadly an ethic in corporate America of "whatever you think you can get away with is OK," and it puzzles me. Yes, third world workers get less than Americans and work longer hours, and are quite often grateful. On the other hand, while breaks and working conditions are "compensation" of a sort, I have to wonder at the factory owner that fails to clue in to the fact that his product is going to be an awful lot better if his workers are well rested, well fed, get necessary breaks, and work in a well ventilated, well lit, safe environment.

It's not as if a $1 light bulb or opening the window is going to break the bank on most factories, after all.

btw...I'll give zero cheers for sweatshots. That sounds yuck.

Shawn and Anthony -- interesting thread. I am still working through Sowell and digesting your arguments.

I read Freidmans' "the world is flat" a few years ago and he certainly convinced me that there is a place for what is often regarded as a sweatshop.

Here is my lingering trouble: you seem to place economic powers as either inherently unassailable or beyond the reach of morality. If someone argues in anyway for price controls, wage controls, etc.. he is a clueless, a socialist (or an ass).

I can't see any place in which you consider anything unfair. It is as if market principles themselves, like mathematics, are somehow unaffected by the depravity of man.

But I would argue that those with power do in fact cheat, cut things short, hold down wages (if possible), and push up prices (if possible). Sure, these things might be against the best interests of their own companies but unless it is a Sole Proprietorship they share the loss overall, and in their own personal interest they might very well make more money in the near term. It is naive to think this doesn't happen and that those with money are somehow always held accountable by market forces and that those without power never suffer at their hands.

Are child labor laws, all safety restrictions, laws against dumping pollutants into drinking water that the workers must live around but not the business owners all feel-goodism and naivete?

Workers who bring these things up get terminated in favor of workers who won't discuss them because these alternative workers either have less to loose or are in inherently worse situations. . . . in many places (surely not all places, nor with all workers. I fully concede that many people who argue against sweatshops end up closing plants and eliminating jobs for people who need and want them. . . but isn't there any place to recognize and work against exploitation and corruption? Do these not exist in your world?

Still waiting on the reading list . . . .

Joel, thanks for saying something I should have said yesterday:

"I can't see any place in which you consider anything unfair. It is as if market principles themselves, like mathematics, are somehow unaffected by the depravity of man. "

eloquently stated and so true. well done, Sir.

joel...glad you're reading sowell...definitely let me know what you think about it.

Of course, I'm not presuming to speak for Anthony, and he may think I'm way off base on all of this.

I certainly do see a lot of pain, depravity, unfairness, etc. within the world. I want to help fix that. BUT...my point is that, to work with your specific examples, price/wage controls do more harm than good, as do almost every single governmental imposition into the market. I realize that that sounds crazy, and I wouldn't have said that 2 years ago. However, I simply am no longer happy with simply the good intentions of legislation, and I've seen far too many examples of things/legislations that I initially thought were good ideas shattered when the “and then what” question gets asked. So, in this case, the best way to fix the lot of the poor in developing and impoverished countries is to let large international companies get in there and “exploit” the workers, paradoxical as that may seem. Of course, the optimal thing would be for Jesus to come back. Second best, however, are incremental steps toward better, utilizing small changes at the margin. Those don’t sell well, though, in public opinion (as we can see here).

Joel, with your example of those in power cheating (which they often can do most effectively with the guns of the government backing them up, and I am violently opposed to commercial/governmental collusion, which I bet you'd typically think is what is meant by the "free market"), holding "down" wages (as if there's some true level of what they should be), and pushing up prices (as if, again, there's some cosmically verifiable level of where they 'should' be...there's that should word again, Chas), what I'm saying is that when the government gets involved, it necessarily and inevitably has unintended consequences that seem to be always worse than when the situation started.

Quite simply, to answer your questions…the real danger is when there’s a monopoly. But there’s almost never (and I really mean never) a monopoly. When there is competition, that forces people to have some fellow-feeling; they simply can not manipulate the circumstances to their own, sole best interests. The butcher, brewer, and baker are encouraged to consider your wishes and wake up at 4:00 in the morning to prepare your food, because if they don’t, some other dude is going to show up who WILL get up, go the extra mile, pay his workers commensurately with their abilities, and charge a lower price for doing all of this. This is the inexorable and consistent trend of history, that of competition making things better. To get back to the original point of monopolies…the real danger for monopoly comes when the government grants monopoly privilege. Otherwise, as barriers to entry into a market are not infinite, there will come a point when competition enters the scene because they think they can make a profit by providing a better product at a lower price than the monopolist.

Look at it this way. I hope you can see that I'm not an utter fool. I've been to seminary (some…though it was a reformed seminary, so you can probably discount my visible caring-for-people-ability due to that), and I'm going to be going to grad school. Anthony is certainly not a fool, and both of us have (and, here I go assuming again, Chas) done more reading on these topics than you have. Shouldn’t that cause you to think “huh…maybe there is more that’s going on here than I’d think…maybe the simple first-pass look that corporations are evil and the market is a colluding bunch of fat cats”?

You may think that I have an unverified faith in the free market. However, I see it as the best alternative available to us, and it certainly has a better track record than anything else around, so that seems little like ‘faith’ to me.

Joel…did you ask for a reading list from people in general, or Anthony in particular? I can tell you that the first book he recommended that I read is Road to Serfdom by F.A. Hayek. Phenomenal book, and I think eminently applicable to these situations we’re discussing (while being brilliantly written and therefore readable).

sorry...."...colluding bunch of fat cats doesn't quite get at the whole story, and so there might be more going on under the surface."

Didn't finish that sentence...

shawn, yeah, yeah, speak for me bro. . .I'm grading tons of papers right now and don't have time to speak for myself!! Consider yourself my official economics spokesman on this issue!!

Shawn,

you said: what I'm saying is that when the government gets involved, it necessarily and inevitably has unintended consequences that seem to be always worse than when the situation started.

Quite simply, to answer your questions…the real danger is when there’s a monopoly. But there’s almost never (and I really mean never) a monopoly"

So, your answer is that governmental regulation can't ever effectively address injustice and cheating. . . and, no, wait, there is never really any cheating since there is never a real monopoly.

I am not arguing for proper response to cheating/injustice . . . yet. . . . I genuinely don't know what that is at market systems level. What I am arguing is that your position places blind faith in a marketplace corrupted by sin and human greed, in need of Reformation and Christian voice, with an answer that says: No, just trust the market and those in power (private wealth of course, not governmental).

So I don't have a response yet but am simply pointing out what I see as an unbiblical/naive embrace of a societal system that is inherently in need of reformation, as are all societal systems. I am suggesting that capitalism is no more benign than is democracy.

So I will keep reading and thinking and learning through you guys. But I will say, lastly that the "I've read more than you so just believe me" isn't helpful. If I took you for an idiot I'd not be interacting.

...i'm not saying "just believe me"...just that the simple objections have probably been considered, and that should be your base assumption. DEFINITELY not saying "just believe me", I promise.

I'd love to see an alternative that produces better results than free market capitalism, ESPECIALLY among people with different faiths/worldviews.

there IS real monopoly: when the government grants it. So, it can come along and "fix" the monopoly, but it's only a monopoly because the govt set it up in the first place. Otherwise, in the free market, there are competitors, choices, and alternatives.

Shawn said, "I'd love to see an alternative that produces better results than free market capitalism, ESPECIALLY among people with different faiths/worldviews."

Hey man, we agree on something!

So Shawn, what are your thoughts about this real example. In the report I read on shrimp processing plants, workers said that when inspectors came by, safety equipment was brought out and used (and when I say "safety equipment," this was really basic stuff--rubber gloves, that type of thing). When the inspectors left, the safety equipment was taken away.

I agree that if people want to work somewhere and it's there choice, that is fine. But when people are trapped in a job or are working somewhere out of desperation and are therefore taken advantage of, that is bad. There are issues of justice and oppression here that cannot be ignored.

I agree that we cannot judge conditions by our own cushy standards, but can you not concede that there do exist working conditions that are bad and ought to be improved just based on people's humanity and dignity?

Jamie's example makes the point I was trying to; there are some things in developing countries that can't be avoided--say low wages and a carbohydrate/rice heavy diet. There are other things that just boggle the mind because they're bad business--processing food without basic cleanliness protocols? Are these people truly so clueless how quickly a food poisoning scare can shut their factory down for good?

jamie...point me to the article/report; i'd love to read it.

I'd love to see an alternative that produces better results than free market capitalism, ESPECIALLY among people with different faiths/worldviews"

you are missing my point. I'd love to see Christians interact with those engaged in free market economies bringing reformation that speaks on behalf of those who are treated unfairly and unjustly. That happens in the US as well as elsewhere.

It is the principles for interaction I am looking for that speak to something beyond undiluted faith in the market to trample only the fewest number. . .

I'll check out road to serfdom after BE. . . My contention on the reading and education thing is just to be careful not to make it an elitist argument that only the truly brilliant can understand. . . .if you want to be persuasive. Anyone can be a geek at something (economics, technology, urban ministry) but when that geekness gets to the point that you can't suffer fools by actually spelling out various arguments then you move to a point of self-reflecting isolation. . . I am being influenced in my thinking by you guys, but not swallowing anything whole. I also don't want to be an econ-geek so probably will never read as much as you on this subject. I do want to better understand the world in which I live and see our urban communities rebuilt and engaged with suburban/mainstream America folks in a way that leads to health. . . so far I realize citywide rent controls are not the way. . . that's a start right?

whoohoo! if you're rejecting rent control, that's awesome. :) see...that's another thing that, at first glance, you'd think (or at least I did) well, that's good, isn't it??

joel...i don't understand these sentences:

you are missing my point. I'd love to see Christians interact with those engaged in free market economies bringing reformation that speaks on behalf of those who are treated unfairly and unjustly. That happens in the US as well as elsewhere.

It is the principles for interaction I am looking for that speak to something beyond undiluted faith in the market to trample only the fewest number. . .

help a brotha out.

in slightly related news: Movin' To Mexico. This is what happens when you artificially increase costs of labor above the market price for labor, and the sooner you raise them, the faster this happens.

http://www.cnn.com/2008/WORLD/asiapcf/04/23/shrimp.workers.report/index.html

You can link to the PDF of the article from this CNN overview. The report was done by a division of the AFL-CIO, so it may be somewhat biased. However, the workers who are quoted make the picture pretty clear for me--at least for the one or two factories that they focus on.

Sorry, correction--you can link to the PDF of the report from the article.

Brotha Shawn~

Ok, again my premises are these:

1. Major: all systems (this side of glory) are put together by fallen people in a fallen world, and are therefore in need of reform.
2. Minor:free market economics is a system.
3. Conclusion: free market economies are in need of reform.

(on the governmental side you could do the same thing with democracy. . . )

So I am not arguing that we should abandon the free market, I am trying to figure out how to work with it in a way that recognizes corruption, greed, and sin -- and countermands them with the powerless in mind.

I don't believe pure competition provides this countermand. That seems quite Darwinian to me. . . . not sure if that is what you are actually arguing, but it seems that way.

Shawn,
what's laughable is that you essentially said that because you read a lot about this stuff that Joel should just trust you. What the hell!

This isn't the only subject you have come across in this arrogant way either so this is becoming a trend with you.

If you want to dialogue and inject your knowledge into stuff then you need to be mature enough to do it homie!

You can take that "I read a lot" stuff and go on some where with that!

Holla!

becoming a trend? dude, I'm arrogant all the time. I'm lucky I have friends at all.

I'm not, however, saying that just because I read a lot that Joel should just trust me. I'm saying, again, that because I *do* read a lot about this that someone who *doesn't* read a lot about it should not think that a simple answer is going to be a "winning" argument (yes, yes, i know we're not trying to win or beat each other, but go with me on this). So, what I mean is: if I hike a trail a lot, and you've never hiked it, and we're going along...when I say "step off right here", you don't have to close your eyes and do so, but your general inclination should be (seems to me at least) to say "hmm...well, this looks like it would be me stepping right off the cliff...but shawn's hiked this before, so I'm going to suppress my gut instinct/first-pass look at the situation, and at least be more willing to explore it."

Maybe that actually is happening, and that's what Joel means by saying the he wouldn't be IN the conversation in the first place if he thought I were full of crap. I'm willing to accept that, and admit that I desperately want to be accepted and approved. I got all giddy before when Anthony said I could be "the spokesperson" about this. Yuck, huh?

Joel...I'll think about what you said and get back with you. Thanks for clearing that up, I understand it much more now. And, I'm a boring reformed presbyterian, so I can certainly agree that we must be constantly reforming, and that the fall affects everything.

Aaron...I'm far from mature. Witness my acknowledged arrogance and pitiful approval-seeking. You're going to have to be mature enough to overlook those in our interactions.

I don't know when it's appropriate to say "Holla!"...so...

ugh, sorry shawn, thanks for giving the economics lesson. . .you must be exhausted. I wish people would read more econ. This was essentially Kuyper's point in 1891 in his lecture "The Problem of Poverty." He said the church had two man problems (1) is the fact of sin and (2) Christians don't know anything about economics and the way resource creation actually works in the real world. Prophetic!!

my pleasure, man...I get all excited talking about this. I hope that I can find a way to talk about this to the church.

Shawn - Did you say that GMU's stipend for their graduate program is a tuition waver, a laptop AND $25/yr? Is that the standard package for all incoming PhD students? If so, DANG. University of Georgia (where I went) was half that, if even. I had to get an outside fellowship to help provide for my family at the time, and it still wasn't $25k. GMU is really treating its people right. Peter Leeson seems like a phenomenal, break-through economist there, so if you enjoy Austrian economics, you should love him. I'm really amazed at his productivity to be honest.

In a manner of speaking, free market economics is not only a prescription, but rather also a description, of how we work. Certainly there are tendencies of people to "game" whatever system exists. However, one "saving grace" of a free market system is that when people "game" one system (someone's business), others are free not to give that person their business for certain commodities. Free entry and exit are two things that tend to mitigate the effects of sin in sound economics.

Now this doesn't mean that you don't need some "legal authority" to punish when people really get out of line--murder, rape, theft, and so on--but it does mean that with free economics, government can be limited to its rightful Romans 13/Genesis 9 place of punishing the wicked and commending the just.

Make sense? It is really only government that can strictly limit entry to, and exit from, markets in commodities, and hence only government can set up an enduring monopoly in any commodity we might name.

scott...this isn't for phd, it's for a masters, and it's through Mercatus; mostly geared toward people who want to go back into the "real world," rather than continuing in academia. It really is a phenomenal deal. I saw it on Marginal Revolution a while ago, and couldn't believe how great it sounded. Of course, never having taken a class in econ in college, I wasn't very hopeful.

Either they loved what I wrote, or not enough people applied. Either way, jackpot for me.

Shawn,
Great response man! I laughed out loud literally! I feel you bro! Your alright with me.

A gentle answer turns away wrath...:)

Peace Homie!

I also never had any econ in college (BA in literature). The masters may suck, so be prepared. The first year of a graduate degree in economics is all math. So you ought to stay and get a PhD! Seriously, I get the sense students at George Mason have an absolute blast - a real exciting laboratory for learning. It's limited to the kinds of things you can learn, but that's growing all the time. Try to take the anarchy class with Peter Leeson, though. You may not be an anarchist afterwards, but I think you'll have a great time.