Libertarian Doublespeak: Obscuring Distributional Struggles Under the Banner of “Economic Liberty”

Jamee K. Moudud

The expression “economic liberty” is a form of conceptual doublespeak. The word doublespeak refers to a kind of “language used to deceive usually through concealment or misrepresentation of truth.” This strategy of redefining reality with the clever use of language is central to the way in which power is exercised in Orwell’s dystopian novel 1984. But it also applies to the Public Choice Economics literature. It requires obeisance to the rule of law and “economic liberty,” while ensuring that the majority of the population cannot reduce the wealth of the richest few. This effect evokes a1984-like dynamic, well described in Nancy MacLean’s Democracy in Chains. MacLean describes how Public Choice’s libertarian ideology aims to restrain society’s ability to regulate the controllers of capital under the guise of “economic liberty.” And of course, a crucial goal is to contain the power of labor. The ideological justification as MacLean put it is that “[I]n a true, undistorted market society, wages should only rise with increases in productivity.”

One could rephrase MacLean’s conclusion a little by saying that in the neoclassical paradigm, wages will rise with productivity under “free markets.” This conclusion follows from marginal productivity theory (MPT). In MPT, production and distribution occur in a context devoid of politics, in which output arises from a technological relationship called the production functionvia the inputs of the capital stock and labor. Given perfectly competitive markets (meaning those populated by small firms without any ability to set prices of their products or influence wages), each firm chooses that level of employment in which the additional cost of hiring one more worker equals the revenue that the output produced by that worker generates. This ensures the condition that real wages equal the marginal product (additional product) produced by each worker, in line with the Lockean view that each person should live by the fruits of their labor. The supplies and demands for the aggregate labor and capital stocks, respectively, determine wages and profits, i.e. the economy’s endowment structure determines the distribution of the output that arises from the production function.

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Free Trade Free for All: Market Romanticism Versus Reality

Jamee K. Moudud – 

The drama surrounding President Trump’s decision to impose import tariffs on steel and aluminum has roiled the Republican Party and wide swathes of the corporate elite. The tariff decision comes on the heels of political bluster about the US being treated “unfairly” by other countries. This accusation of “unfairness” when it comes to US trade deficits is well worn. In a previous era, Japan was the alleged culprit of “unfair” trade practices because of its persistent trade surpluses with the U.S.

This type of political theater draws on a romanticized view of international trade and its persistent conflict with empirical reality. As an explanation of global trade relations,  the Heckscher-Ohlin-Samuelson (HOS) model of foreign trade relies on both of the standard neoclassical assumptions about “efficient” markets. First, it assumes perfectly competitive markets, composed of many, small firms, each without any  ability to set prices. Second, it assumes that there are zero externalities to economic transactions, meaning that transactions do not have any un-priced, third-party effects. And of course, the model assumes the economy  is fundamentally based on barter, according  no roles for money, credit, and effective demand. The absence of money implies that there is no possibility of an increase in liquidity preference (a term coined by Keynes to describe the desire to hold cash rather than illiquid assets) in uncertain times and thus no possibility of shortfalls of effective demand. Together, these propositions of the HOS model predict that a legal framework of “free trade” will produce balanced trading relationships on the international level and full employment in each domestic economy. Significantly, assuming that there is perfect competition implies that firms in each country, regardless of its level of industrialization, have access to the same technology needed to produce goods for the international market. Perfect competition implies that no firm injures others, a point of view that has been challenged by many authors. (See the edited volume by Moudud, Bina, and Mason Alternative Theories of Competition: Challenges to the Orthodoxy). The core aspect of the broad alternative perspectives is that firms do seek to damage each other by attempting to take away market shares via price-setting and cost-adjusting processes. This has nothing to do with either “perfect” or “imperfect” markets.

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There is no necessary trade-off between good work and more work

Frank Pasquale – 

Mainstream economists tend to frame employment policy as a series of tragic trade-offs. If policymakers raise the minimum wage, they are told, employment will inevitably fall, perhaps precipitously. Requirements for vacations, too, might crash the job market. (Never mind that dozens of other prosperous countries mandate paid vacation time.) Technocrats of the center left complain about employer-sponsored insurance as a dreadful distortion of the labor market. Sick pay, family medical leave, maternity and paternity leave—all have been blasted by one economist or another as a drag on economic growth and employment levels. “You are only hurting the people you are trying to help,” labor activists are told, again and again.

Such models are intuitively plausible, thanks to what James Y. Kwak has called “economism:” simplistic perspectives resulting from mechanical applications of supply and demand models to complex social phenomena. In general, the more costly something is, the less consumers will demand it. That reasoning leads, in turn, to more sweeping claims about the need to deregulate labor markets. If there is one policy issue most likely to consolidate bipartisan consensus among economically minded technocrats, it is a suspicion of barriers to entry in the workforce, including occupational licensure and “credentialization.” They lament the former as a paradigmatic example of state power hijacked by private interests to enrich themselves. Credentialization is framed as a market failure: The unjustified preference of bosses for workers educated in ways not directly related to the tasks they will be performing at work.Supply and Demand diagram. Demand has negative slope. Supply has positive slope. further explained below

The bottom line of this economism is grim. To the extent the state requires certain qualifications of workers, or workers themselves demand time off or other entitlements, there will be fewer jobs. Economist Tyler Cowen asks whether “whether workers might not enjoy ‘too much’ tolerance and freedom in the workplace.” While cash wages are taxed, “perks” are not, so employers will be tempted to oversupply perks at the expense of wages (or, even more troublingly to neoclassical diehards, at the expense of shareholders).

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