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Comment by BurningFrog | Hacker News Reader

The price mechanisms of supply and demand are very well understood since the 1800s, and apply to anything that's bought and sold, including labor. 150 years of solid science.

When facts conflict with beliefs we hold dear and perhaps define our identities, our brains are very skilled at finding ways to keep believing what we want to believe.

Especially when the facts define your in-group. Changing such beliefs, makes you one of the people you and your friends hate. The mind will convince itself of pretty much anything to avoid such social suicide.

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This comment is weirdly heavy on lecture and light on substance. I'm going to ignore the second two paragraphs and just stick to the first. The person you're replying to says that labor is different because it has more complex costs to society aka an externality. Your rebuttal, as far as I can tell, is "nuh uh". I can think of a very simple externality - low paid workers are supported by the rest of us via social programs. Goods that require similar support from the rest of us (cigarettes for example) should also be regulated because it breaks the economic magic that makes efficient decisions and allocations. We have known about these basic (literally econ 101) flaws for almost as long as we've studied markets.

I am open to being convinced by either you or OP but your argument is failing to do so.

My claim is just that wages are prices which arise from the same supply vs demand dynamic as any other price. This important truth is sadly very controversial, which I think is really damaging to society.

Of course, I can't prove that from scratch in a HN comment. What I can do is point out that in the science studying this, it is an uncontroversial fact.

I didn't substantiate that, which made it less convincing, but here is an Economics textbook saying the same thing: https://pressbooks.oer.hawaii.edu/principlesofmicroeconomics...

I know, you can think of an externality. Trust me, Economists can also think of externalities, far more than you or me. In general, they just add interesting nuance to the supply/demand model. They don't completely invalidate it.

But I can't easily demonstrate that, so I suspect I have not changed your mind.

I'm not the poster you replied to but I appreciate your clarification. However, I still don't understand your argument. I don't think anyone has argued that supply and demand don't apply to the labour market. However, it seems that you do agree that there are externalities if workers are paid extremely low wages. Is your argument that the government shouldn't put in laws to mitigate or prevent those externalities? Are you saying that minimum wage laws don't actually address the externalities and should be removed? Are you trying to promote other solutions to solving those externalities? If so, what are they? Is there some other point you're trying to make that I'm completely missing?

Many people argue that supply and demand don't apply to the labour market!

Often because they're not even aware of the concept. The more sophisticated claim that it doesn't apply to the labor market.

The minimum wage discussions are dominated by this view.

The supply/demand analysis is simple: If a worker has skills worth $12/hour on the labor market, and the minimum wage is $15, that worker will be unemployed, making 0$/hour. They'll also not learn new skills, since they can't get a job.

Try bringing that up in a minimum wage discussion, and you'll be called many nasty names. Often equalling market wage to human worth, which means you think the poor are lesser humans. A few sophisticates will bring up vague externalities arguments, as if they negate the whole supply/demand concept.

From my perspective minimum wage laws is one of the main factors keeping people in poverty, but that concept is impossible to even explain to most people.

My main thought about externalities is that they their effect is usually minor, and can be ignored. Many of them are also positive. For the bigger ones, it's a case by case analysis.

Is the externality you're thinking of something around the government paying money to the working poor?

That's a strawman. I don't doubt that you've read these things that bother you so much that you bring it up in unrelated discussion, but to the extent serious people critique supply and demand, they don't say it doesn't apply at all (literally all things have supply/demand curves) but that the market distortions in our concentrated economy lead to suboptimal outcomes for society and that the simpler market model (in econ 101 you learn this model is optimal under many assumptions including "perfect competition" that is rarely true of the real world) is an incomplete model of reality which leads to the wrong answer. If you're going to argue against anything please argue against a serious point like one found in an introduction to the topic such as https://en.wikipedia.org/wiki/Minimum_wage and characterize it fairly. If you don't understand this graph then you aren't ready to debate the topic https://en.wikipedia.org/wiki/Minimum_wage#/media/File:Monop...

To demonstrate that this is a strawman, I will parrot back what that basic wikipedia article provides as a critique of your point: often in the real world that $12/hr number you provide is depressed by a one-sided monopsony (few large employers vs many small employees, a fact known as market concentration that has grown stronger over decades) and minimum wage can provide effectively a mega union against it to put it simply. When a market is dominated by a single entity what is something "worth"? You may say whatever the market will bear but in noncompetitive markets that is absolutely not the most efficient allocation of resources for the broader system. If insulin were a complete monopoly would it be worth $1M/vial because a billionaire would happily pay that much to save their life? I use the extreme to demonstrate the concept of market failure to you. By pointing out monopolistic forces am I saying "supply and demand don't apply"? Maybe in a way, but putting it that way is reductive and unproductive for our collaborative search for the truth in this discussion.

Or, for a totally separate but less abstract argument, say someone has no skills except for an ability to dig a ditch at $5/hr - it is low value because you could pay someone $50/hr to rent and operate a trencher and be 100x more productive at less total cost and a better overall outcome to society (I think these numbers are probably roughly reflective of reality), but this low skill person is unable to run that trencher. Is it better for society to "learn new skills" as you say by digging ditches for years? They probably would get a bit stronger but obviously never get close to the trencher's productivity or bang per buck. This is an exaggerated toy model but it demonstrates the point that many sub-minimum wage gigs teach negligible skills compared to formal education. I point this out just to object to your example - many people turn to education if possible when they fail to find employment, so to say sub-minimum wage employment will teach them skills whereas unemployment will be worthless just doesn't map on to most people's experience in the real world and to be frank sounds out of touch.

History has already shown that the free market will reduce wages to the point of slavery and destitution. Minimum wage laws are very important to counter the psychopathic greed of many company management.

Labor isn't just another good, it is actual human beings whose wages greatly affect their quality of life.

Your rant about in-groups is odd.

The predictable end game of unregulated free markets is the opposite of freedom for 99.99% of the population.

There's a curious authoritarian tinge to these "free market" argument. "Free markets are powerful, therefore if I support free markets I am a powerful insider."

It usually takes an encounter with a major economic reverse - like being bankrupted by healthcare - for proponents to realise that the free market doesn't care about them either, no matter what they believe.

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