Defining Labor Economics

Economics is a pretty simple framework of understanding, at least in the small “e” sense. The big problem with Economics, capital “E”, is that the study is dedicated to other things beyond the economy. In the 21st century, it has become almost exclusive to those extraneous errands. It has morphed into a discipline dedicated to statistical regression of what relates to what, and the mathematical equations assigned to give those relationships some sort of meaning.

The immutable laws of economics care nothing of ferbus and the other DSGE models that try to make enough sense of a complex economy so as to fool policymakers into thinking they know both the precise as well as correct amount of some factor to achieve optimal results. There is so much wrong with that foolish idea it is often difficult to know where to begin.

We can start with the idea of optimal. Frankly, like equilibrium, there is no such thing. Even if there was, there surely wouldn’t always be one correct answer or quantification. The ideal of amount of something is only that based on perception, from whose perspective it is derived. Economists have allowed themselves to believe they are above it all, making such godlike decisions on the science of mathematics; they instead play out as the Three Stooges on the scientism of confused models that only embarrass them.

Basic economics teaches us that if something is in high demand, the price of that something will go up and often quite sharply. Again, no study or statistics is needed to establish this principle as the supply/demand curve is intuitively understood long before any student is misled by an orthodox textbook about what that “could” mean. This applies to all tradeable substances as well as effort, including labor.

Six and a half years ago, Washington State governor Christine Gregoire declared a state of emergency over apples. The state is, of course, famous for that particular produce, but the state of that emergency was unusual to say the least. There was no epidemic of some human introduced tropical disease threatening to destroy wide swaths of the industry, nor was there a weather emergency, an early season blizzard that you might typically associate with a mountainous region. I wrote about this more than four years ago and it sadly still applies:

Growers were expecting a massive haul of the crop but were unable to find enough labor to get it off the trees. With the first wisps of frost on the horizon, it would have been criminal to leave so much product to waste and spoil. And, ironically, that is exactly where the beleaguered applers turned.

Through her emergency declaration, the apple owners were able to procure criminal labor (or, more accurately, criminals as labor). Male “offenders” from the Olympic Corrections Center in Clallam County were put to work gathering in that massive harvest, earning all of $8.67 per hour. That, of course, was not the true cost rendered to the apple growers since the state had to pick up the tab (or at least part of it) for transportation and security. That amounts to a government subsidy of growers and perhaps even an expectation for future subsidies.