Tuesday, June 17, 2008


The primary force driving regulation of business in the United States, a trend that has grown without remorse since the latter half of the 19th century, is the belief that businesses are able to dictate terms -- to their workers, to their suppliers (themselves often other businesses), to society at large. This makes acceptance of the principle of equality before the law difficult. In my introductory economics class, we often discuss anti-discrimination laws. I pose the question I once read somewhere, which goes something like this: if it is alright to prohibit employers from refusing to hire someone because of that someone's race, sex, etc., is it all right to prohibit employees from refusing to work for someone because of that someone's race, sex, etc.? Without question, the primary objection students raise to this analogy is that employers and employees are different. In particular, employers have "power" over their employees through their ability to withhold something of value -- namely, the job.

Except when they don't. Employees have the ability to withhold something of value too -- their work. Sometimes, that is a thing of tremendous value, all the more so when workers are in great demand. At a time of overall economic difficulty in the US, The New York Times reports that in Iowa, workers are calling the shots:

Last year, the state added nearly 13,000 nonfarm jobs, in part because of growth in ethanol and wind energy, and lost 3,300 people from the workforce. With statewide unemployment at 3.5 percent, compared to a national rate of 5 percent, nearly everyone who wants to work and can work has a job. “We’re looking for ways to grow our population,” Ms. Buck said.

For workers like Brando Guerrero, 25, a sales analyst at Nationwide Insurance in Des Moines, the jobs shortage means companies “have to sell themselves to potential employees, because there are so many opportunities here.”

“Do they have a free gym, dry cleaning, Starbucks on site?” he said. “What are they doing to make the community better? And once you’re there, companies know they have to promote you to keep you. We’re a little spoiled in our opportunities here.”

(As an aside, the article remarkably goes on to describe this as a negative phenomenon, as something with the potential to crimp Iowa's growth.)

As I have argued elsewhere, "power" is a word that is thrown around a lot because it gets people excited during election season, but appears to have no objective meaning in a political context. We can do a little better by invoking the idea of "coercion," which (following the economist Paul Heyne) is the ability to get someone else to do something you want by limiting his options, in contrast to "cooperation," which is the ability to get someone else to do something you want by expanding his options. This corresponds roughly to the economic idea of elasticity of demand, which measures the closeness and availability of substitutes for what a particular seller is offering.

Seen this way, businesses have relatively little power in any free society. I once heard a colleague argue that Microsoft has tremendous power over her because its buggy software, in combination with its widespread use in our university, limits her ability to do her work. But the very existence of Microsoft software gives her options that she didn't have before, and in any event there are always alternatives for a particular task to Microsoft. "Power" only enters the equation if someone requires her to use a particular type of software -- if her employer, for example, requires her to use Microsoft software or lose her job (which it does not).

Only government in this sense has power by its very nature. And so struggling to combat someone else's "power" is really a way of using the government to force someone else to live for your ends rather than theirs -- in other words, for you to exercise power over them - by increasing their taxes, by threatening them with punishments if they don't follow the regulations you have persuaded the government to draft, etc. This constant war of all against all is the essence of politics and government, and anathema to individual liberty. Government is a necessary evil -- it must provide the lighthouses, defend the borders, build the dams, etc. But sometimes the evil part is more important than the necessary part. And in most modern societies, the desire to use government to redistribute opportunity, cloaked as the desire to cancel someone else's imaginary "power," has correspondingly become the most pressing threat to freedom in the world's most advanced societies.


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