Sunday, June 12, 2011

The iron law of reality

Here is the most important thing to remember about economics theory: Any time economics theory contradicts reality, reality wins.

For example: It is an iron law of reality that human beings have certain fundamental needs: Food, shelter, clothing, and fucking. These needs are imposed by biology, and are not amenable to discussion any more than the fact that 1+1=2 is amenable to discussion. If an activity does not provide one of these fundamentals, human beings may do it out of a desire for intellectual or physical stimulation (see: hobby), but they won't do it otherwise.

So let's look at Austrian "economics". As I've previously pointed out, the Austrians view the Great Depression as more of a Great Vacation, and view today's unemployed the same way -- as slackers who simply aren't interested in working. This is because they have a supply-demand curve that looks like this: If the supply of something (say, labor) exceeds the demand (jobs to be filled by labor), all you have to do is lower the price of the commodity until demand is created for it, and voila.

The problem is that this runs smack dab into the iron law of reality. Below a certain point, the wages received from labor fail to provide food, shelter, clothing, and sex. If the wages are not sufficient to provide food, shelter, clothing, and sex, then people simply will not perform the activity. And given that most of the low-wage jobs are dreary drudgery, people clearly aren't going to do those jobs for intellectual or physical stimulation either. Chamber orchestras may be able to pay their players wages insufficient to sustain life because the players find it so intellectually stimulating to play the world's greatest music, but nobody ever felt that way about flipping burgers at Micky Dee's.

In short, there is a fundamental physical constraint of reality that the Austrians ignore while extolling the beauty of their theory. That physical constraint is the biological needs of the workers. If those biological needs aren't met -- if there is insufficient food, shelter, clothing, and sex (well, the sex is optional, sort of, but folks who don't get any tend to be rather unhappy), the worker ceases to exist. Given that human beings evolved to resist that kinda thing (survival of the fittest and all that), they simply won't accept work that fails to provide the essentials of life. They'll find some other way to acquire those essentials -- they'll spend their time foraging the dumpsters behind restaurants, performing petty burglaries and selling the proceeds on eBay, or otherwise doing whatever it takes to provide food, shelter, clothing and sex for themselves and their family.

In short, there is a lower bounds below which wages cannot fall because it doesn't matter how brilliant the Austrian's theory is, it runs smack dab into fundamental biological reality. Thus if you hear somebody whining about how they can't find employees and thus this means all the unemployed are slackers, what they're really saying is that they're such cheapskates that they refuse to pay their workers the minimum needed for fundamental biological survival -- with clear and obvious results. Of course, lizard people don't care about fundamental biological survival of human beings, since to lizard people human beings are just disposable labor items, sorta like the latex gloves that surgeons use, something to use once then throw away once it's finished. But human beings tend to value their personal survival somewhat more than that...

-- Badtux the Reality-based Penguin


  1. I've often heard it said that it all comes down to Food, Real Estate and Sex.........but never clothing.

  2. Clothing is optional if you live in equatorial Africa. Clothing is *not* optional if you live in Detroit or Chicago in the wintertime. Just sayin'.

    - Badtux the Well-dressed Penguin

  3. And so, all over the US of A people are staggering around naked, homeless and starving, and therefore, presumably, dying.

    However, I learn that in 1900 deaths per 1,000 of population was 17.2 and in 2007 it was, er, 8!

    And the expectancy of white males to live to the age of 80 in 1850 was 5.9, but in 2004 it was 8.1

    Also, and you realise I take it as a duty upon myself to cheer you up, the suicide rate has dropped for everyone, being 13.2 per 100,000 in the comfortable year of 1950, down to 11.0 in 2005.

    Now, are you feeling better? You really mustn't allow those Austrians to upset you, not least because I don't think you really understand them!

    David Duff

  4. Duffer, clearly people have found other ways to sustain themselves while looking for a job that will provide sufficient wages to sustain them. The question was whether there is a lower bound to wages -- the answer is, "yes there is", that is, the lower bound imposed by biological necessities of basic survival. The Austrians (and, apparently, you) deny that reality and claim that wages can fall infinitely and thus all unemployed are just lazy slackers taking a long vacation. That's nonsense, reality simply doesn't work that way, it's as if the Austrians were claiming that 1+1=3. Maybe in some alternate universe of pink unicorns and cotton candy trees, but not in *this* universe, yo!

    - Badtux the Snarky Penguin


Ground rules: Comments that consist solely of insults, fact-free talking points, are off-topic, or simply spam the same argument over and over will be deleted. The penguin is the only one allowed to be an ass here. All viewpoints, however, are welcomed, even if I disagree vehemently with you.

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