In the recent debate of Bob Murphy and Warren Mosler, Murphy explains that the Austrian school is characterized by the eschewing of economic aggregates in favor of explanations of the economy that start at the microeconomic level of individual behaviour.
http://diaryofarepublicanhater.blogspot.com/2013/11/the-bob-murphy-vs-warren-mosler-debate.html
This is another way of saying that Austrian economics is basically the counterrevoluationary school of pre Keynesian economics as it was Keynes who invented macroeconomics prior to him all economics was microeconomics. Austrianism then is just the extreme version of methodological individualism.
It strikes me that this argument employed by Boudreaux is a classic example of such methodlogical individualism run amok:
"If an academic tells you that his research finds that the price of Acme Corp. stock – a stock traded, say, on the NYSE – is too low, what would be the first question you ask this scholar? The first question I would ask him is “How much of that stock are you buying?” If the scholar tells me “none,” or looks at me befuddled as he explains that he’s an academic and not an investor, I would dismiss his research on this front. That person, as I see him here, offers proof as good as it gets that he does not believe what he asserts."
http://diaryofarepublicanhater.blogspot.com/2013/11/the-bob-murphy-vs-warren-mosler-debate.html
This is another way of saying that Austrian economics is basically the counterrevoluationary school of pre Keynesian economics as it was Keynes who invented macroeconomics prior to him all economics was microeconomics. Austrianism then is just the extreme version of methodological individualism.
It strikes me that this argument employed by Boudreaux is a classic example of such methodlogical individualism run amok:
"If an academic tells you that his research finds that the price of Acme Corp. stock – a stock traded, say, on the NYSE – is too low, what would be the first question you ask this scholar? The first question I would ask him is “How much of that stock are you buying?” If the scholar tells me “none,” or looks at me befuddled as he explains that he’s an academic and not an investor, I would dismiss his research on this front. That person, as I see him here, offers proof as good as it gets that he does not believe what he asserts."
"And my confidence in my dismissal of his conclusion would be bolstered when, after he publishes his research in a prominent journal, he and his like-minded scholars continue to insist that the price of Acme Corp. shares is too low. Why, I would wonder, are none of those greedy, profit-hungry Wall Street types – now blessed with ready access to this scholar’s research – not buying lots of Acme stock and, thereby, bidding up the price of this stock to its appropriate level."
I'm not so sure I buy it. Just because a scholar doesn't take the implicit advise of his own paper doesn't mean he doesn't believe what he says. The assumption that he must be lying is based on the idea that economic agents are 'maximizers.' Yet many scholars are already doing very well financially and may well not have the need to go out and buy up a stock. Is Boudreaux suggesting that there shouldn't be any academic work on stocks? If you believe him then supposedly it's all a scam. Yet I doubt this. I don't mean that the scholar in his hypothetical is right in his pick but he may well believe he is and yet it never occurs to him to invest himself. I once worked at a pizza place where the manager told me he hates eating and wishes he could be sustained intravenously-a strange thought but people do compartmentalize.
The point Boudreaux is getting at is even less plausible. He claims that the theory of 'monospony' is false because if it were true then the author of the book would go out and take advantage of workers himself rather than writing about the practice of it. Yes, that's really his augment.
"If folks such as Paul Krugman, Robert Reich, Alan Krueger, and Daniel Kuehn are unwilling to put their own money where their mouths are, the rest of us are more than justified in refusing to let them put our – or anyone else’s – money and livelihoods where their mouths are. Ability to talk endlessly about this blackboard theory and that academic proposition is, in this context, wholly unimpressive if this talk inspires only politicians but no one else to act, and inspires absolutely no one (not even the confident talkers themselves or the politicians who the talkers regard as trustworthy social engineers) to stake anything personal to act on the assertions of the talkers"
Even David Henderson isn't impressed with this argument.
The importance of all this is that Boudreaux wants to prove that there is no such thing as 'monospony'-a kind of monopoly power for employers in the labor market where there able to exert a lot of control over the wage they pay-ie, they're far from passive 'price takers' as the perfect competition model has them. He thinks that if he disproves monospony then there's no argument left for the minimum wage.
"The argument that such employers do have monopsony power is crucial for the more sophisticated proponents of legislated minimum wages because, absent such power, a hike in the minimum wage would indeed price many, or at least some, low-skilled workers out of jobs – a consequence that defenders of minimum wages understandably do not wish to defend."
In a way this is quaint as it assumes that economists get to unilaterally decide on public policy all on their lonesome. Yet on many things society reasons differently than economists. The minimum wage wasn't passed with the blessing of economists in fact the majority were against it at the time. In civil rights we didn't wait for them to agree that discrimination in hiring is uneconomic or that its uneconomic to refuse to serve black customers.
Even a great economist like Arthur Okun understood that economics doesn't get to be the final arbiter on all social policy.
This is not to say that I think that economics can't make a case for the minimum wage just that as a society we agreed to this a long time ago. Economists may not be convinced-even now it's probably about 50-50 of economists who think the MW harms the economy and those who think it doesn't-some of these even think it helps the economy by putting a floor under the income of the poor-but society long since has been.
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