Asymmetrical Information

Nice post. Part of the problem is that after answering the question "Is there a problem?", many assume they have also answered the question "Is there a proper governmental role in the solution?" Some problems have no solution at all while others are best solved without the involvement of government. If your every instinct is to look to goverment for help, you are likely to find it a solution to every problem.

Of course, the opposite can happen. Sometimes a governmental solution is the best answer, but if your every instinct is to look anywhere but government for a solution you may overlook the the best approach. Which is why we benefit from a vigorus debate about the issues.

Umm, is there a typo in the concluding paragraph?

"The liberal mantra is that government fails. The free market mantra is that government fails worse. "

The government fails worse than the government?

Kevin

I know it's off topic, but I have only 2 words regarding global warming:

Maunder Minimum

Your example about the EPA seems to be a bad fit for your argument. You describe the EPA as anti-democratic, but then you show that it stayed away from the global warming issue, because the public wouldn't want it to act.

Moreover, looking back at the extent to which our environment has improved over the last few decades, in light of the Clean Air Act, Clean Water Act, and so forth, can we really say that government-mandated environmental protection has little to show for it? The EPA is a good example of a classical-economics "public good," where government steps in to address a situation where the costs of negative externalities (pollution) are not fully borne by the producers of those costs but rather are distributed over a broad population. Sure, there are examples of agency over-stretch, like the arsenic-standards controversy, but all that shows is that government initiatives can fail when they too far ahead of the public will (as presumably they should).

Suppose your neighbor has a tire fire burning in his side yard. Is it really more efficient to go around to all the neighbors and take up a collection to pay him to stop burning tires (bearing in mind the cost of suing him if he reneges, and the cost of paying other neighbors who start burning tires when they see you paying the first one to stop), than it is to go to the city council and have an ordinance passed that bans tire fires?

Certainly, there are some things that the government does worse than the private market, but I'm not ready to believe that it does all things worse, and your post doesn't really draw any such distinction.

Engineers have a saying: "The fact that something is desirable doesn't mean that it is possible."

I was thinking of the H. L. Mencken aphorism, myself: "For every human problem there is an easy solution -- neat, plausible, and wrong."

"The liberal mantra is that the market fails. The free market mantra is that government fails worse. And I think the weight of empirical evidence is on our side."

There are so many counterexamples of effective government intervention that could be cited. The enormous improvements in environmental quality since the enactment of the major environmental laws, as Tom has noted, is clearly one. Another is the unambiguous success of deposit insurance in addressing the "market failure" of banking panics.

Sure, there are individual cases where government intervention may produce an outcome that is worse than the costs imposed by the market failure, but the existence of such isolated cases does not support the sort of sweeping generalization you, and the Chicago School economists, are so fond of making.

While it is certainly true that groups of sincere and decent people acting in good faith can make reckless decisions, it is also true that power corrupts.

I think the latter explains as much or more than the former. The kinds of people who seek employment in powerful bureaucratic organizations tend to be particularly susceptible to power's corruptive influence.

Conservatives, like liberals, tend to believe that evils perpetrated by powerful organizations result from the former. Yet, if one looks at history, one must be almost willfully blind not to see, for example, that the evils of Stalinism were not caused by decent people acting in good faith. The decent people acting in good faith were only "useful idiots".

Look at http://www.nationalcenter.org/PRShatteredDreams303.html. It is only by the most tortuous illogic that one can conclude these regulatory outrages are aberrations, or are the result of good faith decisions on the part of regulators. The outrages were, on the contrary, precisely what the regulatory perpetrators set out to accomplish, all the while spoonfeeding the useful idiots that the regulations are for "the greater good".

There have indeed been an enormous improvement in environmental quality since the enactment of environmental laws, that is true. This is not necessarily a proof, however. Society was getting richer anyway, so there's a question of how much improvement would have happened without those laws. Certain environmentally friendly actions, like using less packaging, are obviously rewarded by the market anyway. So those types of improvements (which have happened recently) have only a tenuous direct relationship to the laws passed. Does anyone have a very good comparison of rates of environment improvement (worsening) before and after most of those laws were passed?

One of the classic examples in a similar vein used are anti-discrimination laws. As Thomas Sowell and others have pointed out, both economically and in attitude (the latter affects the former), the decrease in racial discrimination in the private sector was just as large or even larger in the years before the passage of the various Civil Rights Laws as afterwards. Partially of course this is because it was changing attitudes that allowed the passage of such laws. (Of course laws against public discrimination were necessary, which is disputed by almost no one.)

Also, there is a common (and reasonable) liberal rejoiner: "Yes, attitudes may prevent the government from acting, or may cause deadweight loss. But there are some things that only the government can protect against."

That is, one can claim that while governmental action did not occur in Easter Island, it was the only reasonable thing that could have prevented it. Free marketers could note that a more robust market for land in Easter Island could have prevented it, as land speculators would have more incentive to prevent environmental devastation that would destroy the value of the land. Of course, they might also favor other types of development that environmentalists don't like.

Your main point remains, of course. Anything that really "can't be forseen" by the market or people not in government can doubtfully be forseen by the government either.

so, the government does worse than the market. would you also argue that gov't reforms introduced in the 19th century (considering england) to curtail "abuses" of factory owners of their workers in early industrial capitaliam were the work of the market? or of the rise of a voting working class looking out for their interests? or a mix? were they a net gain or a net loss, when looked at in the long run? i can agree with you when thinking about the repeal of the corn laws say, but on factory legislation? that appears to be more of "an imposed" by gov't situation to help express the "enlightened self-interest" of the market.

"would you also argue that gov't reforms introduced in the 19th century (considering england) to curtail "abuses" of factory owners of their workers in early industrial capitaliam were the work of the market?"

Well, yes, that's how governments got the idea. The 18th and 19th centuries bubbled over with manufacturing companies that saw profit for all in new approaches to labor. Safer working conditions, adequate housing, improved pay and an overall atmosphere of virtue and respect were seen to translate directly to the bottom line. Healthier workers are better workers. Many find the roots of this evolution in the reformation, the rebellion against authoritarian systems of government and belief, and the emergence of concepts of individual worth and agency. The Anabaptist concept that only an adult can choose to be baptized and become a member of the church was heresy in the beginning since individuals were not deemed to be capable of choice in such matters. The Anabaptists were also canny business men and tended to become wealthy... which enraged jealous governments and led to pogroms and emigration.

It was only after these innovators demonstrated the success of their newer management methods that public opinion changed to support the new methods. John Thacker's observations about the evolution of attitudes enabling regulatory change is apt and supports Jane's comment that "What they seem not to notice is that in a Democracy, the same people making the original error vote."

Government lags society... obviously. A useful role for government is less that of rule maker and more that of broker of information, facilitator of private innovation. When a problem becomes large enough to warrant the attention of central management data can be gathered and requests for solutions issued to creative and motivated entities. The sharing of concepts, partial results, even failures can hasten innovation.

There is a feedback loop between creative entities in society and social customs. Ideas bubble up, tested by application, and those shown to be sound spread through society. Governments can gently assist this by spreading ideas, or they can hamper this by establishment of inappropriately rigid rules. Europe's continuing bungling in modern communications issues are a good example. By establishing standards prematurely with Minitel the French hampered the growth of the more robust and sophisticated internet. By standardizing wireless communication on TDMA technology before the issues were understood Europe wasted great wealth and time in making use of the more useful CDMA technologies. Denbeste's CDMA FAQ seems relevant. http://home.san.rr.com/denbeste/cdmatdma.html

"Well, yes, that's how governments got the idea. The 18th and 19th centuries bubbled over with manufacturing companies that saw profit for all in new approaches to labor. Safer working conditions, adequate housing, improved pay and an overall atmosphere of virtue and respect were seen to translate directly to the bottom line. Healthier workers are better workers."

i would very much appreciate the text you used to support this line of argument. that sounds like a revision of what i was brought up with in eco history. i would like to read this, because of the new possibilities that it opens up.

this leaves me with a question though? if the market led the way, as you suggest in your post, why is there any need for legislation at all in this period? if what you say is true, the market would have naturally come to better conditions and pay on its own. the fact that there are a series of gov't acts that had to be passed in order to ensure these gains seems counter-intuitive to your claim (plenty of factory owners opposed the approach that you outlined above in favour of high hours, low wage model). i would appreciate it if you could clear that up. also, when you refer to bubbling over with companies, the one that comes to mind are factories like those set up by robert owen, for example. i guess you would not describe him as a utopian socialist, right?

With progressing knowledge the empirical evidence improves the future solutions that a government would provide. While all decision makers will improve, government programs have certain benefits( of scale and eliminating free riders) that individuals do not- as well as government solutions understanding what types of solutions they are best at.
Obviously, this is not a call to immediately introduce more govt, but a recognition that are future will.

"the decrease in racial discrimination in the private sector was just as large or even larger in the years before the passage of the various Civil Rights Laws as afterwards. "

Nonsense. A gross misrepresentation of history to fit preconceived ideas. If you believe this you didn't live in Alabama, as I did, in the late fifties and early sixties.

Actually, Bernard, the man who is propagating this idea is a black man who grew up in the South and Harlem in the forties.

"this leaves me with a question though? if the market led the way, as you suggest in your post, why is there any need for legislation at all in this period? "

Where do you get the idea that there was a need for legislation? To be sure, plenty of legislation was passed, but the fact that legislation exists is not proof that it is needed.

I hear this kind of argument a lot - life sucked in the 19th century, when laissez faire was the rule, so laissez faire is obviously a bad idea.

But the reason that our life is better is not because we have a better economic system or because our new laws are of so much benefit, but simply because laws introduced since then have not quite managed to completely halt the march of material and technological progress; thus life today looks better than life back then, and the life we might have had today if the "reforms" of the 20th century had never happened remains hidden from view. I suspect that that life we missed out on involves private spacecraft, heavily populated extraterrestrial regions, working cures for old age, and stuff we can't even imagine here.

"Nonsense. A gross misrepresentation of history to fit preconceived ideas. If you believe this you didn't live in Alabama, as I did, in the late fifties and early sixties. "

In Alabama and other Southern states of that era, racial discrimination was mandated by government law and by criminal gangs that were permitted by the government to operate without interference.

Thus it does not serve as a counterexample to the notion that government nondiscrimination in the delivery of services (including police services) is sufficient.

"Actually, Bernard, the man who is propagating this idea is a black man who grew up in the South and Harlem in the forties."

He's also a man who has a history of misusing evidence to support his ideological agenda. For that reason, he is not really taken seriously by social scientists--of any political persuasion--who study ethnic groups in America. I happened to review a lot of the literature in that area when I wrote my dissertation, and I can't recall anyone who cites Sowell, even conservative scholars like George Borjas.

Yes Jane. I do know who Thomas Sowell is, thank you.

"Does anyone have a very good comparison of rates of environment improvement (worsening) before and after most of those laws were passed?"

John, if you look at data on air pollution emissions, the data for many major pollutants shows a similar pattern--rising levels up to about 1970, falling thereafter. In other words, the decline in pollution almost exactly coincides with the creation of the EPA and the passage of the major environmental laws.

Robert Owen is one example of a capitalist who believed that he could improve his labor force by treating them humanely. He practiced this method in his Scottish textile mills and made money. He wrote and published books about his success and encouraged other manufacturers to use his methods.

Later, he founded a utopian society in New Harmony based on his experiences with labor and manufacturing but also religious and social views. Such communities in the new world were very common at the time. It failed and he went home and became a labor activist.

" if the market led the way, as you suggest in your post, why is there any need for legislation at all in this period?"

Two reasons:

1) It was part of political struggle. Politicians make promises to gain power. Popular demands, when met, create political power.

2) Criminals and nutters. There is always a segment of society that causes pain for the pleasure of doing so, even when it is to their disadvantage using common measures. These are a breed of what game theorists call 'free riders'. They gain benefit from behaviors that only work because most people avoid them. They are in that sense little different from burglars and muggers. In order for cooperative behaviors to flourish it is necessary to punish cheats.

"if what you say is true, the market would have naturally come to better conditions and pay on its own."

It did. Ford is another example of a steely eyed capitalist who saw that better pay meant paying customers for his products. With both Owen and Ford there is a technology connection. Owen leveraged Richard Arkwright's innovations in textile machinery and added his own labor innovations to create a killer application. Ford did a comparable thing with mass production assembly lines. I see the work of Demmings in this same way though his innovations were more purely management methodology that empowered workers. Methodology is technology too.

"the fact that there are a series of gov't acts that had to be passed in order to ensure these gains seems counter-intuitive to your claim "

Government lags innovation. It codifies accepted views. This is obvious when you think about it. Governments don't create ideas, they enforce policies. Those policies evolve from the behaviors of thinkers and practitioners. Anything that diminishes the works of those practitioners harms society. Owen's life is an example of this. He did his best to convince the British government to make policies based on his views, but died before seeing results... except in the private sector.

"Robert Owen is one example of a capitalist who believed that he could improve his labor force by treating them humanely. He practiced this method in his Scottish textile mills and made money. He wrote and published books about his success and encouraged other manufacturers to use his methods."

You're going to have provide stronger evidence than one or two factory owners; I seem to remember labor unions fighitng capital tooth and nail for the 40 hour work week.

regarding the cost/benefit of the arsenic rule:

"EPA performed a cost-benefit analysis for the final rule. Using a 3-percent discount rate, the total annual national system and state compliance costs are estimated at $180.4 million. The quantified benefits of the rule range from $140 million to $198 million. In addition, EPA notes that there are a number of important non-quantifiable health benefits from the rule that were also considered by EPA."

(the search string i used in google.com was "arsenic drinking water cost benefit analysis".)

In other words, about a break-even regulation. considering the tremendous deleterious effects that long-term arsenic consumption can have, not all that surprising.

now, when it comes to public health regulation, the weight of the evidence is on which side?

and, as far as global warming goes, EPA has not designated carbon dioxide as a pollutant, so it has no jurisdiction over "global warming".

All in all, not Jane's most accurate post.

remember, we ARE the government. if you can get a majority of your elected representatives to abolish CERCLA, CWA, CAA,RCRA, FIFRA, ESA etc., and the president agrees, then we get to try market solutions again.

but Bush fils rolled out voluntary "compliance" with various environmental laws when he was governor of Texas. Last I read, the program was an abject failure. It appears that companies which are eligible for the voluntary compliance program are putting short-term profits ahead of a clean environment. what a shock.

now, I'll agree that the command-and-control style of enviro. regulation has been far, FAR more expensive than a cap-and-trade style program would have been. But considering the utter contempt with which many enviromental laws have been held by the business community, it is not all that surprising that the legislators have been unwilling to trust the business community with the kind of self-policing necessary to make a cap-and-trade program work. And given that the business community (for the most part) invests largely in republican candidates, and given that the republican party always has its extremist wing which wants to abolish federal environmental laws, it's not all that surprising that the cap-and-trade policy wonks are finding that legislative fixes are extremely tough sledding.

now maybe if the business community reached across the aisle a little better (disobeying direct orders from the RNC), the democratic party could reduce the impact of the enviros on policy, and cap-and-trade programs could have a better chance of success.

but given the partisan tone out of DC for the last decade, i think i might be building a snowman for Mephistopheles first.

I'd love to see the source on the Anabaptists etc. too.

I have to agree with FDL; command-and-control is worse than creating a market for pollution, but it's a damn sight worse than a complete lack of regulation, which Jane appears to be (maybe? can't quite tell) implicitly advocating.

"In Alabama and other Southern states of that era, racial discrimination was mandated by government law and by criminal gangs that were permitted by the government to operate without interference.

True, but racial discrimination was also approved of by an overwhelming majority of the white population in those states.

Thus it does not serve as a counterexample to the notion that government nondiscrimination in the delivery of services (including police services) is sufficient."

I did claim that it did. I was merely tryig to refute the notion that racial discrimination was rapidly disappearing just around that time.

That seems to me to be one example of a standard argument that has been put forward several times in these comments. Whenever soemone posits a benefit from government action, the claim is that things would have gotten better even quicker without government action.

Racial discrimination was on the way out.

All those electric utilities would have cut down on air pollution voluntarily.

Industrialists were about to stop using child labor.

etc.

Why, exactly, did the people who were doing all these things, and were just about to stop voluntarily, fight tooth and nail against laws that would make them stop?

"You're going to have provide stronger evidence than one or two factory owners; ..."

"I'd love to see the source on the Anabaptists etc. too...."

Perhaps a government program which requires you to study a bit would serve since you seem resistant even when given hints. I oppose such, since it seems you have a right to remain ignorant if you choose, a victimless crime of self abuse.

Another hint: try Google. Use multiple keywords, read likely references and refine subsequent searches. In an hour or two you could greatly enhance your knowledge. New information sometimes leads to insights about patterns which illuminate old knowledge as well as new.

Jane:

Here's a nice mantra, or perhaps a rule of thumb: Ideologues will take an anecdotal case, and generalize.

Seriously, you have in no way shown any "weight of empirical evidence" in this post. You mentioned one action of the EPA, you did not provide an overview of their performance. Nor should you try to do so on a weblog - but don't pretend that you done anything here besides stating your opinion. Surely someone so aware of the failures of government does not expect the EPA to perform perfectly? Government rarely does.

And the "liberal mantra" you state is not actually in contradiction with your free market one. The market does fail. Whether if fails worse than government obviously must be assessed on a case-by-case basis, only the most ignorant ideologues believe otherwise.

That said, your criticism of the problems with unaccountable agencies is interesting. In the region in which I live, transit infrastructure is under such an agency. This may be necessary, since transit under municipal jurisdiction has not gone well (a city just outside the region covered by this board actually blocked a major road leading to another city for months over an unrelated dispute recently). Still, it's very much debatable.

Easter Island is an easy one. Private property. The air, water and climate are much more difficult to privatize, but not impossible. Obviously privatization of problems of the commons requires governance of some sort at some level, be it a restaurant owner who posts a no smoking sign, a town that creates a dump sight, a river basin authority that auctions limited rights to dump gunk in rivers, or an EPA that does the same nationally. The problem is that opaque, non-accountable agencies use problems of the commons for their own purposes of power and do so in ways that invite corruption. That’s the way institutions that are opaque and non accountable behave. To Include labor conditions, racial discrimination etc. as common property problems is the reason social democrats that we insist on calling liberals, get so much wrong so often. These latter were not common property problems; they were, in the first instance, an excess supply of unskilled labor, and imperfect information on both sides of the ocean. Both self-correcting. In the case of racial discrimination the problem was failure to enforce the constitution and governments, courts and a populace that supported that failure. Probably Federal civil rights law helped speed up the transformation we’ve seen, and the political class that has grown up around these laws to exploit them for personal gain was a price worth paying. But few problems are of such magnitude nor so resistant to natural change as institutionalized racial bigotry. Common property problems can only be solved by some collective arrangement; occasionally these require collective arrangements at the highest level of government. Our problem is that the political class wants to treat all identified “problems” as if they could only be solved by government and at the highest level where decision makers are remote, and accountability limited. Why they want to do so is obvious, why ordinary citizen’s support them is not.

With respect to some of the global warming comments posted above, I'd just like to point out that I was at the Smithsonian this past summer, and there was a display that discussed why there was a global cooling trend over the last few decades. I don't think we have as big an impact on climate as we think we do. The climate has been cyclical throughout history, with Ice Ages occuring every 25,000 years, and warming then cooling periods in between.

Bernard, your arguments are not supported by the facts. Segregation would have died out far earlier had the Supreme Court not upheld it in Plessey v. Ferguson (1896, iirc). In that case, the railroads were refusing to obey the segregation laws because it was costly.

Similarly, it was government operated schools that legally required racially separated schools. Rosa Parks was riding on a municipal bus. And on and on.

Economic irrationality doesn't persist without government support. It is not necessary for a majority to overturn anything in the marketplace. Niche markets are commonplace, e.g. governments did not mandate there be "gay bars", or Chinese restaurants.

hi all,
thank you for your comments in regard to my questions re the "worker welfare supporting nature of business during the 19th century". i would be interested in any feedback from those interested in that claim, regarding the following two primary sources. by the way, what do you make of the issue of child labour? and the introduction of the factory acts of 1833 that limited it? was this something that business was leading the vanguard in, or do you think that the introduction of limits on child labour hours actually hindered the progress of the english nation?
take care
cas

[P. Gaskell, The Manufacturing Population of England. London, 1833, pp.161-162, 202-203.]

"Any man who has stood at twelve o'clock at the single narrow door-way, which serves as the place of exit for the hands employed in the great cotton-mills, must acknowledge, that an uglier set of men and women, of boys and girls, taking them in the mass, it would be impossible to congregate in a smaller compass. Their complexion is sallow and pallid--with a peculiar flatness of feature, caused by the want of a proper quantity of adipose substance to cushion out the cheeks. Their stature low--the average height of four hundred men, measured at different times, and different places, being five feet six inches. Their limbs slender, and playing badly and ungracefully. A very general bowing of the legs. Great numbers of girls and women walking lamely or awkwardly, with raised chests and spinal flexures. Nearly all have flat feet, accompanied with a down-tread, differing very widely from the elasticity of action in the foot and ankle, attendant upon perfect formation. Hair thin and straight--many of the men having but little beard, and that in patches of a few hairs, much resembling its growth among the red men of America. A spiritless and dejected air, a sprawling and wide action of the legs, and an appearance, taken as a whole, giving the world but "little assurance of a man," or if so, "most sadly cheated of his fair proportions..."
Factory labour is a species of work, in some respects singularly unfitted for children. Cooped up in a heated atmosphere, debarred the necessary exercise, remaining in one position for a series of hours, one set or system of muscles alone called into activity, it cannot be wondered at--that its effects are injurious to the physical growth of a child. Where the bony system is still imperfect, the vertical position it is compelled to retain, influences its direction; the spinal column bends beneath the weight of the head, bulges out laterally, or is dragged forward by the weight of the parts composing the chest, the pelvis yields beneath the opposing pressure downwards, and the resistance given by the thigh-bones; its capacity is lessened, sometimes more and sometimes less; the legs curve, and the whole body loses height, in consequence of this general yielding and bending of its parts.

A Cotton Manufacturer on Hours of Labor

[John Fielden, M.P., The Curse of the Factory System. London, 1836,pp. 34-35.]

“Here, then, is the "curse" of our factory-system; as improvements in machinery have gone on, the "avarice of masters" has prompted many to exact more labour from their hands than they were fitted by nature to perform, and those who have wished for the hours of labour to be less for all ages than the legislature would even yet sanction, have had no alternative but to conform more or less to the prevailing practice, or abandon the trade altogether. This has been the case with regard to myself and my partners. We have never worked more than seventy-one hours a week before Sir JOHN HOBHOUSE'S Act was passed. We then came down to sixty-nine; and since Lord ALTHORP's Act was passed, in 1833, we have reduced the time of adults to sixty-seven and a half hours a week, and that of children under thirteen years of age to forty-eight hours in the week, though to do this latter has, I must admit, subjected us to much inconvenience, but the elder hands to more, inasmuch as the relief given to the child is in some measure imposed on the adult. But the overworking does not apply to children only; the adults are also overworked. The increased speed given to machinery within the last thirty years, has, in very many instances, doubled the labour of both.”

The argument between those who maintain that laws preceded reforms and those who maintain that they lagged them is a red herring. Insofar as regulations against child labor, 80-hour work weeks and the like lagged the elimination of those practices, they were irrelevant. Insofar as they preceded them, they were harmful. Outlawing child labor in Britain in, say, 1820 would have caused starvation, if it had been enforced. The productivity of labor was such that families who sent their young children to work did so to put food on the table.

Patrick,

You seem to imagine that segregation was imposed on southerners against their will by tyrannical state governments. The reason there were Jim Crow laws is that white southerners overwhelmingly favored them. Segregation and extreme racial discrimination would have existed even without these state laws.

And it would have continued. It took action by the Federal government to end it. John Thacker claimed above that this is not so - that discrimination was rapidly disappearing. I disagree with him.

hi aaron and all,
"The argument between those who maintain that laws preceded reforms and those who maintain that they lagged them is a red herring. Insofar as regulations against child labor, 80-hour work weeks and the like lagged the elimination of those practices, they were irrelevant. Insofar as they preceded them, they were harmful. Outlawing child labor in Britain in, say, 1820 would have caused starvation, if it had been enforced. The productivity of labor was such that families who sent their young children to work did so to put food on the table."

on the face of it, i agree with you. but what happens when we examine why these families are putting their kids to work? it is because the wage system is such, at this time, that two adults cannot fully support their family. i understand the argument for productivity, but as far as i can tell, factory owners could have paid higher wages and still be successful--let us take the example of owen as an example of that possibility (better conditions lead to more enthusiasm and devotion to work, less sickness, etc more productivity-ford will use a similar line of reasoning). the key, as has been made is that we have a factory owner with an enlightened or long run sense of self-interest. yet, as the first of the eyewitness accounts i presented showed, this was not at all common. if you have a source that gives some evidence to support your more universal claim, i would love to read it and be educated.

now, one doesn't have to take a moral position on this, but how does this fit in with the "welfare caring factory owners again"? and in any case, if we are willing to argue that an educated workforce is a better workforce, why would factory owners want to have rules (as the gentleman i quote does) that would ensure that the bulk of a new generation cannot read. it would appear from your post, that if it could be made profitable to educate the workforce, factory owners would benefit and they would support it in a heart beat--if they could afford to do that. that was one of the things that owen worked on. but he was not a common sight in these times. perhaps the desire for quick profit was more important than long term social stability for the average factory owner.

the desire to have kids work these hours: surely in an industrial society, such a situation would be against an owner's best interest in the long run, since an educated workforce is a more productive workforce. even if they do benefit from the cheaper wages in the short run. yet many owners fought this legislation pretty strongly. true, many owners were represented in parliament that passed the legislation. but this still leaves the question of why it is that government legislation was required to regulate a practice that was not in the long term interests of factory owners and society in general. you assert that gov't regulation is irrelevant in improving social conditions in the 19th century. i don't feel you have proved your point.

one more thing, do you believe there was labour agitation in britain and later in the us in the time period? the history books tend to suggest that there was. if so, why is it that workers still believed, in the face of all of what "worker welfare caring factory owners" did for them that they were being treated badly? ingratitude and ignorance? marxist agitators? why go on strike for long periods, risking starvation, beatings, and death to win concessions on wages and conditions?

what explanations do the proponents of the view that factory owners were in the vanguard of worker and societal interests offer for these events. or am i making a mountain out of a molehill?

take care
cas

Bernard, you have either ignored what I wrote, or you didn't understand it.

First, there is no evidence for your contention that a majority of southerners wanted legally enforced segregation. Contrary to the cliche someone else put up, the government is NOT us. Government, pace Buchannan and Tulloch, is notoriously responsive to well-organized special interests at the expense of the much less motivated general interest.

Second, even if you are correct about what the majority wanted, it is irrelevant. The marketplace does not dictate to the minority any more than it does to the majority. Niche markets, as I pointed out and you ignored, can break societal taboos.

Third, the evidence is against you. As I said, it took the force of government to prohibit the railroads from bowing to economic pressure and integrating the trains. Absent that government power, the crack in the dyke would have widened, and the Plessey trickle would have become a flood.

Cas--

I daresay most factory owners paid as little as they could get away with, Owen being a peculiar exception who was more interested in proving his social theories than making money. Owen did well for himself, as Henry Ford did later when he paid the unheard-of sum of $5 a day, but the real point is that the rising productivity of labor exerted continual upward pressure on wages, and would have even if every factory owner had been as tight as Scrooge. Capitalists paid higher wages because conditions forced them to, not, with rare exceptions, out of any special benevolence.

Owners fought child labor laws because they wanted to employ children. Regulation probably ended child labor sooner than the market would have, and this was a bad outcome: it abrogated an arrangement that the factory owners and the parents of the children would have found mutually beneficial, for whatever reason.

And sure, laborers agitated then for the same reason they agitate now: a desire to enforce wages for their group above the level the market will bear.

My source for most of this is T.S. Ashton's The Industrial Revolution, which is brief, elegant, and authoritative.

And this same sort of analysis can be readily applied to anti-discrimination laws. In fact, Richard Epstein has written an entire book, Forbiddien Grounds, which does just that.

"You seem to imagine that segregation was imposed on southerners against their will by tyrannical state governments."

Now you're catching on. While the majority approved of segregation and voted to keep it, a minority of white people (not to mention a large majority of non-white people) wanted no part of it and, indeed, found themselves subjected to the "tyranny of the majority".

The reason there were Jim Crow laws is that white southerners overwhelmingly favored them."

And, more importantly, they used the power of the state governments to eliminate competition from the minority of the population that wasn't interested in maintaining segregation. Absent such state interference, the minority of business owners that wasn't interested in discrimination would have realized large profits by trading in a nondiscriminatory manner. They would have served as a salutary example and as a group of formidable competitors that others would be induced to emulate.

"but what happens when we examine why these families are putting their kids to work? it is because the wage system is such, at this time, that two adults cannot fully support their family. "

There wasn't any nefarious "wage system" other than buyers and sellers of labor trading on mutually agreeable terms. The problem was that there just wasn't much wealth to go around, and screwing around with the "wage system" wasn't going to change that. What did change that was the introduction of new ways of producing things, allowing more wealth to be generated with the same effort, and then more wealth to be generated with less effort.

All of our screwing around with the "wage system" were window dressing at best, and impediments to this process of advancement at worst. Such changes to the "wage system" are not the source of our present wealth.

I don't think one can say, categorically, that banning child labor in 1820 would have had the bad effects posited. Banning child labor would have shrunk the pool of available workers in 1820, such that wages presumably would have risen for the adult workers in the labor market, allowing them (perhaps) to earn enough to support their families. Put another way, families in 1820 had to send their children out to work because wages for the parents were too low to support the family, and part of the reason they were so low is because there were so many children in the labor market, competing against them.

"First, there is no evidence for your contention that a majority of southerners wanted legally enforced segregation."

No one who knows anything at all about the south could write the above sentence. Evidence? The evidence is overwhelming. Go read history books, campaign speeches, newspaper articles and editorials. Look at old news archives. Learn SOMETHING about this topic before you post such an absurd statement

"The marketplace does not dictate to the minority any more than it does to the majority. Niche markets, as I pointed out and you ignored, can break societal taboos."

I suppose you, and Ken, are arguing that without the laws some restaurants, for example, would have served blacks, and this would have been the beginning of the end. I disagree.

Any restaurant that served blacks would have met its own end in short order, either from a white boycott or violence or both. The large profits you imagine simply weren't there. In addition, racial discrimination extended beyond the marketplace. It covered voting rights, to take an important example. Churches were segregated.

As far as Plessey goes, this case was brought by Plessey, an individual who was ordered to sit in a black section of the train, not by any railroad crusading for integration.

I know lots of posters here think anything to do with government is inherently evil, but blaming it for racial prejudice is more than a bit far-fetched.

Somewhere up there in the comments, somebody claimed a point about European Government meddling in telecomms.
No, not really. I doubt if any member of any Government knew what GSM was when it was finalised as a standard. Or cared. But now it is the standard in 110 countries around the world.
These things are not done by 'Government' at all, rather by supra national bodies that have a vested interest in competing over price, quality and service rather than an artificial monolopy of a product line.
Take a computer language for example. C++ is now an international standard. Good thing or bad? No Govermnet was involved. Now that's a good thing.

thanks aaron and all,
thanks for the tip on the read. i went and checked up on prices and it is a bit steep. so i will keep a look out for a second hand or library copy. what do you think of an alternative perspective? perhaps Eric J. Hobsbawm's work. i know there is more of a sense of class struggle in it, but it paints a less sanguine picture than the one ashton apparently does. it still leaves the issues i raised though and to which you partially responded to. to whit:

"Owners fought child labor laws because they wanted to employ children. Regulation probably ended child labor sooner than the market would have, and this was a bad outcome: it abrogated an arrangement that the factory owners and the parents of the children would have found mutually beneficial, for whatever reason.

And sure, laborers agitated then for the same reason they agitate now: a desire to enforce wages for their group above the level the market will bear. "

first, it is that "for whatever reason" that intrigues me. after all, i made an argument concerning the short term blindness of factory owners to their long term interests. so how does this fit in with the conceptual framework of your claim that the market really knows what it is doing. the implication of the point i raised was that the market did not really understand its long term interests. if that is true, gov't legislation actually helps the market get to where its long term interest dictates it should be.

tom t makes the point concerning the availability of competitive substitute labour (children) for adult labour. i think that is a point worth considering (though i do not know if someone has done some work on that thesis-intriguing though).

i am not convinced by ken's argument about the lack of wealth and productivity to support higher wages. the point is that history is full of instances where a booming economic sector was not always followed by increased demands from labour--the last 20 years including the last boom for example, average labour costs remained fairly quiescent, even as average productivity rose by approx 30% in that period. companies, apart from those that inflated bottom lines actually recorded very high profits and rates of return. i do not begrudge them that, but what that suggests is that firms can make above economy normal rates of return. and that workers do not necessarily see the benefits in higher wages of those increased rates of productivity. i guess that is a polite way of saying that owners do not always pass on productivity increases to workers that workers deserve.

when aaron says:
"And sure, laborers agitated then for the same reason they agitate now: a desire to enforce wages for their group above the level the market will bear."

another interpretation, on the basis of what i said above, is that workers were trying to get a greater share of the profitability that their labour earned, and that owners of capital were not willing to pay. they were fighting over the surplus capital generated. sure, owners would like to be able to reinvest that surplus, and no doubt ionvesting that surplus capital fueled economic growth. this would make sense--after all, if you just got enough to repay the costs of your investment and a tidy rate of return, how could you really expect to acquire the capital to realy expand? (unless higher wages led to higher demand, etc.) when you put it like this, it is hard to conclude from this that owners of capital had the best interests of their workers at heart! it is as consistent with the evidence of rising standards of living that you cite for workers, that the emergence of protective legislation and the rising influence of unions was as responsible for these increases as benevolent owners of capital. after all, as we would argue today, the higher costs of labour that such union activity engendered would actually lead to owners of capital to actually substitute labour saving machinery for the more expensive labour. if so, we would expect labour productivity to rise!

sure, this could lead to unemployment, but it doesn't have to: if at the same time, we have the opportunity to lower the costs of materials (through colonization, etc--and terms of trade did steadily fall throughout the period for raw materials) and increase the access to old and new markets, and have a more prosperous consumer class, owners of capital make more profits, and hire more workers because they can sell more to a bigger, more income rich market.

none of this requires the goodwill of factory owners towards workers. it is consistent with the claim that worker agitation and gov't legislation helped create the environment where business could actually do better than its short term interest driven approach would allow it.

anyhow, just some thoughts. sorry to sound like a marxist.

take care
cas

Cas: I don't want to go on too long on Megan's bandwidth, but you adhere, I think, to the medieval concept of the "just price." No such animal. When you say, for instance, that the workers "deserved" more than they were paid, to what standard are you appealing, exactly?

As to sources: Hobsbawm is an unreconstructed Marxist and Soviet apologist far past the time it was respectable. Ashton's book is out in paperback and you should be able to pick up a copy cheap somewhere. Try Bibliofind; I saw a few copies there.

hi aaron,
i don't have to invoke a "just price." just a neo-classical gains from trade argument, as with an edgeworth-boley box approach. i wonder if you assume some kind of symmetric relationship between workers and owners of capital. sometimes it was there. more often, owners had some monopoly power. in such a case, most if not all gains from trade would end up in the owners pockets. sure, its "voluntary" exchange but it does not support the claim that owners of capital had workers' best interests at heart (in support of their own interests).

further, if hobsbawn is an unreconstructed marxist, yes? so? it is the ideas, evidence, and the arguments that matter. do ad hominem approaches help us get at the truth of these things? one can translate the main thrust of many marxist ideas into a neo-classical framework, pretty well, with some changes of assumptions.

and it still leaves the claims i made above, in the last post, unanswered.

thanks for the tip on ashton. i will chase it up.

take care
cas

"Any restaurant that served blacks would have met its own end in short order, either from a white boycott or violence or both. "

And what would allow the mob to direct violence against that restaurant? The white racists were able to keep using the threat of violence to keep everyone else in line precisely because everyone knew that the government was offering police services in a discriminatory fashion.

"In addition, racial discrimination extended beyond the marketplace. It covered voting rights, to take an important example. Churches were segregated."

Of course it extended beyond the marketplace. It wouldn't last within the marketplace without being reinforced and imposed on it. Federal intervention to enforce the terms of the 14th Amendment were entirely appropriate. Federal intervention to dictate to individuals concerning their buying and selling activities was not.

"It did. Ford is another example of a steely eyed capitalist who saw that better pay meant paying customers for his products. "

No, better pay meant he could pick the best workers. Giving extra money to people so that they can by your product isn't going to be any more or less profitable than giving people equivalent discounts on your product.

"the desire to have kids work these hours: surely in an industrial society, such a situation would be against an owner's best interest in the long run, since an educated workforce is a more productive workforce. even if they do benefit from the cheaper wages in the short run. "

An educated workforce may be a more productive workforce, but the education itself costs time and money. Does the increased productivity justify the expense? Depends on the worker, the technology of the day, the subject of the education, and so on. Even today, many college degrees turn out to be losing investments for their owners.

Anyway, potential employers are willing to pay more for more productive workers than for less productive workers. This in turn induces individuals to pursue courses of education that more than pay for themselves in terms of increased productivity. This is much more likely to produce more productive workers than (say) refusing to hire less productive workers "for their own good", or pushing for laws requiring same.

"And what would allow the mob to direct violence against that restaurant? The white racists were able to keep using the threat of violence to keep everyone else in line precisely because everyone knew that the government was offering police services in a discriminatory fashion."

And how exactly would the absence of government stop the violence?

"Of course it extended beyond the marketplace. It wouldn't last within the marketplace without being reinforced and imposed on it. Federal intervention to enforce the terms of the 14th Amendment were entirely appropriate. Federal intervention to dictate to individuals concerning their buying and selling activities was not."

Of course it would last without being imposed.
Let's explore the restaurant example. You claim that, without Jim Crow laws, a minority of white restaurant owners would have welcomed blacks as customers, thereby becoming more profitable than their competitors. Other restaurateurs, seeing this, would also desegregate. Presto, it's done.

Not so, even assuming the restaurant was protected against violence. Given the attitudes that prevailed, it is likely that such a restaurant would have lost most of its white customers. It would shrink, rather than expand, its customer base. Furthermore, given the economic condition of blacks in the south at that time, the new customers would be significantly poorer than the old ones. Not a recipe for success.

We can also look at areas where segregation was not legally enforced to test your idea. There was considerable segregation outside the south as well, where it was not required by law. Where then were these benign market forces? Wasn't it the case that market forces encouraged discrimination in many instances. A restaurateur with no personal prejudices might nonetheless have chosen to bar blacks because he feared he would lose customers who did have prejudices, as I described above.

As far as the market forces go let's look at one well-known area - sports. Surely it is irrational for professional sports teams, who want the best athletes, to exclude some candidates on racial grounds. Yet they did precisely that for many years. Professional baseball began in the latter half of the 19th century. Yet despite market incentives, it was 1947, roughly 75 years later, before Jackie Robinson was in the major leagues. And despite the success of Robinson and other black stars, many teams did not integrate for years. The Yankees had their first black player, Elston Howard, in 1955. The Red Sox had their first, Pumpsie Green, in 1959. Market forces aren't quite as powerful in overcoming prejudice as you think.

And why should they be? After all, we use the markets to satisfy our wants as best we can, to maximize our utility. If there are people who value discriminating against blacks, why should we assume they are unwilling to give up some money to do so? If there are many such people, as there were in the South, then such discriination will be widespread, whether legally required or not.

there is no evidence for your contention that a majority of southerners wanted legally enforced segregation.

Unbelievable.

Simply unbelievable.

hi ken,
thanks for your reply. i have a couple of observations:

"No, better pay meant he could pick the best workers. Giving extra money to people so that they can by your product isn't going to be any more or less profitable than giving people equivalent discounts on your product."

the reason ford offered more money was complicated. part of it was as you say, to attract the best workers, but this was secondary to his main aim: to keep a steady workforce--absenteeism--workers decided to show the value they placed on the jobs they did by not turning up, leaving his employ, etc. the costs of retraining, etc. were very high. he paid the extra wages to committ a workforce to him. that worked. he also got a productivity boost because his workers were willing to work harder for him. he also made no secret of the fact that better pay led to his workers being able to afford his product--a win-win situation. i think what i just said supports the claims made by the "capitalism is good--gov't unnecessary" posts. i just think that many owners in the dim days did not see it that way. after-all, why does it take ford to do it? why wasn't it done earlier? its not just about productivity, its about changing a mindset that sees low wages as the only method to creating profits. that is ford's genius. he understands that his workers will respond to incentives. this is not typical of the 19th century. we remember owen, because his approach was unusual! not because it was common. looking at the last 20 years, i suspect that many employers have lost touch with that lesson (comparison of productivity gains versus stagnant worker pay).

"An educated workforce may be a more productive workforce, but the education itself costs time and money. Does the increased productivity justify the expense? Depends on the worker, the technology of the day, the subject of the education, and so on. Even today, many college degrees turn out to be losing investments for their owners."

i do not disagree with this thinking, except to say: look to the 19th century (or LDCs for that matter)--we are talking about a basic education. the returns to that are very high. college degrees were not an issue back then. if you had one, your return was also very high. it is hard to get a primary education when you are working 40 hours a week. reading and writing have a high utility to a factory owner. but why would a factory owner offer such benefits to a worker, if that worker could take it, acquire the skills then leave for a higher paying job from an owner who did not have to get a return in the education invested in a worker? (that is one reason for the apprenticeship system for crafts--to allow those who invest in a worker's education to get some return for it). it is hard to set up such a system in an early industrial setting, which is the antithesis of a crafts situation. that is why you need a gov't to take on the risk, and also make it harder for your competitors to circumvent you by using cheaper labour (children)than you can. to put it another way, factory owners agree to be bound, so that they all play by the same rules, and all benefit in the long run, without someone breaking the "covenant" for a short term gain (by overusing cheaper child labour).

take care
cas

I find some of the comments on the evils of child labour in factories to be somewhat absurd. It's only in the last couple of centuries that *some* societies have become wealthy enough that children don't *have* to work to live. Children were lining up for jobs in the evil factories because the conditions and rewards were a lot better than the back-breaking work in the fields. The families needed every little bit that they could get. I've lived in the Philippines and I've seen some of this first-hand. Being able to dispense with child labour is a luxury unknown to most of human history.

"we are talking about a basic education. the
returns to that are very high."

Of course they are.

"but why would a factory owner offer such benefits to a worker, if that worker could take it, acquire the skills then leave for a higher paying job from an owner who did not have to get a return in the education invested in a worker?"

He wouldn't. He'd simply pay a higher rate to educated workers, and that would serve as an inducement for workers to forego some present income to pursue profitable courses of education. Granted, some workers wouldn't be able to forego current income, at least until he could convince a lender that his proposed investment was indeed profitable; however, other workers would make the investment, become more productive, and through their efforts raise everyone else's standard of living until more workers could afford to direct some of their resources to investing for the future rather than living day-to-day.

And the inducement works for (decent) parents as well - as soon as they're able to get by without sending the kids to work, they send the kids to school instead. And the ones that can't get by without sending the kids to work don't have to starve.

By relying on the profit motive to get people to educate themselves and their children, rather than relying on the government to force education on people, you would also find that educators, driven by their own profit motive, would offer more profitable education, and would adjust their offerings as the return on different courses of study changed with the times. They would compete on the quality of instruction, the cost of instruction, and/or the time required to complete it. They would not follow the example of today's public education system and waste enormous amounts of their students' time with endless repetition and snail's pace progression tailored for the dimmest of their charges. They would certainly not respond to a demand for more extensive education by keeping their slow pace of instruction the same and simply insisting that their customers' only choice was to extend the childhoods of the students by several years.

"Take a computer language for example. C++ is now an international standard. Good thing or bad? No Govermnet was involved. Now that's a good thing."

'ISO/IEC JTC 1
Secretariat: ANSI
Voting begins on: 1998-04-23
Voting terminates on: 1998-06-23'

All of these groups are quasi-governmental.

Except in the sense that if you violate ANSI standards, they don't come and take you away at gunpoint and put you in a compound surrounded by barbed wire and armed guards.

True, but some government was involved.

"He wouldn't. He'd simply pay a higher rate to educated workers, and that would serve as an inducement for workers to forego some present income to pursue profitable courses of education. Granted, some workers wouldn't be able to forego current income, at least until he could convince a lender that his proposed investment was indeed profitable; however, other workers would make the investment, become more productive, and through their efforts raise everyone else's standard of living until more workers could afford to direct some of their resources to investing for the future rather than living day-to-day."

Two words: path dependency.

Easter Islanders no doubt had, at one time, a private property system and a constitution that supported individual liberty and rights. Individuals carefully protected their resources, encouraged by a system of prices set in competitive markets. When resources became scarce, prices rose and individual Islanders grew even more protective. Unfortunately, a caste of high priests emerged. These priests were called Scientists. The scientists stayed in small rooms all day and only emerged to study Nature. They developed a theory of an Ecosystem that forgot to include the Islands. They encouraged Big Government to protect Nature, gradually fencing off parts of the Island from human use. The Islanders began to stave and fight. Some invented ways to make things produce more, buth the Scientists declared that such inventions hurt the Ecosystem. The Inventions were banned. Eventually, a few Islanders could take it no more, they began to poach on the Scientists' Reserves while the Bureacrats were sleeping. The Scientists grew angry and demanded that more Bureaucrats be hired. But Bureacrats all sleep and need days off, so the poaching and cutting went on. One night, there was only one tree left. A deperate Island drew his saw, thinking, "If I don't cut, the next guy will". So he cut it down. That's how the Easter Islanders met their end.

Dear Jane,

I was inspired by your work to look more closely at the Easter Island history. It's remarkable that we can now discern exactly what was on that Easter Islander's mind. A summary of the evidence is posted on the Answers from History web page, http://mywpages.comcast.net/askamis/index.htm.

Best wishes.

Amis

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