http://www.onion.com/news/index.php?issue=4124&n=3

related to health insurance (managing risks)

I am a big fan of economic analysis, so I am sympathetic to Posner's analysis. However, I think that sometimes people get a little carried away. Economic analysis certainly provides insight into many areas, but it certainly does not provide answers to certain normative questions. For example, what is the true value to an employee of health insurance versus their often rationally ill-informed individual evaluation? Further, how should health (or life) be valued compared to other goods provided by our economy? Posner notes that Medicaid may provide inferior service to an individual than private insurance. But if presumably, inferior service at least sometimes means less favorable health outcomes and if one believes that health is simply not rationally exchangeable for money, then it seems that economic analysis is missing something very important. After all, money can only buy that which other people can provide. But if once health is degraded it cannot be improved (which is sometimes the case), then in that situation, good health cannot be monetized in any non-arbitrary manner.

It is just like the flawed conception of some economists that anything other than a totally arbitrary value can be attached to human life. (Obviously, we are sometimes pragmatically driven to come up with such a value, but in principle, any such value is arbitrary.) Some economists have suggested that one can arrive at a value by comparing the salary differentials that similary skilled and educated workers get paid to do more risky work. If a job increases the risk of death by 1% and the salary is higher by X, we then have a means to attach a value to a human life. This reasoning is flawed. First, the marginal value that most individuals attach to increased risk likely increases exponentially. A worker might be able to handle a 1% risk at a higher wage, but ask the same worker to take a risk with a 50% risk of certain death or 75% or 90% and it seems likely that most would leave the market altogether. I do not think that such behavior could be considered irrational. After all, money can only buy so much and certainly cannot replace a lost life. Now, how much would you have to compensate someone to accept a 100% risk of death? How about a 99% chance? Second, it does not seem to be a stretch to think that many individuals probably behave somewhat irrationally when it comes to evaluating the risk of their own death, believing that they will beat the odds and not become merely another statistic.

So, in the end, I think that Posner's analysis is interesting, but flawed. It reduces a very hard normative question into a very easy economic/math problem based on the assumption that everything can be translated into some common value. The real question we should be asking is probably what can we do as a society to create better health outcomes, without somehow thinking that health can be exchanged for other commodities, such as say, sports cars or nice jewelry. Obviously, income plays some role in health outcomes aside from adequate medical care, and that should be taken into account. (For example, higher incomes might provide more nutritious meals.) I suppose my bias is clear, I do not think that health (or life) can be rationally traded for other commodities and I also believe that it is not unreasonable to say that health is more important than most other commodities and should be placed far above them. I would limit my analysis, however, since I am very much against the regulation of personal risk-taking which is not driven by economic pressures.

Unlike Posner, I think perhaps we should be requiring every employer to provide health insurance. I am not certain. But I AM sure that Posner's limited analysis provides us some insight but no answers. Then again, how much should one expect from a blog anyway? Insight is pretty good for a blog, but I just feel that it would be beneficial if Posner mentioned the problematic limits of his analysis. I think too often economists and non-economists take economic analysis at face value without thinking very hard about the underlying assumptions and the greater or lesser degree those assumptions are acceptable in formulating policy for the real world. Often, the assumptions are acceptable, but often, they are not at all or without adjustment. At least if one hopes to have a useable policy solution rather than some inherently limited insight which is not actionable.

Why we are at it, we probably should be looking at ways to increase supply as well. For example, the arbitrary limit on the number of medical students. It is hard to claim that this limit is rationally based on needed skills when the standards change every year based on the characteristic of the incoming class. Further, when making such standards, it seems little attention is made to the cost of those unable to obtain preventative care when they are priced out of the market. Perhaps, as some cynics believe, the American Medical Association is rent-seeking. But that is another story...

Second time posting. My first was lost with the "rearranging" which was done.

Interesting topic. Walmart bashing is common these days. One thing which I think is neglected in Posner's analysis is that the retail business is very cyclical, which necessitates a flexible (read large number of part-timers) workforce. Much of Walmart's decision to retain a high proportion of part-timers (and therefore many employees who are ineligible for medical benefits) is due to the nature of retail business and not necessarily corporate greed and avoidance of paying medical benefits. I do think, however, that medical costs are effecting Walmart's decisions, but it's wrong to assume that is the only (of even the principal) reason for their actions.

I really don't get the criticism about the wages with respect to Walmart specifically (as opposed to wages generally, which is still flawed but for different reasons). If Walmart raised their wages, they'd have a larger applicant pool, and more qualified and reliable employees would replace many of those currently working for Walmart. It would seem the likely effect of raising wages at Walmart would be to displace current and would-be Walmart employees into similar situations. Many would not be helped at all, and it's possible many could be harmed.

Several points outside of the discussion here, but relevant to the Walmart discussion more broadly. Many bashers of Walmart often neglect a crucial point, that Walmart's principal beneficiaries are the poor (and any consumer for that matter), because of their ability to offer low cost merchandise. Moreover, Walmart is criticizing for driving out the smaller, local chains. Apparently these critics are not very familiar with the typical local business, which usually pay the least and have the most spartan benefit packages.

Posner wrote: "If it charges the employee $1,000 a year in premiums, the cost to Wal-Mart will be only $4,000, so it will be willing to raise the employee’s salary by $1,000. This may seem a complete wash, but it is not."

Does Judge Posner really believe because Walmart saves $1,000 that "it will be willing to raise the employee's salary by $1,000"? That's nonsense. Walmart employees do not negotiate for their wages, they take the Walmart determined wage which is in large part determined by the market wage for similar work. While it is true that systemic cost savings of this kind would result in some increase in wages generally, it is not at all true that because Walmart saves money it will be willing to give that money, let alone every pennny, to the employee.

The general thrust of Posner's analysis here seems correct. Many Walmart employees make more money because they do not have medical benefits, though I have no idea why Posner thinks every dollar in savings ends up in increased wages. I think he confuses ability to pay wages with actually paying them.

Posner early in his post comments about how group insurance by employers is cheaper than private insurance. Yet he neglects this very important point in his later analysis. He states that an employee is better off because savings in medical insurance costs will translate into higher wages, yet he neglects the fact that because private insurance is more costly each $1 Walmart spends is worth much more than a $1 increase in wages (which is further exacerbated by the fact that fringe benefits are untaxable). The crux of this position, apparently, is he thinks every uninsured Walmart employee is a shoe-in for Medicaid, so there is no need to consider private insurance costs in the analysis.

You did NOT just decide to touch labor in the USA with a 10 foot pole?



O.o



And you touched wal-mart labor practices as well ...EEEEWWWWWW... you are far braver, and crazier, than I.



Your writing and Beckers is largely about the financial choices about health care and how it affects their bottom line without even remotely touching labor issues in the USA. You cannot seriously expect anyone to take arguements seriously about profits and justifying a bottom line without talking about labor rights.



To begin with, I agree; any company should be allowed to push their wages as low as they want, and provide as many or as few benefits as they want as well. Anything less would be a system of socialism or communism. I feel a definition of the relation between government, businesses, and people are necissary to illustrate the point I am going to make.



In pure capitalism there is a constant labor war which wages with no rules whatsoever at all. People die and are enslaved through various means, companies are brought to their knees and destroyed in riots; it's all-out no-rules civil warfare. People realised after the world wars and after many labor riots this was probably a bad idea. Additionally, after WW1 and WW2, I think the business establishment figured it would be a really good idea to give the rabble their circus and drink and go covert, considering in a country of 150 million there was somewhere in the viscinity of 20 million trained war vets with ready access to firearms and there still is about that number today.



Not to mention the guns; there are billions of unregistered guns and munitions the government, and therefor business, has no clue as to where they are. Literally, workers gained the respect of businesses by having superior firepower.



More importantly, the labor riots between the 1880-1940 brought in a form of quasi-capitalist-socialism or sociocapitalism. Businesses learned to respect their workers after having factories smashed and managers lynched, and their workers learned to respect the businesses becuase without it they don't have food on their plate. The product of this system was, obviously, the 8 hour work day, benefits, minimum wage, workers rights, and so forth.



Socialism is all about social contract; agreements between government, business, and people about what is expected. This system of sociocaptialism spells out where the labor war may and may not be waged; in many ways it's a peace agreement. It is, however, short-sighted because in times of scarcity certain labor practices are unsustainable and enivitably, because government retracts them, when the scarcity ends you get long-term growth. Because labor expects scarcity they accept the less than great pay which leads to supression of labor markets. When the system is sustainable and profitable again, which it is, labor agreements are not renewed and you get the labor war again. That is, in a nutshell, what has happened since 1970 till today. Deregulation of business law, selective anti-trust law enforcement, selective law-enforcement, corporate rights, government subsidy, labor wars in foregn countries faught with taxpayer money and so forth are products of this process.



Then there's Fascism which is basically government and business become one and constantly fight an all-out civil and economic war on the workers. That doesn't work because workers are often more numerous and, when properly motivated, far more creative and they will win. Even if you were able to cage them all, the society will fall into a state of constant decay from lack of inventiveness and creativity as a prison-state is dependant on it's workers being stupid cogs. Eventually, even the wealthy will be destitute and poor, or more likely, so wealthy they will be unhappy all the time and will commit suicide. The last great persuit of the rich is conquering humanity, and if they manage to do that, then they will have lost the war against ennui because there is nothing great left to do.



There's also communism which is basically the same thing as fascism. Workers and the State are essentially the same, and business is supressed. Some labor warfare and haggling is necissary for our society to work because it allows for the adjustment to scarcity. When that isn't present and you've got a government dictating to people what they will be doing and what rights they will have you've got a very interesting form of direct social slavery which fails for the same exact reason fascism fails; it thrives off of it's population being unform stupid cogs. If you want to see a short-term failure, check out Russia. For a longer-term failure, check out China.



So then, what is the current environment like?



The current system of sociocapitalism is in decay because of the deregulation of business law and so forth, as I mentioned earlier.



In America there is labor supression by tactics such as hanging up pictures of Mexican Factories in American factories, threatening workers with firing for exercising any kind of right, and in some cases even killing them. It's on many more levels than before, especially on a psychological level whereas people are convinced into being slaves because they become convinced there is no other alternative; even with a good education people feel lucky if they get a good job. Media plays a big role in this as well as corporate propaganda. It's also faught on a drug level; I won't get into floridation of water supplies, food poisoning, or malnutrition but just look at how many millions of people are on antidepressants. There are a lot of people who are completly supressed into being a cog on a spiritual and physical level and if you don't want to believe me, go into a wal-mart and talk to the people who work there.



Labor supression has had 2 effects on labor.



The first is that they have gone covert; the laborers have gone underground and are doing a ton of damage. Such as the case as Skype, have undermined and completly destroyed old business models with new technology. Other covert activities include, for example, hactivism, blogging, Peer to Peer media sharing networks, public news systems like newsgroups, education concubines and meetings, political grassroots action, and so forth.



The second effect it's had is that labor has formed a very strange and dangerous attitude of "don't work for the man"; it has formed a fanatical class of anti-government anti-business people who do not self-educate but do arm themselves and riot. This is generally rare; it takes a lot of effort not to self educate and a lot of people simply do not have the discipline.



Currently, we are seeing labor come back with a vengeance but this time it is unique; on one hand, there's a ton of guns and ammo being baught and people self-educating about survival and business. On the other hand, political participation is on a level not seen since the American civil war/war of northern aggression/war of southern independance.



Now, as for health care.



Health care is one of those sociocapitalist agreements (more quasi than official since it isn't mandated by law) which is breaking down. My view on it is this; Wal-mart can do whatever it damn well pleases with pay and with health care because that is the capitalist system. You can balance numbers any which way you please, you can tell us about options, but bottom line, you're analyzing their behaivour and justifying it through saying it's their right to do what it is they damn well please, which I agree with wholly, it is their right in a capitalist system to do whatever it is they damn well please.



The numbers do bring some insight into how they think and therefor, to me anyway, have some value. But largely, without the context of the labor vs business, irrelevant.



Wal-mart is not, however, immune to having it's stores raided, burned down or it's exeuitives and managers lynched when they engauge in fascist and otherwise labor-supressive activities. Without that social contract, the labor war returns, and with it, the violence it once saw.



The war on terrorism is very much a government effort to stem labor violence through quick-response military units. Check to see the FEMA detention centers around the USA; they've literally got the capacity to imprison upwards of 30 million people; there are not 30 million osama bin ladens in the USA. You can also look at documents on prison growth and the prison industry and find a suprising growth there as well; people are being flung into jail for flimsier and flimsier reasons every month. Ever since the military began getting put under control of the exeuitive branch via the department of homeland secuirty, and police cojoined with the military through federal incentives, we've been seeing a more fascist side of government come out. It is fully possible now for bush to order the abduction of a million rioters in a major city and transport them to a forced labor camp. Hell, they kinda do that today by kidnapping protest leaders days before a protest is to occur by keeping them on phony charges. Then there's the free speech zones but I won't tread on that territory much more than mentioning it.



Although government and business have yet to stem the tide of the creative who do the most damage.



If wal-mart doesn't want that to occur, then are automatically not allowed Government subsidy, either in the form of tax-dollars or favorable legislation in any form. Moreso, they are not allowed to bludgeon labor markets through warfare, meaning labor organizations of any kind, to death anywhere in the world accept by the matter-of-fact reality of scarcity. Most importantly, if they want peace, enter into agreements which get broken for well-defined and agree to variables.



The government won't enforce this; the workers will and the laws of nature will. When you leave workers no choice, then they get violent and creative.



Finally, I'd like to make a few arguements against what it is Becker and Posner have said and point out the fallacy of some their own arguements.



"I agree with Posner that companies should not be forced to provide health insurance for all their employees since some employees may not want such insurance" -Becker



Then the company can either provide health care or pay the employee the difference. It's cheaper for the company because they do not have to maintain contact, and it benefits the employee because they can make more.



"An important improvement is health savings accounts (HSA), which were authorized by Congress in 2003 for everyone not on Medicare who has a health plan with high deductibles, such as $1000 for an individual and $2000 for a family."-Becker



A FAR better alternative to health care or medicaid is for-member-profit public insurance institutions that are not government owned. If the government provides the insurance then it is liable to pass law, take money out of it and make up excuses such as what has happened with the replacement of money in Social Security by Non-Marketable Bonds. If a for-profit business does it then the customer subsidises the profit of the business. Insurance works on the premise that fewer people get sick or hurt than actually pay, and if they do then you jack up the payment so, eventually, they pay for their own treatment plus your profit margin.



"The second criticism of Wal-Mart's refusal to provide health insurance to all its employees who do not have other coverage has somewhat greater merit. There is an externality: employees who lack health insurance usually lack significant assets as well, so when they get sick the taxpayer pays their medical expenses." -Posner



Actually, the taxpayer doesn't pay anything. Either they suffer, die, or more commonly, go into debt and declare bankruptcy and deal with the economic desolation (although this is before that bill that forced them to pay for it anyway, I forget the name of it). I suppose, since half of Americans who file for bankruptcy are filing because of medical related problems, if the bank or credit card company goes titsup then the taxpayer gets to pay to subsidise their return.



Other than that, medicaid mostly covers prescription drugs and even then not that well. Social security covers when a person is unable to work and doesn't really pay that much either. Personally, I consider medicaid a form of subsidy to the pharmesuticals industry and social security as a tax as that is what they seem to be to me. I would consider the provided coverage just barely what is needed. Taxpayers do pay but not as often or as much as your statement may imply.

What are your thoughts on the circulation trends at the Chicago Tribune? (if you have insight, please consider the blog njk42.blogspot.com --> the community may need your insight)

Judge Posner's little game is not a true economic analysis of Wal-Mart's wage policy. It is just a meaningless little exercise of playing with imaginary numbers.

To engage in a true economic analysis, we must find the answer (through RESEARCH and STUDY, NOT SUPPOSITION), to the following questions:

1. How much would it cost for Wal-Mart (or other similar employers) to provide health insurance for low-wage employees?

2. How much do employers that provide fringe benefits actually reduce wages? I would guess that the reduction in wages is less than the value of fringe benefits, because a higher base "salary" attracts more and better job applicants. Thus, health insurance is not cost-neurtral to employers. (Just my hypothesis - as I said, this needs study).

3. Are jobs lost when fringe benefits are provided, or do CEOs and shareholders just make a bit less profit?

4. What is the cost of taxpayers of paying the medical expenses (through medicaid or otherwise) of uninsured workers?

If we can answer those questions, or even come close to answering them, then we can determine the total cost to SOCIETY, rather than to the individual company or employee, of Wal-Mart style terms of employment.

We should also analyze whether society as a whole would benefit from national health insurance or from mandatory employer-provided health insurance. A growing number of companies these days are advocating national health insurance, because it can be provided cheaply (bargaining power and economies of scale), it is portable, and it reduces the cost of labor to employers. We are losing jobs to Canada (imagine that!) because of the high cost of health insurance in the U.S. I predict that within 10 or 20 years, the big corporations will demand national health insurance in the U.S. That is when we will finally get it.

some defenses of Judge Posner's approach:

to David: When Posner makes up numbers, he does not intend to insinuate, and it would be incorrect to take it as such, that they reflect much of an estimation of the actual values that would be assigned if one did good empirical research. Rather, what he does is use some pretend numbers to illustrate the effect of economic forces. As in, we may not know what the real, quantitative impact of mandating a certain level of health coverage is, but we can say that it creates "dead weight loss" of some sort in the market by restricting choice. The numbers just make it easier to see what the point is in language (oddly enough, some dollars and cents) that we can think of in our minds.

to David Welker: I disagree that we cannot assign some economic value to health and even the risks of death. Simply put, we all put some economic value on the risks and rewards of driving to work every day, or by choosing how often we go to the doctor for a check-up. The only question, then, is who should make the decisions as to how much to value life and health. By favoring government regulation, one is stating that a bureaucrat or legislature can do that in a way that is consistently superior to large swathes of people. While there is little question that many people do a poor job of managing their own health affairs, one who favors the market (as I do) would assert that the market and individuals still do significantly better than the government can, and people in a free market tend to improve the quality of care through innovation far, far better than a bureaucratic approach moving forward.

my point: I agree with Posner that requiring a certain level of health insurance may sound nice but has so many myriad problems with implementation that it makes the system significantly worse off in the long run.

In addition: The point about individual insurance being more costly than group does not lead to the conclusion that requiring employers to provide it is the best option. As Posner points out, there are many other places that people could choose to associate group insurance with: fraternal organizations, religious institutions, and the like. Better to let people have the freedom to choose which mode is superior for themselves and let the market more efficiently allocate resources. Among the many downsides to requiring health insurance of employers is that employers will attempt to evade the mandate by hiring more temp workers, independent contractors, use more machines rather than labor to do the work, or export labor to countries without the health insurance mandate. The result raises costs, prices, and lowers employment prospects in this country.

2.

Here are some real numbers for you. (From
"Yahoo Finance", "WalmartFacts" and elsewhere)

# of Walmart Employees: 1,700,000

Cash on hand: $5 Billion
Revenue: $291.4 Billion
Gross Profit: $68.40 Billion
Gross Profit per Employee: $40,000

Compensation of 7 top execs, 2004: $41,725,076

2004 hourly pay

Wal-Mart CEO H. Lee Scott, Jr.(based on $17,543,739 per year, 40 hours per week) $8,434.49

Average Full-time U.S. Wal-Mart Employee $9.68

Select Wal-Mart subcontractors:
Bangladesh $0.17
China $0.17
Indonesia $0.46
Nicaragua $0.23
Swaziland $0.53

So, how much of that $40,000 per employee should WalMart spend on employee health insurance? Would it help to know that Walmart spent $2.2 Billion on a stock dividend last year and another $4.5 Billion on repurchasing its own stock in order to drive up the value? (Thats $4000 per employee right there)

This whole discussion is about relative values. WalMart makes enough money to provide health insurance for every employee. It chooses instead to run dividends, stock repurchases, and executive compensation several times higher than the norm. Other companies (Costco for example) in the exact same business have provided health insurance for all of their employees. Costco was punished by shareholders for refusing to adopt the lower cost "WalMart" model, even though their productivity per employee and employee satisfaction were much higher.

Note that the very characterization of wages and health insurance benefits as a "cost" that is opposed to "profit" betrays the value hierarchy at work. The fact that you are all willing to "cost optimize" health insurance shows that you do not think access to health care is an important right, as least not compared to the right of investors to extract profits from the labor of others.

Do you really think that WalMart should be able to avoid providing insurance just because its employees are desperate enough for a job that they can't ask for more? Given the number of accusations of union-busting practices at WalMart, isn't it possible that what we are really talking about here is an unfair/illegal bargaining advantage that WalMart has obtained?

As for freedom of choice, what happens when WalMart employees "choose" their employer as the most logical place to associate group health insurance but Walmart refuses to provide same? People need health insurance, that is a more basic need than the ability to "choose" where to obtain it from.

"Among the many downsides to requiring health insurance of employers is that employers will attempt to evade the mandate by. . ."

OK, and one of the many downsides to banning murder is that many people will attempt to avoid the mandate by being sneaky about killing people.

"The result raises costs, prices, and lowers employment prospects in this country."

First off, WalMart CAN afford health insurance but chooses not to provide it. Second, even if that were not true. Why should prices be so low that people have to take jobs with no health insurance. Why should a job exist that pays so little. WalMart is to blame for the lack of higher paying employment products.

Low prices are the bribe that keeps people going into WalMart even though they know for certain that the store ruined their town by forcing all the local retail shops to close. People know that WalMart is evil, I hear it all the time from friends, family, and folks on the street all around the Midwest (where I currently live). But they all shop at Walmart! Because it is cheap, and honestly, after what WalMart does to wages and benfits in small towns, that's the only place they can afford to shop!

You people claim to be for choice and personal responsibility. Tell me how those things are served by local shop-owners being run out of business by low prices on cheap merchandise at WalMart and having to go work there for $9.68 an hour in some micromanaged sheep job.

The only way this situation improves is for people to voluntarily de-homogenize. If you can afford it, patronize local retailers and buy higher quality merchandise. If you care at all that people making Walmart products in China get paid 17 cents an hour, then don't buy the damn digital lawn ornament.

Oh, and one more thing...

There are 1,700,000 employees of WalMart. There are only 331,000 shareholders of record. A $6.7 Billion preference for dividends and stock repurchase over health insurance is a preference for a narrower distribution of wealth.

1. Employees (who are not shareholders) don't own the company.

2. Wal-Mart sells cheap stuff. Cheap stuff means more $$$ in the avg. consumer's pocket. For consumers of Wal-Mart who don't work there, those savings can be used to generate compounding interest or spent on something else.

3. Increasing Mom and Pop's wealth is good.

4. There are more consumers of Wal-Mart who do not work there than there are consumers of Wal-Mart who do work there. Lowerr prices instead of higher wages is thus the fairer and broader distribution of wealth.

I particularly agree with the importance of Winfield's #4. It is very easy to underestimate the important welfare implications of that.

In addition, if some people want to get health insurance from their employer and others want to do it through another group plan, persons who want it from an employer should choose a company that does so. There are, of course, many such employers. Others may prefer the continuity of health insurance that can come from getting it through a fraternal organization or church, or the other benefits that come from that model. For such folks, they will want an employer who pays them in all cash. Others may want to be self-indulgent and spend their money when they're young and live it up. Fair enough, I don't see that as illegit, either, and I'm not so presumptuous as to tell such persons they are wrong.

Murder, of course, is different, as it involves taking away the life of another without their consent, Corey. You should know that.

RWS:



Thanks for replying to my post. Here are some things to think about.



You think risks to life can be quantified in a non-arbitrary manner? Fine. How much would you personally need to be compensated to take a chance that would result in death with a 95% probability? How much would you need to be compensated to suffer a major, irreversible decline in your health? If you are like most rational individuals, you have difficulty answering these questions. Simply put, there are not any number of commodities or services that can replace life and health. Pragmatically, when people are injured, we may have to put an arbitrary value on life and health, but it should be recognized that the values are arbitrary and not principled (though some economists are under the illusion that there is a principled value, based on faulty assumptions and inferences from human behavior). Further, pragmatically, it is physically impossible to eliminate all risks, and at some point we do not want to interfere with the right of individuals to take remote risks, because we value individual freedom and such risks cannot be totally eliminated in any case. Nonetheless, this does not mean that a dollar value can be placed on human health or life. Maybe you are willing to be compensated with money to take a risk resulting in death with a probability of 95%, if so, you represent a tiny minority. Especially if, in a hypothetical world, people got to see the results of other people making such a deal before they themselves decided yes or no.



More specifically in response to your point:
"Simply put, we all put some economic value on the risks and rewards of driving to work every day, or by choosing how often we go to the doctor for a check-up. The only question, then, is who should make the decisions as to how much to value life and health."



Actually, this is exactly where your thinking is very flawed. 99% of individuals do not investigate traffic fatality patterns to determine their risk of death when they drive to work. Instead, they drive to work assuming that they will arrive safely; while knowing there is a risk, they do not try to quantify it. However, if you are going to exchange one thing for another, most certainly you need to quantify what you are exchanging. If you are offered a job in a different part of town, very few consider the increased or decreased risk involved with the commute, thinking that an n% change in risk of serious injury or death is worth x dollars. Basically, you can't set a value on this in any reasonable manner when people are not even conscious of what they are supposedly exchanging. Not if rational decisions on the free market are based on KNOWING and voluntary exchange.



A further flaw in your point is that the risk of traffic fatality is very low, for any given drive, which is partially why people do not spend much time investigating it. But, if people are willing to be compensated with mere money for small risks which they view as remote and simply assume will never happen to them, then how much will they need to be compensated for risks that are not remote? The problem is that the value that people will attach to a risk is likely to increase exponentially as that risk approaches 100%. There is no amount of money that most people would accept for 100% risk of death, and you are not likely to have many repeat players who accept risks of death as high as 25%, even at outrageous levels of compensation.



So, in a nutshell, your example of the risk of driving to work is poor since most people, rightly or wrongly, do not quantify their risks of serious injury or death in these situations, when such risks seem remote. Further while people may be willing to accept compensation for a remote risk, the real question is how much compensation would they accept for a more serious risk.



As to the point about the advantages of free markets, I think you are right if you think free markets do many things right and are sometimes great at increasing efficiency, which helps everyone, lower-class individuals included. For example, increases in computing power and the decrease in the cost of computers have benefitted everyone, but perhaps the lower classes the most. Low costs for food due to efficiency in its production benefits everyone. Low prices due to efficiencies from superstores like Wal-Mart are beneficial. So yes, the free market does many things well.



On the flip side, it does other things less well. A hammer is not the right tool for every project. Neither is the free market a tool to solve every human problem. This is obvious. For example, we need the government and government bureaucrats to protect property rights. (The bureaucrats in question being police officers, prosecutors, and the court system). The question then, is, for what problems is the free market (or no regulation) optimal, and for which problems is democratically legitimate government action optimal. No simplistic ideologically-driven response can answer this question.



A final point. Low health benefits for Wal-Mart employees might benefit a broader population through lower prices, but that does not mean that those interests are more important than the concentrated interests of Wal-Mart employees. I think it is ridiculous to think that obtaining consumer goods at lower prices for some group of people can somehow be traded against serious health problems or even the lives of other people. Such thinking is perverse.



In the end, Wal-Mart would still have low prices (maybe not as low) if it were required to provide decent health insurance to its employees. It has found many other ways to lower prices, including high efficiencies in distribution, not to mention extensive use of outsourcing. Wal-Mart should be applauded for increasing efficiency and lowering prices. It would still have every incentive to continue that pattern, even if required to provide health insurance. So, ultimately, the issue is low versus lower prices.



I don't think we should pick on Wal-Mart. I think the issue is complicated and I certainly would not advocate a particular solution without very careful thought. But ultimately, I think your reasoning fails as overly simplistic and fails to critically examine the assumptions underlying the cute economic models with which I am sure you are familiar.



A final response to a point you made:
"While there is little question that many people do a poor job of managing their own health affairs, one who favors the market (as I do) would assert that the market and individuals still do significantly better than the government can, and people in a free market tend to improve the quality of care through innovation far, far better than a bureaucratic approach moving forward."



First, this is hardly an empirical or even a well-thought out point, but rather merely an assumption that non-regulation (pure free markets) in this area are superior to any form of democratic action. You may be right, but that would be because you made a lucky guess, not because you provided thoughtful analysis which increased the probability that you were right. One who favor the market (as you do) as a general matter is probably an ideologue, just as one who rejects the market (not me) as a general matter, is probably an ideologue. The problem with ideologues is they tend to see problems and then try to warp the problem in such a way as their preconceived solutions fit. Instead of finding a solution for the problem, they warp the problem to fit their solution.



What if I were to say that I think there should be a free market in property rights? In other words, I think people should establish property rights on their own, without government interference. I am sure that you would think this is absurd, since property rights may not mean much if those who are physically more powerful or gangs of individuals are able to simply take property without government interference. My point here is this. For some reason, government regulation protecting property rights is superior to a free market in property rights (even one, unlike my example, which determines such rights in a non-violent manner. Of course, exactly what should be protected is a difficult question, but certain we can agree that something should be protected. For example, we can agree that if you leave your car in a parking lot to go to a restaurant, not just anyone should be able to take your car. This despite the fact that property law, especially law concerning real property, is a mess and definitely inefficiently determined. (The Coase theorem SHOULD be applied to some degree to government action in this context.) Having acknowledged that government should protect property interests (even if violated in a non-violent manner) I think you must come up with a more convincing rationale as to why other interests (such as health through access to health care) should not be protected. This you have failed to do, other than by your blind assurance that democratically legitimate government action is inferior to the free market.



One last point. Democratically legitimate government action can involve more or less discretion on the part of government employees, something that you also fail to consider. Some government programs are less bureaucratic than others. Thus, you are not comparing "the free market approach" to "the bureaucratic approach" but rather to a plethora of different approaches to possible democratically legitimate government action.

"1. Employees (who are not shareholders) don't own the company."

Yes, and without employees, the company would not exist nor make money. So does ownership or labor have a superior right to profit? Of course we all know by now that Winfield believes in the Divine Right of Capital, so he says ownership.

"2. Wal-Mart sells cheap stuff. Cheap stuff means more $$$ in the avg. consumer's pocket."

That is circular logic because in WalMart's case, we all can agree that lower prices are achieved via lowering wages and benefits. Imagine a sales rep making $20 an hour selling widgets at $20 each. He can work an hour and buy a widget. WalMart sells widgets made (for 17 cents) in Bangledesh for $15. The sales rep now can't compete, closes shop and goes to work for Walmart at the average $10 an hour. Now he has to work LONGER to afford the same thing.

"4. There are more consumers of Wal-Mart who do not work there than there are consumers of Wal-Mart who do work there. Lowerr prices instead of higher wages is thus the fairer and broader distribution of wealth."

No, because lower prices at WalMart also lowers prices at Target and elsewhere, until no US department store can afford to stock US made goods, lowering manufacturing wages and sending many thousands of jobs overseas. Lower wages at WalMart puts wage lowering pressure on other companies (like Costco), which they resist at their peril. WalMart has also significantly squeezed earnings in the entire trucking industry. (They also set up the deal such that you can't truck for WalMart all year unless you agree to truck on Christmas Day.) "Mom and Pop" shopowners forced out of business see lower wages working for WalMart.

Consolidation and centralization of retail has effects throughout the economy and the world.
Average real wages and average buying power are still less than in 1979. There are certainly millions in the US who benefit overall from lower prices. Lucky for them they don't know the names and faces of the people in Bangladesh and Indonesia taking a mere $2 a day to make that possible. There are millions in the US who do NOT benefit overall from low prices on shoddy merchandise, for some of the reasons I just gave.

But the fundamental question is, should a company be able to spend $6.7B of its $10B in profits on shareholder benefits, trumpet that fact in its annual report, and then claim it can't afford adequate health insurance for most of its employees?

"Murder, of course, is different, as it involves taking away the life of another without their consent, Corey. You should know that."

I merely used the example to point up the absurdity of arguing against the existance of a law with "but people will want to break it". (Which both you and Posner did.) If there were no people for whom individual preferences were best served by a behavior, we wouldn't need a law to prohibit that behavior. Laws exist for those things which society deems worth prohibiting even IF they are cost-effective in the moment. Avoidance is an argument for stronger enforcement, not evidence of the need for deregulation. You should know that.

"For example, increases in computing power and the decrease in the cost of computers have benefitted everyone, but perhaps the lower classes the most."

Not everyone... 70% of the people alive today have never made a phone call. Those people couldn't care less how much a computer costs, since they are unlikely ever to touch one. I'm sure they were all real excited when Deep Blue finally beat Kasparov. They probably said, "excuse me, but what do computers taste like?"

"Low costs for food due to efficiency in its production benefits everyone."

It most certainly does not benefit the person who "chooses" to run a small family farm and try to sell the surplus at the local market. Every hour, farms are lost to the bank, are bought cheap by multi-nationals, and their former owners are hired to work the land for a meager salary. Turns out tenant farming is more "efficient" than individual land ownership. Three cheers for Feudalism!

Funny how with all of this hyper-efficient factory farming, hundreds of thousands of children go hungry every year in ariable countries like Nigeria, Bolivia and Brazil...

Those who put their trust in efficiency as a core value would do well to remember that genocide is an efficient way to solve ethnic disputes. One needs something more than cost/benefit if one is to resemble a human being.

First: Brevity (esp. with Comments) = Godliness.

Second: "WalMart CAN afford health insurance but chooses not to provide it." Lots of people and lots of organizations and lots of corporations can afford all sorts of different things, but choose not to purchase some of those things. What's the point?

Third: I wish that the people who dislike Wal-Mart would be honest. Most of you detest Wal-Mart for two reasons. One, it is wildly successful. Two, it tends to offend many of your aesthetic sensibilities (i.e., you, the critics, don't like Wal-Mart's super-store buildings, its parking lots, its tawdry products, and -- oh my -- the NASCAR Christians who shop there -- even though many of you like to sympathize with this group's plight, when, of course, you think of them as "employees," not "consumers").

Lastly: Requiring private companies to provide health insurance would destroy many companies with smaller profit margins than those of Wal-Mart. When these companies go under, people lose their jobs. How do you design laws that discriminate between companies that should provide health insurance and those that should not have to make such provision (AND retain a system of free and private enterprise)?

I'm not the one going around calling people "NASCAR Christians" and presuming to tell people why they dislike WalMart.

I detest WalMart because it sells shoddy merchandise produced with overseas slave labor, because it is the only available retail outlet for much of the country, because it destroys and homogenizes local cultures, and because it treats both employees and customers as if they were stupid hillbillies.

If people want to watch NASCAR, issue vote, and buy digital salad spinners assembled in Bangladesh, then that's their perogative. It does not matter if I approve of their discount shopper aesthetic. (I just say thank you for never competing with me.) But they still should have access to health insurance and make a living wage.

Sounds like we need to socialize health care, then every US company can profiteer in the "free" market without having to worry about pesky morals and insurance costs.

But we are not talking about requiring all companies to offer health insurance, we are criticising one of the world's richest companies for not doing so.

Corey -

Where is your evidence? Show me the "overseas slave labor," point me to the place where Wal-Mart is "the only available retail outlet" or to the place where Wal-Mart is homogenizing "local cultures" (whatever that means), and please provide some evidence for the company's hillbilly treatement of customers and employees.

Your response has confirmed my suspicions. If Wal-Mart paid a "living wage" (more of your unintelligible gobbledygook diction) and provided all employees with health insurance, would you then like Wal-Mart? Of course not. I wouldn't. shop there either.

But your distaste for the Wal-Mart aesthetic pervades your arguments about its pay rates and benefit packages.

Also, if individuals should be free to choose what products they want to purchase, why shouldn't a private company be able to choose what pay rates and benefit packages to offer employees? Those employees are free to accept or decline the offer.

Lastly, your comment about not "requiring all companies to offer health insurance. . . [but] criticising one of the world's richest companies for not doing so" entirely neglects to answer my question about developing laws that discriminate between what companies should and what companies should not have to proved health insurance. Are you proposing an ad hoc policy of simply requiring Wal-Mart to do so?

And when you call Wal-Mart "one of the world's richest companies," remember: 1)it is one of the world's richest companies NOW, but who knows what the future holds; and 2) should we create a precedent whereby successful companies all the sudden become subject to increased government interference (we have probably already done so)? That approach seems to offer a disincentive to companies to grow. prosper, and HIRE more people.

David Welker:

1. I don't think you realize how much the last post sort of casts out these gratuitous insults without sufficient basis. Mainly, it has a whole lot of "your viewpoint is one of an ideologue, not well thought out, and if you actually got to the right answer it was largely by accident." Well, I have three degrees, two of which are in policy analysis, and I have voted for Democrats, Republicans, and Greens in my day. Hardly one of an ideologue. I would submit that your assessment of me is pretty poor.

2. Just because a comment on a blog, or a blog post itself for that matter, does not fully flesh out a viewpoint does not mean that the person composing it is unaware of the underlying assumptions, weaknesses, and real-world subtleties that no amount of academic discussion could ever encompass. This much should be obvious.

3. I want to stand by the "driving to work" example. It has been exhaustively researched in terms of measuring whether people implicitly respond to the risks and rewards of driving, though they may not consciously calculate or quantify them on a daily basis. Obviously, the costs of doing such explicit computation are prohibitively hight, but that does not mean that most people do not do it at some level. People make conscious decisions to wear seatbelts, to buy safer cars, to drive safely rather than get to work quicker, and so on. These are all economic choices.

4. In response to your query as to could I put a price on a 95% chance of death, I certainly could. I just visited the Alamo last week, where those that stayed there probably had about that chance of death by staying and fighting. Well, to them the rewards and (to them) importance of standing for their vision of liberty outweighed the substantial risk of death. Likewise, someone who jumps into a racing river to save his wife--he has such personal value to his relationship with her that it outweighs the massive risk of death. Also, there are probably parents that would risk death to provide for their children, as well. Etc.

"Where is your evidence?"

I don't know sam, maybe three posts up where I listed the hourly wages of the CEO ($8K), the average US employee ($9.68), and overseas labor in several countries (17 cents).

So far I am the only person using real numbers in my posts this week.

If WalMart paid a "living wage" (I suggest you look up that term) and provided employee health insurance, I would not be singling it out for criticism here. Even if I have some secret or obvious dislike for the aesthetic, how is that relevant to a discussion of labor and health coverage?

"why shouldn't a private company be able to choose what pay rates and benefit packages to offer employees?"

Well gee whiz! I never thought of it THAT way!
How clever. Oh... but wait... what if the private company wants to employ 6 year olds at $2 a day because their hands are smaller and they can assemble delicate electronics faster? Should private companies be free to choose to use child labor? Can we have a law banning that, or does it limit choice too much? What about slaves? Can a private company choose to own slaves to avoid paying wages at all?

"That approach seems to offer a disincentive to companies to grow. prosper, and HIRE more people."

Maybe, but the disincentive is more than matched by the companies ability to extract 2 or 10 times as much from the fruits of an employees labor as it pays the employee. People still tried to get rich in 1968 when the top tax rate was 70%. Companies can handle living wage and mandatory health insurance regulation. If they can't, they should close and make way for a business that can. (For example, Costco)

While it might be worthwhile to engage Corey for entertainment purposes, I find it difficult to take his arguments seriously when he uses gross profit (GP) as his measurement of Wal-Mart's profitablity. He even purports to assert a $40,000 per employee gross profit metric as a club to show how mean old Wal-Mart is.

Does he even understand what gross profit is?

In retail accounting, it's simple. GP is merely gross sales less the cost of goods sold (COGS). So when looking at Wal-Mart's numbers, GP is available for what? Dividends to shareholders? No. Big piles of cash? No.

Rather, GP is used for every other expense of the company! That includes all employee salaries, rent, capital expenses, marketing, G & A, etc.

Using GP in this case is horribly misleading. But I think that Corey already knew that.

I also mentioned already: $10 Billion Net Profit last year of which $6.7 Billion was used for shareholder benefits.

I understand that Gross Profit is used to pay salaries, benefits, and other expenses. As such, the gross profit per employee is relevant to a discussion of how much WalMart should/could allocate to wage and benefit expenses.

After all expenses, WalMart had ten billion left over last year, or $5900 per employee. More than enough to cover health insurance if that were the priority of management (instead of shareholder dividends). Do you believe that WalMart should spend 67% of its net profits on shareholders instead of employees or customers?

And that doesn't even go into how WalMart's competitors manage to achieve greater productivity per employee by paying them more and providing greater benefits.

Is Walmart good for its employees? Is Walmart good for America? Who cares, the company is making money and its Executives are getting their bonuses. What do you expect when you allow microeconomic principles to control macroeconomic policy. Ahhh - the joys of Laissez-Faire!

As for the demand calculii, wether it be elastic, inelastic or uniltary: I'm still trying to come to grips with all the implications and nuances of the analysis. I've just got one problem, how many Americans actually go into such an analysis when it comes to health care? Everyone I've ever known simply makes a triadic decision. Do I self diagnose, prescribe, and treat. Or should I go to the Doctor or the Hospital when I'm sick or injured. The health insurance calculis doesn't even enter into the mind.

As for Walmart employees and most others, today it's simply a case of, "Thank God I've got a job!" If there's Health Insurance all the better. And Walmart and their copy-cats take advantage of the situation. We all know the microeconomic principles of margin maximization.

RWS:

(1) Your Alamo example is inapt. Those who died in the Alamo did not do it for money, but rather for non-monetary rewards. So, how much money would it take to get you to take a 95% risk of death, assuming no other non-monetary rewards, such as the privilege of fighting for a cause greater than yourself?

(2) The claim was not that people were not generally aware that certain actions reduced risks, it is that they do not quantify it and that perhaps it is a matter of personality as well as economics. If a person does not get safety feature X at a cost of n, which reduces the probability of death by p%, that does not mean that that person values their life at only 100/p%*n. This is especially so when the change in risk is very small. Essentially, you have already conceded the point. People do not make these calculations explicitly, they can't be said to be attaching a monetary value to their life. (At least if you think that monetary values should be attached based on knowing and voluntary exchange, the free market rather than some central authority which makes bizarre inferences based on unconscious behavior.)

3. Not only did you not flesh out your point of view, you did not even indicate that you perceived any of the difficulties of the issue. Your answer to the problem was simple and you provided simplistic support, merely a bare assertion:

"While there is little question that many people do a poor job of managing their own health affairs, one who favors the market (as I do) would assert that the market and individuals still do significantly better than the government can, and people in a free market tend to improve the quality of care through innovation far, far better than a bureaucratic approach moving forward."

This statement did not indicate in any way the basis for your conclusion nor indicate that there was some deep underlying rationale for you rejecting a plethora of n government actions in favor of your free market solution, which, by the way, you indicated that you supported in a general manner. Further, there seems to be a false dichotomy here, as not all n possible government actions are likely to disrupt the incentives for innovation. Do you really blame me for seeing an ideologue, based on your writing here? Maybe you aren't an ideologue, but if not, perhaps you should at least indicate some of the reasons for your conclusions rather than assertions of faith. :)

4. My intention was not to attack you personally, merely the content of your ideas and your apparent methodology for formulating those ideas.

1. I stand by the Alamo analogy. You asked me what the price would be for a 95% chance of death. I replied that the price will be high--and money in the end is only as valuable as the nonmonetary things it can purchase. And yes, "liberty" can be a somewhat fungible concept. If you gave me $2 million, I would probably give up the right to vote and other assorted civil rights and live in China or something.

2. I understand the point about hedonics not always really accurately valuing life, and that is a very valid and complicated point. Your equation would be too simple to capture the complex matrix of variables that would be required to calculate the relationship of a small risk one takes on to the approximate value one places on life. But, from that observation it does not follow that people value life infinitely, even though they risk life every day by driving or electing ot do other risky activities. If life were valued infinitely, people would act very differently than they do today. And just because they do not calculate/quantify numerically does not mean that they do not engage in economic decision-making.

3. I think, once again, you are misunderstanding how to read comments on a blog. If you pressed me on some of the underlying assumptions and I were oblivious to those assumptions and logical inferences, then you would have a point. People have criticized Becker and Posner for this on their blog, as well. It's just common sense that we have to make assumptions and cannot fully capture the subtleties we ascribe to issues in these online things. One should assume that some measure of subtlety exists, unless the person demonstrates otherwise.

4. Methodology: Feel free to attack it, but don't attack it in a way that is highly likely to be incorrect--as in, to ascribe lemming-like status to posts that attempt brevity and to get to the point efficiently. I don't take it personally, I just am registering my viewpoint on how to read a blog.

Corey -

First, I think I misunderstood one of your previous posts. I took the word "slave" to mean slave. I guess I should have known that the word "slave" also refers to free people who work for an hourly wage. With that equivocation in mind, I just finished my daily eight hours as a slave.

Second, I never said that the goverment should not be able to regulate private industry. It should, and it does. What I did do was pose a question: "How do you design laws that discriminate between companies that should provide health insurance and those that should not have to make such provision (AND retain a system of free and private enterprise)?"

Your answer seemed to be that Wal-Mart, because of its financial success, should have to provide employees with health insurance. The corollary of this is that the government should analyze every company on an ad hoc basis to determine whether or not the company should have to make such provision. This, I think, is absurd.

Third, dictionary.com's definition of "living wage": A wage sufficient to provide minimally satisfactory living conditions. Also called minimum wage.

Since I don't think you were talking about minimum wage, I'll assume that you can quickly tell me what "minimally satisfactory living conditions" are and the wage that makes those conditions obtainable. Also, please tell me how forcing private companies to pay certain employees more money will not result in increased unemployment. (That said, I'd just assume this argument focus on health insurance.)

Lastly, to return to the subject of my first post, there are lots of companies whose CEOs are paid at a rate hundreds and thousands of times greater than the lowest paid employees at those same companies. Moreover, I assume that many of these companies are not providing spectacular (or even better than average) health insurance plans. So, once again, why does Wal-Mart engender such vitriol?

My answer: people do not like what I call the Wal-Mart aesthetic. And that's a perfectly good reason not to like Wal-Mart. I don't shop at Wal-Mart because I don't like its stores and its products. I don't like the Wal-Mart Experience. (Nor do I like the fact that the company's owners do not provide better health insurance opportunities for some of the company's employees.)

But my distaste for Wal-Mart will not mislead me into advocating increased government intervention into the company's operations.

sam, Just one question, "What would it take for for you to accept government policy/intervention into company operations?"

N.E. -

What would it take?

First, I need to be convinced that there is a problem and that we can know and understand it, and that we do indeed know and understand it. Next, I need to know that our purported solution actually solves the problem. Finally, I'd like to have a good understanding of the indirect (and/or unintended) consequences of the solution and be fairly certain that any negative effects don't outweigh the solution's benefits.

This is obviously a speculative process, but we do have lessons from history to help us. The speculative nature of this process is one reason that I am a strong advocate of states' rights (I don't like that term, though). If states are free to legislate on a broad range of policy, we all benefit from lessons learned.

As for Wal-Mart and health insurance in particular, I do not know enough about the particulars to answer your question. The thrust of my previous arguments has been that many people choose to criticize Wal-Mart for reasons they won't admit (and probably don't even realize). I am also leery of ad hoc policies, and that is why I am curious why Wal-Mart should have to provide its employees with health insurance, but the local shoe store should not have to. That Wal-Mart is wealthy and successful is not an adequate answer.

Also, for me, it is difficult to keep from confusing economics arguments and ethical arguments. "What arrangement is in the best material interests of particular individuals and groups of individuals?" is a far different question than "What is right or good for a person or group to do with their resources?"

"That Wal-Mart is wealthy and successful is not an adequate answer."

Yes it is. Because WalMart is wealthy and successful, it CAN afford to provide health insurance. Absent pressure, it has obviously spent surplus profit on shareholder benefits instead of employee benefits. Possible sources of pressure are: employee unions, consumer outcry, government regulation. Pick your favorite.

Personally sam, I would like to see profits taxed in order to provide single payer health insurance for ALL. Perhaps allowing companies to avoid the tax if they were willing to provide private insurance. There are lots of plans and models out there.

But barring that as unlikely, I would support regulation forcing companies that can afford to provide health insurance to do so.

So it isn't that I have a liberal bias against the WalMart aesthetic, it is that I am a socialist.

"I am also leery of ad hoc policies"

Well, doing nothing is an ad hoc policy that favors the people who need nothing done in order to be prosperous. (Because they already are) I think you should have to justify reliance on "free enterprise" the same way you ask others to justify regulations restricting it. Deregulation is as much an ideology as socialism.

And by the way, $5.75 an hour is NOT a living wage. For most people, $9.68 is not either.

Corey -

Your most sensible and honest post yet. In fact, I would like to see more discussion of a health care tax similar to what you mention. I do fear, however, that nationalizing or socializing the entire health care system would deteriorate the quality of the system. Of course, for those currently without access to the system, its quality is not really an issue. (Most hospitals cannot refuse treatment of seriously ill and/pr injured people. Also, for all its faults, medicaid is a tax-supported healthcare plan.)

I assume that your proposed policy would tax a percentage of profits. As such, the "successful" local shoe store would pay the same percentage as Wal-Mart. Correct?

I am still unsure about us trying to determine what Wal-Mart can and cannot "afford." Its profits would seem to provide enough money for employee health insurance all around. But, like I wrote before, Wal-Mart's management is focused on the future. If Wal-Mart fails in twenty years, will it remain true that Wal-Mart could "afford" employee health insurance now (see GM)?

Also, if the government can judge what Wal-Mart can and cannot afford, then can it judge what individuals can and cannot afford. For instance, should individuals on welfare be able to purchase cable television?

Living wage really does sem to be a bad idea. It has many faults; have raised just one: the insuing drop in employment caused by increased minimum wage. There is an indisputable difference between $6 an hour and unemployment.

sam, The question was simple and straight forward. Your answer strikes me as the common dodge employed by all free marketers and states righters, "If you don't want to answer a difficult question, baffle them with B.S.". As for "States Rights", those went into the dumpster of history in 1865 along with the peculiar institution of slavery and I won't even mention the Commerce clause and the subsequent legislation and Codes.

As for economic principles and actions, in reality they cannot be separated from ethical values and concerns. Pehaps a Christian ethic may put it in perspective, "From each according to their ability, to each according to their need." There is something about allowing "the better angels of our nature" to prevail. It's not all simply profit and loss or margins maximization for a select few.

Those are lofty and idealistic statements, Hatfield, but the free market position is that socialism hurts workers in the end, especially in the long run and given that the monopoly power of the decisionmaker (government) so consistently acts in a way that is severly biased in its favor and usually indifferent and counterproductive towards those it purports to help. The Christian share and share alike ethic works better, if it does at all, in the context of small communities and not government entitlements or inflexible mandates.

RWS, And was not this Nation founded on idealistic and lofty ideals and self styled the grand experiment? Or are we to return to Hobbe's "Warre"? Sometimes it's difficult to reach the ideal, but try we must. ;)

N.E.-

I assume the "simple and straightforward" question you refer to is, "What would it take for you to accept government policy/intervention into company operations?" To me, if the question is indeed simple and straightforward, the answer is not.

I'm not attempting to dodge anything or baffle anyone with bullshit. I don't think the solutions that you propose (i.e. government intervention and regulation) are always solutions. I don't think they always solve the problem they are supposed to, and often they create bigger problems than were present with the status quo ante.

As for the distinction between economics analysis and ethical statements, I do think that they can be seperated. We can ask the question, "What arrangement is most favorable to the total material wealth of Nation A?" And we can ask, "Is that arrangement just?" To me, those are distinct, seperate questions. However, as seems obvious to me, when we address public policy we must engage both spheres of anaysis (as well as other spheres, such as, for example, questions about the environment).

For example, as regards the owners of Wal-Mart (i.e., its thousands of stockholders), they can act in a way that is most likely to grow the value of their shares, and/or they can act in what they perceive to be the Christian Way, or the Stoic Way, etc.

I think that this analysis misses one other important question about Wal-Mart: should a community welcome its presence?

Many of the debates about the value of Wal-Mart (or not) devolve into this type of interesting, intellectual exercise of what sort of government intervention in business is proper. Becker's and Posner's analysis will typically yield the same answer to whether WalMart should be required to pay a minimum wage, or provide a safe workplace. Probably the same answer to whether WalMart should be forced by government to sell healthy meat and milk.

Those debates have, for the most part, been settled in the real-world: even the Republican majority is not actively seeking the repeal of the minimum wage or OSHA.

However, there are debates every day in local communities about whether Wal-Mart should be allowed to locate in a particular place, or encouraged to do so. The fact that Wal-Mart's practices with regard to its employees may increase the burden on the local public health system because of its use of part time help and its choice to not provide medical care is, even in the Posner/Becker analysis, a factor that should go into the analysis of whether a community works to facilitate Wal-Mart's arrival.

"2. Wal-Mart sells cheap stuff. Cheap stuff means more $$$ in the avg. consumer's pocket."

That is circular logic because in WalMart's case, we all can agree that lower prices are achieved via lowering wages and benefits."

Actually, it is NOT circular. The average consumer does not work at Walmart.

"1. Employees (who are not shareholders) don't own the company."

Yes, and without employees, the company would not exist nor make money. So does ownership or labor have a superior right to profit? Of course we all know by now that Winfield believes in the Divine Right of Capital, so he says ownership."

Your argument would be more palatable without the needless ad hominem, but nonetheless it is illogical. Employees are paid of out operating costs. Profit is what is left-over after costs are subtracted from gross. Employees are not paid out of the profits. As to profits, creditors and preferred stockholders have priority over common stock holders. But, yes, stockholders do own the company.

One of the benefits of being a stockholder is limited liability. It means you can invest and reap the benefits of a corporate enterprise, but you cannot personally be sued. I wholeheartedly support this feature of corporations because it enables average Joes to accrue wealth. If corporations did not exist, and all we had were partnerships, then only extremely rich people would be able to make money from an economic enterprise -- because partners can bind each other with personally liabilit. In other words, any of us can purchase some of Bill Gates' stock, but if he ran Microsoft as a partnership of billionaires, he would never let any of join in and share in the wealth. Contrary to your unreflective ad hominem, I think profits should be distributed to as many persons as possible, and corporations are a good means to do it, so long as they have shareholder democracy and are well-run.

"4. There are more consumers of Wal-Mart who do not work there than there are consumers of Wal-Mart who do work there. Lowerr prices instead of higher wages is thus the fairer and broader distribution of wealth."

No, because lower prices at WalMart also lowers prices at Target and elsewhere, until no US department store can afford to stock US made goods, lowering manufacturing wages and sending many thousands of jobs overseas. Lower wages at WalMart puts wage lowering pressure on other companies (like Costco), which they resist at their peril."

Unwittingly, this only confirms my point. Lower prices mean more purchasing power for consumers on the whole. There are fewer consumers working in retail than there are in the whole American economy, so the benefit always outweighs the cost, especially if you take into account compounding interest from savings. You've just noted that the prices go really, really low. That only makes my argument stronger.

Winfield, I cited harmful effects on other retail, shipping, and manufacturing industries. Add those to the 1,700,000 WalMart employees, as well as the millions of overseas workers, and that's a whole lot of people geting lower wages in exchange for lower prices. The average consumer IS affected.

And for what, lower prices on what? Necessities? Or novelty goods? I haven't bought anything from Walmart in 15 years, yet my life is full and satisfying. Imagine that.

"Employees are not paid out of the profits."

Yes, they are paid out of the Gross Profits, as has been discussed. Depending on how much management decides to pay, it will change the amount of Net Profits left over. Pay less, more money for managing shareholders.

"In other words, any of us can purchase some of Bill Gates' stock"

Actually, many of us can't. I suppose I could forgo cable TV and buy one share in a few months. Then I could cast my one vote on Microsoft governance issues. And if Bill Gates agrees with me when he votes his 100 million shares... well then I might feel like I was a part of the democratic process... woohoo!

Limited liability isn't something created to help average Joe get rich, it was invented to shield dynastic family fortunes from the inept failings of trust fund brats like George W. Three corporations run into the ground and no personal liability. Yeah, really great for average Joe.

Why should people be able to invest and reap benefits without exposing themselves to liability? The worker is exposed to liability... workplace injuries, mass layoffs, periods of unemployment, un-insured health costs. But Capital can mismanage and ruin the company, causing 10,000 people to lose their jobs, then they can just walk off without so much as damaging their credit rating.

Yes, they are paid out of the Gross Profits, as has been discussed.

Main Entry: [2]gross
Function: noun
Date: 1579
1 : obsolete : AMOUNT, SUM
2 : overall total exclusive of deductions

Main Entry: [1]prof·it
Pronunciation: 'prä-f&t
Function: noun
Usage: often attributive
Etymology: Middle English, from Middle French, from Latin profectus advance, profit, from proficere
Date: 14th century
1 : a valuable return : GAIN
2 : the excess of returns over expenditure in a transaction or series of transactions; especially : the excess of the selling price of goods over their cost
3 : net income usually for a given period of time
4 : the ratio of profit for a given year to the amount of capital invested or to the value of sales
5 : the compensation accruing to entrepreneurs for the assumption of risk in business enterprise as distinguished from wages or rent
- prof·it·less /-l&s/ adjective
- prof·it·wise /-"wIz/ adverb

There is no such thing as "gross profits".

Why should people be able to invest and reap benefits without exposing themselves to liability?

This is a key example of your inability to read. I did not say "liability" PER SE. I said "personal liability". If you do not know the difference, look it up in the same dictionary where you found the word "gross profits".

"Limited liability isn't something created to help average Joe get rich"

Actually, it was. Go read a history textbook.

"In other words, any of us can purchase some of Bill Gates' stock"

Actually, many of us can't. I suppose I could forgo cable TV and buy one share in a few months."

This only makes my point. You CAN. And given that many smokers spend $100 per month on cigarettes, that's around 24 shares in Microsoft per year.

That you care more about cable TV than, say, making profit, is irrelevant.

"But Capital can mismanage and ruin the company, causing 10,000 people to lose their jobs,"

This is another example of your inability to read and fallacious conflation of categories. The managers who manage the corporation are sometime shareholders, but not necessarily so. A corporation can be incorporated, functional and making profit with nothing more than a skeleton crew of directors and officers -- meaning no "workers," or employees, because everyone there is a manager or executive. The shareholders are not necessarily, and usually not, managers of the corporation. So if by "Capital", you mean "the people managing the corporation," then you are not talking about most shareholders. Most shareholders are ordinary people -- not rich fat cats.

That some directors are irresponsible is all the more reason for shareholder democracy. Shareholders can oust such a person or sue such a person on the corporation's behalf. But that is not a reason to expose an average shareholder invested in the corporation to personal liability -- what you're suggesting is using corporations as a backwards way to levy a tax on shareholders and consumers, by raising wages above market rates and thus raising prices above the competitive price, which you're quite aware would screw over ordinary middle-class people who invest for retirement and college-savings purposes.

You're a perverse individual.

"that's a whole lot of people geting lower wages in exchange for lower prices. The average consumer IS affected."

No, it is not. The effects you cited are just lower prices. Lower prices means more money in the consumer's pocket. Your argument is "competition hurts workers, because lower prices drive down wages." That is the same argument that corporations have made since Congress enacted the antitrust laws -- "competition hurts corporations, because lower prices drive down profits, and force us to fire workers and slash their wages." That argument is bullshit today and it was bullshit in 1907.

Competition does not ruin the economy. That argument is the monopolist's argument. That you are a hater of "Capital" and yet making the monopolist's argument is indication of how absurd you and how hollow your pretentious edifice of elitist intellectualism is.

"that's a whole lot of people
The average consumer IS affected."

Right on, Winfield. Corey, you're going to shill for monopolists, the least you could do is follow the cato Institute Rule and even if you doctor them:

PROVIDE SOME STATISTICAL EVIDENCE THAT YOUR RADICAL CLAIMS ARE TRUE.

"You're a perverse individual."
"This is another example of your inability to read..."
"That you care more about cable TV than, say, making profit, is irrelevant."

Wow, such vitriol. You must have made a lot of money on the backs of other people.

I feel confident that reasonable readers can evaluate the content of my posts alongside yours and decide which makes more sense or speaks to their own values.

"look it up in the same dictionary where you found the word "gross profits"."

Actually, I found the word in the Annual report of Walmart, from which I quoted the gross profit figure that was given. Funny eh? People who quote the dictionary in arguments never seem to be able to understand why they can't get girls to talk to them.

"That you are a hater of "Capital" and yet making the monopolist's argument is indication of how absurd you and how hollow your pretentious edifice of elitist intellectualism is."

Now Winfield, can't we just be friends? Well... perhaps not. If your ideal of "democracy" is someone giving up smoking to buy 24 shares in order to vote against the 50 million owned by the Waltons, well... we just aren't playing with the same deck.

Didn't work to call me a communist so now y'all are going to call me a monopolist eh? That's funny. I can use that as an anecdote, thanks!

I'm pretty sure I have said as much about WalMart as is Kosher for a blog I don't run. Have a good week all!

"look it up in the same dictionary where you found the word "gross profits"."

Actually, I found the word in the Annual report of Walmart, from which I quoted the gross profit figure that was given. Funny eh? People who quote the dictionary in arguments never seem to be able to understand why they can't get girls to talk to them."

Except you used the term "gross profits" -- which is more acturately called "gross/profit margin" or "gross income" -- to argue that employees should receive a larger share of profits -- not a larger share of revenues. You didn't say "Employees should have higher salaries," you said, "Shareholders don't deserve to be compensated for their risk BECAUSE THEY ARE SHAREHOLDERS, and their profit should go to workers instead." Anyone can plainly see that. I used the standard definitons of gross and profit to exploit your equivocation, not to be a slave to originalism.

"If your ideal of 'democracy' is someone giving up smoking to buy 24 shares in order to vote"

Again, I did not say 'democracy,' meaning "the American system of governance as it is ideally conceptualized," I wrote: "shareholder democracy," meaning a certain conception of shareholder rights within corporate governance. This is yet another example of your inability to read and reliance on equivocations, which are fallacious. Instead of flipping through Wal-Mart Annual reports, try the "Fallacies" section of a text on Introductory Logic.

"Didn't work to call me a communist so now y'all are going to call me a monopolist eh? That's funny."

You are a Communist, quite obviously. My point was that you're an ignorant one. You're such an ignorant Communist that you'd make a monopolist's argument and think it supported your cause. If anyone is interested in reading documents that prove the absurdity of Corey's illogical claims, find ANY Supreme Court case where a company objects to antitrust regulation by the government because it would result in "ruinous competition." You'll find two things:
1. The argument being made is the same one Corey has made here.
2. The corporation making the argument was a monopoly that lost its case.

As for being a Communist, anyone who reflexively opposes "Capital" is a Communist, unless I was born yesterday. And I wasn't born yesterday.

As for not giving up cable, the point was that people make different choices. Some middle-class families care about investing in their future by purchasing stock and bonds and saving for retirement, catastrophic health costs, and college education for their children. Investing in Wal-Mart may be one way to do that. Corey wants to levy a consumption tax on middle-class families: every time they purchase Wal-Mart goods or purchase Wal-Mart stock, he wants them paying a higher price -- and he plans to do that by forcing Wal-Mart managers to distribute supra-competitive wages to its employees OUT OF RETAINED EARNINGS.

In other words, he wants dividends going not to shareholders, but to employees. There is an easy way for that to happen -- the employees can purchase stock. Or, the company can give its employees stock as part of its compensation package. But robbing shareholders is, well, robbery. And quoting Wal-Mart's Annual report is not justification for robbery.

It isn't justification for anything. It barely qualifies as a cogent argument worthy of response -- its patent idiocy is what ticks me off.

"As for being a Communist, anyone who reflexively opposes "Capital" is a Communist"

And anyone who opposes America is a terrorist. Congrats on being able to distinguish between two whole systems of thought.

"and he plans to do that by forcing Wal-Mart managers to distribute supra-competitive wages to its employees OUT OF RETAINED EARNINGS."

Oh, so now they are "retained earnings"? Oh yes, I agree that sounds much less like something workers might be entitled to share in than does "profits".

What if I said you want to force WalMart workers to take a subcompetitive wage so that shareholders of record (a group 1/5th the size) can loot retained earnings for dividends. You Capitalist! If you're not a communist you are a capitalist. The entire world shall be reduced to dualities and excluded from consideration!

Oh, so now they are "retained earnings"? Oh yes, I agree that sounds much less like something workers might be entitled to share in than does "profits".

Retained earnings ARE profits, you idiot.

"If you're not a communist you are a capitalist."

Again, your inability to read. I did not say anyone who opposes "Capital" is a Communist. I said anyone who reflexively opposes "Capital" is a Communist.

REFLEXIVELY

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