Happy Valentine's Day!

This story reminded me of how people are saying that TV is now where the best programming is (as opposed to movies) because of shows like Mad Men, The Wire, Breaking Bad, etc.

Jack Lew is going to be a terrible Treasury Secretary (his terrible signature isn't even the worst part).

Here is a final word (though probably not actually a final word) on Christopher Dorner.

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And the responses:

1. The basic premise is that, when there is monopsony, the firm can extract the surplus (i.e. the value added to the economy from economically productive activity) from the market for itself.  Think in terms of a monopoly supplier.  If you're the only game in town, you can charge more than the price you'd charge if you had competitors and people will still buy your products - to a point - because they don't have an alternative.  Prospective employees in monopsony conditions don't have other places to turn for employment, so they have to take wages that don't reflect as much of the added value each new employee generates (i.e. the monopsonistic employer can take all the surplus for himself).  Also, because the employer is paying less than he would in a perfectly competitive market (since there are no competitors to offer better wages), fewer people demand jobs (and thus fewer people than the efficient amount are employed).  Wherever this point is for a monopolist or monopsonist, it is more profitable for him to supply less (at a greater price) or demand fewer workers (at lower wages) than a perfectly competitive market would suggest.

So when you impose a minimum wage on this market, employment increases because the employer can still hire extra workers to generate value greater than cost (he just cannot internalize as much of it).  Of course, what the chart does not say is that, if you keep increasing minimum wage, eventually your marginal cost will be greater than the anticipated value generated by each new employee, and as a result the monopsonist will eventually start firing people.  (If you press the button on the monopsony chart, employment would follow the red horizontal line to the intersection with the green line, but if the red horizontal line (the minimum wage) kept going up, then the intersection with the green line would increasingly reflect lower employment.)  That said, the big take-home lesson, as he notes, is that, thinking solely about economics (and not the freedom of contract issues I had), we have to determine whether a job market looks more like a perfectly competitive market or a monopsony.  And this is where social science breaks down.

2. Good for him.

3. Me too!  Especially the last part... :P

4. I did see the story.  If you want to talk about paternalism, that story (and stories with respect to Indian mascots too) are rife with it.

B