Why was there no unemployment in
caveman societies?
When cavemen had enough meat in
their stomachs and enough bear skin coats to keep warm, they probably sat
around doing nothing. The latter did not constitute unemployment because they
were not looking for work.
In contrast, when they were hungry
or needed a bear from which to make a bear skin coat, they went hunting. They
didn’t bother waiting for a “hunting job” to appear in situations vacant columns:
they just upped sticks, and went hunting.
As to the wage, that might have
been several kilos of meat and a bear skin per hour’s work if they were lucky.
Or it could be no meat and no bear skin at all, even after a day’s hunting. But
at least they weren’t unemployed.
So . . . $64k question . . . why
didn’t they experience unemployment? Well the reason was they were TOTALLY
FLEXILBLE when it came to the wage they’d accept: even accepting a zero wage.
Now we could do the same, or
similar. That is, if labour was allocated not by the market, but by the
bureaucracy (i.e. the state), and employers paid nothing for such labour, there’d
be almost no limit to the number of employees an employer would be prepared to
take on. Well, “no limit” is perhaps an exaggeration, but certainly if
something is free, you use it like water: i.e. the demand for labour would rise
by more than enough to virtually wipe out unemployment.
The latter labour market would be
highly inefficient, though it would have an important merit, of which more
below. The inefficiency would arise from the fact that for the bureaucracy to
judge who to allocate labour to, employers would have to apply for the types of
labour they wanted, explain why they needed it. The bureaucracy would then have
to decide which firms most merited particular types of labour and in what
quantities.
The system would have similarities
to Soviet style centrally planned economies: it would be inefficient. That is,
much the best way to allocate any resource, particularly a valuable resource,
is simply to let employers bid for it with the highest bidders getting the
resource. That results in best use being made of the resoure.
However, 21st century
unemployed labour is clearly not a “valuable resource” in the eyes of
employers. To be more exact, while it is easy to use the above mentioned “bidding”
process to get about 90% of the workforce employed, problems arise if the
bidding process (i.e. raising aggregate
demand) is used to get the final 5 or 10% employed: inflation tends to rear its
ugly head. That is, given such additional demand, employers rather than take on
the unemployed, tend to bid up the price of “already employed” labour (or give
in more easily to wage demands.)
In short, unemployed labour is
over-priced. Or put it another way, there wouldn’t be a problem if the
unemployed behaved like cavemen and were prepared to work for nothing.
Now clearly we can’t ask the
unemployed to work for nothing, but there is nothing to stop them being
allocated to employers for free, with the state paying the “wage” or if you
like, having the state make sure the unemployed don’t starve.
So . . . about 90% of the workforce is allocated using
demand, with most of the remainder being allocated via the bureaucracy. That
just leaves one problem: how do we stop employers taking on free labour which
is in fact reasonably productive? And that point is of particular relevance
since the potential output obtainable from any given individual varies
dramatically from month to month. Reason is that one month there might be no
vacancies in a given individual’s local labour market for which they are
particuarly suited, while a month later, a vacancy might appear for which they
are IDEALLY suited.
Well the solution to the latter
problem is not too difficult: just put a strict time limit on how long a
subsidised individual can stay with a given employer. At the end of the time
limit, and assuming the relevant employee is well suited to their vacancy, then
the employer will retain the employee and fund the employee’s wage. If not, the
employer will “let the employee go” as the saying goes. And the bureaucracy can
allocate the individual to another subsidised job.
Out of the mouths of babes and
sucklings . . and cavemen (to misquote Psalms 8:2)
____________
P.S. (3rd Feb 2013).
Coincidentally a post appeared on the Worthwhile Canadian Initiative blog three
days after the above one and on the subject of baboon economies. Plus the
author, Frances Woolley says he might do
a post on elephant economies. I look forward. We have much to learn from
cavemen, baboons and elephants.
No comments:
Post a Comment
Post a comment.