Friday, October 7, 2011

Arnold Kling on Euvoluntary Exchange

My friend Arnold describes the problem.

Employment at one cent a year is not euvoluntary, because it takes advantage of the fact that someone has no good alternative. (Yes, I know that people could get more than one cent's worth out of a year's home gardening and cooking, but that only changes the numbers, not the basic principle.)

We do not want to see people forced to take jobs at low wages for lack of an alternative. Hence, the minimum wage. Hence, unemployment benefits. The economist has a good argument for why the minimum wage is counterproductive. The economist might come up with a better design for unemployment benefits, in order to maintain the household's living standards without taking away as much of the incentive to work. But many non-economists (and, indeed, many economists) would rather see people not work than see them work at very low wages.

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Do you have suggestions on where we could find more examples of this phenomenon?