The Solution To Exploitation Is Not Oppression

Imagine for a moment that you're a recent immigrant from, say, Laos. You speak little English, if any at all. Finding a newspaper in your native tongue, you see an advertisement for a job painting nails. Alas, it turns out that there are apprenticeship requirements, and that for the first few months of the job, you actually pay your employer for the privilege of working there.

Naturally, the New York State Department of Labor gets wind of this and magnanimously offers to raid your employer and others like it on your behalf. How thoughtful of them. The salon owners are presented with an easy-to-understand offer: pay your workers more, or face prison.

You are now out of a job.

Moreover, you remain nearly unemployable. Perhaps you can turn tricks to keep food on the table and a roof over your head, or maybe you can start slinging rock. It's pretty unlikely that this sort of ham-handed intervention will accelerate your march toward independence and property ownership though.

Being an immigrant already sucks. Compounding the difficulty with well-intentioned, paternalistic oppression adds injury to insult.

ATSRTWT

h/t ClarkHat

The Moral Intuition of Supererogatory Production

Billion-dollar-a-year company A runs hellish factories in some of the most poverty-stricken places on earth. Their money-grubbing executives ruthlessly shave labor costs to just barely above workers' BATNA of subsistence farming.

Billion-dollar-a-year company B is fully domestic. They pay above-market wages, have generous 401(k) matches, and pick up most of the premium on their low-deductible health plans. They contribute to the local children's hospital and the employees can often be found building playgrounds in their off-time.

Billion-dollar-a-year company C is international, but unlike company A, they have sanitary, safe, modern factories in developing countries thanks to generous grants from large charitable foundations. They have worker training programs and offer full academic scholarships to the children of employees.

Neither A nor B nor C violate any local laws or labor practices. In the popular press, A is routinely excoriated for sweatshop abuses, while B is held as an example of ethics in business. Think WalMart vs Costco if you like. C, however, is supererogatory. They could be more like A, they might even be profit-maximizing by being more like A, but they choose not to. Perhaps it's out of a sense of duty, perhaps it's to signal to social-minded customers at home, but whatever the reason, they exceed their fiduciary responsibilities (maybe: it's an empirical question whether or not stock price suffers for the decision).

Economists are quick to point out that company A does more to directly improve the lot of workers with dismal alternatives (company B adds to worldwide productivity, which reduces the relative prices of all goods, but it's a fly eructation in a hurricane in a general equilibrium plagued with real-world frictions). In this sense, the hidden assumption is that the natural alternative to A is B. Anti-sweatshop protesters and workers' rights organizations assume that the alternative to A is C. At least I hope that's what they assume. Which assumption better matches reality?

Well, that's an empirical question. Intuitively, the sort of rattletrap operation in A should rely on shallower capital requirements: build a shabby factory, have it crank out t-shirts just long enough to cover costs and don't worry too much about what happens next. This, intuitively anyway, should be more likely in places with particularly nasty political, social, or industrial risk. Domestic production in B is a business decision like any other. Maybe overseas factories are impractical for whatever reason, maybe not. Keeping production at home is still erogatory. There is no common law duty for firms to hire desperate foreign workers or to indulge in the fantasies of international development. The experts can't even get that stuff right. To get C, again—intuitively, you need some combination of low labor costs and stability. For folks in those types of countries, it's a pretty sweet gig, so long as you can get it. Of course, it's a pretty sweet gig even if you can't get it. Higher productivity means lower relative prices, and even if it's just a matter of public infrastructure improvements, everyone benefits from having a more productive economy.

I return to G.K. Chesterton's admonition about knocking over fences. Before you demand changes to company A's policy of running a fly-by-night operation in a developing nation, it might be wise to carefully consider their business logic and what might happen afterwards. It may very well be related to risks beyond the control of the firm. If the alternative to A is B rather than C, clamoring to shut down sweatshops could further damage the plight of the poor in the target economy. Maybe it's better to suffer A types long enough for C types to become feasible.

Then again, it's not always clear how effective name-and-shame campaigns are over the long run anyway, particularly for firms without much of a public face. Most business volume is B2B. How many raw semiconductor manufacturing concerns can you name off the top of your head? If you can't clearly pin an end product to a naughty firm, how can you effectively boycott?

Reblog: Neko Cafes to Hit the City by the Bay

EE of days past: Mungo on Japan's Neko Cafes.

An idea so great that San Francisco is opening one soon. KitTea will serve both as a relaxing place for San Franciscans to chill out with some kitties and to provide a home for wayward felines.

So, what do you think? Will California's notoriously draconian food safety regulators skin this cat? How about Animal Control? PETA? Seems like an uphill battle, even if the result of the venture is to match cat-friendly tea drinkers with purring balls of fur and at the same time providing a nice, safe, warm home (and veterinary care, assuredly) for otherwise homeless cats.

We'll see, but I wish them all the best in the meantime.

What's a Commodity Worker to Do?

A recent post from Raspberry Pi excitedly announces that they will be moving manufacturing from China to Britain (using a plant owned by a Japanese company, no less).

“The initial contract will see the Pencoed plant producing 30,000 Raspberry Pis a month, and creating around 30 new jobs.”

First, I want to recognize that if you have a preference for manufacturing a good in one place over another, that’s fine. You’ll end up paying for it if it isn’t cost-effective, and something like this usually isn’t morally repugnant. I wish to argue that it becomes repugnant when place is combined with a tribal identity that priveleges some at the expense of others.

Even a naive understanding of economics would lead one to note that RP claiming to create 30 new jobs is benefit seemingly without cost. The question we might want to ask is how many Chinese jobs were lost, and how many Chinese citizens equal on British citizen. But, this isn’t a strong challenge and one I don’t think should rightly matter.

Now, creative destruction happens all the time, and arbitrary political borders shouldn’t matter all that much. When The Best Taco Stand in the World ™ moves operations to a neighboring city, leaving behind old employees and hiring new ones, we recognize the negative impact on former employees' lives and the positive impact on the new. But, as a free market activity goes, we can usually find little wrong with it from the POV of efficiency.

As a private (set of) actor(s), I find no reasons to object to RP’s decision. What I object to is the sort of attitude that privileges a set of people born in one arbitrary geographical area over another set of people from a different area.

How should a euvoluntarist looks at the issue of disemployment? I’ve chosen this word for a reason, because it is an action distinct from unemployment, a state of being. One can imagine that if the situation were reversed, with RP moving from Britain to China due to cost considerations, British citizens might tut-tut this as another example of greedy corporations outsourcing to help their bottom line at the expense of their countrymen.

But, disemployment for a British citizen isn’t so bad. We can think of disemployment as moving a worker to their pre-employment BATNA, or the alternative they were considering before consummating the labor contract with the now-estranged employer. Even if that opportunity is no longer available, there are social insurance programs which make the transition relatively less painful. China is improving and getting better all the time, but disemployment is probably worse for the Chinese worker than for the British. Disemployment condemns the worker to their BATNA, or worse.

I think unilateral disemployment is voluntary in the traditional sense, though I think a discussion of this point would be highly entertaining and enlightening. So, disemployment is just, but in certain circumstances, morally repugnant. In the case where prevailing societal attitudes toward the nation-state are the proximate cause for disemployment, and where the counterfactual world without this reverance would not have lead to disemployment, the disemployment is condemnable to a degree modulated by the disutility caused.

In this case, peculiar affectations toward an abstract collective entity bring about injuries reminiscent of naive paternalism.

Henderson on Zwolinski Asks Our Favorite Question.

Matt Zwolinski made a great little Learn Liberty video on sweatshops. David Henderson comments at Econlog. Key question:

I basically like the video, although I have one question and one disagreement. My question is about something he said at the 2:00 point. He says:

So long as sweatshop labor is voluntary, even in the weak sense of being free from physical coercion...

That suggests that there is a stronger sense of "voluntary." I don't know what that sense is. Does anyone reading this post know what that strong sense is? Matt?

That sense is euvoluntary, Professor Henderson. Sweatshop labor is not euvoluntary because of a disparity in BATNA. The alternatives to light manufacturing labor in small economies are truly dismal: subsistence farming (particularly when scrabbling to deal with food aid from abroad), begging, or prostitution just to name a few. There needs be no threat of violence by these employers, just the implicit threat to let them carry on with their otherwise unpleasant circumstances.

As a reminder, here are the conditions needed for an exchange to be euvoluntary:

Conditions for Exchange to be "Euvoluntary"
(1) conventional ownership
(2) conventional capacity to buy/sell
(3) absence of regret
(4) no uncompensated externalities
(5) neither party coerced by human agency
(6) neither party coerced by circumstance; the disparity in BATNAs is not "too large"

I hope this helps to answer your question.

Neko Cafes

Okay, none of the obvious tasteless jokes.  These "cat cafes" are about REAL cats, folks.

 For regulars, the cafes offer a place to unwind and play with cats, while they sip coffee. Many urban apartments do not permit pets, meaning that pet lovers are left without furry friends to call their own. The neko cafes fill that void.


What?  The cats sip coffee?  That can't be right.  Call PETA!

The Dub-MOE on Sweatshops

Art Carden on sweatshops, at Forbes.

Would poor people be better off if we closed the sweatshops, and did nothing else?

Bio-Mechanic

Last week, one of our readers (or perhaps simply someone who ran into one of our posts on sweatshops) contacted me with a link to a rather chilling infographic. In it, we find rather awful tales of environmental damage, poor working conditions and industrial carnage. This in service of the consumer electronics market (though I must wonder to what extent the switchgear and server hardware production process differs, if at all), suggesting that it is the wealthy West's unslaked thirst for electronic geegaws that is responsible for these terrible, unseen consequences. Indeed, this non-euvoluntary market is rife with uncompensated externalities (chiefly, it seems, in the form of environmental damage and poor working conditions).

In the past few days, I've been slowly mulling over the externalities argument. The GTM claims that condition #4 is "no uncompensated externalities". I have no cause to gainsay this, but I would say that there's an interesting lacuna in the development of shifting to a manufacturing-based economy where many externalities are not merely uncompensated, but uncompensatable. Liquidity and credit constraints, restrictions on Foreign Direct Investment and even political barriers prevent firms from internalizing all the costs of production.

All is not lost however. One stylized fact from economies that have successfully transitioned to a more modern economy (Madagascar, Taiwan, heck, even the US in the 19th Century) is that as wealth grows, these restrictions ease. Workers want healthy, safe workplaces, well-educated kids (who may or may not prefer cheese) and clean natural environs. They get wealthy by producing stuff other people want, then trading with them. All that awful, non-euvoluntary production, left unhampered by (usually well-intentioned) meddling will transform, as a matter of empirical regularity, into something more closely approximating the euvoluntary markets we all love.

I might be willing to lend a conditional exception for extractive industries as described by Acemoglu, Johnson and Robinson, but that's a topic for another day.

The Two Theorems of Euvoluntary Exchange

I have said this several places, but I think it meet to summarize. There are two essential claims behind the idea of spelling out when exchanges are "euvoluntary."

1. The state is never justified in interfering with euvoluntary exchanges.

2. Even if exchanges are not euvoluntary based on condition 6 (disparity in BATNAs), interfering with exchange often makes the worst off, EVEN WORSE OFF. This point is made many places, but you will find it made well, and often, over at "Blunt Object." BATNA: Speak it, understand it.

Nic Kristoff on Sweatshops: Exploit Me! Exploit Me!

Nicholas Kristof on sweatshops....from 2009 NYT.

Excerpt:

Mr. Obama and the Democrats who favor labor standards in trade agreements mean well, for they intend to fight back at oppressive sweatshops abroad. But while it shocks Americans to hear it, the central challenge in the poorest countries is not that sweatshops exploit too many people, but that they don’t exploit enough.