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nawhead

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It is shaping the argument to ignore a certain aspect or to manipulate cause and effect as he does here:

What he is in effect saying is that because immigrants kept coming, and because there was less future opportunity in Europe, there could not have been exploitation of the poor.
This is flawed. It is akin to saying, if improva robbed you of $100 and I robbed you of $80, you made $20 so I helped you. You were relatively better off getting robbed by me, but you were not better off empirically.

At best, he has shown that there was less relative opportunity in Europe than here.


i don't understand why being relatively better off by $20 is not also empirically better as well. a slightly different form of this type of logic that makes sense to me comes from inflation analysis. i could say i'm empirically better if my wage increases from $10 to $10.25 an hour, but if inflation has increased prices by 2.5%, my purchasing power is relatively the same as before.

and let's use a different analogy than the robbing scenario as that's really shaping the argument for emotional effect. so to simply say a change from being paid $80 in the Old World and being paid $100 in the New World is relatively but not empirically better is an unqualified statement. you haven't provided any other factor that negates the empirical change.

but besides that, you're also downplaying the fact that even if relatively speaking from our modern viewpoint working conditions might have sucked, to those people the risk of uprooting their life and going to a strange land and endangering their life was worth the reward of +$20. and if the choice was between $0 in the Old World and starving to death or making $20 and living, then they will surely cry, "exploit me, please!" and the poorer they are in the Old World, the greater amount of risk they should be willing to take in the New World.

history tells us and you also acknowledged that trade unions were first used by skilled professions. there's no argument from me that early industrial conditions sucked. but the crucial question is whether these people's lots were improved from trade unions or through the market system. and since the unions had nothing to offer these low-paid, unskilled workers in the beginning.... this doesn't ... aw jeez... i just spent the last hour reading about the industrial revolution and kids being decapitated by machinery. i lost my train of thought...

anyway, this is not even about free markets anymore since what that article is talking about is essentially slavery. and not some euphemistic "wage slavery" like we refer to today, but actual slavery, so i don't know.

Posted 10 months ago

Steppin Razor

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Section 9
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i don't understand why being relatively better off by $20 is not also empirically better as well. a slightly different form of this type of logic that makes sense to me comes from inflation analysis. i could say i'm empirically better if my wage increases from $10 to $10.25 an hour, but if inflation has increased prices by 2.5%, my purchasing power is relatively the same as before.

and let's use a different analogy than the robbing scenario as that's really shaping the argument for emotional intent. so to simply say a change from being paid $80 in the Old World and being paid $100 in the New World is relatively but not empirically better is an unqualified statement. you haven't provided any other factor that negates the empirical change.


I admit it was an imperfect analogy, but the point is being in relatively better shape is not the same as being in good shape, which is what Friedman was attempting to declare.

but besides that, you're also downplaying the fact that even if relatively speaking from our modern viewpoint working conditions might have sucked, to those people the risk of uprooting their life and going to a strange land and endangering their life was worth the reward of +$20. and if the choice was between $0 in the Old World and starving to death or making $20 and living, then they will surely cry, "exploit me, please!" and the poorer they are in the Old World, the greater amount of risk they should be willing to take in the New World.


Obviously people felt that opportunity here was better than Europe, and as you say, they were willing to take greater risk. Many Irish came here in order to avoid starvation. Great risk they took, and their gamble didn't necessarily work out perfectly, or in their favor. None of that refutes or makes impossible monopolies, or exploitative capitalists. What it means is that these people were willing to put up with the conditions that existed. That's all.
You can see now I hope how the argument put forth by Friedman is flawed. That does not even necessarily mean he's wrong about his supposition, it just means his supporting evidence in fact doesn't support his claim (although if his supposition were right one would think it wouldn't be hard to provide pertinent evidence).

history tells us and you also acknowledged that trade unions were first used by skilled professions. there's no argument from me that early industrial conditions sucked. but the crucial question is whether these people's lots were improved from trade unions or through the market system. and since the unions had nothing to offer these low-paid, unskilled workers in the beginning.... this doesn't ... aw jeez... i just spent the last hour reading about the industrial revolution and kids being decapitated by machinery. i lost my train of thought...

anyway, this is not even about free markets anymore since what that article is talking about is essentially slavery. and not some euphemistic "wage slavery" like we refer to today, but actual slavery, so i don't know.


I think mainly what we can learn from those early industrial working conditions is that man will exploit man to the full extent he is able.

Posted 10 months ago

Mullanimal

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That is the equivalent of saying that feelings is not just chemistry. What is next? Humans have a soul?



Can you add a little more substance to your comments? Seriously what the f are you talking about, I gave solid examples of flaws in minimum wage studies that illustrate some reasons why economics is not physics, and certainly show why pushing math and models for the sake of appearance is not scientific, and you respond with gobbledygook rather than debate the points!

Posted 10 months ago

improva

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Can you add a little more substance to your comments? Seriously what the f are you talking about, I gave solid examples of flaws in minimum wage studies that illustrate some reasons why economics is not physics, and certainly show why pushing math and models for the sake of appearance is not scientific, and you respond with gobbledygook rather than debate the points!



I agree that pushing math for the sake of appearance is unscientific. I don't agree that you have shown that is it not physics. You have read some papers and found - just like everybody expected - flaws in them. If there was a paper with no flaws (or limitations) I'm pretty sure the whole world would know about it. Assuming that ('2) and (2) means the same thing is something I would expect to hear from a high school student.

Posted 10 months ago

Mullanimal

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I agree that pushing math for the sake of appearance is unscientific. I don't agree that you have shown that is it not physics. You have read some papers and found - just like everybody expected - flaws in them. If there was a paper with no flaws (or limitations) I'm pretty sure the whole world would know about it. Assuming that ('2) and (2) means the same thing is something I would expect to hear from a high school student.



I referred to the obvious fact that you cannot treat a complex economy with billions of interrelated variables like a test tube or controlled laboratory experiment. In a controlled lab we can run two experiments side by side, controlling the number of variables, and which variable we want to change to identify a relationship. We can't run a US economy under policy set x, and a US economy under policy set y side by side, this is what makes economics fundamentally different.

To give an example, in the US right now you have an austerity vs stimulus debate still on going. Those for austerity will say, look we implemented massive stimulus and the economy is in terrible shape, stimulus doesn't work. Those pro stimulus will say the stimulus wasn't big enough, and if there was no stimulus the economy would be in worse shape. You can see how this pointless merryground can continue on and on. If you think the answer is we can just model something as complex as a modern economy, run policy set x in one model and y in the other you are simply delusional.

The closest we have had to real life test tubes implementing contrasting policies on a similar group of people starting from a similar point, is South Korea vs North Korea, East vs West Germany, and it is pretty obvious which policies were better. I think it is pretty reasonable for Friedman to use the best examples we have and talk about how people vote with their feet, but even then someone can find outs.

And central planning was shown to be an unworkable system by Mises using logic, long before Samuelson made that calamitous prediction based on his models and data in 1989.

Posted 10 months ago

improva

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I referred to the obvious fact that you cannot treat a complex economy with billions of interrelated variables like a test tube or controlled laboratory experiment. In a controlled lab we can run two experiments side by side, controlling the number of variables, and which variable we want to change to identify a relationship. We can't run a US economy under policy set x, and a US economy under policy set y side by side, this is what makes economics fundamentally different.



Just because the conditions for the development of the model are different does not mean that it is impossible to create a model.

Our understanding of economics is a the same level as our understanding of physics before Einstein and before the development of quantum physics.

One of the bad habits that economists have is to use inductive reasoning in situations where it would be better to use deductive reasoning. That is one of the areas where I think the Austrian school has a point.

I personally think that Game theory + Bayesian inference + Inductive inference can be used to create some very powerful dynamic models.

Posted 10 months ago

nawhead

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I admit it was an imperfect analogy, but the point is being in relatively better shape is not the same as being in good shape, which is what Friedman was attempting to declare.

Obviously people felt that opportunity here was better than Europe, and as you say, they were willing to take greater risk. Many Irish came here in order to avoid starvation. Great risk they took, and their gamble didn't necessarily work out perfectly, or in their favor. None of that refutes or makes impossible monopolies, or exploitative capitalists. What it means is that these people were willing to put up with the conditions that existed. That's all.
You can see now I hope how the argument put forth by Friedman is flawed. That does not even necessarily mean he's wrong about his supposition, it just means his supporting evidence in fact doesn't support his claim (although if his supposition were right one would think it wouldn't be hard to provide pertinent evidence).

I think mainly what we can learn from those early industrial working conditions is that man will exploit man to the full extent he is able.


first, i just want to correct how i phrased my last post. a relative change in X can have zero absolute (empirical) change if there are other variables that change along with X. i was tired last night.

and i agree, if Friedman had claimed working conditions were "good," your point would be valid. but i quote:

What Lynn Williams is now saying is utter nonsense. There's no other __ no two ways about it. The conditions of the worker in this country before there was labor unions were very important __ improved very greatly.

he's only claiming change for the better in the absence of unions. at no point does he ever claim some standard condition. and it would be hard for anybody to make such a standard since it's subject to a person's unique expectations and alternatives.

there has always been exploitation of man by man, and nobody is saying otherwise. however, in the absence of coercion, the worker was better off in a free market to sell his labor than the alternatives present to him at the time. whether you want to call it relative or empirical change, a change for the better is change for the better.

furthermore, his lot continued to generally improve in a free market. i say generally since of course, there are always exceptions in any system. and all this during a time mostly free from government regulation and trade union influence. if conditions stayed miserable and hadn't improved, in the absence of coercion, the assumption is that he would have left such miserable conditions if there were better alternatives. this is a relatively simple and necessarily limited argument being put forth by Friedman, and there is no shaping or ignoring evidence going on.

Posted 10 months ago

nawhead

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Did Merton use it correctly when he blew up Long Term Capital Management?


i'm not so good at math, and improva can correct me here, but Black-Scholes assumes the market is under a normal distribution. so i'm going to disagree with improva and say LTCM did do what it was supposed to do.

under "normal" market conditions, this assumption is fine. but there are times when reality breaks from this assumption (like Russia defaulting on its debt in 1998). therefore, relying on normal distrubtions for these models is unrealistic and they should instead prefer a fat-tailed distribution which takes into account true randomness or just reality. doing so assumes greater infrequent, high-impact events and people wouldn't be so keen to leverage and bet against the "impossible" so much.

Posted 10 months ago

nawhead

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I personally think that Game theory + Bayesian inference + Inductive inference can be used to create some very powerful dynamic models.


Heart (i wish i was smart enough to make cool statements like this)

Posted 10 months ago

improva

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i'm not so good at math, and improva can correct me here, but Black-Scholes assumes the market is under a normal distribution. so i'm going to disagree with improva and say LTCM did do what it was supposed to do.

under "normal" market conditions, this assumption is fine. but there are times when reality breaks from this assumption (like Russia defaulting on its debt in 1998). therefore, relying on normal distrubtions for these models is unrealistic and they should instead prefer a fat-tailed distribution which takes into account true randomness or just reality. doing so assumes greater infrequent, high-impact events and people wouldn't be so keen to leverage and bet against the "impossible" so much.



If that is your analysis how can you then say that they did the right thing? Maybe I misunderstood the original question.

Posted 10 months ago

nawhead

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If that is your analysis how can you then say that they did the right thing? Maybe I misunderstood the original question.


of course i don't think they acted correctly.

i interpreted AGTJ's question as asking whether LTCM made a simple mistake in the math which led to the blowup. but there was nothing wrong with the math, only the assumptions underlying the math.

but i suppose you can say that if the assumptions are wrong, the math is wrong too. ok, i think i see your point now.

i guess i'm arguing something similar to Mullanimal although i don't agree with his conclusion that no model can ever represent reality. we don't need to account for a million variables in these models; we only need to understand that there are unaccounted for variables, low probability events are affected by those variables, and that they become non-trivial as a result.

Posted 10 months ago

Steppin Razor

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and i agree, if Friedman had claimed working conditions were "good," your point would be valid. but i quote:

What Lynn Williams is now saying is utter nonsense. There's no other __ no two ways about it. The conditions of the worker in this country before there was labor unions were very important __ improved very greatly.


What do you think he means when he says, 'conditions were very important'? 'Improved very greatly'? Improved from what? Improved how?

he's only claiming change for the better in the absence of unions. at no point does he ever claim some standard condition. and it would be hard for anybody to make such a standard since it's subject to a person's unique expectations and alternatives.


In order for something to be better, it has to be better than something. What is completely left out.

What do you think his overall point was? To me it reads as though he's saying the conditions such as 12hr workdays, 7 days/wk, including the labor of children were fine because if they weren't people would not have continued immigrating. Labor unions arose out of need. If Friedman had put forth a viable alternative explanation to the creation of unions, I'd evaluate that claim. And I would be interested to read, after the amorphous 'important' and 'improved' statements were made clear, why the improvements occurred prior to unionization.


furthermore, his lot continued to generally improve in a free market. i say generally since of course, there are always exceptions in any system. and all this during a time mostly free from government regulation and trade union influence. if conditions stayed miserable and hadn't improved, in the absence of coercion, the assumption is that he would have left such miserable conditions if there were better alternatives. this is a relatively simple and necessarily limited argument being put forth by Friedman, and there is no shaping or ignoring evidence going on.


It is not so simple. You don't need to coerce someone who cannot grow his own food, provide himself clothing, or shelter over his head. Many immigrants chose not to leave the cities for a subsistence lifestyle westward, and many did choose that. Those who chose to stay needed jobs. Not to mention, the formation of unions is a free market solution for labor. It solves the worker's problem of being in a relatively weak bargaining position.

Posted 10 months ago

nawhead

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What do you think he means when he says, 'conditions were very important'? 'Improved very greatly'? Improved from what? Improved how?

In order for something to be better, it has to be better than something. What is completely left out.

What do you think his overall point was? To me it reads as though he's saying the conditions such as 12hr workdays, 7 days/wk, including the labor of children were fine because if they weren't people would not have continued immigrating. Labor unions arose out of need.

It is not so simple. You don't need to coerce someone who cannot grow his own food, provide himself clothing, or shelter over his head. Many immigrants chose not to leave the cities for a subsistence lifestyle westward, and many did choose that. Those who chose to stay needed jobs. Not to mention, the formation of unions is a free market solution for labor. It solves the worker's problem of being in a relatively weak bargaining position.


i interpret Friedman to mean that initial conditions were bad relative to what we, today, think of as normal, but better than whatever alternative circumstances those people came from, and that these conditions got better as employers were forced to compete with each other for workers in a free market of labor. and again, citing 12 hour, 7 day workdays and trying to get some emotional response like "OMG those tired, exploited people" is a non-issue. although i'm no expert, but don't farmers even today have to work 7 days a week? people of this generation were mainly from a rural background and were used to working long and hard and didn't have our modern expectations.

and i think you're now shaping your arguments. it's not some extreme either-or scenario these people faced of "get exploited in a factory or go west and fight Indians and die on the Oregon trail of starvation and disease." if these people thought these industrial jobs were a super bad deal, in the absence of coercion (i keep saying this because i feel for those orphan kids who were basically slave labor), they could have got on a boat and went home, or went back to what they were doing before.

and i bolded those words which i feel are mistaken assumptions on your part. and this gets into...

If Friedman had put forth a viable alternative explanation to the creation of unions, I'd evaluate that claim. And I would be interested to read, after the amorphous 'important' and 'improved' statements were made clear, why the improvements occurred prior to unionization.


in short, unions are formed to protect highly-paid, skilled jobs from competition, usually through government assistance. imo, it's the labor side version of business monopolies. here comes a copy-paste bombtrack!

from the book, Free To Choose by Milton Friedman (1990)

If Gallup were to conduct a poll asking: "What accounts for the improvement in the lot of the worker?" the most popular answer would very likely be "labor unions," and the next, "government"—though perhaps "no one" or "don't know" or "no opinion" would beat both. Yet the history of the United States and other Western countries over the past two centuries demonstrates that these answers are wrong.

During most of the period, unions were of little importance in the United States. As late as 1900, only 3 percent of all workers were members of unions. Even today fewer than one worker in four is a member of a union. Unions were clearly not a major reason for the improvement in the lot of the worker in the United States.

Similarly, until the New Deal, regulation of and intervention in economic arrangements by government, and especially central government, were minimal. Government played an essential role by providing a framework for a free market. But direct government action was clearly not the reason for the improvement in the lot of the worker.

As to "no one" accounting for the improvement, the very lot of the worker today belies that answer.

One of the most egregious misuses of language is the use of "labor" as if it were synonymous with "labor unions"—as in reports that "labor opposes" such and such a proposed law or that the legislative program of "labor" is such and such. That is a double error. In the first place, more than three out of four workers in the United States are not members of labor unions. Even in Great Britain, where labor unions have long been far stronger than in the United States, most workers are not members of labor unions. In the second place, it is an error to identify the interests of a "labor union" with the interests of its members. There is a connection, and a close connection, for most unions most of the time. However, there are enough cases of union officials acting to benefit themselves at the expense of their members, both in legal ways and by misuse and misappropriation of union funds, to warn against the automatic equating of the interests of "labor unions" with the interests of "labor union members," let alone with the interests of labor as a whole.

[this is where he veers off into ancient labor unions ala medical men in Greece 2500 years ago]

Like most professional codes, business trade agreements, and labor union contracts, the Hippocratic Oath was full of fine ideals for protecting the patient: "I will use my power to help the sick to the best of my ability and judgment. . . . Whenever I go into a house, I will go to help the sick and never with the intention of doing harm or injury. . . ." and so on.

But it also contains a few sleepers. Consider this one: "I will hand on precepts, lectures and all other learning to my sons, to those of my teachers and to those pupils duly apprenticed and sworn, and to none others." Today we would call that the prelude to a closed shop.

Or listen to this one referring to patients suffering from the agonizing disease of kidney or bladder stones: "I will not cut, even for the stone, but I will leave such procedures to the practitioners of that craft," a nice market-sharing agreement between physicians and surgeons.

Hippocrates, we conjecture, must turn in his grave when a new class of medical men takes that oath. He is supposed to have taught everyone who demonstrated the interest and paid his tuition. He would presumably have objected strongly to the kind of restrictive practices that physicians all over the world have adopted from that time to this in order to protect themselves against competition.

The American Medical Association is seldom regarded as a labor union. And it is much more than the ordinary labor union. It renders important services to its members and to the medical profession as a whole. However, it is also a labor union, and in our judgment has been one of the most successful unions in the country. For decades it kept down the number of physicians, kept up the costs of medical care, and prevented competition with "duly apprenticed and sworn" physicians by people from outside
the profession—all, of course, in the name of helping the patient. At this point in this book, it hardly needs repeating that the leaders of medicine have been sincere in their belief that restricting entry into medicine would help the patient. By this time we are familiar with the capacity that all of us have to believe that what is in our interest is in the social interest.

Physicians are among the most highly paid workers in the United States. That status is not exceptional for persons who have benefited from labor unions. Despite the image often conveyed that labor unions protect low-paid workers against exploitation by employers, the reality is very different. The unions that have been most successful invariably cover workers who are in occupations that require skill and would be relatively highly paid with or without unions. These unions simply make high pay still higher.

A successful union reduces the number of jobs available of the kind it controls. As a result, some people who would like to get such jobs at the union wage cannot do so. They are forced to look elsewhere. A greater supply of workers for other jobs drives down the wages paid for those jobs. Universal unionization would not alter the situation. It could mean higher wages for the persons who get jobs, along with more unemployment for others. More likely, it would mean strong unions and weak unions, with members of the strong unions getting higher wages, as they do now, at the expense of members of weak unions.

Posted 10 months ago

Steppin Razor

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i interpret Friedman to mean that initial conditions were bad relative to what we, today, think of as normal, but better than whatever alternative circumstances those people came from, and that these conditions got better as employers were forced to compete with each other for workers in a free market of labor. and again, citing 12 hour, 7 day workdays and trying to get some emotional response like "OMG those tired, exploited people" is a non-issue. although i'm no expert, but don't farmers even today have to work 7 days a week? people of this generation were mainly from a rural background and were used to working long and hard and didn't have our modern expectations.


It seems to me that it doesn't make sense to use relative circumstance as a gauge for exploitation. It is not a question of emotional response to consider conditions such as extremely long workdays and hours and the use of children as poor conditions. One could argue they were being less exploited or in less poor conditions than elsewhere, but I think it does not affect the level of exploitation.


and i think it's you who's shaping your arguments. it's not some extreme either-or scenario these people faced of "get exploited in a factory or go west and fight Indians and die on the Oregon trail of starvation and disease." if these people thought these industrial jobs were a super bad deal, in the absence of coercion (i keep saying this because i feel for those orphan kids who were basically slave labor), they could have got on a boat and went home, or went back to what they were doing before.



It is an oversimplification on both Friedman's an your part that the mere presence of workers means the workers were happy and satisfied with their treatment. This is like saying today, if you drive a car, then you are happy with rising gas prices.

As for the bolded in my post, it is my opinion that unions arose out of need (as that is the usual reason for things arising), but it is not an assumption that unions provide greater bargaining for the worker, nor that the union was a solution by labor to protect itself.






from the book, Free To Choose by Milton Friedman (1990)

If Gallup were to conduct a poll asking: "What accounts for the improvement in the lot of the worker?" the most popular answer would very likely be "labor unions," and the next, "government"—though perhaps "no one" or "don't know" or "no opinion" would beat both. Yet the history of the United States and other Western countries over the past two centuries demonstrates that these answers are wrong.

During most of the period, unions were of little importance in the United States. As late as 1900, only 3 percent of all workers were members of unions. Even today fewer than one worker in four is a member of a union. Unions were clearly not a major reason for the improvement in the lot of the worker in the United States.

Similarly, until the New Deal, regulation of and intervention in economic arrangements by government, and especially central government, were minimal. Government played an essential role by providing a framework for a free market. But direct government action was clearly not the reason for the improvement in the lot of the worker.


As to "no one" accounting for the improvement, the very lot of the worker today belies that answer.

One of the most egregious misuses of language is the use of "labor" as if it were synonymous with "labor unions"—as in reports that "labor opposes" such and such a proposed law or that the legislative program of "labor" is such and such. That is a double error. In the first place, more than three out of four workers in the United States are not members of labor unions. Even in Great Britain, where labor unions have long been far stronger than in the United States, most workers are not members of labor unions.


In the second place, it is an error to identify the interests of a "labor union" with the interests of its members. There is a connection, and a close connection, for most unions most of the time. However, there are enough cases of union officials acting to benefit themselves at the expense of their members, both in legal ways and by misuse and misappropriation of union funds, to warn against the automatic equating of the interests of "labor unions" with the interests of "labor union members," let alone with the interests of labor as a whole.


And here we have more manipulation. One does not need to belong to a union to reap the benefits of a union existing. It is nonsense to use percentage of workers in unions as a measure of their impact. I myself worked for a retail company when I lived in VA that was based in NY, that had a union. VA law allowed me to choose whether I wanted to join the union. I chose not to, but still received the same benefits the union had negotiated for the members in NY because the company found it expeditious. A union's impact is often greater than its actual membership.

Also, if government provides the framework, which is another way of saying they set the rules of the game with laws, then how are they not the cause of improvement? Why must they be direct causers?

I separated the last part out because I agree that the union does not always (or in fact today, usually) represent the members' interests.



Despite the image often conveyed that labor unions protect low-paid workers against exploitation by employers, the reality is very different. The unions that have been most successful invariably cover workers who are in occupations that require skill and would be relatively highly paid with or without unions. These unions simply make high pay still higher.


Again, no duh that the most successful unions are comprised of the highest skill workers (although how success is being measured is vague). They aren't the only unions, why don't the other ones count?

Posted 10 months ago

nawhead

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either we're both right and history is entirely subjective and nobody actually knows what causes events in history or else one of us is wrong and is unwilling to look past his own biases. in either case, it's good to bet on human fallibility.

tho Friedman was fond of saying that "sincerity is a much overrated virtue," i think we're both sincere in our desires of wanting a better society. and although we may differ on the best methods to achieve that and on what that society should ultimately look like, i still marvel at how far so many people have progressed in such a short time because of that common desire.

it's my belief that there is no empirical way to determine whether one society is better than another. as people have a tendency to become acclimated to their environment, human experience is too subjective to make such clean judgments.

in any case Steppin, it's been stimulating if not a bit exasperating, as always.

Posted 9 months ago




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