On economics
A reply to the journalist Kelsey Piper, who had argued that automation, the decline of manufacturing, and inadequate wages explained why so many American workers struggle to make ends meet. The response below takes each claim in turn and pushes back — the recurring theme being that what looks like a problem of insufficient money is, in many cases, a supply constraint that money alone can’t solve.
“Lots of unskilled work has been automated.”
This is true, but it’s been true since the 18th century; it shouldn’t cause people to be unemployed unless there are other problems (see eg. Eliezer’s Robots, AI, and Unemployment Anti-FAQ ). What the other problems are gets kind of complicated, but one important one is that semi-skilled workers often create wage floors for themselves, which increases their pay but blocks others from working at that job. Eg. in California, state law mandates that construction site ditch-diggers make roughly $50 per hour plus overtime (“roughly” depending on how you value benefits). There are also often quotas that require contractors to hire (eg.) veterans, disabled veterans, homeless people, high school dropouts, the unemployed, people living in certain areas, poor people, women, blacks, Hispanics, Native Americans, or workers whose bosses are some subset of the above. All those restrictions raise the cost of hiring, which in turn reduces the number of people who can be construction workers.
“Manufacturing as an industry is basically dead.”
FWIW, the death of manufacturing has been highly exaggerated. Of course, it’s less important than it used to be. However, the US is still the world’s #2 exporter, behind China and just ahead of Germany.
“Most jobs that hire unskilled workers do not pay enough to live on.”
A lot of this — not all, but a lot — is just a giant game of musical chairs in disguise. For example, if your city has a million people, and it only has food for half a million, well, then, half a million people are going to starve. If you have a free market, then richer people will bid up the cost of food, so politicians might talk about “income inequality” and the “food gap” and the “high cost of food” and unions and minimum wages and etc. etc. But giving people more money, or even forcibly redistributing food, will not help . It’s simple arithmetic. If there are more people than chairs, someone’s going to go without a chair. It doesn’t matter what economic policies you enact. You can’t make two and two equal five.
Fortunately, we don’t have this situation with food. But, for example, in San Francisco, there is a fixed amount of housing that the city allows to be built. Naturally, this makes housing very expensive. But raising wages, or any other economic policy, will not solve the problem , because no matter what you do there are still way more people than houses. If there are a million people, and only half a million houses, nothing else matters because someone’s going to go without a house (in this case, be forced to leave San Francisco).
Similarly, everyone talks about the “high cost of medicine”. However, in the US, the number of doctors is largely capped by various policies that de facto restrict the number of people who can enter residency programs. Until that’s fixed, it doesn’t matter much what other policies you enact. If there are too many sick people for each doctor, some sick people aren’t going to get treatment. Musical chairs all over again.
And it’s largely the same thing with the “high cost of education”. The elite colleges cap the number of people who can get in, and then fix prices by setting tuition at every college within a few percent of Harvard’s. At one point they, openly, all got together in a smoke-filled room (literally!) and compared students’ financial aid packages, so they could make sure that no one college would ever offer more aid than another. (The government told them to knock it off, but they probably still do it in secret anyway.)