So it's ok to exploit one's personal situation (family and financial commitments stopping one from moving to a location where the cartel is not in force, for example), but hey, no physical violence please, psychological one will do!

There is a main difference between the two actors: employers own original capital, employees don't. The penalty for employers (losing some profit if all workers quit or get fired) is virtually nonexistent: limited-liability companies are set up with the explicit aim of exonerating capital owners from responsibility beyond the invested capital. You lose the company, you lose a bit of capital; but in most cases, there is more where that came from. Workers don't own original capital (which is why they are workers, after all). The penalty for them is much higher, they could lose their house and/or livelihood.

Refusing to consider the fundamental imbalance of labor relationships is disingenuous at best. It's sad that we're still debating this same stuff in 2014.

>>> The penalty for employers (losing some profit if all workers quit or get fired) is virtually nonexistent:

Because in your world running a business carries no risk as businesses never go bust. I see. Must be nice.

>>> limited-liability companies are set up with the explicit aim of exonerating capital owners from responsibility beyond the invested capital.

And losing invested capital (for small business/startup - likely all one has and also a lot of borrowed money) is nothing. Again, must be nice to be a man for whom losing all investment is nothing.

>>> The penalty for them is much higher

You mean, they have to go to work to another place now? If they possess marketable skills of decent quality, it won't be long before they'd be paid for them. If not, now we know why the business went bust - they shouldn't have hired workers which are incompetent.

>>> Refusing to consider the fundamental imbalance of labor relationships is disingenuous at best.

Here we considered it and found you fundamentally misunderstand both nature of business and nature of employment, suggesting business carries no risk and employment only possible with single employer and if that goes bust the worker can not work anymore. Yes, it does sound a bit sad.

We are talking about Google, Apple, Intel and Adobe -- startups? Small businesses? No, market-clearing companies with billions in profit and rich dividends, quarter after quarter.

If they possess marketable skills of decent quality, it won't be long before they'd be paid for them.

As you put it, must be nice to be a man for whom losing a job is nothing. If you are a major investor in Intel or Adobe, chances are you are not going to lose your house over it; things tend to be different for most workers.

I am not saying business never carries risk; what I'm saying is that the type of risk is qualitatively different from the risk of losing a job for an average salaried worker.

>>> must be nice to be a man for whom losing a job is nothing.

I didn't say it's nothing. I said it's not losing your livelihood on permanent basis. If you have marketable skills, you will find another job, and unlike capital, your skills can not be lost. They can become stale and out of date, but there's an easy remedy for that - keep learning and improving - and that needs to happen even if you do have a job.

>>> If you are a major investor in Intel or Adobe, chances are you are not going to lose your house over it;

Unless you deal in trivialities like "if you're a billionaire, then losing a million does not matter", many people lost a lot on dotcom boost, and many lost their house quite literally betting on housing market. Unless you are a politician or friends with one, investment always carries a risk of loss.

>>> I'm saying is that the type of risk is qualitatively different from the risk of losing a job for an average salaried worker.

Yes, it is, investor risk what can be easily and irreversibly lost and can not be protected (I exclude bailout shenanigans of course, this is plain old robbery that our politicians facilitated) and the salaryman risks only a temporary dip in the cash flow in the most cases, and his skills can not be taken away or lost, indeed they are usually improving constantly (15 years of experience is usually better than 5). The nature of risk is substantially different. That's why most people prefer salary.

> Refusing to consider the fundamental imbalance of labor relationships is disingenuous at best

What makes it disingenuous? Isn't grandparent just disagreeing with some of your assumptions?

Sorry. Would you like a cool compress? ;-)

> So it's ok to exploit one's personal situation (family and financial commitments stopping one from moving to a location where the cartel is not in force, for example), but hey, no physical violence please, psychological one will do!

I don't know how to describe the ludicrousness of describing not cold calling someone as "psychological violence".

In general though, I'm no libertarian, but I'm pretty sure they'd be the first to admit that the libertarian model is without exploitation, immorality, or evil. They'd just argue that the use of force to exert controls would invariably be a greater exploitation/immorality/evil.

> employers own original capital

At least with startups in the valley, they most certainly don't.

To clarify: investors by definition are risking original capital, so they always own original capital... of course with a typical investment model, once they invest that capital, they no longer own said capital and in fact may no longer own any original capital.

Employers are generally the businesses themselves, and so don't necessarily have original capital and statistically at least are disproportionately likely to either be in debt or at least have negative cash flow, particularly with startups.

Employees on the other hand, have almost no capital at risk tied to their involvement in a venture beyond equity/warrants in the company. It is entirely possible (and particularly in the case of the tech industry, and particularly in the case of senior employees like those targeted by these practices) that they'd have original capital, and in fact in I think every case of the named companies they have opportunities to contribute original capital into their employer at better than market rates, as well as having sweat equity translated in to options or straight out equity/grants in their employer. So they are more than encouraged to have either original capital or at least the equivalent thereof.

In short, the power dynamic you are implying as universal to the employer-employee relationship isn't universal and most importantly is a particular ill fit to the context in question.

> employees don't

At last with startups in the valley, that is far from necessarily true.

> The penalty for employers (losing some profit if all workers quit or get fired) is virtually nonexistent: limited-liability companies are set up with the explicit aim of exonerating capital owners from responsibility beyond the invested capital.

Yeah... but that limited liability is very hard to escape and often significantly outweighs the relative penalty for employees of quitting or getting fired. Again, at startups... most employees don't recoil in horror about the economic (psychological is a different matter) consequences of quitting or getting fired.

> Workers don't own original capital (which is why they are workers, after all).

Again, at a startup up, it'd be a huge assumption to think they are working there because they don't own original capital.

> The penalty for them is much higher, they could lose their house and/or livelihood.

Assuming there is demand from other employers, the penalty is almost 0. Particularly as a logical consequence of the hiring practices alluded to in the article, an engineer who is laid off is going to get snatched off the market almost immediately. In fact, they are likely to not even miss a single paycheck and could very well end up with a raise out of the whole thing.

> Refusing to consider the fundamental imbalance of labor relationships is disingenuous at best.

Refusing to consider the full impact of distortions on labor relationships is disingenuous at best. Engaging in a debate about this same stuff in 2014 without considering the market & economic realities that motivate these practices in the first place is beyond sad.

Cold calling is not necessary, a worker has networks of his own. Given a situation where the worker is trying to improve his condition by getting fairer compensation for his work, and is forced to renounce by a localised cartel of employers exploiting his conditions (i.e. that he can't leave the area), I'd say that's psychological violence alright... but I guess we'll never agree on the exact degree of intensity of such force.

>At least with startups in the valley, they most certainly don't [own original capital].

We are talking about Apple, Intel, Google etc; they are not startups anymore. Startups are not the ones who colluded, they already cannot pay market wages in most cases. It's the companies who could and should pay full wages, the ones who tried to scrimp on salaries.

I agree that the fundamental asymmetry in labor relationship is mitigated by factors such as business size and investor's own history, but it's still there (how often do we get stories on HN about startup workers being screwed out of rewards for successful business outcomes), and anyway these factors simply do not apply to Google, Apple et al.

>Assuming there is demand from other employers

That's a big assumption. It might be true for Silicon Valley as of 2014, but in most years and in most areas that's simply not the case.

> Refusing to consider the fundamental imbalance of labor relationships is disingenuous at best. >> Refusing to consider the full impact of distortions on labor relationships is disingenuous at best.

I agree, it's a complex matter, but you cannot take as fundamental principles for economic doctrine some localised, exceptional and very limited situation: you take the common scenario and build principles from it, then you tweak it for outliers. "Engineers in Silicon Valley" is the outlier, not the common scenario, and people trying to use that as the basis for "new" theories are, in most cases, just rehashing old excuses for exploiting the workforce.

You are making these company's arguments for them. Although the notion that these individuals would need to know someone to find gainful employment at a competitor is wrong.

> and is forced to renounce by a localised cartel of employers exploiting his conditions (i.e. that he can't leave the area), I'd say that's psychological violence alright... but I guess we'll never agree on the exact degree of intensity of such force.

Rather, I think we should agree that you have created a straw man that while it may very well be an accurate depiction of some circumstances, does not apply to the story you are commenting on.

> It's the companies who could and should pay full wages, the ones who tried to scrimp on salaries.

Google is known to compensate their employees at the upper end of the market. Once you factor in benefits and equity, all of these companies compensate well above median salary for their low level employees as well as the ones targeted by these policies. What you are saying does not reflect reality.

I think a very good case could be made that these policies may constitute unfair labour practices, but if you think about how much the bottom line of these companies would be impacted if the targeted employees had their wages and compensation even doubled, you might begin to appreciate that you are barking up the wrong tree here.

> That's a big assumption.

That's really not a really big assumption when the entire practice was based on there being demand from other employers.

> "Engineers in Silicon Valley" is the outlier, not the common scenario, and people trying to use that as the basis for "new" theories are, in most cases, just rehashing old excuses for exploiting the workforce.

One could paraphrase that as, "it makes sense to apply a common principle to a specific situation, asserting as postulates foundational characteristics of that common principle even when the specific situation directly contradicts those characteristics."

On that basis I could assert that since you and I are arguing on the web that we are both introverted and socially isolated juvenile white males expressing internalized aggression, regardless of the sounds of my spouse and child asking for help with homework...

Yes, because physical violence is provable, psychological violence is easier to fabricate. If the state cannot satisfy a certain level of probity, then it should stay out for the risk of making the accused a victim of physical violence.

That doesn't make psychological damage is morally acceptable, it just means as a society we should find another means of punishing it that doesn't involve the state.

This is a nice example why free markets are not optimal, zero regulation is not the best amount of regulation.

1. The government froze wages in WW2, and companies got around that by offering free health insurance.

2. Unions often got the government to force workers to join the union, because otherwise workers would undercut the union.

3. There were numerous attempts to fix wages of black laborers artificially low after the Civil War, they would constantly fall apart because individual farmers would pay more under the table to attract better workers. See "The Strange Career of Jim Crow".

4. Government "price supports" are there because of the consistent failure of farmers to voluntarily comply with price fixing agreements.

If you look long enougth you can find some cartels and monopolys that are stable for some time. Even when most of these where not able to really raise prices where far.

If you look at goverment enforcment of cartel and monopolys you will find a unbelivable amount. If you add tarrifs to that (ie blocking import of steel from japan). You will find that regulation far more often helps big buissness.

This is what people dont understand about free marketers. I do not belive that it is impossible for goverment action to imporove short run and maybe even long run conditions, but I belive it is far more like that this power is misused.

So yes you can go out of your way and figure out some asymetiric cost for whatever groupe you like. You can then go on and argue that in order to rebalance this the state needs to do 'something' (perfeclty show in the thread by all the people point out that employes can easly switch jobs and therefore there wage is below equillibrum). Stigliz for the win. This all works out great in theory but runs flat against a wall in practice. When it does run against a wall its of course just because of 'republicans' blocking all sencible policy or whatever.

So this is the reason for free market views, it is not as some people seam to belive that 'the free market is always perfect'.

The question to ask here is why do you think your preferred outcome is better than mine and what gives you right to force it on me.

Kill the regulations helping the capitalists, not just the ones giving a hand to the worker, and then we can talk.

http://www.freetheworld.com/2013/EFW2013-complete.pdf (Page 22)

And in any case, if my position was opposed to yours, that argument wouldn't convince me anyway, since I find "economic size" and particularly "growth" to be little more than fetishes of mainstream ideologues. I'm much more easily convinced by what the economists call "consumer surplus", though I'd rather know the "worker surplus".

Like I said, its just the thing that I start with, just this statistic would not convince me either.

That seems like the sort of evidence that's actually useful when making policy decisions about whether we should increase or decrease regulation. Abolishing all regulations is not practical, so what political theorists think would happen in a complete absence of regulation is irrelevant to any real-world issues.

But in any case, if you think what would happen by abolishing all regulation is irrelevant to the real world, then you should be replying to RivieraKid, who was the one drawing such irrelevant (and, in my opinion, unsupported) conclusions.

I was under the impression that, to be allocatively efficient, market participants have to be 'price takers' (along with a bunch of other assumptions) - anything other than this creates an inefficient market.

I also think it is incorrect to assume (even in theory) that this kind of market failure will always resolve itself by the price makers, i.e. those engaging in collusion, being priced out of the market. The alternative, which seems to me to be more likely (otherwise why would people collude?), is that the price makers capture an inefficiently large proportion of the market's productive output.

In short, market theory absolutely does have a position on collusion - it leads to market failure.

You should update your economic belives. Look at the 2002 Nobel Price by V. Smith for this one.

> In short, market theory absolutely does have a position on collusion - it leads to market failure.

The existence of market failure is no position. Just for the fact that there is market failure does not have any implication on what to do about it.

No (almsot no) free market economys belvies that there is no market failure (however you want to define it). That is simply something that is often assert because it makes for good propaganda (makes it possible to laught at the idiot free market people without really listening to them).

The question is not if the market is perfect, it is clearly not. The question is (a) can we do something about it, do we know enougth (b) given the power to do something about it, will the goverment actually do it, or will it use that power to do the oppiste.

Now I would assert (hince my free market views) that both (a) and (b) have to be answer with 'most likly no'. We often do things because we think we can and it turns out that it also has tons of other effects that we did not wish for (law of unintended consequenses). Next even assuming that understand everything about some action, given the power is it not more likly that something else will be done. A quick glance at history clearly shows this, how often is a given regulation used to help buissnesses instead of people workers.

Why do you think you coke is made out of mais sirup instead of cain sugar.

Can you please elaborate? I don't know enough of the details to understand the link you're making.

> The existence of market failure is no position. Just for the fact that there is market failure does not have any implication on what to do about it.

The first sentence is incorrect, and is not implied by the second sentence, which is correct. The 'position' is that, in order to have an efficient market, one should not do things that cause market failure. It is a negative position rather than a positive one (DON'T do X rather than DO X), but it is still a position. It informs you about what sort of things you shouldn't do if you want a market to operate efficiently.

> That is simply something that is often assert because it makes for good propaganda

Saying that collusion can lead to market failure, and thus must be proscribed if one wishes to have an efficient market, is not propaganda. It is the kind of thing that must be said, seemingly repeatedly, to illustrate the point that markets are not a magical solution to the allocation problem.

The argument you subsequently make, that "we don't know better", is both completely standard and completely wrong. We may well not know better than an efficient market - I'm not sure but it seems very reasonable. However, moving from that to suggest that imposing controls such as anti-collusion regulations (along with a whole host of other measures to avoid market failure), is unnecessary, is unsubstantiated.

If you examine your own argument, it is based by your own admission on an assertion. The foundation for why one might think that what you are saying is true (market theory) explicitly lays out the assumptions required for it to work, and you ignore these on a purely ideological basis.

With position I am talking about politcal position, witch is what it is all about.

> The 'position' is that, in order to have an efficient market, one should not do things that cause market failure.

"one should not" who is "one"? I dont understand what you mean. The goverment should defnetly not do things that cause market failure, and in my opinion the should do things against it either.

> Saying that collusion can lead to market failure, and thus must be proscribed if one wishes to have an efficient market, is not propaganda.

My point was to say that, its propaganda to say that free market people dont belive in market failure, nothing else.

> It is the kind of thing that must be said, seemingly repeatedly, to illustrate the point that markets are not a magical solution to the allocation problem.

Again, nobody is arguing for "perfect markets". This is what seemingly repeatedly has to be said.

> However, moving from that to suggest that imposing controls such as anti-collusion regulations (along with a whole host of other measures to avoid market failure), is unnecessary, is unsubstantiated

No it is not. Also you only addressed the first part of my argument. Its hard to argue the general case here, there is tons of litrature showing how for example anti-trust regulation was used to keep prices high. There are tons of cases where goverment was used to enforce cartels as well.

So if the goverment task of managing cartels would not exists then there might be less cartels overall.

> The foundation for why one might think that what you are saying is true (market theory) explicitly lays out the assumptions required for it to work, and you ignore these on a purely ideological basis.

You might be surprised but there no just the walrasian standard model (or Arrow–Debreu). Also just because the make these assumition and the need to be true in there model does not mean that it is the same for the real world. You are assuming that the standard model used in econ 101 is reality.

Well it is not, and everybody who studied economics a bit knows this. You need to bring in transaction costs, theory of the firm, information economics, you need to bring in instiutional economics, there needs to be a explaition market ajustment and so on. Also you need to model politcal economy, are you really so naive to assume that the correction of market failure is also just like in these models. A completly costless third party that only ever does anything when the model goes out of balance, interduce politcal economy into the mix, try modeling 'goverment failure' as well.

Again, I feel I have to say this again, I do not make the argument that a market always is or always reaches generall equillibrum very fast(as in Arrow-Debreu). The simple idea that you seam to have is that any diffrence between Arrow-Debreu assumtions and the real world must be corrected is not woreable in practice, and I belive no economist would still try this.

I was originally responding to adventured, who said "The free market has absolutely no position on collusion, except that force may not enter into economic transactions." I dispute both this statement as I understand it, with the argument I have already laid out, and also your current claim that the "free market political view" has no position on collusion.

On that, I don't think you can just claim to speak for everyone who considers themselves a proponent of free markets, and furthermore a lot of people who do so are very clear about the need for controls on those markets, mostly (it seems to me) with the aim of bringing them closer to the theoretical ideal.

> "one should not" who is "one"?

One here refers to anyone who is trying to engage in free market transactions, as opposed to someone who wants to distort a free market for their own ends. I apologise for my lack of clarity.

> My point was to say that, its propaganda to say that free market people dont belive in market failure, nothing else.

I understand that, however you are responding to a straw man - I didn't say that free market proponents don't believe in market failure, I said that they, meaning the most ardent supporters, believe that market failures are best resolved by the market - that regulators can't do better. You may wish to dispute this.

> ... Also just because the make these assumition and the need to be true in there model does not mean that it is the same for the real world. ... > ... You need to bring in transaction costs, theory of the firm, information economics, you need to bring in instiutional economics, there needs to be a explaition market ajustment and so on. Also you need to model politcal economy ...

I agree wholeheartedly with what you are saying here - it is indeed very difficult to model the economy, and the assumptions on which the models of principle lie most assuredly do not hold in the real world. I also share your understanding that most economists would not claim otherwise - they have much more pragmatic views of the economy.

Overall, I'm not sure I understand what your point is. Mine was originally that basic market theory gives a reason why collusion is bad, and has now been extended to include the notion that simply waving your hands and saying "I don't think regulation works" isn't an argument, for example:

> So if the goverment task of managing cartels would not exists then there might be less cartels overall.

Is a statement that is possibly true, and possibly false, it is not, however, a basis for decision making.

Also the should be allowed to strik, but the employer should also be allowed to fire people who dont show up to work.

Now you're cherry-picking. There are several other laws that regulates what employees and unions can do, what they can demand and how etc. For example, the union must be open to everyone so the agreement can't be used to give preferential treatment to someone.

In the ideal free-market theory, you do not need the anti-monopoly law. But you have to use it in reality to mantain the free-market from collapse. It is clear what author says. He attacks this childish free-market fundamentalism. He makes a right point. You attack him without the reason and defend the flawed ideology, support spreading the wrong beliefs. How can I believe that you is not a libertarian?