Tuesday, October 1, 2019

NY Times should read Chapter 9

Former student John Tamny wrote a nice essay critiquing a NY Times critique of capitalism:
...Wu’s assertions about U.S. corporations wholly focused on profit without regard to “employees, suppliers, customers, and the communities to which they belong” would have meaning if he could produce evidence that the best get that way while running roughshod over the aforementioned. 

John is implicitly referring to the compensating differentials of Chapter 9 (which he has read). Remember that a mobile asset has to be indifferent about where it is used.  Workers will move to the better company, and the migration will continue until wages adjust so that employees are just indifferent between the two.  In this new equilibrium, workers will be compensated with higher wages for working at the bad company.

Labor markets punish companies that mistreat workers by making them pay for their mistreatment.

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