How Markets Work
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How Markets Work

Supply, Demand and the ‘Real World’

Robert E. Prasch

An accessible and enjoyable look at the way the market REALLY works! How Markets Work presents a new and refreshing introduction to elementary economics. The venerable theory of supply and demand is reconstituted upon plausible and defensible assumptions concerning human nature, the law, and the facts of everyday life – in short – the ‘Real World’. The message is that markets differ in ways that matter. Starting with a brief survey of property and contract law, the lectures develop several ‘ideal types’ of markets – such as credit, assets, and labor – while illuminating the similarities and differences among them. Care has been taken to ensure that the reformulations presented are accessible to students and compatible with a variety of non-mainstream traditions in economic thought.
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Chapter: Lecture V: Labor market dynamics when needs are a consideration

Robert E. Prasch


LECTURE V Labor market dynamics when needs are a consideration Labor, that is to say the purchase and sale of a person’s capacity to work for someone else, is another exceptional case that motivates at least two “ideal types” of markets. The reason is that labor markets trade a highly unique item – the time and effort of living, thinking, persons. Persons, unlike inanimate objects, have rights, obligations, and needs. For a moment, let us contrast the exchange of labor with that of a clove of garlic. In the case of a clove of garlic, the transaction can be characterized by the legal condition of being “free and clear” in the sense that after settling with the previous owner I can use the clove of garlic in any manner that I see fit. I might use it to flavor an Italian dish, scare off vampires, or give it to a friend. My use of this clove of garlic is a matter of indifference to the individual or grocery store that sold it to me once its purchase has been negotiated and settled. The reason is that the seller is neither at risk, nor emotionally vulnerable, nor suffers any compromise of their rights, dignity, or any other type of loss no matter how I eventually dispose of this garlic. The above characterizations do not apply to labor. If I agree to work for a wage, I almost always have to deliver the contracted labor in person. For that reason...

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