Supply, Demand and the ‘Real World’
Chapter: Lecture V: Labor market dynamics when needs are a consideration
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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