This Dilbert strip irresistibly reminded me of Kevin Carson’s series of posts on why Mises’ and Hayek’s arguments against the possibility of rational economic calculation under state-socialist central planning apply also to the size of the firm (see here, here, here, here, and here). The obvious corollary is that firms in a genuine free market are likely to be a good deal smaller than those in the kind of governmentally subsidised and artificially cartelised market context that prevails today.
Kevin may be seen as extending and radicalising Rothbard’s “One Big Cartel” analysis here. The strip’s final panels are also relevant to my post on wage gaps here.
Thanks for the links, Roderick. Sometime, probably next week, I’ll post Part III of the article which deals directly with Rothbard’s One Big Cartel analysis.
“If employers pay an employee less than the value of his or her marginal revenue product, then other companies can profit by offering more competitive wages and so luring the employee away. Hence wage rates that are set either above or below the employee’s marginal revenue product will tend to get whittled away via competition.”
In response to your post on wage gaps, I would argue that they have less to do with any disparity in productivity (perceived or otherwise), and more to do with men’s and women’s general response to competition. I would be inclined to believe that there is a greater tendency for a man to seek out other employers to better his salary, or leverage his current employer. If someone showed my empircal data suggesting that women are more risk-averse, and thus less likely to engage in such behavior, I would believe it and be inclined to consider that as the reason for any wage disparity.
Do you know if there is any data on comparing “job hopping” statistics between men and women?
Just for clarification, Rothbard’s argument is meant to define an upper bound on the size of the firm, not to explain the benefits and costs of incremental changes in firm size short of that upper bound. One can construct a Hayekian “knowledge problem” argument for decentralized management and small firms, but this is not quite the same thing. In Rothbard’s One Big Cartel analysis, as long as the cartel is not so large that all external markets cease to exist, economic calculation is possible. That leaves a wide range of possible firm sizes, and organizational types, that could survive and prosper short of this threshold.
Roderick,
Blog about Battlestar! Only four were revealed! GIVE US YOUR THEORIES!
And also: What’s up with Earth? What time are we dealing with? Is it way before now? After now? Totally different from now? Is it now? I saw the outline of the US …
I keep thinking they’re going to get there and found Atlantis.
Anyway, GIVE US YOUR THEORIES.
I’ve gotten so soft reading this blog. Four years I go I had a high demand for Wiggi posts, now I want BG posts. My brain is melting.
It seems there is great attempt on this blog to portray many sound libertarian arguments as supportive of some questionable (if not idiotic) leftist positions (e.g., the claim that Bastiat was an early supporter of labor union rubbish). Prof. Klein adds a very nice counterweight in this particular case.
Hi Profesor Long….I know this is completly out of topic, but, I remember a post about medecine and forms of providing healthcare using coperative systems…do you have the link? Sorry for the inconvinience.
Why exactly haven’t you blogged about BG yet?
Peter,
Actually, I addressed Rothbard’s specific arguments in a third part of the article that I haven’t posted yet. My original posting was confined to Hayekian analysis.
Re Rothbard’s One Big Cartel, you’re right that the absence of outside markets is simply an upper threshold. The correlation between increasing size and inefficiency involves either Hayekian information problems or the agency dilemma.
But depending on your definition of “intermediate products,” Rothbard’s upper threshold might be pretty low. Above the most basic building blocks of technology, there are probably few generic intermediate components for most high-tech goods that are identical between brands of the same general product type. E.g., few of the components of a Ford, beyond the most basic screws and such, are likely to be interchangeable with a Chevy. So there isn’t much of an outside market for those intermediate products. It follows that internal transfer pricing, for intermediate products that are unique to a particular trademarked product design, will be based on some sort of “cost-plus” simulation–the sort of “fake market” Rothbard regarded as largely worthless.
P.S. Why haven’t you blogged about Battlestar Galactica yet?
Patrick,
I would be inclined to believe that there is a greater tendency for a man to seek out other employers to better his salary, or leverage his current employer.
For all I know it may be true that women are more averse to job-hopping than men are; but sexism is so blatantly rampant in the business world that it’s hard to believe the latter plays no role in the explanation.
Peter,
In Rothbard’s One Big Cartel analysis, as long as the cartel is not so large that all external markets cease to exist, economic calculation is possible.
The rest of Kevin C.’s article is online now; comments?
Dan,
It seems there is great attempt on this blog to portray many sound libertarian arguments as supportive of some questionable (if not idiotic) leftist positions
Yes, you’ve correctly divined the purpose of this blog. Thanks for playing!
Sergio,
I remember a post about medecine and forms of providing healthcare using coperative systems…do you have the link?
Here.
Kevin V. and Kevin C.,
Why exactly haven’t you blogged about BG yet?
I am a cylon.
(But I did post a number of links to Ron Moore interviews here.)