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Pastimes : Austrian Economics, a lens on everyday reality -- Ignore unavailable to you. Want to Upgrade?

To: Don Lloyd who wrote (233)	5/12/2003 7:50:47 PM
From: gpowell	Read Replies (2) \| Respond to of 445

I understand your point and I don’t necessarily disagree with it. I’m just not sure what new insight it offers; regardless of the extent it reflects reality. An individual’s productivity is highly variable. One of the benefits of the specialization and aggregation of labor is it lowers the risk of endogenous and exogenous productivity shocks at the scale of the individual laborer. And while it benefits the laborer, it’s been demonstrated that this arrangement has benefits to the firm as well. Therefore, at the scale of one job and one laborer, one could expect a weak correlation between wages and measures of productivity. But the premium is determined completely from bidding process between potential employers for the highest ranked candidate, and leaves the candidate only to take the highest offer. Yet – no one is forced to take an offer. The premium could just as easily come from the demands of the employee candidate. If no one wants to accept a bid then an employer has a couple of options – pay the higher wage and incrementally raise prices, eliminate the job function through other means, or relocate the job function. Which it chooses to do is depend on the firm’s micro and macro state.