One thing I have come to expect, as an advocate of an absolutely free market, is that people will make completely absurd assumptions about what will and will not happen when the market is allowed to operate without government intervention. From robber barons who will create new serfs out of labor, to third world nations owned by "megacorporations", to cut-throat battles between middle managers and 25% unemployed, to all jobs going overseas to other lands, I think I have heard almost every absurdity possible.

But, to be fair, I must confess that I am guilty of the same. Oh, not to the same degree as those I described, but I too have forgotten some basic truths about capitalism and the free market, and it has, from time to time, led me to make unwarranted assumptions about the free market.

What brought this to my attention was my receipt of a certificate form my employer for having been employed there for a number of years. This led me to ponder the changes that have taken place in America, how even as recently as the seventies, and in some industries the eighties, even outside of unions, individuals expected to stay with the same firm for a lifetime, or, if not at one firm, to maybe work for three or four in their lives, if that many. Even in competitive fields, say if were a chef, where it was expected you would study under several professionals before settling down, the number of jobs was still many times smaller than the same field today. It just seems, excepting certain fields, and perhaps a few job markets, the tendency to jump form job to job has become the norm.

And thinking about that was when I made my mistake. You see, after having the same thought I just wrote out above, I sighed a little and though, much as I love the free market, it would probably end up with even more job hopping, and even more rapid turnover, while I really think we might be better off with slightly less rapid change.

But I was wrong, on both counts, or on three counts, though two are related.

First, there is no optimal pace of job change. In a given market, it is best if those in a job paying too much or too little change (the first from the perspective of the employer, the second from the point of view of the employee), for those earning the right amount, they can stay or change jobs as they wish, without suffering economic loss. Of course, the employer would prefer they stay, as there is lost time filling a position, and a new employee is always an unknown, less valuable than an established employee. On the other hand, for the employee, he too will have to establish himself with a new employer, will lose any reputation he had, and any work he had done toward promotion, and will also have the uncertainty of a new job, new circumstances, and so on, so he likely won't leave unless he gains something, or his present job is unsatisfactory in some way other than pay.

In other words, I was wrong to imagine that "we might be better off" with some other pace of change. The rate of change is neither good nor bad. My personal preference for more loyalty between employee and employer makes some circumstances more pleasing to me, but that has little to do with the reality of the market.

And the same problem exists with my second mistake. Not only is there no ideal pace of change, but the economic factors matter much less than social and personal factors. Well, to be accurate, the free market, that is the removal of all government intervention, would have a huge impac ton unionized jobs, and other areas where labor regulation forced unjustified retention, as well as those few unusual areas where the combination of laws, regulations and legal pressures caused employers to retain or let go employees more often than they wished*.

But beyond those cases, the fact is that employment changes are largely non-economic. "Wait!" You might say, "I thought you always talk about wages and employment? About snatching away underpaid employees to make an extra 5 cents? So, why would changing jobs be non-economic?" But that question gives the answer. In a free market competition for labor would be intense, and, as a result, employers would not try to get away with underpaying. Which means employees would be much more likely to be paid close to their real worth. And since almost all employees would be earning close tot heir worth, that would mean job changes would be almost entirely based on non-economic factors, location, particular staff, training, environment and so on.

Which brings me directly to my third error. Thinking that the free market would make any of this change.As I said above, there would be a few small areas, but the choice to change jobs would, for the most part, be base don personal factors and cultural factors. And, despite changing to the free market, our culture is not going to change, at least not soon. And the factors which today encourage changing jobs rapidly (a lack of loyalty between employees and employers, a dislike of feeling too tied to -- or "dependent" on -- an employer, and a number of other influence) will be there with or without the free market.

Which brings me to my bigger point. Whether we have a free market or not, business is still part of our social environment. Exchanges represent voluntary interactions between people. Under the free market even more so, as there is no government pressure forcing interactions the parties don't want. And since all these interactions are just people's voluntary choice, the individuals, much more than the free market itself, influence what will go on.

Now, that is not to say changing from an interventionist to a free market system will not have profound impact. It will. But for those who want to see it having earth changing impacts, and for those whose fear of business makes them dread the free market, the point is that "business" is still just your friends and neighbors. While the populists and protectionists and rabble rousers talk about fat cats and plutocrats and "Wall Street", those are names for your neighbors and your brother in law and the guy who sat behind you in high school. Business, for better or worse, is just ordinary people.

So, unless you think somehow ordinary people are prone to doing horrendous things, why would it happen under a free market? Allowing ordinary people to finally make decisions for themselves should be something we welcome. Why do so many of us predict that it will have, not just dangerous, but absurdly melodramatic, consequences**?

--------------------------------------------------------------------------------

* For example, seasonal jobs which could probably pay off season employees some trivial amount to keep them on call during the off season, but thanks to minimum wage and/or mandatory benefits, could not do so, and this lay off seasonal employees at season's end. And there are a few other cases as well where laws, liability and regulations made it easier to let employees go rather than carry them over until needed again.

** Some think that normal people won't do anything of the kind, but a few "CEOs" or maybe "Chinese investors" will buy up companies and then force them into evil acts. However, I have to ask my readers, would you betray your nation, or even do something you knew illegal or immoral, if your boss asked? Why would you think enough others would to make it a realistic threat? Especially when it would take only one or two whistle blowers to ruin such plans, making even proposing such a scheme outrageously dangerous for the evil bosses. (See "Dismissing Conspiracy Theories" and "Our New Paranoia" for earlier examples of the same argument.)

---------------------------------------------------------------------------------

POSTSCRIPT

As I mentioned my earlier writing on employment and wages, here are links for those who have not read them previously:

Pay Disparities
Exploiting Workers?
When Help Hurts
Capital Investment
Fairness and the Free Market
Exploited Labor
Negative and Positive Rights
Utopianism and Disaster
Child Labor and the Industrial Revolution
The Inherent Disappointment of Authoritarianism
In Praise of Contracts

I would also recommend reading "Planning For Imperfection",  "The Limits of "Scientific" Management", "Greed Versus Evil" and the "Bad Economics" series starting with "Bad Economics Part 14" and working backwards, to get a better overview of my thoughts on economics generally. (As wages and protectionism seem to often become tied together, I would also suggest "Jobs, Jobs, Jobs, and More Jobs", "Free Trade, Employment, Outsourcing, and Protectionism", "Fear of Trade", "Pro Hoc, Ergo Propter Hoc" ,"Cheap Lighters, Overseas Dumping and Monopolies", "Protectionism Right and Left", "The Political Spectrum" and"The Death of Common Sense".)