Market Forces

The market is about supply and demand. The more you want, the more you will be able to buy. If no one wanted ipods, you would never be able to find one. If everyone wanted an ipod at a price less than the cost to build one, you still wouldn't be able to find one. What is true about ipods is also true about people.

If you want to hire a person to work for you, you must pay that person more than the cost that person entails in doing the work. What does a non-worker give up to work? Welfare/unemployment payments, free health care, food stamps, and other public benefits. Then there is the opportunity cost, the possibility of obtaining an even better job. Ideally, you get what you pay for. As in all market situations where trade is the medium of exchange, a win/win is the best outcome, where the employer believes the employee is worth more than what is paid and the employee believes that the reward is greater than what is brought to the table. Anything other than a win/win is a toxic situation.

Anything that artificially increases the floor or decreases the ceiling of the value of the employee will reduce the opportunity for a win/win. Regulations that support unemployment or that cap income will not benefit a free market. An income cap will tend to limit competition at the top, as the probability of reward may be too low to justify the effort to get there, causing a decrease in top quality. A false floor raises the price of production and takes products out of the reach of consumers or transfers jobs and wealth from one location to another, creating unemployment and financial drain where the false floors exist.

Regulations fail for two reasons.

1. They cannot keep up with changes in the market and knowledge.
2. They are open to corruption

Both of these have been seen lately, in the Enron and the banking crises. While we all would like to see braniacs run the market place, no one, not even Paul Krugman, is smart enough to do it.