This also applies to the sweatshop example. If everything else is fixed, then yeah, probably those poor families are better off being allowed to work in awful conditions for low wages. But everything else isn’t fixed.
When a bunch of relatively wealthy and powerful people are benefiting financially from the existence of an extremely poor underclass (who, due to their poverty, are willing to do hard unpleasant work for little money), this creates resistance to reforms that would improve the situation of the poor and thereby give them greater bargaining power.
And, slightly more optimistically, the alternative to sweatshop employment might not be as dire as it seems. When people are literally at risk of starving for lack of work, there tends to be greater political and charitable will to help them, compared to when they’re out-of-sight out-of-mind doing something unpleasant but useful.
The wealthy may benefit from the existence of low-skilled labour, but compared to what? Do they benefit more than they would from the existence of high-skilled labour?
Yes, they benefit from low skilled labour as compared to no labour at all, but high skilled labour, being more productive, is an even greater benefit. If it weren’t, it couldn’t demand a higher wage.
Even without sweatshops that produce products for Western audiences, the wealthy in a given third-world country still profit from cheap labor.
Most communities that have sweatshops also have people who are at risk of starving. It would be surprising to me if there are those dynamics that a closed sweatshop leads to significantly more political and charitable help in the region. Do you know of any case studies where a sweatshop closed and that resulted in increased political and charitable help?
However, forbiding price gouging also disincentivise agents from creating conditions that they can gouge others.
one extreme example: if I can price gouge water, I will be incentivised to go around poisoning all other water source to sell my water at a premium.
since I can not sell my water at a higher price, I am not incentivised to destroy water resource.
This is worth considering, but I basically expect the rest of the legal system to disincentivize this hard enough, and it doesn’t seem obvious that firms can tacitly create these conditions in order to create plausible deniability (as they can with eg tacit collusion).
I am not sure how true is this, but my friend in comsumer protection agency told me that after a particular severe weather event there were a conspiracy to raise roof repair price between most trade workers in the area by not competing on price before the agency crack down on it.
Not even sure if the crack down had any effect to be honest.
I can see the argument that this is natural price raise due to increase demand, but look at it another way it could be seen as artificial reducing supply to increase price.
one argument against price gouging that I don’t see bringing up is the 2nd order effect.
I acknowledge that price gouging can have multiples benefits and act as signal and preventing price gouging would inhibit market’s direct action.
However, forbiding price gouging also disincentivise agents from creating conditions that they can gouge others.
one extreme example: if I can price gouge water, I will be incentivised to go around poisoning all other water source to sell my water at a premium.
since I can not sell my water at a higher price, I am not incentivised to destroy water resource.
This also applies to the sweatshop example. If everything else is fixed, then yeah, probably those poor families are better off being allowed to work in awful conditions for low wages. But everything else isn’t fixed.
When a bunch of relatively wealthy and powerful people are benefiting financially from the existence of an extremely poor underclass (who, due to their poverty, are willing to do hard unpleasant work for little money), this creates resistance to reforms that would improve the situation of the poor and thereby give them greater bargaining power.
And, slightly more optimistically, the alternative to sweatshop employment might not be as dire as it seems. When people are literally at risk of starving for lack of work, there tends to be greater political and charitable will to help them, compared to when they’re out-of-sight out-of-mind doing something unpleasant but useful.
The wealthy may benefit from the existence of low-skilled labour, but compared to what? Do they benefit more than they would from the existence of high-skilled labour?
Yes, they benefit from low skilled labour as compared to no labour at all, but high skilled labour, being more productive, is an even greater benefit. If it weren’t, it couldn’t demand a higher wage.
Even without sweatshops that produce products for Western audiences, the wealthy in a given third-world country still profit from cheap labor.
Most communities that have sweatshops also have people who are at risk of starving. It would be surprising to me if there are those dynamics that a closed sweatshop leads to significantly more political and charitable help in the region. Do you know of any case studies where a sweatshop closed and that resulted in increased political and charitable help?
You can sell more water at the same price. So the incentive is less, but not zero.
good point, I would amend that to reducing the marginal incentive to go around poisoning water source then
This is worth considering, but I basically expect the rest of the legal system to disincentivize this hard enough, and it doesn’t seem obvious that firms can tacitly create these conditions in order to create plausible deniability (as they can with eg tacit collusion).
I am not sure how true is this, but my friend in comsumer protection agency told me that after a particular severe weather event there were a conspiracy to raise roof repair price between most trade workers in the area by not competing on price before the agency crack down on it.
Not even sure if the crack down had any effect to be honest.
I can see the argument that this is natural price raise due to increase demand, but look at it another way it could be seen as artificial reducing supply to increase price.