Non-competes and labor vs. automation technology

We’ve discussed non-competes here before. Here’s my co-blogger, Caleb Fuller, making a common-sense point in a prior post:

Non-competes protect the investments that employers make in their employees…if [the employee] preferred the ability to swiftly switch to a rival employer, he could take lower wages in return for this perk.

Here’s a related passing thought of mine. The prompt is this paragraph in the White House’s commentary on a new Executive Order taking aim at non-compete agreements:

Barriers to competition are also driving down wages for workers. When there are only a few employers in town, workers have less opportunity to bargain for a higher wage and to demand dignity and respect in the workplace. In fact, research shows that industry consolidation is decreasing advertised wages by as much as 17%Tens of millions of Americans—including those working in construction and retail—are required to sign non-compete agreements as a condition of getting a job, which makes it harder for them to switch to better-paying options.

Do non-compete agreements really make it harder to switch to another job? On the surface, yes. But what is the impact of a free contracting environment on the investment employers are willing to make into their employees? And thereby, on wages, generally?

But what interests me is the even broader issue here: To what degree do non-competes change the way executives think about expanding their operational capacity, generally? What solution are they more likely to think of first, when it comes to the decision of whether to hire someone new or invest in a technology solution?

Banning non-competes means employers’ investment into workers is less protected, and the measure increases a company’s exposure to risk from loss of trade secrets. This is significant, and affects how companies think about hiring.

If I had more time, I’d research how wages and demand for labor differ in states where non-competes are illegal (CA, OK, ND) vs. other states. I’d probably start by looking at salespeople and sales agencies. In what regulatory environment are companies more likely to address capacity shortcomings with new hires vs. new technology? Is there some new technology that is more-or-less interchangeable at-cost with skilled labor of some kind? Can we compare this across regulatory environments?

Maybe that’s a thesis idea for some grad student somewhere.

I suppose I’m just stating Fuller’s post another way.

Non-competes benefit workers.

Covid Commentary

Economic voices have been conspicuously absent from discourse since the beginning of covid. Except for reasons of scientism, is there any reason epidemiologists and other health experts should have all the fun? We don’t think so. You don’t have to agree with everything economists say about covid to agree that they bring a unique and valuable perspective.

Here’s a compilation of economists on covid:

My co-blogger, Caleb, from the beginning of the pandemic:

“…the distinction between “essential” and “non-essential” businesses  ignores the fact that the social order is a highly complex system. In order to enjoy our remarkable standard of living, we rely on an extensive division of labor, which contains millions of goods, tasks and production processes. Interrupting this complex system at any point will certainly have ripple effects on supply chains throughout the economy—including for those businesses deemed “essential.” For example, hospitals require tens of thousands of products to operate optimally, and many of these products are produced by “non-essential” businesses. Related, someone who loses their income because their “non-essential” business was shuttered will find themselves less capable of buying “essentials” such as food or medicine.”

Doug Allen on a meta-analysis of the (economics) covid literature. His abstract:

An examination of over 80 Covid-19 studies reveals that many relied on assumptions that were false, and which tended to over-estimate the benefits and underestimate the costs of lockdown. As a result, most of the early cost/benefit studies arrived at conclusions that were refuted later by data, and which rendered their cost/benefit findings incorrect. Research done over the past six months has shown that lockdowns have had, at best, a marginal effect on the number of Covid-19 deaths. Generally speaking, the ineffectiveness of lockdown stems from voluntary changes in behavior. Lockdown jurisdictions were not able to prevent noncompliance, and non-lockdown jurisdictions benefited from voluntary changes in behavior that mimicked lockdowns. The limited effectiveness of lockdowns explains why, after one year, the unconditional cumulative deaths per million, and the pattern of daily deaths per million, is not negatively correlated with the stringency of lockdown across countries. Using a cost/benefit method proposed by Professor Bryan Caplan, and using two extreme assumptions of lockdown effectiveness, the cost/benefit ratio of lockdowns in Canada, in terms of life-years saved, is between 3.6–282. That is, it is possible that lockdown will go down as one of the greatest peacetime policy failures in Canada’s history.

Bryan Caplan on the aforementioned cost-benefit calculus. He writes:

Casual readers will be tempted to declare that the cure has been much worse than the disease.  The right cost-benefit comparison, however, is not to weigh the cost of prevention against the harm endured.  The right cost-benefit comparison is to weigh the cost of prevention against the harm prevented.  You have to ask yourself: If normal life had continued unabated since March, how many additional life-years would have been lost?  I can believe that the number would have been double what we observed, even though no country on Earth has done so poorly.  With effort, I can imagine that the number would have been triple what we observed.  There’s a tiny chance it could have been five times worse.  But fifteen times?  No way.

Peter Leeson and Louis Rouanet on the use and abuse of “externalities.” From their conclusion:

COVID-19 externalities are less prevalent in the absence of government intervention and less
costly to society than is often supposed. That is so for three reasons. (1) Unlike externality-creating behaviors in many classical externality contexts, such behaviors are often self-limiting in the context of COVID-19. (2) In market economies, behaviors that may create COVID externalities typically occur at sites that are owned privately and visited voluntarily. Owners have powerful incentives to regulate such behaviors at their sites, and visitors face residual infection risk contractually.

David Henderson in dialogue with Justin Wolfers.

Robert Higgs and Don Boudreaux on the Higgs Ratchet. They write:

We should be thinking seriously about where all our emergency actions will leave us in the long run. Will the quarantine of millions of people become a precedent? Will broad-scale distributions to the general population without a means test become an enduring public demand even when normal times return? Will the Fed’s exchange of trillions of dollars for rotten securities become a lasting feature of its monetary policy?

Ben Powell on getting out of the way of entrepreneurs.

This is just a sampler, but it does demonstrate the shift in perspective that accompanies a focus on basic economic concepts like trade-offs and off-setting behavior.

Are NFTs Property?

Are non-fungible tokens (NFTs) property?

It’s a good question. Spoiler alert: I don’t know the answer. However, I think a good definition of NFT would be helpful toward deciding one way or the other. And as big as NFTs have been this year, I’ve seen not a single definition that wasn’t lacking (or outright wrong) in some significant ways.

Here’s my attempt at a definition:

An NFT is a unit of data stored on a digital ledger (i.e. blockchain) that certifies a digital asset to be unique and (therefore) not interchangeable. An NFT can be associated with anything, but is (thus far) usually associated with a digital asset of some kind — photos, videos, audio files, etc. But theoretically, this kind of ledger could represent even physical items.

Another angle: An NFT is a deed. And whereas a normal deed (say, to a house) is recognized and upheld by some governing authority, an NFT is defined by the fact that it requires no such authority to recognize or enforce. The author of some asset associates his or her work with an NFT, and then every transfer is logged in the NFT itself.

I think that’s a pretty good definition and explanation.

Now, given this definition, can an NFT actually be property?

Block on Non-Competes

Over at Econlib, Walter Block tackles the banning of non-competes.

After pointing out that non-competes yield compensating differentials, Block also makes the following insightful point:

Another supposed flaw is that these pacts limit mobility. Of course they do. But we do not want infinite mobility, wherein workers switch jobs every millisecond. Rather, if we want economic development, we need optimal mobility. It would appear we could locate closer to that ideal on the basis of freely agreed upon contractual arrangements rather than by precluding options.

The History of The Corporation

Yale Law School will be holding a virtual workshop on the history of the corporation June 10th.

Here’s the description:

In anticipation of the sixth Global Corporate Governance Colloquium, which will be hosted by Yale Law School on 11-12 June 2021, the organisers will present a virtual workshop on ‘The History of the Corporation’ on 10 June 2021. The workshop will journey through Imperial Russia, turn of the century Egypt and China, Edwardian Britain and the Gilded Age US, exploring issues of corporate governance that continue to resonate in the present day. The morning sessions will examine the relative performance of western-style corporations and their indigenous alternatives in Russia, Egypt, and China. The afternoon papers will re-examine structures of corporate governance and control in the US and Britain in the late-nineteenth and early-twentieth centuries. The conference will end with commentary that draws out the broader implications of these historical studies, setting up themes that will run through the discussions of the next two days.

Distinguished scholar of organizations, Henry Hansmann, is an organizer of the conference.

Rapinoe and the Soccer Pay Gap

Megan Rapinoe is a great soccer player.

She’s demanding equal pay for equal work.

Let’s analyze.

First, let’s define terms: What’s the work here? Kicking a soccer ball?

That’s hard work, but it’s hardly work.

The fact is, athletes aren’t paid according to their skill. They’re paid by companies with the resources to monetize their talent by selling tickets, merchandise, and advertisements. They’re also paid by brands who use their names to sell more product (Rapinoe herself has inked deals with Nike and Samsung).

The fact that she (or anyone—Lebron James, Tom Brady, Serena Williams, etc.) is a good athlete adds probably no value to anyone’s life. It’s only when people can watch and be inspired by her skill that her talent becomes valuable. And only when people can see her skill do they want to buy merchandise.

The same isn’t true for, say, the best plumber in the world. We don’t have to watch the best plumber work in order to benefit from his or her labor. What matters is the finished product.

A plumber produces good plumbing. A soccer player produces an event.

Few would care who won the World Cup — men’s or women’s — if no one could see it happen. Imagine the World Cup, but played secretly and without fans or TV crews.

In this sense, Megan Rapinoe is an entertainer. That’s her work. She’s paid in proportion to how many people care to watch her.

So we’ve defined our terms. Megan Rapinoe is an athlete. Athletes are entertainers—compensated according to how many people enjoy watching.

Now what about the context?

Yes, it’s true—the USWNT (World Cup winner) is relatively better than the USMNT (didn’t qualify for the World Cup). And the USWNT earns revenue comparable to the USMNT.

But that last sentence actually undermines Rapinoe’s case for equal pay. The USWNT won the World Cup, but only barely beat the non-qualifying USMNT that year?

The fact is, few people care about women’s soccer. The women’s World Cup brought in about 1/50th the revenue of the men’s World Cup. Major networks did not show the women’s games.

Again, professional athleticism is about the show. If you cannot see an athlete’s performance, it’s not worth much (or even anything)—there is no “finished product” aside from whatever is captured on video.

Now: Does it make sense for one entertainer with a small audience to demand equal pay as anther entertainer with a large audience?

I don’t think so.

The popular conversation shows that many don’t understand how wages are formed (or even that they’re “formed”) or why wages rise. Until they do, we can’t expect most to be curious about the wide array of contractual forms that characterize the commercial world, including that of sports.

For instance, constraining the impulse to maximize individual stats at the cost of team performance has obvious analogues to more traditional commercial contexts (i.e. preventing empire-building at the expense of shareholder value). Curiosity about those questions won’t come until people grasp the basics of what a wage is.

As Bryan Caplan might say, it’s “labor econ vs. the world.”