X-Envelope-to: politics@ohstvma.BITNET
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Newsgroups: bit.listserv.politics
Date:         Tue, 6 Oct 1992 13:07:00 EST
From:         ZIMMERJ@WABASH.BITNET
Subject:      Re: a lengthy precis

>From: Jamie <PL436000@BROWNVM.BITNET>

As many of you will remember, I took a certain discussion off-line
a couple of weeks ago. Jason has incorrectly reported back on
that discussion. I will give some corrections.

Gee, thanks.

>I did, in fact, address the claim that discrimination is costly
>to firms. Though I do not expect Jason to understand this, I
>will briefly restate my answer (for the third time now):
>In the example I gave, discrimination in some sense is costly,
>but its benefits outweigh its costs. I explained what the benefits
>would be.

And I responded that since firms make their decisions on a firm-by-firm basis,
they would still not choose to discriminate (each has incentives to undercut
the agreement, even though every firm would be better off by sticking to it).
As your record undoubtedly shows, I argued this several posts before your last
one.  And it was not answered, other than by restating the hypothetical example.

>I did give an argument to show why discrimination would be
>profitable, and every single participant in the discussion
>off-line (there were 8 others besides Jason and me) understood
>my explanation... except Jason.

I completely understand your explanation.  You claimed that it is in firms'
collective interest to discriminate.  And I argued that collective interests
don't matter and that only indivdual firm's interests matter.  Since firms are
made much worse off if they abide by the agreement and others don't, they too
will choose to break the agreement rather than get suckered by the competition.
Your record will show that this argument was made a long time ago and never
answered, other than restating the hypothesis.

>I even offered a little bet over the outcome
>of a potential strike in Major League Baseball (Jason had
>asserted that unions can never prevent scabs from taking over
>their jobs during strikes).

I don't recall saying "never."  I might have said "almost never," but probably
not "never."  In any case, I'll agree that I am certainly wrong if I said
"never," since absolutes are seldom true, expecially in this case.

>Jason never gave any answer to this reply of mine. Instead, he
>sent me a private, patronizing letter. I pointed out to him
>and the other discussants that the letter was patronizing and
>contained no arguments.

Actually, it said that we would never reach an agreement since we kept going
around and around with the same arguments, a point with which I still agree.

>>Being a student of economics, I know beyond any doubt that I am
>> right on this point.

>Well, how about this. I am perfectly willing to let some other
>student of economics on this list adjudicate.

Fine by me.  The question is "does discrimination impose opportunity costs upon
firms?"  My answer is yes, it does.  Responses, anyone?

>Jason claimed that firms would not abide by the convention I
>gave in my example (which Jason misleadingly calls a "covenant").
>I said that they would. He said that the reason they would not
>abide was that to do so would not maximize profit. I said that
>although I doubted the assumption that firms always act to
>maximize profit, I was willing to accept it arguendo. I then
>explained why individual firms WOULD maximize profit by sticking
>to the convention.

They would maximize profits IF they stuck to the convention.  But each firm
still has the incentive to undercut the convention (as I explained above) EVEN
THOUGH it is worse off than if every firm abided by it.

Or, in other words, if every firm abided by the convention, they would all do
well.  However, if one firm then breaks the convention, it increases its
profits even more since the firm gains a lot (larger labor pool) while losing
virtually nothing (since firms have no concrete ability to "punish" the
offending firm).

And yes, it is question begging to say "the covenant will occur because it
exists."  Your assumption that firms really CAN punish rogue firms immediately
tilts your hypo away from reality and toward your own position (a common trait
of most hypotheticals -- which is why they aren't particularly convincing).

>Then your knowledge is defective. Jason sent one response to
>Peter Schledorn, which Peter graciously forwarded to the
>rest of us.

I appolgize for this.  I thought it was all getting forwarded automatically
(like in this list).

>I never said nor believed that an increase in the tax rate
>directly effects the money supply.

Yes you did, or something damn similar.  I have no idea how to do archives, but
I invive anyone who's intersted to look it up.

>>  Also, I had to explain to him what it meant to shift a supply
>> or demand curve.

>No, you didn't.

Oh yes.  Again, I refer you (third parties) to the archives.  I remember this
one ESPECIALLY well, and I know it was Jamie as opposed to someone else.

If you want to test who's falsifying (I for one was willing to concede that
Jamie was merely mistaken as opposed to lying), look this stuff up in the
archives.  Then we can settle this credibility issue right now.

>Jason mentions the Prisoners' Dilemma. In the first place,
>he says nothing coherent about it. In the second place, it
>is in fact a famous result in game theory that the Prisoners'
>Dilemma is soluble (that is, it is rational to reach the
>cooperative solution) when the game is iterated. I did
>explain this, though I did not use the technical apparatus.

Now this would be interesting, since it would actually adress some of my
arguments.  Please explain.

>Jason explains his qualifications, and asks any grad student
>in economics to come forward if he thinks that the sort
>of convention I described might be stable. In fact, a grad
>student in finance already HAS come forward, explaining
>what was wrong with Jason's claims, and why I was right.
>Jason gave no response.

That same grad student (I assume you mean Jimbo) ALSO said that you're hypo
does not correspond to real life.  In this case, it doesn't matter whether it
is stable or not, since it wouldn't affect any of my arguments as to why we
should abandon equal-employment laws.

>If that economics grad student wants to add anything now,
>he should be my guest.

mine too.

>Jamie

Jason