> It is unfortunate for clarity of economic thinking that
> the price of labor’s services should have received an
> entirely different name from other prices. This has
> prevented most people from recognizing that the same
> principles govern both.
If a given theory treats wages as merely prices, and ascribe them no role in the theoretical model other than that of a price of labour, then it's perfectly reasonable to protest or at least question their getting a special name.
But he gets everything wrong in his second sentence. There's a word for wages as opposed to prices because of how language evolved: put simply, we intuitively perceived wages as something different from prices and felt the need to give them a name of their own. This has nothing to do with science.
So in fact, when we're confronted with a theory where two concepts turn out to be the same thing, that can mean one of two things:
- IF the theory is sound, and grounded on enough evidence as to demonstrate that our intuitive perception was wrong all along, THEN indeed wages are no more and no less than prices. That would be an "aha" moment worth a prize or something.
- ELSE, if the theory isn't sound enough, or doesn't have enough evidence as to defend the notion that wages are merely prices, THEN we're forced to conclude that the theory is merely construing that, and opt-into that belief at our own discretion.
So far we see no theory, so his argument that the two names have "prevented most people from recognizing that the same principles govern both" wages and prices has no meaning whatsoever. And where is his theory? Nowhere to be seen, he's using some commonsense assumptions about prices [2], but he doesn't establish anything scientific enough to defend the ambitious notion that wages are no more and no less than prices. In fact, whenever he applies those vague notions he has of prices to wages, he's begging the question that this gratuitous cross-application of concepts is sound.
Now, since the whole chapter is based on an assumption which the author fails to defend and the application of that assumption to a number of discrete case studies which don't paint the whole picture of what happens once a minimum wage is established (betraying also the much defensible premise of the entire book that we should look at all the consequences of policies to all groups of people through all time)... then I can only assume that the whole chapter is scientifically worthless, and whatever resonates with me in it has to do with my ideologies and not with evidence or soundness of reason.
I think that the words price, wage, rate, cost, expense, income, sales, purchases, etc may all denote the same thing from different perspectives.
Price is used when are interested mainly in the amount especially with respect to other things. So if a programming firm contracts with a client to do work, the contract may talk in terms of the generic price. But the individual programmers doing the work think in terms of wages. And those wages may be a cost or expense to the firm's owners, who also think in terms of rates, income, and sales while the client considers the programming as a purchase.
The term price in particular emphasizes the fact that there are options as to how to spend money. For example, a auto company can hire workers directly, in which case it pays wages. Or it can outsource, paying another company a rate for the labor, or it can just buy the finished parts. It makes sense to compare the different options as prices.
Certainly wages are considered as prices when it comes to automation decisions. What is price of wages and associated expense versus the price of the robot?
This (treating wages as prices) seems like such a basic concept that the burden is on the person who wants to treat wages as different from prices to explain why wages are or should be different.
