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Losing my touch, huh?

Yep.

So now let me give you some more of my mind. (I have enough to go around.)

I hear that a lot . . . by only from you. No one else on FR appears impressed.

The two prior responses show you first how theoretically the typical minwage analysis could theoretically be flawed. Next, with empirical backup, you can see there is evidence that the theoretical has actually occurred.

You haven't given me theory (you've merely said that such arguments exist somewhere on the Web), and you haven't given me empirical backup (you've merely claimed that it exists, somewhere).

Now let me show you once again why and how the von Mises analysis is less than satisfactory.

Von Mises? You mean Ludwig von Mises? How did he get into the discussion? You were harping on someone named "von miser" whom I never heard of. Anyway, this is not specifically an analysis by Mises. It's just ordinary, sound economics (the kind that actually concentrates on how real individuals actually make choices).

Review von Mises, the part where he goes into the marginal productivity theory: “the wages paid by the employer for every type of labor are exactly as high as the increment of value that it adds to the materials in production.

So far, so good. In other words, "wages are ultimately determined by the marginal productivity of labor." That's how it's usually stated, not just by Mises but by everyone else who has studied the subject.

Wages cannot rise any higher than this because, if they did, the employer could no longer make a profit and hence would be compelled to discontinue a line of production that did not pay.”

Still making sense. Another way of saying exactly the same thing is this: An employer will not pay an employee more than he's worth -- i.e., the boss will not pay the worker more than the worker contributes in value to the business.

That stuff just doesn’t happen 99.99% of the time.

It happens 100% of the time, but only in those businesses that can operate according to standard accounting notions of "profit" and "loss".

Such a thing would be exceedingly difficult to measure.

Nothing is easier for businesses -- especially a business in the private sector that operates according to ordinary notions of "profit" and "loss" -- to know when they are operating at a profit and when they are operating a loss. The difficulty your common sense alludes to is usually overcome by the following very subtle procedure: The business in question adds up the money it took in during a certain period, and it then subtracts the money it spent on costs (including, of course, wages). If it just hired a new worker -- the "last" worker or the "incremental" worker or the "marginal" worker (the terms "last", "incremental", and "marginal" mean the same thing) for $5.00/hour and an 8-hour day, then it's paying this marginal-incremental-last worker $40/day, or $200/week. If the business -- a hamburger joint -- fails to sell MORE than $200/week of additional burgers, or fries, or Cokes, then that new worker is a waste of the worker's time and a waste of the hamburger joint's money. There's no point in keeping him if the business merely breaks even; and there's certainly no point in keeping him if the additional wages ($200/week) are more than the additional income (e.g., $150/week). Now here's a very, very difficult and subtle operation: take the additional-incremental-marginal income ($150/week) and subtract the additional-incremental-marginal cost ($200/week). Careful. I might be trying to fool your common sense with reason and logic. Let's see, I think the difference is -$50/week. This means the business is losing $50/week. Can the burger joint continue to operate if its cashflow is -$50/week every week? Careful. It's a very, very tough question. It cannot be answered merely by reason, logic, and knowledge of economics. All sorts of very sophisticated empirical studies must be done to determine if a burger joint can stay open if it suffers negative cashflow every week.

So, you're right. These things are very, very difficult to measure.

Someone with knowledge of economics (though not someone constrained merely by "common sense" without any knowledge) notices something more -- something more subtle that the owner of the burger joint doesn't have time or the inclination to notice because he's too busy running his business and studying his profit-and-loss statements. The economist notices that IF the burger joint purposely continued to run at a $50/week loss, it would mean that it is wasting its resources; society at large values other things more than it values burgers (and it values these other things $50/week more than it values burgers). How do we know? Because if it did value burgers "what they were worth," then -- by definition -- the burger joint would be making a profit: it would mean that the product the joint produces -- "Burgers" -- is more valuable to consumers than the "factors of production" (land, labor, capital) that went into its production. That means that the burger joint -- simply by taking land, labor, and capital worth $XX.00/burger and rearranging the elements to make a burger that lots of people want to buy at $XX.00+n/burger -- is adding value to the entire economy: it's taking something that people value less (some land, some labor, and some capital) and giving them something that they value more (the burger). If a failing burger joint were to be "bailed out" by receiving a taxpayer subsidy, so that it could afford to continue losing $50/week, it would mean that the government has redistributed many people's wealth in order to allow the burger joint to continue to misallocate land, labor, and capital in the amount of $50/week. The subsidy, no doubt, helps the burger joint; but it harms everyone else. The $50/week loss might be diffused over the whole economy, but it's still a real loss. Conversely, were the burger making a profit, the additional value it created would also be diffused throughout the entire economy, but it would nevertheless be real value.

Your average economist could not do it, much less your typical nincompoop business manager.

See above. QED.

Think about it. Bob owns a restaurant. He thinks he needs to hire one more dishwasher. How does he go about figuring the “increment of value” such a dishwasher would add?

He doesn't. He figures out the increment "ex post" -- after the fact -- by looking at his profit and loss statements. The additional profit he makes (or hopes to make) by hiring that additional worker IS the "increment of value." The reason he figures it all out "ex post" instead of "ex ante" (before the fact of hiring the new guy) is that even a smart business manager cannot literally read minds and foretell the future state of the market. The burger joint owner might have a hunch as to the future state of the market for burgers ("Let's see. A new move theater is being constructed. That'll mean lots of kids going out on dates. That'll mean they'll want a place to hang out before and after the show. Better spruce the place up and hire another waiter, another cook for what I expect will be Friday and Saturday midnights, and a busboy.") He knows the wage he'll pay, and he knows the additional burgers he'll have to sell to exceed the additional wages. Could he be wrong? Of course. Happens all the time. If he's wrong, he releases the new workers (in a process usually known as "firing"), and these workers now go elsewhere...perhaps they get jobs at that new movie theater as ushers, candy-counter staff, etc.

He can’t and he doesn’t. How then does he know what such a dishwasher is worth?he doesn’t. He just knows that Joe, down the street pays minimum wage for his, so Bob will pay the same. The same thing goes for waiters, cooks, servers, bookkeepers, greeters, etc.

See above. He guesses what the incremental value will be because he cannot literally predict the future. He can, however, know for CERTAIN what the past WAS, so he can look at his profit and loss statements and determine what the incremental value of the incremental worker was and compare it to the incremental productivity as measured by his incremental profit. QED.

They are simply being paid what someone else in the business is being paid.

And the reason they are being paid at the burger joint pretty much what people popping corn at the movie theater are getting paid is that wages (just like profits) within any given line of work and for any given level of skills, tend to equalize on a free market. If the burger joint owner were offering $5/hour, and the movie theater owner were offering $12/hour, labor would tend to leave the burger joint and seek work at the movie theater. If the burger joint wanted to retain workers, it would have to match or exceed what the movie theater was paying. The movie theater, too, tries to read the future: how much additional corn can we pop and sell to customers if we hire one more worker at $XX/hour? It has to guess at first because it cannot foretell the future state of the market for movies; but it can know with 100% certainty "ex post" if its guess was correct.

It is a “class” thing, not an economic analysis thing.

On a free market, there's actually no such thing as a "class thing." All wages in a given industry for a given skill set tend toward uniformity; all RATES of profit, in ALL industries, tend toward uniformity.

You see, it isn’t that von Mises is stupid, or even wrong. Von Mises is simply irrelevant to what is going on.

Happy to hear that Mises was neither stupid nor wrong. You are both. See above. QED.

parsy, who hopes he is finally getting thru to you.

GoodDay, who hopes parsy doesn't quit his day job.