Why Cowen and Anderson are both wrong-George

In their dialogue, both Cowen and Anderson fail to address important elements of each other's arguments. Cowen's failure is primarily empirical. He dismisses the significance of labor market monopsony out of hand (109). Although economists disagree about the relevance of employer labor market power, Cowen does not sufficiently address the credible evidence of its role in suppressing compensation. This evidence has only grown in the years since Private Government was published. One consideration as to the relevance of monopsony is the pay-productivity gap. Although libertarian economists chafe immensely at any implication that workers do not benefit from higher productivity, and the popular understanding of the pay-productivity gap is indeed exaggerated, even the most pro-market economists are forced to admit to a degree of "delinkage" between the growth of labor productivity and the compensation of nonsupervisory employees. Interestingly, there is less evidence of delinkage between total labor share of income and productivity, indicating that the change for nonsupervisory employees results from a growing tendency for compensation from productivity gains to accumulate at the top of the wage spectrum: in supervisory employees. These observations are from a Larry Summers study, linked here , which was then cited by an AEI economist in an argument against the relevance of the productivity pay gap, linked here, so I feel confident in my assessment despite my lack of expertise on an issue that gets extremely technical. If Summers and AEI say that nonsupervisory workers are missing out on productivity gains, I think it's safe to say that this is at least somewhat true.  The productivity pay gap is consistent with the idea of employer market power. In a functioning labor market, equilibrium wages are equal to productivity. When workers are up against monopsonies, however, they aren't able to negotiate for compensation that reflects their productivity. There are other, different potential explanations for the pay gap, such as that productivity grown has been more concentrated among managerial employees since the decline of manufacturing, but Cowen should engage more thoroughly with the issue of monopsony.

In countering Cowen, Anderson would be much better served to argue this point than to try to tear down economic efficiency as a morally relevant consideration. She offers many helpful statistics about how bad things really are for US workers, but that doesn't really address Cowen's central point about tradeoffs, which is an important one. Of course, Anderson claims that she is only doing ideology critique, but that does not get her off the hook. In fact, the avoidance of engagement with counterfactuals is a central flaw in the ideology-critical approach to ethical reasoning. Cowen is saying that the efficiency gains from private government are worth the costs, not that the costs don't exist.

Anderson's response is to "reject Cowen's terms" in a manner that ignores what market efficiency really means in the context of political ethics (143). She says that "Economic concepts of efficiency accept current endowments of property rights as the normative baseline against which to measure improvements," (143). This is inaccurate. Efficiency is its own normative baseline, and is measured by some understanding of pure market dynamics that are recognized not to exist in reality. Economists know this, hence their constant focus on market failure, including instances where current endowments of property rights diverge form the normative baseline of efficiency. Monopsony is an example of such divergence. 

Anderson goes on to critique efficiency as only valuing worker's interests relative to their wealth. This is of course true, the idea being that in an efficient market, wealth results from either labor productivity or allocative decisions that better align resources with needs. It does not, however, have anything to do with how one considers people's interests outside of the efficient market. The point of the efficient market is to generate a massive amount of resources. I would argue that this is an extremely ethically relevant goal. How one values the interests of people with respect to those resources, is an entirely different ethical question. Many economists in Cowen's camp are vehemently oppose income inequality, and believe in substantial wealth redistribution through tax and spending schemes. The difference between that focus and Anderson's is that it preserves the efficiency of the market, because it generates efficient markets create much wealth, and then makes sure that those who do not benefit directly from efficient markets still get their fair share.

The fact that Cowen "begs the question in favor of workplace dictatorship by choosing efficiency as his measure" is therefore a mark in his favor (143). Efficiency is an ethically relevant measure. The fact that workplace dictatorship is conducive to it is a real ethical consideration in favor of workplace dictatorship. That's why the monopsony point is so important. What Cowen really messes up, as I discuss above, is that workplace dictatorship, to the extent that it exists today, is actually not an indicator of efficient markets, but of market power for employers. This is why I appreciate Anderson's overall argument. Of course, if workplace hierarchies were a product of efficient markets, there would likely still be a case to remedy them. This remedy, however, would be closer to the redistributive schemes that economists like Cowen adovcate for and would occur outside the workplace, giving workers more power without messing up efficiency. However, workplace dictatorship is not a result of efficient markets, but of monopsony. For that reason, I support Anderson's conclusions.