Hazlitt seems not to entertain any question about what restraints on capitalism a community might put on enterprises when someone requests permission from a community to build a factory or other major capital-intensive project on its territory. Is it permissible, from the standpoint of the community, to take advantage of an over-supply of workers and cut wages to the bone? Is it acceptable to deplete the human and other resources of the community and take the factory owner's earning away from the community?
In service of his ideas Hazlitt seems to invoke a hidden principle of economics, the zero-sum game. He says that money that goes one place, e.g. to taxes used to support the unemployed and who knows what other unworthy projects, cannot be used in another place, e.g., to build another factory, earn more money, and pay more workers wages. But money that does not go into the firm's coffers and is not paid out as unavoidable taxes could be used to provide improvements in the medical care of workers and their family members, to provide improved educational opportunities, etc. While there are clearly frills that would add nothing to the productivity of workers, a factory clinic where workers could be seen for over-the-counter medications for headaches and colds, antimicrobials and bandages for minor wounds, etc. could pay both employer and employee good dividends.
It might be true that some businesses could not survive if forced to pay their workers a living wage, but perhaps they do not deserve to survive. Since there is a demand for their products, perhaps a business with better practices would move in and be successful. Perhaps one of the real reasons for paying workers marginal wages is that their employer employs a strategy that goes all the way back to the ant but not to the grasshopper: putting aside large reserves for one's own future maintenance.
Models, by their very nature, never
incorporate all features of the real systems being investigated.
Nevertheless, a simple model of an economy that is isolated to a single
community ought to include all the major factors that would have an
impact on the members of that community.
Books:
Economics in One Lesson, Henry
Hazlitt [External Reviews]
The Making of Modern Economics: The
Lives and Ideas of the Great Thinkers, by Mark Skousen [External Reviews]
Development as Freedom,
Amartya Sen [External Reviews]
Articles
"Hunter-gatherers and the mythology of the market" by John Gowdy [here]."Neuroscience Can Help Us Understand Social Transitions," by John Gowdy (RPI) [here].
"Industrial Revolution and the Standard of Living," by Clark Nardinelli (U.S. Food and Drug Administration) [here].
See additionally, commentary 3, 4, 5, 6, 7. 8, 9, 10, 11,