Good morning, dear readers. Here's a selection of articles and commentary to start your week, with a nod to Labor Day in the U.S.
Different strokes for different markets.
Why can't labor be more like housing, asks George Mason University economist Bryan Caplan. "If housing prices were as rigid as wages, every recession would feature horrific involuntary vacancy rates," he says. Instead, housing prices decline while wages almost never fall ("sticky" is the word economists use). A free-market system is based on flexible prices. If wages actually adjusted when the demand for labor falls, it would mean a lot fewer people on the unemployment line. A lower wage is better than no wage.
A buyer's market for labor.
The Washington Post's Robert Samuelson says the last century was characterized by three broad labor regimes: a free market without worker protections; unionization (after World War II); and now "a confusing mix between old and new." Labor's share of income is eroding as a result, and is less in the U.S. than in the rest of the world. The cure? Fast growth and tight labor markets, neither of which is anywhere in sight.
The worst option except for all the rest.
Harvard's Greg Mankiw explains why a carbon tax is the least bad option for controlling carbon emissions. Expecting people to do the socially responsible thing is something out of la-la land. Government regulation, such as the Corporate Average Fuel Economy (CAFE) standards, is a nightmare. Putting a price on carbon usage "is more effective and less invasive than the regulatory approach that the federal government has traditionally pursued," Mankiw writes. You can't argue with that. Well, lawmakers can -- and probably will.
About those unintended consequences.
New rules and regulations, as specified by the Basel Committee on Banking Supervision and the Dodd Frank Act, are reducing liquidity in the corporate bond market, making it harder -- and more costly -- to exit positions, according to Bloomberg News' Lisa Abramowicz and Liz Capo McCormick. What's more, "the shrinking derivatives market makes it more difficult for dealers to hedge," they say. The complaints always get louder on the way down.
Not that anyone's talking about the cost.
A U.S. attack on Syria will cost taxpayers billions. Each cruise missile costs $1.1 million, according to the U.S. Navy. The ships, missiles and salaries are already paid for, but the costs could escalate quickly if the Pentagon has to secure chemical weapons, train and arm the Syrian opposition, enforce a no-fly zone or engage in additional strikes. Additional military intervention in Syria would cost further billions. At least the militarized Keynesians will be happy.
(Caroline Baum is a Bloomberg View columnist. Follow her on Twitter.)