I’m going to back you up in your simple statement of Coase’s theorem as a justification for extortion. That’s what it sounds like to me too.

I still don’t see why law and economics is thought to be particularly libertarian, and that the alternative to Posner/Coase/etc. is government intervention. If, as in the libertarian conception, the purpose of government is to protect individual rights, isn’t Coase-approved extortion anti-libertarian? Why do we have to jump from there to being for a minimum wage and other government interventions into the economy?

(Me, originally): “The government seems to believe that it’s definition of fair is somehow better than what we would get if each person could determine their own minimum wage. I know, it sounds like an idea asking for exploitation, but there are still jobs that pay two or three times the mandated minimum wage, and don’t require any special schooling. Why? Because both parties have negotiated a higher, fair, wage.”

OK, I didn’t make it clear at all. In fact, I originally wrote without thinking about undocumented workers, or others not in a position to negotiate effectively. I was thinking about the large number of people who can’t negotiate at a bargaining table could, but can “negotiate” through looking for new jobs.

So, I guess I’ll have to admit that I changed my mind between writing the two posts, because Paul did bring up points that I had ignroed.

My main point about the minimum wage is that the federal government isn’t likely to make the right choice about a “one size fits all” minimally-fair wage. However, as I point out at the end of this post, the current system is better than the alternative. Perhaps I should have made that clearer than I originally did.

It is true that high school students working for a little pocket money probably aren’t all that good at negotiating, but then again, they aren’t forced to take any jobs, so it’s safe to assume that they will only take jobs that are “fair” in their mind. Even without a federally-mandated minimum wage.

OTOH, workers who fear some kind of reprisal, such as workers who really should be retired or who lack documentation, simply won’t negotiate regardless of their skills. And, yes, a lot of negotiation only occurs through unions.

And it’s a long shot to expect a “minimum wage for people who otherwise can’t negotiate.” So we have a minimum wage, and people who can negotiate move up from there. I don’t oppose the minimum wage, per se, but I think it only applies in some cases because the alternative is much worse. Repeal the minimum wage and the number of people exploited will be far larger than the number of unemployed workers today who would be willing to work for less than minimum wage because of their unique circumstances.

However, in support of the minimum wage, I’d like to refer you back to your totally correct statement that “farmers aren’t really in a position to negotiate effectively with train companies.”

I think that many workers, especially in poor economies and right-to-work states, aren’t really in a position to negotiate with their employers. Unions (the source of most of your “jobs that pay two or three times the mandated minimum wage, and don’t require any special schooling”) help, but not much. Many workers — especially those doing the dirtiest, hardest jobs, are vulnerable to employer overreaching.

The easiest example: migrant farm workers. I spent a couple years in rural Oregon representing migrant farm workers (despite not speaking Spanish, oy! long story). I have well-founded knowledge of their experience. Much of it can be characterized by fear. They do back-breaking (literally! imagine being stooped over during all daylight hours picking berries!) work that no American would do, for a pittance. Many take whatever they’re offered to provide for their families. They life in dramatic fear, because of the power their employers have over them — some real, and some imaginary but persuasive (i.e. the fear that “la migra” the INS will get called. Not by their employers!). They don’t have access to the general employment market because of language and, often, immigration status barriers. There are usually many more workers than jobs.

They have no negotiating leverage whatsoever! If the employers could get away with it, they would pay them a quarter an hour. Sometimes they don’t pay them at all! (Then someone in the job I had hopefully finds out and sues.)

That’s an extreme case, but the bargaining disparity there is clearly even more dramatic than that between the arsonist railroad and the farmers. The disparity in other categories of employment (fast food? textiles?!) isn’t much better.

And I can think of several counter-arguments to what everyone else understands Coase to mean. For instance, real estate property rights are supposed to go “up into heaven.” Property owners tried to sue airlines for trespassing back in the early days, and the initial allocation of rights definitely had an impact on the fairness of the solution (for the record, courts determined that no trespass occured if the property owners really weren’t going to use that part of the airspace above their property).

So, while I won’t defend the Coase Theorem until I get to read it as Coase wrote it, I will defend the “small-L libertarian” concept that problems that can be solved with private ordering (negotians, contracts, etc.) should be. Problems that can’t be solved via contract and private agreements, then, should be solved through special laws.

I don’t care what labels people use to describe my philosophical leanings, but I don’t consider myself a true libertarian (large or small-L). In this case I happen to agree with classical libertarians.