Sunday, September 11, 2011
Quarry Australia has no people
Fungibility is a feature of a good where two items of that good are so close in their features that they equal substitutes. Currency is the ultimate example. If I lend someone $50 it doesn’t matter to me whether that same $50 note is returned, or another equally good $50 note. Other fungible goods include standardised commodities like wheat, raw metals, oil.
But is labour the same?
I doubt many businesses would be happy to lend an employee for a few days work elsewhere then receive a different person back when the job is done. While there are people with very similar skills and experience who may be suitable substitutes, this is not the case in general. The idea that some workers are subsitutes for some others, but all workers are not substitutable, forms the great divide between the policy prescriptions of the Austrian economists and the Keynesians, and may be one reason for the apparent failure of Keynesian stimulus to ‘create’ jobs in the US. It also explains why labour costs in some industries can rise even with relatively high unemployment.
Read the full article at MacroBusiness.