Moore’s Law

According to The New Yorker, Michael Moore once misrepresented two writers as associate producers in order to skirt labor union compensation rules. Moore has a knack for drawing fire from both friends and enemies alike, so—not too surprisingly—his alleged behavior has provoked accusations of hypocrisy from the Right and greed from the Left. However, I will argue that what Michael did was actually a good thing.

Here is the anecdote as it was reported in an article published by The New Yorker in 2004:

One day during production on the first season of the show, Moore called two of his writers into his office. It was, for both of them, their first job in television, and they had been hired with the title of associate producer. They were not members of the Writers’ Guild, the powerful union for writers in movies and TV, and thus were not receiving health benefits, and would not qualify later for a percentage of video and rerun sales. “Michael said, ‘I’m getting a lot of heat from the union to call you guys writers and pay you under the union rules,’ ” Eric Zicklin, one of the associate producers, says. “ ‘I don’t have the budget for that. But if they keep coming down on me that’ll mean I’ll only be able to afford one of you and the other one’s gotta go.’

Michael Moore is a strong advocate of labor unions and denounces the ruthlessness of profit-hungry business. Given his views, his alleged actions may seem disappointing or even angering. But with the benefit of economic understanding, Moore’s actions look differently: Moore, like every other human, obeys the law of marginal utility.

A supply and demand graph shows that Michael Moore will keep two writers if they don't join the Writer's Guild, but only one if they do.

The law of marginal utility reveals how we all employ scarce resources for the attainment of ends, and have to make choices between those means that we value more over those that we value less. If Michael Moore wants to make a TV show, he must have not only writers but also makeup artists and a camera crew. He only has a finite amount of funds with which to procure all of these things. If his costs rise, he will have to sacrifice some things in order to keep others. In the demand curve illustration we see that, at the original wage price, there is a demand for two writers. But at a higher price, the quantity demanded is reduced by one. Why?  If writers cost too much, some other urgently needed thing will have to be sacrificed and the show may be put in jeopardy.

If the writers join the union and Moore lets one go, which one will it be?  If we think of writing as a homogenous good, like eggs of the same grade, then each page of writing goes first toward the most urgent need—this week’s episode. Once there are enough pages of writing to cover the first episode, any more pages of writing will go to the next one and so on. Each week Moore must have at least enough writing to cover one episode. If writer A can output enough pages to cover a single episode, but writer B can only generate enough to cover part of an episode, Michael will fire B.

Now we can ad more detail to our graph. Before we could say that given increased labor costs, Michael would keep one writer and let the other go, but didn’t know which writer was kept on and which one was fired. Now, we can identify each writer with reasonable certainty. At the lower initial labor cost, Michael’s stock of writers is A, B. After the cost increase, his stock is A.

A supply and demand graph shows that Michael Moore will keep both writers A and B if they don't join the Writer's Guild, but only A if they do.

Even if one writer joined the union and thus cost Michael substantially more to retain, the other could keep his job provided he was willing to lower his own salary sufficiently to make up the difference. But if both writers belong to the union and must be compensated the same, one writer will have to go.

This is why free market advocates point out that minimum wage laws, or equal pay for equal work legislation, are counterproductive: They raise the wage cost of laborers least able to demand a high wage—precisely those that will be the first to be let go, or last to be hired, if costs increase. Minimum wages all but guarantee that the lowest-wage laborers lose their jobs or fail to get them in the first place. They steal from the vulnerable the ability to compete on the basis of price when their skills are not enough, or when they would not be hired because of prejudice.

Instead of pointing out his hypocrisy, or accusing him of greed, we should call attention to the good that Michael Moore was doing by giving his writers fake titles in order to save money: giving them both a chance to work.

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