The really strange thing is that it is obvious that wages are not actually falling. A decline in the cost of living indicates that the real minimum wage has risen, and the official minimum wage must be adjusted to offset this change. We cannot blame the confusion over the Colorado wage situation on sheer ignorance of economics: after all, this issue is being reported and discussed in terms of cost-of-living adjustments. Furthermore, we cannot blame this confusion on the complexity of cost-of-living-adjustment concepts: this is a much simpler matter than explaining monopsony labor markets.

In this first decade of the 21st century, liberal thought, in both its theoretical and political aspects, has reached a historic crossroads. Although the fall of the Berlin Wall and of real socialism beginning in 1989 appeared to herald “the end of history” (to use Francis Fukuyama’s unfortunate and overblown phrase), today, and in many respects more than ever, statism prevails throughout the world, accompanied by the demoralization of freedom lovers.

People in the market can compete on many different margins. They can compete by offering higher productivity, or they can compete by offering better products. Perhaps most importantly, people can compete by offering lower prices. In the case of laborers, this often means offering their services at a lower wage.