> wages only start coming into consideration when the difference is larger
I would think that wage differences would be most important when wages are small. The difference between $5/hr and $6/hr is a lot more important than the difference between $50/hr and $51/hr.
> It is a mistake to assume that there is always a God-given market price that is the "right" price for goods to have. . . . In the case of the minimum wage, society says that labour should have at least a certain price, because that is the morally right thing . . .
I'm not sure what you're trying to say in your last paragraph. There is no such thing as a "morally right" wage. Wages are just prices set by the market unless they are interfered with.
For example, unless you're being paid a government-mandated minimum wage, your wage is set by a mutual agreement between you and your employer. At the time of the agreement, you thought the proposed wage was the best of your options and so did your employer. Had your employer offered you less, then presumably you would have had a better option and would have chosen a different employer. Had you demanded more, presumably your employer would have had a better option and would have chosen a different employee. This is a market wage.
The market, all the people together each choosing as they see best among their various options, this is what generally determines all prices including wages. The market is efficient because each actor chooses what is best for them given the choices of the other actors. Whenever the market is intervened with by government-imposed price controls, like minimum wage, the result is inefficiency (waste): the market acts differently than it would if each actor were free to choose.
One thing conventional economists (not just the hypercapitalist Austrians) ignore is bargaining power. It's fashionable to speak of employers and employees as if both were spheres with equal power. In reality of course, people rent themselves into something which is accurately called wage slavery, where they spend their time under someone's command, watching their tongues. The hotel owner is far more powerful than the room cleaner, and it's very common for bosses to steal wages. (After all, which one can dish out the humiliation while the other takes it?)
Another fallacy of mainstream economics is that markets exist without government. In reality, it is government which creates markets. And yet another fallacy is that markets do not have morality associated with them. Yet markets are intertwined with moral taboos about debt, even in cases where the powerless owe debts to the powerful. (Like with rotten healthcare systems.) David Graeber discusses the history interestingly in _Debt: The First 5000 Years_.
> In reality, it is government which creates markets.
This seems like a obviously false statement. The norm is for people to trade. Just watch children play: it's extremely common to see them trade toys with each other.
The "black markets" enabled the soviet union and the communist-block countries to survive as long as they did.
The reality is that it is governments are the destroyer of trade and markets through taxation, embargoes, price controls, and trade restrictions.
A significant portion of America's prison population are drug offenders: essentially people who tried to operate in an illegal market.
If governments were necessary for markets, why are there all these markets existing despite governments' attempt to stamp them out?
I think your last paragraph is a point that is genuinely worth having a serious debate about. You are probably familiar with the Prisoners' Dilemma, right?
More abstractly, there are situations where it is in the individuals' self interests to behave in a certain way that will lead everybody to end up in a place where they are worse off than if everybody coordinated to achieve an outcome that is not a Nash equilibrium.
If you define "efficiency" as being "the outcome that you get when there is no cooperation between actors", then you're basically saying "efficiency = Nash equilibria with no cooperation". Then government action (which is simply one possible form of cooperation between actors) is inefficient by definition. But then that's simply a tautology, and a useless one at that. After all, whether the outcome is a Nash equilibrium or not is not a moral category.
If you define "efficiency" as being "the outcome is optimal according to some welfare function" (e.g. social optimality, Pareto optimal, sum of logs, or whatever), then Nash equilibria and efficient outcomes are not the same thing, unless you can somehow exclude the possibility of Prisoner Dilemma-type situations.
Do you have an argument against the existence of Prisoner Dilemmas when it comes to price-setting dynamics?
Edit: And to answer your question about a "morally right wage", I think there was simply a misunderstanding between us. There is a moral argument that human labour should be given some appropriate value. This is similar to more general arguments for human dignity and human rights. This is a question of morality and ethics, and it can be the basis upon which a society decides to introduce a minimum wage law. My personal understanding of morality is in line with such a view, but I am not trying to persuade you to change your system of values, if it happens to be different.
I think many times we (and especially governments) mistakenly believe that their intervention in a market is going to bring that market to an equilibrium with a higher social optimum. Governing bodies are drawn to intervene because they get to extend their power, and even those with good intentions are often overly optimistic about their abilities to predict the outcomes of their intervention.
I would think that wage differences would be most important when wages are small. The difference between $5/hr and $6/hr is a lot more important than the difference between $50/hr and $51/hr.
> It is a mistake to assume that there is always a God-given market price that is the "right" price for goods to have. . . . In the case of the minimum wage, society says that labour should have at least a certain price, because that is the morally right thing . . .
I'm not sure what you're trying to say in your last paragraph. There is no such thing as a "morally right" wage. Wages are just prices set by the market unless they are interfered with.
For example, unless you're being paid a government-mandated minimum wage, your wage is set by a mutual agreement between you and your employer. At the time of the agreement, you thought the proposed wage was the best of your options and so did your employer. Had your employer offered you less, then presumably you would have had a better option and would have chosen a different employer. Had you demanded more, presumably your employer would have had a better option and would have chosen a different employee. This is a market wage.
The market, all the people together each choosing as they see best among their various options, this is what generally determines all prices including wages. The market is efficient because each actor chooses what is best for them given the choices of the other actors. Whenever the market is intervened with by government-imposed price controls, like minimum wage, the result is inefficiency (waste): the market acts differently than it would if each actor were free to choose.