Here’s the bulk of an e-mail that I just sent to a lovely and talented high-school junior in Minnesota:
Ms. Annie M__________
Southwest High School
Thanks very much for updating me on your teacher’s reaction to the reason I offered for why mandated “equal pay for equal work” is a bad idea. I wondered what she’d say, and am delighted at your thoughtfulness in passing along to me her response.
Your teacher disagrees with you (and me) that it is nearly impossible for third parties – such as government officials, judges, and juries – to accurately assess just how closely the value of the job performed by worker Jane is to the value of the job performed by worker Joe. Her confidence in the discernment and wisdom of officials with no skin in the game to make accurate judgments about how each ‘player’ in the game is performing relative to other players is much higher than your and my confidence in such officials.
At the end of the day, it must be conceded that if officials with god-like powers of discernment – along with god-like abilities to remain unaffected by partisan politics and ideological prejudices – are in fact in charge, then such officials, being god-like, will always outperform real-world markets (which are only ever operated by us flawed mortals).
Your teacher’s implicit theory, therefore, is correct: gods do outperform humans. Your teacher’s premise, though, is mistaken: government officials, being human, are not gods.
I can’t close this letter without objecting to your teacher’s allegation that my earlier response to you is “the kind of thing believed by only followers of Ayn Rand.” My point to you in my September e-mail has nothing to do with Ms. Rand; it is, instead, pretty standard economic reasoning. And that reasoning reflects a deep wisdom that’s been around since long before Ms. Rand was born. The great Scottish philosopher David Hume, for example, observed in 1772 that “so great is the uncertainty of merit, both from its natural obscurity, and from the self-conceit of each individual, that no determinate rule of conduct would ever result from it.”* While Hume here wasn’t speaking about equal-pay legislation specifically – he was speaking about proposals to reward people according to their moral merit – his wisdom applies perfectly to equal-pay legislation. The ‘true’ market value of any worker’s effort is bound to be obscure to even the smartest government official, and every worker is naturally prone (that is, has “self-conceit”) to believe that he or she is worth more than he or she is paid.
Perhaps your teacher is correct that equal-pay legislation is more economically workable than I think it is, but she is very much mistaken to suggest that objections to giving government officials power of the sort that equal-pay legislation requires are not part of a long and honorable intellectual tradition – a tradition to which some of history’s deepest and most respected thinkers contributed.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030