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I Hope That I Never Enjoy Any Such ‘Advantage’

Here’s a letter to a high-school student in Houston.

Mr. Yazeed Mohmad

Dear Mr. Mohmad:

Many thanks for your e-mail and kind words about Café Hayek.  Russ Roberts and I are delighted that you’re a daily reader!

Your teacher is correct that the average wage in China is far below the average wage in the United States.  Your teacher is incorrect, however, to conclude from this fact that Chinese producers have an “unjust” advantage over American producers.

First, it’s an error to focus on the welfare of producers as if the – or even a – goal of economic activity is to ensure that producers thrive.  Economic activity is to be judged a success only if, and only so far as, it improves the lot of ordinary people as consumers.  If delicious and healthy hamburgers begin to rain from the sky whenever people are hungry for hamburgers, McDonalds and Burger King would undoubtedly regard nature as unjust.  But such a meteorological development would be an unambiguous benefit to humanity, for we would have access to food that requires no resources to produce.

Second, low wages in China reflect Chinese workers’ deep disadvantage relative to American workers.  Decades of brutal Maoist rule destroyed much of that economy’s productive capacity and prevented it from modernizing in ways that we in the west take for granted in our own economies.  Despite more than 30 years of liberalization, the Chinese economy remains far less productive than the American economy.  The low wages that your teacher believes to be such a boon to the Chinese are in fact a reflection of the great economic disadvantages that the typical Chinese worker and business firm continue to suffer.

Tell your teacher that my favorite sports star is New Orleans Saints’ quarterback Drew Brees, who now earns an average of $20 million annually.  Tell him also that I would love to play quarterback for the Saints, and I’d be willing to do so for 0.5 percent of Brees’s salary.  Then ask your teacher if my low wage gives me an “unjust” advantage over Brees.  Ask him if he expects to see me throwing passes anytime soon on Sunday afternoons in the Louisiana Superdome.  If he reflects as he should on my low quarterbacking wage, he might eventually come to realize that low wages are low for a reason: those who earn them are at a productive disadvantage over workers whose market wages are higher.

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