Here’s a letter to the New Yorker:
James Surowiecki’s explanation of the alleged stagnation of ordinary Americans’ pay since 2000 is an example of poor economic analysis (“A Fair Day’s Wage,” Feb. 9). On one hand, Surowiecki insists that this stagnation results from a weakening of corporate “norms of fairness and internal equity” – a weakening presumably fueled by greater shareholder and CEO greed. On the other hand, Surowiecki assures readers that if companies were to raise their workers’ pay to levels that are more “fair,” these companies would enjoy greater productivity and, hence, faster growth and higher profits.
Strange, that. Surowiecki never asks why greedy shareholders and CEOs steadfastly forsake the profits that purportedly are the guaranteed fruits of paying higher wages. Such wages, after all, are – according to Surowiecki – the purchase price of better-motivated and, thus, more-productive labor inputs. So do these same companies also forsake profits by stubbornly failing to buy efficiency-enhancing non-labor inputs such as machines and computer software? Do the corporate norms that today supposedly cause firms stupidly to avoid spending money that is certain to make their workers more productive and profitable also cause firms stupidly to avoid spending money that is certain to make their factories, retail spaces, and other facilities more productive and profitable?
Unless Surowiecki offers a compelling theory for why more-productive labor alone is the one input that profit-obsessed firms consistently and against their best interests refuse to purchase, his explanation for the purported stagnation of wages isn’t credible.
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
I believe that I’ve put my finger on what ails the American economy! The people who possess the information, insight, wisdom, and vision to identify profit opportunities are people who lack the interest and practical skills necessary to exploit these opportunities, while the people with the interest and skills necessary to exploit profit opportunities are people not only themselves singularly lacking the information, insight, wisdom, and vision to identify profit opportunities, but who are also too stupid to heed the investment and other business tips forever being dispensed to them by the likes of James Surowiecki and other intellectuals who do know where such opportunities are. It’s a damn shame that those who most clearly see profit opportunities either will not or cannot take advantage of them, while those who are eager and able to take advantage of such opportunities remain incurably blind to them. Perhaps business people should spend more time reading the likes of the New Yorker and the New York Times, as well as attending seminars at prestigious universities.