First, markets really do capture the voices of the people. Markets are, in F.A. Hayek’s words, communication processes. When we buy and sell — or refrain from doing so — we are sending messages to others about what we want and do not want, and what we’re willing to give up to get it. As I pointed out in “Who’s in Charge, Capitalists or Consumers?” (FEE.org, April 13, 2016), this idea of “consumer sovereignty” means that our choices as consumers drive the allocation of resources and the pattern of incomes in the marketplace. Prices, profits, and losses all reflect the combined voices of the people as expressed in our market decisions.
GMU Econ alum (and University of Tampa economist) Abby Hall Blanco loves teaching Principles of Economics. Her students are fortunate to have such a knowledgeable, wise, inspired, and inspiring teacher! A slice:
The minimum wage is as easy as it gets. If we (meaning government) set wages, or the price of labor, above what the market will bear, several things will happen. First, the promise of higher wages will induce more people to seek minimum wage jobs. In other words, more people will be willing to supply their labor at that price. Second, seeing the increase in the price of labor, employers will be less willing to hire low-skill workers. They will demand less labor. This results in a surplus of labor—otherwise known as unemployment.
But the story doesn’t end there.
I ask my students,
“Who do you think this helps? Who does it hurt?”
The answer is always the same.
“The poor workers,” one will inevitably reply. “They are now getting higher wages.”
“It’s true that workers who retain these jobs will earn higher wages,” I tell them. “These people win. But are they really the people we (government) want to help?”
We then discuss how, when faced with the choice between a relatively skilled worker and a relatively low-skilled worker, employers will choose the skilled worker.
This short video corrects key myths about free trade: (HT Bryan Riley)