Inspired by this blog post, Steve Pejovich sent me this note:
I do not know whether you recall Armen [Alchian]’s beautiful comment in University Economics (first edition)? (I am saying from memory): First Armen quotes a labor-union leader who said that firms that cannot pay their workers at least the minimum wage should not stay in business. Then Armen said that the union leader could but didn’t say that workers whose productivity is below the minimum wage should not work. Armen pointed out that the two statements are identical but not equally attractive.
Svetozar (Steve) Pejovich
Professor Emeritus, Economics
Texas A&M University
I don’t recall this observation by Alchian. It is not (as I recall) in the Third Edition of University Economics (which is the version that I own and have read). Nevertheless, the observation by Alchian that Steve reports is vintage Alchian: an incisive use of a basic economic truth to make a revealing, relevant, and brilliant point.
UPDATE: See here.
