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Quotation of the Day…

… is from pages 225-226 of the 2014 collection, The Market and Other Orders (Bruce Caldwell, ed.), of some of F.A. Hayek’s essays on spontaneous-ordering forces; specifically, this quotation is from an essay of Hayek’s that, although it is relatively unknown, has long been among my favorites – namely, his June 1962 lecture, “The Economy, Science and Politics”:

The merit of an action is in its nature something subjective and rests in a large measure on circumstances which only the acting person can know and the importance of which different people will assess very differently.  Does it constitute greater merit to overcome personal loathing or pain, physical weakness or illness?  Does it constitute greater merit to have risked one’s life or to have damaged one’s reputation?  Individually each of us may have very definite answers to such questions, but there is little probability that we shall all agree and evidently no possibility to prove to others that our opinion is right.  This means, however, that for an attempt to remunerate men according to their subjective merit it must always be the opinion of a few which must be imposed on the rest.

DBx: Many economic misunderstandings infect calls for government enforcement of so-called “equal pay for equal work.”  Not the least of these misunderstandings is the failure to realize the many dimensions in which even the seemingly same job differs, in ways imperceptible to a third party, from employer to employer, from employee to employee, and sometimes even from day to day.

Contrary to the fashionable myth that the relative simplicity of basic economics makes it a poor guide to economic reality and, hence, to economic policy, the relative simplicity of basic economics – much more so than many advanced courses in economics – takes the complexity of the real-world economy very seriously.  Basic economics – an ECON 101 course taught by a competent economist – focuses on explaining the logic of exchange and how exchange fuels a process of cooperation and competition.  Economically irrelevant differences among human beings are assumed away, but – also contrary to myth – there is no assumption that each person is a fully informed lightening fast calculator of pleasure and pain.  ECON 101 supplies a framework of analysis that is surprising both in its simplicity and in its power to reveal aspects of economic reality that otherwise remain unseen.  ECON 101, for example, inspires students to ask a questions such as these to a proponent of ‘equal pay for equal work’: “You say that job A is ‘equal’ to job B.  But how do you know?  Can you see all of each worker’s non-wage benefits of his or her job, such as the friendliness of the bosses or the prospects for promotion?  Can you see all of each worker’s costs of his or her job, such as the difficulties of the commutes or the unpleasantness of the customers the workers much routinely deal with?”

Among the greatest accomplishments of a good ECON 101 teacher is to instill in his or her students a realization of the enormous complexity of economic reality.  Therefore, any student who is fortunate enough to have learned ECON 101 from a good teacher is forever skeptical of calls for government regulation.  Such regulation invariably overlooks nearly all of reality’s relevant complexity.