Among the most poorly targeted quips is this gibe: “Economists know the price of everything and the value of nothing.” Although it emits a scent of profundity, this quip reveals complete ignorance of economics. True, we economists are proud of our ability to explain both what causes prices to be what they are and what roles prices play. But we also understand that many costs and benefits don’t come in the form of prices.
Unlike many politicians, economists understand, for instance, that a job’s value to a worker often is more than the wage. That value often includes “non-price” amenities such as job experience, workplace safety and the job’s prestige. Therefore, jobs with many such amenities generally pay less. Economists understand what many non-economists don’t: These lower wages reflect things that workers value.
I didn’t have the space in my column to write the following: Anyone looking for an excellent real-world example of those who know the price of something but not the value of that something will find what they’re looking for in advocates of minimum wages.