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Bonus Quotation of the Day…

is from page 729 of the 2007 Liberty Fund edition (Bettina Bien Greaves, ed.) of Ludwig von Mises’s 1949 treatise, Human Action:

The reformers, in exhorting people to turn away from selfishness, address themselves to capitalists and entrepreneurs, and sometimes, although only timidly, to wage earners as well. However, the market economy is a system of consumers’ supremacy. The sermonizers should appeal to consumers, not to producers. They should persuade the consumers to renounce preferring better and cheaper merchandise to poorer and dearer merchandise lest they hurt the less efficient producer. They should persuade them to restrict their own purchases in order to provide poorer people with the opportunity to buy more.

DBx: In competitive markets people as producers have much less discretion than is commonly thought over their own conduct as producers. A business owner, of course, is free to offer shoddy products at very high prices, but he cannot compel consumers to buy from him. And so he’ll soon – if he does not change his ways and satisfy consumers – go bankrupt. Likewise, a business owner is free to offer only below-market wages and working conditions to workers. But because he cannot compel people to work for him, he’ll soon – if he does not change his ways and satisfy workers – go bankrupt.

Not all, but very many of the actions of businesses to which people routinely object – actions such as buying supplies from foreign countries, employing low-wage immigrant workers, downsizing, and raising prices in the immediate aftermath of natural disasters – are actions driven by need to remain competitive. The fact that most people do not see this reality no more makes this reality unreal than does the fact that most people do not see distant galaxies make distant galaxies unreal.

When I teach Principles of Microeconomics – which I do every semester – I make a point, when discussing so-called “price gouging,” to tell my students that if they are angry at the greed that they believe explains the rise in prices after natural disasters such as hurricanes and blizzards, they should be angry not so much at the merchants who sell products at these high prices but at fellow consumers who willingly pay these high prices. After all, if no or only a tiny handful of consumers were willing to pay those high prices (as a means of acquiring the goods and services that are in short supply), no merchant could sell at those high prices and, hence, no merchant would charge those high prices.

The same economic lesson should be learned by those folks who are angry at employers who pay wages that the angry folks feel are too low. But why blame employers? The blame belongs – or, at least, a huge chunk of the blame belongs – on workers who are so greedy for employment that they willingly accept employment at wages that third-parties prone to self-righteous anger insist are too low.