Quotation of the Day…

by Don Boudreaux on February 5, 2022

in Competition, Myths and Fallacies, Seen and Unseen, Work

is from pages 9-10 of my late, great colleague Walter Williams’s 2011 book, Race & Economics: How much can be blamed on discrimination?:

Free markets and the profit motive, far from being enemies to blacks have been friends. The reason is quite simple: Customers prefer lower prices to higher prices, and businessmen prefer higher profits to lower profits. The most effective tools for a seller to gain a customer are to offer a lower price and better services than his competitor. Similarly, the most effective tool for a worker to get an employer to hire him is to offer to accept a lower wage (with wages being a form of pricing). Many employers will find higher profits a more attractive alternative to indulging personal preferences or maintaining racial loyalty.

DBx: Indeed so.

In-depth evidence of the truth of Walter’s claim is found throughout much of Walter’s own work, in the work of Thomas Sowell, and in a good deal of the work of Robert Higgs, especially Higgs’s brilliant 1977 book, Competition and Coercion: Blacks in the American Economy, 1865-1914.

And the following point cannot be emphasized too often: Minimum-wage legislation is the ideal tool for racists. Such legislation effectively declares illegal the single most effective means available to low-skilled or disfavored workers to compete for jobs, while allowing racist supporters of the legislation to camouflage their vile intentions as good.

When 2002 Nobel-laureate Vernon Smith was still on George Mason University’s economics faculty, I would ask my students if they think I, out of pure self-interest, would support minimum-economist-pay legislation – specifically, legislation that would require all employers of economists to pay economists at least what is paid to Nobel laureates in economics. I’d ask my students this question before covering the topic of minimum wages. More than half of my students would raise their hand to express their belief that my self-interest would lead me to support such legislation.

After covering minimum-wage legislation, all – or nearly all – of my students understood why, out of pure self-interest, I would oppose such legislation: Such legislation would price me out of any job as an economist. Nobel-laureate economists, of course, would not only keep their jobs, they would get higher pay because most of their competitors would be prevented by legislation from competing with them.

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