Market Prices Versus “Make It So”
Mark J. Perry alerts us to a great quote from P.J. O’Rourke:
“The free market is not an ideology or a creed or something we’re supposed to take on faith, it’s a measurement. It’s a bathroom scale. I may hate what I see when I step on the bathroom scale, but I can’t pass a law saying I weigh 160 pounds. Authoritarian governments think they can pass that law—a law to change the measurement of things.”
Perry then compares this to a minimum wage law:
A teenager with no work experience steps on a “bathroom scale” that accurately and truthfully measures the market value of unskilled labor, and the scale says “$5.00 per hour.” Politicians pass minimum wage legislation to rig the “bathroom scale” of labor value to instead produce an inaccurate, false inflated reading of “$7.25 per hour.” And they then seem puzzled that more than one out of every four teenagers who is looking for a job is unable to find one, but that’s what happens when you “rig” the “bathroom scale.”
As part of my adventure in health care a couple of weeks ago, I had a rather unpleasant encounter with the scale at the doctor’s office. To think that I could achieve my fitness goals by lobbying my Congressman to pass a law would be absurd. Instead, I’ve changed my diet and exercise habits. In particular, I’ve relied on some advice I first heard from Jeff Tucker: no shower until I’ve done thirty push-ups. I’ve been happy with the results after two weeks, and it’s a nice binding constraint.
Recent heat and humidity offer a similar analogy. It has been really, really hot in Memphis and in other parts of the country. People have suffered as a result. A politician who claimed that he was going to fight a war on heat by passing a “maximum temperature law”–or by switching temperature readings to celsius so that the numbers are smaller–would be laughed at. And yet that same politician who claims that he is helping the poor by passing minimum wage laws, price-gouging statutes, rent control, and other forms of interference with market prices is lauded as a compassionate hero of the downtrodden.
You can’t change heat, humidity, or people’s weight by passing laws. You also can’t change people’s productivity by passing laws. “Make it so” is great campaign rhetoric but it’s lousy economics. In a grocery store a few years ago, I saw someone wearing a t-shirt that reads “Stop Plate Tectonics.” A shirt reading “Stop Supply and Demand” would make just as much sense.