Over the past few years I’ve heard three words uttered with increasing frequency. In a country permeated by Obama’s class warfare, the take back Wall Street movement, and high rates of unemployment, I’m hearing the words “just”, fair”, and “equitable” far too often for my liking. These are very dangerous and extremely powerful words, as I’ll show later.
I often tell my students that a free market results in an “equilibrium price” that clears the markets for any good or service. Economists make no judgment whether the equilibrium price is “fair” or “just.” If the market price of corn is $4.56 a bushel, the number of bushels both supplied and demanded will be the same. Otherwise there would be a surplus or shortage of corn, both of which would soon disappear as the market price adjusts downward or upward.
Sometimes my students ask if the equilibrium price is “just” or “fair.” I remind them that even when the “equilibrium” price is reached, this will not stop the buyers from complaining that the price should have been lower. Nor will it stop the sellers from complaining that the price should have been higher. Farmers will say that the $4.56 price is not “fair” to hard working farmers. Meanwhile, buyers of corn will express the opinion that it is “unjust” and “inequitable” that those “rich” farmers got such a high price for corn.
Whereas economic markets are very efficient at rationing goods between buyers and sellers, words like “fair” and “equitable” and “just” are not decided in the realm of economics. As such, they fall into the dominion of politics, and dangerously so.
Is it “fair” to tax George’s high income and give some of it to Clarence if George inherited his money and Clarence works hard at a low paying job? Would your answer be different if George’s high income comes from working long hours at a drudgery-filled job while Clarence sits home because he is too lazy to look for a job? Is it “fair” that a business executive can go to Stub Hub and buy two 50-yard line super bowl tickets for $10,000 each while a $20 per hour construction worker must stay home to watch the game. Would it make any difference if the construction worker is employed, along with 300 other construction workers, by the same business executive who spent $20,000 for those same super bowl tickets?
It is my opinion that we’re better off to have free markets handle these questions than politicians. After all, the words “just”, “fair” and “equitable” were used continuously to justify the rise of Nazism (National Socialism) that brought Adolph Hitler to power in post World War I Germany. They were prominently used to justify Soviet Communism, which was built under the justification that state owned property would be more equitable to the masses than capitalism. More recent dictators like Nicolae Ceausescu, Idi Amin, Papa Doc Duvalier and Hugo Hugo Chavez in Venezuela rose to power by convincing their poorer citizens that a “fairer”, “more equitable”, “more just” country would result. While Barack Obama might not be able to pull off a dictatorship in the United States, he is certainly doing a good job of moving the United States from a land of freedom to a socialistic state.