Apparently, economics is hard. But some things are pretty straightforward.
For example, both parties to a trade gain: it’s called “mutual benefit through exchange.”
Another basic principle? Employers hire labor expecting productivity. Businesses don’t hire workers who can’t produce enough to more than cover their wages — and managers fire workers when they prove they aren’t productive enough.
And yet another? Competition for trade increases the quality of products, reduces price, or both and tends to equalize prices for goods of the same quality.
An appreciation of late economist Gary Becker on reason.com shows the consequence of the latter principle in a perhaps unexpected area: discrimination.
A company that pays someone less than they are worth encourages worker flight, “jumping ship.” Companies that refuse to hire qualified women or minorities when they could underbid similarly productive workers (demanding higher wages) could find themselves out-competed by less discriminatory businesses. Indeed, studies suggest they could find themselves less profitable and even out of existence.
Nobel Laureate Gary Becker saw this, and realized that free markets impose a check upon bigotry. Regulations that limit competition in industry also stifle gender workforce participation and increase inequality. “[C]ountries such as Japan that have avoided deregulation, shareholder capitalism, and open markets,” summarizes Elizabeth Nolan Brown, “tend to lag in both productivity and workplace gender equality.”
There are many good reasons to favor free markets. They not only make us wealthier, they discourage prejudicial behavior. Competition punishes bad behavior even while it emphasizes win-win scenarios.
This is Common Sense. I’m Paul Jacob.