The Economy is Not Always Fair
By Dr. John Hilston
May 17, 2012 - The problem with fairness is that everyone tends to differ about how “fair” should be defined. While it may seem unfair that many noble entrepreneurial efforts fail, in many cases it's probably fair that they do.
The market consists of you, me and every other potential buyer. If we don’t want to buy a solar panel or a car, in a free country that's our right. But if very few people actually buy that solar panel or car, the enterprise will fail without expensive government assistance.
In the labor market, teachers and college professors think they should have a higher salary because they form the basis for people learning other professions, skills and trades. They are 100 percent correct, although I’m not an unbiased observer.
Doctors think they should make more because without health, there is no life. Engineers think they should make more because earning their degree is hard and without their expertise we would not have bridges to cross, buildings to work in or computers to work on.
You get the idea. That's why the best arbiter of what's a fair wage is supply and demand, even if it seems unfair.
The price of labor — also known as the wage rate or salary — is determined through the interaction of labor supply and demand. In the labor market, the worker is the labor supply. As a worker, you are selling your services to employers who are demanding those services.
The alternative to market fairness is a dictator or central planner deciding how things should happen. Ask Cuba how that works.
In Cuba, there are occasional surpluses and constant shortages. Force is needed to maintain the communist, central-planned economy and nobody is allowed to discuss the downsides, except maybe the Castro brothers.
I do understand there is a lot of ground between the current Cuban system and a system with no rules. However, it's important to differentiate between free markets and immoral players within those markets.
Also, unfair behavior is not limited to business people. Government officials behave badly, too. While the 1 percent might behave unfairly at times, if we turn over more power to the government, we are likely to get an even smaller concentration of power than the 1 percent.
Then we'll have even less recourse to address any unfairness. After all, government hasn’t always been known for high ethics and quick responses.
Dr. John Hilston is an associate professor of economics at Brevard Community College on the Palm Bay campus.