Memo to pundits and politicians: You didn’t need to say that we had to finalize the presidential election because it’s important to know who’s going to run the country beginning January 20.
The president doesn’t run the country. This country comprises 265 million people who make billions of decisions every day. Among those decisions are the most important ones that get made: what to produce, what to buy, what jobs to create, what job to take, what investments to make, what house to buy or apartment to rent, what associations to join, how to raise the children, and on and on. The president doesn’t make those critical decisions for us … yet, thank goodness.
It’s true that the president runs one branch of the federal government, which does much more than the Constitution authorizes. But let’s not confuse the executive branch with the whole country. Presidential conceit may infect the chief executive, but let’s immunize ourselves against such folly.
At least since World War II, the American people have been sold a bill of goods (apparently to make us forget the Bill of Rights). They have been told repeatedly by the Eric Severeids and David Broders of the world, along with the various television court historians, that the federal government, especially the president and the chairman of the Federal Reserve, are the stewards of the economy. They can keep on dreaming. The “economy” is so hair-raisingly complex that no one could possibly steward it. Anyone who thinks he can do so is delusional. How does that expression go? It would be like herding cats — only worse, because no one possesses the information that constitutes the “economy,” much less the knowledge of what will happen in the future.
While the marketplace has no steward, and needs none, those who fail to understand this are capable of causing much mischief. For example, President Clinton and many members of Congress believe that the legal minimum wage should be raised. “The people making the minimum wage have not had a raise in many years,” they are fond of saying. That is patent nonsense, of course. No one who was making the minimum wage many years ago is still making it today. That is entry-level pay for the least-skilled workers. Only someone who refuses to accumulate skills and experience would be stuck at the minimum wage. Moreover, in these days of labor shortages, many entry-level jobs pay more than the legislated minimum.
None of this means that a minimum-wage law is irrelevant. It is potentially devastating to its supposed beneficiaries. Wages are not set by employers arbitrarily. When hiring someone, an employer is bound by at least two considerations based on his estimate of the worker’s productivity: if he pays the employee less than he is worth a competitor might hire the worker away; if he pays more than the employee is worth, the business will lose money and its existence (and the job) will be threatened.
It is not the boss who pays the wages. It’s the consumers. They buy a product only if they believe it is worth more than anything else they can spend their money on. If an employer pays his workers more than is justified by their value to consumers and tries to recoup the money by charging high prices, consumers have the power to veto his policy by buying elsewhere. The workers would then have to take a pay cut or lose their jobs.
If the law sets the minimum wage higher than what the market would have set, it will have the same effect as just described. Workers will lose jobs, and new jobs that might have been created won’t be. Intended beneficiaries become victims. The minimum wage is just one of myriad ways that presidents attempt to steward the economy. The results are always similar: the effects are contrary to the stated goals, and the most vulnerable members of society suffer.
The free-market economy is an example of something that may seem impossible at first glance: undesigned order. It achieves incomparable cooperation and consumer welfare precisely because it has no steward. To the extent the president tries to run it, we are in for a heap of trouble.