Friday, July 3, 2015

Why Salaries Of Fire Fighters Don't Need To Be High Even Though Fire Fighting Is Valuable

See Applauding Abundant Supplies of Things of Great ‘Total Social Worth’ by Donald J. Boudreaux.

"Here’s a letter to a long-time correspondent (who doesn’t like today’s Quotation of the Day):
Ms. Anne Koeller
Dear Ms. Koeller:
Thanks for your kind e-mail.
You’re correct that the importance to humanity of the services of firefighters, paramedics, and other first-responders is huge.  But your conclusion that these workers are underpaid doesn’t follow.  Pay isn’t determined by what you call “the total social worth” of some particular line of work.  Rather, pay is determined by the value of each individual worker’s contributions to his or her fellow human beings.
The amount that Jones is paid on the market is determined by the amount that Jones adds to his or her employer’s revenue – which itself is determined by how much consumers willingly pay for the additional output produced by Jones.  If elsewhere lots of what Jones produces is available relative to the amounts of this good or service that people wish to consume, then consumers won’t be willing to pay much for what Jones produces.  The market value of Jones’s output will be low even if the “total social worth” of the good or service produced by all people in Jones’s line of work is astronomically high.
Consider this example.  Nothing has more ‘total worth’ to society than does breathable air.  Without it, we’d all die within minutes.  So suppose that, having accurately noted the great “total social worth” of air, Jones goes into the air-supply business.  He toils many hours to capture air in bottles.  Jones then offers to sell these bottles of life-sustaining gases to willing buyers here on earth.
What price will Jones fetch for his bottles of air?  Zero.  Even you, I dare say, would not pay more than $0.00 for a bottle of Jones’s air.  The reason is not that you deny the great importance of being able to breathe.  The reason is not that you don’t recognize air’s great “total social worth.”  The reason isn’t that you’re oblivious to the fact that humanity could not survive if it were denied the product that Jones works to supply.  Instead, the reason is that air is so abundant relative to humans’ demand for it that each unit of air is worthless.  If you reject the opportunity to breathe the air that Jones offers for sale, the abundance to you of air elsewhere is so great that you sacrifice nothing by spurning Jones’s offer of the air in his bottles.  Any one unit of air is of no market value to you.
While the life-saving services of first-responders are less abundant than is air, the reality is that these services are nevertheless quite plentiful.  These services are so plentiful (relative to our demand for them) that the market value of the contributions of any individual first-responder is relatively low.
Your temptation, I’ll guess, is to lament this economic reality.  But this reality should be celebrated, for it means that something of unambiguously great “total social worth” is supplied to humankind in such abundance that the prices we pay for it are low.  The alternative world in which the market wages of first-responders are very high would be a world cursed by a low supply of people who are willing and able to work as first-responders.  In that world, we’d all, except for the very rich, be constantly at greater risk of dying prematurely.  Put differently, unless you think the world would be better if air were so scarce that air-supply workers would earn high wages by selling air to willing buyers, you should recognize that our world is better than one in which first-responders commanded higher wages.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030"

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