One City Might Have Just Cracked the Housing Crisis

By Binyamin Appelbaum of The New York Times. Excerpts:

"The Canadian government has returned 10 acres in the middle of Vancouver to the Squamish, the First Nation whose ancestors lived there. On that land, the Squamish are building the densest residential neighborhood in the country."

"Cities have largely lost the power to say yes to construction. To prevent officials from acting against the public interest, we have drained them of the power to act in the public interest. Every decision can be appealed, every complaint must be heard, every objection weighed. We are so committed to fairness that we have lost sight of the unfairness of doing nothing."

"Freed from Vancouver’s rules, the Squamish are providing the city’s residents with a chunk of the housing they so desperately need."

"Vancouver, like most cities, prioritized the interests of homeowners at the expense of everyone else"

"It works hard to prevent the replacement of houses with apartment buildings. Sometimes it even replaces apartment buildings with houses. There is an eight-unit apartment building a few blocks from Senakw on the verge of falling down. Under the city’s land-use laws, however, it cannot be replaced by a new eight-unit apartment building. A developer has proposed building three mansions instead." 

"The current generation of Squamish, raised on stories of the old Senakw village, now had the chance to build anew. They could have built single-family homes. They could have built office towers or a shopping mall. They ultimately decided to build a better version of Vancouver."

"The result was a project with more than 6,000 housing units in towers as high as 58 stories"

"Senakw “is literally what the market wants,” said Thomas Davidoff, a professor of real estate finance at the University of British Columbia who supports the project."

"The nation’s leaders frankly acknowledge that money was their most important motivation. The project was a chance for the nation to participate in Vancouver’s pre-eminent industry: real estate development. That is exactly how the economy is supposed to work. To paraphrase Adam Smith, it is not from the benevolence of real estate developers that we expect our housing, but from their regard for their own self-interest. The Squamish are going to make a lot of money, and Vancouver is going to get a lot of new housing."

"Vancouver has moved to reduce its parking requirements and to allow larger buildings in some areas."

"“Restrictive zoning has been pushing people farther and farther away from the communities that they love,” said Christine Boyle, a former Vancouver city councilor who is now housing minister for British Columbia." 

Opinion: No matter how good AI gets, it won’t beat markets

The economy isn't a vast set of equations. It's a complex discovery process done in real time. Even the best computers aren't up to that

By Peter Boettke. 

"Whenever we see big leaps in computation, would-be central planners come out of the woodwork, claiming this finally makes it possible to organize the economy better than markets do — optimizing tax rates, producing enough to meet our needs, and allocating resources in a way that maximizes well-being for all.

Such arguments gained theoretical prominence in the early 20th century, saw a resurgence with the mid-century advent of modern computing and operations research, and have emerged again with the impressive advance of artificial intelligence (AI).

But this line of thinking rests on a false premise: that an economy is nothing more than a computational problem to be solved with accurate equations and enough data and processing power.

As I argue in a recent paper for the Montreal Economic Institute, this error was understood as far back as the 18th century by Adam Smith (1723-90). In his Wealth of Nations, which just had its 250th birthday, Smith observed that producing even simple goods requires the co-operation of so many different hands that the full network of exchanges would “exceed all computation.” Even the making of a woollen coat, for instance, required farmers, spinners, dyers, merchants, shippers, and so on just to get from raw materials to market.

Such complexity doesn’t stop the coat from being produced. But Smith’s point is that there is no single mind directing every step of production, from raising the sheep to selling you a brand-new peacoat. Instead, it is through the spontaneous co-operation of the many hands and minds that make up the “invisible hand” of the market that such production is possible.

In the late 19th century, Italian economist Vilfredo Pareto (1848-1923) expanded on this point, observing that co-ordinating even a modest economy and matching resources to uses and preferences would soon cause an explosion in the number of equations to be solved. But today’s computers can handle quintillions of computations per second, more than Pareto could possibly have imagined. Doesn’t that make a difference?

This is where Nobel laureate economist Friedrich Hayek (1899-1992) comes in. Hayek explained that the problem is not merely that the relevant knowledge is decentralized — spread out across millions of individuals — but that it is often tacit. Local shopkeepers’ understanding of their customers’ buying habits cannot be translated into one data point to feed into an AI or any other kind of model. Nor can we predict the emergence of an entrepreneur dreaming up a product that did not exist before.

Most important of all is the phenomenon of prices — indispensable signals that guide our decision making. Prices are neither set in stone nor arbitrarily fixed. Instead, they emerge from real exchanges. When the price of wheat rises, it is because buyers and sellers are competing for a limited supply. This price increase signals something about relative scarcity. It also provides an incentive to adjust consumption and conserve the resource, to look for a substitute, to increase production and to innovate.

In short, prices are not lying around in the wild, waiting to be harvested and fed into an algorithm. Rather, they are the result of constantly evolving discovery. Without this process of discovery, the knowledge embedded in a price simply doesn’t come into existence.

Hayek called the price system, with its ability to generate knowledge in the market, a “marvel.” He described competition as a “discovery procedure” that does much more than allocate resources. When entrepreneurs bring new products to market, for instance, they are making informed bets. If they’re wrong, they bear the cost. If they’re right, they reap the rewards. Through this process, we all learn a little more about what is possible, what is valued and what works.

As for AI, it can process truly vast quantities of historical data to detect patterns, forecast trends and optimize within given parameters. But it can only look backward to find data, whereas economic life is forward-looking and creative. The growth of the social-media influencer market, to choose but one example, could hardly have been predicted by an algorithm 20 years ago. In the same way, today’s algorithms can’t accurately predict what or how much we’ll consume tomorrow, since much of what will matter tomorrow hasn’t been imagined yet.

As powerful and helpful a tool as AI can be to improve logistics, better manage inventories and analyze markets, it remains just that, a tool. It can help us gain a better understanding of markets but only markets themselves can predict and co-ordinate the results of the billions and billions of voluntary exchanges that take place every day."

Adam Smith on markets and their potential to benefit the poorest in society

Ginny Seung Choi & Virgil Henry Storr. From the journal Constitutional Political Economy.

"Abstract

Revisiting Adam Smith can be a useful way to resurface key aspects of how markets work that are underemphasized in current scholarship. This is especially fruitful when Smith’s claims have strong support within the political economy literature. This article focuses on Smith’s various arguments about the impact of markets on the least advantaged, and whether there is support for his claims in the contemporary literature. Despite advances in the last several decades, and indeed since the Industrial Revolution, poverty remains a worrisome problem. Additionally, inequality between countries and inequality within countries remain social challenges. Adam Smith, especially in The Wealth of Nations and The Theory of Moral Sentiments, has highlighted the potential of markets to improve the material conditions of the poorest in society."

Excerpts:

"Thus far, most global efforts to address the problems of poverty and inequality (perhaps unsurprisingly) have tended to be top-down. In 2015, for instance, all the members of the United Nations adopted 17 Sustainable Development Goals. These goals meant to serve as a call to action for member states and drive an agenda aimed at eliminating poverty, reducing inequality, encouraging economic growth, and promote inclusion and sustainability. It is unclear, almost a decade later, that this top-down effort has been successful. And, although the strategies members agreed to adopt called for expanding trade and promoting markets, they instead encouraged aid, and the focus was on countries adopting certain regulations and pursuing interventions that would ensure that the “right” kind of development occurred. Arguably, markets are frequently viewed as the cause rather than the cure for inequality and poverty." 

"In this article, we argue that markets are the best way out of poverty and toward more equal societies. Despite poverty and inequality still being problems, the evidence suggests that markets are not the problem but are part of the solution. Indeed, the potential of markets to reduce poverty and inequality is a lesson that we arguably should have learned from Adam Smith. More importantly, however, Smith encourages us to focus less on inequality and more on the conditions of the poorest."

Would Adam Smith Support the Jones Act?

Why The Economist is wrong about Smith’s stance on protectionist maritime laws.

By Caleb Petitt of The Independent Institute. 

"In an article in The Economist, it was claimed that Adam Smith would likely have supported the Jones Act because he supported the Navigation Acts. This claim is wrong on two counts. First, the idea that Smith supported the Navigation Acts is either overstated or entirely false. The Navigation Acts did not have a single aim or apply to a single sphere of commerce. Rather, they were seen both as promoting defence and opulence, and the clauses can largely be divided into those that apply to trade with Europe and those that apply to their colonies. There are four combinations of spheres of regulation and reason for regulating that could have been used to support the Navigation Acts: (Colonies, Opulence), (Colonies, Defense), (Europe, Opulence), and (Europe, Defense).

Smith clearly rejected support for the Navigation Acts for three of the four reason-sphere combinations. He advocated the relaxation or repeal of the Navigation Acts as regulations on the colonies, rejecting them as sources of defense and opulence. He also clearly stated that the Navigation Acts, as they related to European trade, were harmful to British opulence, leaving only European regulations for defensive purposes as the only possible justification for the Acts.

The European regulations were also meant to regulate trade specifically with the Dutch, not European trade generally. Smith acknowledged that the Navigation Acts were targeted at the Dutch, but also believed that they had not hindered Dutch trade, had not helped England in her wars against the Dutch, or reduced Dutch naval power. The Navigation Acts targeted the Dutch because the Dutch were the principal country engaged in the carrying trade, a country moving goods between two foreign countries, which was seen at the time as a uniquely beneficial manner of trade. That means Smith undermined a reason for supporting the Navigation Acts when he argued against the idea that there was anything special about the carrying trade.

Smith’s acknowledgment and emphasis of the point that the Navigation Acts were targeted against the Dutch also undermined support for the Navigation Acts further undermined support for them. The Dutch were strong rivals and dangerous enemies when the Navigation Acts were passed. But since then, Dutch and English interests were harmonized with the Glorious Revolution, which positioned France, not the Netherlands, as England’s chief rival. Even if Smith thought the European regulations in the Navigation Acts were effective, which appears unlikely, he certainly saw that the regulations against the Dutch were outdated in the wake of the Glorious Revolution. 

Second, regardless of Smith’s view of the Navigation Acts, Smith would be appalled by the Jones Act today because the empirically demonstrable impacts of policies shaped his policy views. You could not simply say a restriction on free trade was justified for national defense to get Adam Smith on your side; you had to show that it worked. 

For example, Smith was very critical of the herring bus bounty, which was said to improve Britain’s defense by increasing Britain’s sailors and shipping. He did not say that defense was a bad justification, but said that the bounty was too large, that it encouraged fraud, that it was not well adapted to the Scottish mode of fishing, and that it increased the price of a staple food. 

If Adam Smith looked at the impact of the Jones Act today, he would see that Jones Act vessels cost dramatically more to build than comparable foreign ships, they drive up prices, particularly in non-contiguous states and territories, and that the American ship-building industry is virtually non-existent. It would be easy for Adam Smith to see that the Jones Act has not established America as a ship-building nation, has not promoted its defense, and has done more harm than good."

Adam Smith Would not Approve (of the recent tariffs)

By Janet Bufton. She is Program Coordinator & Co-Founder the Institute for Liberal Studies in Ottawa.

"Someone asked recently what would change as a result of the world being plunged into a trade war by the Rose Garden tariffs. I quipped that either Adam Smith would be proved wrong or we’d all get poorer. (This is also true of the scaled-back tariffs, which still leave American tariffs higher than they’ve been in a century.)

In response, as sometimes happens, they brought up Adam Smith’s arguments for tariffs. These arguments come from Book 4, Chapter 2 of Wealth of Nations. They’re a red herring, as we’ll see. But let’s look at how they apply.

There are two instances in which Smith says you can always justify managing trade, and two cases in which managing trade can’t be automatically condemned. Restrictions on imports can always be justified (1) in shipping because it’s tied to military defence, and (2) by taxing imports at the same rate that domestic goods are taxed to create a level playing field. Trade restrictions shouldn’t be automatically condemned when (A) they are retaliatory tariffs, or (B) free trade is being phased in.

So what’s the big deal? Retaliatory tariffs are right there in the list. Why would the Rose Garden tariffs vex Adam Smith?

Smith is very specific about when retaliatory tariffs are appropriate. “There may be good policy in retaliations of this kind, when there is a probability that they will procure the repeal of the high duties or prohibitions complained of.” (IV.ii.39) In other words, retaliatory tariffs are good if they secure freer trade. Israel’s elimination of tariffs against the United States did not spare them. When Vietnam and the European Union offered to eliminate all tariffs, the administration rejected these offers as insufficient. If these were meant to be retaliatory tariffs, they’ve failed.

But the Rose Garden tariffs were never retaliatory. They were not based on how much other countries tariff the United States. They are not even based on estimates of non-tariff barriers. The White House confirmed that the method used to calculate the tariffs was the trade deficit divided by U.S. imports from that country, then divided again by 2 (Unless a country does not run a trade deficit with the United States, in which case the tariff was set to 10%).

So it’s not about retaliation, but—at best—a negative trade balance. And we all know what Adam Smith said about the balance of trade, right?

“Nothing, however, can be more absurd than this whole doctrine of the balance of trade, upon which, not only these restraints, but almost all the other regulations of commerce are founded. When two places trade with one another, this doctrine supposes that, if the balance be even, neither of them either loses or gains; but if it leans in any degree to one side, that one of them loses and the other gains in proportion to its declension from the exact equilibrium. Both suppositions are false.” (WN IV.iii.a)

But anyway, Adam Smith’s arguments about tariffs are a red herring if we want to know what Adam Smith would think of these tariffs.

The effect of the tariff announcement in the Rose Garden was not simply to raise the price of international trade. As Thomas Sowell observed, the tariff announcement also introduced uncertainty that makes foreign investment and globally integrated supply chains more vulnerable—more risky—at the same time as the tariffs themselves make international trade more expensive. The overall effect of these policies is the effect of all trade restrictions: they effectively shrink the global market. Exchanges that would otherwise make sense become more expensive and they don’t happen.

Adam Smith’s core economic insight, the one from which all other arguments in the Wealth of Nations follows, is that the wealth of nations is a product of the division of labour (Book 1, Chapter 1), of cooperation facilitated by our natural propensity to truck, barter, and exchange (Book 1, Chapter 2). The division of labour is limited by how many people we can divide labour between, what Smith calls the “extent of the market” (Book 1, Chapter 3).

If we will not be poorer because the tariff announcement in the Rose Garden shrunk the number of potential trades, and with them the extent of the market, then the division of labour is not the source of the wealth of nations. If the Rose Garden tariffs won’t make us all poorer, then Adam Smith was wrong about everything.

If Smith was wrong about everything, who cares when he says tariffs are good?"

Why the US Grows While the EU Slows: Adam Smith’s Recipe

By David Hebert of AEIR. 

"What explains the curious lack of economic progress in the EU over the past 16 years?

In 2008, the economies of the European Union and the United States were roughly equal in size in terms of GDP. Fast forward through a global financial crisis and pandemic and the US economy has nearly doubled while Europe’s has barely grown at all. How can we explain this?

One answer is to point out the glaring problem with comparing EU GDP in 2008 to EU GDP in 2023: Brexit. Recall that GDP is defined as the value of all the production that takes place within an economy. In 2016, the EU lost its second largest economy and with it, a significant portion of its overall GDP. Still, with a GDP of between $2.5 and 3 trillion, Britain’s exit from the EU cannot, by itself, explain the nearly $10 trillion gap in GDP.

First, we must remind ourselves that wealth does not happen automatically, bestowed from above as if it were manna from heaven. It has to be created through the conscious and deliberate efforts of workers, business leaders, and entrepreneurs. Notice one group of people missing from this list: policymakers. Despite their claims to the contrary, policymakers cannot create wealth. Indeed, they cannot do so. However, their role in wealth-creation cannot be understated, for they wield the simultaneous power to foster growth and to inhibit it.

Adam Smith gave us the blueprint for growth all the way back in 1776. He writes, “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.”

Comparing the US and the EU on these dimensions reveals differences.

Peace

To classify the current US climate as “peaceful” seems disingenuous, especially considering recent attacks, murders, and the bellicose election cycle. Indeed, “reducing crime” is a growing concern for all Americans across the entire political spectrum. Interestingly, crime rates have fallen precipitously in the last several decades. Despite the growing concerns, in a very real sense, Americans have never been safer in their homes and their communities.

Internationally, the US is also much more peacefully engaged than it has been in decades. The US is not currently engaged in any large-scale, direct combat roles in any international conflicts. To the extent that the US is involved (in Ukraine or the Israel-Hamas War), it is through providing political backing, economic aid, military intelligence, and diplomatic support. In other words, the US is engaged in supportive activities, not combative.

Looking at the EU, we see similar results. Crime rates, in general, have mostly fallen throughout the Union, with some cross-country variation. Though, it should be noted that rates of some crimes have been rising in recent years in the EU and some have fallen only slightly and nowhere near the levels to which they have fallen in the US.

Advantage: United States

Easy Taxes

“Easy taxes” could be interpreted many ways. The most obvious interpretation would be the overall tax rate. Because the EU is made up of so many different countries, each of which has their own constellation of policies, direct comparisons can be difficult to make. Looking at top marginal income tax rates, the US comes in at roughly 42.3 percent. Countries in the EU range from 55.9 percent (Denmark) to 10 percent in Romania and Bulgaria, with the average being 42.8 percent. On this dimension, taxes seem to be roughly similar in terms of ease.

One could also consider taxes “easy” if the compliance costs are relatively low and do not disproportionately benefit political cronies or large corporations. Here, both countries largely fail. The US Chamber of Commerce reported in 2024 that 73 percent of small businesses spent either “a great deal” or “a fair amount” of time on issues related to tax compliance. The European Parliament itself, in a 2023 report (PDF), admits as much, saying, “smaller enterprises are burdened with relatively larger compliance costs. Such additional burden does not appear to stem from special allowances for small firms, rather from the general design of a tax system.” Smaller businesses typically do not have access to a dedicated, in-house team of tax experts who are able to handle the administrative and compliance burdens of a tax system.

Finally, we could also consider taxes to be “easy” if they are applied in a way that is equitable. In this context, “equitable” means that people or companies in similar financial or economic situations pay the same amount of taxes. In the US, it is no secret that many companies enjoy special tax abatements and exemptions and that many will choose to incorporate in Delaware for certain tax and business advantages. But the same is true of countries in the EU, especially if we consider that companies can locate their headquarters in a particularly tax-advantaged country and that workers can come from neighboring countries with relative ease. Since tax rates, exemptions, and interpretations of statute vary by country in the EU, it can easily be the case that clever companies can find (unintended or not) loopholes allowing them to save on their tax bill.

Advantage: United States (but only slightly)

A Tolerable Administration of Justice

Whenever even just two people live in close proximity, conflict will occur. This conflict need not necessarily be violent; it could be a simple disagreement between parties requiring outside adjudication. Customers and merchants can disagree on the terms of a warranty, companies can believe that they have complied with various laws and regulations where the public might disagree, or neighbors might disagree on noise levels that are permissible at certain hours of the night.

What is necessary, then, is some means of resolving conflicts in a way that is understood to be fair and impartial to both parties. This conflict resolution mechanism must also be easily accessible so that when disputes happen, a resolution can be reached quickly and at (relatively) low cost. In most countries, this service is performed by courts and other mediation services.

In the US, The National Center for State Courts provides analyses of public opinions of the court system. In their 2023 report, they find that, broadly speaking, the public trusts the court system, finds it to be generally accessible, but that there is growing concern that the court system has become politicized.

For the EU case, the European Commission publishes an EU Justice Scoreboard report, which analyzes the court system on the bases of “efficiency, quality, and independence.” While they find evidence of general improvements being made within the Union, they also acknowledge that much work remains and that there is tremendous cross-country variation in the quality of the judiciary.

We can also get a sense of the overall administration of justice by looking at The Fraser Institute’s Economic Freedom of the World Index, specifically the legal system score by country over the last twenty years. While both the US and the EU score highly in absolute terms, of the twenty-seven countries in the EU, only seven (Austria, Denmark, Finland, Germany, Netherlands, Luxemburg, and Sweden) score higher than the US and only just barely. The other twenty countries are all significantly lower than the US scores.

This matters because having reliable, affordable, and quick access to an impartial court system allows for conflicts to be resolved and for both parties to move forward with their lives — and businesses.

Advantage: United States

Conclusion

Overall, the United States has greater peace, both domestically and internationally, easier taxes, and a more tolerable administration of justice than the European Union. The disparate economic growth between the two is understandable in those terms.

What does remain a mystery, though, is the magnitude of the disparity. If we include the UK’s GDP into the EU’s GDP, there would still be a $7 trillion gap. And while some may point out that Brexit caused reduced economic growth for the entire European region, it is hard to imagine anyone seriously arguing that voting against Brexit would have nearly doubled every single EU member’s GDP. Much remains to be examined.

Still, Adam Smith remains correct: peace, easy taxes, and a tolerable administration of justice are vital for economic progress. With these securely in place, the rest, as he says, will follow and indeed it has."

The UK’s Orwellian sounding Equality Act 2010 is strikingly Marxist

See Equality Act 2010 by Alex Tabarrok.

"The UK’s Orwellian sounding Equality Act 2010 is strikingly Marxist. It demands equal pay for work of equal value where these are defined as follows:

A’s work is equal to that of B if it is like B’s work, rated as equivalent to B’s work, or of equal value to B’s work.

A’s work is like B’s work if A’s work and B’s work are the same or broadly similar, and such differences as there are between their work are not of practical importance in relation to the terms of their work.

…A’s work is rated as equivalent to B’s work if a job evaluation study— gives an equal value to A’s job and B’s job in terms of the demands made on a worker

…A’s work is of equal value to B’s work if it is neither like B’s work nor rated as equivalent to B’s work, but nevertheless equal to B’s work in terms of the demands made on A by reference to factors such as effort, skill and decision-making.

In short, supply and demand have been replaced by judges and labor boards with the authority to deem which jobs are “equal” and therefore should be paid equally. And the labor boards do so based on vague and subjective considerations that do not change with changing circumstances. Imagine replacing “jobs” with “condiments” and having judges decide whether ketchup and mustard should be priced equally because they are similar, broadly comparable, or rated equivalent in terms of the effort, skill, and decision-making that went into their production.

You think I am joking. I am not. Here’s an example of a case just decided in the UK.

More than 3,500 current and former workers at Next have won the final stage of a six-year legal battle for equal pay.

An employment tribunal said store staff, who are predominantly women, should not have been paid at lower rates than employees in warehouses, where just over half the staff are male.

The tribunal ruled that retail workers and warehouse workers were “equal” and thus had to be paid equally. Next replied that they paid everyone market wages. Verboten!

Next argued that pay rates for warehouse workers were higher than for retail workers in the wider labour market, justifying the different rates at the company.

But the employment tribunal rejected that argument as a justification for the pay difference.

According to the tribunal’s ruling, between 2012 and 2023, 77.5% of Next’s retail consultants were female, while 52.75% of warehouse operators were male.

The tribunal accepted that the difference in pay rates between the jobs was not down to “direct discrimination”, including the “conscious or subconscious influence of gender” on pay decisions, but was caused by efforts to “reduce cost and enhance profit”.

It ruled that the “business need was not sufficiently great as to overcome the discriminatory effect of lower basic pay”.

No one is alleging that male and female warehouse workers were paid unequally or that male and female retail workers were paid unequally or that there was any direct or indirect discrimination. The only claim is that warehouse workers, who are less likely to be female than retail workers, earn more than retail workers. And since these jobs have been judged “equal,” the company has violated Equality Act 2010.

Who could have predicted that jobs as disparate as warehouse and retail jobs might one day be deemed “equal.” Yet because Next failed to foresee such lunacy they are now required to pay millions in back wages to their retail employees. Software engineers, particularly in AI, are currently in high demand. A British firm looking to hire them may hesitate to raise wages, fearing that a future ruling could classify software engineers as “equal” to a larger, lower-paid group like HR administrators. Such a decision could easily push the firm into bankruptcy.

The warehouse workers were almost 50% female (47.25%). So females were not barred from the higher paying jobs. The fact that 77.5% of the retail workers were female suggests that retail work has special appeal to females relative to males and thus that there are compensating differentials. Any of the three female plaintiffs could have taken jobs in the warehouse. If the jobs are equal and the warehouse jobs pay more this is, on the plaintiffs’ theory, “puzzling”. [Or, as Ayn Rand would say, blank out.]

In fact, the court case reveals that Next was struggling to fill the warehouse positions and offered any retail employee—including the plaintiffs—the opportunity to switch to warehouse work. On cross-examination, one of the plaintiffs admitted that, given the unpleasant conditions in the warehouse—described by the court as “the drone of machinery,…vibration, alarm sirens and the screeching of machinery, wheels and rollers, continuously present in all areas”—the warehouse job “did not seem particularly attractive” compared to the greater autonomy and more appealing environment of the retail job. The plaintiff added that she would only have considered the warehouse job if it paid “a lot more money.”

Thank goodness for the men and women who were willing to take such jobs for only a little more money! It should not shock that different people have different preferences over jobs, just as they have different preferences over ice cream. In particular, it will perhaps surprise only the judges to learn that men tend to be more wage-focused and “women are relatively more attracted to employers with low pay but high values of nonpay characteristics (NBER 32408).” The court, however, recoiled from this idea, noting that if they were to take demonstrated preferences seriously this would be tantamount to applying “an unfettered free market model of supply and demand.” The horror.

Now consider how the jobs were deemed “equal”. On the left is the job evaluation report for claimant Amanda Cox. The specific categories and numbers are not important; what is important is that the jobs are rated across 11 categories, and the point-scores are then added to get a total score at the bottom.

Amusingly, the evaluators emphasize that they use equal weighting across the categories. Of course, they did—because “equal” is synonymous with fair, right? An unequal weighting would surely be discriminatory!

I am not making this up:

Any scheme which has as its starting point – “This qualification is paramount” or that “This skill is vital” is nearly always going to be biased or at least open to charges of bias or discrimination.

Thus, if you think that a skill is vital for a job, that’s discrimination!

(Notice also that equal weighting is just another form of weighting. Given the subjective nature of both the categories and the points assigned, equal weighting holds no inherent superiority or objectivity.)

But no matter—we have yet to get to the best part. The evaluators selected three warehouse workers and assessed them using the same metric. For example, Amanda Cox was compared to warehouse worker Calvin Hazelhurst, resulting in the table on the right.

Can you spot something surprising in this table? I’ll give you a moment.

The obvious conclusion any reasonable person would draw from this table is that the jobs are clearly not equal. Amanda’s total score is 440, while Calvin’s is 340. 440 ≠ 340. Not even close! In nearly every category—except (no surprise!) physical demands and working conditions—the retail job requires more points, aka “skill and responsibility”.

At this point, most people would stop and ask some critical questions. If the jobs differ so much across multiple dimensions, isn’t it clear that they are not equal? And why do jobs that seemingly require less “skill” pay more? Could it be that our point-score rating system is oversimplified? Maybe the market is telling us something that this crude scoring system isn’t capturing? Is it time to check our premises?

But not the evaluators! Oh, no. The evaluators are thrilled–because the fact that the jobs are unequal proves that they are equal!

War is peace, freedom is slavery, ignorance is strength. UNEQUAL IS EQUAL.

Adam Smith had a much better understanding of wages in 1776 than UK judges have today.

Adam Smith had a much better understanding of wages in 1776 than UK judges have today.

The wages of labour vary with the ease or hardship, the cleanliness or dirtiness, the honourableness or dishonourableness, of the employment. Thus in most places, take the year round, a journeyman tailor earns less than a journeyman weaver. His work is much easier. A journeyman weaver earns less than a journeyman smith. His work is not always easier, but it is much cleanlier. A journeyman blacksmith, though an artificer, seldom earns so much in twelve hours, as a collier, who is only a labourer, does in eight. His work is not quite so dirty, is less dangerous, and is carried on in day-light, and above ground. Honour makes a great part of the reward of all honourable professions. In point of pecuniary gain, all things considered, they are generally under-recompensed, as I shall endeavour to shew by and by. Disgrace has the contrary effect. The trade of a butcher is a brutal and an odious business; but it is in most places more profitable than the greater part of common trades. The most detestable of all employments, that of public executioner, is, in proportion to the quantity of work done, better paid than any common trade whatever.

Today, the UK would convene a labor board to rule that the tailor and the weaver must be paid equally because they DO WORK OF EQUAL VALUE. Case closed.

Labor boards will inevitably lead to the misallocation of labor, diminishing both wealth and fairness. Severe misallocation may lead to further intervention, in the worst scenario, even to the allocation of labor by fiat. Politicization breeds division, rent-seeking, and a stagnant, unpleasant society.

More generally, it pains me that there is no recognition that the market is a discovery procedure, including the discovery of the value of different skills and people’s preferences over different jobs. No recognition that the market harnesses tacit knowledge and knowledge of particular circumstances of time and place–knowledge that is difficult to quantify, communicate, or communicate in a timely manner–and that “society’s economic problems are primarily related to adapting quickly to changes in these circumstances.” No recognition that a price is a signal wrapped up in an incentive.

I despair when I consider that these fundamental ideas are the foundation of our liberal, global, and prosperous civilization. On economics, as on free speech, the UK has entered the great forgetting.

Addendum: A special hat tip to Bruce Greig who brought this to my attention and had the receipts."