Thursday, October 05, 2006

Discrimination and Government Power

In many communities around the nation these days debate rages over the prohibition of so called "big box" merchandisers such as WalMart, Costco, Home Depot and Lowes. One of the main arguments put forward by those who oppose such enterprises centers around the competitive advantage they enjoy over smaller "mom and pop" businesses which the opponents prefer. As the prices in any large scale business tend to be lower than in smaller ones the opponents point to "unfair" competition. There are, however other factors to consider in the competition equation such as service, convenience and time, which customers invariably consider. Customers, if given the opportunity, may be willing to pay extra for such conveniences as avoiding checkout queues and obtaining personal assistance. Conversely, others may opt for the inconveniences in order to retain more of their hard earned cash to spend on other products. Dr. Walter Williams calls this the cost of preference indulgence. Leonidas will tend to oppose those who would use government power at any level to suppress or eliminate freedom of choice.

In the U.S., the Davis-Bacon Act of 1931 (still on the books), a super minimum wage law, was enacted to protect unionized white construction workers from competition with black workers. The support ran along the lines of Alabama Rep. Clayton Allgood's testimony: "That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country." (Congressional Record, 1931, page 6513).

What minimum wage laws do is lower the cost of, and hence subsidize, racial preference indulgence. After all, if an employer must pay the same wage no matter whom he hires, the cost of discriminating in favor of the people he prefers is cheaper. This is a general principle. If filet mignon sold for $9 a pound and chuck steak $4, the cost of discriminating in favor of filet mignon is $5 a pound, the price difference. But if a law mandating a minimum price for chuck steak were on the books, say, $7 a pound, it would lower the cost of discrimination against chuck steak.

Minimum or maximum prices are one of the most effective ways to encourage people to indulge their preferences, be they racial or any other preference. In general, any kind of economic regulation that restricts peaceable, voluntary exchange has the capacity to lower the costs of preference indulgence. Decent people should be against such regulations.

Meanwhile, should automobiles have been prohibited in order to protect buggy-whip makers' jobs?

hat tip/ Dick MacDonald

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