Wednesday, March 25, 2015

Economic Myth #1: Teachers are Underpaid

We all have our favorite teachers – the ones who showed us compassion, given us advice, and taught us valuable lessons both in and out of the classroom. As such, teaching is often referred to as a noble calling. One of my favorite examples of the sentimentalizing of the teaching profession is this comic version of Taylor Mali's half-rant-half-poem, “What Teachers Make.”

However, despite the rhetoric, teaching is also an under-appreciated profession. To explain, when it comes to remuneration, with the exception of the small handful of superstar teachers who become millionaires, most teachers are underpaid (supposedly).

Enter Robert Reich. For those of you who are not familiar with him, he is a former Labor Secretary who served under President Bill Clinton from 1993 to 1997. He is also a former(?) professor at Harvard's Kennedy School of Government. He has also starred in his own documentary, Inequality for All.

Recently, he posted on his Facebook page a supposed conversation that he had with “a wealthy businessman” who believed that American teachers were paid too much. During this discussion that he had with this businessman, Reich bravely defended the embattled American teachers. He said that a nation's human capital is more important than its financial capital; and that, therefore, “if we want talented men and women to become teachers rather than bankers, we need to pay them far more.”

This Facebook post was a reinforcement of a similar post that he published last year in his blog when he championed teachers' “worth.” Not too surprisingly, the arguments he used sounded suspiciously a lot like Karl Marx's discredited and debunked labor theory of value, which is an economic theory that argues that the economic value of a good or service is determined by the total amount of labor required to produce it.

Can you imagine if this were actually practiced? Can you imagine how much it would cost to pay for a single pencil? Considering how thoroughly the labor theory of value had been discredited and how long it has been since it had been discredited, Reich is either pretending to be unaware of this fact for a political reason, or he is truly clueless.

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Furthermore, Reich does not seem to have any idea how prices for commodities – yes, labor is an economic commodity just as anything else – are determined, which is one of the first basic principles that is taught in any semi-respectable Economics 101 class. And I think it is very bizarre that he doesn't seem to know how different laborers' wages are determined considering the fact he used to be the Secretary of Labor! If a former Secretary of Defense did not know where Iraq was located on the map, you'd be a little concerned, too, wouldn't you?

One of the core tenets of economics that Adam Smith introduced to the world is the paradox of value, which is also known as the diamond-water paradox. The question goes like this: Considering the fact that water is vital for life whereas diamonds are not, why are diamonds more expensive than water?

Maybe she's to blame?
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The premise behind the question is certainly true. Water is vital for the preservation of all life as we know it. The popularity of diamonds, on the other hand, is the result of a marketing campaign gone wild. So why the huge difference in price?

That is because when individuals make decisions, they consider the additional cost and the additional benefit that would result from making the decision. This additional cost and additional benefit that people have to consider is known as Marginal Costs and Marginal Benefits respectively.

The important thing to keep in mind is that whenever a person decides to buy anything, he always has to consider the specific price that he is paying for a specific good that he is buying at that time. And then he has to consider how much additional benefit that he will get from enjoying that additional good, which always comes at an additional cost.

However, things change drastically if people were not buying a specific good at a specific price, but rather buying ALL of a particular good at the same time.

For example, if people all over the world simultaneously decided to buy ALL the drinkable water in the world, then yes, due to scarcity of drinkable water, the price of water would skyrocket. The price of diamonds would seem like child's play at that point. In fact, if that were to actually happen, unless your first name was Bill and your last name was Gates, you would never be able to go anywhere near a cup of water. That is, unless you had an army of very angry machete-wielding psychopaths behind you.

That might be enough to get into the Coco Bongo, but for a glass of water? Please.
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Fortunately, however, people never behave this way (here's to hoping that a nuclear apocalypse doesn't break out any time soon). In reality, individuals purchase a specific amount of water or a specific amount of diamonds at any given time. Therefore, what comes into play is subjective value, a concept that Reich cannot seem to get his head around. What subjective value states is that the value of any good is determined by the importance an individual places on that good, which is obviously different for every person.

Now, because we do not have to worry that the next bottle of water that we purchase will cost us tens of millions of dollars, unless we are literally fighting for survival in the remains of a nuclear wasteland, the truth of the matter is that most people value diamonds more than they value a bottle of water. If you want proof of this, try giving your girlfriend a bottle of Evian instead of a diamond ring when you propose to her. And then tell me how saying “But honey, water is vital for life whereas diamonds are not” goes for you.

So now we know why diamonds are more expensive than water. Thus, using that example, we can apply it to Reich's argument that bankers ought to be paid less and teachers ought to be paid more. After all, as Taylor Mali said, teachers make a difference. So why do teachers earn so little compared to bankers?

Like the water-diamond paradox, when we think about why teachers are paid less than bankers, we have to think about marginal costs, marginal benefits, productivity, and subjective value.

If people had to collectively choose between employing ALL teachers and ALL bankers, most people would (hopefully) think that employing teachers would be more beneficial for society. Thankfully, however, no one ever has to make such a choice in reality. After all, if such a choice was made and teachers were paid as much as hedge fund managers, or more, then practically no one would be able to afford to go to school.

Or if the choice came down to teachers versus farmers, then practically no one would be able to afford to eat.
And after we take into consideration marginal costs, marginal benefits, productivity, and subjective value, whether we like to admit it or not, for reasons that range from marginal value that both professions provide for society to simple supply and demand, society in general values the services provided by bankers more than it values the services provided by teachers. Just like it values diamonds more than it values water. That is why there is such a big difference between what teachers and bankers earn.

Going back to Reich's Facebook post, it is therefore easy to see that by insisting that teachers are paid too little and asserting that a nation's human capital is more valuable than its financial capital (never mind the different marginal values that each profession brings to different people), Reich is attempting to force an objective viewpoint  his objective viewpoint  onto others. Seeing how people value things differently at different times and under different sets of circumstances, Reich is not actually making an economic argument, but rather a political one; and an irrational one to boot.

And I do believe that there is a word for that sort of behavior – demagoguery.

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Monday, March 23, 2015

Grieving Lee Kuan Yew's Passing

I go through the news at least twice a day every day. For those who frequent this blog, I am sure that it will not surprise you when I say that I have tailored my newsfeed to focus on news stories that are focused on business, finance, and economics.

However, I saw a news story pop up the other day, the kind that doesn't usually appear on my newsfeed, which grabbed my attention.

It was a headline from The Wall Street JournalSingapore Former Prime Minister Lee Kuan Yew’s Condition Worsens.

At age 91, Lee Kuan Yew has certainly lived a long life, and it is only natural that sooner or later, death comes for saints and sinners alike. And just this morning, I saw that he has finally passed away. No one lives forever, and though his passing was expected, I still feel a deep sense of sadness knowing that he is gone.

I was fifteen years old when I first read Alex Josey's book Lee Kuan Yew: The Critical Years (1971-1978) in my school's library. As I read about the political challenges that Lee Kuan Yew had to face – striving to have Singapore become accepted and then eventually being expelled from the Malaysian Federation, the conflict with the communists, the delicate balancing act that was needed to ensure Singapore's multicultural population did not devolve into ethnic strife, the establishment of an institutional and legal order that were needed to transform Singapore from a former backwater colony to a developed nation – my respect and admiration for him knew no bounds.

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It was right around the time when the conflagration that came to be known as the Asian Economic Crisis engulfed so many lives when I first read about Lee Kuan Yew. Although Brunei, the country where I was living at the time, was not considered as one of the countries that was directly affected by the crisis, when the indirect effects of the crisis merged with Brunei's own internal problems at the time  which involved a playboy prince who had misspent billions of the country's money to maintain a hedonist lifestyle (see here, here, here, and here– Brunei's economy went into a tailspin.

As I compared him to other Asian leaders who were in power at the time, many of them now disgraced and/or forgotten, I felt bitterly angry that there wasn't anyone else who possessed the determination, the vision, the self-confidence, and the intelligence that Lee Kuan Yew possessed. I thought that Lee Kuan Yew was a giant among men and that he was the kind of leader that Park Chung-hee could have been; the kind of leader that world leaders ought to emulate.

Then for many years after that, I had stopped thinking of Lee Kuan Yew, until now. The simple reason for it was that despite the ravaging effects of the Asian Economic Crisis and Amadeo's implosion, life still went on. I went on to graduate from high school, went on to college and then graduated from college as well, learned and experienced new things, gotten jobs, quit jobs, paid bills, accumulated debt, went through personal hardships, overcame some of them, and learned to adapt to those that I could not overcome. Life has a way of moving on, it seems, and making us forget even things that we once held most dear.

As the years passed by, after being influenced by Milton Friedman's eloquent arguments for economic freedom, Friedrich Hayek's seminal book The Road to Serfdom, and Ayn Rand's philosophy of Objectivism, my views changed dramatically. And I stopped believing that Lee Kuan Yew was the kind of leader that others ought to emulate.

I rejected Lee Kuan Yew's tribal notion of “Asian Values” – the implication that “Western-style” democracy is somehow not applicable to Asian nations because of the particular sets of culture that Asians are born and raised in. I rejected the notion that culture determines an entire people's societal structure into perpetuity.

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The United States' military adventures in Iraq and Afghanistan and its subsequent failures to “impose democracy” on those societies might have somewhat exonerated Lee Kuan Yew's belief that cultural differences could cause an imposition of democracy on those societies to become a failure.

However, comparing Asian countries – such as South Korea, Japan, Taiwan, Hong Kong, and Singapore, which have developed their economies, social structures, and their political values since the 1950s – to Iraq which had been ruled by a fascist dictator and to Afghanistan that had been ruled by the Taliban for decades is a clear attempt at academic dishonesty. As the former countries' economies transformed from labor-intensive economies to capital-intensive economies to technology-intensive economies, people's priorities, thoughts, beliefs, and political views have changed.

The idea that people's culture is static is wrong. And it is clear that Lee Kuan Yew could not have failed to have known that. In other words, his notion of Asian Values” was no more than a bald-faced attempt at retaining his own hold on power.

I also rejected Lee Kuan Yew's reliance on Orwellian social engineering programs and Machiavellian politics to curtail social vices that range from chewing bubble gum to caning people for drug-related charges. His use of the Internal Security Act, Singapore's version of Korea's National Security Act, as well as his penchant for bankrupting his political opponents (see here, here, and here), which effectively banned them from participating in politics due to the country's Bankruptcy Laws, was just as abusive, if not more so.

I also found it hypocritical that his government intruded so much into Singaporeans' daily lives despite his proclaimed belief that “the ruler or the government does not try to provide for a person what the family best provides.” The extent that is Singapore's Nanny State is especially glaring considering the fact that over 80% of the Singaporean population lives in public housing.

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However, Lee Kuan Yew's most lasting legacy, which will last into the future long after he is gone, is that he was the intellectual voice behind the foisting of authoritarian capitalism. He succeeded where Park Chung-hee failed. Unsurprisingly, Singapore has long been China's source of inspiration in its plans to develop its political structure as well as its socio-economic engineering programs (see here, here, here, and here).

Considering China's economic might, it is possible that the authoritarian capitalism that Lee Kuan Yew advocated and championed will define the twenty-first century as much as liberal capitalism defined the twentieth century, which would seemingly nullify Francis Fukuyama's theories in his book, The End of History. If Lee Kuan Yew's version of capitalism replaces the liberal form of capitalism in much of the world's zeitgeist, which I think it could, the social changes it could bring to the world will be enormous, in both good and terrible ways.

It has been many years since I thought that Lee Kuan Yew was the kind of leader that world leaders ought to emulate. As I said earlier, I stopped believing that a long time ago. Now, I have lost all faith in the benefits of concentrated political power even if it is in the hands of wise and benevolent leaders of whom I know none.

Although I now stand firmly against many things that Lee Kuan Yew stood for despite my youthful dalliances with authoritarianism, I am still grieving now that Lee Kuan Yew has breathed his last. Although I have come to stand opposed to his leadership style and philosophy, and dearly hope that his legacy will not be as widespread as I fear it will be, what no one can deny is that he was still an intellectual giant among men who had achieved more than most can even dream. Though perhaps not goodness, he has certainly achieved greatness and immortality in his own right. As Richard Nixon once said, had Lee Kuan Yew “lived in another time and another place, he might have attained the world stature of a Churchill, a Disraeli, or a Gladstone.”

Though I am grieving his passing, I do not grieve the authoritarian that he became. Rather, I am grieving the man that he could have been – an intellectual titan who might have attained the world stature of a Locke, a Jefferson, or a Tocqueville – a man who, above all else, might have used his staggering and formidable intelligence to champion the cause of freedom and liberty.

Unless you are on your deathbed
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Wednesday, March 18, 2015

Enslaved Workers vs. Blood-Sucking Employers?

There is an organization called Labor 411, which I came to learn of through my Facebook newsfeed. When I checked out the organization's website, its Mission Statement says, “We are committed to building a national Buy Union, Buy American movement as a means of improving the safety and economic well being of union workers and their families.”

I did not need to read more than that. It's quite obvious from that statement alone that it is nothing more than an interest group that is also not very well-versed in economics. To see why buying locally, which the phrase “Buy Union, Buy American” implies, is so utterly devoid of anything that resembles intelligence, see here, here, here, here, here, here, and here.

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Coming across an individual or a group of individuals or an organization that is economically illiterate is hardly a new experience for me. I come across more than my fair share of economic illiteracy on a daily basis whenever I turn on the news. So, it should not have bothered me too much.

What annoyed me enough to warrant a separate blog post was this picture that they posted on their Facebook page.

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The very first thing that caught my attention was the utter ridiculousness of this “conversation.” It is obvious that this conversation was not based on a real-life dialog between a CEO of some company and one of his employees. For one thing, contrary to popular belief, a business owner does not, in fact, have much to gain by making his employees feel small and insignificant. In fact, that's probably a good way to end up on the news for all the wrong reasons.

Talk about a PR nightmare
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What this meme did instead was expose the psychological condition of the creator of this particular meme, as well as those who liked it. It shows that they have convinced themselves that the employer, the business owner, senior management, the CEO, the rich, or whatever other term that is used to describe those at the upper rungs of the corporate ladder are evil.

By combining ad hominem attacks, appeals to emotion, straw man arguments, as well as forcing the viewers to rely on their own anecdotal evidence, Labor 411 and its supporters have made an argument without ever needing to make an actual argument. It is a type of argument that bypasses logic by means of raised eyebrows, shrugs, and snickers to express only one thing – disapproval – and which in reality is a confession of intellectual impotence. It is a type of argument whereby its supporters substitute moral judgment for intellectual argument.

Secondly, not only did this single picture betray their complete and utter ignorance of economics, it also exposed their complete and utter ignorance of how a business is even run.

Their idea of how a business is run seems to go like this – the workers (aka the slaves) toil away in the factories or cubicles (aka the cotton fields) in order to make a meager wage (aka just to avoid being whipped) while the employer (aka the master) lazes the day away while counting his money in his comfortable office doing nothing more than issuing orders, which anyone else with an elementary school education could do.

This actually seems to be the way many people think business is actually run!
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What these people don't seem to realize is that that is just not how a business works.

Case in point, any business owner, ranging from your corner grocery store to any one of your Fortune 500 companies, will tell you that regardless of what happens, assuming that the business is being run legally and legitimately, at the end of the day, everyone else will always get paid before the owner can pocket anything for himself. When running a business, profits only come later, if at all.

If you are reading this, you should try this thought experiment. If you worked at Company A for a whole month, and then your employer told you that he did not have enough money to pay you your contractually obligated salary before he drove off in his brand new BMW, how much longer would you keep working there?

Not only would you stop showing up to work the very next day, you would also most likely sue.

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Workers are always paid before the owner can pocket anything for himself because a worker's wages are guaranteed by law. However, an entrepreneur's profits are not guaranteed by law. There is no law that states that an entrepreneur is guaranteed the right to make a profit. Whether the entrepreneur makes a profit or not depends on his own abilities, entrepreneurial skills, and luck.

So, a business owner has to provide the money to make sure that the building and the facilities are built, maintained, furnished, and equipped. The business owner also has to pay his workers regularly for doing their work unless he wishes to be sued in court, which will likely end up costing him a lot more money. His suppliers will also have to be paid unless he wishes to be sued by them, too. He has to pay property taxes and payroll taxes unless he wants to make an enemy of the government. Only later, if the business is successful, does the owner see a return on his investment.

A very good example of this is Amazon. According to Forbes Magazine, Amazon was ranked as the thirty-fifth biggest American corporation as the company reported US$74.5 billion in sales and US$274 million in earnings in 2014. So, most people think of Amazon as a huge mega-business that has an almost unlimited stash of money; and to some people, Amazon is now a villainous company that tramples on everyone else for the sake of its own profit margins.

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However, what many people forget (or never even realized) is that even though Amazon was founded in 1994, the company did not make any profit until 2002. For seven whole years, which is much longer than most businesses last (8 out of 10 businesses fail within the first 18 months), Amazon hemorrhaged money, and lots of it. But during those seven years, Amazon's employees and its suppliers kept collecting their checks.

So, if anything, what the meme that caused this whole blog post should have said was:

Him: Lemme tell you something. The fact of the matter is that we all worked really hard to get where we are. It was a hard slog, but we made it. You put in the work and the determination that this company could not have done without. And I took the big risks trying to steer this thing through, which the company could also not have done without. I think you and I earned the right to buy a nice thing for ourselves just this once.

But that would have been too wordy, and it would have made too much sense. And why would anyone allow something like that to get in the way of trying to score cheap political points?

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Monday, March 16, 2015

Trickle-Down Economics Redux

The Straw Man Argument is a type of argument that is used to misrepresent someone else's argument, by way of exaggeration or misrepresentation or complete fabrication, with the intention of making the other person's argument easier to attack. It is a dishonest method that almost always undermines rational debate.

As such, almost everyone hates this form of argument. However, many people still resort to this kind of argument on a daily basis – some deliberately, while others unknowingly. And one of the most prominent Straw Man Arguments that have been used so excessively that many people have come to accept the Straw Man as gospel truth is the concept of Trickle-Down Economics.

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It is very easy to find arguments against trickle-down economics.

Senator Elizabeth Warren said that trickle-down economics “devastated U.S. workers while propping up the wealthy.”

Pope Francis pontificated against it, calling it a “a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.”

(I am not sure if Pope Francis is the right person to talk about naïveté or the idiocy of faith. See here and here.)

Economists have argued against it, too. For example, Paul Krugman said that trickle-down economics is “being nice to the wealthy and cruel to the poor.” And Robert Reich says that it is one of the “big lies” conservatives promise voters.

The OECD released a report that said that “the benefits of growth do not automatically trickle down across society.”

Trickle-down economics has also been attacked and criticized by thinkers, academics, politicians, activists, and journalists in Korea as well (see here, here, here, here, here, and here).

The case against trickle-down economics is clear. It is also clear that it has some very powerful enemies.

Not a friendly face in sight...
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But who actually supports trickle-down economics? Who is actually championing giving more to the rich? The answer is “No one.”

As I already said in a previous post:

Trickle-Down Economics does not actually exist. It is a lie. “Trickle-Down Economics” was a phrase that was devised in the United States in the 1980s when the Democratic Party needed a a catchy zinger to attack President Reagan's economic policy. The phrase was a remarkable political slogan as it painted Reagan and other advocates of tax reduction as sycophants who had all been bought and paid for by greedy billionaires at the expense of the poor and the middle class.

One of the most prolific economists of our time, Thomas Sowell, once challenged anybody “to quote any economist outside of an insane asylum who had ever advocated this “trickle-down” theory.”

To date, no one has ever adequately answered that challenge.

Quoting Thomas Sowell again:

Let’s do something completely unexpected: Let's stop and think. Why would anyone advocate that we “give” something to A in hopes that it would trickle down to B? Why in the world would any sane person not give it to B and cut out the middleman? But all this is moot, because there was no trickle-down theory about giving something to anybody in the first place.

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Those who advocate lower taxes, of which I am one, have never made their case by supporting the idea of transferring wealth from the masses to the rich. Rather, they emphasize the creation of additional wealth and jobs when businesses are not hampered by burdensome regulations and steep taxes.

However, even that is only half of the argument. Those who champion lower taxes do not support lowering taxes only for the rich, but also for everyone else. Crazy as it may sound, no free market capitalist has ever claimed that society would become wealthier because the rich would spend more. Rather, they argue – correctly – that tax cuts in general would stimulate the economy. That is because lowering taxes is based on the idea that if the government lowers taxes, the people – both rich and poor – will have more of their own money and will, therefore, tend to engage in more economic activity.

What is undeniable is that reducing taxes does help the rich more than it helps the poor. However, that is incidental. After all, the rich pay far more than their “fair share” of taxes. Therefore, it becomes all too easy to caricature any tax cut as “tax cuts for the rich.”

Tax cuts might help the rich more, but it also helps the poor. After all, there are only four ways to spend money:

  • Spend your own money on yourself.
  • Spend your own money on somebody else.
  • Spend somebody else’s money on yourself.
  • Spend somebody else’s money on somebody else.

Therefore, the phrases “trickle-down economics” and “tax cuts for the rich” are nothing more than the inventions of a desperate political mind that did not have the ability to debate the merits of an opposing viewpoint. After all, what easier way can there be to “win” a debate than to invent a viewpoint that no one holds, attack that viewpoint, and then claim intellectual victory?

This is not to say that there is no need for a real debate about which policies are needed in order to promote economic growth. With all due respect to Grover Norquist, God knows that lowering marginal tax rates alone is not a panacea (see here and here). That debate is badly needed. Unfortunately, however, demagogues are far too busy trying to slay the imaginary “trickle-down” dragon.

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Monday, March 9, 2015

Gender Quotas for Corporate Boardrooms - A Horrible Idea

On March 6th 2015, Germany passed a law that requires its large companies to allocate 30 percent of their seats on non-executive boards to women by the beginning of next year. Germany's lower house of parliament passed this law due to the fact that women are grossly under-represented in the top echelons of the corporate world (only 11.7 percent of executive posts were held by women).

Proponents of the law claim that the law is needed because women need to have a voice at the level where decisions on working conditions and pay are taken.

Germany has become the latest country to pass an affirmative action law for women. Norway became the first country to have legislated a gender quota in 2003. Other countries, including France, Malaysia, Belgium, Iceland, Italy, the Netherlands, and Spain followed suit.

Now that Germany, the largest European economy and the fourth largest economy in the world, has taken a stance on this issue, I believe that it is only a matter of time before the idea becomes accepted throughout the rest of the European Union. And in time, though who knows how long, it will become a goal that all politicians in the world will support as more and more people will rhetorically ask, “If it works in Europe, why can't it work here?”

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However, I remain firmly opposed to legislating a gender quota just as much as I have always opposed practically any other form of artificially mandated quotas.

Unintended Consequences

The stated goals of establishing a gender quota is to increase the number of women in corporate boardrooms. However, is that the end goal in and of itself? If the goal is merely to increase the number of women in corporate boardrooms, then that would be a silly goal indeed. However, if the ultimate goal is to improve working conditions and wages for women in general, then the goal might not be so straightforward.

One of the unintended consequences of Affirmative Action laws vis-à-vis African Americans is the tokenism that people feel. Whether or not the feeling is truly justifiable is secondary. What is important is that the feeling is real. It is more than likely that tokenism will be just as prevalent when it comes to legislating a gender quota as much as there has been for racial quotas.

When female hires, who might be brilliant, are painted as obligatory and unwanted diversity hires, that can set a negative tone at the top of any corporation. It will also send a damning message  that women cannot successfully compete in the workplace without government intervention.

It is up to private businesses – not the government – to incite change. Admittedly, forcing a gender quota would be one of the fastest paths to bring about change. But at what cost?

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Trickle-Down Economics for Progressives

Many progressives have criticized and challenged Trickle-Down Economics (see here, here, and here), often referring to it as “Voodoo Economics.”

The irony, however, is that Trickle-Down Economics does not actually exist. It is a lie. Trickle-Down Economics was a phrase that was devised in the United States in the 1980s when the Democratic Party needed a a catchy zinger to attack President Reagan's economic policy. The phrase was a remarkable political slogan as it painted Reagan and other advocates of tax reduction as sycophants who had all been bought and paid for by greedy billionaires at the expense of the poor and the middle class.

So, I will echo Thomas Sowell's challenge and dare anyone to “quote any economist outside of an insane asylum who had ever advocated this “trickle-down” theory.”

The thing is, contrary to popular opinion, no advocate of tax reduction actually endorses Trickle-Down Economics.

Ironically, again, there are plenty of progressives who do believe in their version of Trickle-Down Economics. One of the rationale behind establishing gender quotas is the belief that once there are more women in positions of “economic power,” they will make “the system” a bit more women-friendly, from top to bottom. If that does not sound like Trickle-Down Economics, I don't know what does.

But is there any evidence that suggests that forcing an increase in the number of women in corporate boardrooms have translated to better conditions for women at the lower rungs of the corporate ladder? There appears to be no such evidence. For instance, this study states that Norway's move “did not boost female enrollment in business schools, significantly reduce the pay gap or foster a more family-friendly culture in the workplace.”

Voodoo Economics, indeed.

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Political Force vs. Individual Liberty

Businesses exist to make money. Public companies are owned by shareholders who have risked their own capital in the hopes of making a return on their investments. Therefore, the business must be run primarily for the benefit of shareholders. To quote Milton Friedman, “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

Therefore, any time a business decides to employ anyone, they do so with the aim of making as much money as possible. So, whether a business chooses to employ a man or a woman, it is typically because the person hired will likely result in greater profits for the business.

Note that I used the word “business.” In reality, however, business is not a living entity. Only people can choose to employ other people. So, when a government legislates a gender quota or a race quota, that means that the government is denying people the freedom to associate or contract with whomever they choose.

Though I understand why progressives and feminists would support a gender quota, once again, we have to ask “at what cost?”

Also, we have to ask whether the involvement of the government in establishing gender quotas will actually help to combat sexism. My position has always been that equality is better achieved by treating everyone as equally as possible than by relying on the legal use of force, which will more likely breed resentment than anything else.

There is more than one way to measure costs!
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The Market Does Not Solve All Problems!

This is the typical response that I often hear when I say that government interference will not solve a problem, and that the market provides better solutions.

In case I hear it again, I would like to nip it in the bud right away. No, the market does not solve all problems. In fact, I do not know anyone who has ever subscribed to such a caricature of an idea, least of all myself. The free market is merely the function of the free exchanges of goods and services entered into by individuals. Therefore, the market cannot “solve” anything other than the immediate needs of the sellers and the buyers to sell or buy goods.

Case in point, absent external social engineering, such as education or economic sanctions or outright war, if a society's traditional attitudes, mores, and values differ from what is considered mainstream views (à la Pakistan's tribal areas) economics alone will not lead to social changes.

It is certainly true that there are some business owners who simply hate women or ethnic minorities. Yes, they will practice discrimination in its ugliest form. However, what is also true is that market forces are stacked against them. Though neither racism nor sexism is entirely gone, and I doubt that it will ever be completely gone, both have become more and more unpopular attitudes to hold in the modern world.

Also, competition between businesses ensures that bigoted business owners will think twice before refusing to hire competent prospective employees lest a less bigoted competitor employs them.

In the modern world, the punishment for sexism and racism can be swift and terrible. Case in point, it did not take long for Sweet Cakes by Melissa (check the comments section here), a bakery in Oregon that refused to make a wedding cake for a lesbian couple, to go out of business.

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Why Corporate Boardrooms?

Does anyone really know why women are under-represented in corporate boardrooms? If anyone can actually answer that question, I think several Nobel prizes might be in order. I do not have a definitive answer to that question. I doubt that anyone actually does.

But here is what we do know. We know that women are equally represented in certain occupations such as journalism, medicine, and the law. We also know that women are over-represented in other professions such as social work, nursing, and teaching. Finally, we also know that women are under-represented in other professions such as engineering, IT, the police, and the military.

Therefore, it seems that lifestyle and career choices seem to determine which occupations women choose. Granted, the majority of people face social engineering based on their genders from a very young age, but that seems more of a societal problem rather than an economic one.

So why have progressives, feminists, and governments focused on establishing gender quotas for corporate boardrooms and not others? After all, corporate elites live very different lives from the rest of us. They attended the most exclusive universities, and they live and work in economic strata that is out of most people's reach.

Therefore, whether those chosen to belong to corporate boardrooms are men or women, there seems to be very little evidence that suggests that they have an effect on those on the lower rungs of the corporate ladder. For instance, an upper middle-class Korean woman who has a senior position in Samsung probably has more in common with a Japanese woman of her class who works at Sony than the former does with a working-class Korean woman who works at the same company.

Focusing solely on corporate boardrooms is akin to treating a symptom rather than the cause of a disease.

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Attempting to force a gender quota or a race quota or any other kind of quota on private businesses is both immoral and ineffective. It sounds good on paper. It sounds like the fair and just thing to do. It is not. It is feel-good politics. And it ought to be questioned and challenged every step of the way.

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