EIN GEDANKENEXPERIMENT Ὰ LA RAWLS

[The title of my post today is an homage to Karl Marx, who spoke and wrote German, French, and English interchangeably, sometimes all in the same sentence. ] As I was taking my walk this morning at 5:45 a.m., the HU bus passed me along Finley Golf Course Road on its way to the UNC medical complex down Highway 54.  I waved and the bus driver, with whom I have established a relationship, honked in reply [something that could never happen in Paris, by the way].  I wondered idly how much he makes for driving the bus -- not very much, I thought.   That got me thinking about Rawls' original position, Walrasian tâtonnement, the neo-classical explanation of wage rates as determined by marginal productivity, and what a real free market in labor would look like [which gives you some idea how unwise it is to give an aging philosopher too much time to think.]  By the time I had taken my turn at the intersection with 54 and was on my way back past the Ronald McDonald House and the waste water treatment plant, I had conjured up the following theoretical fantasy, which I present as a thought experiment designed to exhibit the fact that contemporary economics is, dare I say, full of it.

Let us imagine that Americans got together and decided to set the wages and salaries for all the jobs in the economy by strict supply and demand.  To begin with, we would make a list of all the jobs and divide the total number into the total amount paid out in wages, salaries, bonuses, and fringe benefits to every working person in America, from the housemaids in hotels to the Masters of the Universe on Wall Street.  Every job would provisionally be assigned this average or mean wage.  How much might that be?  Well, since this is a capitalist fantasy -- indeed, an Ayn Rand/Ludwig von Mises fantasy in a manner of speaking -- we will leave profits to one side, as belonging to the owners of capital, whomever they may be.  There are officially about 145 million men and women employed [never mind all the people who desperately want jobs -- this is a thought experiment, not an economic analysis.]  Roughly nine trillion a year goes to them in wages, salaries, and bonuses, so that works out to $62,000 a year average.  Not bad.  [You see how skewed things are by the enormous wages and salaries at the top.]

We now randomly distribute job assignment slips to all 145 million men and women in the work force, regardless of their preferences.   In other words, each person gets a slip saying "You have been assigned the following job."  There are obviously going to be huge mismatches in the assignment of jobs to people, with lots of people eager to switch jobs, but these mismatches, we may suppose, will not be evenly distributed across the job categories.  Some jobs will be very popular, with lots more people wanting them than can be accommodated by the distribution, while other jobs will be rather unpopular, with many of the people holding those slips wanting to unload them.  This is precisely the sort of situation envisioned by Léon Walras, so now what he calls a tâtonnement , or auction, gets under way.  [Never mind the role of auctioneer.  Keep this conceptually simple.]

I get a slip, let us say, assigning me to be a Walmart store greeter, but I really want to be a bus driver.  So I call out "I have here a slip for Walmart store greeter.  I would like a slip for bus driver.  Will anyone swap with me?"  [Or whatever.  You get the idea.]   If lots of people want to be Walmart store greeters and very few people want to be bus drivers, I will be swamped with offers to trade from people who got bus driver slips.  But as I am about to take the first one I am offered, one of those I have rejected says, "I will not only give you my bus driver slip in exchange for your Walmart store greeter slip.  I will also give you three thousand dollars of my salary a year."

Well, we all know what happens, if we have been lucky enough to take an introductory course in Microeconomics.  A market develops, and huge numbers of exchanges take place.  The wages associated with very popular jobs will fall, while the wages associated with very unpopular jobs will rise, until a point is reached at which there are no more trades being offered for which there are any takers.  [A trade is a swap of jobs with associated wage adjustments.]  A system-wide consistent salary schedule has been established for the entire array of jobs in the economy. 

There is one problem with this scheme that must be addressed.  Some jobs require considerable training, which the holders of those randomly distributed job assignments may not have.  I may receive an assignment as a tool and die maker, about which I know nothing at all.  You may receive an assignment as a brain surgeon, for which you also are not prepared.  There are two ways of handling this difficulty.  The first is to adjust the wage of each job to incorporate the cost of preparation for it.  If I hold a slip assigning me the job of doctor, which I do not want, I may have to pay some portion of the cost of becoming a doctor to a person who wants my slip but has not been trained as a doctor.  But not more than that amount!  I may be willing to pay for the cost of job preparation of someone who wants my slip, but I am not going to be willing to pay for a surplus wage accruing long after the cost of the preparation has been amortized.  The forces of competition and bargaining will wring that surplus inequality out of the offers. 

The other way to handle this difficulty is to make job preparation free to those who are willing to do the work and can succeed at it.  If too many people want to be prepared for a job, then of course the compensation for that job will drop, as a result of competition.

The interesting question now is this:  In such a system, which jobs would tend to be paid more than the national average and which less?  The beauty of the free market is that we do not have to figure that out.  We can just let market forces tell us the answer.  But at least we can speculate [since this is, after all, a gedankenexperiment.] 

What about college professor?  Well, first of all, it is very easy work.  No heavy lifting, as the saying goes, and you never  get your hands dirty. What is more, you keep hours that would make a banker envious:  a Monday-Wednesday-Friday teaching schedule, with maybe three hours on those days in class, a couple of committee meetings each month that you can skip if you want to, and you only work thirty or thirty-two weeks a year.  All those eager young faces gazing up at you with awe and respect.  I figure this would definitely be one of the jobs paying well below the national average.

Garbage collector?  There are pros and cons.  It is physically hard work, and you spend your life licking up other people's garbage, but on the other hand, it is outdoor work, which some people like, and you don't have to wear a coat and tie.  My guess is that it would certainly pay more than college professor.  Hotel maid?  That strikes me as not an attractive job at all, so the salary should rise for it.  Wall Street trader?  Inside work, dress code, lots of stress, but physically easy -- maybe average.  But then, maybe no one would ever want that job except for the big bucks, so it might end up paying as much as hotel maid.

And so it would go. 

This would be a true free market way of setting the wages in the labor market, wouldn't it?  What is that you say?  No self-respecting defender of capitalism would ever consider such a system?  Hmmm.  I wonder what that tells us about capitalism and its defenders.

At about this point I rounded the corner, passed Brixx Pizza Parlor, and headed back home to have breakfast.