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December 15, 2009
On supply and demand c. 1909
The Dec. 15, 1909 NYT prints a letter to the editor with an interesting question to which I think Gary Becker might have an answer: Will a mere man who has been a student of economic problems answer this question: Is there any factor which can affect wages other than supply and demand? My feeble intellect is absolutely staggered by this cry of votes for women on the plea that it will increase wages. I understand perfectly that by popular vote the city employes, school teachers, etc., can be put on an equal schedule with men, but the few covered by this special enactment has absolutely nothing to do with the mass of women workers, hence when the suffrage leaders try to influence women to clamor for the ballot on this plea they are sailing under false colors.I like Becker's theory on labor market discrimination (for it's elegance and it's universality) but if supply is the relationship between price and willingness to sell and demand is the relationship between price and the willingness to buy, then everything ultimately can be cast in "supply and demand." As I tell students in an introductory class (only half in jest) - there are really only three or four different "graphs" in economics, what changes are the labels. I have also suggested that the standard "supply and demand" model, and more specifically the comparative statics of supply and demand, might help one reach the "correct" answer/prediction about 80% of the time. I have no evidence for such a claim, but I stand by it until proven wrong (ha ha). I have had students in the past suggest that the supply-demand model is almost a cop-out on the part of economists, because, after all, it's all about supply and demand and that leaves little room for the non-monetary and intangible. Yet, that is exactly one of Becker's points about labor market discrimiation (in my reading), that the intangible and non-monetary "tastes" of the individual demander or supplier can manifest in actual, tangible, differences such as pay gaps. Of course, labor market discrimination is not the only source of a pay gap, which is why it is important to be careful to accurately measure the sources of such gaps. I think the letter-writer is correct in the sense that the vote can be used to alter the wages of public employees, and it seems that is definitely what is happening today (one of the reasons I have always been a bit uncomfortable with public employee unions). I also think the letter-writer might be correct in that it is difficult to see how granting women the vote would directly impact female wages. Perhaps granting women the franchise increases the desire to obtain human capital, which over time would be expected to alter female wages. Perhaps the franchise would ensure a broader, stronger, and deeper social safety net, which in turn might relieve women of some of the traditional (as of 1909) responsibilities with which they were charged and which, in turn, might have improved their productivity and hence their wages.
Posted by Craig Depken at 01:18 PM in Economics
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The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. -Adam Smith
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