Suppose apples are sold more than oranges and Parliament in its wisdom decides that, in the end, apples and oranges should be compared. Not by consumers – consumers are biased, they simply indicate what they are willing to pay – but by the court, who will decide that apples and oranges are really of equal value and should sell for the same price.
What would the court need to know?
Start with the world. The Oranges live in Florida real estate with one set of amenities; Apple orchards occupy the mountains of Washington and others. Orange opportunity costs include housing development, solar farm, tourist attraction not built in that area. How does the court appreciate what has never been built? Maybe you answer: look at world prices. Good suggestion, I reply. Go ahead.
Next, capital. Orchards take years to mature, so today’s fruits include investments made below what was expected yesterday regarding today’s date, which is financed by interest rates the court must somehow include. Then storage: apples last, oranges rot, so an apple and an orange in April are different goods than the “same” fruit in October. Add transportation, refrigeration, frost, insects, crop insurance, the option to turn the fruit into juice, cider, marmalade, or pie, instead of everything else in the production area, and the changing options of millions of consumers, each of whom knows things about his breakfast that he would never be able to explain in court. Everything matters.
To determine the “fair” value of apples and oranges, the court will need all of the standard valuation systems.
Market prices are necessary to compare other uses of resources, as Mises taught us in the 1920s. In [1945Hayek[1945Hayek added the information problem: relevant information is scattered, local, tacit, and transitory. Free markets are the only institution that aggregates that information, quantifies it and gives people a reason to listen and respond. Price is a signal wrapped in stimulus. Apples and oranges can be compared but only for the incomparably complex functions of the value system. There’s a reason we call it a supermarket.
Britain is now conducting this labor market survey—Is a retail worker equal to a warehouse worker? Canteen work the equivalent of a coal mine? A dinner lady the size of a gravedigger?
Under the “equal value” provisions of the Equality Act, courts compare jobs by determining their basic characteristics – effort, skill, responsibility, working conditions – the labor theory of value applied to the job. How is it going? The Tesco case began in 2018; The court’s fact-finding hearing lasted 36 days, its judgments reached more than 900 pages based on 19,000 pages of training documents, and independent experts it’s still starting a report that will state that the work of a shelf-stacker is equivalent to that of a warehouse worker. Eight years, and the countdown has not yet begun. Apples and oranges, judged but not, as Orwell or Marx or Stafford Beer might have thought, by an industrial empire or by an omniscient artificial intelligence but by lawyers and commissioners and courts. The worst of all worlds.
And after finding that the court cannot call two jobs in ten years, the government is now proposing to add a comparison of race and disability and the enforcement department to publish a legal guide on what reasons for the difference in wages are valid. Office of allowable deficits.
Furthermore, suppose one day the tribunal reaches its conclusion and finds a truly fair value for apples to oranges. Finally, nirvana. The next day the public finds out that vitamin C really does kill cancer – the demand for orange juice goes up. To encourage more orange juice production we need a higher price but wait…nothing about oranges or apples or the labor required to produce them has changed. We need to attract more workers to the orange juice industry but the effort, ability, responsibility and working conditions of orange juice workers have not changed. How can we fairly pay them more than their apple brothers? It’s empty.
The market compares apples to oranges every day. It is the only institution that can. But there is a deeper flaw here than generalization. Let’s say the court wins. Let’s say that after a decade it brings the true and final score, the shelf stacker versus the warehouseman. What would he find? Not justice. Salary is not a grade on your character or a measure of your value as a person. Salary is a price — a report of how rare your skills are compared to the aspirations of people you’ll never meet. Nurses are morally less worthy if they earn less than plumbers or vice versa, and no one except the courts thinks otherwise.
Hayek nailed it in The Mirage of Social Justice: justice is about behavior – how one treats another. An employer who cheats his employees, a worker who steals a plain, a product sold under false pretenses — judge them, take them to court. But the price pattern from millions of voluntary trades is human behavior. No one chose you, no one designed you, no one can be blamed for it. A constellation of values, in Ferguson’s phrase, is the result of human action but not of human design. Demanding that prices be justified is a category error, like blaming the weather. Prices do not measure our worth; they guide our actions. Ask them to do the first one and they can’t do the second one.
Judge Anthony Kennedy said it well in the Ninth Circuit’s ruling that they (mostly) kill a comparable number in the US: “there is no law or concept that treats the free market system as a suspect enterprise.”
