Category: History

Suppose that apples sell for more than oranges and Parliament in it’s wisdom decides that, at last, apples and oranges must be compared. Not by shoppers — shoppers are biased, they merely reveal what they are willing to pay — but by a tribunal, which will determine whether apples and oranges are of truly equal value and thus must sell at the same price.

What would the tribunal need to know?

Start with land. Orange groves sit on Florida real estate with one set of alternative uses; apple orchards occupy Washington hillsides with another. The opportunity cost of an orange includes the housing development, the solar farm, the tourist attraction not built on that grove. How is the tribunal to value what was never built? Perhaps you answer: look at land prices. Brilliant suggestion, I reply. Keep going.

Next, capital. Orchards take years to mature, so today’s fruit embodies investments made under yesterday’s expectations about today, financed at interest rates the tribunal must somehow incorporate. Then storage: apples keep, oranges rot, so an apple and an orange in April are different goods than the “same” fruits in October. Add transportation, refrigeration, frost, pests, crop insurance, the option to divert fruit into juice, cider, marmalade, or pie, substitution with every other item in the produce aisle, and the shifting preferences of millions of consumers, each of whom knows things about his own breakfast that he could not articulate to a tribunal. It all matters.

To determine the “just” price of apples and oranges, the tribunal would need the entire general-equilibrium system.

Market prices are necessary to compare alternative uses of resources, as Mises taught us in 1920. In 1945, Hayek added the knowledge problem: the relevant knowledge is dispersed, local, tacit, and fleeting. Free markets are the only institution that aggregates that knowledge, articulates it in prices and gives people a reason to listen and respond. A price is a signal wrapped up in an incentive. Apples and oranges can be compared but only by the incomparably complex operations of the price system. There is a reason we call it the super-market.

Britain is now running this experiment in the labor market–Is a retail worker equal to a warehouse worker? A canteen worker equal to a coal miner? A dinner lady equal to a gravedigger?

Under the Equality Act’s “equal value” provisions, tribunals compare jobs by scoring their intrinsic properties — effort, skill, responsibility, working conditions — the labor theory of value applied to labor. How is it going? The Tesco litigation began in 2018; the tribunal’s fact-finding hearing ran 36 days, its judgments run to more than 900 pages resting on some 19,000 pages of training manuals, and the independent experts have yet to begin the report that will actually say whether a shelf-stacker’s job equals a warehouse worker’s. Eight years, and the calculation has not started. Apples and oranges, adjudicated but not, as Orwell or Marx or Stafford Beer might have imagined, by a industrial bureaucracy or by an all-knowing artificial intelligence but by lawyers and commissions and tribunals. The worst of all worlds.

And having discovered that the tribunal cannot price two jobs in a decade, the government now proposes to add race and disability comparisons and an enforcement unit to publish official guidance on which reasons for a wage difference are permissible. A bureau of allowable scarcities.

Moreover, let us say that one day the tribunal reaches its conclusion and finds the truly just apple to orange price. At last, nirvana. The next day the public learns that vitamin C really does combat cancer–the demand for orange juice skyrockets. 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 labor to the orange juice industry but the effort, skill, responsibility and working conditions of orange juice workers has not changed. How can we justly pay them more than their apple juice brethren? Blank out.

The market compares apples and oranges every day. It is the only institution that can. But there is a deeper error here than computation. Suppose the tribunal succeeded. Suppose that after another decade it delivered the true and final score, shelf-stacker versus warehouseman. What would it have found? Not justice. A wage is not a grade on your character or a measure of your worth as a human being. A wage is a price — a report on how scarce your skills are relative to the desires of people you will never meet. Nurses are not morally less worthy than plumbers should they earn less than plumbers or vice-versa, and no one thinks otherwise except the tribunals.

Hayek nailed it in The Mirage of Social Justice: justice is about conduct — how one person treats another. An employer who defrauds his workers, an employee who steals from the till, a product sold under false pretenses — condemn them, take them to court. But the pattern of prices that emerges from millions of voluntary trades is nobody’s conduct. No one chose it, no one designed it, no one can be guilty of it. The constellation of prices is, in Ferguson’s phrase, the result of human action but not of human design. Demanding that prices be just is a category error, like suing the weather. Prices don’t grade our merit; they guide our actions. Ask them to do the first and they can no longer do the second.

Judge Anthony Kennedy said it well in the Ninth Circuit ruling that (mostly) killed comparable worth in the US: “neither law nor logic deems the free market system a suspect enterprise.”

Tej Parikh writing in the FT:

…high-end developments unlock long housing chains. As higher-income households move into newly built units, they free up older properties, raising supply and slashing prices for middle- and lower-end housing through a process known as filtering. Numerous international studies underscore this positive ripple effect.

One published last year tracked households that moved into a newly built 512-unit condominium tower in Honolulu, Hawaii. It found that the building created at least 557 vacancies in older and cheaper apartments across the city in just three years, with market-rate units more likely to release the largest chains.

Filtering can also be widespread. A 2021 study in Helsinki using geo-coded population data found that every 100 new market-rate units in the city centre led to around 60 units becoming available in the city’s bottom half of neighbourhoods by income. An analysis across all homes in Sweden over several decades concluded that “new homes, even those initially primarily inhabited by rich people, lead to substantial trickle-down effects that also benefit the poor”.

Other US studies highlight how market-rate developments benefit less well-to-do local residents by lowering housing costs. In San Francisco, a 2021 paper found new developments lowered the risk of eviction notices for residents in rent-stabilised housing. Even “luxury” developments in New York City — which Mamdani has criticised — have been shown to contribute to lower local rents and sales prices.

or David Attenborough:

“Buy land,” they said, “they aren’t making any more.” But in fact, we used to make a lot of land. Half the land area of Boston, a quarter of Manhattan, and 15% of San Francisco were raised from the sea before 1970. Tyler has already pointed to Zigmund Forrest and Max Tabarrok’s piece on land reclamation in Works in Progress. Check it out, it’s an excellent piece.

But also don’t miss Connor Tabarrok’s historical overview of land reclamation featuring the ancient Iraqi city of Ur, Alexander the Great’s siege of Tyre, and the amazing flood tanks built under the city of Tokyo! Connor, a civil engineer by trade, points out that most land reclamation isn’t done to build cities with land fill but rather to create farmland through drainage:

In the lower 48 states, the US Fish and Wildlife Service estimates that wetlands covered 221 million acres in the 1780s and 104 million by the 1980s. That is roughly 117 million acres drained in two centuries, a loss rate the report puts at 60 acres an hour, sustained for 200 years. For comparison, the total urban footprint of the United States is around 70 million acres. America has drained substantially more wetland than it has built city, and nearly all of that drained land became farmland.

… The Dutch invented the modern polder and have spent eight centuries pushing back the North Sea, and the result is one of the densest, richest countries in Europe. Yet around two-thirds of the country’s dry land is farmland. Flevoland, the newest province, is 1,410 square kilometers reclaimed from the Zuiderzee in the 1950s and 60s, and it was laid out as an agricultural basin, not a city. The country with the most reclaimed land per person uses it to grow potatoes, graze dairy cattle, and ranks as the world’s second-largest agricultural exporter.

The other reason that we drained land historically was to get rid of mosquito-driven malaria and to improve sewage.

In the mid-1800s the land south and west of the Washington Monument was the Potomac Flats, a tidal marsh that collected the city’s sewage and exposed it to the sun twice a day. The stench reached the White House. In 1882 Congress appropriated $400,000 and the Army Corps of Engineers, under Major Peter Hains, began dredging the river’s shipping channels and pumping the mud onto the flats. The work created more than 600 acres of new ground and a Tidal Basin engineered to flush the Washington Channel with each tide. The Lincoln and Jefferson Memorials stand on that fill. So do the cherry trees, planted in 1912 on land that had been open water within living memory.

Much more of interest at the whole thing.