Knowledge And Decisions

While the government is the central repository of force, it is by no means the sole repository of force. Labor unions often use force, threats, and harassment during strikes to stop or reduce the flow of customers or employees to the work place and/or the shipment of goods in or out from a struck business. Many major employers do not even attempt to operate during a strike, because of the high prospect of violence and the low prospect of effective law enforcement.¹²

This private use of force to prevent the effective transmission of prices reflecting economic options has very similar effects to those of governmental force in the form of minimum wage laws. The systemic effect of pricing the most disadvantaged workers out of a job is sometimes compounded by intentional effects of barring various minorities from unionized occupations, either explicitly or tacitly. Virtually every immigrant minority was the target of such union exclusions at one time or other during the nineteenth century, and “white only” clauses existed in many union contracts or constitutions in both the nineteenth and twentieth centuries, until civil rights legislation in the 1960s barred such words. However, such intentional discrimination is not necessary in order for unions to have adverse systemic effects on the employment opportunities of disadvantaged groups, similar to those of minimum wage laws which usually¹³ have no intentional discrimination at all. Whether by intentional or systemic effect, labor unions have historically had a devastating impact on the employment opportunities of blacks. Some occupations once dominated by blacks — railroad and construction occupations in the South, for example — became “white only” after unionization.¹⁴

The history of blacks in skilled occupations in the South and North graphically illustrates the difference between intentional and systemic variables. From an intentional point of view, the South would seem to be the most averse to the employment of blacks in skilled occupations, but in reality blacks remained in such positions longer in the South than in the North,¹⁵ because the systemic effects of labor unions and “liberal” or “progressive” wage-fixing legislation came much later to the South.

FORCIBLY LOWERING PRICES

Very similar principles are involved when prices are forcibly kept below the level they would reach if allowed to fluctuate freely. Rent control, interest rate ceilings, and general wage and price controls during wartime or under comprehensive “planning” are examples of forcibly limiting how high prices can go.

Since prices are simply knowledge of available terms of trade-off, to limit how high the price of A can go in trade-offs for B is economically the same as limiting how low the price of B can go in trade-offs for A. All that differs is the phrasing. It should not be surprising, therefore, when upper limits on rents lead to housing shortages just as lower limits on wages lead to unemployment. A mere change of phrasing shows that minimum wage laws limit how much labor can be offered for a given job, causing a shortage of jobs at that price, just as rent control limits how much rent can be offered for a given housing unit, causing a shortage of housing units at that price. All “shortages” and “surpluses” are at some given price, and not absolutely in terms of the scarcity or abundance of the item in quantitative terms. The severe housing shortage during World War II occurred with no significant change in either the amount of housing in the country or in the size of the population. Indeed, more than ten million people left the civilian population, and many left the country, during World War II. More housing was demanded by the remaining civilian population at rent-control prices. The effective knowledge conveyed by artificially low prices was of far more abundant housing than actually existed or had ever existed.

There is no fixed relationship between the number of people and the amount of space “needed” to house them. Whether or to what extent children will share rooms or have their own individual rooms, the time at which young adults will move out to form their own households, and the extent to which single kinfolks or roomers live with families are all variable according to the price of housing and the incomes of the people making the decisions. Virtually every American ethnic group, for example, has at some point or other gone through a stage at which taking in roomers was a pervasive social phenomenon.¹⁶