Tuesday, June 5, 2012

Making people pay for their prejudices


 The equal pay bill was defeated in the Senate. Thirty-four years ago, Uncle Milton showed that this another application of the indifference principle.


  1. This is an excellent discussion of the indifference principle and its real consequences in business over the long run, since in the long run all assets are mobile and indifferent. However, in the short run, some asset may not be perfectly mobile or indifferent, so if a monopoly is held by people of a certain mindset, then the short term consequences could be severe and the meaning of the word "short" variable. In these extremes (say desegregation), should the government not intervene because ten, twenty, or a hundred years later the problem will have solved itself?

  2. Makes sense on the surface, and probably would work in a highly competitive industry. However, hiring practices will be easily obscured by other inefficiencies. I have worked for several companies that I couldn't believe could stay in business much less make a profit after observing the waste in core processes.
    Furthermore, Apartheid South Africa is a perfect example of how a rich and prosperous country was changed through government regulation. Substitute business for country and you get a counter to Mr Friedman's arguement. 20+ years of business sanctions finally brought the Apartheid regime down. Without those sanctions (government regulation) it would been much harder to make that change.