SOME REFLECTIONS ON WAGE & SALARY DIFFERENTIALS & FAMILY INCOME David B. Timmins Professor of Finance & Economics Instituto Technologico de Estudios Superiores de Monterrey Hermosillo, Son., Mexico The Good Morning America program recently devoted a session to discussing the apparent fall in expectations confronting the "yuppie generation" which is finding it increasingly difficult, if not impossible, to attain the same standard of living as their parents. All but one of the participants asserted that they were worse off as a family than their parents had been at a similar stage of their life, and most expressed doubt that their children would be as well off as they were. The question was asked whether the traditional American expectation for each generation to surpass its parents in income and satisfaction of its secular wants may not have peaked. There are some underlying elements of economic theory which may help us to better understand what is happening not only in American society, but what is awaiting other nations currently experiencing the "Revolution of Rising Expectations" which first occurred in the United States. The Determinants of Wages & Salaries There are a number of theories of wages -- not all necessarily completely congruent. Most fundamental, and recent, is the concept of the marginal productivity of labor. Together with the related concepts of the marginal productivity of capital (which determines the "underlying", or "indicated" level of interest), and of land (which determines "rent"), this was perhaps the most insightful contribution of neo-classic economics. Had it occurred earlier and not twelve years after Marx' death, the most egregious errors, if not the calamity of Marxism itself might have been avoided since it wrote fin to the inadequate and dangerously misleading "Labor Theory" of value which has caused Marxism to consider profit as "exploitation of labor". Marxist leadership, not only in Russia, but elsewhere, has thus misunderstood and catastrophically ignored the importance and role of entrepreneurship, depriving the Soviet economy and society of good management and an effectively producing economy. Clearly, the marginal contribution of labor sets a ceiling to salaries, for no firm can long pay more than the added value that labor contributes to the productive process. But the concept of marginal productivity is a teleological not an operational explanation, i.e. it explains a distant end towards which the economic process tends. It does not determine today's wages. Of course, if adjustment towards economic equilibrium were friction-free and instantaneous, if there were no market or societal imperfections, and if we were dealing with a static society and economy, this would not be so, and wages as determined by the market and by the concept of marginal productivity would be one and the same. But given recognition lags, inertia in leaving old employment and encountering new, the constant emergence of new trades and professions, and the time needed for markets to determine the need for and marginal contribution of labor in these new trades and industries, the economy seldom, if ever, achieves a position of settled equilibrium. So we must be satisfied with identifying and living in a "neighborhood of equilibrium" more or less distant from the ever-changing theoretical goal towards which an ever-changing society is tending. In a more settled and traditional past, these same forces of equilibrium were, of course, at work, determining the value contributed by the last unit of labor employed and setting a wage level in the "neighborhood of equilibrium" more or less equivalent to this "marginal contribution" -- though the actual concept and its analysis yet awaited future discovery. Practice often, if not usually, precedes theory. In these more settled conditions, where little change might occur within an entire generation, it is quite possible that a true equilibrium -- or near to it -- was achieved: though economic history attests that even in such times events occurred to upset even balances of long duration -- famines, wars, discovery of new mineral deposits, introduction of new products and processes from abroad -- resulting in periods of disequilibrium and new relationships of wages and prices after a period of testing and settling down. Thus, absent our modern understanding of marginality, an alternative explanation for wages prevailed through most of history: this was the concept of "customary wages", or the "just" wage, which said simply that there was an hierarchy of jobs based on time and experience and that there was an appropriate distance between the salaries of various trades and professions which should be maintained despite occasional shifts in money incomes due to bouts of inflation (or, in pre-Union days) of disinflation, due to the occasional wars, famines, and other destabilizing events mentioned above. As with the concept of the "just price", this theory prevailed through much of history, affecting master/servant relationships in both Greece and Rome and determining wages and salaries in medieval guilds. In traditional times, this alternative explanation for wages and salaries was perhaps an adequate surrogate explanation, rule of thumb, or "shadow" theory, which satisfied, if it did not actually explain, differences in wages and salaries. Even after economic science was able to explain in fine theoretical detail the ultimate determinants of wages and salaries, businessmen by and large continued to rely on the Customary Wage doctrine for setting actual wages and salaries. And, as will be seen, there is a not inconsequential residual element of the "customary wage" concept in the differential between mens' and womens' wages even today (see final paragraph). The great English Neo-Classical Economist Alfred Marshall explained the persistence of this usage. Marshall said that not only did few businessmen have the technical background to understand marginal theory of either wages or prices, it was unnecessary that they do so. As long as a merchant could observe what his successful competitor was doing and imitate him in terms of production technique, style, quality, price, and cost of inputs (including wages), he could survive, even if he were not the most efficient producer. Again, in slower moving times, this was perhaps sufficient. Unfortunately, setting wages by "custom" has continued right down to our own day. But taking into account union pressures, increased international competition, rapidly changing societal expectations, and the contemporary transition to a service economy (where wages and salaries constitute an increasingly predominant share of the cost of production, thus leaving less room for error in their setting), makes such a nonchalant approach to setting wages no longer adequate. There is also the concept of wages within "non-competing groups", which says that incomes for physicians and mechanics, fishermen and lumberjacks, day laborers and electronic technicians need have little effect on each other since the employees of neither group are readily interchangeable nor compete with each other. The most troublesome aspect of these approaches for our current experience, and the main reason why we can no longer accept "rule of thumb" wage determination, is that during the Industrial Revolution, the last great change in wage structure, a major socio-economic consideration became built-in to customary wage determination which has presented major difficulties in the current transition. That is, the cost of maintaining and rearing families. When classical economists talked of wages tending towards "survival level" under the Malthusian conditions of the Industrial Revolution, they were in fact talking of the survival not of the individual worker, but of the worker and his family, his wife, and children. To be sure, wage pressure was such under these conditions that entry-level wages were customarily set for the bachelor worker and marriage was postponed until a worker was established in his trade or profession. There is a remnant of this in our university system where new graduates are accorded the degree of Bachelor of Arts (or Sciences), anticipating his status during his coming years of professional establishment. In these circumstances it was the custom (and became structured into the wage system) to increase the base wage when an employee took a wife, and again upon the arrival of children. Not that this was automatic. But it did become the prevailing custom as can be determined by reading the literature of the time. In effect, single workers were subsidizing the families of their married colleagues and the employer was banker and broker in the deal. Where similar conditions continue to prevail in some professions, e.g. medicine, the military, and diplomacy we call this "paying one's dues". Which brings us to a final, overriding, consideration in the setting of wages and salaries: simple supply and demand, which can -- and historically often has -- overridden the more nuanced considerations of custom, non-competing groups, and marginal productivity. During the Industrial Revolution, which, because wool weaving was an important part of its early stages, coincided with the Enclosure Movement, driving thousands of farm tenants off the land, there was a constant and growing surplus of labor in the newly urbanized industrial regions. This kept wage rates low because it was easy to replace anyone expecting higher wages with a new arrival from the countryside. During this period, it is possible that owing to the surplus of labor wages may well have been well below its marginal product, giving false confirmation to Marx' exploitation theory of profits. Be that as it may, cheap labor, low prices, and high profits soon made England the industrialized leader of the world. Following the American Civil War and the arrival of large numbers of immigrants from Southern and Eastern Europe, similar conditions prevailed in the United States, which soon overtook and surpassed Britain as the Industrial capital and leading exporter of the world. Today we encounter these same conditions in Korea, Taiwan, Hong Kong, Singapore, and Mexico, where abundant, cheap labor is attracting major new capital investment and flooding the world with low cost, quality products. In short, wages are determined by a multiplicity of factors, among which are: a) its supply relative to capital and to competing economies abroad, b) its marginal productivity, c) existing technology and its cost, which determines the optimal mix of labor and capital d) the customary expectations of both employers and workers arising from lags in recognizing changes in professional rankings in the job market, friction in adjusting to these new conditions, and unrecognized built-in social considerations, i.e. the traditional "family premium" paid in the past to heads of families. The Contemporary World A number of years ago, at the beginning of the Women's Lib movement, one of the authors was asked to address a group of working women in Washington D.C. on "The Economic Implications of Equal Wages". He believes the group was more than a little surprised when he told them that the results of equal wages were bound to be far more far reaching than most of them had recognized. For one thing, equal wages were almost sure to virtually eliminate a major life option for many of the less-work-engaged of their gender, i.e. of devoting their lives to enriching the lives of their children and mates through becoming a traditional homemaker. He is sure most of his auditors felt that this would always simply remain an option for the less ambitious or more traditionally-minded. He pointed out that educators had long known that many of the most successful students academically came from families in which mothers spend hours of time reading, playing with, and otherwise enriching the minds of their children. The drive for "wage equality" would by reason of the nature of the economic adjustment process, not result in simply raising the real wages of women to the level of men, it would be the equivalent of the discovery of New World gold to Spain, the Enclosure Act in England, and the mass immigration of impoverished Europeans to the post-Civil War U.S. There would be an enormous increase in output and aggregate wealth owing to the virtual doubling of the labor force, but by reason of supply/demand considerations, real incomes for individual workers would not improve commensurately. Indeed, the tendency would be (taking into account the all but inevitable resultant inflation) to narrow the gap between male and female wages primarily by diminishing male wages in absolute (inflation discounted) terms. The result would be to tilt the equilibrium in favor of capital (which would become a more relatively "scarce" factor than it otherwise would have been), and the elimination of the "family premium" from head of household wages, compelling women who had initially had no desire to do so to enter the job market to maintain the real level of family income. The "Customary" approach to setting wages and salaries has taken other blows. We have entered an era of unparalleled industrial change. New industries emerge daily. We are shifting to a Service Economy, in which wages and salaries constitute a much larger share of production costs than heretofore, forcing employees to focus much more intently on marginal costs and marginal productivity than ever in the past. Publications now exist which focus entirely on sectoral wages and salaries and which forecast future salary trends, thus reducing significantly traditional recognition lags. The speed of societal change is similarly shuffling the relative prestige, demand for, and salaries within various professions at unprecedented rates. Within a single generation we have seen the doubling in the admissions of students to education as medical doctors, a consequent sharp fall in relative incomes, and, more recently, a decline in the number of the otherwise qualified young willing to pay the cost in terms of dollars, time, and sacrifice to become physicians. Young people are better educated and have higher expectations than their fathers. Yet at the same time there has been an erosion in the concept of lifetime devotion to one job, one company, or even one career. The average worker changes jobs five times during his/her life. And it is no longer uncommon for a mid-career individual to return to school to completely retrain him/herself for another career. Economists used to think of "non-competing groups" being an element in wage isolation. Surely this is no longer such an important concept with forty-year olds preparing themselves for new careers in conformity with the latest published salary trends, and with the Courts upholding the rights of professionals competitively to advertise their prices and services. Today more than half of U.S. women work, many whether they wish to or not, just to maintain an expected lifestyle. As a result, the option of many women to live a traditional lifestyle has effectively been eliminated without their having been consulted about this societal choice which was, whatever its merits, inadequately thought through and sold to Congress and the Courts on essentially specious grounds. Many states require referenda before adopting many programs of much less far-reaching importance. This was a classic example of the vociferous few redirecting the lives of the "silent majority" in a direction of benefit primarily to the engaged minority. This has had another unforseen result. By reason of the need for child-care for children of working mothers, and sensing the continuing need for the missing enrichment of a mother-child relationship, there has been a rise in mother-surrogate pre-school child-care centers. Responding to normal supply/demand mandates, these centers have availed themselves of the advantages of every "growth industry", and prices have skyrocketed to match demand. This has, in consequence, reduced the disposable income of working mothers gained from working. Taking into account transportation costs, additional clothing costs, eating out costs, and other associated expenses, many working mothers are finding that they are contributing relatively little additional household revenue. They are spending their days away from the children, returning home as emotionally exhausted as their spouses, while still finding the family falling behind the standard of living achieved by their parents. A Bit of "Futurology" Based on Present Trends The "Good Morning America" program, alluded to above, interviewed a number of "Yuppie" families. With the exception of some minority group families (which is a subject beyond the ambit of this paper and where quite different considerations apply), the Network found them disappointed with the outcome of the New Society introduced in the 1960s. While it is impossible to predict the future with any exactitude, surely it is the function of science to be able to sketch at least the outlines of alternative future courses of action based on the application of theory and reasonable hypotheses. There are a number of considerations growing from present trends which can be predicted with some accuracy: First, a couple of positive probabilities: The number of women in the professions will continue to increase. Already the number of female professors, executives, medical doctors, attorneys, senior civil servants and other government officials has increased dramatically. This will inevitably result in richer and more meaningful lives for these individuals and a better society for everyone, at least from the perspective that any group is better off when it engages the talents and contributions of as many of its members as possible. The waste or under-employment of human capital is the worst economic waste of all. With the elimination of the "family premium" from head of household income, it will remain customary for both husbands and wives to work in future. This is not necessarily bad. Two income families provide an additional "built in stabilizer" which will probably prove as important as social security payments, unemployment and bank deposit insurance, and the graduated income tax in minimizing the shock of future economic recessions. As such, it may eventually permit the economic and financial leadership of the nation to entertain the notion of again permitting such periodic downturns, identified by the great economic thinker Joseph Schumpeter as the periods of "creative destruction", essential to preserve the efficiency of capitalism. having through the application of Keynesian deficit finance avoided any such major downturn for forty years, the stored up results of protecting inefficient competitors from yielding up their resources to the more efficient, have finally come home to roost, underlining Schumpeter's warning that if socialism is to succeed it will be because capitalism has lost sight of its superiority in return for the meretricious doctrine of planned perfection -- something of which fallible human beings are incapable. With Churchill, who once said "Democracy is the worst form of government, except for all the others we've tried", Schumpeter has told us, in effect, that "Capitalism is the worst of all economic systems, except for the alternatives, which promise perfection but deliver perpetual inefficiency in return for eliminating short periods of essential readjustment." Perhaps with more two-income families the occasional recession, permitting the inefficient to go out of business and reallocating plant, equipment, and manpower to more able management, will not be considered too high a cost to pay for economic efficiency, as it appears to have been in the recent past and the American economy will be permitted to operate more efficiently in the future, even at the cost of some short-term, partial unemployment. Doubling the work force not only means increasing output due to more workers, it means increasing the number of brains creatively devoted to the productive process. There is no reason for thinking that the female brain is inferior to the male brain, even should some studies which seem to say that the female brain works somewhat differently than the male brain be confirmed. Indeed, much of the richness and past achievement of the American economy has been due to the fusion of people of different languages (which linguists tell us implies use of somewhat different logic processes), cultures, and backgrounds. More women workers means more human capital -- the scarcest, most productive and most costly of all capital. Which means a large new infusion of productive capacity. And if women use a somewhat different logic, they may well contribute ideas which would not have occurred to male supervisors, managers, engineers, and scientists, just as some think today's physics may be Oriental language physics, capable of coming up with the concept of black holes and negative matter, ideas which may never have occurred to Indo-Germanic language thinkers. Think of the number of Oriental Nobel Prize winners in recent years, when, as it may be, the biggest contributions of Indo-Germanic thought logic have been exhausted. Finally, by tilting the mix of labor and capital somewhat in favor of capital, it may make U.S. wage rates somewhat more competitive relative to foreign labor and stimulate savings (which has been below our historic average in recent years), raising U.S. productivity in another direction. Child-care will be accepted as a normal part of education. In France, children of working mothers are accepted into the Ecoles Maternelles (a sort of pre-Kindergarten) as a matter of regular course. Europeans attend school at least an hour and a half longer per day, plus an additional half-day per week and twenty additional school days per year. Many Europeans start school two and a half years earlier than in this country. Added up, this amounts to a total of almost four additional years of schooling for a young Brit, Frenchman or German. Whether they have better teachers or whether their system of education is more adequate (and both these propositions are debatable) they are almost certain with four more years schooling to learn more than the average American student (and they do -- especially in languages, maths, history, geography, and science). Once Pre-School becomes part of the American education system it can presumably be provided at reduced cost and at a higher standard, thus avoiding the tragedies of children lost down uncapped, abandoned wells, in unlicensed schools. If this is the result, mothers will happily be left with a larger share of their earnings to supplement family incomes and working may become not only economically necessary, but worthwhile. With smaller family size, there will be presumably fewer children in the schools of the future. Should, as is to be hoped, the contemporary movement to year-round schools continue, the double incidence of fewer children and more teacher/classroom space per year should mean sharply reduced class sizes in the future. If insistence is increased for nationwide (possibly federally supervised) periodic teacher qualification testing, one might even hope that the quality of U.S. education might rise over the next decade or two resulting in enhanced economic and social performance. Now to a more debatable likelihood: The drastic fall in family size arising from the two worker family is likely to continue to occur first, if not exclusively, among the better-educated, upwardly mobile Anglo-Saxon majority. Hispanics continue to follow a more traditional family life style, though this may change somewhat over time. And Blacks have evolved an alternative culture in which the majority of Black children are born in single-parent families, often depending on Welfare for support. The renowned Black Economist Thomas Sowell has written insightfully of these problems. It remains to be seen if his counsel will be taken or his recommendations adopted. But taking into account the customary "recognition and implementation lags" this inevitably means that the nation is going to face a changing social, cultural, linguistic, and racial makeup in the coming century. This need not necessarily present a problem, certainly not in the sense that the existing social mix is inherently "better" than any alternative, but it will surely compel some difficult social choices and is certain to increase societal tensions. American law and social and business usages are rooted in Anglo-Saxon tradition, and the rise of competing traditions will unavoidably result in tensions. Both authors will never forget how strongly we were impressed in a graduate class in political theory (at the University of Utah) taught by Professor Francis Worthmuth when he pointed out that most of the revolutions of the past had been caused by emerging minorities challenging the social and economic privileges of older establishments. Nothing, said Professor Wormuth, has stimulated more violence than diminished social distance between the privileged and a previously despised under-group. American social stability, acceptance of court procedures, and willingness to accommodate electoral outcomes without overt manifestations, have been among our great strengths. One need only look back on the disruption of the events associated with the Civil Rights Movement of the '60s when a formerly deprived social group challenged the superiority of an established elite, or the trial of the Chicago Seven challenging traditional courtroom procedure, to accept this analysis. Or one might try to identify other countries with equivalent standards of social order to realize how few they are among the 170 some odd nations of the earth. It is probably impossible for most readers to identify more than two hands full of countries where there hasn't been a recent coup d' etat , rigged election, declaration of a new "president for life", replaced or suspended constitution, widespread political arrests, closed or censored newspapers, controlled radio or T.V., intimidation of the judiciary by kidnapping a wife, sister, or child, or a judge, or just plain theft, bribery, and corruption. Historically and globally, the crust of civilization is more fragile than the privileged youth of America recognized in the '60s when they wanted to "burn everything down and let flowers grow through the ashes". What they didn't understand -- presumably because they'd never been taught history, or read or understood what they were taught -- is that as a consequence of every revolution there is enormous destruction and disorder. It took France over a hundred years to reattain stability after the revolution of 1789. Russia has still not reachieved social stability after 70 years. Nor China. And few countries even improve their situations following the overturn of an established order however inadequate the previous regime: viz., Iran, Cuba, Zimbabwe, Libya, Upper Volta, Nicaragua, Vietnam. And even in the few where matters are somewhat improved following a revolution, the situation often remains tenuous at best: The Philippines, Salvador, Egypt. Most of the rest remain on an unstable edge between prosperity and poverty, democracy and dictatorship: Brazil, Argentina, Mexico, South Africa, India, Pakistan, Indonesia, Taiwan, Korea. So, if the United States is going to experience a telling population shift from a dominant European/Anglo-Saxon traditional majority, to an ever more substantial Black/Hispanic/Oriental minority, we should take thought of what the implications of such a major cultural/social/linguistic tilt may be. If we could be sure that our educational system, as in the more remote past, would inculcate the same love of country, and the traditional forms of government, and respect for law and order, and acceptance of the judicial and governmental/electoral systems as it did for other new immigrants, perhaps one could be less preoccupied. Unfortunately, societies tend to recognize such problems only after the foundation begins to slide and it is too late to shore up. This comment is intended neither as a counsel of despair nor as an expression of fear or dislike of other cultural forms; merely as recognition that few things are more unstable than societies in which a new generation is constantly being born, the old passing away and in which fad and fetish are continually at work undermining custom. Linguists estimate that before dialects become set by the development of written forms and relatively widespread literacy emerges, more than half the vocabulary changes every other generation. (Anyone acquainted with how teenagers invent new "lingo" can appreciate this - especially taking into account that most of the population a few hundred years ago lived little beyond teenage). Winston Churchill recognized this delicate balance, insisting that the House of Commons be reconstructed inch for inch and detail by detail following WW II exactly as it had been prior to its destruction by a German bomb, so that the chemical/geometrical balance achieved during a thousand years of evolving British democracy would not be altered. This was a truly Conservative recognition of the unity of past, present, and future which few Americans are capable of, as we tear down town halls, civic centers, and historic churches, replacing them with new, vastly larger, and architecturally different structures with no appreciation whatsoever for the effects this will have on delicate political, social, or religious interchange between clergy and laity, citizen and town council, or in the dynamic division of power between state, local, and national governments. Of course we cannot prevent change, nor should we wish to. But surely it is not wrong to try to preserve the precious institutions of political stability which have favored our nation's development and insulated us from the graver social disturbances and destruction others have suffered. Some Thoughts on the Social Effects of Wages and on "Externalities" As with the group of working women one of us addressed in Washington almost twenty years ago, and whose sole and simple interest was increasing the size of their monthly pay check, we suspect that few would recognize the profound social forces set loose by an innocent demand for wage justice in the workplace. A great French Classical Economist Leon Walras recognized the interdependence and interrelationship of every item bought, sold or produced in the marketplace. This we today call General Equilibrium Theory. In essence, GET tells us that if a consumer decides to buy one product instead of another, like the effects of a rock tossed into a pond, this effects not only the price and quantity of the product produced, even if infinitesimally, (as even the economically naive might imagine), but of every product and service not bought as well. It also effects the prices and quantities used of every factor of production, including labor, and of every product, factor, and service which interest into international trade, either as an import or export. Similarly, when the price or quantity of any factor (e.g. labor, land rent, bank interest charges) changes, this has repercussions on every other factor and product until another general equilibrium is produced (or, in dynamic conditions, the system is at least tilted towards such new equilibrium). This discussion may have appeared somewhat negative -- perhaps even anti-Women's Liberation. It is not intended as such, even though there were such charges following our address twenty years ago. It is nothing more than an attempt at an even-handed economic analysis of some of the unrecognized implication of introducing a new tilt in the old General Equilibrium. At this point we believe we could safely say that we have expanded Walras' General Theory of Economic Equilibrium into a more all-inclusive concept of General Socio-Economic Equilibrium. We think it has been established that every aspect of our social, cultural, economic, political life impacts on every other aspect. This has already been recognized in some degree by writers examining the reasons for the extraordinary competitiveness of Japan in the modern world economy. It is beginning to be understood that the tight family life of the Japanese, their close parent-child relationship, deferential respect for employer and state, and societal coherence, contribute enormously to their competitive situation. It makes them study harder in school (resulting in better and more economically purchased human capital); they are harder and more devoted workers (contributing ideas freely for making better products with fewer errors through "quality circles"). One Japanese leader recently observed that perhaps Japan Airlines should charge Boeing for all the free advice it has given to improve aircraft quality. Japanese workers, because of the lack of comprehensive social security, save four times as much as US workers. Unlike the US system, this money is not merely transferred from the pocket of current workers into those of the already retired, it is individually owned and individually invested (more capital available to purchase the latest technology, less wastage of resources by unemployed and retired persons -- it is their money they spend, not public funds.) Money that belongs to everyone belongs to no one, like any other unattended for property. And because of Japan's cohesive, inward-looking society they tend to buy "made in Japan" products even if they cost two or three times more than imports, simply because they have not yet learned to look abroad for new styles and products. Similar, but diametrically opposed, profound socio-cultural forces are at work in American society. Some of these have in the past made our society richer and more diverse. But at least some are currently worsening our international competitive position through inducing Americans to spend several times more traveling abroad than foreigners spend here, and to prefer foreign products even when American products may be cheaper and equally well made, simply because of the "cachet" or snob value of the foreign good. At times we seem to make a fetish of our political and economic freedoms to the extent that in some cases we impair their positive value: we are destroying our economy by spending more than we are willing to pay for in social services, and importing too many inessential goods. Economics recognizes the existence of "perverse markets" in which cheaper, inferior products can at times drive better value products off the market -- somewhat akin to Gresham's Law in which adulterated gold coins drive good coinage out of circulation. Journalists are at least as competitive as any profession. But they have used "freedom of the press", a refuge other professions do not enjoy, to dig up stories which will win them better assignments, more acclaim, higher salaries, and by-line notoriety while insisting on freedom from supervision from the Courts, Federal Agencies, or even peer review panels, which virtually no other business or profession enjoys. This has resulted in denying the public of some of our better candidates for public office (and keeping even more from presenting themselves) out of a perfervid interest in inconsequential details of private life. We are milking our social services unmercifully simply because they exist and the money is there to be had by anyone, needy or not, who is technically qualified for a given program (millionaires receive social security payments, teenage girls get pregnant just to obtain AFDC money to achieve "independence" from repressive parents). When we do this by producing so much steel that we destroy our forests by acid rain, or when we buy so many cars that the smog they create induces lung cancer and highway congestion grid-lock, we call this a "negative product" or "externality". The classical solution is to pass these costs back up the line by charging the producer or user a sufficient premium to cover the cost of cleaning up the problem. It has been suggested, for example, that those who insist on driving one-passenger cars into the city center for casual shopping should be charged a Central City "admission fee" or parking fee "surcharge" sufficient to discourage such casual overuse of limited city streets. This was historically the role of import duties on foreign imports, but through an excessive ardor to "show the way" in post-WW II trade liberalization, the US liberalized its trade beyond the capacity or will of most of its trade partners to follow, thus tilting the world productive machinery against us, resulting in a third-best world in which many countries, not the most efficient producers of certain goods, have an artificial advantage. "Second Best Theory", were it understood by policy makers whose economic theory was learned thirty years ago in college, tells us that introducing certain offsetting countermeasures, not for protectionist reasons, but simply to move us from third-best to a second-best position, could improve the productive efficiency not only of the US economy, but of the entire world. Of course, an optimal position of complete free trade would be best, but we are far from achieving that. And to preserve the US image as the freest market on earth, we seem determined to suffer (and cause others to suffer) the results of third-best, caused by excessive, destructive, and unbalanced over-liberalization. Some Final Thoughts It is still being charged that women are yet being discriminated against in wages and salaries. This is ironic. If women have equal marginal productivity, yet are being paid only two-thirds or four-fifths the salary of men, economic logic would insist that this equal yet cheaper factor would have replaced all male workers in both business and industry. As long as managers are economic maximizers, as long as they are driven by the profit motive, and as long as their own salaries and bonuses depend on results, this is inexorably the situation which should prevail. It should be male attorneys, male plant managers, male bankers, and male CEOs sending out their resumes and spending every spare minute "networking" in search of salary equality, if not work itself. That this is not so says much, perhaps, about the residual "customary" elements in setting wages and prices, even if no longer solely the "family premium" previously accorded to heads of family. It probably also says something about the frictional "recognition/reaction lag" in adjusting to changed circumstances. But inasmuch as contemporary families can no longer live on the male worker's salary alone, without supplement from mom, we can rest assured that most of the wage adjustment of the past twenty years has been a downward slide of post-adjustment-for-inflation real male salaries to meet women rather than a rise of womens' salaries to match mens'. There is no free lunch. And there was no way to pay female workers more for the same work without paying male workers less. Those who wish to maintain a contemporary life style must do so by bringing home two incomes. Those remaining traditionalists who insist on mother remaining in the home must pay for it through a reduced standard of living, more of less equivalent to the opportunity cost of what the wife could have earned by going to work. Ironically, the result of the Women's Lib campaign for equal wages is that stay-at-home mothers are subsidizing the "higher but not yet equal" wages of their working peers through a lower living standard, much as in more traditional times single male workers subsidized their married work mates. It is debatable whether having stay at home mothers subsidize two income families is a more equitable or socially desirable solution than having single men subsidize the next generation of children. It cannot be denied that the new approach has profound societal implications which have been insufficiently recognized. It is also doubtful whether this was the source of income expected by professional women in their demand for equal wages. Or whether the stay-at-homes wouldn't have assaulted Congress in their own interest twenty years ago (or even now) if they understood that it is they, not some "unknown benefactor" who is paying for their working sisters' improved situation.