Sowell Sagacity

It has often been asserted that women receive only about two-thirds of what men receive for doing the same work. While this assertion is open to very serious challenges on empirical grounds, the more relevant analytical point here is that it treats employers’ perceptions as if they were independent of the validation processes of economic competition.

For women to be paid only two-thirds of what men are paid for doing the same work with the same productivity would mean that an employer’s total labor costs would be 50% higher than necessary with an all male labor force. If all that was involved was blind prejudice, that might seem to be a viable situation. But, even a cursory consideration of the economic implications of trying to compete and survive in the marketplace with labor costs 50% higher than they need be must at the very least raise serious questions.

Similarly, the owner of a professional basketball team might read Mein Kamf and become a convinced racist, but, if he were then to refuse to hire black basketball players, would there be no economic repercussions? Or, would he be more likely to disappear as a professional basketball club owner via the bankruptcy courts?

Note, that what is involved here is not “enlightened self-interest” on the part of individual economic decision makers, but the systemic effects of competitive processes which winnow out those whose decisions diverge most from reality.

From his Knowledge and Decisions.