Thursday, June 30, 2005

Valid Principles

One of the best ways to evaluate a decision is to test the principle that informed the decision. The best way to test a principle is to apply the principle in as many different circumstances and situations as possible and then determine if the principle is still valid. Sometimes, the more simple the application, the more clear the principle becomes.

For instance, in my previous post I wrote that Fair Trade was unfair because overpaying for one product keeps the price of other products artificially high which hurts both producers and consumers. Now, what would happen if we applied the principle of Fair Trade to another product or industry similiar to what Fair Trade has done to coffee.

Most professional golfers earn less than it costs them to live and/or support a family. While pursuing the dream of someday playing on the PGA Tour, many professional golfers will pay their bills with credit cards. Some will also borrow from family and friends. Most golfers who dream of playing on the PGA Tour will never earn a single penny on the PGA Tour and many will end their career in debt.

Now, if we apply the principle of Fair Trade to professional golf, the correct course of action would be to only support golf tournaments that pay all of the golfers a living wage. Right off the bat, most people would think it ridiculous to pay a golfer just for showing up, but what would happen if we did?

The first thing that would happen is more golfers would want to start playing professionally since they would be paid to show up regardless of the results.

The next thing that would happen is the cost of other products and services would rise because of all the people who are now playing golf and not producing the products and services they produced before we started paying golfers using the Fair Trade approach.

Finally, once the cost of products and services started to rise, we would need to also give all of our golfers a raise since they would not be able to support their family with the living wage we had been paying them before prices went up.

Fair Trade may sound compassionate and therefore the right thing to do. However, Fair Trade will only increase poverty in the developing world because it prevents workers and producers from doing a job or service that is really needed. The reason coffee producers are paid so little is because too many people are producing coffee. A few of the coffee producers need to find another line of work. Perhaps if some of the coffee producers started producing food instead of coffee, the price of food in Latin America would go down along with the rate of poverty.

Another question; should we apply the ONE Campaign principle of forgiving debt to all of the golfers who never earned a penny on the PGA tour?


Derek Simmons said...


You've got a great series going here. But you miss the "non-economic" point that get factored into all the ONE-ness and other certifiable non-sense: I FEEL good about subsidizing a starving African; I DON"T FEEL good about subsidizing a starving golfer. It is not whether such subsidies work, but whether I can delude myself into FEELING that IF they were to work "What a Wonderful World This Would Be" [Louie exeunt blog left.]

Your Brother in Christ (and in rational Chicago-school libertarian economic theory)

Derek Simmons

David M. Smith said...

Wouldn’t life be great if good feelings produced the right results. No more sweat, no more calluses, no more sore muscles…