On May 6, 2006, the Foundation for Economic Education had the honor of presenting the 2006 Adam Smith Award for Excellence in Free-Market Education to two great champions of the free society: Dr. Walter E. Williams and President Václav Klaus of the Czech Republic. The following are the unabridged addresses by Dr. Williams and President Klaus delivered at the Adam Smith Award Ceremony at FEE’s headquarters in Irvington-on-Hudson, New York.
It is with great pleasure that I accept the Foundation for Economic Education’s Adam Smith Award. Adding to that pleasure is to accept the award in the company of such a distinguished guest as President Václav Klaus of the Czech Republic. I want to thank the Foundation for Economic Education’s Board of Trustees and President Richard Ebeling. I also want to thank all of you, some of whom traveled long distances to participate in tonight’s affair.
In making the case for freedom we face three broad classes of people in this world: first, those who are just plain evil; second, those who do evil things because of economic illiteracy; and, third, good people who are economically illiterate. There is little that organizations like FEE can do to fight the truly evil. It is dealing with the latter two that constitutes FEE’s mission, and which has motivated the Foundation’s efforts for sixty years. I am sure that FEE’s founder, Leonard E. Read, would be proud of the yeoman’s job it has done.
Unfortunately, economic illiteracy is intuitive. Take advocacy for increases in the minimum-wage law as an example. What decent person wouldn’t want higher wages for low-skilled workers? If one has the view that an employer needs a certain number of workers in order to perform a given task, then the effect of a mandated higher wage is higher pay for low-skilled workers.
That’s the type of thing we hear reported in the news: “Starting January 1st all minimum-wage workers will see their wages rise from $5.15 an hour to $6.75.” Those who hold this view think that the only effect from the mandated higher wages is an increase in the worker’s take-home pay at the expense of the businessman’s profits.
On the other hand, if you understand that an employer doesn’t simply need a fixed number of workers to perform a given task, you might still be sincerely concerned for the welfare of low-skilled workers but be against increases in the minimum-wage law. Such a person would realize that when the price of a resource rises, employers will seek substitutes. He might substitute capital for labor, he might automate. He might reorganize his productive technique so as to economize on labor costs. He might move his operation to a nation where wages are lower. The workers who lose their jobs will be worse off. Of course, those workers who keep their jobs will be better off, but at the expense of their now unemployed co-worker.
Some of the responses to the recent sharp rise in gasoline prices show just how intuitive economic illiteracy can be. I’ve heard people offer what they see as “proof” of price gouging by gasoline companies. They explain that they can understand how a supply shock such as Hurricane Katrina or Middle East political instability can cause oil prices to rise. But then they ask: What about all that oil sitting in tanks or in transit, which was purchased before the hurricane or the political disruption? Why does its price rise? That’s what they see as proof of price gouging by the oil companies.
What these people don’t realize is that historical prices—what you paid for something yesterday—do not necessarily determine its selling price today. For example, back in 1973, I paid $58,000 for my lovely home in the Valley Forge area of Philadelphia. You can call me a price gouger all you want but I’ll be damned if I’ll sell it for $58,000 in 2006. I’m going to sell it for today’s replacement cost just as the oil companies price their product at today’s replacement cost.
I am optimistic about the future because I believe that it is ignorance that explains much of what we see. I am optimistic because ignorance is curable. If there is one dereliction of duty by economists, it’s their failure to make relatively simple economic principles available and understandable to the ordinary person. In that regard, the work done by the Foundation for Economic Education is just what the doctor ordered.
I thank all of you for your support of America’s first free-market foundation, the Foundation for Economic Education, and for joining us in the celebration of FEE’s 60th Anniversary.
Dr. Walter E. Williams is one of America’s foremost advocates of liberty. His uncompromising stand for the free society and his unique combination of intellectual depth and razor-sharp wit have brought him unmatched success in popularizing the ideas of liberty and influencing hundreds of thousands of people in the United States and around the world.
Dr. Williams’ syndicated column and his frequent appearances on radio and television are always breaths of fresh air in defense of the free society. He is the author of six books, including The State Against Blacks and More Liberty Means Less Government. We are proud that Dr. Williams is a columnist for our flagship publication, The Freeman: Ideas on Liberty. A native of Philadelphia, Dr. Williams earned his Ph.D. in economics at UCLA. He is the John M. Olin Distinguished Professor of Economics at George Mason University. He has always been one of the most sought-after teachers and raised a whole generation of freemarket economists.
Nobody in the United States deserves to receive the Adam Smith Award for Excellence in Free-Market Education on FEE’s 60th Anniversary more than Dr. Walter E. Williams.