The paradox of the well-intentioned rule

Every economist worth his salt — and I count myself among them, though I speak now from inference rather than direct acquaintance with California's labour code — recognises that a rule which is individually just can be collectively ruinous. Reason reports that California has applied standard minimum wage and overtime laws to goat herders, the workers who deploy grazing animals across hillsides to reduce the accumulated brush that feeds catastrophic wildfire. The costs, the outlet says, are unsustainable. The herders may disappear. And the brush will not.

This is not, at its core, an argument against fair wages. I would be the last person to counsel that workers should be underpaid so that the rest of us may sleep more easily. The question is whether the architecture of the policy — a flat application of one rule to every form of labour, regardless of the public function that labour performs — is adequate to the complexity of the problem it touches. I suspect it is not.

There is a concept I spent some time developing, which those in my tradition call the paradox of thrift: the individually rational decision to save during a downturn becomes, when everyone does it simultaneously, the engine of the very depression it was meant to guard against. The logic here is structurally similar. The individually rational application of a labour protection — one that is entirely defensible on its own terms — becomes, in aggregate, the removal of a public good: namely, the managed grazing that keeps the hills from burning.

The state has a legitimate interest in ensuring that essential public-protection services remain economically viable. This is not the same as saying workers should be exploited. It means that where a service carries a genuine public-goods character — where its collapse harms not just the parties to the contract but the wider community — the state ought to consider whether it has a role in making that service sustainable. A public subsidy, a dedicated licensing category with tailored labour standards, a municipal contracting arrangement: these are instruments. They are not exotic ones. They are the ordinary toolkit of a government that takes its duties seriously.

What troubles me about this story — and I mark this as inference, since I have only Reason's lead and headline before me — is that it follows a pattern I recognise. A legislature passes a rule of horizontal equity, applying the same standard to every case, because horizontal equity is genuinely a virtue. What it fails to do is ask what happens to the system when the rule makes certain activities unviable. The cost of that failure, in this instance, is measured not in unemployment statistics but in acres.

The lesson I would draw is modest and practical: California should examine whether a tailored public investment — in the economic viability of brush-clearing operations — would be cheaper, in every sense of that word, than the alternative. Full employment economists have always understood that the state's duty is not merely to set conditions but to actively maintain the productive capacity of the economy. An economy that burns, literally or metaphorically, has failed at the most basic level. Good intentions, unexamined, are not enough.