Steve Landsburg argues in effect, I think, that lower salaries for public servants are efficient in reflecting the lower value of output in the public sector. I think this is not (necessarily) a correct use of economic theory. In microeconomics, value is ultimately subjective, not objective, based on tastes under a given set of economic opportunities. I don’t think that the subjective value of public versus private services can be taken as given as Professor Landsburg does. But before I go on here maybe Professor Landsburg can speak for himself:
I want to emphasize this. The main reason to hold down public salaries/benefits is not to save money for the taxpayers. I have no a priori reason to care any more (or less) about the taxpayers than I do about the public employees themselves. Instead, the main reason to hold down public salaries/benefits is to avoid drawing the “best and the brightest” away from more productive careers into public service.
The argument for holding down public salaries made hinges on what one sees as the value of those services. As public goods they have to be chosen and consumed collectively, not privately where we can choose separate options based on our particular tastes. I like pears and buy those while you like apples and buy those. For some things, like getting into a war we make societal choices, that many of us are inevitably going to be unhappy with but we all pay for them and “consume” them.
As a democratic society we make those judgements democratically, thus tend toward the median voter. Anyone with a higher value for education of small kids (that is all small kids not just their own) versus better cellphones and more sophisticated ways of killing people (that the engineering career may lead to) can argue and try to persuade the median voter of her views, that we should all feel this way and argue for how that’s an economically efficient outcome for “reasonable” tastes. There is no way of showing one’s values in this regard are right or wrong, just that they aren’t the beliefs of the majority, so far. Those who value the output of teacher more highly aren’t wrong, they just aren’t necessarily the value of the democratic majority.
My point is those who value for higher teacher salaries, can I think be said to be trying to change tastes to value universal education among other things more highly. If indeed you can change tastes and raise teacher salaries, that’s an economically efficient outcome. Though if you raise the taste for war and spending on weapons that is too economically efficient. Economic efficiency doesn’t mandate one result or the other.
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