Recently, I’ve been reading libertarian books. Some of them convey convincing arguments. Many of them do not. The most interesting and agreeable argument involves the social value of your income. From Jason Brennan’s It’s OK To Want To Be Rich:
Profit is possible only if you create value for other people. Profit means that from others’ perspectives, you added value to the world. More strongly, the amount of profit you make depends upon the amount of value you add…The greater the value transformation—the more value you add—the higher profit you can possibly make. For that reason, then, we can take the profitability of an enterprise as a signal or a guide to how much good it’s doing…In a normal market, more profit for yourself means more good done for others.
The short way of summarizing this is that if you believe that capitalist trade is a positive-sum exchange, then your income is a great proxy for your social value. An individual having a job and participating in a market economy advances moral goals in at least two ways.
First, that individual’s labor produces value for the employer or business partner, allowing them to pursue their goals, which includes employing other employees, providing services, and creating other trade relationships with other people and institutions. This has a multiplier effect, allowing each person in this network to earn and grow more value.
Second, the individual gets paid, allowing them to participate in trade relationships, which also has a multiplier effect on the rest of the economy. Businesses grow, invest in employees, invest in new technologies, etc. Over time, this network grows and creates more wealth, improving everyone’s standard of living, freedom, and so on. It all starts with working and trading.
This is a dynamic westerners, including myself, take for granted. Humans are not naturally inclined to cooperate with strangers, let alone build things together on the scale that capitalism does. Capitalism is a technology that facilitates cooperation, and it has an empirical impact on our willingness to cooperate. This can be shown empirically. Again, Brennan:
...in the societies where people most often and most routinely interact with strangers and in which cooperation is mediated by money in the pursuit of profit, people are fair, nice, generous, and cooperative; they tend to avoid free riding, they cheat less, and they are willing to incur a personal sacrifice to police unfair behavior. In general, people from market-based economies seem to have adopted a tendency to empathize with strangers and exhibit a stronger sense of fairness than people from non-market societies.
Many westerners resent capitalism because they see all its faults, but they don’t see how it’s had a positive impact on their lives. Capitalism isn’t perfect, but it’s much better than a society that doesn’t use markets and money. It’s been so successful at creating cooperation and wealth throughout our society, the typical westerner really has no idea how much poorer and less cooperative non-capitalist societies are in comparison.
By participating in a capitalist society and abiding by the rules, you’re a species of philanthropist. If you pull out or don’t participate in economic activity, the world is worse off because you deny the cooperative opportunities for the rest of society. You’re contributing to society, and as a result, contributing to everyone getting richer, and all the positive things that come with that.
As Brennan would summarize: “In a competitive market, if you take home $100,000 in income, then you also produced over $100,000 in value for other people. You gave back the same time you took.”
I bring all this up not to mindlessly agree with it, but to also poke holes in it. If it’s true that your income is a proxy of your contribution to this cooperative, philanthropic society, does that mean that Elon Musk is better than the rest of us? Is an executive at a sports gambling or tobacco company making six figures more socially or morally valuable than a teacher or a firefighter?
I will explore each of these questions over my next few posts.