Can anyone give me resources on the economics behind this idea? It seems compelling. Is true that money invented in profit seeking ventures always makes society richer? Don’t charitable donations also add value to society? Can the wealth created by investment be compared to the value created by charitable donations?
Well, first and foremost, when an entrepreneur is successful in his ventures, he creates jobs and products that simply may not have been on the market before. There also several different possibilities that may not have been mentioned, like inventing a more effective production process that can drive down prices etc…Basically, what he is saying is, that even in a capitalistic economy, everyone gets richer and is inevitably better off.
It’s basically the invisble hand that Adam Smith talked about in The Wealth of Nations.
…every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.
What should you do with your money if you really want to improve the world? Earn more of it. Money (unless it’s gained through force or fraud) is evidence that its owner has created wealth — and that’s only done by providing other people with things they want. Making money and getting wealthy is therefore the greatest act of benevolence you can provide the world."
The reality is, unless prevented, force and fraud are usually the most profitable business models… most people with large fortunes have made them using force or fraud. In addition to force, fraud are idle gambling or ‘rent seeking’ (making money just because you own something, not because you do anything). One can make a lot of money through force, fraud, gambling or rent seeking, depending on an individuals abilities.
The current U.S. economy is actually set up to encourage making money through force (join the army! work for Raytheon!) fraud (subprime mortgage lending! naked short selling! usury!) gambling (currency speculation! commodity speculation! stock market speculation! derrivatives!) and rent-seeking (go into debt, be a landlord! invest in a company, have everyone else do the work for you and skim off the top!)
People who actually work and create value pay far higher tax rates than those who don’t, and usually make far less money.
I would posit that, on the contrary, money today may be a better signifier of how much harm an individual has done to society as opposed to how much value he’s created. Not that that’s true for everyone or that it must be so, of course.
“One can make a lot of money through force, fraud, gambling or rent seeking, depending on an individuals abilities.”
What’s wrong with gambling?
“I would posit that, on the contrary, money today may be a better signifier of how much harm an individual has done to society as opposed to how much value he’s created. Not that that’s true for everyone or that it must be so, of course.”
Yeah because Bill Gates and Steve Jobs cause so much harm. The wealthy who do cause a lot of harm, do it with the aid of government.
Well, nothing’s wrong with it, it just doesn’t produce anything. It’s a way to become wealthy without creating wealth. It disproves the sentiment of the OP, which is that having money shows a priori that a person has created something of value to society.
Yeah because Bill Gates and Steve Jobs cause so much harm. The wealthy who do cause a lot of harm, do it with the aid of government.
Bill Gates did some very useful work back in the 70’s and 80’s, and he deserves to have made a lot of money for that, but now he just uses his market power to skim off the top of the cartel MIcrosoft has become. The world would today be a far better place if Bill Gates were exiled to Siberia and Microsoft were broken up into several companies which could issue several WIndows-comaptible operating systems at reasonable prices which could actually do what customers want them to - like boot quickly and have decent resistance to viruses - hey, maybe even come with word processing and not shut down automatically for ‘updates.’ Windows 7 is not worth $200, but Gates won’t even let his own company’s product, Windows XP for example, compete against it on the market.
Additionally, if MIcrosoft were liable for financial damages caused by design flaws in its products, (like any other industry), it could not even exist.
“It disproves the sentiment of the OP, which is that having money shows a priori that a person has created something of value to society.”
Gamblers do provide value to society. If there was only one gambler in the world, who would take his bet? You can’t just bet against yourself, you need another gambler who is also willing to risk his money. Gamblers might not provide value to you, but they still provide value to other gamblers. I don’t think tv’s really have much value but millions of others would disagree.
“The world would today be a far better place if Bill Gates were exiled to Siberia”
Can anyone give me resources on the economics behind this idea?
I would recommend that you read Hayek’s The Fatal Conceit. The book addresses this very issue (among others) in an easy to understand way. It’s a quick read, although lacking the rigor present in Hayek’s more formal works.
There’s no point considering material benefit. Trading a loaf of bread for an orange does not create more goods it only moves them around in patterns that are more psychologically pleasing to actors. Benjamin is simply using a straw man of our trade theory, ignoring the subjective theory of value.
Yeah because Bill Gates and Steve Jobs cause so much harm.
Bill Gates has utilized his vast wealth to cause a huge amount of harm to humanity, usually in the name of “improving global health” or “fighting global warming” or “fighting overpopulation.” His/his foundation’s contributions to society include:
In my opinion, he is a corrupt, power-hungry misanthrope who represents a significant threat to human life and liberty. That being said, he deserves credit for his contributions to society as a successful businessman and entrepreneur. If only he had stuck to computers…
I don’t really care what Bill Gates does with his money, as long as he doesn’t tax me or violate someone’s property rights. If he does violate property rights, then blame the government for allowing him to do so with no consequences.
Just for your sake or for the sake of this entire intellectual community? In my opinion, Infowars is a better source than Fox News or The New York Times. Yes, there are flaws…but there is also quite a bit of truth. Do you disagree with my characterization of Bill Gates? Are all of his schemes to save humanity from global warming and overpopulation actually a good thing?
Maybe its better than fox news, which I also dislike. But I won’t believe something infowars has unless I can find it elsewhere.