Debunking Economic Myths #OWS
The first myth, and the one we spent the most time on, is the idea that people “deserve” the money they earn because it is an accurate measure of their “added value” to society.
There are two parts of this, or actually at least two parts.
First, there’s the idea that you can even dissect the meaning of one person’s value. And if you can, it’s likely a question of a marginal value: what does our society look like without Steve Jobs, and then with him, and what’s the difference between the two worlds? As soon as you say it, you realize that such a thought experiment is complicated, considering the extent to which Steve Jobs’ journey intersected with other people’s like Steve Wozniak and a huge crowd of Chinese workers.
If you think about it some more, you might conclude that the marginal value of a single person is impossible to actually measure, at least with any precision, and not just because of the counterfactual problem, i.e. the problem that we only have one universe and can’t run two parallel universes at the same time. It’s really because any one person succeeds or fails, or more generally contributes, within a context of an entire culture. Even Mozart wrote his symphonies within a cultural context. In another context he would have been a kid who hums to himself a lot.
Second, there’s the assumption that people who earn a lot of money are actually adding value at all. This isn’t clear, and you don’t need to refer to formally criminal acts to make that case (although of course there are plenty of rich people who have committed criminal acts).
In many examples of super rich people, they got that way through not paying for negative externalities like polluting the environment, or because they had control of the legal mechanisms to reap profits off of other peoples’ work. Not technically illegal, then, but also not exactly a fair measure of their added value.
Or, of course, if they worked in finance, they might have made money by keeping stuff incredibly complicated and opaque while providing liquidity to the credit markets. It’s not clear that such work has added any value to society, or if it has, whether it’s balanced the good with the bad.
Some observations about this myth that were brought up include:
- There’s a deep belief in “the markets” at work here which is rather cyclical. The market values you more than other people which is why you’re paid so well for whatever it is you do. Other people who have less to offer the market are get paid less. Anyone who doesn’t have a job doesn’t deserve a job since the market isn’t offering them a job, which must mean they are adding no value.
- There are exceptions where people add obvious value – caretakers of our children for example – but aren’t paid well. This is because of a different mechanism called supply and demand. For whatever reason supply and demand isn’t at work at high ends of the market.
- Or maybe it is and there’s really only one possible person who could do what Steve Jobs did. Personally I don’t buy it. And I chose Steve Jobs because so many people love that guy, but really he’s one of the best examples of someone who might have had a unique talent. Most rich people are generically good at their job and not all that unique.
- It’s mostly the people that benefit from the market system that believe in it. That kind of reminds me of the marshmallow study, or rather one of the many re-interpretations of the marshmallow study. See the latest one here.
- It’s patently difficult to believe in the market system if you consider a lack of equality of opportunity in this country due to extreme differences in school systems and the like. I’m about to start reading this book which explains this issue in depth.
- For other evidence, look at Pimco’s Bill Gross’s recent confessions about being born at the right time with easy access to credit.
- The unequal access of opportunities in this country is becoming increasingly entrenched, and as it does so the myth of the market giving us what we deserve is becoming increasingly difficult to swallow.