Americanly Yours

You might wonder exactly why it is that janitors earn much less money than CEO’s. After all, in most circumstances, janitors engage in much more physical labor than do CEO’s, executives and managers, and even the average “white collar” worker.

Are the working class laborers being systematically exploited by managers and white collar workers? Is it the case that white collar workers are making money at the expense of blue collar workers, or is there a better explanation?

Value Does Not Come From Labor

If labor created value, then society (and all of its members) could get rich by having everyone use their bare hands to dig large holes in the desert and then fill them back up. After all, this would be extremely hard work of a very physical nature. However, this would create no wealth for society—in fact, it would represent a destruction of wealth (imagine what the laborers could have actually produced if they were not hired to complete this task).  Generally, this destruction of wealth takes place in the form of an absence of economic activity which would have otherwise occurred.

The value of a product does not come solely from the labor of the workers. The value of a product is measured subjectively; a product is essentially worth what people are willing to pay for it.

A laborer in turn receives payment for his services based on the value that his work adds to the product or service. A janitor in a shoe factory adds relatively little value to the shoes that are being created. There is likely more value being added by the designer who designs the shoes, by the worker who sews the shoes together, and by the person who manages the distribution network which allows for the shoes to be sold in thousands of stores around the world. These workers add more value to the product, despite the fact that the janitor undoubtedly exerts more physical effort to do his job.

Scarcity

While value added by workers is an important reason for the existence of disparities in income, scarcity tells much more of the story.

As Thomas Sowell put it, economics is the allocation of scarce resources which have alternative uses. With the exception of air, just about all resources are scarce. Similarly, nearly all resources have alternative uses (should this rubber be used to make tires or shoes?, should this glass be used to make a window or a beer bottle?, should my time be spent watching a movie or cleaning the house?).

Scarcity doesnt just mean that there isnt a lot of a certain good. Scarcity means that the good is limited. Even in America, bread is a scarce resource.

Diamonds and Water

Think of diamonds and water. Which of the two resources is absolutely essential to life, and which could we live without? Water is infinitely important: without water we will all die very quickly. Diamonds are nice and sparkly and women love them, but they are hardly essential to our lives. However, water is very cheap and diamonds are very expensive. This phenomenon is known as the “diamond/water” paradox. The reason for the differences in the costs of these goods is scarcity; water is abundant, while diamonds are scarce.

For example, I live in unincorporated DeKalb County [in Georgia] where my water is provided by a government monopoly (and hence is likely more expensive than would be the case under a free market system). Yet, the monthly bill for my 3 bedroom house has averaged $61.17 per month since April of 2007. In other words, over the past 4 years, it has cost about two dollars per day to provide the 2-3 people living in my house at various times with the most important resource that we need for survival. In fact, water is so cheap that I can do more than just use it for survival needs—I use it for showering, cooking, watering my plants, and even brewing beer.

What does this have to do with janitors and CEO’s?

Well, the same principles which lead to the diamond/water paradox also apply to compensation for labor. Please keep in mind that my intent is not to belittle the work that janitors do. I know that this type of work is physically demanding and dirty work. However, there is little skill involved and little intelligence required. The fact of the matter is that nearly every able-bodied person above the age of 13 or so is probably qualified to be a janitor. In contrast, there are only a very limited number of people who have the intelligence, experience, and ability necessary to be a successful CEO of Coca-Cola. Janitors are replaceable and easily trained. High-level executives are not. In other words, the pool of available janitors is relatively unscarce when compared to the pool of available CEO’s of Fortune 100 companies.

Bringing it all together

Disparities in income are hardly the result of exploitation by the white collar class against blue collar workers or the working poor. Compensation results from several factors including the value added by the worker, as well as the relative scarcity of the pool of workers available to fill that position.

There is no Federally mandated wage scale requiring certain salaries for certain types of workers. Decisions on how to pay employees—be they janitors, CEO’s, or something in between—are generally made on a company by company basis. Those in the position to hire janitors will pay them according to the value that they believe will be added to the firm. They will likely tend to pay the janitor at levels similar to that of other janitors in related fields. This is because a janitor is likely to add similar levels of value at which ever company he works. The range of compensation for CEO’s is very large, with CEO’s of smaller companies earning drastically less than do CEO’s at large multi-national firms. This is because of the differences in the amount of value that can be added by different CEO’s in different fields at different companies. The CEO of Wal-Mart is responsible for running a worldwide distribution network, ensuring that over a million employees get paid, and in a broader sense—ensuring that society is fed and clothed. In contrast, the CEO of a small but delicious pizza chain has responsibilities which are much greater than his employees, but which do not compare to that of the CEO of Wal-Mart.

Ceteris Peribus

This article does not deal with things like corporate welfare or other special privileges which are often received by corporations from the State. While special privileges will likely skew the distribution of income away from the bottom of the and towards the top, the principles at hand do not change. In a truly free society with no governmental grants of limited liability, no business licensing requirements, corporate welfare, and private control of the currency, income is likely to be somewhat more evenly distributed among the productive members of society. However, as long as there is any level of freedom of choice, there will always be disparities in income.  Income disparities are not always bad–in fact, they are very important.  Differences in income give us something to strive for.  If we all earned the same wages, no matter how hard we worked, no matter how much value we added to society, and no matter what type of work we did, no matter our ages, or no matter how much experience we had, there would be little reason for people to put much effort into their jobs.  There would be little incentive for anyone to be productive beyond the subsistence level–after all, any additional effort that they did would have to be shared equally with all of society.  If we were all the exact same, there would be no reason for trade, or even for society to exist.  It is our differences which encourage people to interact and trade with each other.  No society larger than a small tribe could survive for long if wages were distributed equally.

As long as there are people with different skills, levels of intelligence, backgrounds, lifestyles, and so on, there will be differences in income. People are different from each other, and as such, will seek out different goods and services. They will also find themselves qualified for different types of employment than their friends and neighbors. Typically, those who are employed in positions that create a lot of value and are relatively scarce will earn higher incomes than those who are employed in positions that create little value and are relatively common.

Americanly Yours,

Phred Barnet

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Libertarians speak often of private property, but to people not educated in libertarian philosophy, this notion can be confusing and seemingly subjective.  In fact, the opposite is true: the concept of private property is objective and quite simple to understand.

Self Ownership

Before understanding man’s ability to own other objects, one must understand man’s ownership of himself (or herself).

Each human being is the sovereign owner of him or herself.  While this conclusion seems fairly obvious, we can arrive at it several ways. I will focus on the method used by Murray Rothbard and others below because I think that it is the easiest method for the common person to understand. For a more detailed and completely different approach, take a look at Ludwig von Mises’ “action axiom,” and Hans-Hermann-Hoppe’s “theory of argumentation.”  This piece by Gennady Stolyarov II also summarizes the point as well.

One way to prove self-ownership is by assessing three possibilities of who owns a person: that everyone in the world owns fractions of everyone else in the world, that some group of elites own everyone else, or that every person owns him or herself.

The first such possibility is that everybody has an equal claim to ownership over everyone else.  Murray Rothbard (page 36) explained that this scenario

“holds that every man should have the right to own his equal quotal share of everyone else. If there are two billion people in the world, then everyone has the right to own one two-billionth of every other person. In the first place, we can state that this ideal rests on an absurdity: proclaiming that every man is entitled to own a part of everyone
else, yet is not entitled to own himself. Secondly, we can picture the viability of such a world: a world in which no man is free to take any action whatever without prior approval or indeed command by everyone else in society. It should be clear that in that sort of. . .  world, no one would be able to do anything, and the human race would quickly perish.”

Thus, we are able to reject any notion that people can be co-owners of each other. Seeing that it is impossible for humans to all own equal shares in each other, we must now examine the notion that one group of people owns all of the rest of the people (page 28).

“a certain class of people, A, have the right to own another class, B…. Th[is] alternative implies that while Class A deserves the rights of being human, Class B is in reality subhuman and therefore deserves no such rights. But since they are indeed human beings, th[is] alternative contradicts itself in denying natural human rights to one set of humans. Moreover, as we shall see, allowing Class A to own Class B means that the former is allowed to exploit, and therefore to live parasitically, at the expense of the latter. But this parasitism itself violates the basic economic requirement for life: production and exchange.”

Thus, we are left with our third option, that every human is the sovereign owner of him or herself.

Acquiring Property

Property can be acquired in three different ways–two of the methods are just, while the third is unjust.

Homesteading

The concept of acquiring property through homesteading has a long philosophical tradition.  In 1690, John Locke famously wrote (page 71):

“Though the earth and all inferior creatures be common to all men, yet every man has a “property” in his own “person.” This nobody has any right to but himself. The “labour” of his body and the “work” of his hands, we may say, are properly his. Whatsoever, then, he removes out of the state that Nature hath provided and left it in, he hath mixed his labour with it, and joined to it something that is his own, and thereby makes it his property.  It being by him removed from the common state nature has placed it in, it has by his labor something added to it that excludes the common right of other men. For this labor being the unquestionable property of the laborer, no man but he can have a right to what that is once joined to…”

Under homesteading, a person who improves or makes use of a natural resource becomes the owner of that resource.  For example, if a person landed on an uninhabited island, and picked an apple off of a tree would become the obvious owner of that apple.  No one else could rightfully claim ownership to the apple.  Similarly, if this man were to cut down several trees on the island and use the lumber to build a home, this home and the land surrounding it would become his property.

Homesteading has its limits–one must improve or change the resource to be considered a just owner of that property.  For example, if a man were to simple build a large fence around an area the size of Texas, he could not seriously claim to be the owner of all land inside of the fence.  Similarly, if I were to claim ownership of the planet Saturn, I would be ridiculed, and when the time came that humans visited Saturn, my descendants could not expect to collect rent from these astronauts.

Murray Rothbard explains this concept (page 170):

“If Columbus lands on a new continent, is it legitimate for him to proclaim all the new continent his own, or even that sector ‘as far as his eye can see’? Clearly, this would not be the case in the free society that we are postulating. Columbus or Crusoe would have to use the land, to ‘cultivate’ it in some way, before he could be asserted to own it…. If there is more land than can be used by a limited labor supply, then the unused land must simply remain unowned until a first user arrives on the scene. Any attempt to claim a new resource that someone does not use would have to be considered invasive of the property right of whoever the first user will turn out to be.”

Voluntary Exchange

Under voluntary exchange, a person can trade any of their justly acquired resources with another person in exchange for some of that person’s justly acquired resources.  For example, the man above who took an apple off of an unowned apple tree could trade his apple with another person for a product of that person’s, as long as the trade was voluntary.

This right also derives from the right of self-ownership.  I own myself and I may sell my labor to another person for a wage or a product (I could sell 8 hours per day of my time to an employer for a fixed rate of $10 per hour).  At the end of the day, I now own the $80 (meaning that the employer no longer has any claim to this money), which I am able to trade with a different merchant for some of his products.

Thus, any resources which are acquired justly can be traded for any other resources that are acquired justly.  In completing such a transaction, original owners must completely give up their right to the property that they have sold.

Theft

Theft is taking things by force (including fraud or threat of violence).  Theft is immoral and unjust, and one who acquires resources by theft should not be considered to be the legitimate owner of that resource.

If I were to take $10 from a person without their permission, it is obvious that I have stolen from them.  If this person is paid $10 per hour by their employer for their labor, I have effectively stolen an hour of this person’s life.

Similarly, if a food merchant were to market a meal as “non fat,” knowing that the meal contained 10 grams of fat, he would have acquired the money from that trade through fraud. Thus, the person who purchased the meal would have a strong claim against the merchant and should be entitled to receive a refund or some form of compensation.

Additionally, if a man with a gun were to demand that unless you pay him 1/3 of your income he would lock you in a cage, he would be guilty of initiating the use of force with the intent of committing theft. It would not matter if the man promised to use this money to pay for a school for your children, for a new highway, or for a missile defense program. Taking things from a person without their permission is, by definition, theft.  Silver-tongued rhetoric may be employed to obscure this fact, but it cannot change it.

Taking something from another person without their permission is always theft and should be condemned as theft. It does not matter what the “reason” or “justification” for this action is.  It does not matter who committed this theft, what was stolen, or how many people told the aggressor to act.

People often use majority support as a justification for  increases in taxes, large new social programs, war, and government debt because “the people overwhelmingly support them.”

Rothbard (Pages 57-58) shoots this idea down as well.

“even if 90% of the people decided to murder or enslave the, other 10%, this would still be murder and slavery, and would not be voluntary suicide or enslavement on the part of the oppressed minority. Crime is crime, aggression against rights is aggression, no matter how many citizens agree to the oppression.  There is nothing sacrosanct about the majority; the lynch mob, too, is the majority in its own domain.”

Unfortunately, our current system does not always respect private property rights.   Remember, that property rights are inviolable, and that action taken against a person’s property without their permission is aggression.  It is a sad fact that property rights (often including the right to self ownership) are regularly discarded by the very government which was instituted to protect our liberties.

Also, check out this video for a great explanation of private property.

Americanly Yours,

Phred Barnet

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Unless you have been living under a rock, you have probably heard that NFL star Plaxico Burress has been sentenced to two years in prison for “criminal possession of a weapon” and “reckless endangerment.”  Plaxico had a gun in the waistline of his pants at a nightclub, it slipped, and as he went to grab it, the gun went off, shooting him in the leg in the process–yet injuring no one else.  And now he is going to jail for two years.

Forget for a second that the United States Constitution states that “the right of the people to keep and bear arms, shall not be infringed.”

Plaxico Burress is famous football player with no history of major criminal actions.  It is pretty safe to assume that Mr. Burress was carrying the gun to protect himself prom any possible threats, rather than with the intent of committing a crime.

The man shot himself in the leg.  No one else was injured.  The fact that the presence of the gun “could have” resulted in injury to someone else is irrelevant.  The truth of the matter is that no one except for Plaxico Burress was injured.

Anyone, whether they are a celebrity like Plaxico or a “regular Joe” has the right to defend themselves. The right to bear arms is protected by the 2nd Amendment to the Constitution.  It is my opinion that the right to self defense is a natural and inalienable right of man.  This idea comes to me directly from the works of John Locke.

A law that violates the spirit and the letter of the Constitution, as well as “natural law” is an unjust law.

Plaxico will be going to prison with rapists and murderers for the next two years as a result of New York’s unjust “law” concerning guns.  His young son will be left without a father for the next two years because the city of New York rejects the right of a man to defend himself.

As I said above, Plaxico was almost certainly carrying this weapon as a defensive measure to use only in case of a hostile threat.  Sentencing a productive, non-violent member of society for two years for this offense is an affront to justice, as well as an affront to the Constitution of the United States of America.

Americanly Yours,

Phred Barnet

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