Can Someone Earn $1-million in a Year Honestly?
With the Fighting Illini launching March Madness Friday with a blow-out, I was all set to watch Saturday and Sunday as they led the Big 10 dominance through the tournament. You can take the boy out of the Midwest but you can’t take the Midwest out of the boy.
Of course, they blew the first game Saturday, leading a memorable Big 10 collapse leaving just two of its mighty nine qualifiers standing at the end of Sunday. It wasn’t much compensation that my other conference, the Pac-12, won its first five games – especially because my grad school alma mater Stanford didn’t even make the party.
What’s a young man to do?
The good news is Sunday afternoon the History Channel featured four parts in six hours of their great 2012 docudrama, “The Men Who Built America.” These episodes cover the late 19th and early 20th centuries and the entrepreneurs, inventors, investors and power-brokers whose truly exciting stories demonstrate the essence of America and capitalism.
Cornelius Vanderbilt in railroads. Andrew Carnegie in iron and steel. Thomas Edison and George Westinghouse in direct-current electricity. John D. Rockefeller in oil and natural gas. Nikola Tesla and J.P. Morgan in alternating-current electricity. Henry Ford and the auto.
Many remember them as robber barons and ruthless predatory monopolists. But they were also men of great courage and vision who were the ultimate benefactors of America and the modern world they wrought.
Without them or their equivalents, we and the whole modern world would be much poorer today. They and their successors made today’s poor live better than monarchs of old and helped open to today’s well-off folks previously unimaginable vistas of knowledge, experience and human flourishing.
Really, Ron? … Really.
Of course, their ruthlessness and winner-take-all motif damaged more than benefitted some folks at the time, and thus engendered bitter enemies, opponents and some legitimate criticism. But it also raised much resentment-based illegitimate criticism and political opposition. Most notable, quotable and threatening of their political opponents was Democrat William Jennings Bryan.
The southern-Illinois-born prairie populist orator, a leading progressive of his day, a/k/a The Great Commoner, ran for president in 1896, 1900 and 1908, coming closest in 1896. At the 1896 nominating convention, he made his most famous speech, speaking in favor of free silver and declaring of the eastern moneyed interests, “They shall not nail us to a cross of gold!!!”
But he was also famous for the assertion he made while on the first whistle-stop presidential campaign tour that, “No man can honestly make $1-million dollars in a year.” A claim the documentary highlights. And the most significant point in understanding the men who built America and modern capitalism.
Bryan’s claim completely misunderstands the nature of markets. He argues essentially there is a labor or similar externally-imposed standard of value that should prevail in commerce; and using that standard, no one could work enough hours in a year to earn anywhere near $1-million.
But an externally imposed earnings standard is not how the world works, nor should it. To promote maximum aggregate human well-being and fairness in a society, labor and everything else should transact at some mix of the values placed on it by its buyers and sellers. And that’s what market systems do: find the market price between those two values that maximizes economic output in the society and thus aggregate human wellbeing and fairness.
When an exchange of goods or services takes place, the price is below the buyer’s willingness to pay and above the seller’s willingness to accept. Otherwise, one side or the other will not make the deal.
The bargaining that takes place in markets determines from the supply and demand for the item being valued what its social value is, and that’s the sale price. It provides a consumer surplus, the difference between the consumer’s willingness to pay and the price; and a producer surplus, the difference between the seller’s willingness to accept and the price.
A person digging a ditch with a pick may work very hard and produce very little value. An inventor, entrepreneur, investor, etc. may, on the other hand, produce huge value for others and thereby honestly earn that $1-million a year.
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