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Market-Made Billionaires are not Self-Made Billionaires

January 27, 2010

In Michael Sandel’s Justice series (which I recommend both on its own merits and because it makes this post more intelligible), Sandel summarizes the libertarian anti-tax argument thusly:

1. We own our own labor -> We own the products of our labor

2. Taxes are the confiscation of the products of our labor -> Taxes are the theft of our labor -> Stealing our labor is akin to forcing labor, which is akin to slavery, so tax-payers are slaves (!!!)

Point 1 is very convincing. If I put my labor into something – say I find some wood and I turn it into two chairs – I own that chair. If my neighbor were chairless, I agree with libertarians that it would be a violation of my rights if the government came into my house and redistributed one of my chairs to my neighbor.

Now imagine that I build myself a mansion. I grow all of my own food, as well as maintaining a vineyard that produces the world’s best wine. I go out and scavenge some copper, silicone, etc. and make myself a computer and a television. I even build myself a private jet, and I produce fuel in the oil refinery I built in my backyard. In short, let’s say that my own labor has produced material wealth equivalent to that of Bill Gates. I would still agree with the libertarians – keep the tax collectors away! The government has no right to a portion of my labor, because I’m a self-made billionaire.

This is the kind of scenario you need in mind in order to equate taxes with slavery. But there are two problems: 1) This scenario is baldly unrealistic and 2) taxes don’t work like this. I really can build all the chairs I want in my free time, and not have to report any of them as income to the government.

Ironically for an ideological movement that worships the free market, I think that this argument fails because it completely ignores the market. 1) There is no such thing as a self-made billionaire, only market-made billionaires and 2) the government doesn’t tax the products of our labor, it taxes the market-value of the products of our labor but only if we expose those products to the market.

The market is also central to undermining a second libertarian argument, that people deserve exactly what they are paid. “Michael Jordan deserves to keep the $80 million per year that he earned at his peak. Michael Jordan produced $80 million worth of joy for other people, so he deserves each penny.” Note that here the libertarian argument shifts from “we own the products of our labor” to “we own the market value of the products of our labor.”

But while I agree with the former – no, the government should not tax Michael Jordan if a crowd gathers while he’s playing basketball with his friends, nor if he tells his friend to buy a pair of Nikes in private – the latter raises the issue of the moral standing of market values. “Owning the product of our labor” is a fundamental moral right, but market values are, from a certain perspective, arbitrary. For example, if a plague killed off half of the American population, Michael Jordan’s endorsement would be worth less because there would be fewer people for him to endorse products to. So in an important way, Michael Jordan’s market value is determined not by his labor, not by his innate talents, but by factors completely external to him: the laws of supply and demand. Despite the fact that our market value is determined by these external and morally arbitrary forces, libertarians still argue that we have the moral right to 100% of our market value.

So if the first libertarian argument ignored the market, the second sacralizes the market. I, on the other hand, think we should recognize the market for what it is: a mechanism that allows individuals to interact with “society.” Once we put the products of our labor on the market, we have in effect admitted that we want more goods and services than we can produce in isolation. We admit that we want standards of living accessible only to market-made man, not self-made man.

The difference between what value we can produce in isolation, and what value we can command on the market, is in fact value produced by society. Call this difference our “societal premium.” Society adds value to our labor in myriad ways not worth discussing here. The point is that the elected representatives of society are within their rights to confiscate a portion of our market value, inasmuch as the societal premium dwarfs the value we are able to produce in isolation.

No matter how proud we are of our worldly success, we all need to admit that we are not self-made. We are market-made.


P.S.  I’ll categorize this under “rhetorical maneuvers” as well, inasmuch as the term “self-made” is a rhetorical maneuver meant to obscure the fact that no self-made person has ever existed.


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