Celebrate with ARI

Yes! I want to celebrate Independence Day with the Ayn Rand Institute. Sign up to attend the live event July 2, 3:00PM E.T.

The real reason J.K. Rowling deserves her billions

In his new book The Road to Freedom: How to Win the Fight for Free Enterprise, AEI President Arthur Brooks makes the point that the egalitarian supporters of wealth redistribution have no right to claim that they are the representatives of “fairness.”

The egalitarians equate fairness with equality, writes Brooks, and therefore conclude that income inequality is unfair. Solution? Take from those with high incomes and give to those with low incomes.

But, Brooks approvingly observes, “If you earn what you have, most people think you have a right to keep it, even if others end up with less.”  And elsewhere he writes: “Fairness means matching reward with merit. Forced equality is inherently unfair.”

There is a profoundly true and important point here. Fairness (or, even better, justice) means that a person gets what he earns—no more, no less. That is what capitalism achieves and that is what the welfare state destroys. Capitalism is the system of fairness.

But that’s only true given a proper understanding of what it means to earn wealth. And, unfortunately, I think the way Brooks explains this point actually blurs the issue.

The Meaning of Merit 

According to Brooks, we “merit” wealth through “hard work and initiative.” He doesn’t explain exactly what he means by that. The best we get is an analogy to a student’s test grade: To “merit” a higher grade, he suggests, is to have spent more time studying than the student with a lower grade.

But that’s wrong. You don’t merit a grade by studying a long time—you merit it by knowing the answers, whether you study for five minutes or five hours.

Same goes for work. You merit wealth, fundamentally by creating it (or otherwise obtaining it through voluntary trade). It is the creation of value that determines one’s wealth on a free market and it sets the standard for what it means to “earn” wealth.

A janitor may work very hard and be worthy of high moral praise, but his productive efforts create very little wealth. His boss may work fewer hours (although that’s doubtful), but the value the boss creates, as determined by the voluntary consent of those who pay his salary, is much greater.

Take another example. Why is J.K. Rowling a billionaire while some self-published author can barely fund his Starbucks habit with the income from his book sales? Very simply: Rowling created books that tens of millions of people enjoyed enough to purchase for fifteen dollars a pop—while the self-published author may have had trouble convincing his Mom to buy a copy of his tome. Rowling earned her billion—and the self-published gent earned his latte.

How Not to Make the Case for Capitalism 

By detaching “merit” from results, Brooks makes it impossible to defend the fairness of market incomes. Talk to any leftist, and he will regale you with tales of rich people who don’t seem to work harder or longer than other people. Can you, he’ll ask, say with a straight face that a janitor working two jobs for nine dollars an hour has shown less merit than his boss?

If the standard is value creation, then the answer is: absolutely. But Brooks’s standard opens the door to wealth redistributionists who would say to that janitor’s boss: “Hey, you don’t seem to be sweating all that much, so we’re going to take some of your paycheck and give it to your hard-working staff.”