From Whence Comes Income?
written by Dr. Walter E. Williams

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Here's part of a letter from a reader: "A hard-working, conscientious person can earn $10,000 a year in a fast-food restaurant. At the same time, movie stars and athletes, who make very little contribution to society, can earn in excess of $10,000,000 a year. A baseball player earns more with every swing of the bat than many people do in a year." The reader's inference is that there's something unfair about income differences of such magnitude. It also reflects ignorance about the sources of income in a free society; that's music to the ears of political demagogues with an insatiable taste for command and control.

I think some of the ignorance and much of the demagoguery stems from the usage of the phrase "income distribution". It might make some people think income is distributed; in other words there's a dealer of dollars. The reason that some people have few dollars while others have millions upon millions is that the dollar dealer is unjust. An alternative vision might be that there's a pile of money intended for all of us. The reason why some are rich and some are poor is that the greedy rich got to the pile first and took their unfair share. Clearly, in either case, justice would require a re-dealing, or redistribution, of the dollars where the government takes ill-gotten gains of the few and returns them to their rightful owners.

Most people, except a few congressmen, would view those explanations of the sources of income as nonsense. In a free society, for the most part, income is earned. It's earned by serving and pleasing one's fellow man. Why is it that Michael Jordan earns $33 million a year and I don't even earn one-half of one percent of that? I can play basketball but my problem is with my fellow man who'd plunk down $200 to see Jordan play and wouldn't pay a dollar to see me play. I'm also willing to sell my name as endorsements for sneakers and sport clothing but no one has approached me.

The bottom line explanation of Michael Jordan's income relative to mine lies in his capacity to please his fellow man. The person who takes exception to Jordan's salary or sees him, as my letter writer does, as making "little contribution to society", is really disagreeing with decisions made by millions upon millions of independent decision-makers who decided to fork over their money to see Jordan play. The suggestion that Congress ought to take part of Jordan's earnings and give them to someone else is the same as arrogantly saying, "I know better who ought to receive those dollars."

Another part of the explanation for Jordan's high salary is simply a matter of supply and demand. If there were tens and tens of millions of people with Jordan's talents, you can rest assured he wouldn't be earning $33 million a year. And similarly you can bet that if people really valued hamburgers and there were only a few people with those skills, they'd be earning much more than they currently earn.

We might think of dollars as being "certificates of performance". The better I serve my fellow man, and the higher the value he places on that service, the more certificates of performance he gives me. The more certificates I earn the greater my claim on the goods my fellow man produces. That's the morality of the market. In order for one to have a claim on what his fellow man produces, he must first serve him. Contrast that moral standard to Congress's standing offer, "Vote for me and I'll take what your fellow man produces and give it to you."

Walter E. Williams
c17-03
April 21, 2003
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