Making Money

The piercing tone from his clock radio is his signal to stumble out of bed, collect himself, and get ready to face another day at work. Shower, breakfast, coffee, commute. He plans the day ahead, then spends it working hard — making tradeoffs, meeting deadlines, and trying to find some value in those unavoidable meetings. He closes up shop and drives home, eager to finally spend some time with the people who mean the most to him. And at the end of it all he lands in bed, ready or not to hit repeat.

The more money he makes during his days — and the more he’s made throughout his life — the more likely he is to hear politicians clamor for him to pay his fair share back to society. Senate hopeful Elizabeth Warren recently sounded off about the need for the most successful businessmen to pay their fair share in taxes, declaring, “You built a factory and turned it into something terrific, or a great idea? God bless, keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

Putting aside the fact that high earners already do pay a large share of their earnings in taxes, Warren’s point and those like it overlook the reality that a person making money is in itself a benefit to society.

The vast majority of people who make money do so only because they’ve delivered goods or services of comparable value. Both parties — employer and employee — benefit from the exchange, and each side’s gain ultimately extends to society at large. An employee’s ability to meet his employer’s needs leaves the employer free to focus on growing the business in order to tackle the needs of potential new customers. This dynamic helps those folks whose needs will now be met as well as those who will be hired to fill new positions in the growing business. In addition, the wealth amassed over the course of a person’s career won’t just be spent on yachts and palaces but also invested back into the economy, spurring the growth of existing businesses and the creation of new ones. As John F. Kennedy famously put it, “a rising tide lifts all boats.”

The wealthiest among us are in this way already contributing the most to society, and those contributions have little to do with taxes.

During a 2010 financial reform event in Illinois, President Obama said, “I do think at a certain point you’ve made enough money.”

I say you can’t get enough of a good thing.

Dollars and Saints

Sean Payton is the head coach of the Super Bowl-champion New Orleans Saints. The Saints are known for their high-powered offense, but few know that their best play this year was made by Sean Payton, before the season even began. Payton gave away $250,000 of his salary so that the Saints would have the funds necessary to sign defensive specialist Gregg Williams. We seldom hear of such sacrifice, but it's actually commonplace; sacrifice is necessary for success in competition.

Payton's goal was to win the Super Bowl. Forced to compete, he had to generate the best possible team with limited salary money. Instead of keeping the $250,000 for himself, Payton improved his team by using the money to acquire Gregg Williams. Williams revamped the team's defense, bringing victory to the Saints and prosperity to the city of New Orleans.

In capitalism, entrepreneurs and executives must compete to attract customers. A company attracts customers only if the price of its service is as low as possible. Low prices are possible only if production costs are low, meaning that resources are allocated efficiently. For example, say that Comcast can more efficiently provide the same Internet service that Verizon provides. If so, then Comcast will attract customers by offering prices lower than Verizon's. Comcast will turn a profit, which is great not only for Comcast, but for the entire country! People will get Internet service more cheaply, and will have extra money to be spent in other industries, which ultimately helps people who don't have Internet service at all.

Success in competition requires an efficient allocation of resources, thus competitors are compelled to sacrifice. In the end, Sean Payton profited from his sacrifice. Instead of equating profit with greed, we should commend risk takers like Payton for trying in the first place, for profits benefit not only the risk takers, but everyone who's counting on them. Just ask anyone on Bourbon Street.