Wealth Creators vs. Wealth Transferrers

[JASKN]

First, does anyone know if or where Rand made a statement something like, "A very small percentage of the population are actually wealth creators. Most people just transfer wealth."? The context in which I heard about it was negative, where the quote means transferring wealth is done by people in business who are more or less useless (like a bad HR person).

Secondly, whether she said it or not, is there even a distinction to make? If anything, I can only think of a quantitative distinction, because either one is working and creating wealth, or one is working and not creating wealth. A transfer of existing wealth falls under one of those, too (unless a creation of value isn't specific enough to be called "wealth").

[KendallJ]

I know of no such reference.

[John McVey]

First, does anyone know if or where Rand made a statement something like, "A very small percentage of the population are actually wealth creators. Most people just transfer wealth."? The context in which I heard about it was negative, where the quote means transferring wealth is done by people in business who are more or less useless (like a bad HR person).

My guess is that what you have in mind is the reference to the Pyramid of Ability in Galt's Speech (and even if it isn't, this rules out the canonicity of the negative judgements you raise):

Every man is free to rise as far as he's able or willing, but it's only the degree to which he thinks that determines the degree to which he'll rise. Physical labor as such can extend no further than the range of the moment. The man who does no more than physical labor, consumes the material value-equivalent of his own contribution to the process of production, and leaves no further value, neither for himself nor others. But the man who produces an idea in any field of rational endeavor - the man who discovers new knowledge - is the permanent benefactor of humanity. Material products can't be shared, they belong to some ultimate consumer; it Is only the value of an idea that can be shared with unlimited numbers of men, making all sharers richer at no one's sacrifice or loss, raising the productive capacity of whatever labor they perform. It is the value of his own time that the strong of the intellect transfers to the weak, letting them work on the jobs he discovered, while devoting his time to further discoveries. This is mutual trade to mutual advantage; the interests of the mind are one, no matter what the degree of intelligence, among men who desire to work and don't seek or expect the unearned.

In proportion to the mental energy he spent, the man who creates a new invention receives but a small percentage of his value in terms of material payment, no matter what fortune he makes, no matter what millions he earns. But the man who works as a janitor in the factory producing that invention, receives an enormous payment in proportion to the mental effort that his job requires of him. And the same is true of all men between, on all levels of ambition and ability. The man at the top of the intellectual pyramid contributes the most to all those below him, but gets nothing except his material payment, receiving no intellectual bonus from others to add to the value of his time. The man at the bottom who, left to himself, would starve in his hopeless ineptitude, contributes nothing to those above him, but receives the bonus of all of their brains.

is there even a distinction to make?

Not anything of any significance in determination of codes of ethics and standards of judgement of people. The vast majority of us are perfectly capable of producing enough to live our lives with. Without the Atlasses that life would not be particularly fruitful, but it would still be a life. Indeed, even without the Atlasses we could still slowly prosper over time were we to act morally. What the Atlasses of the world do is create far more than the rest of us, particularly in the form of ideas, trade that product of their minds with us, and thereby enabling us to be even more productive with our own efforts through us putting those ideas into practice. In that way the progress of prosperity is sped up enormously while everyone involved is still earning what they get through production.

Only small percentage of people can't produce enough on their own to get by, and even then as the modern world gets more advanced the number of such people actually falls. For instance, Dr Stephen Hawking, a guy in a wheelchair who is barely capable of moving a joystick and tapping a keyboard, can still earn his way in this world. The numbers of those who are genuinely just recipients of transfers without producing anything in return - ie all the bona-fide charity-dependents - is miniscule and getting smaller (at least as a proportion of the population.)

JJM

[Clawg]

Wealth is created with each purchase you make [of course with the premise that you earned the money and that you are acting in your own self-interest.]

Edited June 23, 2008 by Clawg

[eficazpensador]

Wealth is created with each purchase you make [of course with the premise that you earned the money and that you are acting in your own self-interest.]

How does that create wealth?

[JASKN]

OK, over at

qtronman and legendre007 have provided helpful responses in the video comments. qtronman traces his reference back to Jeff Walker, in his book The Ayn Rand Cult, but legendre provides Walker's possible reference: Rand's essay "The Money-Making Personality." Unfortunately, this essay is only available in the book Why Businessmen Need Philosophy, which is not available on the Research CD-ROM (damn!).

So, I purchased a used copy. I suspect that Rand will present similar ideas as those in the passage John quoted, but once I get it and read it, I will provide an update!

[Clawg]

How does that create wealth?

In every trade you exchange something of lesser value (to you) for something of greater value (to you). If you chop wood all day the value of your wood is low. If you are a farmer the value of food is low. You both go to the market and exchange wood and food et voila you both gained a greater value for a lesser value -> wealth was created.

[ruveyn ben yosef]

This might be a good place to ask the following question:

What wealth creation functions do speculators perform?

Any sound economic input would be very much appreciated.

TIA.

ruveyn

Edited June 23, 2008 by ruveyn ben yosef

[eficazpensador]

In every trade you exchange something of lesser value (to you) for something of greater value (to you). If you chop wood all day the value of your wood is low. If you are a farmer the value of food is low. You both go to the market and exchange wood and food et voila you both gained a greater value for a lesser value -> wealth was created.

Ok, that makes sense. I was assuming that values weren't subjective.

What wealth creation functions do speculators perform?

They allocate capital to where it is needed the most.

Edited June 23, 2008 by eficazpensador

[ruveyn ben yosef]

Ok, that makes sense. I was assuming that values weren't subjective.

They allocate capital to where it is needed the most.

How does this differ from garden variety investment?

ruveyn

[eficazpensador]

How does this differ from garden variety investment?

ruveyn

Maybe I misunderstood your initial question. Both investors and speculators are trying to allocate their capital as best as possible in order to make money. I don't think their intentions or functions differ much.

but legendre provides Walker's possible reference: Rand's essay "The Money-Making Personality."

That quote is not in "The Money-Making Personality." You are right about the similar ideas though, at least sort of. There is a quote: "I once asked Alan Greenspan...to venture an estimate on what percentage of men in our business world he would regard as authentic Money-Makers-as men fully sovereign, independent judgment. He thought for a moment and answered a little sadly: "On Wall Street-about five per cent; in industry-about fifteen."

Rand defines "Money-Makers" as business men who created their wealth without influence/help from the government. Basically, shes talking about something entirely different than you were talking about.

[DarkWaters]

Ok, that makes sense. I was assuming that values weren't subjective.

Just because two parties mutually benefit from a voluntary transaction certainly does not mean that values are subjective. Given that one villager objectively has a sufficient amount of wood to sustain his needs, it objectively makes sense that he will enhance his welfare by exchanging a few of his logs for agricultural produce. The same can be said for the farmer who trades the produce.

[KendallJ]

That quote is not in "The Money-Making Personality." You are right about the similar ideas though, at least sort of. There is a quote: "I once asked Alan Greenspan...to venture an estimate on what percentage of men in our business world he would regard as authentic Money-Makers-as men fully sovereign, independent judgment. He thought for a moment and answered a little sadly: "On Wall Street-about five per cent; in industry-about fifteen."

Why does it not surprise me that Alan Greenspan's judgement is mistaken for Ayn Rand's. Egads! We all are feeling the effects of his judgement in this most recent crisis.

What wealth creation functions do speculators perform?

Any sound economic input would be very much appreciated.

Before I chime in, I'm curious as to what you think the phenomena of "speculation" actually is. That is, describe it. What is a speculator and what is this class of people supposedly doing to the market?

[ruveyn ben yosef]

Before I chime in, I'm curious as to what you think the phenomena of "speculation" actually is. That is, describe it. What is a speculator and what is this class of people supposedly doing to the market?

Frankly, I cannot distinguish between speculating and investing. A person puts his money into some transaction or enterprise (I assume they are legal) and he hopes to realize a profit. My guess is that the term "speculator" is a scare term indicating and kind of ideological prejudice against investing one's own money with the hope of realizing a profit. Sort of like the term "junk bond". Another scare term.

I have also heard the term "speculator" used against the Hunt Brothers who attempted to corner the market on silver. It did not work. In the long term the market cannot be jiggered.

Please forgive my relative ignorance of matters economic. The only economics I know is 1. the law of supply and demand; 2. Sayes law and 3. Gresham's law. After that I am lost. ]

My take is that anyone investing his money in a legal undertaking should not be interfered with. His risks are his own and so should be his rewards.

ruveyn

[KendallJ]

Please forgive my relative ignorance of matters economic. The only economics I know is 1. the law of supply and demand; 2. Sayes law and 3. Gresham's law. After that I am lost.

If you understand those, you're further ahead than most. My guess is you're right! Economics doesn't defy the basics, and anyone who claims it does it suspect.

[eficazpensador]

Just because two parties mutually benefit from a voluntary transaction certainly does not mean that values are subjective.

No, It doesn't necessarily follow from that. Objective value was just my false premise.

Given that one villager objectively has a sufficient amount of wood to sustain his needs, it objectively makes sense that he will enhance his welfare by exchanging a few of his logs for agricultural produce. The same can be said for the farmer who trades the produce.

Right. He may have an objectively sufficient amount of wood, but the wood is just a means for his subjectively chosen goal. Values are subjective. If a man has enough wood for two dozen people, a single log is of less value to him than to a guy with no wood. A single log does not have an objective value, that is equal for everyone. Values are not intrinsic, it is dependent upon man. Therefore value must be chosen by each individual.

[KendallJ]

Right. He may have an objectively sufficient amount of wood, but the wood is just a means for his subjectively chosen goal. Values are subjective. If a man has enough wood for two dozen people, a single log is of less value to him than to a guy with no wood. A single log does not have an objective value, that is equal for everyone. Values are not intrinsic, it is dependent upon man. Therefore value must be chosen by each individual.

Rational values are not subjective. They are contextually objective. All other things being equal, if you flip these two guys around, the value stays the same in each context.

It is true that some choices, such as choice of career, or favorite color, etc are arbitrary (philosophically speaking), but to the extent that choices are not arbitrary and to the extent that men use reason and adhere to reality, values become knowable, and causal. They may differ among men, but they differ for good reason. They are not whim based, as the term subjective would indicate.

Subjective is not really the right term here.

Edited June 24, 2008 by KendallJ

[DragonMaci]

Subjective is not really the right term here.

Indeed. The right word is contextual. It is interesting though that this came up because I was thinking about the distinction earlier today.

[eficazpensador]

Rational values are not subjective. They are contextually objective. All other things being equal, if you flip these two guys around, the value stays the same in each context.

How can you know that if you flip the two men's position they will each value the log as the other valued it? Lets change the scenario a bit. Lets say one man loves to have flowers around his house and has a lot of them. His friend on the other hand, hates flowers and does not have many. Now clearly the first man values flowers a lot more than his friend. If you flip the two men's position, they will not flip their valuations.

It is true that some choices, such as choice of career, or favorite color, etc are arbitrary (philosophically speaking), but to the extent that choices are not arbitrary and to the extent that men use reason and adhere to reality, values become knowable, and causal.

Yes, they are causal. They are caused by each man's personal choices (whether it is his career choice, or just a personal taste). In other words they are subjective to each individual. I agree that the word subjective has a negative connotation of being irrational. The dictionary definition is: "existing in the mind; belonging to the thinking subject rather than to the object of thought."

They may differ among men, but they differ for good reason. They are not whim based, as the term subjective would indicate.

They're certainly not objective as Marx thought. If values were objective, they would belong to the object. They would be intrinsic. We all know there can only be values for man.

Subjective is not really the right term here.

If you go by the exact definition of the word, then it is correct. If we were to use the word contextual, it would imply that values are based on the context alone, and unrelated to man.

p.s. I like your signature.

[softwareNerd]

They're certainly not objective as Marx thought. If values were objective, they would belong to the object. They would be intrinsic. We all know there can only be values for man.

If you go by the exact definition of the word, then it is correct. If we were to use the word contextual, it would imply that values are based on the context alone, and unrelated to man.

They aren't intrinsic because without the valuer they have no value. On the other hand, they are not purely mental constructs. They are the result of the man looking at the external world and evaluating the "is" for its various attributes (its intrinsic features, if you will); then, relating it to himself and figuring out the "ought".

[KendallJ]

How can you know that if you flip the two men's position they will each value the log as the other valued it? Lets change the scenario a bit. Lets say one man loves to have flowers around his house and has a lot of them. His friend on the other hand, hates flowers and does not have many. Now clearly the first man values flowers a lot more than his friend. If you flip the two men's position, they will not flip their valuations.p.s. I like your signature.

Well then, all other things wouldn't be equal then. My response was worded very carefully. Subjective is too broad a term. It implies that any choice is valid and rational.

Thanks, it's a font I had designed based upon my own handwriting.

[eficazpensador]

They aren't intrinsic because without the valuer they have no value. On the other hand, they are not purely mental constructs. They are the result of the man looking at the external world and evaluating the "is" for its various attributes (its intrinsic features, if you will); then, relating it to himself and figuring out the "ought".

Exactly! Its value depends on the objects ability to ease a dissatisfaction.

Well then, all other things wouldn't be equal then. My response was worded very carefully. Subjective is too broad a term. It implies that any choice is valid and rational.

Thanks, it's a font I had designed based upon my own handwriting.

Well if everything were equal they'd have to have the same exact judgments. Of course they would attribute the same value to the wood. Either way, all we're arguing about now is what term to use. I used subjective simply because that's the word the Austrian economists used for their "Subjective Value Theory."

Edited June 24, 2008 by eficazpensador

[DarkWaters]

A single log does not have an objective value, that is equal for everyone. Values are not intrinsic, it is dependent upon man. Therefore value must be chosen by each individual.

Yes, [values] are causal. They are caused by each man's personal choices (whether it is his career choice, or just a personal taste). In other words they are subjective to each individual. I agree that the word subjective has a negative connotation of being irrational. The dictionary definition is: "existing in the mind; belonging to the thinking subject rather than to the object of thought."

They're certainly not objective as Marx thought. If values were objective, they would belong to the object. They would be intrinsic. We all know there can only be values for man.

I perceive that the disagreement you have with a few other members on this issue stems from different usage of the words 'subjective' and 'objective'. If I am not mistaken, you seem to be using the words 'objective' and 'intrinsic' interchangably. Although this is probably how 'objective' is normally used by modern philosophers, it is not how Objectivists use it. In addition, I suspect that your usage of the word 'subjective' is different from how Objectivists use that term.

According to Objectivist philosophy, there is no dichotomy between subjective values and intrinsic values. Subjective values, if I am not mistaken, would be something that is good because of the subject but completely independent of the facts of the reality. If values are subjective, then some individuals can decide that abusing crack cocaine or crystal methamphetamine regardless of the fact that embracing such a habit will destroy your life. Similarly, intrinsic means that an object is good, in and of itself. So if mozarella cheese is intrinsically good, then it should be good for everyone, regardless if the person happens to be lactose intolerant, has heart problems or just happens to not like the taste.

There is no false dichotomy between subjective and intrinsic values because values can also be objective (in the Objectivist sense). Here, I mean that values are contextually grounded in the facts of what goal-directed actions are required to strive towards the long-term flourishing of your life.

I hope that this offers clarification.

It is true that some choices, such as choice of career, or favorite color, etc are arbitrary (philosophically speaking), but to the extent that choices are not arbitrary and to the extent that men use reason and adhere to reality, values become knowable, and causal. They may differ among men, but they differ for good reason. They are not whim based, as the term subjective would indicate.

I like to use set theory to explain the allowance for personal preferences with objective values. The way I see it, there is an objectively defined set of life-advancing values and the complement of that set are values that are not life advancing. For example, in the context of dietary preferences, there are plenty of foods that are well within the set of possible life-advancing values for cuisine: New York strip steak, Chicken parmesgian, Rigatoni vodka, Bourbon-marinated salmon, et cetera. With reasonable exceptions, an individual can objectively claim that some meals in this set are values to him and others are not, depending on his personal tastes. The point is, this set of possible values is objectively defined. Likewise, we can also objectively say that an individual cannot rationally claim that he values eating broken glass or drinking cyanide.

[KendallJ]

I like to use set theory to explain the allowance for personal preferences with objective values. The way I see it, there is an objectively defined set of life-advancing values and the complement of that set are values that are not life advancing. For example, in the context of dietary preferences, there are plenty of foods that are well within the set of possible life-advancing values for cuisine: New York strip steak, Chicken parmesgian, Rigatoni vodka, Bourbon-marinated salmon, et cetera. With reasonable exceptions, an individual can objectively claim that some meals in this set are values to him and others are not, depending on his personal tastes. The point is, this set of possible values is objectively defined. Likewise, we can also objectively say that an individual cannot rationally claim that he values eating broken glass or drinking cyanide.

This is a very cool way to describe it. Thanks!

[DragonMaci]

If you go by the exact definition of the word, then it is correct. If we were to use the word contextual, it would imply that values are based on the context alone, and unrelated to man.

Only if one was to be silly and take the context as separate from the man for whom it is the context. But as I said, that is silly. A man's context is not isolated; it is tied to the man who's context it is. If one bares that in mind then one will not see such an implication, one will instead see the two rather than just one.