A Person is Worth What He’s Paid
Thomas Sowell is my favorite pundit. He has a very good column up on Townhall today.
When you buy a computer, the only reason you part with your money is that the computer is worth more to you than the money. But the only reason someone sells you the computer is that the money is worth more to them than the computer.
It is the same story when Derek Jeter gets paid millions of dollars to play shortstop for the Yankees. He gains by exchanging his time and skills for the money that George Steinbrenner pays him. But Steinbrenner also gains by paying Jeter to play shortstop — which helps bring in more money in gate receipts, the sale of television rights, and other sources of revenue.
As for the rest of us, it is none of our business what Steinbrenner pays Jeter. It’s their deal. If we don’t understand it, there is no reason why our ignorance should influence what happens.
If Derek Jeter worked like a dog for years to perfect his skills as a baseball player, some might think that he had earned the big bucks he gets. But if he was just born with natural talent and the whole thing is a breeze to him, that would mean he didn’t really merit such a huge payoff.
But Steinbrenner is not paying for Jeter’s merit. He is paying for his productivity, whether at bat or in the field. Somebody who worked twice as hard and was still only half as good would never get the same money that Jeter gets.
Transferring wealth from 300 million Americans and spreading it out over more than two billion people in India and China is not going to do much. But enabling more people in India or China to become more productive can help them and us — and has.
You should read the whole thing. The important thing to learn is that in a free transaction both parties must think than they are better off after the transaction that before. When the government intercedes using brute force that statement is less true. The government can require that I give my money in exchange for a new post office in West Virginia. I feel that’s unfair.
In some cases the choice results in circumstances that hurt both parties in a transaction. Suppose I hire a person to work for a wage that they are willing to accept. The government interfers and says that that agreement between two private parties is illegal. In that case I have the choice whether I am better off with or without that person. In some cases I may decide that I am better off without that person at that wage. I’m out an employee and the employee is without a needed job.
