So What if Billionaires Don't Deserve Their Wealth?
Incentives still matter!
There’s a frustrating pattern among both defenders and detractors of capitalism. Instead of focusing on the outcomes of their systems, they debate whether the rich and the poor really deserve their fate. Take, for example, one exchange between Patrick Bet-David and a participant, Luc, on Jubilee:
Bet-David: Do you think it's easy or do you think it's hard?
Luc: To create jobs is probably hard.
Bet-David: Yeah, it's okay. So, the people that create jobs, you think they should have a little bit of incentive for having risked their life savings, spend time away [from] their families to create jobs so somebody like you can work for that company.
Luc: Sure. But that but that is the incentive and and bravo for them. But that does not give them the right to pay themselves $2 million bonuses while other workers are scraping by [on] $10 an hour.
Bet-David: You don't get to choose how much money I choose to make. That's not your business. That's my business.
Two other participants also lamented that single mothers often work harder than billionaires, and yet are scarcely rewarded. Another, Grace, would protest:
Grace: A millionaire is critiquing the people in poverty. You should work harder. You should you should work. You know, you can be me. We can't all be.
Bet-David: My hope is that you believe you can change and improve. That you believe you can upgrade yourself. That's my hope.
Grace: That's very, you know what? That's what rich people like you want to keep telling us. “You can be just like me. Do you want to be like me? If you work hard enough, you can be like me.”
Bet-David: It's actually you wouldn't be able to be like me because you wouldn't work that hard. Would you work that hard?
Grace: You don't I'm not going to tell I don't have to answer that. I don't have to measure my work ethic to be worthy…
Frustrated with PBD’s performance, I took the opportunity to follow up with Grace and several other anti-capitalists in the Jubilee video. I discussed several things with all of them, but the question of how capitalism compensates workers was a common theme.
One need not be committed to the supposed right of business owners to pay themselves what they want, or the moral worthiness of CEO pay, to defend a market system that determines how workers are compensated. In fact, as a determinist,1 I don’t believe anyone truly deserves their outcome in life. But if you don’t believe the rich and the poor really deserve their fate, the question that still must be answered is how we improve everyone’s lives. That requires economics, not value judgments.
Consider a white male genetically predisposed to being intelligent, born to rich parents2 who send him to high-quality private schools. He goes to business school on his parents’ dime and gets seed capital for his startup from them. His business is eventually wildly successful, and he becomes a billionaire. Does he deserve his wealth?
Probably not, but this is the wrong question to ask! The relevant question should be how valuable his business is to the world and how decisions to start businesses are influenced by policies meant to address this unfairness. Another inspiration for this article was John Cochrane’s similar point when discussing a wealth tax in France:
The wealthy may not "deserve" their comfort, but strangely confiscating the rewards to private success seems always to produce misery for the rest. The French tax system can surely be designed to produce its prodigious revenue with less economic distortion. Shouldn't that be the quest? Does France really need poorer people and much poorer rich people?
One can dispute whether a wealth tax would actually lead to “poorer people and much poorer rich people”. And this is precisely the debate we should be having!
If wealth taxes or socialism make us overall poorer, then even the best moral case for redistribution can’t avoid the fact that the poor will be worse off in the long run. Conversely, if redistribution boosts growth or well-being, defenders of billionaires must admit the property rights of the wealthy are worth the social cost of a worse society.
Focusing on efficiency also leads to the right questions being asked about the poor and poverty. Imagine a lazy Zoomer who slacks off in school to focus on his failing professional Fortnite career. He drops out of high school and can never hold down a job for long because he always stays up too late playing Fortnite to get to work on time. Does he deserve to be in poverty?
Again, this is the wrong question to ask! The life he lives is clearly pretty bad, and we should want to increase his quality of life. The relevant question is how poor decisions are influenced by policies meant to increase the standard of living for the poor.
Just like with taxes, the debate should be about how much we should redistribute and what the most efficient way to do it is. Models and studies done by economists will be the most useful tools in debating these issues!
Of course, moral claims can influence what trade-offs we are willing to make. If you think equality is intrinsically morally important, you may weigh the benefits of a more equal world against the decreased total utility. Once again, the work of economists will be the best tool to examine the costs and benefits here.
The reason I’m a capitalist is that I believe that markets typically lead to an efficient allocation of labor and capital, which central planning would struggle to recreate. It was never about a strict meritocracy or the deservedness of wealth. I defend this idea more in-depth in my debates with Jubilee participants. I think the one with Hunter was the best!
I now put much less credence in determinism than I did in this debate, since I’ve seen smart people make good arguments for compatibilism. However, the type of free will that compatibilists describe hardly entitles billionaires to their wealth, in my opinion.
Some people use “deserve” interchangeably with “a property right to”. For these types, you can deserve wealth from your parents since it’s their property, and they have the right to transfer it. Where it’s trickier to justify the use of the word “deserve” in my mind is genetic disabilities or predispositions, which influence what trades will be mutually beneficial for you to make through no fault of your own.
The fact that a wealth tax would make everyone worse off doesn’t matter to people who want equality for its own sake. I once had a conversation with an environmentalist who was horrified that some African countries were allowing tribes to own and profit from elephant herds.
I pointed out that in those countries, elephant populations were growing, while in countries that followed his preferred approach of banning elephant hunting altogether, populations were shrinking. The problem is, elephants are incredibly destructive to crops. If local people have no incentive to protect them — and every incentive to get rid of them — then they’ll be killed.
His response was that he’d rather see elephants go extinct than see them owned and be a source of profit.
How do you reason with that kind of mindset? How do you engage with people who would rather everyone be equally poor than allow some to do better — even if that means others also end up better off?
The thing is most people don't have enough data to answer the empirical questions. But everyone has a sense of fairness! So of course the question of fairness dominates the discourse.