Monday, 29 September 2014

How to Earn an Honest Living

In this paper, I want to explore ways in which an individual can make his or her contribution to others in civilization. My concern here is not, as the title might suggest, to give practical advice on honest ways to make a buck or two. Rather, it is to try to answer the question: What is it that constitutes earning an honest living?

What do they mean, the words “earn an honest living”? Starting with the noun Living, we visualize a flow of resources or wealth (in the broad sense) coming in towards us, which supports us both physically and mentally. When we add the adjective Honest, we sense that we must obtain this wealth without lies, cheating or deception. When we add the verb Earn, we see that as well as this inward flow there must also be an outward flow. Each of us human beings must give, as well as take. And when we put together the whole phrase, we understand that to earn an honest living, the giving and the taking must be in a relation to each other. Over the long term, we must give out at least as much as we take in. Those, who earn an honest living, are those who are long-term nett creators of wealth, or well-being.

Each human individual who earns an honest living, then, provides a flow of wealth to others. What is the value of this flow of wealth? In the absence of coercion, it is simply what others are prepared to provide in return. Without coercion, the broad-sense wealth, which we receive from others, should eventually rise to a level close to that of the wealth we create. And that will provide us both with satisfaction of our needs, and with incentive to develop our talents further and so to create more well-being. The result is continuing, and increasing, prosperity and happiness for all involved.

What are the ways in which we can create this broad-sense wealth? The productive careers, which we can follow, are of many different kinds. But we can classify the processes, by which we make our contribution to our fellow human beings, under a relatively small number of headings. I identify five such headings, to which I give the names: Genius, Science, Improvement, Business, Support. I will look briefly at each in turn.

Genius is the first, and the rarest, of the ways to create wealth. Among full-blown geniuses of the ancient past, we might name Socrates or Archimedes. In more recent history, Leonardo da Vinci, Shakespeare or Mozart. In modern times, perhaps, Albert Einstein, Thomas Edison or Henry Ford. Full-blown geniuses come in all shapes and sizes, but they all have three things in common. They are creative. They are all ahead of their times. And they change some aspect of the world, just by being who they are and doing what they do.

Most of us possess at least sparks of genius. Some of us manage to uncover our creative powers in our work, or in our hobbies. But few of us can achieve full-blown Genius. So the great majority of us have to find some other way of creating wealth.

The next category we might try, and the second of my headings, is Science. Science, in the broad sense, is adding to the store of objective human knowledge. So Science includes not only the physical sciences, but also other disciplines that aim at an objective understanding of the Universe. Those who create wealth through Science include not only those who are conventionally called scientists, but also such people as archaeologists, objective historians and economists and – when they get it right – even philosophers.

The third category is Improvement. Improvement is the process of developing and advancing human capabilities. One form of Improvement is education, leading out and elevating the talents of the individual. Another form of Improvement is technology, which in the broad sense can be described as making things possible which were not possible before. Those who create wealth through Improvement include not just educators and technologists, but anyone who has a yen to make others more capable, or to look for new, better things to do or new, better ways to do them.

The fourth category, and the one most significant in economic terms, is Business. Business is the provision of goods or services, for which other people are voluntarily willing to pay. Those who deliver wanted services, or manufacture wanted goods, are creators of wealth through the process of Business. As are the honest among those who direct the organizations that provide those services or those goods.

The last of my five categories is Support. Support is an indirect means of creating wealth. A good example of Support is what a housewife does in a traditional marriage. By providing a comfortable, loving and supportive environment for her husband, she enables him to be more effective in his own wealth creation. But Support is common in the economy as well. An internal company accountant, for example, does not directly create wealth. Yet he contributes to the success of the productive, wealth-creating company he works for, by providing information which is valuable to the Business people in that company.

It is my view that all forms of wealth creation fall ultimately under one or more of these five headings. Sometimes, it is true, individuals can create more than one form of wealth at the same time. For example, a musician can create wealth both through a touch of Genius in his performance, and through the Business of people willingly paying to come to his concerts. And sometimes it may at first sight be hard in see in which category a particular form of wealth creation falls. Those who run charities, for example, would probably not expect to be classified as Business people – until they reflect that a charity is, in essence, a Business in which the pay-back to the customer is psychological rather than tangible.

Among the five categories, one, Improvement, is central. For Improving ourselves, educating ourselves and developing our own talents, is the way in which each of us can make ourselves better and better at earning an honest living. And an important factor in driving this self-Improvement is what is commonly called Competition.

Received wisdom would have us believe that competition is about beating off rivals, and is something rather nasty and negative. But true Competition is about seeing what others can do, and then seeking to make ourselves better than they are. Competition is doing things better, doing things quicker, doing things cheaper, doing things others can’t. Competition, indeed, is the process whose result is competence.

Next, I will try to relate each of the five categories to the economic rewards reaped by those who are productive of wealth in those ways. For few lovers of freedom would disagree that those, who create wealth, deserve full opportunity to enjoy the economic fruits of that wealth.

Support, in its economic form at least, tends to be an easier and less risky activity than Business, and so the rewards are generally lower. Business, on the other hand, is where the big bucks are today. Those who take a good idea, and put in the efforts to make it happen, can become rich. And deservedly so. On the other hand, many Business people merely scrape along, and some screw up and ruin themselves. (Or, more often, are ruined by the taxman).

Improvement can often be good Business, and then again it sometimes isn’t, as shown by the recent boom and bust among dot-coms. Those who do Improvement well, however, can command a deserved premium. Scientists, on the other hand, tend to be less well rewarded economically than their contribution merits. This may be partly because the pay-off from their work tends to be long-term. Also, many scientists are driven by love of the job itself, rather than by the rewards it generates. Lastly, Geniuses are laws unto themselves; some make megabucks, others survive on a shoestring.

There is another factor, which greatly distorts the relationship between the wealth an individual creates and the economic rewards following from it. There is a big difference between creating wealth and acquiring wealth. Put in money terms, there is a big difference between making money and getting money.

An example will make this plain. Recently, a form of spread-betting has become popular. Say there is a sporting event with only a small number of possible outcomes, like a football match or a tennis match. Different bookmakers will adjust their odds according to how much is bet with them on each possible outcome. The result is that you can often get better odds on one outcome from one bookmaker, and better odds on another outcome from another bookmaker. If the odds are far enough apart, you can bet yourself into a position where you cannot lose. You will win, whatever the result.

I have no doubt that, done cleverly and without distorting the markets too much, such spread-betting schemes can bring in substantial quantities of money for their practitioners. But no wealth is created by this activity at all. All the scheme does is re-distribute money from the pockets of the poor punters, via the burses of the bemused bookmakers, into the satchels of the savvy schemers. It is essentially a parasitic activity. It is no more than a way of reaping without sowing, of getting money without making money.

The stock market, too – while indispensable in its role of matching investors to those deserving of investment – suffers similar problems. Often it seems to be little more than a glorified gambling game.

All this goes some way towards explaining why, even in a free market without coercion, the economic rewards individuals receive will not necessarily mirror the wealth they create. And when coercion is added to the picture, things get worse. Far, far worse.

How can we lovers of freedom do our bit to make up for this mismatch? What can we do to make the relationship between wealth created and wealth received by each individual more direct? The problem is not soluble within the narrow confines of economics. We must take a wider view, and consider wealth in its broad sense.

Earning an honest living is natural to civilized human beings. The creation of wealth – be it through Genius, Science, Improvement, Business or Support - is a virtue in itself. Indeed, it is the noblest of all human activities. We should applaud and cherish those around us, who earn an honest living. And we should applaud and cherish them in proportion to the wealth they create.

Now there are some who, for one valid reason or another, are unable for a time to create wealth. And therefore they cannot, for a time at least, earn an honest living. Illness, accident, unemployment or disability can hit anyone, not to mention old age. Nor should we condemn those, who are unable to create much wealth because they live in economically poor societies. With such people, we must take the long-term view. Are they nett wealth creators over the long run? If so, they are OK. And if we can remove from their path any obstacles stopping them doing what is natural to them, creating wealth, more wealth and lots more wealth, we should try to do just that.

If not, the next test must be, does the individual strive to earn an honest living? Is he trying to find another job, in which he can start earning honestly? When she recovers from her illness, will she start creating wealth? Does the poor peasant do what he can to be self-sufficient, to avoid being a drain on others? In this way, we civilized human beings can identify those who are on our side, those who when given the opportunities will start honestly creating wealth.

But there are those that do not put in any effort to become competent, those that do not even try to earn an honest living. They contribute nothing of Genius. They contribute nothing to Science. Many of them, indeed, promote the kind of junk anti-science that would have us believe in global warming and ozone holes. They contribute nothing to Improvement – in fact, many of them actively oppose technology, and don’t want people to be well educated. They contribute nothing to Business; they hate honest Business so much that they want to constrict it and to regulate it, and to take away the rewards of Business from those who have fairly earned them. And often, they do not even make any effort to create wealth indirectly, through Support. The only way these noxious creatures can survive is by, fraudulently, parasitically or coercively, taking wealth created and earned by others.

Those that are so lazy that they do not even attempt to earn an honest living, are not our friends. They are failing to behave as civilized human beings. They are failing to behave as our fellows. Why should we waste one penny of our wealth or one milligram of our compassion on them? Why should we care about them in the slightest?

(Neil's Note: October 20th, 2002 is the date on this one. Quite a bit of the early part of this essay also appears, somewhat edited, in the book around pages 84-85.)

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