Quotation of the Day…

by Don Boudreaux on March 20, 2023

in Myths and Fallacies

… is from page 57 of the 2011 revised and enlarged edition of Thomas Sowell’s 2009 book Intellectuals and Society (original emphases):

Contrary to [British Marxist Harold] Laski and many others with similar views, there is no given “sum to divide,” as there would be with manna from heaven. It is precisely the cooperation of capital and labor which creates a wealth that would not exist otherwise, and that both sides would forfeit if they did not reconcile their conflicting desires at the outset, in order to produce it. It is literally preposterous (putting in front that which comes behind) to begin the analysis with a “sum to divide” – that is, wealth – when that wealth can be created only after capital and labor have reconciled their competing claims and agreed to terms on which they can operate together in the production of wealth.

DBx: Yes. And yet many professors, pundits, and politicians continue to write and pontificate as if wealth rains down like manna from heaven, with human institutions and human actions playing at most a very minor role in its creation. The policy recommendations of professors such as Thomas Piketty and Gabriel Zucman, and of politicians such as Bernie Sanders and Elizabeth Warren, make sense (if we exclude the possibility that these people are sadists) only if these people truly believe that wealth is created largely independently of human institutions and actions.

I’ve said before and I’ll say again, many times: The market’s biggest failure is not that it occasionally ‘fails’ in those ways tediously described in economics textbooks; instead, the market’s biggest failure is that it works so successfully, smoothly, and quietly that people take its output for granted. The market thus conveys the appearance or sensation that wealth and economic growth ‘just happen.’ But, of course, wealth doesn’t ‘just happen.’ It must be produced. Daily. With creativity. Careful attention to details, including to the desires and quirks of fellow human beings as well as, of course, to prices. Risk-taking. Hours of toil, often long ones.

Recognition of the realities of wealth production renders silly the harangues against the “unequal” so-called “distribution of income” (or of wealth) in market economies. Unfortunately, too many people are happy to ignore reality in their rush to display what they falsely imagine to be their moral excellence.

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