I have recently been pondering the idea of a person’s value.
Are people truly ‘equal’ in terms of their value to others? What makes a person valuable to society? How does society value a person? How is a person’s value made visible to others?
I believe that some inherent value exist in everyone. This is manifested through the empathy we experience for others, and the rights we codify into law. Let’s ignore the notion of inherent human value for now, though, because it is difficult for society to measure.
Let’s narrow our concept of value to just what’s easy: Transactional value. Value that can be quantified, with money.
By this simplistic view, capitalist economies clearly do value some people more than others: Those with great wealth. Exhibit A is their spending power. Exhibit B is their celebrity.
However, what makes a person valuable to society, and how society values the person, are not the same.
Ideally, society would most value the individuals who provide the greatest value to society. In practice, that is too difficult. Non-financial evaluations of a person have the major disadvantage of being less quantifiable. I am thinking here of such things as civic awards and recognitions, IQ tests, athletic achievements, social media followers, public opinion… These are measurements that don’t stack up easily for clear comparisons of peoples’ across-the-board value.
So, we let wealth be a proxy for value.
Consequently, many of us would like to be rich. We can rightly expect that if we can achieve wealth, society will treat us as more valuable. And, we think that will tell us that we are valuable.
This has been true of me.
But this is a trap.
Acquiring wealth is a very unreliable indicator for the value you have created. Sometimes a person becomes wealthy by stealing or transferring value to themselves, instead of creating it.
To illustrate that concretely, I need to better define ‘value’.
Let’s say I sell you a cup of coffee for $2. Let’s also say that you would’ve spent as much as $3.00 for that coffee, because you really wanted it.
Since I charged you $1.00 less than the coffee was worth to you, in a way I have created $1.00 of value for you.
(I’ve actually created more value for you than just that: You also have the inherent value of enjoying the cup of coffee. But, remember that we’re ignoring anything we can’t easily put a price tag on.)
The point is, you’ve received at least $1.00 of value for my efforts.
Meanwhile, the cup I sold you only cost me $0.25 cents to brew. Thus, I’ve also created $1.75 of value for myself, in the form of profit.
All told, that’s more than $2.75 of value I created, of which I kept $1.75.
This illustrates how when transacting business in a capitalist society, we generally don’t earn value without creating more value than we receive.
This non-zero-sum aspect of transactions motivates us to do business together. Everyone benefits.
The person who scales up this coffee business model enough to get rich doing it will be both valued by society (through their amassed wealth) and be valuable to society (through the value given to customers).
I realize that this is a simplistic example that you could poke holes in. For instance, you could argue that I’m carelessly conflating coffee customers with ‘society’. I am giving economists and capitalism the benefit of the doubt here, which perhaps they don’t deserve.
But if it holds true for the coffee capitalist, this model of value also works for those of us collecting a paycheck. Our employers pay us because they get even more benefit than we cost, i.e. we create value for them.
Note how the process of becoming wealthy through this value creation happens gradually over time.
Something different happens when someone gets rich (relatively) quickly.
Consider hedge fund trading, exorbitant corporate officer pay, government and corporate corruption, tax evasion, scams, cons, and Ponzi schemes.
From society’s viewpoint, getting rich through these kinds of methods can be viewed as a form of stealing. It skips value creation. Instead, it generates wealth through value transfer.
The person who would like to be valuable to society should avoid get-rich-quick methods. They should pay attention to the value they create for others, and ensure that it well exceeds the value ending up in their own bank account.