Gifts, Games, And The Unearned — Laissez FaireLaissez Faire

In his rewardingly positive review of Free Market Revolution, Ari Armstrong raises a few gentle criticisms. Most of them involve our failure to address certain objections to laissez-faire capitalism, such as concerns over privatizing the roads and other “public goods.”

As Armstrong suggests, we left those and many other issues unaddressed given the need to keep the book brief and focused. That’s also one of the reasons we created this blog: to elaborate on issues we didn’t have space to address in the book.

One such issue, which I wanted to address right now, is clarifying what it means to earn wealth. Here’s Armstrong:

In general, the book is written extremely clearly. The only unclear paragraph that stood out to me asserts that the “profit seeker” spurns “unearned money” (p. 77). This section fails to distinguish between legitimate gifts and winnings, such as an inheritance or a prize drawing; and illegitimate gains, such as those “mooched from overly generous relatives” (p. 77).

It’s a fair point. Our view was that the context made it clear that by “unearned money” we meant money gained through “mooching” and “looting.” We left it open whether gifts and winnings are earned.

Our answer? Yes, they are earned, but not precisely the same way a cook earns a wage by making hamburgers.

In the broadest sense, to earn money means to obtain it through production and trade—in contrast to “looting” (obtaining money by coercion) and “mooching” (obtaining money while neither producing nor offering any type of value in exchange).

Money received in the form of gifts or inheritances is also earned through an exchange of values—but here, it’s essential to understand that Ayn Rand’s “trader principle” encompasses spiritual values as well as material goods and services. For example, when a child consistently offers his parents gratitude, good will, loyalty, appreciation, and love, and as a consequence his parents remember him in their will, the child has earned that money—not economically, in the sense of a trade on the market, but morally, because the inheritance is a reward for the spiritual values only he could provide to his parents.

Money won in a prize drawing or lotto is also earned in a certain sense. Under a simple contract, your money buys a promise to pay defined amounts if your numbers are drawn. Your winnings are thus “earned” in that you produced the money for your ticket and your winnings came in trade—they were neither mooched nor looted. But there’s a subtle difference, because the winnings are actually a form of consumption, not production. Just as you might point to a statue or painting in your home and say with pride, “I earned that”—meaning that you bought it with your earnings from productive work—you’re also entitled to point to the Porsche you bought with the proceeds from your lotto ticket and say, “I earned that.”

In our book, we stressed the importance of earning because a rationally selfish person is focused on being productive, and in a division of labor context, that means: making money. Relatively speaking, dispositions of wealth through gifts or consumption are secondary issues that should not distract us from man’s primary need to produce.