I heard a story on the radio a while ago about a health care trend.  Employers are running on-site medical clinics for their employees.  Apparently, when serving a sufficiently large number of people (a few thousand) it is cheaper to run your own clinic than to buy health care on the open market.

http://www.insure.com/articles/healthinsurance/on-site-health-clinics.html

http://www.news-medical.net/news/2006/11/08/20920.aspx

It occurred to me that this is also something that intentional communities could do, and not just in the area of health care.  Lots of maintainence services like plumbing and auto repair could be done this way too.

The key point is that capitalist markets add overhead from transaction costs and zero-sum games like advertising.  The cost of just providing the serivce can be small compared to the non-value-added overhead.  I’ve heard that toll roads have this problem too.  The cost of manning toll booths for 30 years is more than the cost of building and maintaing the road.  They could cut the cost in half by just eliminating billing overhead.  It would create the same customer value at lower cost.  Sounds like a win to me.  But then the builder of the road woud have no way to wrangle that value into his own pocket.  In this case, capitalism cannot choose the globally optimal solution.

Today, July 20th, 2009, is the 40th anniversary of the first manned moon landing.  To commemorate this event, the National Space Society has suggested blogging about the topic of space settlement (http://www.nss.org/settlement/blogging.html).

Space settlement relates very closely to my previous posts about intentional communities and federalism.  I want a world where there are a wide variety of social systems that people can choose to live under.  Unfortunately, societies have a tendency to expand to fill all available area, and then become ossified and resistant to change.  This leaves no room for experimentation with new and different ways of doing things.  I don’t know if this tendency can be avoided, but there is something that can lessen it’s sting, and that is the existence of a frontier.

Why did the first modern democracy come into existence in North America instead of Europe?  Why was women’s sufferage in America first granted in Wyoming instead of some more “liberal” state like New York?  In both cases, they were far away from the existing centers of power at the time.  Being on the frontier allows much more free experimentation with new social structures.  That is the primary reason why humanity should go into outer space.  Not scientific discovery or economic profit.  Those things are important too, but most important is the sociological benefit of having a place where people fed up with the mainstream can go and try something different.

With that in mind, you’ll understand when I say that the government space program is irrelevant.  What good is it to have the government send people into space if the primary goal is to allow people to go to space to get away from the current government?  Instead, we should be trying to create a world where any private citizen can live and work in space for their own purposes without being part of a grand, centrally-planned exploration program.  That is what is meant by space settlement.

Space settlement will require a lot of bootstrapping.  It will be decades at least before families routinely set out for greener pastures in the space age version of conestoga wagons.  In the short term, the thing that can make the most progress towards this goal is space tourism.  It will create a distributed network of technology providers who are not dependent on political whim for their survival, and cement in our social consciousness the idea that it’s okay to go to space just because you want to.

There is a lot of debate in the space settlement community about the right destination for space settlers.  This is kind of a silly debate since we can’t go anywhere right now.  But I suppose when a group of people finds they actually agree on something, like space settlement is good, they have to go on and start arguing over the details.  And who am I to disparage this tradition so I’ll put in my two cents.

The most important thing is to create settlements that are politically independent of Earth.  At the top level, that is what’s important and the location doesn’t matter.  However, I think that goal will be easiest to achieve on the planet Mars.  In order to be politically independent, it will help if the settlement is physically self sufficient.  If the settlers rely on some crucial export from Earth for their survival that could be used for political leverage.

Physical self-sufficiency hinges on the question of environmental closure.  Does your settlement leak any important resource, and can that resource be replenished from the environment around you?  No settlement will ever achieve 100% closure.  Something will leak.  So what environment has the greatest variety of physical elements that can be easily accessed to make up the losses?  After Earth, the second best place is Mars.  I’m not saying that we shouldn’t go other places, or that settlement would be impossible other places.  I just think that politically independent, physically self sufficient settlements will be easiest on Mars.

An intentional community (www.ic.org) is a group of people who have chosen to live together with the intention that their community will have certain attributes, values, etc. which may differ from society at large.  I think intentional communities could be a good solution to some of our society’s problems.

When people hear the phrase intentional community, if they do at all, they tend to think it must be something like a hippie commune.  Certainly, a hippie commune is an intentional community, but it’s not the only kind.  A much different type is co-housing.  In co-housing, there are a bunch of single family houses owned separately by individuals or families.  People have normal jobs outside the community.  Each household has its own finances.  People do not share their income or property with the community.  It’s pretty much a suburban neighborhood, except that the people who choose to live there want to live in a neighborhood where people know their neighbors and do things together like barbequeues and movie nights.

People who want to live in that kind of neighborhood have increasingly found that if they just buy a house in some random suburban neighborhood it will most likely not be that kind of neighborhood.  So the only way they can find what they want is to set out intentionally to create it.  This is the core meaning of intentional communities.  What the community is like can be whatever the members want.

There are countless attributes that people may want out of an intentional community.  They may want to live in a more environmentally sustainable way.  They may want their community to follow religious values.  They may want to achieve communitarian economic goals.  They may want a certain kind of social life.  The common thread is that these goals are hard for an individual to achieve all by himself, but are much easier for a community of like minded people.

This is what interested me in the idea of intentional communities.  In my day to day world I’ve often felt trapped when I wanted anything different from the mainstream.  For example, I would love to live in a place where I could walk or bike everywhere.  Unfortunately, in America modern towns are set up for the convenience of cars.  Wide streets, big parking lots and spread out zoning plans make places further away from each other than they have to be.  It’s no problem if you have a car, just step on the gas.  But if you want to walk or bike it’s a real pain.  To make it convienent to walk or bike everywhere you would lay out the whole town completely differently.  This is not something that I can choose to do all by myself.

I really feel trapped.  I can try to live in a more bike friendly town, but at the same time I’m trying to find a nice house that I can afford close to a job that I can get, in an area of the country that I like.  Most of the time I wind up stuck with what I can get.  If you want what the mainstream has to offer there’s lots of it available, but if you want something different it’s not available, or you have to go far out of your way to get it.

My idea for a solution is to have lots and lots of incredibly varied intentional communities.  These communities would be villages of a few hundred to a few thousand people within a metropolitan area.  The purpose is to increase freedom by increasing the set of available options that people have to choose from.

Being part of a community would make it easier to achieve certain goals.  For example, let’s say you want to buy environmentally friendly products, but it’s hard to tell the true environmental cost of something by looking at the packaging, and you worry about companies greenwashing their products, marketing them as environmentally friendly when they are not.  As an individual, if you spend 1/10% of your time researching environmentally friendly products you have about 10 minutes per week, barely enough time to do a little web surfing.  If a community of 1000 people spends 1/10% that’s one full time person who can be dedicated to that job, and the information they learn can be used by all 1000.

These intentional communities could exist within a very libertarian framework  Basically, libertarianism would be the lowest common denominator that would govern interaction between communities, but within a community people could decide that they want a different vision of how people should interact.  And if a person just wanted to be an individual in a libertarian society they could not join any community.

Ironically, this is a very libertarian idea.  A libertarian framework, and voluntary personal associations.  The difference I would have with libertarians is that I would not support the libertarian lowest common denominator framework unless the intentional communities existed so that someone who doesn’t want to live in a libertarian society has some alternatives to choose from.

This is the best description I’ve been able to come up with for the fundamental principle behind liberaltarianism.  A liberaltarian society should be organized to actively support the three goals of freedom, fairness, and friendship.

I kind of borrowed from the French motto “liberté, égalité, fraternité”, but I had been germinating the ideas before I realized the slogan was a good fit.  I don’t know too much about the intellectual history of the French motto, so please don’t try to associate me with some horrible events during the reign of terror.  I’m just borrowing the textual form, not the history.

Our society should support freedom.  Allowing people to do what they want is an inherent good.  But true freedom is not just the right to do something, but also the ability to do it.  We should be concerned with all of the ordinary day to day roadblocks that prevent people from actually doing what they want with their lives even though they would have the legal right to do it.  For example, how many people would like to start a small business, but don’t because they can’t get health insurance.  Economic coercion can be as powerful an enemy of freedom as political coercion.

Our society should support fairness.  I avoided saying equality because I don’t believe that giving everyone exactly the same is the only possible way to be fair.  In fact, everyone gets exactly the same is often not fair.  One person can deserve more than another based on their actions and choices.  But society and every individual has a moral responsibility to be fair to others.  Getting someone to agree to a deal that’s bad for them because you have information they don’t, or playing off a weakness you know they have is wrong.  “Anything goes as long as they sign a contract” is not the definition of fairness.  You have a responsibility to be fair to others even if you could take advantage of them and get away with it.

Our society should support friendship.  We could have a society that is perfectly free and perfectly fair, but still not be the perfect society.  Everyone could scrupulously keep to themselves, not restrict each other’s freedom, and always give others the bare minimum required by fairness, and yet I think we would want more than that.  We would want a society where people want to be nice to others.  I’m not saying the government should force people to like each other.  I’m saying that our social norms and customs should clearly communicate that caring for each other is the right way for human beings to be.  And we shouldn’t create legal and economic structures that encourage and reward people for acting like Ebeneezer Scrooge.

I just read a speech by George Soros where he describes what he calls the theory of reflexivity.

http://www.geocities.com/ecocorner/intelarea/gs1.html

It’s a truly fascinating idea, and another counterargument to classical economics’ assertion that markets are perfect.

In the stock market, there’s supposedly fundamentals like earnings per share and earnings growth that are determined by factors outside of the markets.  These fundamentals determine the true value of a company.  Stock prices are based on investors’ beliefs about these fundamentals.  Fundamentals may change, and beliefs may be mistaken, but the classical theory is that over time they tend to an equilibrium that accurately reflects the underlying reality.

The theory of reflexivity, on the other hand, says that people’s beliefs about market fundamentals can actually change the underlying fundamentals.  This can lead to instability and disequilibrium.

The simplest way I can explain it is with the old game rock-paper-scisors.  If I know my opponent is choosing rock, I will choose paper.  But if my opponent knows I am choosing paper, he will choose scissors.  But if I know he is choosing scissors I will choose rock, and so on forever.

The information I have about what my opponent will do changes my actions, and if my opponent has correct information about my actions he will change his actions which will cause me to change my actions…

In this game, it will always be the case that either one player has incorrect information, or one player wants to change his action.  There is no equilibrium.

To illustrate my environmental views I’ll start by posing a question.  What good is New York Times columnist George F. Will?  Did he make any money for me this past year?  NO!  Did he give me anything or do anything to help me?  NO!  In fact, I think George Will has never done anything to benefit me in his entire life!  George will is completely useless to me.  Why should I keep him around?

Of course, this reasoning is flawed.  George Will does not exist for my benefit.  He is a separate being with his own innate value.  He has the right to exist for his own purposes regardless of whether he benefits me.  The core belief of environmentalism is that human beings are not the only things in the universe with this innate right to exist for ones own purposes.  A deer living in the forest doesn’t have to justify itself by being useful to us. I firmly believe this is true.

There are however, two deeply flawed attitudes held by some of those in the environmental movement.  I’m not sure how widespread these attitudes are, whether they are held by most of those who consider themselves environmentalists, or only by a vocal minority.  The two attitudes are anti-humanism and the golden age that never was.

There are environmentalists that are anti-human.  They believe that people are a pollution that has spread over the world and we should get rid of us to allow “nature” to return to its “pure” state.  This is rediculous because people are part of nature.  We have just as much right to use the world as other animals and plants do.  Not more, but just as much.  We have the right to use our fair share of the Earth’s resources.  It’s our moral responsibility to figure out what that fair share is.  It’s wrong to hold the anti-environmental attitude that our fair share is everything.  But equally wrong is the anti-human attitude that our fair share is nothing.  Feminism makes a good analogy here.  The core feminist belief is that women are equal to men.  There are definitely feminists who are anti-men, but the core belief is not anti-men.  Likewise, there are environmentalists who are anti-human, but environmentalism is not anti-human.

The second flaw is the golden age that never was.  This is the idea that the world used to be in some perfect state, and any change we make automatically degrades or destroys nature and takes us further from that perfect state.  This perfect state is usually conceived of as whatever existed just before humans started changing it.  Opponents of global warming rightly point out that the cretaceous period was much warmer than today with higher CO2 levels.  There was a different mix of plants and animals.  There were more rain forests and swmaps and fewer glaciers.  Even the continents were in different locations.  That environment was created by nature, so why should we prefer the environment that existed in 1800 AD over what existed in 100 million BC?

I’ve glossed over a couple things so far.  I said that human beings are not the only things in the universe with a right to exist, but how far does that extend?  Do plants have rights? What about bacteria?  Maybe non-human organisms don’t have individual rights, but species and ecosystems do.  You can eat meat, but you can’t extinct a species.  What about inanimate objects?  Some would claim we shouldn’t colonize Mars because we would destroy its natural state.  But even if inanimate things do have rights, how could we know what they would want?  Maybe Mars is hoping we’ll come and plant trees there.  You could say that it’s so beautiful that nature figured out a way to increase the biosphere by evolving humans to bring life to another planet.

The short answer is that I don’t know.  I haven’t figured out an answer that I have total confidence in and no doubts.  I don’t know how far the right to exist should extend, and I don’t know how to decide which natural state we should be trying to protect.  But I do have a couple guidelines:

1) Be conservative.  When we don’t know we should err on the side of caution.  Avoid losing what we have right now because we might not be able to get it back.  We should avoid unintentional changes to the environment.  For global warming, we should not be asking, “Is it definitely happening?”  We should be asking “Is the probability of it happening great enough that we should start taking precautionary measures?”

2) Intentional changes should be carefully considered.  I don’t reject the possibility that it could be good to change the world’s climate to be more like the cretaceous.  But we would need to make an intentional decision to do that after including all stakeholders in the decision making process.  For global climate change, all stakeholders would have to include everyone in the world and proxies representing the interests of non-human species.  It would not require consensus, but it would require a democratic process where everyone was represented.  Until we do that it’s immoral of us to take the decision into our own hands and do things that will change the global climate.

3) Costs should be shared fairly.  Environmental changes create economic winners and losers.  For global climate change, those hardest hit would be non-human species, and the worlds poor living subsistence lifestyles closely tied to the local climate with few resources to retool for a changed climate.  Those who benefit most from current consumption of fossil fuels have the most resources to adapt to climate change, while those who benefit least will suffer most from the side effects.  This isn’t fair.  We need to change that.  On a more local scale, environmental regulations have had the effect of making individual propery owners pay the full cost of protecting the environment, something that benefits everyone.  We need to make sure these costs are shared fairly too.

4) Biodiversity and biomass make good metrics for the health of the environment.  I like lots of living things, and a lot of different kinds of living things.

5) Environmental justice is not optional.  The libertarian approach to the environment is that each land owner can decide to protect the environment if he wants, and if no one does, and a species goes extinct too bad for that species, not my problem.  That’s wrong.  Environmental protection is everyone’s moral responsibility.

I have an old card that I’ve kept for a long time that has a quote from Ralph Waldo Emerson.

“To laugh often and love much; to win the respect of intelligent persons and the affection of children, to earn the approbation of honest critics; to appreciate beauty; to give of one’s self, to leave the world a bit better, whether by a healthy child, a garden patch or a redeemed social condition; to have played and laughed with enthusiasm and sung with exultation; to know even one life has breathed easier because you have lived — that is to have succeeded.”

I kept this card because the first time I read it I noticed what it didn’t say. It didn’t say “to maximize financial return on investment”. It didn’t say “to look out for one’s own interests with no concern for others”. It didn’t say “to make sure you are insulated from other people’s problems”.

Libertarians think that the interpersonal relationships that are forced upon us by living within a community are chains that must be broken before we can be truly free. They are wrong. Those relationships are the very things that make life worth living.

For those who haven’t noticed, there are some interesting new comments in an old post.

http://www.liberaltarian.net/solidarity-or-individualism/#comments

One of the principles of libertarianism is that there is no duty to help others.  You can go through your entire life helping no one but yourself, and as long as you don’t hurt others you haven’t done anything wrong.

This is something that I disagree with, and I’d like to illustrate my point with a hypothetical situation.  Imagine that you are driving along a lonely country road and you see a car wrecked in the ditch up ahead.  As you draw closer you see a small child, maybe about three years old crying near the car.  The child’s parents are laying on the ground nearby.  They were thrown from the car during the accident.  They are not moving.

You know it will get dark and cold soon.  You also know that it’s not likely anyone else will drive past here soon.  You could help this child at negligible cost to yourself by just dialing 911 on your cell phone and telling the police the location of the crash.  You wouldn’t even have to stop and get out of your car.

But instead you say, “It’s not my problem.”  You drive off and do nothing.  Later you read in the paper about a child who survived a car crash, but died of hypothermia before he was found.

Did you do anything wrong?  Don’t try to hide behind what’s legally allowed under current law.  Law should follow morality, not the other way around.  Would you feel bad that you didn’t do anything?  Would your conscience bother you?

I certainly hope so!  Anyone who wouldn’t feel bad in that situation doesn’t have their moral compass set right.  That fundamental moral sense is telling us the truth.  You had a moral duty to help that child and it was immoral for you not to.

But what about the right of self preservation?  Libertarians come up with examples like you are stranded on a desert island with only enough food to keep yourself alive so if you help someone you will die.  How can that be reconciled with a duty to help?

I would suggest that the duty to help and the right of self preservation both exist.  Sometimes they come into conflict, and which one takes precedence depends on the situation.  This kind of arrangement exists for other rights and duties.  For example, you have a right to free speech, but you can’t yell fire in a crowded theater.

If you compare my stranded child example against the libertarian’s desert island example you can see that each one is slanted as far to one side as possible to make it easy to discern what’s right in that situation.  And of course there will be difficult gray areas in the middle.  For some things the only solution is to hash it out on a case by case basis through legal case law precedent.

The duty to help and the right of self preservation both exist.  Sometimes self preservation will take precedence, but that doesn’t change the fundamental fact that a moral duty to help others exists.

A commenter on my gestalt production post had a lengthy comment lost by the web form, and hasn’t had time to rewrite it. He did leave a short comment mentioning the supply and demand theory of pay. Jacob, I’m going to try to describe the theory I think you were referring to and then write a response. If I get it wrong please correct me. This grew too long to be a comment so I’m making it its own post.How are wages determined? According to traditional economic theory they are determined by the marginal revenue of labor. Essentially, if adding another worker will allow the company to make $50,000/year additional revenue then the company will make more money if they can hire that worker for any amount up to $50,000/year. This is the marginal revenue of that worker. In this context, marginal means the change in output due to a small change in input.

According to the law of diminishing returns, each additional worker will produce less marginal revenue than the one before. As a company hires more people, the marginal revenue of labor goes down. This creates a demand curve for labor. If a company currently has few workers it is willing to pay more because the marginal revenue of the next worker is high. Likewise, if a company has many workers it won’t be willing to pay as much because the marginal revenue of the next worker is lower.

The supply of labor is governed not only by the number of workers, but also by their relative preference for money vs. leisure. If jobs are only paying $6/hr maybe I’d prefer to just work part time, live in a hovel, and enjoy more leisure time. If jobs are paying $100/hr, the extra compensation will motivate me to work more hours. Basically, to get me to work an hour, the company has to pay me more than how much I value an hour of leisure. How much I value money vs. leisure also has diminishing returns so to get my first dollar to buy food I’m willing to work a lot, and to get my last hour of leisure a company would have to pay me a lot.

This creates the traditional supply/demand relationship where increasing wages create more labor supply and less labor demand. Where they meet is the equilibrium point. If a worker has scarce skills, or skills that can create more marginal revenue per hour, such as a CEO, then that affects the supply and demand curves for that type of worker and the equilibrium wage might be higher. It might be a lot higher, but there’s nothing wrong with that. Wages are always set by the impartial forces of supply and demand, and markets always operate at equilibrium so prices are always right.

Jacob, let me know if I got that wrong, or if there’s anything you’d like to add.

The above was my understanding of the traditional theory. Below is my response.

I’m not really going to address the issue of whether the supply and demand theory of pay is an accurate description of how wages work in our real economy. I think it has some problems like the difficulty of a firm actually being able to predict the marginal revenue from an employee, especially a unique high-profile employee like the CEO, whether workers are really as free to choose between work and leisure as the theory assumes, and frictional effects like CEOs being on each other’s boards of directors and tacitly agreeing to give each other higher wages.

But I’m not going to focus on that here. For now, let’s just assume that wages really are equal to a worker’s marginal revenue. My main point in the gestalt production post was that marginal revenue is not equal to how much each worker produced.

One idea that libertarians hold to be a self-evident truth is that every individual has an inalienable right to own the economic product of his or her individual efforts. A further idea that libertarians believe is that when you work for wages, whatever you are paid must automatically be equal to the economic product of your efforts. Finally, according to the supply and demand theory of pay, this is equal to the marginal revenue of your labor. What my gestalt production post was primarily about is that these three claims taken together produce a contradiction.

In general, there is no reason why summing the marginal revenue of each worker should add up to the total revenue of the firm. In fact, if you believe the supply and demand theory of pay I can prove that they must be unequal. The marginal revenue that determines the pay for all workers (or all workers of one type) is equal to the revenue change of adding or firing a single worker, the so-called “last worker”. But due to diminishing returns, the last worker must be the least productive. So the actual productivity of all workers of that type other than the last one is greater than their marginal revenue. Marginal revenue of the last worker times the number of workers must be less than summing the actual revenue over all workers.

So the firm will be left with a residue of funds, the difference between marginal revenue times number of workers vs. actual revenue. Capitalist theory takes a left turn at this point, and assumes that this must be the economic productivity of capital goods, the machines that the workers use. But why should we assume that these two quantities are equal? It sure is a convenient idea, but why should it be true? Wouldn’t it be fair to judge capital by the same standards as labor? Lets take each machine out of the process, one at a time, see how much less we would produce without that machine, and that’s the marginal revenue of that machine. The economic productivity of each machine, and how much profit the owner of that machine deserves, should be the marginal revenue of that machine, just like labor. Once again, there’s no reason why the sum of marginal revenue over all workers plus all machines should equal total revenue.

So what do I think I’ve proven? Libertarians believe the following two statements:

#1: In a group effort, the total economic product can be divided up into separate parcels where each parcel contains what was produced by the individual effort of one of the individuals in the group, and what each individual deserves to be paid is the value of their individual effort.

#2: In a group effort, what each individual deserves to be paid is the marginal revenue loss of removing that individual form the group.

What I’ve proven is that the two quantities, “the value of what was produced by an individual’s effort”, and “the marginal revenue loss of removing that individual from the group”, are in general not equivalent.  If you take all of the parcels of individual production and add them all up they had better add up to the total production of the group.  But if you add up the marginal revenue of all individuals, it won’t necessarily add up to the total revenue for the group.  So the two quantities can’t be the same.

Therefore, these two statements are incompatible because they say these two unequal quantities are both equal to the quantity “what each individual deserves”. Capitalist theory has tricked us into thinking that they are the same so that the philosophy of “each individual deserves what they individually produce” can be used to justify the policy, “each individual receives the marginal revenue loss to the firm of firing them”

I haven’t proven that either of these ideas is wrong. I’ve just proven that they can’t both be right. Now I’ll shift gears a little and talk about these two ideas separately.

First let me say that these two statements are two value judgments. They both define what an individual in a group effort deserves. They are both definitions, not the consequence of a line of reasoning. These are not the only possible definitions of what an individual deserves. Fundamentally, when we agree with one of these it’s because we believe it is fair. Have a look at my posts on values and federalism to see how I believe we should handle these kinds of value questions. Basically, I think we should live and let live, and use federalism to have many different kinds of societies so people can choose to live in a society that matches their values. Here I’ll be telling you my values, but I don’t expect everyone to agree with me.

For #1, I think that in a group effort the quantity “what was produced by the individual effort of one of the individuals in the group” is undefined. Splitting the product up in this way is like dividing by zero. It can’t be done. There is no sensible definition of this quantity that guarantees that the sum of all the individual products is equal to the actual total product of the group. If someone could come up with a definition I would like to hear it.

I actually think the idea “each individual deserves what they individually produce” is morally acceptable. It’s not my most preferred definition, but I wouldn’t find fault in anyone who believed this. The problem is that it’s totally unusable in practice since almost everything is produced by group effort. Even if you go off into the woods by yourself there are still questions of equal opportunity. How much of your productive ability came from the fact that you grew up in a first world nation and got a good education as opposed to growing up in a third world nation having to struggle to avoid starvation? Wasn’t your production affected by the people who helped create the environment in which you find yourself? Is there really anything at all that you do where you can say it was totally unaffected by anyone else?

For #2, as far as I can tell, the only moral argument for this was the idea that marginal revenue is equal to what you produce, which has now been debunked. It’s a convenient and easy-to-implement system because you just have to allow anything-goes negotiation, but despotism is convenient and easy-to-implement too. That doesn’t make it fair. There is another argument for the idea that whatever you can negotiate is what you deserve, which is basically that no one owes anything to anyone. Life is the war of all against all so anything goes is fair. I don’t agree with that argument, and I wouldn’t respect someone who did.

What do I think is the definition of who deserves what? First of all, I don’t believe that everyone always deserves the same. There’s a liberal line of thought that no one can deserve more that someone else so any time one person has more than others it must be unfair. I totally disagree with that. If you work harder, you deserve more. What people deserve should be based on what they do and the choices they make.

I don’t have a hard and fast definition. I haven’t figured it out yet. But I do think that our common sense can serve as a “sanity test” to detect situations that are obviously unfair and where the system is obviously broken. For example, what should the ratio be between the salary of the best CEO in the world and an average worker? CEOs do work longer hours. Maybe the CEO works 120 hours per week (that’s 18 hours a day, 6 days a week plus 12 hours on Sunday) while the worker works 40. The CEO should earn 3x for that. And then there’s the amount of effort spent while working. There’s a difference between busting your butt to do the best you can and just punching your timecard. I’ll give another 3x for that. Then there’s the unpleasantness of the job. Sewer workers should be paid more than candy taste-testers. It would be hard to argue that flying around in corporate jets and staying in executive suites is unpleasant, but I suppose the job is stressful, and you have to be away from your family a lot on travel so 2x for that. Then there’s how skilled a person is at their work. This is an area open to some debate. If a person was born with talent do they deserve to be paid more when they didn’t do anything to “earn” their talent? And how much of being skilled is due to things under a person’s control as opposed to inborn talent? I won’t answer this question. I’ll just give the CEO 2x for being highly skilled instead of just an average manager. Then there’s the value of the work itself. I will step back and talk about that a little.

Different arrangements of labor in our workforce can produce different amounts of economic value. A factory making delicious cookies certainly produces more value than if those same people spent the same time and effort making mud pies. And even within an existing organization, changing from a bad manager to a good manager can increase the total output by more than changing from a bad delivery boy to a good delivery boy. I don’t think the manager can take credit for all that difference by himself as if the people he is managing had nothing to do with it. But I can’t deny that there are some positions that have more leverage on the total economic output of a group effort, and it’s more important to have the best people in those positions than in other positions.

Now I think a lot of the “value to society” of your job is outside your control. For example, I’m a computer programmer. There are many highly paid jobs programming computers nowadays because computers help produce a lot of economic value. I happen to have a talent for doing this so I get paid more because I work in this field. But I could easily have been born fifty years ago before these jobs existed. I could have wound up as a high school math teacher earning half or a third (inflation adjusted) of what I’m earning now. There’s no difference in my skills or how much effort I put into pursuing my career. Frankly, I don’t feel like I did anything to deserve this extra money. I was just lucky enough to be born at a time when the career that interests me and that I’m good at happens to have higher than average economic value.

But, there’s another argument that people might choose a job that produces more economic value over a job they would rather do that is less valuable. Maybe our CEO is a very talented manager, but loves music. He is sacrificing himself by working in a job that can produce more economic value to society rather than trying to be a concert bassoonist, which he would really prefer, but would result in less economic value being created. He should be compensated for his sacrifice.

And then there’s the argument that we need to pay more as a motivational incentive to get the best people in these positions separate from any argument that they deserve more. I don’t really know what the answer is, but I’ll give my CEO 5x for his job being a more valuable job.

So if you multiply these out you get: 3×3x2×2x5 = 180. I would have no problem if the best CEO in the world earned 180 times the median wage. The median wage in the US right now is around $45,000/yr. That would give the CEO $8.1M/yr. Not bad, probably higher than most liberals would feel is right, but much lower than a lot of current executives. And the analysis I did was for the best CEO in the world, not an average CEO. Maybe an average CEO works 80 hour weeks (2x), works 2x as hard as an average worker, still gets 2x for the stressful job, gets 1.5x for having above average management skills (average for a CEO), and still gets the 5x for the value of the job. That’s 2×2x2×1.5×5 = 60 or $2.7M. That’s what I think would be fair.

More important than the number is the idea that we need to look to external standards of fairness for why should someone deserve more than someone else. We can’t expect our economic system to tell us who deserves what. We need to decide on what factors make one person deserve more than another based on our values, and then make sure our economic system produces wages in line with that definition of fairness. Our current corporate capitalist system does not do a fair job for super-high earners.