by Caleb Nelson
[253] Wealth was originally synonymous with happiness and health. Many people who have lots of money are miserable, and many people with lesser financial means are very happy. It should be apparent that if you are not happy then you aren’t prospering, regardless of the amount of money you have.
Happiness is the state of consciousness that comes with the achievement of your values—not a whim, or momentary pleasure. This feeling is a profound, guiltless self-esteem and pride in your achievements. It is the enjoyment of life.
[254] Included in the principles governing the achievement of happiness is the principle of personal choice. To a very real extent, we can choose to be happy from moment to moment. Long-term joy, however, requires that we pursue and achieve life-serving values. For example, choosing to be happy will not work if it is in contradiction with our actions. We may try to have a positive attitude but if we also choose drug addictions, abusive relationships, or dishonest professions, we will not attain lasting or meaningful happiness. To ignore or distract yourself from the things you have the power to change is an evasion of reality and will only bring more anxiety.
Prosperity is having every resource that an individual must utilize in order to fulfill and accomplish their values. This is synonymous with the concept of wealth, although, as the modern dictionary showed us, being wealthy now generally places emphasis on access to the material things that make life enjoyable. To be wealthy is the state of having the power to obtain what you rationally desire; having the power to rationally act in your self-interest.
As we have discussed, a value is “that which one acts to gain and/or keep.”
[255] It assumes an answer to the question, “Of value to whom and for what?” Individuals need to achieve values for the furtherance of their existence, and for the fulfillment of their happiness. Correct values (e.g. honest and productive careers and relationships, a healthy body, etc.) result in happiness and life. Incorrect values (e.g. dependence on government, addictions, dysfunctional relationships, etc.) result in misery and death.
Prosperity and wealth refer to all areas of a man’s life which affect his well-being:
Physical prosperity—Includes physical health and fitness, material comforts and resources, and the freedom to use them. To prosper physically one must be a producer and a steward—produce more than you consume, and take personal responsibility.
Social prosperity—Refers to healthy relationships, both familial and otherwise, communication skills and resources, social skills, and respect for and from others.
Mental prosperity—Includes adequate mental faculties for life on earth, access to sources of knowledge, reasoning abilities, and freedom as much as possible from deception, coercion, and ignorance.
Spiritual prosperity—This refers to a proper (i.e. rational and life-serving) moral code, a rational philosophy consisting of reason, purpose, self-esteem, and other virtues, and the fulfillment of rational and life-serving goals and ideals.
All these areas are required for true prosperity. Money is only regarded as an aid to achieving some aspects of physical prosperity—not a source of happiness and certainly not an end in itself.
The nature of happiness makes it impossible to find in the pursuit of irrational whims. There are rules governing the pursuit and achievement of happiness—rules that govern how man is to achieve a joy of living that agrees with his nature. Principles govern everything—the key is discovering them and living by them. We do so by consciously integrating our moral code with reality. We may think freedom means living however we want without consequences. This won’t help us live in reality. Instead, we must come to understand the law of causality and decide which consequences we want and then act appropriately.
In this book, we wish to promote the understanding and implementation of the social system called capitalism. Capitalism is the only social system that properly protects man’s life and property. Man requires the use of private property in his pursuit of his values—family, career, religion, hobbies. In achieving proper values he will experience the reason for his existence: happiness. So there you have it—this book is designed teach you how to be happy! We will now discuss some guiding principles in your pursuit of happiness and prosperity.
EXCHANGE CREATES WEALTH
“Both parties to an economic transaction benefit from it, provided the transaction is bi-laterally voluntary and informed.”
[256] - Milton Friedman
Skousen illustrated in the following scenario that both buyer and seller in a transaction make a profit:
“Take a man who wants to buy a used car. He has a certain amount of money or credit. When he offers this money to the dealer it means that he would rather have the car than that amount of money—the value of the car is greater to him than the value of the money. If the dealer agrees it means that the dealer would rather have the money than the car. In fact, he won’t sell the car unless the price he gets is of greater value to him than the value of the car.”
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Who profited in this scenario?
Both parties went away wealthier. Both men exchanged something they valued less for something they valued more—that is the definition of profit.
Marxists would say that if the dealer sold it for more than it cost him to make or obtain it, then he was exploiting the customer. What Marxists fail to understand is the following principle:
There is no exploitation without deception or coercion.
Take candy bars (again) as an example. They seem to really go up in price at airports, theaters, and sporting events. Why? Are we being deceived about what it cost the vendors to provide the candy bars? We know how much we can get them for at the store down the street. It’s horrible to charge $3 for one at the movies, isn’t it? Not really. Are we being forced to buy one? No, we can eat something else or buy nothing at all. We may sometimes get pretty angry at the movie theater, staring at a $6 bag of popcorn that cost five cents to make. Are we being exploited? Karl Marx would say, “Yes,” but it is not so.
Sometimes, it is worth it to us to buy the popcorn at the theater, or the hot dog at the ballpark. Sometimes, however, it might not be. We can choose to not buy it. (If enough people refused to buy the popcorn at $6/bag the price would drop.) It is obviously worth $6/bag in that place and situation to enough people to make it worthwhile. No one is forcing us to do anything. If we value our money more than the popcorn, then we don’t buy it, and we don’t grumble that we chose what we preferred. We cannot have our popcorn and our money, too.
Here is a concept maybe a little closer to home—your wage.
Sometimes we or our co-workers might think, “My boss doesn’t pay me enough, he just doesn’t know how much I’m really worth.”
Recall that a wage is just a fancy name for the price of labor. Let’s ask the same questions as we did of the car purchase. If we agree to work for $15/hour, how much do we value our time? How much do we value one hour of our life at that time and place? (Don’t say $15!)
We value it less than $15. This is obviously true because if we valued it more, we would find someone else to pay us what we think we’re worth, or we would use that hour for ourselves. We value our hour less than $15 because we constantly trade our hour for that amount. It is our choice to continue to work for $15/hour, we are perfectly free to seek higher-paying employment (and many people do).
How much does our employer value our time and labor? Not enough? They actually value it more than we do! They would prefer to have our hour of labor more than the $15, therefore they value our labor more than that amount of money. How much more? We can’t know—maybe fifty cents more, maybe forty dollars more.
The principle remains that both parties involved in a free exchange profit and grow wealthier. Under capitalism, the employer, the employee, the distributor, the manufacturer, and the customer all benefit and grow literally wealthier as they exchange with each other voluntarily.
Now apply this in non-financial situations. Everyone pro
fits from exchanges of knowledge, of personality, of love and friendship, of familial associations. It’s the entire reason for individuals to want to live near and interact with one another rather than live as hermits. Sometimes we may choose to do a service for someone without getting paid. Why? Because we value seeing that person get help, or we value how service makes us feel, or what we learn from it. What we get out of an exchange doesn’t always have to be measured in dollars. Yet, voluntary exchange, of anything, makes us wealthier.
DOLLARS FOLLOW VALUE
“A free market . . . demands the best of every man and rewards him accordingly.”
[258] - Ayn Rand
Q: If I want more dollars in my control, where do I get them? Where are they currently?
A: In the pockets and bank accounts of other people.
Q: How can I persuade others to give those dollars to me?
A: Create value. Provide a value in the form of a good or service that those people value more than the dollars in their pockets. They will then want to exchange those dollars with you.
In a world of cause and effect, value creation is the cause and dollars are the effect. For a moral individual who does not want to cheat or steal, the only way to increase the amount of dollars he or she has is to find out what value other people want and provide it for them in exchange for currency.
What about begging? This is also an exchange, though not a physical one. The alms-giver may receive the goodwill of the beggar, or the satisfaction of helping someone else. Don’t make the mistake in assuming that because nothing of physical value was given for the dollars that value wasn’t exchanged.
A highly underrated President, Calvin Coolidge, observed that, “Large profits mean large payrolls.” Profit is a good thing! “In no land are there so many and such large aggregations of wealth as here; in no land do they perform larger service . . . . Don’t expect to build up the weak by pulling down the strong.”
[259] He understood that you can’t help those in need by attacking those who are doing the helping, and it is profit that makes it possible for anyone to help anyone else.
It is not within the scope of this book to train the reader on specific strategies for wealth creation; the aim of this book is to teach principles, not issues, number-crunching, or financial-advising. But, in order for any form of wealth-creation strategy to produce fruit, it must be rooted in this truth: dollars follow value.
PROFIT
“If profit is denounced, it must be assumed that running at a loss is admirable.”
[260] - Isabel Paterson
A DIRTY WORD
To socialists, profit is an “overage.” Marx called it surplus value—an unnecessary “overage” over the “actual” price of a product.
To him, there was no such thing as good profit. Socialists view these “unnecessary” overages as lacking utility, purpose, or value.
Marx described this idea with his Labor Theory of Value. Basically, he said that the value of an item is equal to how much it cost to produce it. This is figured in “labor units”—somewhat like estimating the average skill of everyone on the planet and dividing it by how long it takes to produce an item.
Marx believed that value was intrinsic in things. He said that if a business owner sells a product for more than it cost to make, and he doesn’t give that “overage” to his workers, then he is exploiting them of what is rightfully theirs. We have shown that collectivism is anti-mind—well, here is an example. Marx is ignoring and evading the truth that the genius of the human mind and tons of hard work is required to invent an item, start a business, hire workers, and keep a company profitable enough to continue to pay them. Profit is not evidence of exploitation, but a validation of proper business practices. There is no exploitation without force or deception.
Isabel Paterson made an astute comparison. “The objection to profit,” she wrote, “is as if a bystander, observing the planter digging his crop, should say, ‘You put in only one potato and you are taking out a dozen. You must have taken them away from someone else; those extra potatoes cannot be yours by right.’”
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Profit is income minus expenses. It means you produce more than you consume. The idea that profit, or even “excessive” profit, is evil has been a bitter poison that has slowly seeped throughout the philosophy of America for over a century.
Profit is the proper and moral consequence for the courage, thought, initiative, and effectiveness of the movers of an economy. Profit shows that decisions and actions have been a success. Loss represents failure. The amount of profit is an indication of how much customers value something. A loss shows that customers are not valuing it. Because profit is thus a moral value, the only means by which the public may morally curtail corporate or personal profits is this—the public’s refusal to buy. Using government force to curtail profits is as obscenely evil as using government to curtail religion.
AN IMPORTANT TOOL
To be used as a helpful principle to guide our actions, profit is best considered as a tool of validation.
[262] What does it validate? It validates to us that our activities are valued by other people. If our activities are valuable to others, then they will willingly trade with us for them.
Yet, we are asked to “bail out” companies that fail to make a profit. That a company might be “too big to fail” is a blatant deception. There is no private company, occupation, institution, or government program that is such a necessary and natural part of reality that it is to be protected at all costs. The fact that a company is not turning a profit is proof that it indeed is big enough to fail, and should. Every company has ups and downs, but without long-term sustainable profits, the company has proven that whatever product or service it provides is not valuable enough to its customers to continue its current activities. Giving a bailout is forcing the minds and wallets of all taxpayers to support a business that they may not agree with and may not patronize.
Providing a company with a false source of profit incentivizes the poor behavior that resulted in the problems in the first place—it creates a false demand for an unwanted product or service in the marketplace. The same principle applies in our families. If we reward poor behavior in our family or friends, we are offering no incentive for change—the poor behavior will continue, as will the demand for further reward.
For example, you may have seen a child screaming and throwing a fit in the grocery store because they want candy. The parent tells the child “no” time after time and even threatens punishment when they leave the store. But the child won’t stop making a scene, and being embarrassed and too stressed to continue the battle of wills, the parent relents and buys the candy to stop the tantrum.
What has the child learned in this situation? They have learned that their parents are not to be respected or obeyed, that their word means nothing, and that their means to getting what they want in life is disobedience and annoyance. They’ve also seen that escalation in their bad behavior brings about the results faster. They have learned that emotion is their weapon for extorting others. They may have learned a lesson in perseverance, but unfortunately they learned perseverance in emotional terrorism rather than in reason, persuasion, and value creation. If this behavior is not corrected, they will later take these maladaptive behaviors into their other relationships with children, spouse, friends, and coworkers and attempt to wreak similar havoc.
If you agree that profit is necessary for prosperity and progress, but that everyone should only be allowed to keep some of their profit, you are still missing the moral issue. Suppose a company had in its mission statement that they believed in earning a “reasonable profit.” What is reasonable? How much is too much? Is $500 too much, or $1 million? Is a 2% profit margin reasonable or 200%? If we answer “yes” to any of these questions, then we only want people to value everything in the world the same way we do. Why does Bill Gates have more money than most people? Because he created more value than most people and his prof
it is the evidence of that.
Profit is a tool which can be used to see if certain actions are valid in the context of value creation for others, and the longer the time period we examine, the more accurate our assessment will be. Profit is proof that what we did was valuable to someone else. What does this imply about loss? If profit is evidence of valid behavior, loss is evidence of invalid behavior. It is invalid because consuming more than we produce is unsustainable behavior—for individuals, families, communities, and nations.
THEORIES OF VALUE
How people consider value can be divided into three basic belief systems. We’ve discussed the first belief system espoused by Marx—the intrinsic theory. This holds that value—or the good—is inherent in things and actions regardless of any context or consequences, of any benefit or injury that may be had by any party involved. It is also this theory which Kant applies to the collectivist ethic—the belief that self-sacrifice is intrinsically good regardless of any good or bad consequences.
The second is the subjective theory which holds that value bears no relation to reality and is to be found only in man’s consciousness, created by whims, feelings, opinions, and desires. To quote Shakespeare’s Hamlet on this one: “There is nothing either good or bad but thinking makes it so.” As we’ve discussed, this subjectivism can be based on personal whims, or the whims of a collective.