"For Love of Neighbor" is a new documentary film offering a hopeful vision for Christian engagement in politics. Click here to learn more.

Robert Reich Knows What You’re Worth

Social workers, teachers, and healthcare workers would be making a lot more money if they were paid for their true value to society. At least, such is the latest lamentation of injustice from Robert Reich, economist, author, and producer of the documentary film “Inequality for All.”

“And what of writers, actors and poets?” he asks. “Only a tiny fraction ever become rich and famous. Most barely make enough to live on (many don’t, and are forced to take paying jobs to pursue their art).”

As a musician, I understand the frustration.

Before I went to college, my band recorded two albums, shot a music video, gained airplay on over 40 radio stations and played hundreds of concerts. During that four-year run, in which we performed with major acts like Paramore and Mute Math, not one member ever left his day job, and profits went almost entirely back into the business. It was, in a sense, a hobby that paid for itself. Did we contribute something valuable to society? Our fans certainly thought so. But I haven’t been on stage in over 6 years.

What was it all “worth” to this ambiguous thing we call society? And why do I have another full-time job today? This gets to a central question in economics: what determines the value of something?

If we fail to answer that question first, we risk slipping into the same mistaken assumptions that Reich does. For instance, following his rationale, we might point out a few other things society gets wrong. The people who paint lines on streets or install traffic signs are critical to the safety of our roadways. Shouldn’t we make sure their wages are higher than that of hedge-fund managers?

People who farm buffalo should be paid much more as well, since it is a much healthier alternative to the standard hamburger fare. Never mind that some may think buffalo doesn’t taste as good, and that this would increase the price of buffalo burgers—what’s right is right…right?

[pq]How can we figure out how valuable something is for society at large? We can’t.[/pq]

If this is true, how might we correct this injustice? We could pass a law to pay buffalo farmers more and require a certain percent of all hamburgers to meet fat-efficiency standards (working from the clean energy playbook here). But since this would increase the price of an average burger, we would need to provide special assistance and eligibility requirements for people who could no longer afford a major food source. Taxes would need to be raised to pay for this, and who best to tax than those who are making big bucks off the hamburger industry: the buffalo industrial complex and its lobbyists!

And so the cycle goes on, ad absurdum.

Understanding what gives something economic value helps to make sense of the world, but this is precisely what Reich’s article sidesteps. In economics terms, the value of something is subjective; everyone has a different idea of what something is worth. People do not estimate this worth as it relates to “society,” but as they judge the usefulness of a given thing toward the advancement of their own goals: food, shelter, security, love, admiration, accomplishment, entertainment, and so on.

How then can we figure out how valuable something is for society at large? Friedrich Hayek spent his life trying to answer that question. His conclusion: we can’t.

No single person or group is capable of understanding such a complexity of needs, changing with every passing moment, and every different person. Only what Adam Smith termed the “invisible hand” of the market can approximate needs and distribute resources with any degree of efficiency.

But even markets fail.

Individuals cannot possibly know what is best for them in every case. We have what Hayek called “imperfect knowledge.” But this certainly doesn’t mean that a central authority is any wiser. On the contrary, centralized decision-making is likely to add complexity—and cause undue harm in the process.

Part of the difficulty arises from the fact that people are rewarded in many ways for their contributions to the lives of others, and money has only a particular role in this exchange. The term “value” is not itself a monetary term (though value can be monetized). However, when we speak of “economic value” in particular, such as a wage or price, we are indeed limiting the concept to money. The value I enjoyed from performing music was worth much more than the money I made doing it, so my band, and thousands of other groups, were willing to perform for far less than we could make in our day jobs, where our role was more important to someone.

Thus, Reich’s anger at a perceived imbalance of social value and income stems from his decision to reflect on the subject only in monetary terms. He is like the scientist who, upon noting that science cannot confirm metaphysical claims, concludes there is no God, instead of simply recognizing the boundaries of his own methodology.

It should be no surprise that a limited language fails to capture the great expanse of the human experience.

Yet, even when we speak in purely economic terms, Reich’s argument is found to be weak. How can one evaluate the contributions a management consultant or investment banker makes to society when their decisions can affect thousands of employees, millions of customers and billions of dollars in resources. Compare this with teachers, artists and social workers, who can have a deep and lasting influence on the lives of hundreds or thousands of people. Furthermore, we should consider that there are good and bad teachers, as well as good and bad consultants. Reich would have us believe this is a simpler comparison than it is.

In suggesting that society should simply declare which occupations should be worth more than others and pay out accordingly, Robert Reich passes from economist to philosopher, or more accurately, to wishful dictator.