James d. Gwartney

ELEMENT 1.8
People earn income by providing others with things they value.

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make the world a better place for others. This information is generally provided by the earning
opportunities in different occupations.
Some people think that high-income individuals must be exploiting others. But people
who earn high incomes in a well-functioning marketplace generally do so by providing others
with things they value and for which they are willing to pay. Larry Page and Sergey Brin
became billionaires because users found Google better served their needs than Yahoo! or Ask
Jeeves. Popular singers provide another example. Beyoncé and Taylor Swift each have huge
earnings because millions enjoy their music. The role of a society is to ensure that the “rules”
of the game are fair, not to prevent some from winning by a large margin because they are
good at the game. Problems arise when early movers lock in technologies that may eventually
become outdated but hard to replace. This trade-off leads to a great deal of public policy
discussion that is often more a function of political opinion than sound economic analysis.
Business entrepreneurs who succeed in a big way do so by making products that
millions of consumers find attractive. The late Sam Walton, who founded Walmart, became
one of the richest men in the United States because he figured out how to manage large
inventories effectively and sell brand-name merchandise at discount prices to small-town
America. Bill Gates and Paul Allen, cofounders of Microsoft, became billionaires by
developing a set of products that dramatically improved the efficiency and compatibility of
desktop computers. Millions of consumers who never heard of Walton, Gates, or Allen
benefited from their talents and products. These men made a lot of money because they helped
a lot of people.