James d. Gwartney

Video:
The Price System

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Incomes Come From Usefulness
People differ in many ways—in their productive abilities, preferences, specialized skills,
attitudes, and willingness to take risks. These differences influence people’s incomes because
they affect the value of the goods and services that individuals are willing and able to provide
to others.
In a market economy, most people who earn high incomes do so because they provide
others with things they value more than their cost. If these individuals did not provide valuable
goods or services, firms (and indirectly consumers) would not pay them so generously. There is
a moral here: If you want to earn a high income, you had better figure out how to do something
that helps others a great deal. On the other hand, if you are unable or unwilling to help others
in ways they value, your income will be low.
This direct link between helping others and receiving income gives each of us a strong
incentive to acquire skills, develop talents, and cultivate habits that will help us provide others
with valuable goods and services. College students study for long hours, endure stress, and
incur the financial cost of schooling in order to become doctors, teachers, accountants, and
engineers. Other people acquire training, certification, and experience that will help them
become electricians, maintenance workers, or website designers. Still others invest and start
businesses. Why do people do these things?
In some cases individuals may be motivated by a strong personal desire to improve the
world. However—and this is the key point—even people who don’t care about improving the
world, who are motivated mostly by the desire for income, will have a strong incentive to
develop skills and take actions that are valuable to others. High earnings come from providing
goods and services that others value. People seeking great wealth will have a strong incentive
to pay close attention to what others want. And even those people who want to improve the
world need information on the education and skills they can acquire, which will do the most to