This Labor Day, Celebrate the Work of Property Owners, Too
Property ownership is a social good. Work creates wealth, but the converse is also true: wealth creates work.
Although Labor Day was conceived and established as a way of honoring and promoting the interests of the organized-labor movement and the unions that control it, the day can have a much more important meaning than that, if we choose to see it as commemorating the fundamental importance of work as an element of the human condition.
In The Wealth of Nations, Adam Smith noted that work is essential to the creation of wealth, calling labor “the real measure of the exchangeable value of all commodities.” Karl Marx turned this “labor theory of value” into a very different concept, the theory of surplus value, arguing that human labor is the source of all economic value, ignoring the contribution of other resources. That fallacy is the cornerstone of Marx’s thinking and the basis for communism, socialism, and many other authoritarian schemes for controlling humanity.
Economists of the Austrian School recognized the flaw in Marx’s thought. Austrian economists observed that value is subjective, as Smith intuited but could not fully explain (the “diamonds and water paradox”), and that the value of a good or service is established by its marginal utility, “the additional satisfaction or benefit (utility) that a consumer derives from buying an additional unit of a commodity or service,” as Brittanica.com states it.
“Utility” is the important concept here. It refers not only to practical returns on spending but to all “satisfaction or benefit” one may derive from a product or service. That makes the theory applicable to production activities and consumer expenditures alike. It also accommodates all contributions to value, regardless of source.
With those refinements, we can see the true value of human labor and appreciate its real importance in human endeavor. All wealth comes from work. That work is applied to property. (That includes “intellectual property,” of course.) Without property, there is nothing to which to apply our work, and nothing to consume. Without property, humanity would die out.
Even animals work for their food, acting on the “properties” around them (plants, other animals, water, etc.) in accordance with instinct. The same is true of plants and all other forms of life. Work is essential to life.
Celebrating human labor could thus seem to be fatuous, like celebrating breathing or having a heartbeat. Like work, however, those are things we should indeed appreciate. We should, however, see them in their proper places. We cannot attend to respiration and heartbeat to the exclusion of other things, such as work, family, and friendships.
The Marxian fallacy of valuing labor to the exclusion of other factors tempts its adherents to view humans as no different from animals. As nearly two centuries of history have shown, the Marxist overvaluing of labor creates an unstoppable temptation to denigrate property owners; they do not “work,” Marxists claim. Property owners are parasites, according to the Marxist theory of value. Communist governments have commonly gone to the extremes of eliminating property owners—such as the kulaks and mid-century Chinese rural landowners—justifying it by this dehumanization.
The claim that property owners are parasites and do not work is false and scurrilous. Even if they do nothing else toward the creation of goods and services, property owners do essential work: they direct human efforts toward the activities that will create the greatest increases in human welfare. Property owners achieve this because of the natural desire to maximize the value of their holdings. They accomplish these increases in their own wealth by directing its use toward the things that other people value most. They do that because providing what people want most pays off the best.
Adam Smith’s observation about the butcher, brewer, and baker applies just as powerfully to property owners. Just as we receive our dinner from food merchants through “their regard to their own interest,” which we serve by paying them for their wares, so too do we receive capital by serving the interests of its owners.
That is an entirely beneficial system. The property owner looking to maximize the value of his or her possessions will deploy them to their highest-valued uses. If the property brings the greatest satisfaction by being consumed by the owner, that is what will happen to it. If the property will bring greater wealth to the owner by being sold to someone else, or by being used in a wealth-producing activity such as a business, or by being saved for use later, the owner will choose that course.
Of course this might seem like easy work, and it may be that—I haven’t enough wealth to know from experience. Value, however, is measured not by the amount of work put into something but the quantity and quality of satisfaction the end-product or service brings. You could put a massive amount of work into stacking rocks in a pile, but you will not get much money for it if nobody benefits from it.
Thus, property ownership is a social good. Work creates wealth, but the converse is also true: wealth creates work. Property owners ensure that the work is applied to resources and activities that will create the greatest improvements in human well-being—because it is to their advantage to do so.
Of course, Marxists and the American Left argue that property ownership is unneeded to accomplish the production of goods and services and in fact impedes the fair distribution of wealth. The government can do that better and more justly, they claim, because the government is not “selfish.” As I have just demonstrated, however, selfishness does not impede economic production but in fact optimizes it on both the capital and labor ends.
Governments, by contrast, impose a “fair” distribution of wealth by forcibly taking property from some people and giving it to others. That erodes both the pillars of human achievement: people receive benefits without working for them (thus reducing the incentive to produce goods and services) and people lose benefits that they would otherwise deploy in socially useful ways (thus reducing the ability to produce goods and services).
In addition, governments are incapable of directing resources to their best uses. As the great economist F. A. Hayek noted in his essay “The Use of Knowledge in Society,”
The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate “given” resources—if “given” is taken to mean given to a single mind which deliberately solves the problem set by these “data.” It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.
Property ownership is central to the knowledge of which Hayek writes. Government cannot even allocate resources effectively, let alone optimally. Property owners can, and they do.
With Democrat presidential candidate Kamala Harris suggesting imposition of a nationwide wealth tax, this is a critical time to understand, acknowledge, and share the truth that property ownership is a social good and is in fact the foundation for the value of all human labor.
As we rightly celebrate the work of our neighbors across the land, we should also acknowledge the great and vital work that property owners do.