# Profits are a tax on labor **URL:** \ **Category:** Great Debates\ **Created:** [July 12, 2013, 3:07am UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283 "2013-07-12T03:07:25Z")\ **Posts on this page:** 20\ **Page:** 18
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [July 31, 2013, 5:00am UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/341 "2013-07-31T05:00:10Z")
> [@Hellestal](#): > > And this is your final mistake. There is potential value added in making a purchase. > > This thread is easily as bad as the last Rothbardist goldbug thread we had. You’re on the other side of the ideological spectrum, but you’re just as indifferent to factual information as any goldbug I’ve ever come across. It’s the exact same habit of repeating the fantasy and ignoring all cogent criticism. You’re their Mirror Universe doppelganger. (You will have to decide for yourself whether you’re burdened with the added disadvantage of looking particularly unattractive in a goatee.) Your credibility couldn’t sink any lower, so at a certain point, it’s not worth pointing out your zombie mistakes any longer. There’s no profit in it. > > But here you make a new mistake, and it’s an interesting mistake. I’m not sure this particular mistake has been explained to you. > > Deciding what to own, and what not to own, can in fact add value. You’re stuck in the concrete world. It’s all you notice. Tangible objects are the only things you’ve shown yourself capable of recognizing. You’re right that buying a share of Exxon doesn’t create any more Exxon. Purchase a share, and they have the same number of oil wells the second after the transaction that they had the second before the transaction. They have the same number of employees, rented office space, geological survey information, and all the rest. Buying land doesn’t create any more land. Buying gold doesn’t create more gold. Becoming an owner of a particular thing does not, by the very act of purchasing, create more of that thing. There is no _concrete_ change in the world when we make an ownership decision. > > There is an _abstract_ change. From my first post in this thread:Some people will always have problems with abstraction. > > There is value added by making decisions about what to own. Not always. It’s not a perfect process. But it still exists. Buying something creates knowledge in the markets. > > If I have a factory, and my employees have a process that they believe will be highly efficient and successful and profitable if we use twenty billion metric fucktons of tin, then our purchase of tin will in fact create value. It won’t change the amount of tin in the world. There will be the same amount of tin one second after the purchase as there was one second before the purchase. There is nothing concrete here that small children can easily see and understand. I write the check, and ownership of tin moves into my hands, but nothing concrete has changed at that moment when the ink dries on my signature. > > Yet there is abstract value created. Because my purchase of tin increased the price of tin. My purchase created _information_. The suppliers of tin noticed. There is no more tin the moment I made the purchase, but there might be more tin _next month_ because of the fact that I made a purchase, as the suppliers respond to the market signal. The buyers of tin noticed, too. There is no less tin the moment I made the purchase, but current buyers of tin might substitute away and look for a cheaper resource to use in the future. The choices we make ripple across the world. The decisions owners make about what to own ripple through the markets, and yes, that creates value. > > When I buy Exxon shares, I can potentially change the price of Exxon. When I buy land, I might change the price of land. When I buy gold, I can change the price of gold. These are market signals. The buying and selling by owners is part of the act of price discovery, and those prices create value. They convey information. > > Not perfect. Sometimes it’s bad information. Sometimes markets make mistakes. But the choices by owners about what to own conveys their beliefs to the world about how valuable they think those resources are. “The wisdom of crowds.” We each add our own tiny bit of knowledge, and often – not always, but enough of the time – the market will aggregate that information into a signal that other people can understand and efficiently respond to. They have a better chance of making good decisions with their own resources based on my purchase of tin. Buying things does, in fact, create value. It creates knowledge, and without this price system, our present civilization would immediately stop functioning. When people are buying up manors to become lords of their own little territory, that sends a signal. And when people are selling manors because we managed to recognize that we don’t live in the 19th century anymore, that also sends a signal. > > This has now been explained to you. Ignoring this process in your future posts won’t make reality go away. Let me say, first of all, that I’m not against markets. I’m also not against the law of supply and demand, or against letting it govern pricing. I’m not even _against_ unearned income, exactly: I recognize there may be practical reasons why you can’t just eliminate it, without harming other things. Sort of like you may not be able to cut put a cancer, without harming a vital organ. So my question is, not _why does profit exist,_ but _what, if anything, justifies it morally?_ In other words, how do you justify a massive, ongoing, and seemingly ever-growing transfer of wealth from the people who make it (workers) to people who consume it without producing anything (owners)? What you seem to be saying, if I’m reading you right, is that owners really are producing something: information. When they buy and sell things they generate prices, and everybody benefits from knowing what the prices of things are. This seems like a pretty flimsy rationalization. For one thing, by your definition, pretty much everything anyone does generates information. If I buy a can of Coke, it gives the price of Coke a tiny infinitesimal nudge in an upward direction. If someone gets a job, it nudges down unemployment ever so slightly. If I visit this website instead of that one, maybe some advertiser somewhere will pay a little different price for Adwords. So what? Why should anyone pay me for those decisions? Secondly, are owners really getting paid for providing information, rather than for owning things? If that’s the case, suppose I own something, and sell it at a profit. If I somehow avoid providing anybody with any information, do I have to give the money back? If someone gets a job, would you say his wages are really for providing information about the unemployment, or from working? Third, how accurate, unambiguous, and useful is the information? If I relied on its stock price, I’d think Enron was a great company, right up until it went bankrupt. If I relied on S&P I’d think everything was fine, right up until the financial crisis. If stock-picking profits are for providing information, is there any way to get a refund? Fourth, the owners as information-providers theory would explain, at most, capital gains (and losses) right? Is it a problem for the theory if the money that goes into the market is the same as the money that goes out? ---
**Author:** ![Mijin](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mijin/32/9369_2.png) [@Mijin](https://boards.straightdope.com/u/Mijin)\ **Post date:** [July 31, 2013, 8:52am UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/342 "2013-07-31T08:52:54Z")
> [@LinusK](#): > > I’m not even _against_ unearned income, exactly: I recognize there may be practical reasons why you can’t just eliminate it, without harming other things. Sort of like you may not be able to cut put a cancer, without harming a vital organ. Situations which might accurately be labelled “Unearned income” would include a parent giving their child an allowance. Or maybe a bank robbery. _Making an investment_ is something very different to this. It requires someone to risk some amount of capital in an effort to generate new wealth. By all mainstream definitions it’s earned, and the lack of a sweaty brow or dirt under the fingernails doesn’t change that. And there is no need to “justify” anything. It’s something beneficial to society, and does not involve anyone stealing, or parasitically feeding off, anyone else. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [July 31, 2013, 12:21pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/343 "2013-07-31T12:21:48Z")
> [@LinusK](#): > > So my question is, not _why does profit exist,_ but _what, if anything, justifies it morally?_ Enlightened self-interest. Capital is no different in principle than an apartment building. The owner lends it to someone else for their use. In return, the owner receives rents. The residents get a place to live, the owner gets a return on his investment, everybody is better off than if the apartment building sat empty. If workers are morally entitled to some reward for their labor, then investors are morally entitled to a reward for their investment. Because both are necessary to the success of an enterprise. Regards, Shodan ---
**Author:** ![Evil\_Captor](https://avatars.discourse-cdn.com/v4/letter/e/f17d59/32.png) [@Evil\_Captor](https://boards.straightdope.com/u/Evil_Captor)\ **Post date:** [July 31, 2013, 2:00pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/344 "2013-07-31T14:00:12Z")
Don’t sweat it, Slacker, in a few decades automation will make almost all human labor redundant, and transform almost everyone into socialists except the one percent. Interesting times ahead! ---
**Author:** ![Some\_Schmo](https://avatars.discourse-cdn.com/v4/letter/s/e9c0ed/32.png) [@Some\_Schmo](https://boards.straightdope.com/u/Some_Schmo)\ **Post date:** [July 31, 2013, 3:35pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/345 "2013-07-31T15:35:13Z")
I think I understand a bit of from where the OP is coming, but it underestimates the role of business ownership. It’s not that business owners deserve nothing. What’s questionable is the percentage of revenue the owner deserves (given what seems to be fashionable these days). The disparity between workers and owners is certainly getting out of control. This culture of greed is getting very close to collapsing our economy irrevocably. It really should have happened in '08, but we decided to go deeper in debt to put it off for a few more years. We made the poor poorer, the rich richer, and suffocated a little more the shrinking middle class. Yes, I have a hard-on for the super rich. No demographic is worse for our economy, what with their taking large amounts of cash out of the system and burying it in the ground in case they want a 15th private jet in the future. ---
**Author:** ![QuickSilver](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/quicksilver/32/7832_2.png) [@QuickSilver](https://boards.straightdope.com/u/QuickSilver)\ **Post date:** [July 31, 2013, 3:36pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/346 "2013-07-31T15:36:54Z")
> [@Evil\_Captor](#): > > Don’t sweat it, Slacker, in a few decades automation will make almost all human labor redundant, and transform almost everyone into socialists except the one percent. Interesting times ahead! Will there finally be flying cars? ---
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [July 31, 2013, 6:35pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/347 "2013-07-31T18:35:44Z")
> [@Mijin](#): > > It’s easy to see how someone might think that way (well, someone who hasn’t read the previous 7 pages of refutations), but it’s not correct. > > Investments help make something happen that otherwise could not have happened. They do change the world. Now, it might be if I didn’t invest in OmniCorp, someone else would have. Fine. > But _someone_ had to make the investment, and put their money and ass on the line. That someone deserves some credit(s). > > Furthermore, to actually make a decent profit, the investment needs to create wealth. If the market doesn’t grow, or you don’t grab market share (by providing a superior product), then the initial asking price is likely to be comparable to the value you get back. > (factoring in for things like opportunity cost: given the choice many people would prefer $300k cash in hand today rather than $300k + inflation in ten year’s time. The same concept needs to be kept in mind when evaluating whether investments were worth the risk). I can’t argue that investments don’t “help make something happen that otherwise could not have happened.” I will argue, though, that to actually make a decent profit, investments **need not** create wealth. Suppose you bought gold a few years ago, when it was $400 per ounce, and you sold it when it was $1400. You’ve made a decent profit, but you haven’t created anything. All that’s happened is some money’s been transferred from one account to another. The same thing is true if you’d bought stocks, or for any capital gain. You don’t need to grab market share or build a superior product. ---
**Author:** ![Trinopus](https://avatars.discourse-cdn.com/v4/letter/t/2bfe46/32.png) [@Trinopus](https://boards.straightdope.com/u/Trinopus)\ **Post date:** [July 31, 2013, 7:41pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/348 "2013-07-31T19:41:53Z")
> [@LinusK](#): > > . . . _what, if anything, justifies it morally?_ . . . It ended slavery. ---
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [August 2, 2013, 8:38pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/349 "2013-08-02T20:38:42Z")
> [@Hellestal](#): > > You have claimed, repeatedly, that owners do no work as owners. You said others produce and they consume. > > But negotiation with managers is the work of owners exclusively. It is not management work. Management cannot delegate responsibility to itself. But that’s exactly what it does: the CEO chooses the board members, who in turn negotiate with the CEO. Can I ask you a question? When was the last time you actually voted for a board member, or selected a CEO (if you own stocks)? What are the names of the board members of any company that you own? Can you name even one - without looking? If you own shares through a mutual fund, do you even know the names of the companies you own? > [@](#): > > It is the owner’s work. > > If you are denying that owners do any work as owners, then yes, you are denying that owners negotiate. And you are wrong. Owners do work, _because_ they must always negotiate. Even the act of delegating requires that they negotiate the terms of the delegation. It is impossible for owners to dodge this work. Sometimes it is very tricky. > > If you say owners do no work as owners – and you have, repeatedly, again and again – _then you are wrong_. You know, work is a tricky concept. In some sense of the word, when I go to the store and decide between Coke and Pepsi, I’m doing a kind of “work”. I’m exerting mental effort. I’m sending a message about my relative desires for those products at various price points. I’m affecting the relative demand for those products. I am, at least in theory, negotiating with the store - even if that means walking away, because they charge too much. But none of that changes me from a consumer into a producer. > [@](#): > > I haven’t said anything about fairness. > You’re not the judge of that. > > I’m not saying I’m the final arbiter either. > > The rest of the world is the judge of how ideological we’re being, or in this case, the rest of the board. I would also like to tell myself I’m not an ideologue, but I’m careful enough to realize that it might not be true. We don’t know our own minds. Human beings don’t actually know [the deeper reasons why we make many decisions](http://en.wikipedia.org/wiki/Introspection_illusion). I might in fact be driven by an ideology I can’t see. I claim to be utilitarian, but is that true? I think so, but I don’t know so. > > In contrast, from the last 300+ posts of this thread you’ve given me a lot of evidence of your ideology. Sometimes it’s much easier to see the faults in others than the faults in ourselves. I believe I’m on fairly safe ground here. I can smell this stuff [a thousand miles away](http://boards.straightdope.com/sdmb/showthread.php?p=16375400#post16375400). When the Rothbardist types say that their own plan is “sound money”, they’re using a self-serving label to describe themselves. They give themselves these little pats on the back because of ideology. And when you repeatedly write that owners merely “permit” use of the capital they own, that’s exactly the same vibe. It’s a deliberately aggressive label. It ignores the potential difficulties that owners might have finding the right people to use their capital at the right price. The same is true of “unearned income”. It’s a real term, but it’s not a literally accurate term. Well, I’d argue that it is literally accurate. But I realize some people think I’m being sneaky when I use the term, which is why I usually use “profits”. > [@](#): > > Again, deliberately aggressive choice of labels is a typical hallmark of ideology. This is why I put you in the same category that I put them. Everything you’ve posted so far has backed me on that. > > You can deny you’re like this, and I can’t prove you wrong. But I don’t need to _prove_ anything. I can just document your arguments, point out their errors, and let everyone else decide. It’s fine if you don’t respond. That just makes my work easier. > > As for “fairness”, I think I’ve pretty clearly indicated that I don’t think the world is fair. (I have been overprivileged my entire life. That ain’t fair at all.) The thing is, though, that none of my arguments are based on the notion of unfairness. I’m trying to argue facts as much as I can. When I say that owner’s income is “earned”, that is a value judgment on my part, and you might have some bone to pick with me. But fairness has an inherent subjective flavor to it, too, and the very fact that you have some notion of fairness that you think is being violated by our current system is yet another piece of evidence – not proof, but evidence – that we’re dealing with a reflex ideology on your part rather than substantive argument. The same is true of asking about the “morality” of our current system. > > If you had real substance, I think you could make arguments that weren’t so dependent on _undefined_ notions of fairness and morality. You still have a chance to surprise me on this, but I think that’s a very low chance at this point. > The HR departments are hired by management. Management is hired by the owners. Owners must negotiate with managers. No one else can do the negotiating for them. > > Owners must make these decisions. Even if they delegate certain tasks, they cannot delegate away the decision of who to delegate to. They cannot delegate away the task of deciding how much to pay to those they delegate to. These sorts of decisions will always remain, and although some owners get lucky and it’s easy, there’s always the potential that it will become very tricky in the future. > > You can’t call these management decisions. Managers can’t decide to delegate management to themselves. > That’s a part of what I mean, yes. But it goes much deeper than that. > > Maybe they will choose Joey instead of Billy. Maybe they will choose Billy instead of Joey. Maybe they will advertise in the city newspaper for a third party. Maybe they’re too stingy to pay a high enough wage, and the mill is never fully functional. Maybe they’ll choose to invest even more in capital goods to make the mill easier to handle, so they can hire that slow kid for a penny. Maybe that’s a mistake, too, because the slow kid will break the machine and they have to pay an expensive mechanic to fix it again. > > What the owner _wants_ is to get that mill producing at a nice rate of return with as little effort on their part as possible. What is the owner _gets_ depends on who they allocate the mill resource to, and for how much: Billy? Joey? City slicker? Slow kid? What wage? It might be that no matter who they hire, they can’t find anybody who can work in the mill at a wage low enough to make the return on that capital worthwhile. What they want is a return, and if they’re lucky, they’ll be able to hire slow kid for a penny and get lots of lots of flour from the mill. > > So what sometimes happens – and I’m no market absolutist, so I’m not saying it always happens – is that their desire to make a good return tends to get the mill in the most capable hands given the price that they can pay. Let’s say they think paying $10 an hour is highest wage that will make the mill worthwhile to own. Otherwise, they’ll just shut it down. This person must be of average competence. Now they really want to get Billy. Billy is the cleverest. Billy working at $10 would be a boon. But Billy because he’s so good can get $15 an hour working at the next manor over, helping to repair their machines. So this owner doesn’t get Billy. This capital is not allocated to him, even though the owner would really really like that. This is an important part: _Billy adds more value working elsewhere._ So they settle on Joey for $9, getting a little bit lucky on their negotiation, because Joey’s next best opportunity is working for $7 delivering newspapers. I’m not arguing against markets, or against property, or even (necessarily) against profits. What I’m arguing is that profits (and unearned income generally) comes from owning things, not from doing anything productive; and that therefore, the goods and services owners consume come from those how are productive - who, in turn, must either work more or consume less in order to support them. This is not \*necessarily \*a moral argument. Or rather, you could say, “Yeah, that’s true, but so what? Things should be that way.” But anyway, that would be the second part of the argument: whether this way of doing things is justified, or whether it’s wrong or immoral in some way. For my part, the fact that people react so strongly to something that is (to me) so almost self-evidently true, and go to such great lengths to try to rationalize it away, tells me they do think there’s something wrong with it. > [@](#): > > Joey doesn’t have to settle for seven bucks. The mill owner is willing to pay ten because no one else can do the job as well at a lower price. And Billy doesn’t have to settle for ten bucks, because the other owner is willing to pay fifteen. Resources get allocated to their highest paid use. > > Markets help allocate capital more efficiently. Often, not always. If the owner can’t find anybody at 10 bucks, then the mill shuts down. It is no longer worthwhile capital. The investment was a waste, and the owner loses out. You can’t just look at this system like it’s a bunch of non-working leeches making no important decisions, because that is not true. _Some_ of them are fat lazy slobs who get by on inheritance and lucky decisions, but many others are forced to make very very tough decisions or they will lose everything. > > Even the act of choosing the right person to delegate to can be an extremely tough decision. > > This is the core of what economics is about. Knowing bank accounting won’t help you with this. You have to look at the social system _as a system_, and see how the gears fit together. I often complain about the internet Austrians, but this is something that the classical Austrians got absolutely, 100% correct. The price system accomplishes the transfer of information in a way that no centralized system can match for the majority of economic tasks that we need to accomplish. Not all of them. There are exceptions. But for much of the economic work we need done, the price system handles the underlying flow of information that makes our civilization possible. This is about allocating resources, and owners have their role to play in that. > > All of this is very abstract, and you haven’t once acknowledged any of it. > The act of _choosing the right person_ can’t be delegated away. The act of _negotiating the salary/fee of the managers_ can’t be delegated away. They can’t delegate away their choice of who to delegate to. > > These are hugely important decisions. > > No one else can make these decisions. > > This is the work of the owner. > > It is not management work. It is more fundamental than management work. > Not really. Lots of money manager professionals only do a great job of losing their clients money. > > The owners choose wrong. > > For an important example: There are extremely few actively managed funds that manage to consistently beat the market, after we take commissions into account. Among those few funds, we have extremely little way of knowing whether the investors were actually clever or whether they were just lucky. They are professionals, but that doesn’t necessarily mean they’re good at their job given how much they get paid. They are panicky creatures, despite their professional jobs. When the Reserve Primary Fund broke the buck, it wasn’t “dumb money”, the individual accounts, that went into a panic and started the massive run. It was the institutional investors, people in charge of insurance pools and pension funds and the like, who went crazy and started pulling all their cash out. Hell, maybe that was a justified response. Not my area of expertise. But still, it’s interesting how the professionals tend to react. It’s not pretty to see them stampede. > > Index funds with low commissions are, hopefully, well managed. Even then, there’s no guarantee of that. Sometimes the managers are thieves, and they dip into the kitty. Work with a reputable company, and you minimize the chance of that particular risk, but you never eliminate it. > I’m saying you shouldn’t conflate the work of owners and the work of managers. > > I’m talking about the situation when the owner wants to sit back with a nice annuity and do jack shit. I’m saying that even this kind of owner can’t avoid doing work. This owner must find, interview, negotiate with, and hire the manager. This process is not management work. It is owner work. The owner cannot delegate the decision about who they’re going to delegate to. > > This work is what owners get paid for, along with their initial choice of deciding what to own. One thing that’s interesting about this argument is it’s one-sidedness. Obviously, if owners negotiate with managers, that means managers negotiate with owners. Similarly, if owners choose who to hire, managers must choose which job to take. So you might think if owners “earn” profits by deciding who to hire, and how much to pay, then managers - and other workers - earn wages and salaries by deciding who to work for, and how much to be paid. But it doesn’t turn out that way. It turns out in order to earn wages or salaries, workers must not only agree to do a job, and negotiate their pay, they also have to actually do the work. What do owners have to do? Well, they have to own something, of course. Or consider it this way: suppose as an owner, I do some negotiating and some hiring. Then something happens and someone else becomes the owner instead of me. Who is entitled to the profits? The person who negotiated and hired (me) or the owner? If it’s the owner, doesn’t that imply that the profits are for owning, not for negotiating? And what about other unearned income - other than from owning businesses? Is that also for negotiating? Do I “earn” interest income from negotiating the interest rate? Does it matter whether I actually do any negotiating in order to earn it? Or is just deciding to take whatever rate is offered all the negotiating that’s due in that case? > [@](#): > > There can be overlap between management and ownership, but there are some decisions that only owners can make. These are not “management” decisions. You conflate the two because it allows you to conveniently ignore the work that only owners can do. Owners get paid based on their choice of what to own, which can be an extremely tough decision. I’m saying further that they get paid based on the _unavoidable_ choice of who they delegate to and what wage/fee they negotiate with those they delegate to. > > These decisions aren’t management decisions. Managers can’t take this decision away from owners. Owners can delegate many tasks, but they cannot possibly delegate away the task of who to delegate to, nor the task of how much they’re willing to pay for the delegated work. That is the task of the owner alone. Any manager would make the wrong decision, because the incentives would be wrong. They have nothing at risk. > > If they’re going to allocate the resources under their control to a manager, they must still negotiate the terms of that allocation. That is inherently the owner’s job, no one else’s. If they make the right decision, they will get paid for it. If they make the wrong decision, they won’t. > I haven’t called you stupid a single time. You just used that fantasy as an excuse not to engage. “Pretentious” is a two dollar word, and I seriously doubt you know the dictionary meaning of it if you’re going to use it in this context. I like how you claim you don’t call me stupid, and claim I don’t know the meaning of the words I use in the next. 🙂 > [@](#): > > I did make some general comments on how human beings think, and about your posting style. I don’t think they’ve been personal, but if you report a post, the mods might disagree with me and tell me not to make those kinds of comments. > > More than that, I have no need of name calling anyway. There’s a pit thread open for you, justifiably, but I didn’t bother with it. I can just quote your arguments. I don’t need to push you into a hole when you’re happy to dig yourself deeper without any help. You’re harming your own credibility, and you can stop any time you like. That’s always possible. I never write off any human being permanently. > > What it would take at this point is your acknowledge that there is work that owners must do that cannot be delegated to managers. It’s inaccurate to call this a dual-role, because these particular decisions can’t be made by managers on their own. You might think they are management-ish decisions, yet only owners can make them. And the owner’s profit, their rate of return, depends directly on how good their decisions are, along with a healthy dose of luck on top. > > I doubt you’ll be able to admit this. It undercuts what you’ve been trying to argue from the OP. Too much pride is at stake. But hey, I’m open to being surprised. I don’t know. To my way of thinking it proves too much. As I’ve said before, all kinds of outcomes flow from decisions every person in the world has to make. If I buy Pepsi, I’m stuck with the decision I just made. My enjoyment of my drink depends directly on how good a decision I just made. But I don’t think you’d argue I “earned” the Pepsi by deciding to buy it. You’d say I earned it by earning the money I made to buy it; by doing something productive, and exchanging it (indirectly) for something I want to consume. I will say this: at least in the case of business owners, owners \*\*\*should \*\*\*be exercising a supervisory role over the businesses they own. The evidence suggest that they’re not. But I do agree that they should be. And even if overseeing their own investments is part of the “job” of owners, I’d still argue that unearned income flows from owning things. Choosing what to own affects profits in the same way choosing one job or another affects your salary. Yeah, it does affect how much you get - but it’s not what the money is for. ---
**Author:** ![SlackerInc](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/slackerinc/32/275_2.png) [@SlackerInc](https://boards.straightdope.com/u/SlackerInc)\ **Post date:** [August 3, 2013, 12:29am UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/350 "2013-08-03T00:29:18Z")
> [@Evil\_Captor](#): > > Don’t sweat it, Slacker, in a few decades automation will make almost all human labor redundant, and transform almost everyone into socialists except the one percent. Interesting times ahead! Indeed! ---
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [August 3, 2013, 4:51pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/351 "2013-08-03T16:51:42Z")
> [@Shodan](#): > > Enlightened self-interest. > > Capital is no different in principle than an apartment building. The owner lends it to someone else for their use. In return, the owner receives rents. The residents get a place to live, the owner gets a return on his investment, everybody is better off than if the apartment building sat empty. > > If workers are morally entitled to some reward for their labor, then investors are morally entitled to a reward for their investment. Because both are necessary to the success of an enterprise. > > Regards, > Shodan Suppose there’s an apartment building, and it’s owned by somebody, and that’s all he does: he owns the apartment building, and that’s it. He doesn’t collect rents, or do maintenance, or find tenants. He didn’t build the building. He just owns it. He doesn’t do any work. He eats, he drinks, he goes on vacation. He doesn’t work because he doesn’t have to: he owns an apartment building. But what he consumes, it comes from somewhere, right? Somebody has to serve his food, pour his wine, make his socks. So suppose he disappears. He joins an ashram. He renounces earthly pleasures. He’s not there anymore. What happens to whatever he used to consume before? If he’s not there anymore, doesn’t that mean everybody else can either (a) consume little more (drink the wine he used to drink), or (b) work a little less? And on the other side, what stops getting produced, because the owner isn’t there anymore? What stops getting made? Who is worse off? If the answer is nothing, and nobody, doesn’t that mean the owner is consuming without producing - that his income (or his consumption) - is a tax on the work of others? You’re right that the apartment building is necessary. But what about the owner? ---
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [August 3, 2013, 6:01pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/352 "2013-08-03T18:01:58Z")
> [@Trinopus](#): > > It ended slavery. Profit ended slavery? I would have said it was its most naked form: subsisting on the efforts of others, on the basis of a claim of ownership. ---
**Author:** ![Trinopus](https://avatars.discourse-cdn.com/v4/letter/t/2bfe46/32.png) [@Trinopus](https://boards.straightdope.com/u/Trinopus)\ **Post date:** [August 3, 2013, 8:28pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/353 "2013-08-03T20:28:39Z")
> [@LinusK](#): > > Suppose there’s an apartment building, and it’s owned by somebody, and that’s all he does: he owns the apartment building, and that’s it. He doesn’t collect rents, or do maintenance, or find tenants. He didn’t build the building. He just owns it. . . . Yeah, so? So what? You want to take it away from him by force? What’s your point? The guy is making money off of land his grandfather bought and developed. He doesn’t raise a finger. He hires a management company to collect rents and do necessary repairs. He lies on his back and watches daytime TV. SO WHAT? Do you want to make this a crime? He already pays a gob of taxes, both property tax and income tax, so We The People benefit from it. Isn’t that socialist enough for you? > [@LinusK](#): > > Profit ended slavery? . . . Investment did, in the form of advances in machinery, leading to the industrial age, and systems of production that were more efficient than muscle-power. The steam engine freed the slaves. ---
**Author:** ![pancakes3](https://avatars.discourse-cdn.com/v4/letter/p/ba9def/32.png) [@pancakes3](https://boards.straightdope.com/u/pancakes3)\ **Post date:** [August 4, 2013, 2:38am UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/354 "2013-08-04T02:38:37Z")
> [@LinusK](#): > > Suppose there’s an apartment building… The owner has liability. The owner has tax burdens. The owner had to pay for the LABOR that it took to build that building either first-hand as the original owner, or later own by paying a fair market price for what the cumulative cost is. ---
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [August 4, 2013, 5:28am UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/355 "2013-08-04T05:28:05Z")
> [@Trinopus](#): > > Yeah, so? So what? You want to take it away from him by force? What’s your point? That > [@](#): > he’s subsisting off the efforts of others; that he’s consuming without producing. > [@](#): > > The guy is making money off of land his grandfather bought and developed. He doesn’t raise a finger. He hires a management company to collect rents and do necessary repairs. He lies on his back and watches daytime TV. SO WHAT? Do you want to make this a crime? No. Lots of people subsist off the efforts of others. They collect welfare, or disability. They’re children, or they’re elderly. Maybe they panhandle. Or they own stuff. Consuming more than you produce isn’t a crime, it’s a lifestyle. > [@](#): > > He already pays a gob of taxes, both property tax and income tax, so We The People benefit from it. How can We The People benefit from someone who doesn’t produce anything? > [@](#): > > Isn’t that socialist enough for you? > > Investment did, in the form of advances in machinery, leading to the industrial age, and systems of production that were more efficient than muscle-power. The steam engine freed the slaves. Is there anything the steam engine can’t do? ---
**Author:** ![Trinopus](https://avatars.discourse-cdn.com/v4/letter/t/2bfe46/32.png) [@Trinopus](https://boards.straightdope.com/u/Trinopus)\ **Post date:** [August 4, 2013, 6:08am UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/356 "2013-08-04T06:08:10Z")
> [@LinusK](#): > > That he’s subsisting off the efforts of others; that he’s consuming without producing. . . . Again, so what? What do you intend to do about it? Do you propose a law against it? Do you have any meaningful reform in mind at all? > [@](#): > > Is there anything the steam engine can’t do? Educate the ignorant. ---
**Author:** ![Bit\_Wise](https://avatars.discourse-cdn.com/v4/letter/b/b487fb/32.png) [@Bit\_Wise](https://boards.straightdope.com/u/Bit_Wise)\ **Post date:** [August 4, 2013, 6:43am UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/357 "2013-08-04T06:43:38Z")
> [@LinusK](#): > > Suppose there’s an apartment building, and it’s owned by somebody, and that’s all he does: he owns the apartment building, and that’s it. He doesn’t collect rents, or do maintenance, or find tenants. He didn’t build the building. He just owns it. > > He doesn’t do any work. He eats, he drinks, he goes on vacation. He doesn’t work because he doesn’t have to: he owns an apartment building. > > But what he consumes, it comes from somewhere, right? Somebody has to serve his food, pour his wine, make his socks. > > So suppose he disappears. He joins an ashram. He renounces earthly pleasures. He’s not there anymore. > > What happens to whatever he used to consume before? > > If he’s not there anymore, doesn’t that mean everybody else can either (a) consume little more (drink the wine he used to drink), or (b) work a little less? > > And on the other side, what stops getting produced, because the owner isn’t there anymore? What stops getting made? Who is worse off? > > If the answer is nothing, and nobody, doesn’t that mean the owner is consuming without producing - that his income (or his consumption) - is a tax on the work of others? > > You’re right that the apartment building is necessary. But what about the owner? The owner is contributing the use of the building. She owns the building and she could be using it for any number of other things. She could be living in it herself and using it as a giant mansion, sleeping in a different room every night. She could knock the building down and use the land as a polo field for her friends. Those are both her right, since she owns the property, and would provide her with immediate joy and satisfaction. Instead, she is choosing to forgo that immediate satisfaction and is instead using the property as a money-earning business. This is good for her, since it allows her to earn a profit each year, and over the course of her life will hopefully provide her with more joy and satisfaction than she could have gotten otherwise. It is also good for her tenants, who have a place to live, and for the building manager she employs to look after the building, who would otherwise be unemployed. If the owner was not allowed to profit off the use of the building, and instead was just using it as her personal mansion, she would have to live a more frugal life, since the building would not be creating value. This means she would have to consume less. However, this does not mean there is more to go around for everyone else. On the contrary, since she has less money to spend, that means that the local businesses she would otherwise have been patronizing will be worse off. She can’t afford to buy a new TV, so Joe’s TV shop will sell one fewer TV and Joe will be worse off, and so one throughout the community. The existence of the apartment building creates value. If you take away the apartment building, then that value no longer exists, and the community is worse off. And if the owner is not allowed to profit off the building, then the building won’t exist. ---
**Author:** ![SlackerInc](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/slackerinc/32/275_2.png) [@SlackerInc](https://boards.straightdope.com/u/SlackerInc)\ **Post date:** [August 4, 2013, 11:15am UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/358 "2013-08-04T11:15:53Z")
Okay, this mention of an apartment building managed by others reminded me of something that I think qualifies as pretty close to your scenario of receiving profits without any earning being involved with it. And I am not pointing the finger at anyone else in this case but at myself, BTW. My grandfather bought an odd little investment decades ago that is apparently a kind of outmoded tax shelter, but it is still an income earning investment even though the laws have changed. My sister and I each inherited half of this investment. What it is, is a little percentage of a pair of apartment complexes in upstate New York. At the end of every year, we get a letter describing in a page or two: –the amount of total rent that came in during the year –until a few years ago, the debt service, which has now been retired –the maintenance and improvements that were done on the complexes this year –the vacancy rate –management fees, taxes, insurance, etc. It always concludes with “of the X amount of cash on hand, Y has been set aside for capital improvements, yada yada yada, and the remaining amount, X minus Y, has been distributed to the partners.” And so along with this letter, there is a check for a couple thousand dollars or so. Then in March they send a special tax form to file for it, already filled out. Now I know I am not doing anything to earn that money. And I don’t really even have any choices to make. As far as I can tell, I can’t really have any influence on the way these apartments are managed, and this investment is not really liquidatable in the normal sense, although I was told that other partners will give me essentially a fire sale price if I want to sell to them. Basically, though, these apartments are managed and maintained and the people doing the management and maintenance get a cut of the rent; but then there is a surplus amount of profit which just eternally gets distributed to us the partners without us having to do anything for the money other than open an envelope and deposit a check once per year. Now, I’m not going to stop opening these envelopes and cashing these checks–as a socialist friend of mine told me in college years ago, “you gotta live in society”–but if it were up to me, this kind of thing would not be possible. ---
**Author:** ![Bremidon](https://avatars.discourse-cdn.com/v4/letter/b/ac91a4/32.png) [@Bremidon](https://boards.straightdope.com/u/Bremidon)\ **Post date:** [August 4, 2013, 1:39pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/359 "2013-08-04T13:39:26Z")
> [@LinusK](#): > > Suppose there’s an apartment building, and it’s owned by somebody, and that’s all he does: he owns the apartment building, and that’s it. He doesn’t collect rents, or do maintenance, or find tenants. He didn’t build the building. He just owns it. > > He doesn’t do any work. He eats, he drinks, he goes on vacation. He doesn’t work because he doesn’t have to: he owns an apartment building. > > But what he consumes, it comes from somewhere, right? Somebody has to serve his food, pour his wine, make his socks. > > So suppose he disappears. He joins an ashram. He renounces earthly pleasures. He’s not there anymore. > > What happens to whatever he used to consume before? > > If he’s not there anymore, doesn’t that mean everybody else can either (a) consume little more (drink the wine he used to drink), or (b) work a little less? > > And on the other side, what stops getting produced, because the owner isn’t there anymore? What stops getting made? Who is worse off? > > If the answer is nothing, and nobody, doesn’t that mean the owner is consuming without producing - that his income (or his consumption) - is a tax on the work of others? > > You’re right that the apartment building is necessary. But what about the owner? The argumentation is silly. As many people have pointed out, he’s contributing the building which he bought with his own money. You know, that stuff he made working for other people? Why are you so bound and determined to steal from the owner? I suppose you could go with a scenario where he got his money from mom and pop, but then you’re asking a different question: is inheritance a good idea? Warning: you are going to have a devil of a time trying to get at all those people who have too much money in your opinion and still protect worker’s rights in this question. ---
**Author:** ![LinusK](https://avatars.discourse-cdn.com/v4/letter/l/258eb7/32.png) [@LinusK](https://boards.straightdope.com/u/LinusK)\ **Post date:** [August 4, 2013, 7:17pm UTC](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283/360 "2013-08-04T19:17:26Z")
> [@Bit\_Wise](#): > > The owner is contributing the use of the building. She owns the building and she could be using it for any number of other things. She could be living in it herself and using it as a giant mansion, sleeping in a different room every night. She could knock the building down and use the land as a polo field for her friends. You’ve described property rights very accurately. The owner can leave her building empty. She can knock it down, and use it as a polo field. She can fill it full of monkeys, if she wants. She can use it as a giant bathroom. Why? Because she owns it. She didn’t build it. She didn’t make the land it sits on. She doesn’t maintain it. Yet she owns it, so she can do whatever she wants with it. So where does the right of ownership come from? It comes from government, of course. It’s the government that says she owns this particular lot. It’s the government that says what she can and cannot do with it. It’s the government who will send the Sheriff to evict her tenants, and the government that will arrest and punish and imprison anyone goes on her property without her permission. So where does her profit come from? Ultimately it comes from government. Her ability to consume without working? Ultimately it’s a government subsidy. > [@](#): > > Those are both her right, since she owns the property, and would provide her with immediate joy and satisfaction. Instead, she is choosing to forgo that immediate satisfaction and is instead using the property as a money-earning business. This is good for her, since it allows her to earn a profit each year, and over the course of her life will hopefully provide her with more joy and satisfaction than she could have gotten otherwise. It is also good for her tenants, who have a place to live, and for the building manager she employs to look after the building, who would otherwise be unemployed. It’s absolutely true that, in order for one person _to not work,_ some other person _must work in her stead._ so for example, in order for me to eat, without making food, someone else must make food for me. In order for me to dress, without me dressing me, someone else must dress me. This is what’s called _providing employment._ Of course, the idea that for one person to work, some other person must not work, is silly. If half the people work, we’ll have half as much stuff as we’d have had of everybody worked. The fact that some people are able to _consume without producing_ just means that everyone is poorer. > [@](#): > > If the owner was not allowed to profit off the use of the building, and instead was just using it as her personal mansion, she would have to live a more frugal life, since the building would not be creating value. This means she would have to consume less. However, this does not mean there is more to go around for everyone else. On the contrary, since she has less money to spend, that means that the local businesses she would otherwise have been patronizing will be worse off. She can’t afford to buy a new TV, so Joe’s TV shop will sell one fewer TV and Joe will be worse off, and so one throughout the community. It sounds as if you think _if the owner has less money, there will be less money._ is that what you think? > [@](#): > > The existence of the apartment building creates value. It does. I said as much in the post you quoted. The question is, “Does the owner create value?” > [@](#): > > If you take away the apartment building, then that value no longer exists, and the community is worse off. And if the owner is not allowed to profit off the building, then the building won’t exist. Do you mean the building will disappear, or do you mean something else? [Previous page](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283.md?page=17) [Next page](https://boards.straightdope.com/t/profits-are-a-tax-on-labor/663283.md?page=19)