Lion of the Blogosphere

Value transference essay no. 1

Another re-post from the archives.

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The reason we need to talk about value transference is because other people are talking about “value creation.” If you look at the Google ngram viewer, you will see that the phrase “value creation” was practically nonexistent before the 1970s, and that its use skyrocketed during the last two decades.

I don’t really know why the phrase was originally created, but people of a libertarian-conservative bent have glommed onto it as a way of explaining the results of what they call “free markets” and as a way of justifying a libertarian-conservative approach to taxation

The theory behind value creation is that people and businesses make money be creating value that other people are willing to pay for. People may pay in currency, but of course currency is just a store of value that allows people to more efficiently trade the value they created for the value that others created.

Because the United States has a so-called free market, it is argued that the only way to make money in the United States is by creating value. Therefore, the richest people (at least the richest self-made people) are those who created the most value, because there’s a direct and nearly-perfect correlation between value created and how much money an individual or business has accrued.

The correlation between value creation and wealth bolsters the libertarian-conservative viewpoint that taxes should be kept low. Suppose Doctor Uno is lazy and only saves one life per week. Doctor Dos works hard and saves ten lives per week. Is it fair to punish Doctor Dos for his hard work and his life-saving contributions to society by hitting him with a higher tax rate?

What about rich people who clearly didn’t do anything useful in order to become rich, such as people who were born rich or who married rich spouses? The libertarian-conservatives would argue that, if property rights are to mean anything, they should mean that rich people are entitled to do whatever they want with their money, and that includes giving it to spouses and children. So taxing these people would be punishing the original act of value creation.

Even if one accepts the argument that all wealth accretion is the result of value creation, it doesn’t necessary follow that progressive tax rates are wrong or immoral. The purpose of taxation is not to punish anyone but to fund necessary government functions. The rich are taxed at a higher rate because they can afford to pay more and because they have a lower marginal utility for additional money.

As you know, it’s my hypothesis that great fortunes are the result not of value creation but the result of transferring the value created by the hard work of other people. This is what I call value transference, and it’s a necessary counterbalance to the now popular term of “value creation.”

Why do people deny the truth of value transference? No doubt for the same reason they deny the truth of evolution, or HBD. Libertarian-conservative types are so psychologically invested in the idea of wealth equals value creation that any hint of a greater truth causes severe cognitive dissonance. And they get angry at me. If the rich are rich not because they created value but because they transferred the value created by the hard work of others to themselves (some might replace “transferred” with the less polite word of “stole”), what justification is there for allowing them to keep their wealth?

Actually, history is full of justifications for why the people with wealth and power are entitled to their wealth and power. There has never been a society in recorded history where there weren’t a few who were rich and powerful and many who were poor, and the rich and powerful always had explanations for why they were entitled to their positions long before modern theories of economics were invented. Divine right was one such explanation. The Pharoah of ancient Egypt went one better and said the he himself was a god. Today we look back at these explanations and laugh, but who’s to say that in the distant future, humans wiser than ourselves won’t look down similiarly at the justifications used by the billionaires of the present?

This introductory essay leaves many unanswered questions, such as:

1. Is our economy really a free market?
2. What the heck do people mean by a free market anyway? (Answering this question is necessary to answer the previous question as well as the following question.)
3. Is it true that the only way to make money in a free market is by creating value?
4. Why would anyone voluntarily give money to someone else unless they were getting value in return?

Written by Lion of the Blogosphere

August 6, 2016 at 11:59 am

10 Responses

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  1. I have met large number of people like Lion who complain that CEOs create no value, do not deserve their riches. Most of these prople run their business networking on Linkedin. Buy stuff from Amazon, watch movies on Netflix and use Google to search the internet, It is silly for them to complain that CEO of LinkedIn, Amazon, Netflix and Google are just parasites that create no value.

    I just think that people who create no value are jealous of those that do create value and want to shit on them.

    Tiny sven

    August 6, 2016 at 12:11 pm

    • These companies have monopolies. There’s no other choice.

      Lion of the Blogosphere

      August 6, 2016 at 12:23 pm

      • LinkedIn, Amazon, Netflix, and Google get to their enviable status by kicking the competition’s ass.

        E. Rekshun

        August 6, 2016 at 6:56 pm

    • people who create no value are jealous of those that do create value and want to shit on them

      C’mon…A Wall St Pig is jealous of the baker who makes his birthday cake?


      August 7, 2016 at 12:46 am

      • This is for Yakov and playing nice with him:

        A very successful electrician or HVAC technician can garner envy from their value transference clientele, with a team of staff, wearing uniforms and vehicles with company logos.

        I remember this electrical company visiting a law office I used to work, and the partners at the law firm felt almost irrelevant in society, when you have these guys with cool uniforms and logos doing real work. What’s lawyering, just a parasite occupation. Electricians do real work and make the world turn on and off.


        August 7, 2016 at 9:37 am

  2. On top of the monopolies is there corrosive and detrimental involvement in political matters that are not their concern. Why is Mark Zuckerberg so intent on importing illegal Mexican stoop labor, for example?

    Companies like Google and facebook are no different than public utilities.


    August 6, 2016 at 1:14 pm

  3. If u think Amazon and Netflix are monopolies you are silly.

    Tiny sven

    August 6, 2016 at 2:11 pm

  4. Have to disagree somewhat. I admire your implicit Marxist analysis personally. Our real de facto rulers are probably as you describe (although they don’t need to ‘own’ business per se).

    I think you should add Quant Easing as an empirically verified fact that value transference (elites printing money to boost their own art/property/stock prices) does happen in large measure. That’s not debatable.

    On the other hand, I believe a good portion of the elite have merited their spot through entrepreneurial activity, trading, risk taking, hustling and intimidating people.

    Its quite black and white thinking on both sides. Both marxists and libertarians have valid points. None of those points rest on moral assertions however, as we all know morality doesn’t exist.

    The Philosopher

    August 6, 2016 at 6:59 pm

    • It’s more like dumbing down the populace, where propaganda leads to profits.

      In fact, propaganda is what makes the world turn.


      August 7, 2016 at 12:43 am

  5. One value transference scheme that Lion or his reader never really mentions, besides Amazon, are the small merchants. In certain societies and at certain time periods, merchants were scorned as parasites.

    My favorite is the run in the mill independent bookseller (not Amazon). They create no value, but buy items that were created with the sweat of others, and sell them at a much higher price.

    Rag paper, book pirates and old geezers with their brains numbered!


    August 7, 2016 at 12:40 am

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