According to a part-time economist and full-time member of Congress, no one can honestly earn a billion dollars. Rep. Alexandria Ocasio-Cortez (D-NY) has said that “You can get market power, you can break rules, you can abuse labor laws, you can pay people less than what they’re worth, but you can’t earn that.”
There is much wrong with this claim.
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First, consider “market power.” Either no one has such power, or everyone does. Under free enterprise, each person can set a price for what he or she owns. I can offer my pen for $1 million if I choose. That does not mean I can force anyone to buy it. In that sense, market power means only the freedom to set one’s own terms, not the power to compel others.
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If “market power” means the ability to exclude competitors or dominate a market, then that is not a feature of capitalism but of government privilege. True monopoly depends on state support. The post office, patents, and old taxi licensing regimes are examples. Companies such as IBM, Standard Oil, and Ford were not true monopolies in this sense. They were simply dominant sellers for a time.
Second, what about “breaking rules?” Yes, people can become billionaires by stealing, as dictators and criminals do. But such people are not examples of free enterprise. By contrast, many billionaires have earned their wealth honestly through voluntary exchange. They made customers better off, at least in expectation, and usually in reality as well. If Bill Gates sold a computer for $500, a buyer must have valued it at more than $500, or the purchase would not have happened.
Third, labor laws. Some are just. Others are not. If an employer promises to pay a worker and then refuses, that is fraud. But other labor regulations violate freedom of association by forcing employers to deal with workers or unions against their will. If a billionaire followed unjust laws, that would not make him a crook. If he ignored unjust laws while remaining otherwise peaceful and voluntary, that would simply mean he exercised his rights.
Fourth, the claim that billionaires pay people less than they are “worth.” Strictly speaking, people are not bought and sold in a free society, so they are not “worth” anything in that sense. More accurately, the issue is what a worker’s labor is worth. In economics, that is usually understood as the present discounted value of productivity.
Suppose Joe’s labor adds $15 per hour to his employer’s revenue or bottom line, but he is paid only $10. That gap creates an opportunity. Another employer may offer $11, then $12, then $13, because doing so still leaves room for profit. If Joe learns that others pay more, he may leave. In this way, wages tend to move toward productivity. The same logic works in reverse. If a worker is paid more than his productivity, the arrangement cannot last indefinitely, because the employer will lose money.
Ocasio-Cortez’s claim effectively treats all billionaires as if they must have cheated. But that logic is self-defeating. If honestly earning $250 million is possible, then why would repeated honest action not eventually reach one billion? If $100 million can be earned legitimately, then continued similar success could lead to a billion. The same applies to $100, $100,000, or even $10. Once honesty is admitted at any one level, the principle does not suddenly become dishonest at a higher level.
That is why her claim is vulnerable to reductio ad absurdum. If taken seriously, it implies that any amount of wealth could be suspect merely because it might be repeated enough times to become vast wealth. That is incoherent.
Sen. Bernie Sanders (I-VT) has attacked “millionaires and billionaires,” though he has since become the former himself. If he could become a millionaire honestly, then the same method, extended further, could, in principle, make him a billionaire. There is no principled stopping point anywhere.
Wealthy people in a free economy do not become rich by exploiting others. They do so by serving others well. The more successful entrepreneurs there are, the better off ordinary people are. Wealth creation is not a zero-sum game. A society with more billionaires is generally a society in which more value has been created for consumers, workers, and investors.
The United States already has many billionaires: Elon Musk, Jeff Bezos, Bill Gates, Warren Buffett, Mark Zuckerberg, Larry Ellison, Larry Page, Sergey Brin, Michael Bloomberg, Steve Ballmer, and Charles Koch, among them. Many entertainers and athletes have also crossed that threshold. To prove Ocasio-Cortez’s claim, one would need evidence that these people obtained their fortunes through cheating. She offers none.
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Her statement is not a logical truth like 2 + 2 = 4. It is an empirical claim, and these require evidence. That is the central weakness of her argument: It substitutes sweeping moralizing for proof, and then treats the conclusion as if it were self-evident.
Wealth, honestly earned, is often a sign of value created for others. In a free market, big fortunes usually reflect large numbers of voluntary transactions. The presence of billionaires does not prove exploitation. More often, it shows that millions of people found enough benefit in their products or services to trade willingly. She makes an empirical claim: No billionaire can arrive at that status without cheating. Empirical claims need evidence to support them. She provides none and hasn’t the faintest idea that such is required to buttress her charge.
Walter E. Block, Ph.D., is the Harold E. Wirth eminent scholar endowed chairman and professor of economics at Loyola University New Orleans.
