The tweet is succinct and plain:

Wealth is socially created — redistribution just allows more people to enjoy the fruits of their labor.https://t.co/mYvt5tJIiS

— Jacobin (@jacobin) October 17, 2024

Brought to my attention by Phil Magness, this post by Jacobin repeats the cardinal belief held by many people on the political left that wealth just happens. Individual effort, gumption, creativity, and risk-taking are irrelevant. Wealth somehow emerges automatically from society and then rains down on individuals each of whom has as much control over the economic torrent – or shower, or drizzle, or whatever it happens to be – as those individuals have over the actual precipitation that falls, or not, from the sky above their heads.

True, Jacobin mentions “fruits of their labor,” perhaps suggesting a positive connection between human effort and economic rewards. But this suggestion is a mirage. If it really is the case, as Jacobin obviously believes, that redistribution has no impact on the amount of wealth that’s created, then we as workers just do what social forces assign us to do regardless of what we’re paid. We have little say in the matter. We workers play our role in assisting society to generate wealth, yet obviously – again, according to the premise of Jacobin’s tweet – the portion of this wealth that is ‘distributed’ to us has no effect on the amount of wealth that society (and, ipso facto, the amount of wealth that any group of workers) generates.

In fact, Jacobin’s use in the tweet of the word “created” is carelessly inaccurate. Jacobin’s understanding of wealth implies that wealth isn’t really created. Instead, wealth is fated to emerge as social forces fulfill their destiny; any wealth that rains down today was destined from the beginning of time to rain down today. Today’s wealth might not yesterday have yet been assembled into the final form it took before raining down on humanity, but all the materials and instructions for their assembly have been within the social system forever.

This ‘understanding’ of the source of wealth is most obvious among Marxists, for whom history inexorably unfolds according to its own logic and carries us individuals helplessly along. But this ‘understanding’ of wealth is central also to very many other leftist ideologies – for example, that of Thomas Piketty who, in 2013, gave the world a boulder of a book in which wealth is never described as being created. As Piketty sees the economy, wealth evolves, leading to “evolutions” in its distribution. For Piketty, these mysterious evolutions can be, and often are, disturbed and distorted by greedy individuals seizing or capturing disproportionately large shares of the wealth-that-just-happens. But except when calamitous events such as world wars and global depressions erupt, society’s wealth-creating forces grind on relentlessly.

Society’s extruding of the wealth that has always been implicit in it – one cannot legitimately call it wealth creation – is not much affected by the incentives and constraints that we puny individuals encounter in our daily lives. If wealth just happens, then the profit motive and all other economic forces of the sort that are front and center in the analyses of bourgeois scholars such as Adam Smith, F.A. Hayek, and Armen Alchian are pointless. Entrepreneurs and investors do not do what they do because of the prospect of high monetary rewards; those tasks will be carried out, in full and without alteration, if the rewards are dramatically slashed by nearly confiscatory taxation. The same holds true for workers earning high salaries; those jobs will continue to be performed with undiminished skill and consistency if the state seizes the great majority of those salaries and “redistributes” the funds to those persons who were so unlucky as to have been in locations where the rain of wealth was unusually light.

Prices, wages, interest rates, profits, losses – these phenomena play no role except to help determine the distribution of wealth after it has rained down. These phenomena neither inform nor incite individuals in their economic affairs to consume and produce in ways that allow us to get the greatest possible amount of human satisfaction out of the scarce resources at our disposal.

This notion of wealth creation implies that everyone is entitled to equal shares of wealth. From the presumed fact that no one did anything to augment the amount of wealth, it follows that no one is entitled to more wealth than is ‘distributed’ to others. Massive redistribution engineered by the state is thus ethically justified and economically harmless.

This radical conclusion is implied in that lone, simple premise of Jacobin’s tweet. Accepting this conclusion frees its adherents from any responsibility of thinking seriously – or, indeed, of thinking at all – about how wealth is actually created. No effort must be devoted to pondering changes in incentives brought about by changes in public policy or in institutions. All that remains for the caring person to do is to emote about differences in income and wealth.

Of course, in one sense it is indisputable that wealth is socially created, but in a sense directly opposite of what is meant by Marx, Jacobin, or Piketty. We can produce more and better outputs if we cooperate – more specifically, if we specialize in our productive tasks and then exchange the fruits of our labor for the fruits of other individuals’ labor, all voluntarily offered. The greater the number of people who are party to this cooperative effort, the greater the amount of wealth created per person. An extensive system of specialization and exchange enables each individual to consume far more than he or she could have ever produced on his or her own. Each and every person in modern society daily consumes goods and services that were produced by the effort, creativity, and cooperation of countless individuals, and in some cases literally billions of individuals.

Yet for this productive social cooperation to arise and continue, each individual must be adequately informed about how he can best assist his fellow humans and appropriately incited to do so. This information and these incentives come from prices, wages, and other signals that emerge and adjust on free markets. This understanding of the social creation of wealth makes clear the importance of these market signals and the danger of interfering with them. This understanding also makes it impossible to take seriously the mystical notion that wealth is created by social forces independently of human institutions, human action, and the incentives and constraints that guide human action.

Importantly, these incentives and constraints exist at the margin, meaning this: Although we are all part of a vast globe-spanning economy in which countless strangers do many different things almost none of which is under our individual control, each of the gazillions of daily decisions is conditioned by the unique information, constraints, and expected benefits that each person confronts at each moment of decision. In a market economy, each individual can and does exercise meaningful control over his decisions and actions. If the information that each person has is reasonably accurate, if each person is appropriately constrained from interfering with the decision-making processes of others, and if each person is free, within these constraints, to choose those courses of action that he believes are best for him, each person will act in ways that, when combined with the actions of others, contributes to massive production of wealth.

Although “social” in the sense that this market system of wealth creation involves untold numbers of strangers all cooperating to produce wealth, it works only if each of the individuals chooses and acts in ways that contribute to wealth creation. And individuals will generally choose and act in these ways only if the incentives that each of them confronts as individuals prompt them to do so.

Jacobin, Marxists, Piketty, and most progressives look only at “the economy,” supposing that it’s the elemental organism, with a will of its own, that produces all the wealth that we observe, and, thus, that “the economy” imposes its will on investors, workers, and consumers. But they are deeply mistaken. The elemental decision-making creatures in any economy are individuals. Much or little wealth is produced depending on how much or little individuals are prompted to choose and act in ways that lead to the production of wealth. There’s a reason, after all, why the “socially created” wealth in countries such as the United States, Sweden, and Singapore is multiple times greater than is the “socially created” wealth in countries such as Cuba, Venezuela, and Malawi.