In his 1994 book Ethics and Economic Progress, the Nobel Prize-winning economist James M. Buchanan explains why the work ethic matters using the first few pages of Adam Smith’s Wealth of Nations. According to Buchanan, we’re all better off because of a shared work ethic. When we work more, we expand the limits of the market, which increases specialization and deepens the division of labor. In this paper, George Mason University graduate students Gregory Caskey and Zachary Kessler join me to explore what Buchanan’s argument implies for business ethics.
But will we prosper just by working hard? After all, examples abound of physically demanding, challenging jobs that pay poorly. If hard work were all it takes to get rich, then agricultural laborers in low-income countries would live like kings. I flatter myself by thinking I work a lot and work hard, but the truth about academia is that it’s tough to tell where work leaves off and leisure begins.
It’s not enough just to work hard. You have to work hard on the right things. Imagine you start a paper clip organizing consultancy. You develop a suite of sure-fire, industry-specific plans and workshops on how workers should organize their paper clips for optimal efficiency. You spend thousands of dollars on research and preparing a beautiful presentation on when someone should use a paper clip, when someone should use a staple, and when sending loose paper in a manila folder is the right choice. When you contact potential clients, you promise that, among your services, you will conduct a thorough “paper clip audit” that will do a detailed analysis of each and every paper clip in the office and produce a report on which paper clips to discard as well as estimates of the remaining useful lives of the remaining paper clips. You also plow a lot of money into developing specially-branded paper clip humidors that will maximize paper clips’ useful lives.
You spare no expense creating an Enneagram or Myers-Briggs type test to determine when someone should use large paper clips, small paper clips, binder clips, or staples. You develop methods that will allow you to identify precisely how people should assemble and transfer papers to people with different paper clip styles. Suppose the sender is a “small, plastic paper clip” person and the receiver is a “large, binder clip” person. Is a medium-sized plastic-coated paper clip an appropriate option? There are also crucial questions of paper clip etiquette you will want to be able to answer. Should colored paper clips ever be used in a formal setting? You even offer secure paper clip destruction and recycling for a modest fee.
Armed with resources of unparalleled excellence in the paper clip organizing field, you pound the pavement like no one else. You hustle around the clock identifying and contacting potential clients. You get on a first-name basis with each paper clip company’s leading salespeople. You work these connections to establish a rapport with the office supply managers and administrative personnel for their clients. You work yourself to exhaustion so you can be the very best in the world at organizing paper clips. You spare no expense creating a world-class paper clip blog and an app for iOS and Android. You can confidently say there is no one in the world who is better than you. You have become the world’s leading authority on paper clips.
With a bit of introspection, you can probably think of times when you’ve devoted far too much energy to the equivalent of sorting paper clips or trying to start a paper clip consultancy. During my time working at a music store, I spent a decent chunk of one day organizing a bin filled with cassette and CD singles. I missed the point of the display: it was meant to be rummaged through rather than neatly organized, and I was wasting my time not only forsaking higher-value uses of my time for lower-value uses, I was actually spending time reducing value rather than creating it.
In spite of your unparalleled excellence in a field virtually everyone else has overlooked, I can say I’m pretty confident that you’re not going to make any money at this. You are the best in the world, and you work very, very hard. It doesn’t really matter, ultimately, because you are the best in the world at something no one else cares about and that isn’t important enough in most people’s eyes to notice. This isn’t to say you can’t indulge your fascination with paper clips, but you’ll need to recognize that this is a hobby– and there are probably people out there who share your passion; as XKCD reminds us, “Human subcultures are nested fractally”–not a sustainable business.
What, then, are the “right” things? This is where markets come in. At every point in time, you are exercising judgment about what is to be done, where, when, how, and for whom, and markets deliver crucial information about what is possible and what others prefer with prices, profits, and losses. Profits are not decisive–there are a lot of things that might be profitable but that are immoral–but they are informative. Markets make the costs and benefits very explicit, and while we see through a glass darkly by participating in the market process, it is better than seeing nothing at all. The market might be Plato’s cave, but the nonmarket alternative is not perfect light but perfect darkness.
This article was first published by the AIER, and can be found here.
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In this episode of ‘Influencers’, Andy speaks with billionaire investor and Bridgewater Associates Founder, Ray Dalio, as they discuss the volatility in the stock market, Bitcoin as a substitute for gold, and the rise of China as an economic superpower.