Wednesday, January 26, 2011

Two Types of People

Thomas Sowell's column on Monday reminded me of a world view that I find quite useful. I like it because it gives a picture of the type of person one should be, without giving a lot of particulars. There are two types of people in the world: creators and consumers. No one is exclusively one or the other, since everyone creates to some extent, and everyone (must) consume to some extent. So it really is a story of net creating or consuming.

Net creators add more to the world than they take out. There are several obvious examples, like Bill Gates, or Larry Ellison, or the Steves of Apple, or Larry and Sergey of Google. Many examples abound; in fact most people are net creators. If they weren't, the world would not have progressed to the point it has.

But net creators don't always (or only) create new consumer goods or capital goods. Some net creators add to the psychic benefit people derive from certain activities. In a way, this can be considered a consumer good. Football, for example - many people enjoy watching football in its own right. Others enjoy hearing a good sermon at their church, so that the priest provides a psychic benefit.

Net creators put more value into the world than they take out. Net consumers are the opposite: they take without giving. Fortunately such people are the minority. One need not dwell for too long before thinking of a few examples in one's own life. Furthermore, one might suggest football players are net consumers, if you don't enjoy football. I think there's merit there - such that sports stadiums shouldn't be financed by public funds - but that's neither here nor there right now.

My main message here is a moral one. I believe we have a duty to be net creators, to the extent we are mentally and physically capable. My only argument for this, aside for "Protestant ethic" stuff, is the logical opposite: imagine a world of net consumers. Can you?


  1. Are you sure that the majority of folks (limiting our population to America) are net creators? I’m not so sure. When I think of net creators, sales people come to mind. They are on the front lines, selling products and services and supplying the revenue the firm needs to operate. The janitor, on the other hand, has an important job, but doesn’t create wealth in the same sense as the salesman. The same goes for the officer manager, accountant, and general counsel. (Let’s pretend all these folks work for the same firm) These functions are important, but are the people performing these functions net creators?

  2. Brad,

    I think your view is too accounting-oriented. A net creator is anyone whose value of output is greater than the value of inputs. Some people create more than others, and we should all be trying to create as much as possible, but just because someone is a "cost-center" in an accounting sense doesn't mean they aren't creating value.

    Often, the value of a "cost-center" is in freeing up the sales person, from your example, to focus on sales rather than having to do payroll or collect accounts.

  3. Yes, I’m sure my view is too accounting oriented, but I'm an accountant. :)

    You say “A net creator is anyone whose value of output is greater than the value of inputs.” I really want this definition to apply to me – a government employee, but not because I consider my job as essential or necessary. I’m not in the union. It pains me, as a libertarian, to confess that I’m on the government dole. My only redeeming factor is I work for an audit function within the defense department. I’m told my agency saves the army $26 for every $1 spent on salary. This would appear to meet your definition, BUT our whole operation is funded by taxpayers. So, am I a net creator? (if not, please sugar-coat your answer to avoid damaging my well-being)

  4. Brad,

    Well I don't like to use this world view as some sort of external metric. I mean that it's not a "job performance" type of thing. It's a moral conviction, and it doesn't just describe your job. It has to do with your overall effect on the world.

    But as to your work - auditing the gub'ment seems pretty important to me!

  5. Probably more accurate to say Brad is a three-year indentured servant. I believe that is what he signed on for in order to get his gub'ment-funded Syracuse degree. ;)

  6. Hook,

    Yep, and I thank all taxpaying citizens for their contribution. I justify my my experience this way: if I didn't go, someone else would have. But then I wouldn't have met Jeff, and we wouldn't be running this high-speed low-drag blog.

    Only 2.5 years to go.....

  7. We are as a whole net consumers already.

    We are net consuming oil, (we dont produce any) we are net consuming coal, nat gas, fish from the sea, titanium, molybdenum, forests etc etc.

    We are turning these things into other things that will wear out eventually. If we were allowed to live here long enough (our sun will eventually red giant us out of existence) we would use up virtually everything.

    Even your producers net consume by producing. They may nominally produce value but they are all net consumers.

  8. Greg,

    Have you ever heard of Thomas Malthus, or Paul Erhlich? They also thought we'd run out of stuff. The record of human invention, though, is that as the price of using stuff becomes too high (due to scarcity) producers switch to other stuff.

    An example: forestry companies. Using better seedlings for growing trees for lumber has led to using less land in total, and reduced (or eliminated for some firms) the desire to cut down old-growth forests. The new trees grow in about ten years, so forestry companies can just keep "rotating the crops," so to speak, on the same piece of land.

    You are right that many minerals and raw materials are not themselves created by humans. But that doesn't make the production process a net consuming process. Only if the value of the goods produced were lower than the value of the inputs would it be a net consuming process. Since firms would find negative economic profit from such activity, in the absence of subsidies such activities would cease.

    Btw, fish reproduce. But I get you here: that's a tragedy of the commons problem though.

  9. I'm quite aware of Malthus and I view Malthus the same way I view Marx. He had some things right and some things wrong. Much of his analysis (like Marx... and they said a lot of congruent stuff) was correct but his prescriptions and conclusions were wrong in my view.

    Its not even debateable that we live in world with a finite supply of many things we currently depend greatly on. We will, if we survive long enough, need to find substitutes or do without these things. We will always have a limited but unimagineable level of ingenuity so we SHOULD never have to return to a 12th century level of existence. We could however if we made some drastically stupid decisions.

    I think you have waaaay too much faith in engineering/sciences ability to bail us out of any situation we find ourself in, and I'm a science guy. The world of the unknown is turning out to be much more resistant to control than our forefathers envisioned. Take your forestry example. repeated farming of land depletes things that are irreplaceable and will lead to diminished quality of harvest. They most certainly cannot keep using the same piece of land and get a known and stable harvest decade after decade. Nature wont let them.

    My main point was to say that in real economic terms we as a world are and have always been net consumers. Labeling some people producers and others consumers is a fallacy and it only contributes to a demarcation of some being useful while others are useless....... not a very "productive" mindset.

    I believe with the right mindset we can provide for ALL the worlds people ALL their basic needs. The missing ingredient isnt "enough money" (money is our invention...... just invent MORE!), it isnt enough resources or enough land (we could house the entire world within the border of Texas and each unit of four people would have 3600 sq ft of property) its enough empathy. Not that we dont have enough empathy but we are not expressing enough.

    Its interesting that you use value of goods in determining whether we are net consumers or producers because that requires money. We may like i pods better than the raw materials used to make it and therefore we can profit form them (monetarily) but we have still net consumed the raw material and there is a limited number of ipods that can be created. The buyer of the ipod will throw it out someday and the manufacturer consumed a lot as well. We are all net consumers

  10. What on earth do you was Marx's contribution? Never mind, moving on.

    Yes, the world's supply of most everything is finite. That doesn't mean we'll use it all up - that's the beauty of market prices.

    It's not engineering and science I have faith in - it's human ingenuity. Faith in man's ability to invent has yet to be misplaced.

    I disagree with your second-to-last paragraph. Empathy isn't the key - it's freedom, baby! Look where people suffer - it's where they are unfree.

    In your last paragraph, you have a different definition of creation than I do. The important thing is whether we create value. Lower value goods get used up in the creation of higher value goods. It's better, based on really existing human decisions, for people that stuff gets created. If we were net consumers the stuff we created would have less value than the stuff we consumed.

    I get you are hung up on "using up" raw materials and that's why you don't agree. But raw materials are completely valueless until humans have a reason to use them.

  11. So you think Marx got none of his analysis right? Even many non Marxist economists admit he had some great insights, they just disagree with his prescriptions.

    So we are "users" by your definition. Sounds like a synonym for consumers.

    Human ingenuity is expressed via engineering and science. Thats how inventions come to be.

    So how does freedom come to be? Do you get it yourself or is it a group acquisition? I sat freedom cannot come "by yourself".

    How secure and free would you feel in your neighborhood if you were the only one looking out for your own interest? You enjoy the freedom you do because others are taking a stake in insuring it FOR you.

  12. I think of Marx the same as I think of Keynes. What was good wasn't original, and what was original wasn't good.

    Freedom is the result of mutually respecting each other's person. A person alone is neither free nor unfree, since it is defined only in the sense of existing in a community of other persons.

    If you go to this entry: and read the paper I linked (mine, of course) or the paper Two Cheers for Capitalism, by Pete Leeson (Society, 2010) you will get a very good idea of how I approach the freedom angle in a sensible "really existing" way.

    If you can't find the Leeson article let me know.

  13. What is original about Hayek, or Mises or Rothbard?

    I dont think there are too many original thoughts after about the first millenium. Certainly the great thinkers of that time asked and answered all our questions in some fashion and everyone after just added on or reworded. If your only going to consider original ideas and thoughts as noteworthy you'll eliminate everyone in the 19th and20th century thats for sure.

    I like that definition of freedom.

  14. I'm glad you like the freedom definition.

    If you are saying that each new thinker makes marginal contributions to a field, then I agree. But, seriously, you picked two giants in the field - Hayek and Mises. Much was original. Rothbard I think is less original.

    A lot of current thinking is restating previously known things, this is true. It happens because, presumably, we don't typically study history of thought to the extent we ought to in the pursuit of our own fields.

    I don't say Keynes and Marx didn't have original stuff. I do say what was original has been shown to be incorrect. But, there's plenty out there who disagree with me. If I haven't mentioned before, you may want to check out "Failure of the New Economics" available for free at