Daniel Klein on Honest Income
Jan 27 2020

Dan-Klein-300x225.jpg Economist and author Daniel Klein of George Mason University talks about the ethics of working and the potential for our working lives to make the world a better place. This is a wide-ranging conversation that includes discussion of Adam Smith, what jobs we should work on, what charities we should donate to, how we can make ourselves more virtuous, the movies Se7en and Sabrina, and ultimately what Adam Smith calls "the becoming use of our own."

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Explore audio highlights, further reading that will help you delve deeper into this week’s episode, and vigorous conversations in the form of our comments section below.

READER COMMENTS

Daniel Klein
Jan 27 2020 at 8:42am

Thank you EconTalk and Russ!

Listening, I notice I misspoke the first time: It’s Bogey, not Holden, who plays Linus Larrabee.

[By way of further clarity, I think Daniel Klein means Humphrey Bogart when he says “It’s Bogey.” –Econlib Ed.]

John P.
Jan 28 2020 at 12:18pm

Discussions of business ethics often have a surreal aspect (to me) because they tend to ignore the principal-agent aspect of almost all work in modern societies.  This is usually a problem, in that commentators will analyze case studies and purport to provide moral guidelines as if everyone were self-employed–i.e., as if everyone’s work-related duties ran only to third-party customers and bystanders–while ignoring the much more salient duties that workers/businesspeople typically owe to their principals (to their supervisor(s), to their supervisor(s)’ supervisors, and on up the chain to the firm itself and the firm’s owners).  These sets of duties overlap and often conflict; doing good on the principal-agent dimension need not entail doing good on the provider-customer dimension.  It seems to me that one of the great underexamined aspects of business ethics is how and when one decides that duties to outsiders mean that one must breach one’s duties to the principal(s) (e.g., quitting a commitment).

With respect to Daniel Klein’s argument (and I admit I have not read the paper), I think the addition of the principal-agent aspect strengthens his case.  Someone’s “best” use of self may involve both being a producer of good as regards society (making good widgets)  and a being a good agent to one’s principal(s) (being loyal, energetic, prudent in making use of the principal(s)’ capital and in dealing with third parties on the principal(s)’ behalf).  Theoretically, both potential uses of the self should enter into an analysis of the good career for a given individual.

Daniel Klein
Jan 28 2020 at 4:24pm

Thanks for your nice comment. I just wanted to point to a Smithian piece I did for AEI about sympathetic deftness in the workplace — more about coworkers than employee-employer, but nonetheless perhaps of interest. It’s here.

John P.
Jan 28 2020 at 7:10pm

That’s right up my alley.  Thank you!

Floccina
Jan 28 2020 at 12:25pm

I found this a great podcast. It makes a great contribution to the recent discussion of billionaires, the one percent, wage slavery, income inequality etc.

I’ve made peace with Government charity, but I like it to be called that, charity, rather than saying you have a right to say government provided healthcare. The latter seems too close to the idea that high earners took from you what you deserved. Then there is the idea of wage slavery which seems completely wrong, one could just as easily say your employer is complementing you because he thinks your productivity is worth his paying for.

Cody McCormack
Jan 28 2020 at 12:49pm

Hey Russ,

I’ve been listening for several years, but felt I ought to reach out for the first time after hearing this episode, in regards to the conversation around the 1 hour mark. Don’t you think it’s mistaken to use salary as a measure of merit? Not only is the term “merit” meaningful to different people in different ways, but that meaning could never be ascertained until specified in advance what’s being measured. The worlds greatest engineer cannot solve for a problem until he knows what is the variable being sought after.  All we know is that salary relates to ones capacity to serve others in the marketplace. While it’s possibly true you are no-more virtuous now than you were when making $19,000, what MUST be true is that you are better equipped to serve more peoples subjective values. One can’t rely on a single variable (salary) to measure every and all characteristics of life. One must use the right tool for the job, by acknowledging salaries provide information only of other peoples evaluations of what you bring to market. NBA players may not be paragons of virtue, but they are surely bringing to market something which others quite enjoy. Merit itself may be only an idea in the heads of those who think they understand it, while its actual qualities remain inarticulate and unknowable with any amount of economic data at hand.

Dr. Duru
Feb 9 2020 at 5:43pm

The reference to the movie Sabrina made me think of Warren Buffett. Surely he is a modern example of a business person who does business with money as a by-product. He collects more and more wealth and practically insists on doing little to nothing with it except to promise its disbursement outside of his family upon his passing. Meanwhile, a lot of other people are enjoying the benefits of his success.

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DELVE DEEPER

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AUDIO HIGHLIGHTS
TimePodcast Episode Highlights
0:33

Intro. [Recording date: December 3, 2019.]

Russ Roberts: Today is December 3rd, 2019, and before introducing today's guest, I want to remind listeners to go to EconTalk.org, econtalk-dot-O-R-G, where you'll find a link to the survey where you can tell me your favorite episodes of last year. The survey closes on February 2nd, and I'll be announcing results toward the end of February.

00:54

Russ Roberts: And now for today's guest. My guest is economist and author, Dan Klein of George Mason University. This is Dan's 10th appearance on EconTalk. And, to my surprise and disappointment his first, since December, 2011. Eight years ago. Included in those nine previous experiences is a six-part conversation we had about Adam Smith's masterpiece, The Theory of Moral Sentiments, which taught me a great deal about that book, and about Adam Smith, and eventually inspired me to write my book, How Adam Smith Can Change Your Life. Dan, it's been a long time--too long. Welcome back to EconTalk.

Daniel Klein: Thanks very much.

Russ Roberts: Our topic for today is a recent essay you've written for Economic Affairs. The title is, "Is It Just to Pursue Honest Income?" Which will inevitably lead us back to Adam Smith, but I'm sure to other places as well.

At the heart of your essay is the fundamental question: Does our work that which we do in exchange for money, does that make the world a better place? Is that a good starting place, Dan, for our conversation?

Daniel Klein: Sure. Is it a way to advance the good of the whole? universal benevolence, social wellbeing? Those are all the moral responsibility that we all have, believe it or not. That's--Adam Smith's call--is that we are always under this obligation to advance the good of the whole.

It sounds very oppressive. But, of course, we have to think about what constitutes the good of the whole, and what part our own wellbeing plays or occupies in that good of the whole, which then could make it less oppressive because it can then justify our own wellbeing as part of the whole.

And so, yeah: The idea that doing work and getting honest income advances the good of the whole is I think one of Adam Smith's important, very important teachings.

I would go so far as to say that his two major moral authorizations are that the pursuit of honest income is morally, presumptively, just in this broader sense of the term justice. So, a kind of moral authorization of the pursuit of honest income. And then, the moral authorization of a presumption of liberty in policy and politics.

And with those two presumptions that came forward, especially more completely than in the Wealth of Nations and into the last part of his life thereafter, what do we get? Bang: the Great Enrichment.

Russ Roberts: Yeah. I'm a skeptic on that, but we'll stick to the--skeptic on the idea that those ideas, that that moral authorization that you're talking about, of those two kinds, that they created that big bang of prosperity--an idea I associate with Deirdre McCloskey. And she defends it ably and thoughtfully.

But, let's put that to the side for now. And let's start with just this question of honest income. Maybe you should just define what you mean by honest income or what Smith meant by it.

Daniel Klein: Yes, indeed. The major feature of honest income is that you make money within the bounds of commutative justice, which is the more grammar-like, not messing with other people's person, property, and promises due; not messing with their stuff. That's commutative justice. And as long as you're not messing with other people's stuff, that's got a presumptive moral legitimacy. So, that would be the major feature of the 'honest' part of honest income.

I would extend it beyond that. I would say that it includes also not misleading people, not jerking people around. And I feel I have to add that because I don't feel that every case of misleading people or jerking people around constitutes a violation of commutative justice. Like, you can misleadingly advertise things and jerk people around in other ways, which aren't strictly speaking a violation of commutative justice. But I would say don't make honest income or don't make honesty.

And I would also add that despite being a government employee myself--

Russ Roberts: Working for George Mason University.

Daniel Klein: Working for George Mason. I would cleave away for present purposes income you get, income augmentation involving the government, whether you're like me selling your services in employment to the government or selling, you know, missile defense systems, or I don't know, sweetheart grafty contracts, or whatever they may be. They may be perfectly great and wonderful, but it doesn't carry the same presumption in my view. And so, when I speak of honest income, I'd like to put that aside as well.

So, basically, private enterprise, not jerking people around, certainly not messing with their stuff.

Russ Roberts: No fraud, no deliberate misrepresentation of the quality of a product, and so on.

Daniel Klein: Yes.

6:11

Russ Roberts: So, that's--commutative justice is--I always think of it as: Don't hurt other people. It includes not stealing their stuff, not hurting their person. I think you included that in the definition.

Daniel Klein: Yes.

Russ Roberts: And then Smith has another type of justice, distributive justice. So, talk about what that is.

Daniel Klein: That's the making of the becoming use of what is your own. You see, that concerns using your own stuff in a becoming way. As opposed to commutative justice, which is about not messing with other people's stuff. So, there's a very major conceptual difference here.

And this 'becoming use' is obviously aesthetic. Its rules are loose, vague, and indeterminate like aesthetics, as opposed to the commutative justice rules, which are precise and accurate like grammar.

And so, yes, distributive justice is distributing your own stuff, making a use of your own stuff in a way that's becoming. And this becoming, this corresponds to this idea we started with, of serving the good of the whole; serving universal benevolence is another way to put that.

7:34

Russ Roberts: Yeah. Well, let's go into that for a bit because--interesting--economics often pretends not to have much to say about that. And then it turns around--'it'--economists turn around and pretend they have a lot to say about the goodness of the whole.

There are many different strands in economics along these lines. I reject, most of them. I think maybe almost all of them. You might also. So, let me talk about the two strands that I reject that you might also, and then try to distinguish what your vision of the whole is, the goodness of the whole is.

So, one way economists try to deal with the fact that any particular policy helps some people and hurts others, they use the idea of efficiency. So, one measure of "helping the whole" that economists often invoke sometimes just implicitly is that, 'Well the pie's bigger,' and, 'It's bigger means that the people who are harmed could be compensated for their losses. So, this is a good policy because it made the pie bigger.'

I find that bizarre. It's a rule--it's a utilitarian rule, effectively, that I think many human beings in everyday life would reject, certainly in its precise application. But I think even in policy circles, it should be rejected often. It doesn't mean you should ignore things that make the pie bigger. I think often those are the right things to do. But justifying on the basis that winners could compensate losers strikes me as--I guess fundamentally immoral, actually.

The second way that economists have tried to cope with this is through the idea of a social welfare function. This idea that there is this way to aggregate the wellbeing of people in a more subtle or overarching way than just adding up the monetary gains and losses, or even the mone-tized gains and losses that might be psychic. And I find that bizarre and strange. But it is mainstream practice in what would be called public economics or Welfare Economics.

I see your vision as somewhat related to that, but I suspect it's not the same thing. So, why don't you talk about whether you agree with me about those two ways that economists aggregate things, and then what you think is the right way to think about the good of the whole?

Daniel Klein: Yeah. The way I think about it is that it's not well-specified at all. Just like we don't have well specified a notion of a good movie; and yet we talk all the time about what was a good movie, and what is a good movie, and what makes a movie good. So, literature that specifies some, you know, algorithmic description of a social welfare function is very different than this whole Smithian thing. I don't think it's therefore necessarily useless. I think it kind of depends on the use it is put to. And it could be a useful, you know, example, almost a numerical example, that illustrates or sheds light on some point.

As for the reference to something like a bigger pie, let's say GDP [Gross Domestic Product]. Yeah, I think that that--the problems and limitations of focusing on that are a lot like our topic today about honest income, where it's not a true and reliable guide. It does have confounds, exceptions, problems. But then again, I think that, you know, often, at least there's a presumptive value to growing GDP. Just like Tyler Cowen likes to teach, like in his book, Stubborn Attachments.

So, I don't want to be against growing the pie bigger or even--see, it also comes to a question of focal points. Like, you say, 'Growing the pie.' Well, what do we mean by 'growing the pie?' How do we know if we're growing the pie? What includes growing the pie?

And just official GDP measures are one thing that's focal. And, you know, we have to structure our discussion around certain reference, right? That the things we refer to and at least can track, and measure, and discuss, and what happened this? Why did it go up? Why did it go down?

And you're right that not everything that increases GDP is to the good. But it might usually be the case. And if there's a set of categories or types of things that go the other way, we understand that, and we watch out for that.

12:19

Russ Roberts: Yeah. I mean I feel the same way. I just think often we forget about those confounds and the other--it sometimes goes the other way. And, we mismeasure.

And your movie example--I was actually going to use it because I learned it from you some past episode, I think, or in casual conversation--this idea that we don't actually construct an index that says, 'Plot on a scale of 1 to 10 that, 'Well, it was a 7.' And then, 'Acting was 6. The script was really good. I'm going to give that a 9.' And then, 'It was just the right length. It was a little under two hours.' And, 'I've always enjoyed a good comedy. So, I'm going to give that just a bonus point.' And then, 'I'm going to weight them'; 'I'm not going to weight them, I'm going to add it up. Because I like plot more than this.'

And then the question would be what about Dan? Dan might not agree with my scores. And, you might put different weights on it.

But what I learned from you, and you tell me if this is the way you think of it, is that: That's not the way human beings actually think about "good movies" Or, "good public policy." They might want to have an index, or an algorithm, a matrix, to turn it into a scaler--a number, like a 7.3. 'I gave it a 7.3,' and I'll do that sometimes after a movie. I just saw Knives Out. I gave it a 6-and-a-half or 7. It was very enjoyable. Not a great movie, but you might enjoy it.

But I don't think about how I got there. It's just a crude thing, and it's just a shorthand way of saying I liked it a little bit. Not a huge amount, but some.

And I think that's the way--when you've defended it in the past, my first thought--the first time I heard it was, 'Well, that's not very rigorous.' And your answer, I think: What is your answer?

Daniel Klein: No, it doesn't pretend to be rigorous--

Russ Roberts: Yeah; I love it--

Daniel Klein: We have to, like, face up to that and get used to it, not pretend otherwise[?]. And you're right: we don't go around putting numbers like that even way after the movie, and we sit down and discuss the movie. Although, maybe if we go to IMDb [Internet Movie Database], we actually do come up with a number.

But, I would add that we couldn't explain how we came to the number. Like, if we actually fill in, IMDb for a movie we see--we put it in an eight or whatever; and you might put in an eight, and I might put in an eight, and we still might have quite different ideas of what a good movie is, and why this scored an eight.

So, again, yeah, that's the loose, vague, and indeterminate, the good of the whole. And a big part of this moral authorization of honest income is getting us to think about what is the good of the whole, and how things in our lives figure into that. And, can we justify it? Do we accommodate it? Do we allow ourselves these recreations, these pleasures, right? And so on. And as constitutive of the good of the whole.

And those become like moral choices. Not necessarily huge ones, but--and by the way, let me just say that the spending of honest income, that's kind of another side of the whole personal matter. And I don't really mean to address that so much. I don't address that in the paper. It's more about the making of the income that I focus on. But the spending of the income that you then make, of course, is an important question, too.

Let me just say that, listen: Making the income is also a distributive choice. It's also about distributing your abilities, your time, your skills, your attention, and everything else. So, just--everything you do can be viewed in the lenses of distributive justice.

Russ Roberts: And I love the phrase that Smith uses that you emphasize: 'the becoming use of one's own.' It's a very awkward phrase for, I think, a non-English speaker and even some English speakers. Because 'becoming' is a word that in Smith's day meant something else, other than it tends to mean now. It still has that meaning now, but it doesn't get used much--which is: attractive. Smith would call it lovely, I think. And that would mean praiseworthy, meritorious, benevolent.

And I think when we talk about the becoming use of one's own, I tend to think of whether I give to charity, how much I give to charity, which charities I give to; how I spend money on my children, how I share my resources with my children, the style with which I do it--not just the amount--the incentives I give for them to be independent, to grow, to mature versus to coddle, and then take away responsibility if I'm not careful.

But you're really pointing out, it's a richer idea, because part of one's own isn't just your charitable giving, say, or whether you buy things made in a way that someone might call fair or whatever; but also your gifts--your skills, your endowment of nature and nurture that you come into adulthood with. How should you use those? And Smith would call that a question, you're saying, of distributive justice--a particular kind, but an important kind, which is really going to be our focus today.

Daniel Klein: Yeah. And, earning more, like winning more, bringing home more bacon. Like, Smith is essentially making the case that that adds distributive justice to it. Like, there's a strong case for saying that's presumptively distributively just. And that is a becoming use--that it's becoming to bring home more bacon.

Russ Roberts: Yeah. In the Book of Genesis, you should toil for six days, and rest on the seventh. It's actually in Exodus that that gets talked about; but you're supposed to emulate the Divine and work for six days. But it's not just rest on the seventh. It's work on six days--work for six days. Meaning: Transform the world. There is certainly--an important part of our Western culture or civilization, whether it comes through religion or not, that that work--certainly in Judaism, but also obviously in Protestantism--work is admirable.

Daniel Klein: Yeah. So, I guess it's about working--six out of seven days, you work not because you need to work six out of seven days to survive, but that's your duty is to work six out of seven days.

18:59

Russ Roberts: And of course, many of us feel that way. We feel that's part of what drives us, is our work--if you are lucky. Not everybody feels that way, of course. But I'm blessed. I feel[?] to do what I love, and enjoy--I get up in the morning happy and excited to do my job. And that's a somewhat modern phenomenon, but not so much. Maybe.

Daniel Klein: No. But also, part of what I think Smith wants to teach us is: Look, let's suppose you have some other job that, maybe is not--you know, what you would say, about your job--but you could still find a lot of satisfaction, and pride, and virtue in it, and the honest income you earn--on the understanding that it's helping the good of the whole. And you could make the most of that, both by perhaps raising your income, but also just by enriching your life there, and all other sorts of ways that also count to the good of the whole.

So, it's also about attitudes towards work. I mean, my paper is more about the ethics of economic activity as a person, as a regular person, and about economic enterprise. The paper is not so much actually about policy and advocating free enterprise.

It's more like teaching Smith's what gets called commercial humanism by Pocock: Smith's, a kind of virtue in the liberal plan that Smith proposed, that Smith advanced. So, kind of, not only as like a policy prescription and presumption, which it certainly is--and that I would say is maybe properly what it primarily is. But there is a concern with virtue behind all this. And it's not that the Wealth of Nations offers a book of virtues, and a guide to virtue, but it does offer some guidance on how to understand your own merit, and praiseworthiness, and virtue that you were saying in this kind of system.

Russ Roberts: Yeah, I see your paper as a cultural landmark, an attempt to put down a flag, a banner of that this is the way we ought to think about the working side of our lives. That there's a virtue to work itself. Right? That matters. That how we see, how we spend that 6 to 12 hours a day, depending on what job you have, should we be proud of it? Should we be ashamed of it? Should we expand it? Should we take the job that pays the most money? Should we be ashamed of a job that pays a lot?

Daniel Klein: Right. Right. Right. Yeah, those issues are an important part of the liberal civilization that Smith advanced and helped to create.

And so, this ethical side, virtue side of the whole concern, and if you like, movement--I don't know what the right word is--effort to bolster and maintain liberal civilization, has to deal with the ethical conditions that it provides for, and some guidance to people in general about how to understand the ethics of their participation in the whole system.

Russ Roberts: And in some sense you're pushing back against the people who push back against that commercial humanism.

Daniel Klein: Yeah, of course.

Russ Roberts: I'm thinking of Wordsworth's, 'Getting and spending, we lay waste our powers.'

You're saying that's not so. You're saying that getting and spending should be done virtuously: They can be done in ways that are not virtuous, but there's no reason they can't be done virtuously.

Daniel Klein: Yes. And furthermore, that there should be a presumption to honest income serving the good of the whole.

So, it's not only that it's innocent, that it even ought to have a presumption of praiseworthiness. It's not an ironclad: it's just like the presumption of innocence. It's not that it's never overturned. I mean, some people are guilty. But the presumption puts the burden of proof on the prosecution.

So, I think Adam Smith really is helping to build a presumption in favor of honest income.

That's not to say that people who don't make more honest income have something wrong with them or it's a failure or something like that. It's just that it's completely wrong-headed to kind of presume wrongdoing or evil in a person being wealthier.

And on the contrary, until you look further into it, and again, all of this revolves around knowledge problems, you actually ought to assume something more like the reverse: that it reflects some good that they've done.

24:16

Russ Roberts: Explain what you mean by 'revolves around knowledge problems.'

Daniel Klein: Well, that's the thing. I mean, whereas commutative justice is quite precise and accurate, and we have a pretty clear sense and can communicate pretty clearly when we've had our stuff messed with, or when we think that Jim has messed with someone else's stuff. Like, 'Here, look at the smashed window.' 'Hey, look, my porch furniture is now missing.' Or what have you.

Russ Roberts: Jim is a standard-in for an average person. Not a particular Jim you have in mind--

Daniel Klein: That's correct.

Russ Roberts: James.

Daniel Klein: Just our fellow [archetypal?] Jim.

Whether Jim is making a becoming use of his own is, like, a so much more delicate question. Because, first of all, we don't have a great sense of even what his own is here, because it has to do with his own capabilities, his own interests, his own inclinations, his own potentialities. And any issue, any kind of ethical issue is always: Compared to what? And so it's always like, 'Okay, what is it'--like, suppose Jim, goes out, and makes more honest income somehow, or spends extra effort at work, longer hours at the job. So, what exactly is the alternative for Jim?

And so, how do we assess which one is better if we don't even know what the other one is? Because again, it's very private and personal; and fleeting, often. So--and Jim himself may not be able to articulate exactly what his Option B was.

So, there's a very serious knowledge problems in second-guessing people's ethical choices.

So, that's one way that we have knowledge problems, as people who might want to, 'How dare you?'

Of course, knowledge problems are also super-important in trying to be benevolent. In trying to serve the good of the whole directly, in some more conscious or intended way. And there, you know, Adam Smith taught the very important point that when we get much beyond the local, our knowledge declines so much that our benevolence is not as effective.

So, it's not effective to try to help people you don't know anything about.

And this leads to kind of some paradoxes. You might say, 'Okay, so fine. Go learn about those charities, and get to know those people.' And to really get a good relational knowledge, you would actually want to develop a relationship, some relationships with people. And that's all to the good. And I'd advocate that.

But the paradox here is that in a way, now that you've sort of befriended people in trying to help them, you're in a way back to helping your friends--which is again in a sense now your local community, your local interests in a way.

So, there's all these--there's huge knowledge problems in ways to serve the good of the whole. Market prices and the price system are signals to serving that.

And the thing is: everything else is also signals. And if you want to say there's all sorts of market failures, and problems and fallibilities in the market signals: Yeah, there's all sorts of problems, and failures, and fallibilities in the non-market signals. You listen to your friend, you listen to your echo chamber, group think, misrepresentation, good PR [Pubic Relations], marketing, pulling on people's heartstrings, whatever, whatever, whatever. Friends, partiality.

So, we are stuck with having to deal with imperfect signals. And the imperfect signals of the market that Hayek taught us about as a communication system have to be compared with imperfect signals that we otherwise would have to rely on. So, either way we have knowledge problems.

28:27

Russ Roberts: So, I want to say a few things about that or try to. First, I want to make it clear that what you're suggesting--and you're saying that prices are a signal--that wages, things that pay more than other things, have a certain presumption of being more valuable. Meaning, people are willing to pay more for them.

And I think that's problematic, but it's not a bad place to start, because the alternative, as you point out, is it's very challenging. We're going to talk more about that in a minute.

The second thing is I want to broaden your point about the knowledge problem. So, and bringing something--the point you make in the paper--that it's not just that I know more about the people near me: I care more about them. I have a better way to assess whether I'm actually helping them or not because I care.

And I can't care a lot about people who are far away. And not just being physically far away: I mean emotionally far away or that I don't have good knowledge about. So, it's not just that there's a knowledge problem. There's a skin-in-the game, an incentives problem that--I probably don't spend my money so carefully on strangers as I spend it on my friends, as I spend it on myself.

And I think that's important. And it reminds me of an email I've gotten maybe twice as host, where people say, 'I really believe in liberty and I'd like to make the world a better place. What should I do?' And, of course I can't answer that question. I've talked about this on the air maybe once before. Should that person become a fabulous entrepreneur, raise a lot of money, and create a think tank that advocates for what I might call good policy? Should that person get a Ph.D. in economics, and become an advocate? Should they raise a family and be kind to other people? I mean, there's--be an exemplar? So, all three are good, but--

Daniel Klein: You don't know what--

Russ Roberts: I don't know--

Daniel Klein: The becoming use of his own is.

Russ Roberts: No. And part of being a grownup, I think of being a responsible, mature, ethical adult is figuring out that.

And of course, we grope up toward it. It's not a--I recently read a wonderful essay by Paul Graham that he gave. It's a mock high school graduation speech. I think he said he never gave it; when they found out more about him, they revoked his invitation. But it's a wonderful speech. And I shared it with some of my children--not the younger ones; and I might share it with all of them, now that I think about it. Because it says things like, 'Probably not a good idea to have a plan, and a goal, because you don't know enough to have a goal.'

So, if we're thinking about--it reminds me when a reporter once asked me, 'I mean, you're against giving money to help people in Africa have better schools?' I said, 'We can't even figure out how to spend money to have better schools here in the United States. Why would I presume that I could help them? In fact, I'd hurt them.' That's the worst. That's the real problem.

So, the idea that you have a knowledge problem about yourself is it's not just, 'How do I help people, is it myself or strangers or, you know, close friends? How do I help myself? How do I figure out how to proceed with my life?'

And Paul Graham's point--he's been on EconTalk; we didn't talk about this, I don't think--his point is that you don't know enough to know what you should try to be. And some of the things you'd like to be don't exist now, when you'll be capable in 10 years.

I just think that's a really--I'll let you react to that if you want. And then I want to give you another example.

Daniel Klein: No, that all makes perfect sense. That just shows how extreme the knowledge problem is. Like, Jim wouldn't even know for sure himself what his Option B is, and again, how he would understand his being becoming. And you feel your way through life. So, we shouldn't be quick to judge people.

But again, pursuing honest income has some things to be said for it. And, you know, yeah.

32:28

Russ Roberts: So, here's an example I used to talk about when I used to teach Micro or, as I called it, Price Theory. So, at the end of his life, Friedrich Gauss, one of the--I think inarguably one of the five greatest mathematicians of all time, maybe one of the great minds of all time--like, the normal distribution is the Gaussian distribution. That's just one little thing he figured out. And I think when he died, he left a notebook of 16 pages that kept people busy for a century or two. He was just a really deep, deep thinker.

And at the end of his life, I am told or was told by a philosophy professor, I think, he really got into surveying: figuring out how far away things were from other things, designing maps. And you could look at that and say, 'Well, that's a terrible waste. Why should he be a surveyor?'

And, just to take it to an extreme, he may have been a really important surveyor and maybe he actually--I suspect it wasn't a trivial thing. Let's say he was a gardener. I've heard people speak resentfully that Newton was into the music of the spheres--you know what noise, what harmonies, what gorgeous music did the spheres make in the heavens when they rotated? It's the way he saw the universe in some dimension. It's like, 'Well, who are you to tell Newton what he should spend his time on?' But, there's a certain natural reaction to that, that that was not a becoming use of one's own. He could have done more for the whole, if he had done something else.

Daniel Klein: Adam Smith, some people might say, unfortunately took that job at the customs commission in 1778, two years after the great second book came out. He took a job, which really did occupy a lot of his time for the remaining years of his life. It may be--

Russ Roberts: Like, what the heck?

Daniel Klein: Yeah. It may have been one thing that prevented him from completing the jurisprudence work that he had announced in 1759. So, was that an unbecoming use of Adam Smith's own? I don't know. Maybe.

Russ Roberts: Well, I'm going to defend him. Well, not so much Smith, but Gauss, and others I'd include in this--Michael Jordan playing baseball for a couple of years, and depriving the world of his greatness on the basketball court. The point you make in your essay is that: Well, the joy that they got from gardening, or baseball, or surveying, or the music of the spheres--that counts. That's part of the whole. You can't--

Daniel Klein: And furthermore that: we have to manage--when we talk about ourselves as the one who's becoming and the one who is virtuous, it's kind of like Russ-the-soul or like for me Dan-the-soul, that is managing Dan-the-creature, Dan the presentist self; we're very, very presentist. And that's just like in a sense a whole bunch of constraints as well as possibilities and potentialities on the person. And, you have to have your delights. You want to keep the program--if you don't feed the presentist self enough, you kind of lose spirit. You lose will in the whole program. And you might also lose insight, and the kind of joy, and pride, and pleasure that makes you see better ways to serve the whole --to update your goal or your plan, just like you were saying. And so, maybe, gardening was a way and pondering the music of the heavens was ways of being tacitly creative, and taking this recreation or Sabbath, and keeping the whole program as good as it could be.

Russ Roberts: Yeah, I think that's a tempting way to look at it. When you say presentist, you mean my material, immediate self? What do you mean by that?

Daniel Klein: Yeah, yeah, very like immediate--even if it's an immediate reflection of an anticipated future to be like my immediate sentiment and condition in a way. I don't think of it as strictly material. Like, if someone insults me or something that can also be part of a passionate, immediate, presentist self problem--like, emotions, and resentments and insults, and what have you, eagerness, lust, whatever. But we're very presentist. You know what movie was very good on this was the movie Se7en. I don't know if you remember that with Brad Pitt and--

Russ Roberts: I did not see that.

Daniel Klein: I think Kevin Spacey's the bad guy. It's about the seven sins. And one of them is vengeance I think, right? So, I think it was about the sin of this presentist urge to vengeance.

And it fits this whole theme with my essay because we have to learn to manage what we deal with in the present, and to make those passions, and those interests better rather than worse.

So, I quote La Rochefoucauld who says, 'Virtues are swallowed up by self-interest as rivers are lost in the sea.' And what he's getting at there is that no matter how virtuous the inspiration or benevolent the inspiration might be for something, the program and project needs to be turned into things that are more presentist interest--like a structure of interests and even incentives for oneself--to execute, to carry out, to make focal this beneficial project.

And so, what might be virtue-inspired kind of gets lost in self-interest in a way. Oh, like Russ: 'Oh well he's like really into his fame of being the EconTalk rock star,' right? And, 'Getting a lot of notoriety, and getting that darned recording done, and getting done and being able to go home at the end before rush hour, getting rid of Klein.'

I mean, there's a self-interest side that all of this gets turned into as rivers are lost in the sea.

And so, in a way, it's like virtue is more about what it is that we turn into our interests than it's about seeing past our self-interests towards like the social good, like some divide between our self-interest and the social good. No, it's--like, virtue is more about like what it is we make our self-interest.

And similarly with the presentist management of ourself. So, we have to get the right passion. We have to develop the right presentist passions.

Russ Roberts: Yeah. I can't help but note the nature of the word 'becoming,' which is by definition dynamic. It evokes potentiality to be realized--

Daniel Klein: Exactly.

Russ Roberts: the process by which one becomes virtuous.

40:26

Russ Roberts: I want to come back to--you alluded to, and I got the allusion because it's in your essay--but for listeners who haven't read the essay, of course, we'll link to it--recreation, of which gardening would be an example. You use the example going to a sporting event, which on a certain level one could argue as an enormous waste of one's own--one's own time, one's own focus. It's a zero-sum game, a sporting event. That's the crude way to characterize it. It's also a ballet, and a drama to be written that hasn't been scripted, and therefore is delightful to the eye and to the ear. But, this idea that, obviously you shouldn't go to a sporting event, one might argue, because it's a waste of time--one shouldn't go. And I don't just mean a wrestling match, but even a great basketball game or other sport that's beautiful. And you could argue that dance, of course, is a waste of time. You could argue that listening to music is a waste of time. You could argue that, as some philosophers have, that throwing a birthday party for your young child is a waste of your money. It's an unethical use of your own because there are people dying who you could save. There are bed nets to be bought to fight malaria. There's deworming to be paid for. And, many people argue on a utilitarian grounds that is not, I would say, inconsistent with the good-of-the-whole argument that you're making, that all those things, a thoughtful, virtuous person should not do.

And you are suggesting--I think there's a lot to say about that, obviously. But, one of the things you are suggesting is that by indulging--or what appears to be an indulgence--you are actually enhancing the program. But that's of course a very utilitarian argument.

I'd also argue that if all you do is serve others, you're a different kind of slave. Would you work--this gets back to your point about turning your virtues into self-interest. If you gave all, almost all your money away on the grounds that there are people who need it more than you do, could you work as hard as you do? Could you be as productive? Maybe you should be, but could you be?

Daniel Klein: Yeah. Right: Did you keep up the program?

Russ Roberts: Or is that just an excuse for my own indulgences?

Daniel Klein: Well, that's the thing. It's not like I'm excusing all of the football games that people go and pay for to go see. It's not about excusing everything. It's just that it's up for--each person has to wrestle with this themselves, and they've got their own things.

And again, I'm not concerned in the essay actually with what you do with the income once it's come in. It's more about the pursuing of greater honest income. But no, those are all good questions.

If you take your honest income and you give it all to charity, like you suggested, that certainly could be becoming. I hope they are good choices you make in giving to charities. I just want to say that, you know, investing it in plastics, like our character from the movie that I reference, and earning let's say 15%, there's a lot to be said for that. There's a lot to be said for that perhaps being more beneficial even. Not always; I'm not making a categorical claim. But there's reasonable claim there.

44:19

Russ Roberts: So, let's set that up as a reference to the movie, Sabrina, which, I think I've actually referenced on this program at some point. It's kind of the only scene in a movie, an American movie I can think of, where the virtues of capitalism are captured in about 30 seconds. Which is quite an achievement. And just to set--I'll let you read the quote--but it's, William Holden is, say, a ne'er-do-well, playboy brother of, Humphrey Bogart. Humphrey Bogart runs the family business. His younger brother is a hedonist, I would describe him: he likes wine, women, and song; he doesn't work; he lives off the family money. It's a classic character in popular culture.

And Humphrey Bogart is the doer: responsible, and capitalist--very profit-motivated, tycoon, wealthy, striving, and so on. And they have a--there's very short interaction they have in the movie that is--you know, as an economist who cares about prosperity and markets, this is an exhilarating moment. I think it's not in the remake. I'm pretty sure they cut this--

Daniel Klein: I didn't see the remake.

Russ Roberts: I saw the remake. I'm pretty sure it's not in--

Daniel Klein: Harrison Ford.

Russ Roberts: Harrison Ford and Doug Greg, whatever. And I forget who the--Sabrina is Audrey Hepburn in the original. But tell us that scene.

Daniel Klein: Sure. So, Humphrey Bogart, like Russ is saying, is one of the brothers. He's the older brother who's the reliable brother to take and run the family business. He's very focused. So, he's very much this kind of guy pursuing honest income. And Linus is his brother--played by William Holden--the playboy type. And he says to his older brother, Humphrey Bogart, he says:

[Holden/playboy brother]: I don't get it. Why do you work so hard? Why are you so focused on this? You've got all the money in the world.

And then Humphrey Bogart replies:

[Bogart/Linus]: Well, what's money got to do with it? If making money were all there was to business, it'd hardly be worthwhile going to the office. Money is a byproduct.

And then William Holden replies,

[Holden/playboy brother]: Well, then what's the urge? You're going into plastics now. What will that prove?
[Bogart/Linus]: Prove? Nothing much. A new product has been found, something of use to the world. So, a new industry moves into an undeveloped area. Factories go up, machines are brought in, a harbor is dug, and you're in business. It's purely coincidental, of course, the people who never saw a dime before suddenly have a dollar, and barefooted kids wear shoes, and have their teeth fixed and their faces washed. What's wrong with that kind, with the kind of an urge that gives people libraries, hospitals, baseball diamonds, and movies on a Saturday night?

Russ Roberts: So that's Bogart's answer, which--there's a dead-band joke in there, right? Which is--what does he say?--'It's just a coincidence.' Is that what he said, how he phrases it? 'It's just a coincidence that people who never saw a dime now see a dollar'--

Daniel Klein: Yeah. Exactly. Sarcastic.

Russ Roberts: He doesn't mean 'it suggests a coincidence.' He means it's a natural byproduct and he enjoys, when he has the time to reflect on it, his becoming use of his own.

Daniel Klein: Exactly. So, I use him as like an example of a child of the commercial humanism. Like he actually feels virtuous--

Russ Roberts: Bogart? The elder brother?

Daniel Klein: Yes. Bogart as an example. Because he's doing good, and he's got an appreciation for the good he's doing. And I think he's more or less sincere when he says, 'If making money was all there was to business, it'd hardly be worthwhile going to the office.'

Now when he says money is a byproduct--that I don't completely agree with, because it's an essential part of the mechanics, the mechanisms, the signals. And his money, and gains, in a way are a way of his keeping score--not in keeping up with the Joneses or anything like that. But--

Russ Roberts: Or his ego. It's--

Daniel Klein: Yeah, or anything like that. But actually a way of keeping score in a way of like how much he's serving universal benevolence.

Not that it's like a direct measure of like some unit of wellbeing, but just kind of like, the bigger it is, the more he has helped the good of the whole.

Yeah, I don't know where you want to go, but I'm interested in talking about the parable--

Russ Roberts: Oh, I'm going to get to that. Don't worry, Dan. We're going to get to the parable.

49:15

Russ Roberts: I want to first talk about the invisible hand. Which--as you know more than I, I think probably anybody in the world--is used once in The Theory of Moral Sentiments, and once in the Wealth of Nations, the phrase.

And, when it is used in The Theory of Moral Sentiments--correct me if I'm wrong, but I'm pretty sure--he [Adam Smith] is--actually I'm going to back it up. I'm going to talk about the first parable we're going to talk about. Then we'll get to the second one, which is the invisible one.

So, the first parable Smith talks about is the poor man's son--and now it could be the poor woman's daughter--but that the person who is raised in poverty and looks across the river and sees the great mansion, and aspires to material wellbeing, or the wealthy person who has a massive estate with Evermore Gardens and Evermore machinery at his disposal.

Smith says, 'If you look to that ambition, if you look to that desire to have more wealth, and that poor man's son,' says Smith, 'who works hard over his lifetime and eventually attains material success,' Smith says, 'You know: It's not going to make them much happier.' Maybe less happy, actually, because he's going to be under the pressure of business, and the operous[?] machines or machinery that he's become entangled with in this quest for wealth.

And this is really--the way I always say it is: it's a fool's game, that ambition.

And then--and that's a lovely thought, that money for its own sake is not going to do it. But then he has this strange passage, which you quote, which I'm a little troubled by; and we're going to use this to lead into the second parable, which we'll get to.

But this is a strange passage where he says, 'Yeah; so, ambition is stupid. It doesn't really pay off. It leads to often a kind of misery and disappointment. You're going to find out you're no happier with that really great pocketwatch that tells great time, or your really good gadget that's even cooler and hipper than the one you have now. But it's a good thing that that's there because this--we're guided as if by an invisible hand to create employment for people,' and you could say, 'We're going to create the dollar for that poor person who used to only have a dime; the shoes that the poor person, child, can fix.'

So, which is it? I mean, material prosperity is glorious in certain dimensions. It lets us live long and enjoy life. And yet Smith says, 'Eh, it's not so great. You're a fool to think that you should be striving after it.'

And then he basically says, 'Yeah, but without that urge, civilization wouldn't exist.'

Which, by the way is an exact statement, a parallel statement, to a statement in the Talmud that says, 'This evil inclination,' as the rabbis call it, 'this inclination for greed, and acquisition, and that we're not satiated.' He says, 'Boy[?], without that[?],' the rabbis say, 'we wouldn't have children, we wouldn't create cities. We could living in caves and loincloths.' So, what's Smith saying here? Where does he come down on this?

Daniel Klein: Right. That's the big question. And I think the passage provokes just that thought.

And it's very paradoxical, because Smith does exoterically[?] present it as the guy, the son of the poor man who through ambition rises to wealth, and then looks back in his old age and feels like it was sort of not worth it--that this was beneficial. Just as you say: it also creates new goods, and new markets, and innovations. The great enrichment is, I think what Smith is getting at. But--go ahead--

Russ Roberts: Sorry. I didn't mean to interrupt you. I'm going to quote--I should've quoted. He says, it's this deception of that money will make us happy. This deception, which,

first prompted them to cultivate the ground, to build houses, to found cities and commonwealths, and to invent and improve all the sciences and arts, which ennoble and embellish human life; which have entirely changed the whole face of the globe, have turned the rude forests of nature into agreeable and fertile plains, and made the trackless and barren ocean a new fund of subsistence, and the great high road of communication to the different nations of the earth. [Adam Smith, The Theory of Moral Sentiments, Part IV, Chapter I, paragraph 10]

So, the earth by these labors of mankind has been obliged to redouble her natural fertility to maintain a greater multitude of it happening. So, it's not only the civilization got created, but more people could enjoy it--and--wait a minute: I thought that was all just a fool's game.

Daniel Klein: So, yeah. And this way to put this paradox is: Okay, so you've got this'--let's call him Jim again--the poor man's son, who goes through this, enters this from ambition, looking to become a mark of distinction, looking to be among the filthy rich, and succeeds; and then is unhappy at the end of his life. But Smith points out that in the meanwhile he's done all the things or helped to bring about all the things you just read.

Did Jim pursue his career? Was that distributively just?

And I think Smith would have to say no, because purpose and intention matter a lot to justice and virtue. It's not enough that benefits flowed from what Jim did. It's--virtue requires more than that. It also requires stuff on the intention side. And so, that's why I think Smith's parable suggests further thought, and another parable, which I'd like to talk about.

Russ Roberts: Go ahead. Yeah. Lay it out.

Daniel Klein: And so, this is based--

Russ Roberts: I disagree with you on that, but maybe I'll get to it. Go ahead.

Daniel Klein: Okay, let me [crosstalk 00:55:07].

Russ Roberts: Go, go, go. Go ahead.

Daniel Klein: So, Smith's parable, which we see on the page, you could call the visible parable. And I believe that it suggests an invisible parable.

In the invisible parable, which I present in my paper. So, I make it visible in my paper. It's about a young person now, yes, admiring the rich but also certain others may be this person has been--let's call him Jim again, a new Jim--has been listening to EconTalk. And he goes to the library and he goes to the Liberty Fund website, and he learns some things. He reads Smith, he reads Russ's book on How Adam Smith Can Change Your Life, and so on. Anyway, he learns that garnering 15% in plastics means that barefooted kids now wear shoes. He learns all this. And he can now go into investing and pursuing honest income, however it is--labor, whatever--with this kind of appreciation and something on the intention side and spirit side, which now makes it distributively just, which makes it more becoming.

Now, that's to me the invisible parable that Smith's cult--so, Smith is actually part of this parable because he writes the books that this Jim now reads. Smith teaches us that commercial humanism, as Pocock called it. And we've got now people like Linus Larrabee in the Sabrina movie who pursue commerce and honest profit in a more virtuous mode--and maybe even more effectively--by virtue of all this.

So, that to me is the invisible parable, and it does still pose challenges and questions because is this really sustainable? How do we really know that someone has this more virtuous spirit in doing private enterprise?

Again, it's a knowledge problem, so I'm not saying it like resolves things neatly at all. We always have to look into what's in our soul--who knows what lurks like the Shadow knows; only the Shadow knows what lurks in the hearts of men. But that's what you have to do with your own heart, but it's good to appreciate that. And people do come to learn that their hard work, their entrepreneurship, their inventiveness, and so on does mean that barefooted kids now wear shoes. And they can pursue commerce and everything else with that in mind, and I think more virtuously.

58:12

Russ Roberts: So some would say, occasionally it crosses even my mind, that, 'This all sounds good, but isn't that just an excuse for exploiting people, for doing harmful things that earn people a lot of money, gain monopoly power, even rent seeking if you're not careful?' Once you enshrine in some Randian way--which I would say is the extreme version of this, Ayn Rand's vision--once you enshrine money as virtuous, which is what you're implying, you excuse all kinds of really rapacious and ugly things. And Smith wouldn't like that, Dan.

Daniel Klein: Yeah; I agree. I agree. But that's the way the world is: that things can be misused and abused. This line that I'm offering--this kind of invisible-hand line of thinking--can be used to justify, to defend different kinds of profitable practices that are unethical, that are not becoming.

And again, it's got to do with knowledge problems. It's not that anything makes money is therefor praiseworthy, is therefor distributively just. It's a presumption. And overcoming that presumption requires knowledge about how this particular case was unethical, was abusive or exploitative. And that's--so, it's hard.

But that's the way the world is. And we have to work with presumptions to structure just to how we go about in the world, how we treat people, what things are permitted, and attitudes, and encouragement, and everything else. And it's going to be this presumption or that presumption. And so, get used to it.

Russ Roberts: Before going on, I want to mention that there's a website, 80,000hours.org, that tries to help people find out ways that they can use their time to make the world a better place, usually in explicit ways as opposed to these implicit 15% of plastics. So, if you're interested in these questions, you might profit from going to that webpage.

1:00:35

Russ Roberts: The thing that bothers me about this--let me say first what I like about it and then what bothers me. So, I like the idea, and I want to believe that productive people make more money than unproductive people. There's a certain sense in which that's true.

Daniel Klein: And when you say productive, you mean advancing the good of the whole people?

Russ Roberts: Yeah. So, that phrase, I love that phrase because it's vague. And it's clever if you not specify it more precisely. One way to defend it, I guess it, would be to say, 'I know it when I see it. And I know it when it's not true.'

Of course, people differ a great deal on that, and often see--I'm thinking today, right this moment of payday lenders, people who charge high rates of interest to people. Is that a--it's very profitable, right? Of course, one reason it's profitable is there might be a high default rate. The other reason it's profitable is that maybe society looks down on it. And so, to get involved in it, you have to earn a reasonable amount of money to justify getting into that business. So, it gets complicated very quickly.

But I want to believe that wages signal something about virtue. And part of me wants to believe that as a counterpoint to the cultural disdain for wages and profit. Part of me wants to believe that because I make a good living, and I like to feel good about myself. And part of it is because I think it might be true that the--you know, Nozick talks about this in Anarchy, State, and Utopia, where, a great basketball player is entertaining more people, a great basketball player, than a school teacher, a mediocre school teacher, for sure. A great basketball player today entertains more people than a great basketball player of 1960 or 1970.

So, there's a justness to the fact that the wage of a basketball player today is higher than it used to be.

At the same time, that's a little troubling. Do I really want to use the scarcity of talent, which is part of the wage--not just the value or demand for the talent--it's also the scarcity of it. Is there really anything meritorious there? Probably not. There's hard work, but that's part of nature and nurture, also. That's a longer aside that let's not get into.

But my point is that I want to believe those things, and I'm constantly remembering the caveats, and the confounding parts that you point out in the paper--in passing, I would argue, not at the center. You say,

Sometimes the making of an additional honest dollar is unbecoming . Sometimes there is honest profit in serving folly--whether it be pernicious substances or pernicious art and discourse; sometimes real externalities appertain; sometimes the advantage can behad by the less worthy competitor; sometimes making less is becoming because nickel-and-diming [Russ reads 'chiseling'--probably a different draft--Econlib Ed.] is opportunistic, or because a dollar means less to a rich person than it does to a poor person, or because charging less means that more will enjoy a service with non-rivalrous benefits or very low marginal costs.

So, that's a very nice summary of the footnotes. Is it just a footnote? Does that change the presumption that honest income is virtuous?

Daniel Klein: Again, you know, there's a flavor to the comment you just made where you put it as that like the wage or the income reflects virtue. That's not exactly what I want to suggest. It's a little stronger than what I want to suggest.

Remember, the justness is not so much that things are somehow adjusted to a proper pattern or an ideal pattern, say of like compensations and rewards in line with some kind of pattern of contributions. The justness is more like Jim deciding justly his own action in choosing course A over course B.

And so, these issues about the basketball player today versus the basketball player in 1960--I think of it more as like Wilt Chamberlain, like, does he make a just decision in his own world given his own options to pursue a higher income?

And that's the kind of decision I want to suggest, that a presumption--it's not so much that I want to say, yeah. If I'm giving Wilt advice I'm going to tell him, You should pursue the higher income.' I mean, maybe that is what I would tell him if I knew nothing else. It's more that I want to really push back against the people who diss high income, diss the pursuit of honest income, diss the pursuit of acquisitiveness, if you like. And even like kind of regard wealth and the rich as somehow indicative of wrongdoing, like ill-gotten gains. I really want to push back against that. I really don't in any way want to send out any kind of message about if you're not earning much income, you're failing on the virtue barometer. That's really not the thrust of it at all. Does that help?

Russ Roberts: Well, I didn't mean it that way, but that's one way to sharpen what I was saying, I guess.

Let's take you and me. I went into economics because I was good at it, and I loved it. I didn't think anything more about it than that. I found it entertaining and intellectually stimulating. And when I got out of graduate school in 1980, I was earning a little under $19,000 a year, which I think at that time was a little below the median--and I'm not a hundred [percent sure--Econlib Ed.]--I haven't checked that lately. I think it was. Now, I make much more than the median; I've been lucky. The internet came along, which made things like, EconTalk possible, expanded my reach. Made it easier for a foundation like Liberty Fund to support EconTalk and the Hoover Institution to hire me to be part of that.

So, I've been blessed. And I don't think there's anything particularly virtuous necessarily about that I make a lot more than the median income. It does capture something about what I do. But I don't think it makes me better than my--I don't want to think it makes me better than the woman who is the head of the crew that cleans my house for $100 for four people in an hour. I make more than that. And--

Daniel Klein: Yeah, that's what I was getting at. And I I don't really mean it to be like a meter, a virtue. It's more about just: you're choosing something and one of your options means higher income. That there's something to be said for that in your choice to choose that option over your other option. It's not about your virtue versus the other person's virtue.

Russ Roberts: That's a great point.

But the other point would be then--so, let's say I could have been--when I was in graduate school, the thing that most horrified me, and I apologize to anyone I'm offending right now, would be to be the Chief Economist at a Ford Motor. Which was the job that a Ph.D. in economics could do. We disdained that, for no good reason. We could've given a reason, but for no good reason.

But part of the reason I think we disdained it interestingly is it paid really well. One of the reason that it paid really well was to get you to give up the relatively pleasant life of being an academic, you had to compensate a person to take that job.

I don't think there's anything virtuous about being the head of Ford Motor, even though it pays more than a starting professor when I came out of grad school.

And then I start to wonder, 'Well, my whole calculus maybe it's a little bit warped.' You know, my defense of these signals in wages and prices. [inaudible 01:09:13].

Daniel Klein: Yeah. I think that you and I are probably alike, and probably a lot of people listening to this similarly are interested in trying to participate in discourse, and serve the public good in some way, that way.

And you can cash that out in each of our individual cases as certain forms of self-interest, that that gets turned into--again, as rivers are lost in the sea. And so, it's not always just higher income that calls to us, that appeals to us. And we also understand that there's other ways to advance the good of the whole. Okay? And we obviously disagree with that in terms of the kind of discourse we put out because sometimes we disagree with each other--not so much you and me, Russ, but, generally speaking, people in kind of a discourse life, about politics and policy, especially.

Russ Roberts: And we could discover late in life or never that our whole life, this intellectual enterprise, was a brutal mistake--had unintended consequences that we couldn't say, didn't know, and should be ashamed of.

Daniel Klein: Yeah. I don't know that either of us could ever hope to have that much consequence in anything we say.

Russ Roberts: No. But our team--

Daniel Klein: Our team so to speak--

Russ Roberts: that we aligned ourselves with and that we made our small contribution, whatever--

Daniel Klein: Yes, that's true. I mean, you could spin out theories like that way that are not totally ridiculous, are not totally illogical about prosperity, and wealth, and innovation, and technology. Ultimately, arriving at just widespread capability for people to irresponsibly use destructive technologies, say, or other scenarios you could imagine. But you're stuck with those kind of tough options, any which way you turn.

1:11:31

Russ Roberts: Yeah. I love your point. And I think the thing I probably take away from this conversation that I found most profound is this idea that--it's so trivial Dan actually, this insight, and then yet it's so hard to remember--which is that: It's complicated. And we don't like complicated. 'Just tell me the answer. Okay? Is it good to make a lot of money or is it not?' And the answer is: It's complicated, right? But it's complicated, meaning it's not shameful in and of itself. And that part is part of your message.

Daniel Klein: It is.

And this relates to one other caveat in the paper, which is that, just the person himself, the Jim pursuing honest income, can make a vice of acquisitiveness. It can become cupidity, it can become too single minded. And even if he does put, help more barefooted children to then wear shoes, it still can be too much in certain ways in his private life, in his word, in his world. I'm sorry.

And so, you have this problem just on that side, too. It's not like, 'Gee, what you should do is just make sure that you're making more honest income, the most you can. That's your best way to be virtuous.' I don't want to send that message, either. And so, we never really know why someone's, and how virtuously someone is pursuing honest income, and whether it's in that spirit of the commercial humanism like Linus Larrabee or whether it's someone rationalizing, apologizing, right? Justifying, illegitimately actually, some, maybe some undo narrowness, focus, greed and what have you.

I'd just like to say that in this 'we never know'-point, that's kind of one of the things about my title. One way to read it is: Is it just to pursue honest income? Another is: Is it just to pursue honest income?

Russ Roberts: Is it just to pursue honest income? Like, 'That's it? That's the whole thing?'

Daniel Klein: Is it really--are Linus's efforts really just Linus pursuing income? Or, is it, him doing it, like, partly in this mode and with an understanding that barefooted kids will now wear shoes? You see what I'm saying? Like is it just to pursue honest--? I don't know. Forget it.

Russ Roberts: No, but I think that's the--I mean, I wrote an essay a long time ago: When you allude to the idea behind it in your paper this question of the aftermath of a hurricane or some natural disaster, and you have an opportunity. Maybe you have a pickup truck, maybe you have some extra lumber, maybe have a generator, or maybe you have two free hands. Should you head toward that disaster, or away from it, or ignore it? And I've always argued--often argued--again, it's complicated, but that [inaudible 01:14:37] prices rise to the aftermath of that has this great virtue of signaling to people that they're needed. It encourages other people to step aside who might already have a generator not to buy one at the store. There are many things about high prices that--virtues that we often ignore.

And part of what I've spent time doing in my book, The Price of Everything and here on EconTalk is reminding people that it's more complicated than that. It's not just gouging. It has a real, powerful, extraordinary thing of sending a signal in a world of imperfect information, and an imperfect world where people are not all that good. And so, to get them to drive for four hours in their pickup truck, and risk--maybe risk their life--requires compensation and incentives.

And then the point I made, though, I think it's more important perhaps, is that it's not really relevant to talk about--it's not meaningful, it's not precise to talk about what motivates them.

Is it money or is it caring for others?

Well, surely it could be both, can't it? Why can't a person who goes down to an area and provides help feel good about it as well as making money?

And I think that's the Larrabee--Is Linus the playboy or the respons[?]--I can't remember but--

Daniel Klein: Linus is Humphrey.

Russ Roberts: Humphrey. So, is aware. He actually feels, notices that he's doing both. Maybe he doesn't spend a lot of time thinking about it. He probably spends more time thinking about how much to put into plastics at 15% versus other things.

But, is aware. Because maybe he's read Smith, or you, and is aware that he's doing something virtuous. And I actually don't care whether he's aware or not. He's guided as if by an invisible hand. He doesn't even know he's being guided. Those signals are priced and wages are pushing people in different ways.

And of course, they're not all we respond to. We care about non-monetary values as well. We care about the satisfaction we get from the job, not just the amount it pays, etc., etc. So, it's more complicated just in that way.

But the point is, is that, I mean, I just think that's an incredibly valuable thing to remember: that it can be both.

Daniel Klein: Yeah. They're layered. I mean, it's wrong to say is that this or that. The different motivations you speak of, like, one gives rise to the other: the impulse to be useful, to serve, to be involved or whatever, to have the approval of the man within the breast. How do you do that? How is that implemented?

And you have to create practices, habits, things that--interests that then become self-interest. And money, earning money is part of the program of any enterprise, even if it's nonprofit enterprise, right? I mean, resources--you can't give away resources until you earn resources.

And so, this idea that it's this motive rather than that motive, 'Oh, the guy's really just greedy'--it's always layered. It's always layered. And so, like, again, I'd suggest that virtue is as much a matter of what it is we make our self-interest than it is sort of like going beyond our self-interest.

1:17:58

Russ Roberts: That's the second most important thing I think I learned in this conversation, the last part, in our conversation. I want to--it's risky, but I want to add one more thing. This would have been a good place to stop. And for listeners, I usually look for a place around now to stop. But, I want to get this example into the conversation that--I may have mentioned it once in the history of EconTalk. It's a book I used to read to my children. It's called Henry Hikes to Fitchburg. Henry is Henry David Thoreau. Henry is a friend in the book. It's a charming children's book that I used to make fun of it because it bothered me, but there's a part of me that likes this too, so it's complicated.

So, Henry and his friend were going to meet in Fitchburg. Henry walks--the book's called Henry Hikes to Fitchburg. Henry's friend decides not to walk. Henry's friend decides to earn money and take the train. Because, why walk? It's days. Why not take the train? So, in the intermediate--while Henry's hiking, and of course this is romanticized beyond words--Henry's picking blueberries, and waiting in a beautiful stream, and observing the countryside. And in my version, I always add, is getting stung by bees and he's, you know, getting attacked by wolves, so that my children don't over-romanticize nature, although, I'm a big fan of it.

But anyway, Henry has this beautiful time getting to Fitchburg. His poor friend slaves, cleaning somebody's cupboard out, and painting, and working, and makes a dime here and a nickel there. And then he takes the train; and he's the fool because he missed out on this great experience of hiking to Fitchburg rather than working like a dog. And it's a passage taken actually from Thoreau. It turned into this children's book.

And I taught my children--I'm sure they've forgotten it--but I taught my children that Henry's friend didn't just forego the beauties of nature. He also helped serve the people in his community who needed their floor cleaned, or their basement refinished, or whatever it is he did.

Daniel Klein: Yeah. Yeah. So, the cleaning of the basement and understanding and interacting some with the people there perhaps, but also just having the spirit, if you like, of helping others and being proud of that--that's a little bit like the smelling of the flowers for Henry on his walk. I mean, it might smell different. But yeah, that's an interesting way to apply these ideas. Yeah.

Russ Roberts: I think as a parent, and talking to parents out there in the audience, the question of how much we should honor material success, material activity, our job versus our family, and so on--and you mentioned it. It's obvious that a person who is a very successful entrepreneur, and raises children who are damaged because they didn't know their mother or father is--

Daniel Klein: Or he acted like a jerk, because he was so absorbed.

1:21:16

Russ Roberts: Yeah. So, we understand that. But, the point you're making today, which I want to come back to and let you close on it, is that it's important to remember what commercial life is really about.

And I've used this example before. It's from Naomi Remen's book, My Grandfather's Blessings, this doctor who is dying, and some friend decides to bring together a group of people who've benefited from the device this doctor had invented.

And they're sitting around talking, and each one stands up and thanks him for longer life and the things they've enjoyed about life. And he's sobbing--he's dying, but he's sobbing from joy because he says he never realized this. And I'm telling my sister this--my sister's a real estate agent, and she's, 'Can you believe that he never thought about that?' I said, 'Well, how often do you think about the pleasure you bring to people getting them into a house, which is scary, and hard, and frightening, and fraught with challenges. And you help them make that decision. And you help them have a home--not just a house, a home?' She said, 'You know, I never thought about it.'

And how rarely we do think about what we actually accomplish in the ways that we work in the world. And I think it's really important.

Daniel Klein: Yeah. And it's hard to just say, 'Oh, I'm going to think about it.' It's not the same as the actual human interaction, for real sharing of sentiment of the person actually expressing it and so on. But yeah, that's the--we're actually involved in many, many people's lives in a highly indirect way, and we need good attitudes about it. Yeah.

Russ Roberts: My guest today has been Dan Klein. Dan, thanks for being part of EconTalk.

Daniel Klein: Thank you.


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