Giving Back Nonsense

Rich people often describe their philanthropy as “giving back.” This cliche suggests that their wealth was taken from someone or, in other words, that someone else was necessarily made poorer in order for the wealthy donor to become rich. But anyone having even a basic understanding of economics (or just common sense) knows that this is utter nonsense. In a free and capitalist economy all transactions are voluntary.1And even taxes can be regarded as ultimately voluntary in a republic (though only in a political sense) since they are imposed by a government elected by the taxpayers themselves. But then how can later generations regard these taxes as voluntary that were established by governments elected by their ancestors and not by themselves? The answer is that at any time lawmakers can repeal past laws if they choose to. They should not be bound by any previous legislative acts. In this way the continuing reality of public consent to the laws is preserved. However, an exception to this is long-term government debt, which is not voluntary in the sense that future generations of taxpayers are bound by their ancestors to a kind of economic slavery to the nation’s creditors. The descendants must work to pay down the debt of their profligate ancestors without being able to enjoy the past consumption that this debt enabled (except, for instance, in the case of borrowed money spent on national infrastructure lasting more than one generation). And while it is true that later legislators could repeal the laws that bound the nation to repay the debt, doing so would likely make it much more expensive, and rightly so, to borrow in the future. Both parties to an unforced trade must perceive themselves to be better off or they would not consent to it. Another way of saying this is that both parties profit from the transaction. In order to make any money, and especially to get rich, you must offer something for sale that others value more than the money or goods that they give in exchange for it. So, the seller is not taking anything from the buyer that ought to be “given back.” On the contrary, the seller is making the buyer richer! Both parties are made better off, and value is created, simply by the voluntary exchange of money for goods and services in a free market economy. This is the origin of the phrase “making money.”

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