Mr. Smith, a frequent contributor to The Freeman, lives in Santa Maria, California.
I once owned a $1,000 dog. I got him for $2 and a $998 cat.
—Old vaudeville joke
Our house in Los Angeles featured a rather impressive planter area adjacent to the front porch. The builder—it was a new house—had put in a few plants to enhance its eye appeal, and one was a large Australian tree fern.
People who entered the house invariably informed me that the plant was worth $100: “That’s what they go for in the nurseries.” I repeatedly offered to sell them the plant, but they weren’t interested. It supposedly was worth $100, but no one would pay it.
Eventually the fern grew to such mammoth proportions that it was starting to take over the porch, and it was clear that it had to go. I offered it for $50, then $25, then free to anyone who would cart it off. There were no takers, and I wound up paying to have it cut up and hauled away. Still, I was often told in subsequent conversations that the plant had a value of—what else?—$100.
What it boils down to is a gross misunderstanding of basic economics. My plant would have been worth $100, $500, or $1,000 if anyone had been willing to pay that amount. The truth was that it was worth nothing—in fact, less than nothing because I had to pay to get rid of it. To put it simply, an item or service is worth only what another person is willing to pay.
This is the very core of the capitalistic system—the marketplace. Those who understand it generally prosper, and those who don’t haven’t a chance.
We have all read, for example, that no baseball player is worth $5 million a year. In the days of Ted Williams and Joe DiMaggio, we heard that no player was worth $100,000. Whatever the amount, it is a naive statement because it is the marketplace that dictates what a ballplayer, or anyone else, is worth. One can’t compare a professional athlete with, say, a classical musician, or a real estate agent with a locksmith. A person’s services are worth what he can command in the market.
I have talked with people who believe that we should place a dollar value on occupations—through government, of course. They envision a great chart in which a typist might make X dollars, a plumber Y dollars, and a college professor Z dollars. But market values aren’t static. The typist is worth more than the plumber or the college professor if a writer has to get a manuscript in the overnight mail, and the plumber’s value goes up when the basement is flooded.
Where, in this great chart of human values, would we place a high-school-dropout rock musician who cannot name his state capital but who can sell out the Los Angeles Coliseum in a matter of hours? The great chart-maker might put him at a minimum wage level, but the marketplace says he is worth millions. There is no set value for an entertainer. If he sells tickets, he is a valuable property. If no one will pay to see him or buy his cassettes, he is worth very little.
This brings us back to the premise that the economic value of anything is determined solely by what it will bring in the marketplace.
Price controls, rent ceilings, minimum wage laws, and other artificial constraints are really worthless because they are injected into the economy to hold back a tide that isn’t going to be held back. If a person is worth less to an employer than the minimum wage, he isn’t going to be hired; if a price ceiling is far below the real value of a product or service, the item either goes off the market or follows an illegal path to its realistic level. The market value will prevail one way or another.
All of which leads back to my marvelous Australian tree fern. Whatever pleasure I derived was from the delusion that I had a $100 item greeting guests as they entered my house. It wound up as a great disappointment, but now I have something even better. This is my $5,000 pinecone collection. I have decided never to sell it.