Mere Opposition to the ‘Initiation of Force,’ Such As From Libertarians, As Necessary But Not Sufficient
Stuart K. Hayashi
In the 1970s, many libertarians rallied around the principle that it is morally wrong for anyone, including any government, to initiate the use of force against a person or his belongings. Murray Rothbard called this the “non-aggression axiom,” even though this principle is derivative of other principles and therefore not an actual axiom. And it is indeed an important principle. But many libertarians of the 1970s talked as if agreement on this stated principle was adequate to form and maintain a coalition of likeminded people. They talked about how the principle of non-force was an axiomatic First Principle — initially an arbitrary one, apparently — that later could be rationalized after-the-fact through citing Christianity, Buddhism, Immanuel Kant’s Categorical Imperative, or any other philosophic framework. As quoted years ago by Objectivist writer Peter Schwartz, Rothbard asserts,
As a political theory, libertarianism is a coalition of adherents from all manner of philosophic (or non-philosophic) positions including emotivism, hedonism, Kantian à-priorism , and many others. My own position grounds libertarianism on a natural rights theory embedded in a wider system of Aristotelian-Lockean natural law and a realist ontology and metaphysics. But although those of us taking this position believe that it only provides a satisfactory groundwork and basis for individual liberty, this is an argument within the libertarian camp about the proper basis and grounding of libertarianism rather than about the doctrine itself.
The principle against force’s initiation is necessary but it is not sufficient. If you want a consistent defense of free enterprise and the right to the wealth you have produced, you must also identify the source of your rightful ownership of wealth. And you must show that your rightful control over the value that you have created is something much more important than merely a method by which efficient use of resources is incentivized and through which courts engage in dispute resolution. It is also important that you can elaborate on how the justification of your rightful control over your wealth is that you can be objectively identified as the primary creator of this very same quantity of economic value.
When it comes to the matter over why the uninitiated ought to accept the principle that force is wrong, what I have just named are the vital considerations that Murray Rothbard handwaves as inessential to the “doctrine itself.” Accordingly, my conclusion that the non-force principle is necessary but not sufficient is demonstrated by another group of people who claim to oppose the initiation of the use of force. It’s not the group whom many free-enterprisers would expect.
That Laws Are Ultimately Enforced at Gunpoint: These People Agree With Free-Enterprisers About That . . . or Do They?
I often point out that laws — even entirely legitimate ones in a proper constitutional-liberal republican Night Watchman State — are ultimately enforced at gunpoint. Even if the initial penalty for breaking a law is a very small fine, persisting in refusal to comply with the law will bring about an escalation in penalties. If you persist in refraining from discharging the small fine, eventually you will be ruled to be inCriminal Indirect Contempt of Court. And enforcement requires that armed men be dispatched upon you by the State.
Of course, Democrats and Republicans are fond of agitating for new legislation that encroaches upon what peaceful private parties may do with their own belongings and households. Thus, upon being reminded that their favorite legislation initiates violent threats upon peaceful people, these Democrats and Republicans get huffy toward me. At me, they do Rousseau’s Social Contract Song-and-Dance. They recite this big fiction about how, by being born and living among other people, I implicitly consented to a Prime Contract in which I authorize that, for society’s collective benefit, the State may rightfully overrule my peaceful decisions and actual contracts. But in contrast to conventional Democrats and Republicans, there is a group of people — emphatically not fans of large-scale entrepreneurial enterprises — who agree and understand that laws are ultimately enforced at gunpoint.
In contrast to conventional Democrats and Republicans, one woman from this other group denounces governmental institutions, implicitly including the welfare state, for “stealing in the form of taxes...” And just like free-enterprisers such as Frédéric Bastiat and Leonard E. Read, this woman recognizes that “all forms of government rest on violence...” That includes democracies, welfare states, and even proper constitutional-liberal republican Night Watchman States. Similar to that, a man in agreement with this perspective says that when the State takes action upon you who have done nothing to warrant that, it is for you
to be...inspected, spied on, directed, legislated at, regulated, docketed, indoctrinated, preached at, controlled,...censored, ordered about... [It] is to be at... every transaction, ... registered, enrolled, taxed, stamped,...licensed, authorized, admonished, forbidden, reformed, corrected, punished. It is, under the pretext of public utility, and in the name of the general interest, to be...ransomed, exploited, monopolized, extorted, squeezed, mystified, robbed; then, [upon] resistance,...repressed, fined, despised, harassed, tracked, abused, clubbed, disarmed, ... imprisoned, judged, condemned, shot, deported, sacrificed...
The woman I quoted earlier was “Red” Emma Goldman, the anarcho-collectivist mistress to Alexander Berkman. In the late nineteenth century, Berkman tried to assassinate the chairman of Carnegie Steel, and almost succeeded at that. The man I quoted after her was Pierre Proudhon, a contemporary and “frienemy” to Karl Marx. And similar to them was Upton Sinclair. In words he attributed inaccurately to George Washington, Sinclair admitted, “Government is not reason, it is not eloquence — it is force.”
Anarcho-collectivists acknowledge the correctness of free-enterprisers in pointing out how laws, taxes, and government regulations are ultimately enforced at gunpoint. Yet they do not agree with free-enterprisers about what constitutes the initiation of the use of force by one person against another to snatch the second person’s resources.
Does a Mansion Owner Initiate the Use of Force By Calling the Cops on Burglars?
Consider the case of Charles Martin Hall who, on account of years of doing his own research-and-development, devised a new efficient method for producing aluminum, and became a multimillionaire from that devising. Nouveau-riche, he dabbled in art collection. Suppose that a gang of burglars break into Hall’s mansion to loot him. And suppose Hall calls the police on them. The police arrive and stop the burglars.
Free-enterprisers would say that the burglars were initiating the use of force upon Charles Hall, who was minding his own business. And they would continue that the police apprehending the burglars was the proper exercise of force in retaliation only against the force that was initiated. But the anarcho-collectivists have an entirely different take on this scenario.
To the anarcho-collectivists, once you have performed manual labor, you have sufficiently earned a share of resources — economic value — that is equal to that of everyone else’s. For anarcho-collectivists — even if they give some lip service to the value of inventors and engineers — it is the case that by owning and controlling a share of economic value in society that dwarfs that of most men, Charles Hall has absconded with a quantity that is not rightfully his. By claiming control over a share of economic value far greater than what other men have, conclude the anarcho-collectivists, it is Charles Hall who has initiated the use of force against everyone else. In the anarcho-collectivists’ estimate, Charles Hall is hoarding an unfair share by means of physical force. Charles Hall’s option to call the police to guard this stash for him is, to the anarcho-collectivists, proof that it is Charles Hall holding the power to call upon armed men to uphold and enforce his wrongdoing.
And, continue the anarcho-collectivists, the burglars have the moral high ground. By trying to burgle Charles Hall, they say, the burglars are merely trying to retrieve and reclaim some of the wealth that is rightfully theirs. On that interpretation, it is the burglars who are using rightful retaliatory force against the party that initiated it.
At root, the area of disagreement is the ethics over Charles Hall expecting the police to guard what Charles Hall insists is his own rightful private property. There are laws against burglarizing someone’s mansion. And, as understood both by free-enterprisers and anarcho-collectivists, laws are ultimately enforced at gunpoint. When the police stop the burglars, it is an example of the government using force.
For free-enterprisers who wince at rent control and minimum-wage legislation, police stopping the burglarizing of a mansion is one of the few types of legitimate use of force by the State. Even a constitutional-liberal republican Night Watchman State favored by free-enterprisers like Frédéric Bastiat and Auberon Herbert would have punished burglars for hurting Charles Hall. But for anarcho-collectivists such as “Red” Emma Goldman, the protection of rich people’s private ownership rights is the central evil of the State. For Emma Goldman, police foiling the burglary of a mansion is actually the main case studying proving that the institution of government is the violent enforcer of evil. For anarcho-collectivists, the ability of a multimillionaire like Charles Hall to call the cops to protect his private property from burglars is no better than an intensifying of Hall’s initiation of the use of force against the burglars.
That is why it is necessary but not sufficient for you as a free-enterpriser to say, “I am opposed to the initiation of the use of force.” “Red” Emma Goldman and Karl Marx’s contemporary and frienemy, Pierre Proudhon, claim to hold that same position. Nor is it even adequate to say that you oppose it when one man tries to take from others what is not rightfully his. Emma Goldman and Pierre Proudhon would say that they hold this position as well, and it is exactly why they believe the burglars are in the right, not Charles Martin Hall. And anarcho-collectivists would interpret the story the same way if the rich man in question was not Charles Hall but instead Henry Bessemer, the nineteenth-century British man who got rich from his own improved method of steelmaking.
Some English-language translations of Pierre Proudhon superficially resemble, at first glance, statements from Objectivists. Proudhon explicitly rejects rationalizations for government regulations from Democrats and Republicans that rely upon invocations to their precious Rousseauian interpretation of some supreme Social Contract. And in a move that is more seemingly impressive, Proudhon praises what he calls economic “producers” — producer is the word in the English translations of Proudhon. But to Pierre Proudhon, the only economic producers are manual laborers, not CEOs or inventor-engineers.
Nor does Proudhon sympathize with investors. Investors risk their own resources by providing, to the CEO, control over such resources, hoping those resources will be inputted in such a way that they produce a final product that satisfies customers. Investors do that out of hope for a material return. And those investors have to do without those resources in the meantime even if they do get a return. But to Proudhon, only the manual laborers are the “producers” who contribute to the enterprise’s success.
Anarcho-collectivists, as with other opponents of free enterprise, implicitly presume that the quantity of wealth in an economy — the quantity of economic value — is fixed. That would mean that any one person getting more wealth spells less of it for everyone else. As Proudhon says it,
The purchaser draws boundaries, fences himself in... Here, then, is a piece of land upon which, henceforth, no one has a right to step, save the proprietor and his friends; which can benefit nobody, save the proprietor and his servants. Let these sales multiply, and soon the people...will have nowhere to rest, no place of shelter, no ground to till. They will die of hunger at the proprietor’s door, on the edge of that property which was their birthright...
On that interpretation, if Charles Martin Hall had a net worth of 5 million US dollars, then that deprives everyone else in society of 5 million US dollars’ worth of resources. Who is Charles Martin Hall to have so much when the burglars have so much less? That is the mentality behind the presumption that those who would burglarize Charles Hall or Henry Bessemer are the ones who have the moral high ground. That is how Proudhon concludes, “Property is the [false] right of increase claimed by the proprietor over any thing which he has stamped as his own. . . . The proprietor, producing neither by his own labor nor by his implement, and receiving products in exchange for nothing, is either a parasite or a thief.”
Many libertarians praise the philosopher Immanuel Kant, as can be seen at the Institute for Humane Studies, at the Cato Institute, and at the Mises Institute. Such libertarians honor him for his epistemology opposing inductive reason, and they also say he was an important contributor to free-enterprise advocacy itself. They are correct that Kant popularized the observation that the more two countries liberalize themselves domestically and trade with one another, the more that discourages warfare between them.
Still, many aspects of Kant’s views actually lend support to anti-capitalists such as Proudhon. In this context, Kant implicitly endorses the notions that there is a fixed quantity of wealth and that you can only give or take wealth but never produce a net increase in the total existing quantity of wealth.
In giving to a person in need of charity, the giver “makes restitution” for an injustice... ...in giving to an unfortunate man we do not give him a gratuity but only help to return to his that of which the general injustice of our [social] system [such as of private property] has deprived him. For if none of us drew to himself a greater share of the world’s wealth than his neighbor, there would be no rich or poor. Even charity therefore is an act of duty imposed upon us by the rights of others and the debt we owe to them.
And this sounds like a repetition of Christianity’s early Church Fathers, as noted by Stephen Hicks. Pope Francis loved to quote John Chrysostom saying, “Not to share one’s goods with the poor is to rob them... It is not our goods that we possess, but theirs.”
St. Gregory likewise propounded, “When we furnish the destitute with any necessity we render them what is theirs, not bestow on them what is ours; we pay the debt of justice rather than perform the works of mercy.”
Basil of Caesarea similarly proclaimed, “The bread in your hoard belongs to the hungry; the cloak in your wardrobe belongs to the naked; the shoes you let rot belong to the barefoot; the money in your vaults belongs to the destitute.”
And St. Ambrose concurred, “You are not making a gift of your possessions to the poor person. You are handing over to him what is his.”
Yes, it is the tradition of the early Church Fathers, Immanuel Kant, and the anarcho-collectivists to presume that the quantity of wealth that can be enjoyed by the human population to be static. On that assumption, someone getting more wealth translates to less for everyone else. But those premises are false. And we can see that only through a proper rational approach to philosophy, as elucidated by Ayn Rand and Objectivism while citing economic insights from Enlightenment-era philosophes Jean-Baptiste Say and John Locke and from twentieth-century business management professor Julian Simon.
Therefore, let us look at how one gets rich by means other than manual labor.
Multimillionaire Inventor Charles Martin Hall Did Not Steal His Wealth — His Volitional Mind Produced It
First, the usefulness of natural resources — their economic value — is not directly proportional to the quantity of units of this resource. Rather, through technological improvements, a single unit of a natural resource can be made more useful than it had been in years past. And that usefulness — that economic value — is the true definition of wealth. If these improvements have been made over the past five years, than a particular quantity of natural resource can produce more wealth for us today than that same quantity could have five years ago.
The use of electricity in production involves using up natural resources, using up coal and oil and natural gas and biomass. And aluminum is a very useful metal, being strong yet lightweight in comparison to others. But for most of human history, it was difficult to isolate the aluminum from the ore encasing it. That meant you could not get purified aluminum to use it for the best purposes. It was only in 1825 when the scientist Hans Christian Oersted separated a few micrograms of aluminum from ore.
Aluminum was so difficult to separate from ore that, by 1850, aluminum cost more per ounce than gold did. When Louis Napoleon had guests over, he treated them differently according to rank. Somewhat-high-ranking guests got to eat with forks and knives made from gold. But the highest-ranking guests ate with forks and knives made from aluminum.
But after arduous periods of research-and-development, Charles Martin Hall devised a method of using electricity to separate aluminum from the ore encasing it. Whereas it previously took over 74 kilowatts to produce a single kilogram of aluminum — kilowatts that expended natural resources such as coal — by 1886 that same kilogram of aluminum could be produced after the exertion of 40 kilowatts. By 1890, Charles Hall got that down to 15 kilowatts. This means that in 1890, a kilogram of coal that you invested in the aluminum market would avail to people over four times as much aluminum as that same quantity of coal would have in 1825. In the aluminum market between 1825 and 1890, Charles Hall quadrupled the usefulness and economic value of a kilogram of coal. Aluminum’s real price declined by a factor of 200.
Charles Hall making aluminum so widely available, and therefore cheap, had many benefits. To produce the engine of their airplane, the Wright brothers needed a metal that was both lightweight and cost-effective. The metal that suited their purposes was aluminum. Had Charles Hall not made his breakthrough when he did, it likewise would have been much more difficult for the Wright brothers to put together the airplane when they did.
Henry Bessemer made a comparable advancement. Steel production goes back at least as far as the Roman Empire. But, as with aluminum in 1825, it was always difficult to produce steel in large quantities. In the year 1850, mills had to burn 7 tons of coal to generate the amount of heat necessary to produce a single ton of steel. But, as Charles Hall did years after him, Henry Bessemer expended investors’ valuable resources in a risky duration of research-and-development. Through such R-and-D, Bessemer learned that if you quickly blasted jets of cold air on it as it was newly minted, it removed impurities and resulted in purer, stronger steel. On account of the Bessemer converter and Process, by 1862 it took 2.5 tons of coal to produce a stronger ton of steel. This means that, on account of Bessemer, in 1862 a ton of coal could produce over twice as much steel as it could have in 1850. Between 1850 and 1862 in the steel market, Bessemer more-than-doubled the usefulness and economic value of a single ton of coal.
That it took smaller quantities of coal to produce larger quantities of aluminum and steel also made larger quantities of coal available for other endeavors still.
Historians know that Charles Martin Hall became a multimillionaire, but they do not have a firm estimate of how many millions he had. But let us consider what it would mean if he had gained 5 million US dollars. If Charles Martin Hall received 5 million US dollars, it is because, from one end of the supply chain to the other, customers valued the newly-plentiful-on-the-market aluminum more than they valued the quantity of money that they exchanged for it. And the amount of money coming in from customers totaled at $5 million. Had the economic value that Charles Martin Hall not been worth as much to his customers, these customers would not have made those transactions. Thus, Charles Martin Hall gained $5 million only insofar as his customers valued, in total, his innovation at least as much as $5 million.
The benefits that Charles Martin Hall and Henry Bessemer provided was not the result of them snatching from everyone else a share of a fixed quantity of resources such as coal. Instead, each quantity of coal could produce more economic value for people than that quantity could have before Charles Hall and Henry Bessemer came along. If you had a quantity of coal and wanted it applied to steelmaking, your ton of coal was over twice as valuable as it would have been had Bessemer not taken action. Likewise, if you had only a kilogram of coal and wanted it applied to making aluminum available to consumers, your kilogram of coal became over four times as useful and valuable as it would have been had Charles Hall not intervened.
Any time you produce wealth through your labor, that economic value is stored in the direct product of that labor. And maybe you exchange the product of labor for something else. Should you exchange your labor for money or other items, it is the case that you did not directly produce units of that money or those other items. Nevertheless, you retain the economic value that you produced originally. That economic value is now stored in the money or other items for which you exchanged the more-direct products of your labor.
The same principle applies to efficiency-boosting inventions. An inventor such as Charles Martin Hall or Henry Bessemer may sell his patent. As another alternative, he may keep his patent and rightfully use the more well-known method of recouping the costs of the units of resources he expended. After all, those resources were expended in the research-and-development and experimentation needed to arrive at the functional design and delineation that was needed for the invention to perform as intended. Such costs of the units of resources is recouped through licensing — properly selling access to the invention’s functional design. And when money and other items are exchanged for this access, the economic value of the invention is then stored in the money and other items exchanged to the inventor for it. Accordingly, the quantity of wealth that Charles Martin Hall or Henry Bessemer possesses in his mansion is no greater than the net increase in economic value that he brought into being.
Far from snatching an unfair share of a fixed quantity of economic value in society, the wealth enjoyed by Henry Bessemer and Charles Martin Hall was commensurate — no greater — than the net increase in economic value they had availed to the world in total through their finding and applying new methods to produce greater economic value from the existing quantity of resources. Whatever the exact figure, Charles Martin Hall rightfully owned the millions he did because that was the quantity of wealth that he created.
Conclusion
Henry Bessemer and Charles Hall grew rich only to the extent that they had enriched other people who had applied their innovations. And this enrichment came in the form of improved methodology that enriches people far beyond the mere number of units in natural resources available. That net increase in economic value that Hall and Bessemer each produced — a quantity of value that was and remains gigantic in size — redounded upon each of them in their respective personal fortunes. Private property rights enabled Bessemer and Hall to pursue such endeavors, and private property rights enabled Bessemer and Hall to enjoy the just deserts of those efforts.
Far from private property rights being just a mere method for dispute resolution in court, private property rights — especially the intellectual sort — are a documentation of financial identity. They help to identify particular creative efforts by a particular creative party, and thereby assist customers in identifying and recompensing the specific creative party that provided them the specific value.
It is good to educate people about the principle that it is wrong to initiate the use of force. But what is equally needed is more than what Murray Rothbard and many other libertarians cared to provide in the 1970s. Absent of the further clarification, people will not gain any more insight into the need for free enterprise than did Pierre Proudhon and “Red” Emma Goldman.
If you think a productive inventor is right to call the police on people who burglarize his home, then you need to understand what important consideration was missing when libertarians in the 1970s assumed it was adequate simply to unite behind the declaration that they opposed any initiation of the use of force by governments and private citizens. The corollary imperative is to understand that the biggest driver in creating wealth — the wealth that becomes the property at risk of being stolen — is human rationality and its application by inventor-entrepreneurs such as Charles Martin Hall and Henry Bessemer. Absent of this philosophical understanding that intellectual effort — intellectual property — is the basis for rightful ownership over anything tangible, any libertarian proclamation of the wrongness in initiating force against private property rights will be worse than incomplete.
Introduction
In my home state of Hawai‘i, superstitions abound. Every New Year’s Eve, one does not merely practice certain rituals but also eats certain foods. I have been assured that this will please the spirits and they will reward us with good fortune throughout the year. I think these celebratory rituals can be fine and maybe even wholesome when recognized and practiced just as general symbols of desire for happy outcomes. But I worry when they take on priority because it is believed, on some level, that they might be true literally. When I ask different people if they believe in all this literally, they usually give the same reply. They shrug, laugh sheepishly, and say, “Well, ya never know. It’s possible there might be something to all this.” People believe this might possibly be true simply because they can imagine it.
This notion that if you can imagine a scenario, that proves that it is possible, is very common. It serves as the major excuse for belief in the supernatural, such as fortunetelling, ghosts, demons, and deities. It is also a rationalization that underpins so much pretentiousness in philosophy.
This is may be familiar to you. It has become routine that, after taking Philosophy 101 class, someone will say, “Gee, maybe my whole life is not real. Maybe all of my experiences are an illusion, and I am actually a brain in a jar imagining my life. This is theoretically possible.”
Such talk was popular long before the release of The Matrix. It has an extensive history of being entertained copiously in formal philosophy, in some form or another. Immanuel Kant had a version of it, and it is famously associated with Plato. The idea was also extolled by the ancient Chinese philosopher Zhuang Zi. He said that one day he dreamed he was a butterfly, but maybe he is actually a butterfly dreaming that it is Zhuang Zi. Buying into the assertion that what we interpret as sensory evidence might all be misleading, the philosopher Karl Popper proclaimed seriously, “...we never know what we are talking about.” (To that I reply, “Speak for yourself, buddy!”) And although Rene Descartes ultimately did not affirm his agreement with this idea, he still presumed it deserving of very serious consideration.
There is also the nineteenth-century Romanticist poet William Blake. Blake famously disparaged scientists in general and Isaac Newton in particular. In his estimation, for Newton to discover the principles of Nature is to rob Nature of its beauty and wonder. I rebut that assertion here. Along lines similar to these other fantasists about imagination, Blake asserts, “Everything possible to be believ’d is an image of truth.” Hence Blake constructs a straw-man misrepresentation of rationality that is most unflattering. He pronounces, “The idiot Reasoner laughs at the Man of Imagination.”
Disturbingly, the Enlightenment Era philosopher David Hume was explicit in saying that his ability to imagine a scenario was sufficient grounds for deeming it a theoretic possibility that deserves your study. This starkly contradicts Hume’s reputation among today’s professors — that he was a strict empiricist all about sensory experience. As worded by Hume, “To form a clear idea of any thing [that is, to imagine something vividly] is an undeniable argument for its possibility and is alone refutation of any pretended demonstration against it.”
We will return to this erroneous supposition of Hume’s a bit later in this essay. Although Hume made some very sound arguments for free-market economics and having a laissez-faire and constitutional liberal republican Night Watchman State, much of his influence in the area of epistemology, such as with what he has said above, has contributed to setting much of Western society on the wrong track.
People who indulge in this talk — that being able to imagine something is proof that it is possible — have no actual basis for doing so.
I already knew that years ago, and I would offer them this same reply.
I can imagine an isolated ice cube falling to the bottom of a glass of water and remaining on the bottom for eternity. My ability to imagine this is still no basis for introducing this scenario as a theoretic possibility. For a proposition to be worth some consideration as a theoretic possibility, there must be evidence to support it.
And, as far as I was concerned, that was that. However, on Thursday, July 27, 2023, I came up with some additional points about this. These additional points, I think, make more use of formal logic. My new manner of phrasing the matter goes farther down to the foundation of metaphysics and epistemology. The main purpose of the essay you are reading is for me to present my argument in this new form. But, first, I must give some background information that serves as the basis for my new argument.
The Context Behind the Issue
This idea that your sensory experiences might be distorted or illusory, and that there might be a truer plane of existence with which you have not yet made contact, is called metaphysical Idealism. This is not to be mixed up with moral Idealism, which is a persisting commitment to ethical principles. And the ramifications of metaphysical Idealism are not confined to metaphysics. In the realm of epistemology — the discipline that studies how do we know what we know — metaphysical Idealism is frequently accompanied by epistemic Rationalism, which should not be confused with rationality.
This epistemic Rationalism is the notion that there are valid and true ideas we hold that are innate, à priori, and which are truer than knowledge that we can induce à posteriori, meaning from from sensory experience. Someone can be a Rationalist without agreeing that it is theoretically possible that all sensory experience is suspect or misleading or illusory. Still, being an epistemic Rationalist is a very convenient position for someone who agrees that all sensory experience is illusory.
For a metaphysical Idealist, epistemic Rationalism is supposed to answer the question, “If everything learned from sensory evidence is subject to doubt, how do you know that all of that sensory evidence is thrown into doubt?” Once again, people say that their ability to imagine that waking experience is an illusion is enough to make it a theoretic possibility. Those who are most adamant in metaphysical Idealism and epistemic Rationalism go farther, saying they know all this conjecture is a legitimate evaluation.
There is a name for this idea that your consciousness can recognize truths — truths about entities that exist outside of your own consciousness — independently of investigation of those entities by means of sensory experience. That is, the idea is that even if no one ever investigated the matter by means of sensory experience, you can still know what is true about the entities existing outside of your own consciousness, entities such as trees and flowers and volcanoes and clouds and galaxies and other humans.
The name also applies to a still-more-radical idea. The more-radical idea is that, independent of going through sensory motions to affect the entities outside of your own consciousness, your consciousness alone can will those entities outside of your consciousness to change their nature and behavior. The name that the writer Ayn Rand gave those ideas is “the Primacy of Consciousness.”
It is true that your own consciousness can sometimes influence the entities outside of it. But your consciousness can do this only by means of going through motions with the realm of sensory experience, not merely thinking with your consciousness but acting in reality, through physical motions, to implement the ideas from your consciousness.
For example, the Wright brothers conceived of — imagined — heavier-than-air flying machines when none had existed. Then, through their efforts, they created airplanes in reality. In this respect, what once manifested only in their imaginations had also become real entities that existed independently of their consciousness.
But they did this through sensory experience. They observed that, as birds flew, the birds changed the direction of their flight by changing the direction of their wings and the angles at which edges of their wings had bent. The brothers then employed their bodies to draw up plans and diagrams that they formulated to accommodate such observations. They built models and prototypes of a flyer, and they employed their senses to observe the results of tests they ran on such prototypes. By contrast, for the Wright brothers to employ a Primacy-of-Consciousness mindset would have been for them merely to attempt to wish or pray airplanes into being. After all, their father was a priest.
Likewise, here is another example of the Primacy of Consciousness. Suppose that on Monday, I pray that Hawai‘i will not be hit with an earthquake on Tuesday. Then, on Tuesday, Hawaii experiences no earthquake. Then I chalk up the absence of such a disaster to my having prayed to God. I still performed a physical action — I put my hands together and spoke with my mouth. But there is no evidence that this had any causal effect on seismic activity. Moreover, because God supposedly can read my mind, it probably would have been just as effectual if only in my head did I ask God that there to be no earthquake. Hence, this is the Primacy of Consciousness at play.
It is also the Primacy of Consciousness when my loved ones eat a particular dish on New Year’s Eve to bring good luck. Here, good luck refers to steady finances and the good fortune of a hurricane not hitting Hawai‘i months later. Again, this ritual does involve a physical action with entities outside of people’s consciousness. Still, there is no actual evidence of a causal connection between eating a particular food and Hawai‘i having averted a catastrophe. In practice, this is the same as trying to wish away the tropical storms.
In contrast to the Primacy of Consciousness, Ayn Rand discusses the Primacy of Existence. It starts with the most obvious observation you can make — something exists. Something that exists is called an “entity.” Your recognition that something exists will produce a corollary recognition: a consciousness exists — your own. Were it not for Existence, there would not be something there for your consciousness to recognize, and there would definitely be no consciousness there to recognize it. Likewise, were it not for Consciousness, there would not be anything to recognize the existence of itself or anything else.
Your consciousness is clearly important. But when it comes to your consciousness recognizing what is real and true, or at least theoretically possible, looking at Existence must be the starting point. In the realm of Existence — what I also call Nature with a capital N — we find there are some principles that apply consistently. The law of gravity is an example.
And every entity has attributes through which your consciousness can distinguish it from other entities. The pertinent attributes of an entity are what we call the entity’s nature. It is in a tree’s nature, for example, to consist of cells, to grow, and to release oxygen as it takes in sunlight to produce its own food. By contrast, it is not in the nature of a tree to transform into a 400-meter-long rhinoceros and stampede over a city. We discover the respective natures of entities through repeat observations with the senses.
Recognition of an entity by its pertinent attributes is the Law of Identity. Here is how you apply that law. You observe one entity, Entity 1, whose attributes allow you to place it in a particular classification, a particular category — the concept of it. Then you observe Entity 2, which shares the same pertinent attributes as the first entity. Applying the Law of Identity, you recognize Entity 2 as being of the same category as Entity 1.
Entities perform actions. A cloud above you is an entity, and it sending raindrops down upon you is its action. Actions are caused by the respective natures of entities. In the past, when you observed clouds become a very dark gray, these clouds followed up by raining upon you. Today you see another cloud that is a dark gray. Applying the Law of Identity, you predict that this dark gray cloud will likewise send rain.
Derivative of the Law of Identity is the Law of Causality. The fact that entities have particular respective natures is a fact that affects the events that these entities cause. When two entities are of the same type, A, and they are under the same set of pertinent conditions, B, the same stimulus, X, will cause them to react in the same manner, Y.
We have two mobile phones, A, that are similar enough in the pertinent context to be regarded as being of the same type. These are phones 1 and 2. Both of them are under the same condition, B — they are not broken. On Phone 1, I input your phone number. This is the stimulus or causal agent X. This results in your phone ringing, effect Y. Applying the Law of Identity, we ascertain that if, after you have hung up from the first call, I punch in your number on Phone 2 as well, it will likewise cause your phone to ring. We infer that the action of my inputting your number will be consistent in causing your phone to ring. As Ayn Rand phrases it, “The Law of Causality is the Law of Identity applied to action.”
These are the same sensory observations denigrated by metaphysical Idealism, epistemic Rationalism, and, implicitly, by all those who presume that their ability to imagine a scenario is sufficient to prove that it is possible.
Again, the vast majority of philosophy instructors will tell you that David Hume was a consistent empiricist. That is, he was the opposite of a metaphysical Idealist and epistemic Rationalist, of which Plato was both. If they could put aside their prejudicially motivated revulsion toward Ayn Rand long enough to learn her terminology, philosophy instructors would say that admirers of Ayn Rand’s should concede that Hume argued from “the Primacy of Existence.” But I find, sadly, that what Hume has said about imagination and theoretical possibilities is an instance of him showing favor to the Primacy of Consciousness.
In contrast to metaphysical Idealists, epistemic Rationalists, and — in this instance at least — David Hume, I shall now present my new argument about why a posited scenario must have evidentiary backing before it is to be welcomed as a theoretic possibility.
My New Way of Phrasing It
Again, many people in Hawai‘i say that it is theoretically possible that if we appease spirits on New Year’s Eve by eating a particular lucky food, those spirits will help protect us throughout the year. And, again, many people chirp that it is theoretically possible that their whole lives are an illusion and they are actually a brain in a jar being made to dream the dream that is their lives.
As with any supernaturalistic claim, these people begin by imagining a scenario arbitrarily, and then they try to rationalize it after the fact. This approach exemplifies the Primacy-of-Consciousness mindset. Now let us proceed from the other end. Let us acknowledge the Primacy of Existence.
We start off by looking at entities — the objects that exist. To speak of what is “possible” is to speak of a judgment made about some posited event. “Events” are just actions performed by the entities. That is why we look at the entities before we consider their actions and the events or possibilities associated with them. Moreover, the qualities of an action are influenced by the qualities of the entity performing it. Hence, it is only by learning about entities and their attributes that we ascertain what is possible for them.
That is why there is no proper basis or justification for us to speak of what is “theoretically possible” for an entity in the absence of observational knowledge of that entity’s attributes. Facts and evidence about an entity are epistemically foundational, and “possible” is a derivative attribute of that entity’s actions that hinges on such an epistemic foundation.
To be rationally justified, then, in saying that an event is theoretically possible is to say the following. It is to say that even if we are not sure that this particular event will take place, we have gained enough knowledge of the pertinent entities — enough evidence — for us to make an educated guess that they possess the necessary attributes that would enable them to contribute to the occurrence of this event.
When someone floats an arbitrary postulate, such as that astrology predicts the future, often this person issues a particular challenge and advances a particular insinuation. The challenge is for any would-be doubter to put forth an effort to disprove the postulate completely. The insinuation is that, in the absence of such an effort, those who initially doubted the postulate must now concede that the postulate has gained clearance for admission into consideration as a theoretic possibility. Anyone who refrains from entertaining the postulate as deserving of consideration — even if that refraining was originally by passive default — is allegedly duty-bound to engage with arguments for and against the arbitrary postulate, on the pain of otherwise being exposed as intellectually lazy and intellectually dishonest.
It is that challenge and insinuation that are intellectually lazy and intellectually dishonest. There is no limit to the number of arbitrary postulates being foisted in our culture. Anyone who tried to engage with all or even most of them would waste all time on this pursuit, and partake in nothing else in life. On any occasion in which someone floats an arbitrary postulate, it is not incumbent upon me to poke holes in it to justify my passively refraining from entertaining that postulate as a possibility. When someone wants me to welcome the postulate as a theoretic possibility, the burden is on him or her to show evidence for the existence of conditions that can contribute to its occurrence. Thus, we do not rule out possibilities from limitless arbitrary imaginings. Instead we rule in possibilities based on their evidentiary support.
There is only one set of circumstances in which we have a firm footing in ruling out what was previously considered a possibility. It is this. Initially, based on the knowledge we have, we rule in a set of theoretic possibilities, such as A, B, and C. Then we conduct further investigation. Based on the additional knowledge, A and B still appear viable. However, the new information we have gained about the attributes of the pertinent entities exist in such a manner as to preclude C from happening. At that juncture, we can rule out C. But insofar as any proposition is made in the absence of evidence, that proposition is not to be ruled either in or out as a possibility. It deserves simply to be ignored so that we can devote our precious time and attention instead to propositions that are buttressed by evidence.
That is why it is wrong — why it is the Primacy of Consciousness — when people start with some arbitrary imagining, call it “theoretically possible,” and then try to rationalize it after the fact. To understand the Primacy of Existence is to start with observations and facts. And it is after we learn about an entity’s capabilities that way, when we can apply imagination to imagine possibilities in such a manner that can actually get practical results.
What About People Who Accomplish What Was Previously Thought Impossible?
The Wright brothers provide an instructive case study in ascertaining what is and is not possible, and in imagination’s proper role in rendering such judgments. The Wright brothers were highly imaginative. They conceived of a heavier-than-air flying machine at a time when none had existed and in which the consensus was that such a product of their efforts would never take off — pun intended.
“We knew,” said Wilbur, the older Wright brother, “that men had by common consent adopted human flight as the standard of impossibility. When a man said, ‘It can’t be done; a man might as well try to fly,’ he was understood as expressing the final limit of impossibility.”
It was for such reasons that the prospect that the Wrights would succeed at flying was widely dismissed. It was dismissed even by the eminent physicist and entrepreneur Lord Kelvin, who played a major role in laying the first transatlantic telegraph cable and who provides the namesake of the scientific unit for measuring temperature. “...I have not the smallest molecule of faith,” he wrote, “in aerial navigation other than ballooning or of expectation of good results from any of the [aeroplane] trials we hear of.”
In 1899, Scientific American magazine, too, expressed doubt. A major obstacle to the invention of the airplane was developing a method for safe steering. As the ability to duplicate the method by which birds steered themselves seemed unlikely, the periodical determined that aeroplanes would not have “commercial or military utility.”
In light of a spectacular failure of another experimenter, Samuel Pierpont Langley, attempting heavier-than-air flight, the New York Times pronounced in October 1903 that though such manned flight could happen one day in a far-flung future, it would not happen any time soon. “It might be assumed,” said the Times
that the flying machine which will really fly might be evolved by the combined and continuous efforts of mathematicians and mechanicians in from one million to ten million years...
That same year, on December 10, a second New York Timeseditorial stated that such a brilliant enthusiast attempting flight should not
put his substantial greatness as a scientist in further peril by continuing to waste his time and money for further airship experiments. Life is short, and he is capable of services to humanity incomparably greater than can expected to result from trying to fly...
A week later, the Wright brothers made their first flight.
To the dismissals in general, the younger Wright brother, Orville, retorted, “If we all worked on the assumption that what is accepted as true is really true, there would be little hope of advance.”
Of course, in their endeavor to prove it possible for humans to produce heavier-than-air flying machines, imagination was necessary but not sufficient. For what they imagined to manifest as possible, the Wright brothers always had to account for the evidentiary facts of Nature they observed. The reason why the Wright brothers were right. whereas Lord Kelvin and Scientific American magazine and the New York Times were wrong, was that when it came to this issue, the Wright brothers took all the pertinent evidence into consideration much more logically and consistently than did Lord Kelvin, Scientific American, and the New York Times.
What the Wright brothers understood to be “theoretically possible,” at least implicitly, was (a) what they imagined and (b) what they understood to be within the at-least-general bounds of evidence.
Here is a story that is an example of that. To make their first tests on the wings of their contraption, they produced a large kite — the “glider.” The first airplane would have a motor, but, as far as their early experiments were concerned, the glider did not need one. They took the then-motorless glider to Kitty Hawk exactly because its strong winds would carry the glider. In these experiments, they initially relied on “lift tables” provided by another aviation experimenter, Otto Lilienthal.
Lilienthal had experimented on using different shapes for his airfoils — objects to sustain lift in flight, such as wings and tail rudders. The tables were the records he made for the lift-to-drag ratio for each of the various airfoil shapes. Eventually, the Wright brothers noticed major discrepancies between Lilienthal’s lift tables versus their own results. Rather than take the lift tables on faith, the brothers had to admit to themselves that the tables were inaccurate. They therefore had to apply both their imaginations and empirical knowledge to develop their own lift tables.
Their bicycle shop proved fortuitous in this. They built their own small wind tunnel out of wood. A 1-horsepower engine from their bike shop powered a fan that produced airflow. Out of bicycle spokes and hacksaws, they assembled a “lift balance.” Mounted on top of the lift balance would be (1) an airfoil section they intended to test and (2) a flat plate with a surface area equal to that of the airfoil section. As the airflow impacted upon them, the respective torques of the airfoil section and the equivalent-surface-area flat-plate had to be equal to one another. When the respective torques were equal, the Wrights were able to make accurate measurements of lift-to-drag ratio for 48 different airfoil sections.
Observe the need for both logic and imagination even in just these wind-tunnel experiments. The Wrights had to be logical in accepting the faultiness of Lilienthal’s lift tables. They had to be imaginative in devising their own wind-tunnel experiments. And they needed both imagination and logic to understand how this wind-tunnel model would apply to the actual airplane’s flight later on. This smaller part, and the wider project overall, required both logic and imagination.
It was through such empirical observation that the Wright brothers gained further confidence that the flight of an airplane was indeed possible. Orville said, “I believe we possessed more data on cambered surfaces, a hundred times over, than all of our predecessors put together.” Note his mention of data — as in “sensory evidence.” The data came first — and, from it, the Wrights could ascertain what was, and what was not, theoretically possible. Here, we see that, although “theoretic possibility” is permeated with many still-unknowns, it remains within parameters set tentatively by what is known, including that which is recently-discovered.
Four years before the first flight, Wilbur Wright wrote to the Smithsonian Institution asking for information on what had already been tried. His letter touched implicitly upon the basis in evidentiary support for any theoretic possibility. “I am an enthusiast, but not a crank in the sense that I have some pet theories as to the proper construction of a flying machine. I wish to avail myself of all that is already known and then if possible add my mite [own information-gathering]...”
Yes, de facto, the Wright brothers’ approach was Facts come first; then we apply those facts to imagine the possibilities.
As my late father wrote on January 19, 1973, “An idea is not a reality. An idea is a method of perceiving reality.”
It is true that imagination is important. I will argue even that imagination is imperative to logic itself. Any time you recognize a causal relationship — where you recognize that if C happens rather than D it will result in E and not F — you are using imagination. In any instance where you consider future consequences to any action, that is imagination at work. When you read a noun and understand the literal entity that the noun denotes, that understanding, too, involves a form of visualization — that is, imagination. Reasoning cannot take place in the absence of this faculty.
I can be killed by something I eat — I might choke or be poisoned. But the fact remains that eating is for survival. Likewise, although this essay is about how people often use their imaginations to indulge in arbitrary falsehoods, imagination is ultimately the tool for adhering to reality. That is what the Wright brothers teach us.
Yes. Imagination is all about reality. That is provided that one remembers that imagination is necessary but not sufficient for discerning which scenarios count as scenarios of possibility.
The Fallacies in Saying “Maybe Our Sensory Experiences Are a Distortion of Reality, and We Are Ignorant of What Is Actual Reality”
I now want to give special attention to the arbitrary postulate that perhaps everything our senses tell us is a misleading distortion, and that there may be a truer reality that exists beyond our ability to perceive anything. According to this postulate, what our senses inform us is not reality but merely a representation of reality — or, more precisely, a misrepresentation of reality. This postulate is an obfuscation of the very means by which we identify what is a representation or misrepresentation of anything.
To say that R is a representation of Q is to say that R is not literally Q but that R at least symbolizes Q in our minds. Moreover, we know R is a representation of Q because it has enough pertinent similarities in attributes with Q for us to recognize R as representational of it. For instance, we know that a toy truck from the brand Hot Wheels or Micro Machines is not literally a truck. But a toy truck from Hot Wheels or Micro Machines provides enough visual and other sensory cues for us to recognize the toy as a representation of a truck.
Here is a pertinent question. If you present a toy truck to a baby before she has ever seen a real truck, will she recognize the toy as a representation of a truck? She will not. You can recognize R as a representation or simulation of Q no more than the extent to which you have knowledge of what Q itself is like literally.
The same principle applies when we talk of a misrepresentation, or at least a representation that has been found to be inaccurate. Consider how whales are depicted on maps of the Atlantic Ocean that were drawn during the high Middle Ages. Of importance here are some facts about whales that became well-known in the twentieth century. First, whales do not possess scales like those of carp — goldfishes and koi — and the arowana fish. Also pertinent are tail flukes — these are the triangle-shaped parts of the tail fin found on fishes and whales. On whales, the tail flukes are horizontal — there is a fluke on the left and another on the right. By contrast, when a fish has tail flukes, they are more likely to be vertical — there is a fluke on the top of the tail and maybe another on the bottom. Not all fishes have vertical tail flukes, but it is the case that all whales only have horizontal tail flukes.
Now take a gander at a medieval map of the Earth and its oceans, and examine what that map labels a whale. Conventionally, the “whale” will be covered in fishlike scales and sport tail flukes that are vertical like a fish’s, not horizontal. These are inaccuracies in representation. The charitable way to interpret this is that the map’s illustrators labored in earnest and the inaccuracies came from their not having the information about whales that became more accessible from the twentieth century onward. But whatever the cause of the inaccuracies, we know of the representation’s inaccuracies only because we have some knowledge of what actual whales are like.
Thus we discern the illogic in someone saying that all our sensory experiences are no more than a representation of reality, whereas the truer reality is unknown to us. We can discern something as a representation of objective reality no more than the extent to which we have already experienced objective reality directly and thereby gained knowledge of it.
Further, we can discern the even-bigger fallacy in proclaiming that our sensory experiences might be a false representation of an alleged truer objective reality that remains unknown. For us to have a basis in speculating that our sensory experiences might not match reality exactly, once again we would have to know what objective reality is like literally. And yet in this scenario we have already been told that we are wholly ignorant of that very same objective reality.
Conclusion
When someone proclaims, “It’s theoretically possible that all our sensory experiences are deceptive or unreal, and we are in complete ignorance of reality as it truly is,” that proclamation remains wholly arbitrary. And it is to be written off as such.
In sum, the existence of entities and the facts associated with them are primary, and to discern what is theoretically possible for those entities is contingent upon those facts. That is why, just because you can imagine something happening, that is not sufficient for calling it a “theoretic possibility.”
On Friday, August 4, 2023, I added the part about Scientific American magazine.On Monday, August 7, 2023, I added the paragraph about how, subsequent to ruling in a theoretic possibility with the evidence we had at the time, C, we are justified in ruling out C as a possibility upon our discovering further evidence that precludes it. That same day I embedded the YouTube video about how many animals were represented inaccurately in the European-authored bestiaries of the high Middle Ages. On Sunday, June 2, 2024, I added the quotation from my father. On Saturday, September 7, 2024, I added the case study of what the Wright brothers did about the lift tables. The sentences where I use the word literally were added on Friday, December 27, 2024. On Monday, December 30, 2024, I added the sentences about how imagination is actually a tool for living in reality, provided that one continues to adhere to the rules of logic. On Sunday, June 29, 2025, I added the passages about William Blake.
America’s billionaires are rich in their finances and poor in reputation. They have not been getting good press lately.
For much of the past few decades, the common attitude in America was that it is morally permissible to become a billionaire as long as one “gives back” in the form of philanthropy. That was the attitude formalized in The Gospel of Wealth penned by the richest man of its day, Andrew Carnegie. But over the past several years, the debate has shifted to whether it should be legal for any entrepreneur to become a billionaire at all.
Heralding this change was a January 2019 interview that left-wing writer Ta-Nehisi Coates conducted with then-freshman U.S. Sen. Alexandria Ocasio-Cortez. “Do we live in a moral world [if it is one] that allows for billionaires?” Coates asked her. “Is that a moral outcome?”
“No, it is not,” she replied. For this, she received uproarious cheers and applause.
She went on, “I do think a system that allows billionaires to exist — when there are parts of Alabama where people are still getting ringworm because they don’t have access to public health — is wrong.” Here she insinuates that an entrepreneur possessing billions of dollars’ worth of wealth somehow contributes to those Alabamans being too poor to receive adequate protection from, and treatment for, ringworm.
Sen. Ocasio-Cortez’s answer made headlines. It became apparent that many people in the United States and other countries agreed wholeheartedly with it. Almost as famously as his boss, AOC’s policy advisor and senior counsel Dan Riffle was quoted throughout the media proclaiming, “Every billionaire is a policy failure.”
Still more notorious than AOC is a man with seniority over her in the U.S. Senate, Bernie Sanders of Vermont. “There is something profoundly wrong,” he shouted in his announcement for his 2016 presidential run, “when in recent years, we have seen a proliferation of millionaires and billionaires [actually, ‘MILLIONAYAZ AND BILLIONAYAZ’] at the same time as millions of Americans are working longer hours for lower wages and we have shamefully the highest rate of childhood poverty of any major country.”
Note the implication here — as with Sen. Ocasio-Cortez — that the “lower wages” and “child poverty” are at least partially caused by this “proliferation of millionayaz and billionayaz.”
That billionaire entrepreneurs have such an unflattering image can be seen even in attempts to compliment them. Such can be gleaned a video essay by pop-culture commentator Lindsay Ellis. Despite her overall sympathies for the anti-capitalist message of the computer-animated movie adaptation of Dr. Seuss’s The Lorax, she found herself vicariously embarrassed that it was presented in such a ham-fisted manner. In a gesture of perfunctory evenhandedness, Ellis states what she apparently considers to be the strongest argument in favor of for-profit commerce: “...corporations employ people and make us stuff — not useful stuff, but stuff.”
The triteness of her evaluation would not be so concerning, except that it seems even many of the most prominent “defenders” of free enterprise tacitly agree with this characterization. The best that can be said of market economics, it is believed, is that businesses “make us stuff,’ stuff that is “not useful.” The run-of-the-mill defense of capitalism is that it incentivizes the production of “stuff” much more effectively than do the State-owned enterprises of socialism. Socialism might manufacture not-useful stuff, but capitalism elicits much more competence in the assembly of not-useful stuff!
And as entrepreneurs become billionaires by hawking this not-useful stuff, we are told, these same entrepreneurs add to “child poverty” and Alabamans “still getting ringworm” by hoarding all the wealth and resources for themselves.
As Ocasio-Cortez added in 2020, the billionaires “made that money off the backs of single mothers, and all these people who are literally dying because they can’t afford to live.”
Human beings are “literally dying” for the reason that billionaires “made that money”? It is no wonder their legacy is tarnished.
Yet there is more to this story. Uğur Şahin and Özlem Türeci — the scientific married couple who cofounded BioNTech of Germany — became billionaires from developing the first existing COVID-19 vaccine. Noticing this, entrepreneur Louis Anslow tweeted out a Time magazine cover featuring these two, and asked in his tweet, “Are you sure no one deserves to be a billionaire?”
Anslow’s is a worthwhile question. To explore it, this essay comes in two parts. Part One ascertains that there is indeed more that can be said for capitalism and entrepreneurial billionaires than that they “make us stuff.” That many of the free market’s putative advocates tacitly agree with Lindsay Ellis’s belittling of capitalism’s benefits can be inferred from what they have omitted from their “pro”-capitalism statements. What they refrain from stating plainly is that free enterprise — more than any other sort of political economy, socialist or otherwise — has provided the freedom and impetus for innovators to save, lengthen, and enhance human lives. Not just about making us “stuff,” capitalism saves lives. And that is the point that capitalism’s so-called proponents should be emphasizing. If capitalism’s lifesaving nature were obvious to most people, not even an ideologue such as Lindsay Ellis could have been so confident in stating, as a generally accepted platitude, that capitalism is all about producing “stuff” that is “not useful.”
Hence, Part One is a series of over seventeen case studies of this principle in action. Where they are available, the estimated number of lives that a for-profit enterprise saved shall be enclosed. Most of those case studies involve pharmaceuticals and medical devices, but there are other examples that are far less obvious. Electric heating, air conditioners, and even lasers save lives. It was capitalism that facilitated the invention, production, and adoption of these technologies.
To Part One, a detractor can reply, “Yes, that entrepreneurs produce medical devices is nice. But as the Earth consists of a fixed quantity of nonrenewable natural resources, it follows that one person owning a billion dollars’ worth of resources means there is less for everyone else. In that respect, if someone invents a life-saving medical device and gains a billion dollars from that, a billion dollars’ worth of resources all going into the possession of this one man still adds to other people’s poverty and the premature death that it brings.”
Such an assumption fails to understand the actual nature of wealth — economic value — and its origin. Consequently, Part Two considers the prospect that there is no inherent limit to the amount of economic value to benefit human beings. Further, insofar as citizens are free and peaceful with one another, someone gains ownership over a billion dollars’ worth of resources to the extent that she created economic value that was of at least that much worth to others. Part Two also summarizes how capitalism contributed to boosting living standards overall, sometimes even in the poorest countries where the government allows for relatively little capitalism. Whereas Part One focuses on specific inventor-entrepreneurs whose efforts have saved lives, Part Two ends with a summary of how peaceable commerce, in total, saves lives on an international scale.
With that, we take a journey into the past two centuries of entrepreneurship and its lifesaving.
PART ONE: PROFILES OF LIFESAVING FOR-PROFIT ENTERPRISES | ^
Creativity in the Age of COVID | ^
The married couple of scientists, Uğur Şahin and Özlem Türeci, co-founded BioNTech in Germany and partook in a joint venture with the USA’s Pfizer to develop the USA’s first vaccine for COVID-19, one that is an mRNA vaccine. Various attempts have been made to attribute this success more to taxpayer funding than to the couple’s initiative. President Donald Trump tried to take credit for BioNTech’s achievement, proclaiming that it came from Operation Warp Speed, his administration’s program to provide federal funding to synthesize such a vaccine. Yet BioNTech and its American collaborator, Pfizer, did not receive money from this program.
Other parties have said that BioNTech owes its success €375 million (the equivalent of 425 million U.S. dollars) to BioNTech is what should be credited. Yet this grant was made in September of 2020. As Johan Norberg points out, BioNTech’s vaccine had already gone into Phase III clinical trials five months earlier. The actual R-and-D that went into the specific vaccine’s creation did not come from a national government.
Nor was the federal government particularly enthusiastic about the work of the academic biochemist who laid the foundation for such mRNA vaccines, Katalin Karikó. Her role in lifesaving did not net her the billions it did for her BioNTech employers Sahin and Türeci, but it did earn her millions. Moreover, her experiences should be a revelation to those of us who assume that nonprofit academia is generally more open to new ideas than are supposedly greedy for-profit corporations.
In the 1980s, Dr. “Kati” Karikó suffered under communism in her native Hungary. She and her loved ones had to escape. When she and her family came to the USA to start anew, they had no more than what she got from selling her car — the equivalent of $1,200, which she concealed inside her daughter’s teddy bear.
In 1990, the potential of mRNA vaccines had entranced the Hungarian emigrant, now at the University of Pennsylvania. To familiarize a patient’s immune system with the sort of virus that it had to fight, a more-conventional vaccine introduces the immune system to a dead or weakened version of the virus or just a piece of it. By contrast, the vaccines that interested Dr. Karikó would carry chemicals consisting of special instructions for the immune system. These instructions were a “message,” making the vaccine a “messenger” — the m in “mRNA.” The mRNA would instruct the immune system on how to construct its own copies of pieces of the virus. The constructs from within the body would acculturate the immune system with the attributes it needs to recognize in the virus to be targeted. Once the immune system comes into contact with the virus in actuality, it is equipped to identify the virus and pulverize it.
But much of the initial hopefulness over mRNA vaccines dwindled among academicians. When they were injected into laboratory mice, it triggered immune reactions so virulent that it killed the rodents. Dr. Karikó wanted to uncover the cause of this over-inflammation and rectify it. Yet hardly anyone else shared her enthusiasm. The grant proposals she wrote were denied consistently. Eventually in 1995, her department threatened to fire her if she did not accept a dock in pay and a demotion to adjunct professor. And this ultimatum coincided with her receiving a cancer diagnosis.
Dr. Karikó accepted the indignity of that demotion as she battled her cancer. Collaborating with her UPenn colleague Drew Weissman — whom she met as they both rushed to use a university photocopy machine — she searched for answers on what the difficulty was.
An experiment from 2005 brought one such answer. For the control sample, Karikó and Weissman provided tRNA (transfer RNA) to mice. The mice from the experimental sample received mRNA and, as usual, suffered the anticipated life-threatening inflammation. Yet the mice getting the mRNA were fine. The distinguishing factor came down to a single molecule, uridine, which was in the tRNA but not the mRNA. When a mouse’s immune system encountered tRNA, the presence of uridine signaled to the immune system to accept the tRNA as if it were something from the host’s own body. By contrast, on account of uridine’s absence from mRNA, the mouse’s immune system interpreted the mRNA as a foreign intruder — much like a virus itself — and this instigated the immune system’s overreaction.
To determine if this could be corrected, Karikó and Weissman conducted yet another experiment. This time around, they inserted a synthetic protein called pseudo-uridine — which is similar to uridine — into the mRNA. As hoped, the pseudo-uridine in the mRNA proved to be an adequate substitute. Against the odds, Karikó and Weissman had rendered mRNA vaccines safe for mice and humans alike.
Karikó and Weissman got their results published in the medical journal Immunity. Other than that, the rejection from academicians continued. They were still turned down for grants. It was the for-profit BioNTech and its rival, Moderna, which expressed interest in the results.
In 2013, Dr. Karikó pleaded with her UPenn department to restore her faculty position. She recounts that her superiors “told me that they’d had a meeting and concluded that I was not of faculty quality.” Having had enough, she informed her department that she would accept BioNTech’s offer to become the company’s senior vice president. There, she would try to apply the information she gathered. These university bureaucrats laughed at her and then cracked, “BioNTech doesn’t even have a website.”
Those smug university administrators are not laughing now. Dr. Karikó patented her work, licensing it to both BioNTech and Moderna.
She says she now has a net worth of around $3 million. That is far less than what the company’s cofounders have, but when it comes to justice for this woman, it is a start.
And Şahin and Türeci are not the only scientists to have become billionaires from producing and providing a COVID vaccine. The same happened to figures associated with Moderna as well, mostly from the appreciation of the shares they had purchased at the company’s founding.
Among those to gain a billion from such appreciation is the company’s president, Stephen Hoge. A medical doctor, he was also hands-on in leading the R-and-D team that assembled the vaccine with longtime experts from academia, Barney Graham and Jason McLellan. Consistent with Dr. Karikó’s discoveries, Moderna was able to have the messenger RNA synthesize pieces of the virus. But there was still one crucial piece for which another technique was imperative. This was the spike protein with which SARS-CoV-2 enters human cells.
Hoge had the team apply the proposal of McLellan and Graham that when it came to getting the immune system to guard against SARS-CoV-2’s spike protein, it was sufficient to introduce to the immune system a substitute that was similar enough. That came from the MERS virus (Middle East Respiratory Syndrome), which McLellan and Graham had studied for years.
Three of the other people whom Moderna had made into billionaires were early investors. Very prominent among them is Moderna’s chair, Noubar Afeyan.
Afeyan is, like Uğur Şahin, an immigrant to the West from a Muslim-majority country. Had modern nationalist movements prevailed in their stated objectives, and no immigrants from Muslim-majority countries were able to reach the West, it would have reduced the likelihood of the world having available this weapon against the pandemic.
Trained in chemical engineering, Afeyan coauthored numerous academic papers. He is named as an inventor or co-inventor on over 100 U.S. patents. These often involve new processes to be implemented in the biomedical sciences. His experience in biotechnology and pharmaceuticals has given him insight on which firms and projects in these industries will make for promising investments. Through his venture capital firm Flagship Pioneering, he became Modern’s principal shareholder.
Timothy Springer was another one of those initial investors who placed cash directly into Moderna. As Forbesreports, “Springer was a founding investor of Moderna in 2010, when he put about $5 million into the company. Now, a decade later, that initial investment is worth nearly $870 million.” Langer as well, saysTime magazine, was “one of the first” of Moderna’s direct funders. And even before their investments in Moderna, Timothy Springer and Bob Langer engaged in commercial ventures that improved health and human life.
In his early career as a researcher, Springer made important discoveries about integrins. As the Wall Street Journalexplains, “Integrins snare immune cells from the bloodstream and shuttle them to the site of an infection or injury. In autoimmune disorders, they traffic immune cells that attack the patient’s own tissue.” Springer spearheaded the commercial development of drugs to block the integrins that cause one such autoimmune disease, inflammatory bowel syndrome. He also guided the commercial development of drugs based on findings from colleagues who had partnered with him. Herman Waldmann discovered the antibody, alemtuzumab (CAMPATH-1). Springer founded the firm LeukoSite to license Waldmann’s antibody to treat multiple sclerosis — often a cause of life-threatening complications — and leukemia.
Robert Langer got his start in healthcare as the protégé to a medical researcher who, like Kati Karikó decades later, would long endure as an outcast for contradicting the establishment and for pushing back on the prejudice against commercialization. In 1962, Harvard Medical School surgeon Judah Folkman arrived at the theory of angiogenesis. Per this theory, tumors attract blood vessels to themselves and, from this tissue, form their own vessels through which blood flows to nourish the tumors. Folkman concluded that if he could cut off their blood supply, he could weaken or kill the growths. Rather than acclaim for this eureka moment, Folkman was met with ridicule. Folkman having surgery as his specialty, his theorizing about cancer apparently had other academicians reacting as if he were intruding on the disciplines of others.
As it was with Dr. Karikó, Folkman went for years with no luck in obtaining research grants. Then in 1974, he won a ten-year grant of $23 million from Monsanto Corporation on the understanding that the company would have first crack at commercializing any practical medical applications that could be divined from his findings. This was the first instance where Harvard allowed a faculty member to submit a patent application. Dr. Folkman received several patents, and the commercialism antagonized his detractors all the more.
To test his theories, Dr. Folkman looked for some tool to deliver adequately the chemicals that would go into a tumor and destroy its blood vessels. Here he received the assistance of Robert Langer, then a graduate student working under him at Children’s Hospital Boston. The promise was in Langer’s artificial polymers, such as Silastic. A major difficulty in healthcare is the administering of a drug in the proper dosage on a proper schedule. Langer placed a drug inside of a polymer casing that would then go into the patient’s body. By intention, the casing had many pores through which the drug would travel slowly as it made its way through the body. The drug would finally be released upon reaching the outermost pores. Langer designed the casing so that the proper dose of the drug would exit the casing and enter the patient’s organs at the proper rate.
Folkman had to run numerous experiments before settling on particular drugs and the proper dosages for them. In different tests, Langer’s polymer casing released the chemicals at different rates for study. Several drugs today are on the market that cut off the blood supply to tumors, a result of Folkman and Langer’s work.
Afeyan, Springer, and Langer took the millions of dollars they had earned from their prior lifesaving work and plunked these sums down into Moderna at its inception. The cash went to procuring for Hoge and his team the equipment and other resources that went with running the experiments whereby they developed their mRNA vaccine in competition with BioNTech’s.
Are the contributions of Şahin, Türeci, Hoge, Afeyan, Springer, and Langer to the commercial development and distribution of COVID vaccines enough to make them deserving of their respective billion-dollar fortunes? A team led by Alison Galvani of the Yale School of Public Health found that from January to November 2021, COVID vaccines had already saved 1.1 million lives in the United States. Likewise, data from 33 European countries evince that between December 2020 and November 2021, the vaccine saved a total upward of 469,000 people in these countries who were already above the age of 60.
Someone who was not integral to the formulation of this vaccine, but who was nevertheless helpful on COVID, is someone who already had over $100 million. That would be Jonathan Rothberg, the creator of an improved at-home kit whereby people can test if they have COVID and receive the results within one hour.
Rothberg first gained renown for combining his expertise in both biology and information technology. He thereby made a splash in “biometrics” — to take a reading of someone’s health by having the effects of her body be inputs scanned by a machine into its computer that interprets and processes the data. This is crucial to discerning the genetic sequence of a human being or any other lifeform.
In the 1970s, Fred Sanger needed four years to sequence the genome of a virus As the twentieth century transitioned into the twenty-first, scientist-entrepreneur J. Craig Venter and his rivals at the federal government’s Human Genome Project spent eighteen years on drawing a generalized map of the human genome. As of this writing, it now takes two days to gain a more accurate model of a specific person’s DNA sequence. Innovations on Rothberg’s part contributed to that final development. And once your DNA is sequenced, it becomes easier to identify the heritable diseases for which you are most at risk. According to an important chart by the firm Aperion Care — one the World Economic Forum featured on its official website, and which we shall discuss further later — this gene mapping saves five million lives annually. Work on this matter accounts for the affluence that Rothberg earned in the earlier portion of his career. Through his prior map of the human genome, Craig Venter cultivated a fortune as well. The New York Timesannounces, “He estimates that his net worth is in the tens of millions of dollars, even after giving more than $100 million” in shares of his companies “to endow his research organization, which is now called the J. Craig Venter Institute.”
By the spring of 2020, Rothberg then found himself concerned about COVID’s spread. There were two ways for technicians to determine if someone was carrying the virus. The more accurate method was the PCR test, and it took days for its results to come out. Given the relatively long wait, someone’s results could come back negative by the time that she went out again and contracted the virus after all. The other testing method involved antigens. The results of these tests could arrive in a day but their accuracy was often questionable, missing over one out of five positive cases.
Already a multimillionaire by then, Rothberg sought to place the quick response of the antigen tests together with the greater accuracy of the PCR ones. The team he assembled had formulated what was known as PCR-like molecular test. This new test could deliver accurate results within the hour. Starting in November 2021, Rothberg made these tests available to households, pricing them at fewer than $60 per unit.
As COVID’s Omicron variant spread throughout the world, Rothberg’s product became especially sought-after. And noteworthy about Rothberg’s efforts is how they undermined a form of symbolism that has long been exploited to denigrate capitalism. The giant yachts owned by the world’s richest citizens are frequently cited as physical representations of billionaire decadence. As Sen. Ocasio-Cortez would have it, people are “literally dying” from being deprived of the same resources with which billionaires gift themselves needless toys such as these. Yet Rothberg’s “superyacht” played a grand role in his lifesaving.
Rothberg and his children were sailing when the lockdowns of March 2020 began. Fortunate for everyone, Rothberg has his own laboratory on this vessel. From the lab of the yacht where he quarantined, and relying heavily on telecommunication, Rothberg marshaled his team of scientists, engineers, and technicians in bringing his accurate, rapid-result COVID test into reality. This yacht owner’s initiative is a great addition to the work of those who brought us COVID vaccines.
Uğur Şahin, Özlem Türeci, Stephen Hoge, Noubar Afeyan, Timothy Springer, and Robert Langer helped create a product and service that saved over a million lives and, in turn, each became a billionaire. I consider that justice. And this is far from unique when it comes to healthcare companies in particular and to capitalism in general.
Yet such an idea sounds strange to the general public. The common interpretation is Ocasio-Cortez’s: masses of people are “literally dying” because businesspeople “made that money”. Big Tobacco, which sells snack food as well, hooks its victims on nicotine. We are told that the billionaire Sackler family knowingly pushed senior citizens to become addicted to opioids. Even the bestselling self-help guru Robert J. Ringer, who has publicly praised Ayn Rand and free-market economics, approvingly quotes a “friend” in pronouncing that “the greatest mass murderer in history” was not “Adolf Hitler” or “Joseph Stalin” but “Ray Kroc.” Ringer blames the McDonald’s maestro for putting out hamburgers that that “succeed year after year in piling up impressive fatality numbers that would make run-of-the-mill serial killers envious.” The reader may therefore be surprised that abuses are the exception. It is shameful that Lindsay Ellis can go unchallenged, for years, in her assumption that the best that can be said of capitalism is that enables corporations to “make us stuff — not useful stuff, but stuff.” She should have been asked immediately whether she considers pharmaceuticals and medical devices to be “useful stuff.”
The remainder of Part One of this essay shall provide case studies of for-profit initiatives saving lives and enriching the entrepreneurs in the act. Most of these case studies involve pharmaceuticals or medical devices, but not all. Part One also gives examples of entrepreneurial innovations that are probably not so obvious in their lifesaving qualities. Not all of the entrepreneurs named have become billionaires; some of them did not even become millionaires by the standard of their time. However, all of them did attain financial successes by the standard of their era. And in all instances was it that commercialization was crucial to the lifesaving.
When it comes to projects that tally the number of lives saved by inquiries like Dr. Karikó’s, or by other products, there are two that are especially helpful. One is a project started by science journalist Billy Woodward. It began as a nonfiction book of his, Scientists Greater Than Einstein, which profiled several scientists and their lifesaving discoveries. He employed a statistician to tabulate the number of lives saved by each discovery. Woodward then created the website ScienceHeroes.Com to promote the book.
Noticing that there are might have been discoveries and innovators that his book might have missed, Woodward continued researching and hired other experts to advise him. Sure enough, he was right. There were other wonderful accounts of history he had not known before, and he updated the site frequently to incorporate this new information.
The other illuminating project arrives from the health company Aperion Care, introduced in a web post by employee Heather Levine. This project tallies the number of life saved by various technologies. This index was cited by Jeff Desjardins for his website Visual Capitalist. This information so impressed experts that they had Desjardins’s essay on it reproduced on the official website of the World Economic Forum (WEF). In spite of the WEF’s founder speaking disparagingly of “neoliberalism” as a foil to the “stakeholder-based corporate social responsibility” that he prefers, this information on the WEF website gives a flattering impression of the creativity that “neoliberalism” fosters.
In the essay you are currently reading, the numerical figures on lives saved by specific drugs or medical devices are usually sourced to ScienceHeroes.Com. As for the figures on lives saved by other inventions, most of them come from the World Economic Forum’s write-up on the Aperion Care estimates.
Patrick and Paclitaxel | Patrick Soon-Shiong and His Cancer Drug |^
Another lifesaving billionaire is Patrick Soon-Shiong, M.D. This story might seem, at first glance, to be one of taxpayer funding being the lifesaver. But soon Soon-Shiong arrives to provide the twist.
This tale began with the federally funded National Cancer Institute dispersing grants for the promising research of Monroe Wall and Mansukh Wani. From the bark of the Pacific yew tree, they derived the chemical that could be applied to treat cancer patients undergoing chemotherapy. Under the brand name Taxol, this chemical eventually went under the scientific name of just “paclitaxel” or “sb-paclitaxel.” This may initially seem an example of the superiority of government-directed investment over private enterprise, but the “sb” in “sb-paclitaxel” — sb for “solvent-based” — alludes to the difficulties with this treatment. On account of the complications with sb-paclitaxel, various scientists and businesses sought improvements over the drug. One was docetaxel, isolated by Pierre Potier in France. However, docetaxel presented similar problems.
To be administered in chemotherapy, sb-paclitaxel and docetaxel must be dissolved in a liquid called Cremator EL. Unfortunately, this solvent is toxic and impedes upon the patient’s ability to tolerate the medication. The patient must therefore consume other strong drugs, such as corticosteroid and antihistamines, to reduce the nausea that comes with either of these solvent-based taxanes.
This was where Patrick Soon-Shiong entered the scene. A medical doctor originally from South Africa, he had a bitter falling out with his brother and other investors over medical ethics. In 1985, Patrick’s brother and the investors tried to pressure him to perform a surgical operation under conditions that he considered unsafe for the patient. I previously blogged about this.
Patrick told interviewers in 2008, looking back, that the investors told him he should go ahead with the procedure and he will be penalized with nothing more than “a slap on the hand from the FDA.’ And I said, ‘No, that’s not all I’ll suffer. We’ll put patients’ lives at risk and I will not do it.”
Patrick was adamant. His brother and the other investors responded by suing him. Following that dispute and his move to the United States, the surgeon turned his attention to paclitaxel.
Patrick Soon-Shiong originally wanted to find a method for administering paclitaxel without the need to dissolve it in Cremator El. He looked to albumin, a chemical already found in the human body, being the most prominent protein in blood plasma. At the microscopic level, the doctor wrapped the paclitaxel inside an “envelope” of albumin. The paclitaxel was therefore administered to the patient inside this albumin “envelope.” Scientifically, this treatment went by the name of nab-paclitaxel — the NAB being for “Nanoparticle Albumin-Based.”
Although Soon-Shiong mostly wanted to make paclitaxel easier for patients to tolerate, it came with a fortuitous additional benefit. This new version, Hwaryeon Lee and company report in the journal Nature, turned out to be “more effective than the conventional solvent-based (sb) paclitaxel in the treatment of metastatic breast cancer.” In trials, the nab-paclitaxel outperformed the conventional sb-paclitaxel in the rate at which the metastatic breast cancer could be controlled and in terms of the patient’s ability to survive without the cancer progressing. William J. Gradishar and colleagues found in 2006 that metastatic breast cancer patients who received nab-paclitaxel even had almost double the overall response rate than did those receiving the conventional sb-paclitaxel. And Hwaryeon Lee and company add that the patients receiving the nab-paclitaxel also had a longer overall survival rate than those receiving the other alternative, docetaxel.
Soon-Shiong patented nab-paclitaxel and marketed it under the brand name Abraxane. The extent to which this drug outperforms conventional paclitaxel is the extent to which this man’s private and for-profit initiative saved additional lives. And this lifesaving made Soon-Shiong a titan of commerce. As of this writing, his net worth is $7 billion.
Soon-Shiong’s success in light of his refusal to perform that dangerous operation all those years ago highlights an important principle. The common assumption is that someone’s profit-seeking goes with a flagrant disregard for the well-being of other people. On that premise, one would assume initially that Soon-Shiong was sacrificing a profitable career when he refused to put that patient’s life at risk. Yet the truth is the opposite — malpractice on Soon-Shiong’s part would have damaged his credibility. Potential patients and later clients would have wisely avoided him, impeding on his moneymaking ability. It was to the very extent that he looked out for the best interests of patients that Soon-Shiong was able to win trust and build his company.
Hooray for Herbert | Herbert Boyer, David Goeddel, and Genetically Engineered Insulin | ^ Soon-Shiong is impressive, but the premeir story of a for-profit venture producing lifesaving medicine is that of Genentech The company’s ascension began in the 1970s. Academic biologists such as Stanley Cohen had found that by exposing a strand of DNA to particular enzymes and viruses, they could splice off a section of DNA from one spot and preserve it. Cohen collected many separated DNA strands in this manner, but did not yet know what to do with them. Meeting another academic biologist, Herbert Boyer, at a conference in my home state of Hawaii, the two planned an experiment in 1972 on whether they could attach one DNA strand to another. They removed a DNA strand from an E. coli bacterium and, in its place, inserted a strand from an African clawed toad. They did not know what the outcome would be.
Not only did the bacterium accept the toad DNA as part of its own; it replicated that DNA strand in its own cell division.
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This was the first documented instance of human beings succeeding in a conscious effort to splice one species’ DNA into that of another, a practice that came to be known as transgenics. In the case of the bacterium replicating toad DNA, Boyer and Cohen had discovered a lower-cost method of putting bacteria to work in mass producing the DNA of species of far greater cellular complexity.
Venture capitalist Robert Swanson recognized the commercial potential for such a system of manufacture. In 1976, he approached Boyer about starting a company together, and Boyer put in an initial $500. By 1980, Boyer and Cohen would patent their more-generalized method of gene splicing. According to the conventional policies of academic institutions of the United States, Boyer and Cohen had to share this patent with the school that provided the facilities in which they conducted their research, the University of California at San Francisco. They did not anticipate that by the patent’s expiration in 1997, it would generate a total $200 million in royalties for the institution.
With the zeal of true believers, Boyer and Swanson started “GenEnTech” — an abbreviation of the GENetic ENgineering TECHnology that they would employ. On the other side of the continent, Massachusetts scientists led by Kenneth Murray and Harvard’s Walter Gilbert — the same man who helped Fred Sanger sequence a virus’s DNA — formed their own rival firm, Biogen. The two companies set about in a race on which could be the first to apply the new recombinant DNA technology to the production of insulin.
Prior to any biotech solution, insulin had to be harvested from the pancreases of barn animals. Starting in 1923, two tons of hogs had to be slaughtered to extract a mere eight ounces. Even in 1972, seventy pigs had to be killed to supply a diabetic for a year. And because this insulin came from a different species, there was always a risk of the human body rejecting it.
Boyer thought there had to be a better technique. He and Robert Swanson set to task their company’s first hire, David Goeddel. Goeddel knew the sequence of nucleotides — G, C, A, and T —comprising the human genes that produce insulin in the pancreas. He pieced together the DNA strand synthetically and inserted it into the E. coli bacteria. It worked. Once again, the bacteria mass-produced the desired gene. Genentech patented its method and licensed it to the drug manufacturer Eli Lilly. When Genentech’s shares went public in October of 1980, the original investment by Boyer of $500 had become a $37 million personal fortune.
Not everyone was impressed. For biologists to apply their academic findings to commercial pursuits was much more frowned upon in that time. Colleagues thought that something as noble and idealistic as pure science should not be defiled by an influence as base and crass as moneymaking. Two months after Genentech’s IPO, Boyer toldTime magazine that he judged that having a for-profit corporation apply his research findings was more helpful in treating disease than in expecting academia to do it alone. In his mind, “Business is more efficient. It will bring benefits to the public much faster.” In 2003, Boyer further reflected on this damage to his reputation, “There comes a point in a man’s life when he knows not everybody loves him — being accused of being greedy. But, you know, that’s way in the past. It doesn’t bother me anymore. But it was tough at the time. It was difficult to deal with.”
David Goeddel would also use bacteria to produce human tissue plasminogen activator (tPA) in 1982 — a protein the human body applies to break down blood clots. But he eventually left Genentech. The respect redounding upon him for his creation of bacteria-made human insulin made it easier for him to raise capital to start his own companies. One of those companies — Tularik, cofounded in 1991 — he would sell to Amgen in 2004 for $1.3 billion.
William McGinnis, a former molecular biologist of the University of California at San Diego, evaluates, “Dave is a hero. He’s made a huge difference in a lot of people’s lives. Over the decades, I’m sure it’s hundreds of millions.”
And, as a result, Goeddel has had access to hundreds of millions of dollars.
According to Aperion Care, insulin has saved 15 million lives. Insulin had already been saving lives for over four decades prior to Goeddel’s techniques. Still, what Goeddel achieved at Genentech has made a contribution somewhere to that 15 million.
The Creation of CRISPR | Jennifer Doudna, George Yancopoulos, and Gene Editing | ^
Since then, the exciting opportunities in biotechnology have expanded. The gene-splicing method of CRISPR takes advantage of a protein from bacteria called Cas9. Viruses such as bacteriophages prey upon bacteria, and bacteria have hence evolved their own immune systems to protect them. The chemical Cas9 is a weapon whereby the bacteria slice viruses into separate pieces, neutralizing the threat they pose.
A team at U.C. Berkeley led by Jennifer Doudna demonstrated that Cas9 can be employed to slice strands of human DNA in specific places. The precision of Cas9 renders the 1971 method of Herbert Boyer and Stanley Cohen crude by comparison.
Various life-threatening diseases are caused by inherited genes. Such illnesses include sickle-cell anemia, cystic fibrosis, and Huntington’s disease. CRISPR can be employed to enter someone’s DNA and edit out the sequences that cause these illnesses to manifest. Although Dr. Doudna has stated that she refuses to go so far, it is even theoretically possible to edit such inheritable diseases out of an embryo. Once the embryo grows into an adult human being and has children of her own, there would be a substantially reduced risk of her own children and descendants inheriting that same genetic disorder. One generation inheriting the CRISPR-edited improvements of previous generations has been dubbed “germline genetic engineering.”
To commercialize medical treatments developed from CRISPR, Jennifer Doudna co-founded Caribou Biosciences with a former graduate student who worked under her, Rachel Haurwitz. Anticipating the profits to be made from the lifesaving treatments to be fostered, investors have driven up demand for shares in this publicly traded corporation. As of this writing, Caribou’s market capitalization — the total dollar value of all the company’s shares — happens to be $600 million. As Dr. Doudna owns 4.19 percent of the company, her fortune comes to $24 million. The single largest shareholder is Dr. Haurwitz at 6.09 percent, which is over $36 million.
Other good work continues with a scientist with whom Dr. Doudna has sometimes collaborated, George Yancopoulos. A recurring problem is that when medical scientists conduct tests on mice by exposing them to any particular substance, the mice are usually a model for how that same substance will affect human beings. Yet the immune system of a mouse, as a default, has significant differences from that of a human. Hence, what works in mice will not always work in humans. George Yancopoulos’s idea is to alter the mice themselves so that their immune systems will be more similar to those of human beings. This is his ongoing project at the company Regeneron.
Yancopoulos has earned over 100 U.S. patents, and his work as the chief of research and development at Regeneron Corporation has won the confidence of investors. Similar to what Jennifer Doudna has done for Caribou, the potential of the applications of Yancopoulos’s insights has driven demand for ownership in the company. The price of Yancopoulos’s stake has soared, making him the first corporate R-and-D head to attain the status of billionaire.
The collaboration of Regeneron with a company in which Caribou Biosciences holds a 21.9 percent stake, Intellia, has already saved lives. Patrick Doherty inherited a rare degenerative nerve disease called transthyretin amyloidosis. Under this condition, a protein in the body destroys the nerves in the hands and feet of sufferers, crippling and ultimately killing them. In an experiment funded by both Regeneron and Intellia, Doherty and five other patients had their genomes altered by means of a CRISPR technique that Regeneron and Intellia have refined.
This procedure was one of doctors inserting billions of nanoparticles into the patients, each nanoparticle designed to trigger the CRISPR gene-editor. Once the nanoparticles entered the patient’s liver, the nanoparticles activated the gene-editor. Cas9 sliced apart the DNA inside the liver that was producing the destructive protein. The patients have thus shown significant improvement.
Yancopoulos and Doudna take this as empirical evidence that CRISPR can indeed be employed to mitigate much-more-common genetic disorders.
And there are many other instances of for-profit undertakings resulting in lifesaving medicines. There is Dr. Paul Offit making $6 million for co-producing the rotavirus vaccine that saves 1.46 million lives every two years. There is also David Hamilton Smith co-producing a vaccine to prevent meningitis and starting his own company to market it. That vaccine would save 5 million lives and Smith’s company would sell for $232 million.
Capitalism Does Have a Heart | Wilson Greatbatch, C. Walton Lillehei, and Implantable Pacemakers | ^
Medical treatments such as vaccines, cancer drugs, and genetically engineered insulin are not the only lifesavers. Medical devices matter as well. Cardiac patients have benefited greatly from the feats of C. Walton Lillehei, Earl Bakken, Manuel “Manny” Villafaña, and Wilson Greatbatch.
Lillehei was a cardiac surgeon who dreamed of performing various new types of operations. But the technology that would allow him to do this in a manner safe for the patient did not yet exist. In the 1950s, he therefore sought out help to create it.
One issue with cardiac surgery was that to operate safely on the heart, the surgeon had to cut off its blood flow — the very same blood flow that had to continue in order for the patient to stay alive. The maneuver by which get around this seeming Catch-22 was for an object outside of the patient’s chest cavity to act as a temporary substitute performing the functions normally performed by the heart and lungs. Lillehei theorized that this object should be another person. This would be an anesthetized “donor” temporarily donating his or her own body, whose heart and lungs would be pumping blood and oxygen for two people instead of one as the procedure commenced. This was to be known as “extracorporeal” — outside-the-body — “circulation” of the blood “by cross-circulation.”
In the first such experimental surgery in 1954, Lillehei operated on a little boy with the boy’s father in the room being the donor. The first several surgeries caught the medical community’s attention, but the procedure would always be dangerous. Still, the precedent Lillehei set inspired other innovators to search for improvements.
Lillehei intended for his method to be an alternative to what was still an even riskier one — John Gibbons’s heart-lung bypass machine. Here, during the operation the patient would be attached to a giant machine — one bigger than the patient and occupying much of the room — that would be doing the work of the heart and lungs. Fortunately, another loner named John Kirklin made significant improvements upon this contraption, especially shrinking it down.
For Lillehei’s part, he continued refining as well. With Dr. Richard DeWall, he introduced the first clinically successful bubble oxygenator in such an operation. This was a device that helped the patient continue to receive enough oxygen, and it was used for decades until replaced by the membrane oxygenator in the 1980s. And Lillehei noted other dangers to the patient during heart operations. The patient could suffer from brain death if blood did not flow at a fast enough rate. To mitigate this, Lillehei induced mild hypothermia on the patient. When in this state, the patient’s brain could survive as blood flowed more slowly. And Lillehei also pioneered with the technique of “hemodilution,” reducing the quantity of donor blood that would need to be transfused.
Heart-lung bypass machine improver John Kirklin made a database of the mortality rate from open-heart surgeries that he performed. In 1955, just a year following Lillehei’s groundbreaking cross-circulation surgery, that rate remained a terrifying 50 percent. But in 1956 that figure had dropped to 20 percent and, by 1957, it was 10 percent. Today, the figure is less than 5 percent and almost all deaths from the surgery were from patients who were already at that high a risk. (The figures are from pages 86–87 of this book.)
Much of Lillehei’s success came from knowing when to ask for help. He received it from two entrepreneurs as they acted as competitors to one another — Earl Bakken and Manny Villafaña.
Lillehei wanted to ensure that, subsequent to their operations, his patients’ hearts would continue to function. A recurring issue was one of heart block. This was when the heart’s lower chambers failed to receive the electrical pulses they needed from the heart’s higher two chambers.
Lillehei surmised that if the upper chambers could no longer supply the vital electrical impulses, a human-made contrivance would have to do the job instead. This necessitated someone knowledgeable about electricity. For such a gizmo, he turned to a then-inexperienced engineer named Earl Bakken. Bakken figured he would have to start a company of his own to manufacture such devices. As a show of confidence, Lillehei invested $15,000 in it at its start, gaining major ownership of its stock.
With the resources that Lillehei provided him, in 1957 Bakken invented the first wearable pacemaker. This machine would remain outside of the patient’s chest cavity and have to be hooked onto the clothing. Lillehei had the honor of being the first doctor to attach Bakken’s pacemaker to someone.
Bakken’s company would become the multi-billion-dollar, publicly traded Medtronic of Minnesota. The initial $15,000 that Lillehei put in had gained in value. When Lillehei sold his stock in it in 1974, he netted over a million dollars from it. (Page 32.)
Eventually retiring in my home state of Hawaii, Bakken got rich enough to donate “millions of dollars” to various health- and education-related charities.
Not everyone who worked for Bakken was happy with him, though. A disgruntled employee — Manuel “Manny” Villafaña — left Medtronic to start his own ventures. Fortunately, Lillehei’s gratitude to Bakken did not preclude him from collaborating with this upstart entrepreneur. Villafaña was a go-getter who was born in New York City to Puerto Rican immigrant parents and who was over twenty years Lillehei’s junior.
Often, parts of a cardiac patient’s heart would have to be replaced. Villafaña founded St. Jude Medical to get to the bottom of this. Lillehei acted as a consultant to this company as it designed the artificial bi-leaflet heart valve. For his services, he was paid in still more stock. The company’s sale enriched Lillehei still further. And it commensurately enriched the ethnic Puerto Rican entrepreneur. According to the Minnesota Science and Technology Hall of Fame, “An estimated 250,000 patients each year receive a medical device produced by a company that Manny Villafana founded.”
This was where yet another innovator, Wilson Greatbatch, arrived. Whereas Bakken’s pacemaker had to be worn on the clothing, Greatbatch’s could be implanted into the body.
It was a fortuitous accident that inspired Greatbatch. In the 1950s, he was employed at Cornell University’s animal farm. He spent his time attaching machines to sheep and goats that monitored their brain waves, heart rates, and blood pressure. In a barn, he assembled these monitors by hand. One day, he absent-mindedly installed a resistor into his machine. That triggered a response in which the machine alternated between electrically pulsing for 1.8 milliseconds and then pausing for one second. This, by coincidence, matched the beating of human hearts.
This same decade, two cardiac surgeons had visited Cornell’s farm to observe the research performed on the animals. Greatbatch overheard them discussing the recurring complication of heart block. Whereas many other people would have written off the old mistake with the resistor as a past annoyance and forgotten about it, Greatbatch drew a mental connection between that incident and the dilemma vexing the surgeons. The accident was the lead that he pursued.
Greatbatch worked on his implantable pacemaker from 1958 to 1960, spending his life savings of $2,000 throughout the struggle. Nothing about this was easy. And he long believed that heavier government regulation would have made his feat even more difficult to achieve. In an interview conducted in 1988, he remarked,
The problem for a small inventor today is the FDA. So many laws have been written that a small operator can’t do something like a pacemaker. The regulations are so complex and the required testing is so expensive that a small company can’t do it. . . . If I did today what I did twenty years ago, I would go to jail. Imagine making pacemakers in a barn and taking them to a hospital and putting them into patients! But we did it, and it worked. It was done very ethically, and a lot of people are alive today because of that work.
When it came to finding a firm to manufacture units of this invention, Greatbatch first approached Medtronic. Given the very machine that launched the company, this seemed a natural fit. Ironically, Medtronic ultimately rejected Greatbatch’s model. He then pitched his creation to one of Manny Villafaña’s corporations — Cardiac Pacemaker, Inc. (CPI).
Villafaña accepted his offer. Lillehei served as a consultant here as well, and helped work out the bugs. As with St. Jude Medical, this other Villafaña outfit paid Lillehei in still more shares. When Villafaña sold Cardiac Pacemaker to Eli Lilly, Lillehei banked an additional $2 million.
As ScienceHeroes.Com determines, Greatbatch’s work saved over 22.5 million lives.
And, as a consequence of this lifesaving, Greatbatch’s pocketbook was not in poor condition either. The New York Timesstates, “Mr. Greatbatch profited handsomely from his invention and invested” in refining it to making models that were even safer. Subsequent to the success of his first pacemaker model, Greatbatch wanted to develop a more reliable means of powering the device. He found that in the form of a lithium-iodide battery in 1972.
Greatbatch’s profit was such magnitude that his estate could bequeath $10 million for the restoration of the pavilion of a historical landmark, the Darwin D. Martin House Complex.
We commonly hear it said that the provision of healthcare to those who are in need, such as having pacemakers implanted into their bodies, is more important than the entrepreneur’s freedom to enterprise and keep the profit that motivates them. And, the contention continues, if provision of pacemaker implantations and other healthcare to the needy means violation of the entrepreneur’s freedom to enterprise and keep the profit, then so be it. Too often overlooked is that if the State had been too severe in restricting that freedom to enterprise and profit, entrepreneurs would not have been willing or able to invent pacemakers in the first place.
Enemy of Arthritis | Percy Julian, Sr., and New Foam for Fire Extinguishers | ^
Some innovators invent both pharmaceuticals and safety devices. One of them was Percy Julian, Sr., born in Montgomery, Alabama, in 1899, the grandson of slaves. In spite of the heavy discrimination, Julian put himself through school and became a prominent chemical engineer. He became director of research at the Glidden Company where he extracted chemicals from soy and synthesized them into new compounds. First at Glidden and then at his own firm Julian Laboratories, which he started in 1953, he produced steroids to treat the sufferers of rheumatoid arthritis.
Julian and his chemists were able to make gains in efficiency to the point where on some products they quadrupled production. On account of these gains, between 1950 and 1956, Julian was able to lower the per-kilogram price of progesterone, an ingredient in arthritis medication, from $4,000 to $400.
But Julian’s work did not merely relieve pain; it also cut down the number of fatalities. In the early 1940s, he made improvements on the substances contained in fire extinguishers. As recounted on the website of the PBS series Nova, at Glidden he “extracted a soy protein used in fire-fighting foam, which saved thousands of lives during World War II.”
In 1961 he sold Julian Laboratories for $2.3 million — $20 million in 2022 U.S. dollars. Much of the proceeds he would donate to the civil rights movement.
Duane and the Detector | Duane Pearsall and the Smoke Detector | ^
Percy Julian’s activism is an inspiration, and so is this tale about alarms. For decades, inventors and engineers had been trying to figure out how to create an alarm that would warn a home’s residences of a fire before it grew too large for them to escape. These inventors and engineers concentrated on trying to make a machine that would detect heat. By the early 1960s, these heat detectors were already being installed in residences. They would continue to be selling well into the late 1970s.
Yet their weakness was in their unreliability. The detection of a high temperature was not always the same as identifying the outbreak of flames.
In 1963, even as heat detectors were on the market, home conflagrations continued to kill thousands of Americans. That same year, engineer Duane Pearsall had set his sights on something else. The presence of static electricity disrupted operations in factories and photographic laboratories.
To address that interference, he started the company Statitrol — short for “Static control” — and, with assistants, constructed a device to measure ions in the air. He dubbed it his “static neutralizer.” One day as he was tinkering with it, a colleague lit a cigarette. The rising smoke triggered in the neutralizer and it blared uncontrollably. Many other people would have dismissed this reaction as just another complication or inconvenience, and forgotten about it. And Pearsall might have been one of them, had he not mentioned the incident to an engineer friend from Honeywell Corporation. This colleague inferred that this could be ideal for warning homeowners of the presence of a fire.
It turned out that heat detectors were not the best in warning about any emerging blaze. A stronger indicator was smoke. This inspiration led Pearsall to take the knowledge he had already gained from his progress with the static neutralizer and to apply it to this new inquiry.
The models put out by Statitrol were impressive. Yet Pearsall still had to work out the kinks, and he still had to demonstrate that his smoke detectors provided an advantage that the already-established heat detectors did not. Independent investigators, though, noticed the difference. Writing in 1974 in an academic paper for the National Fire Protection Association (NFPA), National Bureau of Standards research engineer Richard G. Wright assessed, “...smoke detector technology has advanced to the point where the judicious installation of one or two smoke detectors could be more effective than a house full of heat detectors in alerting dwelling occupants to a fire” (page 71).
History has borne out Wright’s evaluation. Yet there was already evidence for it by 1962. In that year, J. H. McGuire and B. E. Ruscoe found that the lifesaving potential of the presence of heat detectors in a home was 8 percent, whereas it was 41 percent for smoke detectors (“The Value of a Fire Detector in the Home,” Fire Study no. 9 [November 1962].”
In 1972, the rate of mortality from house fires in the United States was 57 in a million people. As smoke detectors and other safety measures became more commonplace in the home, that rate reduced. By the year 2009, it was fewer than 12 in a million.
And in contrast to the heat detector installations being between $700 and $1,200,
Pearsall’s smoke detector debuted in the Sears Roebuck catalog two years earlier priced at $37.88.
Yet Pearsall could have lost his chance at saving lives had a reputed champion of safety and lifesaving succeeded in thwarting him. That was corporation-bashing crusader Ralph Nader. In 1976, the Health Research Group division of his group Public Citizen sent a letter to the Nuclear Regulatory Commission. The message was dire in tone. Sidney Wolfe, the medical doctor and activist leading the Health Research Group, noted that smoke detectors emit radioactivity. For that reason, Nader and Dr. Wolfe demanded that the NRC place a moratorium on its sale and use. Public Citizen denounced these gizmos as “mindless and dangerous,” followed by a demand that four million of these units be recalled.
Prior to Nader and Dr. Wolfe ever making a fuss, Pearsall already implemented precautions concerning the radiation. When Pearsall started out, his SmokeGard transmitted half a microcurie of Radium 226. Pearsall had already shrunken that to a single microcurie of Americium 241.
Fortunately for Americans who since have been warned of fires by their smoke detectors — and otherwise would have died — the wish of Public Citizen went unfulfilled. To its credit, the NRC rejected the demands of Nader and Wolfe. The NRC replied that the dosage level is what determines whether exposure to radiation and most chemicals is safe or dangerous, and that the dose of radiation from smoke detectors was too small to harm a household. The regulatory agency then noted that a person would already be exposed to over a hundred times more background radiation during a flight across the United States.
To that, Sidney Wolfe replied, rather unscientifically, “The issue is not how much radiation is released but why this extra amount of radiation exposure is necessary at all.” He was referring to how smoke detectors released slightly more radiation than did the heat detectors. He then insinuated that the heat detectors were already adequate in alerting people about fires. The figures on the reduction in deaths from house fires in the following years suggest something quite disparate from what Sidney Wolfe and Ralph Nader assumed.
Statitrol grew so much that, at one point under Pearsall’s leadership, the company boasted over one thousand employees. Yet Pearsall never forgot his hardships when he directed a team of just a few members. Following his success, he remained an advocate for small business. In 2004, the Worcester Polytechnic Institute gave him an award for “saving upwards of 50,000 lives from deadly residential fires over the past 30 years.”
Excellent Electricity | Thomas Edison, George Westinghouse, the Air Brake, and Electric Heating | ^
Even when the technology is not made for an explicit lifesaving purpose, but is instead intended for uses that are more general, it could save lives. That happens with electricity generation. Suffering from the cold at night has threatened human lives since the Stone Age. Deaths from cold annually outnumber those from heat.
Prior to the advent of indoor electric heating, people had to heat their homes by burning firewood. In developing countries, where there are still millions of people cannot access to electricity, such people still have to do it, sometimes with dung. Although there is romance to the image of relaxing before a warm fireplace, this practice carries its own hazards. The fumes can build up in the lungs and ultimately cause growths in them. This is “indoor air pollution,” and there are figures that illustrate the extent of the damage it does.
Worldwide, but mostly in the developing countries, this indoor air pollution proves lethal for large numbers of human beings. Among the higher estimates is 3.5 million per year. That is 200,000 more than the number of people annually killed by the outdoor air pollution that is more familiar to us. This also exceeds the annual death rates of both malaria and AIDS combined. Even the lowest estimates are around 1.6 million per year.
The total number of casualties from indoor air pollution is 260 million, which is almost twice as many as those from all of the twentieth century’s wars put together.
The scourge of indoor air pollution is evident even in rich countries where people have access to electricity but, for aesthetic reasons, opt for fireplaces anyway. Eight percent of Britons do this, and half of them are categorized as “affluent.” Such a small portion of the U.K. population still heating with fireplaces is enough to excrete three times more air pollution than do all the country’s automobile emissions. Wood-burning stoves in the U.K.’s urban areas account for almost 50 percent of Britons’ exposure to carcinogens in particles of air pollution.
Considering all of the perils of the heating methods that people must rely upon when they do not have electricity, this absence is identified properly as “energy poverty.” The flip side is that these dangers and deaths are eliminated when people do have proper access to electricity — especially, in this context, electric heating.
Eighty-seven percent of the global human population currently has access to electricity. And, according to Our World in Data, 4.1 percent of the global population dies from indoor air pollution. That means that out of the Earth’s 7.9 billion people, that is 6.873 billion with electric power. Were it the case that this 6.873 billion did not have electricity and therefore had to rely on fireplaces for heating, and 4.1 percent of them died from indoor air pollution, that would be 281.793 million killed.
This suggests that simply in having electric heating in their homes, at least 281 million people have been saved.
By creating the electricity generation industry, rivals Thomas Edison and George Westinghouse contributed to this lifesaving. And, prior to this, Westinghouse had already made his first fortune with a different lifesaving device.
As it was for his future adversary, invention had been a lifelong vocation for Westinghouse. A prodigy, at age fifteen he had already designed his own rotary engine. A few years later, he would come up with the idea for which he was most famous. Traveling via locomotive then was especially perilous. For a train to stop, a brakeman would have to ride on the roof of a car. This brakeman would have to apply the brake on each car separately and then move on to the next car until the brakes were applied on all of them. On account of this arduous sequence of tasks, the train would normally travel for an entire two miles between the application of the first brake and the time that the train finally ground to a halt. In one year, as many as 5,000 American brakemen were killed during this sequence.
As a young man, Westinghouse came to the rescue with his air brake system. The train’s wheels would be connected to a tube. When the brake was applied, it sent compressed air through the tube that acted on the wheels of all the cars simultaneously. The distance the train would continue to travel upon application of the brakes was now in hundreds of yards instead of thousands.
At age twenty-one, Westinghouse searched for investors. He went to railroad magnate “Commodore” Cornelius Vanderbilt, Sr., who had made his own financially risky innovations throughout his life and who, by this time, had become the richest man in the country, if not the world. Upon hearing Westinghouse’s idea, Vanderbilt cackled, “Do you mean to tell me that you can stop a railroad train by wind?” Vanderbilt had heard enough. He concluded, “I have no time to waste on fools.”
The young Westinghouse remained undaunted. He introduced his air brake to the market in 1872. Twenty-one years later, Congress passed the Railroad Safety Act (RSA), mandating that railroads have their trains make use of both Westinghouse’s air brake and another lifesaving innovation, the Jenny coupler. However, there was a grace period; the statute would not go into full effect until 1900. Many media, such as the TV program Modern Marvels, credit this legislation with railroads adopting these safety devices.
Yet long before the law went into effect, forward-thinking executives already knew that the hazards associated with locomotives made prospective passengers reluctant to ride and prospective employees skittish to apply to work for their railroads. By 1876 — over sixteen years prior to the Railroad Safety Act’s passage and over two decades prior to it going into effect fully — over 37 percent of railroad passenger cars in the United States already had Westinghouse’s air brake installed.
According to engineer Gary McCormick, this invention saved “hundreds of lives each year.” Sure enough, between the years 1890 and 1915, the fatality rate fell by more than 63 percent for railroad passengers and by more than 61 percent for employees. And that was the trend prior to the RSA going into full effect. Between 1890 and 1899, the fatality rate dropped by more than a third for passengers and by one-fourth for employees.
Having established himself as a successful salesman his air brake, Westinghouse turned his attention elsewhere. He took the millions he earned and invested them in other endeavors, such as competing against Thomas Edison in the market for electricity.
Edison’s ambition did not end with inventing and selling his practical incandescent lightbulb. People could only use it if their houses had electricity, something that no one possessed. For there to be demand for Edison’s lightbulbs, he had to make available the means to light it. For that reason, he set to work on providing a system for distributing low-voltage, high-current electricity — direct current.
It is misleading to say that Edison’s system made use of direct current (DC) whereas Westinghouse’s was all about alternating current (AC). Rather, Edison’s system made use of DC only, whereas Westinghouse’s made use of both DC and AC.
The issue with Edison’s system was that DC would only send electricity over relatively short distances — the length of a street. If all of today’s homes were lit only through DC, there would have to be a power plant on every city block.
Conversely, when alternating current is employed, the electricity can be transmitted over many miles, across entire U.S. states. A single power plant could transmit high-voltage, low-current electricity over mostly undeveloped terrain until reaching an urban center. Once the electricity reached the urban center, it would be sent to a transformer that would convert the electricity to DC — low voltage, high current.
Nikola Tesla invented the polyphase induction motor with which Westinghouse transmitted his high-voltage alternating current over miles. As, in his old age, Tesla frittered away his wealth on an unworkable scheme and continued to live expensively in the Hotel New Yorker, Westinghouse took care of him. Subsequent to George Westinghouse’s death in 1914, executives from his company continued to pay $125 monthly to cover Tesla’s room and board.
In 1938 — five years before his own death — Tesla described Westinghouse as
the only man on this globe who could take my alternating system under the circumstances then existing and win the battle against prejudice... He was a pioneer of imposing stature, one of the world’s true noblemen of whom America may well be proud and to whom humanity owes an immense debt of gratitude.
Dying in 1931, Thomas Edison had a net worth of $12 million. In 2020 U.S. dollars, that is $204 million, putting Edison a fifth on his way to being a billionaire.
Considering that at least 281 million lives have been saved by the proliferation of electricity throughout homes, these fortunes were well-earned. These are the billionaires maligned in Alexandria Ocasio-Cortez’s diatribes.
Thomas Midgley, Now Depicted As Evil, “Has Saved Millions of Lives” | Thomas Midgley and Safer Refrigerators and Air Conditioners | ^
Just as George Westinghouse availed to people a safer way to protect themselves from the cold, Thomas Midgley availed to them a safer way to protect themselves from the heat. He did this through his improvements to air conditioning and refrigeration.
The engineer-entrepreneurs Willis Haviland Carrier and Stuart Cramer, Sr., had introduced air-conditioning in at the turn of the twentieth century. But there remained a tremendous disadvantage with the models of air conditioners and refrigerators that were on the market — the gases and liquids inside of them released fumes that were toxic to those who handled them. These gases and liquids were even flammable. They had caused fires that proved to be fatal. This problem was finally rectified in 1950 by a General Motors engineer in Ohio named Thomas Midgley.
If you run a quick Google search this instant on Thomas Midgley, in the results you will find that the man is routinely denounced as misguided at best and evil at worst. He invented leaded gasoline, which proved to be a major toxin. It usually goes unmentioned that Midgley’s work on air conditioning and refrigerants, which is demonized even more ferociously, has actually saved many lives.
At General Motors, Midgley reported directly to multimillionaire Charles F. Kettering, the engineer who invented the modern automobile’s self-starter. Kettering is the reason why car engines today turn on with a turn of the key. GM spun off a subsidiary company, Frigidaire, to refine air conditioners and refrigerators. Such technologies were connected due to GM’s interest in providing air conditioning in its vehicles.
Although leaded gasoline ended up being poisonous, in 1928 Midgley was genuinely interested in finding a technique to produce air conditioners and refrigerators that would not harm their users.
With two assistants, Midgley examined a pocket-sized periodic table. He knew the properties that were needed. Besides being nontoxic and nonflammable, it had to be stable with a boiling point within 0 to -40 º C. The element fluorine would work well except that it was toxic. He thus considered whether the fluorine could be rendered safe if it was bonded to some other elements to form a new compound. After all, hydrogen is dangerous all by itself as an element, but a reaction between two hydrogen atoms and a single oxygen atom results in relatively safe H2O. Likewise, fluorine would be rendered safe if bonded with chlorine and carbon. The seeming answer to the problem was CFCs — chlorofluorocarbons, with which GM tagged the brand name “Freon.”
Still, there was an issue of whether it might turn out later that CFCs did not function as well as they seemed. Hence, General Motors had a backup. Midgley and his team also considered another class of compounds — hydrofluorocarbons, or “HFCs” — that potentially bore the same beneficial qualities as CFCs without the same drawbacks. If ever there was an unforeseen problem with CFCs, then HFCs might serve as a replacement.
Because the gases in air conditioners and refrigerators had earned a reputation for being health hazards, in 1930 Midgley publicly demonstrated the relative safety of Freon. He lit a candle near the liquid. He boiled it in a bowl and inhaled the gases emerging from it. Then he blew the candle out. This presentation ended the public’s reluctance to purchase the new safe refrigerators and air conditioners.
Decades following Midgley’s death, other scientists discovered that sulfur dioxide emissions from the use of CFCs entered the Earth’s atmosphere and depleted the ozone layer. The federal government passed laws to phase out CFCs in the ensuing years. Yet, as science journalist Sharon Bertsch McGrayne notes, the HFCs that became the replacement in air conditioners and refrigerators in the 1990s were “all substitutes discovered by Midgley and his colleagues.”
In recent years, the HFCs have been blamed for posing yet another dilemma. Although they do not have the same effect on the ozone layer, they still contribute to greenhouse warming. Besides his invention of leaded gasoline, this is the other reason that Midgley has become widely denounced all over internet. For such reasons, it appears Pope Francis has revived the idea that this technology is sinful. He intones that the “growing ecological sensitivity” he desires in people still “has not succeeded in changing” the world’s most “harmful habits of consumption... A simple example is the increasing use and power of air-conditioning.” This is a vice that the pontiff deems “self-destructive.”
How capitalism itself can address the issue of greenhouse emissions from air conditioners and other machinery is a matter to which we shall revisit in Part Two.
With the public not yet conscious of ozone depletion or anthropogenic climate change, Midgley rendering air conditioners and refrigerators safe — at least in terms of coming into direct contact with them and handling them — was a boon to GM. This success had made Midgley a multimillionaire.
He was not able to enjoy his new wealth as much as he expected. Beginning in 1940, he was stricken with polio. He underwent intense physical therapy regularly in a swimming pool but he remained paralyzed from the waist down. Throughout his mansion, he set up a system of ropes and pulleys to help him go about independently. Yet one day his wife found him dead, strangled by these same hoists.
Many of the websites condemning Midgley frame this death as a fitting metaphor for the man’s life — Midgley was killed unexpectedly by one of his own inventions, just as he lacked the foresight on how his more-famous inventions would kill others.
Representative of this schadenfreude is YouTube presenter Matthew Santoro, who generally holds a reputation for being a nice guy. He cracks to his audience, “And I know a lot of you right now are like, ‘Aw, it should’ve been the lead poisoning that got him. That would’ve been poetic justice.’ And, to those of you, I say, ‘You’re kind of sick — and right.’” Yet chemistry professor and historian Carmen Giunta observes that Midgley’s own family and loved ones had concluded that Midgley had committed suicide with these ropes. The reason that they let the media report that this was an accident was that persons who killed themselves were stigmatized even more severely back then. By comparison, allowing the public to interpret Midgley’s death as an accident was to save face.
Furthermore, what is usually glossed over is that Midgley’s innovations in air conditioning and refrigeration saved lives very directly. This can be observed in the changes in heat-related mortality in Chicago over the course of a century. In 1901 in the windy city, there were 10,000 heat-related deaths. In 1955, that figure had dropped to 885. In the heat wave of July 1995, it was 300.
In 2016, a team of scholars including Carnegie Mellon economist Karen Clay published a scientific assessment of heat-related mortality in the United States throughout the twentieth century. The team found that between 1940 and 2004, the statistical risk of dying from heat in the USA on a day of over-90-º-F temperatures had fallen by over 60 percent. Between 1930 and 2004, the risk of dying from the heat on over-80-º days reduced by three quarters. And what was the major reason for this reduction? The team admits that the adoption of “residential air conditioning explains essentially the entire decline in hot day–related fatalities.”
It is fortunate, then, that this technology has become increasingly affordable to those of lower income. In 1950, less than 18 percent of all U.S. households could access this technology. By 1997, over 68 percent of U.S. households below the official federal poverty line now had air conditioning. By 2005, among those under the federal poverty line, it was over 77 percent.
Midgley has much to do with how, as was said by Aperion Care and as was published on the World Economic Forum’s website, 2 million lives have been spared of heatstroke from 1950 onward.
Sharon Bertsch McGrayne details how Midgley’s refrigerants saved lives through other avenues.
His safe refrigeration freed us from levels of food poisoning now known only in developing countries. Without Thomas Midgley, millions of infants would have died of diarrheal diseases, vaccination would have been ineffective, and fresh food could not be shipped around the world.
McGrayne notes that prior to 1931, vaccines kept at room temperature were effective for no longer than one week. As a repercussion, the one for smallpox was the only vaccine used routinely; the others were not because they expired too quickly. Conversely, subsequent to 1931, it was Midgley’s safe refrigeration that made it possible to preserve vaccines. It was Midgley who made possible the sweeping vaccination campaigns beginning in the 1940s. It was Midgley who made it possible for Kenneth Murray to save 15 million lives from hepatitis B, for David Hamilton Smith and Porter Anderson to save 5 million from Haemophilus influenzaea type B, and for Paul Offit to save 2,000 a day from rotavirus.For this reason, Sharon Bertsch McGrayne reminds her readers that Midgley’s safe refrigeration itself has “saved millions of lives.”
Some of those millions could be in an area she had not mentioned. Once blood is donated, it is preserved through safe, nontoxic refrigeration. ScienceHeroes.Com attributes the saving of 1.1 billion lives to blood transfusions. Many of those transfusions would not have taken place had it not been for Midgley’s initiatives.
“Death Ray”? More Like “Life Ray” | Gordon Gould and the Laser | ^
Yet another invention that saves lives in a manner far from obvious is the laser. Had this invention remained under the control of the military, it probably would have not have been applied as anything other than a weapon. Thankfully, businesses have been able to adapt it for peaceful civilian purposes.
Lasers are essential to biometric scanners that take in biological data as their inputs. A laser scans an object and enters its reading into a computer that processes the data. This is what happens with bar codes at the grocery store checkout counter. It was by the same principle that Craig Venter relied upon such lasers when mapping the human genome — a development that, as we have learned, saves 5 million lives each year.
Lasers can also be employed in rescue efforts. When firefighters rush into a burning building, they do not know what obstacles inside will hinder them. Worse, the smoke obscures their vision. There would be some relief in having an updated-to-the-minute map of the structure’s interior prior to entry. Modern technology is making this possible.
Sonar (SOund Navigation And Ranging) works on the principle that the machine can measure the distance a sound wave travels before bouncing off an object. Through sonar, sound waves provide a three-dimensional map of an environment. Radar (RAdio Detection And Ranging) applies that same principle but uses radio waves instead of sound waves. Likewise, lidar (LIght Detecting And Ranging) does the same with laser light. As I type this, firms are working on arranging for lidar to provide 3D models of rooms for firefighters.
Lidar is also being utilized in self-driving cars. If this automation can reduce the rate of fatalities and injury on the road, still more lives will be preserved. Aperion Care anticipates that this application will eventually save 1.5 million lives annually.
Early patents on lasers came from the academicians Charles Townes and Arthur Schawlow. By 1957, engineer Gordon Gould developed his own plans that he would go on to patent. Then in 1960, Theodore Maiman built the first working model of a laser while employed at Hughes Research Laboratories, which did R-and-D for Howard Hughes’s defense contracting firms. Soon after this breakthrough, Maiman bristled at news media describing his creation as a “death ray.” The very following year, Hughes Aircraft already began studying the possible applications for lidar. Maiman would leave Hughes to found several other companies, such as Korad. At the time that Union Carbide purchased all of Maiman’s shares in Korad, the corporation had a personnel force exceeding a hundred people and annual sales greater than $5 million.
Gordon Gould won $46 million in his lawsuits over his patents, and made millions of dollars from other enterprises prior to that judgment being rendered.
That was how Gould, once a member of the Communist Party of the USA, became an arch-capitalist whose invention in subsequent decades would reduce the mortality rate.
In 1988, Gould provided his thoughts on his start as an independent inventor:
It’s certainly true that the amount of knowledge in almost any field of science is getting enormous, and that tends to support the idea of teams. But there are still a few areas where I can imagine big breakthroughs coming about through the work of one or two individuals.
He also worried about the “dead weight created by all that red tape” that the State imposes on technology. “Government regulations are even worse than industrial lab regulations at deadening invention, and they certainly deaden entrepreneurship.”
Gould’s $46 million is an appropriate reward for making possible the mechanism that would enable human genome mapping that would save five million lives per annum.
It is ironic, then, that this invention that is most commonly imagined and depicted in media as a lethal weapon has done much to extend human life.
Fritz and His Fertilizer | Fritz Haber, Carl Bosch, and Synthetic Nitrogen Fertilizer | ^
And there is something else that is ironic. Recall that a website frequently cited throughout this essay, ScienceHeroes.Com, was created by Billy Woodward to promote his book Scientists Greater Than Einstein. Although he describes himself as a “businessman” in the About the Author section, the book conveys its author’s unflattering impression of capitalism and for-profit enterprise.
Upon describing an action by Merck that he judges unethical, Woodward hisses that such an action is one “that those teachers who believe in Ayn Rand’s laissez-faire capitalism can teach in business schools and those who revere less the principle of selfishness can explore in ethics classes.” This disparagement is taken farther still on ScienceHeroes.Com.
The book’s final chapter argues that the private sector cannot and will not finance medical research adequately, and therefore there needs to be greater taxpayer funding of science. Woodward frames such “a choice for our future” as one of “Our Health” versus “Our Wealth.”
Yet in totaling the numbers of people saved by scientific projects, ScienceHeroes.Com provides information that is not completely consistent with Woodward’s generally unfavorable estimate of capitalist greed. The scientific endeavor that Woodward’s own website ranks as the one to have saved the most lives is . . . a for-profit venture.
This was the venture by Fritz Haber and Carl Bosch in the industrial production of synthetic nitrogen fertilizer. It is well described on ScienceHeroes.Com in two articles penned not by Billy Woodward but by one of the writers assisting him, April Ingram.
Even for reasons other than his commercialism, Haber is not someone who would normally be described as a humanitarian. Prior to the ascension of the Nazis, Haber was a fervent German nationalist, especially in matters of military conflict. During World War One, Haber eagerly assisted the German government in weaponizing chlorine gas to be dispersed on French soldiers. Yet, even considering his role as one of the founders of chemical warfare, Haber instigated a project that holds the record in number of lives saved.
In 1899, the British scientist Sir William Crookes warned that the farms of the West were exhausting all the nutrients of their soil. Soon, they would not be able to grow any more, and the starvation would result. Haber took this to heart. A decade following Sir William’s dire prediction, Haber formulated methods to produce synthetic fertilizer, ammonium nitrate. As an executive of BASF, Carl Bosch refined those methods and applied them on an industrial scale. This became known as the Haber-Bosch process, and it made its namesakes very rich.
Still, the ascension of the Third Reich doomed both these men. Although Haber was a Christian, the Nazis held his Jewish ancestry against him and banished him from practicing any science. This was a crushing blow to someone previously so worshipful of the German state. Bosch went to Adolf Hitler directly to plead on Haber’s behalf. The industrialist informed the führer that purging Jewish scientists would set the country back on physics and chemistry for a hundred years. To that, Hitler simply replied, “Then we’ll just have to work 100 years without physics and chemistry!”
As the Third Reich held a tight grip on the national economy, it was easy for Nazi officials to inflict reprisals on Germans who did not express sufficient enthusiasm for their governance. As Bosch was highly critical of the Nazis, he was gradually stripped of his duties at BASF. Bosch sunk into depression and alcoholism.
Even decades after their death, the process of Haber and Bosch continued to change the world. After the famines imposed by Mao Tse-tung’s communism, China under Deng Xiaoping applied the process and ended the starvation.
ScienceHeroes.Com admits that the for-profit venture of Haber and Bosch has saved “over 2.3 billion lives.” In a Wired article from 2013, Bill Gates informed his readers, “Two out of every five people on Earth today owe their lives to the higher crop outputs” that the Haber-Bosch process “has made possible.”
All of the cases we have studied were about someone becoming obsessed with some problem or mystery and, in an attempt to solve it, exercised creativity in such a manner that resulted in saving people’s lives. This gives the lie to the claim by famous anti-capitalist Noam Chomsky that it takes a “lack of curiosity and independence of mind...” for someone to reach “the high end” of “income distributions...”
A “lack of curiosity and independence of mind” sure does not describe Katalin Karikó, Jennifer Doudna, Percy Julian, Patrick Soon-Shiong, or any of the other innovators who struck it rich.
PART TWO: HOW, CUMULATIVELY, BILLIONAIRES SAVE BILLIONS OF LIVES | ^
Value Added to the Natural Resources | ^ The author hopes that by now the reader is convinced that there are many instances throughout modern history of for-profit enterprises contributing to the extension of lives and the comforts within them. Yet those who look askance upon capitalism and billionaires are probably not satisfied. They can proclaim that these instances of lifesaving by billionaires such as Patrick Soon-Shiong and George Yancopoulos do not remove an inherently self-destructive attribute from commercial activity.
It is frequently stated that the global economy runs on nonrenewable natural resources. Such nonrenewable resources include petroleum, coal, tungsten, lithium, and silicon. The total quantity of such resources used as raw materials in goods and services only grows annually. Once these resources are used up, it is said, that will be the end of civilization. The persistence of this belief is a major reason why millions of people nodded in agreement as activist Greta Thunberg went before the United Nations to prevail upon various heads of State to abandon their “fairytales of eternal economic growth.”
The belief also feeds into Alexandria Ocasio-Cortez’s looking wistfully on the prevailing bias against capitalism that intellectuals had in the period between 1930 and 1979. She longs for a return to that “one point in time” where there was “almost a full consensus among our greatest thinkers in America that capitalism had an expiration date. This Late-Stage Hyper-Capitalism society of ‘just accrue’? This capitalism as an ideology of capital? And that ‘our number-one goal is to maximize profit at any and all human and environmental costs’? They knew that the idea was not sustainable.”
If the amount of wealth and prosperity is nothing more than a direct function of the quantity of nonrenewable natural resources, then the amount of wealth that can be enjoyed does come in a fixed quantity. It may be said that even if Patrick Soon-Shiong’s development of nab-paclitaxel saved the lives of cancer patients, the benefits came at the expense of everyone else in society. The resources that went into fighting metastatic breast cancer, and that went into the big fancy toys that Soon-Shiong and Jonathan Rothberg bought for themselves, are resources denied to everyone else. If Soon-Shiong and Rothberg own and have direct access over a total eight billion dollars’ worth of resources, that is eight billion dollars’ worth of resources less for the rest of Earth’s human population, especially its poorest.
Hence Alexandria Ocasio-Cortez pronounces, “No one ever makes a billion dollars. You take a billion dollars.” (emphases hers).
And she continues that “this system that we live in — life in capitalism — always ends in billionaires. This thing that we live in, starves people.”
To wit, the richer the billionaire is, the more it “starves people.”
That capitalism staves people is an odd claim to the employees of agribusinesses. It would have been news to Carl Bosch.
Yet Dan Riffle, the policy advisor and senior counsel to AOC who stated, “Every billionaire is a policy failure,” reinforces his employer’s zero-sum interpretation. After pretending to understand that more economic value can be created, Riffle makes it known that he will continue to deny, arbitrarily, the logical ramifications of such a fact. That is implicit in his proclamation that “it’s certainly the case that the bigger Jeff Bezos’s and Bill Gates’s slices of the pie are, the smaller everybody else’s slices of the pie are going to be.”
This is the same idea behind Bernie Sanders’s notorious proclamation, “You don’t necessarily need a choice of 23 underarm spray deodorants or of 18 different pairs of sneakers when children are hungry in this country.” Bernie’s presumption is that the resources that went into producing the twenty-three different types of deodorant and eighteen models of athletic shoes were resources that otherwise would have gone into feeding kids starving in the USA. The number of choices in hygiene canisters and fancy footwear is inversely proportional to the ability of America’s youngsters to have enough to eat.
The belief has been expressed by Percy Bysshe Shelley in words that would become cliché soon after they were published: “The rich have become richer, and the poor have become poorer...”
That slogan’s enduring popularity derives from a flagrant misunderstanding of the nature of wealth. The wealth that distinguishes a grand living standard from an inadequate one has less to do with monetary units than with the goods and services for which those monetary units are exchanged. More than that, that wealth is not an inherent function of the quantity of nonrenewable natural resources available. Instead, wealth is in the efficiency of the methods employed to derive life-enhancing value from such resources. It is therefore fitting that the term capitalism comes from “capital,” which has its origin in the Latin capita, meaning “head.” It is fitting because entrepreneurial innovators must use their noggins to conceive and implement such strategies to improve the efficiency by which the natural resources are used.
Alexandria Ocasio-Cortez blares, “Usually if you’re a billionaire, it means that you control a massive system. It means that you own oil supplies. . . . And to be ethical — if you’re a billionaire today — the thing you need to do is give up control and power” over those resources.
She talks as if petroleum was always inherently worth being in everyone’s control collectively, and then a small cabal of billionaires came and usurped that control all for itself. In reality, the default was a gallon’s worth of crude oil in the Stone Age and even the 1700s was of relatively little advantage to anyone. From the Middle Ages to the eighteenth century, farmers hated it when they found the black sludge. The foul-smelling goop seeped and damaged their crops. The presence of oil on their land only reduced marketplace demand for the property. Striking oil only became a plus and not a minus when Canadian geologist, chemist, and entrepreneur Abraham Gesner discovered and publicized the properties of petroleum that made it an ideal as a source of fuel, one rivaling the utility of whale oil.
That is, a gallon’s worth of crude did not have an inherent value. It gained value subsequent to the fulfillment of two conditions. The first condition was for a scientist such as Gesner to apprehend how that crude oil can be made useful for human beings. And even the fulfillment of that first condition, by itself, was not enough. Once Gesner established that kerosene could be isolated from crude, and that kerosene could light a lamp, that still would not ultimately help anyone who wanted to light a lamp if not for someone bothering to separate the kerosene from the rest of the gunk.
There was nothing obvious about it. That brings us to the second condition that had to be fulfilled for the petroleum to become valuable — someone had to bother undertaking the task of separating the kerosene from the crude and bringing it to market. As anyone with unfulfilled dreams can attest, dreaming up a great plan is a cinch in comparison to following through on it and keeping the commitment. In this instance, someone had to bother setting in motion the separation. That took the planning and organizing conducted by entrepreneurs such as Gesner and George Bissell, and which was taken to a more sophisticated level by John D. Rockefeller, Sr.
Nor was it obvious to Stone Age people that sulfur could be of use to them. It was a nasty, foul-smelling chemical. It took forward-thinking entrepreneurs to transform such a con into a pro. The German chemist Herman Frasch had such foresight, and developed methods both for pumping large quantities of sulrf from deposits and for extracting the sulfur from crude oil so that kerosene could be refined.
This newly accessible sulfur turned out to be an important ingredient in the first widely used antibiotic, sulfa, which went by the brand name of Prontosil. This medication saved thousands of soldiers’ lives during World War One. As a consequence of Frasch’s achievements, Rockefeller purchased his patents and made him Standard Oil’s director of research. The German’s net worth at the time of his death in 1914 was $5 million, $128 million in 2018 U.S. dollars.
And this principle applies to so much more than petroleum and sulfur.
It was not obvious to the ancient humans who first encountered petrified tree sap that one day it could be placed in telegraphs to have them transmit electrical signals. Nor was it obvious to the first caravans that the sand over which they traveled could be converted into cables that one day would enable one person to communicate instantly to someone else on the other side of the planet. And it was not obvious to the humans who first observed lithium that such a metal would be an excellent conductor in tiny rechargeable batteries powering telephones and computers fitting in their pockets. Nor was it obvious that such a metal one day would be invaluable to keeping hearts pumping, as do the lithium-iodide batteries in Wilson Greatbatch’s implantable pacemakers.
The extension or improvement of life that someone gets out of a good or service is what can be called “economic value.” That is wealth in its most direct form. And this economic value is not fixed and intrinsic to units of natural resources. It is instead to be found in human methods for making use of those resources.
That the the entrepreneur’s planning and coordination of production adds a net increase in value to resources is an important consideration missing from AOC’s tirades. If more than half of the oil resources are controlled by entrepreneurs such as Gesner and Bissell, and later Rockefeller, it is because they are the ones who made the hard choices that gave more than half of the oil resources the value that they have.
And as efficiency improves, a person can obtain just as much — or even more — economic value from a good or service even as smaller quantities of resources need to be used up in the provision of this good or service.
Natural Fact One (of Two): Resource Substitution | ^
Insofar as individuals are free to enterprise peaceably, several facts of Nature guard against the depletion of resources. The first fact is that many different types of resources can be applied for the same use. That means that as one resource used for a particular purpose grows scarcer in current availability, human beings can switch to an alternate resource to substitute it. For much of the nineteenth century, people harvested liquids from sperm whales to light their lanterns. It was as whales grew scarcer and their oil gained in price, that Abraham Gesner discerned that kerosene could be marketed as a cheaper substitute. And copper provides another example.
Since the nineteenth century, copper wire had been used to conduct electricity in telecommunications equipment. It was in telegraph wires and then telephone lines and eventually in satellites. From 1960 to 1969, the price-per-pound for copper climbed, in 2020 U.S. dollars, from $2.83 to $3.35. This motivated firms to search for a cheaper substitute. In 1970, three engineers from Bell Laboratories found it in the form of fiber-optic cables made from glass that itself came from sand. To this day, copper continues to be installed in satellites and other telecommunications equipment, but many parts previously cast from copper have been replaced by the fiber-optics. The inflation-adjusted real price of copper then decreased again. By 1990, copper was priced, in 2020 U.S. dollars, at $2.44.
This ability to make use of substitutes has done well to hold off the depletion of resources.
The excellent 1987 book The Doomsday Myth, by Charles Maurice and Charles W. Smithson, provides case studies of such a phenomenon throughout history. During the 1600s, the British stopped burning wood to heat their homes and opted for coal. In the late nineteenth century America, railroads used less timber for tracks and used more iron and steel. Amid World War Two, the shortage of rubber trees led American engineers to produce synthetic rubber from petroleum. It was also from this book where I learned the details of whale oil being phased out in favor of kerosene to light lanterns.
Even the advent of agriculture illustrates this principle. For ancient hunter-gatherers, the price of food was the hard work it took to hunt and forage. This drove many species to extinction, and led to food shortages. The cheaper substitute was for the farming of grains to become the main source of sustenance.
Interestingly, the real price of copper has again ascended throughout 2021 and 2022. Insofar as engineers are free to innovate, we may again witness engineers devising still other replacements for copper in machinery.
Yes, continue the enemies of capitalism, human being can use their engineering know-how to substitute a scarce resource with a more plentiful one. Still, they ask, how does economics reward entrepreneurs from guarding against the depletion of nonrenewable natural resources on the whole? The answer has to do with the entrepreneurs’ costs being a function of the quantity of natural resources they drain. Thus, we come to the second pertinent fact about preventing the depletion of resources. As humans gain a greater degree of scientific knowledge about their resources, they are indeed able to improve the efficiency of how these resources are expended. And this principle applies even when a more abundant resource cannot be acquired as a substitute for a scarcer one.
The economic value that a business produces for its customers is called “output.” “Inputs” refer to the resources that must be used up in the process of generating the output. Inputs include both human labor and the natural resources that the operation entails.
As a firm must trade its own assets to acquire any input, every input adds to the firm’s expenses unless the firm is able to shift such expenses forcibly onto other parties. One example would be for the firm to steal its resources from someone else. That is consistent with the caricature of corporations being evil, but it actually clashes against the very principle of capitalism. Capitalism is contingent upon the enforcement of private property rights. To the extent that a firm coercively plunders someone else, the firm behaves in opposition to capitalism itself. Plunder is stopped to the extent that private property rights — and, with them, capitalism — are enforced consistently. We shall revisit that principle by the essay’s end with respect to pollution and industrial contributions to climate change.
Another method whereby a firm can elude paying the costs of its inputs is for the firm to receive direct taxpayer funding. Insofar as the firm successfully lobbies for this to happen, the firm is redirecting its own expenses onto the taxpaying public. This coercive redistribution is not pro-capitalism nor is this even, as it is often pegged, “pro-business,” “pro-corporation,” “corporationism,” or “corporatocracy.” The costs of a particular business or corporation may be reduced, but this is the result of resources being snatched from the owners of still other businesses and corporations. It is illogical to label this as if it were free capitalist enterprise, as that coercive intrusion leaves those other parties unfree to capitalize on their own enterprise. That is not pro-business any more than the State privileging one human at the forcible expense of another is “pro-human.” In effect, inasmuch as we want businesses to pay their own way, we must oppose direct taxpayer subsidies to them, even ones that perform work as salutary as Moderna’s.
To the extent that people are free and their private property rights are enforced, every input in an entrepreneur’s operations imposes a cost upon that entrepreneur. Thus, the entrepreneur downsizes her costs, and thereby upsizes her profits, insofar as she employs new techniques for producing at least as much economic value as she did before from ever-smaller and ever-fewer inputs of labor and natural resources. And she can also cut costs by producing at least as much economic value from smaller and fewer inputs of tools and machinery. Those tools were created by still other entrepreneurs in prior efforts at coordinating the laborers’ interactions with the natural resources. Hence, everything ultimately comes down to getting more value out of smaller quantities of labor and natural resources.
↑ Profit = Economic value to customers (Revenue from sale) – ↓ Cost of natural-resource inputs
That involves the development of technologies that improve efficiency.
Since the late twentieth century, this argument has been most commonly associated with economist and business management professor Julian L. Simon, first in 1980 in the journal Science and then more famously in his classic book The Ultimate Resource. However, he was not the first intellectual to advance it. Decades before him in Denmark, from her own research the agricultural economist Ester Boserup induced similar insights. The power of her arguments has been noted even in the Proceedings of the National Academy of Sciences (PNAS). And the general idea behind the argument was advanced over a century earlier by Jean-Baptiste Say in a series of letters he wrote to that prophet of resource depletion, Rev. T. Robert Malthus. These letters were published for the public in 1821.
Such arguments have often been written off by the establishment. But someone co-won the 2018 Nobel Prize in economics for making a very similar case in mathematical form, Paul Romer. Romer is much fonder of taxpayer-funded basic research than Simon was, and there are issues with his presumption that scientific knowledge is a “public good” that cannot and should be privatized. Still, Romer is entirely correct in agreeing that the application of the human mind to improving efficiency in resource usage is the true creator of economic value and that it does the opposite of deplete mindlessly all the Earth’s resources.
Frustratingly, such considerations do little to deter those of a particular political ideology from intoning ominously that the size of the human population will outstrip the Earth’s bounty. These people dismiss, as naïve, the notion that firms can simply boost their profits by improving efficiency and reducing waste. Those people scoff because they grossly underestimate the extent to which, throughout history, such efficiency improvements and waste reductions have been a major source of growth in profits.
A case study of this is to be found in the evolution of electric dynamos. The power plant that Thomas Edison finished constructing in 1882 on Pearl Street in Menlo Park, New Jersey, had six Jumbo dynamos. Each of these dynamos weighed 54,000 pounds and generated 100,000 watts. That is 1.85 watts of electricity generated per pound of machinery. By contrast, a gasoline-powered 10,000-watt dynamo constructed by the firm Briggs and Stratton in 2020 generated 34.7 watts per pound.
Edison’s total investment in the Pearl Street power plant was $600,000. In 2020, U.S. dollars, that comes to $17.28 million. Hence, Edison generating 600,000 watts would cost him, in 2020 U.S. dollars, $28.80 per watt generated. In 2020, an entrepreneur could buy sixty Briggs and Stratton generators, each for $2,000. For that entrepreneur in 2020, generating a single watt of electricity would cost 20 cents.
Here we find that, due to efficiency improvements, a single pound’s worth of material comprising a dynamo in the year 2020 could generate more than eighteen times as many watts in electricity as Edison’s dynamos could, and at less than one percent of the cost.
And that is far from all. Consider the nonrenewable natural resource that is coal. Every few years during the early twentieth century, engineers introduced another model of coal-burning machinery that exerted greater thermal efficiency than did the older models. In the year 1900, more than seven pounds of coal had to be burned to power a 100-watt lightbulb for one hour. By the year 2000, for that same lightbulb to perform that same task required burning less than a single pound.
That principle can be expressed through other figures. Lumens are the units by which light is measured. In the year 1898, one watt powering an incandescent lightbulb would produce six lumens. In 1920, that watt produced ten lumens. In 2003, it would be 200 lumens.
That is less and less coal per lumen.
Recall the point from earlier about Edison’s dynamos. In 1898, a single pound’s worth of Edison’s dynamo would generate 11.16 lumens. By 2003, a single pound’s worth of a Briggs and Stratton dynamo could supply 6,940 lumens. In a little over a century, then, the number of lumens generated by that single pound of material had grown over 600-fold.
Indeed, steel has been used more efficiently over the course of the century. Over 68 percent of the steel put to work in the U.S. economy is recycled annually. When this alloy is newly produced and is being installed for the first time, it is called “virgin steel.” That is treated more economically as well. Steel still goes into automobiles, but not exactly in the same fashion as in previous decades. That is one reason why the weight of automobiles dropped by one fourth between the years 1970 and 2001. For such reasons, between the years 2000 and 2015, even as there was an increase in the quantity of products containing steel, total use of the alloy in the United States fell by 15 percent.
Virgin steel is set to work more efficiently than before and, in turn, it is produced more efficiently as well. Producing steel has always required that iron be heated to the extent that it takes on a molten form. At the opening of the nineteenth century, producers had to burn an average seven tons of coal to churn out a single ton of “blister” steel. This changed in 1856 with inventor-entrepreneur Henry Bessemer introducing the process named for him, wherein cold air would be blasted upon the super-heated iron. Then it took no more than 2.5 tons of coal, in super-heated “coke” form, to finalize a ton of higher-quality “crucible” steel. By the year 2020, putting out that same ton of steel required less than 0.86 tons of coal.
And coal is not the only resource being inputted more economically in steelmaking. Between the years 1930 and 1949, making a single ton of steel cost an average 200 tons of water. That figure decreased to 20 tons by the 1980s. By 2018, the most efficient plants could make a ton of steel from three to four tons. For-profit enterprises have produced technological improvements that conserve water in other aspects as well. Before 1997, the Oberti Olive Plant had to deplete over 10,000 gallons to turn out a single ton’s worth of product. Between 1997 and 2002, the same plant only had to consume 859 gallons to deliver that same ton.
In decades past, the flush of a toilet drained an average 20 liters. In 2018, that same flush drained six liters or fewer.
For most of the USA’s history, the total quantity of water used daily steadily increased. But that peaked around the year 1975 at 425 billion gallons per day. From then on, the quantity of water Americans washed down daily remained relatively stable, even as the population and industrial output both grew. From 1984 to 2004, the USA’s per-capita water usage actually dipped by twenty percent.
In the 1970s, every cubic meter of water consumed in Hong Kong generated an average 500 Hong Kong dollars’ worth of economic value. Adjusting for inflation, by the year 2000 that same cubic meter of water yielded twice as much Hong Kong dollars’ worth of wealth. Figures from the heavily populated areas of the United States point to a coinciding trend. In the year 1975, every cubic meter of water inputted for industrial purposes yielded, in 2004 U.S. dollars, an average eight dollars in utility. By 1999, also in 2004 U.S. dollars, that figure doubled.
Gasoline is another nonrenewable input that the market conserves. The inventor and engineer Soichiro Honda, for whom the famous auto company is named, thought that motorists deserved more out of their driving experience. He assembled a team of engineers, including future Honda president Tadashi Kume, to put out a more economical car, the Honda Civic with its CVCC engine. In 1973, before the CVCC engine existed, a motorist could travel 12.9 miles on a single gallon of gasoline. Starting in 1975, upon release of the CVCC, that same gallon would take that same motorist six miles farther. In 2014, that same gallon would take a car farther than 21 miles.
The trend has continued with electric vehicles. When the Tesla Model S came upon the market in 2012, it had a range of 250 miles per charge. By contrast, the Tesla Model S with a Long Range Battery Pack from 2021 had a 390 mile range per charge. Complementarily, in the Nissan LEAF, between 2011 and 2020 the range almost tripled with the number of miles per charge increasing from 73 to 215.
The automobile engines of 2002 were twice as powerful as were those from thirty years earlier. Yet they emitted half as much in exhaust fumes.
Other modes of transportation undergo the same evolution. Compared to one from 1970, a Boeing 747 commercial airliner in 2002 was half as loud and consumed 17 percent less fuel even as it worked at a quarter more horsepower at takeoff. In the duration of 1960 to 1990, the thrust-to-weight ratio in commercial jet engines increased from 4.2 to six. Similarly, between 1940 and 2000, the thrust-to-weight ratio of the gas turbines in these same airplanes lifted from 15 percent to more than 40 percent.
Pollutants that firms release into the air and water are waste byproducts — those are the part of the input that cannot be put into production. As firms gain in efficiency and put every part of the natural-resource input into production, that reduces the waste and therefore reduces the pollution. That is why in both the United States and United Kingdom, firms had been reducing their emissions of toxins in the air even prior to these countries each passing their own particularly strict Clean Air Act.
A doubter might say, “Maybe for every unit of a good produced, less of a particular substance is used. But it doesn’t follow that, in the end, smaller quantities of matter as such are used per unit produced.” Actually, it does follow. That is demonstrated in the reduction of the total mass per unit for particular goods.
A ten-story office building constructed in the year 1999 weighed less than one constructed in 1890. Former Federal Reserve chair Alan Greenspan explains the reasons for this. “Advances in architecture and engineering, as well as the development of lighter but stronger materials, now give us the same working space but in buildings with significantly less concrete, glass, and steel tonnage than was required in an earlier era.”
In 1992, he also noted, “Our radios used to be activated by large vacuum tubes; today we have pocket-sized transistors to perform the same function.” The development of these transistors was responsible for an even more drastic change in the size of computers.
In the 1950s, a mainframe would take up the space of an entire room, sometimes even an entire building. In 2020 U.S. dollars, the cost of assembling and maintaining such a machine was in the millions. A single digital watch today priced at $35 exercises more computing power than did any of those mainframes. A pocket calculator from the year 2000 already computed 350 times faster than did the computers involved in the Apollo 11 mission. Inventor-engineer-entrepreneur Ray Kurzweil makes an even more impressive comparison. He says that in the 1970s, considering the state of technology at the time, it would have taken trillions of U.S. dollars’ worth of resources to build a computer with the same amount of computing power as those of the smartphones that African villagers were carrying around in 2013.
Speaking of mobile phones, from 1990 to 2011, the average weight of one shrank from twenty-one ounces to four ounces. That is, a mobile phone from 2011 was less than one-fifth the weight of one from two deaces prior. Much of this trend has to do with the aforementioned improvements in efficiency of the lithium-ion batteries inside these mobile devices. Between 2008 and 2015, the quantity of kilowatt hours generated per liter of lithium-ion doubled from 200 to 400. And between 2010 and 2017, the quantity of watt hours per kilogram of lithium-ion almost tripled from a little over 100 to 300. Stated in other terms, a mobile phone manufactured in 2015 could perform the same tasks as one from 2008 on just half the amount of lithium.
Using the weight as a proxy in measuring mass, we can discern that a particular product today can produce the same output as that product’s counterpart from decades ago even though the product of today uses up a smaller quantity of mass from natural resources.
That is visible wuth someone we mentioned earlier, that of Jonathan Rothberg and his portable and wheeled MRI machine, the Hyperfine Swoop. Compared to a standard MRI scanner from 1977, Rothberg’s Swoop is ten times lighter in weight and consumes 35 times less energy.
This likewise happens with household tools. The first power drills came out in Germany in 1895. Each weighed seventeen pounds and was only slightly more powerful than a hand-cranked drill. To operate it, someone had to grab its two handles and hold it up to one’s chest. The on-off switch was far away from the machine. To turn it off, the operator had to take his hand off the tool itself. That way, the operator could lose control of the machine and injure himself. In 1917, the American inventors Samuel Duncan Black and Alonzo G. Decker, Sr., introduced a variant that was eight pounds — less than half that of its predecessor — and was easier to use. It had a trigger like a gun that, when pulled, turned the drill on. They priced it at $230, which is over $5,000 in 2020 U.S. dollars.
By 1921, Arno H. Petersen made a version that was still more ergonomic. Instead of putting the trigger where it would go on a gun, Petersen put it on a handle behind the motor. This put less stress on the forearm of the person operating it. And it was four pounds, and sold each unit at $42. That is $609.32 in 2020 U.S. dollars. Petersen’s version, christened the “Hole Shooter,” serves as the general model for those being manufactured in 2022, being roughly the same weight and largely the same in design. In short, the power drills at the time of this writing generate the same output as those from 1895 but are less than a quarter of their weight and sell for less than one percent of their real price.
In 2001, science journalist Ronald Bailey provided other examples of consumers receiving the same or greater economic value from products that consisted of less mass, overall, than did their counterparts from prior decades. That year, food cans were half the weight that they were in 1951. Likewise, plastic soda bottles were only seventy percent the weight of those being sold in the 1970s, and the ones from the 1970s were already lighter than the glass bottles they replaced. And Ronald Bailey returns to our example of copper wire in satellites giving way to fiber-optic cables.
A copper wire can transmit 24 voice channels or about 1.5 megabytes of information per second. Far thinner and lighter optical fiber can transmit more than 32,000 voice channels and more than 2.5 gigabytes of information per second. The first American communications satellite, Telstar 1, was launched in 1962 and could handle 600 telephone calls simultaneously. Modern Intelsat satellites can handle 120,000 calls and 3 TV channels at the same time.
Alan Greenspan observes that this even happens with our clothing. “The development of the insights that brought us central heating enabled lighter-weight apparel fabrics to displace the heavier cloths of the past.”
We can dispel any notion that the reduction in the quantity of one category of natural-resource inputs in every unit produced simply shifts to an increased used of a different natural-resource input for that unit. We can do so by examining how much energy altogether is expended on creating an average unit of economic value. This can be done by looking at overall energy intensity. This is how much energy in total — coal, oil, nuclear, and renewables combined — go into the production of economic value. Energy intensity measures the quantity of megajoules that had to be generated to produce an average inflation-adjusted dollar’s worth of economic value. A reduction in the energy-intensity ratio over time means that smaller and smaller quantities of natural resources must be converted into energy to generate the same amount of economic value.
And that is what we find. From 1880 to 2000, the number of megajoules that had to be generated in the USA to bring forth a constant 1990 U.S. dollar’s worth of economic value shrank from 50 to 15. For the United Kingdom in the year 1830, 35 megajoules had to be generated to produce a constant 1990 U.S. dollar’s worth of value. By the year 2000, it was 15.
It may be said that even if a specific unit of a good has shrunk in mass, such as computers getting smaller, the total quantity of natural resources consumed annually has expanded on account of the number of units produced growing annually as well. But, no, the improvements in efficiency have even preempted a major increase in the total quantity of natural resources consumed per year.
Economists calculate the weight of all the goods and services circulating through the U.S. economy. Once again, we use the weight of objects as a proxy in measuring their mass. Alan Greenspan notes that since 1977, the estimated real goods output of the United States annually has maintained a relatively stable weight.
It reached high points of 1.2 billion metric tons in the separate years of 1979 and 2013.
Rockefeller University scholar Jesse Ausubel writes that among 100 commodities studied by Paul Waggoner, Iddo Wernick, and himself, the total annual usage of 36 of them —including steel, timber, paper, asbestos, and chromium — peaked in 1970 and then dropped off since then.
All this happened even as the American economy experienced a net growth since 1979. The increase in wealth is due not to the natural resources themselves as much as how smartly those natural resources are being utilized.
The Carrying Capacity of Land | ^
“That may be all well and nice,” one reply may go, “but there is still an important commodity of which you cannot produce any more units, no matter how cost-effective are. There really is a fixed quantity of land. Its carrying capacity —the number of people who can safely fit on it and live — is finite.” Yet market economics have indeed increased the carrying capacity of that. This is in two respects. First, technological improvements have allowed for a larger number of people to live peaceably on the same square acreage as before. Secondly, the same plot of land can grow greater quantities of food than it has in centuries past.
Let us first begin with how technological innovation has enabled a greater quantity of people to live and work on the same the square footage of land. Throughout the nineteenth century, the U.S. population grew for two reasons. First was the influx of immigrants from Southern and Eastern Europe, masses seeking new opportunity. Second was that the improvements in living standards from industrialization were already beginning to reduce the death rate. Yet this led not to crowding alone but also an increase in the real price of housing. Rents would go up. Entrepreneurs observed that profit was to be made by finding a novel solution to this. It would come in the form of a change in housing itself.
For much of the past several thousand years, human beings had difficulty with high-rises. And that was with good reason. Most buildings were structures supported by their outer walls. The taller the structure was, the greater a burden the structure put on its base. The base had to be the widest section, much wider than the building’s top. Hence, most tall artifices, be they in Egypt or in Mesoamerica, had to be constructed in the shape of pyramids. The walls having to be wide reduced the space on the interior, and there was less interior space still near the top of the structure.
This was dealt with in the late nineteenth century. This was when, due to greater economic freedom than in centuries past, such figures as George Westinghouse and John D. Rockefeller, Sr., thrived. It was this environment that created opportunities for a pioneer in the designing of skyscrapers, William LeBaron Jenney.
One day upon looking at his wife’s bird cage and the bars on the outside, inspiration breathed new life into Jenney. Limitations were placed on a building’s height exactly because of how architects had traditionally relied on the outer walls supporting the structure. Instead, Jenney reasoned, the structure should be supported by a metal frame — a sort of skeleton — inside the inner walls. The construct, then, would not need to be pyramid-shaped; the highest story could be just as spacious as the lowest.
This greatly increased the carrying capacity of land. As noted by London’s Economic Development Office, “Accommodating the same number of people in a tall building of 50 stories as in a large building of five stories requires roughly one tenth of the land.”
Many great technologies enabled farmers to grow more food per acre of earth. From 1950 to 2001, corn yields per acre in the United States tripled.
And the result of all the aforementioned entrepreneurial ingenuity has been improved living standards. Moreover, with the exception of one category of product we will discuss later, this has led a reduction in real prices over most consumer goods, especially food.
Here we must emphasize the distinction between nominal prices and real prices. Nominal prices are the price of a product taken at face value. A candy bar priced at two cents in 1904 was 44 cents in 2009. The nominal price in the latter year was twenty-two times that of the former year.
The main cause of inflation is the U.S. Treasury and U.S. Federal Reserve putting more and more monetary units in circulation. When the quantity of monetary units increases at a rate that exceeds that rate at which the quantity of goods and services increases, that is more monetary units chasing after the same goods and services. Vendors have to raise the nominal prices of their goods; otherwise, there will be a shortage. This inflation hurts most the parties that are living on savings and fixed incomes, such as senior citizens collecting their retirement. That is why policymakers should listen to free-market advocates concerned about the Treasury and the Fed devaluing the currency. But that is another essay for another time.
Germane to this particular essay, because inflation obscures actual changes in prices, we need another metric by which to judge the extent to which prices have changed over the decades. Many economists rely on something called the “consumer price index” in order to measure inflation. With it, they calculate how much economic value a U.S. dollar from today could have purchased in past years, be they 1930, 1940, or 1950, and vice versa. What a single nominal U.S. dollar could purchase in 1900, for example, was the equivalent of what a nominal $31.10 could purchase in 2020. A price that is calculated to account for inflation is known as “real price.”
Economist W. Michael Cox, formerly of the Federal Reserve Bank of Dallas, has another approach. He asks his fellow citizens to consider the average amount of time someone had to spend at work in order to purchase a particular good.
By that standard, the trend has been for important goods to get cheaper and cheaper. For someone in the year 1930 to afford 100 miles’ worth of air travel, that person would have to do the equivalent of twelve hours and 46 minutes’ worth of work. By 1990, one could purchase that same 100 miles of air travel by working one hour and two minutes. In 1900, affording 100 kilowatt hours of electricity would entail working for 107 hours and 17 minutes. By 1990, that quantity could be earned by spending 43 minutes at work.
The same trend is seen with food. In 1940, a person had to spend one hundred hours on the job to be able to purchase a three-pound chicken. By 1990, that chicken could be purchased after spending fewer than twenty minutes. The downward trend in prices here cannot be attributed properly to federal legislation such as the Fair Labor Standards Act of 1938. The price of chicken was already falling. Between 1900 and 1930, the number of hours one had to labor to obtain this three-pound chicken fell from 160 to 110.
Citing a 2004 study by Erik Rauch at MIT, utilizing U.S. Bureau of Labor Statistics data from 1947 to 2000, Silicon Valley tech writer Andy Kessler observes that by the year 2000, someone would only need to work eleven hours a week to attain the equivalent value of what someone earned from a full forty-hour work week in 1950. To put it into perspective, Kessler writes that “we could have knocked 30 minutes off the average work week every year since 1950” and by the year 2000, “still maintained our 1950 standard of living.”
And, indeed, even as lithium is employed more efficiently in machines, its real price keeps falling. Between 2010 and 2019, its price per kilowatt hour in 2019 U.S. dollars descended from $1,183 to $156. In nine years, that was a more-than-fivefold decrease.
For many consumer goods today, a single hour of work will buy for someone in the First World a larger quantity of theese consumer goods than that same hour of work would have fetched for any previous generation. That is a net gain in wealth for everyone in the First World.
In the United States, a household falling under a certain income threshold puts it under the official federal poverty line. Whether the household is in poverty is calculated by the U.S. Department of Health and Human Services according to the household’s income and the number of people living in it. As of this writing, a family of four is under the poverty line if it brings in less than $26,500 annually. Even many households under this poverty line provide evidence of how living standards improve to the extent that people are free. In 1950, fewer than 80 percent of all U.S. households possessed a refrigerator. By 1997, a refrigerator was in 90 percent of U.S. households falling under the federal poverty line.
Goods That Have Not Decreased in Real Price | ^
The general trend for units of consumer goods is not only for smaller quantities of natural resources to be inputted into their creation but also for them to decrease both in real cost for the manufacturers and real price for consumers. All these reductions are the consequence of improved industrial efficiency. Yet one may notice that the general price decreases do not apply to most of the pharmaceuticals and medical devices I mentioned in Part One of this essay. Genentech’s human insulin reduced costs for producers but it did not substantially shrink in real price for diabetic patients. Nor were there big price reductions in cancer drugs after the release of those from Patrick Soon-Shiong and Axel Ullrich. That is because, sadly, there is one large, general category of product to which the reductions in real price have not applied. This is actually not a failing of laissez-faire free market principles, however.
The products that have not decreased, but which instead have often increased, in real price include health care, pharmaceuticals, medical devices, higher education, and residential homes. What these goods and services have in common is how much of a financial commitment they all are. And they have something else in common. It is that the federal government has instituted measures to help people obtain cash or credit to procure these goods and services. Medicare and Medicaid assist in paying for health care, prescription drugs, and medical devices. Federal loans assist in obtaining higher education and housing — two goods so great in expense that they are paid for in installments.
These are taxpayer subsidies. Even if the borrower pays back the federal loan’s principal plus interest, there remains, on a net balance, a taxpayer-funded payment to the borrower. The reason for that is that the interest rate the federal government charges is always less than the interest rate that would have been charged by a privately owned lending institution. The difference between the government’s and the private lenders’ interest rates is absorbed by taxpayers.
What happens is as follows. First, a particular good in this category is considered too costly. The government then provides taxpayer subsidies to assist in purchasing these goods. However, this raises demand, and the providers of these goods respond to this rise in demand by raising prices. Paying for real estate grows more daunting, as it does with university tuition. As these prices ascend, activists and the general public clamor for larger subsidies to cover these new higher prices. Taxpayer subsidies purported to make a particular good more affordable therefore ultimately make that good more expensive.
Laissez faire is not to be blamed for this predicament. Nor does it follow that these goods and services would not decrease in real price if none of the taxpayer subsidies existed. Cosmetic surgery and LASIK eye surgery, for example, are not covered by health insurance or taxpayer subsidies. Exactly for that reason, such procedures have plunged in real price over the past 15 years.
Recall that throughout the 1950s, Percy Julian was able to reduce the price of progesterone tenfold. By contrast, the legislation in 2006 to ensure that Medicare pay for prescription drugs has only driven up the real price of medication.
Food purchases are also subsidized in the form of food stamps, now called the supplemental nutritional assistance program (SNAP). But all of those who are concerned about food prices should be thankful that these subsidies go to a minority rather than the majority of the population. If the vast majority of Americans paid for their sustenance with SNAP, the real prices of food would be steadily increasing as well.
Laissez faire not being the culprit for the rising real price of taxpayer-subsidized goods, we see that in areas where markets are freer, the freedom of enterprise to improve efficiency has shrunk the quantity of natural-resource inputs used and has lowered real prices for goods and services.
The Poor Get Richer | ^ Yet most of the world’s human population persists in being poorer than it should be. As discussed earlier, there are still many casualties from people breathing — as they try to keep warm — the fumes rising from their fireplaces. The main reason for the holdup in development is that most countries have kleptocratic governments. People practice commerce but their governments usually refrain from protecting them from theft. Often on a whim, the State itself will seize the people’s meager belongings. But as to the extent that they have experienced any liberalization, such as the country becoming more open to international trade and direct investment, the perks of liberalization have conferred improvements in living standards upon the developing world’s residents.
Consequently, average living standards have climbed in both the rich countries and the developing ones over the past half-century. It is here often interjected that the statistical mean, the average among all the numerical figures, is not always the statistical mode —the numerical figure that, among all the cases, recurs most often. If the mean global annual income shot up, what if all the gains went to the wealthiest one percent of the population? Maybe inflation-adjusted incomes for everyone else has remained the same or fallen? The economists David Dollar and Aart Kraay looked into this. They found, “When average income rises, the average incomes of the poorest fifth of society rise proportionately.” A trio of academic economists led by John Luke Gallup had a corroboratory result. They discerned “a strong relationship between overall income growth and real growth of the income of the poor.”
We can gain insight into these changes by observing what the United Nations defines as life-threatening absolute poverty. Someone falls under that threshold if that person makes less than $1.90 per day in inflation-adjusted 2019 U.S. dollars. This should not be confused with the U.S. federal government’s criterion for falling under the country’s official poverty line. Someone can be under the U.S. poverty line but still be out of absolute poverty by the U.N.’s standard.
Overall, the rate of life-threatening absolute poverty has been slashed, even in the developing countries. Between 1981 and 2008, the share of the global human population in life-threatening poverty dropped from 52 percent to 22 percent. That is a figure sliced by more than half.
And China’s ascension to wealth is not sufficient to explain this decline. Professor Max Roser of Our World in Data scrutinized what the results were when China was excluded. In 1981, 29 percent of the non-Chinese human population was in absolute poverty, whereas in 2013 the figure was 12 percent. For such reasons, Georgetown University economics professor Steven Radelet finds it necessary to emphasize that the “improvements” in living standards among the developing countries “go well beyond China.”
Many find it tempting to attribute this poverty reduction to taxpayer-funded foreign aid and to charitable NGOs. They have played a role, but as U2 front man Bono notes, something else has more to do with it. “Commerce — entrepreneurial capitalism,” he told an auditorium of Georgetown University students, “takes more people out of poverty than aid.” The data corroborate Bono’s assessment. Columbia University’s Howard Steven Friedman inquired into how much, between the years 2000 and 2013, the taxpayer-funded U.N. Millennium Development Goals (MDG) had to do with the developing countries’ gains in living standards.
It turns out the MDG had very little to do with the improvements; it was mostly for-profit commerce and private charity. In the few cases where some taxpayer-funded government project helped, such as with the construction of municipal roads, that came from municipal government and municipal taxation, not taxpayer-funded aid from the rich countries.
The World Bank does not attribute trade as the prime reason for the poverty reduction, but the trade does contribute to what the World Bank determines is the prime reason. As the World Bank explains, “the creation of millions of new, more productive jobs, mostly in Asia, but also in other parts of the developing world, has been the main driving force” behind the fact that “poverty has declined in the developing countries.” After all, “the private sector is the main engine of job creation and the source of almost 9 of every 10 jobs in the world.”
Among those jobs are those that capitalism’s detractors have reviled as exploitation. These would be initially low-paying jobs in factories established through foreign direct investment, factories often derided as “sweatshops.” From the 1950s onward, Asians opted for these sweatshops in the city because they paid two to three times as much as those in the village or country. Contrary to modern assumptions, in countries that are more politically liberalized we find that the trend is not for the majority of the workforce to be stuck in low-paying drudgery for decades on end. Reason magazine has profiled a factory in Taiwan that, during the 1970s, manufactured Barbie dolls. The workers in such factories saved their money and sent their children to schools to hone other skills. That is how countries such as Japan and Taiwan arose from destitution to First-World affluence. A similar phenomenon took off in India in the early 1990s with its deregulation of information technology.
The World Bank’s 2013 findings on poverty reduction corroborate Ayn Rand’s observations from over three decades earlier. She already noted that insofar as it has been implemented, capitalism has “raised the standard of living of its poorest citizens to heights no collectivist system has ever begun to equal, and no tribal gang can conceive of.” For such reasons, Rand related elsewhere, “If capitalism had never existed, any honest humanitarian should have been struggling to invent it.”
Although she did not know about him as she wrote those words, Ayn Rand seems to be anticipating the epiphany that Bono has had about global economics. Taking his Catholicism seriously, Bono had always concerned himself with the plight of the poor. When he first rose to fame in the 1990s and exercised his celebrity status to bring attention to this plight, he originally went by the conventional interpretation of capitalism being evil. One day at a conference, he met African development economist George Benjamin N. Ayittey, who implored him to consider it from another angle. As Bono observed over the decades which antipoverty measures worked and which did not, it was exactly his concern for the well-being of the poor that his impressions about capitalism had changed. He imparted to Rolling Stone magazine, “If you told me twenty years ago that commerce took more people out of poverty than aid and development, I’d have scoffed.” He is not scoffing anymore. Instead, he laughs in his speech to the Georgetown students, “ ‘Rock star preaches capitalism.’ Wow! Sometimes I hear myself, and I just can’t believe it!”
We often hear that capitalism must be fought by antipoverty programs. Yet capitalism is the antipoverty program.
That cliché that Percy Bysshe Shelley popularized about the rich causing the poor to become poorer is economically illiterate. To the extent that people are free to enterprise, the rich get richer and the poor get richer.
From the relative liberalization in the nineteenth century, and as a result of its consequent Industrial Revolution, the average lifespan in the United Kingdom, Western Europe, and North America ascended from 27 years in 1800 to 77 years by 1988. Starting in the late twentieth century, the developing countries began to experience comparable effects to the extent that they have been exposed to the gains of liberalization.
Georgetown University economist Steven Radelet points out that between 1980 and 2015, “the rate of child death has declined in every single developing country in the world where data are available. There are no exceptions” (emphasis Radelet’s).
And, as Max Roser notes at Our World in Data, the boost in average lifespan is due not only to reductions in the infant mortality rate. Thus, contrary to the final chapter of the book ScienceHeroes.Com was created to advertise, there is no conflict between “Our Health” and “Our Wealth.” Each of those reinforces the other.
Throughout Part One, we learned of how illustrious entrepreneurs organized the creation and distribution of specific products that saved lives. Here, in Part Two, we begin to see how all those efforts add up.
What Capitalism Can Do for the Climate | ^
Capitalism’s doubters continue to shake their heads. Even if they concede that capitalism drives innovation, they fret that something can reverse this progress. Anthropogenic climate change is frequently cited as the foremost exhibit of unregulated capitalism run amok. The famous progressive journalist Naomi Klein wrote an entire book to propound as much. The idea is right in her book’s subheadline: Capitalism Versus the Climate. To favor capitalism, she inveighs, is to be against the climate.
The assumption is that if energy companies emit carbon dioxide unimpeded, that is the complete exercise of free enterprise and private property rights. But this is actually an initiation of force. It is an initiation of force when industrial CO2 emissions wreak harm on human habitats on account of the emissions contributing to the globe warming by a margin that otherwise would not have occurred.
Despite the aforementioned gains in productivity among industries that emit fossil fuels, they still emit more CO2 than Earth scientists deem to be safe. John D. Rockefeller benefited us with oil that made possible Leo Baekeland’s lifesaving plastic medical equipment and Thomas Midgley’s lifesaving refrigerants. But these men did not anticipate the downside to fossil fuel emissions. These emissions will not cause the catastrophic end to civilization as depicted in Hollywood scare stories, but they will disrupt the climate to such an extent that they will impose more hardships on people, including in the developing countries, than would otherwise would have to be faced. This needs to be addressed.
More companies could gasify their coal and pump this gasified coal through pipelines. That would not eliminate CO2 emissions completely but it would reduce them. But, as the situation currently stands, it is still usually cheaper for that company to refrain from gasifying its coal. And in contributing more CO2 emissions than it otherwise would, that company is contributing to the destruction of waterfront properties. It is also making it more difficult for farmers to produce their output. Hence, the CO2-emitter is cutting its own costs by imposing those costs on other parties, damaging their private property.
As those private parties' private property is being damaged, they should be able to sue the CO2-emitter for compensation. They are transferring the costs back to the CO2-emitter. We can reach a point where it becomes cheaper for the CO2-emitter to adopt methods that reduce CO2 emission, rather than continue with the status quo. Then the market shall signal how much more profitable it would be to adopt more-efficient technologies that produce consistent output while cutting the CO2 emissions.
A proposal aiming at similar results is the levying of a tax on CO2 emissions. That, too, is about returning those costs to the CO2 emitters. My issue with this recommendation is that it hands control over this matter to a government agency that will approach everything from the top down. The government agency will be collectivist in claiming to represent the victimized parties as a faceless whole.
There is no guarantee that the revenue collected from a carbon tax would reimburse the specific individuals who have been harmed by CO2 emissions. Even if politicians promise that the revenue collected will go specifically to the parties harmed, these parties will be treated as a collective — everyone in the group in general, and no one in particular. In contrast to individuals filing lawsuits, such a carbon-tax-collection program would result in greater mismatches between who was most hurt by CO2 emissions and who receives the most money in damages.
Justice is likelier to result from specific individuals filing lawsuits. This is a more from-the-bottom-up, private-property-oriented capitalist approach.
A common concern is that the private parties that will be most devastated by anthropogenic climate change are located in the developing countries. By contrast, the main CO2-emitters are in the developed countries. But, in legal theory, it is still possible to address this through a federal law called the Alien Tort Claims Act. It allows for non-U.S.-citizens to file suit against U.S. companies in a U.S. court.
This statute was invoked in a civil suit concerning the corporation Unocal. The allegation is that Burmese villagers were abducted to toil as slaves on one of the company’s pipelines. Western lawyers invoked the Alien Tort Claims Act to say they could win a lawsuit against Unocal, on the Burmese people's behalf, in a U.S. court. This was ultimately privately settled. However, I think that Unocal would not have been pressured enough to settle the suit if not for the Alien Tort Claims Act being a viable option for the plaintiffs.
Capitalism is being practiced consistently insofar as every firm’s gains and losses are both private and internalized. By emitting more CO2 than is technologically necessary, firms take in privatized gains while socializing or collectivizing their costs. That is not pure capitalism.
Far from capitalism being the cause of damage to human life via climate change, a more consistent implementation of the principles of capitalism is the solution.
Capitalism Vs. Hunter-Gatherer Life Vs. Socialism | ^
No, insist detractors. In lieu of just developing new technologies to continue with man’s consumption of resources, they declare, everyone should just learn to live on less —especially the vendors of the world. Anti-capitalists see vendors such as Wilson Greatbatch not as wizards who enrich others through their inventiveness as much as they see them as predators who extract money from customers.
These anti-capitalists remember a time in their childhoods when their parents or guardians provided the amenities. As adults, these anti-capitalists yearn for the presence of some still-higher-ranking parental figure who can bail out adults in their desperate hours. They remember stories of how human beings once had the abundance of the Garden of Eden, only to lose it. Upon being banished from paradise, human beings were thereafter doomed to mortality and the need to struggle for sustenance. No matter the net increases in global economic value provided by the George Westinghouses and Wilson Greatbatches of the world, they will never measure up to the standard set by Eden.
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Westinghouse and other vendors, then, are not geniuses who have raised us beyond the living standards of cavemen. Instead, in expecting payment for units of their inventions, the Westinghouses and Greatbatches are holding these units for ransom. The customers’ need is the basis of what they deserve. Once the ransom is paid off, these vendors release to their customers the units of value that were rightfully owed to the customers from the outset.
But the reality is reverse. The abundance of the Garden of Eden was never the default. Rather, the default has always been life-threatening poverty. Industrialization and capitalism “did not create poverty,” Ayn Rand elucidates. They “inherited it.” More than that, as we have seen, it is industrialization and capitalism that have done the most to alleviate this penury.
Socialism has over a century of promising that Edenic plenty, of all customers getting everything they need. And socialism has failed for that more-than-a-century, performing worse than whatever amount of capitalism has existed. Yet in its constant false promises, socialism continues to be hailed as more desirable than capitalism.
Such considerations are denied by various opponents of capitalism. Propagandist Michael Perelman huffs about private ownership of agricultural land replacing the practice of shepherds grazing their flocks on the medieval commons. Others go back even farther in time. They cite the living conditions of hunter-gatherers as far better. Many of the lifesaving innovations profiled in Part One were a remedy to dangers imposed by previously established technologies. George Westinghouse’s air brake cut the number of railroad fatalities, but there would never have been a need for this air brake if locomotives were never invented. Electric heating that Westinghouse helped make possible has saved people from having to damage their lungs in the employment of fireplaces. But people would not have suffered from this indoor air pollution if no houses were built. After all, for most of the species’s history, hunter-gatherers have managed to live without skyscrapers, houses, or cabins.
Yes, it is quite fashionable for people, even many self-proclaimed admirers of Ayn Rand’s, to idealize the hunter-gatherer mode of existence. They say that such an arrangement was more pleasant in that the average number of hours of work a hunter-gatherer has to perform to obtain daily meals is a mere four hours. The major source of that figure is anthropologist Richard B. Lee. Arguing along these lines, anthropologist Marshall Sahlins judged that having so much leisure time made hunter-gatherers “the original affluent society.” And, continue the anti-capitalists, the figure about the average lifespan being low among hunter-gatherers is misleading. What mainly drives down the average life expectancy, goes the argument, is the high infant mortality rate. But, continues the argument, if someone lived to be two years old, there was as a great chance of her living to be eighty years old.
There is much to unpack from that.
First, the figure about hunter-gatherers only needing to work an average four hours per day for food is the actual instance of a statistical mean being misleadingly presented as a statistical mode. The anti-capitalists’ citation of this figure brings to mind the false image that, every day, the hunter-gatherer works no more than four hours, and then spends the rest of the day on quality time with family and recreation.
In reality, there is much irregularity in the number of hours per week on obtaining food. Typically, the men in such a band will spend several days attempting to hunt for game or to forage. Often, they can come back with nothing. They next spend the next several days on resting. This is the cycle on repeat.
Further, when anthropologist Richard B. Lee calculated that it took an average four hours per day to obtain their nourishment, Lee mentioned a fact that is seldom acknowledged by people who cite his four-hour figure. It was that, in calculating the average number of hours of “work,” Lee did not count the number of hours that these hunter-gatherers then have to spend on what Lee calls “housework.” Such housework includes the processing of the food that has already been retrieved. The same !Kung San bands that Richard B. Lee studied happened to spend eight hours a week on cracking the mogongo nuts they gathered, four to seven hours per week on assembling or repairing their tools, and fifteen to twenty-two hours per week on butchering and cooking meat and on collecting firewood. As food historian Rachel Laudan summarizes, “each adult spent between 27 and 37 hours a week on food processing and ancillary activities: fuel, water and tools. . . . Thus the total work week for the bushmen on the lowest of estimates turns out to be between 6 and 7 eight-hour days (not counting child care).”
Now we can turn our attention to life expectancy among hunter-gatherers. There is something perverse about people citing, as a counterpoint to the idea that hunter-gatherer subsistence is harsher than modernity, the argument that it is only because of a very large infant mortality rate among them that the average life expectancy of hunter-gatherers is driven down so low. After all, as stated previously, the infant mortality rate among hunter-gatherers is usually one in four. People who make this argument should bother to listen to themselves. That the infant mortality rate would be large enough to do that should be acknowledged, from the outset, as a major indication of how much more perilous the conditions of hunter-gatherer life are. More relevantly, that it has been able to reduce the infant mortality rate from 25 percent to less than one percent is a credit to industrialization and modernization. This is the same industrialization and modernization being belittled.
Moreover, it is not accurate that as long as someone survived being age two, it made it likely for that person to reach age eighty. In mass graves of hunter-gatherers, it is unusual for archaeologists to find anyone who lived to eighty. Even into the days of ancient Rome, some people were lucky enough to reach their seventies, but the percentage of the population that reached such an age was smaller back then than it is today.
Max Roser of Our World in Datademonstrates that, since the year 1700, the rise in life expectancy goes far beyond the salutary reduction in the infant mortality rate.
Overall, the mortality rate is lower for people in modern, liberal, republican, commercial societies than in hunter-gatherer bands, and for every age bracket.
Examining females in the Hiwi band who reach the age of fifteen, only a quarter will live to 70. By contrast, with fifteen-year-olds in a modern industrial society, three quarters can expect to be around for their seventieth birthday.
In members of the Arikara clan found in mass burial sites, the mortality rate for those aged 20 to 40 was 15.3 percent. In American citizens today in that same age range, we find a mortality rate of 3.7 percent.
Ah, counter the opponents of commercialism, escaping the evils of capitalism does not require that we go so far as abandon modern technology in favor of a return to being hunter-gatherers. Nay, they say. We can adopt the political-economic collectivism that is common to hunter-gatherer bands while maintaining the conveniences brought about through industrialization. This shall be accomplished, they offer, through old-fashioned socialism of one sort or another.
Ever since the rise in popularity of Bernie Sanders and Alexandria Ocasio-Cortez, it has, once again, become trendy for Americans to insist that socialism could provide this wealth to a much greater degree than capitalism. The history of the twentieth century does not bear out such an assertion. To the extent that capitalism’s detractors think of socialism as the rich being taxed to pay for social service programs for the poor and middle class, that is actually a welfare state or regulatory-entitlement state. There are great weaknesses to this alternative, but that is another essay for another time.
Let us compare “socialism” as it has been more traditionally defined from the late nineteenth century to the mid-twentieth century. “Socialism” here refers to the public —usually with the government acting as its representative — having collective ownership over heavy industry, such as steel production and automobile manufacture. When a national government has its own agency attempt steel production or auto-making, that agency is known as a State-owned enterprise (SOE). Rather than the selfishness imputed to competing firms that seek profit, the State-owned enterprise is nonprofit and supposedly acts for the good of all.
If we want to look at such socialism being practiced in countries that remained democracies, we can look to Sweden, the United Kingdom, and France from the end of World War II to the late 1970s, the latter period being when the government began converting the SOEs into privately owned, for-profit firms.
Ove Granstrand and Sverker Alänge partook in a study of their native Sweden, examining the origins of the country’s hundred “most economically important innovations” to emerge in the duration of 1945 to 1980. Eighty percent of the innovations originated from major private, for-profit corporations. Twenty percent arrived from then-small startup firms. By contrast, innovation from State-owned enterprises was “marginal,” . . . meaning zero.
Someone who had to confront this reality was Nelson Mandela. For decades during his campaign against apartheid, Mandela proudly called himself a radical socialist itching to nationalize the means of production and turn private companies into State-owned enterprises. Then as South Africa’s leader, throughout the 1990s — the same decade of Bono’s transformation — Mandela met with dignitaries from the former Soviet Union and post-Maoist China. They extolled the significance of privatization. Speaking of those meetings, he told his biographer Anthony Sampson, “I came home to say: ‘Chaps, we have to choose. We either keep nationalization and get no investment, or we modify our own attitude and get investment.’ ”
Capitalism Vs. Taxpayer Funding for Basic Research and R-and-D | ^
Yet it is often stated that even if outright socialization of heavy industry is a failure, governmental intrusions on market activity are still warranted in terms of allocating taxpayer outlays for specific R-and-D efforts. The assumption here is that politicians and government officials are a better judge than are private investors in determining which R-and-D projects will produce results beneficial to everyone. After all, Patrick Soon-Shiong’s nab-paclitaxel merely improved upon a different drug whose development was funded federally by the National Cancer Institute. Likewise, this NCI provided grants to the same Dennis Slamon who had to pester Genentech Corporation to get behind trastuzumab. An article from Kaiser Permanente states that both the BioNTech and Moderna COVID vaccines rely on the federally funded research of Dr. Barney Graham.
I once came across someone on Facebook who insisted to me that all great new inventions came from “government research labs.”
It is a cliché for taxpayer funding’s apologists to comb through the history of the sequence of events that led to the development and refinement of a particular technology, such as smartphones and hydraulic fracturing. Upon finding any instance in this sequence of events where someone in R-and-D received any taxpayer funding, these apologists declare triumphantly that this useful technology would exist in no form if not for the taxpayer funding.
That is a red herring. The issue is not whether anyone received taxpayer funding at any step of the process through which a technology has evolved. The issue is whether value-adding technologies can emerge in the absence of taxpayer funding. Indeed, they can. The primary distinction between the governmental sector and the nongovernmental sector has to do with violence and peace, respectively. Everything outside of direct government involvement — such as for-profit businesses, not-for-profit organizations, and domestic life — is supposed to be nonviolent. Insofar as private parties rely on the threat of violence to assert their will, they are in violation of the law. Then the State is correct to intervene against these parties initiating the use of force.
By contrast, the government is doing the very job for which it was created when it threatens to send armed men against parties that obstinately break its rules. That principle applies even when the initial penalty for disobeying a law is a tiny civil fine. Someone who ceaselessly refuses to pay such fines will eventually be found to be “In Criminal Contempt of Court,” and armed men will be dispatched on this lawbreaker. The government sector and the nongovernment sector are, respectively, the violent sector and the peaceful sector.
Anything that people can do in the absence of threatening violence, people can do in the absence of direct government involvement. To the extent that interested parties can obtaining resources for their research without threatening violence on those who refrain from providing them resources, they can do it without taxpayer funding.
The above is not mere theory. The data themselves undermine the narrative that taxpayer funding is needed, as is sometimes acknowledged by government agencies themselves. First in 1991 and then in 1997, University of Pennsylvania economist Edwin Mansfield inquired over the matter. Between 1986 and 1994, taxpayer-funded research accounted for a mere 13 percent of the new drugs released by U.S. companies. Conversely, 87 percent of the new pharmaceuticals were developed in-house by the companies’ own private capital appropriations. Likewise, in that same duration, taxpayer-funded research accounted for 14 percent of the information-technology products developed. Meanwhile, again, 86 percent of the new IT products were developed in-house, through private financing.
More recently, one can find even government studies that corroborate this.
On the U.S. Bureau of Labor Statistics’ behalf in 2007, Leo Sveikauskas reviewed the literature. He discovered, “The overall rate of return to R-and-D is very large, perhaps 25 percent as a private return and a total of 65 percent for social returns. However, these returns apply only to privately financed R-and-D in industry. Returns to many forms of publicly financed R-and-D are near zero.”
In 2003, Stefan Scarlett and associates reported for the Organization for Economic Cooperation and Development, “The results also point to a market positive effect for business-sector R-and-D, while the analysis could find no clear-cut relationship between public R-and-D activities and growth, at least in the short term.” And the OECD report went even farther, admitting that taxpayer-funded R-and-D has a “negative” correlation with economic growth and innovation. Hence, the report admits, such results “suggest publicly-performed R-and-D” wastes “resources that could be alternatively used by the private sector” more productively, “including private R-and-D.”
Someone who has something to say on this is lifesaving laser inventor Gordon Gould. He has worked on both top secret Pentagon operations and for private companies. In his mind, “Big projects can get done in government research labs, but you don’t see much inventiveness.”
As stressed by he and Wilson Greatbatch, the major source of lifesavings innovation is freethinking individuals who are able to pursue their interests through free enterprise.
Recall that from the Paleolithic Period to the present, a fifteen-year-old’s chances of living to age seventy increased from one in four to three in four. That is due to technological innovation. And the technological innovation is attributable less to government-mandated “investment” than market economics itself.
Accounting for everything, it is hardly doing justice to capitalism for Lindsay Ellis to say that corporations “make us stuff — not useful stuff, but stuff.” The “stuff” is more than useful. It includes pharmaceuticals, medical devices, and other goods that have lengthened lives and added to their quality and comfort.
Contrary to the assumptions of Alexandria Ocasio-Cortez and her counsel Dan Riffle, someone such as Patrick Soon-Shiong acquiring a billion dollars’ worth of monetary exchange value does not deprive the rest of the human population of a total billion dollars’ worth of resources. That entrepreneur’s billion is the consequence of that entrepreneur obtaining natural resources and, by exercising a technique to boost efficiency, changing those natural resources in such a manner that they now provide a greater benefit to human beings than they did in their previous state. The billionaire’s profit is equal to the new value that the billionaire’s efforts produced from the resources inputted, a net increase in the value of the resources employed.
Consider a gram of lithium. Starting in the middle of the nineteenth century, it was occasionally imbibed as a form of medication. For the most part, though, it was exotic. It would not have provided much value to the average person living in the year 1870 or even 1930. Once converted into a particular form, however, that same gram of lithium proved to be of much more practical and immediate value to someone in the year 2009. This is on account of electronics tycoons such as Craig McCaw, Philippe Kahn, and Steve Jobs having lithium power their mobile phones and of medical-device innovators such as Wilson Greatbatch exploiting it to enhance his pacemakers. That usefulness — that value — added to the lithium is economic value that such entrepreneurs created, and for which they are paid in kind. Absent of “the creative power of man’s intelligence,” Ayn Rand reminds us, “raw materials remain just so many useless raw materials.”
Hence, we understand the fallacy of Alexandria Ocasio-Cortez proclaiming, “I do think a system that allows billionaires to exist — when there are parts of Alabama where people are still getting ringworm because they don’t have access to public health — is wrong.” There is no merit to the insinuation that someone having a billion dollars contributes to those Alabamans having ringworm. The best hope for those Alabamans is that an ambitious scientist-entrepreneur will brainstorm a procedure whereby she can profit from providing those Alabamans better medical treatment than what they have received previously.
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When it comes to what he said about twenty-three types of deodorant proving how Americans’ priorities are misplaced, it is projection on Bernie Sanders’s part. There is no inherent inverse relationship between children being fed and their parents being able to choose different types of deodorant. Through the smart employment of resources, there can be more meals for kids even as a variety of deodorants and snazzy sneakers go to market.
If someone acquires a billion dollars through the sale of goods or services, it is because his planning and organizing skills had created, for the world, a net increase in economic value of such magnitude that his customers willingly paid him a total one billion dollars for it. And those customers made such deals because what that entrepreneur provided them was of greater value to them than the money they paid him. The principle remains the same if an entrepreneur becomes a billionaire on account of a rise in the price of corporate shares he owns. In that case, the entrepreneur earns those would-be investors’ confidence that his company will profit its owners by providing great value to customers in the future. Anticipating that the entrepreneur will continue to exercise such competence, demand for ownership in the entrepreneur’s company increases among investors. The more eager the investors are to gain a piece of the action, the greater the demand is for shares in the entrepreneur’s company. Capitalism saves lives and is win-win.
Yet a reader who has been a longtime fan of Ayn Rand’s might notice that she was not fond of an expression like “capitalism saves lives.” That might initially seem strange, considering her status as capitalism’s biggest champion. But there is a special reason for this. The phrase “save a life” is usually spoken in a context where the default is someone going about her life only for some extenral threat to come at her suddenly, which is thankfully removed just as soon.
Capitalism, as Ayn Rand understood the term, is a social system where a liberal republican government allows for people to do anything that is peaceful. Trade and commerce in human history go back at least as far as the Neolithic Period. But even as this commerce was carried out, authority figures could arbitrarily overrule people’s trades and confiscate the fruit of their efforts. It was not until the Enlightenment and the Industrial Revolution that philosophers and statesmen began to enshrine, formally and eloquently, the individual’s right to live and prosper. There would always be some criminals who would try to prey on others, but they would be an aberration. In Ayn Rand’s estimate, then, capitalism did not keep having to “rescue” its citizens. Rather, as far as the threat of violence is concerned, capitalism allows for people to go about their lives without their having to be rescued or saved in the first place.
Definitely, modern industrial capitalism avails to people more opportunities than in centuries past, often because of the new resources whose creation industrial capitalism has facilitated. To try to make a career as a musician in antiquity or during the high Middle Ages, someone would usually have to be born into a family of musicians just to be able to access a high-quality musical instrument. Someone able to master such an instrument would usually then be confined to performing directly before a baron or a politically-connected family.
By contrast, as a consequence of the bounty that market-based industrialization has afforded, someone trying to be a musician today can access many more resources. A middle-class person can record her music and put it on the internet. If she can play multiple instruments, such as a bass guitar and the drums, she can record herself playing each instrument in a separate session, and then put all the sessions together as if she were an entire band playing all the instruments simultaneously. Achieving superstardom is still not easy. The process is more competitive than ever, but it is not for a lack of resources for someone of relatively modest means. Inasmuch as someone wants to pursue her own creative passions and dreams, no social system enables that more than constitutional, liberal republican capitalism. Capitalism enables you to live — not just in terms of survival, but to live in fulfillment, as in make an attempt at the sort of life you want for yourself.
The welfare state and socialism have promised to endow their citizens with greater material security than capitalism ever could; they promise greater access to healthcare and housing. Pursuing one’s artistic passions often interfere with the ability to work a more conventional job to pay for the amenities. Hence, our would-be musician may fantasize about receiving taxpayer funding that can secure her financially so that she has more time for her craft. But every resource a welfare state or socialist government hands out must be taken forcibly from someone. The contradiction inherent to socialism and the welfare state is that their promises of security to someone are enforced by the threat of police violence against others. Rather than say that capitalism saves lives, Ayn Rand judged that capitalism — insofar as it is implemented — is the only social system that enables someone to live a completely human life at all.
Hence, the closest Ayn Rand has come to saying that capitalism saves lives was in her observation that if capitalism itself needed to be “saved” — saved from being replaced by something else — or else the result would be peril to all. In her words,
We must define, understand and accept individualism as a moral law, and Capitalism as its practical and proper expression. If we don’t — capitalism cannot be saved. If it is not saved — we’re finished, all of us, America and the world, every man, woman and child in it. Then nothing will be left but the cave and the club [emphasis hers].
Still, perhaps the principle can be phrased in terms that most people might find familiar. Capitalism does rescue people from the high mortality rates found in hunter-gatherer bands and other pre-industrial societies. If Ayn Rand had to write the phrase at all, it would probably be to state that capitalism saves your life every day.
Billionaires and capitalism do provide us “stuff,” yes, but there is a much grander result than that. To the extent that the relative freedom of a liberal republic has been of benefit to you, billionaires and capitalism have saved both your life and mine.
