Just a short thought prompted by an exchange I had recently on Facebook with a former student of mine. When it comes to Labor, there’s a difference between Value and Activity. In the free market, Value is determined by the Consumer. Whoever is buying decides if the good or service offered has enough Value to justify the price. As I’ve written before, in a free market, Price is simply the agreement of terms set by the Buyer and Seller. If the Buyer doesn’t see enough Value at a given price, he doesn’t buy. If the Seller doesn’t see an adequate return on his labor, she doesn’t sell.
The Free Market demands Producers give their best in order to attract the most Buyers. Now, a Seller could very well try to cut corners, use inferior materials, or cookie-cutter mass produce his goods to get them to market at the lowest price. And the Buyer might favor affordability over quality. Choice. That’s the magic of the Free Market.
Activity is also known as busy work. I’m sure you can identify someone with whom you’ve worked that seems to always be busy, but you can never really articulate what it is that they do or what their contribution to the organization might be. If you’re familiar with the movie Office Space, one of my favorite scenes is when Tom is meeting with the Bobs, trying to explain what did at Initech. People skills!
Now, this is not a rant against management or some Proletariat rallying cry for the Workers. Good managers absolutely add value to an organization. But the biggest culprit of Activity promotion is Government. Government thrives on pushing paper, filling out redundant forms, following arbitrary procedures and protocol, perpetuating outdated equipment, and generally making you wait. And the reason is simple. Government has very little accountability. They’re not measured on whether their Activity produces anything efficiently. They usually have no competition, so there’s little incentive to make any improvements to the status quo.
I remember seeing news stories of the Soviet Union where everyone was given Activities to perform. Someone might have been responsible for cutting pipes. Another person might have been instructed to produce the joints. Another made the valves. Turned out that the pipe cutters used ¾ inch pipes. The joint makers used ½ inch. The valve makers used 3/8 inch fittings. Because they each had an Activity to perform and no incentive to make sure their product was useful or compatible with others, they just kept making their daily quotas. And what happened? Well, if you were trying to build a house, you probably ended up using a lot of duct tape.
Only in the Free Market, where Producers are rewarded for Value they create and Consumers are empowered to choose the products and services that exactly fit their needs, can a nation thrive, overcome poverty, innovate and explore, and progress ahead. Government, almost universally, stands as the greatest inhibitor of progress. It is a parasite on the Free Market, rewarding Activity and not real Value creation.