People earn income by providing others with things they value. Read from Common Sense Economics: What Everyone Needs to Know about Wealth and Prosperity
People differ in many ways – in their productive abilities, preferences, specialized skills, attitudes, and willingness to take risk. These differences influence people’s incomes because they affect the value of the goods and services that individuals are willing and able to provide to others.
In a market economy, people who earn high incomes do so because they provide others with things they value more than their costs. If these individuals do not provide valuable goods or services, consumers would not pay them so generously. There is a moral here: If you want to earn a high income, you had better figure out how to help others a great deal. On the other hand, if you are unable or unwilling to help others in ways they value, your income will be low.
- The authors of Common Sense Economics argue that you get rich by helping people. Steve Jobs and Bill Gates both became very rich in the computer industry. Can you think of ways in which they have helped you? Have they hurt you in any way?
- By contrast, they argue that people with low income are unable or unwilling to help others. There are clearly exceptions to this rule – did Mother Theresa help a lot of people? Did she have a low income? Of course. But think about this some more. In addition to these criteria, the question of the supply and demand and competition in their skill set plays a role. A janitor typically has a low income, but also typically requires little training. Discuss how this general rule applies within a market economy, but has exceptions elsewhere – e.g. in religious or government service.
This reading is an excerpt from Certell’s Common Sense Economics eBook. Certell offers curriculum materials and eBooks free of charge for students and teachers. Click here to download the Common Sense Economics Materials.
10, Sept. 2018, Peter Drucker quote, Definition of Business Enterprise [Digitial image]. Retrieved from <google.com>.