Philosophy: You Get to Keep a Portion of Value You Create

I have been thinking about a simple proposition:

You get to keep a portion of the value you create.

At first glance, that sounds like a defense of capitalism. I don’t think it is. It is a defense of something more fundamental: the power of markets and incentives to encourage human beings to create value for one another.

Capitalism concerns the ownership of capital. Markets are mechanisms for exchange, information, coordination, and incentives. Those mechanisms can operate inside privately owned companies, employee-owned companies, cooperatives, nonprofits, and government programs.

The principle I’m interested in doesn’t require taking a position on who should own the factory. It asks a different question:

What happens when we allow people who create value to retain some meaningful portion of it?

Locke: Creating Something Gives You a Claim on It

The philosophical ancestry begins at least with John Locke.

In his Second Treatise of Government, Locke grounded property rights in labor. When a person applies labor to the natural world, Locke argued, that person acquires a claim to the resulting product.

The details of Locke’s theory have been debated for centuries, but the intuition remains powerful: there is something morally significant about having created something.

If I grow wheat, build a house, write software, or invent a machine, my contribution gives me some legitimate claim to the value produced.

Robert Nozick later developed a much stronger version of this idea. His entitlement theory focused less on the final distribution of wealth and more on whether holdings resulted from legitimate acquisition and voluntary exchange.

I don’t have to follow Nozick all the way to his conclusions to find the underlying insight useful: creation matters, exchange matters, and consent matters.

But none of those things happens in isolation.

Smith: Wealth Is Created Through Exchange

Adam Smith adds the next important piece.

Smith’s great insight wasn’t simply that people are selfish. That caricature badly understates him. His economic insight was that specialization and voluntary exchange allow human beings to create vastly more wealth together than they could create independently.

I don’t make my own shoes, grow all my own food, manufacture my own car, or generate my own electricity. I specialize, as do millions of other people, and we exchange the results.

Markets create a remarkable positive-sum possibility: I can become better off by making you better off.

If I discover a way to provide you something you value at $100 while it costs me $60 to produce, there is room for both of us to gain. That difference between cost and value is where much of economic progress originates.

And it suggests a practical route to wealth:

Want to become wealthy? Find a way to create a great deal of value for other people and retain some portion of it.

Not all fortunes arise that way, of course. Monopoly, political privilege, fraud, inheritance, rent-seeking, and exploitation exist. Henry George built much of his economic philosophy around precisely this distinction between productive wealth creation and the ability to capture wealth created by others.

Those exceptions don’t invalidate the principle. They demonstrate why markets require good institutions.

Hayek: Markets Tell Us What People Value

Friedrich Hayek adds another dimension.

In The Use of Knowledge in Society, Hayek argued that the economic problem is fundamentally a problem of dispersed information. No planner possesses all the knowledge distributed among millions of individuals: their needs, circumstances, resources, alternatives, and changing priorities.

Prices compress some of that information.

A price is not a moral judgment. It doesn’t tell us what something ought to be worth. But it tells people something extraordinarily useful about scarcity and demand.

When the price of something rises, thousands of people who know nothing about one another alter their behavior. Consumers economize. Producers search for substitutes. Entrepreneurs look for ways to increase supply.

No central authority has to understand every decision.

This is what I mean by market power: not the political power of corporations, but the extraordinary coordinating power of market mechanisms.

Incentives are part of that information system. A large potential reward says, in effect:

Solve this problem well, and society will allow you to capture some of the benefit.

That summons ingenuity.

Mill: Distribution Is a Choice

John Stuart Mill provides an important correction to anyone tempted to treat market outcomes as laws of nature.

In Principles of Political Economy, Mill drew a distinction between production and distribution. Production is constrained by physical reality. Distribution, by contrast, is shaped by institutions, law, custom, and human choice.

That matters enormously.

Markets do not descend from heaven with a predetermined tax code, patent system, corporation law, labor law, inheritance law, or definition of property. We construct those institutions.

So saying that people should retain some portion of the value they create does not answer what that portion should be.

There is still a social contract.

Nobody Creates Value Alone

Imagine that I create a company worth $100 million.

I may have taken the risk. I may have supplied the idea, assembled the team, and spent years building it. But I didn’t create the legal system that enforces my contracts, the currency, the roads, the schools, the banking system, property law, national defense, or the internet.

Civilization supplied an enormous platform on top of which I was able to create additional value.

Society therefore has a legitimate claim on part of the resulting economic activity.

That is one way to understand taxation: not as society confiscating something wholly created by an isolated individual, but as the price of participating in an extraordinarily productive system of social cooperation.

John Rawls approached this question from a very different direction. For Rawls, society is fundamentally a cooperative enterprise, and the benefits and burdens of that cooperation have to be allocated according to fair rules.

Importantly, Rawls did not insist upon equal economic outcomes. His difference principle permits inequalities when those inequalities improve the position of the least advantaged.

That creates an interesting overlap between Rawls and incentive-based economics.

Suppose allowing an inventor to make $50 million results in an innovation that makes millions of poorer people substantially better off. Rawls gives us at least one philosophical reason not to object merely because the inventor became richer.

The inequality can be justified by the improvement it produces.

Henry George: Who Created the Value?

Henry George sharpens this distinction beautifully.

Imagine that I build an apartment building. My investment and work produced the building.

Now imagine that I own an empty lot in a small town. Over twenty years, other people build restaurants, companies, schools, parks, transit systems, and cultural institutions around it. My empty lot becomes worth $10 million. How much of that value did I create? George’s answer was essentially: not very much. Land value, he argued, is largely created by the surrounding community. He therefore believed the community had an unusually strong claim to tax that value. That produces a principle I find compelling:

Keep a portion of the value you create. Pay society for a portion of the value society creates for you.

And that brings me to an area where I think our instincts become strangely inconsistent.

Why Are We Uncomfortable With People Making Money by Doing Good?

Consider nonprofit organizations. Suppose an NGO brings clean water to a remote community.

Think about the economic value created. Children spend more days in school. Adults spend fewer hours collecting water. Waterborne disease declines. Healthcare expenses fall. Productivity rises. Infant mortality may decline. Women and girls, who often bear much of the burden of water collection, regain enormous amounts of time.

The cumulative human and economic benefit may be many times the cost of drilling the well or installing the water system. And yet culturally we often become uncomfortable at precisely this point: Someone made money helping poor people? That can sound vaguely improper. But why? Suppose one nonprofit spends $10 million and produces $15 million of measurable benefit. Another organization—perhaps a company, perhaps a cooperative, perhaps a nonprofit with aggressive incentive compensation—spends $8 million and produces $100 million of measurable benefit. Its founders and employees receive $2 million in performance compensation.

Which organization did more good? The second one. Yet there is a peculiar tendency to regard the first organization as morally purer because nobody profited. That confuses profit with extraction. They are not the same thing. Profit can represent value extracted from someone else. But profit can also represent a portion of newly created value returned to the people who created it. The moral question should not simply be, “Did somebody make money?” It should be:

How much value was created, for whom, by what means, and how was that value divided?

What If We Deliberately Made Doing Good Profitable?

This is where the argument for markets becomes particularly interesting. Poor people frequently cannot express the value they place on something through market demand. A family may desperately value clean water but lack the money to pay what supplying it costs. That doesn’t mean the water has little value. It means value and purchasing power are different things.

So perhaps the role of government and philanthropy is sometimes to create a market where one does not naturally exist. Instead of paying organizations simply to perform activities, pay for outcomes.

Not: We funded a $10 million homelessness program., But: We will pay for successfully and sustainably housing 1,000 people.

Not: We funded malaria prevention. But: We will pay for verified reductions in malaria.

Not: We funded literacy programs. But: We will reward demonstrated improvements in literacy.

Then let nonprofits, businesses, universities, cooperatives, charities, and public agencies compete to figure out how to produce the outcome. And let the winners do well. We already see versions of this idea in pay-for-success programs and social-impact bonds, where payments are linked to measurable outcomes rather than merely expenditures or intentions.

There are obvious difficulties. Outcomes can be measured badly. Metrics can be gamed. Organizations can cherry-pick easy cases. Some profound human goods resist monetary valuation altogether. Those are serious problems. But they are problems of mechanism design, not reasons to abandon incentives.

Markets Are Tools, Not Moral Systems

Markets do not determine morality.

They can allocate harmful things just as efficiently as useful ones. A market tells us something about preferences, scarcity, and willingness to pay. It does not tell us what society should want. Democratic institutions, culture, ethics, and philosophy have to answer that question. But once society decides that it wants more of something—clean water, literacy, disease prevention, energy efficiency, affordable housing—why would we refuse to use one of civilization’s most effective tools for producing it?

Make creating the desired outcome rewarding.

This does not require capitalism. The capital could belong to shareholders. It could belong to workers. It could belong to a pension fund, a cooperative, a nonprofit foundation, or the state. The important mechanism is that people receive information about what others value and have an incentive to discover better ways of producing it. Locke reminds us that creation can establish a claim.

Smith shows how specialization and exchange multiply wealth. Mill reminds us that distribution is an institutional choice, not a natural law. Hayek explains why decentralized markets process information that no central authority could possibly possess. Rawls reminds us that the productive system is a cooperative enterprise whose rules must ultimately work for everyone. Nozick forces us to take seriously the moral significance of legitimate creation and voluntary exchange. And Henry George asks us to distinguish carefully between wealth we create ourselves and wealth we capture because society created value around us.

Put those ideas together and I arrive back where I started:

You get to keep a portion of the value you create.

Not all of it. Civilization helped. Not automatically. The value has to be created without coercion, fraud, or simply capturing somebody else’s contribution. And not only when the value has an obvious commercial price. If you invent a better search engine, you should be able to prosper. If you make factories more efficient, you should be able to prosper. If you create a great restaurant, you should be able to prosper. And if you figure out how to bring clean water to ten million people at half the previous cost?

I hope you get very rich.

Because if society genuinely wants more good things to happen, one of the most powerful things it can do is make doing good worth doing extraordinarily well.

A Question for the 2026 Midterms

The next federal general election is November 3, 2026. All 435 House seats and roughly one-third of the Senate are part of the regular congressional election cycle. (USAGov)

As we approach it, I think this framework offers a more useful political question than many of the ones we usually ask.

Which side of the aisle is actually investing more in the creation of social value?

Not which side uses the word freedom more often. Not which side talks more about compassion. Not which side has the better slogans. Which policies are most likely to produce more scientific discovery, healthier people, better-educated children, stronger universities, more useful technology, better art, safer communities, more productive workers, cleaner water, longer lives, and greater opportunity? Those things create value too. Some of that value shows up quickly in GDP or corporate earnings. Much of it does not.

A scientific discovery may take decades to become commercially useful. A university may educate a student whose greatest contribution lies thirty years in the future. Basic medical research may fail repeatedly before producing a treatment that saves millions of lives. A museum, orchestra, public library, or great work of art may generate cultural value that no market price can adequately capture.

That does not make the value imaginary. I am a liberal in the older and broader sense of the word: I believe in individual liberty, markets, pluralism, science, education, institutions, and the capacity of human beings to improve their condition. And one reason I am comfortable with public investment in science, medicine, universities, infrastructure, culture, and education is precisely because I view them as investments. They create capabilities that individuals and businesses subsequently build upon.

The laboratory that produces basic science, the university that educates an engineer, the public health system that keeps a workforce healthy, and the museum that transmits culture all become part of the platform on which future private value is created.

This brings us back to the philosophers. Whatever their differences, many of the thinkers in this essay understood that a society cannot remain stable merely by protecting the comfort of those who already possess it. A prosperous society surrounded by desperation is not really prosperous.

The wealthy cannot indefinitely wall themselves off from a society in which millions of people believe they have no reasonable path toward security or advancement. Nor should the middle class feel entirely comfortable with its own security while large numbers of children begin life without adequate nutrition, healthcare, education, safety, or opportunity.

That observation need not lead automatically to any particular tax rate, welfare program, or political party. It does suggest a test. When politicians ask us for power, perhaps we should ask them:

What are you going to create?

What investments will make the country more capable ten years from now? Which programs actually expand human potential rather than merely transfer money between constituencies? Which regulations protect genuine public goods, and which merely preserve incumbents? Which tax policies reward productive value creation rather than rent-seeking? Which investments produce benefits that markets cannot easily price today but that society will depend upon tomorrow? And when government spends a dollar, is it merely spending—or is it purchasing an asset for the civilization? That seems to me a better political argument than either “government is always the problem” or “government should solve every problem.” The question is the same one we would ask of an entrepreneur:

How much value are you creating relative to what you consume?

If markets are powerful because they reward value creation, public policy should aspire to the same discipline. The purpose of a good society should not be to prevent anyone from becoming rich. Nor should it be to preserve wealth regardless of how it was acquired.

It should be to create an environment in which enormous amounts of human value can be produced—and in which the people who produce it, the civilization that enables it, and those who begin life with the fewest advantages all have a legitimate claim on the result. That seems like a question worth carrying into the voting booth.

Other Traditions Worth Exploring

Ibn Khaldun

Ibn Khaldun. The Muqaddimah. 1377.
A remarkable early analysis of labor, specialization, taxation, incentives, political institutions, social cohesion, and economic prosperity.

Wikipedia:
https://en.wikipedia.org/wiki/Muqaddimah

Mozi

Mozi. Mozi. c. fifth–fourth century BCE.
The foundational text of Mohism, a Chinese philosophical tradition emphasizing practical benefit, reduction of harm, merit, and policies that improve human welfare.

Wikipedia:
https://en.wikipedia.org/wiki/Mozi

Kwame Gyekye

Gyekye, Kwame. Tradition and Modernity: Philosophical Reflections on the African Experience. 1997.
Gyekye’s moderate communitarianism attempts to reconcile individual autonomy and rights with obligations to the broader community.

Wikipedia:
https://en.wikipedia.org/wiki/Kwame_Gyekye

Amartya Sen

Sen, Amartya. Development as Freedom. 1999.
Sen argues that development should be judged by the substantive freedoms and capabilities people possess rather than income alone.

Wikipedia:
https://en.wikipedia.org/wiki/Development_as_Freedom

You Get to Keep a Portion of the Value You Create

Locke: Creating Something Gives You a Claim on It

Smith: Wealth Is Created Through Exchange

Hayek: Markets Tell Us What People Value

Mill: Distribution Is a Choice

Nobody Creates Value Alone

Henry George: Who Created the Value?

Why Are We Uncomfortable With People Making Money by Doing Good?

What If We Deliberately Made Doing Good Profitable?

Markets Are Tools, Not Moral Systems

A Question for the 2026 Midterms

Further Reading

John Locke

Adam Smith

John Stuart Mill

Henry George

Friedrich A. Hayek

John Rawls

Robert Nozick