The Moral Liberal

By Dennis Behreandt

A liberal economist, dining out with her husband to celebrate her birthday recently at an upscale Washington, D.C. restaurant, spied Wisconsin Representative Paul Ryan at the same restaurant drinking wine with two other men. The problem for the liberal economist? The wine was $350 per bottle and Ryan and his friends had two of them.

Cue the liberal outrage.

The blog Talking Points Memo covered the story on July 8. According to TPM’s account, Rutgers University associate business professor Susan Feinberg “did the math” on the back of an envelope and discovered that the two bottles of wine cost more than a family on minimum wage earned in a week. Here’s how TPM reported the gist of the story:

“We were just stunned,” said Feinberg, who e-mailed TPM about her encounter later the same evening. “I was an economist so I started doing the envelope calculations and quickly figured out that those two bottles of wine was more than two-income working family making minimum wage earned in a week.”

The outraged Feinberg decided to confront Ryan in the restaurant. According to TPM, she demanded to know “how he could live with himself” drinking expensive wine while contemplating budget cuts to programs for the poor.

That’s a dumb (and self-righteous) question coming from someone claiming to be an economist.

Assuming Ryan didn’t break any laws by taking gifts from lobbyists in the form of expensive wine (and he produced a receipt showing that he paid $472 for his meal and bottle of wine, including an $80 tip), then Ryan’s and his buddies slurping of pricey pinot noir was actually the moral thing to do in a free market economy.

Here’s why.

First, somewhere someone put in a great deal of time, effort and money to develop and maintain a vineyard capable of growing the proper grapes necessary to the process of producing a quality pinot noir. At that vineyard, the owners and likely their family and employees, work hard to grow and bring in the grapes. They then must be fermented and aged, sometimes for years, before reaching a maturity that means they are ready for the market. This is a difficult process that requires time and exquisite craftsmanship.

Wines, like that sold to Rep. Ryan from the vineyards of Robert Jayer-Gilles are particularly noteworthy for their quality and scarcity. In 1999, the New York Times described the wines Jayer Gilles produces:

Mr. Jayer-Gilles is best known for his Echezeaux from the Cote de Nuits area. But knowledgeable wine lovers … also treasure his wines from the Hautes Cotes, both red and white, which have set admirably high standards for other winemakers in the region.

A common complaint about wines from the Hautes Cotes is that they lack depth. Because the vineyards are at a higher altitude, Hautes Cotes grapes do not always ripen as quickly as grapes in the Cote d’Or. Mr. Jayer-Gilles and winemakers like him compensate by keeping vineyard yields low.

Put simply, using supreme skill, hard work, and dedication to quality, Jayer-Gilles produces a product that is limited in quantity but in high demand as a result of its quality. The limited quantity and relatively strong demand result in an elevated price set at the equilibrium point where the supply and demand curves meet. Those on the demand side that save up enough money to trade for a bottle of Jayer-Gilles do so voluntarily. As a result of the transaction, the buyers on the demand side acquires something he or she values and enjoys increasing the quality of their lives. On the supply side of the exchange, the sellers acquire new financial resources to apply to satisfaction of their needs — paying salaries, buying supplies, and investing in the myriad wants and needs of daily life. Out of this transaction, a handful or even dozens, of people see their lives materially improved.

Ryan’s purchase of the wine, then, helped a number of people and hurt no one. It was a completely moral transaction.

But it’s not just the supplier of the wine and Rep. Ryan who benefitted from the transaction. The owners and employees of the restaurant where Ryan dined also benefited.

The restaurant, by providing an inviting atmosphere and environment, adds value to the meals and drinks it serves. As a result, it sells not only the food and wine but the physical environment within its walls as well. Thus, the price of the food and wine is legitimately “marked up” from retail price — diners are naturally and understandably paying not only for what they consume but for the privilege of consuming it within the restaurant. As a result of the restaurant owner’s hard work in creating the inviting environment and providing a quality service, diners voluntarily pay the markup on the food and wine they consume.

Again, everyone in the transaction benefits. Diners choose to enjoy the restaurant, voluntarily paying for the privilege and increasing the quality of their lives as a result. The restaurant owner makes a profit, earning back a just reward for the effort put into making the establishment a desirable destination. But it doesn’t end there. The restaurant’s employees also benefit, earning a wage for their labor and tips from customers who appreciate their efforts to make their time in the restaurant enjoyable. No doubt the waiter(s) or waitress(es) who received Ryan’s $80 tip enjoyed their ample and just reward.

And again, the benefits from voluntary transactions like this one don’t end with just the first or second tier parties to the transaction. Those on the supply side who received compensation for the products they sold and the services they rendered will, as with the owners of the vineyard and the vineyard’s workers, use the money they received to purchase the goods and services they need or desire. Those transactions will likewise have the effect of increasing the well-being and quality of life of uncounted dozens or hundreds of others as goods and services continue to be exchanged in the economy.

As a result, to paraphrase Adam Smith, though in each case the people engaged in any given transaction only seek to improve their own lots in life, the “invisible hand” of the economy works through these transactions to improve the lives of countless others.

Voluntary transactions within a free market economy are not only efficient, but entirely moral. But what about the opposite?

Liberals prefer to raise taxes and take money from some and give it to “the poor.” The result is not permanent improvement in the lives of the unfortunate, but a catastrophe that prevents the free market from increasing living standards while simultaneous forcing the poor to remain so.

Obviously, what is taken from “the rich” in the form of taxes is no longer available to its rightful owners to be spent voluntarily within the market. Untold hundreds, thousands, millions and billions of voluntary transactions that buoy business and create opportunities and wealth are thus foregone.

Instead, the money is transferred to the poor, in the process paying the salaries of the massive army of bureaucrats that manage the wealth transfer regime. These bureaucrats produce nothing of value to the economy, but are simply a drag on economic progress. Moreover, the wealth transfer distorts economic outcomes as those who receive the transfer payments deploy their meager share of the dole in ways that differ from how the original and rightful owners of those assets might have deployed them.

In addition, those receiving the “government benefits” are often unable to get off the dole, regardless of how much they may desire to do so, because of rules put in place that limit their mobility. For instance, many poor live in subsidized housing, apartments that are available at bargain rates to low income families because the government offsets the real cost of rent. A great deal, right? Except that if an ambitious person living in one of these subsidized units were to get a job, even one paying a marginal salary, chances are he or she would no longer qualify for the subsidized housing. In such a case, the incentive is then to avoid getting the higher paying job in order to retain the subsidized housing. Such policies create a trap that makes it difficult for low income families to “pull themselves up by the bootstraps” as they may desire to do.

In the end, Rep. Paul Ryan and his friends have done more to improve the economy and raise living standards by buying two bottles of expensive wine than dozens of bureaucrats at the state, local and federal levels do by pretending to play Robin Hood.

The moral choice lies with the free market. So please, Rep. Ryan, buy more wine.

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The Moral Liberal associate editor, Dennis Behreandt, is the Founder and Editor In Chief of the American Daily Herald, and former long-time contributor, serving both as Senior and Managing Editor, to The New American magazine, writing hundreds of articles on subjects ranging from natural theology to history and from science and technology to philosophy. Mr. Behreandt’s research interests include the period of late antiquity in European history as well as Medieval and Renaissance history.