In Praise of Golden Toilets

"HONG KONG (AP) – Inspired by Vladimir Lenin's vision … a jeweler has built two solid gold toilets in a bathroom gilded with 24-carat gold and encrusted with gems.

"Lam Sai-wing says he has dreamed since his youth in China about having enough wealth to build toilets of gold – which Lenin in 1921 said would serve as a useful reminder of the waste of capitalist warfare."

So begins a left-handed tribute to the free market, carried on the AP wire in February. Walter Williams wrote recently that when an American is wealthy, assuming he earned it, the wealth is a measure of how others value him. Anyone who earns his wealth is paid by people who believe they will be better off for doing so. Williams' focus was the inheritance tax (he's against it), but his point can be expanded to show the value of free markets.

As an example, examine a touted peculiarity of the free market: Is it fair that Michael Jordan made $30 million per year for playing a game? Well, there are two problems with the question. First, it is not the business of an economic system to judge what is just and what isn't. Economic systems evolved, and did so often without supervision, to solve human problems and answer needs. Reality, not justice, is the milieu of economic systems. The second problem with the question is that those who ask it are completely ignorant of some fundamental economic principles.

Michael Jordan made money because people paid to attend his basketball games, and paid more for products, or bought more of them, when they carried his endorsement. Those who attended his games paid $60 and more per ticket, and thus directly paid his base salary. Ask them why, and they'll tell you it's because it was worth it. The fans who bought season tickets will say they got their money's worth, as did the fans who cared to fork over enough for only one game. The salaries of sports stars will decrease precipitously if fans decide they're not getting their money's worth and stop attending. Supply and demand, working freely, have brought about the high salaries.

Did Michael Jordan create wealth? Watching a basketball game is the consumption of value, or the enjoyment of wealth. Anyone who pays for a ticket is telling the league he would rather watch the game than keep the money; the game is worth at least the price of the ticket. Nor is the game the end of the wealth creation: Michael Jordan created jobs for people who write advertising, people who manufacture products he endorsed, and people who sold concessions at the games. His store of wealth cannot help but create more wealth – in a free market, at least – unless he buries it. If he buys a house, he employs manufacturers and builders. If he keeps it in a bank, he employs bankers, who loan the money to businessmen to create goods and services, and jobs. On balance, the salary of a sports star is the world's compensation, given freely, commensurate with the value the market believes the athlete creates.

So what about golden toilets? First, they tell us that Mr. Lam already has done something that people in Hong Kong have found valuable, or he wouldn't have the resources to build the bathroom. Lam has several millions invested in this bathroom, and plans to charge $14 for a mere peek at the toilets. If the venture makes money, it means people value that peek. People value running and jumping enough to pay $30 million each year to watch it; the $5 million or so invested only once in the jeweled privy is far less significant. The bathroom can be there decades hence. An entire year of basketball, the whole thirty million dollars worth, is but a highlight reel now.

There's a bigger lesson here. Lam built the bathroom because Lenin said that communism would be so efficient compared to capitalism that many Russian toilets would be solid gold. The reality, nearly a century later, is that only two manufacturers are capable of building a large passenger jet: Boeing, an independent American firm, and Airbus, requiring the cooperation of several European nations. America and Europe have in common relatively free economic markets. What does Russia produce, besides vodka and caviar, that anyone else wants? Oh, right, weapons. (Russia's ballets and orchestra music peaked in the 1940's.)

America, the freest big-nation market, produces its own large jet planes, the world's largest automobile makers (Honda, Mercedes, BMW, and others are now building here; Honda brings its Japanese managers to Marysville, Ohio to see how the most efficient auto plant in the world works), and the world's largest entertainment industry. These capitalist "excesses" are not alone – America has the world's most prolific medical, pharmaceutical, and agricultural industries.

That Michael Jordan, Tiger Woods, and other stars have incomprehensible incomes, and that Lam Sai-wing has built a golden bathroom, are not signs of decadence, waste, or even greed. They signify other things of great import: The economies that give rise to such things obviously have solved basic problems of food, clothing, and shelter (so much so, for example, that 74% of households in the United States that are designated "impoverished" by the national government own video cassette recorders). Basic problems have been solved so comprehensively that we have money and, equally significantly, time to spend on basketball and impractical commodes. From this perspective, perhaps it should be our goal that all nations have golden toilets. First we must make all nations economically free.

March 7, 2001

Brad Edmonds, Doctor of Musical Arts, is a banker in Alabama.