>In a typical transaction, no market value is created.[1] If I give you an apple and you give me an orange, the total amount of fruit in the economy remains constant. We can’t create fruit by bartering with it. We can only do so by foraging or cultivating an orchard.
This is egregious. We no longer live in a world where trade is a zero sum game. Market value is created in every transaction.
If I have an apple tree, and my neighbour has an orange tree, and I want to eat oranges and my neighbour wants to eat apples, we might:
A) Forage for the seeds of the respective tree we want, cultivate an area to grow it, spend a significant amount of time looking after it while it grows, and all this for the risk of it dying or being eaten by bugs before it fruits, or
B) Trade surplus fruit of our respective trees for the respective fruit we want to consume.
While yes, in accounting terms we have traded 1 fruit for 1 fruit, in economic terms we have traded 1 fruit for 1 fruit as well as the time/effort/cost associated with option A.
This is because how economists see value is different to how accountants see value. This is represented in the concept of 'opportunity cost'.
>But however you look at it, taking full credit for every single dollar of compensation as value creation— as if Amazon, and not the US Mint, created those dollars, and as if the many, many millions of hours of labor consumed by the company in return were valueless— is a ghastly overstatement.
Amazon didn't create the money. They created the value. And this isn't to say that the millions of hours of labour spent were valueless, but it is a fact that if someone is working for Amazon, it is because it is the best value-per-hour they could get. Yes, in the absence of Amazon these people would probably all have other jobs, but the fact that they are working at Amazon and not these other jobs is evidence that Amazon is creating value in these people's lives above what would exist in the absence of Amazon existing.
>It doesn’t matter whom value was created for— the shareholders would be the ones getting rich regardless.
>And to be clear, using profit to measure value created is also fraught.
Except this is exactly the point of capitalism. It absolutely matters to whom the value is created for. The shareholders will only get rich if value is created for society. No rational person would make a purchase at their own expense, and the circumstances where the marginal value of utility is 1 to 1 are extremely rare, if possible at all. Outside of monopoly or oligarchy markets, value necessitates a profit-incentive.
> These are three completely different measurements: one is profit, one is savings, and one is time. They cannot be added together to anything meaningful.
They are all measurements of value, and the dollar figure attached is the dollar figure of this added value.
The author has done the same thing that he claims Bezos is doing, and as illustrated in the opening scenario. Juxtaposition of accounting, mathematics and economics so as to suit the purposes of getting to an answer that the author envisions. Except this time the aim isn't to educate but to mislead.
>In a typical transaction, no market value is created.[1] If I give you an apple and you give me an orange, the total amount of fruit in the economy remains constant. We can’t create fruit by bartering with it. We can only do so by foraging or cultivating an orchard.
This is egregious. We no longer live in a world where trade is a zero sum game. Market value is created in every transaction.
If I have an apple tree, and my neighbour has an orange tree, and I want to eat oranges and my neighbour wants to eat apples, we might:
A) Forage for the seeds of the respective tree we want, cultivate an area to grow it, spend a significant amount of time looking after it while it grows, and all this for the risk of it dying or being eaten by bugs before it fruits, or
B) Trade surplus fruit of our respective trees for the respective fruit we want to consume.
While yes, in accounting terms we have traded 1 fruit for 1 fruit, in economic terms we have traded 1 fruit for 1 fruit as well as the time/effort/cost associated with option A.
This is because how economists see value is different to how accountants see value. This is represented in the concept of 'opportunity cost'.
>But however you look at it, taking full credit for every single dollar of compensation as value creation— as if Amazon, and not the US Mint, created those dollars, and as if the many, many millions of hours of labor consumed by the company in return were valueless— is a ghastly overstatement.
Amazon didn't create the money. They created the value. And this isn't to say that the millions of hours of labour spent were valueless, but it is a fact that if someone is working for Amazon, it is because it is the best value-per-hour they could get. Yes, in the absence of Amazon these people would probably all have other jobs, but the fact that they are working at Amazon and not these other jobs is evidence that Amazon is creating value in these people's lives above what would exist in the absence of Amazon existing.
>It doesn’t matter whom value was created for— the shareholders would be the ones getting rich regardless.
>And to be clear, using profit to measure value created is also fraught.
Except this is exactly the point of capitalism. It absolutely matters to whom the value is created for. The shareholders will only get rich if value is created for society. No rational person would make a purchase at their own expense, and the circumstances where the marginal value of utility is 1 to 1 are extremely rare, if possible at all. Outside of monopoly or oligarchy markets, value necessitates a profit-incentive.
> These are three completely different measurements: one is profit, one is savings, and one is time. They cannot be added together to anything meaningful.
They are all measurements of value, and the dollar figure attached is the dollar figure of this added value.
The author has done the same thing that he claims Bezos is doing, and as illustrated in the opening scenario. Juxtaposition of accounting, mathematics and economics so as to suit the purposes of getting to an answer that the author envisions. Except this time the aim isn't to educate but to mislead.