An economic transaction occurs only when the parties disagree about the values of the things exchanged.
You exchange A for B because B is worth more to you than A, and A is worth more to me than B.
Both sides come out ahead.
The reason you want lots of economic activity is not that it keeps people off the streets, but that it produces lots of profit on both sides of each transaction.
Each transaction raises the standard of living of the nation.
The most efficient way to produce lots of disagreement about value is the division of labor; and companies are great organizers of that.
Sometimes the populist politics takes over though, and the point of companies is said to be not to produce value to others cheaply, but to provide jobs; at least of the CEO is regulated, or possibly is an idiot.
Everything depends on disagreement over value.
ReplyDeleteAn economic transaction occurs only when the parties disagree about the values of the things exchanged.
You exchange A for B because B is worth more to you than A, and A is worth more to me than B.
Both sides come out ahead.
The reason you want lots of economic activity is not that it keeps people off the streets, but that it produces lots of profit on both sides of each transaction.
Each transaction raises the standard of living of the nation.
The most efficient way to produce lots of disagreement about value is the division of labor; and companies are great organizers of that.
Sometimes the populist politics takes over though, and the point of companies is said to be not to produce value to others cheaply, but to provide jobs; at least of the CEO is regulated, or possibly is an idiot.