Marian Tupy illustrates how Jeff Bezos has more than earned his fortune:
Consider the arithmetic. Suppose an hour of labor is worth about $64, roughly the average gross domestic product per hour worked in the countries in which Amazon operates. If Mr. Bezos’ fortune corresponded to the total value that Amazon created, his $275 billion would represent about 4.3 billion hours of saved time. Divided among Amazon’s more than 300 million active customers, the saving comes to about 14 hours per customer over Amazon’s life. That’s nothing. Many customers save that in a month.
But entrepreneurs don’t capture all the value they create. The Nobel Prize-winning economist William Nordhaus estimated that innovators keep only a small share of the social value—roughly 2%—produced by their innovations. Under that assumption, Mr. Bezos’ $275 billion fortune implies that Amazon created about $13.8 trillion in total value for society.
Alas, wealth envy is yet again all the rage. John Cochrane isn’t buying it:
The recent Piketty-Saez-Stiglitz revival of wealth taxes, ostensibly to improve the lot of the poor, makes many mistakes. I’ll focus on one: the difference between wealth and consumption. The poor wish consumption. Turning capital into consumption must destroy the capital that produces consumption. Taxing wealth in the name of inequality will make the world, including the poor, much poorer.
The fact that wealth taxes won’t work out as desired is counterintuitive to many. Speaking of counterintuitive, check out David Friedman on how preventing divorce might raise marriage rates in his larger post on “How to Raise Birth Rates” (this one took me a second):
Marriage is a serious, often life changing, step; some people might be unwilling to take it if the other party was free to back out later; willingness to marry is a stronger signal of intent to stay married if divorce is not an option, one reason eliminating or restricting divorce might result in more people getting married. If that seems wrong to you, consider the effect on the mortgage market of a legal change that made it easy for borrowers to default.
A through line in these is that it takes two to tango. There is always a counterparty. In trade it is win-win (consumers and producers) where the consumers almost always make orders of magnitude more than the producers. In taxing wealth generation it is lose-lose-lose (wealthy, society, and the state taxing the wealthy)—killing the golden goose. In marriage it is obviously the two getting married where an easy out for either means reluctance to commit (especially for the one more committed in the first place).
Substacks mentioned:
