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Again, What a Bargain!

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In my latest column for AIER I riff on Nobel-laureate William Nordhaus’s 2004 paper on the widespread sharing of the benefits of market innovations [2]. A slice:

And yet Jeff Bezos is just one entrepreneur among a multitude. A handful of these entrepreneurs, like Bezos, are famous, but the vast majority are unknown. Do you know the name of the inventor of the shipping container that dramatically reduced the cost of shipping cargo? I’ll tell you: Malcom McLean [3] – who, when he died in 2001, was worth $330 million. McLean, therefore, likely increased humanity’s collective well-being to the tune of about $15 billion, or by just about $2 for every person alive today.

Or have you heard of Janus Friis [4]? He’s a high-school-dropout Danish entrepreneur who was critical to the development of Skype. Friis is now worth $1.3 billion – meaning that he likely enhanced humanity’s welfare by about $58.5 billion, or $7.60 per person.

Similar calculations can in principle be made for every entrepreneur who has ever succeeded in the modern market economy, from legendary titans such as Bezos and the late Steve Jobs to the far more numerous yet unknown – but as a group no less important – entrepreneurs who innovate in much smaller ways.

These latter innovators are unheralded. They include those who introduce tasty new fusion cuisines, figure out how to profitably reduce the cost of supplying automobile drivers with liability insurance, devise better methods of dry-cleaning clothes, and shave a few cents off of the per-mile cost of laying asphalt on street surfaces. The list of such examples is as long as is the list of innovations over the past two or three centuries. And each of these successful innovators, while in most cases personally becoming at least modestly wealthy, was obliged by the forces of market competition to give far more material wealth to others than each kept for himself or herself

It’s as if strangers routinely approach us and, asking nothing in return, hand to each of us a stash of cash. Bezos gave to each of us $840 (so far – he’s still innovating), and for each $840 he gave away he kept for himself only $19. Janus Friis forked over to every person $7.60, and kept for himself in each case $0.17. Malcom McLean effectively slipped into every human being’s palm a $2 bill, each time keeping for himself a mere $0.04. And these are only three of millions of entrepreneurs.

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