

Is Amazon Bad for Books? - sheldoan
http://www.newyorker.com/reporting/2014/02/17/140217fa_fact_packer?currentPage=all

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ergoproxy
From the article: "Amazon has successfully fostered the idea that a book is a
thing of minimal value."

Adam Smith discovered the _Paradox of Value_ : "Nothing is more useful than
water: but it will purchase scarcely anything; scarcely anything can be had in
exchange for it. A diamond, on the contrary, has scarcely any use-value; but a
very great quantity of other goods may frequently be had in exchange for it."
See _An Inquiry into the Nature and Causes of the Wealth of Nations_ , Book I,
Chapter IV, "Of the Origin and Use of Money," Paragraph 13.

Like water, books may have a high use-value, but a very low exchange-value.
Ditto for free open-source software.

It's unfortunate that the dominant school of economics today--Neoclassical
economics--equates the value of a commodity with its price, whether the market
is competitive or not.

By contrast, Classical economists like Adam Smith distinguished between (1)
value, (2) use-value, (3) exchange value, and (4) price. Prices are further
distinguished between natural prices and market prices--

(1) Value: The amount of labor necessary to the production of a marketable
commodity.

(2) Use-value is the amount of discomfort or labor saved through the use of an
object. Use-value does not depend on the existence of a market.

(3) Exchange-value: What quantity of other commodities an object will exchange
for, if traded. It does not need to be expressed in money prices.

(4) Money prices: There's a distinction between "natural prices" (long-run
cost-of-production) and "market prices" (price you actually pay for an object
in the market); and these are only equal under conditions of market
efficiency, equilibrium, and rational expectations. See the blog post "Adam
Smith on Equilibrium" (March 26, 2013) at
[http://somrh.blogspot.com/2013/03/adam-smith-on-
equilibrium....](http://somrh.blogspot.com/2013/03/adam-smith-on-
equilibrium.html)

Canadian poli-sci professor Robert Albritton claimed that capitalists (like
Jeff Bezos, presumably) are indifferent to the use-value of the commodities in
which they deal, since the only thing that matters to them is the money they
make. Source:
[http://www.nodo50.org/cubasigloXXI/congreso/albritton_31ago0...](http://www.nodo50.org/cubasigloXXI/congreso/albritton_31ago03.pdf)

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ArbitraryLimits
Everything you've said is strictly true, but I feel like it misses the point.
The difference between water and diamonds is that water's marginal utility is
almost zero, owing to its ubiquity, whereas the marginal "utility" of a
diamond is huge since most people have none already.

~~~
ergoproxy
Adam Smith's LTV also solves the _Paradox of Value_ just as well as
Marginalism: "The real price of every thing, what every thing really costs to
the man who wants to acquire it, is the toil and trouble of acquiring it"
(Book I, Chapter V, "Of the Real and Nominal Price of Commodities, or of their
Price in Labour, and their Price in Money"). So diamonds cost more simply
because they require more toil to acquire than water.

Marginalism (in its incarnations as Austrian economics and Neoclassical
economics) has got its own problems: (1) impossible to measure an individual
consumers' marginal utility; (2) general equilibria only exist under
conditions of perfect competition; (3) uniqueness of a general equilibrium not
guaranteed; and (4) general equilibria aren't stable (see the
Sonnenschein–Mantel–Debreu theorem).

Marginalism in all its forms seems to exist only to attack government
regulation, justify income inequality, and otherwise promote the interests of
the top 1%. And it's proponents tell us that the only alternatives are systems
designed to rob us and take away our individual freedom (Keynesianism and
Marxism).

So my point was to provoke a reconsideration of Classical economics, which
offers a forgotten alternative: Classical economists like Smith saw wealth as
a flow of goods rather than as a stock of money; emphasized the creation of
wealth; and (most importantly) viewed "laissez-faire" as a _means_ to the end
of greater competition, rather than as an end in itself.

Returning to the topic in the OP, in Classical economics, it's possible that
the "natural prices" of books are higher than the "market prices," because the
market is not competitive, and middlemen like Bezos are using their market
power to suppress the wages of authors.

