Home Business Of Course Jeff Bezos Is Worth His $200 Billion

Of Course Jeff Bezos Is Worth His $200 Billion

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As Jeff Bezos retires from Amazon – at least, from the CEO slot – there’s the usual whimpering about how there’s not way he should be allowed to have $200 billion. Storm the barricades and redistribute that, Brothers!

Of course this is just miserable tosspots talking. For the great beneficiaries of his business career are you and me out here. It’s a usual estimation – from Bill Nordhaus – that entrepreneurs end up with around 3% of the value their innovations create. Near all of the rest of it comes to us, us out here, in the consumer surplus.

With Amazon and Bezos, there’s this thing called the “Amazon Effect“.

Quoting a study, the bank said during its last meeting that e-commerce companies like Amazon are the reason behind the lack of adequate inflation, as they led to price wars and the comparability of prices. As a consequence, prices rose more slowly than at other times — and even slower than what economic theories suggest.

According to the bank, Amazon and its peers have pushed down inflation by about 0.1 to 0.2 percent.

That’s per year. So, to be middle of the road let’s say it’s only been a decade. So, the general price level is now 2% lower than it would have been without the existence of Amazon. For the US alone that’s a benefit of $400 billion a year (2% of GDP) to consumers. Note that consumers get that every year.

We can convert that to a wealth number by using the Saez and Zucman method. The simplest version of which is simply to multiply it by 20. So, US consumers are now richer by $8 trillion. Jeff Bezos as $200 billion.

OK, that’s 4% not 3 but it’s pretty close to the Nordhaus estimate, isn’t it?

And this is why we let Bezos keep that cash too. Not because it just, or righteous, or moral. But because we’re on the right end of one of the great bargains in all history here. W”e even think that there might be some geek out there with another idea that might do this all over again. So, we let the last people who contributed to making us all stonkingly rich keep their cash to encourage the next generation to give it a go as well.

There’s also another joy here. New Keynesianism tells us that menu costs – the rigidity of prices in the face of the costs associated with changing them – leads to the business cycle and thus recessions. That whole online thing means that we’ve not really got such menu costs any more. So, we’ll have fewer – not none because the business cycle itself isn’t the only cause of recessions, like it didn’t cause the last two – recessions in future.

Or, more joyfully, Bezos gets to keep his cash for having proven New Kenynesianism wrong.

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expunct (ɪkˈspʌŋkt)
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