The irrelevance of good intentions.
A vital and profoundly essential element of Market Capitalism is its capacity to serve masses of people of all income levels and dramatically improve their lives. This essential element is invisible to many (most?) people. Widespread thinking regards profit making as a necessary evil that needs to be tempered by acts of charity by the profit makers. Some even think that profit is unnecessary and that companies that produce stuff for sale, ought to donate all their profits to worthy causes.
This attitude, so common, is
rife with confusion. In fact it is the opposite of the truth, as explained in
the WSJ op ed reproduced below. The greatest, most effective creator of value,
and reducer of poverty, is profit. In an unencumbered competitive market the
only way to make a profit is to produce something, some good or service, that
someone values, that improves someone’s life. In fact, the “good” done by
making profit far exceeds in value terms the amount of “good” done by
charitable giving – though in America the latter is impressively huge. The
benefit created by Bill Gates’s Microsoft, by the creation of software
solutions, far exceeds the benefit created by his donations to non-profit
efforts to fight malaria, AIDS, and other worthy causes. This is not to suggest
that such charitable efforts are either unnecessary or should be abandoned.
They are vital for certain targeted specific benefits – health, homelessness,
research, etc. And they would not be possible without the generosity and
particular passions of the profit makers to make their mark in many different
ways.
I find this is one of the most
difficult ideas to teach or to convince many of my “liberal” friends about. The
key obstacle is to get past the fundamental truth that good intentions
are not necessary for good results, and, in fact, mandating good intentions (by
mandating generous behavior) is counterproductive, it produces bad results.
In an open market the pursuit of profit (self interest) produces good results
whatever the intentions of the profit maker. Voluntary trade creates value for
everyone involved. It is created, not distributed.
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Jeff Bezos Earned His Fortune The Amazon founder’s
innovations save customers 22 hours a year on average, giving them the gift
of time. By Marian L. Tupy May 26, 2026 4:56 pm ET Amazon founder Jeff Bezos
speaks at the America Business Forum in Miami, Nov. 6, 2025. Rebecca
Blackwell/Associated Press Amazon founder Jeff Bezos recently made a point that every critic
of billionaire wealth should confront: “If I do my job right, the value to
society and civilization from my for-profit companies will be much, much
larger than the good that I do with my charitable giving.” To see if he is correct,
consider the one resource that is truly finite: time. Modern debates about
wealth start in the wrong place. They begin with the fortune. They should
begin with customers and their time. Mr. Bezos is worth roughly $275 billion.
That number offends many people because they assume wealth must have been
taken from someone else. But Amazon didn’t become valuable by force. It
became valuable because hundreds of millions of people chose to use it. Consumers weren’t forced to
buy books, batteries, diapers, cables, razors, tools, groceries or printer
ink from Amazon. They did so because Amazon saved them time, money, effort or
uncertainty. Sellers weren’t forced to use Amazon’s marketplace. They did so
because it gave them access to demand. Firms weren’t forced to use Amazon Web
Services. They did so because renting computing power was cheaper than
building and maintaining their own information-technology infrastructure.
That is capitalism: People get rich by creating something others value enough
to buy. The Bezos fortune looks large
because it is visible. The value Amazon created is harder to see because it
is dispersed. A mother who doesn’t drive to a store to buy diapers doesn’t
appear in an economic headline. A small business that reorders supplies in
two minutes doesn’t make the evening news. A rural customer who gains access
to goods once available only in cities doesn’t receive a subsidy check with
Amazon’s logo on it. Yet each transaction saves time, and time is limited. 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. At $64 an hour, that means
Amazon has saved its customers about 214 billion hours. Across 300 million
customers over roughly 32 years (Amazon was founded in 1994), the saving
equals about 22 hours per person a year. That is 25 to 26 minutes a week, or
a little less than four minutes a day. So the question isn’t whether
Mr. Bezos has too much money. It is whether Amazon has saved the average
customer four minutes a day. The answer is yes. A single avoided trip to a
store can save 30 minutes. Finding a product online instead of driving to three
retailers can save an hour. Reading reviews can reduce the chance of buying
the wrong product. Automatic reordering can save repeated errands. Price
comparison can save money and time. Fast delivery can substitute for
inventory kept in closets, garages, offices and warehouses. The savings extend beyond
retail. Amazon Web Services lowered the cost of starting and scaling
companies. It gave firms computing capacity without the old capital expense.
That made experimentation cheaper. Some firms failed faster. Others grew
faster. Both outcomes matter. Cheap failure is part of progress. Amazon also forced competitors
to improve. Walmart, Target, grocery chains, hardware stores,
logistics firms and online retailers responded with better websites, faster
delivery, wider selection and lower search costs. Even people who dislike
Amazon benefit when its competitors become better because Amazon raised
consumer expectations. Charity can do good, but Mr.
Bezos is right: Business can do better. Charity moves existing resources
toward chosen ends. Business, when it works, creates new value by
reorganizing labor, capital, knowledge and logistics. Philanthropy can fund
scholarships, clinics, museums and disaster relief. Enterprise can improve
how hundreds of millions of people spend their time every week. Some people
will spend the extra time earning money to buy things they previously
couldn’t afford, helping their communities, enjoying the company of their
loved ones, taking a holiday or relaxing. That distinction is often
lost. Critics praise billionaires when they give money away but condemn the
process that made the money possible. That is backward. The social
contribution of an entrepreneur usually occurs before the charitable
foundation is created. It occurs when customers gain, workers earn, suppliers
sell, competitors improve, and resources move to better uses. None of this means Amazon is
perfect. No large company is. Amazon can make errors. But that doesn’t cancel
the basic fact: Amazon created enormous consumer surplus. The moral case for Mr. Bezos’
wealth doesn’t require blind admiration of his business acumen. It requires
arithmetic. If Amazon saves each customer 22 hours a year, Mr. Bezos’s
fortune passes the Nordhaus test. If it saves more than that, society receives
far more than he keeps. It is easy to resent the billionaire. It is easy to ignore the saved hours. But the hours matter because time is limited. It is our most precious resource. Count the time saved, and Mr. Bezos’ fortune becomes less mysterious and much more defensible. Mr. Tupy is a senior fellow
at the Cato Institute. |
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