Transactions create value

When a tailor makes a hand-made dress, she spends time and effort to make it special. The cost of the materials added to the cost of her time and expertise determine what the value of the dress is. Prior to the tailor’s labor, there were only raw materials, able to be sold at the same value as they were purchased. Yet the price she sells the dress for reflects not only the sum of the materials and labor that went into it, but also a margin for profit. Where does this margin come from? It is because what has been created is more than the sum of its parts, new value has been generated that did not previously exist. More value has been added to the world!

The value that is in the world is constantly increasing. From the first business transaction to the last, the labor of each person in business has added value for all. This is an incredible thought, that our labor does not merely transform raw materials into finished goods, but actually increases the value that is in the world! If it were not for the interaction of humans in buying and selling, the place where we evaluate a good or service in terms greater than the cost of its parts, our work would never truly add value to the world. It would only convert raw materials into other things. But the interaction that occurs between parties creates value that wasn’t there before. Amazing!

The buying and selling of goods and services between interested parties is a God-given way for us to love one another. It is also a way to multiply the wealth God has placed throughout the earth. Each transaction produces more wealth and, when it is done equitably, brings good to both parties every time.

When two individuals make a transaction, wealth is created. A corporation will make more wealth, for the number of transactions it is able to produce is greater than the individual transactions of its employees. And when there is freedom and equity across a nation, that nation is sure to see a vast growth in wealth.

Therefore the corporation is in part a way for many people to obey God’s command to “love your neighbor as yourself”, and it is a way to obey God’s original command to “be fruitful and multiply and fill the earth and subdue it” (ESV, Lev 19:18; Gen 1:28).

For some reason it only now occurs to me that all this talk of ‘creating value’ is actually quite literally true. There’s more going on than simply an exchange of one thing for another, as I’ve supposed. Rather, it appears to me that more value is created in a transaction than can be explained by materials and labor alone, and that value is called profit. I suppose philosophically it’s actually the buyer’s evaluation that ownership or use of a thing is worth more than its parts, but let’s not get carried away. This is good news, for it means that, barring the unjust and inequitable, the purchase and sale that makes up day-to-day business is actually a good and God-blessed thing which grows more wealth in its continued activity. I am thankful this system is relatively free of corruption in America, and now have deeper insight into the bottle-neck of value caused by corrupt government.

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