Economics 101 -- Value Added by Selling
When I was a teenager taking the LDS Seminary classes in the early morning before my high school classes, I read a passage in the Book of Mormon that caused me a bit of discomfort.
And it came to pass that the Lamanites did also go whithersoever they would, whether it were among the Lamanites or among the Nephites; and thus they did have free intercourse one with another, to buy and to sell, and to get gain, according to their desire. (Heleman 6: 8.)
In other places where you have scriptures talking about getting gain, there is a negative sense, such as in James 4: 13, where we are warned that our plans can disappear in a puff of smoke. Here, there really isn't such a sense. Rather, the implied meaning is about how wonderful a time it was, when erstwhile enemies were hanging out together and cooperating and even getting gain together.
But the thing that bothered me was the question I thought was going begging,
Why should buying and selling produce value?
My primary economic experience at that point was that of a paid worker. I was trying to figure out a way to tie wages to hours worked, in the hopes that the inequities of a free market could be addressed.
Why should buying and selling produce gain?
I was aware of the idea that some people work under, that whatever the market will bear is by principle a fair price.
The problem I thought I saw was the question of how the value added to the system could justify profit. If no value is added to the system, getting gain would, I thought, be like chain letter profiting and pyramid investment schemes -- just driving inflation.
I figured out, somewhere along the line, that connecting producers with markets actually does produce value, but today I took notice of the mechanism. And, for some reason, I'm impressed by the principle today.
Say I have a plot of ground and I can raise enough rice to feed myself and my family and have some left over. If I know the extra rice is just going to go to waste, I'm likely to quit producing extra once I know how much I need to start with to make sure I produce enough for the year ahead and some for storing for emergencies.
On the other hand, if I have a place to sell it (or otherwise see that it goes to people who need it), I am more likely to produce some extra.
The market adds value by giving the producers a reason to keep working when they might be doing something else.
Now there's another question I see going begging:
What if that something else was ultimately of greater value?