If a company figures out how to make product X using less steel or less glass, assuming the end result has the same utility as the original product, then the company has created additional economic value, right? If a company leverages its bargaining power to force suppliers of steel or glass to lower their prices, has it created any economic value? If is does the same with respect to labor, has it created any economic value?
Here’s a concrete example. Company A makes product X and it sells for $10. Because this company has a captive work force (it’s the largest employer in a small town), it is able to lower wages. It uses labor savings to lower the price of product X to $9. Has the company created any additional economic value?
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