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Splitting the Pizza

June 9, 2014 in Economics

By Peter G. Klein

pizza

Apple underwent a 7-1 stock split last night, such that shares that traded at $645 yesterday opened this morning at $92. Much of the media coverage took a playful tone, e.g., “Don’t freak out. Here’s why Apple’s stock is below $100.” I was particularly intrigued by the brief story on today’s NPR Morning Edition. As the host explained, it’s not that Apple is worth less, just that Apple’s total market capitalization is being divided into a larger number of shares. “It’s like a pizza. If you cut it into 8 slices instead of 6, you don’t get a larger pizza, just smaller slices.”

How ironic, coming from a news outlet that embraces fully the naive, sophomoric, “vulgar Keynesianism” that dominates today’s economic policy discussions. NPR’s researchers, writers, hosts, and guests are 100% convinced that dividing the economy’s stock of real wealth by a larger number of paper tickets gives us, well, more real wealth!

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Source: MISES INSTITUTE

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