Amazon is planning to launch its own currency called Amazon coins. Matthew Yglesias argued that developmental economics helps provides some insight into why it’s doing this:

• Microsoft, Apple, Google and Amazon are trapped in a war of ecosystems. Apple has the advantage because it launched its app ecosystem before the other players in the game and so developers build apps for that ecosystem.
• In response to this Microsoft offers subsidies to particular developers who will build for its own ecosystems.
• This is similar to a centrally planned system as Microsoft picks the apps that it thinks consumers will demand.
• Amazon, on the other hand, announced with its system of coins that it would be giving out millions of coins for free.
• Thus they will artificially stimulate demand for apps. In anticipation of this demand, app developers have a reason to start building for the Amazon ecosystem.
• And where will Amazon get the money for this? By issuing debt. Its credit rating is so good that it can essentially borrow money for free to give a short term fiscal boost that ultimately turns its ecosystem into one that is self-sustaining.

Yglesias ends by noting that national governments could learn a thing or two from Amazon’s strategy. You should read the entire piece here.

Source: Slate