There are points in history where the productivity increases were more equitably spread, and we still got lasers, microwaves, MRI, mRNA, microchips, the internet, etc, etc, from national funding no less.
A milder version would be: People are paid based on the marginal cost of replacing them. But still, either of those is a far cry from claiming it's "the value they create".
It's not hard to show either. Imagine you're on an island and have been gored in the stomach by a wild animal, and a skilled surgeon can save your life. Most people would instantly agree that continued existence is of immense "value".
However after making that decision, you discover that you're on an island where almost everyone is a surgeon and the going-rate is much lower than you expected. Are we supposed to believe that your new knowledge somehow reaches backwards in time and retroactively changes the "value" of Not Dying? No, that'd be crazy. Valuation is never the same as price-point.
Elon Musk stopped producing value quite a while ago, nowadays all he does is tweet stupid stuff. Meanwhile his net worth has skyrocketed.
Everyone who's ever spent 6 months in big tech knows how easily compensation is divorced from value. Plenty of net-negative, work-creating behavior gets rewarded with big raises.
> Elon Musk stopped producing value quite a while ago
No evidence of that.
> Everyone who's ever spent 6 months in big tech knows how easily compensation is divorced from value.
You could always sell your yourself to a big tech company with your expertise in who are the value ones. A person with that skill would be very valuable to a company.
And people demand the maximum pay they can get. It's the Law of Supply and Demand.
Consider this. You hire Bob for $10/hr, and he produces $100/hr in value. What's going to happen? Your competitor hires him away from for $20/hr. Then another competitor hires Bob away for $30/hr. This proceeds until Bob gets paid about $85/hr. The ROI of hiring Bob is somewhere around 15%.
There's a good reason why the vast bulk of the American workforce is paid much more than minimum wage.
You are correct that there is no friction-less market.
However, lack of information is called "risk", and risk strongly affects what you will pay for something. A low risk deal will cost you more than a high risk deal.
Risk is part of every transaction in a market economy, and is priced in.