http://www.nytimes.com/2006/07/23/weekinreview/23scott.html?ex=1167541200&en=c0a0313242dab789&ei=5070The middle class shinkage. If you dont know the middle class is shrinking you can find a hundred articles saying so. Here one for now.
That’s an article about the middle class being squeezed out of high-rent cities like SF, not that the middle class is shrinking. Did you even read the article before you linked to it, or did you just look at the title? And you wonder why no one takes you seriously around here… :rolleyes:
You’re the one who said that this “business stuff” is over their head. I don’t care if you agree with me, however most of your argument seems to be based on emotional appeals regarding certain groups earing too much or not enough instead of sound economic theory (at least as how it was taught to me…in business school).
I’m not sure how to even argue with you because you throw out so many irrelevent and tangential arguments. The “throw as much bullshit against the wall and see what sticks” argument isn’t any more valid for economics than it is for evolution.
There is corruption and inefficiencies in the market, however that does not invalidate the economics of the problem. Wealth is not created by setting wage floors and ceilings. Wealth is created by the businesses you seem to dispise so. These businesses are formed by people with the vision and drive to turn an idea into a money-making venture. Yes, sometimes they are jerks. But they are the ones creating the jobs. It’s worth it to me to give some guy $5 million if he creates $500 million worth of jobs.
That’s really the problem, as I see it. If you don’t know anything about business or economics, it’s easy to make recomendations based on emotion and intuition that may not actually be productive.
No. I don’t got it.
My experience? I’m used to dealing with people with law degrees, CPAs, MBAs and other masters degrees. People who actually run companies. I make my living investigating all the corporate corruption you guys constantly talk about.
What spcifically would you like to know?
Yeah well, no man ever died thankful that he spent his entire life working as a minimum wage drone either.
Err, no offense, but have you really never heard of outsourcing? Or, if you need a historical example, how about the Great Migration of blacks from the rural South to the industrialized North. Why did they migrate? They could get better-paying jobs than being a share-cropper.
Well, again, no offense, but isn’t it up to you to prove that your beliefs are justified?
But again, I do not see how you have demonstrated that limiting income for those at the top will increase income for those at the bottom. If you want, you could re-visit my surgeon example and show how limiting his compensation as a surgeon will lead to increased incomes for hospital orderlies or something. AFAICT, it is just the opposite - if Dr. Moneybags works less, there will be less demand for orderlies to clean up the operating rooms and less patients who need their bedpans emptied. Can you suggest a mechanism that will reverse this?
One of my problems with what you describe as “progressive” thinking is that I can certainly see how you will limit growth in incomes. I just don’t see why doing this will bring about a cure for malaria (or whatever). Just the opposite, in fact - a law that says the inventor of a cure for malaria will never make more than a million dollars a year from it means that he is that much less willing to expend the energy and money to develop one. And I don’t see why he should try, even if he can’t make any more from selling Viagra either.
And, at least as far as a medical example goes, I doubt that the reason we don’t have a malaria cure is because there is no money to be made from it. Nor, if the government ordered everyone to shut down research on other pharmaceuticals in favor of malaria cures, it would work automatically. See the current lack of an AIDS vaccine or cure for an example of why it is more than a matter of government mandate to find disease cures.
The hard part is knowing when a government bureaucrat is correct in thinking that everything is in place to cure an ill, and then passing laws to force people to spend money on that and not what they want.
If you need examples, see either Khrushchev’s ideas on “virgin lands” or the famous Great Leap Forward for times when the government thought everything was available to solve a problem - but it didn’t quite work out.
Haven’t read the book. Perhaps you could outline his thoughts, and marshall the evidence that leads you to conclude that it would work?
Well, no, I don’t see that, especially since we are talking about a situation where demand is essentially the same. I reiterate - how is the market greater if one person wants to buy a thousand one-dollar widgets, or a thousand people want to buy one widget apiece?
That’s up to the individual, isn’t it? But I think you lost me. What do opportunity costs have to do with it?
Same thing - I am not following your argument.
You realize that this merely means that, if we pass a law saying no one can make more than a million a year in salary (or whatever you are saying), that just shifts the form under which executives are compensated, and the amounts hardly at all? And in many instances, you won’t be able to tell the difference at all.
I do? So I can just decide that my house is worth $10 million? OK, done - how do I collect?
But that cost is set by the market - it is about as far from “intrinsic” as you can get.
But what they can get is a slice proportionate to what their input is worth to someone else. See the difference? The market price is set by agreement between two or more parties. No one party can set it. Maybe you want more. You have to convince me to give it to you. Maybe I want to give you less. I have to convince you to accept it.
No, I don’t see that.
Regards,
Shodan
I just need to make a quick interjection:
Inequality in a stagnant place like Saudi Arabia equals oppression.
Inequality in a dynamic economy like NYC’s equals opportunity.
Too many of the posters here think the US is like Saudi Arabia. Parts of it are, but the parts where people can and do do better are more like NYC. Places like LA, Chicago, Dallas, Seattle, San Fran, even Washington DC.
In all of these places, equality would equal oppression, because it would mean there would be no chance to do better.
Well said, pantom. The idea of an “old boys network” controling wages and competition is a cartoonish version of reality. New corporations are formed every day, and new businesses suplant the old ones all the time. If all you aspire to is to punch a clock and drone your way thru your 40 hours a week, then maybe it seems like you’re getting shafted. But there is so much opportunity in our economy for people who have just a little ambition and drive. And that includes opportunities at the companies that create those “drone” jobs, too. WalMart is more than just a bunch of greeters and clerks-- there are plenty of good paying jobs in supervisory roles or being a buyer or whatever other salaried jobs a retail company like that is going to have.
Outsourcing is moving production to areas of lower cost, not labor moving to areas of higher wages/standards of living. And the Great Migration was an example of labor movement within the borders of a country. Can labor cross borders as easily as capital? Conservatives are all for open markets unless it involves immigration. No double standard there.
Executive pay is generally set by compensation committees. While they will look at market trends, their offer is usually based on the person’s experience, business contacts, and the cash flows of the business. The market is perhaps the least important factor. And at the Fortune 500 level, it often becomes who you know is more important that what you know. If you dont belong to the ‘correct’ organizations, associations, and other ‘networks’, you will never even be on the list of interviewees. I see it already in at my university. If you want interviews with certain companies, you need to be a member of certain clubs or fraternities.
I know next to nothing about medical procedures and patent law, but why couldnt the surgeon follow the path of most inventors and license his procedure and collect royalties? Is conducting the surgery himself the only way he can profit from it? You realize how Bill Gates became a billionaire right? It wasnt through his paycheck.
Again you confuse limiting compensation with limiting wealth. The surgeon can create a company and build that company as large as he can. And the income generated by that company, and most companies, is better served by being directly reinvested in capital, not being spent on yachts, golf clubs and green fees, and designer suits and handbags.
And the market will ensure everyone that should have a mosquito net will get one? That medicine will affordable for those that need it most?
But businesses have perfect knowledge on how to allocate resources? How many government programs fail compared to business plans? People never waste money without the help of the government?
Yet somehow we still eradicated smallpox, rebuilt Europe, got to the moon…
The person is buying a thousand one-dollar widgets, he’s buying one thousand-dollar widget. So which has the greater capacity for growth? Which market is going to have greater demand then next day? The next year? Why is India and China growing 8%/year compared to 3% for the US? Could the greater availability of capital be part of it? That is it no longer tied up in large-scale enterprises?
How much growth are we losing because of excessive income? Are we losing? I think we are, but how do you measure it?
Well, the idea behind stock grants and stock options was to align the agents interest with the principals by making them part owners. Didnt work out too well in practice since the agents ended up being the ones who decided on how to grant the stocks and options.
Show me your cash flow projection on how your house will generate more than $10 million dollars. Then we can go see a banker.
The price might be set by the market, but the cost is determined by the needs of production. How do you determine if the market price is too high? The sniff-test? The primary constraint on business is not the market, but the availability of capital.
You honestly believe that the average job seeker has equal power and information compared to the average employer? The boss is going to show prospective employees his books so they can determine if he is telling the truth about his offer? Or is the applicant who has rent, insurance, gas bill, water bill, et al. due going to take whatever is offered since this is first offer he’s had in five interviews?
But no, they should get a slice proportionate to the effort the put in - which should be a proportionate share of the profits from the enterprise, but our ancestors got shafted early into thinking that the division of labor meant the division from capital. The average employee works solely for wages with no claims on the profits even though they experience equal risk as the provider of capital. If the enterprise fails, they may even lose more. But this is an entirely different debate, though it is a primary reason why living wages are even an issue. A more fundamental question is why should anyone work solely for wages, considering how fickle they can be.
Just follow the links I provided above for the outline. I think it will work since he doesnt base it on theory, but on objective development lessons learned over the past generation. He outlines the costs involved - starting at $75 billion for 2006, then scaling up to $150 - 200 billion per year until 2015 or 2025 depending on the targets involved. So for the cost of the war in Iraq, we could be providing the extreme poor of the world the necessary resources to climb out of their poverty trap. And only about 75% of that amount is required from the donor nations (either governments or individuals). The US’s share, based on percentage of GDP, would be about $50 billion.
So? You are claiming that labor cannot move to where the jobs are. The Great Migration shows that they can and do. So does immigration into the US from Central America. So does migration from mainland China to Hong Kong.
Your notion that labor cannot migrate is merely wrong. And see my previous post - what difference does it make if it crosses national borders? Re-investment is re-investment.
No doubt you can prove this.
In this instance, there is no useful distinction between limiting compensation and limiting wealth. Any such limits tend to reduce the desire for success.
If you are going to pass a law saying that executives cannot be compensated (in any way) more than some arbitrary limit, executives are going to stop working for success as they approach that limit. Simple as that.
If I don’t benefit in any way that my company is better served by capital investments, why do I care how much better it is served? This would tend to affect those at the margins, as economic laws tend to do. Joe Executive is CEO of a corporation poised for growth. He currently makes a million a year in stock options, salary, and so forth.
If he works hard and takes the right risks, his company will take off and double its revenues. If he basically just treads water, it will continue the same as it does now. Why should he bother with the headaches of expansion? It won’t make him a dime more than he makes now.
So he doesn’t. And the company doesn’t expand, and they don’t hire anyone new.
How exactly are the poor workers benefitted from that?
Perhaps - perhaps not. The market doesn’t exist to do that. The market exists to mediate net demand against net supply, given all the perceived costs and benefits.
You are making another mistake common to “progressives”. The market is neither moral nor immoral; it is amoral. It operates on facts as they are, not as anyone wishes they should be. Maybe a cure for malaria would be wonderful, and everyone says they agree. But maybe developing such a cure would consume more resources than people can spare from everything else. So we don’t do a Manhattan Project style effort to cure malaria. The opportunity costs of curing malaria, IOW, are too high. Or maybe it is not possible to come up with a cure for malaria at all, and we would be wasting our time if we dropped research into treatable conditions to chase the moonbeam of a malaria cure.
But that isn’t going to change because the government says it should. Neither will it change if progressives try to make the government say it should.
Health care costs what it costs because that is the level at which enough people are willing to spend a given level of their available resources to get it. If people are willing to spend more, the cost goes up. If people have reached the limit, then the cost stabilizes. If enough people drop out of the health care system, then demand will drop and the cost will be reduced.
Do you like that? Good. Do you dislike it? Too bad - that doesn’t change anything.
It is said that Americans want three things from their health care system. They want [ul][li]The best care in the world []Available to everyone []At a reasonable cost.[/ul]They can have, at most, any two of those three. [/li]
No, of course not. That’s why businesses go out of business.
That’s exactly the problem - government has the bottomless pit of taxation, and if a government plan fails the bureaucrats don’t lose their jobs.
Why do you think the Post Office has to be protected by law from competition from FedEx and the like? Why do we subsidize Amtrack?
Name a government agency which has gone out of business because it failed. Sam Stone mentioned the Rural Electrification project of the thirties, which persists despite the near-total lack of need for its services.
Of course they do. But there is the self-correcting mechanisms of the marketplace to put an end to it. There is no such mechanism in government.
Well, if widgits cost a thousand dollars apiece, and no one has more than a hundred bucks, and they don’t band together, then the market for thousand-dollar widgits is zero, as I am sure you realize. So their future is limited, unless the goverment revokes that stupid law against anyone making more than a grand a year.
BWAHAHAHA!
Let me see if I get this straight. You think that India and China are growing faster than the US because they have more capital available? You don’t think the fact that they are starting from a much lower baseline and a much smaller, less industrialize economic base, has anything to do with it?
OK, how about you dig up a few cites that show that India and China have more capital available for investment, and that this is because they don’t pay their executives very much.
Well, I guess you could compare, for instance, China before the economic reforms and after, and see which was the more successful. That might give us a hint.
Or compare East vs. West Germany, North vs. South Korea, etc., for some notion on how successful state-run vs. private economies tend to be.
Bullshit - you said intrinsic worth was set by the owner. Now you want to bring in the market without admitting it.
For the seller, whether or not it sells. For the buyer, whether or not you want to buy it.
And it doesn’t make any difference if I spent ten thousand or ten million to build a house. If I can’t sell it for more than a hundred thousand dollars, then the cost of the house is a hundred grand, and I am SOL. That’s why “intrinsic” worth is not set by the cost of production alone, nor by the seller alone. It is set only and always by the market - by what you can convince someone else to pay.
Well, slavery is dead, so no one can force you to work somewhere if you don’t want to. And private ownership is still alive, so no one can force you to hire someone if you don’t think they can earn their keep. Do you have evidence to the contrary?
Well, if he is keeping fraudulent books, then he is going to be in trouble for a lot of reasons. But I bet the risk is much the same as when someone lies on his resume.
I bet he does. And your point would be?
Nope, wrong. They should get the best deal they can, where neither side coerces the other with false information. If that includes stock options and a seat on the board, bully for them. If it means $5.15 an hour and a paper hat, and nobody offers anything better, then that is what your labor is worth, and how much effort it costs you to say, “You want fries with that?” means diddly-squat.
You mean instead of buying stocks, the primary way people share in the (limited) risks and reap the (equally limited) profits?
Which links tell me about all this? No to be difficult…
But I don’t want to assume he is suggesting giving more money to the United Nations (as if it were going to help) before I need to.
My guests are about to arrive. Perhaps tomorrow.
Regards,
Shodan
[QUOTE=Shodan]
…It is said that Americans want three things from their health care system. They want [ul][li]The best care in the world []Available to everyone []At a reasonable cost.[/ul]They can have, at most, any two of those three… [/li][/QUOTE]
Regards, Shodan
Everyone who wants to immigrate from Central America is able to do so legally? Affordably, based on their current earnings? With the same ease that a banker can transfer a million dollars from the US to Europe to Japan and back again? With the same ease that companies can sign contracts to outsource or offshore their labor?
Hmmm, let me look for the great migration from Eastern Europe to Western Europe after the Berlin Wall fell. Hmmm, cant find it. Because it didnt happen because of legal barriers. Not because of market constraints, but rather protectionist fears of what all that labor would do to the local markets.
You have yet to demonstrate that I was wrong. And what difference does it make? The difference between working for $6 a day at a maquiladora or $6 an hour flipping burgers. Re-investment is not simply re-investment when capital moves. Different communities benefit. You get brain drain, donor drain, and other adverse affects with labor bearing the brunt of it.
Here’s a good place to start. Citigroup. PDF. Lot of talk about relationships, talent and performance. Competiveness is only a minor concern, not the major one.
If you cannot see the distinction between increases in income and equity compensation - the difference between entrepeneurs like Bill Gates and raiders like Michael Eisner, then I cant help you.
By your logic every one should be paid on commission then. What’s the point of any straight salary then? Monetary incentives are the only ones that matter? Ownership stakes serve no purpose whatsoever? ESOPs are worthless?
No, this is a myth perpetrated by neo-classical economists that economics should only be concerned with positive and not normative models. I’ve yet to hear why this should be the case, especially considering its demonstrably false. The market consists of choices by actors made in a normative sense, not the positive sense. The mechanisms of the market are not based on any natural forces, but by value-judgements of the actors.
One, research and development are the greatest determinant of cost, not demand. Demand only affects how long it will take to recoup that investment, if at all. And a large majority of that R&D is provided at government expense, not just business.
Two, the demand for healthcare is fairly inelastic - something the industry is well aware of, which overrides most price constraints in the market.
You and Sam Stone with bottomless pit of taxation. Do you have cites for that? And shit has to almost literally start flying, but bureacrats have been known to lose their jobs.
And for prime examples of government failures that result in wholesale housecleaning look at the average school board election in every major city. More than a few have required takeovers by the states. Cite.
And those mechanisms ensure the failure of every enterprise that should? Or do many struggle along with an adequate return in spite of poor management? Idiot bosses dont exist? With government, we have elections, referendums and term limits to enable the electorate to have checks over them. Are they 100% effective. Hell no, but neither is the market. As long as enough idiots support an idiotic business, both groups will continue to thrash about. (Look at the fast food industry for some prime examples.) But thats the freedom of the market, right?
The only reason the thousand dollar widget would exist is because there is a buyer for it. Two ways to make money - sell low and make it up on volume. Sell high and make it on the markup. Both ways generate the same amount of gross revenue. But if Cartier is the only watch company, how many burger flippers are going to be able to tell time?
I am positive that is a factor also. But why are China and India doing so now? Why are they finally move from their baseline? What was the impetus? Hmmm, because businessmen could finally get financing to start business? Because legal and market barriers were finally removed to allow that financing? Hmmm.
And capital continues to be available since profit-taking is minimal.
Same cite as the other thread. Who determines the intrinsic value - the user/owner of the asset, but they dont pull it out of thin air. And where does the market come into it?
That is how you profit or figure out you are SOL - you try to receive an extrinsic price greater than the intrinsic value.
But I’m letting this dog lie.
And do you have a cite that this is an accurate representation of the general labor market? Where the greatest fault is not false information, but the lack of information. Where jobseekers (heck, employers also) have all the protections and tools necessary to prevent asymmetric information and power in the hiring process? That every negotiation is in good faith? That’s why workers decided to receive solely wages and cede all claims on capital and profits?
Yep, we all know those burgers flippers are buying up shares with their awe-inspiring paychecks. And the primary way is actually buying bonds. Something to do with tax deductions and leveraging I think.
The End of Poverty
The Millenium Project
And this gentleman brings up some similar issues, especially point five, though he admits it on a ‘unscientific basis’.
AP
Our manufacturing jobs migrated to India a few years ago. The American were no allowed to migrate after them. India would not allow you to move unless you brought more jobs with you.
This is just obfuscation and back-peddling. You claimed labor can’t move, I showed several examples where it can and does.
Not looking real hard, were you?
More obfuscation.
When come back, bring evidence.
Especially with no evidence.
Different people, different markets, different choices.
Strawman.
I assume the difference between “normative” and “positive” is like your use of the word “intrinsic”, which apparently has no definite meaning.
Distinction without a difference.
Sorry, more double-talk.
And, of course, cite?
So your example of self-correcting mechanisms is one government program being taken over by another government program.
As far as correction goes -
And all the teachers and administrators involved lost their jobs, right? Only, not.
You’re refuting yourself here, so I needn’t bother.
Which is exactly what I said.
:shrugs:
More self-refutation - the market is why they don’t pull it out of thin air.
I don’t blame you. 
The rest of it is just flailing around and throwing about randomly selected terminology.
I’ll have a look when I get a chance, and see if this is anything real, or just “let’s throw money at it”.
Regards,
Shodan
I don’t understand why people think that a living wage for everyone in the entire world would be a disaster. The trick is to get everyone’s productivity up to the point where a living wage is justified.
If the world were fair, everyone would start off with exactly the same abilities and opportunities in life. That’s not how the world works and nooone is going to sacrifice their lifestyle to remedy that.
What would be nice is if we could get some of our priorities straight. We have spent 350 billion dollars on the war in Iraq, we could have spent it more wisely:
If you want to help the entire world, you could spend money on stuff like:
vaccination: vaccination and immunization is widely considered the best bang for the health buck, millions of people die every year due to lack of vaccination; we could vaccinate the entire world for the rest of time for far less than 350 billion dollars.
primary education: literacy is very important to economic development and a population with at least a 5th grade education is far more productive than an illiterate one; we could provide primary school education to every child who lives in a country without a public primary school system for a generation for less than 350 billion dollars.
Famine and starvation: Every year millions of children have stunted physical and mental development due to poor nutrition, many die due to starvation or complications that arise from poor nutrition; for 350 billion dollars we could virtually eliminate the problem.
I’m sure there’s probably other places we cold spend 350 billion dollars more productively than on the war in Iraq (I wonder how far 350 billion dollars would get us in the war on terror).
Who has said that a living wage for everyone would be a “disaster” if everyone’s productivity were high enough to justifify* it? But it would be a trick indeed to get there. The problem is not that the rich countries are being stingy towards most of the poor countries. The poor countries that have adopted free market economics and have established a stable society with the rule of law are generally improving and climbing up the productivity ladder. But those countries with corrupt, despotic governments intent on plundering the country’s resources can’t be helped by just having money thrown at them.
That’s terribly unfair for the poor citizens of those countries, but unless we’re willing to force the governments to change (which we are not), there is little we can do to affect their long term prospects. We give lots of food aid even to a country like NK, but that does nothing to improve the future for the next generation of North Koreans.
*Not to menetion, of course, that there is no objective way to determine when a certain productivity level “justifies” a LW except by deferring to the market itself. Perhaps we can be guided by our experience with the MW in the US-- once the vast majority of the people already make more than that level, it matters little whether that level is mandated by gov’t or set by the market.
Well, it wouldn’t be a diaster IF you could get everyone’s productivity up to the point where it was justified. I’d be interested in seeing how you accomplish this ‘trick’ though. Short of putting guns to everyone’s head, I don’t see how it can be accomplished…and to be honest even PUTTING those guns to everyones heads doesn’t seem to have accomplished much for those countries (say, Russia and China et al) that have tried it. You can’t mandate productivity by fiat you know? Or did you know that?
Short of getting everyone’s productivity up to that point however, simply mandating a living wage world wide WOULD be a disaster…IMHO. YMMV, but I’ve seen no indication in this thread that it would be so…just various appeals to emotion that it SHOULD be that way, and various rants on how evil business is, and how wrong the main stream thinking in economics is, etc etc…
-XT
I don’t think anyone is stating that a living wage would be a disaster. If you look at the exponential growth of human wealth over the last 10,000 years, it seems inevitable that we will one day live in a society in which even the poorest among us earns an equivalent to what would be today considered a living wage ($15/hr or so).
In fact, exponential growth is so strong that it is not unreasonable to expect that, within the next century, the economy may double in size in a matter of weeks, not years or centuries (Warning: PDF). Within our lifetimes (at least for us young uns), we might very well be living in a world in which items like food, shelter, clothing, and even automobiles and computers are simply handed out for free as inducements to consumers to purchase more expensive products, much like supermarkets offer samples or McDonalds offers free restrooms, when not 100 years ago indoor plumbing was a considerable luxury.
Back on topic. The problem is not that people will earn a living wage, but in attempting to dictate this conclusion via fiat when they are not currently productive enough to merit it. If workers are sufficiently productive to earn a living wage, companies will pay it even in the absence of a law. If they are not, then the law will only serve to keep such people unemployed. It amazes me that we can be over 400 posts into this thread and many otherwise intelligent people are incapable of understanding this relatively simple conclusion.
This is no longer worth my time. I have provided evidence, citations, arguments and definitions. You refute minor points while either ignoring or dismissing the larger arguments. You refuse to see clear distinctions or accept common definitions. I have not seen any arguments of substance from you to make me change my opinions or judgments.
If you do not know the difference between intrinsic and extrinsic value, normative and positive economics and the rather large distinctive difference between net worth and net income, why do you post in threads about economic issues?
AP
To correct your mistakes and misconceptions. It seems my work is done here.
Regards,
Shodan
Productivity has been skyrocketing the last few years. I am sure you are aware of that. Many articles have pointed out that more has been done with less people. The jump in profits has simply gone to the top. Wages have stagnated or dropped.
Why won’t anyone answer my question? 