It’s work that ultimately pays for everything, including yachts. It’s the actual making of the yacht that creates wealth, not money. Money is a way of dividing things up.
I feel confident that the average car I have owned had over 200,000 miles on it when it reached the junkyard. If we went through cars the way those banks went through signs, we’d put maybe 10K on them before junking them, and would certainly become collectively poorer as a result. You are proving my point!
Talk about moving the goalposts. I say “the claim that a restaurateur opening a new joint provides thirty new jobs in my town is bullshit” and you (plural) respond that “but the town is better off because they have a choice of restaurants to eat at”. Completely beside the point, which is that very often “job creation” is massively exaggerated at best.
But as a SEPARATE SIDE ISSUE, you have failed to consider that it is quite possible, even likely, that in your scenario both Gino’s and Chico’s will go out of business. If the town previously could just barely support an established restaurant that didn’t have any startup or marketing costs and minimal, infrequent training costs, it may well be that Chico’s could have coasted on its own momentum and customer loyalty (or force of habit) and stayed just in the black, eking out an existence as long as no one else came along and fucked with them.
Once Gino’s throws a wrench in the works, though, they are unsustainable, both go belly up, and people in the town eat out less frequently. Both the supermarket and the restaurants in the nearest town, fifteen miles away, see a slight uptick in business. But our putative town has lost thirty jobs and a local gathering place. As a result it hemorrhages population, ensuring that no restaurant could possibly survive there, not even a revivified Chico’s.
Would a resident still stuck living there, unable to sell her home, be wrong to think the opening of Gino’s was the worst thing ever to happen to the town she grew up in?
Conventional wisdom. And I named a number of ways wealth is created–among them manufacturing, intellectual content creation, mining, agriculture, construction. GDP is not however an optimal instrument to measure wealth creation, because it goes up when you make finished goods out of raw materials, as it should, but also when you destroy things or just shuffle them around. It is collective madness to say that if a country built a million homes, and then demolished them all immediately after their completion, that it is now richer than before.
Wealth increases anytime two parties trades something they have for the other person’s thing because they value it more.
How do you explain the wealth of Hong Kong for instance, with minimal-to-no contribution from the sectors you’ve listed?
You act like the “shuffling” is random. It’s not.
That’s very different from your bank-sign example, in which the bank needed and used the signs they purchased.
Or, look at the United States. The service sector makes up 68% of our GDP.
Mining? 2%
Agriculture? 1%
Construction? 4%
Manufacturing? 12%
Entertainment? 1%
The United States should be pretty poor then, with the large majority just shuffling the wealth created by 20% of the economic activity back and forth. And yet, it’s not. It’s incredibly wealthy.
I don’t entirely accept your premise, but the world could certainly get by without its Hong Kongs more easily than without its agricultural breadbaskets and industrial parks.
I didn’t say that. But my point is that it is shuffling rather than “creation”.
All right, how about if people live in them for eight months and then destroy them all?
I don’t buy this ratio at all. That 68% counts the same dollars over and over as they get transacted around. This is my point, that the way GDP is calculated is goofy.
And I have yet to see anyone directly address the point about whether business owners in the service sector should be credited with “creating X jobs” when X is the number of people they hire but no effort is made to determine whether this is truly NET job creation in the overall economy.
It’d be much worse off without either. Look at prices, not gut instincts, for what’s valued and to what degree.
Please explain how this “shuffling” is recorded as GDP.
If that’s what the residents want to do, sure. That’s the other side of the ledger you’re ignoring: people paying for things they want.
But would they or would they not become collectively poorer despite all this economic activity (construction, finishing, utility hookups, demolition, recycling)? Whether they chose to become poorer is beside the point.
That’s where much of our wealth comes from. Do you really think it’s from 20% of the economy, the rest of us along for the ride and fighting over their dollars?
It’s a net gain, obviously. If the people were formerly unemployed, then it’s a truly new job. If they left a job they valued less to take this one, it’s a gain of whatever the difference in wage or satisfaction is.
That depends on how they value disposable, 8-month homes. If they value them more than whatever they are paying for them, then no, they aren’t poorer for it.
Am I poorer when I buy a new car? No, or I wouldn’t have bought it.
Marxian economics is nonsense.
Umm…okay then. I feel that you are utterly failing to grasp an important point which I cannot think of how to explain any more simply and clearly. Perhaps you feel the same about me. You do have CW on your side, so congratulations on that score.
It’s very misleading to cut just those sentences out of that paragraph. Human Action was saying it’s a net gain because this or that. You’ve then quoted him as saying “it’s a net gain because this”.
As for the point you’re trying to make here, you are taking exception to claims like “30 new jobs created” because, you believe, often those jobs will result in unemployment elsewhere. Even if this were true, it doesn’t make the claim false, just misleading.
But, in reality, it’s not possible to know the net future effect on employment everywhere. What do you want the journalist to say?
What we can say is that service sector jobs are not zero-sum and can be created; hence the tens of millions employed in this field.
How about simply saying this competitor is entering the service sector in question? One could, if one wishes to look for the positive, note that this gives the consumer more choices (though I notice no one has disputed my point that this can in some cases actually hurt a community). But the fiction that this is such a boon to the jobless in the area (and the Randian, supply side implication that the capitalist trying to make a buck in this arena is a benificent “job creator”) makes me ill.
Sorry, but you can’t just dismiss risk.
But if he breaks it, you’re out a chainsaw, aren’t you? If you’re in the business of hiring chainsaws out, you’ve spent money on each chainsaw, so each breakage is a financial loss to you. Not only fro the physical loss, but also by no longer being able to rent out that chainsaw until you get a replacement. Yes, there are ways of mitigating this loss, but they reduce your income and thus your profit (if any).
Very few people look at this from a purely Randian point of view because of the inherent problems with the objectivist economic model. Rand has about as many admirers as Marx. Which is few enough (except on these boards, for some odd reason… 
). Additionally, capitalists are rarely seen as “benificent job creators”. But they are an integral and vital part of the free(-ish) market economy. So while we may fairly decry the particularly egregious displays of greed by some, overall, they are a vital part of the economic engine and a rising tide lifts all boats in the harbour.
Your personal feelings (anti-Rand / pro-Marx, I’m guessing) don’t alter the facts of the matter. The facts are that on a macro level, the economy is not a zero sum game. This has proven to be true through significant time and trial under the capitalist economic model. The communist model - not so much.
It may be beside the point because it is not what I said.
The town is not better off because they have a choice of restaurants. In my example, the town had no more choice after than before - they had one restaurant before, they had one restaurant after. The town is better off even with only one restaurant because they now have their optimal choice.
If customers value a choice of restaurants enough to dine in each restaurant often enough to keep both restaurants going, then they have their optimal choice. If they value eating at one restaurant more than having a choice of restaurants, then that restaurant stays in business and again, they have their optimal choice.
I am sure she would think that. But if the town cannot support a restaurant, then it cannot support a restaurant and no restaurant is going to succeed there. If your margins are so small and your customer base so fragile that another restaurant will ruin you both, then you don’t have a viable business.
And besides, the town is deciding that they do not value a choice in restaurants by not spending money at a variety of restaurants. The optimal choice is apparently buying dinner at the supermarket or driving fifteen miles to the next town. That might be hard on Gino and Chico, but, as you mention, it is good for supermarket owners in the town.
But yes, it sucks for that resident who can’t sell her house. The alternative seems to be to subsidize businesses who cannot support themselves, and thereby tie up resources that could be better used elsewhere. Or a town, for that matter. Why should we try to keep a town going when it cannot support any businesses? Sure it sucks when you can’t sell your house. But a house is, at least in part, an investment. Remember what was said earlier about profits as a reward for successfully taking risks?
Regards,
Shodan
There are a number of prominent Republicans who are avowed fans of Rand, including their most recent VP nominee. Bernie Sanders might be a fan of Marx, and maybe some CBC members, but I hardly think it is equal. Although (fortunately from my POV) Millennials are much more positively predisposed to “socialism” (though, curiously, also to “libertarianism”).
Straw man! See my previous posts.
Huh, I could have sworn that it was in the communist era that the Russian people went from a toothless, mostly illiterate mass of dirt poor peasantry to an industrial, military, and industrial superpower with one of the world’s best educated populations. And that Cuba had the best educated, healthiest, longest-lived population in the Caribbean. Or that the people of Kerala, an Indian state with a longstanding Marxist government, had the highest standard of living in India despite being poor by the standard measure of per capita GDP.
What part of economic theory proves this? Let’s remember that in the scenario described, Gino was not making a rational choice to start a competing restaurant in a town where the already established restaurant was just barely making it. So who says that operating a marginal business somewhere is not workable because you must expect someone to come in and disrupt your business by doing something irrational? You might as well say almost any business is not viable, then, because Bill Gates or Warren Buffett could disrupt and destroy pretty much any business he wants to. All he has to do is subsidise a competitor next door that offers the same thing for half the price, and then wait until your business dies before withdrawing his.
More goalpost moving. The stated premise in the thought experiment (a premise stated not by me but by someone else), was that the town can support only one restaurant. You are trying to fudge it by saying that the town can decide to support more than one. Yet I am sure that at business school they do not teach budding free-market capitalists that a town “decides” what to support, but rather that demographics and market research will give you a good idea of whether your business plan is viable.
This ridiculous invisible hand dogma (“optimal choice”–pfffft) proves that if Pangloss were around today, he would be a free-market libertarian capitalist.
Let me turn to a much simpler example as to why the invisible hand, free market setup works in fits and starts, but is far from optimal. It comes from something I read about a few years ago, which I assume has not radically changed: the market for natural gas. It is relatively unregulated, giving us a chance to see that invisible hand in action. So what happens is, wildcatter natural gas drillers go and chase profits when the price for gas is high. This results in a glut of gas on the market, making prices crash, at which point the wildcatters must abandon their wells and seek employment elsewhere. This causes the price to spike, starting the cycle over again.
A Panglossian free marketeer would probably insist that this shows the average price over time is kept where it should be. But it is much less efficient to repeatedly start up and shut down operations like this, using more equipment, wasting time drilling and capping and drilling again; not to mention assembling workers, training and retraining them, and having many of the workers only doing this for relatively short stints of their lives rather than gaining steady experience. So that average price is higher than it would be if the government estimated demand and contracted sufficient drillers to steadily meet that demand.
We have seen the same problem happen in farming, which is why the government developed programs like price supports, paying farmers to leave fields fallow, and so on. These are not always optimally applied, but they are better than the wild boom-bust cycles that preceded them.
No, I am not moving anything. You claimed that it was only if the town wound up with more jobs than before that they were being benefitted. That is not the case, as I mentioned.
If the government can estimate demand so accurately, and thereby is able to produce gas at a lower average price, why doesn’t the private sector do so?
Regards,
Shodan
Incorrect. I disputed the claim of thirty created jobs. Others changed the issue to benefits. I noted that this was beside the point. Now you are still trying to stick me with that as the case I made, which is false.
Because they are competing against each other, not operating as a collective entity. Hence the inefficiency.