Anti-Capitalist Sentiment (with some morality)

[OngBonga]

You'll find there are certain areas, especially those requiring creative solutions, that money incentives have shown to have a detrimental effect on.

Probably. There's also plenty of people who aren't motivated by money. I think we have to look at this in general terms.

[Savy]

Probably. There's also plenty of people who aren't motivated by money. I think we have to look at this in general terms.

The thing with capitalism, and if anyone disagrees please do say, is that the idea is to put a value on things which currently we are so far away from actually being able to do that the idea gets ignored and we talk about money. Incentives are a great thing but they have to be relevant, for example job security has an incredible value that people don't really value correct and a lot of people are very falsely under the impression that their job is much safer than it really is. Anyway a better point is that personal development in your role is an absolutely huge incentive & for a lot of things vastly superior to money incentives whilst also leading to some of the other qualities mentioned such as self-respect. Those should all be accounted for in a real economic system but obviously doing so is hard whereas saying £5 > £4 therefore incentive is too simplistic and as a result when applied across the board it's wrong.

[wufwugy]

The thing with capitalism, and if anyone disagrees please do say, is that the idea is to put a value on things which currently we are so far away from actually being able to do that the idea gets ignored and we talk about money. Incentives are a great thing but they have to be relevant, for example job security has an incredible value that people don't really value correct and a lot of people are very falsely under the impression that their job is much safer than it really is. Anyway a better point is that personal development in your role is an absolutely huge incentive & for a lot of things vastly superior to money incentives whilst also leading to some of the other qualities mentioned such as self-respect. Those should all be accounted for in a real economic system but obviously doing so is hard whereas saying £5 > £4 therefore incentive is too simplistic and as a result when applied across the board it's wrong.

You're definitely thinking like an economist.

[CoccoBill]

You're definitely thinking like an economist.

Isn't the economist thinking more the opposite, that is, ignoring all those pesky externalities and just using money as the only metric? :P

[wufwugy]

You'll find there are certain areas, especially those requiring creative solutions, that money incentives have shown to have a detrimental effect on.

Yeah even sometimes on non-creative work I think. Sometimes when people do things because of money they associate less of themselves or whatever with it. I'm not sure how valuable this knowledge is for macroeconomic policy though. If you want to cut cops' wages in half and just try hiring ones who will do a good job because it's "the right thing", you're gonna have a bad time.

[OngBonga]

Most of the people I've worked with in life do not want shares in the company or a variable income in any way. They want a secure paycheck which has - above all else - predictability

Wait a minute... I didn't suggest that performance and profit related pay should replace hourly wages. I'm simply saying that the profit, or at least some of it, should shift from private owners to the workers... in this way, productivity is maximised.

An hourly rate can still be guaranteed, allowing security.

[wufwugy]

should shift from private owners to the workers... in this way, productivity is maximised.

If this improved productivity, we would see great movement in corporations to do it. I earlier mentioned two reasons why it is likely to harm productivity. I may be able to come up with more.

Got one already: social ownership mandates would virtually destroy startups. If Britain legalizes weed and you start growing some Alaskan Thunderfucker, and you are doing well and you wanna expand and grow beyond just yourself, you're gonna have a bad time bringing in new employees, because they'll also have to be owners. You may just want to pay somebody to water the plants and nothing else, but if you have to give him ownership stake, well now you have to find somebody far more reliable, you have to waste time on silly logistics, and your own incentive to grow your company just dropped in the shitter (since your equity diminishes). This would make it so that any new person you bring into your company wouldn't be to just water the plants, but would be somebody similar to you, another entrepreneur who would bring lots of value to lots of elements to the business.

This would have two big effects: (1) it would kick out all the low skill people from the labor force (since nobody is going to get brought on and given ownership to do just low-skill work). (2) It would reduce productivity because efficiency would hit the toilet without a well structured division of labor.

[OngBonga]

Those are fine points, but personal development and self respect are still incentives when the workers are also taking a slice of the profit.

I'm thinking of this is the basic sense of a factory that creates goods. The harder the employees work, the more profit the company makes. A very simple model, but also relevant to a large % of our work force. All the incentives that capitalism offers are there... personal development, promotion, self respect etc... but where employees also have a financial stake in the success of the business, well that creates a further, and extremely powerful, incentive.

Of course when we start to think of services, rather than industry, it becomes much more complicated, because it's harder to put a value on the quality of a service, as opposed the value of increased productivity. But that just takes it out of my depth.

[Savy]

I'm not saying it should be one or the other.

[OngBonga]

Nor am I, I'm merely arguing that incentivising workers with profit will likely result in increased productivity.

[Savy]

Nor am I, I'm merely arguing that incentivising workers with profit will likely result in increased productivity.

Except in all the circumstances where it doesn't and has been shown not to + all the ones we don't yet know about. Ye.

[OngBonga]

Shown not to? Not to me. Show me.

[Savy]

Shown not to? Not to me. Show me.

[MadMojoMonkey]

Interesting information.

[CoccoBill]

I agree wholeheartedly. The key issue there is that that's how it works after the employees earn enough for the money to no longer be an issue. The majority of people work because they have to, they need to support their family and pay the bills. If they have to constantly struggle doing that, that's pretty much the only thing in their minds. If on the other hand they earn enough as their base salary to comfortably manage that, any added income sees drastically diminishing returns. Some extra luxury, sure, but the comparison to the value of each dollar when you're barely making ends meet is huge. After you're earning enough, other things probably become more important for most people.

For example, I'd personally much rather work less hours for my current pay, than get a raise working the normal hours. Life > work, free time > money.

[OngBonga]

Ok, my first thought was that these people are being given tasks which require skill or intelligence. But he gets to that, so cool.

The gist I'm getting is that performance related pay would work in the factory where the job in hand is to operate machinery, or other mundane tasks like picking & packing, basically a great deal of industrial production. According to this research, it starts to fall apart where the job in question is cognitive... where it requires innovation and creativity. I guess smart people perform worse when under financial pressure, and where there's a huge carrot, it distracts them from peak performance. It's an interesting conclusion.

I think the points I am making relating to industry are supported by this research. Mechanical tasks improve in quality with pay.

[CoccoBill]

^I'd assume some of that is explained by the difference in wages, more people falling under the barely surviving category. Factory workers doing monotonous tasks probably earn a great deal less on average than people doing innovative and creative work. The other alternative which I'm a bit hesitant to pursue is saying factory workers are simpler folks who don't care about their work having a purpose, or at least have slightly less ambitious goals regarding that.

[OngBonga]

I think the lack of purpose thing is important in factory workers. This is why they lack incentive.

The pay... I'm not sure that really matters. I mean wealth is relative. Someone earning £1000 a week, being offered a £5k performance bonus, might be more motivated to earn that reward than someone who is earning £10k a week and offered a £20k bonus. It's five weeks wages to the former, and two to the latter. People's idea of "a lot of money" differs drastically depending largely on income.

[wufwugy]

I think the points I am making relating to industry are supported by this research. Mechanical tasks improve in quality with pay.

If I'm making guesses, I would guess that the causality is backwards. Pay is determined by productivity. Somebody getting a raise to do the same job is unlikely to become that much more productive, if any more, but somebody more productive than the equilibrium wage for his job is very likely to get a raise. And if he didn't get a raise, it would mean that his bosses are bad at business. He could very easily get a job at a different firm making more too.

[CoccoBill]

I'd say a £2k bonus to someone making £20k a year is quite a bit more important than even £40k for someone else making £200k. For the former that extra money might be the difference of being able to pay your bills, for the latter maybe buying a new car every year instead of every other year. No question about who'd value getting the bonus more and be more likely to put effort into getting it.

[OngBonga]

Fair points.

Ok so instead of giving new employees profit share, we give people who have worked at the company for 12 months a profit share, assuming they have met fair productivity targets.

Let's now apply this to my new employee watering my plants. If all he does for 12 months is water my plants, well he's not going to keep his job. I want him pruning the plants too, monitoring pH and humidity levels, pest control, driving to the store to get supplies, perhaps even dealing with buyers... if he's doing all this, well he's earning a share of the profits. That might not be outright ownership, it could just be an annual profit related bonus. Or maybe shares every year of employment to gradually increase his interest. One thing is for sure, you're right that I wouldn't want to give a new employee a slice of the business before he's even proved his worth. I recognise that will stifle innovation.

But if he does prove his worth... well giving him a slice might make such a difference to productivity that I end up making more money too. It would certainly be prudent of me to consider such a scheme, calculating how much extra productivity I need for it to be mutually beneficial.

If he's just getting an hourly wage, well all he'll do is what his job description tells him to do. If he's got a vested interest in the company, well he might start taking more care of the plants, which will have a beneficial effect on yield.

You make a fine argument, but I'm yet to be convinced the problems you outline can't be overcome.

[Savy]

If he's just getting an hourly wage, well all he'll do is what his job description tells him to do. If he's got a vested interest in the company, well he might start taking more care of the plants, which will have a beneficial effect on yield.

Why do you think this is true? When I first started in a job earning just over minimum wage on a zero hours contract I went above and beyond whilst having no intention to stay there long enough to gain any benefits from this in terms of longer term employment, more money, promotions, professional development, etc. It wasn't even in an industry I wanted to work.

[OngBonga]

Why do you think this is true? When I first started in a job earning just over minimum wage on a zero hours contract I went above and beyond whilst having no intention to stay there long enough to gain any benefits from this in terms of longer term employment, more money, promotions, professional development, etc. It wasn't even in an industry I wanted to work.

You're a rare breed if you're doing more than expected on a zero hours contract with no hope or even ambition of development.

I wouldn't even take a zero hours contract. You were talking of security being an incentive not so long ago. You don't even have that, and you're grafting. Yeah, a rare breed. Either that or naively keen to make an impression.

[Savy]

You're a rare breed if you're doing more than expected on a zero hours contract with no hope or even ambition of development.

I wouldn't even take a zero hours contract. You were talking of security being an incentive not so long ago. You don't even have that, and you're grafting. Yeah, a rare breed. Either that or naively keen to make an impression.

Zero hours contract actually was ideal for me. It meant when I didn't want to go to work I didn't go. If I wanted to take some time off I did. If anything it benefited me much more than the company using it. You're obviously thinking when people exploit them and have tonnes of workers on them who they force into poor working conditions with the threat of no work.

[wufwugy]

Fair points.

Ok so instead of giving new employees profit share, we give people who have worked at the company for 12 months a profit share, assuming they have met fair productivity targets.

Let's now apply this to my new employee watering my plants. If all he does for 12 months is water my plants, well he's not going to keep his job. I want him pruning the plants too, monitoring pH and humidity levels, pest control, driving to the store to get supplies, perhaps even dealing with buyers... if he's doing all this, well he's earning a share of the profits. That might not be outright ownership, it could just be an annual profit related bonus. Or maybe shares every year of employment to gradually increase his interest. One thing is for sure, you're right that I wouldn't want to give a new employee a slice of the business before he's even proved his worth. I recognise that will stifle innovation.

But if he does prove his worth... well giving him a slice might make such a difference to productivity that I end up making more money too. It would certainly be prudent of me to consider such a scheme, calculating how much extra productivity I need for it to be mutually beneficial.

If he's just getting an hourly wage, well all he'll do is what his job description tells him to do. If he's got a vested interest in the company, well he might start taking more care of the plants, which will have a beneficial effect on yield.

You make a fine argument, but I'm yet to be convinced the problems you outline can't be overcome.

You're totally right and you are free to run your business that way. If it worked out better that way, you'd be silly to not do it.

It's just that for the most part it doesn't work better this way, but people are totally free to do it this way (and some do). In fact, I suspect that some businesses are actually more productive as co-ops (or at least provide more utility), just not a whole lot are. Co-ops take a certain kind of person. I remember when I visited Bellingham, Washington a lot (weed capital of the world btw), they had a co-op grocery/restaurant. It was a very popular destination, but also very niche. The Bellingham town area is populated by lots of people who don't want to live any other way but small, basic, and laid back.


A point I'll make about your hypothetical is that the 12 month mandate mark would also cause lots of problems. We'd see an abundance of people working up to the 12 month mark then being let go. It's an unintended consequence of regulation, which to solve requires more regulation, which causes more unintended consequences, which...you know how this one goes.

[wufwugy]

Watched the video. Good stuff. One thing I would like to point out is that it's not quite accurate when he says that the results seem not like economics. Econ 101 covers quite a bit the idea that people are often more motivated by things other than money profit. In the end of the video, when he says that it's not just that people are profit maximizers but purpose maximizers, he's basically talking about utility maximization. If we take the example of people with jobs doing even more complex hobby "work" in their free times and not getting paid for it, what's going on is that those people are putting subjectively lower opportunity cost on the hobby "work" and a higher opportunity cost on additional paid work.

[OngBonga]

Alright I'll think like a capitalist.

If I'm going to employ someone to help me grow weed, I'll calculate how much extra productivity I can expect as a result of his labour.

First of all, let's calculate how much I can personally manage, assuming a weed legal price of £100 and oz (roughly 70% of the current black market price). I could handle 25 plants on my own easy, and I'd expect to get 4oz a plant as an average, so that's 100 oz a crop (£10k), then five crops a year probably. So, alone, I'm making £50k a year.

Now I employ someone. I'd only do this to expand... and seeing as I can deal with 25 plants alone without a problem, I'd expect two people to manage 50 plants. That's an extra £50k a year turnover.

So I pay my dude £15k a year and give him a £5k bonus if we meet the 4oz per plant from 5 crops target, well he's incentivised to make the target, and I'm paying him less than what his labour is worth to the business.

Would he work as hard if I just paid him £20k a year?

[OngBonga]

We'd see an abundance of people working up to the 12 month mark then being let go.

I did consider this as I was typing, which is why I added the caveat "fair productivity targets". If it can be shown in straight numbers that the employee has met the targets, then you're gonna need a really good reason to "let them go".

There isn't a need for more regulation. Unfair dismissal is already a thing.

[wufwugy]

I did consider this as I was typing, which is why I added the caveat "fair productivity targets". If it can be shown in straight numbers that the employee has met the targets, then you're gonna need a really good reason to "let them go".

There isn't a need for more regulation. Unfair dismissal is already a thing.

Then the 8 month mark instead. Regardless, if policymakers did everything they possibly could to make this regulation "work," then we're back to where we started: where nobody wants to hire low-skill and where production gains are much slower and more costly than they are today.

The USSR went the opposite direction of what I'm describing. They made "hiring" mandatory, and the result was productivity sinking to subterranean levels. In your situation, if people aren't forced to hire, it would have a different (but similarly bad) effect of creating vast unemployment.

[OngBonga]

Yeah fair enough sav, I've done agency worked in the past when it suited me to ignore the phone at 5am if I didn't want to go in. There is a place for zero hours work, but it's purpose should be casual labour.

[wufwugy]

Something cool to note: a smart wage earner gets more out of the company he works for than the company gets out of him. On-the-job skills learned are of great value to employers. A smart employee gains skills as he works and uses those skills to negotiate for better work and higher pay.

I do not think the solution to low-wage labor is to mandate things. The marking distinction between the low-wage person and the high-wage person is that the latter is more diligent about his success.

[OngBonga]

Something cool to note: a smart wage earner gets more out of the company he works for than the company gets out of him.

This obviously isn't true. If an employee gets more out of the business than vice versa, then the business is destined to fail. Or, at the very least, a company can only afford to employ a small amount of "smart wager earners", as you put it. In the vast majority of cases, the labour is worth more than the wage; it must be for the company to thrive.

[wufwugy]

This obviously isn't true. If an employee gets more out of the business than vice versa, then the business is destined to fail. Or, at the very least, a company can only afford to employ a small amount of "smart wager earners", as you put it. In the vast majority of cases, the labour is worth more than the wage; it must be for the company to thrive.

A smart wage earner moves diagonally.

If we're talking in aggregate, then you're right, or if we're assuming that the hypothetical employee stays at the same company, then you're right.

I was making the point that if you are an employee who actually wants to succeed, you have the tools to provide more value for yourself than for any one of your employers.* I made this point because it's common to think in terms of business owners having a lot of power and wage earners not having a lot of power. This is not true, but I think the reason it's a popular sentiment is that those lower down typically do not employ their power nearly as diligently as higher ups. This makes sense since for obvious reasons those who employ their power more travel up the totem pole as is.

*However, doing so will also provide that value to the economy.

[MadMojoMonkey]

You ignore relevant factors all the time.

You ignore that there are things people value to the exclusion of monetary value. You talk about everything as though human emotional responses are not a real thing which influence people's decisions. People are motivated by so much more than wealth acquisition. People are motivated by a sense of personal fulfillment, by love, by loyalty, etc. to the point where they will scoff at you if you were to suggest you could assign some monetary value to their motivations which would be the $$$ necessary for them to give up their ideals. Not all ideals can be purchased. Sure many can, and for some people, perhaps all can. However, that's not the whole story.

I.e. How much would you need to be paid to completely 180 your opinions on politics? Is there any reasonable amount of money that would get you to believe act in such a way that by all appearances you believe that humans are not rational actors? Or that minimum wage is not cancerous to the economy?

Is there any sense in you that these are beliefs you hold out of their economic convenience and not that they are True Facts?


***
E.g.
You ignore the very relevant factor that your thoughts on minimum wage have never been economically proven, but you adhere to the idea that minimum wage is cancerous to the economy anyway. This is nothing less than ignoring a relevant factor. I'm not saying that you are wrong about minimum wage. I'm saying that your level of assurance that you're right is in direct ignorance of the lack of data. At the very least, you're playing fast and loose with your definition of relevant.

[wufwugy]

You ignore that there are things people value to the exclusion of monetary value. You talk about everything as though human emotional responses are not a real thing which influence people's decisions. People are motivated by so much more than wealth acquisition. People are motivated by a sense of personal fulfillment, by love, by loyalty, etc. to the point where they will scoff at you if you were to suggest you could assign some monetary value to their motivations which would be the $$$ necessary for them to give up their ideals. Not all ideals can be purchased. Sure many can, and for some people, perhaps all can. However, that's not the whole story.

I have always claimed that people value things outside of that which is expressed in monetary terms.

I.e. How much would you need to be paid to completely 180 your opinions on politics? Is there any reasonable amount of money that would get you to believe act in such a way that by all appearances you believe that humans are not rational actors? Or that minimum wage is not cancerous to the economy?

Like others, I'd gladly shill for the right price.

Is there any sense in you that these are beliefs you hold out of their economic convenience and not that they are True Facts?

Like others, I believe lots of things that I don't consider demonstrated fact.

You ignore the very relevant factor that your thoughts on minimum wage have never been economically proven, but you adhere to the idea that minimum wage is cancerous to the economy anyway. This is nothing less than ignoring a relevant factor. I'm not saying that you are wrong about minimum wage. I'm saying that your level of assurance that you're right is in direct ignorance of the lack of data. At the very least, you're playing fast and loose with your definition of relevant.

It would be very foolish to act like there is any reason to think that, when all else is equal, the minimum wage doesn't reduce the demand for labor. This is the case while accounting for the fact that econometricians have not been able to demonstrate causality.

[MadMojoMonkey]

I have always claimed that people value things outside of that which is expressed in monetary terms.

Always? No, not always. I'd say not even often, if we're only talking about what you post on FTR.
You frequently attempt to make your economic points in terms of only money/profit and not of other human values.

Where do you emphasize the outside values in your position on minimum wage?

Like others, I'd gladly shill for the right price.

EITHER
A) Lies. I'm not talking about trivial things you'd say if you were perhaps working as an advertiser. I'm talking about your core beliefs.
OR
B) Fair enough. I assumed you were a man of principle, and not merely a tool of whatever highest bidder. At any rate, I'm talking about people with core principles which they hold as "unwavering."
I caution you to not be so quick to assume that other people are as variable in their morals as this attitude you just professed.

Let me rephrase, then: How much would you suggest the going rate is to pay a mother not to love her child?

Like others, I believe lots of things that I don't consider demonstrated fact.

So... ignoring my question and changing the subject?

I'm not arguing what you believe, I'm questioning how adamantly you assert certain beliefs, in the light of a drastic lack of the normal standard of proof you require for other beliefs you hold. I'm questioning your use of language which is superlatively affirmative of your economic ideas when you know full well that the standard of proof to which you hold them is less than your usual standard.

It would be very foolish to act like there is any reason to think that, when all else is equal, the minimum wage doesn't reduce the demand for labor. This is the case while accounting for the fact that econometricians have not been able to demonstrate causality.

Very foolish? You resort to a personal attack of your opposition's intelligence?
Not a compelling point.

Act? So anyone who is disagreeing with you is acting? I.e. they do not really believe what they're saying, but are just playing devil's advocate? It doesn't suit you to condescend, wuf.

What indication do you have that "all else is equal?" Why even stipulate such nonsense?

This is the case? You just said if I disagree with you, then I'm foolish or pretending or both, and that the existence of minimum wage doesn't change anything except the demand for labor. None of these things is true, and certainly not a demonstration of your point.

The glaring lack of a demonstrative causal relationship should at the very least quell your adamant stance. Your insistence that this is a trivial point looks more like stubbornness than someone seeking to understand a complicated subject.

***
Your assertion that all of your beliefs are on an equal footing as far as how firmly you believe them is actually a little bit funny or at least a bit cute, but I doubt that's what you were going for. (Now I'm the one condescending, but I am mostly messing with you, here).

[wufwugy]

You frequently attempt to make your economic points in terms of only money/profit and not of other human values.

In the post above, I explained how economists think of everything in terms of money (when possible). The policy points I have made favor profit because it is the best known option to account for the most meaningful variables most efficiently, not the perfect and comprehensive option.

Let me rephrase, then: How much would you suggest the going rate is to pay a mother not to love her child?

For most, infinity. It is reasonable to claim that most humans have lines they would not cross for any monetary incentive. I have lines for sure.

I'm not arguing what you believe, I'm questioning how adamantly you assert certain beliefs, in the light of a drastic lack of the normal standard of proof you require for other beliefs you hold. I'm questioning your use of language which is superlatively affirmative of your economic ideas when you know full well that the standard of proof to which you hold them is less than your usual standard.

I do my best, but I'm not perfect. If you see me assert something that you think is wrong, call me on that.

Very foolish? You resort to a personal attack of your opposition's intelligence?

I didn't intend to imply you. I meant me and others who know the theory.

What indication do you have that "all else is equal?"

Ability to hold all else equal is imperative for finding meaningful associations in econometrics.

The glaring lack of a demonstrative causal relationship should at the very least quell your adamant stance. Your insistence that this is a trivial point looks more like stubbornness than someone seeking to understand a complicated subject.

The lack of econometric conclusion on the matter does not change the equation much. This is because of how solid of other empirical conclusions the theory is based on. Consider bouncing a basketball on Mars. Have physicists conducted experimentation enough to conclude that basketballs bounce on Mars? No. If you ask a physicist if it is reasonable to claim that basketballs would bounce on Mars, would he say yes? Yes.

Your assertion that all of your beliefs are on an equal footing as far as how firmly you believe them is actually a little bit funny or at least a bit cute, but I doubt that's what you were going for. (Now I'm the one condescending, but I am mostly messing with you, here).

You'd be doing me a big favor if you called me on the things specifically when I do them.

Y'all need to call me on my shit. I know I post some shit from time to time (even though I try not to, I'm only human). Generalities don't necessarily help me to improve. Granted, calling me on my shit is liable to be a difficult task since I defend myself with vigor, but if you can somehow get it through my thick skull why I'm wrong, I will admit it. That is an absolute promise. I take great pride in admitting when I'm wrong. It is a quality that I believe if I ever lose I will become a silly and stupid person.

I once was a young earth creationist. I was wrong then, and I am capable of being wrong now.

[MadMojoMonkey]

I didn't intend to imply you. I meant me and others who know the theory.

What does that change? You're still saying that anyone "who knows the theory" and still disagrees with its assured application to minimum wage is foolish or disingenuous.

That's a prime feeding ground for echo-chamber thinking.

Ability to hold all else equal is imperative for finding meaningful associations in econometrics.

So you just assert that you can do it, then?
That's not sound reasoning.

How do you reconcile this idea with the description of economic systems as complex feedback loops?

The lack of econometric conclusion on the matter does not change the equation much. This is because of how solid of other empirical conclusions the theory is based on. Consider bouncing a basketball on Mars. Have physicists conducted experimentation enough to conclude that basketballs bounce on Mars? No. If you ask a physicist if it is reasonable to claim that basketballs would bounce on Mars, would he say yes? Yes.

This is a false equivalence and exactly my point about how you have a different standard for what counts as proof when it comes to various things you believe. Or at least the reasons you believe in gravity are at a far lower bar than a physicist's.
You know what, no they're not.
You've never once in your life ever observed anything which acted in violation of gravity. You'd know something was up in a second if you saw some hoax video which claimed to have anti-gravity because that's contrary to your every experience. You simply can't say the same for your economic ideas. Or if you can... you have yet to do so in a way that I agree with what you purport to have observed.

If 2 honest people can't agree on what they observed, then stipulating one of their observations as fact is premature.

I don't believe for a second that econometric conclusions are anywhere near as thoroughly tested as General Relativity. Can you make predictions which are accurate to 30+ decimal places?

The difference isn't trivial. Show me an economic principle which I can't shoot holes in immediately by just examining various human cultures and economies at various scales w/o ignoring the nuance and complexity of individuals.

Your overstatement of your ideas and lack of seeming understanding of when and how far you're extrapolating does your credibility no favors.

[Savy]

I imagine the issue is more that $ value isn't the measurement that should be used in fact it should be this sort of true value everything can be defined by (idealistic) of which money is a small part whereas what happens is $ is the easiest so we try to put everything in those terms which is a slight falsehood.

I very much imagine that most things do have a monetary value. There was a great line in Mr Robot (bastardisation version) about a date not going well so the man says to the woman this hasn't gone great but if I paid you a million dollars would you come back and have sex with me, to which the woman thinks and says yes. The man replies what about for a dollar? The woman, outraged by this says "What type of woman do you think I am?". We've already established what type of woman you are, now we're just haggling.

[wufwugy]

I imagine the issue is more that $ value isn't the measurement that should be used in fact it should be this sort of true value everything can be defined by (idealistic) of which money is a small part whereas what happens is $ is the easiest so we try to put everything in those terms which is a slight falsehood.

I very much imagine that most things do have a monetary value. There was a great line in Mr Robot (bastardisation version) about a date not going well so the man says to the woman this hasn't gone great but if I paid you a million dollars would you come back and have sex with me, to which the woman thinks and says yes. The man replies what about for a dollar? The woman, outraged by this says "What type of woman do you think I am?". We've already established what type of woman you are, now we're just haggling.

Heh, I was thinking of that example. Great show

I remember playing the "what's your price" game in high school. It's pretty eye opening when you're honest.

[wufwugy]

Tons of economists have stopped using the word "rational" because of how misleading it is. The word makes it seem like the assumption doesn't account for the irrational while it actually does.

[Poopadoop]

Tons of economists have stopped using the word "rational" because of how misleading it is. The word makes it seem like the assumption doesn't account for the irrational while it actually does.

Explain how it accounts for the irrational please.

[wufwugy]

Economics is a field of great depth and great rigor, and most of what I do is relate what I've been taught by PhD's in the field.

I don't think I've come across a field that isn't as popular to challenge either. There's a famous quote by an economist that the hardest part about being an economist is that everybody thinks they understand economics. Bryan Caplan has a similar story: he's one of the most renowned economists in the world and his dad, who knows nothing about economics, still tells him he's wrong about some of the most basic principles of the field.

[MadMojoMonkey]

I once told you a personal, first-hand story where I was definitely acting in a manner absolutely contrary to your economic definition of being a rational actor and you ignore it. The example was only economic in the sense that I wanted to do one thing, but did the exact opposite thing out of rote habit.

You (wuf) actively ignore data which contradicts your theories.

This is not common in economists I've been having conversations with. They are ready to explore the fuzzy boundaries of these statements you make, and I think you'll be a much more excellent economist when you see the fuzz, too.

[wufwugy]

I once told you a personal, first-hand story where I was definitely acting in a manner absolutely contrary to your economic definition of being a rational actor and you ignore it. The example was only economic in the sense that I wanted to do one thing, but did the exact opposite thing out of rote habit.

You (wuf) actively ignore data which contradicts your theories.

This is not common in economists I've been having conversations with. They are ready to explore the fuzzy boundaries of these statements you make, and I think you'll be a much more excellent economist when you see the fuzz, too.

What was the example?

I have declared many times that I think humans are deeply irrational.

It would be best if the term rationality was avoided entirely when it comes to economics. Arguments have been had on this forum because the term is confusing since it makes more common sense to think of it in terms of cognitive reasoning. Standard economics attempts to account for every decision regardless of how it is made. Economists chose the wrong word to describe this.

[MadMojoMonkey]

The fundamental assumption of mathematics is that the number 1 is a meaningful concept, that the observation of distinct-ness between "different" objects isn't some flaw of human perception, that identity isn't absurd.

This isn't a trueism, as you say. It is a postulate.

Whether or not it is a fault of human perception to see one thing as unique to other things, no matter how similar, is unclear.
I mean, we are both people, similar in many ways, but we believe that we are not each-other, for a slew of reasons, all of which are based on our perception. So the assumption that our perceptions are a reliable way to describe us is woven in there.

I'm not saying it's a bad assumption, I'm saying it's undoubtedly an assumption, even if it is never shown to be false, it has no antecedent principles from which it is derived. I personally think the fact that it seems consistent in many ways (I keep perceiving to be me and not you all the time) is a strong reason to think it's not a bad assumption, but that just shifts the un-derivable onto my appreciation of consistency, which is ultimately a part of my perception, and now it's clearly circular.

All fields start with fundamental postulates, which, by definition, are not provable. Their worth is in their utility (change your pants, wuf).

[wufwugy]

The fundamental assumption of mathematics is that the number 1 is a meaningful concept, that the observation of distinct-ness between "different" objects isn't some flaw of human perception, that identity isn't absurd.

This isn't a trueism, as you say. It is a postulate.

Whether or not it is a fault of human perception to see one thing as unique to other things, no matter how similar, is unclear.
I mean, we are both people, similar in many ways, but we believe that we are not each-other, for a slew of reasons, all of which are based on our perception. So the assumption that our perceptions are a reliable way to describe us is woven in there.

I'm not saying it's a bad assumption, I'm saying it's undoubtedly an assumption, even if it is never shown to be false, it has no antecedent principles from which it is derived. I personally think the fact that it seems consistent in many ways (I keep perceiving to be me and not you all the time) is a strong reason to think it's not a bad assumption, but that just shifts the un-derivable onto my appreciation of consistency, which is ultimately a part of my perception, and now it's clearly circular.

All fields start with fundamental postulates, which, by definition, are not provable. Their worth is in their utility

top notch

(change your pants, wuf).

topper notch

[MadMojoMonkey]

topper notch

[MadMojoMonkey]

What is science without specific predictions?

What can be predicted if constancy is false?

[Poopadoop]

What is science without specific predictions?

What can be predicted if constancy is false?

Yup, we'd have a hard time doing science then. Not sure what else you're getting at though.

[MadMojoMonkey]

Assumptions are the building blocks of theories. If your assumption is shit, your theory is also likely to be shit.

I fully share your skepticism as to the utility of the postulates of economics.

Yup, we'd have a hard time doing science then. Not sure what else you're getting at though.

This convo

They would prove the assumption [of constancy] false and require the theory to rethink it's assumptions.

Sorry if not fully on topic. I think I am, but not positive.

[Poopadoop]

Well sort of I guess. I mean the point isn't so much whether the assumption of utility is circular given all assumptions are circular (on a philosophical level). It's that there's so much flexibility in it that it's unfalsifiable. This isn't the case with the assumption of constancy, and that's what makes it a good starting point whereas the assumption of maximizing utility isn't.

It's not to say there isn't something to the utility idea, it just isn't described with anywhere near enough precision to be useful in the context of science. Not to mention that it can be adjusted post hoc to explain everything. It has very limited value imo.

[Poopadoop]

Granted, economics is a soft science and maybe it isn't fair to hold it up to the same standards as physics or chemistry. That's one of it's problems though, the system is so chaotic as to be nearly indecipherable.

I'm just trying to understand what economics actually has to offer in a concrete sense.

[wufwugy]

Well sort of I guess. I mean the point isn't so much whether the assumption of utility is circular given all assumptions are circular (on a philosophical level). It's that there's so much flexibility in it that it's unfalsifiable. This isn't the case with the assumption of constancy, and that's what makes it a good starting point whereas the assumption of maximizing utility isn't.

It's not to say there isn't something to the utility idea, it just isn't described with anywhere near enough precision to be useful in the context of science. Not to mention that it can be adjusted post hoc to explain everything. It has very limited value imo.

It could be that the value is to say that when somebody wants something, they want it, as opposed to not wanting it or randomly wanting or not wanting it. This seems like the sort of assumption economics would need.

[wufwugy]

I fully share your skepticism as to the utility of the postulates of economics.

I do too. I don't really know what goes into deciding assumptions. My best guess is that original economists said "yo we can only say stuff about what people do if we have an assumption behind it all; something like people want more of something they want and less of something they don't want, where want means whatever they decide."

[CoccoBill]

For-profit schools. Imagine you're running one, and you're facing competition, as one does. Your investors demand profits, as they do. To make yourself more competitive, is it easier and cheaper to

a) cut costs
b) invest in development?

Let's say you're an idiot and you choose b), do you

a) invest in marketing
b) invest in better teachers, curriculum, facilities etc and hope someone eventually notices?

[Renton]

For-profit schools. Imagine you're running one, and you're facing competition, as one does. Your investors demand profits, as they do. To make yourself more competitive, is it easier and cheaper to

a) cut costs
b) invest in development?

Let's say you're an idiot and you choose b), do you

a) invest in marketing
b) invest in better teachers, curriculum, facilities etc and hope someone eventually notices?

In all likelihood, all of the above. A properly run business will devote resources to increasing cost effectiveness and development, to marketing and to improving the product, in a ratio of expenditure appropriate to maximizing profit and potential for expansion.

You frame the thought experiment to evoke a response of "worse, cheaper product, sold for a higher price," but do you see that result in the private sector for goods like smartphones and LCD televisions, or services like restaurants or package delivery? Absolutely not. Generally, we enjoy cheaper and higher quality goods and services over time in our capitalistic system. The left-leaning among us irrationally ascribe radically different expectations of how the free-market would handle services that are essential*, but in most cases, those services would respond just as robustly to free trade.

*Never mind the inaccuracy of that word in describing some of them. Ask the truly poor of the 3rd world to find out what essential really is.

[Savy]

If you ask questions like that you won't get good answers.

"Demand profits" - not how it works
If you make bad business decisions then you lose, when you lose the people not making those bad decisions survive.

a & b in situation one and two aren't mutually exclusive.

You seem to forget or be unaware that schools already spend a lot of time on marketing themselves anyway, it's important.

Schools also heavily market themselves on grades, curriculum, facilities, etc.

[CoccoBill]

You're both missing the point. I'm not saying that's the decision tree in 100% of cases, and those single decisions are the only single action they will take. I'm talking about incentives, which type of action brings the best bang for buck. The r&d becomes necessary only after it's no longer possible to compete just with costs and marketing.

Of course competition [also] incentivizes development and building better products, but that's secondary, not the reason companies exist. The primary motive is to make money. A not insignificant percent of businesses will try to employ the easiest way to get there, which is the smart business decision, and that's where the decision tree comes in.

https://capseecenter.org/comparing-c...ollege-sector/
http://www.huffingtonpost.com/davidh..._14064182.html

[Renton]

I don't think it's appropriate to cite for-profit universities as examples of market failures for the same reason that you shouldn't cite health insurance companies as such. These industries are running in tandem with deeply flawed public systems, and thus cannot be considered to be accurate examples of free markets in action.

[CoccoBill]

Maybe so, but I also don't think it's appropriate to dismiss the distortion of incentives just based on somewhat irrelevant factors. That same incentive structure is true for every company, is it not? The public-private nature of education in the US might affect the outcomes, but not those principles.

To me it sounds like you don't object to the principles?

Edit: To summarize, the easiest, quickest and most economical ways to improve profitability, in order:

1. cut costs
2. invest in marketing
3. invest in product

[BananaStand]

Edit: To summarize, the easiest, quickest and most economical ways to improve profitability, in order:

1. cut costs
2. invest in marketing
3. invest in product

It's unbelievable that you've made multiple posts for an argument that's supported by this inexplicably flawed premise.

There's another easy, quick, and economical way to improve profitability that you've completely left out of your equation here. When you add that OBVIOUS solution back into the conversation, then nothing you've posted today makes a damn bit of sense.

[CoccoBill]

It's unbelievable that you've made multiple posts for an argument that's supported by this inexplicably flawed premise.

There's another easy, quick, and economical way to improve profitability that you've completely left out of your equation here. When you add that OBVIOUS solution back into the conversation, then nothing you've posted today makes a damn bit of sense.

Aww please don't keep us in suspense, tell, tell!

[BananaStand]

Aww please don't keep us in suspense, tell, tell!

Raise the price dummy

[Renton]

As I said, all three of those things will have resources devoted to them simultaneously at any given time. There isn't an order of importance or priority that's etched in stone. Each of those things might be the top priority depending on the market conditions.

[CoccoBill]

As I said, all three of those things will have resources devoted to them simultaneously at any given time. There isn't an order of importance or priority that's etched in stone. Each of those things might be the top priority depending on the market conditions.

My point is that the order of importance or priority [in a vacuum] for rational actors is to follow those steps, and only move to the next step when the current one is exhausted. Why invest if you don't have to?

[MadMojoMonkey]

Increase prices?

Fire under-performing employees?

Garage sale?

[CoccoBill]

Fine.

1. increase prices
2. cut costs
3. invest in marketing
4. invest in product

Yeah my point was completely invalidated.

[BananaStand]

Fine.

1. increase prices
2. cut costs
3. invest in marketing
4. invest in product

Yeah my point was completely invalidated.

Well it kinda fucks up your decision tree, doesn't it? Doesn't it look like this now?

1) Increase Prices and let the revenue flow to the bottom line. Kids keep learning, investors get dividends, everybody wins.
2) Increase Prices and reinvest the additional income into the school in the hopes of attracting new revenue streams (more students)
2a) Use additional new revenue to invest in marketing
2b) Use additional new revenue to invest in product
3) Cut Costs, i.e. degrade the quality of the product.

It seems that your point is that a for-profit school system would be compelled by the free market forces to prioritize bottom line financial results over the quality of education provided to it's students.

You're saying that when faced with profitability concerns, a school administrator's first move would be to cut costs. The first page of the playbook is to diminish the amount and quality of services provided. Your first post seemed to espouse the idea that only an "idiot" would do anything other than this.

But supposing the administrator IS an idiot, you believe his next move would be to take more money out of a failing business and then use it to gamble on measures that may or may not attract more students.

Also in your scenario, it never occurs to this administrator to invest in the quality of service in order to justify a higher price to his existing students.

Unless I'm mistaken, your premise here is that the privatization of education will result in a system where student's concerns rank last. But in order to prove that, you need to use a decision tree that is devoid of the most obvious and beneficial solutions.

Well played

[CoccoBill]

Well it kinda fucks up your decision tree, doesn't it? Doesn't it look like this now?

No.

1) Increase Prices and let the revenue flow to the bottom line. Kids keep learning, investors get dividends, everybody wins.

Yes, assuming that the price increase does indeed raise revenues, and not lower them. The only one suffering are the customers, who pay more for an identical product. No appeal to morality, just an observation.

2) Increase Prices and reinvest the additional income into the school in the hopes of attracting new revenue streams (more students)

Now you're fabricating reality. It makes no sense to reinvest if you're already making sufficient profits. If you're not, we've already exhausted option 1), which this is. I'm not looking for anecdotal stories of what company x might do, I'm looking at incentives and the most rational business decisions.

2a) Use additional new revenue to invest in marketing
2b) Use additional new revenue to invest in product
3) Cut Costs, i.e. degrade the quality of the product.

Why would you do this, when cutting costs accomplishes the same with lower expenditure? Alright, major company reorgs and downsizing are more costly than marketing, after the easiest cost-cutting measures have been exhausted. The point is, that improving the actual product seems to make the least economical sense, that's the last resort. R&D, improving manufacturing processes, better QC etc. are costly as shit, take a long time and still don't guarantee better sales.

It seems that your point is that a for-profit school system would be compelled by the free market forces to prioritize bottom line financial results over the quality of education provided to it's students.

More or less.

You're saying that when faced with profitability concerns, a school administrator's first move would be to cut costs. The first page of the playbook is to diminish the amount and quality of services provided. Your first post seemed to espouse the idea that only an "idiot" would do anything other than this.

But supposing the administrator IS an idiot, you believe his next move would be to take more money out of a failing business and then use it to gamble on measures that may or may not attract more students.

Also in your scenario, it never occurs to this administrator to invest in the quality of service in order to justify a higher price to his existing students.

Unless I'm mistaken, your premise here is that the privatization of education will result in a system where student's concerns rank last. But in order to prove that, you need to use a decision tree that is devoid of the most obvious and beneficial solutions.

Well played

I haven't said anything about results or what anyone's gonna do, I've looked at the incentives. The rational move is to minimize expenditure and maximize profits. You could possibly gain more relative profit using a more costly method, but that seems to incur more risk, which again makes no rational sense. To me it looks like improving the product comes last down the list. All the adding of the price hikes to the decision tree does is drop the product improvements further down the list.

[BananaStand]

No.

Yeah, yeah it is.

Yes, assuming that the price increase does indeed raise revenues, and not lower them.

Seems like an obvious and trivial assumption. People don't choose schools merely based on what's cheapest. If that were true, then there would be no such thing as private schools, since public schools are free! School selection is based on a myriad of other choices, which are likely to factor more heavily into a decision than a small price increase.

Also, Price elasticity is a thing. Banks will try to get you set up with auto-pay for your bills and a bunch of other integrated services so that it becomes a monumental endeavor to change banks. Then they jack up the ATM fees when you're not looking. I imagine that effect would be much more intense when we're talking about children, who have formed relationships with teachers and classmates.

In that context, a price increase is unlikely to reduce revenue.

The only one suffering are the customers, who pay more for an identical product. No appeal to morality, just an observation.

If you're not trying to appeal to morality, don't use words like "suffering". Bullshit ploy. Businesses experience rising costs for their materials and labor all the time. Those costs get passed onto consumers all the time. It's called an economy, not the "why isn't he world exactly how I want it" game.

Now you're fabricating reality.

Preposterous.

It makes no sense to reinvest if you're already making sufficient profits.

This just demonstrates that you know zilch about business. Where did you hear that businesses ever use terms like "sufficient" when talking about profits.

It's totally common and natural for a company to invest money in measures that attract more revenue, even in times of prosperity.

If you're not, we've already exhausted option 1), which this is

How? Where in this ridiculous fabrication of nonsense did you stipulate that we can't raise prices?

Why would you do this, when cutting costs accomplishes the same with lower expenditure?

Because quality, brand, reputation, and service are all things that matter.

The point is, that improving the actual product seems to make the least economical sense, that's the last resort. R&D, improving manufacturing processes, better QC etc. are costly as shit, take a long time and still don't guarantee better sales

Cutting costs doesn't guarantee against a loss of sales. For every action, there's a reaction. What's your point?

More or less.

So explain how a state-run institution would do it better? They have no profit motive, but are still motivated to reduce costs. In that scenario, why would they EVER in a million years consider reinvesting money into the quality of their product? Their decision tree has one branch....cut costs.

This is why it's pretty much a proven economic certainty that competition improves quality and lowers prices. Remove the competitive aspect and you have a beached whale of a business.

I haven't said anything about results or what anyone's gonna do, I've looked at the incentives. The rational move is to minimize expenditure and maximize profits.

Why do you equate a minimization of expenditure with a degradation in quality? Is it possible that a business spends money on frivolous things? Is it possible that there is fraud, waste, and abuse occurring within the business? Is it possible that a reduction in costs could improve the quality of education?

You could possibly gain more relative profit using a more costly method, but that seems to incur more risk, which again makes no rational sense.

In what universe is the goal of businesses to avoid any and all risks? Do you fold everything but the nuts in poker? It's perfectly reasonable for businesses to assume risk if the potential rewards justify it.

To me it looks like improving the product comes last down the list. All the adding of the price hikes to the decision tree does is drop the product improvements further down the list.

Jeeeeezus! Did you go to public school or something!?

Look at the list again. By adding price increases to the list, you have options to generate capital that finance growth, expansion, and improvements. And then way down there at the BOTTOM of the list, is cost-cutting and quality-lowering.

[CoccoBill]

OK, I'll just answer to the bits with even a modicum of relevance.

It's totally common and natural for a company to invest money in measures that attract more revenue, even in times of prosperity.

For sure, but not by spending as much money as possible.

Because quality, brand, reputation, and service are all things that matter.

Sounds like you're cutting too much costs, in other words you've exhausted option 2.

Cutting costs doesn't guarantee against a loss of sales. For every action, there's a reaction. What's your point?

Of course it doesn't, but it's in most cases cheaper to implement than doing R&D.

So explain how a state-run institution would do it better?

Let's not get ahead of ourselves, we're just talking incentives.

Why do you equate a minimization of expenditure with a degradation in quality?

I don't, it's you who said that: "3) Cut Costs, i.e. degrade the quality of the product." Either way, I'm sure you can agree that at some point the degradation of quality is inevitable.

In what universe is the goal of businesses to avoid any and all risks? Do you fold everything but the nuts in poker? It's perfectly reasonable for businesses to assume risk if the potential rewards justify it.

Probably in the same universe where someone claimed that. Why do you think the potential rewards always justify it?

Look at the list again. By adding price increases to the list, you have options to generate capital that finance growth, expansion, and improvements. And then way down there at the BOTTOM of the list, is cost-cutting and quality-lowering.

Yes, and I agreed raising the price is the most +EV option if that is viable in your market situation. If it isn't, most likely the next best option is to cut costs, since that is also quick and easy, entails no additional costs like research, testing, development, and is fairly guaranteed to work, since you don't need to generate more business. Marketing is also a better option than r&d, since it's far cheaper and quicker. Then again it's not guaranteed to work.

[OngBonga]

4) get another job
5) stop working altogether

[MadMojoMonkey]

It seems that only a complete idiot of a businessman would assume they will retain their current level of customer loyalty if they reduce the quality of their product w/o a commensurate reduction in price.

All of your points, CoccoBill, must be addressed by any business on a relatively constant basis for the business to thrive and grow.

There are good schools and bad schools. There are wealthy neighborhoods and poor neighborhoods. Some people don't care about much. Other people care more about their work than anything else. Your attempt to pigion-hole all schools as identical actors in their economic climate is fatally flawed in this assumption.

Just as Banana's "Let's assume we can remove survivorship bias" statement. Sure, I agree with what follows, but how can we possibly accomplish that assumption?

[CoccoBill]

Your attempt to pigion-hole all schools as identical actors in their economic climate is fatally flawed in this assumption.

Forget schools for a bit, I'm not talking about them or what any school should or does do in any given situation. What I'm trying to say is that it looks like the economic incentives are not in line with consumer benefit. If you're in a competitive market and need to do something to compete, you have several options. Doesn't it make sense to pick the option that gives you the best bang-for-buck, the most +EV? Improving the product seems to be last on that list which I find, as a consumer, less than optimal. In fact, out of the 4 options identified:

1. increase prices - same product with higher price, consumer gets shafted
2. cut costs - worse product for same price, consumer gets shafted (or in best case no effect, when just trimming excess from the company)
3. invest in marketing - same product with higher price, consumer gets shafted
4. invest in product - better product with same price, consumer benefits

Now I'm not (yet) saying anything about what's the right way to run a school or a business, or whether for-profit or not-nor-profit is better, just talking about this dynamic. Yes, there are obviously a million other variables in play on top of the incentives, but it's hard for me to think they're irrelevant unless someone proves they are.