Anti-Capitalist Sentiment (with some morality)

[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.