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Thanks. That article was pretty short. I can't imagine how short the blog was. Interesting that the author spends most his words explaining the rent concept, t

Thanks. That article was pretty short. I can't imagine how short the blog was. Interesting that the author spends most his words explaining the rent concept, then abruptly ends with speculation that the rise of temp workers, agency workers, part-time workers, basically everyone who is not an FTE, it to blame for labor not capturing the financial benefit of increased productivity. The only solution to this problem is going to be through the tax system. If you hire me to shovel dirt all day long, and one day an inventor sells you a more productive shovel which you give to me, I don't really deserve more pay because I'm shoveling dirt better. But commerce and tax laws are the purview of the democracy, how much money the business owners need to pay back to society for the benefits they receive, and also so society doesn't burn their homes and factories down and kill them, is a matter public policy.

logfromblammo 11y ago
I disagree. If I am a dirt-shoveler with a v1.0 shovel, and I can make a hole with volume of 8 cubic yards in 8 hours, that sets the business expectation for how much a typical dirt-shoveler can do, and how much it costs to dig an additional cubic yard of holes. Namely, it costs one hour of dirt-shoveler labor. If the v2.0 shovel allows me to dig a hole with volume of 10 cubic yards in 8 hours, that reduces the marginal cost of digging an additional cubic yard of holes. It now costs 0.8 hours of dirt-shoveler labor. In the short term, the demand for new holes is unchanged, but the demand for shoveler labor has shifted left, as its supply is unchanged. In the long term, the marginal dirt-shovelers--especially those without v2.0 shovels--exit the market. The supply curve for shoveler labor shifts left, and price goes back up, as quantity decreases. Deserving doesn't enter into it. If dirt-shoveler pay per hour does not go up to reflect the increase in productivity, some shovelers will stop digging for their living and go do something else (or remain unemployed), because they will get paid zero for the holes that they are no longer able to dig. The ones who survive the cull will only be able to demand more pay when someone wants a hole dug, but can't get anyone to do it at the offered rate. The cost of a v2.0 shovel is now a barrier to entry to the profitable region of the dirt-shoveler business. Now extrapolate to mechanized earth-moving equipment. If you need to excavate a basement for a new building, you hire one guy with the $100000 v46.3 shovel, rather than 20 guys with 20 v3.1 shovels. At this point, just owning the shovel is profitable, because that guy can just rent it out to people who know how to dig holes, but lack the necessary accumulated capital to be competitive in the business. But those 20 guys you didn't hire to dig your basement are still out there, and they're getting hungry. And they're looking at their crappy v3.1 shovels and thinking, "If I sharpened this edge a bit, it would make a decent weapon, and I could take that v46.3 shovel by force." There are many possible solutions, because the problem is making multiple economic variables (aka human motivations and desires) balance. A change in the taxation regime is only one, and not necessarily the best one.
- euroclydon 11y ago
  I wasn't sure if you were moving the goalposts through your first five paragraphs, but paragraph six confirmed it: In my hypothetical, the employer owns the shovel. In yours it's the worker. If you own your own tools that you use for work, you're probably an independent entity like a contractor, not an employee. You seem to confirm this at the end of paragraph six with the example of a homeowner hiring twenty shovel laborers -- surely this homeowner does not intend them as FTEs.
  - logfromblammo 11y ago
    The shovel doesn't care who owns it. If the employer owns it, the employee gets paid less because the shovel rental is effectively deducted from his pay. If the worker owns it, the end consumer can (theoretically) pay less, because the worker does not need to pay any rent on his tools. The purchase cost of a better shovel is a barrier to entry, not a marginal cost of production. By the time you get up to giant mechanized excavators, the barrier is so high that a guy with just a spade and a dream can never get that far, because anyone either renting or owning a better tool can outcompete him at every turn, and the rent on a better shovel may be such a large proportion of the cost of shoveling that the laborer using it could never accumulate enough savings to buy his own tool. That's where you have to rely on an external force to change the status quo, "force" being the key word. The guy who doesn't play nice gets metaphorically whacked in the head with a shovel. Taxes are just one of many ways to do that.
    - euroclydon 11y ago
      If the little guy gets a mechanized excavator, he's not so little any more. And wouldn't that be his goal anyhow? Why would anyone want to go through the trouble to buy one, if there were not a high barrier to entry?

logfromblammo 11y ago

I disagree. If I am a dirt-shoveler with a v1.0 shovel, and I can make a hole with volume of 8 cubic yards in 8 hours, that sets the business expectation for how much a typical dirt-shoveler can do, and how much it costs to dig an additional cubic yard of holes. Namely, it costs one hour of dirt-shoveler labor. If the v2.0 shovel allows me to dig a hole with volume of 10 cubic yards in 8 hours, that reduces the marginal cost of digging an additional cubic yard of holes. It now costs 0.8 hours of dirt-shoveler labor. In the short term, the demand for new holes is unchanged, but the demand for shoveler labor has shifted left, as its supply is unchanged. In the long term, the marginal dirt-shovelers--especially those without v2.0 shovels--exit the market. The supply curve for shoveler labor shifts left, and price goes back up, as quantity decreases. Deserving doesn't enter into it. If dirt-shoveler pay per hour does not go up to reflect the increase in productivity, some shovelers will stop digging for their living and go do something else (or remain unemployed), because they will get paid zero for the holes that they are no longer able to dig. The ones who survive the cull will only be able to demand more pay when someone wants a hole dug, but can't get anyone to do it at the offered rate. The cost of a v2.0 shovel is now a barrier to entry to the profitable region of the dirt-shoveler business. Now extrapolate to mechanized earth-moving equipment. If you need to excavate a basement for a new building, you hire one guy with the $100000 v46.3 shovel, rather than 20 guys with 20 v3.1 shovels. At this point, just owning the shovel is profitable, because that guy can just rent it out to people who know how to dig holes, but lack the necessary accumulated capital to be competitive in the business. But those 20 guys you didn't hire to dig your basement are still out there, and they're getting hungry. And they're looking at their crappy v3.1 shovels and thinking, "If I sharpened this edge a bit, it would make a decent weapon, and I could take that v46.3 shovel by force." There are many possible solutions, because the problem is making multiple economic variables (aka human motivations and desires) balance. A change in the taxation regime is only one, and not necessarily the best one.

euroclydon 11y ago
I wasn't sure if you were moving the goalposts through your first five paragraphs, but paragraph six confirmed it: In my hypothetical, the employer owns the shovel. In yours it's the worker. If you own your own tools that you use for work, you're probably an independent entity like a contractor, not an employee. You seem to confirm this at the end of paragraph six with the example of a homeowner hiring twenty shovel laborers -- surely this homeowner does not intend them as FTEs.
- logfromblammo 11y ago
  The shovel doesn't care who owns it. If the employer owns it, the employee gets paid less because the shovel rental is effectively deducted from his pay. If the worker owns it, the end consumer can (theoretically) pay less, because the worker does not need to pay any rent on his tools. The purchase cost of a better shovel is a barrier to entry, not a marginal cost of production. By the time you get up to giant mechanized excavators, the barrier is so high that a guy with just a spade and a dream can never get that far, because anyone either renting or owning a better tool can outcompete him at every turn, and the rent on a better shovel may be such a large proportion of the cost of shoveling that the laborer using it could never accumulate enough savings to buy his own tool. That's where you have to rely on an external force to change the status quo, "force" being the key word. The guy who doesn't play nice gets metaphorically whacked in the head with a shovel. Taxes are just one of many ways to do that.
  - euroclydon 11y ago
    If the little guy gets a mechanized excavator, he's not so little any more. And wouldn't that be his goal anyhow? Why would anyone want to go through the trouble to buy one, if there were not a high barrier to entry?