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> however the machines will drastically improve productivity, therefore reduce prices Except why would that ever happen? If you were a business owner selling w
by kdamken 11y ago
> however the machines will drastically improve productivity, therefore reduce prices
Except why would that ever happen? If you were a business owner selling widget X, and it suddenly cost you half as much to make that due to automation, you don't pass those savings on to your customers, you celebrate how much better your margins have gotten and how much more profit you're making.
- tedsanders 11y agoCompetition is one reason. Increased sales volume is a second. Social pressure is a third. It's why we get clean tap water for less money than it would cost someone to bring it by bucket. It's why a gallon of gasoline costs less than the bale of hay equivalent. Regardless of the mechanism, the world is full of examples of technology lowering costs. Certainly you're correct that not all of the cost savings will be passed on to consumers, but as long as the market is not a zero-price-elasticity monopoly immune to social pressure and government regulation, some savings ought to be passed on.
- seabee 11y agoTrue in a monopoly situation, but if you have competition and they can automate like you, there will be a race to the bottom.
- makomk 11y agoNow suppose the automation technology is thoroughly patented and the inventor effectively has a government-granted monopoly on the right to use it or anything similar to it.
- icebraining 11y agoThat might delay things, but (1) patents expire and (2) there are often ways around them.
- marcosdumay 11y agoIn this case, the inventor gets rich, and everything still gets cheaper (just not as much as in the alternative).
- atemerev 11y agoBecause of this little thing called "competition". There will always be new businesses who can live with lower profit margins and drive you out of the market for good. Capitalism 101.
- wavefunction 11y agoYou should check out Capitalism 102 where they discuss barriers to entry.
- atemerev 11y agoLess and less industries today have any remaining barriers of entry. Some still remain, though. Race and gender issues being the most obvious (I find it shameful and outrageous that this is still a problem in 2016, but evidently it is). Another fantastically blatant example is having a non-US non-European citizenship and being unable to relocate to San Francisco Bay Area, wherever this magic wonderland filled with ponies and unicorns is. Others, like access to education, are disappearing very fast, despite all resistance of the education mafia. Thank you, Wikipedia, I owe you so much.
- dragonwriter 11y agoIt would happen, assuming a competitive market, because competition drives out economic profit, so that reduced costs mean reduced prices. Obviously, monopolies are different, but even with a monopoly cost decreases can reduce the price point at which maximum profit is realized.
- dinkumthinkum 11y agoYou're missing a key component of economics. You are saying suddenly widgets can be made for less then previously by automation. If there was a monopoly seller of widgets, your argument makes sense but if there is competition, prices will be driven down, or some other effect will occur.