4 ms·

If salaries go up, shortages go down (both on silly and demand side)

by jwatte 10y ago

randomdata 10y ago
Shortage is defined as a situation where price cannot rise, such as the government setting a price ceiling. If price can rise then a shortage is impossible.
- cauterized 10y ago
  So if right at this moment the world had only enough doctors to care for half the population, regardless of the price, that wouldn't be a shortage of doctors? If there were a severe drought and only enough food to keep half of us alive, but prices weren't capped... That wouldn't be a food shortage? If there are only 10,000 people in a field who are under the age of 70 but have at least 20 years of experience, and the industry needs 50,000 of them to function efficiently - that's not a shortage of experienced skilled workers? Not everything is a commodity. Not every commodity experiences a drop in demand as the price rises. Some things are needs that people continue to have demand for even if they can't afford them due to shortages. Even commodities have limits to their production. And some things can't be produced quickly enough to address a short or medium term shortage. Markets aren't magic. They have inefficiencies and externalities and logic limits. Econ 101 deals only in simplifications and spherical cows. And people with specific skill sets aren't spherical cows.
  - randomdata 10y ago
    > So if right at this moment the world had only enough doctors to care for half the population, regardless of the price, that wouldn't be a shortage of doctors? Doctors may not be the best example. Where I live, at least, the government really does set a price ceiling for doctors, so a shortage is very much possible. Ignoring that, simply not being able to afford a doctor does not mean there is a shortage of them. That means you cannot afford a doctor. Which is a problem in its own right, but not a problem defined by shortage. Not all problems are shortage problems. > If there are only 10,000 people in a field who are under the age of 70 but have at least 20 years of experience, and the industry needs 50,000 of them to function efficiently - that's not a shortage of experienced skilled workers? No, because as price rises, that 50,000 number will decline. There is only so much money willing to be spent. At some price point, businesses will only be able to afford 10,000 people and the demand will be met exactly by the number of people available to work. Or if the job really requires 50,000 people absolutely, they will decide it no longer needs to be done, leaving the the need at 0 people. > Not every commodity experiences a drop in demand as the price rises. How can that be? Not everyone has the same resources available. Like the businesses above, as price rises, some can no longer afford the good or service. That takes them out of the market. Demand does not simply mean what you want to have. Price is always a component. Like that great earlier comment here about Porches, there isn't shortage of Porches because every poor man who admires the car can't afford one. They are simply not in the market for one in the first place, no matter how much they dream about owning one. > Markets aren't magic. Nobody said they were. The scenarios you point out, where price is able to rise, are something, but not shortages.
    - cauterized 10y ago
      That seems to me like a strange, limited, and impractical definition of a shortage. When the supply of something is insufficient to support effective operation (or to support existing life), that's a shortage. Yes, perhaps prices will rise until no more people can afford it than the supply will support. But perhaps that supply isn't enough to keep the industry from collapsing or to keep the population from collapsing, etc. Regardless of whether the price rises to keep the resource out of the hands of everyone who needs it, the insufficient supply for effective function is still damaging - to a population, an industry, an economy. I would most definitely consider that a shortage.
      - randomdata 10y ago
        > That seems to me like a strange, limited, and impractical definition of a shortage. Well, that's its definition, for better or worse. I didn't write the economics dictionary. I only can repeat it. Is there reason to overload this particular word? While the implications of the scenarios you describe are clear, I'm not sure why it has to be "shortage" that represents it. Why not another word or term that encompasses those cases – unaffordable, perhaps – while leaving shortage to mean what it means?
        cauterized 10y ago
        Why not let "shortage" have a vernacular meaning too? One that it already had before the field of economics adopted it for a more specific purpose?
- mooreds 10y ago
  > If price can rise then a shortage is impossible. In the long term I agree. In the short term, the markets are not perfect and goods and labor are not perfectly fungible. It takes time to retool, even if prices are sending signals.
  - randomdata 10y ago
    While your points are certainly true, I'm not sure that state is characterized by shortage. Shortage occurs when price does not rise. When price does rise, demand wanes. Hypothetically, if there was only one programmer in the world, the price would rise to the point where that programmer is no longer willing to change jobs with the offers being given. At that point, the additional demand goes away. Those businesses are no longer in the market for a programmer. It really doesn't matter if it takes time to retool, as far as shortages go, because the demand has met the supply. A shortage does not mean not being able to get what you want at a price you are willing to pay. On the other hand, where I come from the government sets the price that doctors must charge. We really can run into the issue of doctor shortages. I can't go to my doctor and say, "I know you are completely booked and can't see me, but here is $100,000 above your regular rate to cancel those appointments and take care of me instead". The doctor is required, by law, to reject my offer. If price was able to rise, the doctor would be able to take my offer, allowing me to get what I want as indicated by price, and those who aren't willing to pay $100K more to have the doctor look at their common cold exit the market. Equilibrium is reached. That scenario certainly comes with its own set of issues – and why our government defines the price to not allow market-based preferential treatment – the issue would not be that of a shortage.
    - mooreds 10y ago
      I'm not arguing that government action can prevent prices from rising and that such activity can cause shortages. I agree with your arguments about the doctors. What I'm arguing is that, because many goods (in particular labor) aren't fungible and liquid, that an increasing price doesn't (in the short term) solve shortages with these types of goods.

If salaries go up, shortages go down (both on silly and demand side)

by jwatte 10y ago

If salaries go up, shortages go down (both on silly and demand side)

Shortage is defined as a situation where price cannot rise, such as the government setting a price ceiling. If price can rise then a shortage is impossible.

cauterized 10y ago
So if right at this moment the world had only enough doctors to care for half the population, regardless of the price, that wouldn't be a shortage of doctors? If there were a severe drought and only enough food to keep half of us alive, but prices weren't capped... That wouldn't be a food shortage? If there are only 10,000 people in a field who are under the age of 70 but have at least 20 years of experience, and the industry needs 50,000 of them to function efficiently - that's not a shortage of experienced skilled workers? Not everything is a commodity. Not every commodity experiences a drop in demand as the price rises. Some things are needs that people continue to have demand for even if they can't afford them due to shortages. Even commodities have limits to their production. And some things can't be produced quickly enough to address a short or medium term shortage. Markets aren't magic. They have inefficiencies and externalities and logic limits. Econ 101 deals only in simplifications and spherical cows. And people with specific skill sets aren't spherical cows.
- randomdata 10y ago
  > So if right at this moment the world had only enough doctors to care for half the population, regardless of the price, that wouldn't be a shortage of doctors? Doctors may not be the best example. Where I live, at least, the government really does set a price ceiling for doctors, so a shortage is very much possible. Ignoring that, simply not being able to afford a doctor does not mean there is a shortage of them. That means you cannot afford a doctor. Which is a problem in its own right, but not a problem defined by shortage. Not all problems are shortage problems. > If there are only 10,000 people in a field who are under the age of 70 but have at least 20 years of experience, and the industry needs 50,000 of them to function efficiently - that's not a shortage of experienced skilled workers? No, because as price rises, that 50,000 number will decline. There is only so much money willing to be spent. At some price point, businesses will only be able to afford 10,000 people and the demand will be met exactly by the number of people available to work. Or if the job really requires 50,000 people absolutely, they will decide it no longer needs to be done, leaving the the need at 0 people. > Not every commodity experiences a drop in demand as the price rises. How can that be? Not everyone has the same resources available. Like the businesses above, as price rises, some can no longer afford the good or service. That takes them out of the market. Demand does not simply mean what you want to have. Price is always a component. Like that great earlier comment here about Porches, there isn't shortage of Porches because every poor man who admires the car can't afford one. They are simply not in the market for one in the first place, no matter how much they dream about owning one. > Markets aren't magic. Nobody said they were. The scenarios you point out, where price is able to rise, are something, but not shortages.
  - cauterized 10y ago
    That seems to me like a strange, limited, and impractical definition of a shortage. When the supply of something is insufficient to support effective operation (or to support existing life), that's a shortage. Yes, perhaps prices will rise until no more people can afford it than the supply will support. But perhaps that supply isn't enough to keep the industry from collapsing or to keep the population from collapsing, etc. Regardless of whether the price rises to keep the resource out of the hands of everyone who needs it, the insufficient supply for effective function is still damaging - to a population, an industry, an economy. I would most definitely consider that a shortage.
    - randomdata 10y ago
      > That seems to me like a strange, limited, and impractical definition of a shortage. Well, that's its definition, for better or worse. I didn't write the economics dictionary. I only can repeat it. Is there reason to overload this particular word? While the implications of the scenarios you describe are clear, I'm not sure why it has to be "shortage" that represents it. Why not another word or term that encompasses those cases – unaffordable, perhaps – while leaving shortage to mean what it means?
      - cauterized 10y ago
        Why not let "shortage" have a vernacular meaning too? One that it already had before the field of economics adopted it for a more specific purpose?
mooreds 10y ago
> If price can rise then a shortage is impossible. In the long term I agree. In the short term, the markets are not perfect and goods and labor are not perfectly fungible. It takes time to retool, even if prices are sending signals.
- randomdata 10y ago
  While your points are certainly true, I'm not sure that state is characterized by shortage. Shortage occurs when price does not rise. When price does rise, demand wanes. Hypothetically, if there was only one programmer in the world, the price would rise to the point where that programmer is no longer willing to change jobs with the offers being given. At that point, the additional demand goes away. Those businesses are no longer in the market for a programmer. It really doesn't matter if it takes time to retool, as far as shortages go, because the demand has met the supply. A shortage does not mean not being able to get what you want at a price you are willing to pay. On the other hand, where I come from the government sets the price that doctors must charge. We really can run into the issue of doctor shortages. I can't go to my doctor and say, "I know you are completely booked and can't see me, but here is $100,000 above your regular rate to cancel those appointments and take care of me instead". The doctor is required, by law, to reject my offer. If price was able to rise, the doctor would be able to take my offer, allowing me to get what I want as indicated by price, and those who aren't willing to pay $100K more to have the doctor look at their common cold exit the market. Equilibrium is reached. That scenario certainly comes with its own set of issues – and why our government defines the price to not allow market-based preferential treatment – the issue would not be that of a shortage.
  - mooreds 10y ago
    I'm not arguing that government action can prevent prices from rising and that such activity can cause shortages. I agree with your arguments about the doctors. What I'm arguing is that, because many goods (in particular labor) aren't fungible and liquid, that an increasing price doesn't (in the short term) solve shortages with these types of goods.