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If their contribution is greater, then why isn't somebody willing to pay them more? If there was such a trove of hidden value, you would think that some greedy

If their contribution is greater, then why isn't somebody willing to pay them more? If there was such a trove of hidden value, you would think that some greedy capitalist would snap it up and exploit it. You should ask a postdoc making ~30k a year to do cutting edge science the same question. They could triple that tending bar.

CWuestefeld 16y ago
There's no mystery here, I already gave the answer in my previous post. Quoting myself: there is no such thing as "outside the marketplace". There is more to the market then just financial transactions. Everything we do: how we elect to use our time, the care we invest in a relationship, everything, is a decision about how we use our limited resources (time and attention in my two examples, but the potential list covers literally everything). And we necessarily make those decisions by weighing what we expect their costs to be versus what we expect to derive from them. And that is what the study of economics is about -- money is only the smallest part of it. Those postdocs derive greater satisfaction from doing their science than they would by tending bar. In their own internal calculus, the rewards of their career are greater than the simple money equation. Progressives like to think they're being deep and insightful when they observe that there's more to the world than just money. But it's not news to anyone, least of all to economists. This is embodied in the concept of utility. See http://en.wikipedia.org/wiki/Utility http://en.wikipedia.org/wiki/Utility : Utility is usually applied by economists in such constructs as the indifference curve, which plot the combination of commodities that an individual or a society would accept to maintain a given level of satisfaction. ... [Quoting Paul Samuelson] "Utility is taken to be correlative to Desire or Want. It has been already argued that desires cannot be measured directly, but only indirectly, by the outward phenomena to which they give rise: and that in those cases with which economics is chiefly concerned the measure is found in the price which a person is willing to pay for the fulfilment or satisfaction of his desire." Thus, in the case of your hypothetical postdoc, the opportunity to do his (or her) science is worth $60K. (I oversimplify due to things like marginal utility, but that's the gist)
- timtadh 16y ago
  Good job regurgitating micro econ 101. /sarcasm off/ In all seriousness trying to discuss utility of a general group of people (or even a specific person) is doomed to failure. Utility is a nice round theoretical construct for trying to talk about why consumers make the decisions they do. However, there is a lot of evidence to show consumers do not make entirely rational choices. Even if they did, trying to determine a utility function for a consumer would still fail. For instance, can you even with certainty determine your own utility function. I know I can't. Now lets pretend a consumer does in fact only make rational choices, and their utility function for every conceivable situation is known. I have distinct, although unproven, suspicion that determining what choices the person would make through their day would be NP-complete as their present choices would effect their future choices. Thus all possible outcomes would have to be considered far into the future if one truly wanted to maximize utility. Therefore, assuming what I have just said is fairly logical, it is impossible for a rational consumer to exist even if their utility function is known, since it would be impossible to for them to compute any given choice in a finite amount of time. In conclusion any discussion that touches on "utility" or assuming a group of people is making "rational" choices is doomed to failure. The truth is we don't know why any given person make any given choice. Also you seem to ignore the important of positive externalities in your arguments. I believe this is where you disagree with other posters.
  - CWuestefeld 16y ago
    there is a lot of evidence to show consumers do not make entirely rational choices. Even if they did, trying to determine a utility function for a consumer would still fail. For instance, can you even with certainty determine your own utility function. Of course; I never claimed otherwise. It's certainly true that any person's utility function is at least partly unknown to them, and in any case changes over time. As a result it has little value as a predictive tool. But that doesn't mean that it doesn't exist. Ludwig von Mises attacks this head-on in Human Action (http://en.wikipedia.org/wiki/Human_Action http://en.wikipedia.org/wiki/Human_Action ). It's undeniable that at any juncture, the action that a person takes is based on some judgment, conscious or not (and quite possibly mistaken), that the chosen action delivers a greater utility than its alternatives. Thus, the hypothetical postdoc-cum-bartender is deciding -- for reasons that we don't know, but real all the same -- that he would prefer to do his research over bartending, even to the extent of giving up $60K to do so. Who are we to second guess his decision? Precisely because, and not in spite of, the fact that his reasons are inscrutable, we can only assume that he's making the best call he can. By what right can we override it? And more to the point, if his/her university is providing such a valuable career for him, who are we to say that they must sweeten the pot and throw in even more money?

CWuestefeld 16y ago

There's no mystery here, I already gave the answer in my previous post. Quoting myself: there is no such thing as "outside the marketplace". There is more to the market then just financial transactions. Everything we do: how we elect to use our time, the care we invest in a relationship, everything, is a decision about how we use our limited resources (time and attention in my two examples, but the potential list covers literally everything). And we necessarily make those decisions by weighing what we expect their costs to be versus what we expect to derive from them. And that is what the study of economics is about -- money is only the smallest part of it. Those postdocs derive greater satisfaction from doing their science than they would by tending bar. In their own internal calculus, the rewards of their career are greater than the simple money equation. Progressives like to think they're being deep and insightful when they observe that there's more to the world than just money. But it's not news to anyone, least of all to economists. This is embodied in the concept of utility. See http://en.wikipedia.org/wiki/Utility http://en.wikipedia.org/wiki/Utility : Utility is usually applied by economists in such constructs as the indifference curve, which plot the combination of commodities that an individual or a society would accept to maintain a given level of satisfaction. ... [Quoting Paul Samuelson] "Utility is taken to be correlative to Desire or Want. It has been already argued that desires cannot be measured directly, but only indirectly, by the outward phenomena to which they give rise: and that in those cases with which economics is chiefly concerned the measure is found in the price which a person is willing to pay for the fulfilment or satisfaction of his desire." Thus, in the case of your hypothetical postdoc, the opportunity to do his (or her) science is worth $60K. (I oversimplify due to things like marginal utility, but that's the gist)

timtadh 16y ago
Good job regurgitating micro econ 101. /sarcasm off/ In all seriousness trying to discuss utility of a general group of people (or even a specific person) is doomed to failure. Utility is a nice round theoretical construct for trying to talk about why consumers make the decisions they do. However, there is a lot of evidence to show consumers do not make entirely rational choices. Even if they did, trying to determine a utility function for a consumer would still fail. For instance, can you even with certainty determine your own utility function. I know I can't. Now lets pretend a consumer does in fact only make rational choices, and their utility function for every conceivable situation is known. I have distinct, although unproven, suspicion that determining what choices the person would make through their day would be NP-complete as their present choices would effect their future choices. Thus all possible outcomes would have to be considered far into the future if one truly wanted to maximize utility. Therefore, assuming what I have just said is fairly logical, it is impossible for a rational consumer to exist even if their utility function is known, since it would be impossible to for them to compute any given choice in a finite amount of time. In conclusion any discussion that touches on "utility" or assuming a group of people is making "rational" choices is doomed to failure. The truth is we don't know why any given person make any given choice. Also you seem to ignore the important of positive externalities in your arguments. I believe this is where you disagree with other posters.
- CWuestefeld 16y ago
  there is a lot of evidence to show consumers do not make entirely rational choices. Even if they did, trying to determine a utility function for a consumer would still fail. For instance, can you even with certainty determine your own utility function. Of course; I never claimed otherwise. It's certainly true that any person's utility function is at least partly unknown to them, and in any case changes over time. As a result it has little value as a predictive tool. But that doesn't mean that it doesn't exist. Ludwig von Mises attacks this head-on in Human Action (http://en.wikipedia.org/wiki/Human_Action http://en.wikipedia.org/wiki/Human_Action ). It's undeniable that at any juncture, the action that a person takes is based on some judgment, conscious or not (and quite possibly mistaken), that the chosen action delivers a greater utility than its alternatives. Thus, the hypothetical postdoc-cum-bartender is deciding -- for reasons that we don't know, but real all the same -- that he would prefer to do his research over bartending, even to the extent of giving up $60K to do so. Who are we to second guess his decision? Precisely because, and not in spite of, the fact that his reasons are inscrutable, we can only assume that he's making the best call he can. By what right can we override it? And more to the point, if his/her university is providing such a valuable career for him, who are we to say that they must sweeten the pot and throw in even more money?