3 ms·

What do you mean by "aggregate shortage"? Since you reference economics: There's a supply curve, there's a demand curve, and QS/QD/price are set by where they

by xaa 9y ago

What do you mean by "aggregate shortage"? Since you reference economics: There's a supply curve, there's a demand curve, and QS/QD/price are set by where they intersect. The fallacy in this article (and in your first paragraph) is pretending that the supply curve for programmers is vertical; i.e., that the same amount of people would be programmers (i.e., QS), no matter the salary. Patently false. For that matter, demand being inelastic is false as well which is what GP is pointing out with his website job. AFAIK, shortages only exist if either price or quantity produced is held static by some external force. There is no shortage here. The demand curve for programmers is just such that employers are unwilling to pay for the quantity they SAY they'd like. The very nature of demand curve is such that the people who are willing to pay most will get the item "first", no shortage required.

wai1234 9y ago
Please re-read my comment. The quantity produced is held static by an external force: the ridiculous filter used by the SV bigs that exclude 99% of developers sight unseen. They create a shortage for themselves and then complain there is a shortage because the world isn't producing enough 'geniuses' to meet their needs (without also requiring any investment by them). It's a self-inflicted problem for which they accept no blame. This 'farm team' notion is just the light dimly dawning on some of them that they might be able to solve their own bind by actually engaging (and investing) in the solution and not just whining. By cutting themselves off from the vast majority of the potential talent supply, they have, in essence, stranded themselves on a desert island of their own manufacture. Side rant: Directed at many posts already in this tree. Economics 101 does not describe any real market and the labor market is about as unreal as it gets. Developers are not interchangeable goods, and the flexibility in supply is almost non-existent. There will not be 100 new universities founded this fall to 'sell' into this 'market'. The market for DaVinci's would never clear if he were alive in a way that would make all buyers happy. Not. Going. To. Happen.
- xaa 9y ago
  I take it your point is that programmers are not fungible. So higher-quality programmers are worth more than lower-quality programmers. Sure. And when they say there is a "shortage", they mean there is a limited number of programmers that are "good enough" by whatever metric (they would not add the important qualification at the current salary). Suppose then there are really two markets here: one for "good" programmers and one for "mediocre" ones. My rejoinder still holds if it is really the case that they can only do with good programmers and not mediocre ones (doubtful). And since it is presumably possible to transition from non-programmer to mediocre to good with effort, the fact that "not enough" people are doing so still implies the price is not high enough. I am mainly taking umbrage at your use of "shortage". The preferences of the market participants themselves are certainly not an external force. I think we should not concede to them that there is a shortage when there is not because then they go on to use that as justification for all kinds of counterproductive legislative proposals. BTW, more than half of Keynes' GTEIM is about employment. The original question impelling modern economics is "how do we get to full employment? and what does that mean anyway"? Of course the model is an approximation. But don't use "economics" to justify an argument and then turn around and say economics doesn't model the real world.
  - wai1234 9y ago
    Anyone that looks at SV salaries knows that they are incredibly high (and the much freer markets around them, like housing, know it :) The fact is that they could offer $1,000,000 starting salaries tomorrow and the pool of 'qualified' applicants would not change because salary is not the determining factor here. If everyone east of the Mississippi suddenly moved to SV drawn by those mouth watering numbers, what would happen? "Well, you didn't attend Stanford, so...". BTW, does anyone actually graduate from Stanford anymore?
    - xaa 9y ago
      They're "high" relative to some (most) jobs and not others. It sounds like you may be implying something like "programmers make enough already". Perhaps true on a moral plane, has nothing to do with economics though. Why is gold so expensive? Because it's demanded. There is no inherent correct price to anything absent a market. > The fact is that they could offer $1,000,000 starting salaries tomorrow and the pool of 'qualified' applicants would not change because salary is not the determining factor here. OK. I think this is the core of the matter. Let's assume the number of "qualified" programmers is fixed over the short term. The market is made of actors/companies. If a company wants more of the qualified programmers, and they pay $1M starting salary, that company will get them. And then the market price will rise. The fact that it hasn't risen to $1M implies the companies don't really want them that badly. And in the long term, a price raise would encourage more programmers to become qualified and the problem would be rectified. But if what you are saying is true, and they really only want Stanford grads or equivalents, why would they care about H1Bs? It's not. They want to keep the price down. Even if we assumed the number of qualified programmers were constant, there would be no more of a "shortage" than there is a shortage of gold. We don't say there's a gold shortage even though its quantity is "fixed" and presumably everyone would like more of it if it were cheaper. I think people make a stronger argument for a shortage in the labor market WRT doctors. In that case there is a cartel (the AMA) keeping the quantity artificially low. There is no such phenomenon in programming. There's nothing stopping a university hiring all top-notch CS profs and becoming the next CMU/Stanford, and charging students a bundle...if the price were right.
cityhall 9y ago
Employees aren't a manufactured product. The claim is the supply is inelastic in the short term. You can outbid your competitors for talented developers but a rise in average salaries won't make weak developers better or get lawyers to take a code bootcamp. The only short term ways to increase supply are immigration and outsourcing.
- randomdata 9y ago
  > The only short term ways to increase supply are immigration and outsourcing. Which is why the parent says that rising price eliminates any superfluous demand. Demand is an economic principle that describes a consumer's desire and willingness to pay a price for a specific good or service. Holding all other factors constant, an increase in the price of a good or service will decrease demand, and vice versa. If we take it to the logical extreme and assume there is only one good developer in a local area, the business most willing to pay the price will get that person. Those not willing to pay the price are not demand, and thus don't necessitate supply. A shortage, by definition, is a scenario where price is unable to rise. For instance, where the government enforces a price ceiling. In my local jurisdiction that happens for medical care providers. A shortage of doctors is very much possible. It is less clear what could cause a shortage of developers. Having said that, there is another way to increase the supply: Attract others (back) into industry. There are plenty of people who find themselves doing other, perhaps more lucrative, things that would be suitable for the kinds of jobs these companies seek. For the right amount you can attract them into these jobs, but without better offers there is no incentive for them to stop doing what they are already doing.
- xaa 9y ago
  > The claim is the supply is inelastic in the short term. That is correct, and it may be true. The reason I'm very skeptical is that we have been hearing this same spiel for 5 years at least. If companies are unwilling to raise salaries short-term, it will not incentivize long-term migration into this sector. If you substitute "programmers" with "widgets", it is obvious what is going on here. Companies want "trade" (immigration) barriers lowered so they can get their widgets more easily and at a lower price. They don't care whether their widgets come from endogeneous US production or from abroad, so long as it is at a minimal price. Best of all for them if there are tons of widgets available both domestically and internationally, so that the price will be minimal.

by xaa 9y ago

wai1234 9y ago

Please re-read my comment. The quantity produced is held static by an external force: the ridiculous filter used by the SV bigs that exclude 99% of developers sight unseen. They create a shortage for themselves and then complain there is a shortage because the world isn't producing enough 'geniuses' to meet their needs (without also requiring any investment by them). It's a self-inflicted problem for which they accept no blame. This 'farm team' notion is just the light dimly dawning on some of them that they might be able to solve their own bind by actually engaging (and investing) in the solution and not just whining. By cutting themselves off from the vast majority of the potential talent supply, they have, in essence, stranded themselves on a desert island of their own manufacture. Side rant: Directed at many posts already in this tree. Economics 101 does not describe any real market and the labor market is about as unreal as it gets. Developers are not interchangeable goods, and the flexibility in supply is almost non-existent. There will not be 100 new universities founded this fall to 'sell' into this 'market'. The market for DaVinci's would never clear if he were alive in a way that would make all buyers happy. Not. Going. To. Happen.

xaa 9y ago
I take it your point is that programmers are not fungible. So higher-quality programmers are worth more than lower-quality programmers. Sure. And when they say there is a "shortage", they mean there is a limited number of programmers that are "good enough" by whatever metric (they would not add the important qualification at the current salary). Suppose then there are really two markets here: one for "good" programmers and one for "mediocre" ones. My rejoinder still holds if it is really the case that they can only do with good programmers and not mediocre ones (doubtful). And since it is presumably possible to transition from non-programmer to mediocre to good with effort, the fact that "not enough" people are doing so still implies the price is not high enough. I am mainly taking umbrage at your use of "shortage". The preferences of the market participants themselves are certainly not an external force. I think we should not concede to them that there is a shortage when there is not because then they go on to use that as justification for all kinds of counterproductive legislative proposals. BTW, more than half of Keynes' GTEIM is about employment. The original question impelling modern economics is "how do we get to full employment? and what does that mean anyway"? Of course the model is an approximation. But don't use "economics" to justify an argument and then turn around and say economics doesn't model the real world.
- wai1234 9y ago
  Anyone that looks at SV salaries knows that they are incredibly high (and the much freer markets around them, like housing, know it :) The fact is that they could offer $1,000,000 starting salaries tomorrow and the pool of 'qualified' applicants would not change because salary is not the determining factor here. If everyone east of the Mississippi suddenly moved to SV drawn by those mouth watering numbers, what would happen? "Well, you didn't attend Stanford, so...". BTW, does anyone actually graduate from Stanford anymore?
  - xaa 9y ago
    They're "high" relative to some (most) jobs and not others. It sounds like you may be implying something like "programmers make enough already". Perhaps true on a moral plane, has nothing to do with economics though. Why is gold so expensive? Because it's demanded. There is no inherent correct price to anything absent a market. > The fact is that they could offer $1,000,000 starting salaries tomorrow and the pool of 'qualified' applicants would not change because salary is not the determining factor here. OK. I think this is the core of the matter. Let's assume the number of "qualified" programmers is fixed over the short term. The market is made of actors/companies. If a company wants more of the qualified programmers, and they pay $1M starting salary, that company will get them. And then the market price will rise. The fact that it hasn't risen to $1M implies the companies don't really want them that badly. And in the long term, a price raise would encourage more programmers to become qualified and the problem would be rectified. But if what you are saying is true, and they really only want Stanford grads or equivalents, why would they care about H1Bs? It's not. They want to keep the price down. Even if we assumed the number of qualified programmers were constant, there would be no more of a "shortage" than there is a shortage of gold. We don't say there's a gold shortage even though its quantity is "fixed" and presumably everyone would like more of it if it were cheaper. I think people make a stronger argument for a shortage in the labor market WRT doctors. In that case there is a cartel (the AMA) keeping the quantity artificially low. There is no such phenomenon in programming. There's nothing stopping a university hiring all top-notch CS profs and becoming the next CMU/Stanford, and charging students a bundle...if the price were right.

cityhall 9y ago

Employees aren't a manufactured product. The claim is the supply is inelastic in the short term. You can outbid your competitors for talented developers but a rise in average salaries won't make weak developers better or get lawyers to take a code bootcamp. The only short term ways to increase supply are immigration and outsourcing.

randomdata 9y ago
> The only short term ways to increase supply are immigration and outsourcing. Which is why the parent says that rising price eliminates any superfluous demand. Demand is an economic principle that describes a consumer's desire and willingness to pay a price for a specific good or service. Holding all other factors constant, an increase in the price of a good or service will decrease demand, and vice versa. If we take it to the logical extreme and assume there is only one good developer in a local area, the business most willing to pay the price will get that person. Those not willing to pay the price are not demand, and thus don't necessitate supply. A shortage, by definition, is a scenario where price is unable to rise. For instance, where the government enforces a price ceiling. In my local jurisdiction that happens for medical care providers. A shortage of doctors is very much possible. It is less clear what could cause a shortage of developers. Having said that, there is another way to increase the supply: Attract others (back) into industry. There are plenty of people who find themselves doing other, perhaps more lucrative, things that would be suitable for the kinds of jobs these companies seek. For the right amount you can attract them into these jobs, but without better offers there is no incentive for them to stop doing what they are already doing.
xaa 9y ago
> The claim is the supply is inelastic in the short term. That is correct, and it may be true. The reason I'm very skeptical is that we have been hearing this same spiel for 5 years at least. If companies are unwilling to raise salaries short-term, it will not incentivize long-term migration into this sector. If you substitute "programmers" with "widgets", it is obvious what is going on here. Companies want "trade" (immigration) barriers lowered so they can get their widgets more easily and at a lower price. They don't care whether their widgets come from endogeneous US production or from abroad, so long as it is at a minimal price. Best of all for them if there are tons of widgets available both domestically and internationally, so that the price will be minimal.