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I have very limited understanding of how economy works, and I have a question. Author says that train tickets price is not enough to make train profitable. Ok,

by ordu 9y ago

I have very limited understanding of how economy works, and I have a question. Author says that train tickets price is not enough to make train profitable. Ok, I agree, its hard to disagree with such a claim. But then he reasons about wasted investment, and this seems wrong for me. Such a conclusion would be true in capitalist's word: investors want their money back. But it is not true in communism, because central planning and everything is in government possession. The only reliable way to measure effect of investment is to deduce how investment affect on global economy. Train passengers are governmental employees, to raise costs on tickets is to raise costs for other departments. After I invested time to train my fingers to play on piano, I wouldn't pay them for playing. I'd like to get payments from others, but my fingers would get nothing. Maybe I oversimplified situation? Maybe there are private companies who profited from new train line, and it would be justified to move some costs on them. Maybe there are private investors, who invested in new train line along with government. Maybe I'm wrong. Am I?

Nomentatus 9y ago
Think about it as a measure of value - a very high value of inputs went in; the tickets have a low price because what was built has no great value to the riders, so you can't charge them more or they won't travel. Now if the government is subsidizing something of great value fine - child care, education, research, preventative medicine, all that's fine 'cause that produces great value over time. On the other hand, if you keep using up a big pile of inputs to produce a smaller pile of outputs or nearly-useless outputs, real wealth shrinks even though the economy is churning away producing apparently good numbers re economic activity. Hiring people to tear down every structure in China would also produce good economic numbers while reducing wealth. Roads to nowhere do pretty much the same thing, just more slowly.

by ordu 9y ago

Nomentatus 9y ago

Think about it as a measure of value - a very high value of inputs went in; the tickets have a low price because what was built has no great value to the riders, so you can't charge them more or they won't travel. Now if the government is subsidizing something of great value fine - child care, education, research, preventative medicine, all that's fine 'cause that produces great value over time. On the other hand, if you keep using up a big pile of inputs to produce a smaller pile of outputs or nearly-useless outputs, real wealth shrinks even though the economy is churning away producing apparently good numbers re economic activity. Hiring people to tear down every structure in China would also produce good economic numbers while reducing wealth. Roads to nowhere do pretty much the same thing, just more slowly.