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What kind of messed up thinking is this? More consumer spending has an opportunity cost? What’s a capitalist supposed to do if nobody can afford their stuff?
by maxxxxx 7y ago
What kind of messed up thinking is this? More consumer spending has an opportunity cost? What’s a capitalist supposed to do if nobody can afford their stuff?
- CryptoPunk 7y agoThis is basic economics. Consumer spending is not the only kind of spending, and directing all economic output to meeting consumer demand would be disastrous for the economy. >>What’s a capitalist supposed to do if nobody can afford their stuff? Investing in new capital equipment is how you allow more people to afford your stuff. More consumers will afford your stuff in the future when you've built your factory and you can churn out more stuff for more people. Capital investment is why 2.5 billion people can afford smart phones today instead of 50 million people, like 12 years ago.
- maxxxxx 7y agoThat’s totally backwards. If nobody had had any money nobody wouldn’t have bought any phones. You Can’t just invest into things nobody can buy.
- CryptoPunk 7y agoActually you have it backwards. Everything produced is sold at its clearing price. If everyone has half as much money, then the price gets cut in half. Likewise, if the number of goods/services produced is doubled, the price of everything gets cut in half. A little bit of a simplification, but that's generally how it works. Money is not wealth. It's how we measure it. Real wealth is goods/services. And the only way to increase the volume of goods/services produced is to invest in the capital equipment that increases our productivity in producing them. More goods/services means more purchasing power, which means higher wages.
- imtringued 7y agoWhat you just said completely defies the laws of supply and demand. Companies don't just overproduce and accept a loss on their goods and services [0]. If everyone has half as much money then the supply gets cut in half. Likewise the supply will only be doubled if everyone has twice as much money. What you might be talking about is how economies of scale result in increased productivity but your rule of thumb is a pretty poor model. Every industry has it's own learning rate. PV for example reduces costs by 28.5% on every doubling of production capacity. [0] Ok, ok, this is actually the business model of Uber and pretty much all modern unicorn startups but they do it to drive out competitors, not because it makes economical sense.
- CryptoPunk 7y agoWho said anything about accepting a loss on their goods/services? Capital investments allow them to produce at lower costs, which lets them offer goods/services at lower prices and still profit. >>If everyone has half as much money then the supply gets cut in half. No, money is not wealth. If everyone had half as much money, each unit of that money would double in value. >>Likewise the supply will only be doubled if everyone has twice as much money. If we expanded by the money supply 20X, we wouldn't get 20X more production. Money is not valuable in and of itself. It's only a claim on the real goods produced, and each unit will adjust in value based on how many currency units there are relative to real goods produced. The limiting factor in the value of money is the number of goods/services that the economy is capable of producing. And that capability can only be improved with capital investments.
- maxxxxx 7y agoSeems like you are a true supply side economist.
- gubbrora 7y agoCapitalists building ever fancier yachts for each other. I mean hypothetically.