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Have you considered what the cost of adding these “mandated buffers and redundancies” to the overall economy? Have you attempted to integrate these costs over t

by zaroth 7y ago

Have you considered what the cost of adding these “mandated buffers and redundancies” to the overall economy? Have you attempted to integrate these costs over time when there isn’t a pandemic going on, and made any attempt to determine the net effect? Have you considered that you can’t start a small business with buffers and redundancies? And that small business accounts for 50% of overall employment?

tonyhb 7y ago
Yes. His point is that game theory and economic principles favour the leaner, therefore every company moves to max. efficiency with JIT supply chains and max leverage. The only way around this is regulation if we want to be able to withstand crises _without_ bailouts. That's currently not the situation, which is why bailouts happen.
- chrisjc 7y ago
  Agree with you completely, but how can we regulate domestically and expect companies to survive when the external competition doesn't have to abide by the same kinds of regulations. Edit: the obvious answer is tariffs, etc... but we haven't seen any real action like this until recently
- zaroth 7y ago
  It’s not just game theory, it’s actual real world efficiency. Which translates into jobs and salaries. Reducing baseline capital efficiency drives up all baseline costs. These costs are passed on to consumers and act as a drag on the economy. It would make no sense to do that in response to a black swan event. Let’s say small business has to keep 6 months of expenses in reserve instead of the typical 3 months rule of thumb. For the same amount of cash on hand that means you can afford half the monthly expenses. It’s not just a matter of “hoard more cash”. That cash had to come from prior quarter’s net income. Revenue you don’t invest drags down growth (a.k.a hiring). Revenue you don’t spend is also taxed, adding further drag on the business. Basically what this proposal is suggesting is to drastically reduce the “money multiplier”. This shrinks GDP. If the government forces your company to shut down for weeks, I expect them to pay for it. It doesn’t make any sense for small businesses to self-insure against government mandated shutdowns. That would simply be a recipe for destroying small business.
  - tonyhb 7y ago
    Nope, the efficiency is captured as profit only until other efficient competitors appear and lower the price. The price does _not_ "trickle down" to consumers or employees until it has to. Again, theory: why would a company give away free money?
TeMPOraL 7y ago
> Have you attempted to integrate these costs over time when there isn’t a pandemic going on, and made any attempt to determine the net effect? No, I didn't. I'd actually like to - because it isn't obvious to me that the result would come in favor of minimizing the buffers. Consider that buffers in the supply chain only cost as much as the storage costs. Which may run well into billions over time, sure. But this pandemic has already erased trillions of dollars in the last three weeks, and it isn't showing any sign of stopping any time soon.

by zaroth 7y ago

tonyhb 7y ago

Yes. His point is that game theory and economic principles favour the leaner, therefore every company moves to max. efficiency with JIT supply chains and max leverage. The only way around this is regulation if we want to be able to withstand crises _without_ bailouts. That's currently not the situation, which is why bailouts happen.

chrisjc 7y ago
Agree with you completely, but how can we regulate domestically and expect companies to survive when the external competition doesn't have to abide by the same kinds of regulations. Edit: the obvious answer is tariffs, etc... but we haven't seen any real action like this until recently
zaroth 7y ago
It’s not just game theory, it’s actual real world efficiency. Which translates into jobs and salaries. Reducing baseline capital efficiency drives up all baseline costs. These costs are passed on to consumers and act as a drag on the economy. It would make no sense to do that in response to a black swan event. Let’s say small business has to keep 6 months of expenses in reserve instead of the typical 3 months rule of thumb. For the same amount of cash on hand that means you can afford half the monthly expenses. It’s not just a matter of “hoard more cash”. That cash had to come from prior quarter’s net income. Revenue you don’t invest drags down growth (a.k.a hiring). Revenue you don’t spend is also taxed, adding further drag on the business. Basically what this proposal is suggesting is to drastically reduce the “money multiplier”. This shrinks GDP. If the government forces your company to shut down for weeks, I expect them to pay for it. It doesn’t make any sense for small businesses to self-insure against government mandated shutdowns. That would simply be a recipe for destroying small business.
- tonyhb 7y ago
  Nope, the efficiency is captured as profit only until other efficient competitors appear and lower the price. The price does _not_ "trickle down" to consumers or employees until it has to. Again, theory: why would a company give away free money?

TeMPOraL 7y ago

> Have you attempted to integrate these costs over time when there isn’t a pandemic going on, and made any attempt to determine the net effect? No, I didn't. I'd actually like to - because it isn't obvious to me that the result would come in favor of minimizing the buffers. Consider that buffers in the supply chain only cost as much as the storage costs. Which may run well into billions over time, sure. But this pandemic has already erased trillions of dollars in the last three weeks, and it isn't showing any sign of stopping any time soon.