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It's not far fetched... but it gets into somewhat abstract (or debated, at least) economics. For an analogy, neoclassical-adjacent economics' take on internati
by netcan 6y ago
It's not far fetched... but it gets into somewhat abstract (or debated, at least) economics.
For an analogy, neoclassical-adjacent economics' take on international trade practices like dumping or export subsidies is pretty much what you said. EG, if China subsidizes toothbrush exports, the rest of the world gets subsidized toothbrushes at chinese taxpayers' expense. A similar point to the one you are making.
This argument is typically to counter the claim that export subsidies unfairly kill local production, and/or forces a subsidy war.
Riffing on David Graeber (the polar extreme, and not exactly an economist) somewhat... I'd interpret Uber's investor-subsidized losses differently. Investors haven't really lost much money so far, the stock price is fairly flat. They buy shares, and then they have those shares.
The shares themselves are a type of money which companies print. It is new money. Investor buys one share for $1. His net worth has not changed. Uber's bank balance has changed, and they can now fund another $1 of losses. As long as the share price holds, losses are offset by the new money (share) creation. It's that new money subsidizing rides.
On a less abstract note... I think it's important to remember that subsidies don't just transfer. They also create waste... which no one benefits from. For every $1 lost, consumers only gain a few pennies of value (utility in old timey economist speak) goes to consumers and/or drivers.
The whole reason that uber needs to subsidize rides is that consumers aren't consuming enough of them at "full price." That means they don't value rides at full price.
- TomMarius 6y agoThey don't create new money, they hand over a part of the company. The shares don't grow by themselves. It has nothing to do with printing money like central banks do.
- zelos 6y agoIf the 'true' value of the company is (say) $0.5 per share issued, haven't they effectively printed money?
- TomMarius 6y agoNo, they just sold a chunk of the company and made a $0.5/share profit on it, probably by promising future profits; there is not even a guarantee that the buyer will be able to sell it for the same price they bought it. They might commit fraud and sell valueless shares and effectively "print money" (especially if people take loans to buy them), but I have a feeling that it doesn't work for long.
- netcan 6y agoWhat I meant was that printing a share at any price is printing money. Uber prints a share. An investor exchanges currency for it. The share goes into his account. He can treat that share as money for most purposes. For many uses of money (eg securing a loan, providing working capital..) it's as good as having foreign currency, sovereign or private bonds. For other uses (eg paying rent), it's fungible with currency/money/coinage/etc.. Shares can be overpriced, but so can currency. It's besides the point, imo.
- netcan 6y agoI did say it gets abstract, and into some stuff that's highly debatable. Interestingly, economists (also sociologists, historians, etc.) disagree agree on what money is. For the purposes of this topic though... I think it's sufficient that marketable securities sit under "current assets" on a balance sheet, alongside "cash & equivalents." Say an investor buys a new share in uber for $35. Her balance sheet isn't meaningfully changed. Uber's bank account has grown by $35. I'm not saying that the accounting doesn't work out. The $35 isn't counted as revenue, and doesn't impact earnings. Still... $35 has now appeared in one account without disappearing from another. Again, I'm not saying the accounting is dodgy. Theoretically, when you buy a $2 ice cream then you have a $2 ice cream and 2 fewer dollars. Your "balance sheet" nets the same amount. Same thing when a woodshop buys timber. But for most practical purposes in the modern economy, a company's "total assets" don't matter much. "Current assets" do. Whether or not you want that money (or even currency) creation is interesting, but it works the same as money in practice. Gold, sovereign notes, bank bonds... Same result as shares.
- TomMarius 6y agoI don't follow. A literal part of the company has been handed over in exchange for the money, where is new money being printed?