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This is usually comes from a confusion of upfront costs and ongoing. For example a printing press. To use old tech as an example. The press itself is wildly

This is usually comes from a confusion of upfront costs and ongoing. For example a printing press. To use old tech as an example. The press itself is wildly expensive. So I will have to divide that price across all things I sell using that press. However once the press is paid off my marginal costs are little more than cost of paper, shipping it around, and paying someone to run/fix the press. Computer chips are made of silicon one of the cheaper materials to buy out there. The up front costs of setting up a foundry is akin to buying a printing press. An older tech foundry can still make marginal money as the big cost is already been paid for. Everything after is marginal.

rlanday 6y ago
Books and computer chips aren’t really assets (unless they’re collectibles, I guess), they’re commercial products, so I’m not sure my argument really works.
- sumtechguy 6y ago
  A large company would most certainly consider a computer an asset would they not? Until it is paid off and/or can no longer provide value to them? Your argument is with medallions is mostly correct. They had an artificial constraint on an environment. With the artificial constraint they act like assets and not permits. However once a good that was equivalent showed up the value of the asset value did fall. A market will tend towards MR=MC (marginal rev=marginal cost). However in the medallion case the supply was artificially constrained. So a floor was created. This moves the price people are willing to pay up the demand curve instead of lower near the usually lower mr=mc spot. In this case as the population grew but the number of allowed taxis did not the price went up because demand went up but supply did not. Once another good showed up that demand curve changed as less people were willing to pay that amount as well as more supply. This is the madness of economics. The demand curve always changes. Chips are mostly worthless because there are so many of them and better fab equipment exists and the capex of the machines to make them was paid off decades ago. So their depreciation is very quick (much like cars). Rarity does play into price as well. As some people do like the idea of owning a rare thing. You also have part of it with your comment here. Assets rarely 'hold' value for a long term. If you do not move the value around your total monetary value will depreciate. The medallion case was an artificial constraint so the value rose because demand remained high enough. Once a new supply came in the real price showed up. Housing can act like this too in artificially constrained environments. Rent control, poor tax structures, poor zoning, etc can all cause this. If you get a situation where the owners work with the gov (medallions and the taxi commission and the cities) they will write laws to artificially constrain growth to limit their asset depreciation. That is usually called regulatory capture. For these sorts of arguments I like to say 'if everyone suddenly had 1 billion dollars what would you pay for a loaf of bread?'. Most people would say '1-2 dollars'. But what about next week when the company realizes people will pay 1000 dollars for one? Would you still buy it? Would your friends? It usually shows that the demand curve is not static and value is a moving market in and of itself.

rlanday 6y ago

Books and computer chips aren’t really assets (unless they’re collectibles, I guess), they’re commercial products, so I’m not sure my argument really works.

sumtechguy 6y ago
A large company would most certainly consider a computer an asset would they not? Until it is paid off and/or can no longer provide value to them? Your argument is with medallions is mostly correct. They had an artificial constraint on an environment. With the artificial constraint they act like assets and not permits. However once a good that was equivalent showed up the value of the asset value did fall. A market will tend towards MR=MC (marginal rev=marginal cost). However in the medallion case the supply was artificially constrained. So a floor was created. This moves the price people are willing to pay up the demand curve instead of lower near the usually lower mr=mc spot. In this case as the population grew but the number of allowed taxis did not the price went up because demand went up but supply did not. Once another good showed up that demand curve changed as less people were willing to pay that amount as well as more supply. This is the madness of economics. The demand curve always changes. Chips are mostly worthless because there are so many of them and better fab equipment exists and the capex of the machines to make them was paid off decades ago. So their depreciation is very quick (much like cars). Rarity does play into price as well. As some people do like the idea of owning a rare thing. You also have part of it with your comment here. Assets rarely 'hold' value for a long term. If you do not move the value around your total monetary value will depreciate. The medallion case was an artificial constraint so the value rose because demand remained high enough. Once a new supply came in the real price showed up. Housing can act like this too in artificially constrained environments. Rent control, poor tax structures, poor zoning, etc can all cause this. If you get a situation where the owners work with the gov (medallions and the taxi commission and the cities) they will write laws to artificially constrain growth to limit their asset depreciation. That is usually called regulatory capture. For these sorts of arguments I like to say 'if everyone suddenly had 1 billion dollars what would you pay for a loaf of bread?'. Most people would say '1-2 dollars'. But what about next week when the company realizes people will pay 1000 dollars for one? Would you still buy it? Would your friends? It usually shows that the demand curve is not static and value is a moving market in and of itself.