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Profit maximizing would be slavery with $0 wages. But social utility maximizing is the price that emerges spontaneously when people are free to broadcast job of

Profit maximizing would be slavery with $0 wages. But social utility maximizing is the price that emerges spontaneously when people are free to broadcast job offers and to contract, that is set by supply and demand: https://en.wikipedia.org/wiki/Supply_and_demand https://en.wikipedia.org/wiki/Supply_and_demand

AstralStorm 6y ago
Unfortunately for us, there is no such thing as free market. Deregulated markets devolve into might makes right (by size), regulated ones are facing the problem of justification for everything. In terms of wages, the markets in the US are extremely deregulated, in addition to lobbying messing with the politics. Somehow actual solutions are presented as less free market when they don't actually impact how trades are made. Big corporations can always undercut small companies on costs by investing into capital expensive technologies. Does it mean the smaller companies should be allowed to run wage slavery? No, because then we run into arbitrary wage differentiation. The proper way to evaluate the minimum wage is to compute local Purchasing Power Parity, check how many PPP-dollars are required for life, then set the minimum wage at slightly higher level to compensate for how rarely it is adjusted. These numbers will be a bit different per state in plain US dollars. Anything else is not a living wage, and a living wage is the only reasonable way of approaching it. From capitalist point of view, a business that cannot supply a minimum wage is insufficiently competitive and should fail. It is trying to run feudal by creating wage slaves. Alternative approach would be interventions to lower PPP-adjusted cost of living, such as building cheap or free housing, not means tested food stamps, free healthcare, free education etc. But these are much less predictable, and put the onus on government, while at the same time allowing bigger corporations to undercut their salaries, so it is at best a part of a combined approach.
- CryptoPunk 6y ago
  >>Deregulated markets devolve into might makes right (by size), regulated ones are facing the problem of justification for everything. The existence of regulatory restrictions on free market exchange, that distort the free market, will rarely justify further regulatory infringements on contract rights, like the minimum wage. The additional regulatory restriction will generally add to, and not counter-act, the existing market distortions. >>The proper way to evaluate the minimum wage is to compute local Purchasing Power Parity, check how many PPP-dollars are required for life, then set the minimum wage at slightly higher level to compensate for how rarely it is adjusted. These numbers will be a bit different per state in plain US dollars. That in no way determines if a price floor of labor will do harm to public welfare and the economy. >>From capitalist point of view, a business that cannot supply a minimum wage is insufficiently competitive and should fail. That is not a "capitalist point of view". It's just a pure economic fallacy that harms all those who are priced out of work, and capital that is less efficiently utilized as a result. I recommend you read the Wikipedia article on price floors: https://en.wikipedia.org/wiki/Price_floor https://en.wikipedia.org/wiki/Price_floor And then consider how a price floor would affect available labor.
  - AstralStorm 6y ago
    But what effect would lack of price floor have on labor? You guessed it right, serfdom. The ultimate "capitalist" system. Labor is not a typical price elastic product, when it is required to live, its price is relatively inelastic. The capitalist always has a way to drive the cost of labor down, whether it is by overloading workers or not. The workers do not have the means to negotiate hiring price in most instances, so equilibrium analysis does not apply either way. One side has a smooth choice, the other has barely a binary choice, and ofte not even that. Setting a price floor on a price inelastic good will not increase the price because people will not buy/sell less of it. Demand and supply is unchanged. Additionally, employers are not buying people's labor off a market. There's not a "list of all employees where they set the price they want to work for" which would be required for employment to be an actual market. When an employee cannot set the price, market price discovery just does not work by definition. The "job market" is a glib lie. Only the employers compete, but employees do not. And employers do everything to prevent price discovery or make their option the only possible one. Ever heard of work rules to not share your wage with coworkers? Is that compatible with free market?
    - CryptoPunk 6y ago
      A lack of a price floor would lead to 1. higher employment and 2. higher rates of wage growth over time, because it means more people are employed contributing to the production of economic resources that can then be invested into new productivity-enhancing capital. >> The capitalist always has a way to drive the cost of labor down, whether it is by overloading workers or not. The workers do not have the means to negotiate hiring price in most instances, so equilibrium analysis does not apply either way. One side has a smooth choice, the other has barely a binary choice, and ofte not even that. This is simply not true. Wages tripled in China over the last 20 years: https://www.ineteconomics.org/perspectives/blog/chinas-wage-growth-how-fast-is-the-gain-and-what-does-it-mean https://www.ineteconomics.org/perspectives/blog/chinas-wage-... Another example is the so-called Gilded Age US. During the late 19th century in the US, there was no income tax, personal or corporate, little-to-no labor regulations, and very weak unions (largely because of the lack of labor regulations granting them extra-contractual rights at the expense of the free market). Wages grew at records in the US during the late 19th century, and this was amidst massive immigration of low-income laborers from Europe, who increase the supply of low-skilled labor and thus apply downward pressure on wages. In neither of these cases was this because of regulations. It was because of investment of surplus output into new capital by profit-motivated individuals, that increased productivity and thereby allowed even larger surplus outputs. All these additional economic resources led to labor being bid up. We see a microcosm of that in Silicon Valley amongst tech workers. So productivity growth, derived from the [ investment -> productivity-boost -> greater investment ] cycle is the primary source of wage growth, and the reason wages are 20X higher today in the US (after adjusting for inflation) than they were 200 years ago. We're nowhere near the limits of what levels of productivity this fundamental market process can attain. Adam Smith: "As every individual, therefore, endeavours as much as he can, both to employ his capital in the support of domestic industry, and so to direct that industry that its produce maybe of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it."
epivosism 6y ago
Not sure I agree - total profits and living standards have both gone up drastically since slavery was abolished, and went up faster and farther in countries that abolished slavery earlier. Thinking that slavery is profit-maximizing is very zero-sum, and disproven by history. Actual profit maximization over time involves lots of freedom and choices for individuals participating in capitalism.
- epivosism 6y ago
  Map of the timeline of the abolition of slavery - clear link between current prosperity and the time of abolition: https://upload.wikimedia.org/wikipedia/commons/thumb/9/92/Slavery_abolition.svg/2560px-Slavery_abolition.svg.png https://upload.wikimedia.org/wikipedia/commons/thumb/9/92/Sl... The outliers (Saudi Arabia 1962, despite current wealth) are due to resource extraction, not truly positive sum freedom + capitalism.
- CryptoPunk 6y ago
  Yes, I meant in the short-term, in the context of a single firm being able to practice it, and how it would affect its profit margins. In the long run both wage maximization and profit maximization aligns with social utility maximization, which we achieve through the establishment of a free market where all interactions are mutually voluntary.

AstralStorm 6y ago

Unfortunately for us, there is no such thing as free market. Deregulated markets devolve into might makes right (by size), regulated ones are facing the problem of justification for everything. In terms of wages, the markets in the US are extremely deregulated, in addition to lobbying messing with the politics. Somehow actual solutions are presented as less free market when they don't actually impact how trades are made. Big corporations can always undercut small companies on costs by investing into capital expensive technologies. Does it mean the smaller companies should be allowed to run wage slavery? No, because then we run into arbitrary wage differentiation. The proper way to evaluate the minimum wage is to compute local Purchasing Power Parity, check how many PPP-dollars are required for life, then set the minimum wage at slightly higher level to compensate for how rarely it is adjusted. These numbers will be a bit different per state in plain US dollars. Anything else is not a living wage, and a living wage is the only reasonable way of approaching it. From capitalist point of view, a business that cannot supply a minimum wage is insufficiently competitive and should fail. It is trying to run feudal by creating wage slaves. Alternative approach would be interventions to lower PPP-adjusted cost of living, such as building cheap or free housing, not means tested food stamps, free healthcare, free education etc. But these are much less predictable, and put the onus on government, while at the same time allowing bigger corporations to undercut their salaries, so it is at best a part of a combined approach.

CryptoPunk 6y ago
>>Deregulated markets devolve into might makes right (by size), regulated ones are facing the problem of justification for everything. The existence of regulatory restrictions on free market exchange, that distort the free market, will rarely justify further regulatory infringements on contract rights, like the minimum wage. The additional regulatory restriction will generally add to, and not counter-act, the existing market distortions. >>The proper way to evaluate the minimum wage is to compute local Purchasing Power Parity, check how many PPP-dollars are required for life, then set the minimum wage at slightly higher level to compensate for how rarely it is adjusted. These numbers will be a bit different per state in plain US dollars. That in no way determines if a price floor of labor will do harm to public welfare and the economy. >>From capitalist point of view, a business that cannot supply a minimum wage is insufficiently competitive and should fail. That is not a "capitalist point of view". It's just a pure economic fallacy that harms all those who are priced out of work, and capital that is less efficiently utilized as a result. I recommend you read the Wikipedia article on price floors: https://en.wikipedia.org/wiki/Price_floor https://en.wikipedia.org/wiki/Price_floor And then consider how a price floor would affect available labor.
- AstralStorm 6y ago
  But what effect would lack of price floor have on labor? You guessed it right, serfdom. The ultimate "capitalist" system. Labor is not a typical price elastic product, when it is required to live, its price is relatively inelastic. The capitalist always has a way to drive the cost of labor down, whether it is by overloading workers or not. The workers do not have the means to negotiate hiring price in most instances, so equilibrium analysis does not apply either way. One side has a smooth choice, the other has barely a binary choice, and ofte not even that. Setting a price floor on a price inelastic good will not increase the price because people will not buy/sell less of it. Demand and supply is unchanged. Additionally, employers are not buying people's labor off a market. There's not a "list of all employees where they set the price they want to work for" which would be required for employment to be an actual market. When an employee cannot set the price, market price discovery just does not work by definition. The "job market" is a glib lie. Only the employers compete, but employees do not. And employers do everything to prevent price discovery or make their option the only possible one. Ever heard of work rules to not share your wage with coworkers? Is that compatible with free market?
  - CryptoPunk 6y ago
    A lack of a price floor would lead to 1. higher employment and 2. higher rates of wage growth over time, because it means more people are employed contributing to the production of economic resources that can then be invested into new productivity-enhancing capital. >> The capitalist always has a way to drive the cost of labor down, whether it is by overloading workers or not. The workers do not have the means to negotiate hiring price in most instances, so equilibrium analysis does not apply either way. One side has a smooth choice, the other has barely a binary choice, and ofte not even that. This is simply not true. Wages tripled in China over the last 20 years: https://www.ineteconomics.org/perspectives/blog/chinas-wage-growth-how-fast-is-the-gain-and-what-does-it-mean https://www.ineteconomics.org/perspectives/blog/chinas-wage-... Another example is the so-called Gilded Age US. During the late 19th century in the US, there was no income tax, personal or corporate, little-to-no labor regulations, and very weak unions (largely because of the lack of labor regulations granting them extra-contractual rights at the expense of the free market). Wages grew at records in the US during the late 19th century, and this was amidst massive immigration of low-income laborers from Europe, who increase the supply of low-skilled labor and thus apply downward pressure on wages. In neither of these cases was this because of regulations. It was because of investment of surplus output into new capital by profit-motivated individuals, that increased productivity and thereby allowed even larger surplus outputs. All these additional economic resources led to labor being bid up. We see a microcosm of that in Silicon Valley amongst tech workers. So productivity growth, derived from the [ investment -> productivity-boost -> greater investment ] cycle is the primary source of wage growth, and the reason wages are 20X higher today in the US (after adjusting for inflation) than they were 200 years ago. We're nowhere near the limits of what levels of productivity this fundamental market process can attain. Adam Smith: "As every individual, therefore, endeavours as much as he can, both to employ his capital in the support of domestic industry, and so to direct that industry that its produce maybe of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it."

epivosism 6y ago

Not sure I agree - total profits and living standards have both gone up drastically since slavery was abolished, and went up faster and farther in countries that abolished slavery earlier. Thinking that slavery is profit-maximizing is very zero-sum, and disproven by history. Actual profit maximization over time involves lots of freedom and choices for individuals participating in capitalism.

epivosism 6y ago
Map of the timeline of the abolition of slavery - clear link between current prosperity and the time of abolition: https://upload.wikimedia.org/wikipedia/commons/thumb/9/92/Slavery_abolition.svg/2560px-Slavery_abolition.svg.png https://upload.wikimedia.org/wikipedia/commons/thumb/9/92/Sl... The outliers (Saudi Arabia 1962, despite current wealth) are due to resource extraction, not truly positive sum freedom + capitalism.
CryptoPunk 6y ago
Yes, I meant in the short-term, in the context of a single firm being able to practice it, and how it would affect its profit margins. In the long run both wage maximization and profit maximization aligns with social utility maximization, which we achieve through the establishment of a free market where all interactions are mutually voluntary.