4 ms·

Isn’t it oversimplifying it to suggest that all “the market” rewards is low prices? Doesn’t the market also sometimes reward quality and timeliness?

rjzzleep 5y ago
I think you're right, I went through a E40m construction project once and the leaders kept saying how they have to chose the lowest bidder. But that was actually a convenient lie they did to avoid having to do due diligence on the bidders. Mid and long term cost actually turned out a lot higher than if they had chosen the better slightly more expensive bids.
- yodelshady 5y ago
  "get three quotes and take the middle" is a common heuristic in my locale - for any work you're going to be living in, under or on, at any rate.
- mianas 5y ago
  I've seen this turn out the other way on a road contract near my house. (rural Ireland) Some Italian construction company underbid, and slightly later went bankrupt after finishing some of the work. They just about missed the contract milestones for payment too, and got nothing out of it. Then, the contract went to someone else who bid, with expected costs adjusted. Think there was an 8-ish month delay.
  - rjzzleep 5y ago
    The way I see the successful low bids happen is usually the following: 1. Submit a low bid for EXACTLY what's written in the RFP 2. Submit contract delay notifications with contract amendment offers, explaining that the original bid was incorrect and therefore if the amendment is not accepted the project can't continue. 3. rinse and repeat No. 2 is basically legal speak to make sure you get paid(or win a lawsuit in the event that you don't) even though you can't continue construction. It's basically saying, you made a mistake in your original RFP, therefore nobody could have continued the construction anyway and therefore you have to accept my amendment. Good bidders will actually tell you that your RFP was wrong. As an example in the construction project I was in the main architect requested custom spliced decades outdated Fiber wiring, when I finally got a hold of the wiring company and asked them why didn't just do MTP, they mentioned that a) they mentioned to the architect that the request wiring makes no sense and b) they were not allowed to talk to us(the engineering department) directly. Same happened with the fire protection rules from anything like stair handles to the garage. That's also why I don't think the Airport delays in Berlin were engineering mistakes but rather gross mismanagement. Also, while in this whole project there is a lot of physical work that you can't optimize away, a lot of the physical work delays and do-overs were also due to gross mismanagement, which is something the toplevel comment completely ignores in his assessment of the 4 day workweek.
unishark 5y ago
If you can provide a product with those features at lower cost the market would still reward you. But yes any description of economics is necessarily a simplification. For example market segments where people intentionally pay more for the exclusivity that comes with being charged more.
corty 5y ago
I would do some nitpicking here: The market _rewards_ low prices. But the market _punishes_ low quality and untimeliness. Why do I phrase it this way? Because the only market mechanism is a sale, you either buy or you don't. Low price is visible before a sale, so a new sale is reward for the low price offered. Quality and timeliness are only apparent after a sale, so can only be punished retroactively by not buying again. The punishment signal is also far weaker than the reward signal, lots of goods are not bought too often and problems get forgotten by customers, alternatives may have their own problems, etc. And prices can be compared objectively for standardized goods, and at least easily for other goods. Quality and timeliness are often in the eye of the beholder, subject to variation. Comparisons in those areas are also systematically prevented by most vendors.
- ehnto 5y ago
  > Why do I phrase it this way? Because the only market mechanism is a sale, you either buy or you don't. That's not always true. When a rail network gets privatized, the argument is that the market will make sure it's a good service still. But they are usually paid by the government, not the patrons. The commuters vote becomes negligible, and the rail network has every incentive to optimize for a minimum viable network that meets their government set targets while the service gets worse and worse in all other metrics. Seats are shittier, service is less clean, graffiti stacks up, railstock gets rickety etc.
  - corty 5y ago
    That railway example is just a plain market failure, and an uncorrectable one at that. Markets only work under certain conditions, very important among those: absence of monopoly, monopsony and limitations that work to the same effects. A privatized rail network is still the only rail network in the country or region, so still a monopoly. If you hack it to bits and split it up too much, it will be useless, connectivity is paramount in that business. If you leave it as a large network (or several large networks) it will be a national or regional monopoly. Having only the government pay is a monopsony. Limiting building new stations and tracks (which the government will have to do at some point, if real estate prices don't) will also prevent competition. So having a functioning rail market is impossible, therefore any argument about market mechanisms involving railways (or roads, water, gas and electricity distribution) is nonsense: Those can never be proper free markets.
MomoXenosaga 5y ago
Companies like Action, IKEA and Amazon thrive on low prices and efficiency.
- mywittyname 5y ago
  Manufacturing and construction are pretty different segments. When manufacturing, it's very easy to optimize for cost because you know exactly how much material is required and how much time, probably to the second, it takes to process such material into the final form. Even shipping prices are pretty well known and can be optimized for through effective packaging. Construction isn't like that. Companies aren't cranking out a million buildings a day, so they can't remove every ounce of unnecessary materials; they don't control the environment, making delays a fact of life; they don't control all of the companies and people involved; etc. There's just so much unknown when it comes to construction. Like software, it can be difficult to figure out how much padding to put into estimates. It's a good bit easier when it comes to things like roads, but companies still need to contend with unexpected delays a lot.

rjzzleep 5y ago

I think you're right, I went through a E40m construction project once and the leaders kept saying how they have to chose the lowest bidder. But that was actually a convenient lie they did to avoid having to do due diligence on the bidders. Mid and long term cost actually turned out a lot higher than if they had chosen the better slightly more expensive bids.

yodelshady 5y ago
"get three quotes and take the middle" is a common heuristic in my locale - for any work you're going to be living in, under or on, at any rate.
mianas 5y ago
I've seen this turn out the other way on a road contract near my house. (rural Ireland) Some Italian construction company underbid, and slightly later went bankrupt after finishing some of the work. They just about missed the contract milestones for payment too, and got nothing out of it. Then, the contract went to someone else who bid, with expected costs adjusted. Think there was an 8-ish month delay.
- rjzzleep 5y ago
  The way I see the successful low bids happen is usually the following: 1. Submit a low bid for EXACTLY what's written in the RFP 2. Submit contract delay notifications with contract amendment offers, explaining that the original bid was incorrect and therefore if the amendment is not accepted the project can't continue. 3. rinse and repeat No. 2 is basically legal speak to make sure you get paid(or win a lawsuit in the event that you don't) even though you can't continue construction. It's basically saying, you made a mistake in your original RFP, therefore nobody could have continued the construction anyway and therefore you have to accept my amendment. Good bidders will actually tell you that your RFP was wrong. As an example in the construction project I was in the main architect requested custom spliced decades outdated Fiber wiring, when I finally got a hold of the wiring company and asked them why didn't just do MTP, they mentioned that a) they mentioned to the architect that the request wiring makes no sense and b) they were not allowed to talk to us(the engineering department) directly. Same happened with the fire protection rules from anything like stair handles to the garage. That's also why I don't think the Airport delays in Berlin were engineering mistakes but rather gross mismanagement. Also, while in this whole project there is a lot of physical work that you can't optimize away, a lot of the physical work delays and do-overs were also due to gross mismanagement, which is something the toplevel comment completely ignores in his assessment of the 4 day workweek.

unishark 5y ago

If you can provide a product with those features at lower cost the market would still reward you. But yes any description of economics is necessarily a simplification. For example market segments where people intentionally pay more for the exclusivity that comes with being charged more.

corty 5y ago

I would do some nitpicking here: The market _rewards_ low prices. But the market _punishes_ low quality and untimeliness. Why do I phrase it this way? Because the only market mechanism is a sale, you either buy or you don't. Low price is visible before a sale, so a new sale is reward for the low price offered. Quality and timeliness are only apparent after a sale, so can only be punished retroactively by not buying again. The punishment signal is also far weaker than the reward signal, lots of goods are not bought too often and problems get forgotten by customers, alternatives may have their own problems, etc. And prices can be compared objectively for standardized goods, and at least easily for other goods. Quality and timeliness are often in the eye of the beholder, subject to variation. Comparisons in those areas are also systematically prevented by most vendors.

ehnto 5y ago
> Why do I phrase it this way? Because the only market mechanism is a sale, you either buy or you don't. That's not always true. When a rail network gets privatized, the argument is that the market will make sure it's a good service still. But they are usually paid by the government, not the patrons. The commuters vote becomes negligible, and the rail network has every incentive to optimize for a minimum viable network that meets their government set targets while the service gets worse and worse in all other metrics. Seats are shittier, service is less clean, graffiti stacks up, railstock gets rickety etc.
- corty 5y ago
  That railway example is just a plain market failure, and an uncorrectable one at that. Markets only work under certain conditions, very important among those: absence of monopoly, monopsony and limitations that work to the same effects. A privatized rail network is still the only rail network in the country or region, so still a monopoly. If you hack it to bits and split it up too much, it will be useless, connectivity is paramount in that business. If you leave it as a large network (or several large networks) it will be a national or regional monopoly. Having only the government pay is a monopsony. Limiting building new stations and tracks (which the government will have to do at some point, if real estate prices don't) will also prevent competition. So having a functioning rail market is impossible, therefore any argument about market mechanisms involving railways (or roads, water, gas and electricity distribution) is nonsense: Those can never be proper free markets.

MomoXenosaga 5y ago

Companies like Action, IKEA and Amazon thrive on low prices and efficiency.

mywittyname 5y ago
Manufacturing and construction are pretty different segments. When manufacturing, it's very easy to optimize for cost because you know exactly how much material is required and how much time, probably to the second, it takes to process such material into the final form. Even shipping prices are pretty well known and can be optimized for through effective packaging. Construction isn't like that. Companies aren't cranking out a million buildings a day, so they can't remove every ounce of unnecessary materials; they don't control the environment, making delays a fact of life; they don't control all of the companies and people involved; etc. There's just so much unknown when it comes to construction. Like software, it can be difficult to figure out how much padding to put into estimates. It's a good bit easier when it comes to things like roads, but companies still need to contend with unexpected delays a lot.