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>If widget specialists flood the market, their wages go down [1], but so do widget prices. Only if we make the patently unrealistic assumption that the widget

>If widget specialists flood the market, their wages go down [1], but so do widget prices. Only if we make the patently unrealistic assumption that the widget manufacturers have negligible market power (a perfectly competitive market). That assumption would also lead us to believe that they have negligible profits. They don't. Those billionaires have a lot of market power between them and make a lot of profits. If we used your assumptions, the tech wage fixing cartel of 2013 would also have been impossible. It happened.

SilasX 11y ago
True: depending on the parameters of a particular market, things may go one direction or the other. I acknowledged as much in the footnote referenced in the part you quoted, and indeed gave a scenario where the input prices go in the opposite direction as profits! So your theory [1] would require that this "make everyone a better programmer" is more like wage-fixing (in terms of economic incidence) than the tomatoes, even though a) the wage fixing affected demand, and this education program affects supply, of programming labor; and b) the big companies are a much bigger fraction of the SV labor market than of the workers that would learn through this program. It's also not clear to what extent the wage fixing agreement was mitigated by driving programmers to non-conspirators. Getting the full picture would require a careful assesent to the sensitivity of these markets to all those parameters, not simply assuming that any increase in the supply of programmers purely benefits employers of them and doesn't affect the relative scarcity of their final output. And FWIW, I don't get your insistence that one theory requires "perfect competition"; it might require some level of competition, but why perfect? The tomato result would hold true even in very lumpy markets. (Or were you just exaggerating?) [1] I know, not "your" theory, but it's much simpler than "the theory you offered in your previous post", and I add this footnote only to fend off a possible indignant reply about "hey, that's not just my theory".

SilasX 11y ago

True: depending on the parameters of a particular market, things may go one direction or the other. I acknowledged as much in the footnote referenced in the part you quoted, and indeed gave a scenario where the input prices go in the opposite direction as profits! So your theory [1] would require that this "make everyone a better programmer" is more like wage-fixing (in terms of economic incidence) than the tomatoes, even though a) the wage fixing affected demand, and this education program affects supply, of programming labor; and b) the big companies are a much bigger fraction of the SV labor market than of the workers that would learn through this program. It's also not clear to what extent the wage fixing agreement was mitigated by driving programmers to non-conspirators. Getting the full picture would require a careful assesent to the sensitivity of these markets to all those parameters, not simply assuming that any increase in the supply of programmers purely benefits employers of them and doesn't affect the relative scarcity of their final output. And FWIW, I don't get your insistence that one theory requires "perfect competition"; it might require some level of competition, but why perfect? The tomato result would hold true even in very lumpy markets. (Or were you just exaggerating?) [1] I know, not "your" theory, but it's much simpler than "the theory you offered in your previous post", and I add this footnote only to fend off a possible indignant reply about "hey, that's not just my theory".