Hacker News Reader

Comment by scarejunba | Hacker News Reader

Why? A low-margin high-revenue high-employment company is great for the local economy if the margins are low due to labour costs. City admins absolutely want that company way more than a hundred guys each making a hundredth at way higher margin. This way labour eats up more surplus and that's what you want if you're running a city.

View on HN

What do you mean "if the margins are due to labor costs"? Margins are always due to all costs and the sales price.

Right, but labor costs might be a large or small portion of the total costs.

Which doesn't address the flexibility of the margin. Carbon fiber might cost more than an operator of a machine that turns carbon fiber into a useful good.

Sorry, I picked the wrong word. If labour is a large part of total costs that's superior to it going to a single person outside the city c.p. etc. etc.

That's not obviously true by itself without some underlying unspoken premises we probably do not share.

I reject mercantilistic views of economy. They belong in the 1600s where they died.

Yeah, you know, I'm not really convinced myself to be honest. Obviously you want to take advantage of comparative advantage, etc. but is a more prosperous city one which has a less unequal income or wealth or does optimizing for top-line wealth just create everything else along the way? I don't really know.

I'm pretty comfortable abandoning the view. It wasn't built on a strong basis.

Income inequality is weakly correlated with everything. It seems to be a necessary consequence of both the most and least prosperous societies.

Honestly, income inequality is a red herring of left politics and public schooling. If the most prosperous societies have high income inequality, then the question must be asked: does it matter?

Unless you want to design a utopia. That goes swimmingly every time, I promise.

Edit: If income inequality is a consequence of freedom, it's a very, very tiny price to pay. Don't optimize for the economy. Optimize for freedom. Empirically, that's how you create prosperity.

I think the percentage of the cost of the final product sunk into labor acts more like a VAT. Sure, the manufacturer making carbon fiber canoes may spend more on carbon fiber than the operator. But what percentage of the carbon fiber supplier's cost to manufacture is labor? And what about the the labor costs in the tools the supplier uses? Etc. It's a cumulative percentage, not just at the last mile. Similar to how VAT is calculated (at least in my admittedly limited understanding of VAT).

I think this is in contrast to highly automated industries (tentatively). I think the train of thought is that lower labor costs results in a higher concentration of wealth as less wealth is distributed since there are lower labor costs.

However, I would posit that the more direct measure is profit percentages. Hypothetically, if labor costs go down, and profit margins stay the same (ie if the savings are passed on to consumers), then I would imagine there would be an increase in consumption.

Where the money gets back to workers may change (as increased consumption would mean increased demand for the materials McDonalds uses, which likely have higher labor costs). High profit percentages, however, typically benefit those that own some of the company.

This is entirely conjecture, I am not well versed in economics. If there is some flaw in this (and I'm sure there are several), I would love to be corrected for my own education!

Labor cost mean that that money is going back into the hands of workers. there are plenty of other costs that don't benefit the average person nearly as much.

Pretty all costs eventually go into the hands of workers through the beautifully complex web of economy.

I know this isn't the same as distinguishing between cost of labor and cost of non labor things like keyboards and shovels. But the cost of those things benefits the average person that build them, or built their components, and so on.

Even the profit taken by the rich ends up benefitting the average person because, well, where does all that loan money come from?

Not sure what your point is beyond a humanities professor ignorantly preaching saying "profit bad"

An ever widening wealth gap would disagree with you there. I'm not a doom and gloom tear down the system guy by any means, but wages have not risen alongside the wealth of the rich in this country lately.

>Not sure what your point is beyond a humanities professor ignorantly preaching saying "profit bad"

Not sure why you felt the need to throw that in. Your argument (what little there is) is essentially trickle down economics, which is BS.

Okay, that's my point.

If you have a thousand wealths and I have one wealth, that's worse than if I have a million wealths and you have a quintillion wealths.

No, not trickle down economics. It's history. The standard of living of the impoverished is dramatically higher than the rich of yore, and continually rising. And the reason is unequivocally capitalism.

Your view of the wealth gap is just not relevant because economics is not a zero sum game. The pie is not a fixed size. The promise of capitalism is that we get to grow the size of the pie. This isn't speculation or opinion. It's one of the few things we know for certain in economics.

Yes, the wealthy are getting wealthier faster than the poor are getting wealthier. But the one thing people who think that's a bad thing cannot explain is why that's a bad thing. It's not obvious that it's even possible to dramatically enrich everyone like capitalism very definitely did in the past without disproportionately enriching the few. That just may be a consequence of the only process of collective enrichment that appears to have ever existed on the planet.

I volunteer to explain why. Because people are envious, and status and by extension happiness are to some degree determined by relative prosperity, not absolute.

That is to say, there exist people who would be happier if everyone was equally a medieval peasant, rather than today's status quo.

Given that scarce goods exist and will always exist, you can't even say this viewpoint is irrational. When the range of status is minimized, it makes status mobility easier. Human happiness is also adaptive to a sort of baseline norm; it's not clear that increasing prosperity in Western countries actually makes people happier past a certain point.

I'm not on board for designing economy based on the happiness levels of the envious. Besides, the literature is clear that rising in status has very little long term impact on happiness.

Edit: it kinda goes like this

"I'm not happy because i don't make enough money"

"Here's some money"

"I'm not happy because i don't make enough money"

"Here's some money"

"I'm not happy because i don't make enough money"

"Ummm.... Maybe you should find a better metric for meaning in your life, because we're getting nowhere."

Beyond a certain point, which appears to be "bill collectors aren't knocking down your door", more money does nothing for your mental health. Look up Jordan Peterson to find the non-controversial reasons why.

Edit 2: the great tragedy of the leftist economic designer seems to be that subsidizing the poor seems to have no effect. If you do that, the labor costs of goods rises to meet it. So all you did is eat into already-narrow profit margins to, at best, raise prices for everybody including the middle class, or at worse, kill local small businesses.

The real darkly funny part about this whole thing is that, in America, controlling for factors like disability, poor individuals don't stay poor very long. You work hard, you're not poor for much longer. If you don't work hard, you're poor forever.

Edit 3: I often hear a politician say a thing that's false, that people "can't get ahead". It might be true that they can't get ahead as fast as they would like. But so what? We can't fix that problem. Literally, it's not possible. How fast you get ahead is a function of how hard you work. That's how capitalism works.

It's a complicated subject. I think you're too quick to dismiss income redistribution based on the happiness levels of the envious: this is a fundamental part of human nature. Just as we exploit human greed in our capitalistic society, so too we must mollify human envy so there aren't riots in the street. Uncontrolled wealth inequality leads to a breakdown in the egalitarian ideal (or fiction, if you are more cynical) we have of our Western society. Insofar as wealth represents power and influence, this was a topic of concern even to the Founding Fathers.

Status seeking is something you see in all animals, not just humans, and we shouldn't deny the effects of it on happiness. Trying to make social policy without considering it is ignoring a valuable piece of information.

I make no comment on the effectiveness of the US' current social safety net and income redistribution policies. Just that there is a principled argument for having them.

>where does all that loan money come from?

It comes from the central bank. The rich don't loan out their money for a negative interest rate.

Reply on news.ycombinator.com