> If you're competing against firms like Google or startups that just raised unicorn funding, and these days everyone is, then the people bidding in the market or labor are not doing cost benefit analysis. They just need to hire.
That is a cost-benefit analysis.
They've received funding, they have a business model, now they need labour.
It seems to me your real gripe is that there's a large amount of investment flowing into Silicon Valley and you don't believe that should be happening.
> This loop ends when only one of the people can still pay and everyone else starves.
That's right. And that means, in the valley in particular, some companies will never get off the ground because they can't afford the price for labour.
The solution is simple: hire in a different labour market.
> To the people actually in the market, they have limited information and don't know what the bidding limit is for the other players, and thus to them it can appear that regardless of what price they bid, they are always beaten by 20%.
Sure, that's called incomplete information, and it's a feature of virtually all markets, minus open and instantly traded markets like stock exchanges.
I'm not sure what point you're trying to make, here, other than to complain about a general feature of capitalism that (in a refreshing change of pace) happens to be working in favour of labour.
> In a properly functioning liquid market in which nobody has access to printed money
And now we get to the political axe you're grinding.
Look, the SV labour market has been explosively expensive for 20-30 years. This isn't a new phenomenon by any stretch, and it certainly pre-dates the 2008 financial crisis and the low interest rate environment that followed. There's a reason outsourcing became so popular throughout the early 2000s.
The problem is that tech companies failed to expand their labour pool beyond a few tight markets, either by opening offices in other locations or supporting remote workers. That's their choice, but don't complain when labour prices go up as a consequence.