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Comment by naasking | Hacker News Reader

There is nothing wrong with markets solving basic human needs as long as the incentives are properly aligned.

Company and customer incentives are fundamentally not aligned.

Companies want to maximize profit and minimize cost, while customers want as much as possible for the lowest price.

And companies have to compete for customers on cost, which yields an equilibrium that works out well for customers on most goods and services. This is well established at this point.

It is not well established at this point. I get the impression you're reading a textbook on economics, and not how it works in the real world.

Take covid inflation for example. Covid caused supply chain issues which then caused a temporary bout of inflation, however, companies took this as an opportunity to increase their profit margins more than they need to. They specifically bragged about this in quarterly earnings calls.

If companies truly compete on cost then how does stuff like that happen? Shouldn't it have been corrected by now? But that's not what we see, we see companies continue to increase prices with little consequence.

> It is not well established at this point. I get the impression you're reading a textbook on economics, and not how it works in the real world.

You're writing this from the comfort of your home where you're enjoying the fruits of the most significant quality of life improvements over 200 years. Hedonistic adaptation has blinded you to all of the evidence that's staring in the face, like the screen you're reading on right now.

> however, companies took this as an opportunity to increase their profit margins more than they need to. They specifically bragged about this in quarterly earnings calls.

Temporary aberrations from extreme disruptions do not refute the general rule.

How does one properly align the incentives of people and corporations?

Regulations, of course! Of which there are many for Texas' electricity markets.

IMHO, you can't have markets without regulations, and the markets that work best are those in high-trust societies, and that high-trust usually comes form a solid regulatory structure (i.e. laws).

This is why saying "deregulation is bad" is just as incoherent as saying "regulations are bad." We need to move beyond that sort of fallacious dichotomy.

Probably some kind of basic income scheme, so that no people will become invisible to the corporations.

Private goods and club goods are provided by markets because incentives are already aligned.

Public goods and common goods need artificial markets created by regulatory frameworks.

How do we keep "the incentives [...] properly aligned" when "the government can no longer control the market due to being 'too big too fail' and because it gave all control away"? And why can't I find anything about this in your generic pro-market answer?

Yes it does, because it leaves the fulfillment of those necessities to the whims of the market. If suddenly an endeavour is not profitable any more, or is simply less profitable than an alternative, what happens? You have to subsidise it, at great cost, leaving you at the mercy of those privatised concerns.

Neither public services nor private enterprise is a silver bullet to everything.

> If suddenly an endeavour is not profitable any more, or is simply less profitable than an alternative, what happens?

They pivot or they slowly die.

And in what world is the incentive of cutting costs and price gouging - of necessities no less - aligned with the incentives of the vast majority of mankind who would just like energy, healthcare, housing, public infrastructure, etc. to be as affordable and high quality as possible.

The incentive of cutting costs directly leads to affordability.

Companies cut costs to increase their profits, not to pass the cost savings on to customers. If there is price pressure, they may pass on the savings. But at the latest when the market is sufficiently consolidated, they will prefer to keep these savings themselves. And even if this were not the case, there would still be no direct implication of affordability.

No quite obviously cutting costs increases profit which goes into reinvestment to then generate more profit and so on. It has no relation to prices unless the business happens to be losing customers to competition which is unrelated. Prices are lowered only as much as it can increase the rate of profit. Increasing affordability past that point for the good of the consumer is strictly against the incentives of the business since it prevents the growth of capital and thereby hampers them in competition.

Also quantitatively cutting costs qualitatively looks like enshittification of goods and services in practice, and unlike in undergrad economics textbooks consumers rarely have recourse in the form of switching brands since basically all "markets" for necessities are oligopolies (thanks often to government contracts for public works in an increasingly privatized world, if not simply the natural global minimum of any market).

On a basic level the point of putting a commodity on the market is to sell it to the highest bidder. Why is this the preferred way to distribute necessities? It certainly "aligns" with one particular incentive - that of the seller - not that of most people. Doesn't everyone need access to healthcare, housing, energy, etc.? Are poor people to compete with people who can outspend them several times over for food and housing? As the cost of living continues to increase does it make sense to hand over an increasing portion of our wages for the same - or worse - standard of living?

If you want freedom of choice in what you consume and have the means to do so then go ahead and turn to a market to buy a penthouse or gourmet food or whatever. But why is it such an offense to the current hegemonic ideology to ensure that there is basic universal access to essential resources?

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