Hacker News Reader

Comment by dkfmn | Hacker News Reader

This isn't really an ideal article to kick off a series of debates that could be very interesting. It's trying to relate too many concepts from taxation theory to economic stimulation to labor management, etc, etc.

If the main point is to ask if capital or labor risks more the answer is trivial: capital. There is a -100% downside for investment and minimum positive earnings for labor. On the other hand capital has an unlimited upside, while labor does not.

A more interesting question would be how to you optimize the opportunity between capital and labor?

View on HN

Joe Schmo losing his $20k/yr burger flipping job for a year will suffer far more than Bill Gates losing $20B in a market fluctuation, despite the fact that the latter is literally 1,000,000 times worse on paper. Monetary risk and utility risk are not the same thing and choosing one over the other is equivalent to picking a side in the debate.

As for optimizing opportunity between labor and capital, I tend to suspect that this metric would favor more equitable wealth distribution so as to maximize the feasibility of bootstrapping (low overhead, perverse incentives avoided, nothing remotely exploitative about it on either end of the deal) and to maximize the "surface contact" between capital and labor. But nobody is looking to maximize opportunity in general, only their individual opportunity, and the Nash equilibrium for that process lies in exactly the same place as the Nash equilibrium for wealth.

Of course there's a difference between monetary risk and utility risk. They shouldn't be conflated in this discussion for a number of reasons. One such is that measuring utility is very difficult without resorting to a yardstick like capital.

You also bring up personal utility which is important. How do you balance the risk of a destroyed livelihood against a much greater capital loss? We also have to be careful not to presume that Joe Schmo can't find another job (better or equivalent).

You ignore the article's point about the risk of choosing a proffession. For example, what's the return on investment for the worker that trained to be a professional car welder in Detroit? I don't know if "-100%" captures the loss.

There are many more choices for the capital worker. They have to judge every transaction they make. For example they ought to check whether the companies they invest in are diligent about back-ups, because that's a cause for losing the whole investment. They have to choose whether they'd rather invest in start-ups or grown companies, and if in startups, they have to gather enough info that the startup has good chances of succeeding.

In your example, it sounds like we take the job and location as a constant. If they guy can't choose a profession that has good chances of surviving throughout the years, he'd be really bad as an investor.

This is an apples to oranges comparison. You're bringing up losing a job and comparing it to losing an investment. In this case the investment is gone, and the FUTURE earnings of the worker from that specific job are gone. The worker already received compensation for past work.

However, there is a point to be made about how the loss of livelihood, or a reduced standard of living can be devastating. It's just not the same economically.

You're discounting the time it takes to learn the skill. That training is worthless to the worker now. It's an investment that is gone.

Reply on news.ycombinator.com