The rationality I'm referring to is economic rationality; I probably should have made that more clear. Based on your wholehearted agreement of that one particular sentence, it sounds like we are in agreement.
The problem is you are imposing your own values onto others. You have made a value judgement that is decidedly not yours to make. Economically speaking, people *always* behave rationally. You might say that it is irrational that someone would run up their credit cards irresponsibly, but someone who does just that demonstrates that, based on his or her own value scale, was the most rational decision. It doesn't necessarily mean that it was the best financial decision. But that is not for us to say. Take, for example, the current health insurance debacle. Government has decided that it is a bad decision for people to not purchase health insurance. I know many perfectly reasonable, rational people who did not purchase health insurance before the ACA because it was not worth it to them. I made the opposite decision; but there is no way that I could ever objectively come to the conclusion that their decision (or mine) was a good or bad one. Value is entirely subjective and for someone to impose their own subjective values onto another is asinine, coercive, and straight up maddening.
It is not needlessly inefficient. For various reasons, consumers have demonstrated that they WANT these "needlessly inefficient technologies." Just because you don't have a use for them doesn't mean another person doesn't. Everyone has different preferences and value scales. Unfortunately it has become all too common for governments to step in and say they no better than all of the individuals that they govern. What's worse, we have people stupid enough to say "[this is] the right thing to do," as if it is some sort of moral issue that people choose to use "needlessly inefficient technologies." Under what ground can one assert morality over the subjective value of individuals? No, I'm afraid the only thing we can philosophically come to is that it is wrong for a 3rd party to interfere with the consumer making an exchange with a producer for some arbitrary, nonsensical reason.
Hahahaha yeah it was government intervention that caused repackaged subprime mortgages and credit default swaps. Pull the other one.
Yeah artificially low interest rates and easy credit made possible by the Fed had absolutely *nothing* to do with the housing boom. I suppose the destruction of risk caused by "too big to fail" and other such nonsense also had no part to play.
Under the fair tax, nobody pays income or payroll tax at the time of exchanging labor for money. Everybody pays (a much higher than currently exists anywhere) sales tax when money is exchanged for goods or services. Every citizen who asks for one receives a $10k (or so) check from the IRS each year in lieu of reporting income tax and receiving a tax refund or accounting for a tax liability. Basically: every citizen receives a 10k stipend to account for poverty-level spending and for the switch from progressive tiered income tax to regressive flat sales tax.
Yeah I understand the consumption tax part of it. I was unaware of the $10k subsidy, which is an awful idea. It's similar to Milton Friedman's "reverse income tax." Such practices essentially subsidize poverty. What's worse is at this point it's not just poverty that's subsidized, but everyone. The net effect is that these sorts of things tend to increase the disutility of labor, making people less likely to pursue higher paying jobs or better productivity. Also, the money has to come from somewhere (or I suppose it could just be printed, thus marginalizing all of the rest of the currency). The last thing we need is higher taxes or more government debt; those are the only two mechanisms government has to acquire such funds. But wait! Tax the rich! Yeah, never mind that the rich (top 10%) already pay 70% of our income taxes. (But really, I would be more worried about the implications of subsidizing the poor than about taxing the rich.) Now, if this $10k replaced ALL other welfare benefits and was not based off of how many children people have, it might be better than the current system (more on this below).
Not simply wanting something, but wanting something, having the funds, and acting on it. The demand curve of econ 101 doesn't measure what people want, but what they are willing and able to spend. I want solar panels on my house: that doesn't mean I can just have them without taking a lot of other things into consideration. Minimum-wage worker X wants to feed and clothe his children, but he has to choose one or the other this month.
You keep speaking of minimum wage as if it's some sort of living wage. It isn't and was never designed to be such a thing. Furthermore, if it was a living wage (say $12-15/hr), it would further exacerbate our unemployment problem, as people who cannot provide $12-$15/hr worth of labor would no longer be employable. People working minimum wage jobs have no business having children; it is financially irresponsible. But people are far removed from financial responsibility when they know aid is always available, exacerbated by the fact that welfare benefits increase as financial irresponsibility increase (aka more children). What people generally fail to realize is that the vast majority of the time, people who work minimum wage jobs do not work them their whole lives; they move on, they move into more productive jobs that pay more. This brings me to another reason why I am against minimum wage laws and general poor subsidization: Once a certain level is reached, it incentivizes people to stay where they are and not strive to improve their skills and move into more productive areas. I realize you are not proposing this (I don't think), but one of my friends thinks every job should more or less pay the same. They should all pay, let's say, $50,000 a year. Let's ignore the vast market distortions this would cause and instead analyze the incentives this provides. Why would anyone want to invest in new skills (time-wise and monetarily) if there is to be no
I don't follow. Does not the private sector produce goods and services for the public sector to consume? Granted: there is a problem with no-bid contracts and inflationary billing to the government. Granted: the public sector is anchored to political power instead of floating on the economic sea as the private sector does. But the public sector participates in many markets.
Yes, the government distorts markets. Ideally it does so in such a way as to enforce an accounting for externalities like pollution with impacts that would otherwise be ignored or at best delayed until after their deleterious effects have already caused harm, or to ensure equal opportunity through such actions as trust-busting. I don't know a better way to accomplish these important goals other than government. Free markets don't do it: monopoly is a natural tendency of an unregulated market. Free markets don't account for the commons until they are already tragic.
My point is that there is no way to measure the governments contributions to the market place, so we should not count it at all. I was simply trying to point out that using GDP is a measurement of productivity is very fallible. And no, the private sector does not produce goods and services for the public sector to consume. It creates goods and services for consumers to consume.
As for the government's roll in the free market, I very much disagree. It has no place; properly enforced property rights is surely enough to handle cases such as pollution or other externalities. In fact, if private property rights were respected, polluters would likely be punished much, much harsher than under the system we have now. I also challenge your claim that monopoly is a natural tendency of an unregulated market. But if we're going to branch into talk of monopolies, we must come to an objective definition that is actually relevant.
Surely new construction and remodelling [nahb.org] (5% of GDP) count as productivity? I'm not so sure about rental income and particularly 'imputed' rental income...
Yes, new construction and remodeling count as productivity. However, with the government's intervention in the housing market via easy, cheap loans, and all of the other nonsense that caused the last boom/bust cycle, asset prices have inflated beyond their natural levels. As such, the productivity levels as reported by GDP are also inflated. Once again, my point is simply that GDP cannot be used as a measure of productivity.
and I'm a little squigged by these, too. It seems that "Gross Domestic Product" doesn't measure 'what we produce' so much as 'how much money we move', which is perhaps not as useful for comparative analysis of income level over time, but IMO is still an extremely important metric. Currency is the blood of the economy; the economy is healthy when currency moves and circulates, regardless of who moves it. The more hands it passes through the better. The economy is unhealthy when the flow of currency is dammed or forced to recirculate in small segments.
Currency is not the blood of the economy, production that meets consumer wants and needs is. Your premise (the economy is healthy when currency moves and circulates) is flawed. What good does moving currency accomplish if there are not enough goods?
I agree. What do you think about the Fair Tax [wikipedia.org], under which, as I read it: we tax consumption instead of income and profit, ensure all citizens are nudged above the poverty line, and encourage a strong business climate with drastically reduced business taxes.
The name is misleading: there is no such thing as a tax on consumption. A consumption tax simply ends up being a roundabout method of taxing income. When income is taxed, consumption may be reduced, but so too is savings and investment. I'm all for reducing business taxes. This will sound extreme, but I don't believe there should be any business taxes. I think the
The ratio of CEO compensation to average worker compensation is now approximately 10 times its value in 1950. This is approximately commensurate with the average increase in the Dow average adjusted for inflation.
Right; and one should hardly be surprised by this since our government continually passes more and more regulations that generally only benefits big businesses. The barrier to entry for a small or medium-sized firm to get on a public stock exchange is enormous. When competition is limited, one should not be surprised when the market can no longer efficiently remove wasteful players. Paying prices vastly more than necessary to secure a proper executive is, of course, very wasteful. But this is not a fundamental issue with CEO pay, this is an issue with regulation that keeps smaller firms out.
But why should CEOs receive the entire benefit of a growing economy when all actors have contributed to that growth? CEO compensation has no correlation with company performance.
As I see it, the problem has nothing to do with a free vs. a coerced market. The problem is that the market of executive compensation is entirely divorced from the market at large. "Stockholders... vote... for whatever the management recommends no matter how poor the management’s record of accomplishment may be". This is what I mean by oligarchy: a few privileged elites have control over this smaller market without the essential feedback cycles that stabilize prices in the larger economy.
Yes, and this smaller market is much easier to manipulate when it remains artificially small due to artificial barriers to entry. That said, your definition of oligarchy is quite arbitrary; even if you could absolutely measure the power the "privileged elites" have over a smaller market, at what ratio of power to size does it constitute an oligarchy? I do agree with your sentiment, and I think my paragraph above speaks to it.
The issue is that the market value of labor has plummeted in relation to productivity and in relation to the value of top earners. In the 50s one could work part time at a minimum wage job and pay rent and college tuition and walk away with a degree free and clear. Today, just to pay rent, one needs roommates or more than one part-time minimum-wage job, let alone any ability to pay for education in order to get a better job.
How do you measure productivity? GDP is a pretty useless measurement. Also, there is this silly notion that public sector consumption should actually be counted as production. Since there is no objective way to measure public sector "productivity" (since it is not part of a market), it should not be included in aggregates; also it is quite common for the public sector to be horribly inefficient with its "funds". Government makes up
I would love to hear your arguments that back your assertions. Specifically: How have you concluded that managerial skill isn't worth {x} more than {y} labor? What about the executive labor market is not free (I think this is the core of your second dispute; it very well may not be free)? If the executive market and labor market differ (they most certainly do), in which way should they not differ and why?
It also may be beneficial if I define free market: A market that is free from coercion. Clearly, all markets have some elements of coercion in them; taxes alone is enough to ensure that. How would you define oligarchy? What about monopoly? The only satisfactory definition I've heard of either involves state interference, such as prohibiting all competitors in a market, save Company B. Few firms in a given market is insufficient to declare an oligarchy.
Once you're home, I'm sure you can come up with enough household chemicals to do the trick. If not, the.45 under the night stand ought to do it. I realize this may not constitute "humane," but whatever. I'd do it if I had no other choice.:P
Interestingly, market equilibrium is reached faster when the market is larger. Believe it or not, I do not follow Ayn Rand I do not consider myself an Objectivist. Economically speaking, though, we must treat things scientifically: such things must be rational. I agree, we will probably continue in circular discussion. I have thoroughly enjoyed the discussion with you and would like to thank you for keeping a narrow subject matter; far too often when I discuss things like this, someone says, "Yeah, but {{thing out of left field that is somewhat related, but not really}}". I do have one parting thought, though: Does the regulation that you would propose really lend itself to be more dynamic and adjust to market conditions faster than an unregulated market?
P.S. On a side note, there is a reason outside of economics that I steer clear of regulation and it really boils down to the nature of government to grab for more power. It's so much more challenging for such the government to gain power if there are philosophical lines on what it can and cannot do. The US Constitution was a failed attempt at setting these philosophies (I think ultimately, the philosophies were far too vague and open to misinterpretation); it actually allowed far too much leeway. If it were up to me, there would be a simple litmus test for whether a piece of legislation is valid or not: Does the legislation step beyond enforcing contracts and providing basic protection of its citizens (protection against other citizens, not protection of the citizens against themselves)? Of course, even that is possible to get around because "protection," as we've seen in recent years, can be taken to the extremes.
It is also too bad that Slashdot has no private messaging system, which makes it very difficult to continue conversations like this.
It really is too bad we can't grab a beer. I see this conversation moving into monopolies and oligopolies, which I find fascinating. For now, a brief summary will have to do. Basically, the problem with monopolies and oligopolies is that there is *no* way to objectively classify a company as such, save for when the government grants such a status. People like to talk about monopoly prices, etc, but the reality is, there is *no* objective way to determine the objective price. Murray Rothbard has some fascinating insight into this in Man, Economy, and State, which he elaborates on in Power & Market. As far as cartels go, there is indeed no difference between a merger and a cartel so long as the cartel continues to exist. Empirically, though, we know that cartels tend to be short lived; market forces have a tendency of breaking them up. It ultimately all goes back to competition: those members of the cartel who are more efficient get frustrated with essentially propping up the less-efficient and break from the cartel. Even if the balance is even enough, if real price gouging is going on, the same exact thing happens as in a monopoly: new competition enters the market. I realize this is a fundamental point on which we disagree on, though.
Truth be told, there is no economic reason why a firm could not establish itself so strongly in a market with exceptionally high barrier to entry and do exactly what you've talked about; if that were to happen, regulation may be reasonable (although I fear that in countries like the US, regulation would only get passed if it helped the corporation). I would still be very apprehensive of regulation, though, even if corruption could be ruled out. Even if you can somehow deal with all of the problems with defining monopolies, identifying the monopoly price vs the market price, etc (you can't), you still have to reevaluate where things stand as time and technology progresses. One of the great things about the free market is the innovation it brings, which tend to lower prices, thus increasing standard of living. Without a free market price to compare to, one does not know if the current rates of the government-granted monopoly are appropriate or not. This is known as the calculation problem that occurs when there is no free market comparison; it is one of the main reasons the Soviet Union fell on its face in such an epic way.
History tells us that there is nothing "natural" about natural monopolies. Here is a great read, if you're interested: https://mises.org/journals/rae/pdf/rae9_2_3.pdf. It is a bit dated, but the principles remain the same. So, to sum up the summary, while monopolies and oligopolies are theoretically possible, empirical data says not to worry.
First of all, let me state that I have very much enjoyed our exchange. It's refreshing to talk to someone who disagrees in an intelligent manner.
As for what an unregulated cellular market goes, I do not know exactly what that would look like. But empirically, even fields that naturally have high barriers to entry still have a tendency of being more competitive than when the government grants "natural monopoly" status. One thing that I've speculated about in the free market, is that there may be corporations that own land specifically for the use by utilities. They would then regulate its use as it sees fit, renting out portions of it to other corporations such as cellular companies. This would, of course, lower barriers to entry greatly; but of course, there's no way to be sure something like this would happen. Regardless, though, even if an exceedingly high barrier to entry prevented more than just a handful of competitors, I'm confused why that would lead to higher prices? Do we not already have very high prices already? At some point, in the free market, profits in one area drive in other competition, as you've mentioned; high barriers to entry or not, competition will inevitably come. I'm confused as to how our current system does a better job of this? One final thought on this: if the first to enter a given market keeps their prices low enough as to not provide opportunity for competition to come in, and their services adequately meet the need of the consumers (in other words, there is not really a successful business model in trying to compete), might I ask, what is the problem, exactly? Is not the point of all this to ensure that consumers receive the product that they want at the best price available? If a competitor cannot offer them a better service or a similar service at a lower price, is the consumer actually harmed? The threat of competition never goes away; the original business to enter the market must always worry about the potential of new competition. (Actually, if you want to talk further about monopolies, I would be happy to elaborate much more on this topic.)
And yes, I do believe we would have a continent-wide cellular network simply because consumers want it and clearly are willing to for it. If there is a successful business model somewhere, it is only a matter of time before some "greed, profit-seeking entrepreneur(s)" move in to fill the gap.
Indeed, there is no way to state that all regulations are more bad than good. Economics does not make value judgements, after all. There is no real way to measure such things; I just haven't seen any arguments that justify such intervention in the market. As for predictions, it really depends on what school of thought you follow. Economics by nature can only give qualitative predictions that ultimately rely on everything remaining the same (further human action, which is inevitable, can always move the target). Unfortunately, there is a great deal of "mathematical economics" schools out there that attempt to move Economics towards being quantitative. It is, for better or worse, impossible to make quantitative predictions about human action.
The problem with this argument is that it assumes opportunity can remain equal even as distribution moves toward a Pareto-law curve. In reality, even when opportunity is equal at some arbitrary point in time, several years or decades later, those who have amassed wealth also have additional power and opportunity, (which tends to further wealth concentration - lather, rinse, repeat), while those who missed the boat end up with less opportunity than they started with. Even if we assume that the concentration of wealth is primarily a result of skill, intelligence, talent, and hard work, (and I don't - I believe luck is a much, much greater factor than most people realize), shouldn't we take care to limit the size of that disparity? Isn't making sure the disadvantaged don't get left too far behind, one of the major tenets of a civilized society? Also, isn't that how revolutions are prevented?
The top 1% is the most volatile of all "brackets". People rarely stay there for any length of time; it is transient in nature. In fact, most brackets are transient. The problem though, is that the system enables corporations to leverage their resources to create inequality of opportunity through monopoly grants, regulations, barrier to entry, and other legislation of privilege. If my post somehow communicated that I am happy with the status quo, I apologize; that was certainly not my intent, as it couldn't be further from the truth. My study of economics has taught me that efforts to limit the disparity causes more problems than it solves. But more importantly, such interventions are unprincipled; there are grave philosophical implications to granting government arbitrary power. That said, of course we shouldn't allow the disadvantaged to get too far behind. This is a very commonly-held sentiment; so common, in fact, that it is almost certain that society would solve the problem voluntarily.
20:1 was average in the 60's, when we had a strong middle class. Today it's more like 200:1, (perhaps higher), and the middle class is disappearing. Perhaps the current lack of "wealth and progression" of the middle class, and the lack of mobility among classes, are by-products of the concentration of wealth. I'm fully aware that correlation isn't causation, but shouldn't we at least be questioning whether or not there's a causal relationship? (And by questioning I mean actively investigating, not resorting to economic theory and/or ideological dogma).
I think it's actually closer to 400:1 now. I'm not convinced the disparity is a problem. But if it is a problem, we need to make sure we address the root problem and not try to apply a band-aid, which is almost certain to cause unintended (although generally predictable) consequences. Any legislation that is in place that favors a certain people group, creates barriers to entry, or does anything at all to prohibit or restrict the free movement of individuals through the various income brackets would be the first place I would start. I forget where, but I saw something once that was indicated that increasing income disparity tends to be a fairly natural phenomenon in a progressing economy. I'm not sure if that's true or not but ultimately, the income disparity is not what worries me, but rather the healthiness of society as a whole. If the "elite" make 1500x more than the average worker, what does it matter if the average worker lives in abundance? I'm not saying that is the case right now; I am simply trying to point out that disparity in and of itself may not be problematic. Unfortunately, common misinformation is that economics is a zero sum game: that one person must lose for the other to win. Most people disregard that the entire point of a market system is wealth generation; some may accumulate wealth quicker than others, but the general tendency of a free market is for everyones' wealth to increase.
This argument suggests to me that you believe the free market to be somehow morally rig
If your skills and accomplishments are what you boast, then put some pressure on for a raise or go find another job. The fact that you are in this position with this skill set is indicative that you are in this position voluntarily.
No, it's arbitrary. At this point, the government can pass whatever the fuck they want to. The philosophical distinction is that the prior places limits on what the government can do.
Well, you'd have to have a lot more money than a billion dollars.
And they'd have to coercively prevent those individuals from building more farms. Yes, more than a billion dollars would be needed, but his argument also ignores the reality of competition. If a very rich individual comes in to buy up all the farms and then decides not to sell the people any food, there is now exceptional incentive for others to sell these people food (at a profit) until market equilibrium is reached again. Such circumstances are virtually impossible in the long run, especially now that the economy is becoming more and more global. The trouble is the coercive governments that have this nasty tendency of preventing free trade.
A contract is an agreement; it need not necessarily be in paper (although it does make the enforcement much easier). Actually, they are not meaningless without an enforcement agency. Generally speaking, it is bad business practice to continually recant on contracts. You get a reputation for it. I imagine if there were no government enforcement of contracts, there would be a much larger reliance on third party tools to rate how your dealings with an individual/business went. If not that, then some apparatus would have to crop up to help spread information about dishonest dealers. So long as information is free to spread about someone's dishonesty/violation of contract, the contracts have a tendency of enforcing themselves. That said, there *is* a moral difference between a government that enforces contracts and one that enforces a pay scale: the prior is agreed upon by both parties, implicitly stating it is OK if the enforcement agency enforces the terms of the contract; the other has no agreement necessarily by either party, it is arbitrary.
I never said that they'd perform worse, but that they would find other ways to make the money that they are capable of making, e.g. they could leave the area that makes such ridiculous laws. Actually I may be missing up thread responses; I detailed it somewhere else. It is about economic growth because when you place restraints like this on the market, there are real economic consequences.
The truly free market is purely hypothetical. It can never exist because people will always intervene in others' lives. That does not somehow invalidate the goal of achieving more market freedom. By definition, the free market is free from coercion: as soon as there is a mechanism available for corporations to lobby for privilege, coercion has entered the picture and the market is no longer free. What, pray tell, is wrong with this? I fully understand that we live in an imperfect world, which is precisely why I am of the opinion that the less the government is able to intervene, the better, since corporations will always try to use it to their gain (and our loss). What makes absolutely no sense to me is how people can argue, "the free market is an impossible state, so we should just abandon the idea altogether and embrace systems that grant government more power," thus providing an even greater apparatus for the corporations to wield.
It appears that I misspoke. I meant the correlation between free markets and mobility, which is what my assertion has been all along: That the freer the market is from meddling, the more likely you are to see mobility.
I beg your pardon? No, the booms and their busts are caused by credit expansion, which is very limited in a free banking system. The 1800's was filled with legislation that protected bankers, further enabling them to expand credit beyond what would be capable in a free market. You can't simply isolate Glass-Steagall; you must look at all of the bullshit bank protectionist legislation that has been passed throughout our nation's existence.
Nowhere have I stated that the United States is a beacon of truth of the Free Market. No, I think it is quite clear that the soft-fascism that exists here does an excellent job of keeping the rich... well, rich. Interestingly, the article you referenced says:
Along with the aforementioned “Do Poor Children Become Poor Adults?" study The Economist also stated that "evidence from social scientists suggests that American society is much `stickier` than most Americans assume. Some researchers claim that social mobility is actually declining."
Considering the increasingly anti-competitive legislation in the United States, this actually backs up my position. As for comparing Nordic countries with the United States, this is hardly conclusive. I admittedly do not know that much about the Nordic states, but one cannot simply make the correlation with income inequality with mobility. It is probable that the Nordic states do not have the same sort of anti-competitive legislation in place as we do in the states; there could be countless other explanations.
I can appreciate your sentiment. I actually agree with the heart of what your'e saying; it is in the implementation that our views part paths. I'm afraid I don't have time for a full response, so I will instead have to summarize.
It really comes down to this: Is it principled to forcibly take from one person to give to another? We generally call this theft in our society, yet when the government doesn't, it's called welfare. Should there have been some sort of mechanisms to prevent the horse and buggy market from tanking when the automobile was created? Would it not have been an undue burden upon society to prop up that industry when consumers were so decidedly moving away from it? Labor is always a non-specific resource: there is not just a single skill set or ability that one has and once that is no longer in demand in the market, that person is doomed. Thank goodness for that. It may seem like a charitable thing to do: to artificially bolster up a declining industry so that those who previously worked it would not be ill-effected. But it is not. Instead, it creates a dependency upon the state; it also raises questions of how long will the "stimulus" last and to whom will it apply? Would it not be better to allow the natural change in labor specialization that is bound to happen than to provide a false sense of security?
Another contention I have is any system that does exactly what you advocate: the removal of fears and worries about living with a decent quality of life. Labor comes in varying degrees of disutility. The more attractive you make leisure, the more likely one is to forego labor and choose leisure. Contrary to common belief, we do not live in a society of unlimited resources. If enough people stop working (or stop working in market-driven industries), quality of life for everyone will decrease.
Of course that is the goal. But it is ill-conceived and highly fallacious, just like your example, which assumes far too much. These assumptions include but are not limited to the following:
The person who runs a $100 million company is indeed the person responsible for determining his own pay
There are no other employment options for these individuals
No threat of outside competition exists
The point I'd like to focus on is the last one; I think the others are rather self evident. But you see, the market always is moving towards the "evenly rotating economy" (ERE, aka general equilibrium). This is a hypothetical construct in economics that exists to analyze what would happen if there were no more uncertainties and no more change in peoples' preferences or actions. In the ERE, profits and losses disappear: for entrepreneurs, the only source of income that is left is that of the natural rate of interest, which is uniform throughout our hypothetical world. The ERE will never come into realization, but nevertheless, it is the constantly-moving target to which the market is always attempting to shift.
All that said, let us consider your example more thoroughly. It is clear that such a company has achieved phenomenal profits (albeit arguably at the expense of their employees). However, other entrepreneurs will recognize this; new businesses will enter the market. After all, those entrepreneurs would be happy to make less than $98 million: perhaps $50 million for the owner would be sufficient? Now, everything else equal, the prices of the other company can be severely undercut. What is more important to our discussion, however, is that upon another business entering the market, the demand for labor increases. As we know from the Law of Supply and Demand, when demand increases, so does the price, everything else staying the same. This scenario will continue until the profits of all the businesses involved are roughly equivalent to that of the rest of the economy. This does assume that no coercive action is taken by the state or any other entity, such as legislation barring entry into this new, highly prosperous market.
Slashdot Mirror
The rationality I'm referring to is economic rationality; I probably should have made that more clear. Based on your wholehearted agreement of that one particular sentence, it sounds like we are in agreement.
The problem is you are imposing your own values onto others. You have made a value judgement that is decidedly not yours to make. Economically speaking, people *always* behave rationally. You might say that it is irrational that someone would run up their credit cards irresponsibly, but someone who does just that demonstrates that, based on his or her own value scale, was the most rational decision. It doesn't necessarily mean that it was the best financial decision. But that is not for us to say. Take, for example, the current health insurance debacle. Government has decided that it is a bad decision for people to not purchase health insurance. I know many perfectly reasonable, rational people who did not purchase health insurance before the ACA because it was not worth it to them. I made the opposite decision; but there is no way that I could ever objectively come to the conclusion that their decision (or mine) was a good or bad one. Value is entirely subjective and for someone to impose their own subjective values onto another is asinine, coercive, and straight up maddening.
It is not needlessly inefficient. For various reasons, consumers have demonstrated that they WANT these "needlessly inefficient technologies." Just because you don't have a use for them doesn't mean another person doesn't. Everyone has different preferences and value scales. Unfortunately it has become all too common for governments to step in and say they no better than all of the individuals that they govern. What's worse, we have people stupid enough to say "[this is] the right thing to do," as if it is some sort of moral issue that people choose to use "needlessly inefficient technologies." Under what ground can one assert morality over the subjective value of individuals? No, I'm afraid the only thing we can philosophically come to is that it is wrong for a 3rd party to interfere with the consumer making an exchange with a producer for some arbitrary, nonsensical reason.
Hahahaha yeah it was government intervention that caused repackaged subprime mortgages and credit default swaps. Pull the other one.
Yeah artificially low interest rates and easy credit made possible by the Fed had absolutely *nothing* to do with the housing boom. I suppose the destruction of risk caused by "too big to fail" and other such nonsense also had no part to play.
Under the fair tax, nobody pays income or payroll tax at the time of exchanging labor for money. Everybody pays (a much higher than currently exists anywhere) sales tax when money is exchanged for goods or services. Every citizen who asks for one receives a $10k (or so) check from the IRS each year in lieu of reporting income tax and receiving a tax refund or accounting for a tax liability. Basically: every citizen receives a 10k stipend to account for poverty-level spending and for the switch from progressive tiered income tax to regressive flat sales tax.
Yeah I understand the consumption tax part of it. I was unaware of the $10k subsidy, which is an awful idea. It's similar to Milton Friedman's "reverse income tax." Such practices essentially subsidize poverty. What's worse is at this point it's not just poverty that's subsidized, but everyone. The net effect is that these sorts of things tend to increase the disutility of labor, making people less likely to pursue higher paying jobs or better productivity. Also, the money has to come from somewhere (or I suppose it could just be printed, thus marginalizing all of the rest of the currency). The last thing we need is higher taxes or more government debt; those are the only two mechanisms government has to acquire such funds. But wait! Tax the rich! Yeah, never mind that the rich (top 10%) already pay 70% of our income taxes. (But really, I would be more worried about the implications of subsidizing the poor than about taxing the rich.) Now, if this $10k replaced ALL other welfare benefits and was not based off of how many children people have, it might be better than the current system (more on this below).
Not simply wanting something, but wanting something, having the funds, and acting on it. The demand curve of econ 101 doesn't measure what people want, but what they are willing and able to spend. I want solar panels on my house: that doesn't mean I can just have them without taking a lot of other things into consideration. Minimum-wage worker X wants to feed and clothe his children, but he has to choose one or the other this month.
You keep speaking of minimum wage as if it's some sort of living wage. It isn't and was never designed to be such a thing. Furthermore, if it was a living wage (say $12-15/hr), it would further exacerbate our unemployment problem, as people who cannot provide $12-$15/hr worth of labor would no longer be employable. People working minimum wage jobs have no business having children; it is financially irresponsible. But people are far removed from financial responsibility when they know aid is always available, exacerbated by the fact that welfare benefits increase as financial irresponsibility increase (aka more children). What people generally fail to realize is that the vast majority of the time, people who work minimum wage jobs do not work them their whole lives; they move on, they move into more productive jobs that pay more. This brings me to another reason why I am against minimum wage laws and general poor subsidization: Once a certain level is reached, it incentivizes people to stay where they are and not strive to improve their skills and move into more productive areas. I realize you are not proposing this (I don't think), but one of my friends thinks every job should more or less pay the same. They should all pay, let's say, $50,000 a year. Let's ignore the vast market distortions this would cause and instead analyze the incentives this provides. Why would anyone want to invest in new skills (time-wise and monetarily) if there is to be no
I don't follow. Does not the private sector produce goods and services for the public sector to consume? Granted: there is a problem with no-bid contracts and inflationary billing to the government. Granted: the public sector is anchored to political power instead of floating on the economic sea as the private sector does. But the public sector participates in many markets. Yes, the government distorts markets. Ideally it does so in such a way as to enforce an accounting for externalities like pollution with impacts that would otherwise be ignored or at best delayed until after their deleterious effects have already caused harm, or to ensure equal opportunity through such actions as trust-busting. I don't know a better way to accomplish these important goals other than government. Free markets don't do it: monopoly is a natural tendency of an unregulated market. Free markets don't account for the commons until they are already tragic.
My point is that there is no way to measure the governments contributions to the market place, so we should not count it at all. I was simply trying to point out that using GDP is a measurement of productivity is very fallible. And no, the private sector does not produce goods and services for the public sector to consume. It creates goods and services for consumers to consume.
As for the government's roll in the free market, I very much disagree. It has no place; properly enforced property rights is surely enough to handle cases such as pollution or other externalities. In fact, if private property rights were respected, polluters would likely be punished much, much harsher than under the system we have now. I also challenge your claim that monopoly is a natural tendency of an unregulated market. But if we're going to branch into talk of monopolies, we must come to an objective definition that is actually relevant.
Surely new construction and remodelling [nahb.org] (5% of GDP) count as productivity? I'm not so sure about rental income and particularly 'imputed' rental income...
Yes, new construction and remodeling count as productivity. However, with the government's intervention in the housing market via easy, cheap loans, and all of the other nonsense that caused the last boom/bust cycle, asset prices have inflated beyond their natural levels. As such, the productivity levels as reported by GDP are also inflated. Once again, my point is simply that GDP cannot be used as a measure of productivity.
and I'm a little squigged by these, too. It seems that "Gross Domestic Product" doesn't measure 'what we produce' so much as 'how much money we move', which is perhaps not as useful for comparative analysis of income level over time, but IMO is still an extremely important metric. Currency is the blood of the economy; the economy is healthy when currency moves and circulates, regardless of who moves it. The more hands it passes through the better. The economy is unhealthy when the flow of currency is dammed or forced to recirculate in small segments.
Currency is not the blood of the economy, production that meets consumer wants and needs is. Your premise (the economy is healthy when currency moves and circulates) is flawed. What good does moving currency accomplish if there are not enough goods?
I agree. What do you think about the Fair Tax [wikipedia.org], under which, as I read it: we tax consumption instead of income and profit, ensure all citizens are nudged above the poverty line, and encourage a strong business climate with drastically reduced business taxes.
The name is misleading: there is no such thing as a tax on consumption. A consumption tax simply ends up being a roundabout method of taxing income. When income is taxed, consumption may be reduced, but so too is savings and investment. I'm all for reducing business taxes. This will sound extreme, but I don't believe there should be any business taxes. I think the
The ratio of CEO compensation to average worker compensation is now approximately 10 times its value in 1950. This is approximately commensurate with the average increase in the Dow average adjusted for inflation.
Right; and one should hardly be surprised by this since our government continually passes more and more regulations that generally only benefits big businesses. The barrier to entry for a small or medium-sized firm to get on a public stock exchange is enormous. When competition is limited, one should not be surprised when the market can no longer efficiently remove wasteful players. Paying prices vastly more than necessary to secure a proper executive is, of course, very wasteful. But this is not a fundamental issue with CEO pay, this is an issue with regulation that keeps smaller firms out.
But why should CEOs receive the entire benefit of a growing economy when all actors have contributed to that growth? CEO compensation has no correlation with company performance.
As I see it, the problem has nothing to do with a free vs. a coerced market. The problem is that the market of executive compensation is entirely divorced from the market at large. "Stockholders... vote... for whatever the management recommends no matter how poor the management’s record of accomplishment may be". This is what I mean by oligarchy: a few privileged elites have control over this smaller market without the essential feedback cycles that stabilize prices in the larger economy.
Yes, and this smaller market is much easier to manipulate when it remains artificially small due to artificial barriers to entry. That said, your definition of oligarchy is quite arbitrary; even if you could absolutely measure the power the "privileged elites" have over a smaller market, at what ratio of power to size does it constitute an oligarchy? I do agree with your sentiment, and I think my paragraph above speaks to it.
The issue is that the market value of labor has plummeted in relation to productivity and in relation to the value of top earners. In the 50s one could work part time at a minimum wage job and pay rent and college tuition and walk away with a degree free and clear. Today, just to pay rent, one needs roommates or more than one part-time minimum-wage job, let alone any ability to pay for education in order to get a better job.
1950: $0.75/hour * 20 hours * 50 weeks = $750 wages $42 * 12 months = $504 rent $35 * 4 quarters = $140 tuition
2013: $7.25/hour * 20 hours * 50 weeks = $7250 wages $602 * 12 months = $7224 rent $3917 * 2 semesters = $7834 tuition
How do you measure productivity? GDP is a pretty useless measurement. Also, there is this silly notion that public sector consumption should actually be counted as production. Since there is no objective way to measure public sector "productivity" (since it is not part of a market), it should not be included in aggregates; also it is quite common for the public sector to be horribly inefficient with its "funds". Government makes up
I would love to hear your arguments that back your assertions. Specifically: How have you concluded that managerial skill isn't worth {x} more than {y} labor? What about the executive labor market is not free (I think this is the core of your second dispute; it very well may not be free)? If the executive market and labor market differ (they most certainly do), in which way should they not differ and why?
It also may be beneficial if I define free market: A market that is free from coercion. Clearly, all markets have some elements of coercion in them; taxes alone is enough to ensure that. How would you define oligarchy? What about monopoly? The only satisfactory definition I've heard of either involves state interference, such as prohibiting all competitors in a market, save Company B. Few firms in a given market is insufficient to declare an oligarchy.
Once you're home, I'm sure you can come up with enough household chemicals to do the trick. If not, the .45 under the night stand ought to do it. I realize this may not constitute "humane," but whatever. I'd do it if I had no other choice. :P
Interestingly, market equilibrium is reached faster when the market is larger. Believe it or not, I do not follow Ayn Rand I do not consider myself an Objectivist. Economically speaking, though, we must treat things scientifically: such things must be rational. I agree, we will probably continue in circular discussion. I have thoroughly enjoyed the discussion with you and would like to thank you for keeping a narrow subject matter; far too often when I discuss things like this, someone says, "Yeah, but {{thing out of left field that is somewhat related, but not really}}". I do have one parting thought, though: Does the regulation that you would propose really lend itself to be more dynamic and adjust to market conditions faster than an unregulated market?
P.S. On a side note, there is a reason outside of economics that I steer clear of regulation and it really boils down to the nature of government to grab for more power. It's so much more challenging for such the government to gain power if there are philosophical lines on what it can and cannot do. The US Constitution was a failed attempt at setting these philosophies (I think ultimately, the philosophies were far too vague and open to misinterpretation); it actually allowed far too much leeway. If it were up to me, there would be a simple litmus test for whether a piece of legislation is valid or not: Does the legislation step beyond enforcing contracts and providing basic protection of its citizens (protection against other citizens, not protection of the citizens against themselves)? Of course, even that is possible to get around because "protection," as we've seen in recent years, can be taken to the extremes.
It is also too bad that Slashdot has no private messaging system, which makes it very difficult to continue conversations like this.
It really is too bad we can't grab a beer. I see this conversation moving into monopolies and oligopolies, which I find fascinating. For now, a brief summary will have to do. Basically, the problem with monopolies and oligopolies is that there is *no* way to objectively classify a company as such, save for when the government grants such a status. People like to talk about monopoly prices, etc, but the reality is, there is *no* objective way to determine the objective price. Murray Rothbard has some fascinating insight into this in Man, Economy, and State, which he elaborates on in Power & Market. As far as cartels go, there is indeed no difference between a merger and a cartel so long as the cartel continues to exist. Empirically, though, we know that cartels tend to be short lived; market forces have a tendency of breaking them up. It ultimately all goes back to competition: those members of the cartel who are more efficient get frustrated with essentially propping up the less-efficient and break from the cartel. Even if the balance is even enough, if real price gouging is going on, the same exact thing happens as in a monopoly: new competition enters the market. I realize this is a fundamental point on which we disagree on, though.
Truth be told, there is no economic reason why a firm could not establish itself so strongly in a market with exceptionally high barrier to entry and do exactly what you've talked about; if that were to happen, regulation may be reasonable (although I fear that in countries like the US, regulation would only get passed if it helped the corporation). I would still be very apprehensive of regulation, though, even if corruption could be ruled out. Even if you can somehow deal with all of the problems with defining monopolies, identifying the monopoly price vs the market price, etc (you can't), you still have to reevaluate where things stand as time and technology progresses. One of the great things about the free market is the innovation it brings, which tend to lower prices, thus increasing standard of living. Without a free market price to compare to, one does not know if the current rates of the government-granted monopoly are appropriate or not. This is known as the calculation problem that occurs when there is no free market comparison; it is one of the main reasons the Soviet Union fell on its face in such an epic way.
History tells us that there is nothing "natural" about natural monopolies. Here is a great read, if you're interested: https://mises.org/journals/rae/pdf/rae9_2_3.pdf. It is a bit dated, but the principles remain the same. So, to sum up the summary, while monopolies and oligopolies are theoretically possible, empirical data says not to worry.
First of all, let me state that I have very much enjoyed our exchange. It's refreshing to talk to someone who disagrees in an intelligent manner.
As for what an unregulated cellular market goes, I do not know exactly what that would look like. But empirically, even fields that naturally have high barriers to entry still have a tendency of being more competitive than when the government grants "natural monopoly" status. One thing that I've speculated about in the free market, is that there may be corporations that own land specifically for the use by utilities. They would then regulate its use as it sees fit, renting out portions of it to other corporations such as cellular companies. This would, of course, lower barriers to entry greatly; but of course, there's no way to be sure something like this would happen. Regardless, though, even if an exceedingly high barrier to entry prevented more than just a handful of competitors, I'm confused why that would lead to higher prices? Do we not already have very high prices already? At some point, in the free market, profits in one area drive in other competition, as you've mentioned; high barriers to entry or not, competition will inevitably come. I'm confused as to how our current system does a better job of this? One final thought on this: if the first to enter a given market keeps their prices low enough as to not provide opportunity for competition to come in, and their services adequately meet the need of the consumers (in other words, there is not really a successful business model in trying to compete), might I ask, what is the problem, exactly? Is not the point of all this to ensure that consumers receive the product that they want at the best price available? If a competitor cannot offer them a better service or a similar service at a lower price, is the consumer actually harmed? The threat of competition never goes away; the original business to enter the market must always worry about the potential of new competition. (Actually, if you want to talk further about monopolies, I would be happy to elaborate much more on this topic.)
And yes, I do believe we would have a continent-wide cellular network simply because consumers want it and clearly are willing to for it. If there is a successful business model somewhere, it is only a matter of time before some "greed, profit-seeking entrepreneur(s)" move in to fill the gap.
Indeed, there is no way to state that all regulations are more bad than good. Economics does not make value judgements, after all. There is no real way to measure such things; I just haven't seen any arguments that justify such intervention in the market. As for predictions, it really depends on what school of thought you follow. Economics by nature can only give qualitative predictions that ultimately rely on everything remaining the same (further human action, which is inevitable, can always move the target). Unfortunately, there is a great deal of "mathematical economics" schools out there that attempt to move Economics towards being quantitative. It is, for better or worse, impossible to make quantitative predictions about human action.
The problem with this argument is that it assumes opportunity can remain equal even as distribution moves toward a Pareto-law curve. In reality, even when opportunity is equal at some arbitrary point in time, several years or decades later, those who have amassed wealth also have additional power and opportunity, (which tends to further wealth concentration - lather, rinse, repeat), while those who missed the boat end up with less opportunity than they started with. Even if we assume that the concentration of wealth is primarily a result of skill, intelligence, talent, and hard work, (and I don't - I believe luck is a much, much greater factor than most people realize), shouldn't we take care to limit the size of that disparity? Isn't making sure the disadvantaged don't get left too far behind, one of the major tenets of a civilized society? Also, isn't that how revolutions are prevented?
The top 1% is the most volatile of all "brackets". People rarely stay there for any length of time; it is transient in nature. In fact, most brackets are transient. The problem though, is that the system enables corporations to leverage their resources to create inequality of opportunity through monopoly grants, regulations, barrier to entry, and other legislation of privilege. If my post somehow communicated that I am happy with the status quo, I apologize; that was certainly not my intent, as it couldn't be further from the truth. My study of economics has taught me that efforts to limit the disparity causes more problems than it solves. But more importantly, such interventions are unprincipled; there are grave philosophical implications to granting government arbitrary power. That said, of course we shouldn't allow the disadvantaged to get too far behind. This is a very commonly-held sentiment; so common, in fact, that it is almost certain that society would solve the problem voluntarily.
20:1 was average in the 60's, when we had a strong middle class. Today it's more like 200:1, (perhaps higher), and the middle class is disappearing. Perhaps the current lack of "wealth and progression" of the middle class, and the lack of mobility among classes, are by-products of the concentration of wealth. I'm fully aware that correlation isn't causation, but shouldn't we at least be questioning whether or not there's a causal relationship? (And by questioning I mean actively investigating, not resorting to economic theory and/or ideological dogma).
I think it's actually closer to 400:1 now. I'm not convinced the disparity is a problem. But if it is a problem, we need to make sure we address the root problem and not try to apply a band-aid, which is almost certain to cause unintended (although generally predictable) consequences. Any legislation that is in place that favors a certain people group, creates barriers to entry, or does anything at all to prohibit or restrict the free movement of individuals through the various income brackets would be the first place I would start. I forget where, but I saw something once that was indicated that increasing income disparity tends to be a fairly natural phenomenon in a progressing economy. I'm not sure if that's true or not but ultimately, the income disparity is not what worries me, but rather the healthiness of society as a whole. If the "elite" make 1500x more than the average worker, what does it matter if the average worker lives in abundance? I'm not saying that is the case right now; I am simply trying to point out that disparity in and of itself may not be problematic. Unfortunately, common misinformation is that economics is a zero sum game: that one person must lose for the other to win. Most people disregard that the entire point of a market system is wealth generation; some may accumulate wealth quicker than others, but the general tendency of a free market is for everyones' wealth to increase.
This argument suggests to me that you believe the free market to be somehow morally rig
If your skills and accomplishments are what you boast, then put some pressure on for a raise or go find another job. The fact that you are in this position with this skill set is indicative that you are in this position voluntarily.
You seem to be falling into the trap of the fallacious Labor Theory of Value. Pull up! Pull up!
No, it's arbitrary. At this point, the government can pass whatever the fuck they want to. The philosophical distinction is that the prior places limits on what the government can do.
Well, you'd have to have a lot more money than a billion dollars.
And they'd have to coercively prevent those individuals from building more farms. Yes, more than a billion dollars would be needed, but his argument also ignores the reality of competition. If a very rich individual comes in to buy up all the farms and then decides not to sell the people any food, there is now exceptional incentive for others to sell these people food (at a profit) until market equilibrium is reached again. Such circumstances are virtually impossible in the long run, especially now that the economy is becoming more and more global. The trouble is the coercive governments that have this nasty tendency of preventing free trade.
A contract is an agreement; it need not necessarily be in paper (although it does make the enforcement much easier). Actually, they are not meaningless without an enforcement agency. Generally speaking, it is bad business practice to continually recant on contracts. You get a reputation for it. I imagine if there were no government enforcement of contracts, there would be a much larger reliance on third party tools to rate how your dealings with an individual/business went. If not that, then some apparatus would have to crop up to help spread information about dishonest dealers. So long as information is free to spread about someone's dishonesty/violation of contract, the contracts have a tendency of enforcing themselves. That said, there *is* a moral difference between a government that enforces contracts and one that enforces a pay scale: the prior is agreed upon by both parties, implicitly stating it is OK if the enforcement agency enforces the terms of the contract; the other has no agreement necessarily by either party, it is arbitrary.
To be abundantly clear, I hate the current system as much as the next guy. I do not advocate for the status quo.
I never said that they'd perform worse, but that they would find other ways to make the money that they are capable of making, e.g. they could leave the area that makes such ridiculous laws. Actually I may be missing up thread responses; I detailed it somewhere else. It is about economic growth because when you place restraints like this on the market, there are real economic consequences.
The truly free market is purely hypothetical. It can never exist because people will always intervene in others' lives. That does not somehow invalidate the goal of achieving more market freedom. By definition, the free market is free from coercion: as soon as there is a mechanism available for corporations to lobby for privilege, coercion has entered the picture and the market is no longer free. What, pray tell, is wrong with this? I fully understand that we live in an imperfect world, which is precisely why I am of the opinion that the less the government is able to intervene, the better, since corporations will always try to use it to their gain (and our loss). What makes absolutely no sense to me is how people can argue, "the free market is an impossible state, so we should just abandon the idea altogether and embrace systems that grant government more power," thus providing an even greater apparatus for the corporations to wield.
It appears that I misspoke. I meant the correlation between free markets and mobility, which is what my assertion has been all along: That the freer the market is from meddling, the more likely you are to see mobility.
I beg your pardon? No, the booms and their busts are caused by credit expansion, which is very limited in a free banking system. The 1800's was filled with legislation that protected bankers, further enabling them to expand credit beyond what would be capable in a free market. You can't simply isolate Glass-Steagall; you must look at all of the bullshit bank protectionist legislation that has been passed throughout our nation's existence.
Along with the aforementioned “Do Poor Children Become Poor Adults?" study The Economist also stated that "evidence from social scientists suggests that American society is much `stickier` than most Americans assume. Some researchers claim that social mobility is actually declining."
Considering the increasingly anti-competitive legislation in the United States, this actually backs up my position. As for comparing Nordic countries with the United States, this is hardly conclusive. I admittedly do not know that much about the Nordic states, but one cannot simply make the correlation with income inequality with mobility. It is probable that the Nordic states do not have the same sort of anti-competitive legislation in place as we do in the states; there could be countless other explanations.
I can appreciate your sentiment. I actually agree with the heart of what your'e saying; it is in the implementation that our views part paths. I'm afraid I don't have time for a full response, so I will instead have to summarize.
It really comes down to this: Is it principled to forcibly take from one person to give to another? We generally call this theft in our society, yet when the government doesn't, it's called welfare. Should there have been some sort of mechanisms to prevent the horse and buggy market from tanking when the automobile was created? Would it not have been an undue burden upon society to prop up that industry when consumers were so decidedly moving away from it? Labor is always a non-specific resource: there is not just a single skill set or ability that one has and once that is no longer in demand in the market, that person is doomed. Thank goodness for that. It may seem like a charitable thing to do: to artificially bolster up a declining industry so that those who previously worked it would not be ill-effected. But it is not. Instead, it creates a dependency upon the state; it also raises questions of how long will the "stimulus" last and to whom will it apply? Would it not be better to allow the natural change in labor specialization that is bound to happen than to provide a false sense of security?
Another contention I have is any system that does exactly what you advocate: the removal of fears and worries about living with a decent quality of life. Labor comes in varying degrees of disutility. The more attractive you make leisure, the more likely one is to forego labor and choose leisure. Contrary to common belief, we do not live in a society of unlimited resources. If enough people stop working (or stop working in market-driven industries), quality of life for everyone will decrease.
Of course that is the goal. But it is ill-conceived and highly fallacious, just like your example, which assumes far too much. These assumptions include but are not limited to the following:
The point I'd like to focus on is the last one; I think the others are rather self evident. But you see, the market always is moving towards the "evenly rotating economy" (ERE, aka general equilibrium). This is a hypothetical construct in economics that exists to analyze what would happen if there were no more uncertainties and no more change in peoples' preferences or actions. In the ERE, profits and losses disappear: for entrepreneurs, the only source of income that is left is that of the natural rate of interest, which is uniform throughout our hypothetical world. The ERE will never come into realization, but nevertheless, it is the constantly-moving target to which the market is always attempting to shift.
All that said, let us consider your example more thoroughly. It is clear that such a company has achieved phenomenal profits (albeit arguably at the expense of their employees). However, other entrepreneurs will recognize this; new businesses will enter the market. After all, those entrepreneurs would be happy to make less than $98 million: perhaps $50 million for the owner would be sufficient? Now, everything else equal, the prices of the other company can be severely undercut. What is more important to our discussion, however, is that upon another business entering the market, the demand for labor increases. As we know from the Law of Supply and Demand, when demand increases, so does the price, everything else staying the same. This scenario will continue until the profits of all the businesses involved are roughly equivalent to that of the rest of the economy. This does assume that no coercive action is taken by the state or any other entity, such as legislation barring entry into this new, highly prosperous market.