no third solution

Blogging about liberty, anarchy, economics and politics

Category Archives: Economic Theory

Wages, Revenue & Labor

August 10th, 2010

Without ‘owners’ the workers collect revenue from sales. What the workers keep we might consider “wages” in an accounting sense, but strictly speaking, there are no “wages”, there is just “revenue”.

We might suppose that, in addition to probably cutting out the ‘middleman’ (the capitalist-entrepreneur), worker-owners would allocate revenues over their costs of production differently than would the capitalist ‘owners’. For starters we expect that they would either have, or aim to have, vastly different cost structures in the first place. But that’s a digression we need not follow.

So for the moment let’s forget about this and imagine that the workers have just wrested control from the hands of the “capitalists”, and that the cost structures (imperfect as they are) remain at least for the short- and probably for the medium-term.

Aside from beginning to pink-slip all the bureaucrats (how you identify and defenestrate the bureaucrats, I don’t really care) and turning those dividend checks (previously distributed to absentee shareholders) in to coin in the workman’s pockets, what else do they do differently?

The entirety of disagreement between cappies/commies, boils down to what is essentially a difference of opinion with regard to how sales revenues should be allocated.  Is it really that simple?

Maybe, but probably not. Stay tuned.

Proof You Are Being Exploited

July 16th, 2010

Ever wonder why we’re still working 40 hours per week? As if that’s some sort of magic equilibrium between labor/leisure that has just organically emerged over the centuries? It’s insanity, really. And evidence that we aren’t free to choose. I touched on this before, commenting that all of our productivity is wasted:

The average worker is several orders of magnitude more productive than he might’ve been a half-century hence… We’ve got more more people doing more jobs, producing more things and still we’re working 40 or 50 or 60 hours a week.

And this doesn’t strike anybody as being just a little bit insane?

In a free market where you aren’t being exploited there is a continuum, a trade-off between labor and remuneration. Let’s say you figure out some way to do your job in a quantifiably better/faster/more efficient manner. Assume for this thought experiment that you are able to double your productivity.

In a free market there is a real tradeoff between labor, leisure, and pay

What would happen in a free market? You could cut your work-week in half and achieve the same output for which you would expect the same remuneration. You could keep your work-week the same, in which case you would expect greater remuneration (perhaps as much as double your current pay). Or any combination along that continuum which would result in some amount of less work, and some amount of relatively (but often absolutely) greater remuneration.

What happens in practice? If you develop some brand new process which, compared to the old process, requires half as much labor, the odds are practically zero that your employer will offer you to begin working a 20-hour work week for the same rate of pay, despite the fact that by working 20 hours you produce the same quality and quantity of output. And it is equally unlikely that they will double your salary, which would justify a 40-hour week because you now produce twice as much and as good of output as before.

Probably what will happen is that some other sap will get canned. You’ll have to absorb at least part of his workload but you will not absorb any of his salary. The corporation will absorb his salary as profit. If you’re fortunate, you’ll get a small raise or spot bonus.

Generally speaking, for a job well-done, under budget, ahead-of-schedule, and to quality, the only reward is more work. We don’t get to enjoy more leisure if we produce more and better and faster, we just have to work even more. For the most part, productivity is severely penalized.

What is the alternative? I do not believe for a second, that given all of the technological advances in the last 200 years, a majority of people in the developed world would continue to work 40 hours a week, if they had any say in the matter whatsoever.  Imagine a 20-hour work week.  Imagine creativity unleashed. Imagine what would happen to progress and productivity, if only people were actually rewarded for the work that they do.

Health Care Reform Rains on Ski Resorts

April 5th, 2010

There’s going to be a lot of fallout from the health care “reform” that’s recently been forced upon America. For starters, certain plans (i.e., high deductible or catastrophic plans) will be de jure illegal — even though most people who buy these plans do so with eyes wide open and with the financial wherewithal to deal with all but the most catastrophic perils. And it’s going to cause a lot of disruptions for a lot of industries, who are already spending millions of dollars on lobbyists (to fight the laws), lawyers (to analyze and make recommendations) and consultants (for advice on how to deal with the changes).

The snow sports/resorts industry hasn’t been spared, either, according to Vail Daily:

New federal health care reform could cost Vail Resorts and other ski companies a lot of money in 2014, the year a provision goes into effect that fines employers $2,000 for every employee that works more than 120 days per year and isn’t offered health care coverage…

Ski areas often employee seasonal, part-time workers who, under the new law, would qualify for employer heath care coverage even though the employees are not considered full-time employees.

— Vail Resorts Eyes Health Reform Costs (April 2, 2010)

I don’t even know where to begin with this. Of course everyone should be “offered health care coverage” but that kind of misses the mark. Health care reform isn’t asking employers to “offer” health care, it’s requiring that they provide health care. There’s a difference here.

I’ve said it before, that the biggest problem with “health care” in the U.S. is that it is essentially tied to one’s employment, and furthermore that those who happen to be employed receive health care on favorable terms compared to the unemployed or the self-employed due to the unintended consequences of World War II-era price controls, embodied in a tax code which treats employer-provided health care “benefits” differently than personal health care expenditures.

Nothing in the so-called health care “reform” (which was drafted primarily by the health care industry) does anything to address the source of the problem. Requiring people to buy a product from an oligopoly will only solidify their power.

So what will happen if this “reform” really does require resorts to offer provide health care to their seasonal, part-time workers?

Those $90 lift tickets are going to get a bit more expensive, and it’s likely that some people currently employed will become unemployed as the marginal costs of employing them exceeds their value-add. If you’re currently working for $10 an hour and you work 1,000 hours a winter, you’re costing the company $10,000. If, next year, the company has to provide you with $3,000 worth of health care, that’s like giving you a 30% raise. What will happen is that they’ll pay you $7/hour, or they’ll do without you, because nobody, anywhere, ever, gets a 30% raise without sucking serious CEO dick and then blackmailing him for it.

Any political measure which forcibly raises the costs of doing business will be passed on to individual taxpayers. Taxes are (always and everywhere) borne by individuals, and not by “corporations”. These costs may be borne as reduced profits/dividends for shareholders, reduced wages, hours or other benefits for employees, and last-but-not-least, as higher prices for customers.

The end result is that we all suffer, while the force of law underwrites the insurance companies’ profitability.

no third solution

Blogging about liberty, anarchy, economics and politics