A Challenge for Moorobot

[Nielsio]

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There is no known large scale society that didn't need a significant level of government intervention.

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Time for some false morality exposing.

You may explain yourself. Societies don't exist, people do. You state that people need violent intervention. What is this need, where does it come from, and is it universal, as in: the people that are being intervened, can they also intervene on the people doing the invervening?

[pvn]

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However, car companies are often paying less than $5,000, all things considered, to create a car they can sell for $25,000 to a dealer, who then charges $30,000 to the consumer. Among other things, More competition from others who can also take advantage of economy of scale would push that car's price a lot closer to the actual cost to create that product.

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After Wal-Mart hires you to implement your ingenious "double all prices to increase profits" plan, maybe you can go work for GM and show them how much money they're making and how they really are not losing $12,000,000 per day.

[madnak]

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No, if somebody else was competing with them, who had the ability to engage in this economy of scale, then the prices would be much lower still in general. If it costs me $40,000 to make a car that somebody will pay only $30,000 for, it is a complete waste.

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Thus, such a product wouldn't be viable.

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However, car companies are often paying less than $5,000, all things considered, to create a car they can sell for $25,000 to a dealer, who then charges $30,000 to the consumer.

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Making the product viable, and making a profit for the manufacturer and the distributor and the retailer while giving the consumer a sweet ride.

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Among other things, More competition from others who can also take advantage of economy of scale would push that car's price a lot closer to the actual cost to create that product.

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I agree. But if no other company is willing to make the capital investment, or is able to outperform the initial company, then the initial company is providing the best price the market will support. If that price is so high as to result in 500% profit margins, believe me someone else will make the investment and compete. As far as I'm aware that level of profit is unheard of, even with all the corrupt corporate giants.

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First you should look up monopsonistic labor markets-most markets in labor are some mix of monopsony and pure competition, hence you aren't using the correct economic model in your post (and you can't simply just use a model, because last time I checked there wasn't a mixed model-as an aside, this is prevalent among actual markets; they almost never fit very easily into any of the textbook models).

Remember, I'm talking about averages here. Not every employee at every job making $6/hr is worth exactly $20/hr.

Second, market power: a lot of workers have none. you have to think about how easily replacable workers who make $5 an hour-a lot of people could do that job in most cases (not that they want to), that is why it is called unskilled labor. So it makes no sense to pay Joe (whom you somehow know is worth $20/hr) $6/hr when you know you can have someone else who can work the same job for $5/hr and bring $20/hr in value to the company. Your example makes sense only if you suppose there is not someone else willing to take the job for $5/hour who will bring about the same productivity. because there are always some unemployed people in capitalism, and because welfare is temporary and in any case is socially stigmatized and does not come close to replacing all the benefits of being employed, there is always a nice pool of people who have the ability amd desire to work unskilled jobs. Your example would make sense if nobody else had the capacity to perform the jobs in question, however, that is rarely true. The same thing is true when a worker asks for a wage increase: why is it in the interest of employers to raise that person's wages when someone else will do the same job for less?

So essentially the supply of unskilled but highly productive labor is very high. This puts the capitalists in a very solid bargaining position. Hence they can set both the wages and working conditions for unskilled laborers to a considerable degree. (and also semi-skilled and skilled jobs, if a lot of people have the skills/qualifications in question relative to demand and/or the skill were cheap, easy and untimeconsuming to attain). This is the main reason unions increase wage rates (20-30% on average): when workers are unionized, that in some ways changes a bunch of workers into one harder to replace worker, one whose strike can actually make things difficult for an employer, increasing the power of labor relative to capital.


Third, labor markets are notoriously incomplete (this is a technical term) and probably always will be, as the 'somehow knows' comment above I was alluding to. One of the reasons why this is is that people aren't omniscent. An example of its incompleteness: even if there were vastly different levels of ability amongst unskilled workers, it is hard to tell who exactly has that ability. Burger King does not know how much money employ X makes for Mcdondald's; Mcdonald's itself has not calculated this for each individual employee and told them so nobody can throw it on an application. So employers don't necessarily know who is going to make them a lot of money, and workers can't 'demand what they are worth' under a state because they do not know (and in any case would be worth something else at a different job). But labor markets are incomplete for many other reasons; and for many reasons I think the market in labor is much worse than the market in consumer goods.

Always take into account the (simplyfing and/or fraudulent) assumptions that economic models make, and compare them to current, real conditions. You will then quickly discover they are rarely accurate descriptions of actual markets, and learn not just to assume that we can derive policy decisions or understand the way the universe works just because of them.

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Keep in mind that I'm working from the assumption that capitalism results in ideal competition. "Ideal" meaning the best that is practical under a certain economic context. Of course you dispute that assumption, and I don't think this thread is the place to debate it, but it crops up very often and seems like a good indicator of our basic differences.

At minimum it seems difficult to evaluate the situation, but a low demand for labor is a major element. Do you disagree with the statement that the demand for labor is infinite in AC?

Many companies don't know what their products are worth initially. Many companies also make attempts to undercut one another. And yes, many companies are profitable and almost all of them have some income. Isn't every market incomplete to some degree? Is there some qualitative difference in the labor market, or is there just a "greater margin of error?"