I work on a large software project. I’m part of one team that works with 5 other teams to develop a core product which is then built on top of for 3 other core applications each of which have their own development teams that are made up of subteams of 3-8 members. The company sells the product for millions of dollars to existing customers and new customers. How much should I get paid?
The product core and the first application took 2.5 years to build, during which time there were no sales. The only way we were able to build the first product was because the company has several billion dollars in the bank and was able to fund the project a capital investment in the future sales.
I hope you can see into the point I’m making. There may be other ways to build software products. And in fact there are more organic models for software development. However, when a company needs a product like ours, they have to save money and invest in it’s development. Or they come to a company like ours and ask for products we’ve already built.
Labor is not the source of value. The majority of labor we see is productive, not because it’s the source of value, but because labor which does not produce things that are valued disappears from the market. It’s called non-productive because it generates products that are not preferred by consumers. The consumer’s subjective valuing is the source of the value. Labor which does not produce goods that are valued gets removed from the market. Because of this correlation it’s natural to think that labor itself is somehow the source of value, but that’s inverting the forces at play.
If a person produces something and he deems its “just/fair price” to be $1,000, but the most anyone will pay him for it is $500, do you think he’s necessarily being exploited? Why or why not?
I work on a large software project. I’m part of one team that works with 5 other teams to develop a core product which is then built on top of for 3 other core applications each of which have their own development teams that are made up of subteams of 3-8 members. The company sells the product for millions of dollars to existing customers and new customers. How much should I get paid?
Nothing, intelectual property is illegitimate.
they have to save money and invest in it’s development. Or they come to a company like ours and ask for products we’ve already built.
Somoone buys products in advance or buys them after they’ve been made.
Labor is not the source of value. The majority of labor we see is productive, not because it’s the source of value, but because labor which does not produce things that are valued disappears from the market. It’s called non-productive because it generates products that are not preferred by consumers. The consumer’s subjective valuing is the source of the value. Labor which does not produce goods that are valued gets removed from the market. Because of this correlation it’s natural to think that labor itself is somehow the source of value, but that’s inverting the forces at play.
Thank you for explaining to me that the marxist labor theory of value is incorrect even though I knew that.
If a person produces something and he deems its “just/fair price” to be $1,000, but the most anyone will pay him for it is $500, do you think he’s necessarily being exploited?
Just price theory basically just says that price should not be changed arbitrarily, especially to exploit someone’s misfortune.
In other words, labor theory of value meant that value is both subjective and objective.
Meant that value is subjective but should not be arbitrary.
Papirus : Meant that value is subjective but should not be arbitrary.
If it’s subjective you don’t get to judge whether or not it’s arbitrary. You simply get to say you think he’s right or wrong. Now, the next question becomes how do you react to the fact that he values things differently than you? The market responds through voluntary exchange.
If it’s subjective you don’t get to judge whether or not it’s arbitrary.
It a fact, not matter of opinion whether it’s arbitrary or not.
The market responds through voluntary exchange.
Depends.
What do you see as the difference between “subjective” and “arbitrary”? I see no difference.
Subjective means that he himself determins the price. Arbitrary means that he changes it on a whim.
I put forward this question on another forum, but only got a sort of psychologist’s fallacy as an answer, maybe you guys here would be more ingenoutive.
The question was whether there is something wrong with the seller raising prices for a buyer just because of the compulsion that buyer is under (to buy a product from that seller), even though that seller did not impose that compulsion? Notice that the seller is not in deal with the compulsor, he just knows about the compulsion (or not the directly about the compulsion but only of his readyness to pay whatever for what he needs) and knows that he can use the situation the buyer is in to charge a price that same buyer would never pay if he were not in that situation.
If he first offers what he produced for $1,000, and no one buys it at that price, and he then lowers the price to $500, and someone then buys it from him, would you say that he himself determined the price?
On another note, what would you say is not a whim?
First off, what’s your definition of “compulsion”?
If he first offers what he produced for $1,000, and no one buys it at that price, and he then lowers the price to $500, and someone then buys it from him, would you say that he himself determined the price?
He determined the value of the product to be 1,000, but had to sell it at a price of someone else’s opinion of what the product is worth.
On another note, what would you say is not a whim?
Eg. the example you gave where he has to change the price out of necessity, if he doesn’t he won’t sell at all.
First off, what’s your definition of “compulsion”?
Then you and I see the world fundamentally differently. A man’s reasons are his own, and some may have been reasoned and constructed, and some may simply be given and undissectable.
For example, I like Led Zeppelin, I don’t like Motley Crue. I find myself singing to just about anything if I know the words. It’s a deep-seated love of music. Don’t know why, though my best explanation is that I love music. I can’t stand seafood. Don’t know why… But I don’t. If someone knows this, they could most likely charge me a premium in a seafood establishment for a chicken dish I don’t really like.
Those sentences mean the same thing. In both cases the observable behavior is a “price”. That’s it. In both cases some internal operation of the mind happened that led this person to set the price to a specific quantity. Why is one arbitrary and the other not? How does this change anything about what economics as a science has to say about the phenomena?
You’re asking for an ethical discussion not an economic discussion. The answer will be necessarily subjective.
I think the proper thing to do is to talk about necessary side effects.
People have memories… This type of behavior leaves an impression, it helps construct the sellers reputation, and will influence his social relations.
You use he word compulsion, this is simply another word for valuing something very strongly. It’s become so immediate and so necessary (in the mind of the buyer) that he will necessarily be willing to part with more than another man would due to some unspecified reasons.
The price paid, and the details of why are important information or phenomena that is present. It tells the other economic actors something important about the environment. It’s a business opportunity for someone else to find a way to offer a service that would mitigate this sudden jump in value.
This phenomena is called a motivated buyer. Or in the reverse a motivated seller. If you bring in the emotional aspect too quickly, you will miss the broader impact of interference. If one offers a solution to mitigate or interfere with the behavior, then the solution must also be analyzed praxeologically. There is important information in prices. Especially in price spikes. They represent a sudden change in motivation of market actors. If you punish the seller, you remove the information from the market.
One of the classic behaviors that man engages in as a generic hedge against such events is saving. Another is insurance. If however, we find ways to subsidize risky behaviors, or prevent “price gouging”, then we may in fact be interfering with important information getting out to the market. The side effects will most likely be far more devastating and far more wide reaching than the damage caused by the “price gouging” itself.
The extreme examples here were best seen in such situations like the Katrina disaster in Mississippi and New Orleans. There are stories about evictions and rent increases like this. The fact is that the housing in such locations hasn’t accurately reflected the real conditions of maintaining the housing in these locations. Hurricane damage and flooding are real risks, they are not easily predicted or accounted for, and they are devastating. The insurance costs, building standards, etc. should be necessarily much higher to cover the costs of living in such locations. New Orleans in particular is UNDERWATER!? The low income tenants of those locations see their rent go up, and they object. The market can’t support the prices they can pay.
The market can resolve this problem. It’s quite possible that they city of New Orleans might go away simply because it’s too expensive to live their due to the weather risks. But on the otherhand, if the poorer members have to move out, either to cheaper housing or move to cities or towns where the risk costs are lower and thus housing is cheaper, the city will lose the cheap labor. This will drive up wages. If businesses can’t continue to thrive on the higher labor costs, then the businesses will close down, and move their capital investment elsewhere. However, if businesses can still thrive then the labor will move back at the new higher wages, and the housing will be filled again. Let the market do it’s job.
If government interferes it creates these tragedies instead of allowing the market to solve them. The fact that New Orleans insurance costs weren’t higher due to it’s being underwater is a travesty. Rents should have been higher, and they should go up. It will force poorer families to make hard decisions about where they live. If instead the government interferes, it’s like an obese kid with diabetes getting forcefed candy by his mom. It’s morally reprehensible.
The inhabitants may have made crappy decisions, but rising prices on rent, insurance, or infrastructure to combat the flooding would have forced them to make smarter decisions about where they lived. Rent goes up and they have to move. We see that as a micro tragedy. It is depressing and can be devastating to the individuals involved. It’s even more tragic to subsidize living in a place where the existential risks are so high especially for those who can’t swim for their lives when the floods come. Hospitals should have evacuation plans, they should be liable for patient risks. Their per bed costs should be higher accordingly. Otherwise you create a moral hazard. Insurance costs should be higher, building standards should necessarily be more stringent, and directly affect the insurance rates, etc. If it makes the city financially unviable, that’s the way it is. But the human tragedy of Katrina would be avoided through normal market behaviors.
That article demonstrates to me the moral depravity of man in this society. How can one even make arguments like this. We don’t pat people on the head when the market tells them something is wrong with the cost structure of their behavior and choices, and try to go fix the market. The whole tone of the article represents as logical and preeminent that the suffering of the renter is the paramount tragedy. The tragedy is that the owners of these buildings will necessarily disappear, the buildings will fall into disrepair and get destroyed and no one will live their. They will end up in the same situation in 2-5 years anyway, and in the meantime they’ll be farther away from getting into a financially more sustainable position. And they’ll be better prepared or protected from similar disasters.
We mitigate risks by bearing the costs and coming up with cheaper and better solutions. Ignoring the risks is morally depraved. We actually have criminal codes about depraved indifference. Praxeology explains in clear an certain terms exactly how price signals work, and why they’re important. Interfering with price signals destroys peoples lives on a grand scale. It destroys the necessary information we need individually. Prices carry the current information that man has about real living conditions in the world.
All of the devices and technology of mankind aims at overcoming obstacles to man’s survival and well-being. In the end, the solutions that survive are the ones which successfully improve the subjective experiences of the individuals. But on a grander scale the larger social implications of the solutions we create result in emergent behaviors that will determine the success or failure of the social groups which live under the conditions that emerge from such behaviors.
The current social democatic governments are being used as tools to manipulate the rules such that we can avoid the consequences of our choices. Unfortunately you can change the rules of the specific institutions, but you can’t change the effects they have. The rules of the physical world still apply. We can’t undo them, we can’t make laws that preempt or overrule them. And when the things we choose are bad for us, either at the individual level or for the social cohesion and economic well-being of the social group as a whole, so be it. We can stomp our feet and pout all we want. We can scream and cry and throw all the temper tantrums we want, but in the end, you can’t make reality be something it’s not.
We’re spoiled brats, insisting that mommy change the rules to make it all better, and our societies are going to decay and crumble as a result.
Subjective means that there’s no one forcing his to charge a specific price. Arbitrary means that after he himself set the price (a sign of what the value of the product is) he arbitrarily changes it (contradicting his own assessment of the value of the product).
You’re asking for an ethical discussion not an economic discussion. The answer will be necessarily subjective.
If it’s subjective, it’s not about ethics, being that validness of ethics is objective.
Regarding the rest of your text just a note- most people are spoiled, but not being raised by social darwinists doesn’t mean you’re spoiled.
In other words, he himself didn’t determine the price at which it sold - right?
Couldn’t you also say that, although he determined the value of the product to be $1,000, the person who ended up buying it from him determined its value to be $500? Doesn’t this illustrate how there’s no such thing as a correct value?
He didn’t have to change the price at all. But he ended up preferring to sell it at a lower price rather than not sell it. That was entirely up to him. So I fail to see how he didn’t change the price on a whim.
And by “aggression” you mean “initiation of force”?
n other words, he himself didn’t determine the price at which it sold - right?
He determined the value. He sold it under that value.
Couldn’t you also say that, although he determined the value of the product to be $1,000, the person who ended up buying it from him determined its value to be $500?
Yes.
Doesn’t this illustrate how there’s no such thing as a correct value?
I was of the opinion that the correct value of (alienable) property is what the owner of that property says it is worth to him.
And by “aggression” you mean “initiation of force”?
He determined (i.e. imputed) a value. Clearly, if others can impute different values to it, then there is no sense in speaking of “the value”.
What makes that the correct value? Or are you just defining “correct value” of something as “the value that its owner says it’s worth to him”?
Okay, so now I’ll go back to what you wrote earlier:
I think it is wrong for a seller to charge a higher price to a person who’s under compulsion to buy from him, and who the seller believes won’t refuse the higher price (because of the compulsion he’s under). That’s because the compulsion he’s under is immoral IMO (as is all compulsion - using your definition of it), and thus I think the seller is benefitting from immoral activity.
Papirus, I’m going to assume you don’t see it, you’re blurring the subjective value within the mind, with an objective measure in reality. You seem to misunderstand that a price isn’t a price until an exchange actually occurs, or an offer for an exchange is rejected. At that point, and only at that point do we know anthing definitive about the values of the actors.
For example, if I say I want $1000 for something but end up selling it for $500, then we haven’t learned anything about the direct value of the item within my mind, we only know something about it’s value compared to the amount of money I received. We don’t know if I would have accepted less money, we can be certain that it’s very likely that I would have accepted $501 and any amount higher than that also. And thats all we can ever know when about the value of a good economically. The price is not a precise measure of how it’s valued, and can never be. What we also know is that the buyer preferred the item to the $500. We also know that he valued the item less than he valued $1000, assuming he had $1000 and could have paid for it. We also know that he would have been willing to pay less for it. Again, this tells us about the value of the money relative to the item, and that’s all.
I don’t care what you “say” something is worth, when you exchange the good, we actually have real phenomena that gives us factual data about how you value it. When you reject an exchange offer, we also have some information that’s factual about how you value the item relative to what’s offered. That’s all. This idea of “correct value”, or “actual value”, is irrlevant, exchanges are real phenomena, asking prices simply give me a number that’s larger than the value you place on the item (and necessarily so.) When he says the price he wants to sell it at is $1000, he’s saying this is more than it’s worth to me. In fact we can never find the lower limit, we can only find a price that’s too low to create the exchange. Every exchange is a one off historical event. We can never recreate the conditions. We can’t recreate the mental state of the man engaging in the exchange at that point in time such that we can retry it in a variety of different conditions (different price offered). Such experimentation is the only way one could construct some type of preference curve such that we can find the price at which his brain locks up and he can’t figure out whether or not to enage in the exchange.
I hope this helps, this entire discussion seems a bit… disjointed. because you’re throwing out numbers as statements of quantitative measurements of subjective value which they are not. They are statements of relative comparisons of different subjectively valued goods in an exchange.
Does this not imply that, as Auto said, that the owner of the property values selling for $500 more than not selling it and asking $1000? Therefore, the owner does determine the price (as much as the seller), and thus the correct value is arrived at. Part of this speaks directly to the function of the price system, which is utilized by (and depends upon) both potential buyers and sellers.
and thus I think the seller is benefitting from immoral activity.
It is wrong to benefit from an immoral activity, irrelevant of the fact that you did not violate anyone’s rights? On what sort of justification would such a thing be sanctioned?
By that reasoning, he’s entitled to get whatever he asks for in exchange, which implies that, if he gets less than that, his rights have been violated. But you’ve already disagreed with that notion.
I think it’s justified on the basis of “common purpose” (also known as “joint enterprise”). Think of a bank robbery. The person driving the getaway car may not have violated anyone’s rights, if he stayed in the car during the actual heist, but he was nevertheless part of the overall effort. Another situation where I think “common purpose/joint enterprise” applies is one person hiring a second person to murder a third person.
Guys reject this immoral argument from compulsion. Compulsion is not so easily identifiable. I’m reading through some descriptions, and it’s probably rightly confined to the realm of psychology. It seems to be used to describe an internal mental condition in which one has a drive to perform a specific action or acquire means to perform that action and is unable to use logical and will to override the behavior. We should use the term coercion, which is one for the social realm. In which case a person coerced to buy my product already values it less than my current price, jacking up the price doesn’t change his subjective valuation of my product, it just represents how much he’s willing to pay to avoid the threatened behavior.
If it’s coercion it’s a violation of rights. However, if you argue that a seller manipulates his price due to some information he has about the buyer and the buyers willingness to pay more for the goods, then you’re back in economics land, and the price should go up and reflect that information. The buyer and others who encounter the situation “compelling” him to suddenly require this good regadless of the cost will have a strong motivation to find a way to avoid such situations, or buy the good in circumstances where the “compulsion” isn’t strong, and thus more cheaply due to competitive shopping.
Immoral isn’t sufficiently defined, and the use of information about market phenomena or actors needs and wants cannot in and of itself be deemed immoral. It’s cooperative, social, and voluntary. You need to introduced some other phenomena to classify it as immoral. All economic action is considered as “exploitation” if viewed in that vein. If you want to close a profit gap by providing a service, that’s the “right” way to “correct” this “immoral action”. But hey, wouldn’t that constitute an immoral activity by your own standard?
Both actors in any exchange are better off than they were before hand (subjectively) and neither is as well off as he’d liked to have been. If I accept $500 for a product and wanted $1000, I’m obviously better off than I was, but not as well off as I’d like to have been. I wanted $1000 and didn’t get it. But I didn’t want the product as much as I wanted $500 and thus am better off than I was. But not as well off as I wanted to be.
The same can be said for the buyer, he wanted to pay $250 for the item, but he settled on $500. Obviously he’d prefer to have the item and to have only given up $250 more than he wanted to give up $500. But there’s also no doubt that he wanted the item more than he wanted the $500. Both are better off, neither is as well off as he’d like to be.
You don’t have enough information to interfere with the exchange. If you don’t like some of the conditions that led to an exchange that you feel were immoral, then get up and go offer the same good for cheaper! That’s how markets work.
Papirius already defined “compulsion” as “threat of initiation of force”. In other words, he seems to have defined “compulsion” the way you define “coercion”.