Sunday, September 13, 2015

Consumers Are The Conductors Of Commerce

Reply to: Welfare recipients aren’t taking all your money. Business owners and investors are.


If Bob, the greedy owner of a bakery, pays the least amount possible to his employees… then it stands to reason that he strives to pay the least amount possible for flour, bowls, ovens and all the other “inputs” he needs to operate his business. Do you know how many different inputs Bob needs to run a bakery? I sure don’t. 

The thing is… flour, bowls, ovens and nearly all the other inputs that Bob needs are produced by other business owners. Yet, despite the fact that Bob endeavors to pay these other business owners the least amount possible, they also manage to rake in the profits. 

So what is it, exactly, that makes Bob’s employees so exceptional? Why do they, unlike everybody else that Bob pays, fail to rake in the profits?

If we dug a little deeper then we’d discover that the businesses who supply Bob’s inputs aren’t equally profitable. So the real question is… why is there a disparity in profitability? 

Let’s take flour for example. The more businesses that supply flour… the higher the competition… and the lower the profits. 

The point of profits is to tell people what to do…

Low flour profits = “Hey people, don’t start a business that supplies flour”
High flour profits = “Hey people, please start a business that supplies flour”

If Bob is paying really high prices for flour… then he’s basically trying to incentivize more people to supply flour. 

But if Bob is able to pay a lot of money for flour… then perhaps it’s because people are paying him a lot of money for his baked goods. 

Consumers are the conductors of commerce. Like the conductor of an orchestra… consumers wave their money around and producers supply the most beautiful music. 

Not everybody is equally good at following the conductor. Yet, here you are arguing that the music will sound even more beautiful if the people who fail to follow the conductor are paid more. 

People who ignore the directions of consumers should be paid more? People who ignore profits should be paid more? 

We need minimum wages because… increasing the supply of unskilled workers is always good for the economy? Just like increasing the supply of flour is always good for the economy? Just like increasing the supply of flutes is always good for the symphony? 

Poverty exists because people, such as yourself, don’t understand the point of market signals. Whose fault is it that you don’t understand the point of market signals? 

Surely it can’t be your fault. It’s got to be my fault. 

Maybe a military metaphor would help? Profits say, “follow me!” and producers reply, “lead the way!”

When I was stationed in Panama I spent a lot of time in the jungle with a compass and a map. Land navigation works better when the compass and map are accurate. 

I kinda stole the compass comparison…

The management of a socialist community would be in a position like that of a ship captain who had to cross the ocean with the stars shrouded by a fog and without the aid of a compass or other equipment of nautical orientation. — Ludwig von Mises, Omnipotent Government

When I wasn’t in the jungle, I ran a race across the Bridge of Americas, participated in a few sprint distance triathlons and rode a bike from the Pacific coast to the Atlantic coast. I also had sex. A lot of sex. Even with some white chicks in the Air Force. 

Here’s an excerpt from your most popular blog entry

Sex isn’t something you do to someone else. It’s something you do together; it’s a dance. Good tango dancing requires the dancing partners to read each other, communicate with each other and play off each other.

Nowadays, “intercourse” is synonymous with “sexual intercourse”. Back-in-the-day, if I had said, “the economy is intercourse with everybody”, then nobody would have jumped to the conclusion that the economy is a massive orgy. 

One of the main characters in the show Heroes is a mind reader. Spoiler alert: he’s really good at sex. 

In real life nobody is a mind reader. Nobody is omniscient. Hence the value of communication. Hence the value of accurate communication. Hence the value of accurate market signals. Hence the problem with inaccurate market signals…

The only alternative to a market price is a controlled or fixed price which always transmits misleading information about relative scarcity. Inappropriate behavior results from a controlled price because false information has been transmitted by an artificial, non-market price. — Mark J. Perry, Why Socialism Failed

Ever had a threesome? Do you think adding another person to the mix makes accurate communication less or equally or more important? 

Even though I really like that song by Stereo Total… I’ve never even spent a single penny on it. 

The free-rider problem is a problem because again, nobody’s a mind reader. How can Stereo Total know whether they should continue, or discontinue, their behavior if I don’t accurately communicate to them how much benefit I derive from their behavior? 

It behooves us to positively reinforce beneficial behavior. And benefit is entirely in the eye of the beholder. 

Right now you’re giving your labor away. Clearly you’re under the impression that people should have the freedom to sell their labor for $0.00 dollars an hour. But you’re also under the impression that people shouldn’t have the freedom to sell their labor for any amount between $0.01/hour and $7.25/hour.

J. S. Mill was one of the best libertarians ever. But he was under the impression that people shouldn’t have the freedom to sell themselves into slavery. I wonder if he was also under the impression that people shouldn’t have the freedom to commit suicide. 

I think it’s very possible to regret selling yourself into slavery. But in theory it shouldn’t be possible to regret committing suicide. Well… unless you go to Hell. 

You and I were both free to enter into the military and, after we completed our contract, we were free to exit from the military. More specifically… you were free to enter into and exit from the Chair Force and I was free to enter into and exit from the Army Infantry. 

The military isn’t for everybody just like the infantry isn’t for everybody. And society works a lot better when people are free to decide for themselves what is, and isn’t, for them. 

Personally, I have a pretty high tolerance for relatively miserable conditions. From the soaking wet jungles of Panama to the frozen slopes of the Andes to the scorched deserts of Afghanistan… I didn’t just survive… I thrived.

Who are you, or anybody else, to prevent me from deciding for myself which conditions/compensations are, or are not, optimal for me at any given point in time? 

You don’t know me like I don’t know you. Nobody can ever know me as well as I know myself. So why are you so willing to impose your own personal standards on me and everybody else? Is it simply because you don’t appreciate the point of accurate market signals? Or does it stem in some part from a failure to adequately appreciate the immense diversity of preferences and circumstances? 

Right now I’m not earning more. I could be earning more… but I’m not. I’m choosing to partially ignore the conductor in order to dance more to the beat of my own drum. Clearly I think sacrificing some comfort is worth taking more of this tricky, terrific and terrifying trip to discover and eliminate the bottleneck in progress. 

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