[alanlammiman]

I wonder what would happen if private sector wage-based jobs were forbidden. If essentially your only option as an entrepreneur/company were to pay in equity/profit-sharing. The labor equivalent of, on the capital front, religions that forbid lending with interest but allow equity investing. I wonder if the complexity/transaction costs/uncertainty/governance problems would kill the economy or if it would be possible to somehow eventually get to an economy where everybody eventually thinks like a business owner. Here in Brazil, the labor laws are tricky and payroll taxes are high, so many people now work as contractors setting up small companies. That means they need to do a few things like get an accountant, a separate bank account for the business, pay business income tax (rather than have taxes deducted from their pay), but more often than not end up working full time for 1 client much like employees. I have been struck (anecdotally) how these hybrid employees/business owners seem to develop a more entrepreneurial mindset that can ultimately lead to more success. Maybe jobs do need a rethink.

[imtringued]

That would solve absolutely nothing.

Btw religions forbid interest for very good reasons.

[gruez]

>Btw religions forbid interest for very good reasons.

By preventing anyone but rich people to have access to capital, while at the same time sounding like a policy that most people would support?

[alanlammiman]

I was reading about early Islam (Reza Aslan's 'no god but god'). It's not a rule that has aged well, but according to him the reasoning was that basically in pre-islamic arabia if you didn't have family support (e.g. widow, orphan), you'd have no livelihood, would end up borrowing money and then fall into slavery. In the absence of financial markets, bankruptcy laws, social safety net, free markets for labour/entrepreneurship, forbidding usury potentially made sense.

As an economist, I still think consumer lending (excluding consumer lending that is actually funding investment like mortgages and vehicle financing) in 2022 is pretty questionable and only economically logical in a minority of cases, and that it would make sense to restrict/regulate some of it more heavily.

[blockwriter]

How would you compensate work if their equity position needs to be maintained in perpetuity but the value of their work remains the same? If I worked retail at Nordstroms in 2006, I would have needed to earn pennies a week to balance out the next 60 to 70 years of equity I have in the company.

[alanlammiman]

well maybe if you made $20/h in cash and the share price is $20 you get 1 share/h. You can sell it (so you dont need to keep the equity in perpetuity) but if you live off $15, that you can have $5 (plus/minus appreciation/depreciation &dividends) shares in 60y time is a feature not a bug. Or maybe you have some mechanism whereby people have to sell back their shares when they leave (like partners at professional service firms).

A classic economist would say that the 1st example proves that its the same as cash and thus nothing much should change, but behaviourally there is endowment bias etc. I wouldn't be surprised if paying people in savings/investments and then letting them liquidate would result in a much higher saving/investment rate than giving them cash and expecting them to invest.

[blockwriter]

Maybe, but the share price is unlikely to be $20, or anything close to an hourly wage, if the company is paying all of its employees in equity positions.

[alanlammiman]

Well, but you're also cutting the cash outflow. From a P&L perspective it doesn't matter if you're paying $20 in cash or in stock.