[stryker]

I will concede that there are many reasonable social frameworks designed to maximize societal wealth in the long run. You are simply describing your own version.

After all, capitalism is one solution to this very complex problem of resource allocation. It's not without flaws, of course: e.g. externalities. That's where regulation steps in. It's possible to get companies to pay for the negative externalities they are creating or even stop altogether (see: pollution). A theme in my post will be: let's not throw the baby (capitalism) out with the bath water (negative externalities).

Here are some points I came across reading your post.

1) You say that products should be priced close to their cost, that they should not charge "the highest possible price". Why? If Apple forcefully lowered their prices you could actually argue that Apple is trying to squeeze competitors out. Apple is hugely efficient. If they charge slightly above cost, do you think any other company would be able to sell anything remotely similar for a reasonable price?

I know you're going to say that Apple uses underhanded means to be so efficient. I agree with that. By abusing human rights, Apple is getting a cheaper deal unfairly.

But your claim that "products should be priced near cost" is flat out wrong. If the observation "Apple unfairly gets highly efficient" led to a policy "let's force all companies to sell at slightly above cost" to "benefit consumers", that would actually exacerbate the issue, with everyone rushing to abuse human rights in order to compete with Apple's efficiency. Profits are not evil. If you're going to target Apple's ethics, by all means do so, but do not use false economic arguments to support that claim.

2) You want geniuses and great inventions to come about, but then once they do (e.g. Steve Jobs, Bill Gates) you don't want them to make too much money. How much is too much? For you, billions. For others, millions. Maybe even just thousands. Where do you draw the line between "too much" and "enough"? Do you think it would be a good precedent to force all companies making over a million dollars a year to donate half of it to some charity? I think this is yet another slightly irrelevant argument you make to support your main point, which is that Apple shouldn't be able to get away abusing human rights. To verify this, imagine: suppose Apple makes billions but also supports human rights everywhere by only working with legitimate companies. Do you now have respect for Apple? Or do you think they should still do more things for society? If the latter is the case, you're basically saying that all wealth should be redistributed by law, to some arbitrary degree (maybe the voters decide?). Hmm... not exactly communism, but not capitalism either. I have no additional points here, I haven't had time to imagine such a world in detail. I won't dismiss it outright, though.

3) Patent monopolies. I do agree that patents are tricky. On one hand, you want society to benefit as soon and as much as possible from new stuff. On the other hand, you want to encourage inventors to spend lots of money on research with the promise that they will be rewarded handsomely with patent monopolies. If you remove patents, you risk a world where no one will ever sink mounds of money and time into research (I would even contend that this world wouldn't be quite so bad, seeing projects like Wikipedia, as long as theft is not tolerated). If you support patents too strongly, you risk a world where society is squeezed dry even after the original inventor passes away (I believe the incumbents want this way, and it's bad). There is a middle ground here...

Indeed, your last statement really is the heart of your argument, which is what you should really focus on instead of spurious economic arguments: neglecting human rights is a negative externality. We as a society should pay to uphold human rights and punish those who do not.

EDIT: Some grammar issues.

[Andrew_Quentin]

I think you are mistaken in suggesting that my main argument is that of human rights. That is because everyone agrees that human rights should be upheld, thus there is no argument to make.

You make some very good points though. If Apple is to charge just above the cost, thus making "enough" profit, whatever that may be, then you say Apple would beat all competition. You say that is so because they are very efficient. Perhaps, but I think it is more likely that they would beat everyone because of their inventions. Iphone, Ipad. Efficiency therefore has little to do with it. Just as Bill Gates became a billionaire despite of any efficiency. They invented something. Then they have gone on to exploit such invention by ripping people off through charging them 30% more than the product is actually worth. Not 10, not 20, but 30. That is greedy and the consequences are concentration of wealth in the hands of the few for their benefit alone.

As for the solution, government already decides how to distribute wealth through taxes. I think it should go further. Perhaps there should be a law that no man can be paid in total above, say, 1 million per year. Nor can any company make more than 10 billion in profit. Both, of course, increasing by the base inflation point. With an individual is easier, you just make it illegal. With a company is more difficult. Maybe the profit above the 10 billion can be a rebate to those that purchased their product or service.

The very existence of the law would probably incentive companies to treat their employees and their customers better rather than focusing on a Darwinian jungle of eating everyone at any expense and ripping off everyone as much as you can get away with.

[stryker]

You are being downvoted not only because a large portion of HN believes that adding huge amounts of value to society should pay off handsomely, but also because a lot of your points are easily falsified.

Changing the example from Apple to Microsoft does not make my point any less true. In any market, the most efficient player, if he chooses to cut prices drastically, will make it tougher for other players, even if he's not actually that efficient. Through competition, this process weeds out the less efficient companies and ends up lowering prices. Microsoft was one of the only producers of a decent operating system. You can argue that Microsoft was a bloated bureaucracy, but they were surely the most efficient player of their time. They would have dearly hurt competition if they lowered prices.

In fact, many today argue that students who pirated Microsoft software cemented Microsoft's monopoly. Generations of youngsters too poor to afford Windows somehow got their hands on it and trained themselves so that when they got old, they were already equipped to use Word, Excel, etc.

If the observation "Microsoft makes too much money" led to the policy "make them cut their prices" I would bet that the exact opposite of what you intended would occur. They would have cut their prices by half for about a year, driven out their competition, gotten every cat, dog, and donkey on their OS, and cemented their monopoly status.

This phenomenon is not rocket science or new... it's called predatory pricing: http://en.wikipedia.org/wiki/Predatory_pricing.

As for distribution of wealth... I was able to think a little bit more about it, and I have been able to pinpoint some cons with your idea. Basically, your idea is closer to communism than capitalism, so my rebuttal is basically a rebuttal against communism. I do not attach any a priori negativity against communism. I like to argue ideas on their merits, so hear me out.

As I mentioned before, you might think a cap of 1 million per year per person is reasonable, but someone else might think the cap should be 100,000. "There's too many starving kids in the world", he might say. In fact, if members of the government aren't so well paid, they will probably take an existing precedent of 1 million and abuse it to grab more and more cuts from successful businesses. "If you give an inch, they'll take a mile." But let's say your government is corruption-free for the sake of argument. Is it still a good idea?

Allow me to tell a story. WIDCO is a company that makes widgets. These widgets are very complicated and so require manual labor. Meet employees Bob and Jake. They're both exceptional widget makers, but Jake is above and beyond the better one. He might possibly be the best in the world. A normal employee averages 50 widgets a day; Bob averages 100; Jake averages 300. It's clear that Jake is providing quite a lot more value to WIDCO than any other employee. But because of regulation, WIDCO can pay at most $100,000 to Jake. Jake understands. He is a humble man and understands that $100,000 is enough for him and his family. But day after day, he gets demoralized because he realizes that his hard work and skill is being used to subsidize the pensions of employees who just can't do the work as well. Eventually, Jake realizes that he'd rather leave early to his family than work his ass off for no additional benefit. He figures that making about 150 widgets or so a day is enough to keep his salary constant. So he works just 4 hours a day and goes home soon after. Bob never feels this as he's getting paid $85,000, which he can still increase by getting better at producing widgets. He still believes in hard work and produces more and more. Until he reaches the cap, of course.

You might think, oh well Jake goes home! Better welfare! But whereas today, Jake actually has a choice between working more + get paid more vs. stop working + go home, in this world the government's basically removing that choice. Now, if that choice is absent in today's world, yes that is a problem that points to human rights abuses like I mentioned in my first post.

Do you want to discourage employees like Jake? You can imagine employees like Jake in the real world, who really aren't greedy, but who also aren't gonna just work for free when they have alternatives like going home.

You can see that the artificial salary cap has DECREASED the production rate of WIDCO.

Above all, I think you have a deep-seated belief that consumers need protection from themselves. It's not a black-and-white issue, of course, but you're strongly putting words in their mouths by claiming that they're being "ripped off". When millions of people can't wait long enough to hand money to Apple, are they really being ripped off? On what basis do you get to decide how they should spend their money? What if they're actually getting a DISCOUNT for the happiness they derive from the IPad? Before, they had to spend a weekend in Tahoe to get X units of happiness. Now, they just need to spend $600 on an IPad for the same X. In that case, they're not being ripped off at all right?

My advice to your future theorycrafting: think through the consequences of policies, not just the immediate and close ones, but also the long term and global ones.

[Andrew_Quentin]

I do not mind the downvoting. I expected it, but still chose to reply because I do not think that my points are not worth making, I do not think I am trolling, but instead it seems that I have been able to generate a nice intellectual debate about a matter which is extremely relevant today in a forum where intellectual debate is encouraged.

I should also add that perhaps I do not hold any belief in what I said or any sort of conviction. I am theorising about how a system can be improved and am very much open to be shown that my suggestions are not optimal.

You say that my points are easily refuted, yet it seem that you are not addressing them fully.

Predatory pricing, according to the linked wikipedia article, occurs when the price is set below the cost of production. I have nothing against profits, but exuberant profit which I think is the product of exploitation.

Apple invented the Iphone and the Ipad and before that the Ipod. All are great products. All wanted these products. The products have benefited society greatly. That all is good.

It also explains the great profit made, in my opinion. The competition, which to start with there was none, came later to the game and as such had a less favourable environment because they faced a competitor, unlike Apple to begin with. I think therefore that the profit generated has little to do with efficiency - although that probably is a factor - and much more to do with the fact that they invented a unique product which everyone wanted. Thus, had a monopoly in practice.

Invention is of course to be encouraged, but not the exploitation of such invention. I do not think it can be doubted that they made a 30% profit on their revenue because they priced their products 30% higher than their actual cost. That means that millions of people had to give away more of their wealth to one person or one company making such person or company richer, while everyone else poorer.

No one forced them, but that is beside the point. No one forces anyone to buy electricity. What person can today for example have a decent job and not a computer. It can even be said what person can have a decent job and not an Iphone or a smartphone.

If you agree with that point, that one should be able to make a profit but not excessive profit, then the question becomes technical, namely, what is excessive.

I said 1 million in total remuneration for an individual. You say why not 100,000? The example you gave is a very good answer to that question. 100,000 would not allow for differentiation between individual productivity. That cap can easily be reached, as you showed from that example. There are many people today earning 100,000 and probably they deserve it. They are many people earning 400,000 or 500,000. You can count on one hand however the people that are earning a million or more in total remuneration. In my opinion, such people are awarded such amounts not because of any genuine extra productivity, but because there is no mechanism which can keep a check and balance on their pay.

1 million therefore allows for the differentiation of individual production and is a sufficient amount to incentivise producers.

So what argument can there be against setting a maximum remuneration at a cap of 1 million? The only one I can think of is that of founders. Bill Gates for example has certainly contributed more to the world than many others who may be capped at one million.

It is not difficult, conceptually and even practically to make an exception for founders and set their cap to 1 billion. One billion, in my opinion, is a sufficient incentive for anyone. Why, afterall, should their children, who merely won a lottery, have a higher claim on their fathers wealth than 1 billion?

You may say that it seems that I am simply picking up these numbers from thin air. Perhaps you are right. I think however that the vast majority of people - and we live in a democracy where the majority rules - would agree that if a cap is to be set it should be at such levels, or perhaps, slightly higher, i.e. maybe 2 million and 2 billion. That, however is a point about technical matters which is worthy of discussion if one agrees with the main principle. Which is that society should have a say on the maximum profit and remuneration of an individual and company so that society as a whole can benefit at an optimal level.

As to whether it is more communism or capitalism in my opinion is irrelevant. It is neither. It is a mixture of the two. You can have profit - capitalism - but not too much profit - communism.

I do not think simply because something may be linked to some ideology it should be discounted for that reason alone, as you accepted. Neither communism nor capitalism are perfect, they both are extremes, thus perhaps a middle ground would be best.

[jonhendry]

"That means that millions of people had to give away more of their wealth to one person or one company making such person or company richer, while everyone else poorer."

No, the people who bought Apple's products were not poorer. They converted part of their wealth (or resources if you prefer) from currency to an Apple device, having decided that the exchange was a fair one.

Electronics don't hold their value very well, so over time the person will gradually become "poorer" in the sense that they could not sell their Apple device and get their money back. But in the meantime the person was richer in that he or she had the use of the device.

[eugenejen]

Also this falls into the "pie fallacy" of view of wealth. Total wealth in the world is not a static function that doesn't change overtime. If people decide to exchange some of their wealth and "time" to make them feel happy and satisfied and just their state of happiness make them produce more stuffs/services/quality of life because they are much happier than they were before exchange. Is that a negative thing?

[stryker]

>> Predatory pricing, according to the linked wikipedia article, occurs when the price is set below the cost of production. I have nothing against profits, but exuberant profit which I think is the product of exploitation.

Yes, strictly speaking, predatory pricing is when products are priced below cost. My point was that in the absence of competition, artificial price cutting makes it more difficult for newcomers to setup shop, and in the presence of competition, is a natural result.

>> No one forces anyone to buy electricity.

Actually, if you look at the law, it specifically lists certain types of public utilities, such as electricity, that must be regulated because the providers are what are called "natural monopolies". You basically are forced to buy electricity from one company (or two) and electricity is nowadays considered a necessity. But I digress.

>> one person or one company making such person or company richer, while everyone else poorer.

You can't look at every transaction as simply an exchange of money. By that metric, every time I buy some food, I'm becoming poorer. True, but pretty meaningless, because I would have not spent it any other way. Now are you claiming that an IPad is a "basic necessity"? People chose the IPad, even among similar knock-offs, if they chose to buy one at all. I, for one, have chosen not to buy any tablet. In any case, these buyers are basically saying, "I'm happier with an IPad than $600".

Perhaps there's an externality here, where people end up wasting more time and reducing their productivity as a result of buying up IPads, and so Apple should be forced to pay that cost to society. But that's still a different issue than your claim, which is that they're priced "too high".

>> thus perhaps a middle ground would be best.

Note that our current economic system is not so extremely capitalist. It's capitalism + externality pricing + taxes + (other stuff that I frankly think is government mandating inefficiencies to support special interests, like subsidies).

>> Which is that society should have a say on the maximum profit and remuneration of an individual and company so that society as a whole can benefit at an optimal level.

I can think of another way to phrase this claim -- most people will not live any happier with $1 billion than $1 million. All that extra money could be used to increase the utility of other people by a much higher margin.

But I must note: people already do donate. I'm sure you've heard of the billionaire's pledge. It's happening TODAY, in our capitalist society. Like my example with Bob and Jake, in our society, people have a choice. They have a choice to donate their billions to the plights of the world. In your world, all citizens will be forced to.

So I guess to summarize: 1) I like giving people choice. 2) I think if you give government an inch, they'll take a mile. Even if capitalism and communism were identically effective theories, a government in a communist economy by definition is so much more powerful than a government in a capitalist economy... I think the corruption would be difficult to battle.

EDIT: By the way, it sounds like you are pretty reasonable. However, your initial tone of "profits are evil" and that false economic policy statement "companies should price just above cost" probably pissed a lot of people off. You probably shouldn't say those things because they're not your main point anyway and they just close off people unnecessarily. As I've seen, you clearly have a more reasonable way to express your arguments anyway!

[eugenejen]

There are several arguments I disagreed.

1. A company may be hold such beneficial position for a while, but not forever if we allow competitions and fair market without political connection to protect this status quo by law.

2. Human being can invent things and no one buys them. We see this everyday in fail web startups. And customers vote with their money and their time to use service or product, so if an invention doesn't improve general/macro efficiency for its own customers with spent time/exhanges of money. It won't sell. And don't forget that people can choose not to use the service and product unless it is required by law. Apple/Microsoft are not in such position if I remember it correctly.

So invention as you said is improvement of efficiency. They may not improvement in their own manufacturing efficiency but they improve macro efficiency.

3. I understand the human right issue, that's why I raise restaurant business as a case. Why there are so many illegal immigrants working in restaurant business under bad conditions and people are aware of and without saying a word? Those workers also don't want to go to law enforcement to endanger themselves.

4. But to improve the human right issue in China, I don't think there is shortcut. The only way is to wait for the time that Chinese labors demand and fight for their rights. for democracy and rules of law. This takes time and unfortunately we are exploit them for business benefits.

5. As for fair taxation of such a huge profit. Don't you think it is very unfair for USA to take lion share of them and redistribute it to USA citizens ONLY. Or due to Apple's most work is done in china and let Chinese government to take majority of the profit on behalf of workers or ruling bureaucrats?

[eugenejen]

I feel you confuse cost of a thing/service with worth of a thing/service.

For example, your employers knows it costs them much less than your salary for you to survive. You can live on basic food, clothing, and other very low cost means to survive. But don't we personally strive to look for maximize the salary?

I know you will argue that companies shouldn't be treated as human beings. But why do we need to treat a collective of human brings different from individuals?