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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. |
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.