[asdff]

The problem with the concept of a middle class job (one where you can comfortably afford living, fun, saving, etc I think is most people's interpretations), is that it represents an unstable equilibrium state. Incentives of most businesses are the opposite of someone in the middle class. Businesses don't think in terms how they can take so little such as to perpetuate some idyllic lifestyle unimpinged, they think in terms of how much can they possibly take off the table for our own gain without bleeding the beast dry. This is why over time, middle class lifestyles get clawed away into more desperate paycheck to paycheck ones. So even if AI used well restores some middle class jobs tomorrow, what about next week lets say when companies realize they can charge more for goods and services, and people are back to paycheck to paycheck? Short of a planned economy with price controls I don't know how you prevent these incentives from emerging.

[hiddencost]

There's a whole range of options. We can make the state stronger without going full planned economy.

To pick a few things we could do: -> criminal liability for white collar crime -> muscular antitrust -> roll back citizen's united -> public option for health insurance -> taxes on real estate as investment

I don't understand why people think this is all or nothing. Plenty of countries are doing much better than the US on these fronts.

[smallmancontrov]

Right, max/median net worth is about 1000000:1, there is lots of room between 1000000:1 and 1:1.

The problem is that for the people on the 1000000 end of the spectrum, the same mechanics that encourage investment in productive activities also encourage investment in corruption, as they make no distinction between the two. With hundreds of billions in present-value-of-future-cash-flows at stake, almost any expenditure is justified. The laws of economics say that for you lobbying is a hobby, but for them it's a job with ROI (a whole office full of jobs, in fact). That's a steep advantage to overcome, but we've done it before and we'll do it again.

[asdff]

Can you cite some countries that haven't seen any wage stagnation and have actually seen wages grow linearly with productivity? I certainly can't think of any. Wage stagnation is endemic in the western world at least.

[ben_w]

> one where you can comfortably afford living, fun, saving, etc I think is most people's interpretations

My understanding is that most people's understanding of "middle class" is "about 20% richer than me", and that this remains true regardless of how rich one is.

Most people, for most of the years since Joseph Marie Jacquard realised he could control a loom with punched cards, the Red Queen race of automation has given us more stuff and experiences per hour of labour — if you wanted to live the 1820s idea of a middle class life, you can retire as soon as you get around €$£ 25-50k of savings (just don't start a family, the rest of society considers this standard to be unacceptable for that, what with no electricity).

If this improvement in living standards is despite, or because of, each business trying to maximise revenue, is basically the entire disagreement between Adam Smith and Karl Marx; though it's worth also noting that neither liked rent-seeking, and if you have a completely efficient market then nobody can extract any profits because competition drives margins to zero… but also since then we've had research show that complex markets aren't and can't be efficient: https://arxiv.org/abs/1002.2284

[smallmancontrov]

> "middle class" is "about 20% richer than me"

There are better definitions.

> Karl Marx

You said Voldemort's name! Now he will surely haunt us.

In any case, your objective function dramatically changes when you own things for a living rather than work for a living. Many people would call someone with a 1MM retirement portfolio rich, but 4% returns on a 1MM portfolio is $40k/yr and probably isn't going to replace a job, not for someone who managed to amass 1MM in the first place. However, 4% returns on a 10MM portfolio is $400k/yr, and it might. 4% on $100MM is $4MM/yr, and it probably will. So the composition of incentives switches from worker-like to owner-like somewhere around $10MM net worth, and this is worth noting.

If you ever saw old timey movies from the 50s or 60s where "millionaire" was said with reverence, note that $1MM in 60s dollars is $10MM in 2024 dollars. They were aware of the class divide back then in a way that people generally are not today.

[ben_w]

> There are better definitions.

I'm a linguistic descriptivist, not a prescriptivist. This is how I think most use the term, even if there's a more useful term of art in economics or in politics.

> You said Voldemort's name! Now he will surely haunt us

One might even say that a spectre is haunting Europe… ;P

> So the composition of incentives switches from worker-like to owner-like somewhere around $10MM net worth, and this is worth noting.

In a sense, sure. This is also close to what I'm told is the actuarial value of a human life in the USA, and that's not a mere coincidence.

But also, at that level you most likely only got the money by having a very different objective function to begin with, as it comes from starting a successful business. (Other options are "inherit" and "win big on lottery" and both groups have differently bad reputations to the kind of bad reputation that successful businesses people get; I can't possibly comment how accurate any of these reputations are).

[smallmancontrov]

Sure, and I see the wisdom in it: everyone gains 50 IQ points when they place a bet, so private ownership of the economy means that every section of the economy is owned by a responsible skin-in-the-game party incentivized to maximize value. A few simple rules create distributed intelligence. Cool!

But I also see the dark side. The economic notion of "value" being maximized is actually "wealth weighted value," a tiny but enormously consequential difference. Creating value isn't about doing what people want, it's about doing what rich people want, and rich people mostly want to get paid for being rich. Competition is supposed to keep this in check, but we police competition with the vigor and enthusiasm of a decaffeinated sloth, because that's what the people who own the economy want. When suits brag openly about anticompetitive strategy -- network effects, platform effects, last-mile and two-sided-market dynamics -- and regulators snooze more loudly every day, it's pretty clear that the system is captured.

Not that tech is unique, in fact we are pretty good all things considered. We still provide more value for less money every year. Many sectors have been doing the opposite for decades. Real estate is probably the stinkiest sector, where the incumbents are perpetually voting for dysfunction to pump the value of their own properties. Health care has similarly been squeezing its own training pipeline for the explicit, stated-out-loud purpose of pumping salaries, and now that boomers are aging this is going to get spectacularly ripe. None of this is wise stewardship, but it follows directly from incentives and power. Anyone who wants to claim that capitalism produces systematically good incentives had better have a really good answer for this cartel shit, because it rules the economy.

It's not just the economy, though. Capital interests are in the driver's seat in government as well. The extent to which tax policy has been pushed away from the capital gains loop and towards the wage-labor loop is almost comical. We brought women into the workforce without "meeting in the middle" on aggregate hours so now the average couple isn't allowed to raise a baby which shockingly produced a fertility crisis. Our trade policy has been re-geared so heavily to pump assets and dump exports that Alexander Hamilton is spinning in his grave next to the 30 year old opioid addict who is in his own grave because said policy changes sent his job overseas so that rich people could benefit from the higher stock returns.

In terms of the capital/labor pendulum, we've actually been here before, after the industrial revolution failed to net trickle down. I don't think we need glorious *ist revolution, but I do think we need another Roosevelt.

[ben_w]

> But I also see the dark side.

Indeed; if there were no dark side, Marx would have had nothing to write about.

The difference between "money" and "value" can also be found in the difference between what is measurable and what is important is noted in Goodhart's law, which was originally specifically about two different measures of money and why putting pressure on them specifically for economic reasons was not having the anticipated result: https://en.wikipedia.org/wiki/Goodhart%27s_law

I hope that the successor to Smith and Marx will account both for Goodhart and for Nash equilibria/game theory, both of which were developed and formalised over a century after the Communist Manifesto and around two centuries after The Wealth of Nations.

[username332211]

> and if you have a completely efficient market then nobody can extract any profits because competition drives margins to zero…

That's nonsense. It's not just businessmen that compete for consumer's money. Consumers compete for businessmen's money as well.

Suppose a widget-making enterprise made 3% profit on it's capital. What's the sensible thing a widget maker should do? Obviously, fire his employees, sell or scuttle his machines, turn everything into cash and turn the cash into 4.313% treasury bonds.

And the destruction of widget-making machines and enterprises shall continue until widgets sell at a margin that justifies their existence. And if nobody can afford widgets at the that price, there shall be no more widgets.

I find it amazing how people can talk about capitalism, without any understanding of the concept of capital, it's formation and destruction.

[ben_w]

> That's nonsense. It's not just businessmen that compete for consumer's money. Consumers compete for businessmen's money as well.

I wrote "if", and then provided a citation that the clause is false.

> Suppose a widget-making enterprise made 3% profit on it's capital. What's the sensible thing a widget maker should do? Obviously, fire his employees, sell or scuttle his machines, turn everything into cash and turn the cash into 4.313% treasury bonds.

This seems to be even more of a flawed toy model as the words of mine which your complaining about.

Even assuming that's the same period so these are equivalent (3% per sale but you make a widget in 4 hours and sell them just as fast is much more than 4.313% per year): Why does a treasury bond earn interest in the first place? How does the government cover this cost?

The usual answer to the latter is "the bond is to raise money for a thing the government wants to do, in order to boost the economic output of the country, thus future taxes pay for it". If they set the interest rate so high that everyone laid off all their workers, this would not be effective, so a government would not do it.

You also suggest they may sell their machines: to whom? If everyone is doing this, there is no market to sell to.

--

Now consider: an investor has investment opportunities of 2% and 3% return. The economic choice is 3%, you are a widget maker promising this, they invest in your business.

Your competitor knows your profit margin and your costs, they know that if they can make widgets at the same cost then they can charge 3% and get a share of the same customers… except that both producers have fixed costs as well as per-widget costs, and the market size is not in their power to change.

The competitor's options:

1) Continue to compete at the same profit margin

2) Undercut your prices: if all the customers are perfectly rational spheres in a vacuum, then they will immediately switch supplier even with an infinitesimal price reduction, significantly increasing their sales at the cost of yours

3) Increase their prices in order to promise a higher return on investment to their investors — but they know that if they do this, homo-economicus customers will all reject their widgets in favour of yours, and that their business will therefore earn nothing, and they know that their investors know this too

4) Leave the market entirely, potentially allowing you to become a monopoly and raise your profit margin (to maximise their options within the supply/demand curve limits)

Option 2 is the game theoretic choice on any given round, but it's not a one-shot game and you as the original widget company get to respond before running out of money. The whole thing is symmetric, so you tend towards no profit even though you'd like to collude because it's a prisoner's dilemma payoff matrix.

This is also symmetric with regard to different industries, so switching from widgets to gadgets in order to boost return on investment merely changes the players and not the, ah, game.

What slows this process down includes, but is not limited to (because I'm not an economist):

1) Customers aren't perfect spheres of economic rationality

2) People don't know all their price options

3) People are lazy

4) Your costs aren't likely to be exactly the same as your competitor's costs

These[0] reasons are why markets aren't efficient.

[0] and I would hope many other things, because otherwise this topic is simpler than I expected

[sideshowb]

I'd like to see that math expanded because I'm not sure I follow. Just because some (even if all) companies want to bleed the world dry, they aren't all colluding. If Tesco put up their prices it's not going to derail my middle class lifestyle, I'll just go shop at lidl instead. If my employer cuts pay in real terms then that's certainly a tougher situation which is why we have a union, but though it may be hassle, middle class people have been known to change jobs.

[asdff]

I'm not alleging collusion, I don't believe there is any active collusion at all. These things are possible through just incentives. E.g. consider a hypothetical streaming providor; compute is cheaper by the year, cost of owning your datacenter goes down by the year, your customer base grows by the year, the amount of money you return on investments like productions continues to pay out by the year, yet your shareholders expect you to raise prices by the year as well despite productivity increasing, customer reach widening, and your costs lowering. Imagine a CEO arguing they don't need to raise prices like the board wants in order to see a bump in the speculative markets on their investments, they'd just sack that CEO for someone who will.

That's just for the hypothetical streaming agency. When you add up all these little increases of just about every good and compare that to wage growth, you see that wages are stagnating relative to other metrics like cost of living or business/national productivity, in the US or the UK or just about anywhere with these sort of metrics available. You can raise minimum wages to fend of a total economic collapse every now and then but these increases find their way to these other hands reaching into your pocket before long as well. A constant sucking noise and a march to what, I'm not sure, but it won't be pretty I expect.

[Animats]

When electric utilities were tightly regulated, utility stocks were rated on the size and consistency of their dividends. PG&E was a great stock to own for a century. The stock price didn't go up fast, but the dividends were paid consistently. That's the steady state of a mature company.

Then came deregulation. Within five years, PG&E went bankrupt.[1]

[1] https://en.wikipedia.org/wiki/2000%E2%80%932001_California_e...

[mschuster91]

> Then came deregulation. Within five years, PG&E went bankrupt.[1]

It's not like deregulation was the only issue, that just accelerated the bullshit. PG&E had neglected ("deferred") maintenance for many decades - the deadly 2018 wildfire was caused by a cable hook that was around a century old and had never been inspected for a very VERY long time until it eventually failed [1]. IMHO, that amount of maintenance neglect should have been classified as financial fraud:

> PG&E has said in recent court filings it didn’t track when its hooks were installed or how long they had been exposed to weather. It also didn’t routinely inspect them to look for corrosion or wear. Before the Camp Fire, PG&E inspection forms didn’t even include space to note the condition of hooks and other hardware.

How PG&E dared to pay dividends when they didn't even know how much liabilities they had on the books, that is just utterly insane.

[1] https://www.wsj.com/articles/this-old-metal-hook-could-deter...

[smallmancontrov]

> they aren't all colluding

The world is mostly inhabited by people who work for a living but mostly run by people who own things for a living.

These two sources of income (or capital gains -- heaven forbid we tax our rich like we tax our plebs) lead to highly distinct and often directly opposed objective functions. The extent to which this leads to a self-serving policy spiral for the rich is a function of the degree to which the inhabited-by/run-by distinction is true: with a steep enough wealth distribution, yeah, it's fair for people at the bottom to say that people at the top actually are all colluding.

The self-serving policy spiral doesn't look like "Lidl hikes prices and Tesco doesn't, so you can just shop at Tesco," it looks like "merger approved between Lidl and Tesco, now listen to the surviving PR department tell you how this will surely save you money."

[sideshowb]

Ok so gp was talking about businesses. You are talking about the fact that money is power which is a fundamental problem, though a different one. Not sure how to solve it but stronger controls on political donations and lobbying would help.

[drewcoo]

> The problem with the concept of a middle class job (one where you can comfortably afford living, fun, saving, etc I think is most people's interpretations), is that it represents an unstable equilibrium state. Incentives of most businesses are the opposite of someone in the middle class.

Ok, and I claim that the problem with the current model of capitalism, as opposed to the post-WWII model, is that it's oppositional to a middle class - the incentives are opposed.

Now the question is about the societal outcomes we expect from the systems people create. Why should we prefer greater inequity and an even more complete loss of the middle class? These things are all being imposed by human-manufactured systems - we can control them.

We don't even need to throw AI or human desperation or planned economies on this bonfire of ideas to recognize that, as initially posed, the problem is itself incorrect.

[asdff]

>Now the question is about the societal outcomes we expect from the systems people create. Why should we prefer greater inequity and an even more complete loss of the middle class? These things are all being imposed by human-manufactured systems - we can control them.

Control of these systems lies in the capital class not in the working class. They prefer greater inequality, you and I probably don't but you and I have zero agency to do anything at all about how the world works. We lack support and we lack money to advertise our position and garner support relative to the groups empowered and enriched by the status quo.

[aerhardt]

Who are companies going to sell to if everyone is impoverished? The emergence of the middle class was a boon for businesses.

[asdff]

Why charge $5 for paper towels when clearly people can afford to spend $6? Repeat ad nauseum for just about everything a consumer might purchase until we go from the 1950s where an unskilled manufacturing job can pay for a home and two cars and a nonworking spouse and kids in college, to where you need to be a physician to afford the same today. Sure people aren't all impoverished and starving, but there's plenty of sources out there that highlight how wages have stagnated despite productivity gains and cost of living increases.

[liveoneggs]

That is a problem for next quarter, not this one.

[abdullahkhalids]

Institute law that give employees greater than 50% shares of any large company they were work for. So, the capitalist class can't actually extract wealth away from the worker class.

[asdff]

There are many ways to snap ones fingers and right the ship, very few ways to do it in practice. Imagine trying to get such a law passed, you'd have the entire worlds economy outadvertising and out lobbying you.

[abdullahkhalids]

> We live in capitalism, its power seems inescapable – but then, so did the divine right of kings. Ursula K Le Guin [1]

[1] https://www.theguardian.com/books/2014/nov/20/ursula-k-le-gu...

[asdff]

In practice, is there anything different between a king and someone who was born into a wealthy family? Not really. We might have severed the idea of divinity choosing who receives these resources (plenty of billionaires praise god of course for their success all that being said) but we have not done anything about the issue of a small chosen few accumulating the bulk of the gains of our productivity.