Business

We Can’t Wait for an Invisible Hand. It’s Time to Rewrite the Rules of the Economy

To survive, the game of business needs to update its rules

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By Tim O’Reilly 

Modern economics likes to think of itself as a science, and too often its practitioners have attempted to uncover its “laws,” as if they were modern Isaac Newtons uncovering the laws of motion. But many of the laws of economics are far more like the rules of a game than like the laws of nature.  Some of the rules represent what appear to be fundamental constraints – the availability of resources, say, or the absorptive capacity of the environment, or even the behavioral patterns of human nature – while others are arbitrary and subject to change, such as tax policy, government entitlements, and minimum wage requirements.

An economy has untold possible outcomes. Its complexity comes both from the near infinite variety that can come from permutations of simple rules, and from the fact that billions of humans are playing the game simultaneously, each affecting the outcomes for each other. Many of the rules are written down nowhere, controlled by no one, and constantly evolving. Individuals, businesses, and governments are all players, and none of them can know the full consequences of their decisions.

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Even the simplest and most definitive of the “rules” of an economy are far more complex to apply than they appear on paper. As an internet wag noted many years ago, “The difference between theory and practice is always greater in practice than it is in theory.” This difference between theory and practice is driven by complex interactions not only between rules but between multiple players with competing incentives.

This complexity came to mind last year in a conversation I had with Uber’s economists. I was arguing that just as Google’s search algorithm takes many factors into account in producing the “best” results, Uber’s algorithm would benefit if it took drivers’ wages, job satisfaction, and turnover into account, and not just passenger pickup time, which is its current fitness function. (Uber aims to have enough drivers on the road in a given location that the average pickup time is no more than three minutes.)

The economists explained to me that Uber’s wages were, by definition, optimal, because they simply represent a demand curve, one of the most basic laws of economics.

 

Supply-and-Demand-Graph

Uber’s real time matching algorithm actually satisfies two overlapping demand curves. If there are not enough passengers, the price must go down to stimulate passenger demand. That’s the essence of Uber’s frequent price cuts. But if there are not enough drivers to satisfy that demand, the price has to go up to encourage more drivers to come on the road.  That’s the essence of surge pricing.

Uber’s argument is that the algorithmically determined cost of a ride is at the sweet spot that will drive the most passenger demand while also providing sufficient incentive to produce the number of drivers to meet that demand. And because driver income is the product of both the number of trips and the rate paid, that sweet spot will also maximize driver income. Any attempt to set rates to specifically raise driver income would suppress rider demand, and so reduce utilization and thus wages. Of course, if too many drivers show up, this will also reduce utilization, but the economists seem confident, based on data that they were not authorized to share with me, that they have generally found that sweet spot.

If Uber had the courage of its convictions, it would be doing completely algorithmic pricing (including surging prices in a negative direction, below the base price), much as Google sets ad prices with an auction. Why don’t they? Because they believe that customers are more comfortable with a known base price. That is, the difference between theory and practice is greater in practice than it is in theory.

I do believe that labor marketplace algorithms can be game changers for business and society if they are used to model and satisfy more and more complex conditions. There’s no question that even in their current state, Uber’s real time marketplace algorithms allows for far better matching of supply and demand than the previous structure of the taxicab and limousine industry. But Uber can do better. Algorithms such as these can be a real advance in the structure of our economy, but only if they take into account the needs of workers as well as those of consumers, businesses, and investors.

Here’s the rub in the real world: Uber isn’t just satisfying the two simultaneous demand curves of customer and driver needs, but also competitive business needs. Their desire to crush the incumbent taxi industry and to compete with rivals like Lyft also affect their pricing. Under the rules of the venture-backed startup game, they must grow at a rate that will allow them to utterly dominate the new industry that they have created in order to satisfy the enormous valuation placed on them by their investors.

Drivers are also not playing a simple game in which they can just go home if the wages aren’t sufficient. They have bills to pay, and may have to work far more hours than they would like in order to meet them. They may know in theory that they are depreciating the value of their vehicle and running up expenses that undermine their hourly earnings, but in practice they don’t feel they have any choice. Alternative jobs may be even worse, with less flexibility and even lower pay.

I suspect that over time, driver wages will need to increase at some rate that is independent of the simple supply and demand curves that characterize Uber’s algorithm today. Even if there are enough drivers, the quality of drivers deeply influences the customer experience.

Driver turnover is a key metric. As long as there are lots of people willing to try working for the service, it is possible to treat drivers as a disposable commodity. But this is short-term thinking. What you want are drivers who love the job and are good at it, are paid well, and as a result, keep at it. Over the long term, I predict that Uber and Lyft will be engaged in as fierce a contest to attract and keep drivers as they are to attract and keep customers today.  And that competition may well provide further evidence that higher wages can pay for themselves by improving productivity and driving greater consumer satisfaction.

Many simplistic apologists for the capitalist system celebrate disruption and assume that while messy, it will all work out for the best if we just let “the invisible hand” do its work. This is true, if we correctly understand the invisible hand. The law of supply and demand is not describing some magical force, but the way that players of the game fight for competitive advantage. There are games within games. As Adam Smith put it,

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

The “law” emerges from the contest between players. As labor organizer David Rolf said to me, “God did not make being an auto worker a good job!” Those middle class jobs that we look back at with such nostalgia were the result of a fierce competition between companies and labor as to who would set the rules of the game. The invisible hand became very visible indeed by way of bitter strikes, and then transcended the market into the political process with the National Labor Relations Act of 1935 (the Wagner Act), the Labor Management Relations Act of 1947 (Taft-Hartley), and state “right to work laws.” Over the past 80 years, these acts have tilted the rules first one way, then the other. The low wage jobs of today aren’t inevitable, any more than were the high wage jobs of earlier decades.

Right now, we’re at an inflection point, where many rules are being profoundly rewritten. Much as happened during the industrial revolution, new technology is obsoleting whole classes of employment while making untold new wonders possible. It is making some people very rich, and others much poorer. It is giving companies new ways to organize; those new forms of organization are gradually being matched by labor.

I am confident that the invisible hand will do its work. But not without a lot of struggle. The political convulsions we’ve seen in the UK and now in the US are a testament to the difficulties we face if we let the invisible hand struggle through normal channels! We are heading into a very risky time.

These discussions are more than theoretical. Rising global inequality is triggering a political backlash that could lead to profound destabilization of both society and the economy. As my friend Bill Janeway wrote to me in an email, “The supposed laws of welfare economics assert that the optimal distribution of wealth is achieved when (1) no one can be made better off if done so by making someone worse off and (2) the winners compensate the losers. Unfortunately, the winners rarely do except as the result of political coercion.”  That political coercion may be at hand.

Many discussions of our technological future assume that the fruits of productivity will be distributed to the benefit of all. And that is clearly not the case. Right now, the economic game is enormously fun for far too few players, and an increasingly miserable experience for many others!

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“Between the end of World War II and 1968, the minimum wage tracked average productivity growth fairly closely,” wrote economist John Schmitt. “Since 1968, however, productivity growth has far outpaced the minimum wage. If the minimum wage had continued to move with average productivity after 1968, it would have reached $21.72 per hour in 2012 — a rate well above the average production worker wage. If minimum-wage workers received only half of the productivity gains over the period, the federal minimum would be $15.34.”

Meanwhile, the vast bulk of the value created by increasing productivity has been allocated to corporate profits. Contrary to what you might expect, this is not because companies need those higher profits to grow and sustain themselves, investing in new products and hiring more people in the process. It is because of the unintended consequences of rules designed to align the interests of management and shareholders that instead made management prioritize growth of the stock price above all other considerations. As Rana Foroohar, author of the book Makers and Takers and one of the speakers at this year’s Next:Economy Summit, put it in a recent Time magazine cover story, “the single biggest unexplored reason for long-term slower growth is that the financial system has stopped serving the real economy and now serves mainly itself.”

Another huge swath of value has been allocated to consumer surplus – the difference between what goods sell for and what customers might have been willing to pay. (A huge amount of the value that new technology brings has been provided to consumers free of charge, creating consumer surplus that is difficult to measure.) Free trade and depressed wages have also led to fierce competition by companies to expand their market share by offering goods at lower prices (much as Uber has done with taxi fares.) This is also a powerful kind of consumer surplus, and one of many strategies that economic game players employ to gain advantage.

I like to use Walmart as an example of the complexity of the game play and the tradeoffs that players ask us to make as a society. Walmart has built an enormously productive business that has vastly reduced the cost of the goods that it supplies. A large part of the value goes to consumers in the form of lower prices. Another large part goes to corporate profits, which benefits both company management and outside shareholders. But meanwhile, Walmart workers are paid so little that most need government assistance to live — by coincidence, the difference between Walmart wages and a $15 minimum wage for their US workers (approximately $5 billion/year) is not that far off from the $6 billion/year that Walmart workers are subsidized via Federal supplemental nutrition assistance (SNAP, formerly known as “food stamps.”)

You can see here that there is a five-player game in which gains (or losses) can be allocated in different proportion to consumers, the company itself, financial markets, workers, or taxpayers. The current rules of our economy have encouraged the allocation of gains to consumers and financial shareholders (now including top company management), and the losses to workers and taxpayers. But it doesn’t have to be that way.

We can wait for the invisible hand (i.e. the push and pull of the many players in the game) to work things out, or we can try out different strategies for getting to optimal outcomes more quickly. We can rewrite the rules.

In professional sports, leagues concerned about competitive play often establish new rules. Football (soccer) has changed its rules many times over the past 150 years. NBA basketball added the 3-point shot in 1979 to make the game more dynamic; rule changes are being proposed again after the game-changing play of Golden State Warriors star Stephen Curry.  Many sports use salary caps to keep teams in large markets from buying up the best talent and making it impossible for smaller markets to compete. And so on.

The “fight for 15”, the movement towards a national $15 minimum wage, is one way to rewrite the rules. Businesses and free market fundamentalists argue that raising minimum wages will simply cause businesses to eliminate jobs, making workers even worse off. The evidence shows that this isn’t the case. As Nick Hanauer said during the Q&A at last year’s Next:Economy Summit, “That’s an intimidation tactic masquerading as an economic theory.”

The key question, expressed in the true language of Adam Smith’s “invisible hand,” is who gets more, and who gets less. Capital, labor, consumers, taxpayers.

As noted above, a $15 minimum wage might cost Walmart on the order of $5 billion/year. This is no small number. It represents about a quarter of Walmart’s annual profits, and about 1.25% of its annual US revenues.  But it might save taxpayers $6 billion per year (and that’s just the amount used to subsidize Walmart; including all the other low-wage employers in America, the number is far larger.)

If Walmart weren’t able to pass off part of its true costs onto taxpayers, the company would have to accept lower profits or raise its prices. But is that really such a bad thing? Let’s do some back of the napkin math. If Walmart’s profits were reduced by $5 billion (approximately 20%), its market cap might fall, a loss to shareholders. But leaving aside the shock of a sudden drop in earnings due to a change in the rules, would the owners of Walmart really not have wanted to own it if it generated $20 billion a year in profit instead of $25 billion?

If Walmart were to pass along the additional costs to consumers, prices would have to go up by 1.25% (or $1.25 for every $100 spent at Walmart.) If the costs were split between capital and consumers, that would require only a 10% drop in Walmart profits and an additional 62 cents per $100 spent by consumers. Would people really stop shopping at Walmart if they had to spend little more than an additional half cent for every dollar?

Those higher prices might discourage some customers, but the higher incomes of workers might encourage them to spend more. So it’s not inconceivable that Walmart and its shareholders would come out whole.

And of course, raising the minimum wage is only one way to address the way that the current rules of our economy favor owners of capital over human workers. Tax rates really do need some rethinking! Why do we have preferential rates for taxes on capital when it is so abundant that much of it is sitting on the sidelines rather than at work in our economy? Why do we tax labor income when one of the problems in our economy is lack of aggregate demand due to insufficient consumer spending?

We could change these relative tax rates, and even institute a “Wealth tax” such as proposed by Thomas Piketty and use the proceeds to help fund a Universal Basic Income! In fact, why not tax carbon rather than labor, substituting a carbon tax for social security taxes, among the most regressive of all taxes imposed? These rule changes might be even more costly to some capital owners but might well benefit society overall!

These are political decisions as much as they are purely economic or business decisions. And that is appropriate. Economic policy shapes the future not just for one person or one company, but for all of us.

Throughout history and across continents, economies have played the game using different rules: All land belongs to kings and aristocrats. No one can own the land. All property should be held in common. Property should be private. Property is entailed and cannot be sold by the owners or heirs. Labor belongs to kings and aristocrats and must be supplied on demand. A man’s labor is his own. Women belong to men. Women are independent economic actors. Children are a great source of cheap labor. Child labor is a violation of human rights. Humans can be the property of other humans. No human can be enslaved by another.

We look back at some of these rules as barbaric, and others as utopian dreams. But we also can see that some rules have led to golden periods when society flourished.

Here is one of the failed rules of today’s economy: humans are expendable. Their labor should be eliminated as a cost whenever possible. This will increase the profits of a business, and richly reward investors. These profits will trickle down to the rest of society.

The evidence is in. This rule doesn’t work.

It’s time to rewrite the rules. We need to play the game of business as if people matter.

Originally published here.

2016 August 4


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  • brian t

    The invisible hand … life as an economic contest … survival of the fittest … the question that I keep coming back to is “what happens to the losers”? In the natural world, the contest is to breed, and so the losers die without breeding. The “alpha” lion mates with all the females in his harem, the “beta” lions either slink away or die trying to usurp the “alpha”. When it comes to economies, however, the “losers” don’t go away: they keep up their own struggle to survive, even at the expense of others. That Uber driver who can’t make it pay, whose car suffers some expensive malfunction or who has some medical problem not fully covered by insurance … where does he go? Has he suddenly become a bad driver?

    The “gig economy” might be a good example of the “invisible hand” in action, but that only cares about outcomes, not potential. Getting the best out of people requires that other people think beyond immediate obvious outcomes and also allow for potential. In our society, the “losers” don’t go away, they stick around to cause “problems”. On the other hand, being an economic “loser” is not perfectly correlated with being a human “loser”.

    • Andrew

      The Darwinian aspects of the competitive market are not about ‘people as losers’ but rather ‘businesses as losers’. Insulating people from the collateral damage of economic losers (businesses as losers) is a worthwhile pursuit that preserves the benefits of a competitive market. Maximizing the economic security of the individual and the competitiveness of the free market economy are not mutually exclusive.

      Also, once again, nobody on Evonomics seems to understand what the Invisible Hand actually means.

      • undisclosed location

        I think they know better than most what the invisible hand is. I think what many people don’t like is how the writers at Evonomics relentlessly point out how the invisible hand fails when it is manipulated by business interests.

        Simply put, invisible hand does not function to curb market abuses when there is a concentration of power. This usually happens when you have non-rival goods such as drugs or medical treatments. Usually there is a single party owning the intellectual property, maintaining the monopoly to maximize resource extraction from the target market.

        My personal experience with this is one drug I take for a specific medical condition. The cheaper drugs don’t work so if I want to get better, I have no option. I have to buy from the monopoly.

        In the circumstances, one could say the other invisible hand should guide the government to apply a countervailing force to the monopolistic behavior. For example, letting Medicare negotiate drug prices or even transparency in terms of where the money goes in a company. How much for R&D, how much for marketing etc. Once you have a counter force, then the magical invisible hand will act in a more beneficial way.

        • ReadMyLips88

          You should have stopped with just the first paragraph. No manipulation of market forces can exist without the force of government to manipulate it.

          In your specific case, the cost of drugs is not driven by monopoly, but by the combination of crony capitalist Big Pharma with the high barriers-to-entry erected for them by the FDA. Competition drives those prices down, not some benevolence for the affordability of the common Joe.

          • undisclosed location

            Corporations manipulate market forces all the time. One such manipulation is called price-fixing. Another is buying out your competition.

            The FDA’s “high barriers” are essential for safety. The barriers are not the right barriers in some ways because they can be warped through corporate regulatory manipulation such as unethical testing (only reporting successes and bad math). I suggest you look into the history of gabapentin.

            Looking at the comparison between just US and Canada, as well as the history of prices and generics, you will see that competition does not bring down prices. It’s governmental negotiations

            Another distortion of market forces is executive pay. In a in a true free-market, corporations would hire low cost CEOs from overseas because they provide better value for the dollar. The fact that we only see replacement of lower-level employees with cheap overseas talent but not at the executive level is pretty much proof positive of a market failure.

          • jandr0

            [Corporations manipulate market forces all the time]

            Yes, but not without the force of government. As the previous commenter made clear.

            So please look at your darling government, the major cause of inequality.

            [One such manipulation is called price-fixing. Another is buying out your
            competition.]

            Utter nonsense. That IS the market at work. But clearly you do not understand economics.

            Since you start with such basic misrepresentation, I couldn’t be bothered to read the rest of whatever it is you wrote.

          • undisclosed location

            Collusion, price-fixing, externalization of costs are all market failures from intentional actions by corporations. Government is not involved.

            However, you are right in one sense. All of these market failures are the market at work. Without external intervention (i.e. the other invisible hand), all markets tend to a monopoly. As a friend of mine pointed out, the end result of a capitalist environment is everything owned by one person.

            An unfettered market let’s a corporation use any means necessary to achieve market domination ranging from ordinary competitive behavior to outright force and everything in between.

            When the government gets involved in market failures, it is when corporations use laws they crafted against competitors. Instead of having a private army, a corporation externalizes anticompetitive behavior into the legal code.

    • Max

      Your insistence on calling economic actors “winners” and “losers” is predicated on the assumption that the economy is a zero-sum game, which it definitely is not. The “poorest” in the United States have a standard of living that is in the top 10% of the rest of the world. When an economy is free to grow (with as little gov’t intervention as possible) it is precisely the “losers” who benefit the most and who’s standard of living is increased the greatest. When gov’t intervenes in the market and creates artificial barriers (minimum wage laws, cronyism, regulatory cost and barrier to entry, etc) that’s when “losers” are created.

  • Interesting thinking Tim, as far as it goes.

    Unfortunately it doesn’t go nearly far enough, and misses the most important aspects of our age, which appear to me to be a series of interlinked ideas.

    1/ Is the exponential increase of automation. Most people have now heard of Moore’s Law, a doubling of price performance of computation every 2 years. There are some aspects of computation that are doubling every 10 months.
    Most people consider something that is only 0.1% of the economy insignificant.
    To get from 0.1% to 100% is only 10 doublings – or 8 years.
    Automation is already way past 0.1%.

    2/ Most people are told and believe that market based economic systems are based on matching supply and demand.
    That is untrue.
    Markets do not measure demand.
    Markets only measure unmet demand.
    Consider the oxygen you breath.
    You (and everyone else) has a massive demand for oxygen, it needs to be met by taking a breath every few seconds.
    The supply of oxygen in the air is so abundant, that for most people all of the time there is no unmet demand, so no market price for air.
    There must be unmet demand for markets to function, or in other words, markets demand poverty (unmet demand) for some significant fraction of society, in order to function.

    3/ Most people are taught that evolution is all about competition.
    That is untrue.
    Certainly, in some circumstances, competition can be a powerful force in evolution.
    What evolution is about is differential survival.
    What that leads to is two general classes of strategies.
    In contexts where there are sufficient resources for all to do well, then cooperation will do better than competition.
    If there are insufficient resources, then those who compete best survive.

    There is a general illusion that we don’t have enough for everyone.
    That is false.
    We could easily create automated systems to deliver enough goods and services to allow every person on the planet a high modern standard of living – clean air and water, nutritious safe food, energy, secure housing, healthcare, education, transportation, tools and toys (within reasonable limits).
    The major reason it has not been done is that it would break the current system of economic control and slavery that dominates this planet, because for most people they would have no unmet demands, and no need to engage in economic activity.

    4/ There is a persistent myth that people are motivated by competition. That is true only of a certain set of rather basic activities. Most of what people call creative activities are actually inhibited by the stress of competition (competition narrows the focus, closes the mind to creative possibilities).
    Creativity flourishes in secure cooperative environments.
    That has clearly been true throughout history.

    All life forms are a mix of cooperative and competitive systems.
    It seems clear that all major advances in life forms are the result of new levels of cooperation becoming stable – and as games theory tells us, raw cooperation is always vulnerable to exploitation by cheating strategies, and require attendant strategies to prevent cheats invading – thus the truism – The Price of Liberty is Eternal Vigilance.

    We have a narrow window of opportunity to take humanity as a whole to a new level of cooperation. Not one built on central control, but one empowered by distributed automation, distributed cognition and communication, and distributed trust networks.

    Centralised networks are always vulnerable because they provide a single point of focus for cheating strategies to dominate.
    Biology has long since established that the safest strategy is massive redundancy at all levels (and as human beings we all have many levels).

    We are not short of either energy or matter.
    The Sun produces enough energy for every person to have what humanity as a whole currently uses – very few people need anything remotely approaching that much energy.
    Similarly with matter – we live on a vast ball of it, with other large balls in nearby space.
    Most people only need a few tens of tons to provide all the things they want.

    The thing to really get about very smart automated systems, is that they allow us to do a lot more with a lot less.

    So we are nowhere near running out of stuff.

    The scarcity many experience is created by the rules of the economic game many are playing – and is not a necessary aspect of reality.

    What endangers us most is holding on too tightly to ideas that worked well in our past, but are no longer of positive value in our future. Markets and money are one such idea.

    So yes – interesting article, with some very true aspects, and it also entirely misses the deeper and more relevant truths of our age.

    • Alex Chiriac

      I find your comment is much better than the article.
      Indeed stable cooperation and redundancy are key (among others), and not centralisation and arbitrarily playing with the rules.
      The sad part is the taboo no one addresses from the high western horses: people do starve daily or die from violence, i.e. humans are expendable within current framework.
      Historically we live in a boom of humans, i.e. vast supply, so no more market for humans (sic). Also, as with every boom, it’s bound to correct sometime.

      • Some of us have been consistent for decades in the need to meet the reasonable needs of everyone, and the improbability of any market based system ever doing that.

        While it is true that no population can keep exponentially expanding forever, we do currently have the materials, energy and technology to sustain far more people than we currently have on the planet. We are just highly unlikely to do so in the current mix of strategies present.

        There are many levels of threat present today, not least of all that of a runaway military industrial complex in the US, and in another perspective that is more effect than cause.

        So we live in complex systems, complex times, with many subsets of systems that are past the boundary of complexity and into the realms of chaos that are not even potentially controllable.

        And the logic of long term personal survival, at any and all levels, does seem to point clearly to a set of strategies that delivers abundance and security for all – however historically improbable such a scenario may appear.

  • Sherman Ackerson

    The government has been subsidizing big business and undermining workers in several ways: First, the government has failed to enforce the borders, bringing millions of poorly educated people flooding into the country in direct competition with other low-skilled workers raising the poverty rate. Additionally, H1B and H2B programs have been expanded bringing in hundreds of thousands of skilled workers in direct competition with other workers, reducing wages and benefits even for skilled workers. Then of course is the 1 million legal immigrants brought into the country every year to compete for jobs. Add to this is the fact that government has expanded food stamp eligibility, welfare, WIC programs, Medicaid and a host of other programs designed to help working and underpaid workers. Thus business is essentially subsidized by taxpayers and I don’t see how it will change unless we force much higher minimum wages.

    In 1968, Caesar Chavez tried to organize farm workers across California but was frustrated in his efforts by farm owners bringing in hoard of illegals to replace union workers. The farmers used fear and intimidation against the workers to keep the UFW out.

    The Chamber of Commerce does not have the interests of workers in mind, and we must demand that businesses be responsible and pay all their workers a living wage. Here is an article worth reading: http://www.bloomberg.com/news/articles/2016-08-04/hungary-s-labor-woes-may-trigger-wage-explosion-minister-says

  • KeyBoards

    No! We do not need to rewrite the rules of economics. We need to find out what natures rules are, and then swallow our pride & prejudice and follow the natural laws.

    And Yes! There will be some noses out of joint. But we would all be better off!

  • Max

    I guess the next evolution in economics is to ignore economics and identify as many economic fallacies as possible in one article. I’m sure Walmart and all of their share holders (including all 401K and pension holders who depend on Walmart stock for their retirement) are just going to sit back and accept a 25% decrease in their operating profits, operating profits that are currently a razor thin 2.66%. Maybe before we “evolve economics” we should at least take the time to understand it’s history. “Today’s supporters of minimum wages should be embarrassed and ashamed, not only for their weak grasp of economics and scientific method, but also for championing a policy conceived by anti-immigrant white supremacists and finally hatched at the national level in the U.S. by a “Progressive” government bent on protecting the profits and wages of white northerners from the competition of ‘inferior’ southerners.” If the minimum wage was called what it actually is, “The Black Youth Unemployment Act”, I doubt Mr. O’Reilly and his economically ignorant ilk would support it so feverishly.

  • A very large minimum wage will merely augment trends towards automation. I just saw an article on an “ATM machine” for pizza. Put your card in and pull out a piping hot pizza. And as 3-D machines get more ubiquitous and build more and more varied things, manufacturing jobs will vanish even faster.
    Rewriting the rules. Hmmm. Most have never been written. They are emergent phenomena. And as tech accelerates, any would-be planner or writer of rules will find his or her ability to do so effectively will vanish in an accelerating speed.
    I believe that accelerating tech will lead to a society in which people will not work for a living. People will live on the work done by the machines, which will be capable of producing anything people want at any time. On the order of Star Trek replicators. At that point, economics will vanish. Politics will play no role at all, except possibly the negative role of slowing these trends down.

    • Aritz

      If one examines patriarchialist narrative, one is faced with a choice: either accept poststructuralist materialism or conclude that the establishment is part of the absurdity of consciousness. Therefore, the subject is interpolated into a modernism that includes sexuality as a reality. A number of appropriations concerning the difference between language and sexual identity exist.

      • deverson

        You are kidding, aren’t you? This is a parody, right?

        • Aritz

          No apperently Pizza ATM machienes are indeed real.

          • deverson

            I’m just going to back away slowly. No sudden moves…

          • Aritz

            Wait, you’re saying you don’t want to hear more from the lady talking about Star Trek replicators? Too bad…

  • geoffleach

    Tim,

    You’re a successful entrepreneur. You have a profitable company. I know that, because form where I sit I can see a good yard of O’Reilly titles. In the spirit of setting an example, why not reduce your profits by 25% before laying that on Walmart?

    /?

  • jandr0

    [Here is one of the failed rules of today’s economy: humans are expendable. Their labor should be eliminated as a cost whenever possible. This will increase the profits of a business, and richly
    reward investors. These profits will trickle down to the rest of society.]

    No. What that paragraph is, is an absurd, false, straw-man claim and a complete failure to understand economics.

    Tim O’Reilly has become increasingly sanctimonious and moralistic over the years, and is now dabbling in specious “arguments” to support his personal feel-good notions.

    Do whatever you want with your own companies Tim, but have the decency to keep your interfering nose out of other people’s voluntary activities.

  • deverson

    Is Econ 101 no longer taught? Tim: your X-Windows books were great. Your economics essay, not so much.

  • You should stick to classical antiquity…..and leave economic theory to the economists…. 🙂 Are there any economist writers on this page?

  • The only way capitalism is going to survive automation is if the people doing the work, own the means of production. We’re due (via numerous studies, in numerous countries) to lose about 45% of jobs to automation in the next 15 years. There is an outside chance for a generations’s grace via green Keynsianism, but sooner or later, the jobs are going… and you can’t run an economy on that.

    A UBI seems like a good idea – but if it’s purpose is just so people can pay rentier capitalists… and they are the only ones making enough money to pay the tax for a UBI (and they ain’t paying tax now in any case), then that isn’t going to work.

    If you work for a company, and are replaced by a machine – you lose your job. You’re not even part of the conversation about what happens to you.

    If you co-own the company and are replaced by a machine, you get a say in what happens next – you could (for example) make the same money, but be freed from the labour.

    I think what we need to do is pass a law such that whenever a company changes hands, the people that actually work there get first right of refusal to buy it and run it themselves, backed by a govt loan with the same interest rates as we gave the banks in 2008.

    This will provide a gentle transition. Alternatively you can just let money-lenders take all the money, while our technorati create the machines that lose 1/2 of us our jobs, and we get no say in what happens to us.

    That is not a gentle transition… and hey, take a look around. The fallout has already started.