NY Times Op-Ed: Beware Rich People Who Say They Want to Change the World

[PeterMP]

27 minutes ago, CousinsCowgirl84 said:

 

Fair enough. If you want to to go down that route breaking up a larger company into smaller ones is less efficient and will lower gdp but it might allow the bottom to grow.

 

the poor aren’t getting poorer, the rich are getting richer. I know that @PeterMP said that the people are working more hours but it’s only a 15 percent difference, and it doesn’t say who is working more. So it’s interesting but it would need more information to be convincing.

 

Again, there's no evidence that breaking up companies lowers GDP.

 

Zero.

 

Or really decrease efficiency.  Due to their nature, monopolies actually in some cases limit innovation and make it harder to bring innovation to the market and there make things less efficient.

 

In fact historically, monopolies have been known for such things because they are a monopoly.  They no longer respond to normal market (capitalistic) forces.

 

https://www.simontaylorsblog.com/2016/05/16/rising-monopoly-power-may-partly-explain-us-inequality-and-productivity-slowdown/

 

"Rising monopoly power may partly explain US inequality and productivity slowdown"

 

"The problem comes if this market power is either unearned through successful innovation or service or even if it was, it allows a company to build barriers to entry which prevent other firms from competing. To an economist, the danger of monopoly power comes in two forms: i) the monopolist can and will price above marginal cost, so the price no longer reflects the true resource cost of production; and ii) the monopolist may stop being innovative and dynamic and instead become lazy and inefficient, secure in the knowledge that competitors offer no threat."

 

I'll say it again.  The reality is that income and wealth mobility are declining in the US.  We can accept that reality and do something about it, or we can keep making up fairy tales.

[NoCalMike]

3 minutes ago, TD_washingtonredskins said:

 

I think we agree...I guess it's the classification of these damages that is tough to quantify. 

 

If I start a company that sells oven mitts and ultimately can offer an equal product for less than John's Mitts down the street, do I hold back for fear that putting John out of business will lead to social or economic damage? Where do we draw the line between survival of the fittest and these damages? 

 

Again - in my scenario I'm not doing anything illegal or underhanded (like hiring children to make my oven mitts for pennies). 

 

No but I would think in theory  Matt's Oven Mitts vs. Jon's Oven Mitts, in the battle for oven mitts supremacy, there will be lots of give and take between consumers, prices will go up and down, it will be a an on-going competition.   When you have say, Wal-mart vs. Matt's Oven Mitts,  Wal-Mart can buy from the same supplier at a lower wholesale price then undercut retail the price and likely even take a loss for a year on the oven mitts due to all their other products they sell, then once Matt's Oven Mitts lose all their customers to dirt cheap prices,  Matt's Oven Mitts is forced to shut down, Wal-Mart now has the market cornered, and can raise the price on oven Mitt's to what Matt was charging in the first place.

[CousinsCowgirl84]

3 minutes ago, PeterMP said:

 

Again, there's no evidence that breaking up companies lowers GDP.

 

Zero.

 

Or really decrease inefficiency.  Due to their nature, monopolies actually in some cases limit innovation and make it harder to bring innovation to the market and there make things less efficient.

 

In fact historically, monopolies have been known for such things because they are a monopoly.  They no longer respond to normal market (capitalistic) forces.

 

Amazon isn’t a true monopoly. Or even a oligarchy...  if it was you would be correct.

 

 

[Fresh8686]

Just now, TD_washingtonredskins said:

 

I think we agree...I guess it's the classification of these damages that is tough to quantify. 

 

If I start a company that sells oven mitts and ultimately can offer an equal product for less than John's Mitts down the street, do I hold back for fear that putting John out of business will lead to social or economic damage? Where do we draw the line between survival of the fittest and these damages? 

 

Again - in my scenario I'm not doing anything illegal or underhanded (like hiring children to make my oven mitts for pennies). 

Yup, it's as you said a question of parameters for damage or what levels of "damage" rise to the threshold for which we would deem that particular practice as irresponsible. As the leverage of technology increases that threshold becomes ever more subtle and nuanced.
 

[PeterMP]

Just now, CousinsCowgirl84 said:

 

Amazon isn’t a true monopoly. Or even a oligarchy...  if it was you would be correct.

 

 

 

An olgiarchy is a kind of government, and there if you define it broadly enough, there is never such thing as a true monopoly.  Even with Ma Bell, people made the argument you could send letters, etc.

 

it is very likely that the a company the size of Amazon is having as much of a negative impact on the economy as a positive one, and there is zero evidence that breaking it up would actually lower GDP.

[TD_washingtonredskins]

4 minutes ago, NoCalMike said:

 

No but I would think in theory  Matt's Oven Mitts vs. Jon's Oven Mitts, in the battle for oven mitts supremacy, there will be lots of give and take between consumers, prices will go up and down, it will be a an on-going competition.   When you have say, Wal-mart vs. Matt's Oven Mitts,  Wal-Mart can buy from the same supplier at a lower wholesale price then undercut retail the price and likely even take a loss for a year on the oven mitts due to all their other products they sell, then once Matt's Oven Mitts lose all their customers to dirt cheap prices,  Matt's Oven Mitts is forced to shut down, Wal-Mart now has the market cornered, and can raise the price on oven Mitt's to what Matt was charging in the first place.

 

Good point...but either Wal-Mart keeps the prices lower (which isn't a bad thing) or they raise them and open themselves up for Jon's Oven Mitts to come in. I still don't see the huge issue. If Wal-Mart is able to sell something for less (without breaking laws, of course) should they really be focusing on how Matt's Oven Mitts is doing?

[PeterMP]

8 minutes ago, TD_washingtonredskins said:

 

Good point...but either Wal-Mart keeps the prices lower (which isn't a bad thing) or they raise them and open themselves up for Jon's Oven Mitts to come in. I still don't see the huge issue. If Wal-Mart is able to sell something for less (without breaking laws, of course) should they really be focusing on how Matt's Oven Mitts is doing?

 

But there is a barrier to starting a business and when Matt starts to move to open his business Wal-Mart can lower its prices under cutting Matt before he really even gets started and certainly before he can reasonably recoup the investment needed to start his business.  And everybody knows this and so it even becomes difficult for Matt to raise money to start his business and Matt doesn't get to open his business.

 

And as result, Wal-Mart can keep their prices higher than they should be without really facing the risks of competition.

 

Consumers end up paying more than they should (and you stifle things like innovation) simply because of the size and flexibility of Wal-Mart.

[NoCalMike]

Or Wal-Mart figures out how to produce the product for cheaper and less quality, which raises the profit margin on the oven mitts.

 

Like I said, it is a complex issue, neither side IMO, is completely wrong or completely right.

[PeterMP]

And of course because Matt's store isn't going to open, Wal-Mart has less competition for labor too so they can pay their workers less than they normally would.

 

And the extra money can go to stock holders who are mostly wealthy.

 

And you get increases in income inequality.

 

Which is exactly what we are seeing.

[Fresh8686]

1 minute ago, TD_washingtonredskins said:

 

Good point...but either Wal-Mart keeps the prices lower (which isn't a bad thing) or they raise them and open themselves up for Jon's Oven Mitts to come in. I still don't see the huge issue. If Wal-Mart is able to sell something for less (without breaking laws, of course) should they really be focusing on how Matt's Oven Mitts is doing?

Are they keeping it artificially lower via selling at a loss and leveraging previously accrued capital to drown out the competition? If so that is not a responsible or competitive practice. They aren't winning by having a better product, they are winning because they have huge concentrations of wealth they can use to "upset the table".

Personally, I think a good measure to determine what practices are acceptable versus not, are whether or not that practice creates a "race to the bottom" situation.
 

[TD_washingtonredskins]

1 minute ago, PeterMP said:

 

But there is a barrier to starting a business and when Jon starts to move to open his business Wal-Mart can lower its prices under cutting Jon before he really even gets started and certainly before he can reasonably recoup the investment needed to start his business.  And everybody knows this.

 

And as result, Wal-Mart can keep their prices higher than they should be without really facing the risks of competition.

 

Consumers end up paying more than they should (and you stifle things like innovation) simply because of the size and flexibility of Wal-Mart.

 

But isn't Wal-Mart kept in check by Target or another big box store? Doesn't that keep them from being able to keep prices higher? 

[CousinsCowgirl84]

17 minutes ago, PeterMP said:

 

it is very likely that the a company the size of Amazon is having as much of a negative impact on the economy as a positive one, and there is zero evidence that breaking it up would actually lower GDP.

 

Meant Oligopoly.

 

Thats only because breaking up companies is rarely done so there isn’t enough data. My point is if you loose economies of scope and scale you loose efficiency, productivity, and ultimately gdp.

 

As I said though, it’s possible that breaking up a company is a net benefit, there isn’t enough data either way.

[Bozo the kKklown]

13 minutes ago, PeterMP said:

And of course because Matt's store isn't going to open, Wal-Mart has less competition for labor too so they can pay their workers less than they normally would.

 

And the extra money can go to stock holders who are mostly wealthy.

 

And you get increases in income inequality.

 

Which is exactly what we are seeing.

Exactly

[NoCalMike]

10 minutes ago, TD_washingtonredskins said:

 

But isn't Wal-Mart kept in check by Target or another big box store? Doesn't that keep them from being able to keep prices higher? 

 

I'd be interested to see what the crossover customer base is for Wal-Mart & Target. 

[PeterMP]

25 minutes ago, TD_washingtonredskins said:

 

But isn't Wal-Mart kept in check by Target or another big box store? Doesn't that keep them from being able to keep prices higher? 

 

To a certain extent, but there is a cost associated with opening a store for a Target and Wal-mart too.  In addition, they've very much divided the market where Target is generally pursuing more middle class people and coming into areas around malls and other pre-existing shopping centers. 

 

Wal-mart more targeted lower class people and came into areas between towns and communities.

 

But in general, Target is going to open up a store that to make a profit (including the investment on opening the store) that long term requires them to beat Wal-Mart on prices.  If a Wal-Mart is charging more than they should for somethings, Target isn't going to say, 'Hey, we need to open a store there.' because Wal-Mart will under cut them.

 

Clearly, neither is a monopoly, but large companies start to have "negative" impacts (if you think the rich getting richer is okay, then it isn't really negative) before they become monopolies.

19 minutes ago, CousinsCowgirl84 said:

 

Meant Oligopoly.

 

Thats only because breaking up companies is rarely done so there isn’t enough data. My point is if you loose economies of scope and scale you loose efficiency, productivity, and ultimately gdp.

 

As I said though, it’s possible that breaking up a company is a net benefit, there isn’t enough data either way.

 

There are plenty of studies done based on models on the effects of large companies.  In addition, the effects of the Ma-Bell break up has been well studied.

 

There is zero evidence that breaking up very large companies reduces GDP.  Your post was fantasy.

[TD_washingtonredskins]

2 minutes ago, NoCalMike said:

 

I'd be interested to see what the crossover customer base is for Wal-Mart & Target. 

 

"I root for Big Box Stores and I like Target"

[PeterMP]

The other thing that is important, is that for the most part, even the most powerful monopolies will fail over a long enough time because of technology.

 

Ma-Bell wasn't moving into cellular communications and clearly, today a Ma-Bell would be in trouble.

 

But that doesn't mean while it is functional that it didn't hurt consumers, stifle innovation, and wasn't a force that caused wealth to rise to the top.

[CousinsCowgirl84]

25 minutes ago, PeterMP said:

 

There are plenty of studies done based on models on the effects of large companies.

 

Which are...

 

ma-bell isn’t really relevant to what we are talking about since they were a sole provider and amazon has many competitors..

 

25 minutes ago, PeterMP said:

 

There is zero evidence that breaking up very large companies reduces GDP.  Your post was fantasy.

 

 

There is plenty of evidence which suggests that larger companies experience cost saves due to economies of scope and scale, and there is plenty of evidence that is ultimately results in lower prices for the consumer, which is what makes those large companies so attractive in the first place.  

[PeterMP]

10 minutes ago, CousinsCowgirl84 said:

 

Which are...

 

ma-bell isn’t really relevant to what we are talking about since they were a sole provider and amazon has many competitors..

 

There is plenty of evidence which suggests that larger companies experience cost saves due to economies of scope and scale, and there is plenty of evidence that is ultimately results in lower prices for the consumer, which is what makes those large companies so attractive in the first place.  

 

Do you want me to give you links to studies?

 

Start with this:

 

https://www.kauffman.org/what-we-do/research/firm-formation-and-growth-series/the-importance-of-startups-in-job-creation-and-job-destruction

 

Again, that depends on how you define competition.  It isn't like ma-bell was the only way that people communicated.

 

Yes, initially, that's the case, but over time there is good reason (as I've laid out over the last few posts) that isn't the case.  (You haven't explicitly stated it, but you are leaning towards arguing that prices are the result of production costs, which is false.).

[JCB]

There's also plenty of evidence that those large companies ensure a cheaper product by exploiting their employees. Not many Wal-Mart employees find it an "attractive" place to work, and Americans are usually too selfish or stupid to investigate this angle much.

[Bozo the kKklown]

35 minutes ago, JCB said:

There's also plenty of evidence that those large companies ensure a cheaper product by exploiting their employees. Not many Wal-Mart employees find it an "attractive" place to work, and Americans are usually too selfish or stupid to investigate this angle much.

Same thing is happening with Amazon warehouse employees.

[CousinsCowgirl84]

8 hours ago, PeterMP said:

 

Do you want me to give you links to studies?

 

It’s a shame that you can’t really find real studies on google anymore, whatever you search for you get some article written by someone working to advance an agenda. 

 

8 hours ago, PeterMP said:

Start with this:

 

https://www.kauffman.org/what-we-do/research/firm-formation-and-growth-series/the-importance-of-startups-in-job-creation-and-job-destruction

 

Thank you... The paper discusses an advantage of start ups, in that they create net jobs. It makes sense. A start up is different from breaking up a larger company (but i agree that that would probably also create jobs, more managerial positions for example). But job creation is only one facet of the economy.  

 

 

Quote

 

Again, that depends on how you define competition.  It isn't like ma-bell was the only way that people communicated.

 

ma-bell was the only way for people to communicate on a telephone, amazon is not the only way for people to shop online. I think we can agree that amazon faces substantially more competition than ma-bell did.

 

 

Quote

 

Yes, initially, that's the case, but over time there is good reason (as I've laid out over the last few posts) that isn't the case.  (You haven't explicitly stated it, but you are leaning towards arguing that prices are the result of production costs, which is false.).

 

Theoretically, price is a function of demand and supply. Input costs shift the supply curve. Depending on the elasticity of demand the price increases or qtd demand goes down... 

 

 

Though it depends on the context of what you mean by “setting the price”.

 

Businesses often use production costs to determine what price to set. 

 

https://www.businessinsider.com/3-powerful-pricing-strategies-businesses-should-always-consider-2013-10

 

[PeterMP]

On 2/8/2019 at 11:52 PM, CousinsCowgirl84 said:

 

It’s a shame that you can’t really find real studies on google anymore, whatever you search for you get some article written by someone working to advance an agenda. 

 

 

Thank you... The paper discusses an advantage of start ups, in that they create net jobs. It makes sense. A start up is different from breaking up a larger company (but i agree that that would probably also create jobs, more managerial positions for example). But job creation is only one facet of the economy.  

 

 

 

ma-bell was the only way for people to communicate on a telephone, amazon is not the only way for people to shop online. I think we can agree that amazon faces substantially more competition than ma-bell did.

 

 

 

Theoretically, price is a function of demand and supply. Input costs shift the supply curve. Depending on the elasticity of demand the price increases or qtd demand goes down... 

 

 

Though it depends on the context of what you mean by “setting the price”.

 

Businesses often use production costs to determine what price to set. 

 

https://www.businessinsider.com/3-powerful-pricing-strategies-businesses-should-always-consider-2013-10

 

 

I wanted to come back to this.  I want to point out that I didn't claim that jobs are the end all and be all of the economy.  My point is that there are a large number of studies that look at the effects of different sizes and different types of companies on the economy.

 

And to my knowledge, none of them claim that larger companies support higher GDP.  There is zero evidence that your initial claim is true.

 

I've made no real counter claim (though, I suspect that breaking up things like Amazon and Facebook would have no real impact on the large scale measures of the economy like GDP) other than your claim isn't something that you can really support.

 

You have not separated what you know from what you think you know, and you make claims as if they are true based on what you think you know.

 

Sprint and MCI both existed at the time that AT&T was broken up.

[CousinsCowgirl84]

1 hour ago, PeterMP said:

 

I wanted to come back to this.  I want to point out that I didn't claim that jobs are the end all and be all of the economy.  My point is that there are a large number of studies that look at the effects of different sizes and different types of companies on the economy.

 

And there is no conclusion because Economics is a new art, not a science.

 

1 hour ago, PeterMP said:

 

And to my knowledge, none of them claim that larger companies support higher GDP.  There is zero evidence that your initial claim is true.

 

You havnt produced information that it is false. I pointed out already there are limited  studies on the effect of breaking up large companies....  and you posted a study that was interesting but not too pertinent.

 

I did find this article interesting

 

https://www.fresheconomicthinking.com/2011/08/economies-of-scale-do-not-equal.html?m=1

 

I guess it just depends where we are at on the curve (and ultimately, having to choose, I would say we are closer to diseconomies I’d scale)

 

 

 

 

 

 

 

 

[PeterMP]

1 hour ago, CousinsCowgirl84 said:

 

And there is no conclusion because Economics is a new art, not a science.

 

 

You havnt produced information that it is false. I pointed out already there are limited  studies on the effect of breaking up large companies....  and you posted a study that was interesting but not too pertinent.

 

I did find this article interesting

 

https://www.fresheconomicthinking.com/2011/08/economies-of-scale-do-not-equal.html?m=1

 

I guess it just depends where we are at on the curve (and ultimately, having to choose, I would say we are closer to diseconomies I’d scale)

 

Economics is very much a science.

 

It is your point.  It is your job to support it.  I can't read and cite every economics study ever done.  If you want to claim the breaking up Amazon would be bad for the economy at large, it is your job to support that claim.

 

You said something that you can't support.  There's plenty of evidence that large companies can actually be harmful to the economy.

 

You are entitled to your opinions, but you are not entitled to pass your opinions off as facts, which is what you did.