Tuesday, October 20, 2015

Is market structure a zero-sum game?

I'm working up a concept to take all the umph out of the unregulated market fetish: the concept recognizes that which particular way markets are structured (e.g., union/non-union) can be just a zero-sum game -- as far as overall output results.  And that is even assuming that a more equitably power-balanced market is not for NON-MATHEMATICAL (social reality) reasons actually much more productive (and healthy).

Leaving us perfectly free to structure markets with the greatest good for the greatest number in mind.

In a high union density (or a high co-op, that is employee owned) market consumers will pay more for less goods from firm "A" -- causing some of firm "A"employees to lose jobs; and because consumers who continued to patronize firm "A" in spite of higher prices now have less money to spend over at firm "B", some employees will be laid of fat firm "B" also.  If the employees of "A" now hide their new pay raises under their mattresses that will be the end of the economic effects.

But I'm guessing that the employees of firm "A" will have a propensity to spend their new incomes at firms "X", "Y" and "Z" and don't forget "B" and don't forget even "A" -- making jobs for the formerly laid off employees of "A" and "B."  And the prepetual motion dollars just keep going round and round -- as long as they keep circulating among people with the same (middle class?) propensity to spend. 

I would plead that the more prices are set on the maximum the consumer is willing to pay labor -- and less on the Iron Law of labor -- the more equitably production will be shared around.  It is more like consumer preferences v. consumer preferences doing the market clearing.

Of course, in the real world if you squeeze too much income to the top, then, you will IMMEDIATELY (as opposed to the LONG RUN; we'll get to that) slow down the economy unless the most of the beneficiaries of the squeezing have the propensity to spend of Larry Ellison.  Sort of like QE doesn't work well if the banks don't lend all that liquidity the Fed is forcing down their throats.

The long run is the real story -- even if more equal distribution meant less efficiency; even if not a zero-sum game.  

Just as import substitution, etc. by underdeveloped economies would lower world output on ONE DAY -- but -- AFTER a couple of decades of hiding behind tariffs, etc. the now more productive economy will raise overall world output ...

... even if more equal distribution made our domestic economy less productive on ONE DAY -- after a couple of decades of better education, better food, better lives for the previously poorly paid employees the economy will be more productive overall (but it really is a zero-sum game) -- and life will be better all around (e.g., much more crime free).

That's what I'm working up.

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