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skilesare comments on Publishing my initial model for hypercapitalism - Less Wrong
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Not quite. The difference between the price the buyer pays and the cost of the good to the seller is the seller's profit which is not the same thing as rent. To call something "rent" implies that the seller controls some limited resource that cannot be easily reproduced or acquired by his competition.
I think it is semantics that depend on your assumptions:
http://www.investopedia.com/terms/e/economicrent.asp
Profits are economic rent are the same in a lot of instances. If all markets were perfect their would be neither profit nor economic rent. Can you think of a situation where profit is not economic rent?
Profit is not the same thing as economic rent. You can think of economic rent as the portion of revenues deriving purely from the scarcity of some resource you hold, e.g. land in Manhattan (but not the stuff involved in administering or maintaining it), or the rights to a patent, or skills or credentials that are underrepresented in a market thanks to cultural factors. That has almost nothing to do with profit; although you can profit from economic rents, you can profit from other things too, and almost all transactions involve factors other than rents. A perfect market would eliminate rents, but it would not eliminate profits -- though it would drive down profits to the minimum necessary to motivate transactions.
There are rents involved in the production of most material goods, because natural resources are almost always scarce in this sense. However, as a counterexample we could imagine e.g. a frontier situation where land was essentially free and the prices of agricultural goods directly reflected the costs and effort involved in cultivating them.
When you talk about perfectly competitive markets having no profit, you're probably thinking of the term "economic profit". The sort of profit everyone usually thinks of is revenue minus cost, which is called accounting profit by economists so as to distinguish it from economic profit. Also economists are really bad at naming things. Economic profit is revenue-costs-opportunity costs.
In perfect competition, firms do make accounting profit, but they don't make economic profit.
Thanks for posting your model here and getting involved in the discussion. It's always good to be able to discuss these things publicly because I'm sure many people are learning a lot from it.
..and I'm all for profit. I think it is a great thing....I just also think there is an advantage to it being a time bound great thing. You made a profit! Awesome! Good for you! Now use it for the greater good or give it back(slowly...but still...)
That is not correct. If there are no profits, there are no incentives for sellers to stay in business.
Sure. I walk into a grocery store and buy an apple. I paid more than the cost of the apple to the store -- where is my "disadvantage" that the seller exploited to get rent? To forestall the location rent argument, let me point out that there is another grocery store selling the same apples down the block.
The economic rent is in the fact that there wasn't an apple tree on your the walk to the store.
Economic rent isn't always bad. Otherwise we'd have an apple tree infestation problem.
And we come full circle to me pointing out again that this is NOT the meaning in which mainstream economics uses the word "rent".
You do want to popularize your theory, right? That means explaining things using terminology that your target audience knows and understands. Unless you have a very good reason, changing the meaning of pretty standard terms leads to much confusion.
Hmm...I'll have to look into this more. There certainly is a difference between 'rent' and 'economic rent'. I'm really don't think I'm misusing economic rent.
You can call it profit if you want. In the model, some nodes have a better ability to extract profit than others. Or we can call it 'make moneyness'.
"Moneyness" is a term in finance :-)
Do you mean "better extract profit" or do you mean "generate value with higher productivity"?
And my initial question still stands: what is your aim and what problems do you want to solve?
See my answer below:
http://lesswrong.com/r/discussion/lw/m38/publishing_my_initial_model_for_hypercapitalism/ca33
I mean that some of us are better at generating some kinds value than others. (Division of Labor)
A wine maker who has been in the business for 25 years can make a better bottle of wine than I can. If he wanted to make the same bottle of wine that I can, he could do it more easily.
A competent wine maker is already rewarded for being able to produce a good bottle of wine under normal capitalism -- he can sell this bottle for, say, $50 and you can't do this with your homebrew.
As to you goals, I don't see why low velocity of money is a problem (yes, I'm familiar with Keynes). It's a symptom of the sluggishness of the underlying economic activity, not its cause. Having bank deposits or bonds pay negative interest is also a solved problem (see contemporary Europe), and if you want all store-of-value to be subject to negative interest rates you have to outlaw cash and equivalents to start with.
I don't know what is "good" value. I also don't know what is "dignity of labour".
And I don't think you're serious about robots :-P
The wine buyer is not rewarded for buying from a wine maker that will make a better wine bottle tomorrow though. Think for a bit on if she was.
I'm not sure if the velocity of money is a result or a cause of economic activity, but my reason tells me that if it is flowing faster, 'I' have a better chance at having some flow to me. P(making 100k at mv 6) < P(making 100k at mv 12)
Can you name a form of non artificial capital that is a cash equivalent? Maybe gold? Any non elements that aren't subject to entropy? Ultimately, yes, I think all artificial forms of 'store of value' should have an artificial form of entropy added to them because that is the way the world works.
I bet if you don't know what good value is that you at least know bad value when you see it.
I talk more about the full output of labour in this paper: https://www.dropbox.com/s/k97dzssxc58ux1s/hypercapitalismwpv1.1.pdf?dl=0
...as for the robots. I'm a little serious. If agi emerges into a world where economic nodes are dependent upon each other and it has more to gain from cooperation than dominating, it might buy us a few years to find a balance.
From what I gathered if two sellers would sell the exact same product but another seller could sell it at double the price it would become a favoured node. If they were not interchangeable products you could try to argue that the difference must be between the quality of the products. However if the same product has the same use value the measure is more about better extracting profits. There is the effect that given choice of equal product at cheaper or higher price a consumer ought to go with the lower cost. Competetive effects are supposed to kill off overpriced products but giving a bonus to seller for having a big mark up dulls their teeth.
This is a tough one because most of the readily available literature on competition and market take a specific approach. Specific in the sense of time. Of course at the instant we don't want people favoring more expensive things...unless there is a damn good reason to. If you add in time though things get very interesting. This system alters the proposition to current market decision + future potential. You wouldn't pay more just to pay more, but you might buy a Tesla instead of a Honda accord because you think that Tesla had better long term earning potential and you are getting in on the ground floor.
Most of the things we buy aren't commodities. There is some trade off on features vs cost. This system does tip the scales toward things that may be more expensive, but only if there is a long term advancement that can be leveraged.
In the instance where we actually deal with a commodity, more emphasis will be placed on the long term repetitive production of that commodity. If the commodity can't be renewed it will be less favored. Thus I'd expect a vector away from depletable goods and toward renewable alternatives.
These assumptions are harder to work into a model.
You could offer the Tesla at a high price or a lower price. If the price is higher individual sells will move the company quicker to ground floor. That is Tesla + 1 stock will probably cost less than Tesla + 10 stock. But what is that prevents from offering the option of Tesla + 0 stock or the minimum amount of stock allowed?
There is also the issue that if you think you can afford Tesla + 5 stock but could not afford Tesla + 0 stock you might end up with Tesla that bombs harder than just taking a unpaybackable loan for Tesla + 0 stock. That is when the future component factors in to everyday products future speculation will impact the price of milk. People might have a bigger resistance to buy into things because it doesn't need to only work in the moment but it needs to work for the future as well. You can't look at your accout balance and know how well of you are as you are expecting uncertain returns, returns you might need to stay on the positives.
Wikipedia has an article on "economic rent", so it probably is an existing term, although I have never heard it before.
Seems like "rent" is an income from a (generally) limited resource, while "economic rent" is an extra income from a resource that (locally, temporarily) acts like a limited resource.
Just like apples are generally not a limited resource, but if you need an apple, and your time is limited, and there is only one shop on your way, and it contains a limited amount of apples... then those apples here and now behave like a limited resource.
Yes, exactly. Most economic theory assumes 'in the moment' and a bit of God like reach. In the real world we have to deal with time and space.
For most of us working stiffs, when we go to the store to buy milk we are charged an large amount of economic rent to buy it cold, in a container, near our home. Despite the fact that you really need to drive an hour or more to find a cow. Given infinite time and teleportation, we'd hit the farm and get it for much, much less. You only have to look to digital assets to see how this plays out. This isn't a bad thing. We want the farmer, the pasteurizer, the delivery man and the grocery store to stay in business, but we also want them to do it better, faster, cheaper next time. General market dynamics cause this to happen a rate. I want it to happen at a faster rate.