Total Posts:46|Showing Posts:1-30|Last Page
Jump to topic:

Outsourcing

darkkermit
Posts: 11,204
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 5:52:49 PM
Posted: 5 years ago
It just amazes me that average person is so against outsourcing. Argument in favor of outsourcing:

Comparative advantage -> Comparative advantage states that both parties benefit from trade, increasing wealth in both countries, even if one country is better at producing all goods and services.

I'm not stating that those against outsourcing don't have their merits. But, it seems that it is unfairly weighted against outsourcing.
Open borders debate:
http://www.debate.org...
Greyparrot
Posts: 14,268
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 5:56:18 PM
Posted: 5 years ago
Outsourcing ensures the most efficient use of global resources for a low cost and high quality standard of living for an independent consumer in a global market. If you live off of the government however, then you probably don't give a rat's tail.
Ore_Ele
Posts: 25,980
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 5:56:52 PM
Posted: 5 years ago
At 5/19/2011 5:52:49 PM, darkkermit wrote:
It just amazes me that average person is so against outsourcing. Argument in favor of outsourcing:

Comparative advantage -> Comparative advantage states that both parties benefit from trade, increasing wealth in both countries, even if one country is better at producing all goods and services.

I'm not stating that those against outsourcing don't have their merits. But, it seems that it is unfairly weighted against outsourcing.

Maybe because it benefits only the company doing the outsourcing (on the US side). Just a thought.
"Wanting Red Rhino Pill to have gender"
Xer
Posts: 7,776
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 5:58:05 PM
Posted: 5 years ago
At 5/19/2011 5:56:52 PM, OreEle wrote:
At 5/19/2011 5:52:49 PM, darkkermit wrote:
It just amazes me that average person is so against outsourcing. Argument in favor of outsourcing:

Comparative advantage -> Comparative advantage states that both parties benefit from trade, increasing wealth in both countries, even if one country is better at producing all goods and services.

I'm not stating that those against outsourcing don't have their merits. But, it seems that it is unfairly weighted against outsourcing.

Maybe because it benefits only the company doing the outsourcing (on the US side). Just a thought.

US consumers are non-existent?
Greyparrot
Posts: 14,268
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:00:04 PM
Posted: 5 years ago
At 5/19/2011 5:56:52 PM, OreEle wrote:
At 5/19/2011 5:52:49 PM, darkkermit wrote:
It just amazes me that average person is so against outsourcing. Argument in favor of outsourcing:

Comparative advantage -> Comparative advantage states that both parties benefit from trade, increasing wealth in both countries, even if one country is better at producing all goods and services.

I'm not stating that those against outsourcing don't have their merits. But, it seems that it is unfairly weighted against outsourcing.

Maybe because it benefits only the company doing the outsourcing (on the US side). Just a thought.

If that is the case, what coercive force are US outsourcers using to force other countries against their will? Military takeover threats? We need Geo to chime in on this...
Ore_Ele
Posts: 25,980
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:01:07 PM
Posted: 5 years ago
At 5/19/2011 5:56:18 PM, Greyparrot wrote:
Outsourcing ensures the most efficient use of global resources for a low cost and high quality standard of living for an independent consumer in a global market. If you live off of the government however, then you probably don't give a rat's tail.

Not really, even if the price of goods drop 10%, that doesn't help if you are jobless (i.e. your income is down 100%). Sure you may find a different job, but it will be paying less, and likely less than the price of goods dropped.
"Wanting Red Rhino Pill to have gender"
Ore_Ele
Posts: 25,980
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:01:59 PM
Posted: 5 years ago
At 5/19/2011 6:00:04 PM, Greyparrot wrote:
At 5/19/2011 5:56:52 PM, OreEle wrote:
At 5/19/2011 5:52:49 PM, darkkermit wrote:
It just amazes me that average person is so against outsourcing. Argument in favor of outsourcing:

Comparative advantage -> Comparative advantage states that both parties benefit from trade, increasing wealth in both countries, even if one country is better at producing all goods and services.

I'm not stating that those against outsourcing don't have their merits. But, it seems that it is unfairly weighted against outsourcing.

Maybe because it benefits only the company doing the outsourcing (on the US side). Just a thought.

If that is the case, what coercive force are US outsourcers using to force other countries against their will? Military takeover threats? We need Geo to chime in on this...

see above.
"Wanting Red Rhino Pill to have gender"
Greyparrot
Posts: 14,268
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:03:06 PM
Posted: 5 years ago
At 5/19/2011 6:01:07 PM, OreEle wrote:
At 5/19/2011 5:56:18 PM, Greyparrot wrote:
Outsourcing ensures the most efficient use of global resources for a low cost and high quality standard of living for an independent consumer in a global market. If you live off of the government however, then you probably don't give a rat's tail.

Not really, even if the price of goods drop 10%, that doesn't help if you are jobless (i.e. your income is down 100%). Sure you may find a different job, but it will be paying less, and likely less than the price of goods dropped.

This is true, but let me do some research, and I am sure I can find something that shows examples where the cost of living decreases more than the average wage of a region, like a state.
Reasoning
Posts: 4,456
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:03:58 PM
Posted: 5 years ago
At 5/19/2011 5:58:05 PM, Nags wrote:
US consumers are non-existent?

The way that outsourcing benefits American consumers is not immediately apparent.
"What we really ought to ask the liberal, before we even begin addressing his agenda, is this: In what kind of society would he be a conservative?" - Joseph Sobran
belle
Posts: 4,113
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:06:34 PM
Posted: 5 years ago
At 5/19/2011 5:56:52 PM, OreEle wrote:
At 5/19/2011 5:52:49 PM, darkkermit wrote:
It just amazes me that average person is so against outsourcing. Argument in favor of outsourcing:

Comparative advantage -> Comparative advantage states that both parties benefit from trade, increasing wealth in both countries, even if one country is better at producing all goods and services.

I'm not stating that those against outsourcing don't have their merits. But, it seems that it is unfairly weighted against outsourcing.

Maybe because it benefits only the company doing the outsourcing (on the US side). Just a thought.

meh. to me it seems analogous to any employee being replaced by new technology or people willing to do the same job for less... very bad for them, but good for everyone (including them, assuming they don't starve in the short term) in the long run. although i suppose its possible to argue that it may not be beneficial in all such situations simply because it has been for many in the past. maybe the efficiency gains by outsourcing are illusionary, for example. still, its not nearly as bad as people make it out to be. the downsides are just more blatant.
evidently i only come to ddo to avoid doing homework...
Xer
Posts: 7,776
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:11:29 PM
Posted: 5 years ago
At 5/19/2011 6:01:07 PM, OreEle wrote:
Not really, even if the price of goods drop 10%, that doesn't help if you are jobless (i.e. your income is down 100%). Sure you may find a different job, but it will be paying less, and likely less than the price of goods dropped.

Production for its own sake fallacy.
Greyparrot
Posts: 14,268
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:14:24 PM
Posted: 5 years ago
At 5/19/2011 6:11:29 PM, Nags wrote:
At 5/19/2011 6:01:07 PM, OreEle wrote:
Not really, even if the price of goods drop 10%, that doesn't help if you are jobless (i.e. your income is down 100%). Sure you may find a different job, but it will be paying less, and likely less than the price of goods dropped.

Production for its own sake fallacy.

AKA Ragnar Rahl's Brick Wall Punching based economy.

Love that example.
darkkermit
Posts: 11,204
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:14:25 PM
Posted: 5 years ago
At 5/19/2011 6:03:06 PM, Greyparrot wrote:
At 5/19/2011 6:01:07 PM, OreEle wrote:
At 5/19/2011 5:56:18 PM, Greyparrot wrote:
Outsourcing ensures the most efficient use of global resources for a low cost and high quality standard of living for an independent consumer in a global market. If you live off of the government however, then you probably don't give a rat's tail.

Not really, even if the price of goods drop 10%, that doesn't help if you are jobless (i.e. your income is down 100%). Sure you may find a different job, but it will be paying less, and likely less than the price of goods dropped.

This is true, but let me do some research, and I am sure I can find something that shows examples where the cost of living decreases more than the average wage of a region, like a state.

You shouldn't really have to do research, as the model should confirm it. But do research to prove OreEle wrong.

Also, since foreign nations also trade, this will create jobs. Jobs are created as jobs are destroyed. Most people tend to favor technology, but that "destroys" jobs.
Open borders debate:
http://www.debate.org...
darkkermit
Posts: 11,204
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:18:28 PM
Posted: 5 years ago
At 5/19/2011 6:06:34 PM, belle wrote:
At 5/19/2011 5:56:52 PM, OreEle wrote:
At 5/19/2011 5:52:49 PM, darkkermit wrote:
It just amazes me that average person is so against outsourcing. Argument in favor of outsourcing:

Comparative advantage -> Comparative advantage states that both parties benefit from trade, increasing wealth in both countries, even if one country is better at producing all goods and services.

I'm not stating that those against outsourcing don't have their merits. But, it seems that it is unfairly weighted against outsourcing.

Maybe because it benefits only the company doing the outsourcing (on the US side). Just a thought.

meh. to me it seems analogous to any employee being replaced by new technology or people willing to do the same job for less... very bad for them, but good for everyone (including them, assuming they don't starve in the short term) in the long run. although i suppose its possible to argue that it may not be beneficial in all such situations simply because it has been for many in the past. maybe the efficiency gains by outsourcing are illusionary, for example. still, its not nearly as bad as people make it out to be. the downsides are just more blatant.

I mean, there are many assumptions that comparative advantages make that could be argued. You can argue that the assumptions are false, and thus outsourcing is bad. But I don't think most people argue against the assumptions.

But then again, I don't even think the average person even knows what comparative advantage, nonetheless argue against the model.
Open borders debate:
http://www.debate.org...
Ore_Ele
Posts: 25,980
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:20:14 PM
Posted: 5 years ago
At 5/19/2011 6:06:34 PM, belle wrote:
At 5/19/2011 5:56:52 PM, OreEle wrote:
At 5/19/2011 5:52:49 PM, darkkermit wrote:
It just amazes me that average person is so against outsourcing. Argument in favor of outsourcing:

Comparative advantage -> Comparative advantage states that both parties benefit from trade, increasing wealth in both countries, even if one country is better at producing all goods and services.

I'm not stating that those against outsourcing don't have their merits. But, it seems that it is unfairly weighted against outsourcing.

Maybe because it benefits only the company doing the outsourcing (on the US side). Just a thought.

meh. to me it seems analogous to any employee being replaced by new technology or people willing to do the same job for less... very bad for them, but good for everyone (including them, assuming they don't starve in the short term) in the long run. although i suppose its possible to argue that it may not be beneficial in all such situations simply because it has been for many in the past. maybe the efficiency gains by outsourcing are illusionary, for example. still, its not nearly as bad as people make it out to be. the downsides are just more blatant.

One of the downsides is the circulation of money. Money is just a lubricant for the transactions of goods and services. The more lube you have, the easier it is for services to be done (that can be taken so wrong). If the lube is leaving you, your growth slows down.

It's just like starting a business, you need capital and investment. You need money, and it helps if that money is in local banks and credit unions and what nots, rather than in another nation.

Also, I'd argue about if it creates more wealth. Businesses are not trying to create maximum wealth, they are trying to create maximum wealth for themselves (that is a big difference).

And how do you measure the wealth created? The price of the material before working vs the price of the material as a finished product, right? If I buy a bunch of wood for $30, and make 10 chairs to sell for $150, I just created (through my labor) $120 of wealth (in this case, all for me, because I didn't have pay anyone to work), right?
"Wanting Red Rhino Pill to have gender"
Ore_Ele
Posts: 25,980
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:23:34 PM
Posted: 5 years ago
At 5/19/2011 6:11:29 PM, Nags wrote:
At 5/19/2011 6:01:07 PM, OreEle wrote:
Not really, even if the price of goods drop 10%, that doesn't help if you are jobless (i.e. your income is down 100%). Sure you may find a different job, but it will be paying less, and likely less than the price of goods dropped.

Production for its own sake fallacy.

You're gonna have to explain how that relates to an individual worker.
"Wanting Red Rhino Pill to have gender"
Greyparrot
Posts: 14,268
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:26:46 PM
Posted: 5 years ago
At 5/19/2011 6:20:14 PM, OreEle wrote:

Also, I'd argue about if it creates more wealth. Businesses are not trying to create maximum wealth, they are trying to create maximum wealth for themselves (that is a big difference).


The big difference is that the unintended byproduct of creating maximum wealth by getting an advantage over the competitors results in lower costing goods to the consumer. This is of course UNINTENDED by the companies, but nevertheless, exists for the consumer's benefit.
Xer
Posts: 7,776
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:28:19 PM
Posted: 5 years ago
At 5/19/2011 6:23:34 PM, OreEle wrote:
At 5/19/2011 6:11:29 PM, Nags wrote:
At 5/19/2011 6:01:07 PM, OreEle wrote:
Not really, even if the price of goods drop 10%, that doesn't help if you are jobless (i.e. your income is down 100%). Sure you may find a different job, but it will be paying less, and likely less than the price of goods dropped.

Production for its own sake fallacy.

You're gonna have to explain how that relates to an individual worker.

Nope, that's a straw man. If your argument is that outsourcing is bad because an individual worker will lose his job, then congrats, you win.
darkkermit
Posts: 11,204
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:31:04 PM
Posted: 5 years ago
At 5/19/2011 6:20:14 PM, OreEle wrote:
At 5/19/2011 6:06:34 PM, belle wrote:
At 5/19/2011 5:56:52 PM, OreEle wrote:
At 5/19/2011 5:52:49 PM, darkkermit wrote:
It just amazes me that average person is so against outsourcing. Argument in favor of outsourcing:

Comparative advantage -> Comparative advantage states that both parties benefit from trade, increasing wealth in both countries, even if one country is better at producing all goods and services.

I'm not stating that those against outsourcing don't have their merits. But, it seems that it is unfairly weighted against outsourcing.

Maybe because it benefits only the company doing the outsourcing (on the US side). Just a thought.

meh. to me it seems analogous to any employee being replaced by new technology or people willing to do the same job for less... very bad for them, but good for everyone (including them, assuming they don't starve in the short term) in the long run. although i suppose its possible to argue that it may not be beneficial in all such situations simply because it has been for many in the past. maybe the efficiency gains by outsourcing are illusionary, for example. still, its not nearly as bad as people make it out to be. the downsides are just more blatant.

One of the downsides is the circulation of money. Money is just a lubricant for the transactions of goods and services. The more lube you have, the easier it is for services to be done (that can be taken so wrong). If the lube is leaving you, your growth slows down.

It's just like starting a business, you need capital and investment. You need money, and it helps if that money is in local banks and credit unions and what nots, rather than in another nation.

Also, I'd argue about if it creates more wealth. Businesses are not trying to create maximum wealth, they are trying to create maximum wealth for themselves (that is a big difference).

And how do you measure the wealth created? The price of the material before working vs the price of the material as a finished product, right? If I buy a bunch of wood for $30, and make 10 chairs to sell for $150, I just created (through my labor) $120 of wealth (in this case, all for me, because I didn't have pay anyone to work), right?

Well all other businesses are trying to maximize wealth as well, so the benefits of outsourcing well help the consumer more then the business owner.

Wealth is measured in GDP. It's not a perfect system, but I can't think of a better model. That is one of the downfalls of the GDP model. It doesn't measure non-transaction production (for example a wife making dinner. Has productive value, but isn't measured in GDP)
Open borders debate:
http://www.debate.org...
Greyparrot
Posts: 14,268
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:31:18 PM
Posted: 5 years ago
At 5/19/2011 6:26:46 PM, Greyparrot wrote:
At 5/19/2011 6:20:14 PM, OreEle wrote:

Also, I'd argue about if it creates more wealth. Businesses are not trying to create maximum wealth, they are trying to create maximum wealth for themselves (that is a big difference).


The big difference is that the unintended byproduct of creating maximum wealth by getting an advantage over the competitors results in lower costing goods to the consumer. This is of course UNINTENDED by the companies, but nevertheless, exists for the consumer's benefit.

Or let me put it to you this way, if companies could grab a larger market share without reducing prices, they would gladly do it. Lower prices are an unintended bonus to the consumer for a company's greed driven desire to dominate the market place.
Ore_Ele
Posts: 25,980
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:35:24 PM
Posted: 5 years ago
At 5/19/2011 6:26:46 PM, Greyparrot wrote:
At 5/19/2011 6:20:14 PM, OreEle wrote:

Also, I'd argue about if it creates more wealth. Businesses are not trying to create maximum wealth, they are trying to create maximum wealth for themselves (that is a big difference).


The big difference is that the unintended byproduct of creating maximum wealth by getting an advantage over the competitors results in lower costing goods to the consumer. This is of course UNINTENDED by the companies, but nevertheless, exists for the consumer's benefit.

I never said it wasn't a benefit, only whether it outweighs the concequences.

Obviously if you replace a $10/hr wage with a $1/hr wage, the average wages are going to decrease. That may make the product cheaper, but does it make it cheaper, by the same ratio as wages drop?

I'd (again) argue that it doesn't.

I'm looking at a particular product made in China, that my company enjoys selling (and making a fat profit off of it). If they doubled the amount that they paid their laborers, the price of the item would likely increase at most about 1/7 of 1% (and that's if we chose to pass the entire increase in labor cost to the customer and not eat any of it, though S&D suggests that we would meet somewhere in the middle).
"Wanting Red Rhino Pill to have gender"
Ore_Ele
Posts: 25,980
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:37:39 PM
Posted: 5 years ago
At 5/19/2011 6:28:19 PM, Nags wrote:
At 5/19/2011 6:23:34 PM, OreEle wrote:
At 5/19/2011 6:11:29 PM, Nags wrote:
At 5/19/2011 6:01:07 PM, OreEle wrote:
Not really, even if the price of goods drop 10%, that doesn't help if you are jobless (i.e. your income is down 100%). Sure you may find a different job, but it will be paying less, and likely less than the price of goods dropped.

Production for its own sake fallacy.

You're gonna have to explain how that relates to an individual worker.

Nope, that's a straw man. If your argument is that outsourcing is bad because an individual worker will lose his job, then congrats, you win.

Not really a strawman, since I was arguing from the beginning (which was only asking why people are against it), and most people are workers, so the loss of job risks apply to them.
"Wanting Red Rhino Pill to have gender"
Greyparrot
Posts: 14,268
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:38:41 PM
Posted: 5 years ago
One thing to consider Oregon when comparing loss and benefits, is that the ratio of workers to consumers is one hell of a staggering ratio, especially if a product is mass produced, which accounts for a large percentage of outsourced jobs (like computer assembly).
Justin_Chains
Posts: 623
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:40:54 PM
Posted: 5 years ago
Tell me how outsourcing helps when it puts a large portion of workers in a nation out of work.

There is hardly any steel, clothing, electronics, or pharmaceuticals which are manufactured and bought in the United States. And I use those as examples because they are some of the leading areas in manufacturing that impact the economy.

Tell me how that is good for the US economy?

And it does not work both ways. No other nations are manufacturing here for the same reasons that we are outsourcing, the cost is too high.

I would like to know how America benefits from this.
Xer
Posts: 7,776
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:41:07 PM
Posted: 5 years ago
At 5/19/2011 6:37:39 PM, OreEle wrote:
At 5/19/2011 6:28:19 PM, Nags wrote:
At 5/19/2011 6:23:34 PM, OreEle wrote:
At 5/19/2011 6:11:29 PM, Nags wrote:
At 5/19/2011 6:01:07 PM, OreEle wrote:
Not really, even if the price of goods drop 10%, that doesn't help if you are jobless (i.e. your income is down 100%). Sure you may find a different job, but it will be paying less, and likely less than the price of goods dropped.

Production for its own sake fallacy.

You're gonna have to explain how that relates to an individual worker.

Nope, that's a straw man. If your argument is that outsourcing is bad because an individual worker will lose his job, then congrats, you win.

Not really a strawman, since I was arguing from the beginning (which was only asking why people are against it), and most people are workers, so the loss of job risks apply to them.

This sentence doesn't make much sense, you were arguing what from the beginning?

If you're arguing that outsourcing hurts the employees who lost their jobs due to outsourcing, I think everyone agrees with you. That doesn't make outsourcing bad economically though.
Greyparrot
Posts: 14,268
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:51:56 PM
Posted: 5 years ago
Anyone who wants a serious and clear insight on outsourcing should read what I just read.

http://mises.org...

It addresses many anti-outsourcing fallacies, explains the concept of value adding, and explains why it would be a terrible idea to shut down Japanese owned car plants in this country.
darkkermit
Posts: 11,204
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 6:58:16 PM
Posted: 5 years ago
At 5/19/2011 6:35:24 PM, OreEle wrote:
At 5/19/2011 6:26:46 PM, Greyparrot wrote:
At 5/19/2011 6:20:14 PM, OreEle wrote:

Also, I'd argue about if it creates more wealth. Businesses are not trying to create maximum wealth, they are trying to create maximum wealth for themselves (that is a big difference).


The big difference is that the unintended byproduct of creating maximum wealth by getting an advantage over the competitors results in lower costing goods to the consumer. This is of course UNINTENDED by the companies, but nevertheless, exists for the consumer's benefit.

I never said it wasn't a benefit, only whether it outweighs the concequences.

Obviously if you replace a $10/hr wage with a $1/hr wage, the average wages are going to decrease. That may make the product cheaper, but does it make it cheaper, by the same ratio as wages drop?

I'd (again) argue that it doesn't.

I'm looking at a particular product made in China, that my company enjoys selling (and making a fat profit off of it). If they doubled the amount that they paid their laborers, the price of the item would likely increase at most about 1/7 of 1% (and that's if we chose to pass the entire increase in labor cost to the customer and not eat any of it, though S&D suggests that we would meet somewhere in the middle).

Where does the money go towards then?

Again if the assumptions of the model are correct, then wealth is produced by both parties.
Open borders debate:
http://www.debate.org...
Ore_Ele
Posts: 25,980
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 7:07:49 PM
Posted: 5 years ago
At 5/19/2011 6:38:41 PM, Greyparrot wrote:
One thing to consider Oregon when comparing loss and benefits, is that the ratio of workers to consumers is one hell of a staggering ratio, especially if a product is mass produced, which accounts for a large percentage of outsourced jobs (like computer assembly).

That's true. The way I see it (going back to the chairs, since it is simple), is that I buy material for $3 per chair, and through labor, turn it into a $15 chair (so I'm creating $12 in wealth, assuming that the chairs are purchased, we'll hold that assumption). And let's say I can make 20 chairs a week (that is $240 a week, not much to live on).

If I hire people to make chairs, and pay them for their labor at $4 a chair, I'm only making $8 per chair, and if I pay $1 per chair to trasport it around (bigger customer base more sales) so I am netting $7 for myself. But now my employees are making 200 chairs a week. All in all, there is $2,400 in wealth being created, $1,400 goes to my pockets, $800 to employee pockets, and $200 to the freight company's pockets.

A company is only interested in maximising how much the owner makes, not total wealth created. Sometimes they go together, sometimes they don't. Let's look at three hypotheticals based off of the current chair company (which it's employees at $4 per chair).

_____A_____

The company can outsource to china, where it can pay a labor of $1 per chair, rather then $4 per chair. It can then lower the price of the chair somewhere between $12-15 (S&D says it will fall somewhere in the middle pending the elasticity of the curves, let's just say it falls to $13). The new lower price means that instead of selling 200 chairs a week, they are selling 300 chairs a week (lower prices, increased demand). But now, since the chairs are made in China, freight costs increased to $2 per chair (you'll see soon that this does not really matter to totally wealth created, only to the owners cut of that wealth).

The material still cost $3 per chair, so the created wealth per chair is now $10 per chair ($1 to the laborer, $2 to the freight company, $7 to the owner). So the total wealth created is $3,000 (up 25% from before), the owner gets $2,100 of that, the laborers get $300, and the freight gets $600.

We can see that this is benefitial to the owner, so the owner will likely do it, and it will create more total wealth.

______B_______

Owner does the same thing as in A, moves manufaturing to china at a labor cost of $1 per chair (freight still increases to $2). However, his research suggests that the lower prices are only going to increase chair production from 200 a week to 210 a week.

This means that the total wealth created will be $2,100 (down 12.5% from original), but his cut will be $1,470 (up 5% from before), while laborers get $210, and freight gets $420.

Here, we can see that less wealth is actually being created, but the owner is getting more in his pocket, and we'd expect the owner (if motivated by individual profits) to carry through with this.

______C______

This is just like B, except that after the owner sees that lowing the price will barely increase sales, he decides, let's just leave the price at $15, and the sales will still be 200 a week.

The total wealth created is going to be $2,400 (the same as it was before), however, the owner is now getting $1,800, the laborers getting $200, and the freight getting $400.

With this we can see that no new wealth is actually created, but more of the created wealth ends up in the owner's hands.

Now, I'm not arguing that the accumulation of wealth is a bad thing (I would, but not in this thread), but just showing that just because something makes more money for the owners, does not mean that it is making more wealth all around for everyone.
"Wanting Red Rhino Pill to have gender"
Greyparrot
Posts: 14,268
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 7:10:49 PM
Posted: 5 years ago
At 5/19/2011 7:07:49 PM, OreEle wrote:
At 5/19/2011 6:38:41 PM, Greyparrot wrote:
One thing to consider Oregon when comparing loss and benefits, is that the ratio of workers to consumers is one hell of a staggering ratio, especially if a product is mass produced, which accounts for a large percentage of outsourced jobs (like computer assembly).

That's true. The way I see it (going back to the chairs, since it is simple), is that I buy material for $3 per chair, and through labor, turn it into a $15 chair (so I'm creating $12 in wealth, assuming that the chairs are purchased, we'll hold that assumption). And let's say I can make 20 chairs a week (that is $240 a week, not much to live on).

If I hire people to make chairs, and pay them for their labor at $4 a chair, I'm only making $8 per chair, and if I pay $1 per chair to trasport it around (bigger customer base more sales) so I am netting $7 for myself. But now my employees are making 200 chairs a week. All in all, there is $2,400 in wealth being created, $1,400 goes to my pockets, $800 to employee pockets, and $200 to the freight company's pockets.

A company is only interested in maximising how much the owner makes, not total wealth created. Sometimes they go together, sometimes they don't. Let's look at three hypotheticals based off of the current chair company (which it's employees at $4 per chair).

_____A_____

The company can outsource to china, where it can pay a labor of $1 per chair, rather then $4 per chair. It can then lower the price of the chair somewhere between $12-15 (S&D says it will fall somewhere in the middle pending the elasticity of the curves, let's just say it falls to $13). The new lower price means that instead of selling 200 chairs a week, they are selling 300 chairs a week (lower prices, increased demand). But now, since the chairs are made in China, freight costs increased to $2 per chair (you'll see soon that this does not really matter to totally wealth created, only to the owners cut of that wealth).

The material still cost $3 per chair, so the created wealth per chair is now $10 per chair ($1 to the laborer, $2 to the freight company, $7 to the owner). So the total wealth created is $3,000 (up 25% from before), the owner gets $2,100 of that, the laborers get $300, and the freight gets $600.

We can see that this is benefitial to the owner, so the owner will likely do it, and it will create more total wealth.


______B_______

Owner does the same thing as in A, moves manufaturing to china at a labor cost of $1 per chair (freight still increases to $2). However, his research suggests that the lower prices are only going to increase chair production from 200 a week to 210 a week.

This means that the total wealth created will be $2,100 (down 12.5% from original), but his cut will be $1,470 (up 5% from before), while laborers get $210, and freight gets $420.

Here, we can see that less wealth is actually being created, but the owner is getting more in his pocket, and we'd expect the owner (if motivated by individual profits) to carry through with this.


______C______

This is just like B, except that after the owner sees that lowing the price will barely increase sales, he decides, let's just leave the price at $15, and the sales will still be 200 a week.

The total wealth created is going to be $2,400 (the same as it was before), however, the owner is now getting $1,800, the laborers getting $200, and the freight getting $400.

With this we can see that no new wealth is actually created, but more of the created wealth ends up in the owner's hands.

Now, I'm not arguing that the accumulation of wealth is a bad thing (I would, but not in this thread), but just showing that just because something makes more money for the owners, does not mean that it is making more wealth all around for everyone.

You are totally ignoring a company's greed driven desire to dominate the market place by offering goods at a lower price though.
Ore_Ele
Posts: 25,980
Add as Friend
Challenge to a Debate
Send a Message
5/19/2011 7:17:13 PM
Posted: 5 years ago
At 5/19/2011 7:10:49 PM, Greyparrot wrote:
At 5/19/2011 7:07:49 PM, OreEle wrote:
At 5/19/2011 6:38:41 PM, Greyparrot wrote:
One thing to consider Oregon when comparing loss and benefits, is that the ratio of workers to consumers is one hell of a staggering ratio, especially if a product is mass produced, which accounts for a large percentage of outsourced jobs (like computer assembly).

That's true. The way I see it (going back to the chairs, since it is simple), is that I buy material for $3 per chair, and through labor, turn it into a $15 chair (so I'm creating $12 in wealth, assuming that the chairs are purchased, we'll hold that assumption). And let's say I can make 20 chairs a week (that is $240 a week, not much to live on).

If I hire people to make chairs, and pay them for their labor at $4 a chair, I'm only making $8 per chair, and if I pay $1 per chair to trasport it around (bigger customer base more sales) so I am netting $7 for myself. But now my employees are making 200 chairs a week. All in all, there is $2,400 in wealth being created, $1,400 goes to my pockets, $800 to employee pockets, and $200 to the freight company's pockets.

A company is only interested in maximising how much the owner makes, not total wealth created. Sometimes they go together, sometimes they don't. Let's look at three hypotheticals based off of the current chair company (which it's employees at $4 per chair).

_____A_____

The company can outsource to china, where it can pay a labor of $1 per chair, rather then $4 per chair. It can then lower the price of the chair somewhere between $12-15 (S&D says it will fall somewhere in the middle pending the elasticity of the curves, let's just say it falls to $13). The new lower price means that instead of selling 200 chairs a week, they are selling 300 chairs a week (lower prices, increased demand). But now, since the chairs are made in China, freight costs increased to $2 per chair (you'll see soon that this does not really matter to totally wealth created, only to the owners cut of that wealth).

The material still cost $3 per chair, so the created wealth per chair is now $10 per chair ($1 to the laborer, $2 to the freight company, $7 to the owner). So the total wealth created is $3,000 (up 25% from before), the owner gets $2,100 of that, the laborers get $300, and the freight gets $600.

We can see that this is benefitial to the owner, so the owner will likely do it, and it will create more total wealth.


______B_______

Owner does the same thing as in A, moves manufaturing to china at a labor cost of $1 per chair (freight still increases to $2). However, his research suggests that the lower prices are only going to increase chair production from 200 a week to 210 a week.

This means that the total wealth created will be $2,100 (down 12.5% from original), but his cut will be $1,470 (up 5% from before), while laborers get $210, and freight gets $420.

Here, we can see that less wealth is actually being created, but the owner is getting more in his pocket, and we'd expect the owner (if motivated by individual profits) to carry through with this.


______C______

This is just like B, except that after the owner sees that lowing the price will barely increase sales, he decides, let's just leave the price at $15, and the sales will still be 200 a week.

The total wealth created is going to be $2,400 (the same as it was before), however, the owner is now getting $1,800, the laborers getting $200, and the freight getting $400.

With this we can see that no new wealth is actually created, but more of the created wealth ends up in the owner's hands.

Now, I'm not arguing that the accumulation of wealth is a bad thing (I would, but not in this thread), but just showing that just because something makes more money for the owners, does not mean that it is making more wealth all around for everyone.

You are totally ignoring a company's greed driven desire to dominate the market place by offering goods at a lower price though.

They only offer at lower prices if it means more money to them. I work for a company that makes $400+ cooking knives (yes, over $400 for a single knife). They balance the price to maximise their profits, not wealth creation.

Those hypotheticaly we based on balanced markets (as in those numbers were where the demand curve natural sits). If you want, I can make, made up demand curves and use calulus to show the same thing, though it will have to wait until tomorrow. But since every product has a unique demand curve, a made up one (so long as it is plausible in the real world) is justified in an example.
"Wanting Red Rhino Pill to have gender"