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What are your Ideas for Incentive Structures?

ptarkington
Posts: 17
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10/4/2016 2:03:55 AM
Posted: 2 months ago
The left want higher wages, the right want no wage controls. The labor wants to be compensated for the work he puts in, the owner wants the labor to get more done in the same amount of time. A liberal will tell you how higher taxes means more money for social programs aimed at increasing everyone's happiness, while the conservative will ask why should you get to take from which I earned?

While there are two sides to lots of issues, I'd like to take an aim at the margin, and see if I can offer an idea that encourages us all to want to work, and to be rewarded for that work. My hope in this is that those of you on both sides will have some refuting analysis to test the robustness of my idea. Further, my hope is that you will offer your own ideas of similar nature.

What we are looking at right now is very low unemployment, but not low enough to press the market minimum wage up. The reason we don't see wages rising despite the limited supply of labor availability is that demand for labor does not have a strong enough force to cause an outward shift in the demand curve. So, here is my suggestion, don't tell businesses to pay more, give them the right incentive structure to get them to do what you want. The problem comes because policy advocates struggle to be direct in what they want.

The stock market as it was intended (i.e. to be access to funds for growing businesses) was a great thing with many benefits, but all too often in the economic times we face now, it is my assessment that the stock market is used as a form of business investment that, with the appropriate hedging model will yield fantastic returns. Especially for firms who already have a lot to invest. But corporate funds parked in financial products or the stock market, shifting around like a pinball in hopes of moving faster than the information, do very little with regard to U.S. Output. So my policy is a shot at trying to entice firms to invest in capital expenditures to increase their production capacity, rather than parking them in the stock market. My policy is one of a tax on business institutions (who operate outside the scope of the financial sector) who choose to invest in financials rather than real production or capital in the amount that reduces the return from financials to near the risk free rate. So we can exploit these corporate financial tactics and extract them from existence. In this policy, individuals who invest in the same financial products, hedge funds and Investment banks are the only ones who can engage in financials and still avoid the tax. Because it is the line of business in which they operate. Note: If a non-financial business is found to be using hedge funds or investment banks to invest in financial products, the punishment must be worse than otherwise.

I'm a little long winded here, I apologize, but I preferred to cover the policy as best I could. What are your Ideas? What are your critiques?
"Capitalism is the belief the wickedest of men, will engage in the wickedest of dealings, for the greater good of all of us." -Keynes
DisKamper
Posts: 63
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10/5/2016 8:16:28 PM
Posted: 2 months ago
It seems to me that when a business invests in a financial product like a stock, they do boost investment in the real (non-financial) economy. The companies listed in a stock market are (in most cases) non-financial companies. When one buys a stock in a company either during the IPO or in the secondary market, they are funding some kind of real capital investment, which is probably good for the economy.

Creating an incentive for non-financial companies to invest in themselves instead of other non-financials might result in a loss of efficiency. Money might not go where it creates the best return.

If I owned a lemonade stand and had a neighborhood monopoly over lemonade, it might not make sense to expand my lemonade empire if the expansion would not lead to higher profits. Instead, it might make sense to invest some of my profits in a coffee selling startup in my neighborhood, diversifying my company's assets. This seems better for the economy.
Chang29
Posts: 732
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10/6/2016 12:41:39 AM
Posted: 2 months ago
The title would be better as "What are your Ideas for Disciplining disagreeable actions?"

Economics can not be studied until threats of violence have been removed. When interactions are peaceful, and if there are still problems someone is being denied access to a market. When interactions are peaceful and markets are assessable, economics can be studied to understand how society, not government, can use voluntary tools to incentivize desirable results. Society's tools are non-violent whereas government's only tool is a thug with a gun.

A low wage, low unemployment situation can be caused in many way. If wages are too low, employees can become entrepreneurs with less risk and compete with their former employer. If this is not happening entry costs could be high or government is protecting industries from new competition, through methods like licensing, zoning, fees, and many others.

The method of unemployment measurement does not include people that stopped looking for work but would take a job. These people are getting money from some benevolent source that enables them to eat without earning. That benevolent source of funding is allowing people not to be motivated to create a job.

Financial markets are growing due currency being exempted, by government, from the laws of scarcity. If currency was subjected to scarcity, currency would be used much differently. For most of us, currency scarce, but at the Fed and member banks currency can be created at no cost in almost unlimited amounts. For those with access to low cost newly created money, financial markets are a great place to earn an return. The solution here is to use peaceful money, that is money that is subjected to laws of scarcity and not backed by government violence to maintain value.

Economics is about voluntary human action, not reactions to threats of violence for non-compliance. Government threats are benefiting a few financial at a great cost to the rest.
A free market anti-capitalist

If it can be de-centralized, it will be de-centralized.
ptarkington
Posts: 17
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10/8/2016 4:18:51 AM
Posted: 1 month ago
At 10/5/2016 8:16:28 PM, DisKamper wrote:
It seems to me that when a business invests in a financial product like a stock, they do boost investment in the real (non-financial) economy. The companies listed in a stock market are (in most cases) non-financial companies. When one buys a stock in a company either during the IPO or in the secondary market, they are funding some kind of real capital investment, which is probably good for the economy.

Creating an incentive for non-financial companies to invest in themselves instead of other non-financials might result in a loss of efficiency. Money might not go where it creates the best return.

If I owned a lemonade stand and had a neighborhood monopoly over lemonade, it might not make sense to expand my lemonade empire if the expansion would not lead to higher profits. Instead, it might make sense to invest some of my profits in a coffee selling startup in my neighborhood, diversifying my company's assets. This seems better for the economy.

Good observation, I suppose the issue I seek to address is executive using stock manipulation techniques to yield a higher return for investors while not investing in their production line. I suppose the assumption underlying my thoughts are that those who produce are earning the greatest possible return in their craft alone. It may be a bit outdated way of thinking. If producers specialize in their craft I suppose it will create the best quality individual markets but is not necessarily the best for the individual producing it. So the profit motive is underlying why they choose not to act the way my model wants them to
"Capitalism is the belief the wickedest of men, will engage in the wickedest of dealings, for the greater good of all of us." -Keynes
Javier-Riefkohl
Posts: 11
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10/9/2016 12:46:35 PM
Posted: 1 month ago
The low wages, low employment approach I believe is to be what my country is going for in the near future. Since Puerto Rico is going to be watched over by a select group appointed by Congress, they announced that the minimum wage will be lowered to $4.25. I'm guessing that the purpose is too give the employers more flexibility to higher more workers?
JavierRiefkohl
Quadrunner
Posts: 1,079
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10/28/2016 9:14:02 PM
Posted: 1 month ago
At 10/9/2016 12:46:35 PM, Javier-Riefkohl wrote:
The low wages, low employment approach I believe is to be what my country is going for in the near future. Since Puerto Rico is going to be watched over by a select group appointed by Congress, they announced that the minimum wage will be lowered to $4.25. I'm guessing that the purpose is too give the employers more flexibility to higher more workers?

Lower wages across a productive economy would be an advantageous trait with a high wage trade partner.
Wisdom is found where the wise seek it.