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Comment by tehwalrus | Hacker News Reader

Etymological nit pick:

Capitalism was defined by Marx. It is the political movement to give power to people with financial resources, and it's principal consequence is exploitation (in Marx' analysis, every penny of profit comes from underpayment to your workers. This analysis is a mathematical one, about as rigorous as any theory of economics is possible to be.)

I prefer the term Market Economics or Market Forces to describe the positive effect you mean, which was discovered and described much earlier by Adam Smith.

(If you would like to read a decent history of economic ideas, I recommend The Worldly Philosophers, which is a very good book.)

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Not sure what mathematical rigor you're talking about and I must admit I never had the patience to fully read his work, but Marx also promoted the "labor theory of value", saying that the value of a product or service is determined by the labor necessary to produce it and not by the value the owner gets from using it.

It's no wonder then that in Marx' analysis profit comes from the underpayment of workers. But it's a fundamentally flawed theory.

Exactly. For anyone wondering why "labor theory of value" is flawed, the currently accepted theory is "supply and demand".

I found it very interesting that this was not widely understood during the times of Marx and is a relatively young insight.

And one that still most people reject.

See for example the reactions to "surge pricing" from Uber. Standard economic theory suggests that by letting prices rise (or indeed fall), supply will adjust to match demand and overall utility will be increased. But paying more for a cab when lots of people want to use the available cabs strikes people as unfair.

As a nerdy fan of economics, I believe the underlying problem is inequality which humans are apparently very sensitive to and surge pricing makes it explicity that rich people are getting the benefit. If there was less inequality then it could be reframed as "the people who really value a cab ride right now".

I don't think giving Uber at this point as proof of anything is OK.

In my city Uber has inflated prices almost all the time, except for maybe after 22:00 at night.

And it seems unfair for one because they don't provide a good mental model of what's going on. If the standard pricing is never available between 7 and 22, then the standard pricing is a hoax. In fact, the standard pricing shouldn't be available at rush hours, because daily rush hours are normal. I can understand rainy, snowy or foggy conditions making traffic difficult, or upcoming holidays, but your regular Tuesday should not have surged prices at 9 o'clock in an area that's not the most crowded part of the city, because then the standard pricing is a hoax. Also, people that think Uber's pricing is unfair do so because taxis with much lower and stable prices still exist, even at rush hour. They even have apps now. And many cities have a working public transport system as well.

As for supply and demand, you have to remember that Uber is not a free market, because the drivers are not the ones that can set pricing ;-)

This is why I stopped using Uber, because they'll be very dangerous if they'll ever have monopoly. Now I'm using a local app for cabs (CleverTaxi in Romania, for those interested) and Taxify, which is like this European-made alternative from Estonia. They have the same surge pricing model, but are being more conservative in applying it for now.

I argue against tolling as a means of traffic congestion management from the same motivation: I don't actually care how rational it might be, I just can't stomach the idea of creating more opportunities for rich people to buy their way out of hassles the rest of us will continue to be stuck with. Emotionally, I'd rather we just left the highways un-tolled and congested, so at least we all suffer equally.

The rich just move closer to work, then.

Oh hello, San Francisco.

Sure, that's the whole point of being rich: they already have lots of options. So why on earth would the rest of us want to give them any more?

The point is that if you try to prevent pricing of goods, you get a) pricing by other means, often more inflexible, b) underinvestment and underproduction, c) departure of the wealthy through other markets.

The problem with road pricing is usually not the pricing per se, but rather, that the government bodies doing the pricing just apply the revenues to something totally unrelated, breaking the connection between services and revenue. Road pricing can work if it is actually used for maintaining and building the road network - a genuine pay-for-service model.

Like I said, I don't actually care how rational it all might be in economic terms. I'm not willing to allow rich people to pay for more privileges than they already have, even if we might all be better off as a result. They have too many privileges already. So, exactly as ZeroGravitas was saying, it's clear that my reaction is really about inequality and not about highway congestion management. Fix the inequality problem and I'd probably start feeling more OK about tolling proposals.

>Like I said, I don't actually care how rational it all might be in economic terms. I'm not willing to allow rich people to pay for more privileges than they already have, even if we might all be better off as a result.

Cool, we'll just do envy-based policy then. That'll work.

For an example which isn't envy based, see the performers who fight against ticket touts and reselling.

Again, my nerdy economics answer is to bid up the price of the tickets so that the people who really want to go pay more and all that extra profit goes to the performer. Yet, they explicitly fight against this, to their own detriment, because they don't want only the rich to be able to buy their tickets.

(I still think my solution has potential. Reserve some small amount of tickets for people with lots of money to buy at short notice. Don't make them Vips or anything, just convienient for busy people and to undercut touts reselling the standard tickets.)

It's not envy; it's more like resentment. There's something wrong with a system producing such outcomes; lacking the power to change the fundamental character of that system, I fall back on refusing to cooperate with it.

I'm not really advocating that other people should adopt this point of view; I'm simply observing the fact that I have been responding this way, as further supporting evidence for ZeroGravitas' suggestion about surge pricing.

I'm not sure that the labour theory of value is related to "supply and demand" as you say.

If I remember correctly, labour theory of value says that all value come from work, that is: you have nature, you have capital (that is work already done) and the only way to create more value is working. If after consuming the product of that new work, you have surplus, you have new capital available.

How is that related to supply and demand?

If I remember correctly (and its been a while since I've read Das Kapital), Marx tried to explain why a good costs what it costs, where its value really comes from. So he was dissecting the different parts that went into its creation only to conclude that they really weren't different parts, but that it all came down to labour in the end - basically what you said.

His theory however did not explain why the value of a good fluctuates over time, like the price of bread in times of bad harvests, and I have some fuzzy memories of weird corner-case explanations to maneuver around this issue.

Today we know that no matter how much human labour went into the creation of something, in the end the laws of supply and demand determine its price.

I could be wrong though and thats not what Marx goal was, after all.

Again from memory, but I think that price and value are related but not the same thing. Prices would be determined by supply and demand, but value would be, by definition, anything added to the inputs.

I think I will spend some time looking into it.

The description in the Worldly Philosophers is my main source: that in Das Kapital he flips between ranting and precise mathematical language quite sporadically.

It is my understanding that he was the first to predict economic cycles of boom and bust, too.

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