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Comment by wbsss4412 | Hacker News Reader

Your compensation is determined by your power within an organization, not your contribution to it.

What blows my mind is the degree to which people believe that perfect competition exists everywhere and “the market” will fix all inefficiencies.

Edit: I want to make clear that I am not denigrating the value of markets, I’m only looking to point out the idealization that exists in many people’s minds, especially as I have encountered on this exact forum.

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Market theories don't claim everyone makes efficient decisions just that over time, people tend to pay for their inefficiencies. In contrast, systems based on status, family lineage, etc, provide little to no natural force against similar inefficiencies.

There are plenty of market theories that claim that in the long run decisions will converge towards an optimum.

In practice, this is a tautology. People pay for inefficiencies, but inefficiencies are defined as what lose money. You didn't say anything, you just diluted a (wrong) theory to make it correct and as a result don't have a theory anymore, just a rhetorical trick.

> There are plenty of market theories that claim that in the long run decisions will converge towards an optimum.

Do you have an example of an economist making that argument, outside of theoretical modeling?

I don't see the tautology. One person in a leadership position may value certain things and be willing to lose money on them. The cost gives their peers and supervisors at least one reason to question that practice.

The tautology is that business inefficiencies are costs, either future, current, or comparative. Saying that inefficiencies will be punished in the long term is tautological, you're just restating the definition business inefficiencies.

As far as economists making that argument, take a look at the strong and semi-strong EMH. Plenty of economists agree with the semi-strong version.

The gap between the actual theories and the popular conception is what I’m commenting on.

Note that these theories are actually generally descriptive, no one wholesale invented capitalism. For the entirety of human history we have had systems based on a combination of markets, status, family lineage, etc. this applies both to the past and to today.

What I’m taking issue with is the degree to which all of that is glossed over and people assume that the market will evolve naturally if left unspoiled/untouched.

> “the market” will fix all inefficiencies.

The market does fix many such inefficiences - just not in the way which most people imagine.

It is rather that the market fix is that in the long term [!] such companies will go bust or at least become shadows of their former selves.

Unless all companies do things in such ways, equally inefficient

(I mean, if powerful execs get lots of money everywhere? almost)

That is not the end game because small companies, startups, etc. are more efficient than big ones and have no ingrained culture that prevents innovation.

Eventually some of those small companies become inefficient big companies. We see this struggle recently in the news, with the CEOs of Facebook and Google talking about how they need to become more efficient, maybe certain people shouldn't be there, etc. -- they got big when times were good and now they struggle with the inevitable consequences of bigness.

This has happened many times. Nobody saw Microsoft coming in the 1970s to dethrone IBM. Microsoft didn't see Google coming and still can't beat them on search, they didn't see AWS coming and is catching up on cloud years later, etc. Most of the automotive industry thought Tesla could not scale and would go out of business years ago.

That happens sometimes. Many times, the variance in launching a small company is so high that the risk premium and payoff for challenging the inefficiencies has a negative expected value.

Yet there is no shortage of people starting new companies and the trend over time has been toward more of that, not less.

I would dispute that claim. Business and organizations have never been larger, more powerful, more wealthy, or more politically connected. Small business has been shrinking drastically for generations now all across the globe. Especially outside of tech. But even in the tech world how many of the workers are operating primarily under the direct employment or contract of some 50,000+ employee company along with thousands of other contractors? And how many 20 person tech businesses have been operating consistently for 15 years?

> Small business has been shrinking drastically for generations now all across the globe. Especially outside of tech.

I am not saying it is not true but it would be good to have some data about this. Cafes, bakeries, small restaurants, lawyer offices, flower shops are all small businesses, a lot of them run by 1 or 2 people.

I guess it depends what we consider a small business.

> Unless all companies do things in such ways, equally inefficient

Keep in mind that there also exists competition from companies from other countries, such as China.

Not really. If a company from a fundamentally different economic framework were to become dominant in core industries it would be banned.

Yup, just like democracy, free market systems are bad.

It's just that everything else is worse...

Indeed. And these things:

> the justification that a good one is well worth the price.

that's just what they (the execs in bigger corps) say to fool the employees, make them shut up. Or to look good in the press?

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