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Comment by Jensson | Hacker News Reader

There is no objective cost to things, the amounts you need to offer to entice individuals to do that work isn't a solved problem.

If the person is tired today and wont work unless you pay him a thousand dollars, then it costs a thousand dollars today. If the person is already fully booked, then you have to pay more than the previous customers plus pay those customers for the inconvenience you cause by taking their spot in that system, to be fair, so now it got very expensive.

How do you avoid this in your system? Do you enslave people and force them to work? Soviet did that, you weren't allowed to not work, you had to work, nobody was free.

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> There is no objective cost to things

What? How do you produce things? Do you will them into existence? That's great for you, most everyone else uses resources and labor to produce things. These represent objective costs.

> If the person is tired today and wont work unless you pay him a thousand dollars, then it costs a thousand dollars today.

Or you don't hire them today.

> How do you avoid this in your system?

A labor market.

> Do you enslave people and force them to work? Soviet did that, you weren't allowed to not work, you had to work, nobody was free.

...calm down.

>These represent objective costs.

That's the point, they don't. Nothing has an objective cost. What's the objective cost of one hour of work painting a house? Of one kilogram of rice?

> What's the objective cost of one hour of work painting a house?

You answered your own question. It cost one hour of house-painting labor. You have an action and a measurable duration. It doesn't get much more objective. How much you or someone values that labor is subjective, but the labor itself objectively happened.

This could be the case before the invention of currency.

What about the invention of currency negates it?

And if I want you to paint my house, what does it cost me? The objective cost doesn't matter, what matters is what others are willing to exchange for it. I could spend ten hours of back-breaking effort digging a ditch, but if nobody wants a ditch, then it has no value. And if it's just for me, that's not economic activity. Economics involves exchanging goods and services.

> The objective cost doesn't matter

How could anybody run a business if they don't know what it costs to make something? How is stating something so incredibly obvious and simple so difficult for you to understand?

Bank: What's your business plan?

Loan applicant: I don't need one! Costs are subjective lol!!1

So explain what it costs a business to make something in non-monetary terms. Will the bank be loaning them painting hours?

> So explain what it costs a business to make something in non-monetary terms.

I've just spent like 20 comments doing so. Short version: labor and resources.

> Will the bank be loaning them painting hours?

Tangential to my point, but I'm happy to go into details on how this might work. Effectively various forms of labor would have a known cost (set by labor markets) and various resources would have a known cost (beyond the labor to extract them) derived from some social price-setting process (we can just call it "democracy" for now). So if you make widgets, you'd have to demonstrate to the bank that you can do so with X resources (at R cost) using A labor at L price, and together the total cost being N (remember, we can add R + L because they both have a price value either set by labor markets or by democratic pricing, ie a common unit) and you'd have to demonstrate there is a social need for your widgets at R + L cost. If you can do so, when another company orders 100 of your widgets, they take on the disaggregate cost of your widgets (100 * (R + L)) and that cost is removed from your company's costs. So although the costs are reducible to a single "price" (an at-cost price) which can be used for effectively limiting a company's upper ceiling on costs, the actual disaggregate costs are the ones that are tracked and passed through the economy until purchase by a consumer, who is able to inspect and act on the disaggregate cost (but pays the aggregate price as a single number). Yes, I know what you're thinking, shortages, clearing prices, etc etc. Short rebuttal: the consumer might not pay the actual at-cost price based on a set of automated incentives the company follows to limit shortages or clear inventory.

So back to your question, the bank might loan them a total aggregate amount that they can spend to acquire at-cost items from the economy to transform them into widgets, at-cost.

Happy to expand...and forgive me if I've been short, but the number of people engaging who are automatically assuming I want slavery or don't know how markets or prices work is making it difficult to separate good faith from bad.

How do you compare the value of these things with other things? In capitalism that is the role of price system.

How 1 hour of house painting compares to 1 hour of dog walking, with 1 hour of a neurosurgeon, 1 hour of dish washing, of 1 hour of playing football, etc?

> A labor market.

That is capitalism though and has the same problems as capitalism. For example, the doctors guild could say that surgery costs a million dollars. That makes all the doctors rich, so all doctors agree to not perform surgeries for less than a million dollar. Does that mean that surgeries objectively costs a million dollars?

The way we solve that issue today is by regulating unions so they don't get that level of power. But what that regulation looks like isn't objective in any way, and it will shape the prices you will see, so labour prices are subjective.

Labor markets are not capitalism. A commodity production system using prices for exchange with productive instruments under private ownership is capitalism.

If we define capitalism to mean "anything that supports my argument" then yeah, of course you're right.

> For example, the doctors guild could say that surgery costs a million dollars.

And they would have exactly zero customers and go bankrupt, because another competing doctors guild would do the surgery because they value saving lives over driving luxury cars. Labor market.

> Does that mean that surgeries objectively costs a million dollars?

If you paid it, then it objectively cost that much when you paid it, no?

> But what that regulation looks like isn't objective in any way, and it will shape the prices you will see, so labour prices are subjective.

Yeah, labor prices are subjective. Observed labor, performed at a specific price, performed over a specific time, is objective.

How much labor and what amount of resources and what processes took place to transform those resources for any given product is very much objective. These values might change over time as some labor becomes more costly or resources become more scarce than others, but that doesn't change that there is an objective measurement to what it cost to make some thing. Not some thing that might exist in a day or a week, but some thing that already exists.

You can thump your subjectivity bible all you want, but you're wrong.

> because another competing doctors guild

Why would there be another competing doctors guild? Worker organizations become monopolistic just like any other unless you regulate that.

edit:

> How much labor

Labor isn't fungible, you can't replace a doctor with an average person. No two human do exactly the same labor, labor is therefore impossible to quantify unless you simplify it, and how we decide to simplify that is also subjective. Naïve socialists tend to say that all work hours are equal, which obviously isn't true and wont work at all. So then we have to decide whose labour is worth what, and we are back at the unequal society we have today where some persons labour is decided to be worth billions and others barely anything, unless you come up with some new different way to value labour.

> Why would there be another competing doctors guild?

Why wouldn't there be? Communism is "the free association of producers." If people need a surgery and I'm a doctor with full access to the means of performing surgeries...

It might help to try to break out of the red scare/USSR box you're putting everything into. Nobody wants SLAVERY, BREAD LINES, or HOLODOMOR.

> Labor isn't fungible, you can't replace a doctor with an average person.

Nor am I advocating for it. You're continually taking the worst representation of a concept I'm explaining and it's becoming tiring. You can track labor as "heart surgeon labor" or "house painter" labor, or "serial concept misunderstander" labor.

And, by the way, none of what you said negates what I've said about objective costs.

> because another competing doctors guild would do the surgery because they value saving lives over driving luxury cars

No, because they can undercut they other doctors and get all their customers while still making a lot of money.

That's literally how all business work in competitive markets and most of them have nothing to do with 'saving lives', yet they behave in the same way.

And free market competition is something generally associated with capitalism because it's hardly possible without private ownership of businesses.

> performed over a specific time, is objective.

Because it's determined by the market (more or less the same like the price for all other goods). It's objective as much as the price of any good and service in a capitalist system is.

> Because it's determined by the market

Sure, a labor market, like I've been saying. And my argument is that this raw information has usefulness to making economic decisions, and prices erase that information. A labor market determining the value of labor, and that labor being performed and imbued into some product, is a much more objective measure than that product costing some arbitrary amount set by some analyst trying to maximize margins.

You aren't refuting the fact that prices erase information, you're just explaining how markets work.

> imbued into some product

Labor can be worthless if it's 'imbued' into a worthless product. I'm not sure what you're suggesting, supply and demand determines the price, if your good cost more in labor and material to produce than anyone is willing to pay for it nobody will buy it.

> much more objective measure

So the market will set prices for labor but not for goods and services? What?

> You aren't refuting the fact that prices erase information

What does that even mean? Are you implying that workers should only be paid as much as they need to fulfill some set of needs and no more?

> I'm not sure what you're suggesting

Really? That it costs labor and resources to make things? Is that really hard to understand?

> if your good cost more in labor and material to produce than anyone is willing to pay for it nobody will buy it.

Thanks for explaining markets again. This is tangential to my point.

> So the market will set prices for labor but not for goods and services? What?

You're getting close. Cost and price are separate entities. Price is "what I think someone should pay" cost is a set of labor and resources it took to make something.

> Are you implying that workers should only be paid as much as they need to fulfill some set of needs and no more?

No? I'm not saying anything about paying people or even the organization of production.

I'm saying that prices are a form of lossy compression. 5 + 7 + 6 + 2 = 20, but given 20, we have no idea that 5, 7, 6, or 2 were part of the equation or that there were four numbers to begin with. If it takes an hour of labor and a kilogram of wood to build something (something that, yes, someone wants because we're not talking about mudpies obviously), the cost to build that thing is an hour of labor and a kilogram of wood, not $20. $20 is arbitrary and effectively useless measurement. The number $20 contains information and you might be able to infer some of the information contained in it, but you can never actually be sure what the information is or the other pieces of information that make it up.

Prices erase information. As a system of measuring cost, they are pathetically limited. Yeah, ok I get it, people exchange things in markets and blah blah, but if a chair has 3kg of wood in it, then we know that it cost at least 3kg of wood (a resource) to produce.

There is nothing subjective about this.

> That it costs labor and resources to make things? Is that really hard to understand?

Yeah, but that's a pretty obvious thing? If that was the entire point then I'm sorry I misunderstood you.

> Prices erase information. As a system of measuring cost, they are pathetically limited

Yes. But I don't see a problem with that (I mean you can still estimate costs and offer a price based on that).

> but if a chair has 3kg of wood in it, then we know that it cost at least 3kg of wood (a resource) to produce

Same applies to labor though. e.g. it took the worker N hours to make it, he used up X amounts of calories to do that, his dormitory bunk costs Y etc. So X+Y+... is the "real" cost. That'd be absurd, the worker can/should charge as much for his work as the market will bare.

> There is nothing subjective about this.

No, the way you put it of course not. So what, though?

> If that was the entire point then I'm sorry I misunderstood you.

That's fine, no problem.

> Yes. But I don't see a problem with that (I mean you can still estimate costs and offer a price based on that).

It's not a problem in a capitalist or even a fully market-based system. My original point is that the information prices obscure might be functionally useful in a non-capitalist system.

> Same applies to labor though. e.g. it took the worker N hours to make it, he used up X amounts of calories to do that, his dormitory bunk costs Y etc.

Yes! There's some amount of cost to derive this information, and there would be thresholds where it just doesn't make sense to collect (or feasible). My point is that we actually do know the costs of various forms of labor and the amount of resources used in things, we just happen to throw them in the trash with each transaction.

> So what, though?

The information we throw out could be useful in scenarios other than "well, that's the price and that's all that matters." One example is the ability to price in known externalities of various resources (or the processes they go through). If you know fossil fuels burned at-scale are "bad" and you know exactly how much fossil fuels it took to build some product, you can immediately tax some externality-cost price amount of the product at point of sale.

In effect, this limits the scope of "economic planning" only to pricing externalities and lets "markets" (not really, because profit is gone, more like "distributed production") self-organize as a solving mechanism for those externality costs.

That's not to say you can't still use planning for bulding a freeway or a bridge or something, but fully planned economies are a beast of their own and I'm not a fan. This is a way of transforming markets into systems that operate within humanity's collective knowledge of the side-effects of production in ways that governments just can't handle.

> My point is that we actually do know the costs of various forms of labor and the amount of resources used in things

Price of the final good (or rather demand for it) can significantly influence the price of labor in certain cases though. There is no fixed "cost of labor" which is somehow directly tied to output produced by those workers.

> Price of the final good (or rather demand for it) can significantly influence the price of labor in certain cases though.

Absolutely, which is why I believe labor markets are a viable solution. Demand signals can propagate backwards and labor organizes accordingly.

> There is no fixed "cost of labor" which is somehow directly tied to output produced by those workers.

I think we're getting wrapped up in future vs past again. For any given product, a certain amount of different types of labor went into producing it. These hours and wages that went into the labor represent objective measures, and are fixed costs because there is no way to undo them.

If you were to make the same product again, the cost could absolutely be different, and you could make an educated prediction on the cost based on past knowledge, but you could not do so with 100% accuracy. I'm not suggesting that costs are predictable, but rather that they are measurable, and our current system doesn't even bother to measure them, it actually just erases the data with each transaction.

> That is capitalism though and has the same problems as capitalism.

No, capitalism is not “when there is a labor market”.

Capitalism is a system of property rights, of which an essential one is proprietary control of the means of production. Having a labor market is a feature of many economic systems, not just capitalism.

Insofar as some of the problems of capitalist systems are endemic to markets and not specifically tied to proprietary control of the means of production, any system with markets may share that subset of the problems of capitalism, sure.

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