Hacker News Reader

Comment by timwiseman | Hacker News Reader

Perhaps someone could explain this to me, "But too many workers serving a need leads in one direction for prices: Up."

I am no economist, but I would expect the opposite. Having too many people in one field would result in a reduction in wages and prices until people started leaving that field as a result and the supply/demand ratio stabilized. What am I missing or misunderstanding?

View on HN

I agree that statement was poorly worded, but I think what they meant is that if a particular good is inefficiently produced, or rather, requires a large investment of human capital, that good is going to be more expensive than if the same good requires fewer workers. I believe that was a reference to the cost of health care.

Suppose:

  1 unit of X and Y both cost 10 man hours in 1962.
  1 unit of X costs 10 man hours in 2012.
  1 unit of Y costs 1 man hours in 2012.

All things being equal. Due to the cost drop people will buy more units of Y, but not 10 times as much so they will also buy more units of everything else including X. Thus, people are spending a higher percentage of there income on X and a lower percentage on Y even if they are getting more of both and possibly a lot more of Y in 2012.

Check out this This American Life story about how doctor oversupply in an area resulted in unneeded medical procedures being performed:

http://www.thisamericanlife.org/radio-archives/episode/391/t...

Along similar lines and even more enlightening:

http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_...

(Who provides cheap healthcare? The Mayo Clinic.)

Perhaps it is meant in the sense that, in a capitalist society, if 10 new restaurants open up on your main/high street to serve a "need", let's say steaks, then price for raw beef will go up since all these restaurants have to buy supply before any steaks are sold/eaten.

I think its in the sense of one, individual need. An oil change with one guy working on your car for 20 mins costs 1/4 as much as 4 guys working on your car for 20 mins (minus supplies).

Reply on news.ycombinator.com