Saturday, March 02, 2013

The End of Capitalism

(This is not an actual prediction, just a dystopian future in which I took a trend line and ran it straight off the graph just to see what would happen.)

Every time people trade, it creates value.  If you value some good or service as much or more than you value your money, you'll buy it.  If you don't, you won't.  From the perspective of the person selling it to you, the opposite holds true.  If they value your money more than the good or service, they'll sell you it and buy your money.

In a typical transaction, both sides capture some of the value created by the trade.  However, in extreme circumstances, one side can capture all or nearly all of the value.  For example, a man dying of thirst would give everything he owned for a jug of water.  That water is still worth it to the buyer, but the person with whom he dealt captured all of his resources.

As technology improves, and sales techniques improve, businesses are getting better and better at capturing value from their customers.  As the databases grow, business will discover exactly how much you, individually, are willing to pay for every item.  They will also discover how to mask that price discrimination from you.  The crude and discoverable techniques of today, e.g., charging different prices based on browser use, are only a foreshadowing of future sales techniques.  You'll always get exactly what you pay for, and not a penny more.  Similarly, they'll be able to determine exactly how much they have to pay you to purchase the labor they need, and not pay you a penny more than they need to.  You'll work for the lowest pay you'll accept, and buy for the highest price you'll accept.

In short, discretionary income will disappear.  Consequently, capitalism will disappear.  No one will need to market to you, or try to trade with you, or produce anything beyond what you actually need.  It sounds a bit like slavery, except in slavery they had to compel you to do things.  Here, you're making all the best decisions, it's just that the best decisions aren't any good.


Blogger Yoel Natan said...

Since companies have been charging higher prices to Americans for years, and lower prices to Canadians and Mexicans and everyone else, what you describe as the end of capitalism is just the domestic version of what's been going on internationally for decades.

Meanwhile, the poor in America have been paying top dollar merely because they happen to live in a country with a lot of rich people who don't want to share their wealth, not for healthcare or education or nothing. As the GINI Index gets worse in America, the international price divide widens. Now average Americans can't even afford a new car:

Washington DC is the Only City Where Families Can Afford New Cars:

4:01 AM  
Anonymous Roger Kovaciny said...

Of course, Obama ruining the economy and jacking up taxes on the middle class didn't have ANYTHING to do with the fact that middle-class people can't afford new cars, nor do all the regulations making those cars more expensive, nor do the unions who not only get about $72 an hour but also add $1500 in health benefits to non-employees to the price. And the fact that "the poor in America" live in high-crime areas where their Democrat mayors have been unsuccessful in fighting crime have anything to do with it. Nor do the poor themselves, most of whom are poor because they didn't bother paying attention in school, getting a diploma, or getting a marriage license. Nope. Not their fault at all. "The rich" are all to blame. Oddly enough, however, it's only "the 1%" who actually produce anything who are to blame. The "other 1%," the political 1%, swindlers like Franklin Raines and Harry Ried--they are never to blame.

8:50 AM  
Blogger Noumenon said...

Hmm, but the highest I'm willing to pay is dependent on what other monopolists are offering me. Like, someone might contrive to set the price of every single-family house to my entire income, but that doesn't mean I have no money left for food and will starve; I can go live in a cardboard box. I won't get the box free at the grocery store, oh no, I'll probably have to pay $400/month, the maximum it's worth to me not to have to sleep on the bus. But there's still room for someone to market me an Outdoor Slanket for $149.

I wonder about the good effects of this. I don't have to produce everything up to the specifications of the pickiest marginal customer. The customer can take price as a perfect signal of how much they'll like something. It may increase access to things, because you can sell 1 million iPhones at $30 each without losing the profits from that first guy who would pay $1000.

9:22 AM  
Blogger Octavo Dia said...

Every time I see the phrase, "income inequality," I read it as "ungratefulness." "Income inequality" doesn't mean that you've been harmed, that an injustice has been done. All it means is that someone else has more than you, and rather than being thankful for what you have, you're ungrateful and envious of what others have.

9:27 PM  
Blogger Yoel Natan said...

Octavio Dia, your post complains that those with more money might be charged more for the same product on, say, Amazon, than poorer persons. Then when someone points out that high income inequality means the poor of any entire country must pay more for everything because they happen to live in a country with high income equality, while right across the border poor people with the same incomes are paying less for the same things, you think this is coveting or ungratefulness?! The poor are supposed to feel grateful for the rich making a fortune off of the poor? PayDay Loans, Rent-to-Own and the entire banking sector makes its profit off of fees charged to the economically marginal.

You apparently are only concerned about the gripes of the rich, and not the trouble they cause the poor either directly or indirectly. When Jesus was concerned about the 1%, it was the 1% of sheep with bad luck, not the 1% who had it made.

No one really sympathized with the gripes of the rich against the progress tax rate structure, but as long as the US had good credit, money could be borrowed and spent on the poor as was seen fit. Also, the rich were interested in national defense because they really want the US to survive, the only country that borrows tons of money just so the rich can accumulate money and not pay much in taxes. That's all over now says the credit rating agencies, so everyone must return to reality soon or later. The rich would already be paying more in taxes if it weren't for gerrymandering. The GOP won the house with only 48% of the vote, and thus were partially able to avoid reality for another two years (or maybe a few more). However, with cuts actually going into effect now (delayed until after the election), it becomes harder to imagine Republicans winning again since the cuts will bring out the anti-austerity vote soon enough:

Gerrymandering thwarts majority rule:

11:11 PM  
Blogger Yoel Natan said...

Kovo, the poor are crammed into cities so it is easy to gerrymander their vote. Hence, a ton of money goes towards rural areas and small towns for questionable pursuits such as making ethanol and bushels of grain, and not the cities where it is really needed. The cities are only able to sway the top of the ticket (President, US Senator, Governor), but the bottom of the ticket is where the purse strings of govt are held. So if the gerrymandering stopped, the big cities would improve greatly on all counts.

You've quoted studies that say that married blacks are better off than average whites, but if you want a real factor that explains the situation, look at the birth rate. Married blacks have only 1.3 CPW, while unmarried blacks have 2.1 CPW rate, and whites have a 1.6 CPW rate. So the married blacks are better off mainly because they have a very low birth rate, but ironically only the unmarried blacks and Hispanics have a birth rate that's sustainable, i.e., is at the replacement rate. So if demographics is destiny, you have to hand it to the unmarried blacks. BTW, the Hispanic birthrate took a hit during the Great Recession and may not recover, not only in the US, but in Mexico and S America. Demographers say the days of Mexicans hopping the US fence en masse US are over, or nearly over.

11:25 PM  
Blogger Octavo Dia said...

@Yoel - How would you define covetousness and ungratefulness?

9:59 PM  

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