TigerHawk: Things I wish liberals knew, or would acknowledge, about American business and business people:
Business acknowledges that it extracts value from labor in excess of its cost. However, it also confers value to its customers in excess of the price it charges. Left liberals worry a great deal about the surplus value conferred by labor, but often give no credit to the surplus value businesses confer on their customers.
Fantastic post by TigerHawk. Read the whole thing.
(Via @Fausta on Twitter.)
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They should all be required to take the “class” George McGovern took:
After leaving the Senate in 1981, I spent some time running a hotel. It was an eye-opening introduction to something most business operators are all-too familiar with — the difficulty of controlling costs and setting prices in a weak economy. Despite my trust in government, I would have been alarmed by an outsider taking control of basic management decisions that determine success or failure in a business where I had invested my life savings……
Read more: http://articles.businessinsider.com/2009-05-07/wall_street/30050584_1_small-business-life-savings-george-mcgovern#ixzz2597G7vhw
McGovern, in spite of his reaction to his war experiences, was still a pretty sensible guy. He’s 90 and, as far as I know, is still sensible. As opposed to Tom Harkin.
I have also posted this comment at Tigerhawk
A great post.
But, you support something which is not true, and it is very important: “Business acknowledges that it extracts value from labor in excess of its cost. However, business also confers value to its customers in excess of the price it charges.”
“Extracts value” associates coercion to the act of paying someone for their work. If this is coercion, then it can not be excused by passing along the extra value to customers. This would be a sort of slavery, justified by the value passed along.
What does “value in excess of its cost” mean? The services a person offers is exactly as valuable as he agrees with his employer. I might hire a person to refine platinum. His job is to observe and adjust the process. I want to pay the least possible for the skills and attention needed. I might be willing to pay as much as $100 per hour to run this lucrative process. But, I need only pay $30 per hour, because I can find the needed skills at that price.
Am I “extracting” value from that employee above some cost? No, because he has no right to coerce me into paying more, just as I have no right to coerce him to accept less. He doesn’t have to work for me, and I don’t have to employ him. There is no valid comparison to what he might earn in an alternate world which doesn’t exist.
Owning and running a business is a property right. The owners and managers construct a productive organization. The employees are paid out of that production at mutually agreed wages. A worker might resent the owners and feel he should be paid more. That worker might as well resent the fact that people are not willing to just hand him money on the street, or resent that banks have piles of money which they will not hand out to him as a gift.
A worker might demonstrate to his employer that he is more efficient than others, and could be even more valuable to the company in other work. If he negotiates a raise, this doesn’t mean that he was being underpaid in the past. Knowledge, ability, and experience allows a person to negotiate more when he convinces his customer (his employer) that he offers services of greater value, hard to obtain elsewhere.
So, don’t concede to the Left that workers are exploited if the organization makes a profit. That presumes the owners have no right to their share of what is produced. It is not exploitation to receive a wage from a profitable company. That definition of exploitation is produced from Leftist greed and envy.
I think that many kids nowadays don’t even have the concept that the government does things worse than the private sector. You should ask open ended questions of them and you’ll be astonished by the results.
Probably because half the economy works for the government anyways and because many have to “volunteer” with non profits to get into school anyways.
“Owning and running a business is a property right. The owners and managers construct a productive organization. The employees are paid out of that production at mutually agreed wages. A worker might resent the owners and feel he should be paid more. That worker might as well resent the fact that people are not willing to just hand him money on the street, or resent that banks have piles of money which they will not hand out to him as a gift. ”
When I was in practice, I had the highest paid employees in the medical community. There were only two and a half of them but they did a great job. A surgeon has to realize (or did before Obamacare) that every phone call could be a patient who needs a $7,000 operation. The pediatricians in my community paid much less and one group used to fire everybody every few years when their periodic raises pushed their salaries too high. To them (and I may be slandering them), the patients and the phone calls were far less valuable and, unlike the platinum refiner, each interaction was not very valuable to the employer.
After I left the group that ran the trauma center, I joined up to share call with another surgeon in solo practice. Eventually, we became partners and my staff took over all the accounts receivable. In the next year, they collected nearly $400,000 in old receivables of his. His office manager had sort of retired on active duty and many of his old accounts had never been called.
A medical practice used to be a small business. Now, in anticipation of Obamacare, most of them have been sold to larger health care companies, which often own hospitals. Doctors are mostly on salary now. Needless to say, productivity has dropped sharply. If Obamacare survives, primary care will mostly be done by non-physicians. Medical students know this and are avoiding primary care.
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