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Flubber
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With a view of the Rockies
Aug 2000
time: 22:17
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quote:
Originally posted by Kidicious
Capitalists are compensated for their labor, and a risk premium. Arrian and I have agreed that they are paid a premium above that. He calls it incentive. Do you think that we must pay this 'incentive' for capitalism to work? |
hmmm I would never break it down in that fashion. Its ALL a risk premium. You look at a "riskless" investment such as US government bonds and work from their. The required rate of return works from there. Even then a good looking rate of return may not be enough if the downside risk is too high.
Consider a project that costs $1B that has a 60% chance of earning a 25% rate of return and a 40% chance of earning no return at all ( negative 100%). Obviously the risk-weighted return on this investment is less than zero and the project will not proceed. Its ALL about the risk.
Do you need a risk premium? YES. But we don't make some conscious decision to pay it to "the capitalists". They are not guaranteed to get it all . . . that's why it is called risk.
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Arrian
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Kneel before Grog!
Jul 2001
time: 00:17
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Risk premium, incentive... components of profit. It's just another way of explaning profit.
-Arrian
Last edited by Arrian on 14-12-2004 at 02:01
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Flubber
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With a view of the Rockies
Aug 2000
time: 22:17
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quote:
Originally posted by Kidicious
In capitalism the worker has a disinsentive to work, because he has to pay for the incentive for the capitalist. In communism there is no disinsentive to work. |
Bull. The worker collects his wage even if the capitalist loses millions. You seem to think that "the capitalists" have some system of guaranteed profits.
Also capitalism as a DISINCENTIVE to work. Where have you been? capitalism is FULL of stories of people working hard and getting promoted, earning bonuses and getting rich.
You CANNOT SERIOUSLY be saying that workers in a large communist nation-state have more incentive to work hard.
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Kontiki
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Canada
Aug 2001
time: 00:17
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quote:
Originally posted by Kidicious
In capitalism the worker has a disinsentive to work, because he has to pay for the incentive for the capitalist. In communism there is no disinsentive to work. |
You keep coming out with these platitudes, but no real information. I'm really trying to have a serious discussion here, not just bash you around. I asked you before, how does communism keep you free from exploitation? How is there no disinsentive to work? What do you work for?
Seriously, for the sake of this discussion, I'm willing to take everything you say about capitalism at face value - it's a horrid, evil system that exploits the common worker. So now tell me how communism solves these problems - not merely "well, it's not capitalism", but real meat. Specifically, where does the motivation to work come from? Detailed description of the lack of worker exploitation. I'm not Vel, I promise I won't bring up the USSR or any other historical communist bastardization.
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Kidicious
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Diety of Kidiverse
Mar 2003
time: 21:17
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quote:
Originally posted by Kontiki
You keep coming out with these platitudes, but no real information. I'm really trying to have a serious discussion here, not just bash you around. I asked you before, how does communism keep you free from exploitation? How is there no disinsentive to work? What do you work for?
Seriously, for the sake of this discussion, I'm willing to take everything you say about capitalism at face value - it's a horrid, evil system that exploits the common worker. So now tell me how communism solves these problems - not merely "well, it's not capitalism", but real meat. Specifically, where does the motivation to work come from? Detailed description of the lack of worker exploitation. I'm not Vel, I promise I won't bring up the USSR or any other historical communist bastardization. |
You are paid to work. Honestly, that's the answer.
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Kontiki
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Canada
Aug 2001
time: 00:17
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quote:
Originally posted by Kidicious
You are paid to work. Honestly, that's the answer. |
But that's not an answer - it's "because I say so". You've expressly claimed that you want an equalization of salaries, so why would anyone work harder than the laziest member of their company/plant/commune/whatever?
And what if I don't want to work at all?
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Flubber
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With a view of the Rockies
Aug 2000
time: 22:17
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quote:
Originally posted by Kidicious
Do you agree that the cost of the risk premium should equal the benefits? |
Its a short question but it raises a number of points
1. What is the "cost of the risk premium" ? If we go to drill an exploration well, it might cost $ 30 million. It has a 50% chance of failure and we earn nothing. It has a 25% chance of recouping well costs and up to a return of 25%. It also has a 25% chance of a return beyond 25% including a 10% chance of a return of 100% and a 1% chance of a 500% rate of return. So I ask you, what is the cost of the "risk premium". The cost of gas will be unaffected by our well and the risk premium could go from less to nothing up to $ 150 million. This is the type of information a "capitalist" has when they make their decision
2. "Equal"-- How does one equate an expenditure with benefits when some are monetary and others and non-monetary
3. The benefits. What are they?? The exploration company obviously thinks the financial cost is worth the risk and see possible production sufficient to justify the expense. But benefits can be a much broader concept. Bring additional natural gas to market will mean some additional pollution due to development and processing but may allow more industries to be much cleaner by not using oil and coal so there is a net pollution benefit. Also there are some additional jobs created in a number of places. Can you put a dollar figure on this, I can't.
Here again I am butting your theoretical model up against a real world example. Kid, how would you even begin to answer this question.
My answer is that the company deserves whatever profit they get since they took a massive risk.
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GePap
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of the Big Apple
Nov 2001
time: 23:17
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quote:
Originally posted by Kidicious
Political? In a way that has nothing to do with exploitation? |
Explotation is only an issue in the political sense. Shouldn't then the solution be political then, instead of economic?
Last edited by GePap on 14-12-2004 at 02:13
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Flubber
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With a view of the Rockies
Aug 2000
time: 22:17
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quote:
Originally posted by Kidicious
All the while they have to pay an incentive to get other people to be capitalists. When they could be the capitalists. That's not exactly an incentive to work. |
errr bull-- no one requires a worker to pay anything to the capitalist. The worker sees 20 bucks an hour as being a better wage than other people doing the same work.They work hard to keep the job and don't care if the company made a 20% profit (in which case you see the worker as paying the capitalist) or a 20% loss--- How does it fit when a capitalist loses money-- Is the worker exploiting the capitalist by taking too much in wages??
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Kontiki
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Canada
Aug 2001
time: 00:17
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quote:
Originally posted by Kidicious
People should be paid piece work. I realize that's not always possible, but it is a lot of the time. |
Ok, what about for the parts that you realize aren't possible? Let's say, for instance, teaching or medicine?
quote:
You will have to work. |
Why? What happens if I don't?
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Flubber
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With a view of the Rockies
Aug 2000
time: 22:17
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quote:
Originally posted by Kidicious
Let me ask that another way Flubber. Do you think the benefit of the risk premium should be equal to the cost of the risk, or more? |
It appears to me to be the same question. See my previous answer where I question what these terms mean.
All I can say is you seem to think that capitalists just wave a magic wand and immensely profitable ventures appear. Thats just not the case. Why? Because if its immensely profitable, competitors appear or bid up the price.
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Flubber
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With a view of the Rockies
Aug 2000
time: 22:17
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quote:
Originally posted by Kidicious
Flubber,
What a bunch of crap that post is. Let me ask it another way.
Suppose that the cost of the risk is equal to the risk premium. Why would anyone invest? |
Why is reality always a "bunch of crap" to you ?? The example is real . Although the numbers are simplified thats the type of analysis you get from geologist geophysicists and the financial folks. So I ask you what is the "cost of the risk"?
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Flubber
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With a view of the Rockies
Aug 2000
time: 22:17
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quote:
Originally posted by Kidicious
You are a businessman. Do you expect us to believe that you don't understand the terms 'risk cost' and 'risk premium'? |
I understand many tems but we do not use the term "risk cost". Also you have a tendency to define terms in your own way i.e. "exploitation" or "unfair". I tehrefore want to know what you mean . . . a reasonable request I would think.
I simply want to know what you mean. I have seen the term risk premium many times and in our business it means the expected rate of return required in order to justify investment at a given quantifiable risk.
Oh and I stand by my long post that you dismiss as a "bunch of crap". I ask that you address the problems outlined in it.
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Kontiki
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Canada
Aug 2001
time: 00:17
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quote:
Originally posted by Kidicious
You can give teachers and doctors incentive. You can pay teachers for how much their students learn, an you can pay doctors for how many patients they treat, and how well they do. |
So there are incentives in communism to work harder/better? I thought you just said there weren't? And monetary ones to boot?
quote:
What would you do if you didn't work. Bum? |
Not sure what you mean here. What would I do with my free time? Or how would I earn money? What do I need money for? Is there no social safety net in communism?
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Flubber
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With a view of the Rockies
Aug 2000
time: 22:17
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quote:
Originally posted by Kidicious
I gave you a chance to change it.
Anyway, I don't understand why you want to seperate political and economical. They are really the same thing. |
Errr yes and no--- Economically its hard to show why the worker making 30 ducats an hour is exploited while the one making 20 ducats is not. It takes the politcal portion of your theories to make sense of that
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14-12-2004 01:45
That is not what you said earlier. You said 
Oops. I was writing it the way I'd SAY it, not the way it would be calculated.
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