Because He Reads The Wrong Books?

Matt Yglesias presents "An Influential Idea I Didn’t Get in a Book".  The gist - profit in perfectly competitive markets is zero (after returns for labor, capital, and presumed managerial expertise), so businessmen seek to create market imperfections:

This competitive market sure looks like a horrible place! You might make a living there, but you sure as hell aren’t going to get rich. Think of the immigrant family that owns the dry cleaning shop around the corner—long hours, hard work, modest income. That’s your capitalism and it pretty much sucks.

Obviously the whole reason to become a businessman in the first place is to get rich. Operating a business in a competitive marketplace is for suckers, or immigrants with limited English ability. The whole name of the game is to do something else. Get a license for something. Get into a line of work with network effects. Win government contracts. Get your hands on some intellectual property. Become a monopoly. Find some barriers to entry. If you think about Bill Gates, who’s about as successful a businessman as they’ve got, and he’s doing a whole bunch of those things simultaneously. That’s how you get rich.

First, wow - I never understood the motivation of the typical small businessman in quite that way.  It's great to know that fourteen year old cocooned libs are advancing policy ideas for the rest of us based on their rich understanding of the world.

Secondly, whoa!  Dare I mention Adam Smith, who made that very point back in 1776?

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

Thirdly, we can scarcely wait for the day when Matt discovers (perhaps not by way of a book?) that Big Business is not automatically "conservative", but is often happy to ally itself with Big Government in the course of seeking rents.

Finally, I'll wager that if Matt attempts to provide a continuing series based on ideas he didn't get from books, he should be good for material until spring Kansas is knocked out of the tournament  I stop laughing.  Which will be soon, but not right away.

Comments

[PD]

I assume Yglesias works for nothing? Because if anyone pays him for this stuff, he's getting ripped off.

[Danube of Thought]

Obviously the whole reason to become a businessman in the first place is to get rich.

TM, this guy is dumber than homemade soap. Why do you insist on importing him to this site?

[Porchlight says Obama sucks]

Mickey Kaus said something recently about being paid $80-90K/year for his blog at Salon; if Yglesias is anywhere near that he's making out pretty well. So from his point of view, running a business probably really is for suckers.

[JorgXMcKie]

Some people have obviously been coddled for so long their brains have curdled.

[JorgXMcKie]

Of course, the dumbest thing is that "businessmen seek to create market imperfections".
First, there is precisely zero chance of there ever being a "perfectly competitive market". If that is his jumping-off point he's even dimmer than I thought.
"Perfectly competitive markets" are Platonic ideals not even remotely achievable in real life. If nothing else, information 'friction' would prevent them.
In actuality, since all markets are made up of very fallible individuals, all markets will always be imperfect.
Businessmen [of which I was one, once] seek to exploit the imperfections. They don't really need to create any, just recognize those which exist.
However, many of them do seek to use government power to maintain whatever imperfection they're exploiting.
It's sad to see what a Harvard education can do.

[Patrick R. Sullivan]

Joseph Schumpeter famously said, 'The only way a monopolist can remain a monopolist is by not acting like a monopolist.' That is, unless the monopolist can bribe politicians to pass legislation that prohibits competition.

Unfortunately, we have too many examples of politicians being all too willing to do just that. Parading their morality all the while. The NCAA being one prominent example right now. It's a cartel in restraint of trade in collegiate athletes, exploiting--mostly young black teen-agers--by prohibiting them from profiting in the market for their skills.

Another is the American Medical Assn. which, as Milton Friedman showed in his Phd dissertation--Income From Private Professional Practice--restricts entry into the medical profession and raises physicians' (lucky enough to be admitted to the cartel) incomes. Which is no small part of why American medical treatment is so expensive.

[Danube of Thought]

Unfortunately, we have too many examples of politicians being all too willing to do just that.

Brother, do we ever. Mark Steyn recently highlighted the highly restrictive (and expensive) licensing process for florists in New Orleans (vital to protect the public from unlicensed florists, don't you know)..then there's the elaborate process in D.C. before you a hairdresser can legall offer to do cornrows.

For thirty years I have held the view that the purpose of the CA state bar, and its exams, is to limit the number of competing practitioners. I suspect that's true in many places. And in many professions.

[Danube of Thought]

Uh oh--did I just permanently italicize this page?

[Danube of Thought]

Test.

[Porchlight says Obama sucks]

test

[Porchlight says Obama sucks]

off in Internet Explorer at least...

[Danube of Thought]

Sorry, friends...

[JanesaysObamasucks]

Yup Dot, you made us all slant.

Meanwhile, Darryl Issa is rocking on C=span.

[Porchlight says Obama sucks]

No worries, we've all done it at one time or another.

[Patrick R. Sullivan]

Keith Hennessey, as usual, has inside dope on a $29 billion gimmick:

The bill passed by the House last November contained a huge Medicaid win for doctors and their lobby the American Medical Association, although at the expense of federal taxpayers rather than States:

[1] Through their Medicaid programs, States would be required to pay primary care doctors no less than Medicare pays. In some cases this would significantly increase the amount a doctor received for performing a service in Medicaid. ....

[2] The federal government would reimburse States for any the increased Medicaid costs that result from this mandated payment rate increase. ....

This was a $57 B win (over 10 years) for primary care doctors in the House-passed bill. This is in addition to a much-discussed separate $210 B side deal commitment to the AMA from the White House and Democratic Congressional Leaders to support separate legislation that would prevent Medicare payments to doctors from declining in future years. I will surmise that the $267 B of additional Medicare and Medicaid payments to doctors are the primary reason AMA supported the House-passed bill.

CBO charged the House-passed bill with $57 B of additional spending for this provision.

....The House-passed bill contains this policy as a permanent windfall for primary care doctors beginning in 2010 (it’s phased in over the first two years).

The reconciliation bill’s authors have limited the House-passed provision so that it applies only for 2013 and 2014.

CBO charged the new reconciliation bill with only $8 B of additional spending, since the provision is in effect for only two years.

....The reconciliation bill would therefore create a new Medicaid (not Medicare) “primary care doctor payment cliff,” beginning after 2014. Just as Congress is under unbearable pressure now from doctors to prevent Medicare payments to doctors from being cut, the reconciliation bill would create exactly the same thing in Medicaid, beginning January 1, 2015.

If you assume Congress will not allow that newly created Medicaid funding cliff to bite beginning in 2015, they will spend an additional $29 B in the first decade, beginning in 2015.

This is an intentional gimmick designed to reduce by $29 B the scored cost of the reconciliation bill. As policymakers on both sides of the aisle bemoan the mid-90s Medicare policy change that created today’s Medicare funding cliff, the Speaker and her allies propose to create an exact parallel in Medicaid, beginning Monday.

[MikeS]

I'm thinking Matt is probably more qualified to teach brain surgery than economics.

[Jack is Back!]

Ygleasis would make a fine addition to Obama's cabinet as Sec of Commerce or even better Administrator of the Small Business Bureau. I wonder if he files his taxes?

[reliapundit]

only a person who never did honest work for a living could believe that crap.

the author must be a politician - and that's not honest work.

[mockmook]

Is anyone making the point that this "deficit reduction" is achieved by $500+ Billion dollars in new taxes?

Every time a Dem says "biggest Deficit Reduction ever", Repub should reply with "one of the largest tax increases ever"!!!

BTW, does anyone know the estimated projected premiums from the individual mandate?

Aren't those premiums a new fee/tax?

[MarkJ]

"I'm thinking Matt is probably more qualified to teach brain surgery than economics."

Yeah, Matt does appear to have some expertise in brain surgery since he's obviously lobotomized himself.

[matt]

interesting how all the commies are coming out of the woodwork finally, isn't it? Krugman, Yglesias, etc.

All the while we find it was crooked insiders, many of the Dems, who twisted the rules into pretzels and enriched themselves.

There was an excellent interview of Michael Thomas on Bloomberg last night. His opinion was that Goldman and AIG were right at the heart of it and were utterly corrupt, from my take. What's it going to take to rein these scumbags in?

[MJW]

Pleas ignore. This is just another experiment to help me understand the stuck tag syndrome (STS).
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>
</i>

[MJW]

and again...

</i>

[Whitehall]

The guy had hit on one of my complaints about economists. They ALWAYS start with an assumption of equilibrium.

But there's little profit at equilibrium conditions. So all good business people search for opportunities to profit from disequilibrium.

They can do that via government action. Rent seekers are the worst case but there are reasonable counter cases like patents. You're given a patent to create a monopoly IF you can bring something new to the party by innovation and invention. Same with a copyright.

A new process, a new market, a cost savings method - all these are the creative aspects of capitalism that the desire for profits from disequilibrium motivate.

So our guy Yglesias is just short-sighted and cynical. He's just not good enough to be a businessman.

[MJW]

There's obviously something about HTTP or Firefox I don't understand (no surprise there), because I see closing tags in the page source, but they don't stop the italics.

[sbw]

At least now all the characters in this thread lean right.

[sbw]

At least now all the characters in this thread lean right.

[James]

I agree Whitehall.I remember disequilibrium from college.

Any small business needs hard work, creativity, sacrifice, and luck to prosper. My wife and I built our farm business into something which will give us a comfortable retirement through often desperate choices.

Such success is obviously beyond Yglesias's pay grade.

[Andrew_M_Garland]

Yglesias is saying that Capitalism produces a life of miserable, underpaid work (as in Marx) where competition (not cooperation!) drives wages into the dust. If any profit is left over, it is the result of cheating, scheming, and special favors. So, see all the profits around you? These profits prove how rotten capitalism is.

(I commiserate. If you watch goverment at work, it is easy to think that most wealth does come from cheating, scheming, and special favors.)

Of course, Yglesias does not see his salary and benefits as his profits, earned by "Yglesias Corp.". No, they are mere wages for honest work. Not like the capitalist making money from sitting at a desk, firing people.

Progressives and leftist hate profits. Profits are horrible. Without profit, things would be so much cheaper. Or, maybe not.

I once met a person who blamed a bakery for selling her a cake. You see, thay made a profit off of her need.

They Are Profiting From My Needs

[LogicalUS]

Yglesias shows repeatedly that he is s stupid as a person can get and still not drown himself shaving each morning but luckily for him he has a following of even more stupid bone-idle fools.

No wonder he just loves Obama, both of them are idiots who hide their stupidity with long diatribes about nothing.

Yglesias is an idiot of the first order.

[MJW]

Another experiment.

[MJW]

And again.

[skintagremover]

He wants to prove that Congress runs agencies who create imperfections cause they're really smart and Congress isn't smart, so it's no one's fault but the capitalists, who as we all know Obambi says are really socialists but not yet reporting to Congress like agencies or GM but don't create imperfections or they're taken over and run by Obambi and Congress who create imperfections to take over and run them like agencies with his wife as CEO.

Congress isn't stupid, capitalists are for thinking they can get away with what agencies do imperfections created by Obambi.

[Jim Glass]

Who's more of a naif, Yglesias or Ezra?

Every time I read either one of them he changes my mind.

Matt is stunned by an insight given in the first week of any econ 101 class. Now he's figuring out the implications.

Wait until he realizes that price discrimination exists! As an expression of greedy evil business motives. Which must, obviously, hurt us all!

In the meantime he lectures on without end about HCR, the entire economy, politics,...

[Greg Ransom]

So he's a self confessed economic illiterate .. besides all the rest Of the moronic and historically illiterate stuff he's written.

What needs explaining is why anyone with more than a 3rd
grade education reads this guy.

[Greg Ransom]

"Who's more of a naif, Yglesias or Ezra?"

Sort of like trying to figure out how to square relativity theory win
quantum mechanics, isn't it?

[Polluted. That's what it is, polluted.]

They're up to the excuse making stage. What is that, bargaining?
===========

[narciso]

Alright I've moved to this thread, seeing as "Marvelous Matt" thinks Pelosi deserves a
new office building named after her

[Rob Crawford]

A crematorium?

[Frau Haselnuss]

"and again...

"
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