Step one is value production. There are entities (people and organizations) which produce tradeable value. That ability is not limited to “rich people”—anyone can do it.
Step two is you offer the value you created to the market. The transactions are voluntary, so each purchaser of your goods gains from that exchange (that’s called a “consumer surplus” in economics). This way the value of the good = price + consumer surplus.
Price, in turn, is production cost + profit, so
value = production cost + producer’s profit + consumer surplus
Rich people are rich (in this stylized context) because they collected a lot of profit. That could be because the profit was high or because the volume of sales was high—or both, of course. But note that the consumer surplus is always positive. Each and every transaction results in gains for the consumer.
Now, the easiest way to be poor is not to produce anything of value. No profit, no consumer surplus, no nothing. In this case, sure, the non-producing poor are poor because they do not produce. Tyler Cowen has a term, “ZMP workers”, that is, Zero Marginal Productivity workers. They exist.
But, of course, that’s not the only way to be poor. You can be highly productive and someone might take all the surplus away from you. Such people also exist (and their plight has been well explored by e.g. Karl Marx).
That could be because the profit was high or because the volume of sales was high
Or because the cost of production was comparably very small, for example externalizing some factors (cfr. the classic example of a factory that saves by not installing filters but pollutes the air).
I’m mostly interested in the unemployed and why they aren’t producing value at the moment. You seem to blame it on poor skills or morals, while I blame the job market and the recursive process that makes it worse.
Well, let’s take a look at how the markets work.
Step one is value production. There are entities (people and organizations) which produce tradeable value. That ability is not limited to “rich people”—anyone can do it.
Step two is you offer the value you created to the market. The transactions are voluntary, so each purchaser of your goods gains from that exchange (that’s called a “consumer surplus” in economics). This way the value of the good = price + consumer surplus.
Price, in turn, is production cost + profit, so
value = production cost + producer’s profit + consumer surplus
Rich people are rich (in this stylized context) because they collected a lot of profit. That could be because the profit was high or because the volume of sales was high—or both, of course. But note that the consumer surplus is always positive. Each and every transaction results in gains for the consumer.
Now, the easiest way to be poor is not to produce anything of value. No profit, no consumer surplus, no nothing. In this case, sure, the non-producing poor are poor because they do not produce. Tyler Cowen has a term, “ZMP workers”, that is, Zero Marginal Productivity workers. They exist.
But, of course, that’s not the only way to be poor. You can be highly productive and someone might take all the surplus away from you. Such people also exist (and their plight has been well explored by e.g. Karl Marx).
Or because the cost of production was comparably very small, for example externalizing some factors (cfr. the classic example of a factory that saves by not installing filters but pollutes the air).
That’s an example of high profit since profit = price—cost of production.
Right, I wasn’t thinking in terms of fixed price.
I’m mostly interested in the unemployed and why they aren’t producing value at the moment. You seem to blame it on poor skills or morals, while I blame the job market and the recursive process that makes it worse.