Jobs should not be a terminal value. That’s right. If an activity could be done for free and the activity eliminated the need for a job, that would (most likely) be a net benefit for society.
But, the fact that some people don’t get jobs because of the activity does weigh into the overall cost-benefit calculation, particularly when you’re trying to do something with explicit altruistic motivation.
Suppose Alice can do a job for Bob at the market rate of $20. The opportunity cost of Alice’s time is $15, and the value of the job to Bob is $25 (so they split the social surplus of $10 equally).
Let’s say that the opportunity cost of Carl’s time is $18, but he thinks something like “hey, if I do this job for Bob for free, I can generate a social surplus of $7, whereas if he hired Alice, he’d only get $5 in value.” What Carl is doing is essentially donating $18 of his time to Bob and adding $7 in social surplus, and all of that $25 is captured by Bob. But Carl’s choice reduces social surplus from $10 to $7.
Now, if Carl were not being altruistic, he would charge for at least the $18 that’s his opportunity cost, which is more than Alice’s opportunity cost. Since Alice has lower opportunity cost, she’d bid down her price to below the $18, and Bob would still hire Alice. So, in the absence of altruism, the market mechanism works to maximize social surplus.
But, since Carl is being altruistic, Alice has no way of undercutting him on wages, and Bob, even though he knows that Alice’s time is valued less, is gaining so much more ($25 instead of a measly $5, or even the maximum possible $10 he could get if he bid Alice’s wages down) that he has no incentive to hire Alice.
Anyway, the above illustrative example is just to illustrate why job losses can matter when we introduce altruistic calculation into the market mechanism.
That works for digging a ditch, not for writing a computer program or really anything covered by copyright or patents .
Lets say, for example, that there is some piece of software wanted by 1000 companies who would be willing to pay 50 cents each.
It’s also wanted by 10000 other entities without the resources to pay a notable amount.
It would cost our programmer $400 worth of time to make it so he could make it and sell it or make it and give it away.
The companies willing to pay would get angry if he took their money then also gave it away for free to everyone who had not paid so they make their offer of 50 cents each conditional on access being restricted to those who have paid.
After all, they don’t want their competitors getting it without having to pay and thus getting an advantage over them.
He could make it for free and give it away to everyone generating utility not just for the companies with 50 cents to spare but also for all the ones which don’t.
This also eliminates many of the transaction costs for the parties involved. the 1000 companies now don’t even have to pay for the bureaucracy needed to decide how much they’re willing to pay and to track the payments while the 10000 other entities without resources can get it easily.
Jobs should not be a terminal value. That’s right. If an activity could be done for free and the activity eliminated the need for a job, that would (most likely) be a net benefit for society.
But, the fact that some people don’t get jobs because of the activity does weigh into the overall cost-benefit calculation, particularly when you’re trying to do something with explicit altruistic motivation.
Suppose Alice can do a job for Bob at the market rate of $20. The opportunity cost of Alice’s time is $15, and the value of the job to Bob is $25 (so they split the social surplus of $10 equally).
Let’s say that the opportunity cost of Carl’s time is $18, but he thinks something like “hey, if I do this job for Bob for free, I can generate a social surplus of $7, whereas if he hired Alice, he’d only get $5 in value.” What Carl is doing is essentially donating $18 of his time to Bob and adding $7 in social surplus, and all of that $25 is captured by Bob. But Carl’s choice reduces social surplus from $10 to $7.
Now, if Carl were not being altruistic, he would charge for at least the $18 that’s his opportunity cost, which is more than Alice’s opportunity cost. Since Alice has lower opportunity cost, she’d bid down her price to below the $18, and Bob would still hire Alice. So, in the absence of altruism, the market mechanism works to maximize social surplus.
But, since Carl is being altruistic, Alice has no way of undercutting him on wages, and Bob, even though he knows that Alice’s time is valued less, is gaining so much more ($25 instead of a measly $5, or even the maximum possible $10 he could get if he bid Alice’s wages down) that he has no incentive to hire Alice.
Anyway, the above illustrative example is just to illustrate why job losses can matter when we introduce altruistic calculation into the market mechanism.
That works for digging a ditch, not for writing a computer program or really anything covered by copyright or patents .
Lets say, for example, that there is some piece of software wanted by 1000 companies who would be willing to pay 50 cents each.
It’s also wanted by 10000 other entities without the resources to pay a notable amount.
It would cost our programmer $400 worth of time to make it so he could make it and sell it or make it and give it away.
The companies willing to pay would get angry if he took their money then also gave it away for free to everyone who had not paid so they make their offer of 50 cents each conditional on access being restricted to those who have paid.
After all, they don’t want their competitors getting it without having to pay and thus getting an advantage over them.
He could make it for free and give it away to everyone generating utility not just for the companies with 50 cents to spare but also for all the ones which don’t.
This also eliminates many of the transaction costs for the parties involved. the 1000 companies now don’t even have to pay for the bureaucracy needed to decide how much they’re willing to pay and to track the payments while the 10000 other entities without resources can get it easily.