## The Economic Pie

• 4.4k
100 people all contribute to producing something. It costs a certain amount to produce, and is sold for a certain amount more than that, a price usually determined by a group of people (often stated as determined by "market forces"). The price - the cost is the profit.

Two questions:

(1) Should some of the 100 people get more of the total profit accumulated per year compared to others? If it's not equally distributed, who should get more -- and based on what criteria?

(2) If so, how much more? Should 60% of the pie go to this individual or group of individuals -- say 10 people? Or should it be more like 30%? What about 90%?

(3) Who decides (1) and (2)?
• 10.7k
The guy who puts up the money gets:

[The money he put up] + [Risk of loss] + [Reasonable incentive to invest]

The other 99 get a salary or wage and benefits that allow living a decent life.
• 10.7k
(3) Who decides (1) and (2)?

• 2.7k
If it's not equally distributed, who should get more -- and based on what criteria?

It could be equally distributed if all participants did exactly the same contribution. 100 persons, then 1 % of effort of each contributor.
So, my criteria is based on the contribution and effectiveness of the participants. If they agreed of being equal parts, it is fine. But if someone does or contributes more than the rest I think it is justified to give to such participant more proportion of the pie than the rest.

If so, how much more? Should 60% of the pie go to this individual or group of individuals -- say 10 people? Or should it be more like 30%? What about 90%?

I think it should not be more than 49,99 %. Why? Because otherwise would let the community to tear apart due to the big differences of proportions among them. If someone contributes more than 50,00 % we are not in a community at all... so they will end up dissolving themselves due to lack of effectiveness. Or the individual with huge percentage could be abusive to others, etc...

(3) Who decides (1) and (2)?

The participants in a voting system. 3/4 of the votes could be useful to reach the distribution of proportions among the members.
• 1.1k
(3) Who decides (1) and (2)?

Those that have the power to do so.

Bit of a flippant answer maybe, but probably one of the more honest ones.

In the world we live in it you never get to escape some already existing power relations. That is the situation you start from and then maybe you organise to negotiate a bigger share or change the rules... that is you take it by getting more power. And there it probably helps if you can appeal to some moral sentiments, yes.

But ultimately there is no non-arbitrary answer to these kinds of questions in the abstract. If you say everybody should get a share equal to his input, then you are presupposing some kind of meritocratic principle. Why, who knows? You could just as well decide to allocate shares according to needs, or maybe you just give everybody an equal share for practical reasons etc etc... Every answer presupposes some value or principle that can't be wholly justified.
• 836
(3) Who decides (1) and (2)?

That depends on the economic and political system under which this enterprise is carried out.
• 6.1k
You could do that with a loan too, which will have a pre-defined interest and end date instead of giving the right to perpetually earn whatever executives feel they have to promise in dividends to shareholders, to ensure they get insanely high wages in return for their class treason.
• 6.6k
Quite insufficient information. (Perhaps on purpose.)

Who has made the investment? All 100 equally? The equipment, the capital, is owned equally by the 100?

Whose idea was the enterprise? Do all 100 have equal share on the property rights, if there were any?

Do all really contribute the same amount to the production? Nobody is let's say an accountant on the team or a cleaner while another person is a highly important specialist crucial to the whole production who would eagerly be hired by other companies.

Before making this an ethical question on the grounds that some person gets more than he or she should and others get less, such above should be taken into consideration. These issues aren't solved in a vacuum, there's the outside world out there.

The easiest answer would be that if 100 people get together to produce something, the first obvious issue is what it costs for them to be in the project. Because there's always the option for them to be doing something else. And if they make more money somewhere else, which is equally gratifying work, then they opt out. So you won't get a corporate lawyer to solve international legal issues for 1$per hour (assuming it's not for charity). That's where you could start: how much the 100 people have to get that they are willing to contribute to the enterprise? • 7.2k 100 people all contribute to producing something. No. 100 people and the accumulated wisdom of 10,000 years of human civilisation and the accumulated capital of 7 billion years of evolving life all contribute to producing something. The 100 people had better go on a diet because the economic pie is way past its sell-by-date. • 4.4k The guy who puts up the money gets: [The money he put up] + [Risk of loss] + [Reasonable incentive to invest] The other 99 get a salary or wage and benefits that allow living a decent life. How much of the profits does he get? That’s the question. There is an answer in real life, which is decided by real people. The answer to this also directly affects the “decent life” part. But if someone does or contributes more than the rest I think it is justified to give to such participant more proportion of the pie than the rest. Sure. No question. The question is: who decides? What’s the process in deciding? And, importantly, what’s the number? How much should that person (or group) receive of the profits? I think it should not be more than 49,99 %. Or the individual with huge percentage could be abusive to others, etc... Interesting. In real life, does it play out like this? Who decides? I'm talking of course about business, particularly big business. The participants in a voting system. 3/4 of the votes could be useful to reach the distribution of proportions among the members. Hmm. A voting system within a company, you mean? (3) Who decides (1) and (2)? — Mikie Those that have the power to do so. Sure...and in our socioeconomic reality, who is that? (3) Who decides (1) and (2)? — Mikie That depends on the economic and political system under which this enterprise is carried out. That's true. Let's narrow it down and say the a typical Fortune 500 multinational corporation. But that's a question of fact. There's also a question of what's just, which I'm also interested in. Who has made the investment? All 100 equally? The equipment, the capital, is owned equally by the 100? Whose idea was the enterprise? Do all 100 have equal share on the property rights, if there were any? ssu Let's say only a handful of people own the property. I'm not assuming everyone is equal, I'm asking how distribution of profits is decided -- and by whom. No. 100 people and the accumulated wisdom of 10,000 years of human civilisation and the accumulated capital of 7 billion years of evolving life all contribute to producing something. 100 people all contribute to producing something. Try again. • 836 That's true. Let's narrow it down and say the a typical Fortune 500 multinational corporation. In that case, all the workers - menial, skilled, clerical, service, marketing, legal and executive get about 50%, not divided evenly, of course: some shills skills are valued more highly than some productive work. CEO, about 10%, plus perks (which are filed under operating costs); shareholders divvy up the remaining 40%. In general you can say the returns are inversely proportional to the effort exerted. • 10.7k You could do that with a loan too, which will have a pre-defined interest and end date The loans I have taken out have pre-defined interest and end dates. How are things different there? • 10.7k How much of the profits does he get? That’s the question. There is an answer in real life, which is decided by real people. The answer to this also directly affects the “decent life” part. Your question was what should it be, not what is it. You're right, what a reasonable incentive and decent life constitute is open to question. Decent life means pays for healthy food, secure housing, good education, health care, transportation, child care, and two six-packs of Bud Lite a week. Incentive is what's left over. • 6.1k I'm contrasting that with equity. • 10.7k I'm contrasting that with equity. Yes. I misunderstood. • 181 more Is this question in my ideal world or the current world? Taking your subsequent clarification about a Fortune 500 company, I'll assume this is a US company today you are asking about. 1) Each employee should be payed their market value. By this I mean the average salary they can get for doing a similar job in a similar company other than this 2) What their market value is. This depends on the specific breakdown for the jobs, and the market conditions at the company's competitors 3)The people who put the capital in decide. • 4.4k Your question was what should it be, not what is it. Sure. So how much should that be? There are real life examples, so we can speculate in specifics as well. You offered a rather abstract formula. In any case, who decides? Everyone? Just the guy (or persons) who put up the money? "Me" is a joke answer, I assume. • 6.1k Let's say only a handful of people own the property. I'm not assuming everyone is equal, I'm asking how distribution of profits is decided -- and by whom. That's defined in the statutes of the company and usually lies with the executive board members. But they are voted in by the shareholders, so any shareholder with sufficient voting rights will effectively decide on the board members, so board members are incentivised to make shareholders happy. Shareholders generally only want profit to the exclusion of all else. Legislation can curb the profit motive through legal requirements. So indirectly governments will have a say on how profit is distributed. In a globalised economy, however, the ability of governments to set requirements is limited by companies' ability to relocate abroad. Under all this lies a legal framework that allows incorporation of for-profit entities in the first place and assumptions about the efficacy of capitalist and market organisation to the extent that it affects moral valuation. It's the economy, stupid. • 4.4k Each employee should be payed their market value. What their market value is. The people who put the capital in decide. So the people who put int he capital decide the market value, both theirs and their employees? Nice position to be in, yes? "My market value is 350 times more than my average employee's value." • 10.7k we can speculate in specifics as well. I don't have the information I need to do that. I'm perfectly happy to let the amount of profit be determined by the market as long as workers are paid a decent living wage. "Me" is a joke answer, I assume. Sure, a joke, but also an acknowledgement that what we decide here doesn't affect how it's really done. • 4.4k That's defined in the statutes of the company and usually lies with the executive board members. But they are voted in by the shareholders, so any shareholder with sufficient voting rights will effectively decide on the board members, so board members are incentivised to make shareholders happy. You're exactly right, of course. This is the reality we live in. I'm asking about both how things should be run and how they actually run, so this is an important piece. The board of directors makes most of the decisions, along with the CEO. So who are the shareholders? Seems like if each shareholder gets a vote, it's a somewhat democratic system. • 4.4k Shareholders generally only want profit to the exclusion of all else. Says who? • 4.4k I'm perfectly happy to let the amount of profit be determined by the market as long as workers are paid a decent living wage. There's the invoking of "markets" again. But do markets really decide what the CEO or the average worker makes or what prices are? No. • 181 Yes this is how it works. The people who put int he capital, through a form of competition, decide on market value. Your market value is simply how much someone is willing to pay you for the job. Not how I would like it to work though, but how it works. Interestingly the power has very much been in the hands of the employer, but recently I have seen more articles talking about a change - more employees quitting and refusing to work unless they get the wage they think they deserve. I very much support that, as I support strikes. • 10.7k But do markets really decide what the CEO or the average worker makes or what prices are? Again, the question was "what should," not "what is." • 6.1k Says 200 years of reinforced economic theory (market economics) married now successfully to neoliberalism aka "culture". • 4.4k Yes this is how it works. Not how I would like it to work though, but how it works. Kind of. Minus talk about markets, anyway -- which is usually used as an abstract cover for real people making real decisions, usually for unjustified reasons. Again, the question was "what should," not "what is." So the market *should* decide? Sounds like you were claiming that markets do decide -- which, incidentally, is what most companies will claim. I don't think markets should determine, nor do I think they in fact determine, how profits are distributed. • 4.4k Says 200 years of reinforced economic theory (market economics) married now successfully to neoliberalism aka "culture". I agree, except for the 200 years part. More like 50 years. I attribute that assumption (regarding shareholders) mostly to Milton Friedman, incidentally. But it's clearly wrong, factually and morally. • 181 Minus talk about markets, anyway -- which is usually used as an abstract cover for real people making real decisions, usually for unjustified reasons. The "market" is the total set of real people making real decisions, all whose decisions are linked to each other. Company A run by Adam will pay$55,000 for an entry level software developer job.
Company B run by Brenda will pay $48,000 for an entry level software developer job. Company C run by Colin will pay$65,000 for an entry level software developer job.
Company D run b Daisy will pay $60,000 for an entry level software developer job. ... ... Each one of those is a case of real people making real decisions. Each one is also influenced to some degree by each other and is looking over each others shoulder. "The Market" is simply saying the aggregate of the above instead of listing them all out one by one, nothing more nothing less. It is not some mythical magical beast, but it is not nothing either. How effective I would be in hiring a given entry level software engineer depends, among other things, on how my pay stacks up against the above - in other words how my pay stacks up against "the market." • 10.7k So the market *should* decide? I don't care how much profit companies make. how much executives are paid, or how it is determined as long as workers are paid a decent living wage. • 4.4k "The Market" is simply saying the aggregate of the above instead of listing them all out one by one, nothing more nothing less. And has nothing to do with how those individual decisions are made. So the "market", back in the 50s and 60s, determined that the average CEO deserved 20 times what the average worker made. Now, lo and behold, the market determines that that number is 350 times. It's an abstraction used to cover real decisions based on flimsy reasoning. It doesn't matter that most companies don't pay a living wage, and hence that the median income in the US is$32,000 or so. What matters is why so many companies are screwing their workers -- when in the past they haven't.

"The market" is a convenient fall guy.
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