Political compass, beautiful, beautiful, political compass!

[brainiac3397]

But big business relies on the existence of small business. Outsourcing certain aspects of the big business are far cheaper than doing it themselves since the small business will generally provide better efficiency in accomplishing the task.

Thus it's not that small business is disappearing, but rather it's serving as specialized tools that aid big businesses. There's a company in my city that only makes the pistol grip for the military M-16 and M4. That's all they make. Same for non-military contractors, they can make specific items faster and cheaper than the big business itself could, and save the headache of supervision and management in such a big company.

Of course we as the public don't really see this part of the business world. They'll say "Sony PS3" but it's more likely many of the parts within the device are made by other small businesses. The reason they don't get named is because the big business still owns the final product. They just license you to build some of their stuff for them, or to put it together for them.

Globalization also didn't destroy small business. It simply made more small businesses accessible outside the borders of a single country. Why use more expensive American companies when a Japanese or Chinese small business can do it at a far lower cost and in such quantity that a certain percentage of item failure is easily trumped by the massive number of working items.

Big business may influence government, but small businesses are more versatile and thus relied on by the big business.

[thewake]

Trar:

I took the economics course at a university. It's my major. I'm in intermediate microeconomic theory right now.

As for empirical evidence:

http://www.jstor.org/stable/23016644
"We ask whether barriers to entry are a quantitatively important reason for the income gap between developing countries and the United States. We develop a tractable general equilibrium model that captures the effects of barriers to entry and the other main distortions typically considered in the development literature. We carry our model to the data and ask it to match the main development facts from the Penn World Table. We find that this requires large barriers to entry in developing countries, which account for about half of the income gap with the United States."
...
"There is also evidence that even in richer countries barriers to entry have detrimental effects. In particular, in the OECD countries product market regulation is negatively related to investment (Alesina et al., 2005) and total factor productivity (TFP henceforth) (Nicoletti and Scarpetta, 2003). In both cases, barriers to entry are the dimension of product market regulation that has the biggest negative impact. Many industry case studies find similar results."

http://www.jstor.org/stable/256737
"Researchers have suggested that environmental regulations may deter
the entry of firms into industries, and their assertions imply that an
advantage is thereby conferred on incumbent firms. Empirical analysis
showed that environmental regulations inhibited new firm entry in a
variety of manufacturing industries. Implications for affected firms and
future research are discussed."

http://www.jstor.org/stable/41057771
"The 1998 reform of the Italian retail trade sector delegated the regulation of entry of large stores to the regional governments. We use the local variation in regulation to determine the effects of entry barriers on sectoral performance. We address the endogeneity of entry barriers through local fixed effects and using political variables as instruments. We also control for differences in trends and for area-wide shocks. We find that entry barriers are associated with substantially larger profit margins and lower productivity of incumbent firms. Liberalising entry has a positive effect on investment in ICT, increases employment and compresses labour costs in large shops. In areas with more stringent entry regulation, lower productivity coupled with larger margins results in higher consumer prices."

===

Also, your criticism of the economics science is weak. You use buzz words and bring up the Koch bogeyman, and you (ironically) throw out some of the same criticisms of neoclassical economics ("jelly of physics") that the heterodox Austrians, a school of thought that's radically free market, have used against the neoclassical school.

I apologize for not hitting every point you've made, but hats off to you for writing so much.

[brainiac3397]

Getting into European markets is a bitch. I did some research for my company, and it's insane. I realized they'd be better off opening a subsidiary in some low-tax EU country and importing goods direct from origin of manufacturing, then sell via subsidiary. The transportation would be cheaper and the tax wouldn't be so big a pain.

Course stating a subsidiary in another country requires tax advisors, lawyers and somebody to go through the application process.

[Trar]

(05-08-2014 09:14 AM)brainiac3397 Wrote:  But big business relies on the existence of small business. Outsourcing certain aspects of the big business are far cheaper than doing it themselves since the small business will generally provide better efficiency in accomplishing the task.

Thus it's not that small business is disappearing, but rather it's serving as specialized tools that aid big businesses. There's a company in my city that only makes the pistol grip for the military M-16 and M4. That's all they make. Same for non-military contractors, they can make specific items faster and cheaper than the big business itself could, and save the headache of supervision and management in such a big company.

Good point, although I can't recall if you were addressing any point of mine. There are also at least a few companies that would likely prefer to completely control their supply and production chain, I'd bet.

(05-08-2014 09:14 AM)brainiac3397 Wrote:  Globalization also didn't destroy small business. It simply made more small businesses accessible outside the borders of a single country. Why use more expensive American companies when a Japanese or Chinese small business can do it at a far lower cost and in such quantity that a certain percentage of item failure is easily trumped by the massive number of working items.

Small business isn't being destroyed, I'll grant you that. It has suffered enough that protectionism became a thing, which I think usually turned out well. Consider the other ramifications of outsourcing, too. China isn't known for its commitment to workers' rights, or the environment (up until very recently, and we still have yet to see what its response will be like).

(05-08-2014 09:14 AM)brainiac3397 Wrote:  Big business may influence government, but small businesses are more versatile and thus relied on by the big business.

Again, good point, although I can't recall if you were addressing any point of mine.

(05-07-2014 11:08 PM)DoA Wrote:  Both of you have fair points, but consider this:

Current regulatory legislation is harder on small business than it is on big business. It has to be; the Congressmen are, after all, getting their bribes from the corporations, and are thus expected to defend their interests.

True enough, and it should stop too.

(05-08-2014 12:39 PM)W Kuts Wrote:  Trar:

I took the economics course at a university. It's my major. I'm in intermediate microeconomic theory right now.

(05-08-2014 12:39 PM)W Kuts Wrote:  As for empirical evidence:

http://www.jstor.org/stable/23016644
"We ask whether barriers to entry are a quantitatively important reason for the income gap between developing countries and the United States. We develop a tractable general equilibrium model that captures the effects of barriers to entry and the other main distortions typically considered in the development literature. We carry our model to the data and ask it to match the main development facts from the Penn World Table. We find that this requires large barriers to entry in developing countries, which account for about half of the income gap with the United States."
...
"There is also evidence that even in richer countries barriers to entry have detrimental effects. In particular, in the OECD countries product market regulation is negatively related to investment (Alesina et al., 2005) and total factor productivity (TFP henceforth) (Nicoletti and Scarpetta, 2003). In both cases, barriers to entry are the dimension of product market regulation that has the biggest negative impact. Many industry case studies find similar results."

http://www.jstor.org/stable/256737
"Researchers have suggested that environmental regulations may deter
the entry of firms into industries, and their assertions imply that an
advantage is thereby conferred on incumbent firms. Empirical analysis
showed that environmental regulations inhibited new firm entry in a
variety of manufacturing industries. Implications for affected firms and
future research are discussed."

http://www.jstor.org/stable/41057771
"The 1998 reform of the Italian retail trade sector delegated the regulation of entry of large stores to the regional governments. We use the local variation in regulation to determine the effects of entry barriers on sectoral performance. We address the endogeneity of entry barriers through local fixed effects and using political variables as instruments. We also control for differences in trends and for area-wide shocks. We find that entry barriers are associated with substantially larger profit margins and lower productivity of incumbent firms. Liberalising entry has a positive effect on investment in ICT, increases employment and compresses labour costs in large shops. In areas with more stringent entry regulation, lower productivity coupled with larger margins results in higher consumer prices."

Did you read all of them or did you just cherry-pick? I'm glad to say I read all of http://exiledonline.com/the-nobel-prize-...economics/ although it was a while ago, You'd do well to do the same.

I should also think that slightly decreased economic productivity is a small price to pay for: workers' safety, a livable wage, and other things I've already mentioned.

(05-08-2014 12:39 PM)W Kuts Wrote:  Also, your criticism of the economics science is weak.

Economics isn't a science. It's theorizing that oftentimes ignores externalities.

(05-08-2014 12:39 PM)W Kuts Wrote:  You use buzz words

buzz words what

(05-08-2014 12:39 PM)W Kuts Wrote:  You use buzz words and bring up the Koch bogeyman

They're the most prominent example of the type of person I was referring to.

(05-08-2014 12:39 PM)W Kuts Wrote:  and you (ironically) throw out some of the same criticisms of neoclassical economics ("jelly of physics") that the heterodox Austrians, a school of thought that's radically free market, have used against the neoclassical school.

The whole "envious of physics" thing was more of an offhand joke. The Austrian school is WORSE, too. I don't see how any of this adds up to me being weak.

(05-08-2014 12:39 PM)W Kuts Wrote:  I apologize for not hitting every point you've made, but hats off to you for writing so much.

Fair enough.

[brainiac3397]

I'm sure many companies would rather control the entire process.

Unfortunately it's a pretty expensive endeavor, and more likely to be inefficient and be more a problem than a solution. Think of it like Feudalism, centralizing the power to a single King would be wonderful, but the burden would be too much for a single King. Thus the King holds his own territory(and the entire kingdom) but has "smaller monarchs"(as vassals) ruling various regions and providing service and taxes.

[thewake]

I like how I bring up actual empirical evidence that proves my point and it's handwaved because "economics ignores externalities."

Lolwut? I had an entire class this semester on law and economics that focused a lot on Ronald Coase, Harold Demsetz, and their studies of externalities. In fact, economics literature is filled with discussion of externalities.

http://www.jstor.org/action/doAdvancedSe...q5=&f5=all

Look at all the literature on externalities.

[brainiac3397]

* brainiac3397 handwaves

[Trar]

(05-08-2014 02:19 PM)W Kuts Wrote:  I like how I bring up actual empirical evidence that proves my point and it's handwaved because "economics ignores externalities."

Lolwut? I had an entire class this semester on law and economics that focused a lot on Ronald Coase, Harold Demsetz, and their studies of externalities. In fact, economics literature is filled with discussion of externalities.

http://www.jstor.org/action/doAdvancedSe...q5=&f5=all

Look at all the literature on externalities.

I was referring to the propensity of some economic theory to ignore externalities, usually when they would be very important.