Part of the reason is because it's a set order. Consider that in pricing his beef normally, the vendor has to account for three things:
1. Beef that sells within 35 days at regular price
2. Beef that sells within 60 days as a discounted price
3. Beef that sells after 60 days for a loss.
The beef's regular price has to be somewhat higher than in an efficient market because some of it will be sold at a loss.
Getting an order for a set amount per week allows him to disregard the losses he normally has from beef that has to be sold for dog food, because the purchaser is guaranteeing their quantity, smoothing their expectations on how much beef to purchase in the future.
It's possible that at $18 a pound, without any waste, he's making the same margins/profit as he would at $34 with some waste.
Right. So the value add here is not actually about moving cash flow forward in time through reservation deposits, but rather just having a predetermined order size. Am I misunderstanding, or is this a complete non-example for the point of the article?
I'd guess in the restaurant game, net-120 also has the risk of the restaurant going out of business, so any "predetermined order sizes" are less than guaranteed (a very long way from the guarantee the pre paying gives).
By the restauranteur having reservation deposits which allow them to offer to pay upfront (moving that cash flow 120 days earlier) - the wholesaler reduces both uncertainty (I wonder how much beef I need to order and how much extra I should add that I'll later sell for a loss to make sure I don't run out if sales increase?) as well as risk (What if this restaurant shuts down owing me for 4 months worth of beef?)
This doesn't really add up though because in reality the butcher would just use invoice finance to get the money ahead of time at a way lower cost than a 50% discount he's offering, which would probably include some insurance if the restaurant went under. It doesn't make sense. Invoice finance might cost 5-15% of the invoice. Why wouldn't you do that rather than giving customers 50% off? I can get a small discount but half price doesn't seem realistic.
The point is that improving the cash position of the restaurant (traditionally a low float, low margin business), by moving customers payments forwards in time, allows them to improve their margins by pre-paying their food vendors. This is in contrast to the example right before, where speedy deliveries from a lean manufacturer motivates downstream distributors to switch suppliers, despite taking a margin hit, because they can improve their cash position by doing so.
So why isn't there a futures market for selling these meats?
The farmer/producer would like certainty of sale, at a certainty of price. This is exactly what a futures option gives them - they can offload the risk of price fluctuations (and demand reduction/changes) in the future, and someone else can speculate on this (and make more profit, or loss).
It seems stupid for a farmer/producer to take on this risk, rather than sell these futures.
Futures markets work for commodities where what you get from one seller is essentially interchangeable with what you get from another seller.
There are futures markets for livestock, but that's not going to cut it for the high-end restaurant market that this example comes from--the restaurants this story is about are internationally famous and will have exacting food quality standards that are hard or impossible to meet from a futures market. The suppliers they work with are in turn focused on supplying high-quality meat and produce that isn't really interchangeable enough for a futures market.
Farmers who grow commodity crops (corn, soybeans, etc.) or commodity livestock often do use futures markets in the way you describe, or work with financiers who essentially do it on their behalf.
I think part of it is the conservative (website states its ideological position) viewpoint that communism's goal is to put everyone in a state of shared suffering, whereas Engels likely wanted a world where everyone could share in his pleasures.
My problem with his solution is that it lacks two key components of an implementable design, better incentives and a competitive advantage. As a result, you'd seemingly need an authoritarian government to force these types of changes, which has the potential to cause greater harm than the problem it's fixing.
Incentives - While such a system seems better for workers, it doesn't show any benefit for entrepreneurs or investors. Why would anyone start such a business if they lose control almost immediately? What is the incentive for investment if it doesn't come with the potential for a return?
Competitive Advantage - The reason you'd need an authoritarian government is because anyone using a traditional ownership model would have an advantage against these types of companies. As we've seen in cooperatives, one-person-one-vote creates freerider and horizon problems, and the pressure to form smaller firms would eliminate the economies of scale that many firms today enjoy.
This feels more like a political solution, and seems liable to succumb to predictable economic behaviors.
Indeed there s no self-reflection on the viability of the supposed "plan". Yet again, this is the same guy who was supposedly planning to counter the ECB's demands by setting up a guerilla currency through blockchains and I-owe-Us.
> Indeed there s no self-reflection on the viability of the supposed "plan".
Perhaps the viability is examined in the book, which is mentioned within the article title?
> Yet again, this is the same guy who was supposedly planning to counter the ECB's demands by setting up a guerilla currency through blockchains and I-owe-Us.
"Supposedly" as in conspiracy theories backed by thin air?
1. Using "true story," then telling a very general story without any citation. That he did it twice was worrying.
2. People like the writer who treat our current understanding of science as if it were a religious text that is complete. Science is an ongoing process of discovery and experimentation to try to further our understanding of the world. The fact that it's wrong is kinda the point, because it motivates us to challenge the assumptions underlying our theories.
3. The story about his mother losing her job is likely true, but the way he tells is seems like it purposely omits relevant information.
For example, he says his mother lost her job as a "social worker," but according to this wedding announcement (https://www.nytimes.com/1988/03/06/style/alexandra-roosevelt...), she was the Director of Social Services at Hillcrest Convalescent Hospital in Long Beach, CA.
I also checked the Federal Register for that date, and it seems that the change also included an exception to the bachelors degree requirement, provided the individual had two years experience. His claim in the article that his mother had 20 years of experience should have been sufficient.
"In § 483.15(g), we are requiring that social services be provided by a qualified individual defined as an individual with a bachelors degree in social work or two years experience in a health care setting working directly with patients or clients, or similar professional qualifications."
For 1 and 3 I think that the question is do these examples (assuming that they are real and true) support the argument made, and can we , do we, agree that it is plausible and reasonable to assume that these are real and true. If you doubt the notion that a social worker could be dismissed by this kind of data driven change of policy then I would concede that damages the argument. This is not a physics observation though (kinda the point here!) if you say that there is one example where a social worker wasn't dismissed in this way then I do not agree that is sufficient to derail the argument. On the other hand if you show me one example of a situation where an atom decays differently and produces behaviour not accounted for by the standard model I will happily declare that the standard model is bust.
For 2; this is not about the contingent knowledge that science produces, it's about the applicability of the process that produces that knowledge so effectively in some domains. There are domains where it is not appropriate or useful to think exclusively and uncritically in a scientific way, medicine and economics being just two examples of domains in which uncritical application of the scientific method and mindset have done significant harm to a significant number of people.
> if you say that there is one example where a social worker wasn't dismissed in this way then I do not agree that is sufficient to derail the argument.
Isn't that kind of ridiculous? If you say "Thing A happens! Here's an example of when thing A happened," but it turns out that your example did not actually happen, well it sure seems like your argument is likely not true, or that thing A happens with such low frequency that I don't need to worry about it.
The argument is not how you phrased it "here's one time this thing didn't happen," it's the fact that the example you provided did not happen. You have every incentive to find real examples to support your case.
Price controls is an unfairly simple way to say that the company signed a long-term contract in which the city covered 2/3rds of the construction costs and set the fare at a maximum of 5 cents for most rides for the next 49 years.
When the company tried to raise the fare to 7 cents, they were disallowed by the courts because they couldn't prove the 5 cents fare was confiscatory.
I understand the city could raise the fare to benefit the company, but that isn't their obligation.
I would assume you're libertarian from the point you've made, and am curious whether you believe it was right for the contract to be enforced as it was agreed upon.
So, the contract should be viewed as a suicide pact? The results of the decisions by the politicos speak for themselves: money poured into duplicative infrastructure, starvation of existing infrastructure, stagnation.
Passenger rail service in the US suffered a similar fate when the federal government called in its chips to move personnel and supplies all over the place during the command economy years of WWII. Yes, the rails received substantial subsidies in land grants, etc, to get started. Yes, there was agreement to serve the public interest in this way because of that. Yes, this was a big blow to passenger rail.
1. Beef that sells within 35 days at regular price 2. Beef that sells within 60 days as a discounted price 3. Beef that sells after 60 days for a loss.
The beef's regular price has to be somewhat higher than in an efficient market because some of it will be sold at a loss.
Getting an order for a set amount per week allows him to disregard the losses he normally has from beef that has to be sold for dog food, because the purchaser is guaranteeing their quantity, smoothing their expectations on how much beef to purchase in the future.
It's possible that at $18 a pound, without any waste, he's making the same margins/profit as he would at $34 with some waste.