Capital Club

[Patrick Anderson]

Originally posted to http://listcultures.org/pipermail/p2presearch_listcultures.org/2008-March/000398.html


Hello fellow researchers,

This post is a first step toward describing the very basics of
economic activity - including such topics as ownership, production,
profit, policy, governance, growth.

This material should be understandable by any audience, but
concentrates on issues that are not so commonly discussed, so should
be interesting to even the most hardened economist.

I hope you will help me shape this into a full description of how we
have arrived at the dangerous centralization of power we now face at
the global level.

Please give critical feedback with logical arguments.

This first part shows that individual consumer ownership is the most
efficient arrangement when utilization/price is large enough, and that
individual consumers already choose that path.

Part One: The Utilization-to-Price Ratio

Why do most people choose to buy an automobile instead of renting?

Why do most people choose to rent a rug-doctor instead of buying?

When a person can make use of (utilize) a machine to a sufficient
degree, it is more efficient for them to OWN instead of RENT.

But wait, how could that be? The owner (whoever he is) must pay all
costs either way. A rental agency must pay for the initial
investment, upkeep/repair/maintenance/wear, insurance,
protection/security, storage, taxes, and any wages to workers needed
to do any of those thing. A private owner must pay those exact same
costs, so how could it possibly be cheaper to own outright instead of
rent?

The difference is called 'profit'. Profit is the difference between
the costs an owner pays and the price a consumer is willing to pay.
When the owner and consumer are the same person, there is no such
thing as profit. That is the savings in ownership over rental.

But what about machines that are not "worth it" to own because that
individual cannot sufficiently utilize them? It must be worth it for
SOMEONE to own them, otherwise the rental agency wouldn't do so. The
difference here is a matter of utilization.

How can a consumer increase utilization to the point of making
ownership "worth it"? One way is to buy the machine with a group of
other consumers. Organizing with your neighbors to buy a rug-doctor
is cheaper if there are enough of you to keep that equipment busy, so
why don't we (consumers) do this more often? Why do we leave that
work of organizing up to a business that intends to charge us price
above cost?

There is real work involved in the act of organization, but that cost
(wages to management) must be paid either way. So what is keeping us
(the consumers) from organizing and cooperatively owning machines,
buildings, even land?

I think part of the problem is a long-standing belief that whoever
possesses the skills to operate those machines should be the owners,
but doesn't the above argument show that the consumers must be the
owners for optimum efficiency?

I think another part of the problem is in figuring out how those
resources should be shared among the owners. It is a difficult,
sticky situation that most people would rather just avoid altogether
because of the in-fighting they perceive would occur. It seems such a
group could write some 'rules' about how to schedule access and how
much each individual must compensate the others for any extra wear or
exclusion they cause. I see such a contract, if 'properly' written,
would be the only thing our society needs to begin down the road of
peace and abundance, but will delay that discussion for now.

Cooperative consumer ownership is quite rare today, but there are a
few cases where a group of friends wanting a private airplane make a
"shared investment", and then rent the plane from the collective
others whenever they want to use it. None of those people need the
ability to fly themselves, they can just hire a pilot and pay that
wage as a cost while still saving money by not paying profit.

Another example is shared ownership of a vacation house. The
for-profit "Time Share" industry has grown around that desire, but I'm
referring to the less common case when a private group of people buy a
house that they share amongst themselves in whatever way they see fit.