Yet again we have the interests of macroeconomics clashing with the interests of communities.
This makes perfect economic sense. You're a business, if things go poorly you scale down cost-free, if they go better, scale up at slightly higher cost than fixed, but the flex is more than worth it. After all, with this you protect margins in all scenarios. Perfect no? In this sense, it mirrors cloud compute instances. Lower capital investment, granular scalability (in this case of human resource rather than compute resource).
Except that it reminds me of an old adage of finance: you cannot eliminate risk - you can only transfer it. This is a classic example of risk transferral: from capital to labour. It makes tons of sense for a business. It makes much less sense for the employees, who, atomised commodities, have no bargaining power. This is, by extension, a bad idea for society, if you accept that groupings of individuals, including those defined by today's "corporations" exist precisely to reduce risk for each individual. That is the implicit exchange between employee and employer. I will provide you with the opportunity to profit from my labour; you will provide me with security. This breaks that contract.
To those who will argue that it is good for aggregate growth, I say, trickle down is not happening. Eliminate the trickle down argument and you're left with a bad proposition.//
"the on-demand economy is not introducing the serpent of casual labour into the garden of full employment: it is exploiting an already casualised workforce in ways that will ameliorate some problems even as they aggravate others."
How do you protect the workers who little control and no guarantees? A (much) higher minimum wage, an hourly retainer (like prostitutes receive), or Basic Income.
It is frightening to think that homeless people can have jobs that are simply so low-paid that they cannot afford to live anywhere.
That is the implicit exchange between employee and employer. I will provide you with the opportunity to profit from my labour; you will provide me with security.
Interesting, but I can't say I agree. Some jobs are compensated in risky, performance-based ways already (e.g. sales). And conversely, if everyone prefers job security, freelancing websites could attract better-quality workers by becoming more like employers.
There are a number of other theories for why firms exist, but the classic explanation is that it reduces transaction costs if you can bug Jill down the hall for 10 minutes of her time instead of hiring an outside contractor. http://en.wikipedia.org/wiki/Theory_of_the_firm
Even most sales jobs come with a base salary. You might still be fired for not hitting targets but if you happen to have a bad run, you're not destitute.
These jobs don't look like good full-time jobs, no, but don't we have a big problem right now with underployment, especially in the unskilled labor sector? It seems to me that providing a way to productively fill the empty mornings in your week with odd jobs actually reduces risk in certain ways.
That being said, the people with disposable income don't typically live down the street from the people with more time than money. The U.S. may not have diverse enough zip codes to support this model beyond a modest scale. That is, is the transaction cost too high if the guy helping you move that fridge has to commute 1.5 hours and spend another 15 minutes finding your house?
Can you give a specific example? It seems to me you can either share out risk, or place a bet to offset the risk, in which case you have transferred the risk to the person taking the bet at some price. They may be taking / placing yet another bet, but that simply moves it on further.
To make it concrete, if I buy a house, and there's a chance that it'll fall down this year and I'll loose the 100k , then after a year is up, if it's fallen down the sum of whatever portfolio it's been distributed in is still down 100k.
If you buy a small piece of many houses you have much less uncertainty because it is incredibly unlikely that they will all fall down. The total loss is the same but it is spread out so much that it averages out and becomes much more predictable. It reduces volatility (which is often referred to as "risk") but I think you are correctly pointing out that it does not change the average outcome.
ha - brilliant. The fallacy of "diversification" is that it only transfers risk intertemporaly. Ultimately someone will get shafted double or more at some stage - it's just a question of arbing the unstable correl matrix while you can... which can and will go to a fully populated matrix of (abs)1s at some unfortunate stage when you (they!) are left holding the baby. You're left hoping that you'll have been paid a few bonuses before that happens....
The point of diversification is that no one gets shafted because lots of people are left holding the the "baby" together. It does not reduce the total amount of loss but it trades a 1% chance of losing $50 with a 50% chance of losing $1.
sure but when correlations go to 1, you're as badly off as if you only had one position. Diversification engenders false senses of security, and moreover, means everybody has a bit of everything. Therefore mass panic can ensue causing the correl matrix to ramp. See: 2008.
I contend that diversification makes for great maths, but often poor risk management.
This makes perfect economic sense. You're a business, if things go poorly you scale down cost-free, if they go better, scale up at slightly higher cost than fixed, but the flex is more than worth it. After all, with this you protect margins in all scenarios. Perfect no? In this sense, it mirrors cloud compute instances. Lower capital investment, granular scalability (in this case of human resource rather than compute resource).
Except that it reminds me of an old adage of finance: you cannot eliminate risk - you can only transfer it. This is a classic example of risk transferral: from capital to labour. It makes tons of sense for a business. It makes much less sense for the employees, who, atomised commodities, have no bargaining power. This is, by extension, a bad idea for society, if you accept that groupings of individuals, including those defined by today's "corporations" exist precisely to reduce risk for each individual. That is the implicit exchange between employee and employer. I will provide you with the opportunity to profit from my labour; you will provide me with security. This breaks that contract.
To those who will argue that it is good for aggregate growth, I say, trickle down is not happening. Eliminate the trickle down argument and you're left with a bad proposition.//