The article mentions fixed costs of building Tom’s business. Like if Fred’s business costs $1m to start and creates $100k/year surplus value, it gets paid off in ten years, which seems like a good return on investment. If Tom’s building costs $1m to make and only creates an extra $10k/year surplus value (growing the market a little but mostly taking Fred’s business), it gets paid off in 100 years, which seems like a bad return on investment.
I guess some things involved in the fixed costs are
Tom’s space isn’t used for some other purpose
Time and materials spent building Tom’s shop are lost
How much should we expect the market to be like “well, if Tom’s business is a net negative socially, then I’ll be able to find some other use for that location and time and materials, which will leave society-at-large better off”? I don’t know.
Like if Fred’s business costs $1m to start and creates $100k/year surplus value, it gets paid off in ten years
Oh, not quite. “Costs $1m to start” sounds like it’s talking about the cost to Fred. Some of that will be e.g. wages paid to construction workers. For this accounting to work, we need to talk about the costs to society versus the value to society. (The costs to society being similar to those from Tom’s shop—space, time and materials.)
The article mentions fixed costs of building Tom’s business. Like if Fred’s business costs $1m to start and creates $100k/year surplus value, it gets paid off in ten years, which seems like a good return on investment. If Tom’s building costs $1m to make and only creates an extra $10k/year surplus value (growing the market a little but mostly taking Fred’s business), it gets paid off in 100 years, which seems like a bad return on investment.
I guess some things involved in the fixed costs are
Tom’s space isn’t used for some other purpose
Time and materials spent building Tom’s shop are lost
How much should we expect the market to be like “well, if Tom’s business is a net negative socially, then I’ll be able to find some other use for that location and time and materials, which will leave society-at-large better off”? I don’t know.
Oh, not quite. “Costs $1m to start” sounds like it’s talking about the cost to Fred. Some of that will be e.g. wages paid to construction workers. For this accounting to work, we need to talk about the costs to society versus the value to society. (The costs to society being similar to those from Tom’s shop—space, time and materials.)