Originally Posted by
scott967
Bike builder Jones works a 40 hour week, does all his welding/brazing/painting by hand and turns out one bike a week which he sells for $1,000.
Bike builder Smith buys $200k in automated tooling. Working the same 40 hour week Smith turns out 5 bikes. By that labor theory, Smith's bikes should sell for $200. Great for the consumer.
But why should Smith buy or finance his $200k investment in tooling? That investment has a real cost but Smith gets the same pay as Jones.
So you say the solution is have the state buy the $200k tooling and give it to Smith (or maybe Jones depending on whom is favored) then both Smith and Jones are happy, right? And there isn't any cost if the state buys the tooling, right?
Amazingly bad/unrealistic/oversimplified example in so many ways
More like artisan frame builder works from his garage, is highly regarded and charges 2500 to 12000 per complete bike. Overhead is low, no marketing costs to speak of, biggest cost is painter, followed by materials and components.
No one would buy 200k worth of equipment if there was not an ROI and most ROI needs to be shown in 5 years or under (my brother is looking at a $500k powder coat oven... ROI is 2 years) More like bike builder smith increases automation with 200k investment allowing him to produce 5 bikes a week, has to reduce price as hand crafted cachet is gone so bikes sell for 800 and no one is going to make money on producing 250 $800 bikes a year after depreciation, debt service, cost of components, marketing cost, etc etc etc
Reducing labor costs is done by production efficiency or lower labor cost, typically by moving to areas where labor does not cost as much