Earlier quoted context omitted.
1. Shifting profits from the entrepreneur (with skin in the game of providing consumer wants) to the middleman can be deadweight. You'd want some evidence that rewarding disloyal middlemen results in we the consumer surplus, not just a flourishing middle-man economy. There can be price-discovery benefits to middlemen, like market makers at the NYSE. But the financial markets usually involve fungible goods. Consumers…
Good points! Let me try to dissect them, let me know what you think. 1. I agree with the themes of not paying disloyal middlemen, but I'm not sure if it applies to the example. > You'd want some evidence that rewarding disloyal middlemen results in we the consumer surplus, If entrepreneur Y is willing to pay 2x the salary of entrepreneur X for the same employee, presumably its because Y thinks they can use the salesp…
I'm not sure that's true. Y thinks Y having the profits from S's relationships are worth the marginal cost of paying 2 x $X (the salary). Presumably, he could offer that to S's Boss -- but the angle is that S will usually sell out for less. S has less skin in the game.
As you note, it's hard to tell how much S is actually benefitting consumers, versus how much they're trying to extract rent once they've got Boss over a barrel. And it seems the best time to solve that is with a voluntary agreement between consenting adults before Salesman has Boss over a barrel.
If Boss runs the risk of being gutted by S, the usual response is to raise prices, or conclude that it's just too expensive to make this good. So probably consumer prices rise under this regime. Now, maybe if you're the party of middle management, that's a political good!
2. I don't know enough about that to BS beyond what I've BS'd already. But it strikes me as mostly a toss up -- sometimes it's good, sometimes it's bad. And, again, I think the libertarians are mostly right about respecting deals between consenting adults, even when there's a wealth or social gap. The parties will have a much better idea about when they're good and bad. I'm not sure why you'd outlaw them.
I guess the best argument I have against myself is that California has already done something similar for awhile, and it hasn't crippled their market for talent. So whatever effect I might be worried about, it's de minimus, and it seems to be a morale booster for middle-management types.