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RE: Salary Survey

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-----Original Message-----
From: Christopher Wright [mailto:chrisw(--nospam--at)skypoint.com]
Sent: Monday, September 27, 1999 8:21 PM
To: seaint(--nospam--at)seaint.org
Subject: Re: Salary Survey


>I guess I wasn't clear. The allusion was to Adam Smith's (I think) term
>for the effect of market forces is translating the pursuit of profits
>into a better deal for everyone. Supposedly the 'invisible hand' does it
>better than anything--even brains and a little thought for the future.

You weren't unclear, you were just wrong in your description of the
invisible hand. Not even Adam Smith said that it would give anyone a better
deal. It just acts irrespective of the purported wishes of the actors.
COnsider that Adam Smith's model of the evaluation of value was the very one
adopted by Karl Marx when he wrote Das Kapital. That is, that value is a
function of the labor invested in the creation of the value. This was
disproven theoretically by Karl Menger and is disproven day after day by
actual human activities.

The real situation is simple: An object as precisely the value that the
seller and buyer agree it has. If you sell your services for $150/hr and
your client pays the bill, your services are worth $150/hr. It is a purely
subjective determination and is, in part, negotiated.

The real estate example was not taken far enough. Many people are unwilling
to pay an agent and will sell their homes themselves. The agents lose out on
those sales. And, as someone else pointed out, real estate commissions are
contingent upon a sale. When engineers contribute potentially free services
in a competition  as part of a team, for instance, the might receive a
higher fee if the project is awarded to their team assuming, of course, that
they negotiated it that way.

When I estimate a fee I base it on four things. One is my cost and profit.
Second is my billing rate. Thirdly, I look at what my competition might
charge. And finally, I try to estimate the benefit my client will receive
from using my firm as opposed to my competition. I also work for contractors
and developers who understand the value of my product.

Mark