Experiment with a Simple Business



This spreadsheet can be downloaded and used on your own computer. It is designed so that you can change the values written in red. There is a version for Excel and also one for Macintosh Numbers.

In a world where water can be exported from Fiji and sold for a higher price than some wines it is clear that what something is worth depends on what people are willing to pay for it. That being the case, it is difficult to create a simple case in which there is a naturally occuring minimum wage. However, in this scenario there exists a community on the edge of a forest preserved in wilderness condition and open to nut collectors who pay a small license fee. They are permitted to collect nuts from a kind of tree that produces a vegetable food even more nearly perfect than sesame seeds for human nutrition. Accept for the monotony, a human can survive on about six nuts per day. This scenario assumes that any nut collector can collect, on average, eight nuts per day. So to work for hire an individual would not be wise to accept less than an eight nut per day salary. Since other parts of the domain in which the forest is found do not produce these nuts, they are more valuable in trade than they are in local consumption. A trading post manages the packing and the hand-off of surplus nuts to traders. amd they receive fish hooks, ax heads, and various other things that they cannot get locally. The individual who manages the trading post hires nut collectors and pays them in nuts, which are a de facto unit of currency. The workers in turn can buy trade goods from their employer at cost. People in other occupations, e.g., fishermen, sell their products for nuts, which can be used to pay for fish hooks, for labor used to repair their boats, etc. 

The trading post owners determine how many of the villagers will be given work as nut collectors and other workes in the post. If they hire too many they may get so many nuts that they cannot trade them all before they lose their value as food. The workers can collect more of fewer nuts per day depending on how well the nut trees are producing and how well the collectors are working. Packing and related costs are constant since nut husk fibers are used to weave simple containers for transportation. The owners keep back a certain amount of their gross income since the trading post needs a new thatched roof every few years, and there are some other small upkeep expenses. They have to pay a forest management fee that undergoes inflation at such a small rate that it is barely noticed from year to year. Small expenditures are also needed for communications, coffee and snacks for visiting traders, etc. These expenses are pretty constant from year to year. The government can tax them at any rate that it wants.

I have set the initial conditions, exhibited above, to indicate trading post owners who imprudently keep their workers at a bare subsistence level. As a result, next year they will have three fewer workers. Everybody in the community will know why they quit, got sick and infirm, or died. Next year it may be difficult to find three more people willing to work for the trading post.

The attrition rate I've set, the minimum standard of living, the amount the government takes in taxes, the amount the owners hold back for their own use and spend and/or save, the number of nuts that workers can collect each day, and perhaps other factors (e.g., a fire in the trading post that destroys half of a year's crop) can all change for reasons that onlookers might never expect. No attempt has been made to include war, theft, the trading post owners taking up gambling, etc. Nevertheless, those interested in experimenting can try things like computing the number of workers lost to attrition, and plugging the number of workers remaining to see what might happen the next year if other conditions were not to change. What would happen in a worker-owned trading post wherein the management is paid exactly the same as the janitor?

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