I am not an economist, but I think it is a problem with information assymetry. The cleaning worker does not have many connections to CEOs, to wich he can sell his services, but the middle men have. The middle men can leverage this situation to gain the profit, the cleaning worker would have gained. But I have no idea, why this would evolve into a pyramid scheme. One level of "management" would have solved the "information assymetry"-problem, without inefficiency (and this could be done in a fair way, so the worker can profit too).
> The cleaning worker does not have many connections to CEOs, to wich he can sell his services, but the middle men have.
Bingo.
Additionally, in many cases the person/team carrying out a procurement process may require (often by law or company policy) a ridiculous set of documents that some sleazy company is an expert in navigating, and exploiting any loopholes or poorly-written selection criteria. They deliver crap service that barely qualifies, but the procurement person/team can say, "well technically they fit the criteria" so their ass is covered. The procurement team is not rewarded for selecting the best candidate, so they minimise their own exposure.
Also the problem is in many businesses the person choosing the cleaning company isn't spending their own money. So if company A is more expensive but Company B will take more effort to onboard due to the fact they aren't familiar with the paperwork. The employee (often on salary for unlimited hours) will pick the easier option.
Another reason to support small businesses, it helps keep markets honest.
Well, if that is the case, the free market is a pureley theoretical concept, that is not realized anywhere in the world. And it cannot be realized, because there is always inevitable some form of information assymetry.
Something can be a theoretical concept and still useful. For politics you might want to favour transparency instead of obscurity.
As an employee in software I've been working through intermediaries for a good part of my career, so obviously interested.
I suspect that, at least in my country, it's more a matter of bad regulation than of information assymetry. But the mere fact that we're not sure which are the causes is in itself information assymetry.
Since there is inevitably going to be information asymmetry, this is rather a "no true scotsman" approach to redirecting blame away for the problems that plague free markets in the real world.
> The cleaning worker does not have many connections to CEOs, to wich he can sell his services
I think you might of hit on a possible explanation there, maybe it's wealth inequality? When there was more equality that CEO (or company owner, or just someone near the top) might have been going to the same bars or been part of the same local sports clubs as the cleaner, their kids might have gone to the same school. Now they probably live in other parts of the city.
Politics lately has been an example of this divide.
> might have been going to the same bars or been part of the same local sports clubs as the cleaner, their kids might have gone to the same school. Now they probably live in other parts of the city.
I don't think this ever the case, in any era. Rich people in many countries definitely send their kids to posh schools through their connections (e.g. slots available for those with a parent who attended), go to different bars and follow different sports (e.g. rugby union vs football/soccer, depending on the country obviously).
>Rich people in many countries definitely send their kids to posh schools through their connections (e.g. slots available for those with a parent who attended), go to different bars and follow different sports (e.g. rugby union vs football/soccer, depending on the country obviously).
Yes, but company owners in many countries weren't that rich that the other people they provided services to. Consider a company with 10-20-100 people, serving a city.
Now, those jobs go to huge conglomerates and companies with 1000s upon 1000s of employees, and CEOs that are 100x as rich as the people buying their services.
I'm not thinking CEO of MEGCORP here, but a typical business owner or office manager of a 5-50 person office, they aren't so detached. I'm not sure which end of the wealth divide the fall on though.
