RSS 2.0 Feed

» Welcome Guest Log In :: Register

Pages: (4) < [1] 2 3 4 >   
  Topic: Economic theory, game theory and social impacts, continuing discussion of economic theory< Next Oldest | Next Newest >  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 04 2006,12:07   

hey all,

just a placeholder to continue some very interesting discussion on economic theory, game theory, and social impacts of various strategies.

cheers

  
Dean Morrison



Posts: 216
Joined: Dec. 2005

(Permalink) Posted: Jan. 04 2006,12:43   

Cheers Sir ToeJam!

Interesting stuff over at the PT thread - but I think we need to re-define the topic somehow?

Perhaps Flint could do it if he joins us??

  
BWE



Posts: 1898
Joined: Jan. 2006

(Permalink) Posted: Jan. 04 2006,12:48   

Ok I'll bite.
Flint,
Quote
I can only disagree that economics is a form of morality. We might make economic decisions for moral reasons, but economics doesn’t care, anymore than mathematics cares if we decide three is a magic number.

We have seen economies (or at least attempted economies) where taxes are 100%, and *everyone* lives by subsidy. We saw terrible productivity, terrible environmental practices, entirely shoddy workmanship (when anyone bothered to work), empty shelves “full” of “free” goods, etc.

You may not *like* the idea that income determines the quality of our lives in many ways, but not for nothing is the free market described as the worst possible arrangement, except for everything else that’s been tried.


Economics doesn't care is true, but economics doesn't exist w/out economic activity. And that, dear flint, is a bunch of moral decisions. I agree about the free market thing you mentioned but it does have drawbacks that I think Keynes and Adam Smith make clear. http://books.google.com/books?i....ev=http

--------------
Who said that ev'ry wish would be heard and answered
When wished on the morning star
Somebody thought of that, and someone believed it
Look what it's done so far

The Daily Wingnut

   
haceaton



Posts: 14
Joined: Dec. 2005

(Permalink) Posted: Jan. 04 2006,13:44   

Flint said:
Quote
By economic principle, those who have more money are producing more of value - that is, more stuff that other people are willing to pay for.


Let's take Paris Hilton for example. It's true she produces porn, stupid TV shows and other stuff "of value" but suppose she didn't and instead did nothing but eat the food brought by her servants and agree to let her accountant execute a simple strategy (to be described). Suppose further a total abolishment of the estate tax as Bush would like (and although it's oh-so-hard to figure out what effects this might have, I'm going to make a wild guess how it could affect dear Paris).

So her strategy is to inherit her billion(s), invest in a broad mix of stocks and securities worldwide, taking care to choose those that either pay no dividends or very low dividends. She could hope that Bush would get his "no taxes on captial gains" wet dreams but until then she will only sell the losers as necessary. She uses her portfolio to secure loans for whatever spending needs she might have. As fully secured loans she gets a pretty good interest rate, but let's be really generous and say 10% per annum. Now suppose she spends a mere $10 million annually just for a modest living style (I know, it's really hard to go a year on a mere $10 million, but she's playing the miser in order to get really rich). Suppose on average her $1 billion portfolio gains in value at 6.5%, well below the historic stock market average return of  8.7%. She spends $10 million on snacks and such and another $1 million on interest (actually she usually just lets the interest accrue and pledges more stocks as necessary). Her accountant might even sell the odd loser stock (accruing a capital loss carry over) and make a loan payment or two. With a bit of loss-carry-over she can even sell a few winners now and again just to keep her interests costs down. Note that she never pays taxes 'cause she's got no income. Say she does this for another 50 years and dies. She's got loans totaling just over $11.6 billion assuming she's never made interest payments. No matter, her portfolio is worth $21.9 billion. Say she has a child who inherits these assets and debts. Through the magic of resetting the cost basis at the time of death, there are no capital gains for her heir to pay taxes on, (s)he just sells $11.6 billion of the stocks, pays off the loans and starts over.

This (jiggered, the actually results of a real strategy like this are way better than the bogus numbers I've used above) example clearly illustrates the wisdom of a few of Flint's ideas: (1) nobody can figure out what the heck tax policy effects might be, especially not a layman*, (2) Rich folks like Paris are super productive and all rich people like them have more money 'cause they've produced more value, and (3) There is no moral element *at all* to any economic policy.

*The layman might be tempted to think that any policy formulated by wealthy elites would result in the wealthy elite become richer in relative terms than everyone else, but that would just be a dumb guess with no basis in reality.

  
C.J.O'Brien



Posts: 395
Joined: Aug. 2005

(Permalink) Posted: Jan. 04 2006,13:53   

A random thought Re: "economics doesn't care" vs. "economics depends on an economy (with its moral baggage)"
It has often been pointed out that, even if it were true, as many fundies like to claim, that "evolution is bad (for morals or society) because it teaches us we're no better than (amoral) animals" this implication has no bearing on the truth or usefulness of the theory AS a scientific theory.

So, does a similar situation hold in economic theory? i.e. should economists consider the potential effects on society of economic policies inspired by their work? Or are they engaged in a descriptive enterprise that can be isolated from actual economic behavior?

--------------
The is the beauty of being me- anything that any man does I can understand.
--Joe G

  
Dean Morrison



Posts: 216
Joined: Dec. 2005

(Permalink) Posted: Jan. 04 2006,13:54   

Funny co-incidence - I watched 'One day in Paris' today and she certainly passed on some added value to me - although it didn't cost me a penny as I ripped off the bittorrent.

Money isn't everything as they say.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 04 2006,13:56   

BWE:

I'm not sure we can get very far along these lines. I view an economy in the traditional microeconomic view, as everyone trying to make rational decisions as to how best to allocate their resources, so as to maximize their self-interest. I see this process as being entirely amoral. I have a dollar. I can spend it on food, or I can spend it on gasoline (let's say). I can't spend it on both. Well, what's more important to me, getting somewhere or eating? I make my allocation decision. At least as I see it, this is a moral decision only in the loosest possible sense.

I won't deny that people attempt to apply economic pressures for moral reasons, but this doesn't make economics moral anymore than using a baseball bat to mug someone makes the bat a mugger. An economy is an emergent property of many individual allocation decisions. That property is irrespective of the rationale the individual actors have for their decisions, except insofar as they are presumed to be acting selfishly.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 04 2006,14:20   

haceaton:

I'm not sure what you are trying to say. My best guess is that you are attempting to score points with sarcasm, and if that's so, you win all the points. If you have any particular problem, I hope you can articulate it clearly. However, I can say that the ideas you ascribe to me are clearly in error: I said no such thing. I can try to clear that up a little:

Quote
nobody can figure out what the heck tax policy effects might be

No, I didn't say this. I was talking about the effects of LOTS of tax policies, all at once, on the national economy. I certainly agree that if I had been talking about the effects on any particular individual of a change in income tax rates, the effect on that individual would be pretty obvious. Now, would changing the tax rate on that individual have any measurable effect on national economic productivity? How would you isolate it?

Quote
Rich folks like Paris are super productive and all rich people like them have more money 'cause they've produced more value

No, not quite. Fortunately, you quoted the general principle - that money tends in general to go to to those who earn it. But of course, there will be plenty of exceptions. In the case of Paris Hilton, part of her fortune was inherited, but part has resulted from her own activities - whether or not YOU consider her TV shows valuable. And then there are lottery winners, etc. But what you're doing is like pointing to helium balloons as "proof" that the observation that dropped items fall is foolish. Good work, man!

Incidentally, let's say we decided to eliminate inheritance, and have the government confiscate everything everyone died still owning. Would THAT have any macroeconomic impact? Or would you need to know what the government decided to do with the money?

Quote
There is no moral element *at all* to any economic policy.

You're on a roll! I was careful not to speak about economic policy, only about economic activity. In general, ALL economic policies have moral overtones if not direct moral intentions. They are adopted to Make Things Better. Economic policies, in general, are attempts to manipulate the forces of supply and demand (and thus distort market mechanisms) to achieve some moral purpose.

  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 04 2006,15:10   

Quote
I won't deny that people attempt to apply economic pressures for moral reasons, but this doesn't make economics moral anymore than using a baseball bat to mug someone makes the bat a mugger


in fact, we seem to readily forget how evolutionary theory has been abused by those who want to find their own justifications for racism, etc.

I certainly wouldn't fault evolutionary theory for the abuse of bigots, nor would i fault economic theories for the abuses of politicos and corporate wankers either.

Which is exactly why i wanted to track down the origins of the current competing economic theories and seperate them from the various abuses that they have been subjected to.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 04 2006,16:10   

Sir Toejam:

There aren't so much economic theories, as economic schools of thought. You might really want to visit this Wikipedia page. The battle between the Austrian school (Mises, etc.) and the Keynesians is surprisingly bitter.

Wikipedia also introduces you to the monetarists, the classicists, the supply siders, and other views. You might get some insight into this battle at this site (with which I must say I agree entirely, and the Austrians detest it).

  
Alan Fox



Posts: 1391
Joined: Aug. 2005

(Permalink) Posted: Jan. 05 2006,00:39   

How is economics any better at forecasting than fortune telling?

  
haceaton



Posts: 14
Joined: Dec. 2005

(Permalink) Posted: Jan. 05 2006,05:06   

Flint:
Quote

nobody can figure out what the heck tax policy effects might be

Quote

No, I didn't say this. I was talking about the effects of LOTS of tax policies, all at once, on the national economy.


Can you explain how tax policies are applied singly, not all at once so that you can understand their effects? I didn't think so.

In terms of the national economy, I agree nobody can understand all of the effects on the national economy, but you can understand a few important ones. For instances virtually every policy that Bush has advocated can, will and has had the effect of making the rich richer at a faster rate than everyone else. That's not their only effect but it is one significant effect. I think maybe this is an effect that is meaningless to you. It seems like the only effects you're concerned with are the GDP and its first derivative. However, as a moral issue, some people care how the money is distributed. The "biggest economic boom" in history may have occured during the late 90's by your view, but median household income (in the U.S.) went up a lot faster during the 50's. Hint: a lot more of the 90's boom went to the super-rich which is why the median didn't rise that much.

This whole side-thread started because you expressed derision with someone who held an opinion on some economic policy while admitting no formal training in economics. The odd thing is that you've since been arguing that those with expertice really don't know very well what effects different policies will have either. I disagree, I think many policy formulators have a pretty good idea what effects their policies while have (probably not the global consequences but at least the most basic consequence that they care about). They know it will make them and their supporters even richer in relative terms which is what they care about.

Quote
But what you're doing is like pointing to helium balloons as "proof" that the observation that dropped items fall is foolish.


Paris was a bad example because, as I admitted, she does produce "value". I tired to abstract it by saying "what if" she didn't does those value added activities. The trouble is that the tens of thousands of rich oafs that actually don't do anything except get richer are not well know by the public, so they make rather abstract examples. But I have to disagree with your analogy to my point. I'd guess that about half of the rich people are rich due to their "value" contributions to the economy and the other half were born in to it or just had it fall in their lap. In terms of total dollars this is a big deal. To extend your analogy it would be as if 20% of the mass of the earth were helium balloons floating up which you'd like to describe as inconsequential because they were only a few thousand balloons with all that mass.

Quote
I was careful not to speak about economic policy, only about economic activity.


Sorry, my bad. I'm glad you've cleared up that you agree that economic policy decisions are often moral decisions. Kinda suggests that maybe laymen with no formal economic training might not be so absurd to voice opinions on these moral matters.

  
BWE



Posts: 1898
Joined: Jan. 2006

(Permalink) Posted: Jan. 05 2006,05:44   

Quote
But I would posit that economic desisions that we need to make as a people are largely moral decisions. i.e. How far do you let members of your community fall? How do we justify witholding preventative health care based on income? Are we equating income with quality of being? etc.


Flint,

I guess my point is that economics as an academic tool of analysis is certainly not moral and is also far more complicated than a few weeks worth of study could do any justice for. But the original point was that evolution is too complicated for the layman (which I happen to sort of disagree with but that is a very long thought so I will save it for another time) and that economics is too. My point was and is that they are fundementally different things. Economic activity and policy decisions are inherently decisions that a layman can and should be a part of precicely because they are moral decisions. A community has to decide if they want to allow a walmart for example. That is a moral decision to a large extent. A small community is not allowed to decide that all business with x number of employees pay for health insurance  or a living wage or etc. Those sorts of powers would most certainly be used to limit competition and encourage cronyism. (Hobbs) But the community includes all its members and the community at large needs to decide whether to employ economic policies that marginalize those on the left side of the bell curve even more. Either that is OK or it is not. THat is a value judgement.

Tax policies make that judgement whether they can be related to their consequences or not. My stock and investment choices have been very succsessful for me. But I do not own stock in walmart or haliburton. Both of those stocks have done quite well over the past several years but my moral decision, however hypocritical it may be, was to not own those stocks. I always vote yes on school and library bonds for the same reason. In my moral world schools would have lots of money. Enough to send the x grade class on a trip to DC every year. Enough to have full time art and music instructors. Enough to buy curriculum from the best places. Enough to bring inspirational people in to talk to the school at assemblies. Enough to have plenty of sports equipment. I think that's enough to illustrate my point.

Evolution is a descriptive word that describes a process that is observable and verifiable. Unfortunately for the fundies, it has been verified. Economics as a discipline is useful to describe behavior but the behavior is largly moral.

--------------
Who said that ev'ry wish would be heard and answered
When wished on the morning star
Somebody thought of that, and someone believed it
Look what it's done so far

The Daily Wingnut

   
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 05 2006,05:50   

haceaton:

Quote

Can you explain how tax policies are applied singly, not all at once so that you can understand their effects? I didn't think so.

Only insofar as you did - that the effects on a single individual can be sorted out pretty easily.

Quote
In terms of the national economy, I agree nobody can understand all of the effects on the national economy, but you can understand a few important ones. For instances virtually every policy that Bush has advocated can, will and has had the effect of making the rich richer at a faster rate than everyone else. That's not their only effect but it is one significant effect.

No question about it, but again that's NOT a national effect in terms of the national economy. That's an effect on basically the richest 1/2 of 1% of the population. For them, it's significant.

Quote
I think maybe this is an effect that is meaningless to you. It seems like the only effects you're concerned with are the GDP and its first derivative. However, as a moral issue, some people care how the money is distributed.

Yes, but this is a somewhat different orientation. You're talking here about the politics of envy. Personally, if I'm making $X a year and I'm comfortable, I don't become any less comfortable to discover that someone else is making $100X a year. Nor do I feel poorer to learn that tax cuts have raised them to $120X a year. But I understand that some people pay attention to these ratios, and DO feel poorer.

Quote
The "biggest economic boom" in history may have occured during the late 90's by your view, but median household income (in the U.S.) went up a lot faster during the 50's. Hint: a lot more of the 90's boom went to the super-rich which is why the median didn't rise that much.

I agree there are many ways to measure a boom. I was using the DOW as a yardstick, but of course this is limited in lots of ways. Perhaps median household income is better. Perhaps unemployment rate is better. I'm aware that much of that boom didn't really translate into economic activity.

Quote
This whole side-thread started because you expressed derision with someone who held an opinion on some economic policy while admitting no formal training in economics.

This is only partially correct. I was expressing derision that someone who admitted no formal training or knowledge, was expressing an opinion I felt ANY formal training or knowledge would refute. To compare with evolution, there's a difference in my mind between somone saying "I have never studied any biology but it looks like chimps resemble gorillas" and someone saying "I have never studied any biology but I know that evolution doesn't happen." Supply and demand don't go away because people dislike the moral implications.

Quote
The odd thing is that you've since been arguing that those with expertice really don't know very well what effects different policies will have either. I disagree, I think many policy formulators have a pretty good idea what effects their policies while have (probably not the global consequences but at least the most basic consequence that they care about). They know it will make them and their supporters even richer in relative terms which is what they care about.

I'm not sure if I follow this correctly. Hopefully, we've agreed that there is a difference between predicting what effect a policy will have on a specific cohort of economic actors, and predicting what effect the policy will have on the economy at large. Policy formulators tend to focus on constituencies; their purposes are political. Even so, actual and intended effects don't always coincide; sometimes they are wildly different. One school of though argues quite persuasively that the Great Depression was made MUCH deeper and longer because in response to the first symptoms, Congress took the worst possible fiscal tack.

Quote
I'd guess that about half of the rich people are rich due to their "value" contributions to the economy and the other half were born in to it or just had it fall in their lap.

Yes, I think that sounds about right. In economic terms, I think we could say that *someone* earned the money by making a genuine contribution valued highly by the market. Fortunes can certainly take generations of heirs not doing much productively before dissipating.

Quote
Kinda suggests that maybe laymen with no formal economic training might not be so absurd to voice opinions on these moral matters.

Not absurd, but not necessarily correct either. Most of these moral opinions are statements of preference, and everyone has preferences. But preferences are not economics. Here's an example: we have a factory chuffing pollution into the air. We want it stopped. Now, should we levy a fine for polluting of $X, or should we sell the polluter a pollution license for $X? Most people find the former morally satisfying and the latter morally appalling, yet economically (from the perspective of the polluter), there's no difference. $X has been added to the cost of doing business.

I'm always amused at the anger toward WalMart. They are moral victims of their own success - they have provided what their customers want so excessively successfully that they are now being vilified for doing so. People aren't willing to give up their low prices, but they demand better wages, more benefits, more competition, better community dynamics etc. IN ADDITION.

  
BWE



Posts: 1898
Joined: Jan. 2006

(Permalink) Posted: Jan. 05 2006,06:06   

Quote
I'm always amused at the anger toward WalMart. They are moral victims of their own success - they have provided what their customers want so excessively successfully that they are now being vilified for doing so. People aren't willing to give up their low prices, but they demand better wages, more benefits, more competition, better community dynamics etc. IN ADDITION.


No. They used a business model which takes advantage of communities offering food stamps and health care. They made what I think of as an immoral business model which cuts costs by letting welfare pay their workers. Sure the people who don't work there like the low prices at first but it is difficult to see the real cost of those low prices. I will argue all day over this one: Walmarts business model is equivalent to me finding a way to tack my automatic mortgage deduction onto my neigbor's and make it look like property tax. I get to live in a nice house and my neigbor is trying to figure out how to make enough money to pay for his kids textbooks. He is bitching about all the money he pays for his property tax and starts voting for people who promise to cut taxes.

--------------
Who said that ev'ry wish would be heard and answered
When wished on the morning star
Somebody thought of that, and someone believed it
Look what it's done so far

The Daily Wingnut

   
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 05 2006,06:07   

BWE:

Quote
Economic activity and policy decisions are inherently decisions that a layman can and should be a part of precicely because they are moral decisions.

I still don't understand. I gave an example of a purchasing decision. I didn't see any morality involved.

Quote
A community has to decide if they want to allow a walmart for example. That is a moral decision to a large extent.

Again, I don't understand. I think the community should understand by now that a WalMart is going to have pervasive economic consequences. They even know what those consequences are going to be. So they can make an informed decision as to whether the benefits (which are very real) outweigh or are outweighed by the consequences (which are also very real).

Even the decision whether to spend your money on an apple or a quart of motor oil is a value judgment.

Quote
Both of those stocks have done quite well over the past several years but my moral decision, however hypocritical it may be, was to not own those stocks.

As I wrote earlier, it's entirely possible to attempt to impose economic pressures for moral reasons.

Quote
In my moral world schools would have lots of money.

Here's where my idea of economics comes in. Yes, I agree. Schools should have lots of money. Most government programs are worthwhile and should have lots of money. Charities are valuable and should have lots of money. Taxes should be low because *I* should have lots of money. But hard as I search through your post, I simply can't find what you have decided you will *do without* so that schools can have more money. Maybe you're saying you're willing to pay (let's say) double your current taxes? OK, that's a community decision.

Quote
Economics as a discipline is useful to describe behavior but the behavior is largly moral.

Maybe this terminology is too vague? Economics describes tradeoffs. Individual economic actors (you and me, for example) allocate our resources according to our best current understanding of our self-interest, however much enlightenment we choose to extend to that understanding. Now, we have everyone making their individual decisions, and what emerges is a large-scale pattern of resource allocation. Resources here are more than money, they're time and skill. Economics tries to study these patterns, to learn how they arise and how they can be modified.

I think you're right that economics is a tool of analysis. The actors are making moral decisions perhaps, but the economy is not moral. The ballplayers care dearly who wins the game, but the game itself (the set of rules they play by) does not care.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 05 2006,06:13   

BWE:

Quote
No. They used a business model which takes advantage of communities offering food stamps and health care. They made what I think of as an immoral business model which cuts costs by letting welfare pay their workers.


But WalMart has broken no rules; as I said, they have set low prices as their goal. They are dedicated to doing everything legally possible to keep prices minimized. If the community rules allow them to pass costs outside their system, then of course they will do so. To go back to my ballplayer analogy, WalMart tries everything possible within the rules to win their game.

Now, you seem to be saying that the rules should be changed, because they permit organizations like WalMart to cut their costs by shifting costs where you'd prefer they not be permitted to do so. But following the rules is not immoral, and WalMart follows the rules (and are punished when they do not). So what you are saying is that the RULES are immoral. And the community can certainly change the rules if they desire to do so.

  
Dean Morrison



Posts: 216
Joined: Dec. 2005

(Permalink) Posted: Jan. 05 2006,06:43   

.. seems like I was right to suggest this side thread - and that you wanted to push your particular 'school of economic thought Flint'.

Quote
Yes, I think that sounds about right. In economic terms, I think we could say that *someone* earned the money by making a genuine contribution valued highly by the market. Fortunes can certainly take generations of heirs not doing much productively before dissipating.


So what was it all these Russian billionaires did over the last few years to make them so rich Flint? Hasn't your country gone through a similar history of vast fortunes gained by dubious means? .. and once these fortunes are in place - aren't they self-perpetuating regardless of any added value that the current owners might give to them?

I think game theory is far superior as a model of how society works with money rather than economics. Think motivation?
As a rich man with rich friends do you think that George W Bush was being entirely altruistic by suggesting tax cuts for the rich? some conflict of interest surely? no possiblility that he was using his power to re-inforce a monopoply position? And even in a democracy votes can be manipulated if you throw enough money at the 'problem'.

I found a passage by Matt Ridley (next best British populariser of Evolutionary Biology) in the 'Origins of Virtue' which suggests that even slime moulds employ 'taxation' and 'public goods'. I'll post it a bit later when I get a chance..
:D

  
BWE



Posts: 1898
Joined: Jan. 2006

(Permalink) Posted: Jan. 05 2006,06:49   

Quote
Now, you seem to be saying that the rules should be changed, because they permit organizations like WalMart to cut their costs by shifting costs where you'd prefer they not be permitted to do so. But following the rules is not immoral, and WalMart follows the rules (and are punished when they do not). So what you are saying is that the RULES are immoral. And the community can certainly change the rules if they desire to do so.


Ok. We are saying the same thing I think. Economic policy is making rules and that is the morality I was talking about. Walmart broke no rules but the rules didn't anticipate walmart either. Yes, my morality would say that we should change the rules. I wouldn't need to pay as much more tax if I wasn't already paying for food, rent and health care for walmart employees.

Earlier you said something about politics of envy. Ok, If I am getting by then why should I care if you are making millions.
Answer: I don't. I do care if you are releasing pcb's into the waterways near where I live, making a million and leaving the pcb's. I do care if you are shifting the costs of your business onto me through my tax burden. I don't shop at walmart and it irritates me that I have to spend money there through taxes. I do care that our tax burden is becoming less fair with the tax policies that Bush has pushed. I do care that the lottery and cigarette taxes are taxes on the poor. That is my personal morality. As a citizen, I have an obligation to at least learn enough about what I am voting for to vote my conscience. Thus, the layman doesn't need to understand game theory to make informed economic decisions because economic decisions are largely moral. In zen, half of your training is figuring out that the rules aren't the game.

--------------
Who said that ev'ry wish would be heard and answered
When wished on the morning star
Somebody thought of that, and someone believed it
Look what it's done so far

The Daily Wingnut

   
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 05 2006,07:53   

Dean Morrison:

I think we are not communicating here. Let's start at a very general level. People, by application of time and skill, produce goods and services others want. People exchange these things. That's an economy. Economic activity results in the distribution of goods and services.

There is no explicit or implicit requirement that those who produce the most market value, be the same people as those who end up with the most money. Indeed, entire political economies have been set up explicity to *prevent* this sort of thing, for one reason or another. One thing economics CAN tell us is how per capita production relates to per capita wealth over the long term. The general trend has been, the closer these two correlate, the larger the per capita wealth across the economy as a whole.

Now, is increasing per capita wealth ("growing the economy") a good thing? Economics can't answer that, but most individuals find it desirable. Economics doesn't even pass moral judgment over theft. That's simply another economic transaction, with economic implications.

I won't say that most rich people "deserve" to be rich, but I WILL say that we can tell whether someone is doing something someone else is willing to pay for. I should also point out that investment is a value in the sense that it enables others to create value. Investment is rewarded with interest and dividends and (sometimes) with capital appreciation.

I'm not saying anything about altruism. I personally think Bush is rewarding his supporters, as any politician seeks to do.

Economics can describe what sorts of redistributive properties monopolies lead to. In general, monopolies have two effects on wealth: they polarize it, and they reduce it. Economics doesn't pass judgment on whether this is a "bad thing." Economics only describes what happens and how it happens.

Back to the baseball game. You seem entirely hung up on who wins, and you pay no attention to how the game works. You're like the creationists reacting to the Dover decision - who cares what the law is or how the court system works or what our procedures and principles are? THE WRONG SIDE WON. What else matters?

  
Dean Morrison



Posts: 216
Joined: Dec. 2005

(Permalink) Posted: Jan. 05 2006,08:12   

Now which economic model are these little critters following?:

(From 'The Origins of Virtue'  - Matt Ridley 1996) chap1 Pg 27

" In the slime mould, the confederation of amoebae that comes together to build a stalk from which to launch spores, there is a classic conflict of interest. Up to a third of the ameobae will have to make the stalk, as opposed to spores  and will die.
An amoeba that avoids being in the stalk therefore thrives at the expense of a more public spirited colleague, and leaves more of its selfish genes behind. How does the confederation persuade the amoebae to do their stalk duty and die? Often the amoebae that come together to make a stalk are from different clones, so nepotism is  not the only answer. Selfish Clones might still prevail.
The question turns out to be a familiar one for economists. The stalk is a public good, provided for out of taxation - like a road. The spores are private profits that can be made from using the road. The clones are like different firms who are facing the decision of facing the decision of how much tax to pay for the road. The ''law of equalisation of net incomes' says that, knowing how many clones are contributing to the stalk, each clone should reach the same conclusion about how much to allocate to the spores (the net income). The rest should be paid in stalk (tax). It is a game in which cheating is supressed, though precisely how is not yet clear.

{He then goes on...}

In human beings, too, there is always conflict between the selfish individual and the greater good. Indeed so pervasive is this tendancy that a whole theory of political science has come to be based on it.........

Ridley seems to get his info on slime moulds from this paper:

Matsuda, H. and Harada, Y. 1990. Evolutionarily stable stalk to spore ratio in cellular slime moulds and the law of equalisation of net incomes.
Journal of Theoretical Biology 147:329-44

Perhaps economists should study slime moulds - no danger of influencing their subjects - or 'insider trading'????
:D

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 05 2006,08:13   

BWE:

I admit I simply don't know what you're trying to say most of the time.

Quote
I do care if you are releasing pcb's into the waterways near where I live, making a million and leaving the pcb's.

I don't blame you. So what? If we as a community want to change this, economics tells us we'd be well advised to change the financial incentives. This happens because when the incentive changes, the perceived self-interest of the polluter will change. Economics holds that the polluter, as an economic actor, will act in his perceived self-interest.

Quote
I do care if you are shifting the costs of your business onto me through my tax burden. I don't shop at walmart and it irritates me that I have to spend money there through taxes.

I'm not sure I understand this. Are you referring to the tax breaks communities have sometimes extended to WalMart to attract a store to their district? Increasingly, results are coming in showing that communities tend to suffer a net economic loss by offering large tax breaks to major employers. So this practice may become less common in the future. Economics, by the way, is a tool that allows people to generate and analyze these results.

Quote
I do care that our tax burden is becoming less fair with the tax policies that Bush has pushed.

What do you mean by "fair"? I've seen claims that "fair" means everyone pays the same amount, claims that "fair" means everyone pays the same *rate*, claims that "fair" means that the rich pay all the taxes and the poor get subsidies, etc. Which is your version of fair?

Quote
I do care that the lottery and cigarette taxes are taxes on the poor.

I think you've made a poor selection here - there is no requirement that anyone purchase either one. If I place a price on my product that nobody is obligated to pay, and some people choose to pay it, then for those people BY DEFINITION I have placed a fair price on my product.

Now, you might be talking about taxes and fees that are effectively regressive, in the sense that poorer people spend a higher percentage of their income on such taxes and fees than richer people spend. So I'm going to guess that when you spoke earlier about "fair", you meant either neutral or progressive effective tax rates. Now, so what? Yes, changing the shape of the tax structure has economic consequences. We can figure them out, so we can say who wins and who loses, and within some range how MUCH they win or lose, as a result. Whether any of them *ought* to win or lose, economics can't tell us.

Quote
That is my personal morality. As a citizen, I have an obligation to at least learn enough about what I am voting for to vote my conscience.

Yes, I agree. To the degree that you can predict the consequences of your actions, you can more accurately direct your efforts so as to achieve your perceived self-interest.

Quote
Thus, the layman doesn't need to understand game theory to make informed economic decisions because economic decisions are largely moral.

Huh? You just built a case for the exact opposite - that the layman DOES need to understand these things if his decisions are to result in what he wants. You just said the layman is "obligated" (I don't like the term. He isn't obligated to inform and educate himself) to learn enough to know that if he does X, the likely result is Y. And that's what economic analysis can tell him. And I also agree with an implication you carefully don't make explicit: Most people DO NOT know the consequences of their actions, they only have a seat-of-the-pants, often dead wrong, "feel" for what's "right". Then, when they don't get what they expect, they blame others for being "immoral".

Economics is a tool, like math. By themselves, these tools are not moral.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 05 2006,08:22   

Dean Morrison:

Quote
Perhaps economists should study slime moulds

I can only laugh. Such tradeoffs are pretty much the ENTIRE content of economics 101. Typically, in that class you will graph cost against benefit. At one extreme (all spore, no stalk) the benefits are 0. At the opposite extreme (all stalk, no spore) the benefits are also zero. The graph between them is a parabola. The "ideal" tradeoff between stalk and spore is where reproduction is maximized. This occurs (it's easy to see on the graph) where the slope is zero - the very top of the parabola. Piece of cake, just take the first derivative of the equation of the curve, and that's where your maximum lies.

Of course, the amoebae didn't apply differential calculus to find this mix. Most likely, they used trial and error. Those who most nearly approximated the maximum did the best job of reproducing.

  
Dean Morrison



Posts: 216
Joined: Dec. 2005

(Permalink) Posted: Jan. 05 2006,08:38   

Am I wrong in thinking that you more or less hold to a 'laissez faire' school of economic thought Flint?

You seem to be making the argument that this school is supported by mathmatical 'proofs' and is not therefore open to question.
I'd say there are economic 'truths' involved, and study of economic dynamics should inform our fiscal policies. However it seems to me that your view requires some underlying assumptions that are contentious. The existance, efficiancy and even desireablity of a 'free markets' being just some of them for example.
Your assertions about Wal-Mart for example - depend on them functioning in a free market. If they are extremely dominant in one area then they are likely to be able to develop monopoly powers - undesireable from any point of view.
The only corrective force available to the population is democracy. However in the USA - with no limits on campaign financing then rich corporations have the means to manipulate the popular vote to see that this doesn't happen.
Democracy, after briefly flourishing in Russia, has now succumbed to the same process. The pressure from the West to adopt the 'free market' and privatisation has effectively delivered the wealth of the country into the hands of a few crooked individuals who now control the state.
Economics, in the form of the study of systems - is of course fairly neutral (althought we all have 'Point of View' of course) - economic 'schools of thought' that are pushed politically are not.
You're entitled to your views, and you will find that I share many of them.
However I don't think that either of us should pretend that our 'economic views' are either 'entirely neutral' - or free from value judgements.

  
Dean Morrison



Posts: 216
Joined: Dec. 2005

(Permalink) Posted: Jan. 05 2006,08:54   

Quote
Of course, the amoebae didn't apply differential calculus to find this mix. Most likely, they used trial and error. Those who most nearly approximated the maximum did the best job of reproducing.


A bit more complex, weird and wonderful than that I'm afraid. Not just of tending toward the optimal solution on a graph - that would be an everyday example of evolution.

Slime moulds are single-celled organisms that live in colonies. The colonies that were studied were not mono-clonal If a single clone out-competed it's peers (which is what you'd expect) then all slime mould colonies should be mono-clonal. Each clone 'wants' to be making the spores not the stalk. In the end they all end up contributing the same proportion of 'tax' for the same 'benefit' - presumably in relation to their prevelance in the colony ('capital?) The very fact that we find multi-clonal colonies means there must be some undetected (at the time that that was written) form of 'policing' or at least some reason to believe that the other clones won't 'cheat'.
The passage suggests the the slime moulds can even detect how many clones there are in the colony (in order to work out it's allocation of resources).
Remarkable for a single-celled organism don't you think?
.. but then .. slime moulds are just weird.... :0

  
BWE



Posts: 1898
Joined: Jan. 2006

(Permalink) Posted: Jan. 05 2006,09:08   

Right. Sorry.

I get that I don't always make sense. I'll try this again.

My point is that self-interest is a largely moral issue. And that you don't need a thorough understanding of economics to have a valid opinion about economics. Individual policy and economic decisions do have a moral element. I am not talking about economics as a field of study. I am talking about economic policy and activity as a series of decisions. Economics as a field of study is simply descriptive and to some extent prescriptive in a very amoral sense. The actual decisions we make are not the rules and the rules are not the decisions. We fall because of gravity but we choose whether to jump off a cliff.

Either we allow pcb emmitters to dump thim into the waterways or we don't or we find some kind of a middle ground. I don't need to know much about rational self-interest to know that my personal morality dictates that I do not lend my vote to allow pollution to continue.

Walmart is shifting their costs to me through taxes by hiring people for less than a living wage and setting up systems to help those employees take advantage of  food stamps, rent assistance and publicly funded health care. Those are things that my taxes pay for. My sense of rational self-interest says that I should lend my ballot to the policies which force walmart to assume those costs. But I don't need to know about rational self-interest to know that I feel that way.

Being as economic choices are largely moral, I get to define whether I think Bush's tax policies are fair and I don't think they are so regardless of whether my fair and your fair are similar, my morality dictates my position. I just paid a sonofabitch in capital gains taxes when I sold a building we owned. In the end it amounted to a little over 7%. If that was my income tax that wouldn't seem so bad but writing one check made it hurt. However, my morality justifies my writing the check because the society around me alowed me to make the transaction. So for me it's a good tradeoff. But once again, it's my morality that dictates my position.

I chose cigarette and lottery very carefully because my point is that my individual sense of morality dictates that taking advantage of peoples' ignorance is morally wrong. Me personally. In order to follow my own personal morality I should vote or involve myself in such a way as to make these things less rather than more.

But I don't think you need to know much economics to make these kinds of decisions. I think unintended consequenses are not very common in the kinds of policy decisions I have used as examples. Cutting taxes on the super wealthy takes that tax money out of the public coffers. Period. If you start reducing spending eventually you hit schools and libraries. Maybe you get a boom in services catering to the super rich but I haven't seen any data showing an increase in infrastructure investment.

--------------
Who said that ev'ry wish would be heard and answered
When wished on the morning star
Somebody thought of that, and someone believed it
Look what it's done so far

The Daily Wingnut

   
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 05 2006,09:16   

Dean Morrison:

Quote
Am I wrong in thinking that you more or less hold to a 'laissez faire' school of economic thought Flint?

I don't know why this even matters. Laissez faire economics has knowable consequences. Regulation has knowable consequences. "Pure" socialism has knowable consequences, both (in general terms) for the economy as a whole, and for the individual actors within it.

Now, do I *prefer* a system of economic management that, like a rising tide, expands and lifts all boats? Yes, personally, I do prefer that, but within limits and with certain constraints.

Quote
You seem to be making the argument that this school is supported by mathmatical 'proofs' and is not therefore open to question.

I don't see where this statement might be coming from. Economics as a tool can be used to analyze the economic consequences of various management goals and techniques. But I feel like I'm trying to explain how addition works, and you're trying to decide which numbers I must like best.

Quote
I'd say there are economic 'truths' involved, and study of economic dynamics should inform our fiscal policies.

"Inform" is perhaps a slippery term here. Such a study may be helpful in telling us what results different policy alternatives are more likely to produce. They are useless for telling us which results are "better".

Quote
However it seems to me that your view requires some underlying assumptions that are contentious. The existance, efficiancy and even desireablity of a 'free markets' being just some of them for example.

Some markets exist that are freer than others that exist. Is this an "underlying assumption"? I'd call that a straightforward observation. Is market freedom "desirable"? Economics can't tell us our desires. It might help us REACH our desires, but that's something entirely separate.

Quote
Your assertions about Wal-Mart for example - depend on them functioning in a free market. If they are extremely dominant in one area then they are likely to be able to develop monopoly powers - undesireable from any point of view.

Again, you are complete blinkered by moralistical concerns. WalMart is successfully reaching WalMart's own goals, within the constrants within which WalMart must operate. Are their goals "good" ones? WalMart thinks so; that's why they're doing it. Indeed, I would argue that monopoly is the inevitable (and rapid) result of a completely unregulated free market. Which is just wonderful for the monopolists, but pretty grim for everyone else.

However, I seriously doubt that WalMart can achieve a true monopoly. They don't even control the largest segment of the retail pie in US history - that crown still belongs to A&P (remember them? Whatever became of A&P?)

Quote
The only corrective force available to the population is democracy.

I don't understand the context you intend. "Corrective" meaning what - to change WalMart's practices to more closely conform to YOUR preferences? Yes, incentive systems can be modified that will likely accomplish this - *at someone else's expense*. As a general rule, every change that helps anyone, hurts someone else. You seem desperately eager to pin "bad guy" and "good guy" labels on economic actors. I'm more concerned with "doing X usually results in Y, and here's how."

Quote
However in the USA - with no limits on campaign financing then rich corporations have the means to manipulate the popular vote to see that this doesn't happen.

I don't see your point, but this claim is simply not correct. There is a tradeoff here as well - the corporations have lots of money, but votes win campaigns. Money can influence votes to some extent, but that influence is nowhere near as comprehensive as you prefer to think. Historically, the party less favorable toward corporations wins about half the time.

Quote
The pressure from the West to adopt the 'free market' and privatisation has effectively delivered the wealth of the country into the hands of a few crooked individuals who now control the state.

In my observation (personal opinion only here), any market requires some regulation. What causes markets to grow, and middle classes to emerge, and national wealth to accumulate, is *competition*, not necessarily "freedom." So my personaly opinion is that a nation is best off (in terms of both per capita wealth and equitable distribution of that wealth) if freedom is restricted so as to guarantee competition.

Back to economics as a tool, it says nothing about whether monopolies are good or bad. Economics makes no moral judgment. It's a way to analyze economic consequences of policies.

Quote
However I don't think that either of us should pretend that our 'economic views' are either 'entirely neutral' - or free from value judgements.
No, but perhaps not the kind of value judgment you are stuck in. I find the Keynesian approach more comprehensible than the Austrian approach, and I think the monetarists have things backwards.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 05 2006,09:47   

BWE:

Quote
I am not talking about economics as a field of study. I am talking about economic policy and activity as a series of decisions.

Then we have no disagreement. I'm talking explicitly about economics as a field of study. I've already agreed that people use their values to make ALL the judgments in their lives.

Quote
Either we allow pcb emmitters to dump thim into the waterways or we don't or we find some kind of a middle ground. I don't need to know much about rational self-interest to know that my personal morality dictates that I do not lend my vote to allow pollution to continue.

And exactly HERE is why ignorance of economics is hurting you. Presumably, these polluters are producing some product. They are selling it successfully, or they wouldn't be in business. Pollution reduces their costs. This reduction in costs means more money for something else. Let's say they use their savings to lower their prices. You purchase (in all ignorance) the least expensive, highest quality products you can. Theirs is one of them, BECAUSE they pollute. By purchasing their product, you are "lending your vote" in favor of their practices. Equally important, by NOT buying the more expensive product from the non-polluter, you are punishing him for absorbing the cost of being clean.

Quote
Walmart is shifting their costs to me through taxes by hiring people for less than a living wage and setting up systems to help those employees take advantage of  food stamps, rent assistance and publicly funded health care. Those are things that my taxes pay for. My sense of rational self-interest says that I should lend my ballot to the policies which force walmart to assume those costs. But I don't need to know about rational self-interest to know that I feel that way.

Economics can't tell you what to feel. But you might just for grins consider the tradeoffs from a different perspective. Let's look at the set of WalMart employees. They aren't being paid enough to live on by WalMart, and so you are effectively subsidizing WalMart by providing these people (through your taxes) with food stamps and the like. Yes? Now, lets shuffle the cost structure around a little bit. Let's reduce your taxes by the amount of the food stamps and other subsidies. You now have more money to spend. Let's raise WalMart's prices enough so that WalMart is now paying their employees enough so they don't NEED food stamps. Are you happy now? Yes, morally you are overjoyed.

And what has happened? Effectively, nothing at all. YOUR money is still being spent (but now through high prices rather than taxes) making WalMart's employees better off. You can spend it through taxes, or you can spend it through higher prices, or you can spend it through a higher risk of theft (burglary) by desperately poor people, etc. But now matter how you cut it, the same economic value as ever is coming out of your pocket. The ONLY thing you have gained is smug moral gratitude. You smote the wicked, you did!

Quote
Being as economic choices are largely moral, I get to define whether I think Bush's tax policies are fair and I don't think they are so regardless of whether my fair and your fair are similar

Of course, I didn't tell you MY definition of fair, I asked you to specify yours. I notice you haven't done so. You have CALLED your preferences "fair" but carefully not said what that means.

Quote
I chose cigarette and lottery very carefully because my point is that my individual sense of morality dictates that taking advantage of peoples' ignorance is morally wrong.

There isn't, to my knowledge, much if any correlation between smoking and "ignorance". I'm surrounded by brilliant engineers all day long. Most of them smoke. ALL of them know the consequences of smoking. So what are you talking about?

Quote
But I don't think you need to know much economics to make these kinds of decisions.
Yes, I agree. These are the kinds of statements that result from a fairly normal human need to assign values to everything. Neutrality is an acquired taste. The human brain is a dichotomizing machine - everything must be pigeonhold as good or bad, right or wrong, moral or immoral.

Quote
Cutting taxes on the super wealthy takes that tax money out of the public coffers. Period.

And if you put it in capital letters, do you think it would be even more true? In fact, it's only partially true. You need to ask, if this money were not taken from the super wealthy in income tax, where would it go? Into the stock market? But then it would suffer capital gains tax. Into consumption? But then it would suffer sales and excise taxes. Into building a factory? But then the employees would be paying the taxes. So the money WILL end up in the public coffers one way or another. Please follow this link. Your eyes will be opened.

Sure, since I'm not rich, I'd just LOVE to see the rich reduced to my meager level, while at the same time I'd be paying absolutely nothing in taxes. If such a policy had no economic consequences other than to shower me with money, I'd be overjoyed. Unfortunately such an economic policy will have countless drastic consequences, both direct and indirect, both immediate and downstream. Maybe if I pretended that doing so would be MORAL, those consequences would go away? Well, we can dream...

  
Dean Morrison



Posts: 216
Joined: Dec. 2005

(Permalink) Posted: Jan. 05 2006,10:08   

Flint:

You do hold  a 'laissez faire' position then, although you will allow for a certain amount of regulation - glad we cleared that up. (Perfectly respectable point of view of course - but not the only one) I was right to point out that you were introducing a 'particular economic point of view' into the Panda's thread.

The 'floating boats' analogy is of course a politically motivated one, just as much as 'trickle down'. What does the water represent in either system? or the size of the boats? or the size of the glasses? what is important the water level, or tide level? A nice image to sell to the masses, but not one that demonstrates an economic insight.

As I agreed Economics can be used as a tool of analysis. However promulagating an economic school of thought, as if it is a neccessary consequence of economic analysis; is overstretching. I said you seemed to be arguing your ideas with the certainty of mathematic proof - and you said you felt like you were trying to explain addition to me. Speaks for itself.

As for 'free markets' I noticed you ducked the potential challenge to 'efficiency'. If you accept that there  are situations where free markets are not 'efficient' -  then does impact on their desireabilty. We can make choices about how we let markets operate - we don't have to to let them operate freely from some 'higher principle'. A contentious area perhaps - but the mere existance of the contention means you shouldn't state your ideas with the confidence of a 'mathematical proof'

As for Wal-mart - I wasn't expressing moralistic concerns - other than saying the tendancy to monopoly is undesireable and to be resisted - something you agree with. As a UK citizen I don't remember the other company you were talking about (and we don't have Wal-mart - although we have it's subsidary - ASDA). I do understand that in the early part of the last century your country had to instigate a number of 'anti-trust' laws to try to control development of monopoly powers. These always seem to have been implemented after things got out of hand. I would hazard a guess that we are seeing the same process happen again with major retailers both in the US and the UK.

By corrective, I meant 'corrective' to challenging monopoly power - something you agreed yourself was undesireable.
If money doesn't influence votes that much - why do your guys spend increasing amounts at each election? ..and after all, just a few votes can swing things either way.

I'm not sure about your 'party that is less favourable to corporations' winning less than half the time? I would have thought that both your parties were favourable to corporations - just different ones. If you had had a social democratic party that was elected once then you might have a starting point - I suppose F.D.Roosevelt was the nearest you came?

And finally!!!  :D  :D  :D  :D  :D

<quote>In my observation (personal opinion only here), any market requires some regulation. What causes markets to grow, and middle classes to emerge, and national wealth to accumulate, is *competition*, not necessarily "freedom." So my personaly opinion is that a nation is best off (in terms of both per capita wealth and equitable distribution of that wealth) if freedom is restricted so as to guarantee competition.

Quote
Back to economics as a tool, it says nothing about whether monopolies are good or bad. Economics makes no moral judgment. It's a way to analyze economic consequences of policies.

[quote]
However I don't think that either of us should pretend that our 'economic views' are either 'entirely neutral' - or free from value judgements.

No, but perhaps not the kind of value judgment you are stuck in. I find the Keynesian approach more comprehensible than the Austrian approach, and I think the monetarists have things backwards.[/quote]

.. on which I am entirely in agreement with you :)  :)  :)  :)  :D  :D  :D  :D  :D

at which point I'll quit whilst we're both ahead, both our boats have been floated - and now I'll trickle down to the pub next door as it's getting late here in blighty.

Been nice sparring with you - look forward to seeing you again the next time a troll pops up :D

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 05 2006,10:44   

Dean,

Quote
I was right to point out that you were introducing a 'particular economic point of view' into the Panda's thread.

I wasn't trying to do so in the sense of preferring monetarism or supply side economics or the like. But I suppose you're right that I place a moral value on the greatest good for the greatest number, and that I assign the value "good" to personal freedom, comfort, and potential. And I haven't taken a moral position with respect to WalMart in any way.

Quote
What does the water represent in either system?

In the case of the rising tide, the water represents per capita wealth, as measured by the market. If we want to use money to measure it (why not?), then the water is money.

Quote
A nice image to sell to the masses, but not one that demonstrates an economic insight

Im sorry if YOU got no insight out of it. Most people do. We have seen that economic policies can lead to the expansion or contraction of the *entire economy*, irrespective of the distribution of wealth within that economy. I encourage you to keep looking.

Quote
I said you seemed to be arguing your ideas with the certainty of mathematic proof - and you said you felt like you were trying to explain addition to me. Speaks for itself.

Apparently it doesn't. You used math, so I accommodated you. In fact, if you go over what I've written, you'll see that if anything I said just the opposite of what you're now trying to put into my mouth. Economies are unweildy, messy, complex adaptive feedback systems highly resistant to any organized analytical method, where we can try to read statistical tealeaves and intuit patterns and trends. I admit I was quite astonished that you'd see this (which heceaton interpreted as "economics can't tell us anything useful at all") as mathematical certainty. My writing skills must be terrible, if one reader sees me arguing certainty whereas another sees me as arguing purest guesswork.

Quote
If you accept that there  are situations where free markets are not 'efficient' -  then does impact on their desireabilty.

I can't parse this. Efficiency can be defined fairly rigorously, while desireability is something totally unrelated. So I don't know what you're trying to say.

Quote
We can make choices about how we let markets operate - we don't have to to let them operate freely from some 'higher principle'.

I'm not aware that there even ARE any higher principles. Economics tells us (at least somewhat) how economies will react to different strategies of management.

Quote
A contentious area perhaps - but the mere existance of the contention means you shouldn't state your ideas with the confidence of a 'mathematical proof'

I remain baffled by this. Where have I done so? Imagine if I kept saying that you should write in English and not keep writing in French. You might wonder after a while...

Quote
As a UK citizen I don't remember the other company you were talking about

I wonder how many Americans remember the Great Atlantic And Pacific Tea Company. My grandmother would, if she were still alive...

Quote
I meant 'corrective' to challenging monopoly power - something you agreed yourself was undesireable.

Not sure I see this either. I wrote that monopolies have two economic consequences: they reduce the size of the entire pie, and they polarize the wealth within economies. From an economic standpoint, this is a neutral observation. No, it's not my personal preference. But I'm trying to describe how economics works, and you're trying to pin me down to my moral preferences. As I wrote earlier, I'm trying to explain addition, and you can't get past trying to decide which numbers I like best.

Quote
I'm not sure about your 'party that is less favourable...

I'm just not up for explaining American politics to you.

  
JimB



Posts: 16
Joined: Jan. 2006

(Permalink) Posted: Jan. 05 2006,11:49   

Flint,

Thank you very much for the economics lessons, keep up the good work.

Despite possing a technical graduate degree, I've never taken a course in economics!  Although I consider myself well educated and well read and feel I have a good grasp of the basics of economics, I am very much enjoying your posts.

Consider this a sign of support!

  
Dean Morrison



Posts: 216
Joined: Dec. 2005

(Permalink) Posted: Jan. 05 2006,11:57   

If you accept that there  are situations where free markets are not 'efficient' -  then does impact on their desireabilty.

Quote
I can't parse this. Efficiency can be defined fairly rigorously, while desireability is something totally unrelated. So I don't know what you're trying to say.


A contentious area perhaps - but the mere existance of the contention means you shouldn't state your ideas with the confidence of a 'mathematical proof'

Quote
I remain baffled by this. Where have I done so? Imagine if I kept saying that you should write in English and not keep writing in French. You might wonder after a while...


I thought you might understand the specific meaning of 'efficiency' as it is applied to 'free markets' - and the 'neo-Keynsian' critique that has been applied using this meaning for the last twenty years - but I guess you don't get exposed to those ideas over there?

Ah well - 'two nations seperated by a common language' - c'est la vie.. ;D

  
BWE



Posts: 1898
Joined: Jan. 2006

(Permalink) Posted: Jan. 05 2006,13:46   

Quote
And exactly HERE is why ignorance of economics is hurting you. Presumably, these polluters are producing some product. They are selling it successfully, or they wouldn't be in business. Pollution reduces their costs. This reduction in costs means more money for something else. Let's say they use their savings to lower their prices. You purchase (in all ignorance) the least expensive, highest quality products you can. Theirs is one of them, BECAUSE they pollute. By purchasing their product, you are "lending your vote" in favor of their practices. Equally important, by NOT buying the more expensive product from the non-polluter, you are punishing him for absorbing the cost of being clean.
Which is why my morality ought to dictate more stringent regulation. A double edged sword to be sure. I don't see how this is ignorance of economics.

Quote
Now, lets shuffle the cost structure around a little bit. Let's reduce your taxes by the amount of the food stamps and other subsidies. You now have more money to spend. Let's raise WalMart's prices enough so that WalMart is now paying their employees enough so they don't NEED food stamps. Are you happy now? Yes, morally you are overjoyed.

And what has happened? Effectively, nothing at all. YOUR money is still being spent (but now through high prices rather than taxes) making WalMart's employees better off. You can spend it through taxes, or you can spend it through higher prices, or you can spend it through a higher risk of theft (burglary) by desperately poor people, etc. But now matter how you cut it, the same economic value as ever is coming out of your pocket. The ONLY thing you have gained is smug moral gratitude. You smote the wicked, you did!

No, what has happenned is that the other companies who feel responsible for their employees can compete against walmart on a level playing field. The walmart employees have health benefits so they can be more productive members of my community all at no cost to me. I would pay for this but I get it free. What a bargain!

Quote
Of course, I didn't tell you MY definition of fair, I asked you to specify yours. I notice you haven't done so. You have CALLED your preferences "fair" but carefully not said what that means.


First, I didn't call them "fair" by any standard other than my personal preference and that is why I didn't elaborate: It doesn't matter what I think fair is, it only matters that I form my opinions and base my actions on what I think is "fair". Personally, what I think is "fair" is that all economic activity is taxed equally at enough to assure the solvency of exceptional public education and recreation (National parks and wildernesses). That could be interpreted as a sort of a steve forbes flat tax I guess but remember, I am a biologist, not an economist. I don't mind if people get fabulously rich but I do mind if people get fabulously poor. I could work out a complicated policy position that would temper these ideals with practical solutions but I don't need to in order to stil behave according to my morals.

I am not sure about smokers average income. I am under the impression that smoking is more prevalent in lower income groups but I do know that lottery purchasing is far more prevalent in low income families. I sat in on our city club meetings about expanding video poker in portland and we were shown some grisly statistics. I'm sure you can imagine.

Is there something wrong with the "fairly normal human need to assign values to everything"?


Quote
You need to ask, if this money were not taken from the super wealthy in income tax, where would it go? Into the stock market? But then it would suffer capital gains tax. Into consumption? But then it would suffer sales and excise taxes. Into building a factory? But then the employees would be paying the taxes. So the money WILL end up in the public coffers one way or another.

-website-
Let me say this about that: There may be economists who say that deficits don't matter but If I don't pay my visa bill off completely every month I get charged interest. That is less efficient. If I borrow money at one rate and invest it at a higher rate I am making money, the gov't doesn't do this.

And, my moral stance again, I don't feel much regret if people who use inherited money to make more money have to pay more tax. I do care if they are taxed to pay for the war. I do care if they are taxed to pay for some other things too. But my morality is what I use to determine what I think is a worthwhile thing to spend public money on and my morality dictates that we all pony up until "my" priorities are met. If I have to pay more taxes that's ok as long as every one else does too. Also, speaking of my morality and introducing rational self interest again, doesn't increased spending on education help the economy? What about increasing the funding for the SBA? That surely would  help the economy.

But in the end, being a biologist and not an economist, I am most concerned with sustainability rather than how big we can grow the economy. Maybe that's easy to say from my comfortable position but, there you have it, it's a good thing one side doesn't control all the government isn't it.

--------------
Who said that ev'ry wish would be heard and answered
When wished on the morning star
Somebody thought of that, and someone believed it
Look what it's done so far

The Daily Wingnut

   
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 05 2006,14:48   

BWE:

I'm having trouble following your train of thought.

Quote
No, what has happenned is that the other companies who feel responsible for their employees can compete against walmart on a level playing field.

Don't be silly. The playing field is a combination of the law of supply and demand, and the restrictions of community regulation. These are the same for everyone - these ARE the playing field. Everyone's playing field is the same in this case. Or are you arguing that your community has exempted WalMart from certain laws?

Quote
I would pay for this but I get it free. What a bargain!

And once again (this bears repeating, but never seems to get across), NOTHING is free. Everything that has a benefit, has a cost. Bargains, yes, these are possible. If you wish to do any "economics think" at all, the very first question you must ask is, if anyone enjoys any benefit from any action, WHO PAYS? Someone ALWAYS pays. There is no free lunch. Ever. Health benefits cost money. Someone pays that money. If WalMart pays that money, where does WalMart GET the money to pay with? They get it by raising their prices. You can think of this price rise as a tax on the community to pay for those health benefits. Nothing is free.

Quote
It doesn't matter what I think fair is, it only matters that I form my opinions and base my actions on what I think is "fair".

In any community, there are going to be as many different notions of "fair" as there are members of the community. Economics describes what all of these members do as a group. Even supposing that everyone bases their buying choices NOT on what they want or need, but on whom they think they are rewarding or punishing by making these purchases, people STILL act in their perceived self-interest. I might buy a widget because I think it's neat; you might buy a widget because you want to support the widget-maker's employers or punish WalMart (who doesn't sell widgets). So what? What matters is whether widgets show enough profit to stay in production.

Quote
There may be economists who say that deficits don't matter but If I don't pay my visa bill off completely every month I get charged interest. That is less efficient.

Again, you pretend your coin only has one side. In fact, paying interest is how your visa company stays in business. For them, your being a revolving customer is *highly* efficient. Remember, once again, for every benefit there is a cost, and for every cost there is a beneficiary.

Quote
speaking of my morality and introducing rational self interest again, doesn't increased spending on education help the economy?

Sigh. You're still trying to decide who are the good guys and who are the bad guys. Over the long term, it's highly likely that paying taxes to support a good public education system has economic impacts. Whether these impacts are "helpful" is a value judgment. Economics might help you predict or evaluate the magnitude of the impacts. Economics can't tell you if that impact is good or bad.

Everything is a tradeoff in economics. Everything. Money spent on X can't be spent on Y. policies that help one group (defined as having them end up with more money) hurt another group (those whose money was transferred). The only exception to this concerns growing the economy as a whole. You say you're interested in sustaining rather than growing the economy. In that case, it's simple. EVERY dollar anyone gets, represents a dollar loss for someone else. So the only way to get a NET gain is by arbitraging in a sense: I sell you something you want more than the money I ask, while I want the money more than the item. We both think we came out ahead. But economically, we only made at best an incremental change in the market value of the item. Everything balances out.

I admit I would not be comfortable walking around in a world where everone and every organization had to be categorized as good or evil. In my world, the WalMart people have done an excellent job of taking advantage of their environment. They are like the English Sparrows of the retail world: smart, savvy, aggressive, highly successful competitors. But this doesn't blind me to the fact that WalMart's gain is, and MUST be, someone else's loss. Every benefit has a cost, and someone must pay it. If nobody paid any costs, nobody could benefit.

I remember talking on the net with someone who had spent a year somewhere in Europe, and returned enthusiastic about the "free" medical care. I attempted to point out that nothing is free, but sometimes the costs are (deliberately) hidden and indirect. She flat refused to listen. She KNEW health care was free, dammit, she got sick and they treated her and didn't charge her anything. If that's not free, what is? I tried to point out that one of the costs of that "free" medical care was a 20% unemployment rate. Nope, no communication. What does unemployment have to do with not being charged for an aspirin?

So I never reached the point where I could show her that this "safety net" for the poor in fact only shoved costs around. To pay for free medical care, the government was taxing their people at rates upwards of 90%. To get employees, companies were forced to pay wages MUCH too high to permit them to employ the unskilled. So the unskilled STAYED unskilled, and unemployed. Which meant taxes had to stay high to pay for their "free" aspirin. And of course, all poor are not equal. Poor of the "wrong" ethnic background were the last to be hired and first to be let go.

Which leads to yet another cost of "free" medical care, if you've been following events in France lately. It seems that *somebody* noticed who was paying the brunt of these costs. The French were trying for a free lunch, by sweeping the cost onto their Muslim population. Eventually, it stopped working so well.

So once again, we all want lots of benefits. Not asking who pays for them, and how (in what form) that payment is made, doesn't make the costs go away.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 05 2006,15:47   

JimB:

You understand, I'm not an economist. Economics is something I'm interested in, and I took quite a few courses in it in graduate school, and participated in a few economic studies afterwards. But it's not my profession.

Still, if you've had the fortitude to trudge through this thread, I can only appreciate the effort you've made.

  
haceaton



Posts: 14
Joined: Dec. 2005

(Permalink) Posted: Jan. 05 2006,16:39   

Flint:
Quote
Personally, if I'm making $X a year and I'm comfortable, I don't become any less comfortable to discover that someone else is making $100X a year. Nor do I feel poorer to learn that tax cuts have raised them to $120X a year. But I understand that some people pay attention to these ratios, and DO feel poorer.


Usually the amount people pay attention to this is proportional to how rich they are. Thus the Walton family spent over $3 million lobbying for a permanent estate tax cut, because it is a big deal to them if they can be the group that has 20% more (even though they already have more than they could ever spend). Besides the pure perception issues, an accelerating highly skewed distribution of wealth will have long-term unhealthy consequences for the nation.

Quote
Here's an example: we have a factory chuffing pollution into the air. We want it stopped. Now, should we levy a fine for polluting of $X, or should we sell the polluter a pollution license for $X? Most people find the former morally satisfying and the latter morally appalling, yet economically (from the perspective of the polluter), there's no difference. $X has been added to the cost of doing business.


Funny that those business for whom it "makes no difference" are pouring millions of dollars into lobbying for laws to allow purchasing pollution tax credits. Since it makes no difference, why do these highly educated people (some with on-staff economists no less) waste their money in this fashion? Personally as a policy matter I favor the criminal approach - throw the polluter (the CEO who orders it done) into jail. They can go ahead and factor in that cost in their decision making.

Quote
My writing skills must be terrible, if one reader sees me arguing certainty whereas another sees me as arguing purest guesswork.


No, it's your smug style. You began this all by indicate it was a matter of ignorance that a layperson questioned the  appropriateness of policy ideas such as tax reductions for the wealthy, etc. This implies that you think you know what global economic effects these policies will have and that they are "good". At the same time you admit no economist has a real good idea of how these policies actually work in the real world, except for that they do know the immediate effects on the people that matter (i.e. the rich). This is why Dean sees you as having mathematical certainty (you smuggly *know* that certain policies will have "rising tide" effects), while I attack your smugness because you admit they're based on the shakiest of econometric models. Heck, you even wrote (seriously) that Walmart's strategy is to have the lowest prices. Bzzzzt! Their strategy is to make the most money for themselves; low average prices to gain customers and ultra-low costs through any cost shifting they can get away with (whether legal or not) are only the tactics used to execute that strategy.

Quote
Efficiency can be defined fairly rigorously


Ok, I'll bite. Please provide a mathematical definition for efficiency of a market and provide the units (you can claim it's dimensionless if you like). Now tell me the numerical value for the efficiency of the market for, say, General Motors common stock. Provide the estimates of error for your efficiency value and please explain how you arrived at them. Remember, this is "like addition" so it should be cake for you.

Finally, I'd like to comment that you've got the usual conservative straw-man list of "which is fair?" tax strategies; none of them are fair if they're based on income. As I pointed out with the Paris example, for those with large amounts of capital they can continue to grow and spend their money without ever incurring any tax liability at all.

A fair tax scheme might be one in which every person pays a fixed fraction of the values of all of their assets each year, coupled with a VAT tax to cover consumption.

  
celtic_elk



Posts: 11
Joined: Oct. 2005

(Permalink) Posted: Jan. 06 2006,04:31   

Quote
Here's an example: we have a factory chuffing pollution into the air. We want it stopped. Now, should we levy a fine for polluting of $X, or should we sell the polluter a pollution license for $X? Most people find the former morally satisfying and the latter morally appalling, yet economically (from the perspective of the polluter), there's no difference. $X has been added to the cost of doing business.


Strictly speaking, this is true, but your assumption that "$X has been added to the cost of doing business" assumes that the polluter chooses to continue to pollute.  I'd like to explicate this assumption a little in order to maybe clarify how economic thinking works (disclaimer: I'm not an economist, but I took a course in graduate school that included microeconomics).

The polluter is polluting because toxic products are generated in the course of their business practices.  There are surely other ways to deal with these toxins: environmentally-approved storage and disposal, for example.  The polluter didn't choose that option in the first place because it's cheaper to pollute, and therefore polluting provides the largest profit margin.  If we level a pollution fine of $X, or offer a pollution license for $X, the polluter will choose either of these options provided that X is less than the amount they would have to spend on an alternative waste disposal option.  If we make it more expensive to pollute than to do the "right thing," they'll do the "right thing".

Quote
Funny that those business for whom it "makes no difference" are pouring millions of dollars into lobbying for laws to allow purchasing pollution tax credits. Since it makes no difference, why do these highly educated people (some with on-staff economists no less) waste their money in this fashion? Personally as a policy matter I favor the criminal approach - throw the polluter (the CEO who orders it done) into jail. They can go ahead and factor in that cost in their decision making.


What Flint should perhaps have said was "these two options, while regarded as having different moral weights, have exactly the same impact on the cost of the polluter's product".  There are, however, other effects to the choice of fine vs. license, which are tied in to the perception of the company by the public (law-breaking vs. law-abiding) and the subsequent impact on demand for the polluter's product (assuming that there is an equivalent product available for an equivalent price).  This analysis discards the assumption of perfect rationaliuty of actors made by basic economic theory, and so goes a little beyond the theoretical framework that Flint has been working in.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 06 2006,04:45   

haceaton:

If you disagree with the gist of what I'm saying, I'm glad to discuss and even concede that you're probably right. We surely both recognize that nearly any statement about economics is going to have exceptions or be subject to debate.

Quote
Besides the pure perception issues, an accelerating highly skewed distribution of wealth will have long-term unhealthy consequences for the nation.

So long as we agree that "unhealthy" is a value judgment. Highly skewed distribution IS a consequence of certain policies. There are indications that this is a positive-feedback tendency, feeding on itself. If you suggest a few methods by which this skew can be reduced, we might consider the side-effects of those methods. Right now, the top 10% of income-receivers are paying HALF of the US national income taxes. So maybe income taxation isn't a good method?

Quote
Funny that those business for whom it "makes no difference" are pouring millions of dollars into lobbying for laws to allow purchasing pollution tax credits.

A puzzle to me too. My speculation is that these businesses are hoping to better quantify and predict their operating costs. Fines can be capricious, and criminal penalties can't be ruled out.

Quote
Personally as a policy matter I favor the criminal approach - throw the polluter (the CEO who orders it done) into jail.

Yes, this is certain to be perceived as an unacceptably high price by the CEO. It might be perceived as a bargain by the board of directors. That might be an interesting battle...

Quote
You began this all by indicate it was a matter of ignorance that a layperson questioned the  appropriateness of policy ideas such as tax reductions for the wealthy, etc. This implies that you think you know what global economic effects these policies will have and that they are "good".

I disagree. Perhaps my style is smug (though this seems an eye of the beholder thing), but we've already gone over this. I didn't question "appropriateness" in the sense I think you mean. I questioned the presumed impacts. Let's say someone writes "Fires are bad things. Let's throw more wood on them to satisfy them so they'll go away." If you come along and point out that the recommended action will have unintended consequences, you are NOT commenting one way or another on whether fires are bad. So let's say that someone jumps up and claims you are defending fires. It sounds that way to him. Is he correct?

Quote
At the same time you admit no economist has a real good idea of how these policies actually work in the real world, except for that they do know the immediate effects on the people that matter (i.e. the rich).

So long as we agree that the "people that matter" are the intended voting constituency. The reason those below the median income pay essentially none of the income taxes is because they have half the votes, but make so little money that revenues aren't damaged much by eliminating their income taxes.

Quote
This is why Dean sees you as having mathematical certainty (you smuggly *know* that certain policies will have "rising tide" effects)

Then this is a failure of presentation on my part. I observe, from multiple historical experiences, that certain policies have nearly always had "rising tide" effects, while other policies have not, or had the opposite. So I "know" this in the sense that I "know" that if you invest your money, you'll end up with more of it. You can find countless exceptions to this rule of thumb, of course, but on the whole it's true for reasons fairly well understood.

We're really talking about two parameters here: Total wealth creation within a political economy, and wealth distribution within that economy. Economists think they understand, in general terms, what factors influence both of these things, and in what directions. There is some debate as to how independent these parameters are.

Quote
Heck, you even wrote (seriously) that Walmart's strategy is to have the lowest prices. Bzzzzt! Their strategy is to make the most money for themselves; low average prices to gain customers and ultra-low costs through any cost shifting they can get away with (whether legal or not) are only the tactics used to execute that strategy.

From what I have read about WalMart (quite a bit), you are simply wrong. WalMart makes lots of money. What do they DO with that money? Do they pay their upper management exorbitant salaries? No. Do they pay out high dividends to their stockholders? No. Do they pay decent wages or bonuses to their rank and file? No. So where DOES the money go? By observation, WalMart converts their cost savings (however achieved) into lower prices. By comparative industrial standards, they aren't doing this to get personally rich. Their profit margins aren't exceptional. So you have fallen one step short here. You notice that WalMart does everything possible to reduce their costs, some of it legally shaky, some of it hard on their employees or on other retailers in the community. You're right; they do this. What I pointed out was, they translate these things into lower prices. It is WalMart's corporate policy. If it did not succeed, people wouldn't shop there so exclusively as to skew community economies so badly.

So I repeat: their goal is to minimize their prices. NOT to pocket high profits, which they do not make.

Quote
Ok, I'll bite. Please provide a mathematical definition for efficiency of a market and provide the units (you can claim it's dimensionless if you like). Now tell me ...

Here's a start. I think I will rescind my claim of "fairly rigorous", since this is misleading enough to be incorrect. I had intended to state that the notions of efficiency and desirability are qualitatively different. Desirability is purely subjective; efficiency is not (at least, not intended to be).


Quote
Finally, I'd like to comment that you've got the usual conservative straw-man list of "which is fair?" tax strategies; none of them are fair if they're based on income. As I pointed out with the Paris example, for those with large amounts of capital they can continue to grow and spend their money without ever incurring any tax liability at all. A fair tax scheme might be one in which every person pays a fixed fraction of the values of all of their assets each year, coupled with a VAT tax to cover consumption.

We are probably going to have to disagree here. "Fair" is a pure value judgment. Most parents with more than one child can understand this. Is it "fair" to treat them equally, when their desires or needs differ? Is it "fair" to accommodate their differences, if one needs more than another? Maybe the parent is "fair" if the children perceive no favoritism?

If I follow you, you are proposing a tax based on wealth instead of income. Hopefully in practice this won't devolve into a "whack the investor" proposal. If you and I have the same income, but you spend every penny you make, while I scrimp and save so as to have as much savings as possible, then you pay no tax while I pay some fixed percent. To counter this problem, you propose that an extra tax be levied on consumption, which would affect you more than me. Yes, it would extract a bunch of money from those who inherit a fortune, win the lottery, or whatever. Hey, I'd be willing to give it a try and see what unanticipated consequences we'd need to adjust for later.

However, I hope we agree that Congress is psychologically incapable of leaving any tax structure alone. In their view, the tax system has two primary purposes: to fund government activities and programs, and to modify public behaviors through social engineering. Which of these two purposes is more important, they probably couldn't say. But within minutes, the "flat tax" would be encrusted with many thousands of exceptions, VAT rates would be highly variable, no two alike. Politicians from poor districts would trade exceptions for certain classes of wealth (perhaps no tax on houses), in exchange for exceptions to certain classes of poverty (maybe no VAT on food).

I predict it would also be politically difficult to impose a wealth tax. A few years ago, some politician (from a poorer district) proposed that inheritance be taxed to draconian levels, perhaps 90% or more. He figured that the poor (who had nothing to inherit) would support this proposal, so he was astonished to find that the poor opposed it overwhelmingly. Turned out, after some investigation, that the poor realized that the only chance they had at any real money was some unexpected inheritance. To be remembered in the will of some wealthy person. They knew the chances of this were infinitesimal, but they were NOT willing to give up what they saw as their only chance altogether.

The picture is of income as a hose to the bucket of wealth. The hose leaks, because the government taps into it every which way they can dream up. But dammit, whatever reaches that bucket is MINE, safe from government confiscation. Why, even if I won the lottery (the poor person is thinking), I can't take the lump sum and invest it wisely; the government will extract a pound of flesh out of it every year until it's gone.

So what I'm saying is, I don't believe most people would regard a wealth tax as "fair". People want, they dream of, beating the system. A system you can't beat might be "fair" but it won't be popular.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 06 2006,04:53   

celtic_elk:

Quote
If we level a pollution fine of $X, or offer a pollution license for $X, the polluter will choose either of these options provided that X is less than the amount they would have to spend on an alternative waste disposal option.  If we make it more expensive to pollute than to do the "right thing," they'll do the "right thing".

I agree. They'll minimize the cost of doing business, whatever the path of least cost may be.

Quote
There are, however, other effects to the choice of fine vs. license, which are tied in to the perception of the company by the public (law-breaking vs. law-abiding) and the subsequent impact on demand for the polluter's product (assuming that there is an equivalent product available for an equivalent price).  This analysis discards the assumption of perfect rationality

Not entirely. Corporate "good will" is quantified and on the books, however speculative the assigned amount. But there have been enough cases of bad corporate citizenship to calibrate "good will" a little bit better than SWAG. I've often wondered if all the money Philip Morris has spent on anti-smoking commercials has paid off in increased cigarette sales.

  
guthrie



Posts: 696
Joined: Jan. 2006

(Permalink) Posted: Jan. 06 2006,09:51   

I broadly agree with Flint about the non moral situation of markets.  Thats one of the reasons why I am some kind of leftie liberal, seeing as markets arent moral, yet we (humans) seem to like some kind of morals, and mine dictate that rampant capitalism is not a good thing.

An extreme example being drugs and child porn, there exist markets for both, but they are judged to be dangerous and harmful by most people, hence ultimately they are suppressed.  

And it also ties in with ideas of freedom and liberty etc. And lets not get into differentiating when you are acting because of a moral principle, or because it just suits you.

I only have some interest in economics, and a little of it from when I did some management modules at university, and I have also read a few popular books on teh subject, and history thereof.  I am currently reading some of Marx's writings, and have some Smith, von Mises and Keynes lined up.

  
BWE



Posts: 1898
Joined: Jan. 2006

(Permalink) Posted: Jan. 06 2006,10:05   

You are assuming a world where consequenses are irrelevant, a purely "economics" academic world where the tradeoffs are simply to be measured and categorized. It seems to me that you are saying that it is fine what walmart does as long as it's within the rules. So when I said that shifting the costs back to walmart would be good because I would get something for free and that that would be a more level playing field, I was making a value judgement that I prefer a world where business cant use my taxes as profit. Especially when it does so much damage to the communities.

If you are saying that walmart doesn't do damage to communities and that walmart is perfectly ok because it is logical then say that. Saying that what we now know about walmart's tactics isn't important because them's the rules is pretty callous and if that's who you want to be then that's ok, but there are benefits to community that you might someday want to take advantage of.

I wonder if you think that prejudice plays no role in opportunity.

--------------
Who said that ev'ry wish would be heard and answered
When wished on the morning star
Somebody thought of that, and someone believed it
Look what it's done so far

The Daily Wingnut

   
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 06 2006,10:44   

BWE:

I'm sure we aren't communicating, but I'll keep trying anyway.

Quote
You are assuming a world where consequenses are irrelevant

No, I'm assuming a world where consequences can be understood, predicted to some extent, and managed.

Quote
a purely "economics" academic world where the tradeoffs are simply to be measured and categorized.

But if your goal is to alter the tradeoffs more to your liking, surely it's in your interest to know what they are, and to be able to measure and categorize them so you know if your efforts are paying off.

Quote
It seems to me that you are saying that it is fine what walmart does as long as it's within the rules.

Absolutely. The rules are created to be followed. If following the rules produces undesirable side effects, then change the rules to prevent this.

Quote
So when I said that shifting the costs back to walmart would be good because I would get something for free and that that would be a more level playing field, I was making a value judgement

No, you were making an ERROR. Nothing is free. What is WalMart supposed to do if you change the rules to increase their costs? Open up a private mint and coin money to pay them? No, WalMart will have to raise prices. Are higher prices "good" for the community? By observation, community members given the opportunity to pay higher prices to other retailers, do not do so.

Now, what you seem to be recommending is that if the members of the community want lower prices, then they are wrong and you are going to be "moral" and FORCE them to pay higher prices anyway.

And once again, there are no special "WalMart rules". The playing field IS level. WalMart is simply a more skillful player.

Quote
I prefer a world where business cant use my taxes as profit. Especially when it does so much damage to the communities.

But all these damaged community members *continue* to shop at WalMart. So are you arguing that everyone else is stupid, or that they are all immoral?

You sound like a religious fanatic. If nobody else will believe what you know is true, you will MAKE them behave "morally" anyway. And how about their preferences, which they express with every purchase? I guess other people's preferences don't much matter to you, because yours are RIGHT and theirs arent. Sheesh.

Quote
If you are saying that walmart doesn't do damage to communities and that walmart is perfectly ok because it is logical then say that.

I'm saying that we have a rule structure, and WalMart operates within that structure. You sound like a little kid in class who gets a C grade and blames the kid who got an A for taking unfair advantage of the grading system.

Quote
If you are saying that walmart doesn't do damage to communities

WalMart *changes* communities. You dislike the changes. WalMart's customers seem delighted with the NET changes - the very fact they all shop there shows that lower prices are more valuable to them than the consequences (the negative values). The community has spoken, and spoken so loudly their preferences cannot be denied. I wouldn't be at all surprised if some opinion poll discovered that the community people wanted BOTH the low prices and the mom and pop stores (where they would not shop), PROVIDED they weren't taxed to subsidize the small expensive shops. In other words, people want the benefits, but don't wish to pay the costs. And indeed, some communities have refused to allow WalMart to build there. From what I have read, the people are very self-satisfied that they have "preserved" their community values - while they all drive down to the next town's WalMart to get those low prices!

Quote
Saying that what we now know about walmart's tactics isn't important because them's the rules is pretty callous

Oh climb down! Now that we know in detail the consequences of our rule system, we can make *intelligent and informed* changes. Economics can help us predict the consequences of our changes. The rules still haven't changed: For every benefit, there is a cost. I notice you STILL haven't addressed what that cost is or who pays it.

guthrie:

Quote
An extreme example being drugs and child porn, there exist markets for both, but they are judged to be dangerous and harmful by most people, hence ultimately they are suppressed.

These are excellent examples of what you don't seem to realize. What we have done by *attempting* (but most emphatically NOT succeeding) to suppress these, is to drive up their cost to the consumer, vastly (by orders of magnitude) increasing the profits to the sellers, whom we have made both organized and wealthy. That's how supply and demand work.

And this is true because the market IS amoral. The market doesn't care that policy makers are trying to protect the delicate sensibilities of people by telling them what they're not allowed to like. The market cares that the effort at suppression rearranges the costs and the benefits.

It's no accident that drug dealers funnel huge gobs of campaign contributions into the coffers of the anti-drug candidates. They know what side their bread is buttered on.

Quote
And lets not get into differentiating when you are acting because of a moral principle, or because it just suits you.

I think BWE is arguing that there's no difference there. Whatever you prefer, whether it be chocolate over vanilla or red over blue, is a moral principle to him.

  
Alan Fox



Posts: 1391
Joined: Aug. 2005

(Permalink) Posted: Jan. 06 2006,12:15   

Quote
Economics can help us predict the consequences of our changes.


But how is it any better at prediction than fortune telling? Does anyone objectively record predictions to see how they compare with reality. It seems to me that predictions of future growth by government spokesmen are often short-term and of a sufficiently wide margin to be meaningless, and figures are often be massaged  retrospectively to fit the prediction.

  
guthrie



Posts: 696
Joined: Jan. 2006

(Permalink) Posted: Jan. 06 2006,12:17   

Hey, thats kind of what I was trying to say anyway.  I know all that, making something illegal pushes up costs etc etc.  Thats really basic stuff.  I just disagree with exactly the way you word it:

"policy makers are trying to protect the delicate sensibilities of people by telling them what they're not allowed to like"

Whereas I think if you actually asked most people about child porn, they would certainly ban it.  Drugs, well, people do silly things and are somewhat shortsighted in their outlooks, so simply banning them is too simple.  But anyway, banning both of them could be justified because "god told me so" or "Taking drugs is bad for you and your community" or "Children are not capable of making the informed choices necessary and anyway they come to harm".  Which are moral rather than economic positions.  I dont see people arguing that drugs or child porn should be banned because they dont benefit anyone economically.

  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 06 2006,12:30   

Quote
And this is true because the market IS amoral


well, there's the way we like to think of market forces in general, and then there's reality.

I have one quick question:

If you really believe that Flint, would you have any objections to free-market secondary school systems?

corrollary:

why do we have standardized testing?

while i completely agree that we MUST start with a purely amoral analysis in order to derive economic models, in reality any model, economic or biological, must incorporate non-standard variables in order to more accurately represent real world observations and data.

It's unrealistic to assume free market forces to be amoral, or not to be influenced by moral interpretations of one kind or another.

I'm sure you realize this.

There is value in modeling; it's always a good place to analyze assumptions and make new predicitions, but I see all too commonly that modelers try to over-extend the value models have wrt to natural systems.  

this is as accurate whether we are speaking of economics or global warming models.

It's not realistic to view Walmart's success or failure purely on the basis of free market economics.  Nor is it realistic to presume morality plays no part in free market forces.

I hope that really isn't the point you were really trying to make, and that you really meant to just be arguing for the value of predictive models in economics.

  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 06 2006,12:41   

Quote
But all these damaged community members *continue* to shop at WalMart. So are you arguing that everyone else is stupid, or that they are all immoral?


FLINT!  ask yourself why so many americans support ID, then think about the answer to your own question.

did you ever see that southpark episode they did on Walmart?

  
Alan Fox



Posts: 1391
Joined: Aug. 2005

(Permalink) Posted: Jan. 06 2006,13:08   

Quote
I hope that really isn't the point you were really trying to make, and that you really meant to just be arguing for the value of predictive models in economics.


And are these predictive models better than fortune telling?

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 06 2006,13:15   

guthrie:

Quote
I think if you actually asked most people about child porn, they would certainly ban it.

I'm quite sure you're correct. I recall a poll where the Bill of Rights was reworded to say functionally the same things, and people overwhelmingly disapproved of nearly every one of them.

I agree these bans (remember prohibition?) are always done for moral reasons. And history is pretty clear on this one: banning things people want to do but do not want *other people* to do, never works very well. It's pretty obvious that we can't ban abortion; what we can do is make abortion prohibitively costly for the poor, much more costly for everyone else, and that these high costs will benefit those providing the abortion and related (i.e. transportation, underground clinics, quacks with coathangers, etc.) services.

Alan Fox:

Quote
But how is it any better at prediction than fortune telling?

Consider: can evolution help us make predictions? Well, much like economics, it can make *some* predictions very accurately, but doesn't help much with other predictions. The economic prediction that changing cost structures will change resource allocation decisions in known ways is a slam dunk, like the evolutionary prediction that succeeding generations will share genes with their ancestors. The economic prediction that a recession or boom is coming, well, that's like predicting what the next cat to evolve will look like.

Sir Toejam:

Quote
there's the way we like to think of market forces in general, and then there's reality.

No, the reality is that the market is amoral. the market really does not care what we do. Supply and demand can be manipulated, and the market will follow.

Quote
would you have any objections to free-market secondary school systems?

Almost no objection - I think light regulation would be helpful, things like your standardized tests. Some way to ensure that schooling is actually taking place. Also, I personally see social value in a fairly common knowledge base.

Quote
It's unrealistic to assume free market forces to be amoral, or not to be influenced by moral interpretations of one kind or another. I'm sure you realize this.

Probably, though I might be expressing it differently. Free market forces are amoral. Lower the temperature and people will put on their coats. Certainly I don't deny that moral precepts influence market manipulations. That's what I was discussing above with guthrie - make drugs illegal for moral reasons, change the profit structure to make dealers so wealthy they can't buy banks fast enough.

Quote
It's not realistic to view Walmart's success or failure purely on the basis of free market economics.

I don't understand quite what you intend here. WalMart is successful because their business model works. They have accurately identified a public preference, and focused on it with narrow zeal. Allowing that they are subject to regulation like any other business, how is this not a free market behavior? This looks to me like the canonical better mousetrap.

Quote
Nor is it realistic to presume morality plays no part in free market forces.

This is a very different formulation. As BWE has made abundantly clear, people's individual morality may play a strong, perhaps decisive role in their rational assessment of their self-interest. Attempts to legislate morality, though, are invariably attempts to frustrate the perceived self-interests of others, where we ourselves are otherwise not directly affected. (For the sake of clarity, I'm defining moral legislation here as the prohibition of economic transactions whereby all of the parties to the transactions consider themselves satisfied.) And THOSE attempts, like the war on drugs or laws against abortion, don't change market "forces" per se, they change either supply or demand, and market forces adjust accordingly. Morality this ain't.

Quote
I hope that really isn't the point you were really trying to make, and that you really meant to just be arguing for the value of predictive models in economics.

I admit I'm not clear what your point is. People make decisions about economic transactions (the exchange of goods and services, immediate or postponed) for a wide variety of reasons. Change the costs, change the incentives, and the pattern of transactions changes accordingly. Yes, there are inelasticities, but when gas prices rise, gas sales drop.

Maybe the term "morality" needs to be set forth more concretely? I see nothing wrong, personally, in Henry Ford putting buggy-whip makers out of business, nor in WalMart putting mom&pop retailers out of business. These aren't moral issues as I see it, these are competition issues. Produce what the public wants (regardless of WHY they want it), and you will succeed at the expense of those who do not do the same. Where is the morality here?

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 06 2006,13:29   

Sir Toejam:

Quote
FLINT!  ask yourself why so many americans support ID, then think about the answer to your own question.

Again, can you explain a little more? What's obvious to you may not be obvious to others. I would say so many Americans support ID because doing so is in their perceived self-interest. They know science works really well, they know God exists and the Bible is His word. They WANT science to find God, so that there will be no cognitive conflict. ID makes the claim that science HAS found God. Hallelujah! They get their cake and eat it too. Who could ask for more?

So BWE and I were talking about knowledge: Yeah, WalMart offers low prices, but you (the community member) don't get low prices for free. You pay a very real community cost for those low prices. But you have to KNOW, that your are paying a cost, and what that cost is, to make an informed decision about where to shop or how to modify the rules so as to change WalMart's cost structure and incentives. Education matters.

Similarly with ID, you have to know something about science and something about ID to recognize that the claim that ID is a marriage between science and God is a false claim, based more on wishful thinking than anything else. Hey, I'm participating on these forums because I see real value in education.

(I've never even HEARD of southpark. Is it a TV show? I don't watch TV...)

Alan Fox:

Quote
And are these predictive models better than fortune telling?

Yes where they are appropriately applied, no where they are not. Economists are not morons; they know what their theories explain and predict well, and where their theories are worthless. Unfortunately, where their theories are least helpful just happens to be where people, especially politicians, most demand answers. Most economists I have read are quite ready to admit that their profession is ill-equipped to predict the future in these ways, and that they are speculating with little more basis than anyone else.

I can fairly accurately predict that if the price of Brand X canned peas doubles, you will switch to another brand. I might even be able to predict the future price of canned peas, though this is like predicting the weather - accurate overnight, worth taking with some salt within 3 days, fiction beyond that.

  
Alan Fox



Posts: 1391
Joined: Aug. 2005

(Permalink) Posted: Jan. 06 2006,13:37   

Well, I'd like to see evidence that economists can do more than provide justification for politicians' economic decisions that they intend to make anyway.

Economics seems to have the same basic flaw in predictive power as Demski's EF; you can't factor in the unknown. I have heard pundits talk about the economic cycle, but the economy is chaotic.

I accept that very short term predictions may come off, but, like weather forecasting, anything long range is about as good as rolling dice.

  
Alan Fox



Posts: 1391
Joined: Aug. 2005

(Permalink) Posted: Jan. 06 2006,13:44   

I take it back Flint. I just posted before seeing your latest post.

Quote
(I've never even HEARD of southpark. Is it a TV show? I don't watch TV...)


Too much blogging. It's a great show, which I miss as I can't get it here.

  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 06 2006,13:54   

Quote
Almost no objection - I think light regulation would be helpful, things like your standardized tests


uh, you have GOT to be kidding!  standardized testing itself would NOT be considered "light" regulation under a free market scholastic system.

You really are living in a dream world if you think a free market educational system would actually create anything other than complete dogma in a very short time.

I underestimated you Flint.  I was thinking you were just arguing from a postion of theoretical economics, but now i see you have totally swallowed many false presmises that simply don't jive with the real world.

You live in fantasyland if you really beleive that truly free-market economies actually work.  or true democracies, for the same reasons.

The reason so many folks shop at Walmart is exactly the same reason folks end up supporting ID;

pure ignorance of the consequences.

I worry for you, truly, that on the one hand you can clearly see the problems inherent with teaching ID theory, yet on the other can't see the problems with the assumption that Walmart is simple free-market economics in action.

sad.  very sad.

With that viewpoint, i really can't see any reason to continue this discussion further.

you have a very disjointed thought process.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 06 2006,13:58   

Alan:

Actally, you raise an important point. Supply and demand are manipulated all the time for political reasons, which is one of the things that impedes good predictions. Maybe economics can help us (mostly through analysis of past situations regarded as sufficiently analogous) say if we do X, we'll get more Y. But then policies change again. And again.

Also, you are correct that economists are much like expert trial testimony. For $400 an hour, anyone can hire a *qualified* expert to testify to anything. And so politicians hire economists to find plausible ways to explain how policies intended to reward or attract votes or money, are "good for the nation." And of course, ANY economic policy in the short run will be good for SOME of the nation. So it's not all hot air. And the long run is politically irrelevant; policies will change before then.

Quote
Too much blogging.

For years now, I confess. On the net, I can pretend I'm not a dog.

  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 06 2006,14:00   

Quote
. Attempts to legislate morality, though, are invariably attempts to frustrate the perceived self-interests of others, where we ourselves are otherwise not directly affected.


it is rarely the case (ever?) that another's version of morality does not directly affect our own in a public circumstance.  Regardless of whether you view a system of morals as merely extensions of self interest or not.

hence we have a legal system to regulate the inevitable conflicts.

would you prefer a laisez faire system instead?

watch how fast your personal system of morality lasts in a true laisez-faire system.

truly, i don't think you have thought this out very well.

I've seen far better and more coherent arguments from you on subjects you haven't claimed to have spent time studying.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 06 2006,14:26   

Sir Toejam:

Quote
uh, you have GOT to be kidding!  standardized testing itself would NOT be considered "light" regulation under a free market scholastic system.

I don't want to quibble over adjectives. The way I interpreted your question, free market secondary education would be much like free market colleges - pretty much what we have in place today. I don't know where we'd draw the line and say "Beyond X amount of regulation, this isn't free market anymore." I'll debate this if you wish, though.

Quote
You really are living in a dream world if you think a free market educational system would actually create anything other than complete dogma in a very short time.

Then I will continue to dream. As I said, the college system is a free market system, with a very wide variety of choice among competing private colleges. Do we see "complete dogma"? Well, only if "a very short time" exceeds the several hundred years the private college system has existed, since it hasn't happened yet. Or are you going to argue that YOUR education was simply a matter of swallowing and memorizing "complete dogma"?

Quote
I was thinking you were just arguing from a postion of theoretical economics, but now i see you have totally swallowed many false presmises that simply don't jive with the real world.

For my part, I've long suspected that outside your narrow specialty, you were a walking sloganeer, and I see that I was correct. For you, the rest of the world is "Anything I choose to believe so long as I remain too ignorant to know better." Which you are defending with all-too-familiar tactics.

Quote
You live in fantasyland if you really beleive that truly free-market economies actually work.  or true democracies, for the same reasons.

You really must define your terms, otherwise you come across as a brainless ideologue. Maybe you ARE one, but I'll give you the benefit of the doubt.

I think a fully free-market economy doesn't exist, has never existed, and cannot exist. It's simply a useful conception in model-building. Same with a true democracy. Let's assume a spherical cow in a vacuum - no, I mean let's assume everyone has a "vote button" hooked to a national network, and the entire population votes on every issue and proposal. Let's also presume that the vote is implemented immediately on being taken. How long would any government last? A few minutes? Sorry, but I'm aware that a great deal of regulation and inertia and resistance and friction (and checks and balances) must be built in for either an economy or a government to exist and operate effectively.

Quote
The reason so many folks shop at Walmart is exactly the same reason folks end up supporting ID; pure ignorance of the consequences.

And are you proposing that all these people, who used to shop elsewhere, used to be LESS ignorant? People shop at WalMart because they perceive that they get good value for their money. And indeed, they DO get good value for their money. At a cost, to be sure. As a matter of fact, I think your entire pathetic display of spleen here is because you perceive that I am not a devout member of your Church of Anti-Walmart. Whereas, if you could set your faith aside long enough to check, you will find that I have NEVER ONCE taken a moral position about WalMart, good or bad. And I've done that for several purposes, only one of which is to use WalMart as an example of economic costs and benefits. I'll admit, one reason is to see who starts hyperventilating, assuming that since I haven't taken their position, I must therefore OPPOSE their position. Sound familiar?

Still, I'm amused that you have dichotomized this issue to the point where the only two choices are to HATE WalMart, or to suffer "pure ignorance." Let us now pray, right?

Quote
I worry for you, truly, that on the one hand you can clearly see the problems inherent with teaching ID theory, yet on the other can't see the problems with the assumption that Walmart is simple free-market economics in action.

From my perspective, I see that you are adamantly opposed to WalMart, and like any creationist, you are simply not open to ANY analysis of how they operate, what the consequences are, why they're successful, what we as a community may wish to change to improve matters, or anything else that might include facts. In your mind "WalMart" is like the word "evolution" in the mind of Pat Robertson - a trigger to stop thinking and start emoting and sloganeering.

Quote
With that viewpoint, i really can't see any reason to continue this discussion further.

And this is ALSO much like a creationist. Having preached, having told the sinner he's mentally incompetent, you stalk off in self-congratulation. As an economist, you're a good biologist, I suppose. You don't know the facts, you don't know the theory, but you DO know what's True, and nothing else matters. Bless you, brother.

(And what's ironic is, I also see WalMart as a symptom of something deeply wrong with our regulatory system. Sorry that my approach is more analytical, and less emotional as you clearly would prefer (and practice)).

  
Dean Morrison



Posts: 216
Joined: Dec. 2005

(Permalink) Posted: Jan. 06 2006,14:34   

'Laissez -faire'? - let me take that back -

a better characterisation of the particular economic school of thought I was criticising would be :

'Shit happens' (shrugs shoulders) - deal with it.

I don't think this school of thought arises as a neccessity from the study of economic theory - it's a unsupported overextension, and it's fatalistic nature doesn't encourage further critical study.

Reminds me of ID a bit....

However - Flint does have a lot of valid points, and speaks a lot of sense a lot of the time - I just don't think it speaks to the issue ( although I can't remember exactly what that was now - started off with Tara talking to he girlfriends over coffee - her own blog has lots more on-comment posts and some new trolls BTW)

Having enjoyed this interesting diversion I'm off to the Thumb, or elsewhere here to taunt Larry/Paley, so thanks to you all - but especially you Flint.

See you around....



:D

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 06 2006,14:38   

Sir Toejam:

OK, carrying right along here...

Quote
it is rarely the case (ever?) that another's version of morality does not directly affect our own in a public circumstance.

Yes, I'd say it's more rare than otherwise, if only because on a larger scale moral preferences tend to average out. But of course, this still depends on the definition of morality.

Here's an example. I drive down the road, unaffected by those coming the other direction who stay on their side of the line. Are we obeying the rules of the road for moral reasons? If yes, then you are correct, morality determines just about everything. If no, then morality determines relatively little. So definitions matter.

Quote
hence we have a legal system to regulate the inevitable conflicts.

Same issue here. Is every conflict of interests a moral conflict? Let's say I hire you to shingle my roof, and the next week it rains and my roof leaks. I sue you. Do we have a MORAL issue here? I wouldn't say so. You might.

Quote
would you prefer a laisez faire system instead?

Since you ask, absolutely not. Laissez faire systems as I understand them don't work - they tend to reward cheating and other mendacity and punish industry and honesty. Regulation is a practical necessity.

Quote
truly, i don't think you have thought this out very well.

Truly, I don't think you really understand what I've been trying to say.

Quote
I've seen far better and more coherent arguments from you on subjects you haven't claimed to have spent time studying.

Think just for a moment. You have seen far more coherent arguments from me on subjects you know quite thoroughly. This is the first time the playing field has moved from where YOU are more knowledgeable, to where I am. Does this suggest anything to you about how your perceptions are influenced by your knowledge? Maybe a little bit?

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 06 2006,14:50   

Sir Toejam:

Quote
I've seen far better and more coherent arguments from you on subjects you haven't claimed to have spent time studying.

On further reflection, my irony meter needs replacement. I remember the many times you have implored creationists to just READ, follow these links, INFORM yourselves, know what you're talking about, base your objections (if any remain) on actual knowledge. But of course, the creationists don't NEED knowledge, they have Truth.

And here we are, in a field where I know much more than you do, and the pattern is impossible to miss. I implore you to educate yourself, but you're content to tell me I'm incoherent, don't know what I'm talking about, you have the Truth. You are MORAL. This absolves you from actual, like, learning or anything. You think, knowing little or nothing about the field, that you can tell OTHERS they "haven't thought it out well." You know this because, well, you have FAITH.

Just as a mental exercise, turn it around. Imagine that I, who admit I have no biological training, education, or experience at all, tell you that YOUR biological arguments are incoherent, and that you haven't thought them through. Just how patient would you be with me? I doubt you'd be any more patient than you are with the creationists whose techniques you are mimicing with impressive verisimilitude.

But as I wrote earlier, economics is one of those subjects like politics or psychology where everyone considers themselves an automatic expert. And indeed, this is one of the factors that make the field difficult. So much to UNlearn, so little willingness to admit it.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 06 2006,16:56   

After a little MORE reflection, maybe there's no irony here after all. Sir Toejam dismisses those whose knowledge is dwarfed by his own (and who disagree with him), as ignorant, while those who are admittedly without much knowledge (but who agree with him) are regarded as "coherent". Sir Toejam dismisses those whose knowledge (in other fields) dwarfs his own (and who disagree with him), as incoherent. Presumably those who agree with him, however ignorant of the subject, would be regarded as entirely reasonable.

The salient common factor here may not be knowledge, but rather agreement. And in this respect, Sir Toejam is *precisely* like a creationist. Knowledge doesn't matter, logic doesn't matter, experience or education doesn't matter. His opinion is the ONLY yardstick. In his mind, someone becomes a coherent thinker to the extent that one agrees with him. His opinions may be based on no knowledge whatsoever (think creationist), but what does knowledge or understanding have to do with being correct?

Maybe I'm wrong about the merits of a liberal education (in the old-fashioned sense of an education that exposes the student to multiple viewpoints about multiple subjects. The original PhD where the Ph denoted broad understanding across all disciplines). Sir Toejam, I'm willing to consider, may be truly authoritative on aquatic biology. But maybe we're seeing something analogous to famous actors pontificating on politics: he KNOWS he's an authority within his specialty, therefore he MUST be equally authoritative on anything where he has an opinion, however ignorant. The examples of even world-class scientists making truly idiotic "ex cathedra" statements WAY outside their field are legion.

Personally, I really don't know whether the extreme reluctance to admit either error or ignorance is a function of education, specialization, morality, or character. It's surely an error to seek a single villain in any case. Personally, I suspect that the tendency to either listen or reject, when someone knowledgeable in another field speaks, is a character trait.

  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 06 2006,18:18   

Quote
And here we are, in a field where I know much more than you do, and the pattern is impossible to miss.


what's hard to miss, is my shock that you would actually propose the value of a true free market economy in the face of the utter failure of laisez faire economics throughout history.

the same is true of pure democracies, or pure communism.  they fail because of the nature of humans, not because in principle the theories or models are flawed, but because they can't take into account the variability and vagaries of human behavior.

greed is NOT good.  this is a myth.  just like a true democracy, a true free market economy would NOT result in a better standard of living, or a better set of products, than a regulated economy would.

Funny, but I've heard your exact same arguments before; economists and politicians using them were often termed "Social Darwinists".

Put that in your irony meter.

Oh, and if you want to ever discuss anything with me ever again, or avoid having me hound YOU on every thread, I highly suggest you stop taking this debate to other threads.

that's extremely bad form.

How could you possibly understand the value of a classic education if you never had one?

calling me a creationist is really a form of projection, there Flint.

You can win this argument quite easily:

1.  show me any time in history where a true laisez faire economy ever produced a stable and viable result.

2.  show me any economic periodical that espouses the virtues of a free-market educational system over a public one, and provides data to support such an argument.

You may have studied some economics texts, but your knowledge of history appears astoundingly bad.

I can only conclude that this is the result of that "lack of classical education" that you espouse as a virtue.

but, as i said, I'll give you this argument hands down if you can do what i asked above

  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 06 2006,18:30   

ok, now i see this:

Quote
Since you ask, absolutely not. Laissez faire systems as I understand them don't work - they tend to reward cheating and other mendacity and punish industry and honesty. Regulation is a practical necessity.



... and now I'm confused.  a true free market system IS a laissez faire system.

regulation is indeed a practical necessity.

uh, that was exactly what i was arguing for, and why i said a free-market educational system wouldn't work.  

could all this argument be over definition?

please tell me it ain't so.

  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 06 2006,18:53   

stil there Flint?

or are you busy trying to invade yet other threads with this?

you can still end this any time.

remember, it wasn't me who got mad that folks disagreed with me, I disagreed with YOU, albeit vehemently.

so who is acting like the creationist?

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 06 2006,19:56   

Sir Toejam:

Quote
and now I'm confused.  a true free market system IS a laissez faire system.

You have proposed a definition here. I would argue that an unregulated market would very quickly become an oligarchy. Free markets require continuous competition. Competition is unnatural and must be enforced. This calls for rather extensive regulation, since it's in the vested interest of the primary economic actors to circumvent such regulation and suppress competition. The result, in evolutionary terms is called an "arms race". It never ends. The primary actors keep finding ways to circumvent competition, the regulators keep stuffing a cork in it.

Quote
what's hard to miss, is my shock that you would actually propose the value of a true free market economy in the face of the utter failure of laisez faire economics throughout history.

What baffles me is that what I've written could be interpreted as support for such a system. It's not a workable system. Rules are the rule! Anything resembling a free market requires continuous focused regulation. But regardless of the regulation (i.e. no matter how pervasive, how biased or directed, how micromanaged) people will STILL act in their perceived self-interest.

Quote
the same is true of pure democracies, or pure communism.  they fail because of the nature of humans, not because in principle the theories or models are flawed, but because they can't take into account the variability and vagaries of human behavior.

I don't know if this is very defensible, because of both the variation in such systems, and the malleability of human nature. I'm willing to agree that there ARE limits and boundaries to human nature, and that systems pushing the envelope are dubious. Consider: marriages are pretty close to pure communism, but they work. Small towns, deciding things by voice vote at town meetings, are pretty close to pure democracy, but they work. Why? I have my theories, of course, but this question is important. I suggest (as a proposal, not a doctrine) that people as a species evolved in groups large enough to constitute communities (people are gregarious), but small enough so that everyone in the group knew everyone else. In such an environment, morality was important; social status was critical. Social, political, and economic systems were workable in 200-member groups that are NOT workable in 200-million person nations.

Quote
greed is NOT good.  this is a myth.

And THIS is a Doctrine! Greed isn't necessarily bad; context matters. Personally, I think greed is a given. Any practicable market regulation must assume greed. But it can easily be argued that unregulated greed ultimately results in a net loss for the community.

Quote
just like a true democracy, a true free market economy would NOT result in a better standard of living, or a better set of products, than a regulated economy would.

We're back to battling opinions here. I think "pure" democracy would self-destruct very quickly. I think a "pure" free market would do the same. The "invisible hand" presumes unrestricted competition. When competition doesn't happen, economic benefits become polarized.

Quote
Funny, but I've heard your exact same arguments before; economists and politicians using them were often termed "Social Darwinists".

Not quite so funny, your ignorance of the subject has resulted in a serious misunderstanding. Ignorance has that effect. "Social Darwinsim" has historically made the bogus claim (by the "haves") that there is a biological justification for the economic and social status quo. Of course, there is no such justification. Economic circumstances have no biological component.

Quote
Oh, and if you want to ever discuss anything with me ever again, or avoid having me hound YOU on every thread, I highly suggest you stop taking this debate to other threads.

Where direct parallels exist, I will point them out. I hope I've made my point: you've been rather reflexive in dismissing those not knowledgeable in your field, and equally reflexive in dismissing those MORE knowledgeable in THEIR fields. This doesn't reflect well on you.

Quote
How could you possibly understand the value of a classic education if you never had one?

What do you consider a "classic education"? I'm quite curious. I'd certainly be willing to compete with you in terms of total degrees, total number of degress in different disciplines, total number of areas studied, total number or credit hours, and so forth. I was a "professional student" for *decades*. But perhaps you're equating a "classic educuation" with what YOU studied?

Quote
calling me a creationist is really a form of projection, there Flint.

I pointed out that the technique you are using is a quintessential creationist technique. Of course I expect your response to be a combination of denial and accusation. That's ANOTHER creatinist technique. What would be dazzlingly NON-creationist would be to say "Maybe you know more about what YOU studied than I do, since I didn't study it." Of course, creationists dismiss knowledge as irrelevant...

Quote
show me any time in history where a true laisez faire economy ever produced a stable and viable result.

A true laissez faire economy would be extremely unstable, if it were ever attempted. To my knowedge, it never has been. What's amusing to me is that I'm considered a far-left winger on the Ayn Rand-inspired forums, for my insistence that regulation is an absolute necessity. Depressingly, I've never found anyone sophisticated enough to discuss what sorts of regulation are appropriate, what regulatory limits might be imposed, what enonomic consequences might derive from various types of regulation, and so on. Nonetheless, I'm convinced that the KIND of regulation matters. We might wish to discuss this, once the necessities are dispensed with. Meanwhile, real-life politicaians have little choice but to deal with these questions, and do so daily.

Quote
show me any economic periodical that espouses the virtues of a free-market educational system over a public one, and provides data to support such an argument.

This is a confusing request. I'm not trying to equivocate here, I'm trying to say something. Early in American history, in the days where the frontier was real, education was totally unregulated. Of course, the quality varied with the capabilities of the instructor(s). Whether or not the students of those schools were "better educated" than the students who went through the Eastern Establishment schools is impossible to quantify. Then as now, I would expect the best of either system to far exceed the worst of either system.

But moving up to the present, you still find this a problematical issue. In inner cities, where public schools are battleground day care centers, education is a happy accident. You can easily find home-schooled and private-schooled students who have won national science awards, won national science-fair trophies, won national (you name it - chess competitions, spelling bees, etc.). With even LESS effort, you can find home-schooled students who can't find their ass with both hands. Indeed, the argument against free-market educational systems is that the variation in their success is unacceptably wide. Which is why I supported such systems, but with regulation. I proposed that they be like the college system, where accreditation matters. My unabashed goal is to allow each child to maximize his/her potential. My observation is the public schools for the most part (with exceptions at both extremes) hew to the mundane median; private schools occupy the extremes. I quite sincerely don't know how to inspire both public and private (and home) schools to do a uniformly outstanding job.

Quote
You may have studied some economics texts, but your knowledge of history appears astoundingly bad.

Accusations like this are hard to credit without any concrete illustrations. All I can say is, I studied both political and economic history extensively, MANY credit hours. I like to think I learned something in those courses. If my knowledge is "astoundingly bad" in comparison to yours, how much political and economic history have YOU studied? If I said that your knowledge of biology were "astoundingly bad" (never having studied it myself), would you feel personally remiss? Or would you dismiss my ignorant conclusions for what they'd be?

Quote
I can only conclude that this is the result of that "lack of classical education" that you espouse as a virtue.

And I espoused this where?

Quote
stil there Flint? or are you busy trying to invade yet other threads with this?

No, I'm still taking you seriously and trying to answer you rationally.

Quote
remember, it wasn't me who got mad that folks disagreed with me

Yes it was, and yes I remember. I haven't become angry at anyone yet. I'm still trying to communicate, rather than taking my ball and going home.

Quote
so who is acting like the creationist?

so far, YOU have been. In spades. But as I say, I haven't given up.

  
JimB



Posts: 16
Joined: Jan. 2006

(Permalink) Posted: Jan. 07 2006,18:57   

Flint,

So how about we tackle the economics of healthcare?

We've got two good examples close to home: Canada (a very nearly communist approach to medicine) and the US (a very capitalist approach to medicine).

Both approaches appear fairly broken.

In Canada it can take MONTHS to get diagnostic tests and treatment for cancer patients no matter how much money you might have.  I might add that this is months that those patients cannot afford to lose.

In the US it can take excessive amounts of money to get necessary treatments.  But if you have the cash you can get in to the a Dr. on the day you make the appointment.

Interestingly, there was an evening news program (can't remember which it was) that discussed this issue recently.  Their conclusion about the US problems were that
1) Newer (and more effective) treatments are more costly than old ones
2) When it comes to people's health nearly everyone is unwilling to skimp on getting the best healthcare.
3) As insurance prices go up, those unlikely to need insurance drop their coverage.  Meaning only those with needs (healthcare costs) are left, making the cost for insurance higher, which entices other healthy members to drop out.
4) The US is the only industrialize western country without nationalized healthcare.  This means our businesses incur costs that competing foreign companies do not have to pay (directly).  They estimated that GM paid more in healthcare costs last year than they did for the steel used in their products.
5) In general insurance and healthcare companies are NOT getting wealthy off of the steep rise in health care costs.
6) The major component of the steep rise in costs was expensive treatments like those for cancer (see issue #1).

I think all of this boils down to (as Flint would say) supply and demand.

In both cases, the behavior of the govenments has essentially artificially reduced the "costs" associated with getting healthcare.  In Canada's case, this is obvious: everyone pays into the system via taxes but incur no additional charge at the time of service.  This strongly stimulates demand for those services because there's no additional cost of getting them.

In the US's case, this is partially due to the US law requiring healthcare workers to provide services regardless of the patients ability to pay.  I think it is also partially due to how the healthcare insurance works.  It does not provide enough feedback back to the insurance holders.

So what this boils down to is rationing healthcare.  What standards do we use (money)?  Who will be left out in the cold (the poor)?  Or do we switch to Canada's standard in which those that need prompt treatment are left in the cold?

  
JimB



Posts: 16
Joined: Jan. 2006

(Permalink) Posted: Jan. 07 2006,19:01   

Oops, I didn't put in the additional text that in the US healthcare workers are required to provide services in life threatening situations regardless of the patients ability to pay.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 09 2006,03:40   

JimB:

Sorry for the long delay. My video controller took a dump. I'll cheat and use my work computer here...

I think you're right about supply and demand. These forces become especially problematical (and painful) when it comes to health care.

Personally, I'd start by noting the sheer cost of health care, not in dollars so much as in the requirements of providing it effectively. Perhaps the important factors are:
1) Good physicians require enormous amounts of education, experience, and other training. And it may well be the case that only a small minority of people are capable of becoming highly qualified despite any amount of training.
2) Serious health problems are a lock. Everyone dies. Studies show that at least half the average person's medical costs occur in the last few months of their life.
3) For better or worse, the public is unforgiving about any perceived errors made by any health care providers. Malpractice awards are stratospheric.
4) State of the art medical care (drugs, equipment, etc.) calls for materials that are prohibitively costly to produce, but for which the demand is generally too low for truly high-volume production.
5) The state of the art is in rapid flux; yesterday's drugs and machinery are obsolete today. And maybe didn't work very well anyway. And maybe today's aren't that effective either.
6) But the same demand for perfection and penalties for malfunctions increases the cost of producing these things by orders of magnitude. Legal dispensation requires climbing an Everest of red tape, which requires lots of expensive people working for years.

Now, add all these things together, and it quickly becomes apparent that the social cost of providing state of the art medical treatment to everyone who needs it, is going to bankrupt even the richest State. Half the citizens would be health care providers, caring for the other half, paid for in goods and services nobody would be left to produce.

(There's an interesting parallel with law enforcement. If we wish public safety at the same level we want national healthcare levels, half of the population would be cops watching the other half, and half our buildings would be prisons.)

In other words, there is going to be a point of diminishing returns, some point where a nation is providing all the medical care it can afford to provide *as an economy.* And inevitably, that point is going to be reached WELL before there's enough care to go around. The questions the become:
a) Are we as a nation providing as much *total* care as we can - i.e. is the market properly balancing healthcare demands with all other demands?
b) How is the available care being distributed? In other words, what distortions is the State introducing to the market for moral and/or political purposes?

In different ways, the US and Canada both subsidize health care. The economic result is that there is MORE of it than a hypothetical free market would provide. Since there STILL isn't anywhere near enough to go around, the US and Canada have made different allocation decisions. The US has elected a system that provides care on a timely basis. Since there plain isn't enough to provide to *everyone* on this basis, the US sorts the recipients by ability to pay. The poor (except for low-quality emergency care) lose out.

Canada has chosen to provide care on a "treat everyone equally" basis. The shortage of care under the Canadian system means that *everyone* waits a long time. In serious cases, the delay proves fatal. In other words, Canada sorts the recipients by *severity of problem*, an effective triage approach where those with the worst problems, rather than the poor, lose out.

But the point is, *someone* must lose out. Competent health care is always going to be scarce and expensive; that's the nature of the beast. No matter HOW we decide to distribute it, some receive (adequate) care and most do not.

So at this point, I'd like to ask how an "unbroken" system is going to distribute a resource that everyone needs, but only a few can receive enough of. In your ideal world, who gets it and who doesn't?

  
Dean Morrison



Posts: 216
Joined: Dec. 2005

(Permalink) Posted: Jan. 09 2006,04:08   

Flint.. seems like you have made a very good case for spending taxpayers money on preventative medicine: as the cost-benefit ratio is so favourable - and not leaving it to the 'free' market as you originally advocated.
Winners all round and lots of floating boats.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 09 2006,04:19   

Dean,

Quote
Flint.. seems like you have made a very good case for spending taxpayers money on preventative medicine: as the cost-benefit ratio is so favourable - and not leaving it to the 'free' market as you originally advocated.


Bear with me, but I have several problems with this statement, and I'd like to address them one at a time.

1) I did not advocate leaving anything to the 'free' market - I have been very very careful NOT to advocate any such thing on this thread. I have tried to point out that the market is in the business of making allocation decisions, and that different market distortions (economic policies) influence these allocations. I haven't recommended any particular allocation.

2) I did not make a case for spending taxpayer money on medical care. Making such a case would *necessarily* require that I specificy and justify what I would want LESS of, in order to get MORE medical care. Remember, recommending goodies for everyone is what politicians do. Economists must recognize that there are only so many goodies available, not nearly enough to go around, and that if we increase medical goodies, we must *decrease* something else. Politicians never say what we should have LESS of.

But a cost/benefit ratio cannot even be approximated without consideration of the costs. You may have interpreted (though I didn't say explicitly) that allocating more resources toward health care is a benefit. In fact, I think it could be regarded as a benefit, but no benefit comes without a cost.

And therefore, the ONLY reason you see "winners all around" is because you've carefully ignored the losers. But there HAVE to be losers. Money taken away from you by government to pay for someone else's health care, is money YOU don't have to spend on what YOU want. You might not consider this a loss, but most people will. You might consider it a loss worth taking, but it's still a loss.

  
Alan Fox



Posts: 1391
Joined: Aug. 2005

(Permalink) Posted: Jan. 09 2006,04:58   

Quote
You might consider it a loss worth taking, but it's still a loss.


No, it's an investment, just like a lottery ticket.

Seriously, I have been grumbling about paying high French social security since moving to France four years ago. but since I was diagnosed with cancer 4months ago, operated on within 6 weeks, and receiving all (I hope and believe) necessary aftercare, with the further assurance that my illness is 100% covered for life (as all long-term illnesses such as diabetes, etc.,) I am relieved and grateful to be in a "socialist" system. where healthcare is available quickly and efficiently to those that need it.

  
BWE



Posts: 1898
Joined: Jan. 2006

(Permalink) Posted: Jan. 09 2006,06:08   

Ok, I'm back  :)

Oh good, we've gotten into health care. First, one quick regression back to walmart:
Flint, I am trying to educate myself on this issue. Please correct me where I am wrong, -You are saying that there are trade offs with walmart's model and that the consumers who pay a lower price are recieving one end of that tradeoff and the communities that subsidize walmart through healthcare food stamps rent subsidies and the like (not to mention the employees themselves) are on the other end of that tradeoff. Is this an accurate analysis?

Then you are saying that the benefit/cost balances and it is up to us to change policy if we so choose, right?

In the course of determining the health of some local fisheries, we take small scoops off the ocean floor at different depths. Above 40 fathoms near harbors we are seeing vast ecosystems being over run by non-native species who are following the rules. I wouldn't want to haphzard a moral stance on this phenomena. It does have the capacity to effect our fisheries in a negative way but perhaps that is unimportant since we are doing a very nice job of destroying them without these invaders' help.  Hmmm. I'm not sure how that relates but I somehow feel like it does.

My point would be in the walmart example that the cost is born unequally by the community over the benefits of the lower prices. In fact, I would go on to say that, despite the fact that it is all, er, mostly, perfectly legal and in step with the rules, the simple act of conducting business by walmart is detrimental to many communities and therefore the tradeoff is not equal. If you follow that line of reasoning, then you would say that the rules should be changed? No? So, How much education do I need to arrive at that conclusion?
Now, how much education do I need to arrive at the opposite conclusion? The conclusion that despite using chinese manufacturing to avoid environmental regulations (ANd I am avoiding the issue of cheap labor, let's assume that markets seek out cheap labor and this this is a neutral issue) , despite shifting the costs of paying their employees onto the local communities, despite the loss of local business that does contribute to the communities' wellbeing by providing a living wage and healthcare, that walmart is playing by the rules, is succeeding, and is making stockholders money so it is in fact a good thing?

If education is the element that changes these factors then our education system is in the business of creating values and moral opinions I think. That, by the way, is an aside and not a discussion point.

--------------
Who said that ev'ry wish would be heard and answered
When wished on the morning star
Somebody thought of that, and someone believed it
Look what it's done so far

The Daily Wingnut

   
JimB



Posts: 16
Joined: Jan. 2006

(Permalink) Posted: Jan. 09 2006,06:27   

BWE,

Re: You don't like how Walmart affects local communities and you therefore wish to change the rules...

I think that Flint would agree with you that if you don't like Walmart and wish to curtail it's expansion, you should change the rules.

Clearly the communities into which Walmart expands have the capacity to understand what affects it'll have.  And yet, they ask Walmart to come in.

The citizens of those communities complain about the decline in the local businesses, the low wages that Walmart pays, but still go to Walmart to shop.

My small community has a Walmart.  Although I do not refuse to shop there, I generally take my business elsewhere (for multiple reasons).  Interestingly as I drive by the Walmart, it's parking lot is almost always full.  Clearly the citizens of my community do not share my opinion.

  
JimB



Posts: 16
Joined: Jan. 2006

(Permalink) Posted: Jan. 09 2006,06:41   

Alan,

I don't consider either health care insurance or lottery tickets and "investment".

I picked healthcare as an interesting economic issue because it is exceedingly difficult to divorce our emotions from logic for this type of problem.

It's all well and good to define coverage, costs, rationing, etc. for something like healthcare; but as soon as it's MY (or heaven forbid my CHILDREN's) health, my emotions will kick in and I'll want the best of everything!  Furthermore it's easy to say in those situations that it's not *fair* for me to have to bear the entire cost.

The show that I saw on healthcare indicated that the majority of the cost increases were caused by the cost of treatment for certain difficult problems (e.g. cancer).  If it wasn't for the new and exceedingly expensive (albeit effective) treatments for these diseases, then the increases would have been much lower.

Here in the US, I've noticed that the healthcare insurance, now has a lifetime benefits cap.  I don't recall seeing these 10 years ago (of course I might not have been paying attention).  I think these caps are designed to limit the insurers total liability in cases of cancer or other high costs health issues.

Regarding preventative care.  I'm certain some of it provides a net cost reduction.  The question is how much?  I would add though that the preventative care is typically not prohibitively expensive.  Most middle income families can afford it without too much problem.

Interestingly, I know couples that refuse to get their children vaccinated.  They don't want their kids to suffer from the potential side effects of vaccinations.  They also assume that since every other parent is getting their kids vaccinated that theirs will be OK.  The problem is that this has become a trend with greater and greater percentages not vaccinating their kids.  Once a critical threshold of non-vaccinated kids is reached, the population will be ripe for an "epidemic" of disease for which there is a viable vaccine (measels, mumps, rubella, etc.).  I'm sure these couples will be the first to complain when their kids suffer long term problems or death from their own short sightedness.

  
Dean Morrison



Posts: 216
Joined: Dec. 2005

(Permalink) Posted: Jan. 09 2006,07:35   

Flint: you may not have noticed the use of the word 'preventative' - the word that was carefully used when the issuse of healthcare was originally brought up.

Quote
2) I did not make a case for spending taxpayer money on medical care. Making such a case would *necessarily* require that I specificy and justify what I would want LESS of, in order to get MORE medical care. Remember, recommending goodies for everyone is what politicians do. Economists must recognize that there are only so many goodies available, not nearly enough to go around, and that if we increase medical goodies, we must *decrease* something else. Politicians never say what we should have LESS of.


Palliative medicine is, as we all agree, very expensive. Expenditure by society now on inexpensive preventative medicine is a worthwhile expenditure as it reduces future costs. The market is one way of allocating resources; but not the only one; and as it is no more able to excercise foresight than 'Natural Selection' - it is not neccesarily the most efficient one (Note that this is the use of the word 'efficient' in the sense that economists apply it to markets, and to which I alluded earlier).

Preventative medicine applied to communicable diseases should make the point even clearer to you. Market economics would never have been able to eradicate Smallpox. We are all benefitting economically (and medically) for not having this disease lingering on in the poor of the world. 'Goodies for everyone' as you say.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 09 2006,08:02   

BWE:

Quote
You are saying that there are trade offs with walmart's model and that the consumers who pay a lower price are recieving one end of that tradeoff and the communities that subsidize walmart through healthcare food stamps rent subsidies and the like (not to mention the employees themselves) are on the other end of that tradeoff. Is this an accurate analysis?

Close enough.

Quote
Then you are saying that the benefit/cost balances and it is up to us to change policy if we so choose, right?

Yes.

Quote
My point would be in the walmart example that the cost is born unequally by the community over the benefits of the lower prices.

Economic policies, as a rule, shift costs and benefits around. We discussed the progressive income tax a few pages back. The entire purpose of this strategy is to place the costs entirely on those who get no direct benefits, and benefit those who pay none of the costs. We do this because as a nation, we have made the political decision that government costs and benefits should be borne unequally.

Quote
the simple act of conducting business by walmart is detrimental to many communities and therefore the tradeoff is not equal.

I'm not sure I understand this. Benefits match costs, but are not borne by the same populations. A member of a community might consider the "WalMart effect" to be either beneficial or detrimental, depending. I don't think you'll find unanimous agreement.

Quote
If you follow that line of reasoning, then you would say that the rules should be changed? No? So, How much education do I need to arrive at that conclusion?

Which conclusion? I would argue that you need a good deal of education to determine HOW to change the rules, so that you don't suffer too many unexpected consequences. I don't think you need ANY education to determine WHETHER to change the rules. That's an emotional decision.

Quote
that walmart is playing by the rules, is succeeding, and is making stockholders money so it is in fact a good thing?

Any time you speak about a "good thing", you need to qualify this by specifying whom it's good for, and in what way. It's an exceedingly rare case where anything anyone considers a good thing (for him), someone else considers a bad thing (for him). IF WalMart's goal were to pay huge dividends to its stockholders (but it's not), then WalMart's tactics would be a "good thing" for the stockholders, in their opinion. But instead, WalMart keeps their costs to a minimum to keep their prices to a minimum, and their profit margin is industry average. This is a Good Thing in the opinion of those who shop there, while they are shopping. But many of the same people who shop there to get low prices, simultaneously lament the effects WalMart has on the rest of the community, which they consider a Bad Thing. NOT bad enough to shop elsewhere, of course...

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 09 2006,08:22   

Dean:

Quote
Expenditure by society now on inexpensive preventative medicine is a worthwhile expenditure as it reduces future costs.

"Worthwhile" is a value judgment. I agree that an ounce of prevention is worth a pound of cure. If I'm selling prevention, this is my sales pitch. If I'm selling cure, I place my emphasis somewhat differently...

Quote
The market is one way of allocating resources; but not the only one

This claim needs a bit more depth. I think you could argue that most policies are designed to modify supply and demand, so as to make the market serve new motivations. Some resources are indeed allocated outside any market mechanism.

Quote
it is no more able to excercise foresight than 'Natural Selection'

"The market" in this sense shouldn't be anthropomorphized. The market is an emergent result of zillions of discrete individuals making autonomous economic transations. To a very real extent, people make these transactions in anticipation of future trends and/or events. It would be quite accurate to say that "the market" is exercising foresight to the degree that the individual actors are doing so.

Quote
it is not neccesarily the most efficient one (Note that this is the use of the word 'efficient' in the sense that economists apply it to markets, and to which I alluded earlier).

That sense of efficiency had to do with how much information the market had about its transations, how transparently that information was available to all participants. And in this sense, the market is as efficient as available information (both quantity and quality) permit. Inefficiencies are introduced through secrecy, misinformation, and the sheer perverse refusal of the future to make itself known until it's too late to take advantage of it.

Quote
Preventative medicine applied to communicable diseases should make the point even clearer to you. Market economics would never have been able to eradicate Smallpox.

I don't know. I can tell you that my community offers vaccinations - through my doctor, my employer, or whatever. For a fee, I can purchase preventive medicine. Legally coercing people to be vaccinated isn't a market mechanism, though, I agree...

Quote
We are all benefitting economically (and medically) for not having this disease lingering on in the poor of the world. 'Goodies for everyone' as you say.

Yep, there are bargains out there to be had. We might regard disease, like pollution, as an economic externality. Communities band together to cooperate for the common good, which in practice means forcing someone to do or refrain from doing something in the interests of everyone else, whether they want to or not. We experience a constant community debate as to whether any action's benefits exceed the costs by enough to justify imposing the costs on (some) members of the community, who rarely wish to pay it.

  
Dean Morrison



Posts: 216
Joined: Dec. 2005

(Permalink) Posted: Jan. 09 2006,09:00   

Quote
Expenditure by society now on inexpensive preventative medicine is a worthwhile expenditure as it reduces future costs.


Quote
Flint replied: "Worthwhile" is a value judgment. I agree that an ounce of prevention is worth a pound of cure. If I'm selling prevention, this is my sales pitch. If I'm selling cure, I place my emphasis somewhat differently...


by society Flint - not individuals in a market. The market is blind to these universal benefits. A society might make the value judgement that such a treatment is worthwhile. If you want to sell a new preventative medical treatment to society - then it needs to have the funds to pay you. through taxation.

Quote

it is no more able to excercise foresight than 'Natural Selection'


Quote
Flint replied: "The market" in this sense shouldn't be anthropomorphized. The market is an emergent result of zillions of discrete individuals making autonomous economic transations. To a very real extent, people make these transactions in anticipation of future trends and/or events. It would be quite accurate to say that "the market" is exercising foresight to the degree that the individual actors are doing so.


'anthropomorhized'? - where is the human hand in 'Natural Selection' Flint? If anything you could accuse me of anthromorphizing 'Natural Selection' by making an analogy with ' the market'.
To the degree that the motivations and foresight of individual actors in a market might not allocate resources in an optimal way; even for an individual actor; then markets may be 'inefficient' (I'm not saying most are - just that this can happen). At which point it is legitimate for a government to step in and allocate some of societies resources to an issue for the common good.


Quote
Preventative medicine applied to communicable diseases should make the point even clearer to you. Market economics would never have been able to eradicate Smallpox.


Quote
Flint replied: I don't know. I can tell you that my community offers vaccinations - through my doctor, my employer, or whatever. For a fee, I can purchase preventive medicine. Legally coercing people to be vaccinated isn't a market mechanism, though, I agree...


There is a concept in epidemiology of 'herd immunity' - think of it as being worth your while to immunise someone else so they don't infect you. We can't rely on noble-spirited people to do this because others will be 'market-driven' to cheat, and not contribute (or bother to get themselves immunised if herd immunity starts to take effect).
To ensure no-one cheats we institute universal taxation for public goods.

Yes we do indulge in community debate on the nature of the community goods we should pay for, and the who should pay how much from them.

A 'Laissez-faire' or 'free market' position is one that says we should minimise spending on community goods and services, and minimize the contribution of the wealthy.

It is not an inevitible conclusion drawn from the study of economics; it is a particular (and 'value-laden' ) viewpoint.

Which is why I objected to you introducing it into  Tara's thread about the intelligence of her friends and their acceptance of evolution.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 09 2006,09:38   

Dean,

I think we're mostly communicating, but in some cases just missing. Probably my fault...

Quote
If you want to sell a new preventative medical treatment to society - then it needs to have the funds to pay you. through taxation.

Why necessarily through taxation? If I invented a preventive treatment that was guaranteed effective, and I sold it for an affordable price, would you buy it?

Quote
To the degree that the motivations and foresight of individual actors in a market might not allocate resources in an optimal way; even for an individual actor; then markets may be 'inefficient' (I'm not saying most are - just that this can happen). At which point it is legitimate for a government to step in and allocate some of societies resources to an issue for the common good.

Not everyone would agree with you here. Yes, lack of information and various structural rigidities make the market less efficient. But government action introduces LOTS of inefficiency no matter WHAT it does. So efficiency really isn't the issue at all here. What's at issue is (a) whether something is beneficial enough for the "common good" to justify coercion by the State; and (b) how we determine where that point lies. But this is the content of politics and political science since before recorded history. Just what is the "optimal" way for a community to make decisions that affect that community, so that we approximate some "ideal" midpoint between the community inferfering too much with the life of the individual, and the individual interfering too much with the well-being of the community.

Quote
There is a concept in epidemiology of 'herd immunity' - think of it as being worth your while to immunise someone else so they don't infect you.

I'm well aware of it. It's a good argument for involuntary vaccination.

Quote
A 'Laissez-faire' or 'free market' position is one that says we should minimise spending on community goods and services, and minimize the contribution of the wealthy.

Really? Do you have a link? My notion of "laissez faire" is that the market should not be regulated. "Laissez faire" means "let do", and implies that anything goes. It does NOT necessarily imply that there is no government or no taxation, nor does it specify anything in particular about the poor or the wealthy. It just says that the government won't act as the mediator in contract enforcement.

Quote
It is not an inevitible conclusion drawn from the study of economics; it is a particular (and 'value-laden';) viewpoint.

Absolutely. I am most emphatically NOT a proponent of "laissez faire" economics. However, I'd like to point out that truly elementary microeconomic analysis presumes such a system, much as elementary physics presumes no friction or boundary effects. These are simplifying assumptions to clarify certain principles; they aren't reality.

Quote
Which is why I objected to you introducing it into  Tara's thread about the intelligence of her friends and their acceptance of evolution.

I don't understand this accusation. What I objected to was an economic analysis that carefully assumed away and ignored ALL of the benefits, to misrepresent a situation as a "pure" cost. This kind of "analysis" is either profoundly dishonest, or profoundly ignorant. So I tried to point out that for every benefit there are costs (to someone), and for every cost, there are beneficiaries. Economics consists of identifying both the costs and benefits, and the economic actors experiencing them.

In the process, I seem to have encountered some poorly-thought-out but nonetheless (and perhaps *therefore*) intensely-held political positions. To the point where even *mentioning* that there are benefits purchased with costs, sets some people off like fireworks. Someone on this thread actually said (and quite evidently believes) that anyone who shops at WalMart does so out of pure abject ignorance and for no other reason!

  
Alan Fox



Posts: 1391
Joined: Aug. 2005

(Permalink) Posted: Jan. 09 2006,10:00   

JimB, I'm English, I was being ironic :)

Mind you, life is a lottery, and whether to "invest" in healthcare is also a lottery for an individual or a community. Being part of a caring community is less of a lottery than going it alone, i suggest.

  
Alan Fox



Posts: 1391
Joined: Aug. 2005

(Permalink) Posted: Jan. 09 2006,10:12   

Flint asks

Quote
If I invented a preventive treatment that was guaranteed effective, and I sold it for an affordable price, would you buy it?


If you knew that alcohol and tobacco shortened many people's lives would you ban them, knowing the loss of income from reduced taxation, which might otherwise contribute to additional healthcare.

BTW, I agree with Dean,  preventative healthcare, especially dietary advice and education within the public school system, could have huge benefits to the US economy.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 09 2006,10:27   

Alan Fox:

Quote
If you knew that alcohol and tobacco shortened many people's lives would you ban them, knowing the loss of income from reduced taxation, which might otherwise contribute to additional healthcare.

Well, as I recall, the US tried to ban alcohol. The effects of that effort were regarded as profoundly negative on society, MUCH worse than the alcohol ever was, and indeed a good argument can be constructed that those effects are still with us. Prohibition lasted 12 years, easily long enough for crime to get organized and STAY organized.

However, you are correct that while we wouldn't eliminate smoking or drinking, we WOULD eliminate the excise taxes imposed on these activities. The savings that consumers enjoyed in lowered taxes, by experience, were more than offset by lowered product quality. Of course, it's an ill wind that blows nobody good: organized crime made a fortune. This was the single most profound economic effect of prohibition - and also an effect *completely unanticipated* by those who thought they were doing everyone a favor.

After all, the demand never diminished. The attempt was made to cut off the supply. This invariably causes prices (and profit margins) to skyrocket. When profits are astronomical and not obtainable legally, then they are obtained illegally. Always. Our current "war on drugs" makes drug dealers so wealthy they don't know how or where to store all the money. These dealers also contribute heavily to anti-drug politicians; they know the score even if do-gooders don't get it.

If you're asking for my personal values, I would require that everything known about the health effects of smoking and drinking be prominently displayed so anyone curious about them couldn't possibly miss them. Then I'd let people make whatever informed decision they saw fit.

Quote
I agree with Dean,  preventative healthcare, especially dietary advice and education within the public school system, could have huge benefits to the US economy.

In general, what you're talking about is information. I think most people will take preventive steps if they're aware of them, and if those steps aren't too inconvenient. And I also agree that preventive health care however achieved would increase per capita productivity significantly.

But once again, the question isn't whether such care would increase productivity, reduce sick time, etc. The question is whether others *ought* to have the authority to impose "wise" health choices on you. And that is not an economic issue at all. That goes back to the philosophical tradeoff between obligation and liberty. We all owe the community something for the value the community provides. But HOW MUCH do we owe, and how do we DECIDE how much we owe?

  
Alan Fox



Posts: 1391
Joined: Aug. 2005

(Permalink) Posted: Jan. 09 2006,10:49   

Quote
Then I'd let people make whatever informed decision they saw fit.


Then why not cocaine, or heroin. (BTW if anyone gets offered morphine as a painkiller after, say, an operation, my advice is say "yes please"). Tax income, no policing of drug crime, pure product with controllable doses and no cutting with lethal stuff such as scouring powder. Prohibition was a disaster, control and taxation works with alcohol and tobacco; why not?

  
BWE



Posts: 1898
Joined: Jan. 2006

(Permalink) Posted: Jan. 09 2006,10:53   

Tragedy of the commons. Of course people shop there. You know, Game theory study, can't find it but I'll post it when I do: American kids almost always tended toward defection while European kids chose cooperation more of the time. I know this is opening my flank but my point is simply that economics is of course amoral but a moral choice, one that would choose cooperation in the prisoners' dilemma (note how I define moral choice) would choose to change the rules somehow, anyhow, to force walmart to change business practices even at the cost of raising prices. Their model is defection. We'll take it where we can even though we both could lose in the long run. (It's also kind of an imperial policy - the economy is based on sucking the smaller communities then moving on when they are no longer sources of wealth)

--------------
Who said that ev'ry wish would be heard and answered
When wished on the morning star
Somebody thought of that, and someone believed it
Look what it's done so far

The Daily Wingnut

   
Alan Fox



Posts: 1391
Joined: Aug. 2005

(Permalink) Posted: Jan. 09 2006,10:59   

Perhaps it all boils down to whether we choose theft or toil?
Indeed, if we can choose as individuals.

  
JimB



Posts: 16
Joined: Jan. 2006

(Permalink) Posted: Jan. 09 2006,11:13   

My personal perception of theft, is that it is the economic equivalent of biological parasitism.  The host is perfectly capable of surviving without parasites/theft.  Furthermore, it damages the host and only benefits the parasite/criminal.  If the host is too overburdened by parasitism/theft, then it dies/collapses - taking the parasites with it.

The toil economy works more like a biological organism in which cells/individuals cooperate for mutual benefit.

  
Alan Fox



Posts: 1391
Joined: Aug. 2005

(Permalink) Posted: Jan. 09 2006,11:32   

I think you may be a closet socialist, JimB. :D

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 09 2006,11:41   

Alan Fox:

Quote
Then why not cocaine, or heroin. (BTW if anyone gets offered morphine as a painkiller after, say, an operation, my advice is say "yes please"). Tax income, no policing of drug crime, pure product with controllable doses...

In other words, legal with reasonable regulation (to regulate perhaps age of purchase, quality of ingredients, etc.) Yeah, you'd get my vote.

JimB:

Quote
My personal perception of theft, is that it is the economic equivalent of biological parasitism.  The host is perfectly capable of surviving without parasites/theft.  Furthermore, it damages the host and only benefits the parasite/criminal.  If the host is too overburdened by parasitism/theft, then it dies/collapses - taking the parasites with it.

Exactly so. This is called the "free rider" effect. Where everyone is honest, nobody needs a lock. A single, or a very few, thieves have it made. But as theft becomes more commonplace, people start taking steps to make it harder to do - make it more expensive. Same with WalMart and the local community - WalMart's health requires a healthy community, where customers come from. So WalMart can't afford to damage its host too much without damaging itself.

BWE:

Where everyone tries to get more than everyone else out of a community resource, the entire community loses. Many ecologists are convinced that by breeding like bacteria, we have already exceeded the steady-state carrying capacity of the planet. The known result of overbreeding your resource base is a population implosion. What people have been "smart" enough to do is exploit the entire planet, and switch to new resources as prior ones are depleted.

This strategy has two effects: it allows us to spend longer building up to a higher total population, and it guarantees a maximally vicious implosion when the time comes (because the resources we've spent took 10^8 years to accumulate, and will take that long to recover). We have treated the entire planet as "the commons" and we've been engaged for a couple of hundred years in desperate haste to consume all we can of it before anyone else gets there first.

Some days, I feel truly sorry for our grandchildren.

  
JimB



Posts: 16
Joined: Jan. 2006

(Permalink) Posted: Jan. 09 2006,11:43   

Alan,

When I was a teen I read about socialism.  At that time, I thought it sounded like a utopian society, "from each according to their ability, to each according to their need".

It sounded like how people *should* treat each other.

Then my father pointed out that in every case it's been tried in large scale societies, everyone quit working.  Why work when you could not work and still get what you need from others.  And some of these societies died out from it!

Now I still think it *sounds* utopian but extremely impractical.  Plus, I'm now enjoying the capitalistic fruits of my own "from each according to his ability" (education et al).  I'm now firmly ensconced in my capitalist home :) !

  
Alan Fox



Posts: 1391
Joined: Aug. 2005

(Permalink) Posted: Jan. 09 2006,12:05   

Quote
I'm now firmly ensconced in my capitalist home :) !


Me, too!

  
Dean Morrison



Posts: 216
Joined: Dec. 2005

(Permalink) Posted: Jan. 09 2006,12:21   

I' glad we're bringing a few biological analogies into the debate on economics. I think there is some room for 'crossover thinking' although there is also the possibility of overstretching.
As for capitalism/socialism - it really is a continuum. I'm sure that there are libertarians in the states who consider George Bush to be a closet socialist. (After all he's spending a lot of the taxpayer's money - even if it is on war).

It's just that some of us would like a leveler playing field than others...

I'm in my capitalist home but my (mutual) building society own half of it.

;)

  
haceaton



Posts: 14
Joined: Dec. 2005

(Permalink) Posted: Jan. 10 2006,13:59   

Flint:
Quote
From what I have read about WalMart (quite a bit), you are simply wrong. WalMart makes lots of money. What do they DO with that money? Do they pay their upper management exorbitant salaries? No. Do they pay out high dividends to their stockholders? No. Do they pay decent wages or bonuses to their rank and file? No. So where DOES the money go? By observation, WalMart converts their cost savings (however achieved) into lower prices. By comparative industrial standards, they aren't doing this to get personally rich. Their profit margins aren't exceptional. So you have fallen one step short here.


Really, are you that naive? It doesn't take a genius to realize that *margin* is not profit. Margin times volume = profit. Walmart, like all good profit making enterprises seeks to maximize total profit. They do this by trying to find the peak in the total profit curve. Evidently, they believe this peak lies at lower prices than they have yet been able to achieve. Bully for them, they may well be right. I think many other capitalist (e.g. record companies) drive their prices way too high just for the huge margins and make themselves poorer in the process.

Bill Gates once had a wet dream where he would monopolize the market for banking and transaction clearing software so he could make virtually all commerce clear through servers that he would control. I'm sure he intended to charge very low per-transaction clearing fees, while netting a few trillion profit anually. This is no joke, he really believed it. He underestimated his monopoly power and essentially got nowhere with this plan. But at least he wasn't stupid like you and thought the way to achieve massive wealth was by maximizing his profit margin. This despite the fact that he has monopoly power within his market and does use outsized margins to his advantage in his main business.

Really Flint, for a guy that argues that the rest of us are economic dolts, you're looking pretty pathetic. Since you're interested in the subject of Walmart and have read, but misunderstood, what they were up to, let me give you a highly simplified tutorial:

(1) Maximize corporate income (volume x margin)
  (a) raise volume through lower prices
  (b) use whatever techniques necessary to keep the best margin possible while doing this. Strategies
       include: (i) economies of scale (ii) market power (iii) government subsidy (iv) theft (v) fraud
       (vi) conspiracy.
(2) Pay minimum taxes.
  (a) Use creative "accounting" to show minimal profits to the IRS, while a different creative "accounting"
        to show shareholders maximal profits.
  (b) Obtain wherever possible tax credits, deferments, etc.
(3) Never, ever pay a dividend. Dividends are taxed and it is challenging to give them only to the "right" shareholders.
(4) Do not pay employees decent wages or give any benefits you can avoid. These just raise costs.
(5) Do not pay management oversized salaries.
  (a) salaries are taxed as income, you don't keep as much this way.
  (b) Not all of management "deserve" to dip into the money stream. Only a special few may
        drink from the well.
(6) Walmart's expanding profits (NOT MARGIN; PROFITS) will result in rising market valuation - this is where the real money is made.
     (a) Favorable tax treatment for "capital gains"
     (b) Unlimited upside, only requires a greater fool to pay a higher price. Fools are born at an
          alarming rate, so this is a slam-dunk.
(7) Use stock options to inflate the float while directing the new shares to the special few. Ordinary shareholders
     will fall for this dilutional sucker-punch every time.
(8) Use the magic of every share of stock is worth what the last trade price (i.e. the excepted standard for stock
    valuation) to convince bankers that your newly minted stock is worth a bundle.
(9) Borrow as needed against this "equity".
(10) Get all offspring listed in Forbes World's Richest People.
(11) Lobby like #### to repeal the inheritance tax so the family can keep it all in perpetuity.
(12) Lather, Rinse Repeat.

This is why the Waltons are filthy rich and you are not. You have no idea how the game is played. Seriously, if you are wondering why the energy and chemical moguls are lobbying hard for trading pollution credits, then you really ought to ask yourself "What do they know that I don't know ?" Instead you think you're smarter than them. Nothing could be further from the truth.

  
BWE



Posts: 1898
Joined: Jan. 2006

(Permalink) Posted: Jan. 10 2006,14:32   

And that is why we don't need a degree in economics to make judgements in economic arenas, because economic choices are largely moral choices and, though you can abstract them into an academic field and paint those moral choices as amoral and descriptive versions of those moral choices, in the end our economic activity boils down to moral choices. Walmart is an absolutely beautiful illustration of that fact for the reasons listed above.

--------------
Who said that ev'ry wish would be heard and answered
When wished on the morning star
Somebody thought of that, and someone believed it
Look what it's done so far

The Daily Wingnut

   
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 10 2006,16:36   

haceaton:

Quote
It doesn't take a genius to realize that *margin* is not profit. Margin times volume = profit. Walmart, like all good profit making enterprises seeks to maximize total profit. They do this by trying to find the peak in the total profit curve.

Sigh. Yes, I understand.

Quote
Evidently, they believe this peak lies at lower prices than they have yet been able to achieve. Bully for them, they may well be right.

So the question is, could WalMart increase total profits by raising their prices? After all, most of what they sell is commodity items, and commodity items tend to sell on price alone. Which means you don't need to undercut your competition by more than a little bit to get all the sales.

My perception is that WalMart has a more complex goal structure than simply maximizing profits. They're aware that this goal, all by itself, is highly impermanent. If we layer on ancillary goals like maintaining acceptable (but not highest possible) profit levels for as long as possible, strategies change.

Quote
But at least he wasn't stupid like you and thought the way to achieve massive wealth was by maximizing his profit margin.

You seem to be falling into the Sir Toejam mire of assuming anyone with whom you disagree is stupid (or would you allow ignorant in addition?) I thought on one of my posts earlier, I spoke of spending all of economics 101 creating and solving the total profit curve, to find the ideal price such that either lowering OR raising the price reduced total profits. Do you sincerely feel I don't follow this?

I think we agree that WalMart's total strategy is intended to both solidify and increase their market position, not to take the money and run.

Quote
Seriously, if you are wondering why the energy and chemical moguls are lobbying hard for trading pollution credits...

Let me guess. It's because they are EVIL BASTARDS out to line their pockets by abusing their power at the expense of us poor schmucks who couldn't vote in an honest Congress because the Big Guys have all the politicians in their pockets, and are manipulating government regulation so that it protects them and their profits at our expense. Am I getting warm?

Quote
Really Flint, for a guy that argues that the rest of us are economic dolts, you're looking pretty pathetic...You have no idea how the game is played.

Golly, I hope you feel better now. I understand SO MUCH MORE than I did before your fine little performance. You may pat yourself on the back and go enlighten some other pathetic ignoramus now. I won't mind. If you want to play some more after you grow up, that's fine too. You clearly have nothing to learn from anyone.

BWE:

Quote
And that is why we don't need a degree in economics to make judgements in economic arenas

But nobody said we did. What you would learn in economics is how to do things like set product price and quality so as to maximize profits. And to analyze costs and benefits so that you are not taken by surprise.

Quote
in the end our economic activity boils down to moral choices.

Yes, but the moral choices made by a very large number of actors can be generalized enough to make fairly accurate predictions in some areas.

We are still not communicating. Consider: The odds of rolling snakeyes can be calculated, regardless of whether gambling is considered moral. There is a qualitative difference between the optimal strategy for playing the game, and whether the game itself *ought* to be played. You seem to be trying to make the case that the best way to understand economics is to attend church so as to avoid sinful differential calculus.

Quote
Walmart is an absolutely beautiful illustration of that fact for the reasons listed above.

But again, we are talking about different things. Even assuming that WalMart follows haceaton's implicit dictum that the more cynical he is, the more accurate he is likely to be about how the world works, and that assuming "the enemy" (everyone else) is as dishonest as they can get away with, supply and demand still operate. Haceaton apparently believes that Adam Smith missed the boat entirely, and that Al Capone was the real economist. But that doesn't make it true at all. Economics is a world of costs and benefits, where more of something means less of something else. An economy is where zillions of individual transactions determine relative values of everything. WHY those transactions are made really don't matter that much. If you wish to believe that people buy brand X canned peas for moral reasons, fine. Economists will note with amusement that the most moral peas ALSO tend to have the lowest price, all else being equal.

As these discussions continue, it becomes clear that WalMart, probably by their very success, has triggered deep-seated political instincts. You and haceaton seem so fanatically convinced that WalMart is evil that any effort to understand their business model that does NOT continuously rave and drool against the Unclean is regarded as either hopelessly uninformed (by haceaton), or outright immoral( by you).

But WalMart is nonetheless an economic actor, and their policies do in fact have economic effects beneficial to some and harmful to others. I think it's kind of sad that fanatacism has made this simple observation so difficult for you two to understand or accept.

To you, all I can say is bless you, brother. May you live in righteousness. To haceaton, I can say I'm glad I don't live in the world of his imagination, where he tries to puff up his withered soul by living among terrible enemies of whom he assumes the worst.

  
haceaton



Posts: 14
Joined: Dec. 2005

(Permalink) Posted: Jan. 10 2006,18:33   

Quote
Do you sincerely feel I don't follow this?


Certainly you must have in EC101. Why you dropped the ball in order to criticize my position that the Walmart owners are out to maximize their wealth, I don't know, so I appologize for calling you stupid. But the argument you made relied on this error so you should either make a good argument or concede that Walmart is run to make the most money.

Quote
So the question is, could WalMart increase total profits by raising their prices?


Maybe, but I would say that they (Walmart management) doesn't think so. Since you disagree, what do you think is their motivation for low prices that makes them break the law, act unethically, etc.?

I would argue that the evidence points to a desire to make money; Sam Walton amassed an enormous fortune and this did not happen by accident or dumb luck, it was a systematic effort on his part; and he's surely taken better advantage of "the system" than Al Capone ever did or could.

I'm not fixated on Walmart, it was an example that you and others were using and I felt you were mis-characterizing. So I added my two cents. The same arguments can be made for many large corporations.

As for evil, no I don't think Walmart or the people that run it are evil. Greedy, yes. Unethical, yes. But this sort of greed and ethical lapses is very common in the business world - it is far from unique to Walmart. As you point out Walmart is vilified because of its success, not because it is peculiarly unethical. Heck, it probably even started out as a totally ethical, honest enterprise.

I would describe the pathology more like a drug addiction than "evil". Because the punishments are usually light to none and there is still the thrill of more money especially when you have too much, so the corporate tycoons really can't help themselves. I'd like to think I wouldn't do the same in their shoes, but it's easy to see how it happens.

Certainly there are many good, honest and ethical politicians. It's just that there are a lot more who aren't. The same with corporate executives. So we end up with laws that strongly favor the wealthy. I have no illusions that it will ever be any different, but I make it a point to try to "do the right thing" in politics anyway. I do believe we have a seriously broken system where corporations have the rights of citizens (free speech, etc.) without the responsibility (no such thing as corporate three strikes you're out or corporate life-imprisonment). It is what leads to the light punishments, resulting temptations and wealth addicted corporate chieftans.

Let me say two things before I go on: (1) I respect most of what you've said in on-topic (i.e. TOE) posts on PT and (2) I agree completely with:
Quote
Some days, I feel truly sorry for our grandchildren.


It surprised me that you said this because nearly all of economic theory seems to be based on the idea that unbounded growth is a necessity.

Quote
the Big Guys have all the politicians in their pockets, and are manipulating government regulation so that it protects them and their profits at our expense.


Hey that's pretty close! They may not have the politicians in their pocket, but they would like to. That is why they spend their hard earned money lobbying: to buy influence. [ What do you think paid lobbying is for?] Why do they want rules for pollution credit trading? Indeed it is to protect their profits. If they absolutely can't pollute then their costs will rise, their margins will shrink, and their market will shrink too. They won't make as much money so it is "not in their interest" to not pollute. The environmentalists don't want any pollution, and they have bought some influence too. So it's much "better" for the corporate mogul who wants to protect his profits to have predictable costs in the form of pollution credit trading than to run the risk of real severe and unpredicatable penalties in criminal or tort claims. The good news is that there are some ethical people running some corporations (Toyota comes to mind) that instead want to invest in finding ways to reduce pollution even though it reduces their profits. But you can identify those companies that want to pollute instead by how they lobby the congress.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 11 2006,03:44   

haceaton:

Quote
Certainly you must have in EC101. Why you dropped the ball in order to criticize my position that the Walmart owners are out to maximize their wealth, I don't know, so I appologize for calling you stupid. But the argument you made relied on this error so you should either make a good argument or concede that Walmart is run to make the most money.

Multiple comments seem called for here.

First, it can reasonably be said that ALL for-profit businesses are out to maximize their wealth as a primary goal. I don't know why you would consider this a bad thing per se. According to even the most basic notions of the market, for-profit businesses are presumed to be attempting to increase their wealth. As Robert Townsend wrote in Up The Organization, if you're not in business for fun or profit, what are you doing here?

Second, I can't see why you refuse to accept that businesses (including WalMart) can have no other motivations. As you point out, they pay fairly low dividends, although they could pay much more. So the owners aren't taking advantage of dividends to maximize their wealth. How about the price of the stock? Well, no, WalMart stock is selling for 10% less than it did 5 years ago. They are *losing* money on the stock price.

Now, I suppose you might argue that WalMart's owners are stupid. They could easily extract a great deal more personal wealth out of their company, at least in the short run. Yet they do not. Perhaps their goal is to maximize their wealth over a much longer timespan? But doing this will entail reaching some kind of equilibrium with the communities where they operate...

(Incidentally, I've seen economic analyses indicating that WalMart's low-price policies have had a measurable effect on national inflation rates. A positive thing for most of us, even if it is ALSO positive for the major shareholders.)

Quote
Maybe, but I would say that they (Walmart management) doesn't think so. Since you disagree, what do you think is their motivation for low prices that makes them break the law, act unethically, etc.?

With a business as large as WalMart, I'd take this on a case-by-case basis. My reading (YMMV certainly) is that most of the cases aren't WalMart corporate policy, and most have been zealousness on the part of individual store managers. But it also seems that corporate headquarters hasn't been aggressive in stopping some of the improper practices. And so I have been arguing from the start that regulation is a necessity. Certainly the motivation to make money is uppermost, and store managers are evaluated on that basis. In a larger sense, business success is evaluated on that basis, and the failures go broke and vanish. The motivation to bend or break rules and cut corners is strong. (Would you fall over backwards in astonishment if news were to come out that Toyota has been cooking the books?)

Quote
As for evil, no I don't think Walmart or the people that run it are evil. Greedy, yes. Unethical, yes. But this sort of greed and ethical lapses is very common in the business world - it is far from unique to Walmart.

I regard it as inherent in any capitalist system, considered generally as any system where the more money one makes, the more one gets to keep. These aren't "lapses" so much as they are a continuous battle between those who make and enforce the rules, and those who seek ways to circumvent the rules. A story is told of a robber baron who called in his lawyer and said "Find me a legal way to do this." And the lawyer replied "But sir, you can't do that, it's illegal." And the robber baron replied, "That's not what I asked."

Quote
As you point out Walmart is vilified because of its success, not because it is peculiarly unethical. Heck, it probably even started out as a totally ethical, honest enterprise.

Perhaps where we differ here is, I regard it as being as honest and ethical as (say) General Motors, or Sears or any other large business. And a LOT better than the Enrons of the world. I sincerely believe WalMart (and others) top management wishes to make a good-faith effort to keep integrity levels at or just above minimally acceptable. I don't think Sears achieved market dominance through underhanded management, nor lost it by becoming honest.

If you revisit your list of "how the real world works", you'll notice that nowhere do you even mention customers or competitors.

Quote
I make it a point to try to "do the right thing" in politics anyway. I do believe we have a seriously broken system...

Well, I'm not trying to dispute your political preferences. I just don't believe there ever has been a "golden age" when politicians or businesses were more honest, and in fact my reading of American history is that there have been periods of truly boggling corruption. If you'd been alive 100 years ago and known what was going on, you'd have had apoplexy. Of course, the tycoons ran the media, so you wouldn't have known.

Quote
I respect most of what you've said in on-topic (i.e. TOE) posts on PT

Do you post on PT also?

Quote
It surprised me that you said this because nearly all of economic theory seems to be based on the idea that unbounded growth is a necessity.

We seem to approach this from different angles. Economic theory as I understand it provides tools for analysis of a shrinking, steady, or growing market. Growth isn't a necessity, but it has implications different from the other conditions. I'll observe that fertility is inversely proportional to living standard; if ALL nations could consume at the rate the US is consuming, perhaps the birth rate would go down more voluntarily?

Quote
Hey that's pretty close!

Imagine my surprise.

Quote
Why do they want rules for pollution credit trading? Indeed it is to protect their profits. If they absolutely can't pollute then their costs will rise, their margins will shrink, and their market will shrink too.

Um. No such thing as "absolutely can't pollute". There are only relative costs. Politicians aren't about to shut down the major employer in a community. The problem is wider: If running a non-polluting operation is prohibitively expensive (which it is for some sorts of manufacturing), then the level of polluting one can get away with influences the price of the product, which influences market share. Often, the competition is in China, where pollution levels are ghastly, and the Yellow River runs with sludge the half the year when it runs at all. Combine this with Chinese peasants working for peanuts, and its very hard for American businesses to compete. Competitive failure costs lots of American jobs and industries, and politicians are sensitive to this. Some balance needs to be struck between allowing pollution, and losing the businesses (which causes the people to elect the opponent!;).

Quote
The good news is that there are some ethical people running some corporations (Toyota comes to mind) that instead want to invest in finding ways to reduce pollution even though it reduces their profits.

But other tradeoffs must always be made. Perhaps I'm misunderstanding you, but you seem to be implying that the decision to pollute/break laws/act unethically implies a character trait without economic ramifications. But I doubt people buy Toyotas because corporate headquarters is populated by good citizens. Instead, they buy Toyotas because they are competitively priced in relation to their level of quality.

Now, I agree that the example set by Toyota and others shows that it CAN be done. But of course, Toyota is out to maximize their profits as well, and Toyota lobbies powerfully at local, state and national levels. And Toyota employees are paid less in both upfront wages and indirect benefits than GM employees. And Toyota's primary owners are very rich. And Toyota aggressively seeks favorable tax treatment. In my district, a new Toyota plant just opened that was enticed to locate here in exchange for *bonuses instead of taxes*.

(Incidentally, diluting stock as you described is a very serious SEC no-no. Recently the accounting rules were changed (admittedly over stuck-pig protests) to consider options differently, as actual stock. Keeping two sets of books, one for the SEC and one for the public, lands you in jail very #### quickly. Many other items on your list are "heads I win, tails you lose" things - if they pay high dividends, they are ripping us off. If they don't pay any dividends, they're ripping us off. If they pay enormous salaries to their top brass, they're ripping us off. If they don't they're ripping us off.

As for keeping wages in line with skills, this is problematic. Most WalMart jobs are unskilled or semi-skilled; nearly any retard can do them. This is in the nature of retailing. But WalMart must STILL compete for such people with other employers; they get no "first dibs" on anyone.)

  
BWE



Posts: 1898
Joined: Jan. 2006

(Permalink) Posted: Jan. 11 2006,06:00   

Quote
[QUOTE]And that is why we don't need a degree in economics to make judgements in economic arenas


But nobody said we did. What you would learn in economics is how to do things like set product price and quality so as to maximize profits. And to analyze costs and benefits so that you are not taken by surprise.[/QUOTE]

Quote
What’s annoying is that in some fields (like economics, politics, psychology, etc.) we have the public perception that “opinions are like assholes” and no amount of education or experience can lead to a better understanding of these topics than can be assimilated in kindergarten.

So I’m amused at the irony here. Tara Smith has friends who are intelligent, educated (but not in evolution), and still “know better” than to “believe in evolution.” And here we have a response from someone intelligent, educated (but not in economics) who still “knows better” than to “believe in” trickle-down economics. Without knowing even what it is. Sound familiar?


http://www.pandasthumb.org/archive....t-67491

Quote
So does this mean economics remains beyond human comprehension? Is this why economists are said to be paid twice, once to tell you what will happen and again to tell you why it didn’t? But nonetheless, you tell me that “a layman can grasp the impact of some basic economic policies.” Too bad economists can’t model it, despite decades of tweaking. Maybe they should go out and poll some laymen?


http://www.pandasthumb.org/archive....t-67514

The reason I didn't tell you my particular morality before was that it wasn't important. Yours is equally valid. I thought you were saying that making polital economic decisions requires an academic understanding of economics. I work for that big bad gov't and I can tell you first hand that enough money can get a report that took me two years of research to create buried. Fisheries are an economic area where there is a lot of money to be made. I am an expert in that area and I can tell you we done raped the sea. Most of the fisheries we have left are heading toward the precipice. But have no fear! Farm raised salmon are here! Leaving behind a 12 mile swath of dead seafloor, breeding with native stock and weakening the genetic capacity to withstand certain obsticles to reproduction and many more lovely things that would take too long to explain. But economists are writing reports about how economic theory shows that our research doesn't matter. We are making political decisions at the request of 4 or 5 people with large financial risks at stake. The list goes on and on and on and on but those people are making moral decisions based on their morality. That is why they are buying the politicians. That seems right for them. Unfortunately for me (and this is where I leave my original point) one of them is worth a few million of me because I can't buy influence. I have to organize a group of people and petition and show our elected officials that I can get them elected through my unfunded PR efforts. That is an aside though. Of course there are tradeoffs. Of course economics is legitimate. But you don't need to know a whole lot about economics to make reasonable economic choices.

--------------
Who said that ev'ry wish would be heard and answered
When wished on the morning star
Somebody thought of that, and someone believed it
Look what it's done so far

The Daily Wingnut

   
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 11 2006,06:20   

BWE:

Quote
I thought you were saying that making polital economic decisions requires an academic understanding of economics.

I guess I need to clarify this. You don't need any understanding of economics at all to make economic policy, but you DO need this understanding to predict what your policy might lead to. Politicians know what their constituents want, and they do it. Often enough, they're well aware that the actual results will probably be, and that the results are the opposite of their stated intent.

Quote
But economists are writing reports about how economic theory shows that our research doesn't matter. We are making political decisions at the request of 4 or 5 people with large financial risks at stake.

Yeah, too true. These economists aren't hired to explain what will happen, but rather to produce plausible deniability in support of short-term profits. Yes, large amounts of money are at stake, along with different time frames and commons issues.

Quote
The list goes on and on and on and on but those people are making moral decisions based on their morality.

Maybe this is a semantic issue. I'd say these people are making monetary decisions based on their immediate self-interest.

Quote
That is why they are buying the politicians.

They aren't buying morality or immorality, they are making a transaction they regard as an investment. Contribute $X to a political campaign, get policies worth $50X in exchange. For them, a bargain.

Quote
But you don't need to know a whole lot about economics to make reasonable economic choices.

If by "reasonable economic choices" you mean purchasing decisions, this is true. If you mean setting price and quality of your product, this is not true. If you mean making economic political policy, economics can help you determine financial impact on specified actors.

  
haceaton



Posts: 14
Joined: Dec. 2005

(Permalink) Posted: Jan. 11 2006,07:45   

Quote
First, it can reasonably be said that ALL for-profit businesses are out to maximize their wealth as a primary goal. I don't know why you would consider this a bad thing per se.

I'm going to take this that you have conceded the point that Walmart's strategy is to maximize its wealth and that minimizing prices is a tactic used to achieve it.

I never said that maximizing wealth is a bad thing. If you bound the maximum by ethical consideration then there is nothing wrong with it. When ethical considerations are put aside in order to reach an unbounded (by ethics) maximum wealth, then it is a bad thing.

Quote
Would you fall over backwards in astonishment if news were to come out that Toyota has been cooking the books?

No. I didn't use Toyota as a catch-all example of corporate ethics, only as a pollution example. But I can see where what I wrote suggested broader ethics than what I intended.

Quote
I just don't believe there ever has been a "golden age" when politicians or businesses were more honest

Neither do. I never suggested such a thing.


Quote
I regard it [Walmart] as being as honest and ethical as (say) General Motors, or Sears or any other large business. And a LOT better than the Enrons of the world.

I agree with this, but their honesty and ethics level is too low.

Quote
Do you post on PT also?

I have, but not too often. Look for harry eaton rather than haceaton.

Quote
Incidentally, diluting stock as you described is a very serious SEC no-no.

I'm not talking about unregistered securites (a no-no that is also seldom severely punished). I'm talking about having a shareholder vote where they agree to increase the shares outdanding (for example it is often pitched to allow for a stock split). This is perfectly legal and is used to "recharge" the bank of stock held by the company to issue "incentive" options. Ordinary shareholders should seldom agree to this (at least with the typical vague, non-binding reasons given in the proxy card for increasing the outstanding shares) but they routinely do.

Quote
Recently the accounting rules were changed (admittedly over stuck-pig protests) to consider options differently

Sort of. Companies can still elect to use the method of APB 25, the so-called "intrinsic value" method of valuing options  grants which is an absurd fiction. It is interesting that the tycoons are so worried about the effect this accounting change will have on the markets. Personally I think it won't matter much; the well informed could figure it out before and the rubes will continue to be rubes.

Quote
Keeping two sets of books, one for the SEC and one for the public, lands you in jail...

I'm not talking about two separate sets of books, I'm talking about how they are accounting for the IRS vs reporting to shareholders. There is growing creativity by most corporations in this area these days, and most of it is "legitimate" at least until the IRS updates their rules. But no worries, the IRS is always a step behind.

Quote
if they pay high dividends, they are ripping us off. If they don't pay any dividends, they're ripping us off.

Why would you think this? I certainly don't view either strategy as "ripping off" anyone. Personally I don't see why investors would buy the stock of companies that have a firm policy of never paying any dividend. I guess it's for the hope of stock re-purchase plans. [In the short term, it is the hope of rising prices of course, but absent any bonafide connection between the stock and real money it is purely a game of hypotheticals.] I described the motivation of management to not pay dividends not as a rip-off but as a way for the top management to maximize their personal wealth.

The rip-off comes in the form of diluting shareholder value through option compensation grants. In principle it should result in reduced stock prices. In practice it hasn't but then maybe it's just a matter time since the expansive use of options grants is a relatively new phenomenon.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 11 2006,08:45   

haceaton:

Good to get the discussion back where we can actually address these issues.

Quote
I'm going to take this that you have conceded the point that Walmart's strategy is to maximize its wealth and that minimizing prices is a tactic used to achieve it.

OK, fine, so long as we agree that maximizing wealth can be construed in different ways, over different periods of time, and (as you point out) tempered with other goals. Perhaps ultimately ANY economic goal can be considered "wealth" including goodwill, market share, longevity, committed and dedicated employees, etc.

Quote
If you bound the maximum by ethical consideration then there is nothing wrong with it. When ethical considerations are put aside in order to reach an unbounded (by ethics) maximum wealth, then it is a bad thing.

I'm going to continue to insist that "good" and "bad" are personal and entirely relative. What is good for someone is generally bad for someone else. If someone plays by the rules, this is all I think we can reasonably require. Like in sports, there is a difference between being a hard-nosed player (admired), and unsportsmanlike conduct (generally illegal). As I wrote, competitors will (and IMO *should*) seek every possible way to get an edge. If shabby treatment of employees is "bad", presumably some competitor can outcompete them by treating employees better and thus attracting better employees. If community relationships sour, someone more community-oriented can outcompete them. The most effective regulation I know of is regulation that ensures that competition is as transparent as possible.

Quote
Neither do I (believe there was a golden age). I never suggested such a thing.

Then you feel the system has *always* been "seriously broken"? I wonder if you could put your finger on a time and place where "the system" was NOT "broken".

Quote
I agree with this, but their honesty and ethics level is too low.

This statement is meaningless without some scale of ethics against which the measurement is made, along with some more-or-less objective point ON that scale below which is "too low". I personally would hate to have to specify either one.

Quote
Ordinary shareholders should seldom agree to this (at least with the typical vague, non-binding reasons given in the proxy card for increasing the outstanding shares) but they routinely do.

I agree. The notion that executive incentives will inspire the officers to perform better strikes me as absurd. Even where bonuses are tied to performance, there always seem to be ways of finding rewards. And no amount of money will make the executives smarter or better able to predict the future.

Quote
But no worries, the IRS is always a step behind.

Yep, that's right. I wrote earlier of "a continuous battle between those who make and enforce the rules, and those who seek ways to circumvent the rules." But my gut feeling is that this battle is healthy, and that NOT seeking an edge for "ethical reasons" isn't so healthy. The kind of "ethical behavior" I envision (maybe I'm misinterpreting?) is like for a ballplayer to deliberately strike out because his team is well ahead and the opposing pitcher's statistics need a little boost. Maybe to you this is "kindness" but to me it's a disturbing violation of the game itself. Even altruism, IMO, should be practiced in the interests of maximizing self-interest, though perhaps more long-term.

"Ethical" considerations, at least in sports, are usually a quid pro quo - I'll tank this match when you desperately need a win and I don't, in the expectation that you'll return the favor later. To me, this isn't a matter of helping out those who need a hand; it's a way to undermine the integrity of the game. I just don't think WalMart should take actions that reduce their immediate total profits, EXCEPT in the hopes that by doing so, they can increase their long-term profits. This is what I meant by an equilibrium with the community.

Quote
Personally I don't see why investors would buy the stock of companies that have a firm policy of never paying any dividend.

I think I can understand the argument that, at least during some interval, it's in their interest in the medium term to shovel profits back into growth. After all, "never" means "not right now." Even Microsoft has started to pay dividends (however minimal).

Quote
I described the motivation of management to not pay dividends not as a rip-off but as a way for the top management to maximize their personal wealth

I'm not sure I follow here. Top management can maximize their personal wealth by being granted a major bundle of stocks and then pay lots of dividends; by being granted a bundle of stock and having the market price rise a bunch, or by paying themselves huge salaries and bonuses. In the context of WalMart, I wasn't seeing the Walton family doing any of the above. But I just left a company that pays minimal wages, loses money every quarter (for years now), and pays the CEO in the millions per year. They also pay no dividends.

Quote
The rip-off comes in the form of diluting shareholder value through option compensation grants. In principle it should result in reduced stock prices. In practice it hasn't...

I think there are different flavors here. I know at the company I just left, there was a program of granting options to those above a certain pay grade. But this didn't increase the number of shares outstanding on the books. Granted, when they wanted more shares they needed a vote, and most shareholders rubber-stamped it.

  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 11 2006,09:11   

I don't want to sidetrack the current state of this discussion.  I've been quite busy the last several days and kinda feel I've fallen too far behind in this discussion to continue.

I'll sum up all of my previous comments about Flint's free market arguments by addressing this single comment by Flint:

Quote
I don't know where we'd draw the line and say "Beyond X amount of regulation, this isn't free market anymore.


hmm.  unless i missed the point of the basic definitions I was taught in the economics course i took, ANY amount of regulation makes it no longer a free market by definition.  You now have a regulated market.

I think all of our arguments are based on a misconception of what the terms free market and laissez faire actually mean.  Laissez faire, is typically used in cases where it meant "hands off", as in NO regulation, and is commonly used to mean a "true" free market.

In support of this definition, I give you wiki:

http://en.wikipedia.org/wiki/Laissez-faire

After saying you had little or no problem with free market educational systems, you followed that up by noting that appropriate regulation in an economy stems corruption and provides stability.

this is exactly what i was trying to get at.  So, aside from the rest of the BS on both sides, it appears we actually agree that free market systems don't actually work.

If there is further clarification of your position you wish to make, please do so, but refer back to your earlier statements and clarify those as well then, if you would be so kind.

otherwise, I'm just as happy to let those who have started new conversations in this thread to continue on as if i never posted this.

cheers

  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 11 2006,09:26   

Quote
I think there are different flavors here. I know at the company I just left, there was a program of granting options to those above a certain pay grade. But this didn't increase the number of shares outstanding on the books.


Actually, working in Silicon Valley, I found it's pretty common to offer options in publically traded companies in leiu of benefits or pay raises, for all pay grades.

but as you point out, options are NOT shares.

The excericise of options can be arbitrarily regulated by the company itself, in order to control how those options actually are converted into shares.

Yeah, I learned that at my company too.  the hard way.

Also, there often are not only written rules as to how options may be excercised, but there are internal "pressures" as well.  Your boss might pull you aside, for example, and warn you that you should wait until X time to excercise your options.

If you work for a company that actually offers shares instead of options, you work for a company that likely has a decent income outside of profits from the sale of shares.  that's a good sign.

If you start work for a company that immediately offers you options in leiu of an appropriate pay scale, or benefits, I would be highly suspicious and suggest checking out that company's sources of income and expenditures.

There were a lot of "junk" tech companies in the 90's that simply ran off income from stock sales, with no actual product line even.  

There were even companies, like the one i mentioned I worked for above, that actually shifted their business model in order to take advantage of this.

If not sustainable in the long term, it can be quite profitable in the short term.

but then, we start talking about issues of morality again.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 11 2006,09:56   

Sir Toejam:

Quote
I think all of our arguments are based on a misconception of what the terms free market and laissez faire actually mean.

I suspect you are right. You have assumed a dichotomy: There's free, and there's not free. I have assumed a continuum, with a level of regulation varying from nearly nothing up to a tightly controlled and managed economy. So for me, a "free" market is one toward the less-regulated range of this continuum.

My notion of economics is that management is unavoidable. Even the "ideal" laissez faire notion has a form of management; it's just redirected into such things as assassinations, espionage, sabotage, and other mechanisms that work toward a sort of equilibrium. I personally believe that so long as competition is strictly enforced, the competition itself will act as a powerful regulator of market behavior. And one of the best enforcements of competition is a practice of full disclosure of nearly everything any supplier is doing. In fact, without some pretty comprehensive (and timely and accurate) information, competition is inhibited and the market suffers regardless of how stringent the regulation.

Quote
So, aside from the rest of the BS on both sides, it appears we actually agree that free market systems don't actually work.

Again, we have different definitions of "free". I still see this as a matter of degree. I'll admit I'm more a proponent of incentives than micromanagement. I'll wager that if we eliminated all of OSHA in favor of a policy that "each job-related injury will cost you a million bucks, whether it was preventable or not" we'd see a dramatic improvement in safety. Of course, we'd need to set this up so as not to provide an incentive to employees to GET injured...

Quote
There were a lot of "junk" tech companies in the 90's that simply ran off income from stock sales, with no actual product line even...If not sustainable in the long term, it can be quite profitable in the short term. but then, we start talking about issues of morality again.

Maybe we have difficulty with the term "morality" just like we viewed "free" differently. I think it's entirely legitimate to start up a company armed with a really good idea and an effective business plan, and sell ownership in the company to raise capital. I've done this myself. My experience was that those who purchased this ownership exercised it by ensuring that their investment was directed toward implementing the idea, so that future income would come from sales of product within some reasonable time frame.

So I presume you're saying that if I had set things up so the investors had no such authority, and then spent their money on high living until I ran out of investors, that would be immoral. And I suppose so; I admit I was never able to find such investors.

  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 11 2006,12:04   

Quote
I think it's entirely legitimate to start up a company armed with a really good idea and an effective business plan, and sell ownership in the company to raise capital. I've done this myself.


of course it is.  but you do know what i mean by "junk" companies yes?

the issue is one of motivations and intentions, and these inevitably lead to discussions of morals.

basically, what we saw in the 90's was similar to the junk bond issues we saw in the 80's.  In the case of "junk companies" There was no dissuasion for anyone who wanted to set up a company under false pretenses, then artificially inflate the stock value (it was - and still is- very hard to "nail" someone legally for doing this).

This of course helped to contribute to the bubble we saw.

I could argue a similar pattern occurring in the real estate market, with the bubble occurring from pure speculation, and Greenspan warning (as he did with tech investments) that real estate is in an artificially inflated bubble.

the fed has only one apparent way of dealing with this: rate hikes.

One wonders why rate hikes weren't more common during the "internet boom", considering Greenspan made essentially the same arguments at the time.

right, so a small bit of history aside; it does come back to motivations and intentions, and thus how can it not inevitably lead to discussions of morals?

I assume your morality (like mine) dictates that you wouldn't "abuse" start up funds from investors in order to just artificially inflate your company's value (for quick profit taking).

However, it is a quite common practice (or at least used to be during the 90's).  so not all share these morals.

in fact, many investors (and investment funds) specifically WANTED these kinds of quick turn-arounds on their investments.  ####, who can argue with a quick 500% or better return on your initial investment?

same reasoning involved in why junk bonds were so "popular" in the 80's.

Those of us with any morals saw the damage junk bonds would eventually cause, and the resulting S&L collapse will be paid for by all of us over several generations.

If it were just about making money, I'd be all for junk bonds, real estate speculation, and stock speculation.  

But it ain't.  So, if it isn't, then the only conclusion I can make is that regulations attempting to stem such behavior can only result from the moral implications involved with "passing the buck" basically.   A moral view, I would add, that is certainly NOT shared by many neocons.

I have several times seen the pure generation of wealth presented as an argument for the functional purpose of any economy.  However, I have seen no support for that being a stable, or even a realistic, position when applied historically.

But what makes it unstable?  

Doesn't it inherently boil down to a perception of "fairness"?

past experience of societal revolutions against pure top-down wealth structures are not based on generation of maximum wealth, but rather on a perceived imbalance in the distribution of that wealth.

so, the inherent instability in a pure free market system has less to do, imo, with economics per sae, than it does with the application of morals and ethics.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 11 2006,14:13   

Sir Toejam:

Quote
so, the inherent instability in a pure free market system has less to do, imo, with economics per sae, than it does with the application of morals and ethics.

I think I understand what you're saying. Adam Smith's invisible hand was quite straightforward in saying that broad social benefits resulted from each individual actor being motived by pure short-term greed. I think the morality of short-term greed in the eyes of the Randroids has been morphed into a virtue, but Rand's fictional characters were painfully honest about their greed - which did NOT motivate them to lie, steal, and then vanish.

The buyer can't beware if he has no information. And I don't understand how anyone can "artificially inflate" stock values using complete, accurate and timely information. Most of that information was deliberately incorrect. But maybe some of the junk tech companies weren't set up under false pretenses, they just quickly figured out that (a) they had a ton of money; and (b) their business plan couldn't work. Now what? Wouldn't YOU be tempted to stash away a bundle, go through some motions, and give up?

Quote
past experience of societal revolutions against pure top-down wealth structures are not based on generation of maximum wealth, but rather on a perceived imbalance in the distribution of that wealth.

While I disagree in detail, I agree in general. People understand that wealth is never going to be very evenly distributed, and probably shouldn't be. I think revolutions are triggered by perceived violation of an implicit contract of mutual obligations. But regardless, these are still perceptions of "unfairness".

I always come back around to information, though. If I took a risk based on an accurate representation of the situation, and the risk didn't pan out, I don't mind. But if the representation was wrong, then I very much mind.

  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 11 2006,15:18   

Quote
But maybe some of the junk tech companies weren't set up under false pretenses, they just quickly figured out that (a) they had a ton of money; and (b) their business plan couldn't work. Now what? Wouldn't YOU be tempted to stash away a bundle, go through some motions, and give up?


It's true that some of these companies started out with what they thought were "legit" business plans, then realized too late they wouldn't work.  However, it's even more basic than that.  some of them were deliberately set up on the premise that the presentation of a flashy logo and a lot of PR would suffice in leiu of a product in order to generate increases in stock value. This was considered a legitimate business plan in and of itself.  

Again, when we think in terms of "legitimate" business plan, you and I don't necessarily just think in terms of just equating that with "profitable".  Which means we include moralistic limitations to what constitutes a "legitimate" business plan.  There are a lot of investors who would see any business plan that would generate a significant return on their investment as "legitimate", regardless of whether any real product or service was intended or whether it was all an elaborate front intended to deceive.

####, I used to have a collection of these "companies" stored away on my links, but that was many computers ago.  I suppose it wouldn't be to hard to track some historical examples down; I'm sure someone has archived a few examples somewhere.

I personally dealt with the mindset involved in forming feaux companies like this; the CEO of my own company was such a shark on raising investment capital in LA that he was famous, at least in "shark" circles ;).  He got called on it once or twice; but suffered only minor penalties.  less than a slap on the wrist, really.   His name is Rainer Poertner and he used to manage the Rolling Stones, once upon a time (no kidding!;).

I'd say he ran the gamut, from the production of products that were misrepresented as to their efficacy (entirely), using PR to generate capital investment instead of actual product sales (hmm, you might remember a product called "Soft Ram" that came out about 8 years ago?), to the co-option of businesses like the one I was involved with that actually DID produce legitimate products and services, but changed its business model almost yearly to accomodate the latest "trends" in internet investment.

in any case, the bottom line is that, imo, what constitutes a legitimate business model, in itself, is dictated by preconceptions based on morality, rather than immediate profitability.

many folks don't care about whether the companies they invest in survive long term, only whether they generate significant return in the short term.  

There are an awful lot of ways to generate investment dollars short term that have nothing to do with a legitimate business model like you put forth, and I would agree with.

Quote
always come back around to information, though. If I took a risk based on an accurate representation of the situation, and the risk didn't pan out, I don't mind. But if the representation was wrong, then I very much mind.


indeed, but as i pointed out, wouldn't you mind if the information was accurate, but representative of the type of business model I described above?

I could come to you and say, "I have an idea on how to make money by pushing a fake business".

that would be exactly representative of the situation, and there would be risk, but also accurately represented.

they could even show a pretty good track record of success on significantly increasing your initial investment with this "business model".

would you bite?

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 11 2006,15:43   

Sir Toejam:

Quote
I could come to you and say, "I have an idea on how to make money by pushing a fake business". That would be exactly representative of the situation, and there would be risk, but also accurately represented. They could even show a pretty good track record of success on significantly increasing your initial investment with this "business model".

would you bite?

Is this legal? It sounds almost like if someone came to you and said "I have devised a nearly foolproof way to rob banks, and if you'll fund the development of the necessary device, we'll split the proceeds."

I'd really need to know my exposure here. I wouldn't want to be in the line of fire if "pushing a fake business" should run afoul of any criminal laws, you know? I should think constructing elaborate fronts with the intent to deceive are, shall we say, less winked at today than they were pre-Enron when everyone was getting rich selling one another spun sugar.

Incidentally, there's a really fascinating article starting on Page 47 of the January 2006 issue of Science purporting to show that my basic economic assumptions aren't really justified, but are rather a subset of a larger (and I suppose you could call it "ethical") context. It's game theory, not necessarily easy reading, but I'm learning a lot. I recommend it.

  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 11 2006,16:13   

Quote
Is this legal?


hmm. debatable.  I have seen a well presented argument that it is entirely legal, but I never bothered to followup because i considered the whole idea much like you just did.

those that promote this kind of business plan are the WC Fields type; sucker born every minute and it's their fault if they get stuck type.

In practice, it works out very much like a pyramid scheme, and as such, various laws could cover it, but there you would lose me.  I haven't checked into how the law is applied in these cases (the very few times they ever went to court).

Quote
I'd really need to know my exposure here.


that would differ no more than any other "risk" factor to many investors.

they could always claim they themselves were duped.  How could you prove they weren't?  because they made money?

the only people really at risk are the CEO of the company itself, and related officers, and I'm quite sure there are many ways to minimize one's exposure, tho i wouldn't consider myself knowledgeable of the specifics.

I HAVE seen several cases brought against fraudulent PR and "pusher" campaigns on blogs intended to artificially inflate stock prices, but even that is hard to prove (and isn't even always involved in these fictitious businesses).

Quote
I should think constructing elaborate fronts with the intent to deceive are, shall we say, less winked at today than they were pre-Enron when everyone was getting rich selling one another spun sugar.


people said the EXACT same thing after the junk bond craze finally died out, and the S&L's were blown open.

it will go quiet for a time, then resurface with a vengeance.  Again, i think there are a lot of loopholes for folks selling this type of business model to hop through.

I haven't checked out how common they are at the moment, i kinda deliberately avoided staring at the issue after having been burned by something similar.  don't care to dredge up the muck, so to speak.  I'm sure if you are interested, you could even track this stuff down via googling.

I do remember sitting at my desk one day a few years back, where we for a lark started tabulating the number of businesses that we could readily tag as fictitious, then checking on how their stock was doing.

now don't get me wrong, junk businesses aren't nearly as common as honest ones, of course!  or even the case you noted above of mistaken optimism in a product line.

but they are out there, and i have talked with the folks that have no moral issues with promoting them.

Ever met somebody that has no problem with pyramid schemes?

same mentality.

I'll check out that article in Science next time i hit the library.  sounds interesting.

we never really got much into game theory in this thread; it is an interesting topic and perhaps worthy of starting a new thread.  

Perhaps I'll start a new one after I check out the article in Science.

cheers

  
Dean Morrison



Posts: 216
Joined: Dec. 2005

(Permalink) Posted: Jan. 13 2006,00:29   

Seems that there is a new field 'Bioeconomics' which results from the crossover of economic theory and evolutionary biology.

I wonder if it'll ever get to the point where a new economic policy can be tested out on the lab bench?

  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 13 2006,09:32   

any chance you could expound on that a bit?

the link you provided took me to a registration page instead of the article you were trying to reference.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 13 2006,10:00   

When I clicked on Dean's link, I got
Quote
While trying to retrieve the URL: http://www.springerlink.com/(jjt3t2....03315,1

The following error was encountered:

Unable to determine IP address from host name for www.springerlink.com
The dnsserver returned:

No DNS records
This means that:

The cache was not able to resolve the hostname presented in the URL.
Check if the address is correct.

  
Flint



Posts: 478
Joined: Jan. 2006

(Permalink) Posted: Jan. 13 2006,13:24   

Sir_Toejam and haceaton:

Here's the abstract of the Science article. I may need to rethink the influence some notions of ethics may have on economic activity...

Abstract: (I have reformatted a bit for easier reading)

Quote
The canonical model in economics considers people to be rational and self-regarding. However, much evidence challenges this view, raising the question of when "Economic Man" dominates the outcome of social interactions, and when bounded rationality or other-regarding preferences dominate.

Here we show that strategic incentives are the key to answering this question. A minority of self-regarding individuals can trigger a "noncooperative" aggregate outcome if their behavior generates incentives for the majority of other-regarding individuals to mimic the minority's behavior.

Likewise, a minority of other-regarding individuals can generate a "cooperative" aggregate outcome if their behavior generates incentives for a majority of self-regarding people to behave cooperatively.

Similarly, in strategic games, aggregate outcomes can either be far from or close to Nash equilibrium if players with high degress of strategic thinking mimic or erase the effects of others who do very little strategic thinking.

Recently developed theories of other-regarding preferences and bounded rationality explain these findings and provide better predictions of actual aggregate behavior than does traditional economic theory.


This article is by Colin F. Camerer of the California Institute of Technology, and Ernst Fehr of the Institute for Empirical Research in Economics, University of Zurich.

  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 13 2006,14:33   

thanks flint.

I'll definitely check out the article next time i hit the library.

  
Dean Morrison



Posts: 216
Joined: Dec. 2005

(Permalink) Posted: Jan. 13 2006,14:33   

Sorry.. I don't seem to get quite the same problem..

but more interesting as I look into it:

some other stuff 'seems it was defined as a concept in '79'


.. failing that 'google' for it...

Role of culture and meaning in rational choice

or Flint will like this one... ( the guy was from Chicago)

1979 Bioeconomics

or apply economics to fisheries. and then wonder where all the fish have gone????


Lobster Bioeconomics

seems like 'Bioeconomics' started by applying 'sociobiology' to 'human economics; which seems self- fulfilling to me.

I'm interested in the 'meta- mathematics' that, ecological, and financial, systems share....

  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 13 2006,14:37   

Quote
or apply economics to fisheries. and then wonder whre all the fish have gone?


been there done that, several times.

check out the history of the fishery for angel sharks off of CA, USA sometime.

quite depressing.

on the bright side, the idea of preserving breeding refugia is starting to take off, so maybe that will do something to stem the tide.

I'm not gonna hold my breath tho.

  
Dean Morrison



Posts: 216
Joined: Dec. 2005

(Permalink) Posted: Jan. 13 2006,14:54   

We still have a thriving little fishing community right here on the English channel.

A lot to do with all the wrecks and unexploded ordanance still lying around after a couple of World Wars, and the natural effects of being the busiest shipping lane in the world with a huge tidal range and a tempremental climate.

Favours the small boats and the fish - the big boats lose all their tackle.

Secondary income from **uggling of course - 'but if I told you I'd have to kill you'

http://www.hastingsfish.co.uk/index.htm


Lesson is ?

  
sir_toejam



Posts: 846
Joined: April 2005

(Permalink) Posted: Jan. 13 2006,19:03   

unlimited growth of an industry based on a very finite resource is bad?

  
Dean Morrison



Posts: 216
Joined: Dec. 2005

(Permalink) Posted: Jan. 19 2006,00:13   

Just to shed a little light on the 'public funding for prevetative healthcare' debate that came up earlier in theis thread:

Dr Tara Smith talks eloquently on this subject on her 'Aetiology' blog:

http://scienceblogs.com/aetiolo....hp#more

  
  115 replies since Jan. 04 2006,12:07 < Next Oldest | Next Newest >  

Pages: (4) < [1] 2 3 4 >   


Track this topic Email this topic Print this topic

[ Read the Board Rules ] | [Useful Links] | [Evolving Designs]