Tuesday, October 04, 2011

Putting the Jobs Cart Before the Growth Horse

The idea that creating jobs will lead to growth and prosperity is a fallacy that is at the heart of our unemployment problems, according to venture capitalist Bill Frezza, who appeared on National Public Radio today.

According to Bill Frezza, "It puts the cart before the horse. It’s actually the other way around. Growth causes employment, employment doesn’t cause growth.   

The best way to think about that is to take every political statement that has the words “job creation” and substitute the words “expense creation,” and you said you’re going to go out to businesses and want them to enhance their “expense creation,” how do you think they would react?"

In the NPR interview, Bill Frezza discussed many of the points he made in a recent Real Clear Markets article "Putting the Jobs Cart Before the Growth Horse."  Here are some excerpts:
 
"As impolitic as it is to say out loud, we need to face the fact that jobs are a necessary evil. In any rationally managed business the payroll is a burden, not a benefit. Entrepreneurs and hiring managers only add staff if they think additional employees will produce more value than they consume. This happens as a matter of course in healthy, growing businesses when the amount of work that needs to be done exceeds the number of hands on deck to do it. Increasing the number of hands when the amount of work is unpredictable, stagnant, or declining is a recipe for bankruptcy.

"What about all that cash being hoarded on corporate balance sheets?" quacks the leader of the free world. "Why don't corporations use that money to hire more workers?" Does this really merit an answer? Obviously, if corporations thought that hiring more workers was the best way to earn a proper risk-adjusted return on their investments, then that is exactly what they would do. Instead they are parking it in short-term securities earning, what, a percent or two in interest.

What does that tell you? The business community has become so whipsawed, bludgeoned, and bewildered by the epic incompetence and bloviating hostility of our political leaders that they are keeping their powder dry until they can size up the next set of leaders the electorate foists on them. Fourteen months is not too long to hunker down and hope for change when you consider the cost of getting caught in a cash crunch when the global sovereign debt house of cards comes tumbling down."

160 Comments:

At 10/04/2011 9:24 AM, Blogger Che is dead said...

"Fourteen months is not too long to hunker down and hope for change when you consider the cost of getting caught in a cash crunch when the global sovereign debt house of cards comes tumbling down."

Hope and Change. It has a nice ring to it.

 
At 10/04/2011 9:28 AM, OpenID American Delight said...

"when the global sovereign debt house of cards comes tumbling down."

Could somebody please treat me like I'm a college freshman & explain that statement to me?

 
At 10/04/2011 9:34 AM, Blogger VangelV said...

What does that tell you? The business community has become so whipsawed, bludgeoned, and bewildered by the epic incompetence and bloviating hostility of our political leaders that they are keeping their powder dry until they can size up the next set of leaders the electorate foists on them.

I agree. But what you fail to realize is that this is one of the reasons why the US has a trade deficit and why the trade deficit is not as benign as you seem to imply in other postings. Your trade deficit is bad because of the the, "epic incompetence and bloviating hostility of (y)our political leaders." And your expected/predicted recovery is unlikely to materialize unless there are serious changes to the political system. That goes well beyond replacing Obama with an idiot Republican or having a new mix in the house.

 
At 10/04/2011 9:39 AM, Blogger VangelV said...

"when the global sovereign debt house of cards comes tumbling down."

Could somebody please treat me like I'm a college freshman & explain that statement to me?


It means that governments are broke and incapable of meeting their obligations. The financial system, which was forced by the Basel III Accord to hold most reserves in the form of sovereign debt issued by bankrupt governments, is insolvent and incapable of meeting financing needs for companies. This is why many businesses are sitting on a great deal of cash in case that there is another credit crisis coming before the next election.

 
At 10/04/2011 9:51 AM, Blogger sethstorm said...


What does that tell you? The business community has become so whipsawed, bludgeoned, and bewildered by the epic incompetence and bloviating hostility of our political leaders that they are keeping their powder dry until they can size up the next set of leaders the electorate foists on them. Fourteen months is not too long to hunker down and hope for change when you consider the cost of getting caught in a cash crunch when the global sovereign debt house of cards comes tumbling down

Summarized in short: It's OK to scuttle the economy until we get our political danegeld.

If they want to stop being attacked, they can start hiring people directly and fully - without complaint to skillset or employment status.

 
At 10/04/2011 9:57 AM, Blogger Sean said...

As impolitic as it is to say out loud, we need to face the fact that jobs are a necessary evil.

This illustrates nicely the difference between the perspective of business institutions and humans. From the human perspective, businesses exist to serve: to provide goods and services, but also to increase our opportunities to earn and trade for them (to improve the human environment by providing jobs).
Our businesses, on the other hand, seek to make money for their owners, preferably with the lowest possible costs.
Businesses are a "necessary evil": they provide net benefits to humans, but they are in an interesting sense actively antagonistic to them.

 
At 10/04/2011 10:14 AM, Blogger Becky Hargrove said...

Sounds like the real balance of powers that could actually create wealth lie between human skill and the monetary business realm, instead of the tortured balance of powers in government.

 
At 10/04/2011 10:33 AM, Blogger Jon said...

I think this is a good example of how on the right assertions count for arguments.

Creating jobs won't lead to growth. Economic growth causes employment. How do we know this? I just did a thought experiment. As the economy grows businesses hire more. Good enough.

The left could just as easily do a thought experiment that proves the opposite. When employment is high people have money to spend. That spurs demand which leads to growth. I guess we're right since we said it and it sounds plausible to us.

Let's try a different method. Let's look at the historical record. During the 50's and 60's economic growth in the US was rapid. Tax rates for the wealthy were extremely high. That basically served to redistribute money. Since everyone had money and jobs this lead people to purchase things. This created demand which lead to more growth.

Bush cut taxes. This reduced the redistribution of wealth. The poor have less, so they can't purchase things. The rate of increase in demand slows (you need constant demand increases just to sustain employment with productivity gains). The economy collapses. The solution from the right? More tax cuts. More redistribution of wealth towards the rich. More of the same the same policies that have failed. Why do they recommend this? Because they don't look at the real world. They've read Ayn Rand and she says everyone is "Going Galt". The "job creators" are going to leave.

Look at the world instead of indulging fantasies.

 
At 10/04/2011 10:37 AM, Blogger Che is dead said...

"Businesses are a "necessary evil": they provide net benefits to humans, but they are in an interesting sense actively antagonistic to them." -- Sean

Why should current business owners be the only ones saddled with the obligation of providing "net benefits to humans" on the terms that you have demanded? How many "opportunities to earn and trade" have you provided? Have you created a business with the sole purpose of "... [improving] the human environment by providing jobs." without regard to making money. No, I didn't think so. You and the rest of your lefty friends are not caring and noble. You are simply parasites living off the drive and creativity of other men and insisting that those more creative and more driven men provide for your ever increasing needs and demands. You are the essence of greed. This illustrates nicely the difference between the men who own and run successful business institutions and ignoble parasites that would seek to make them their slaves.

 
At 10/04/2011 10:39 AM, Blogger Seth said...

"Bush cut taxes. This reduced the redistribution of wealth. The poor have less..." -Jon

Which redistribution programs were cut along with taxes that caused the poor to have less?

 
At 10/04/2011 11:01 AM, Blogger Che is dead said...

"I just did a thought experiment." -- Jon

You should have realized that you were headed for a dead end right there.

"When employment is high people have money to spend. That spurs demand which leads to growth." -- Jon

Ah, yes, it just so simple, we start with high employment. Tell me, what was the demand for the iPod before Apple took the risk and invested the capital necessary to create, produce and market one? The personal computer? The television?

"During the 50's and 60's economic growth in the US was rapid. Tax rates for the wealthy were extremely high. That basically served to redistribute money." -- Jon

Better living through redistribution of wealth. That must be why Mao's China and the Soviet Union did so well. In fact, you can see the success that North Korea, Venezuela and Cuba are having with this policy right now.

How many times does someone have to explain that while tax rates in the 50's and 60's were high, no one actually paid taxes at those rates. Or, that a large part of U.S. industrial growth at that time was a consequence of WWII destroying the economies and industrial capacity of our competitors. Pathetic.

"Bush cut taxes. This reduced the redistribution of wealth. The poor have less, so they can't purchase things." -- Jon

The Bush tax cuts were progressive resulting in much lower rates relative to income for lower wage earners. The rich actually wound up shouldering a greater share of the overall tax burden after they were enacted. So, the poor, as defined by those who actually paid taxes, had more money to purchase goods and services.

"The economy collapses. The solution from the right? More tax cuts. More redistribution of wealth towards the rich. More of the same the same policies that have failed. Why do they recommend this? Because they don't look at the real world." -- Jon

The current recession was the end result of many government policies that pre-dated Bush's presidency. And one doesn't "[redistribute] wealth towards the rich" since they are the ones who, for the most part, have created it. You do not give a man anything by promising to take less from him. As for the "real world", I doubt that that is something that you have much experience with.

 
At 10/04/2011 11:02 AM, Blogger Jon said...

Welfare reform caused a reduction in welfare expenditures. Social Security compensation has been declining. Less availability of federal revenues has put pressure on states and essentially lead them to reduce the subsidies at universities. That way when people graduate they often now have a mountain of debt, which was unheard of 30 years ago, leaving them with less available for purchasing, which spurs the demand and creates the jobs.

There's also been a redistribution of the way funds are allocated in government. Reagan for instance basically declared that the Wagner Act would not be enforced. So the National Labor Relations Board basically stopped doing the kinds of things they are supposed to do in order to protect unions. A massive war on unions has reduced their membership, which means far less of the revenue generation finds its way into the pockets of labor. More shifts towards ownership and management. Hence a massive increase in inequality. So those that are working that are among the bottom 50% have stagnating to declining wages. That's a wage redistribution that deprives the poor and leads to reduced demand.

 
At 10/04/2011 11:20 AM, Blogger Jon said...

Tell me, what was the demand for the iPod before Apple took the risk and invested the capital necessary to create, produce and market one? The personal computer?

You mean in the 50's and 60's? Yeah, demand was pretty much non-existent. So the government stepped in and generated the demand by funding the development of computers. The government was the exclusive source for the demand that made this possible. After decades of development they were finally ready for personal use, at which point private parties stepped in.

That must be why Mao's China and the Soviet Union did so well. In fact, you can see the success that North Korea, Venezuela and Cuba are having with this policy right now.

Saying redistribution is bad because N Korea does it is like saying vegetarianism is bad because Hitler was a vegetarian. An economy doesn't have to be centrally planned to have some redistribution. Here are some other countries that redistribute. Norway, Switzerland, Great Britain, Belgium, Germany. Here are some that let you keep more of what you earn. Haiti, Guatemala, Colombia, Nicaragua, Nigeria, Liberia. Listing a couple of countries that partially follow a policy you advocate doesn't really tell us much, does it?

And let's notice that China is the world leader in economic growth, and has been near the top for 30 years. Cuba has been subjected to a 50 year terrorist war from the US and an illegal embargo. And it's still a dream come true compared to free market Haiti.

How many times does someone have to explain that while tax rates in the 50's and 60's were high, no one actually paid taxes at those rates.

If by "explain" you mean "assert" you can do it forever and it will continue to make no difference to me, because an assertion is not evidence. Evidence looks like this.

Or, that a large part of U.S. industrial growth at that time was a consequence of WWII destroying the economies and industrial capacity of our competitors.

Why do you need to explain things that I don't deny and that do not change what I said?

The Bush tax cuts were progressive resulting in much lower rates relative to income for lower wage earners. The rich actually wound up shouldering a greater share of the overall tax burden after they were enacted. So, the poor, as defined by those who actually paid taxes, had more money to purchase goods and services.

Again, if assertions count for evidence then you're looking great here. But they don't. Do you reach this conclusion with a thought experiment? Put some evidence down.

 
At 10/04/2011 11:35 AM, Blogger Speedmaster said...

We spend because we are prosperous. We are not prosperous because we spend.

 
At 10/04/2011 11:44 AM, Blogger Sean said...

Che is Dead,

Why should current business owners be the only ones saddled with the obligation of providing "net benefits to humans" on the terms that you have demanded
First, they aren't. Second, what terms have I demanded, exactly? I have only pointed out that the drive to make a profit may be useful, but there is no humanism in it.

Have you created a business with the sole purpose of "... [improving] the human environment by providing jobs." without regard to making money.
I work, and I try to improve my situation and the situation of those around me. You can do that with or without owning a business.

You are simply parasites living off the drive and creativity of other men and insisting that those more creative and more driven men provide for your ever increasing needs and demands.
Who the hell are you talking to? Phantoms in your own mind?

This illustrates nicely the difference between the men who own and run successful business institutions and ignoble parasites that would seek to make them their slaves.
Yes, I'm a welfare queen AND a socialist politician. How did you know?

 
At 10/04/2011 11:54 AM, Blogger VangelV said...

This illustrates nicely the difference between the perspective of business institutions and humans. From the human perspective, businesses exist to serve: to provide goods and services, but also to increase our opportunities to earn and trade for them. We try to gain
Our businesses, on the other hand, seek only to make money for their owners, preferably with the lowest possible costs. I could imagine a world including businesses run by AI that require no human labor at all.
If the purpose of such institutions is to serve humanity I call them good. If their purpose is to serve the few and shelter them against the many, then they must be recognized as evil.
And what is the difference in intention between today's businesses and the theoretical person-less businesses I posited? For-profit businesses are a "necessary evil": they offer many practical benefits, but they are not "good".


You are confused. Businesses exist to serve consumer needs. Profit is determined by the choices made by the individual who chooses what purchases to make among the available market choices. Nobody stays in business by trying to be 'good' in some social sense because consumers don't care. They want cheap stuff that meets their needs.

The anti-capitalist, anti-market sentiment is the biggest problem that the real economy faces today. That mentality provides an excuse for idiot politicians to meddle with the market and to restrict choices for consumers. Get rid of the meddling, stop saving inefficient businesses, end the tariffs and subsidies and the economy will find a strong base upon real progress can be built. Prevent the necessary liquidation by bailing out lousy businesses and punishing consumers with tariffs and you are asking for a total collapse when the Treasury and Fed run out of options.

 
At 10/04/2011 11:57 AM, Blogger VangelV said...

The left could just as easily do a thought experiment that proves the opposite. When employment is high people have money to spend. That spurs demand which leads to growth. I guess we're right since we said it and it sounds plausible to us.

This is the problem with the left. It still believes that consumption is the driver of prosperity and that capital formation is the symptom. In reality, history and actual theory tells us the opposite is true.

 
At 10/04/2011 12:05 PM, Blogger Jon said...

Show us the history, VangeIV. Assertions are not arguments.

 
At 10/04/2011 12:08 PM, Blogger VangelV said...

Nonsense. You are under the impression that high tax rates meant that the rich paid a higher portion of the total tax revenue. But that is not true. The rich have ways to structure compensation so that they do not have to pay much in taxes. This is how Bob Hope became a billionaire even with a tax rate of nearly 90% during most of his working life.

Demand does not create wealth. Producers of marketable goods and services do. When statists use redistribution schemes to punish the productive they get the mediocrity that they wind up subsidizing.

 
At 10/04/2011 12:11 PM, Blogger Sean said...

VangeIV,

You are confused. Businesses exist to serve consumer needs.
My brother would say businesses exist to lower the transaction costs among people trading.
One of my points is that the "value" of business depends on perspective in the same sense that the value of any good sold depends on the consumer's demand.

Nobody stays in business by trying to be 'good' in some social sense because consumers don't care.
This is not quite true. A number of firms have as their product some social good (real or perceived). Organic foods, "locally grown" foods, Priuses, whatever. Companies spends millions training teachers, donating to charities, planting forests, and other such things in order to gain "goodwill" and a positive brand image.
I would argue that a number of successful consumer product companies succeed in large part because they value their product quality highly enough not to cut corners even where they can't convince themselves most consumers will notice.

The anti-capitalist, anti-market sentiment is the biggest problem that the real economy faces today.
It is a big problem, but announcing that "jobs are necessary evils" is not likely to solve it. Convincing the public that capitalism creates jobs may.

 
At 10/04/2011 12:18 PM, Blogger VangelV said...

Welfare reform caused a reduction in welfare expenditures.

Welfare reform was one of Clinton's best accomplishments. It got a lot more people off their butts and into the work force.

Social Security compensation has been declining.

Really? References please.

Less availability of federal revenues has put pressure on states and essentially lead them to reduce the subsidies at universities.

First, education is a state issue and should be funded by the states, not the federal government. Second, tax revenue is much higher today than when Bush was elected.

http://www.project.org/images/graphs/Receipts-by-Dollar.jpg

That way when people graduate they often now have a mountain of debt, which was unheard of 30 years ago, leaving them with less available for purchasing, which spurs the demand and creates the jobs.

Ah, the irony. Don't you realize that student debt has gone up because government funds made huge tuition hikes possible? In the 1960s you could have paid for your university education by working part time. Nobody who was concerned about making a living took huge loans to get a degree that required no marketable skills that could generate an income.

 
At 10/04/2011 12:18 PM, Blogger Sean said...

VangeIV,

This is the problem with the left. It still believes that consumption is the driver of prosperity and that capital formation is the symptom. In reality, history and actual theory tells us the opposite is true.
True enough, but here's the flip side.
The left also believes that inequality foments discord and crime, and inclusive prosperity sows peace. They believe that peace is good for prosperity. History and evidence also show that to be true.
If leftist policies don't solve that problem, fine and good to point it out, but what policy would?

 
At 10/04/2011 12:21 PM, Blogger VangelV said...

You mean in the 50's and 60's? Yeah, demand was pretty much non-existent.

No he means demand for the iPod a month before it was released. There was very little demand. Jobs and company took a big risk that they cold create a product that would compete in the small mp3 player market. They got it right and now Apple is one of the great companies in the United States. Same is true of Amazon and the Kindle. Before its release there was very little demand for electronic readers. Demand was not the cause of reater production and prosperity. It was the effect of production and prosperity.

 
At 10/04/2011 12:24 PM, Blogger Paul said...

Jon,

"During the 50's and 60's economic growth in the US was rapid. Tax rates for the wealthy were extremely high."

You've left out about a thousand other variables. The biggest variable might be the fact that much of the rest of the developed world was still recovering from being flattened in WWII.

"Look at the world instead of indulging fantasies."

This from a guy who worships the tyrant Fidel Castro.

 
At 10/04/2011 12:30 PM, Blogger Che is dead said...

"The Bush tax cuts were progressive resulting in much lower rates relative to income for lower wage earners." -- Che

"... if assertions count for evidence then you're looking great here. But they don't. Do you reach this conclusion with a thought experiment? Put some evidence down." -- Jon

By 2003, Mr. Bush grasped this lesson. In that year, he cut the dividend and capital gains rates to 15 percent each, and the economy responded. In two years, stocks rose 20 percent. In three years, $15 trillion of new wealth was created. The U.S. economy added 8 million new jobs from mid-2003 to early 2007, and the median household increased its wealth by $20,000 in real terms.

But the real jolt for tax-cutting opponents was that the 03 Bush tax cuts also generated a massive increase in federal tax receipts. From 2004 to 2007, federal tax revenues increased by $785 billion, the largest four-year increase in American history. According to the Treasury Department, individual and corporate income tax receipts were up 40 percent in the three years following the Bush tax cuts. And (bonus) the rich paid an even higher percentage of the total tax burden than they had at any time in at least the previous 40 years. This was news to the New York Times, whose astonished editorial board could only describe the gains as a “surprise windfall.” - Washington Times

There are not 116 million "wealthy Americans," but that's how many taxpayers benefited from the President's tax relief. The across-the-board tax cuts provided tax relief to every American who pays income taxes, created a new bottom 10 percent bracket rate, doubled the child tax credit to $1,000, and actually increased the share of the Federal income tax burden paid by the top 10 percent of individual earners from 67 percent in 2000 to 70 percent in 2005. Furthermore, this Administration removed 13 million low-income earners from the income tax rolls completely. - RCP

continued ...

 
At 10/04/2011 12:31 PM, Blogger Che is dead said...

continued ...

In 2000, the top 60 percent of taxpayers paid 100 percent of all income taxes. The bottom 40 percent collectively paid no income taxes. Lawmakers writing the 2001 tax cuts faced quite a challenge in giving the bulk of the income tax savings to a population that was already paying no income taxes.

Rather than exclude these Americans, lawmakers used the tax code to subsidize them. (Some economists would say this made that group's collective tax burden negative.)First, lawmakers lowered the initial tax brackets from 15 percent to 10 percent and then expanded the refundable child tax credit, which, along with the refundable earned income tax credit (EITC), reduced the typical low-income tax burden to well below zero. As a result, the U.S. Treasury now mails tax "refunds" to a large proportion of these Americans that exceed the amounts of tax that they actually paid. All in all, the number of tax filers with zero or negative income tax liability rose from 30 million to 40 million, or about 30 percent of all tax filers.[17] The remaining 70 percent of tax filers received lower income tax rates, lower investment taxes, and lower estate taxes from the 2001 legislation.

Consequently, from 2000 to 2004, the share of all individual income taxes paid by the bottom 40 percent dropped from zero percent to –4 percent, meaning that the average family in those quintiles received a subsidy from the IRS. (See Chart 6.) By contrast, the share paid by the top quintile of households (by income) increased from 81 percent to 85 percent.

Expanding the data to include all federal taxes, the share paid by the top quintile edged up from 66.6 percent in 2000 to 67.1 percent in 2004, while the bottom 40 percent's share dipped from 5.9 percent to 5.4 percent. Clearly, the tax cuts have led to the rich shouldering more of the income tax burden and the poor shouldering less. - Heritage Foundation

"When comparing changes in after-tax income, low-income workers benefitted substantially from the Bush-era tax cuts, and so they would pay much higher taxes if political gridlock allows the imminent expirations to occur on schedule," Kasprak said. - The Hill

Obama has pushed tax cuts for low- and middle-income families and tax increases for the wealthy, arguing that wealthier taxpayers fared well in the past decade, so it's time to pay up. The nation's wealthiest taxpayers did get big tax breaks under Bush, with the top marginal tax rate reduced from 39.6 percent to 35 percent, and the second-highest rate reduced from 36 percent to 33 percent. But income tax rates were lowered at every income level. The changes made it relatively easy for families of four making $50,000 to eliminate their income tax liability. - Yahoo Finance

continued ...

 
At 10/04/2011 12:32 PM, Blogger Che is dead said...

continued ...

... based on an analysis of IRS data by Michael Strudler and Tom Petska of the IRS and Ryan Petska of Ernst and Young. The authors found that over the course of 20 years the richest 0.1% of all taxpayers saw their overall tax share double -- to 11.05%, from 5.06%. The top 20% of all earners also saw their tax share increase sharply to more than two-thirds of all taxes paid. Meanwhile, the bottom 20% of earners paid only a tiny share in 1979 but saw even that share cut in half 20 years later -- including payroll taxes.

As for the windfall for the wealthy alleged to have been provided by the Bush tax cuts, the authors show that the tax share paid by the superrich fell only marginally even after the 1999 data were adjusted for the lower 2003 tax rates. The richest 0.1% would have still paid nearly double the share they paid in 1979 -- that is, double what they paid before the Reagan tax cuts of 1981, which were also supposed to have favored the wealthy. As the authors note, "The progressive nature of the individual income tax system is clearly demonstrated." - WSJ

 
At 10/04/2011 12:33 PM, Blogger Paul said...

The left could just as easily do a thought experiment that proves the opposite. When employment is high people have money to spend. That spurs demand which leads to growth. I guess we're right since we said it and it sounds plausible to us.

If it were that easy then there wouldn't be any poverty left anywhere on the planet. Any fool can pay people to dig holes and fill them back up.


"Less availability of federal revenues has put pressure on states and essentially lead them to reduce the subsidies at universities."

If that's true then it's a perfect excuse to give the steel-toe to the legions of Marxist, gold-bricking professors, some of whom obviously poisoned your mind. Or maybe you're one of them.

 
At 10/04/2011 12:35 PM, Blogger VangelV said...

"That must be why Mao's China and the Soviet Union did so well. In fact, you can see the success that North Korea, Venezuela and Cuba are having with this policy right now."

Saying redistribution is bad because N Korea does it is like saying vegetarianism is bad because Hitler was a vegetarian.


That is not what was said. What was said that history shows us that central planning of the economy and the redistribution of earnings has not led to prosperity.

An economy doesn't have to be centrally planned to have some redistribution. Here are some other countries that redistribute. Norway, Switzerland, Great Britain, Belgium, Germany. Here are some that let you keep more of what you earn. Haiti, Guatemala, Colombia, Nicaragua, Nigeria, Liberia. Listing a couple of countries that partially follow a policy you advocate doesn't really tell us much, does it?

You really should do some fact checking before you post.

First, few of the economies that you claim are free low-tax jurisdictions would be described as such.

Second, I suggest that you check your Columbia reference. The economy has been booming over the past decade thanks to a liberalized economy. Compare its condition to Ecuador and Venezuela, which have a common heritage but have chosen to adopt the type of economic model that you prefer.

And let's notice that China is the world leader in economic growth, and has been near the top for 30 years. Cuba has been subjected to a 50 year terrorist war from the US and an illegal embargo. And it's still a dream come true compared to free market Haiti.

Yes, let us look at China. It is still a very poor country that has only grown after it dumped the planned economy model and let sectors free of the government planners. China is actually the perfect argument against your case.

As for Cuba, it has been free to trade with other nations, including Canada and Mexico. It has failed because Castro was in full control of the economy. As Cuba liberalizes there is little doubt that it will do very well. You might want to look into some real estate on the island. In 10-15 years those crappy apartments will be selling for fifty times the current price.

 
At 10/04/2011 12:37 PM, Blogger Jon said...

Jon-Social Security compensation has been declining.

VangeIV-Really? References please.


Sorry. My mistake. I misread my source. I withdraw the claim.

VangeIV-Second, tax revenue is much higher today than when Bush was elected.

http://www.project.org/images/graphs/Receipts-by-Dollar.jpg


Your graph is unsourced and possibly invented/fabricated. My source says no, revenue is still down since Bush took office.

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200

Ah, the irony. Don't you realize that student debt has gone up because government funds made huge tuition hikes possible?

No, I don't realize that because it is the opposite of the truth. See here.

 
At 10/04/2011 1:09 PM, Blogger Paul said...

No, I don't realize that because it is the opposite of the truth. See here.

So again, send the dead weight out into the private sector where they expect results. A little streamlining is way overdue.

 
At 10/04/2011 1:13 PM, Blogger Sean said...

Paul,

So again, send the dead weight out into the private sector where they expect results. A little streamlining is way overdue.
Absolutely. Try the University of Phoenix on-line. I hear it's great ;)

 
At 10/04/2011 1:50 PM, Blogger Che is dead said...

This comment has been removed by the author.

 
At 10/04/2011 1:52 PM, Blogger Che is dead said...

"I work, and I try to improve my situation and the situation of those around me. You can do that with or without owning a business." -- Sean

Sorry, that's not good enough. The responsibility to create wealth and the resulting economic growth and jobs, like the one you have, doesn't fall to only a few. No, that responsibility belongs to everyone. If a simple willingness to work were all it took then we would have no economic problems.

First, you must have an idea for a business, simple, right? Next, you must be willing to take a risk. Mortgage your home, empty your bank account, borrow money from friends and family, put everything on the line. Now, you can work. Of course, you will have to work 7 days a week / 12 to 14 hours a day, with no guarantee of getting paid, being sure to meet your payroll and other costs first. But, hey, piece of cake.

Then there's the bright side. If you make it, the government will be your 50+ percent partner on the upside. The politicians will vilify you for not paying your "fair share" in taxes and smother you in reams of regulation, some of which are nothing more than protections for your competitors who had donated to their campaigns. Some of your employees will insist that all of your success is due only to your exploitation of their labor which you sell for a profit and lawyers will constantly probe for opportunities to take you to court. And if you don't make it? You'll be broke, ineligible for unemployment insurance and no one will know your name.

How's that for trying to improve your situation?

 
At 10/04/2011 1:58 PM, Blogger VangelV said...

Show us the history, VangeIV. Assertions are not arguments.

Try looking at the history of China before and after Deng liberalized the economy.

Or you can do an apples to apples comparison by looking at the difference between North and South Korea and East and West Germany. That should be a good start.

 
At 10/04/2011 2:14 PM, Blogger VangelV said...

My brother would say businesses exist to lower the transaction costs among people trading.

Some businesses exist for this purpose. But I think that you are confusing the purpose of money with businesses.

One of my points is that the "value" of business depends on perspective in the same sense that the value of any good sold depends on the consumer's demand.

All value is subjective. So?

This is not quite true. A number of firms have as their product some social good (real or perceived). Organic foods, "locally grown" foods, Priuses, whatever.

People buy things because they prefer them to the other options, not because of a social good. They buy organic not because it is good for the environment but because they think that organic means healthier. Most buyers of Priuses think that they will save money. Or they make the purchase because they want to signal to others that they care abut the environment.

Companies spends millions training teachers, donating to charities, planting forests, and other such things in order to gain "goodwill" and a positive brand image.

Correct. The "goodwill" has more value to the companies than the resources that they invested in the activities. That is not being selfless or good. It is being prudent.

I would argue that a number of successful consumer product companies succeed in large part because they value their product quality highly enough not to cut corners even where they can't convince themselves most consumers will notice.

Consumers notice. You are assuming that consumers care more about perfection or high quality than they actually do. If my wife wants a dress for a party she may choose to buy one that is only $150 even though over a number of wearings the $350 similar looking dress turns out to be much cheaper. She knows the difference. She just does not think that it is worth the extra $200.

Lost in your narrative is the acknowledgement that in a free market it is the consumer who picks winners and losers and calls the shots. That is the most important point in this discussion. Perhaps you need to take the time to think about it.

It is a big problem, but announcing that "jobs are necessary evils" is not likely to solve it. Convincing the public that capitalism creates jobs may.

The public does not create jobs. Entrepreneurs and venture capitalists do.

 
At 10/04/2011 2:25 PM, Blogger VangelV said...

The left also believes that inequality foments discord and crime, and inclusive prosperity sows peace.

If the inequality comes from crime than you would be right. If it comes from people creating value than you are wrong. The fact that Bill Gates got rich by selling cheap software that consumers wanted did not hurt the poor even though inequality increased. The poor are hurt when their income drops thanks to meddlers in the economy and businesses that use the government to protect them from competition. And they get pissed off when businesses that made lousy decisions get bailed out while ordinary people lose their homes.

The inequality that you argue against comes from meddling of and theft by governments. If you let the gamblers lose their shirts rather than take a small 'haircut' the level of inequality would be smaller. But the last time I checked the left was all in favour of bailouts and the transfer of taxpayer funds to the failed banks and manufacturing companies.

They believe that peace is good for prosperity.

Do they? Then why is Obama so eager to wage war? Why did the left not object the Obama Afghan occupation as it did when Bush was in charge?

History and evidence also show that to be true.

Only the left and right wing nutcases would argue otherwise.

If leftist policies don't solve that problem, fine and good to point it out, but what policy would?

A policy of freedom. You know, where the average taxpayer does not have to bail out rich bankers and the UAW. One where people can work for whom they choose at a price that they agree on. Where there are no monopolies on forced government services. Where there are no barriers to competition, subsidies, or tariff protection that robs consumers of purchasing power.

The last time I looked liberty and free markets were preferred to central planning.

 
At 10/04/2011 2:34 PM, Blogger Sean said...

Che is dead,

Sorry, that's not good enough. The responsibility to create wealth and the resulting economic growth and jobs, like the one you have, doesn't fall to only a few. No, that responsibility belongs to everyone.
I reject your assertion that it is everyone's responsibility to start a business or that starting a business is the only way to create wealth. The primary value of starting a business (relative to other work) is the willingness to take on risk and the coordination of workers towards a single goal. This is indeed valuable, but it would be far less valuable if everyone were capable of that coordination. Find a way to support oneself is a responsibility. Starting a business is a choice.
I could start a hamburger stand or run a McDonald's, but I think I provide more value on a microprocessor design team.

But, hey, piece of cake.
Starting and running a small business is indeed difficult. I respect that. My comments were really geared more towards the nature of corporations and other large entities: small businesses are a different beast.

If you make it, the government will be your 50+ percent partner on the upside.
I can understand your bitterness about that. I would probably feel similarly in that position. What you paid to succeed and the overhead from government is very visible: any benefits from government are very hard to see.

The politicians will vilify you for not paying your "fair share" in taxes and smother you in reams of regulation
I haven't heard much vilification of small business owners, and large businesses are typically *not* built or kept in motion by one person, however much that person might think so. The regulation we have is certainly a problem. But yes, I can understand wanting respect for what you created at great personal cost.

And if you don't make it? You'll be broke, ineligible for unemployment insurance and no one will know your name.
From what I've heard, many businesses owners went broke several times before achieving success in business. But I'm curious that you care so much about being known?

 
At 10/04/2011 2:58 PM, Blogger Sean said...

VangeIV,

All value is subjective. So?
So the greatest value of business to many who intend to work for someone else is that they create jobs. Destroying jobs crates negative goodwill.

People buy things because they prefer them to the other options, not because of a social good
Some of the same people that donate a dollar to the Jimmy Fund every they go through a McDonald's drive-through also do thing like buy "fair-trade" chocolate. They feel pride to have supported businesses that value people.

Consumers notice. You are assuming that consumers care more about perfection or high quality than they actually do
No, my point was that consumers notice more than a number of American marketers and designers think they do, and so sometimes playing for the biggest short-term measurable profit backfires. It was a statement decrying American business practice rather than the market. Of course, sometimes we want cheap stuff too.


Do they? Then why is Obama so eager to wage war? Why did the left not object the Obama Afghan occupation as it did when Bush was in charge?
I honestly don't know. This was one issue where I actually expected better.

The public does not create jobs. Entrepreneurs and venture capitalists do.
They are not members of the public?
One thing "the public" does create is more government. "The public" is worth convincing on some issues.

 
At 10/04/2011 3:09 PM, Blogger Sean said...

VangeIV,

The inequality that you argue against comes from meddling of and theft by governments.
I've seen you argue elsewhere that inequality is natural and governments only cause harm trying to end it. So is equality natural or government-caused?

The fact that Bill Gates got rich by selling cheap software that consumers wanted did not hurt the poor even though inequality increased
The problem is not real harm, it's perceived harm.

People judge poverty by what their neighbors have. That's why posters here get in pissing contests over money and the value they've created and get so bitter about parasitic louts even if they work for a living. Every single one of them has enough to live well and even a tax increase wouldn't hurt them in material terms, but that's not really the issue. It's pride. Most people would like to feel like a success, but they absolutely loathe and fear failure. The inner-city gangster and the terrorist don't kill their neighbors because they don't have enough to eat: they do it because they feel slighted, because they don't know how to feel like a success.
Inequality feeds that effect. Much of our crime is fed from it, and I'm not sure there is a good solution. But places with more government control have made a devil's bargain to reduce inequality and crime, and the evidence I've seen indicate it actually does work at least in the short term. It's the hope of a partial solution to that problem that feeds support for the left.

 
At 10/04/2011 3:19 PM, Blogger Paul said...

Sean,

"But places with more government control have made a devil's bargain to reduce inequality and crime, and the evidence I've seen indicate it actually does work at least in the short term."

For example...

 
At 10/04/2011 3:21 PM, Blogger t11s said...

"Bush cut taxes. This reduced the redistribution of wealth."

Redistribution requires government spending. Yet despite the reduction in marginal Federal income tax rates, US government spending per capita did not go down at all...

Total Federal, State, and Local US government spending per capita:

1990: $8,399
1995: $9,959
2000: $11,483
2005: $14,880
2011: $19,812

Source: http://www.usgovernmentspending.com

 
At 10/04/2011 3:37 PM, Blogger Sean said...

Paul,

For example...
I went to grad school with people from Spain, Germany, France, and Canada. The people from all those countries were completely convinced that the European welfare model led to significantly less violent crime than in America. It's hard to judge attribution correctly, and arguments about the relation between inequality and happiness/crime have been very controversial.

But check out Western Europe vs. the US:
http://en.wikipedia.org/wiki/List_of_countries_by_intentional_homicide_rate

 
At 10/04/2011 3:37 PM, Blogger Sean said...

This comment has been removed by the author.

 
At 10/04/2011 3:42 PM, Blogger Sean said...

Link seems to have been cut.

 
At 10/04/2011 4:52 PM, Blogger VangelV said...

Your graph is unsourced and possibly invented/fabricated. My source says no, revenue is still down since Bush took office.

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200


My reference comes from the Office of Management and Budget, the same as yours. You might be confused because it ends in 2008 and you are thinking about the situation today, in the third year of Obama's reign.

In either case the data is pretty clear. Tax revenues in constant dollars have not declined except over short periods of time. The estimate for this year is around $2.2 trillion a bit higher in current dollars than 2000 and more than twice the spending during Clinton's first year.

The problem is spending regardless of which party controls Congress or the presidency.

And keep in mind that the revenues have been inflated by large SS contribution surpluses that have hidden the true extent of the problem. Clinton and the Republican Congress managed to increase the federal debt by 50% over an eight year period. That was actually an improvement over Bush I, Reagan, and Carter.

 
At 10/04/2011 4:59 PM, Blogger VangelV said...

"Ah, the irony. Don't you realize that student debt has gone up because government funds made huge tuition hikes possible?"

No, I don't realize that because it is the opposite of the truth. See here.


My point is actually valid. Without state support and state loans the universities could not charge as much as they do for the crappy education that they provide. There is no way that families will continue to shell out as much cash as they used to given the negative returns on their education investments. Most students would have been better off to avoid universities and to get actual marketable skills that would allow them to get jobs in the real economy.

 
At 10/04/2011 5:14 PM, Blogger VangelV said...

So the greatest value of business to many who intend to work for someone else is that they create jobs.

You are missing the point. Value is subjective. Period. Businesses exist to provide goods and services to consumers. Obviously they do that by employing people.

Destroying jobs crates negative goodwill.

But not hiring is not destroying jobs. And consumers only care about the production of the business. Do they get what they want at a better price than is offered by the competition. End of story.

Some of the same people that donate a dollar to the Jimmy Fund every they go through a McDonald's drive-through also do thing like buy "fair-trade" chocolate. They feel pride to have supported businesses that value people.

They value the feeling that they get from paying more for chocolate under rules that favor big companies that can jump through all of the hoops to the chocolate produced by small family owned companies that can't afford to allocate resources to all of the paperwork. Their decision is selfish. They choose what they prefer to other options just like everyone who ever makes a choice.

Subjective value may be too subtle an issue for you but I suggest that you take the time to understand it. Some Menger may do you a lot of good.

No, my point was that consumers notice more than a number of American marketers and designers think they do, and so sometimes playing for the biggest short-term measurable profit backfires. It was a statement decrying American business practice rather than the market. Of course, sometimes we want cheap stuff too.

As I wrote above, the consumers call the shots. What is the problem with that?

"Do they? Then why is Obama so eager to wage war? Why did the left not object the Obama Afghan occupation as it did when Bush was in charge?"

I honestly don't know. This was one issue where I actually expected better.


You are naive. Most politicians care only about power. American history shows that the left does not dislike war any more than the right.

They are not members of the public?

There is no such thing as 'the public.' There are only individuals and voluntary social groupings which are very fluid. You seem to confuse human society with an ant colony.

One thing "the public" does create is more government. "The public" is worth convincing on some issues.

Like I said, there is no public. There are only voters who are manipulated by the political elite. Voters don't matter 99% of the time. When they do the system is in collapse so they are not the solution. Again, look at your history.

 
At 10/04/2011 5:57 PM, Blogger Sean said...

VangeIV,

You are missing the point. Value is subjective. Period. Businesses exist to provide goods and services to consumers.
I'm missing the point? How can value be subjective and purpose absolute?

Their decision is selfish.
When people make a choice to support others, it may be misinformed without being selfish. And in not all of my examples were the choices misinformed.

Subjective value may be too subtle an issue for you
I'm trying to decide if you're being deliberately obtuse. Altruistic and individual desires are indistinguishable from a market perspective: so what? The concepts affect the choices people make.

Some Menger may do you a lot of good.
I'll add him to the list.

American history shows that the left does not dislike war any more than the right.
Perhaps I was naive. I just can't figure who Libyan action benefited that so many countries were inclined to partake.

There is no such thing as 'the public.' There are only individuals and voluntary social groupings which are very fluid.
How can one survive childhood not knowing that people behave differently in group than alone, even if those grouping are involuntary? People are individuals, but in groups they tend to conform and act according to some least common denominator of interest.
Corporations, for example, are composed of people. But people making decisions on the behalf of corporations make very different decisions than at home: they internalize the collective interest of the corporation as one might internalize the collective values of one's fellow Libertarians.
And yet we retain a set of values on which we don't compromise or compromise less. People are fascinating.

There are only voters who are manipulated by the political elite
I'm sorry: who thinks we're in an ant colony? I don't find the view of sheep driven by an elite and the uselessness of collective concepts logically compatible.

Voters don't matter 99% of the time.
They matter more implicitly than explicitly. Polls decide whether people like Perry, Trump, or Palin ever run. People that don't have values acceptable to a large number of other people don't become elites.

 
At 10/04/2011 7:42 PM, Blogger VangelV said...

I've seen you argue elsewhere that inequality is natural and governments only cause harm trying to end it. So is equality natural or government-caused?

Inequality is natural. But that does not mean that meddling will not create inequality that is very unfair. For example, we do not need to have taxpayers bail out billionaire bankers who gambled or lost or unions and management groups that destroyed formerly great manufacturers. The natural inequality does not harm those who are poor because it does not rob them of purchasing power or income. The government-created inequality does harm them because they wind up subsidizing gamblers who lost and overpaid unproductive workers who are overpaid.

 
At 10/04/2011 7:56 PM, Blogger VangelV said...

The problem is not real harm, it's perceived harm.

Envy is natural among people. Some people do not care about winning as long as others lose more. But that is not a sound basis for governance.

People judge poverty by what their neighbors have. That's why posters here get in pissing contests over money and the value they've created and get so bitter about parasitic louts even if they work for a living. Every single one of them has enough to live well and even a tax increase wouldn't hurt them in material terms, but that's not really the issue. It's pride.

No, it is theft. Many people do not believe that extortion is a good basis for civil society.

Most people would like to feel like a success, but they absolutely loathe and fear failure. The inner-city gangster and the terrorist don't kill their neighbors because they don't have enough to eat: they do it because they feel slighted, because they don't know how to feel like a success.

This is a stupid statement that is not supported by any real data.

Dying to Win: The Strategic Logic of Suicide Terrorism

Inequality feeds that effect. Much of our crime is fed from it, and I'm not sure there is a good solution.

Crime? Do you think that one gang member kills someone from another gang because of inequality? How about a man who kills his wife? Or someone who kills a child? Are robberies fueled by inequality or simply to raise money to feed a drug habit? Did Madoff steal money from old ladies because he was protesting against inequality?

But places with more government control have made a devil's bargain to reduce inequality and crime, and the evidence I've seen indicate it actually does work at least in the short term.

It never does and never has. Robbing the productive class to subsidize the less productive can only work when a society has a lot of productive capital that it can burn through and has access to freely flowing credit.

It's the hope of a partial solution to that problem that feeds support for the left.

The left created this mess. The productive economies were destroyed by Keynesian meddlers on both the left and the right. They helped to create the illusion of stability for a while but once the lunch bill had to be paid chaos broke out. Before it is over European cities will burn as will American cities. The fires will be set by the idiots on the left who are very attracted to violence because they have no actual solutions to provide. Their whine about inequality would have been a lot more convincing if they were not so eager to bail out the rich that they are complaining about.

 
At 10/04/2011 8:03 PM, Blogger VangelV said...

I went to grad school with people from Spain, Germany, France, and Canada. The people from all those countries were completely convinced that the European welfare model led to significantly less violent crime than in America.

I guess it could not have been the tolerance of drug use and the availability of cheap drugs. Or the demographics. Or many other factors. Narratives among lefties in grad school do not prove anything other than lefties are not very smart about economics.

It's hard to judge attribution correctly, and arguments about the relation between inequality and happiness/crime have been very controversial.

You are damned right they are. If Obama wants less crime all he has to do is end the war on drugs which is the cause of so much of it.

But check out Western Europe vs. the US:
http://en.wikipedia.org/wiki/List_of_countries_by_intentional_homicide_rate


Adjust for race, demographics, and drug law differences and then let us look at the data. As you wrote above, "It's hard to judge attribution correctly, and arguments about the relation between inequality and happiness/crime have been very controversial."

 
At 10/04/2011 8:16 PM, Blogger Hydra said...

Growth causes employment, employment doesn’t cause growth.

================================

What is the big deal about employment, anyway? We can make more than we need of most everything, with very few people actually working.

Competition for the remaining useful jobs will drive payroll through the floor. We already have a minority of the people paying a majority of the taxes, and they will soon be paying even more of the taxes as fewer and fewer people have enough income to tax.

Before long, government support payments will be more than what a worker can earn, and people will take jobs only to avoid the stigma of food stamps and to avoid idle boredom.

++++++++++++++++++++++

Growth causes employment, employment doesn’t cause growth, my foot.

They are co-dependencies: traditionally, you can't have either one without the other. You don't get growth when no one is employed, unless robots are doing the work, in which case you grow production, but not necessarily sales. That cannot continue, so you sell the robots and put yourself out of work.

Eventually mergers and acquisition lead to one giant, fully automated production company that makes everything and hires no one. The CEO is the sole remaining employed person on the planet, and he pays ALL the taxes.

Here is a guy with infinite production capacity. As the population expands he can grow and produce more and more, and never hire anyone.


Think this is far fetched? Take a look around. Something like 17,000 businesses employ half the people in the US, and as Frezza points out, the last thing they want to do is hire someone.

So much for the job creators.


Obviously Frezza left something out by equating employment only with expense, because employment is also what grows the company. Employment creates value that is greater than the expense, and part of that value translates to profit.

Frezza it talking nonsense.

 
At 10/04/2011 8:24 PM, Blogger Hydra said...

If Obama wants less crime all he has to do is end the war on drugs which is the cause of so much of it.

========================

Yep, he could have a lot less crime by legalizing immigration, too. While we are at it, let's legalize stealing. Just think of the bonus we would get in the reduction of onerous business regualations, which would no longer be necessary, since stealing would be legal.

Which corporations do you think will jump in to fill the supply gap when drugs become legal? Smuckers? Kraft Food? Johnson&Johnson? How about SmithKline/ADM?

 
At 10/04/2011 8:31 PM, Blogger Hydra said...

by the idiots on the left who are very attracted to violence

+++++++++++++++++++++++++++++++

There are some crazy violent lefties, eco-terrorists and such, and even Jimmy Carter sent that cruise missile to ethiopia or wherever, but I don't rcall the greens mounting a major campaign demanding that we invade Iraq or Afghanistan or Boznia.

A little street violence pales in comparison to what the right has in mind.

 
At 10/04/2011 8:34 PM, Blogger Hydra said...

that does not mean that meddling will not create inequality that is very unfair.

++++++++++++++++++++++++

Boy, I am glad to know that there is fair inequality and unfair inequality. Thanks for clearing that up.

 
At 10/04/2011 8:39 PM, Blogger Hydra said...

a large part of U.S. industrial growth at that time was a consequence of WWII destroying the economies and industrial capacity of our competitors.

+++++++++++++++++++++++++++

Eureka. the answer to our economic problems. Lets have another war and destroy the industrial capacity of our competitors.

I told you the right was proce to violence.

 
At 10/04/2011 8:43 PM, Blogger Hydra said...

God knows we don't want to subsidize overpaid unproductive workers.

We ought to slap a huge surtax on the rich who are not doing anything productive. Certainly they are not fulfilling their role as job creators.

 
At 10/04/2011 8:47 PM, Blogger sethstorm said...


ecause they don't look at the real world. They've read Ayn Rand and she says everyone is "Going Galt". The "job creators" are going to leave.

Pursue and forcibly repatriate, given that there is no place to hide. If there is any physical sabotage, they're fair game for a drone strike.

When they start crossing the line from not harming anyone else, to harming nearly everyone outside themselves, they aren't leaving people alone.


Try looking at the history of China before and after Deng liberalized the economy.

The same country, except they get their dissidents even faster. The bulk of the Chinese are simply used as leverage against those in the US and EU.

China is a perfect example of why you dont reserve freedom for only the businesses.

 
At 10/04/2011 8:53 PM, Blogger VangelV said...

I'm missing the point? How can value be subjective and purpose absolute?

Value is subjective. Read all about it here.

When people make a choice to support others, it may be misinformed without being selfish. And in not all of my examples were the choices misinformed.

You are still ignorant of the point being made. Whenever you choose to take any action it means that you prefer it over all the other alternatives that you have. That makes any choice a selfish one by definition. If you prefer helping someone to playing ball that means that you rank helping higher than playing. You choose the preferred alternative just as the guy who preferred to spend his time with hookers and booze did.

'm trying to decide if you're being deliberately obtuse. Altruistic and individual desires are indistinguishable from a market perspective: so what? The concepts affect the choices people make.

People always choose that which gives them the most pleasure, even if that is helping others. There is nothing wrong with that because in the real world all humans act. Which brings me to another bit of suggested reading.

Perhaps I was naive. I just can't figure who Libyan action benefited that so many countries were inclined to partake.

It helped Sarkozy who was trailing badly in the polls. It helped Merkel, Obama, and Cameron, who all needed to boost their own polls. It helped the arms dealers who give campaign contributions.

How can one survive childhood not knowing that people behave differently in group than alone, even if those grouping are involuntary?

Of course people behave differently in groups. Humans are social animals. But humans like to join groups voluntarily and do not liked to be forced to be a part of groups that they have no wish to join.

People are individuals, but in groups they tend to conform and act according to some least common denominator of interest.

Chess clubs are formed to play chess and have rules that all people who join have to follow. But they do not apply these rules to other social or economic activities. You fail to make the connection between voluntary organizations dedicated to a narrow interest or goal and large groups with many interests.

 
At 10/04/2011 8:53 PM, Blogger VangelV said...

Corporations, for example, are composed of people. But people making decisions on the behalf of corporations make very different decisions than at home: they internalize the collective interest of the corporation as one might internalize the collective values of one's fellow Libertarians.

I think that you are still missing the point. If you make cars there is no collective interest other that making cars effectively. If you have a religious interest you do not go to GM but to a church.

And yet we retain a set of values on which we don't compromise or compromise less. People are fascinating.

They are complex and highly individualistic. Yet, you treat them like insects who have a common interest to serve the hive. I find that fascinating.

I'm sorry: who thinks we're in an ant colony?

Your posting reveal that you do.

I don't find the view of sheep driven by an elite and the uselessness of collective concepts logically compatible.

Either I made the point badly or you missed it. Voters have been fooled into thinking that there is a difference between having Bush or Obama in power or having Congress be dominated by Republicans or Democrats. But there is no difference. The political elite only care about the health of the state, not the serfs that live in it. No matter how smart the voter, unless that point is understood s/he is doomed to be irrelevant.

This is what I find funny about the left and right commentators on this and most threads. They argue about huge differences among their leaders and when the actions of those leaders turn out to be the same they are confused.

They matter more implicitly than explicitly. Polls decide whether people like Perry, Trump, or Palin ever run. People that don't have values acceptable to a large number of other people don't become elites.

The only 'value' these mountebanks have have is the desire for power. Everything else is veneer. Look to Obama's actions on bailing out lousy businesses, occupying Iraq or Iran, holding prisoners without trial, etc, and tell me how different they were from the actions of Bush.

 
At 10/04/2011 8:55 PM, Blogger VangelV said...

Which corporations do you think will jump in to fill the supply gap when drugs become legal?

Who cares? A demand will always be served by the market. If you want a parallel just look at the end of Prohibition.

 
At 10/04/2011 8:56 PM, Blogger VangelV said...

Before long, government support payments will be more than what a worker can earn, and people will take jobs only to avoid the stigma of food stamps and to avoid idle boredom.

In the real world governments that are broke can't keep extending payments forever.

 
At 10/04/2011 9:05 PM, Blogger VangelV said...

There are some crazy violent lefties, eco-terrorists and such, and even Jimmy Carter sent that cruise missile to ethiopia or wherever, but I don't rcall the greens mounting a major campaign demanding that we invade Iraq or Afghanistan or Boznia.

First, it was Clinton that pushed for Bosnia and Kosovo. He bombed civilians in Serbia just as Obama is bombing civilians in Yemen and Libya.

Second, the left was all for the Iraq/Afghanistan attacks. Those who opposed Bush on Iraq were attacked by both sides.

A little street violence pales in comparison to what the right has in mind.

Both the left and right are statists. They both love violence but the left is far more likely to engage in the violence of envy.

 
At 10/04/2011 9:08 PM, Blogger VangelV said...

Boy, I am glad to know that there is fair inequality and unfair inequality. Thanks for clearing that up.

Ussain Bolt can run a lot faster than me and Bill Gates can program code better than me. That is fair inequality. Jamie Diamond is much richer than me because he was bailed out by Obama. That is unfair inequality. There is a big difference.

 
At 10/04/2011 9:13 PM, Blogger VangelV said...

Eureka. the answer to our economic problems. Lets have another war and destroy the industrial capacity of our competitors.

I told you the right was proce to violence.


That is not what he said. If you want a proponent for war as a way to prosperity look to the NYT and Paul Krugman.

 
At 10/04/2011 11:36 PM, Blogger Hydra said...

In the real world, governments that are broke are not taxing the rich enough.

Krugman has not started a war, but the Bushes have started three.

You guys tanks yourselves way too seriously.

You cannot even see how rildiculous and amusing your comments are.

 
At 10/04/2011 11:42 PM, Blogger Hydra said...

Jamie Diamond is better at politics than you. It is a fair inequality, by your definition.

 
At 10/04/2011 11:47 PM, Blogger Hydra said...

what he said was that we succeeded because war destroyed our competitors ability to compete.

Isn't that the goal of most wars?

And we have the greatest military, why, exactly?

 
At 10/05/2011 8:33 AM, Blogger VangelV said...

In the real world, governments that are broke are not taxing the rich enough.

In the real world rich people don't live or don't do their business in jurisdictions that tax too much.

Krugman has not started a war, but the Bushes have started three.

Krugman has not started a war because he has no power to do so. And which one of those three wars did the Democrats oppose? Look at the votes in Congress and you will see that the Democrats overwhelmingly supported the conflicts just as they always have. Vietnam and Korea were Democratic adventures. The American entry into World War One, which made Hitler and Stalin possible, was a Democratic decision. In fact, if you check your history you will find that the most consistently anti-war were the conservatives in the Old Right.

You guys tanks yourselves way too seriously.

No. I just think that you and your lefty friends are clowns just like the pro-war right wing nutcases on this thread.

You cannot even see how rildiculous and amusing your comments are.

Empty words without any meaning. How typically lefty of you.

 
At 10/05/2011 8:36 AM, Blogger VangelV said...

Jamie Diamond is better at politics than you. It is a fair inequality, by your definition.

Not if his political buddies steal from the poor to make Jamie rich. Stealing is not fair. Even a lefty can see that.

Of course, when I anticipate the actions and get rich by front running the inevitable that is perfectly fair because everyone has the same opportunity to take the actions that I did.

 
At 10/05/2011 8:46 AM, Blogger VangelV said...

what he said was that we succeeded because war destroyed our competitors ability to compete.

That is only partially true. The West Germans did better even though their industrial base was destroyed by the war. The economy is too complex to look to any one factor and draw conclusions.

Isn't that the goal of most wars?

No. The goal is power for those that start the wars.

And we have the greatest military, why, exactly?

This question is wrong on many levels. Your military is not very great because there is no nation that would risk a direct conflict. Yes, you can try to invade and occupy other nations but that has not been a winning strategy for decades. Other than Grenada I have yet to see an American victory. You went into Lebanon and Somalia only to withdraw after taking unacceptable losses. In Iraq you have done a great job by weakening or eliminating most of the opposition to Iran. Now that you are ready to move out, the Iranian proxies will take over the government. Afghanistan is playing its role as the graveyard of empires. The Russians are feeding false intelligence to your military in the hope that you move further away from the Pakistanis. That is working out well for them and we are now in a position where there are huge risks of conflict in the region that could involve the United States, India, Pakistan, and China. You have spent a trillion but the Taliban is still making gains. It is only a matter of time before the troops left, just as they did Vietnam. But before they do, they will add more than a trillion to the debt and will accrue unfunded pension and benefit liabilities that may be several times that number.

Your military is a liability, not an asset. The fact that you do not understand it any better than the right wingers who you keep arguing with tells us a great deal.

 
At 10/05/2011 10:42 AM, Blogger Dan Ferris said...

American Delight, think of it this way...

Think of sovereign debt as subprime mortgages taken out by borrowers who couldn't afford them, and think of Greece and other economies as the borrowers. These are huge amounts of money, and the sovereigns are in danger of not paying them back. That'll cause enormous problems with big European banks. But this is a global economy, so problems at big European banks are also problems at big American and other banks. It's another liquidity crisis, like in 2008, only this time the instruments and borrowers are more concentrated.

 
At 10/05/2011 12:37 PM, Blogger Sean said...

VangeIV,

Having trouble with my ereader, but I'll work on your Menger text.

Whenever you choose to take any action it means that you prefer it over all the other alternatives that you have. That makes any choice a selfish one by definition.
I know some people define "selfish" that way, but I don't think it's a useful definition. It's essentially taking word that has meaning and defining it out of existence, usually followed up by using the useless definition to define altruism as useless. It's a cheap rhetorical trick illuminating no truths.

f course people behave differently in groups. Humans are social animals. But humans like to join groups voluntarily and do not liked to be forced to be a part of groups that they have no wish to join.
So far, so good. People have valid concerns about the way they are viewed and how they are grouped or pidgeonholed.

You fail to make the connection between voluntary organizations dedicated to a narrow interest or goal and large groups with many interests.
True. Groups can be defined for many reasons and purposes that very greatly. I in fact did not spend time developing categorizing means of grouping people.

I think that you are still missing the point. If you make cars there is no collective interest other that making cars effectively.
It's always possible I missed some point, but I did not miss this one. Every business has profit as its primary goal, but the means to achieve it in fact vary and are fluid. The Intel corporation was primarily a computer memory manufacturer at one time. The interests in which is is involved are many and have varied over time.


. People are fascinating.

They are complex and highly individualistic. Yet, you treat them like insects who have a common interest to serve the hive. I find that fascinating.

A cheap shot. It does not belittle a man that you can predict his behaviors when you constrain his circumstances. Learn the difference between character, role, and circumstance, and perhaps you will not be threatened by this truth.

to be continued...

 
At 10/05/2011 12:46 PM, Blogger Sean said...

VangeIV,

Voters have been fooled into thinking that there is a difference between having Bush or Obama in power or having Congress be dominated by Republicans or Democrats. But there is no difference. The political elite only care about the health of the state, not the serfs that live in it.
"Voters" is a collective noun describing a broad and relatively non-voluntary association of people "The political elite" is a collective noun.
Both are useful terms. The identification of a collection of people does not imply that members of the association must submit their goals and interests to the collective, although you state that "the political elite" do. Your self-contradictions have the sound of one lying to himself in order to conform to a philosophy. You continue to tell me who I am and what I believe while lying to yourself.


The only 'value' these mountebanks have have is the desire for power. Everything else is veneer. Look to Obama's actions on bailing out lousy businesses, occupying Iraq or Iran, holding prisoners without trial, etc, and tell me how different they were from the actions of Bush.
They did not differ from the actions of Bush. Obama is a centrist: his political philosophy is to conform to the masses. I find it amusing to hear this explained by a desire for power. Like the News Mogul in "The Fountainhead", such people are more slaves to popular opinion than shapers of it. So the question becomes: power to do what?

 
At 10/05/2011 1:08 PM, Blogger Sean said...

VangeIV,

I realized I missed more mountains of text. :) I'll try to address a few bits.

This is a stupid statement that is not supported by any real data.

Dying to Win: The Strategic Logic of Suicide Terrorism

Thanks. Sounds like an interesting resource. I draw my conclusion from excerpts of excerpts. It'll be nice to have some access to rawer data.

Inequality ... blah blah blah
You make some good points. I don't actually believe redistribution should be the basis for governance. I only point out that societies do have problems that freedom alone won't solve.

I agree that the war on drugs has been harmful.

The left created this mess. The productive economies were destroyed by Keynesian meddlers on both the left and the right.
Yes, they at least contributed to the mess.



You are missing the point. Value is subjective. Period. Businesses exist to provide goods and services to consumers.

My point was that perceived value to an individual is linked to purpose. The founders of businesses may have one intent, but consumers may feel differently about the "purpose" of that business in society. I can't tell either that they are wrong: it's a matter of perspective about what's important. The fact of the matter is that businesses create goods, services, and employment.

 
At 10/05/2011 9:33 PM, Blogger VangelV said...

"Voters" is a collective noun describing a broad and relatively non-voluntary association of people "The political elite" is a collective noun.

I agree.

Both are useful terms. The identification of a collection of people does not imply that members of the association must submit their goals and interests to the collective, although you state that "the political elite" do.

I am a bit tired so I am not sure exactly what you mean. I do not claim that the members of the political elite submit their own goals and interests to the collective. I am saying that the members personally benefit from the structure that has been established to keep them in power. The only truly common goal is to keep that structure intact.

They did not differ from the actions of Bush. Obama is a centrist: his political philosophy is to conform to the masses. I find it amusing to hear this explained by a desire for power. Like the News Mogul in "The Fountainhead", such people are more slaves to popular opinion than shapers of it. So the question becomes: power to do what?

Power to change the structure of health care. Power to bail out the banking system and the unions. Power to kill people without warrants or convictions. Power to do as they please without worrying about the law.

Your self-contradictions have the sound of one lying to himself in order to conform to a philosophy. You continue to tell me who I am and what I believe while lying to yourself.

There is nothing self-contradictory in my postings. I claim that both parties are statist and there is very little difference between the Democrats and Republicans when it comes to personal liberty because neither party is pro-individual and pro-liberty. There is no evidence that I see that contradicts those conclusions.

 
At 10/05/2011 10:00 PM, Blogger VangelV said...

Thanks. Sounds like an interesting resource. I draw my conclusion from excerpts of excerpts. It'll be nice to have some access to rawer data.

First, the book lays out the results from the data pretty well. Second, the conclusions are nothing new. The author could have discovered the same thing by reading the explanatory essay of his UoC colleague's translation of Plato's Republic. Bloom pointed out Plato's insight regarding thumos very clearly. His lecture on the subject was actually one of the most valuable one I ever sat in on in university.

You make some good points. I don't actually believe redistribution should be the basis for governance. I only point out that societies do have problems that freedom alone won't solve.

If you look to history you will find the opposite. The societies in which large inequality is least damaging are those that are freest. It is those societies that are best able to generate the large amount of wealth that makes it easy for even the poorest members of society to survive.

I suggest that you look to history again. People found ways to insure and protect themselves without the welfare state. Human beings are social animals and find ways to create voluntary organizations to meet their needs. Governments mostly get in the way and make things worse.

Yes, they at least contributed to the mess.

I would say that they created this mess. Control of the economy has been shred between the socialists and the national socialists. There are no free markets; only battles between special interests who use political power to gain advantage over others. When politicians from both sides of the spectrum throw trillions to bail out failed banks and automobile companies and wage wars to feed the military-industrial complex you cannot claim that there is any economic freedom. And when you see regulations that can put you in jail of your toilet tank uses too much water you can't talk about a free country with any credibility.

What the US needs is a system of small government that adheres to the strict limits in the Constitution. (For the record, I agree with some others on this board that the Articles of Confederation were much better but that is a subject for another thread and time.)

My point was that perceived value to an individual is linked to purpose. The founders of businesses may have one intent, but consumers may feel differently about the "purpose" of that business in society. I can't tell either that they are wrong: it's a matter of perspective about what's important. The fact of the matter is that businesses create goods, services, and employment.

I suggest that you take a look at introduction in the Menger book, where the issue is explained fairly clearly. There is no right or wrong when it comes to voluntary economic transactions. When you have a single buyer and seller, goods are only exchanged if both sides of the transaction can determine an exchange ratio (or price) that leaves each one better off than if the transaction did not take place. In a market that has a large number of buyers and sellers, the market price reflects the subjective valuation of the buyer that is least willing to buy and the seller that is least willing to sell.

The true argument is about two very different views. If you have not seen these I suggest that you take a few minutes and enjoy the lessons.

Fear the Boom and the Bust

Fight of the Century: Keynes vs. Hayek Round Two

 
At 10/06/2011 1:42 AM, Blogger Ron H. said...

Sean: "This illustrates nicely the difference between the perspective of business institutions and humans."

But business are just groups of people joining together for a common purpose.

"Our businesses, on the other hand, seek to make money for their owners, preferably with the lowest possible costs."

That's exactly right. People start a business to make money. The sole mission of that business is to maximize profit for the owners.

"Businesses are a "necessary evil": they provide net benefits to humans, but they are in an interesting sense actively antagonistic to them."

Businesses aren't "necessary", but we would sure be poor without them. We could do everything for ourselves, with no division of labor, but that would suck big time.

How can businesses that provides us with goods and services that we want, and with jobs, be evil?

 
At 10/06/2011 2:14 AM, Blogger Ron H. said...

"Jon: Let's try a different method. Let's look at the historical record. During the 50's and 60's economic growth in the US was rapid. Tax rates for the wealthy were extremely high. That basically served to redistribute money. Since everyone had money and jobs this lead people to purchase things. This created demand which lead to more growth."

Gee, that sounds a lot like the Left's wet dream, as you dsescribed it, except you've added a "high tax rate on the rich" part. This isn't really a different method, is it.

Rather than just taking Chomsky's word for it, you might want to do some checking on your own as to how that high tax rate on the rich actually worked during the 50s and 60s. You might find that it didn't correlate well to actual tax revenue at all, as the rich have this clever habit of shifting their incomes to forms that are taxed the least, or even taking their assets - and jobs - somewhere else.

It's truly amazing how people move away from something that burns them.

So, if I understand your ideal system, the rich are required to produce things for people who buy them using money the rich have previously redistributed to them.

The poor are required to buy things from people who produce them, using money the producers have given to them previously, for that purpose.

This is called growth and prosperity.

 
At 10/06/2011 2:26 AM, Blogger Ron H. said...

"More shifts towards ownership and management. Hence a massive increase in inequality. So those that are working that are among the bottom 50% have stagnating to declining wages. That's a wage redistribution that deprives the poor and leads to reduced demand."

Hmm. The rich must be really stupid. Don't they realize they are destroying their own customer base? Sheesh! I wonder how they manage to dress themselves in the morning?

 
At 10/06/2011 7:50 AM, Blogger Sean said...

Ron H.,

How can businesses that provides us with goods and services that we want, and with jobs, be evil?

Calling business evil was a highly provocative statement. Usually I make statements of that nature as an exercise in perspective.

Libertarian morality is pretty much of the from "do no harm". A business that, for example, stacks benchmarks to make their product appear that it is better than it is has violated this principle by lying to a consumer to alter the terms of trade. A business is considered to have a fiduciary duty to do such things if they are profitable. Ergo, the business is generally considered to have a duty to be immoral (evil) under certain circumstances.

Businesses are not just organizations of people, they are organizations of people bound to a least common denominator of interest, and have a legal duty not to consider concerns such as morality over profit.

 
At 10/06/2011 12:25 PM, Blogger VangelV said...

How can businesses that provides us with goods and services that we want, and with jobs, be evil?

Unless you are a confused anti-market socialist or national socialist they can't be evil.

 
At 10/06/2011 12:39 PM, Blogger VangelV said...

Calling business evil was a highly provocative statement. Usually I make statements of that nature as an exercise in perspective.

I am sorry but it looks to me as if you are just confused. This is very common among the young or people who have spent far too much time in academia as dependents of others. I am not suggesting that others on this site are not guilty of using language in a sloppy manner or always being rational because it is too easy to be rash on forums like this one. I am suggesting that when we look at your postings in total they reveal someone who believes in failed Keynesian ideas that have been discredited by history.

Libertarian morality is pretty much of the from "do no harm".

I do not believe that this is true. Libertarian morality is about liberty. End of story. And the more liberty the more 'good' is accomplished in society. Liberty and responsibility are positive influences on society that go far beyond 'do no harm.'

A business that, for example, stacks benchmarks to make their product appear that it is better than it is has violated this principle by lying to a consumer to alter the terms of trade.

First, there are laws against outright fraud that defend customers against businesses that deceive them. Second, there are neutral institutions that exist to give consumers independent assessments regarding the quality and value of the products and services that they wish to purchase. Third, unlike the government, businesses cannot force consumers to make decisions. In a free market it is the consumers who call the shots as they make buying decisions. It is they who determine which producer prospers and which one fails.

A business is considered to have a fiduciary duty to do such things if they are profitable.

A business cannot commit fraud. Period.

Ergo, the business is generally considered to have a duty to be immoral (evil) under certain circumstances.

Your twisted logic has failed to convince. As I wrote above, fraud harms the business because it leads to legal penalties and a loss of reputation that could drive a company under. Successful businesses are those that deliver the goods time after time, not ones that fool consumers by lying to them.

Businesses are not just organizations of people, they are organizations of people bound to a least common denominator of interest, and have a legal duty not to consider concerns such as morality over profit.

You need an education. Take a look at all of the leading companies in any sector and find evidence that their position comes from lying to the consumer. Until you do all you have is a theoretical discussion without any real support.

 
At 10/06/2011 1:22 PM, Blogger Sean said...

VangeIV,


Libertarian morality is about liberty. End of story
That is precisely why it is so barren. I think libertarianism might make a decent secular container society. A society with less coercion is, prima facie, a much better society. I think it leaves a lot to be desired in answering the question of how to live and what to value, but that is just opinion.

First, there are laws against outright fraud that defend customers against businesses that deceive them
Correct. This is why businesses spend large amounts of money figuring out how best to mislead the consumer while leaving plausible deniability against fraud.


Second, there are neutral institutions that exist to give consumers independent assessments regarding the quality and value of the products and services that they wish to purchase.
If I try to steal and someone else tries to stop me, my behavior is still immoral.

Third, unlike the government, businesses cannot force consumers to make decisions
True, but irrelevant to the point.

A business cannot commit fraud. Period.
Can I play too? Politicians cannot commit crimes. Period.

If you read from the Consumerist, I don't think you could take that position.


Your twisted logic has failed to convince. As I wrote above, fraud harms the business because it leads to legal penalties and a loss of reputation that could drive a company under
The logic is fine. You equated lying and misleading to "fraud", a harder concept with a higher boundary of proof, then asserted that the costs of fraud are higher than the benefits.
It's the defense I expected, because business's leeway to manipulate information is in fact limited.
But if you think that businesses do not constantly attempt to misrepresent quality in an attempt to save costs that they don't have to pass to the consumer, I have a bridge to sell you. I have certainly had salesman outright lie to me (I can think of three examples offhand regarding cars, fresh meat, and home security installation). They just have to make sure the misrepresentation in costs are not greater than the cost of retaliation.

You need an education
On the meaning of caveat emptor?

Take a look at all of the leading companies in any sector and find evidence that their position comes from lying to the consumer.
If I don't do my research before buying a graphics card or a processor, I can easily lose $50 of value (buying the slower device or overpaying for the faster one). But it has not been uncommon in the past for Nvidia and ATI both to release benchmarks showing their cards are the fastest. Duplication and examination of those benchmarks showed obvious cheating (through compiler or driver version tricks, hand-coded optimizations not available in the consumer product, non-comparable base systems, etc). There is never any meaningful retaliation: it's expected behavior. Caveat emptor.

It's not so much that you get to be #1 by lying: it's that you get to survive for a long time with good margins on an inferior product by lying.

 
At 10/06/2011 1:39 PM, Blogger overtheedge said...

What is being overlooked is the sole reason behind everything; tax revenue enhancement.

Every transaction generates tax revenues. Yes, even barter: see IRS code on barter.

With the enhanced revenue, each politician has access to transferable funds available for redistribution to the most politically productive sectors amongst each politicians constituency.

Everyone needs to read some Adam Smith.

Businesses are not a collective effort, but rather the efforts of an individual or small group of investors. The employee just wants a paycheck for delivering the least efforts towards the company's bottom line. Every organism lives and dies by the maxim of "least effort for maximum returns aka conservation of energy expenditure."

Businesses have a fiduciary responsibility to maximize the return on investment (ROI). The employee is not an investment, but rather a tool.

The ROI is the bottom line. Couple this with gov't intervention and the business gets saddled with curious non-producer (CNP)employees whose sole purpose is regulatory compliance and reporting. The CNPs produce nothing. They are just an added expense.

But, each CNP gets a wage and ergo the gov't gets their cut of the transaction. With the gov't's requirement of knowing some predictable tax revenue stream, each CNP adds data to the gov't's knowledge base.

Now to consider a business to have a social responsibility is questionable at best. The whole idea rests on the principle of the business owes the purchaser more than the purchaser paid for. And worse, the business owes the non-buyers as well? Nonsense, get a job! The business' only responsibility to society is not foul the commons aka air, water, etc.

Debts must be paid. To pay these debts requires growth of the tax base which demands productivity that has a market. It is fundamentally impossible to create a sustainable market by increasing debt. Ergo gov't redistributions of tax revenues to prospective buyers is doomed. Hence the requirement for "cash for clunkers", etc.

Socialism has never worked. A business is not evil. Society is. Society demands an ROI without investment in the business.

Our problems have been traced to the creation of the Fed Reserve. Nonsense. It began with sec. 4 Amendment XIV and was finalized by Amendments XVI and XVII. Without these, we wouldn't have gotten in this shape. Creation of the Fed was just the capstone on the possibility for gov't largess to buy votes.

Everything is about maintaining the tax revenue stream. Bail-outs are all about tax revenue streams.

 
At 10/06/2011 1:43 PM, Blogger Sean said...

VangeIV,

I am suggesting that when we look at your postings in total they reveal someone who believes in failed Keynesian ideas that have been discredited by history.
As I discussed with Ron H.,
Hayek's takedown of "the paradox of thrift" seems incomplete. Keynesian modeling seems to offer some actual insight, however those policymakers who call themselves Keynesians just want an excuse to spend money, and so do things that Keynesian models would actually say are bad things. And in reality, they have had bad results. I don't know enough to know if Keynesian insights properly developed could be applied to to improve results, but I certainly can't recommend trying. However, there are insights there that don't seem to merit the academic garbage heap just yet.

 
At 10/06/2011 1:50 PM, Blogger VangelV said...

That is precisely why it is so barren. I think libertarianism might make a decent secular container society. A society with less coercion is, prima facie, a much better society. I think it leaves a lot to be desired in answering the question of how to live and what to value, but that is just opinion.

It is an opinion out of ignorance. As I said, the basis of libertarianism is liberty. It makes no statement about how the free citizens of a free society would choose to live and which voluntary institutions they will form. There is nothing barren in a society that permits a wide variety of voluntary organizations to flourish without coercion.

Correct. This is why businesses spend large amounts of money figuring out how best to mislead the consumer while leaving plausible deniability against fraud.

But as long as it is not fraud there is nothing wrong. Consumers are not stupid and will not purchase goods from companies that have tried to fool them in the past. Such companies usually don't last very long because consumers and the competitive marketplace destroy them.

Now if a company was lying about a product why wouldn't a competitor reveal the lie and gain market share? Do you think that the government is more likely to pick up on a false claim than competitors or consumer product rating agencies? And if a company is exposed as lying what do you think that happens to its management when market share is lost and reputation is ruined?

And don't you dress better than you usually do and improve your manners over the way you normally act when you go out on a first date? Of course you do. What happens when that date gets a better idea of who you really are? To put the best face forward is very human whether that is done on an individual or institutional basis. This is only a problem when there are material issues that make the actions fraudulent. Most of us are grownups and do not dwaddle on insignificant trivia as you seem to. I suggest that the reason you are doing it because you have no rational response and need to grasp at straws.

If I try to steal and someone else tries to stop me, my behavior is still immoral.

It is not stealing. If you don't like a product you can always send it back. If fraud was committed you can actually get your money back plus damages.

True, but irrelevant to the point.

But it is relevant. In societies that are not free consumers are forced to make choices that they would not if given an opportunity to choose differently.

Can I play too? Politicians cannot commit crimes. Period.

You can sue a business that defrauded you. Period.

If you read from the Consumerist, I don't think you could take that position.

I do look at the Consumerist. And I do take that position because there are laws against fraud. The only way that companies can get away with fraud is if government regulations exempt them. While that can happen in our Keynesian nightmare when lobbyists create the legislation it cannot happen in a free society where the laws do not protect those with political connections from competition or the laws that bind the rest of us.

You are confusing the country that you live in with a free country that has a free market.

 
At 10/06/2011 2:11 PM, Blogger Ron H. said...

Sean

"Libertarian morality is pretty much of the from "do no harm"."

That's doctors. :)

"A business that, for example, stacks benchmarks to make their product appear that it is better than it is has violated this principle by lying to a consumer to alter the terms of trade."

Fraud is not OK. If not punished by law, it will be punished by the market. Customers are not totally reliant on benchmark results provided by the manufacturer.

We have lost faith in such self interested testing after wasting too much of our lives viewing laundry detergent commercials, in which each manufacturer proves that their product is superior to every other.

In fact, that's a good case for independent testing services. a business opportunity for you, perhaps?

"A business is considered to have a fiduciary duty to do such things if they are profitable. Ergo, the business is generally considered to have a duty to be immoral (evil) under certain circumstances."

A duty to cheat customers? No.

"Businesses are not just organizations of people, they are organizations of people bound to a least common denominator of interest.."

So far, so good. that LCD of I is the reason they formed an organization to start with.

"...and have a legal duty not to consider concerns such as morality over profit."

That's not true. Individuals should always consider morality.

An OB-GYN working in a clinic an refuse to perform an abortion if they are morally opposed to it.

That refusal may result in separation from the clinic, but they is no legal duty that is not agreed to as a condition of employment.

By the way, a woman's "right" to choose to terminate her pregnency, isn't really a right at all, if it imposes an obligation on someone else.

 
At 10/06/2011 2:30 PM, Blogger Ron H. said...

Sean

"Correct. This is why businesses spend large amounts of money figuring out how best to mislead the consumer while leaving plausible deniability against fraud."

True, and consumers understand this. They are not as helpless or stupid as you seem to think, and quickly catch on.

Although, as P. T. Barnum said...

As VangelV said, delivering the goods time after time is the best policy, even from a point of self interest.


VangelV: "Second, there are neutral institutions that exist to give consumers independent assessments regarding the quality and value of the products and services that they wish to purchase."


Sean: "If I try to steal and someone else tries to stop me, my behavior is still immoral."

That is correct, and consumers will punish you.

 
At 10/06/2011 2:32 PM, Blogger overtheedge said...

Carrying the discussion to the next theater of operations brings us to the concept tooted by academia; corporate taxation.

Once again this is good for tax revenue enhancement. The nice part is the people are such idiots. (Idiot defined as inability to learn.) The additional tax is paid by the consumer. The consumer pays ALL TAXES even the taxes paid by the shareholders of the corporation.

Only an idiot would be joyous about increased corporate taxation. Which brings us back to academia. Why would an academic with multiple degrees favor increased corporate taxes? Who is footing the bill for these non-producers? Yes Dorthy, academics and the education system will always defend their revenue stream.

The elitists are the academics first and always. Who does the gov't listen to? Who does the gov't grant monies to? Who is paid to defend the system? The members of the academic class are completely dependant upon the social system for their income stream. They profess to offer a service; education and analysis. The problem is the product is tainted by self-serving biases. And academia is loath to admit this bias.

Hence we get the sad results of GI-GO. The politicians are just parrots for the elite. Businesses and the wealthy are NOT the elite. They are the recipients of all the additional expenditures demanded by the academics for the gov't to gain data. And the consumer pays the bill through corporate taxation.

And the idiots vote for hand-outs that they have to pay for. The irony is each transaction carries a gov't handling fee that is taxed too in the form of wages paid to a gov't employee.

An endless circle of debt. The idiots won't be happy until they destroy themselves and business.

We forget that we are animals with animal tendancies. We want the most for the least expenditure of effort. We are wary of other's success and are jealous to the point of sabotaging success. Example: environmental impact studies that endlessly stay in the courts system. The animal askes,"What's in it for me?" Animals are self-serving and demand a stable environment to survive. Change alters this environment and stresses the animal. For the individual that realizes this condition and adapts to change, each change provides new opportunities.

Which brings us full-circle back to the idiots "fighting the future." Success in adaptation breads hostility by the less adaptable members of the specie.

As an old army buddy was fond of saying, "What we need around here is a good old-fashion rat-killing." The animals will destroy themselves and our infrastructure. I will mourn the loss of infrastructure. So many great things destroyed by idiots.

Everything is connected to everything.
Everything has to go somewhere.
There ain't no such thing as a free lunch. TANSTAAFL

Spray paint and Bondo won't fix a system cobbered together with duct tape and super-glue. Though it will hurt dreadfully, we need to return to a truly free-market devoid of bail-outs and purchased insurance. A free-market system forces each participant to self-insure. Screw-up, pay up. Jobs will come with economic growth. And each employee needs to realize that they are expendable unless each makes themselves so valuable to their employer that the employer will do anything to hang on to them. It worked before the Wagner Act. Free-markets demand freedom to replace a tool (employee) with a better tool to remain competative.

Gov't doesn't create productive jobs. No production, no wealth creation. It is just redistribution of existing wealth. Highways, airports, etc., just tax revenue enhancement.

 
At 10/06/2011 2:33 PM, Blogger Sean said...

Ron H.,

Fraud is not OK. If not punished by law, it will be punished by the market.
If it's found out, committed by a business large enough to carry a persistent reputation, and perceived to be serious, then it is.



"...and have a legal duty not to consider concerns such as morality over profit."

That's not true. Individuals should always consider morality.

And that's the problem with the corporate arrangement: it creates a strong incentive not to consider morality. Societal ammunition to "do the right thing" despite being a member of the corporation is really valuable.

We have lost faith in such self interested testing after wasting too much of our lives viewing laundry detergent commercials, in which each manufacturer proves that their product is superior to every other.

In fact, that's a good case for independent testing services. a business opportunity for you, perhaps?

GameInformer, Tom's Hardware, and Anandtech being good examples. They are also good examples of how, if insufficiently supported by consumers, those agencies are strongly "influenced" by the corporations. If GameInformer gives a major game release a rating below a 6, someone often gets fired.
Those business have similar problems to government rating agencies (there are some differences, of course). It's not like rating agencies saved us from CDOs.

Corporations are good things to have around. However, worshiping like the political right does tend to put pressure against morality.

 
At 10/06/2011 2:34 PM, Blogger VangelV said...

The logic is fine. You equated lying and misleading to "fraud", a harder concept with a higher boundary of proof, then asserted that the costs of fraud are higher than the benefits.

You lie every day of your life. All people do. That is not a crime. But when you engage in an economic transaction making specific claims about the product can be and often is a crime. It is not prosecuted because if you don't like a product you usually return it and get your money back. Producers hardly ever sell their products directly. When I buy a Sony TV I do not get it from the factory. I get it from a retailer who also sells other models and has a very large selection of products at different prices. I usually make the purchase after doing some research and checking different retailers to find the best deal that I can. I do not expect that each of the retailers that I talk to will tell me the 'truth' because the decision is so complex there is no one factor that is the deciding factor. As a rational human being I know that what I may prefer is not the same as most individuals who may be trying to make a similar choice. The features that I value may be different than those valued by others because that is the way the real world works. The only thing that may make effect all of us in a similar way is the reliability statistics but those come from the independent consumer ratings institutions, not the manufacturers or the retailers.

You are just playing games by arguing theory without substance. In the real world that we live in it is the consumer who decides what companies prosper and which fail. These decisions are not based on lies but on actual evaluations made by millions of individuals through their purchasing power. If you think that you are too stupid or naive and that you cannot make rational decisions do not assume that others are just as incapable.

It's the defense I expected, because business's leeway to manipulate information is in fact limited.

In a world where information travels instantaneously and is free fraud does not work very well for very long.

But if you think that businesses do not constantly attempt to misrepresent quality in an attempt to save costs that they don't have to pass to the consumer, I have a bridge to sell you.

Do you ask Sony how good their TVs are or do you use Consumer's Reports in combination with the various magazine reviews? Do you buy the TV without actually looking at the picture and comparing it to the products offered by the competition? And after you have done all that and compared the specs and the viewing experience did you not look at the price differences? I know that most people do. So there is no problem. We all try to put our best foot forward when we try to sell ourselves or our products. That is to be expected by all human beings that are on the other side of the economic or social transaction that we engage in. To think otherwise is to live in a fantasy. And to think that is evil is to be very anti-human.

 
At 10/06/2011 2:34 PM, Blogger VangelV said...

I have certainly had salesman outright lie to me (I can think of three examples offhand regarding cars, fresh meat, and home security installation). They just have to make sure the misrepresentation in costs are not greater than the cost of retaliation.

Who buys a car without checking the independent evaluations? And if your particular vehicle happened to be a lemon you have warranties that the producers have to honor. Lousy meat can be returned at any retailer that I shop in. Home security services can be cancelled. If you make bad decisions do not blame the people who sold you the product. Blame yourself for not doing the research or not seeing things as they really were.

On the meaning of caveat emptor?

No. You need an education on how the real economy works and how real human beings function. You sound a lot like some kid in university who has never really thought much about reality.

If I don't do my research before buying a graphics card or a processor, I can easily lose $50 of value (buying the slower device or overpaying for the faster one).

But in something as fluid as the graphics card business you can do everything perfect and make the wrong decision because of the rapid change in new designs. There is no lying required to make a decision that is not optimum because there is no way to determine which decision is optimum in most cases.

But it has not been uncommon in the past for Nvidia and ATI both to release benchmarks showing their cards are the fastest. Duplication and examination of those benchmarks showed obvious cheating (through compiler or driver version tricks, hand-coded optimizations not available in the consumer product, non-comparable base systems, etc).

Which is why in the real world people actually look at independent evaluations of those cards.

There is never any meaningful retaliation: it's expected behavior. Caveat emptor.

Welcome to the world of complexity. But the argument that I gave is still valid. If any of the graphics companies continued to underdeliver it would be out of business. The reason that they are not has to do with their abilities to satisfy their customers who are happy with the product that they get for the price that they get it at.

It's not so much that you get to be #1 by lying: it's that you get to survive for a long time with good margins on an inferior product by lying.

Give us examples of this. Where have you had a company that managed to sell lousy products and maintain fat margins by lying? Certainly Nvidia and ATI are not an example of that. Both have done well because of their excellent products. But neither company has 'fat margins' even though both make excellent products. The companies have been in price wars with each other and competitors and the bigger winners have been consumers, not investors.

 
At 10/06/2011 2:39 PM, Blogger Sean said...

Ron H.,

Sean: "If I try to steal and someone else tries to stop me, my behavior is still immoral."

That is correct, and consumers will punish you.

It is a balance among opposing forces, but as a consumer you are expected to take part in figuring out where the BS is.
You can identify companies that will generally *try* to treat you well, but you will usually pay extra for the privilege, one way or another.

 
At 10/06/2011 3:02 PM, Blogger Sean said...

VangeIV,


Certainly Nvidia and ATI are not an example of that.
The price per performance you can get from these companies is seldom equal, but the sales numbers respond slowly. That is the benefit they get from obfuscation. Intel and AMD have both enjoyed similar benefits at different periods in time.

No. You need an education on how the real economy works and how real human beings function. You sound a lot like some kid in university who has never really thought much about reality.
I'm identifying the role of individual components in a system from a few degrees off of conventional framings. You keep pointing out counterbalancing forces in some other aspect of the system and assuming that because I come at things form a slightly different perspective that I don't know the conventional story. In this particular discussion, that's not the case.
I'm not confused: I'm turning around the perspective of the discussion. When MP's author said that "jobs are a necessary evil", he's right from one perspective. I took the opportunity of taking the opposing perspective of the same reality because I can, and because the business-worship perspective gets old. But you either have little capacity for original abstract thought or little interest in it. In either case, I'm trying to patient, but it's irritating to be continually criticized for "confusion" by someone who doesn't even seem that interested in anything but the boilerplate narrative that you've read from one school of thought that doesn't *actually* invalidate what I'm saying. Generally I already have heard what you're trying to say multiple times, even multiple times from you. I assure you I'm not *that* slow.

 
At 10/06/2011 3:21 PM, Blogger Sean said...

VangeIV,


You lie every day of your life. All people do.
Speak for yourself. I do not.

If you make bad decisions do not blame the people who sold you the product.
I don't like to be lied to, regardless of the outcome. I find it mildly irritating that there's someone whose job it is to try to screw me.

You are just playing games by arguing theory without substance
Yes, mostly I am, but not completely. My point was this: the role of a business is to try to get the most out of any transaction, not to get a "fair" transaction. The difference is that the business attempts to manipulate information to make this occur. I do not. If this didn't matter, businesses wouldn't spend money doing it.
Does it break the system or do more harm than the good of having the opportunity to make the transaction? Of course not.
But that's not the point. And I never said otherwise ;)


These decisions are not based on lies but on actual evaluations made by millions of individuals through their purchasing power.
If misinformation didn't play a role at all in pricing, no one would pay for it.


We all try to put our best foot forward when we try to sell ourselves or our products.
Yes, and that's fine. The only question is where the line should be drawn.

That is to be expected by all human beings that are on the other side of the economic or social transaction that we engage in. To think otherwise is to live in a fantasy.
That is true.

And to think that is evil is to be very anti-human.
A well-put argument. But when dealing with good and honest people, those factors are pretty small. Let's put it this way: no one I know has ever boasted "they got a good deal" or "drove a hard bargain" when making a trade with a friend or a local businessman they know. It's when dealing with strangers or assholes that you start to hear such statements.

 
At 10/06/2011 4:31 PM, Blogger Ron H. said...

Sean

"If it's found out, committed by a business large enough to carry a persistent reputation, and perceived to be serious, then it is."

The guy who mows my lawn has a reputation to maintain. As does my barber, my dentist, my favorite restaurant, etc. Size doesn't matter. Loss of business is loss of business.

"GameInformer, Tom's Hardware, and Anandtech being good examples. They are also good examples of how, if insufficiently supported by consumers, those agencies are strongly "influenced" by the corporations. If GameInformer gives a major game release a rating below a 6, someone often gets fired."

Then they aren't independent, and you, at least, know not to rely on them to any great extent.

"Those business have similar problems to government rating agencies (there are some differences, of course). It's not like rating agencies saved us from CDOs."

Don't know about CDOs, but MBSs were rated correctly. They are guaranteed by US taxpayers. How much safer can they be?

"Corporations are good things to have around. However, worshiping like the political right does tend to put pressure against morality."

An odd comment. It sounds almost like something Sethstorm would write. Not sure what you mean.

Let me reword it:

"Groups of people with a commom interest are good to have around. However, worshipping like the political right does tend to put pressure against morality."

Did that help?

No. It still makes no sense.

"It is a balance among opposing forces, but as a consumer you are expected to take part in figuring out where the BS is.
You can identify companies that will generally *try* to treat you well, but you will usually pay extra for the privilege, one way or another.
"

I believe it's called "shopping".

 
At 10/06/2011 4:40 PM, Blogger Ron H. said...

Sean

"I think it leaves a lot to be desired in answering the question of how to live and what to value, but that is just opinion."

Those decisions are left up to the individual. That is the beauty of it. It seems preferable to being told how to live and what to value.

You understand, groups of libertarians can join together for any purpose they wish, and commit to each other whatever they wish. "One for all and all for one", and stuff like that, but they won't include others who don't want to be included, in their commitment.

 
At 10/06/2011 4:54 PM, Blogger Sean said...

Ron H,

Size doesn't matter. Loss of business is loss of business
I was originally going to add "local" to large, but it didn't feel like a strong sentence.

Then they aren't independent, and you, at least, know not to rely on them to any great extent.
I rely on them somewhat: I know the rules of the game. But few such agencies are so well paid by consumers as to be both effective and independent. Again, I'm pointing out roles because I got drawn into a long conversation: they're not necessarily "problems".

An odd comment. It sounds almost like something Sethstorm would write. Not sure what you mean.
Ugh, my typing has gotten so bad. I mean "worshiping business like the political right" is bad. Too much advocacy (for almost any cause) makes people stupid.

I believe it's called "shopping".
Tada! And here's the lunchtime conversation version of the conversation:

"Jobs are necessary evils".
"Corporations are necessary evils too in the sense that they behave immorally when held very strictly to the same standards of judgement as humans".
"Huh, what?"
"In any deal, they try to screw the other party to get the best deal".
"Haha, so do most people. And it's not like that's a real problem in a free market".
"A lot of people, not what I'd call 'good' people. It may not be a problem, but there's a deadweight loss that would be lessened if people were more honest".
"True, but it's not a big deal."
"No, generally not".

THE END

 
At 10/06/2011 5:12 PM, Blogger Ron H. said...

"Let's put it this way: no one I know has ever boasted "they got a good deal" or "drove a hard bargain" when making a trade with a friend or a local businessman they know. It's when dealing with strangers or assholes that you start to hear such statements."

But your friends and local businessmen are saying that when they trade with you. :)

 
At 10/06/2011 5:14 PM, Blogger Ron H. said...

Sean

"But few such agencies are so well paid by consumers as to be both effective and independent."

Consumer's Union.

 
At 10/06/2011 7:50 PM, Blogger VangelV said...

....Hayek's takedown of "the paradox of thrift" seems incomplete.

First, it isn't. Second, there have been many takedowns that show just how muddled Keynes was. Here is a section by section refutation of his General Theory.

Keynesian modeling seems to offer some actual insight, however those policymakers who call themselves Keynesians just want an excuse to spend money, and so do things that Keynesian models would actually say are bad things.

First, Keynesian modelling does not offer much in the way of valid insight into the real world. Second, the followers of Keynes IMPROVED on his muddled thinking. Sadly, they could not do much given the poor foundation so Keynesian thinking cannot make any positive contribution to real world economics. It is simply a tool that is used to spread national socialism around the globe.

And in reality, they have had bad results. I don't know enough to know if Keynesian insights properly developed could be applied to to improve results, but I certainly can't recommend trying. However, there are insights there that don't seem to merit the academic garbage heap just yet.

I see no evidence of that. And I suspect that you have none.

 
At 10/06/2011 8:45 PM, Blogger Sean said...

This comment has been removed by the author.

 
At 10/06/2011 8:51 PM, Blogger Sean said...

Ron H.,

But your friends and local businessmen are saying that when they trade with you. :)
No doubt ;)

 
At 10/06/2011 9:09 PM, Blogger VangelV said...

The price per performance you can get from these companies is seldom equal, but the sales numbers respond slowly. That is the benefit they get from obfuscation. Intel and AMD have both enjoyed similar benefits at different periods in time.

Obfuscation? Most of the sales made by the two graphics board companies are made to PC companies who employ very smart engineers. They have many factors to consider when deciding on which chip set to use and there never is a very clear answer. We live in the real world where there are complex decisions to be made because of a variety of demands made by consumers, not in a Utopia where everything is clear cut and there is only one choice.

I'm identifying the role of individual components in a system from a few degrees off of conventional framings. You keep pointing out counterbalancing forces in some other aspect of the system and assuming that because I come at things form a slightly different perspective that I don't know the conventional story. In this particular discussion, that's not the case.

You are confused. You expect clear answers and linear behaviour in a complex world where nothing is static and the right decision today may be the sub-optimum one tomorrow.

I'm not confused: I'm turning around the perspective of the discussion. When MP's author said that "jobs are a necessary evil", he's right from one perspective. I took the opportunity of taking the opposing perspective of the same reality because I can, and because the business-worship perspective gets old.

Nobody is worshiping business. As I pointed out, in a free market the consumer is king.

But you either have little capacity for original abstract thought or little interest in it.

What I don't have interest is in BS where we have to imagine a world in which human nature does not exist. In such a world people are selfless and do things for others instead for themselves. Well, that is not our world. Here we have self interest everywhere we look and the most good comes when that self interest is not interfered with by the initiation of force by anyone, including government. Your make believe world works when bureaucrats and politicians are angels. But that wold does not exist here.

In either case, I'm trying to patient, but it's irritating to be continually criticized for "confusion" by someone who doesn't even seem that interested in anything but the boilerplate narrative that you've read from one school of thought that doesn't *actually* invalidate what I'm saying. Generally I already have heard what you're trying to say multiple times, even multiple times from you. I assure you I'm not *that* slow.

But you are. You are still stuck in a make believe world where human nature does not exist. And you are clearly still ignorant of economics.

 
At 10/06/2011 9:59 PM, Blogger VangelV said...

Speak for yourself. I do not.

Or course you do. You lie or mislead when you go out on a date, tell your wife/girlfriend/boyfriend that s/he looks great even when that is not true, when you go for a job interview, when you meet new people. Few people are missing the filters that would have them behave as they should instead of letting them tell the truth. How many people do you know who always tell the truth or never answer in ways that mislead? I don't know any.

I don't like to be lied to, regardless of the outcome. I find it mildly irritating that there's someone whose job it is to try to screw me.

Nobody likes being lied to. Most people understand that thanks to social convention people lie all the time. Even a smart guy like you should know that.

And as I said, when you buy things it is up to you to ask the right questions. If you buy something that you feel was sold by people who lied you have the right to return the product. If my little kids can understand this and do their own research instead of rely on just one individual why don't you?

My point was this: the role of a business is to try to get the most out of any transaction, not to get a "fair" transaction.

A "fair" transaction? All transactions are fair because if you did not think that you are better off you would not have made it. If you valued your money more than you valued the product you would not have purchased it. If the seller valued the product more than your money s/he would not sell it. That is why transactions happen; both sides prefer what the other is offering to doing nothing.

The difference is that the business attempts to manipulate information to make this occur. I do not.

I take it that you have never applied for a job and had a job interview. Or gone out on a date. If you had you would know that your statement is not exactly true.

If this didn't matter, businesses wouldn't spend money doing it.
Does it break the system or do more harm than the good of having the opportunity to make the transaction? Of course not.


You are rambling because you have no idea what you are talking about. As I pointed out way above, value is subjective. This means that transactions happen because both sides prefer what the other is offering to doing nothing. This does not mean that you will not get buyers (or seller's) remorse if you make a bad decision. But if you do it is your fault, not anyone else's because your decision was voluntary.

If misinformation didn't play a role at all in pricing, no one would pay for it.

It doesn't play a role in pricing. When they buy a TV set or a car people know what they are getting. When you marry that stripper you know what you are doing. If later on there is remorse it has little to do with bad information and a lot to do with bad judgment.

Yes, and that's fine. The only question is where the line should be drawn.

The line is there for all to see. If they want to. All it takes is understanding human nature and getting information on your own. If you buy a washing machine just because it is on sale and some salesperson tells you it is OK you have nobody to blame but yourself. Even my kids know that when they make a bad decision it is their fault because there is plenty of information available to point them in the right direction.

 
At 10/06/2011 9:59 PM, Blogger VangelV said...

A well-put argument. But when dealing with good and honest people, those factors are pretty small.

The guy who is selling you a TV does not really care if you buy a Sony or a Samsung. He gets paid either way. If you indicate that you wanted the Sony and he says that it is all right he is not lying to you even if you find later that you might have preferred a Samsung. In the real world value is subjective and not all people make the same choices. Sales people know that and will steer you in the direction that you signal you want to go because that is their best chance of closing a sale. Most will actually give you a better option if you listen because they have no trouble doing what they think is better. But if you send out signals that you want something that is stupid, they will not save you from yourself. Don't ask for something and claim that you were mislead when you get what you wanted.

Let's put it this way: no one I know has ever boasted "they got a good deal" or "drove a hard bargain" when making a trade with a friend or a local businessman they know.

Of course not. But when they take part in a transaction they still show that they prefer what they received to what they gave up. They were perfectly happy to gain more pleasure by paying more than they would have if the person on the other end was a stranger and they paid less by driving a hard bargain.

It's when dealing with strangers or assholes that you start to hear such statements.

You still don't get it. No matter who is on the other side, you only act when you feel that you got more than you gave up. What you get and what you pay may not be restricted to the material realm because as human beings other factors come into play. When I pay $85K for a car sold to me by my friend when I could have gotten it for $83K if I bargained harder with someone I did not know the $2K actually purchased something other than the car. Why can't you understand that?

 
At 10/06/2011 10:40 PM, Blogger Sean said...

VangeIV,


This means that transactions happen because both sides prefer what the other is offering to doing nothing.
Yes, and as long as they know what they're doing, it's fine. People generally know what they're doing and take responsibility for their choices and the risk they are wrong. Fine. I'm just saying I really do try to avoid deception and only avoid telling people what they really don't want to know. Most other people also keep the deception in the noise level. Marketers, salesman, and advertisers are under more pressure not to. Yes, everyone learns more or less how to deal with that in the real world.


When I pay $85K for a car sold to me by my friend when I could have gotten it for $83K if I bargained harder with someone I did not know the $2K actually purchased something other than the car. Why can't you understand that?
I understand that just fine. But that other "good" is in this case information, and I tend to give it pretty freely. Most other people do the same.

You are rambling because you have no idea what you are talking about. As I pointed out way above, value is subjective.
Look, I understand what you're saying, and it's basically correct if you want to view things that way. But I'm speaking about the same things with a slightly different language and perspective. If you honestly think what I'm saying is made-up nonsense, well it's actually kind of scary that someone could be so stubborn or literal-minded. That's the *only* thing in this conversation I really don't understand: how someone could spend so many pages talking past another person, seemingly hearing every world, but not comprehending the point at all.

 
At 10/07/2011 8:06 AM, Blogger VangelV said...

Yes, and as long as they know what they're doing, it's fine.

Most people know what they are doing most of the time. When they make errors our system usually has in place ways to reverse the transactions. For large transactions like buying cars or homes the purchaser has independent resources that provide him with more information than ever before in history. For such large purchases there is a legal system that protects the consumer against fraud. So what exactly is your problem?

People generally know what they're doing and take responsibility for their choices and the risk they are wrong. Fine.

So far so good.

I'm just saying I really do try to avoid deception and only avoid telling people what they really don't want to know.

Which is what most people do. But they still lie a huge portion of the time in the strict sense of the word. This is not only about human nature but about the inadequacy of language, the inability to understand complexity, memory illusion, false memory, etc. Any rational adult should understand the issue.

Most other people also keep the deception in the noise level.

Nonsense. People have been executed because of false eyewitness testimony. I think that we can agree that people would be very diligent and careful when testifying in capital cases. Yet their memories still fail them. Now look to the trivia of daily life and tell me how much more accurate your memory is or how much more careful you are when trying to reason and still maintain a straight face.

Marketers, salesman, and advertisers are under more pressure not to. Yes, everyone learns more or less how to deal with that in the real world.

But marketers are not told to lie. They are told to be as honest as they can be about the details because there are other ways to close sales. I can sell you an LG TV that may not be 'as good' as a Sony by emphasizing features that may appeal to you or by showing you that the extra price is not worth it. And if I fail to sell you the LG I still enjoy the higher commission from the higher priced Sony. Good salespeople make their money by helping consumers to find what they want as fast as they can. They do not have the time to lie and deal with the consequences because that is less profitable for them personally.

You really need to live in the real world of consumers and producers, not in theoretical constructs that do not reflect reality. As I wrote above, in the real world business success is determined by the purchasing decisions made by customers over long periods of time.

I understand that just fine. But that other "good" is in this case information, and I tend to give it pretty freely. Most other people do the same.

But free does not mean that you do not benefit. You get the pleasure of thinking that you have done some good by being helpful. You are focusing only on the material factors and ignoring the intangible benefits from social transactions. While that may be fine for failed Marxist theories it isn't enough for the real world in which we live. Why should all of your benefits be measured in money?

 
At 10/07/2011 8:12 AM, Blogger VangelV said...

Look, I understand what you're saying, and it's basically correct if you want to view things that way.

What other way is there in a human society? Value IS subjective. What you think is most important to you is not the most important thing to me. When you engage in any social or economic transaction you do so because you value what you get more than what you have given up. The same is true for the other side of that transaction.

But I'm speaking about the same things with a slightly different language and perspective. If you honestly think what I'm saying is made-up nonsense, well it's actually kind of scary that someone could be so stubborn or literal-minded.

No. I do not take everything you say literally. What I am noting is that your fundamental argument fails because it has no sound foundation on which it can be supported. I gave you the links to the free Menger and Hazlitt ePub books for a reason. Both show that your beliefs are based on false and discredited ideas.

That's the *only* thing in this conversation I really don't understand: how someone could spend so many pages talking past another person, seemingly hearing every world, but not comprehending the point at all.

I comprehend your points. But I ignore the superficial trivialities to get to the underlying assumptions and theory, which is where the weakness of your position resides.

 
At 10/07/2011 12:03 PM, Blogger Sean said...

VangeIV,

What other way is there in a human society? Value IS subjective
That was never a point of argument. It doesn't really affect anything I was saying.

I gave you the links to the free Menger and Hazlitt ePub books for a reason
Yes, to prove a point that was never under contention.


I comprehend your points
See above.

My argument was that the role corporations play rewards certain behaviors that some forms of traditional morality exhort humans to avoid. So if someone wants to say something true (from a certain perspective), useless, and deliberately provocative like "jobs are a necessary evil", I can reply with the similarly true (from a certain perspective), useless, and provocative statement: "so are businesses". Value being subjective doesn't deter my case (my joke) at all.

 
At 10/07/2011 12:40 PM, Blogger Sean said...

VangeIV,

What I don't have interest is in BS where we have to imagine a world in which human nature does not exist. In such a world people are selfless and do things for others instead for themselves
I don't think you and I are even participating in the same discussion. You can certainly say, "anything you want is selfish because it has some tangible or non-tangible benefit to you". That allows you to consider any human choice as an interest maximization problem, so it's useful in that context. But humans can and do internalize the interests of others without giving up their natural desires to help themselves. If you want to understand that process, the concept that "all choices are selfish" goes from useful to an impediment: context and perspective are everything.

 
At 10/07/2011 1:51 PM, Blogger Sean said...

VangeIV,

As far as I can tell, your argument is that every trade is always good: since value is subjective, any trade has to be considered god because the participants agreed on it. Each party to the trade must assume responsibility for whatever information is required to evaluate the trade or else no trade could ever be considered as valid. Therefore, manipulating information to achieve a better trade has to be considered irrelevant unless the standard of proving fraud has been met. If you don't more or less define trade that way, it won't actually occur, so we kind of have to accept that idealization.

In reality, whoever knows the worth of the items being traded in some useful sense will drive a better bargain and come out ahead. If you know the the cost a car dealer paid for a vehicle or the price a dealer across town paid, you can often bargain for a lower price than if you didn't know these things. Information about cost or quality isn't free, and it affects the real prices you can expect to pay for a good, although technology, competition, and other factors these reduce the cost of that information. But there are quite a few individuals out there that will give you that information for free.
So I'm just hypothesizing a world where that information is given freely by each party to a transaction if they have it. The prices paid in that world I'll assume are "fair" prices, and the deviation from that world the price of information "manipulation". I think you'd find consumers do better in that world relative to large businesses than in this one because individuals tend to value honesty more and profit less relative to corporations. In this thread, I've basically taken the perspective of someone who cared about that difference. It's a thought experiment, but it's not that different from reality's trend to a world with more information technology and more competition.

If you don't care about that thought experiment, that doesn't bother me. But it's not born of ignorance.

 
At 10/07/2011 9:13 PM, Blogger VangelV said...

My argument was that the role corporations play rewards certain behaviors that some forms of traditional morality exhort humans to avoid. So if someone wants to say something true (from a certain perspective), useless, and deliberately provocative like "jobs are a necessary evil", I can reply with the similarly true (from a certain perspective), useless, and provocative statement: "so are businesses". Value being subjective doesn't deter my case (my joke) at all.

But you are still making crap up. As has been pointed out to you, companies that are known to lie outright about their products, even when it does not rise to the level of fraud, are punished by consumers in the marketplace. So what you are suggesting does not happen. And the fact that you have a retailer as the intermediary between most producers and consumers means that the incentive to lie is even lower because the people making the sales do not really care which 'brand' you choose most of the time. Add protection in the way of money back policies or/and the courts and credit card insurance plans and there is little for you to complain about.

Your statements have only served to take the argument away from the issues being discussed. You tried to argue that it was some kind of duty for businesses to create jobs. But that is clearly not the case. They exist to serve consumers. Period. They only create as many jobs as are necessary to optimize their operations because over the long run consumers care about the product and the cost, not about social motivation. Businesses that create unnecessary jobs create products that are more expensive than those of their competitors. That is punished by consumers in the free market by reduced sales.

This is a simple argument. By trying to make it something that it isn't you are just diverting attention from the fact that your initial position was not defensible.

 
At 10/07/2011 9:26 PM, Blogger VangelV said...

I don't think you and I are even participating in the same discussion.

No. I think that we are discussing more than one issue.

You can certainly say, "anything you want is selfish because it has some tangible or non-tangible benefit to you".

No. What I say is that when you make a decision to act each action is one that is preferred to all your other options. That is reality. The 'selfish' argument is brought up by the statists who try to imply that one should live one's life for some unknown collective of others that they call society. And somehow they feel qualified to be speakers on behalf of society and believe that they have the authority to preach to everyone.

But humans can and do internalize the interests of others without giving up their natural desires to help themselves.

True. They usually think of their families, friends, members of their social circle. But few ever think about society in general because they don't really care as much about people that they do not know than they do about those that they do know. See the problem with your argument yet?

If you want to understand that process, the concept that "all choices are selfish" goes from useful to an impediment: context and perspective are everything.

This is not true. If I make a different decision because I value my friends and family than I would have made if I had no friends or family I am still choosing what I prefer to the other options. If you take the time to actually think about the ideas that Menger pointed out to us when he published Grundsätze der Volkswirtschaftslehre you will find that your social theology does not stand up very well to scrutiny. As I said, you really do need to do some actual reading because your Keynesianism has not allowed you to see the non-statist position very clearly.

 
At 10/07/2011 9:50 PM, Blogger VangelV said...

As far as I can tell, your argument is that every trade is always good: since value is subjective, any trade has to be considered god because the participants agreed on it.

At the time a trade was made both sides preferred it to doing nothing. But this does not mean that all social or economic transactions are good because people make mistakes due to poor judgment. I have a pal who likes booze and strippers. That does not mean that he does not regret his actions the morning after.

Each party to the trade must assume responsibility for whatever information is required to evaluate the trade or else no trade could ever be considered as valid.

A trade is valid when both sides agree. If one side was rash, uninformed, or just plain stupid that is his/her problem.

Therefore, manipulating information to achieve a better trade has to be considered irrelevant unless the standard of proving fraud has been met.

Pretty much. If you are deciding between a Sony or an LG whatever the sales person, who gets paid no matter what you choose, tells you. The final decision to act is still yours. If you don't feel that you do not have enough information just walk away or learn to live with the risk that you could have chosen better.

If you don't more or less define trade that way, it won't actually occur, so we kind of have to accept that idealization.

Trade is simple. Each side has something that wants to give up in exchange for something else. The transaction does not happen if what is obtained is preferable to what is given up. For both sides.

In reality, whoever knows the worth of the items being traded in some useful sense will drive a better bargain and come out ahead.

Worth? Value is subjective. If there is an established market price it is a starting point. What happens from there depends on the players. But if you buy it means that you preferred the good or service than the money you gave up. The seller preferred the money to the good. Now you could argue that the seller may have given up the good for a lower price. But the seller could argue that you could have been persuaded to pay more. Whichever position is true, and both may be true, does not really matter because both sides still did what they wanted because they preferred the trade to the alternatives.

If you know the the cost a car dealer paid for a vehicle or the price a dealer across town paid, you can often bargain for a lower price than if you didn't know these things.

Yes you can. Or if you like the sales person you might pay a few hundred bucks than you would have if someone else tried to sell you the vehicle. Haven't you ever knowingly overpaid?

Information about cost or quality isn't free, and it affects the real prices you can expect to pay for a good, although technology, competition, and other factors these reduce the cost of that information.

Why do you expect to be given free information? And if you ever got free information would you really trust it?

But there are quite a few individuals out there that will give you that information for free.

How do you know to trust them? Few things that take time and energy for someone to create are just given away and usually someone pays. If you are comfortable with free information I have a few mining stock promoters that I can introduce you to.

 
At 10/07/2011 10:05 PM, Blogger VangelV said...

So I'm just hypothesizing a world where that information is given freely by each party to a transaction if they have it.

Fine. Suppose you have all the objective data for television set performance that you can ever possibly want. You would still have a serious problem making a choice because much of what makes watching TVs enjoyable are characteristics that are very subjective. This is why different sales people, who all get a commission no matter what you buy, will give you different recommendations a great deal of the time.

The prices paid in that world I'll assume are "fair" prices, and the deviation from that world the price of information "manipulation".

There is nothing 'fair' about the prices. They are what they are. A less efficient car producer may sell a vehicle for a higher price to a dealer than the more efficient producer does. You know both prices and choose to purchase the vehicle from the less efficient producer because of the lower margin. That does not mean that you got a 'better deal.'

I think you'd find consumers do better in that world relative to large businesses than in this one because individuals tend to value honesty more and profit less relative to corporations.

You are still deluded. Look around you. The biggest beneficiaries of trade are not producers but consumers. Producers have to compete very hard for customers in a free market and have to keep lowering prices to stay in business. In the end margins will be quite low and there will be no excess returns because no matter how vibrant the industry commoditization is the name of the game over the long run.

In this thread, I've basically taken the perspective of someone who cared about that difference. It's a thought experiment, but it's not that different from reality's trend to a world with more information technology and more competition.

As I said, there won't be much of a difference. We already live in a world of a great deal of information and many consumers see no value in wasting a great deal of time and energy to find even more information for most transactions.

If you don't care about that thought experiment, that doesn't bother me. But it's not born of ignorance.

I do care but it is not reflective of the real world. As I said, there are always other factors at play and the information is never enough. In the end all decisions are still subjective value calls.

 
At 10/07/2011 11:03 PM, Blogger Sean said...

VangeIV,

As has been pointed out to you, companies that are known to lie outright about their products, even when it does not rise to the level of fraud, are punished by consumers in the marketplace. So what you are suggesting does not happen.
To a degree, yes. I just think that the costs of a negative reputation are over-estimated. A lot of people are actually pretty tolerant to being lied to and sold crap (or too lazy or apathetic to adjust their behavior much), or Pier 1 and a lot more Dollar store chains would be out of business.

You tried to argue that it was some kind of duty for businesses to create jobs.
No, I tried to argue that jobs are what people want out of business, a much stronger position.


Businesses that create unnecessary jobs create products that are more expensive than those of their competitors.
Absolutely true! But the flip side of that is that a job represents a investment in a person that presumably paid off. A number of CEOs are proud that they managed to invest in people and make it pay, just like they would be proud of investing in a technology and making it pay.

 
At 10/07/2011 11:09 PM, Blogger Sean said...

No. I think that we are discussing more than one issue.
Yes, that's true.

What I say is that when you make a decision to act each action is one that is preferred to all your other options. That is reality. The 'selfish' argument is brought up by the statists who try to imply that one should live one's life for some unknown collective of others that they call society.
I think the sticking point here is in fact that the word "selfish" is so often used by "statists" or members of religion to try to invoke a feeling of guilt in order to coerce. It seems natural to try to co-opt the word or devalue it. But I think that's a distraction. Humans talking to humans categorize desires, and that can be useful.

But few ever think about society in general because they don't really care as much about people that they do not know than they do about those that they do know.
I'm not so sure about that. People can't possibly comprehend the sum of the needs and wants of individuals, and they tend to care more about what's familiar. But a lot of people are attracted enough to the ideas of a successful society, a successful country, or a more peaceful world. They want things that at least they ascribe to the benefit of "society in general", even if it turns out that others disagree on what would benefit society. These ideas are very prevalent in fiction, which is a great scoreboard for what people want (at least if it doesn't cost too much).

See the problem with your argument yet?
I'm not sure which argument you're referring to in this thread.


If I make a different decision because I value my friends and family than I would have made if I had no friends or family I am still choosing what I prefer to the other options.
I never contended this point. I do think the reasons matter.

As I said, you really do need to do some actual reading because your Keynesianism has not allowed you to see the non-statist position very clearly.
I'm sorry, I must have lost the thread of the discussion: I don't see how this applies.

 
At 10/07/2011 11:37 PM, Blogger Sean said...

VangeIV,


Suppose you have all the objective data for television set performance that you can ever possibly want. You would still have a serious problem making a choice because much of what makes watching TVs enjoyable are characteristics that are very subjective.
I've got my own preferences almost down to a formula. There are subjective elements, but technical information helps enormously.


Why do you expect to be given free information? And if you ever got free information would you really trust it?
This is the objection I expected, and the weakest point in my argument from my perspective. Basically, if we all think we're better off if we share information, we should agree to do it.
Is it realistic to think a sizeable number of people might agree to this? It's not uncommon to see people sharing information to help others if it doesn't cost them much personally. You see a lot of unpaid reviews. I've gotten free great advice from some salesmen even if I've gotten terrible from others. And when I sell or give away anything used, I always give full disclosure because I think it's the right thing to do.

There is nothing 'fair' about the prices.
In the end, the only fully objective measure for prices is what was paid. But subjectively, you know you can do better than that. If I paid $2M to park 10 feet closer to a building, you'd know I wasn't quite sane. That indicates to me that prices are complicated and certainly dependent on subjective factors, but more "relative" than completely arbitrary. I find the supposition that prices would be in some way better in an efficient market than an inefficient one reasonable. And one of the few things shown to make a market demonstrably inefficient is high information cost.

The biggest beneficiaries of trade are not producers but consumers.
Perhaps so. It is difficult to be a producer: it's an analogous problem to finding a job. But are you arguing for less competition?

 
At 10/08/2011 10:13 AM, Blogger VangelV said...

I've got my own preferences almost down to a formula. There are subjective elements, but technical information helps enormously.

But you already do have the technical information. And plenty of independent sources.

From what you are writing it is apparent that you have not hung around a retail outfits very much or do not know just how trivial specs can be in the overall evaluation process once a certain hurdle has been cleared. To illustrate this point, take a look at Issue 89 of my favourite audio magazine.

For those people who are extremely thorough the specs play a minor role at the beginning of the process. Once your minimum acceptable technical requirements have been reached everything comes down to quality evaluations that are very subjective and have little to do with a difference in specifications. For those that are not thorough all that matters is brand reputation, product reviews, price, and payment terms.

This is the objection I expected, and the weakest point in my argument from my perspective. Basically, if we all think we're better off if we share information, we should agree to do it.

But we already do this. Go on Amazon and take a look at the product reviews. People tell you what they think of the product. Or go to the library and look at the Consumer Products reviews.

Is it realistic to think a sizeable number of people might agree to this? It's not uncommon to see people sharing information to help others if it doesn't cost them much personally. You see a lot of unpaid reviews. I've gotten free great advice from some salesmen even if I've gotten terrible from others. And when I sell or give away anything used, I always give full disclosure because I think it's the right thing to do.

But as I wrote above, you are imagining a world that already exists. Information is very cheap and easily available to anyone who goes to the library or has a computer. The issue is trying to figure out what reviews to trust. I am sure that there are a lot of Sony employees writing great reviews of Sony products.

In the end, the only fully objective measure for prices is what was paid. But subjectively, you know you can do better than that.

But you are ignoring reality again. Yes, I could do better if I shopped around. But I only do better if my time, automobile use, etc., were free. They aren't. In the real world we do not drive an extra 10 km to get a $2 discount on detergent because the savings are not worth it.

If I paid $2M to park 10 feet closer to a building, you'd know I wasn't quite sane. That indicates to me that prices are complicated and certainly dependent on subjective factors, but more "relative" than completely arbitrary.

You would only be insane if the $2M was worth more to you than the parking position. That may not always be the case to all people.

 
At 10/08/2011 10:14 AM, Blogger VangelV said...

I find the supposition that prices would be in some way better in an efficient market than an inefficient one reasonable. And one of the few things shown to make a market demonstrably inefficient is high information cost.

But in a free market, where consumers rule, information is not expensive. The markets always provide it very efficiently. The proof is on your browser right now. To illustrate the issue I just did a search for the Totem Rainmaker speakers because an idiot audiophile pal wants to upgrade his system at the cottage with a much better set. I did a quick search and in seconds I found this, this, and this review. There are many others.

Now my success was achieved searching for a very unique product that serves a small segment of the speaker market. The information was excellent and could be the basis of my research. I can always supplement that by going to my local audiophile store and talking with the sales people, who have always been very eager to help and can provide me with a great deal more information as well as specialised information about issues that may not be evident in the reviews and how much it would take to resolve those issues. I could not do this ten years ago because the information was harder to find and required far more time, which many people find to be too valuable to waste.

Look around you. The world that you live in has given you what you claim you need. Businesses are not in the business of destroying good will that they have built up over time. And value remains subjective as it always has been.

Perhaps so. It is difficult to be a producer: it's an analogous problem to finding a job. But are you arguing for less competition?

No. I am actually arguing for less barriers to competition and for no bailouts for lousy producers.

 
At 10/08/2011 10:40 AM, Blogger Sean said...

VangeIV,

But as I wrote above, you are imagining a world that already exists. Information is very cheap
Information about commodities and retail products is cheap and becoming cheaper. Modern communication technology and nearly free access to "the internet" are what I primarily attribute that to. It's true that that requires people be free enough to take advantage of the system.
So it's true that in the retail space, the information cost problem is small. But I set out upon a qualitative analysis, not a quantitative one. In the past, in a lower technology world, the problem was larger.

You would only be insane if the $2M was worth more to you than the parking position.
I would be willing to make the subjective judgement that you'd have to be either nuts or very very rich to hold that preference.

But you are ignoring reality again. Yes, I could do better if I shopped around. But I only do better if my time, automobile use, etc., were free
Or if information about the alternatives were free. I am nitpicking, but I'm not ignoring reality.

From what you are writing it is apparent that you have not hung around a retail outfits very much or do not know just how trivial specs can be in the overall evaluation process once a certain hurdle has been cleared.
Only if you care very much about very fine distinctions. An audiophile certainly would agree with you about speakers. I don't think that's true about most products.

No. I am actually arguing for less barriers to competition and for no bailouts for lousy producers.
I can't disagree, but I don't think that's what we were talking about.

 
At 10/08/2011 12:39 PM, Blogger VangelV said...

Information about commodities and retail products is cheap and becoming cheaper. Modern communication technology and nearly free access to "the internet" are what I primarily attribute that to. It's true that that requires people be free enough to take advantage of the system.

So it's true that in the retail space, the information cost problem is small. But I set out upon a qualitative analysis, not a quantitative one. In the past, in a lower technology world, the problem was larger.


We live in the present, not the past. And in the present there is no support for your position.

I would be willing to make the subjective judgement that you'd have to be either nuts or very very rich to hold that preference.

Not necessarily. Think about the ten feet as being separated by something like the Berlin Wall. Or the wall that created the barrier between the Warsaw Ghetto and the outside world. I know that you are trying to point out an absurd scenario but even that does not work out too well in the context of this argument. The fact is that all value is subjective. Once that is acknowledged the left and right do not have much in the way of logic to support their statist goals.

Or if information about the alternatives were free. I am nitpicking, but I'm not ignoring reality.

But as I pointed out, the information about your alternatives is free or very cheap.

I can't disagree, but I don't think that's what we were talking about.

My arguments are ALWAYS in favour of liberty. That is exactly what I am talking about. As I pointed out, nobody should be compelled to create jobs or to sacrifice his life for others. History shows us that society is much better, safer, happier, and wealthier when people are free.

 
At 10/08/2011 2:30 PM, Blogger Sean said...

VangeIV,

We live in the present, not the past. And in the present there is no support for your position.
That information costs are currently severely damaging the retail market? No. For other arguments like health care and health insurance, I could make a stronger claim. That businesses have incentive to do nasty things and try to sort out the costs later? That argument could go for volumes if I had the patience. I don't.

The fact is that all value is subjective.
Value has subjective and non-subjective components. Once you know precisely what you want (which is subjective), the remaining component of value becomes a comparison of the alternatives and their costs, which are often based on more absolute factors. That distinction is not entirely academic because humans are not random number generators.

My arguments are ALWAYS in favour of liberty.
Yes, but I'm not arguing against liberty, so...?

 
At 10/08/2011 6:31 PM, Blogger VangelV said...

That information costs are currently severely damaging the retail market? No. For other arguments like health care and health insurance, I could make a stronger claim.

Don't you understand why? The retailing business is far less regulated and has far more competition than health care and health insurance. You are suggesting that markets that have little freedom have more trouble. That is definitely true and what I have been arguing.

That businesses have incentive to do nasty things and try to sort out the costs later? That argument could go for volumes if I had the patience. I don't.

You can't support that claim. In a competitive environment lying businesses will be exposed by their competitors, consumer advocates, and will alienate the customers on which they depend. Your argument holds true for government granted monopolies like the banking system, Post Office, DMV, bond rating agencies, primary bond dealers, etc.

Value has subjective and non-subjective components. Once you know precisely what you want (which is subjective), the remaining component of value becomes a comparison of the alternatives and their costs, which are often based on more absolute factors. That distinction is not entirely academic because humans are not random number generators.

Your ignorance is showing again. Read your own comment above and tell me where you show that there is an objective component to value. Comparison of alternatives is subjective because you have to determine which factors matter to you more than others, how to weigh the different factors, and how to relate them to price. In the end you still wind up with value scales being ordinal and not cardinal. And your decision is still subjective.

 
At 10/08/2011 7:42 PM, Blogger Sean said...

VangeIV,

Don't you understand why? The retailing business is far less regulated and has far more competition than health care and health insurance.
I agree at least that free markets with more information provide more counter-incentives to bad behavior.

Your ignorance is showing again. Read your own comment above and tell me where you show that there is an objective component to value.
Precisely as I said, determining what matters to you is subjective, but your options are a function of objective reality. If I am a web service provider, once I have made an evaluation of the profit I can make per server transaction, my likely cost for power, and I know I want to buy and maintain a server myself rather than use managed hosting, the rest is research and math from a buyer's perspective (the seller also has objective and subjective components to selling price).
From an economic modeling perspective, once a subjective component enters the picture, there is no incentive to disentangle it from the objective component: it complicates your model without providing any benefits. But economic models, like all models, are wrong. They are just a pale shadow of reality, the simplest means of describing it that offer sufficient predictive value to justify the effort.

 
At 10/09/2011 10:11 AM, Blogger VangelV said...

I agree at least that free markets with more information provide more counter-incentives to bad behavior.

As I wrote before, competitors and short sellers will expose lies much faster than any government agency. And free markets produce as much information as there is demand for and people are willing to pay.

Precisely as I said, determining what matters to you is subjective, but your options are a function of objective reality. If I am a web service provider, once I have made an evaluation of the profit I can make per server transaction, my likely cost for power, and I know I want to buy and maintain a server myself rather than use managed hosting, the rest is research and math from a buyer's perspective (the seller also has objective and subjective components to selling price).

Again, read what you just wrote. First, you are going to be guessing all along the way. There is no objective reality that you can capture and evaluate at any point of your analysis because you live in a complex world where everything changes. And in the end, as the producer you are not in charge. In a competitive market what you will make is determined by your customers buying decisions, not by your costs plus desired margin.

Menger's lesson is actually a very simple one. Even my ten and eleven-year-old kids can figure it out. Why can't you?

From an economic modeling perspective, once a subjective component enters the picture, there is no incentive to disentangle it from the objective component: it complicates your model without providing any benefits. But economic models, like all models, are wrong. They are just a pale shadow of reality, the simplest means of describing it that offer sufficient predictive value to justify the effort.

You are writing gibberish again. First, economic models are not reality. They are a guess that try to approximate reality by making assumptions that are very subjective. Second, the economy is a dynamic, non-linear system where everything is changing. What you would consider the objective reality is changing continually and you have no way to measure it accurately. The only things that you might be able to measure effectively are simple inputs and outputs. And in the end, your products/services are only a part of a bigger system where those that determine your success or failure are customers who make subjective valuations, just as you do.

 
At 10/09/2011 8:59 PM, Blogger Sean said...

VangeIV,

Menger's lesson is actually a very simple one. Even my ten and eleven-year-old kids can figure it out. Why can't you?
You and your kids grasp the primary point Menger makes (prices derives human demand for a good, not from inherent properties of the good -- AS I MYSELF ADMITTED MANY TIMES), and confuse any disagreement on small points with support for errors illuminated in this section of the text:
"D. The subjective character of the measure of value. Labor and value. Error."

You are thrown by my language. But Menger says things like this:
"We must investigate: (1) to what extent different satisfactions have different degrees of importance to us (subjective factor), and (2) which satisfactions of concrete needs depend, in each individual case, on our command of a particular good (objective factor). "

What, objective factors?! In fact, the objective factor I was referring was availability of the good. In his examples about the price of biscuits, Menger derives a "price" for biscuits from "objective need" and availability. He also talks about exact goods substitutes and near substitutes as well as the derivation of component goods from base goods (in the section on "The Laws Governing the Value of Goods of Higher Order") .. upon which my example relied (if you disagree on the details, your failure to grant the basic concept that objective factors may affect availability and therefore price if are you are able to know or fix some subjective factor). Menger even talks about the ability to derive the long term value of component goods from demand from the finished product and capital costs: objective components to a subjective price.

In other words, perhaps my examples constructed from my intuitive understanding were not rigorously set up, but I was trying to illustrative almost exactly the same principles Menger described, using different language.

So if you know thoroughly what you're talking about, you clearly are an execrable listener. Or you're just being an ass.

 
At 10/10/2011 12:20 AM, Blogger Ron H. said...

Sean

I think you are confused about the definition of objective value. Something can have objective value, only if it has that value outside of anyone's perception of it. We often attribute objective value to moral ideas like truth, goodness, and beauty. And, to things like "We hold these truths to be self evident."

Anything related to goods or services can only have subjective values.

Menger: "We must investigate: (1) to what extent different satisfactions have different degrees of importance to us (subjective factor), and (2) which satisfactions of concrete needs depend, in each individual case, on our command of a particular good (objective factor). "

I will reread the Menger in larger context, but this sure sounds like he is describing subjective value or even marginal utility.

 
At 10/10/2011 8:13 AM, Blogger Sean said...

Ron H.,


We often attribute objective value to moral ideas like truth, goodness, and beauty.
The philosophies that espouse "natural law" and other innate principle of human interaction might agree with you, while existential philosophies would surely disagree. Christian philosophies derive all objective value from God: objects and principles have value directly or indirectly because God values them (or because they have value to his children, whom he values). So for Christians, beauty and truth matter because God made them to matter.
Who am I to tell you which perspective is correct?

I will reread the Menger in larger context, but this sure sounds like he is describing subjective value or even marginal utility.
He is, but he separates optional subjective values from needs (objective components of value) in order to promote a hierarchy of values. His example of "objective value" here this case that a human might need one biscuit a day in order to survive.
But the implicit objective factor, combined with the subjective desires of humans, is the availability of the good. For any fixed set of subjective concerns, availability will affect price.

 
At 10/10/2011 9:31 AM, Blogger VangelV said...

In other words, perhaps my examples constructed from my intuitive understanding were not rigorously set up, but I was trying to illustrative almost exactly the same principles Menger described, using different language.

But you are not doing a good job at all. First, you still have not done anything to correct your error when you wrote, "I have only pointed out that the drive to make a profit may be useful, but there is no humanism in it." Had you understood Menger at all you would have realized just how silly your statement was. All human beings make choices between various alternatives and those alternatives are based on an ordinal ranking of utility. There is no less humanism in what businessmen than there is in what their customers do.

So if you know thoroughly what you're talking about, you clearly are an execrable listener. Or you're just being an ass.

I listen and I am being an ass sometimes. But I would be less so if you actually listened and tried to learn. The best way to show that you had is to go back to your earliest statements and see just how foolish they were because of your lack of thought on the matter. Let me note that I do not expect a lot from most people, even very intelligent ones. Up until recently few people were ever exposed to Menger, Mises, Hayek, or
Rothbard because universities and high-schools were mostly interested in Keynes and his failed theory. In my case I discovered the writings of the Austrian School in China of all places, where the economists that I socialized with were interested in what the Austrian School had to say because of its accuracy of making accurate predictions about future events and its ability to explain the real world without making invalid assumptions and using fudge factors. A decade and a half I would have argued just as you do. Now that I understand better I don't.

 
At 10/10/2011 10:16 AM, Blogger Sean said...

VangeIV,


But you are not doing a good job at all.
I've made mistakes and been sloppy at times, but I flatter myself to think that quite a few of my arguments and insights have been solid, and you seem to work very hard to acknowledge none of them.

First, you still have not done anything to correct your error when you wrote, "I have only pointed out that the drive to make a profit may be useful, but there is no humanism in it.
This is indeed a bad statement: my apologies. What I meant was that a drive to make a profit by any legal means necessary can include means that harm others, including trying to buy off government to establish a monopoly position, to use your favorite example. There are others, which as discussed a free market will tend to oppose. But I think some small margin will always exist through manipulation of information and human nature. Otherwise intelligent and strong-willed people really will buy a shampoo because the producer's commercial included the right woman in the right suggestive pose, and not to satisfy any preconceived want. These costs will remain small, but as real as things like natural local monopolies. They may not require external action to solve, but they deserve acknowledgement.


Still, I don't see why I should be expected to scour through my past statements for mistakes. I do make my share of mistakes: I like to think I'm quite intelligent in some ways, but I have my weaknesses as well.

But I would be less so if you actually listened and tried to learn.
What makes you think I haven't listened or even that I haven't learned things from you? I always try to come out wiser at the end of a discussion than at the beginning.
The things you kept repeating I had already acknowledged, and I brought new things to the table. If previous statements of mine bothered you, why didn't you highlight them specifically instead of asserting my allegiance with specific errors committed by others?

 
At 10/10/2011 10:26 AM, Blogger VangelV said...

I will reread the Menger in larger context, but this sure sounds like he is describing subjective value or even marginal utility.

He is describing marginal utility. When Austrians talk about objective factors they mean being able to measure something and having access to whatever is desired. It is clearly pointless to talk about subjective decisions about whom one wants to spend the evening with when Angelina Jolie is not available. The decisions are based on actual options, not imagined ones.

 
At 10/10/2011 10:47 AM, Blogger VangelV said...

He is, but he separates optional subjective values from needs (objective components of value) in order to promote a hierarchy of values. His example of "objective value" here this case that a human might need one biscuit a day in order to survive.

I suggest that you begin with the actual introduction. Menger rejected the idea of objective value. Of course there is an objective reality that makes it clear that we need to eat to survive. But that does not tell us what we would choose to eat and how much we would choose to pay for what we eat given all of the alternatives that are available to us.

As Klein points our clearly in the introduction, "Menger’s approach has been labeled "causal-realistic," partly to emphasize its differences with the mainstream, neoclassical approach. Besides its focus on causal relations, Menger’s analysis is realistic in the sense that he sought not to develop formal models of hypothetical economic relationships, but to explain the actual prices paid every day in real markets. The classical economists had explained that prices are the result of supply and demand, but they lacked a satisfactory theory of valuation to explain buyers’ willingness to pay for goods and services. Rejecting value subjectivism, the classical economists tended to treat demand as relatively unimportant and concentrated on hypothetical "long-run" conditions, in which "objective" characteristics of goods—most importantly, their costs of production—would determine their prices. The classical economists also tended to group factors of production into broad categories—land, labor, and capital—leaving them unable to explain the prices of discrete, heterogeneous units of these factors. Menger realized that the actual prices paid for goods and services reflect not some objective, "intrinsic" characteristics, but rather the uses to which discrete units of goods and services can be put, as perceived, subjectively, by individual buyers and sellers."

Menger never denied the fact goods have objective characteristics. He simply pointed out that when you make a value judgment those characteristics are not the determining factor that determines price. This is why a cup of water holds more value in some circumstances than a cup of diamonds and why bread, which is essential to life is of less value than a ruby, which isn't. The classical theory would value the utility of all bread against all diamonds. But that does not happen in the real world. Here what matters are the transactions at the margin, which is where Menger's great insight comes in to clear the picture.

One way to think about your example is to look at your biscuits as sitting on the supermarket shelf. How does the very objective fact that you need to eat help set an objective price on those biscuits? It does not. Value is subjective.

 
At 10/10/2011 10:53 AM, Blogger VangelV said...

But the implicit objective factor, combined with the subjective desires of humans, is the availability of the good. For any fixed set of subjective concerns, availability will affect price.

Tto rank your options you have to have those options. That does not mean that you do not rank your choices and act in accordance to that ranking. That means that value is subjective. (And if it is subejctive, it cannot be objective.)

 
At 10/10/2011 11:14 AM, Blogger VangelV said...

This is indeed a bad statement: my apologies.

Why do I get the feeling that you will slip deeper into it than before?

What I meant was that a drive to make a profit by any legal means necessary can include means that harm others, including trying to buy off government to establish a monopoly position, to use your favorite example.

Please be clear. Are you now saying that the law does not really protect the individual from harm and that you are arguing in favor of fewer regulations in a legal system that recognizes the right to live free of coercion and fraud? If you are, welcome to the libertarian position. The funny thing is that your postings imply that you are a statist who opposes the librtarian position.

There are others, which as discussed a free market will tend to oppose.

Correct. In a system that requires that producers compete, the opposing companies will keep each other in check. In free markets it is consumers that call the shots.

But I think some small margin will always exist through manipulation of information and human nature.

Welcome to humanity. We do not live in an ideal world imagined by lefty academics. Out here people have very human characteristics. Which is why the statists have huge problems trying to implement their foolish goals.

Otherwise intelligent and strong-willed people really will buy a shampoo because the producer's commercial included the right woman in the right suggestive pose, and not to satisfy any preconceived want.

So? In a world where competition has narrowed the differences in quality producers have to resort to all kinds of signalling to get the consumers to buy their product. There is nothing wrong with that. After all, didn't you dress better than you usually do on first dates?

These costs will remain small, but as real as things like natural local monopolies.

There are not very many natural local monopolies in a free market. Where there is excess profit there is always an incentive for new players to come in and compete.

They may not require external action to solve, but they deserve acknowledgement.

I see no major problem or any suggestion of a better system.

 
At 10/10/2011 12:30 PM, Blogger Sean said...

VangeIV,

One way to think about your example is to look at your biscuits as sitting on the supermarket shelf. How does the very objective fact that you need to eat help set an objective price on those biscuits?
Menger was correct in this case: it doesn't. He was also correct in his Crusoe and biscuit-on-a-ship examples: in those case, the value of the biscuits in economic terms is at least bounded by objective factors. Imagine 30 crewmen needing one biscuit per day to live (and 35 per day are available), what the crewmen will be willing to "pay" for the biscuits has a lower bound (they cannot choose less than one biscuit per day), therefore so does the price of the biscuits. If a "price" is bounded but partially determined by personal preference, Menger is arguing it must have a subjective and objective component under conditions of scarcity. If food were not required for survival or were free and plentiful, it could not be an economic good, so "price" is bounded by availability, objective need, and personal preference.


To rank your options you have to have those options. That does not mean that you do not rank your choices and act in accordance to that ranking.
So far, so good.

That means that value is subjective. (And if it is subejctive, it cannot be objective.)
Here I am defending Menger!
Let's review what we're talking about with the word value. What we tend to think of as value (the sum of an individual's preferences) is fuzzy and can't be measured by those terms. We know it contains objective and measurable components (what a human needs to survive) and components that can't be directly measured (what will make an individual happy) and which are known to vary from human to human.

We measure value by what options a human will choose to forgo to attain a good: they define the price. And that price is bounded by objective components, subjective components, and availability of a good. But for our discussion, I'll call this price, not value.

Now let's talk about the word subjective. The semantics we're concerned with appear to be m-w.com's :
3a: characteristic of or belonging to reality as perceived rather than as independent of mind
4a: peculiar to a particular individual : personal

By definition 4a all value is certainly subjective: it relates to an individual. However, by that definition, it could contain objective components in the same way that you possess an arm. Your focus seems to be on 3a: what is in a human mind you assume to be both arbitrary and unknowable. And in practical terms, the human mind contains arbitrary and unknowable components (although science is allowing to us know and predict more about human preference than might make us comfortable).

So by the definitions above I totally agree all value is subjective: it is both personal and affected by individual perception and preference (which is only partially knowable: a Vivaldi versus Beyonce prefence must be treated as arbitrary). Menger assumes people want to live and so says those personal preference are partially composed of objective measures of need: I cannot disagree. Price, on the other hand, is largely determined by what we're calling value, but also by availability (which is not wholly static: Menger talks about this in the chapter on the value of capital).

Now, if you define objective as "fully measurable" then maybe you can argue against Menger that preference contains no objective components in practice, but by that standard even electrons might not be considered objective because of the Heisenberg uncertainty principle.

So I would say value is subjective, but contains objective components. Meanwhile price, while largely determined by the subjective concept of value, is also composed of objective components (bounded by objective reality), even if the objective components cannot always be precisely measured.

 
At 10/10/2011 12:36 PM, Blogger Sean said...

VangeIV,

I see no major problem or any suggestion of a better system.
It was not my objective to put forth either.

I was irritated by the statement that "jobs are a necessary evil" and sought to show that it was no more illuminating than the opposite position "businesses are a necessary evil", since "evil" in the context of the original quote is used in a very subjective sense.

 
At 10/10/2011 5:28 PM, Blogger Ron H. said...

Sean

"in those case, the value of the biscuits in economic terms is at least bounded by objective factors. Imagine 30 crewmen needing one biscuit per day to live (and 35 per day are available), what the crewmen will be willing to "pay" for the biscuits has a lower bound (they cannot choose less than one biscuit per day), therefore so does the price of the biscuits."

In Menger's examples, the price of biscuits, while bounded by an objective factor, range from essentially 0, to a human life. I don't see an objective component within that range.

Your example is the same as Menger's middle one, where there is sufficient for life, and some amount more. There is room for trade, but the upper bound would still be a human life, while the lower bound would be 0 for someone who valued everything else more than extra biscuits.

I read "have command of" to mean either having in one's possession, or being able to buy, restricted only by the quantity available.

The air we breathe is an even more extreme example of the biscuit story. We must have it to live, therefore it's worth a human life, yet no one I know of pays any amount for extra air in its natural state all around us.

What objective value is there to air?

 
At 10/10/2011 6:13 PM, Blogger Sean said...

Rob H.,

The air we breathe is an even more extreme example of the biscuit story
And even better example of how availability matters to price: as described in an earlier chapter, supply is so great it becomes a non-economic good.

In Menger's examples, the price of biscuits, while bounded by an objective factor, range from essentially 0, to a human life. I don't see an objective component within that range.
Take out the "I'd rather die" option (I think Menger does) and you get a better story: that's Menger's "objective component" to consumer preferences: it is presumed no one will trade away biscuits for gold just to die and be rich (don't even dare bring up inheritance!).
But the price of a good is what you'd forego for it: if you get three biscuits a day and need to eat one, you can bet "prices" of any other tradeable goods would hover around 1-2 biscuits in the case where nothing else comestible was on-board.

 
At 10/10/2011 6:33 PM, Blogger Ron H. said...

Sean

"(don't even dare bring up inheritance!).

Darn! I thought you would like the great example of altruism. :)

"But the price of a good is what you'd forego for it: if you get three biscuits a day and need to eat one, you can bet "prices" of any other tradeable goods would hover around 1-2 biscuits in the case where nothing else comestible was on-board."

The point being that all value is subjective, up to, but not including, "I'd rather die", which has no equivalent value, in biscuits or anything else.

 
At 10/10/2011 7:10 PM, Blogger Sean said...

Ron H.,

The point being that all value is subjective, up to, but not including, "I'd rather die", which has no equivalent value, in biscuits or anything else.
I could say "Take it up with Menger". After all, he's dead :)

But I'll say see above: all value is subjective, with objective components.
Why this is not a contradiction:
1. y = 4 + x, If X is arbitrary, y is too, but it's not the same as Y = X
2. People respond to common incentives (pain, hunger, sexual desire, pride) and their perspectives are altered things like intoxication.

People can make choices counter to these effects and incentives, you can only measure their effects statistically, and they even vary from person to person. But they are still external influences proven to affect decisions. If your decision is Y, these are the "4"'s.

 
At 10/10/2011 9:15 PM, Blogger VangelV said...

So I would say value is subjective, but contains objective components. Meanwhile price, while largely determined by the subjective concept of value, is also composed of objective components (bounded by objective reality), even if the objective components cannot always be precisely measured.

Value is subjective. End of story. As I wrote above, the objective factors are not very important because nobody expects one to rank choices that cannot be made because one has no access to the goods in question. This last part seems to be giving you a lot of difficulty.

It was not my objective to put forth either.

I was irritated by the statement that "jobs are a necessary evil" and sought to show that it was no more illuminating than the opposite position "businesses are a necessary evil", since "evil" in the context of the original quote is used in a very subjective sense.


You failed to meet your goal because you were not very clear. Frankly, you still aren't because you seem to be arguing for the Keynesian position even as you claim to argue for something else.

I read "have command of" to mean either having in one's possession, or being able to buy, restricted only by the quantity available.

That is correct. If you are trying to decide which girl to take home she has to be present and available. The fact that someone is not present is an objective factor that limits your choices. But when you make your choice it is still subjective and based on your ordinal listing of alternatives.

The air we breathe is an even more extreme example of the biscuit story. We must have it to live, therefore it's worth a human life, yet no one I know of pays any amount for extra air in its natural state all around us.

Which is perfectly rational. There is no need to pay for the 'extra' air because what we have is more than sufficient for our needs.

What objective value is there to air?

Here is your problem. Value is subjective and is set at the margin. We never have to choose between all the air or bread in the world and all the diamonds. If we did then the air or bread would be more valuable than the diamonds. But in the REAL WORLD, which is where we all reside, we do not make choices between all the bread and all the diamonds. We just have to choose between an extra loaf and a diamond. And in most cases the extra diamond, even though it is not essential to life, is worth much more than the bread.

Note that this is the typical error made when people argue about the pay of teachers versus NBA players. For some reason people think it rational to argue that because teaching is more valable to society than sport a good teacher should be paid as much or more than a good point guard. If they understood what Menger was saying they would not have made the argument.

 
At 10/10/2011 9:40 PM, Blogger Sean said...

VangeIV,

Value is subjective. End of story
That certainly makes things simpler. Why do you point me to Menger if you disagree with him?

You failed to meet your goal because you were not very clear.
Clear enough to convince you? An impossible goal on any account, so not really a concern.

Frankly, you still aren't because you seem to be arguing for the Keynesian position even as you claim to argue for something else.
You keep saying this. You've brought up Keynes a half-dozen times where I don't even see the connection.

 
At 10/10/2011 10:27 PM, Blogger Ron H. said...

V: "That is correct. If you are trying to decide which girl to take home she has to be present and available. The fact that someone is not present is an objective factor that limits your choices. But when you make your choice it is still subjective and based on your ordinal listing of alternatives. "

And, the number of acceptable choices in this example, increases with each beverage, until by closing time, every choice is acceptable.

Hence the oft heard sayings "The difference between a dog and a fox is a sixpack." and "There are no dogs at 02:00 AM."

Perhaps that explains the cryptic formula:

1. Y = 4 + X where fox = 4 drinks + dog.

Or the profound insight that:

2. Perceptions are altered by intoxication.

 
At 10/10/2011 10:37 PM, Blogger Ron H. said...

V: "Frankly, you still aren't because you seem to be arguing for the Keynesian position even as you claim to argue for something else."


S: "You keep saying this. You've brought up Keynes a half-dozen times where I don't even see the connection."

You may be correct. Your position seems more closely in agreement with the theories of Marx than Keynes.

 
At 10/10/2011 10:57 PM, Blogger Sean said...

Ron H.,

You may be correct. Your position seems more closely in agreement with the theories of Marx than Keynes.
I'm just explaining what Menger said!!! That guy seemed pretty smart.

I wish my perceptions were altered by intoxication right now, but my body no longer encourages that kind of thing, so I'm not really free to partake.

 
At 10/10/2011 11:33 PM, Blogger Ron H. said...

"I'm just explaining what Menger said!!! That guy seemed pretty smart."

That guy was VERY smart, but I don't think he's saying what you think he is.

He writes kind of funny, so he's not always perfectly clear.

Here is an article by Henry Hazlitt discussing Menger in 1981. Hazlitt is much easier to read than those "foreigners". :)

 
At 10/11/2011 7:23 AM, Blogger Sean said...

Ron H.,

That guy was VERY smart, but I don't think he's saying what you think he is.
Of course he is.

Thus in a given community the exchange value of a given increment of each good will be determined by the relation between its total available quantity and the intensity of the human need or want that it fills.
So, price is determined by availability, want and need. Rolling needs and wants into one subjective bundle (Y instead of X + Z) doesn't really hurt in practice since learning and measuring those "objective components" doesn't offer much in the way of predictive value.
So if the field evolved into dropping the "objective component" jargon and just leaving the subjective part as simpler and clearer, I wouldn't be shocked by that.

 
At 10/11/2011 12:02 PM, Blogger Ron H. said...

Sean

"So, price is determined by availability, want and need."

You quote Menger saying "want or need". He is being inclusive with out making a distinction.

"Rolling needs and wants into one subjective bundle (Y instead of X + Z) doesn't really hurt in practice since learning and measuring those "objective components" doesn't offer much in the way of predictive value."

Y = (X + Z)

Where X + varying degrees of urgency - whether perceived or real - becomes Z, the relative values on this scale being determined by each individual for themselves.

 
At 10/11/2011 12:16 PM, Blogger Sean said...

Ron H.,

You quote Menger saying "want or need". He is being inclusive with out making a distinction.
No, I was quoting a synopsis within your link.

Y = (X + Z)
Y is the sum total of a person's preference. X is the part Menger referred to as "objective", Z the part which is considered arbitrary as well as personal.
Saying Y is subjective is not incorrect, so I agree there is no particular need to distinguish among its components: just saying value is subjective is fine, as VangeIV so gracelessly argued. (But that's not how Menger introduces the topic, I really don't understand the insistence that I'm confused about the issue).

 
At 10/12/2011 8:49 PM, Blogger VangelV said...

I'm just explaining what Menger said!!! That guy seemed pretty smart.

This may explain it to you.

 
At 10/12/2011 8:49 PM, Blogger VangelV said...

That certainly makes things simpler. Why do you point me to Menger if you disagree with him?

I don't. That is what Menger teaches. Value is subjective. The fact that you don't understand what he means by objective factors is your problem, not mine. I have tried to explain but I guess after years of having the Smith/Ricardo/Marx ideas of value pounded into your brain you have a hard time adjusting to the Mengerian insights.

 
At 10/13/2011 1:20 AM, Blogger Ron H. said...

"This may explain it to you."

LOL That's great, I love it.

I happen to have Carl Menger right over here. I'll let him explain it to you.

Well, he is shy, (and quite moldy), but he want's me to tell you that his whole book can be summarized in one phrase:

"Value is subjective."

 
At 10/13/2011 8:57 AM, Blogger Sean said...

This may explain it to you.
Cute.

The fact that you don't understand what he means by objective factors is your problem, not mine.
I went back and looked at the wording again, and you're both right, dammit. Value is subjective and determines demand. Supply is objective, and in combination with demand, determines price.

I don't know what's wrong with my brain lately. I usually don't make this kind of mistake.

But what I was saying isn't *that* different from what Menger said. Now, will you continue to insult and torment over it?

 
At 10/13/2011 11:12 AM, Blogger Ron H. said...

Sean: "I don't know what's wrong with my brain lately. I usually don't make this kind of mistake."

How old are you? I've found that I have less control of my brain and my bladder as I age. :)

But what I was saying isn't *that* different from what Menger said. Now, will you continue to insult and torment over it?

Nah, I can only speak for myself, but I'll save it 'til I'm really in a bind. :)

 
At 10/13/2011 3:03 PM, Blogger VangelV said...

But what I was saying isn't *that* different from what Menger said. Now, will you continue to insult and torment over it?

The point is not to insult but to clarify. I have the same problems at time when I read something very carefully but do not put it in context and miss the author's intended point. For Menger what is important is to note his most important insight. Value is subjective. Once we get that many of the arguments made by the meddlers and statists fall apart and the curtain is lifted on those that try to pull the levers.

 
At 10/13/2011 3:22 PM, Blogger Sean said...

Ron H.,
VangeIV,

I'll try to work on patience and make sure to check things twice. Anyway, thank you for the discussion.

 

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