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Economists goes around this argument saying that what you consider as profit is in fact the remuneration of the capital factor
I know, but I think this argument is poor. To me the models imply that there is renumeration beyond the fair return on capital.
Like you pointed out the fact that conditions constantly change means that market mechanisms are the are necessary, if equilibrium was the norm, regulating/controlling output and/or prices would be the superior method.
Perfect markets are not possible, labour and capital are not perfectly mobile, sunk costs are often very large, tacit collusion is common, information is imperfect and assymetric etc etc etc
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On February 03 2014 18:49 Crushinator wrote:Show nested quote + Economists goes around this argument saying that what you consider as profit is in fact the remuneration of the capital factor I know, but I think this argument is poor. To me the models imply that there is renumeration beyond the fair return on capital. Like you pointed out the fact that conditions constantly change means that market mechanisms are the are necessary, if equilibrium was the norm, regulating/controlling output and/or prices would be the superior method. Perfect markets are not possible, labour and capital are not perfectly mobile, sunk costs are often very large, tacit collusion is common, information is imperfect and assymetric etc etc etc
Yes I agree, sonnenschein proved that perfect market are nothing but a fiction. But it is a fiction that is used as the ground for all modern economic theory (look at the economy of the environment, it is all about equilibrium...). It's poor, but the theory is based on the knowledge that it is not empirically true.
There are so many flaws in the theory that we could discuss it to no end.
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On February 03 2014 19:15 WhiteDog wrote:Show nested quote +On February 03 2014 18:49 Crushinator wrote: Economists goes around this argument saying that what you consider as profit is in fact the remuneration of the capital factor I know, but I think this argument is poor. To me the models imply that there is renumeration beyond the fair return on capital. Like you pointed out the fact that conditions constantly change means that market mechanisms are the are necessary, if equilibrium was the norm, regulating/controlling output and/or prices would be the superior method. Perfect markets are not possible, labour and capital are not perfectly mobile, sunk costs are often very large, tacit collusion is common, information is imperfect and assymetric etc etc etc Yes I agree, sonnenschein proved that perfect market are nothing but a fiction. But it is a fiction that is used as the ground for all modern economic theory (look at the economy of the environment, it is all about equilibrium...). It's poor, but the theory is based on the knowledge that it is not empirically true. There are so many flaws in the theory that we could discuss it to no end.
I think simple models are valuable, but people who take only introductory courses into economics are taught the limitations of the simplest models only in passing, while learning to find the perfectly neat equilibria that these models result in. It is quite sad that models of imperfect markets and their implications are rarely taught at the basic level, if they were I think there would be fewer free market advocates.
Though if the empirical evidence was emphasized there might be fewer socialists aswell 
I realise that there is an ideological element to this discussion aswell, with advocates of individual freedom and social equality on opposite sides. But my position is that of a pragmatic moderate, I think market performance must be monitored and corrected wherever the outcome is unacceptable, with the understanding that regulation and control has drawbacks too. Deregulation and privatisation can work too (I personally think it has worked quite well in Dutch healthcare in the last decade for example), and should be implemented wherever market mechanisms can reduce unacceptable wasteful behavior.
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On February 03 2014 19:45 Crushinator wrote:Show nested quote +On February 03 2014 19:15 WhiteDog wrote:On February 03 2014 18:49 Crushinator wrote: Economists goes around this argument saying that what you consider as profit is in fact the remuneration of the capital factor I know, but I think this argument is poor. To me the models imply that there is renumeration beyond the fair return on capital. Like you pointed out the fact that conditions constantly change means that market mechanisms are the are necessary, if equilibrium was the norm, regulating/controlling output and/or prices would be the superior method. Perfect markets are not possible, labour and capital are not perfectly mobile, sunk costs are often very large, tacit collusion is common, information is imperfect and assymetric etc etc etc Yes I agree, sonnenschein proved that perfect market are nothing but a fiction. But it is a fiction that is used as the ground for all modern economic theory (look at the economy of the environment, it is all about equilibrium...). It's poor, but the theory is based on the knowledge that it is not empirically true. There are so many flaws in the theory that we could discuss it to no end. I think simple models are valuable, but people who take only introductory courses into economics are taught the limitations of the simplest models only in passing, while learning to find the perfectly neat equilibria that these models result in. It is quite sad that models of imperfect markets and their implications are rarely taught at the basic level, if they were I think there would be fewer free market advocates. Though if the empirical evidence was emphasized there might be fewer socialists aswell I realise that there is an ideological element to this discussion aswell, with advocates of individual freedom and social equality on opposite sides. But my position is that of a pragmatic moderate, I think market performance must be monitored and corrected wherever the outcome is unacceptable, with the understanding that regulation and control has drawbacks too. Deregulation and privatisation can work too (I personally think it has worked quite well in Dutch healthcare in the last decade for example), and should be implemented wherever market mechanisms can reduce unacceptable wasteful behavior.
I agree with your middle ground point of view for a big part.
But from my point of view, if empirical evidence was emphasized, there might be a lot more socialists. Economic theory shows that a lot of our problems are linked to a bad definition of the right of property (environmental problems are defined as such for exemple). Socialism adressed that two centuries ago. Marxism is a huge tryout from Marx to take reality in perspective in an age where philosophy was the only way to apprehend political matters (he was one of the first of his generation to try to use statistics, badly but well it was just the beginning).
Actually it is my belief that we will never be able to adress the environmental crisis without a redefinition of the rights of property of the "Earth" - most notably a critics of the idea of usus and abusus.
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On February 03 2014 19:58 WhiteDog wrote:Show nested quote +On February 03 2014 19:45 Crushinator wrote:On February 03 2014 19:15 WhiteDog wrote:On February 03 2014 18:49 Crushinator wrote: Economists goes around this argument saying that what you consider as profit is in fact the remuneration of the capital factor I know, but I think this argument is poor. To me the models imply that there is renumeration beyond the fair return on capital. Like you pointed out the fact that conditions constantly change means that market mechanisms are the are necessary, if equilibrium was the norm, regulating/controlling output and/or prices would be the superior method. Perfect markets are not possible, labour and capital are not perfectly mobile, sunk costs are often very large, tacit collusion is common, information is imperfect and assymetric etc etc etc Yes I agree, sonnenschein proved that perfect market are nothing but a fiction. But it is a fiction that is used as the ground for all modern economic theory (look at the economy of the environment, it is all about equilibrium...). It's poor, but the theory is based on the knowledge that it is not empirically true. There are so many flaws in the theory that we could discuss it to no end. I think simple models are valuable, but people who take only introductory courses into economics are taught the limitations of the simplest models only in passing, while learning to find the perfectly neat equilibria that these models result in. It is quite sad that models of imperfect markets and their implications are rarely taught at the basic level, if they were I think there would be fewer free market advocates. Though if the empirical evidence was emphasized there might be fewer socialists aswell I realise that there is an ideological element to this discussion aswell, with advocates of individual freedom and social equality on opposite sides. But my position is that of a pragmatic moderate, I think market performance must be monitored and corrected wherever the outcome is unacceptable, with the understanding that regulation and control has drawbacks too. Deregulation and privatisation can work too (I personally think it has worked quite well in Dutch healthcare in the last decade for example), and should be implemented wherever market mechanisms can reduce unacceptable wasteful behavior. I agree with your middle ground point of view for a big part. But from my point of view, if empirical evidence was emphasized, there might be a lot more socialists. Economic theory shows that a lot of our problems are linked to a bad definition of the right of property (environmental problems are defined as such for exemple). Socialism adressed that two centuries ago. Actually Marxism is a huge tryout from Marx to take reality in perspective (he was one of the first of his generation to try to use statistics, badly but well it was just the beginning). Actually it is my belief that we will never be able to adress the environmental crisis without a redefinition of the rights of property of the "Earth" - most notably a critics of the idea of usus and abusus.
That is an excellent point, you rarely ever hear. For example, IF the cost of storing (not even talking about GETTING THE FUCK RID OF IT) the nuclear waste of power plants was included in the price of energy people would be a hell of a lot more sensitive to the whole ordeal and hypocrisy that's going on. How long are such shelters supposed to last? 5-10k years lol?
Renewable energy - or at least pouring a shitton of R&D money into said thing just got a whole lot more interesting.
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On February 03 2014 20:16 Doublemint wrote:Show nested quote +On February 03 2014 19:58 WhiteDog wrote:On February 03 2014 19:45 Crushinator wrote:On February 03 2014 19:15 WhiteDog wrote:On February 03 2014 18:49 Crushinator wrote: Economists goes around this argument saying that what you consider as profit is in fact the remuneration of the capital factor I know, but I think this argument is poor. To me the models imply that there is renumeration beyond the fair return on capital. Like you pointed out the fact that conditions constantly change means that market mechanisms are the are necessary, if equilibrium was the norm, regulating/controlling output and/or prices would be the superior method. Perfect markets are not possible, labour and capital are not perfectly mobile, sunk costs are often very large, tacit collusion is common, information is imperfect and assymetric etc etc etc Yes I agree, sonnenschein proved that perfect market are nothing but a fiction. But it is a fiction that is used as the ground for all modern economic theory (look at the economy of the environment, it is all about equilibrium...). It's poor, but the theory is based on the knowledge that it is not empirically true. There are so many flaws in the theory that we could discuss it to no end. I think simple models are valuable, but people who take only introductory courses into economics are taught the limitations of the simplest models only in passing, while learning to find the perfectly neat equilibria that these models result in. It is quite sad that models of imperfect markets and their implications are rarely taught at the basic level, if they were I think there would be fewer free market advocates. Though if the empirical evidence was emphasized there might be fewer socialists aswell I realise that there is an ideological element to this discussion aswell, with advocates of individual freedom and social equality on opposite sides. But my position is that of a pragmatic moderate, I think market performance must be monitored and corrected wherever the outcome is unacceptable, with the understanding that regulation and control has drawbacks too. Deregulation and privatisation can work too (I personally think it has worked quite well in Dutch healthcare in the last decade for example), and should be implemented wherever market mechanisms can reduce unacceptable wasteful behavior. I agree with your middle ground point of view for a big part. But from my point of view, if empirical evidence was emphasized, there might be a lot more socialists. Economic theory shows that a lot of our problems are linked to a bad definition of the right of property (environmental problems are defined as such for exemple). Socialism adressed that two centuries ago. Actually Marxism is a huge tryout from Marx to take reality in perspective (he was one of the first of his generation to try to use statistics, badly but well it was just the beginning). Actually it is my belief that we will never be able to adress the environmental crisis without a redefinition of the rights of property of the "Earth" - most notably a critics of the idea of usus and abusus. That is an excellent point, you rarely ever hear. For example, IF the cost of storing (not even talking about GETTING THE FUCK RID OF IT) the nuclear waste of power plants was included in the price of energy people would be a hell of a lot more sensitive to the whole ordeal and hypocrisy that's going on. How long are such shelters supposed to last? 5-10k years lol? Renewable energy - or at least pouring a shitton of R&D money into said thing just got a whole lot more interesting.
Factor in the theoretical cost of a "real" meltdown and what an insurance against that should cost. Nuclear energy just became really, really expensive. This was sort of allright until the plants started to be run by private companies... Now it has become the poster child of "privatising earnings / socialising risks."
I'm not even really against nuclear energy but it for sure just seems "cheap" when compared to other energy sources because most of its costs are actually not factored in.
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On February 03 2014 21:37 Velr wrote:Show nested quote +On February 03 2014 20:16 Doublemint wrote:On February 03 2014 19:58 WhiteDog wrote:On February 03 2014 19:45 Crushinator wrote:On February 03 2014 19:15 WhiteDog wrote:On February 03 2014 18:49 Crushinator wrote: Economists goes around this argument saying that what you consider as profit is in fact the remuneration of the capital factor I know, but I think this argument is poor. To me the models imply that there is renumeration beyond the fair return on capital. Like you pointed out the fact that conditions constantly change means that market mechanisms are the are necessary, if equilibrium was the norm, regulating/controlling output and/or prices would be the superior method. Perfect markets are not possible, labour and capital are not perfectly mobile, sunk costs are often very large, tacit collusion is common, information is imperfect and assymetric etc etc etc Yes I agree, sonnenschein proved that perfect market are nothing but a fiction. But it is a fiction that is used as the ground for all modern economic theory (look at the economy of the environment, it is all about equilibrium...). It's poor, but the theory is based on the knowledge that it is not empirically true. There are so many flaws in the theory that we could discuss it to no end. I think simple models are valuable, but people who take only introductory courses into economics are taught the limitations of the simplest models only in passing, while learning to find the perfectly neat equilibria that these models result in. It is quite sad that models of imperfect markets and their implications are rarely taught at the basic level, if they were I think there would be fewer free market advocates. Though if the empirical evidence was emphasized there might be fewer socialists aswell I realise that there is an ideological element to this discussion aswell, with advocates of individual freedom and social equality on opposite sides. But my position is that of a pragmatic moderate, I think market performance must be monitored and corrected wherever the outcome is unacceptable, with the understanding that regulation and control has drawbacks too. Deregulation and privatisation can work too (I personally think it has worked quite well in Dutch healthcare in the last decade for example), and should be implemented wherever market mechanisms can reduce unacceptable wasteful behavior. I agree with your middle ground point of view for a big part. But from my point of view, if empirical evidence was emphasized, there might be a lot more socialists. Economic theory shows that a lot of our problems are linked to a bad definition of the right of property (environmental problems are defined as such for exemple). Socialism adressed that two centuries ago. Actually Marxism is a huge tryout from Marx to take reality in perspective (he was one of the first of his generation to try to use statistics, badly but well it was just the beginning). Actually it is my belief that we will never be able to adress the environmental crisis without a redefinition of the rights of property of the "Earth" - most notably a critics of the idea of usus and abusus. That is an excellent point, you rarely ever hear. For example, IF the cost of storing (not even talking about GETTING THE FUCK RID OF IT) the nuclear waste of power plants was included in the price of energy people would be a hell of a lot more sensitive to the whole ordeal and hypocrisy that's going on. How long are such shelters supposed to last? 5-10k years lol? Renewable energy - or at least pouring a shitton of R&D money into said thing just got a whole lot more interesting. Factor in the theoretical cost of a "real" meltdown and what an insurance against that should cost. Nuclear energy just became really, really expensive. This was sort of allright until the plants started to be run by private companies... Now it has become the poster child of "privatising earnings / socialising risks." I'm not even really against nuclear energy but it for sure just seems "cheap" when compared to other energy sources because most of its costs are actually not factored in.
Factoring in various costs is exactly what economists are trying to do. They are giving "value" for nature, different type of value, to try to take into consideration the value of a forest "for itself", for people who like plants and shit, to make sure the market take all that into consideration. They are trying to internalize costs with taxes and whatnot.
This does not work, because the state will always be running after externalities: it only gives short run solution for small micro problems such as the nuclear problem (yes nuclear energy is a small problem in regard to the state we are in, if you doubt it then just ask yourself if without it we would have no environmental crisis). Take into consideration all "external" costs in the costs of nuclear energy (like it is really possible) ? Then people will find other kind of energy, with other kind of externalities because those will become relatively cheaper.
It is pretty clear that we cannot really face the environmental problem without a real change in our modus operandi, the way we produce, the way we consume, etc. and taking care of all those externalities one by one is too much for us - as reality is imperfect by nature. It all goes down to an imperfection of our right of property ; how can we make sure bees respect our property rights and stop try to gather nectar on fields with insecticides ? Seems kinda ridiculous.
That's why people are arguing that we only can fix this by changing our property rights, who are based around the "usus" (the right to use what you own) and "abusus" (the right to abuse of what you own) since the roman empire. In France, various people (someone like Yves-Charles Zarka wrote a decisive book on the subject, named L'inappropriabilité de la Terre, but only in French I guess) wants to change the abusus part : you should be able to use what you own (you could exploit the ressources of a forest that you own for exemple) but you should not be able to abuse of it (you are still responsible before "humanity", and thus justice, if you destroy or damage the forest).
BTW this would also mean that you are responsible before law if you put in the garbage a perfectly working product.
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Norway28738 Posts
That makes a whole lot of sense.
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The problem is people tend to ignore "externalities" of so called green energy much more. Everyone is aware of the problem with nuclear waste storage. Almost noone is aware of how much energy inefficient is so called "green energy".
For example governament subsidies might make solar panel economical plusible but it still doesnt change the fact that it generates net energy loss.
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On February 03 2014 23:01 Silvanel wrote:
The problem is people tend to ignore "externalities" of so called green energy much more. Everyone is aware of the problem with nuclear waste storage. Almost noone is aware of how much energy inefficient is so called "green energy".
For example governament subsidies might make solar panel economical plusible but it still doesnt change the fact that it generates net energy loss.
Well it's certainly true that there's a lot of waste and inefficiency with renewable energy. Though I would argue exact the opposite, MOST people are very much aware of solar and/or wind getting huge subsidies. With nuclear energy I am not so sure - and that's not even taking the "hidden" costs into consideration... hidden is a bad word I guess, you just can't put a number on it.
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On February 03 2014 23:01 Silvanel wrote:
The problem is people tend to ignore "externalities" of so called green energy much more. Everyone is aware of the problem with nuclear waste storage. Almost noone is aware of how much energy inefficient is so called "green energy".
For example governament subsidies might make solar panel economical plusible but it still doesnt change the fact that it generates net energy loss.
Iirc modern solar panels (and also wind energy) are no longer generating "net loss", that was like a problem in the early-mid 00s but has changed since then.
And yeah, subsidies make them cheaper... But no one seems to ever talk about all the "classical" energy sources that also get various benefits and just because of that are as cheap as they are.
With the subsidies for "clean" energy also rise some bizarre Problems. Watherpower in Switzerland as an examples runs into the problem that its too expensive because importing Solar/Wind-Energy is cheaper due to the subsidies These energy forms get from the EU.
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On February 03 2014 23:27 Doublemint wrote:Show nested quote +On February 03 2014 23:01 Silvanel wrote:
The problem is people tend to ignore "externalities" of so called green energy much more. Everyone is aware of the problem with nuclear waste storage. Almost noone is aware of how much energy inefficient is so called "green energy".
For example governament subsidies might make solar panel economical plusible but it still doesnt change the fact that it generates net energy loss. Well it's certainly true that there's a lot of waste and inefficiency with renewable energy. Though I would argue exact the opposite, MOST people are very much aware of solar and/or wind getting huge subsidies. With nuclear energy I am not so sure - and that's not even taking the "hidden" costs into consideration... hidden is a bad word I guess, you just can't put a number on it.
On the other side, fossil energy or nuclear energy are also vastly inefficient if we could take into consideration the externalities they are responsible of : destruction of nature, loss of biodiversity, asthma and even death, etc. One could even say that the economic growth we have witnessed in the last two hundred years could be vastly over estimated because we didn't take in consideration the irrevocable damage that "growth" caused on our earth and our population. It is a basic critic of the GDP today.
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On February 03 2014 23:38 WhiteDog wrote:Show nested quote +On February 03 2014 23:27 Doublemint wrote:On February 03 2014 23:01 Silvanel wrote:
The problem is people tend to ignore "externalities" of so called green energy much more. Everyone is aware of the problem with nuclear waste storage. Almost noone is aware of how much energy inefficient is so called "green energy".
For example governament subsidies might make solar panel economical plusible but it still doesnt change the fact that it generates net energy loss. Well it's certainly true that there's a lot of waste and inefficiency with renewable energy. Though I would argue exact the opposite, MOST people are very much aware of solar and/or wind getting huge subsidies. With nuclear energy I am not so sure - and that's not even taking the "hidden" costs into consideration... hidden is a bad word I guess, you just can't put a number on it. On the other side, fossil energy or nuclear energy are also vastly inefficient if we could take into consideration the externalities they are responsible of : destruction of nature, loss of biodiversity, asthma and even death, etc. One could even say that the economic growth we have witnessed in the last two hundred years could be vastly over estimated because we didn't take in consideration the irrevocable damage that "growth" caused on our earth and our population. It is a basic critic of the GDP today.
Well wouldn't that open an interesting can of worms :p
One I am not sure the current elites would appreciate.
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On February 03 2014 23:38 WhiteDog wrote:Show nested quote +On February 03 2014 23:27 Doublemint wrote:On February 03 2014 23:01 Silvanel wrote:
The problem is people tend to ignore "externalities" of so called green energy much more. Everyone is aware of the problem with nuclear waste storage. Almost noone is aware of how much energy inefficient is so called "green energy".
For example governament subsidies might make solar panel economical plusible but it still doesnt change the fact that it generates net energy loss. Well it's certainly true that there's a lot of waste and inefficiency with renewable energy. Though I would argue exact the opposite, MOST people are very much aware of solar and/or wind getting huge subsidies. With nuclear energy I am not so sure - and that's not even taking the "hidden" costs into consideration... hidden is a bad word I guess, you just can't put a number on it. On the other side, fossil energy or nuclear energy are also vastly inefficient if we could take into consideration the externalities they are responsible of : destruction of nature, loss of biodiversity, asthma and even death, etc. One could even say that the economic growth we have witnessed in the last two hundred years could be vastly over estimated because we didn't take in consideration the irrevocable damage that "growth" caused on our earth and our population. It is a basic critic of the GDP today.
If we experience real damage, then it will some day be reflected in the GDP output. GDP is not a forecaster, but a current measure.
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On February 04 2014 02:03 aksfjh wrote:Show nested quote +On February 03 2014 23:38 WhiteDog wrote:On February 03 2014 23:27 Doublemint wrote:On February 03 2014 23:01 Silvanel wrote:
The problem is people tend to ignore "externalities" of so called green energy much more. Everyone is aware of the problem with nuclear waste storage. Almost noone is aware of how much energy inefficient is so called "green energy".
For example governament subsidies might make solar panel economical plusible but it still doesnt change the fact that it generates net energy loss. Well it's certainly true that there's a lot of waste and inefficiency with renewable energy. Though I would argue exact the opposite, MOST people are very much aware of solar and/or wind getting huge subsidies. With nuclear energy I am not so sure - and that's not even taking the "hidden" costs into consideration... hidden is a bad word I guess, you just can't put a number on it. On the other side, fossil energy or nuclear energy are also vastly inefficient if we could take into consideration the externalities they are responsible of : destruction of nature, loss of biodiversity, asthma and even death, etc. One could even say that the economic growth we have witnessed in the last two hundred years could be vastly over estimated because we didn't take in consideration the irrevocable damage that "growth" caused on our earth and our population. It is a basic critic of the GDP today. If we experience real damage, then it will some day be reflected in the GDP output. GDP is not a forecaster, but a current measure.
What's real damage ?
It will reflect in the GDP only if it indeed has an impact on production. The loss of biodiversity has no real impact on GDP because biodiversity has no impact on production - altho we (humans) value it, the market does not. Same for death from working conditions or asthma, not only there are people to take the place of the workers who died (yes it lower unemployment ! how great !), but the health problems are positively taken into account in GDP through medical costs.
Actually, if you employ some people to destroy a forest and then replant it, the positive impact on GDP is double, as both the added value for the destruction and for replanting the forest are counted in positively. But the value of the ecosystem that has been destroyed is not a market value (economists call it a value of non usage) so it is not counted in.
There are try outs to take those into consideration : http://en.wikipedia.org/wiki/The_Economics_of_Ecosystems_and_Biodiversity and they valued it at 2 to 4.5 trillion USD loss a year in 2008. And to be fair, it's grossly under valued, since the only way to value those heavily depends on assumptions that everybody could criticize if they were out in the open (like how economists value the life of a Man), and the value is assessed in relation to men's preference (which is quite sad if you think about it, should we protect nature for our own desire, or for itself ?).
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On February 03 2014 12:16 KwarK wrote:Show nested quote +On February 03 2014 11:50 FabledIntegral wrote:On February 03 2014 10:50 KwarK wrote:On February 03 2014 10:31 FabledIntegral wrote:On February 03 2014 08:06 KwarK wrote:
Should also be noted that the free market is in no way optimal. Supply and demand relies upon undersaturation of markets to create price gouging victims to create a profit stimulus for increased production. Likewise it relies upon failed enterprise to determine when the market is sufficiently saturated and overlapping businesses to weed out the inefficient business practices. Nothing about it is particularly optimal, about the most you can say for it is that it's better than a command economy. Everything you just stated are short term issues while the basic premise of the free market being optimal is considered for long term results. When is this hypothetical point where the market decides it's optimised and competition stops? Has it happened yet? Because as long as competition is happening it's suboptimal. You typically are a decent poster, but I can't help but feel you're either just playing dumb or don't have a basic grasp of what's being said. The models never determine that competition will stop, it just reaches a point where things generally stabilize. Also, as stated prior, the vast majority of people are entirely aware that a true free market does not exist, but rather it's better to apply the principles when possible. The majority of economic research typically doesn't have to do with stating why a free market does work, but at finding as many imperfections as possible and finding ways to optimally fix them, typically through regulations or other external stimuli. That's a nonsense. Markets are never fixed they are built on a constantly changing system. Supply and demand are constantly changing, if the economy goes up that'll change buying patterns, if it goes down that'll change buying patterns, if people start buying shit off the internet more and shopping less it'll change shit, there is no point at which everything stops and the market is able to work out exactly what it needs and then just provide that. Instead it attempts to best match these changing conditions with businesses going under or having to cease activities as some areas dry up and entrepreneurs starting new ones in other areas to meet new demands. Some of these will provide more than the market can bear and go under, others will compete for the same market and force out competitors with inferior business practices but never, at any time, will it stop. There is no "in the long term". Capitalism incentivises accurate guesses at what the market wants to encourage people to invest capital in guessing in order to make returns. The better guessers keep going and the worse ones stop but the process itself isn't even slightly efficient and the idea that there's some point where they go "okay guys, we've worked it out, stop everything and we'll just keep this going" is laughable. The market changes and the guessing game continues and each inaccurate guess is lost value. Capitalism is fundamentally inefficient and someone claiming that it is optimal has a poor understanding of how it works. It's basically evolution in action and while it's cool to go "look at that salmon going back to the river it was born in, how amazing" you can't ignore the billions of shitty proto-salmon that got lost and didn't breed. It's more efficient than a command economy because it has a better feedback and is more reactive to changing conditions but it's certainly not optimal and nobody who understands it would ever claim it was.
Yes, the market is constantly changing. I wasn't attempting to contradict that, if anything I was stating that I agreed with that. No one thinks it "stops", but it will stabilize, until new things are introduced, in which the market will react to new variables and eventually stabilize based on those variables. It does not stabilize overall, it just stabilizes to what the new variables are. The "constantly changing" part is rather that new variables or externalities are constantly being introduced, not that existing ones are extremely volatile.
Thus, there is most definitely a "long term." Guessing, over the long term, generally does in fact taper down. Guess why there's no huge push for new car manufacturers in the United States? Because the market is saturated already and prices aren't as competitive. That's long term, right there. Does that mean someone else won't enter the market place? Not necessarily, but you don't see droves of entrepreneuers incoming, you see it on occasion at best (ie. Tesla).
Same thing happened in Asia, where there was a huge influx of car mfg. after the opportunities presented itself and then the market there generally stabilized as well. Are new variables constantly coming? Yes, and the market is adapting, and there may be something radical to make it change. But generally speaking, until something radical comes in (and which will cause the market to shift), the market has stabilized.
Your constant reiteration of "anyone who understands it knows it's not optimal" is just stupid. As mentioned, the majority of economics consists of finding market imperfections where the free market fails because so many of the basic premises aren't met. The part where you're referencing people "constantly guessing" with capital, and that somehow resulting in a market that is supposedly less optimal than other "unpresented" alternatives is just sillly. Almost no one will argue a truly unregulated free market is optimal. But the entire premise of economics is to get as close to it as possible while fixing the imperfections along the way through regulation.
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On February 04 2014 02:52 FabledIntegral wrote:Show nested quote +On February 03 2014 12:16 KwarK wrote:On February 03 2014 11:50 FabledIntegral wrote:On February 03 2014 10:50 KwarK wrote:On February 03 2014 10:31 FabledIntegral wrote:On February 03 2014 08:06 KwarK wrote:
Should also be noted that the free market is in no way optimal. Supply and demand relies upon undersaturation of markets to create price gouging victims to create a profit stimulus for increased production. Likewise it relies upon failed enterprise to determine when the market is sufficiently saturated and overlapping businesses to weed out the inefficient business practices. Nothing about it is particularly optimal, about the most you can say for it is that it's better than a command economy. Everything you just stated are short term issues while the basic premise of the free market being optimal is considered for long term results. When is this hypothetical point where the market decides it's optimised and competition stops? Has it happened yet? Because as long as competition is happening it's suboptimal. You typically are a decent poster, but I can't help but feel you're either just playing dumb or don't have a basic grasp of what's being said. The models never determine that competition will stop, it just reaches a point where things generally stabilize. Also, as stated prior, the vast majority of people are entirely aware that a true free market does not exist, but rather it's better to apply the principles when possible. The majority of economic research typically doesn't have to do with stating why a free market does work, but at finding as many imperfections as possible and finding ways to optimally fix them, typically through regulations or other external stimuli. That's a nonsense. Markets are never fixed they are built on a constantly changing system. Supply and demand are constantly changing, if the economy goes up that'll change buying patterns, if it goes down that'll change buying patterns, if people start buying shit off the internet more and shopping less it'll change shit, there is no point at which everything stops and the market is able to work out exactly what it needs and then just provide that. Instead it attempts to best match these changing conditions with businesses going under or having to cease activities as some areas dry up and entrepreneurs starting new ones in other areas to meet new demands. Some of these will provide more than the market can bear and go under, others will compete for the same market and force out competitors with inferior business practices but never, at any time, will it stop. There is no "in the long term". Capitalism incentivises accurate guesses at what the market wants to encourage people to invest capital in guessing in order to make returns. The better guessers keep going and the worse ones stop but the process itself isn't even slightly efficient and the idea that there's some point where they go "okay guys, we've worked it out, stop everything and we'll just keep this going" is laughable. The market changes and the guessing game continues and each inaccurate guess is lost value. Capitalism is fundamentally inefficient and someone claiming that it is optimal has a poor understanding of how it works. It's basically evolution in action and while it's cool to go "look at that salmon going back to the river it was born in, how amazing" you can't ignore the billions of shitty proto-salmon that got lost and didn't breed. It's more efficient than a command economy because it has a better feedback and is more reactive to changing conditions but it's certainly not optimal and nobody who understands it would ever claim it was. Yes, the market is constantly changing. I wasn't attempting to contradict that, if anything I was stating that I agreed with that. No one thinks it "stops", but it will stabilize, until new things are introduced, in which the market will react to new variables and eventually stabilize based on those variables. It does not stabilize overall, it just stabilizes to what the new variables are. The "constantly changing" part is rather that new variables or externalities are constantly being introduced, not that existing ones are extremely volatile. Thus, there is most definitely a "long term." Guessing, over the long term, generally does in fact taper down. Guess why there's no huge push for new car manufacturers in the United States? Because the market is saturated already and prices aren't as competitive. That's long term, right there. Does that mean someone else won't enter the market place? Not necessarily, but you don't see droves of entrepreneuers incoming, you see it on occasion at best (ie. Tesla). Same thing happened in Asia, where there was a huge influx of car mfg. after the opportunities presented itself and then the market there generally stabilized as well. Are new variables constantly coming? Yes, and the market is adapting, and there may be something radical to make it change. But generally speaking, until something radical comes in (and which will cause the market to shift), the market has stabilized. Your constant reiteration of "anyone who understands it knows it's not optimal" is just stupid. As mentioned, the majority of economics consists of finding market imperfections where the free market fails because so many of the basic premises aren't met. The part where you're referencing people "constantly guessing" with capital, and that somehow resulting in a market that is supposedly less optimal than other "unpresented" alternatives is just sillly. Almost no one will argue a truly unregulated free market is optimal. But the entire premise of economics is to get as close to it as possible while fixing the imperfections along the way through regulation.
The entire premise of neoclassical economics. For many economists (keynesians right ?) this equilibrium theory has no sense.
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Norway28738 Posts
But then how much regulation is the right amount of regulation, and does market efficiency trump betterment of society? The problem I often have when I see people who are "more stalwart capitalists" argue is that it seems like increased market efficiency is a great societal goal by itself.. It's not that capitalism isn't good at adjusting to people's consumptive habits - that's the very problem, it wants more consumption because that is what makes the economy improve.
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United States43545 Posts
At no point did I argue that we had a less wasteful alternative to the free market, I merely attacked the idea that the free market is efficient. It's better than a command economies but the forces that drive competition are surplus demand creating profit and surplus supply weeding out the inferior businesses, both of which are waste. It's a waste driven economy.
I'll give a very basic example. There are no shoemakers in my village. Shoes are in demand. As someone able to make shoes I then open a shoemaking shop and sell my shoes for the money equivalent of ten times the labour involved in their production from a properly saturated market (example if a baker bakes one loaf an hour and sells it for cost +$1 then his time is worth $1/hr, I then sell my shoes at cost +$10/hr). The reason I do this is because I want to spend 90% of my time not working, or alternatively hoard 10x as much as I would otherwise have. The force driving my shoe shop is the desire to have 10 other dudes working just to meet my surplus desires, or to spend 90% of my time masturbating instead of working. And that's okay because we get shoes out of it and we needed shoes but don't tell me that it's efficient.
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On February 04 2014 02:16 WhiteDog wrote:Show nested quote +On February 04 2014 02:03 aksfjh wrote:On February 03 2014 23:38 WhiteDog wrote:On February 03 2014 23:27 Doublemint wrote:On February 03 2014 23:01 Silvanel wrote:
The problem is people tend to ignore "externalities" of so called green energy much more. Everyone is aware of the problem with nuclear waste storage. Almost noone is aware of how much energy inefficient is so called "green energy".
For example governament subsidies might make solar panel economical plusible but it still doesnt change the fact that it generates net energy loss. Well it's certainly true that there's a lot of waste and inefficiency with renewable energy. Though I would argue exact the opposite, MOST people are very much aware of solar and/or wind getting huge subsidies. With nuclear energy I am not so sure - and that's not even taking the "hidden" costs into consideration... hidden is a bad word I guess, you just can't put a number on it. On the other side, fossil energy or nuclear energy are also vastly inefficient if we could take into consideration the externalities they are responsible of : destruction of nature, loss of biodiversity, asthma and even death, etc. One could even say that the economic growth we have witnessed in the last two hundred years could be vastly over estimated because we didn't take in consideration the irrevocable damage that "growth" caused on our earth and our population. It is a basic critic of the GDP today. If we experience real damage, then it will some day be reflected in the GDP output. GDP is not a forecaster, but a current measure. What's real damage ? It will reflect in the GDP only if it indeed has an impact on production. The loss of biodiversity has no real impact on GDP because biodiversity has no impact on production - altho we (humans) value it, the market does not. Same for death from working conditions or asthma, not only there are people to take the place of the workers who died (yes it lower unemployment ! how great !), but the health problems are positively taken into account in GDP through medical costs. Actually, if you employ some people to destroy a forest and then replant it, the positive impact on GDP is double, as both the added value for the destruction and for replanting the forest are counted in positively. But the value of the ecosystem that has been destroyed is not a market value (economists call it a value of non usage) so it is not counted in. There are try outs to take those into consideration : http://en.wikipedia.org/wiki/The_Economics_of_Ecosystems_and_Biodiversity and they valued it at 2 to 4.5 trillion USD loss a year in 2008. And to be fair, it's grossly under valued, since the only way to value those heavily depends on assumptions that everybody could criticize if they were out in the open (like how economists value the life of a Man), and the value is assessed in relation to men's preference (which is quite sad if you think about it, should we protect nature for our own desire, or for itself ?).
Ah, but if those costs that expand GDP (like health costs and whatnot) are ultimately detrimental to our survival or productivity, it will show in diminished growth/production capacity later down the road. So, are you asking for GDP to be some sort of measure of production minus some fantasy loss that we have no standardized way to measure?
You seem to be wanting some sort of measure that uses economics to make a point outside the actual realm of economics. Like trying to take the temperature of the distance between two planets, you'll just end up with garbage and numbers that are ultimately meaningless.
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EPT
