On January 28 2012 23:18 Hider wrote: Paralel: I must not have made my self clear. I actually assumed that was your logic from reading your prev. post. Its actually a huge problem that jap. buys their own debt, because of the demographical problem of the jap. citizens.
The Japanese situation is very complicated. Yes, Japan does seem to be facing long run problems with debt because of their aging population. But again, it's a very complicated problem that has seemed to defy the best economists, Japan's governments, Japan's central bank for about 20 years now. For about 20 years, Japan has sustained astronomical levels of debt without much issue. I can't say that I completely understand Japan's situation, or what the solution is, and I highly doubt you do.
But the point I was trying to make is that governments can easily sustain large amounts of debt, much higher than the US debt, without financial catastrophe and that the only country that is in trouble because of high government debt is Greece.
On January 28 2012 17:28 liberal wrote: So your stance is that Ron Paul isn't racist, but he wants to act like a racist to make a profit from a.... newsletter? Someone who made their occupation as a doctor and was elected to congress really needs that obscure newsletters profit so much that he's willing to espouse something that is against what he believes in, someone as principled as Ron Paul is?
Oh, and racists (of course we mean white racists here) choose to not support hard core conservative right wing candidates, and instead flock to.... libertarians? Because... libertarians believe that people should not be hired or discriminated against on the basis of race?
You've really got some odd ideas there, I must say.
Show me a audio clip of him saying anything remotely racist at all. You won't find any because that doesn't reflect on what and who Ron Paul stands for. I see why liberals like you attack the good doctor because you fear him as someone that could potentially beat down Obama in a 1:1 race. You know why? Because he's not a lying scumbag that takes money from special interest groups like Goldman Sachs and ends up hiring them as part of their cabinet. People like you are blinded by the left-right paradigm and don't see the person for what they stand for. Here let me show you an example of what I mean:
Why is Goldman Sachs giving money to both Romney and Obama?
Surely they should pick who they want to win, and give him all the money.
The Obama picture is from 2008, where he was almost sure to be the general election winner. This was around the time of the TARP bailouts, so of course banks wanted to get into the new president's good graces. This time around, Romney is getting bank money at 3:1 over Obama. If you look at the campaign contributions page, the contributions come from employees and affiliates of the organization, not from Goldman Sachs itself. Companies sometimes hedge their bets on the presidency. Goldman Sach's contribution to Obama in 08 is roughly a seventh of a percent of his campaign sum.
People need to look closer at Congress and its levers of power when they talk about what's wrong with our government.
I will focus on the last part as that is where we seem to disagree.
Your example is not of a macroeconomy. If people didn't want that many haircuts, then it would be futile for government to boost demand, unless they could endlessly inject stimulus to keep demand at the level that corresponded to a $30 price.
But how this differs from the real macroeconomy is a lack of feedback loops. In a real macroeconomy a sudden collapse in value makes people less willing or less able to spend which reduces demand, which puts people out of work which reduces demand further. Then people are unemployed, standing around doing nothing, contributing nothing, and that is a waste of human capital.
This argument doesn't hold in your example, a sudden collapse in the haircutting market doesn't make people less willing to spend on other things, like buying TVs or food. Of course, if this were some alien species where all they do is haircuts, i.e. the haircut market is the entire macroeconomy, then for the reason above, government stimulus is a good idea.
I think you're mixing up microeconomics and macroeconomics.
Your hypothetical example seems to fall into the realm of micro. There is a reason why micro and macro are usually taught in separate courses at universities. There are key differences: in macro feedback loops are very important.
The failure to recognize the difference between macroeconomics and microeconomics is also the root of the completely wrong analogy whereby an indebted government is compared to a person who borrowed so much money he can't pay it back anymore. Last edit: 2012-01-28 22:38:34
I am not talking about microeconomics or macroeconomics specific. Demand/suply still affects prices in the real world. Not just in microeconomics.
I am talking about a hyphotetical situation, and I give you the chance to explain the situation using your own logic.
So from how I understand your post you feel like the difference between my example and the "real world" is the fact, that the increasing unemployment affects demand in all other sectors (not just the haircut sector). But of coruse it does that as well in the haircut sector. Its only logical that if (assuming no fiscal policy) demand is below suply, then unemployment rises and prices decrease, and demand in the rest of the world decreases.
So you can assume that prices in all industries are falling (though not as much as the haircut industry), and unemployment is rising. But remember as well that during the "haircut" boom prices in every sector rose as well above its "natural level" (though not as much as the haircut sector). Do you still think given the above scenario that fiscal policy is a good solution. Or do you disagree with the realism of the scenario (I suspect you don't think natural prices of all sectors are above its natural level during a boom).
Your example is not of a macroeconomy. If people didn't want that many haircuts, then it would be futile for government to boost demand, unless they could endlessly inject stimulus to keep demand at the level that corresponded to a $30 price.
But how this differs from the real macroeconomy is a lack of feedback loops. In a real macroeconomy a sudden collapse in value makes people less willing or less able to spend which reduces demand, which puts people out of work which reduces demand further. Then people are unemployed, standing around doing nothing, contributing nothing, and that is a waste of human capital.
This argument doesn't hold in your example, a sudden collapse in the haircutting market doesn't make people less willing to spend on other things, like buying TVs or food. Of course, if this were some alien species where all they do is haircuts, i.e. the haircut market is the entire macroeconomy, then for the reason above, government stimulus is a good idea.
I think you're mixing up microeconomics and macroeconomics.
Your hypothetical example seems to fall into the realm of micro. There is a reason why micro and macro are usually taught in separate courses at universities. There are key differences: in macro feedback loops are very important.
The failure to recognize the difference between macroeconomics and microeconomics is also the root of the completely wrong analogy whereby an indebted government is compared to a person who borrowed so much money he can't pay it back anymore. Last edit: 2012-01-28 22:38:34
I am not talking about microeconomics or macroeconomics specific. Demand/suply still affects prices in the real world. Not just in microeconomics.
I am talking about a hyphotetical situation, and I give you the chance to explain the situation using your own logic.
So from how I understand your post you feel like the difference between my example and the "real world" is the fact, that the increasing unemployment affects demand in all other sectors (not just the haircut sector). But of coruse it does that as well in the haircut sector. Its only logical that if (assuming no fiscal policy) demand is below suply, then unemployment rises and prices decrease, and demand in the rest of the world decreases.
So you can assume that prices in all industries are falling (though not as much as the haircut industry), and unemployment is rising. But remember as well that during the "haircut" boom prices in every sector rose as well above its "natural level" (though not as much as the haircut sector). Do you still think given the above scenario that fiscal policy is a good solution. Or do you disagree with the realism of the scenario (I suspect you don't think natural prices of all sectors are above its natural level during a boom).
As I've already said, fiscal policy should not be used to boost the haircut market when the haircut market crashes, only when the entire economy crashes. The difference is in the feedback loops, which in the haircut market example is so small it is virtually nonexistent. When the economy blows up, you can't just move into a different economy, like you can when the haircut market blows up.
Demand falling in the haircut market and unemployment rising in the haircut market does not cause a feedback loop whereby demand is falling in the the entire economy because of a financial crisis and unemployment is rising in entire economy, causing demand to fall further.
Because the feedback loop is virtually nonexistent in the haircut market, government must permanently increase spending to bring demand in haircuts to the pre-crash level. However, the feedback loop is highly important in the case of the entire economy, so that only a temporary increase in government spending is required to restore aggregate demand. This is the notion of a fiscal multiplier. Fiscal multipliers are not applicable in microeconomics.
You cannot use the example of a haircut market and make inferences for the entire economy just by substitution. That's why there's microeconomics and macroeconomics and why they are treated differently and separately.
On January 28 2012 17:28 liberal wrote: So your stance is that Ron Paul isn't racist, but he wants to act like a racist to make a profit from a.... newsletter? Someone who made their occupation as a doctor and was elected to congress really needs that obscure newsletters profit so much that he's willing to espouse something that is against what he believes in, someone as principled as Ron Paul is?
Oh, and racists (of course we mean white racists here) choose to not support hard core conservative right wing candidates, and instead flock to.... libertarians? Because... libertarians believe that people should not be hired or discriminated against on the basis of race?
You've really got some odd ideas there, I must say.
Show me a audio clip of him saying anything remotely racist at all. You won't find any because that doesn't reflect on what and who Ron Paul stands for. I see why liberals like you attack the good doctor because you fear him as someone that could potentially beat down Obama in a 1:1 race. You know why? Because he's not a lying scumbag that takes money from special interest groups like Goldman Sachs and ends up hiring them as part of their cabinet. People like you are blinded by the left-right paradigm and don't see the person for what they stand for. Here let me show you an example of what I mean:
Please stop spamming this topic with propaganda that has long been discredited.
As for him being "racist", this would be the closest I can find.
Granted, it's his ignorance on the subject that makes it worth noting, not necessarily him being racist by any means. He seems to believe that collective groups of people outside of government will not and cannot be racist.
He believes that greed will trump racism and where it doesn't, people have the right to be racist, that is people have the right to associate freely and think whatever they like.
Greed will trump racism, in that if people hire white workers over black workers due to racism, the price of black labour will go down and white labour will go up. The net effect will be to make black labour more productive on a cost basis compared to a white worker, and hence the businesses that hire black labour will be able to undercut all-white businesses and drive them out of business. This, of course, neglects to account for the fact that diversity undercuts productivity (people are more productive when all workers that work together are of the same race/gender, due to comfort and sexual reasons, respectively), as well as that people are willing to pay a racism premium - they will pay extra money to live in all white neighbourhoods, for example. e.g. white flight from neighbourhoods once they exceed 15% black or so.
The right to freedom of association (one of the universal human rights as per the United Nations Declaration of Human Rights) means that you do not have to work with anyone you do not wish to work with, do business with anyone you do not wish to do business with, be friends with anyone you do not wish to be friends with, live with anyone you do not wish to live with.
Freedom of thought is a given. You have the right to think whatever you wish.
Greed did not eradicate racism.
The only time that has happened is on paper. It's all theorycrafting.
The civil rights act is one of the biggest examples of how government intervention can improve a situation. This notion that free-market capitalism would eradicate racism flies against everything that history tells us.
Greed will trump racism, in that if people hire white workers over black workers due to racism, the price of black labour will go down and white labour will go up. The net effect will be to make black labour more productive on a cost basis compared to a white worker, and hence the businesses that hire black labour will be able to undercut all-white businesses and drive them out of business. This, of course, neglects to account for the fact that diversity undercuts productivity (people are more productive when all workers that work together are of the same race/gender, due to comfort and sexual reasons, respectively), as well as that people are willing to pay a racism premium - they will pay extra money to live in all white neighbourhoods, for example. e.g. white flight from neighbourhoods once they exceed 15% black or so.
Just a small example.
The bank manager is racist. Your supplier is racist. You are the forward thinking Randian hero of the story who owns his own restaurant.
You want to open your business to everyone. Afteral, if black people and white people can eat at your restaurant, you will make a killing.
You start letting black people eat at your restaurant.
Next week you get your delivery, all the food you need to run your restaurant. The delivery guy sees black people sitting in your restaurant. He points out that your contract with the supplier states that you cannot service black people. He goes back to the supplier, you get a call. You need to hang up a "no nigger" sign or you will be sued for a breach of contract.
But you are our Randian champion, you press ever forward.
Turns out that the first non-racist supplier is so far off that they don't deliver. The manager feels sympathy for your cause and offers to supply your restaurant, but you have to cover the extra charge. The resut of this extra cost will be that you will offer the same product as the white-only and black-only restaurant across the street but your product will be 30% more expensive.
So already, you are offering a product that depends on the sympathy of non-racists. People willing to pay 30% more for not being racist. But you live in a racist society where the majority of the customer base has been taught from birth that white or black people are disgusting.
So your product is overpriced, your customer base is small.
You decide to fight the big guys, you are going to start your own supply business. You supply to everyone.
You make a business plan and offer it to the bank manager. The bank manager says that he likes your idea, but he won't sign out a loan unless you promise to only supply to white restaurants. You refuse to do so, you don't get the loan.
You get back to your overpriced restaurant. The customer base gets fed up with overpaying for your product.
Your free market ideas were crushed. The white and black only restaurants outperform you. Being racist is the only way to succeed in business.
But a racist supplier and a racist bank manager don't exist in theory land. But economics still involves humans. And humans are more then just numbers.
Free market capitalism does not eradicate racism. It has never done so. History, in fact, shows that it has never succeeded in diminishing racism. All notions that it does are purely theoretical and disregard the human aspect of economics.
2 things to note. In your post you actually dont assume that everybodt maximses wealth (greedy), as e.g. the bank manager prefer racism > profit.
But lets assume that almost everybod are in fact racists and dont care about profits. If everybody were racist, the politicans would be racist as well and make racist laws, and people through the democracy voted them in. If 55% of the population were racist when government could screw the rights of the blacks over. If 55% of the population in a free market is racists, they couldn't do shit, as there still would be banks, supliers, customers that wants to maximse profits.
On January 28 2012 23:51 Hider wrote: I will focus on the last part as that is where we seem to disagree.
Your example is not of a macroeconomy. If people didn't want that many haircuts, then it would be futile for government to boost demand, unless they could endlessly inject stimulus to keep demand at the level that corresponded to a $30 price.
But how this differs from the real macroeconomy is a lack of feedback loops. In a real macroeconomy a sudden collapse in value makes people less willing or less able to spend which reduces demand, which puts people out of work which reduces demand further. Then people are unemployed, standing around doing nothing, contributing nothing, and that is a waste of human capital.
This argument doesn't hold in your example, a sudden collapse in the haircutting market doesn't make people less willing to spend on other things, like buying TVs or food. Of course, if this were some alien species where all they do is haircuts, i.e. the haircut market is the entire macroeconomy, then for the reason above, government stimulus is a good idea.
I think you're mixing up microeconomics and macroeconomics.
Your hypothetical example seems to fall into the realm of micro. There is a reason why micro and macro are usually taught in separate courses at universities. There are key differences: in macro feedback loops are very important.
The failure to recognize the difference between macroeconomics and microeconomics is also the root of the completely wrong analogy whereby an indebted government is compared to a person who borrowed so much money he can't pay it back anymore. Last edit: 2012-01-28 22:38:34
I am not talking about microeconomics or macroeconomics specific. Demand/suply still affects prices in the real world. Not just in microeconomics.
I am talking about a hyphotetical situation, and I give you the chance to explain the situation using your own logic.
So from how I understand your post you feel like the difference between my example and the "real world" is the fact, that the increasing unemployment affects demand in all other sectors (not just the haircut sector). But of coruse it does that as well in the haircut sector. Its only logical that if (assuming no fiscal policy) demand is below suply, then unemployment rises and prices decrease, and demand in the rest of the world decreases.
So you can assume that prices in all industries are falling (though not as much as the haircut industry), and unemployment is rising. But remember as well that during the "haircut" boom prices in every sector rose as well above its "natural level" (though not as much as the haircut sector). Do you still think given the above scenario that fiscal policy is a good solution. Or do you disagree with the realism of the scenario (I suspect you don't think natural prices of all sectors are above its natural level during a boom).
Demand falling in the haircut market and unemployment rising in the haircut market does not cause a feedback loop whereby demand is falling in the the entire economy because of a financial crisis and unemployment is rising in entire economy, causing demand to fall further.
You cannot use the example of a haircut market and make inferences for the entire economy just by substitution. That's why there's microeconomics and macroeconomics and why they are treated differently and separately.
As I've already said, fiscal policy should not be used to boost the haircut market when the haircut market crashes, only when the entire economy crashes. The difference is in the feedback loops, which in the haircut market example is so small it is virtually nonexistent. When the economy blows up, you can't just move into a different economy, like you can when the haircut market blows up.
Because the feedback loop is virtually nonexistent in the haircut market, government must permanently increase spending to bring demand in haircuts to the pre-crash level. However, the feedback loop is highly important in the case of the entire economy, so that only a temporary increase in government spending is required to restore aggregate demand. This is the notion of a fiscal multiplier. Fiscal multipliers are not applicable in microeconomics.
Well if the haircut market actually was really big. A lot of investors had put their money into haircut saloons during the boom (just like real estate, or if thats is too insane, prob like the dot-com prices. Instead of ppl buying dot-com stocks they would buy shares in haircut saloons). So the entire economy will be affected by the crash in the haircut market.
On January 28 2012 23:51 Hider wrote: I will focus on the last part as that is where we seem to disagree.
Your example is not of a macroeconomy. If people didn't want that many haircuts, then it would be futile for government to boost demand, unless they could endlessly inject stimulus to keep demand at the level that corresponded to a $30 price.
But how this differs from the real macroeconomy is a lack of feedback loops. In a real macroeconomy a sudden collapse in value makes people less willing or less able to spend which reduces demand, which puts people out of work which reduces demand further. Then people are unemployed, standing around doing nothing, contributing nothing, and that is a waste of human capital.
This argument doesn't hold in your example, a sudden collapse in the haircutting market doesn't make people less willing to spend on other things, like buying TVs or food. Of course, if this were some alien species where all they do is haircuts, i.e. the haircut market is the entire macroeconomy, then for the reason above, government stimulus is a good idea.
I think you're mixing up microeconomics and macroeconomics.
Your hypothetical example seems to fall into the realm of micro. There is a reason why micro and macro are usually taught in separate courses at universities. There are key differences: in macro feedback loops are very important.
The failure to recognize the difference between macroeconomics and microeconomics is also the root of the completely wrong analogy whereby an indebted government is compared to a person who borrowed so much money he can't pay it back anymore. Last edit: 2012-01-28 22:38:34
I am not talking about microeconomics or macroeconomics specific. Demand/suply still affects prices in the real world. Not just in microeconomics.
I am talking about a hyphotetical situation, and I give you the chance to explain the situation using your own logic.
So from how I understand your post you feel like the difference between my example and the "real world" is the fact, that the increasing unemployment affects demand in all other sectors (not just the haircut sector). But of coruse it does that as well in the haircut sector. Its only logical that if (assuming no fiscal policy) demand is below suply, then unemployment rises and prices decrease, and demand in the rest of the world decreases.
So you can assume that prices in all industries are falling (though not as much as the haircut industry), and unemployment is rising. But remember as well that during the "haircut" boom prices in every sector rose as well above its "natural level" (though not as much as the haircut sector). Do you still think given the above scenario that fiscal policy is a good solution. Or do you disagree with the realism of the scenario (I suspect you don't think natural prices of all sectors are above its natural level during a boom).
Demand falling in the haircut market and unemployment rising in the haircut market does not cause a feedback loop whereby demand is falling in the the entire economy because of a financial crisis and unemployment is rising in entire economy, causing demand to fall further.
You cannot use the example of a haircut market and make inferences for the entire economy just by substitution. That's why there's microeconomics and macroeconomics and why they are treated differently and separately.
As I've already said, fiscal policy should not be used to boost the haircut market when the haircut market crashes, only when the entire economy crashes. The difference is in the feedback loops, which in the haircut market example is so small it is virtually nonexistent. When the economy blows up, you can't just move into a different economy, like you can when the haircut market blows up.
Because the feedback loop is virtually nonexistent in the haircut market, government must permanently increase spending to bring demand in haircuts to the pre-crash level. However, the feedback loop is highly important in the case of the entire economy, so that only a temporary increase in government spending is required to restore aggregate demand. This is the notion of a fiscal multiplier. Fiscal multipliers are not applicable in microeconomics.
Well if the haircut market actually was really big. A lot of investors had put their money into haircut saloons during the boom (just like real estate, or if thats is too insane, prob like the dot-com prices. Instead of ppl buying dot-com stocks they would buy shares in haircut saloons). So the entire economy will be affected by the crash in the haircut market.
Would you then advice fiscal spending?
Yes, if it will adversely affect the entire economy, increase unemployment, and reduce aggregate demand as you imply.
On January 28 2012 17:28 liberal wrote: So your stance is that Ron Paul isn't racist, but he wants to act like a racist to make a profit from a.... newsletter? Someone who made their occupation as a doctor and was elected to congress really needs that obscure newsletters profit so much that he's willing to espouse something that is against what he believes in, someone as principled as Ron Paul is?
Oh, and racists (of course we mean white racists here) choose to not support hard core conservative right wing candidates, and instead flock to.... libertarians? Because... libertarians believe that people should not be hired or discriminated against on the basis of race?
You've really got some odd ideas there, I must say.
Show me a audio clip of him saying anything remotely racist at all. You won't find any because that doesn't reflect on what and who Ron Paul stands for. I see why liberals like you attack the good doctor because you fear him as someone that could potentially beat down Obama in a 1:1 race. You know why? Because he's not a lying scumbag that takes money from special interest groups like Goldman Sachs and ends up hiring them as part of their cabinet. People like you are blinded by the left-right paradigm and don't see the person for what they stand for. Here let me show you an example of what I mean:
Granted, it's his ignorance on the subject that makes it worth noting, not necessarily him being racist by any means. He seems to believe that collective groups of people outside of government will not and cannot be racist.
He believes that greed will trump racism and where it doesn't, people have the right to be racist, that is people have the right to associate freely and think whatever they like.
Greed will trump racism, in that if people hire white workers over black workers due to racism, the price of black labour will go down and white labour will go up. The net effect will be to make black labour more productive on a cost basis compared to a white worker, and hence the businesses that hire black labour will be able to undercut all-white businesses and drive them out of business. This, of course, neglects to account for the fact that diversity undercuts productivity (people are more productive when all workers that work together are of the same race/gender, due to comfort and sexual reasons, respectively), as well as that people are willing to pay a racism premium - they will pay extra money to live in all white neighbourhoods, for example. e.g. white flight from neighbourhoods once they exceed 15% black or so.
The right to freedom of association (one of the universal human rights as per the United Nations Declaration of Human Rights) means that you do not have to work with anyone you do not wish to work with, do business with anyone you do not wish to do business with, be friends with anyone you do not wish to be friends with, live with anyone you do not wish to live with.
Freedom of thought is a given. You have the right to think whatever you wish.
Greed did not eradicate racism.
The only time that has happened is on paper. It's all theorycrafting.
The civil rights act is one of the biggest examples of how government intervention can improve a situation. This notion that free-market capitalism would eradicate racism flies against everything that history tells us.
Greed will trump racism, in that if people hire white workers over black workers due to racism, the price of black labour will go down and white labour will go up. The net effect will be to make black labour more productive on a cost basis compared to a white worker, and hence the businesses that hire black labour will be able to undercut all-white businesses and drive them out of business. This, of course, neglects to account for the fact that diversity undercuts productivity (people are more productive when all workers that work together are of the same race/gender, due to comfort and sexual reasons, respectively), as well as that people are willing to pay a racism premium - they will pay extra money to live in all white neighbourhoods, for example. e.g. white flight from neighbourhoods once they exceed 15% black or so.
Just a small example.
The bank manager is racist. Your supplier is racist. You are the forward thinking Randian hero of the story who owns his own restaurant.
You want to open your business to everyone. Afteral, if black people and white people can eat at your restaurant, you will make a killing.
You start letting black people eat at your restaurant.
Next week you get your delivery, all the food you need to run your restaurant. The delivery guy sees black people sitting in your restaurant. He points out that your contract with the supplier states that you cannot service black people. He goes back to the supplier, you get a call. You need to hang up a "no nigger" sign or you will be sued for a breach of contract.
But you are our Randian champion, you press ever forward.
Turns out that the first non-racist supplier is so far off that they don't deliver. The manager feels sympathy for your cause and offers to supply your restaurant, but you have to cover the extra charge. The resut of this extra cost will be that you will offer the same product as the white-only and black-only restaurant across the street but your product will be 30% more expensive.
So already, you are offering a product that depends on the sympathy of non-racists. People willing to pay 30% more for not being racist. But you live in a racist society where the majority of the customer base has been taught from birth that white or black people are disgusting.
So your product is overpriced, your customer base is small.
You decide to fight the big guys, you are going to start your own supply business. You supply to everyone.
You make a business plan and offer it to the bank manager. The bank manager says that he likes your idea, but he won't sign out a loan unless you promise to only supply to white restaurants. You refuse to do so, you don't get the loan.
You get back to your overpriced restaurant. The customer base gets fed up with overpaying for your product.
Your free market ideas were crushed. The white and black only restaurants outperform you. Being racist is the only way to succeed in business.
But a racist supplier and a racist bank manager don't exist in theory land. But economics still involves humans. And humans are more then just numbers.
Free market capitalism does not eradicate racism. It has never done so. History, in fact, shows that it has never succeeded in diminishing racism. All notions that it does are purely theoretical and disregard the human aspect of economics.
2 things to note. In your post you actually dont assume that everybodt maximses wealth (greedy), as e.g. the bank manager prefer racism > profit.
But lets assume that almost everybod are in fact racists and dont care about profits. If everybody were racist, the politicans would be racist as well and make racist laws, and people through the democracy voted them in. If 55% of the population were racist when government could screw the rights of the blacks over. If 55% of the population in a free market is racists, they couldn't do shit, as there still would be banks, supliers, customers that wants to maximse profits.
Your post makes absolutely no sense. First, politicians aren't allowed to make racist laws because of laws and court decisions that expressely forbid that kind of thinking in law. This is the same kind of check that needs to be applied to businesses. Why do we put checks and limits on our government and yet you don't think it's ok to put them on businesses? They're both run by people.
Second, you (like you have always been doing in this thread) are assuming a nice, neat, competitive market. The problem here is that people only have certain skillsets, and when a market is dominated by a few large companies (which is the case in many if not the majority of markets in our economy) then this means that workers only have a limited set of options for work. If these limited sets of options agree on certain policies to enact, it screws the workers over. In fact, this sounds quite a bit like something that happened earlier in history.
Finally, the main problem with free-market thinkers is that they rely so much on logic, math, etc. to try to determine fiscal policies, yet they don't understand that economics is not an entirely rational field of study. The economy is heavily swayed by the actions, thoughts, and feelings of humans, who are very rarely rational.
On January 28 2012 17:28 liberal wrote: So your stance is that Ron Paul isn't racist, but he wants to act like a racist to make a profit from a.... newsletter? Someone who made their occupation as a doctor and was elected to congress really needs that obscure newsletters profit so much that he's willing to espouse something that is against what he believes in, someone as principled as Ron Paul is?
Oh, and racists (of course we mean white racists here) choose to not support hard core conservative right wing candidates, and instead flock to.... libertarians? Because... libertarians believe that people should not be hired or discriminated against on the basis of race?
You've really got some odd ideas there, I must say.
Show me a audio clip of him saying anything remotely racist at all. You won't find any because that doesn't reflect on what and who Ron Paul stands for. I see why liberals like you attack the good doctor because you fear him as someone that could potentially beat down Obama in a 1:1 race. You know why? Because he's not a lying scumbag that takes money from special interest groups like Goldman Sachs and ends up hiring them as part of their cabinet. People like you are blinded by the left-right paradigm and don't see the person for what they stand for. Here let me show you an example of what I mean:
Granted, it's his ignorance on the subject that makes it worth noting, not necessarily him being racist by any means. He seems to believe that collective groups of people outside of government will not and cannot be racist.
He believes that greed will trump racism and where it doesn't, people have the right to be racist, that is people have the right to associate freely and think whatever they like.
Greed will trump racism, in that if people hire white workers over black workers due to racism, the price of black labour will go down and white labour will go up. The net effect will be to make black labour more productive on a cost basis compared to a white worker, and hence the businesses that hire black labour will be able to undercut all-white businesses and drive them out of business. This, of course, neglects to account for the fact that diversity undercuts productivity (people are more productive when all workers that work together are of the same race/gender, due to comfort and sexual reasons, respectively), as well as that people are willing to pay a racism premium - they will pay extra money to live in all white neighbourhoods, for example. e.g. white flight from neighbourhoods once they exceed 15% black or so.
The right to freedom of association (one of the universal human rights as per the United Nations Declaration of Human Rights) means that you do not have to work with anyone you do not wish to work with, do business with anyone you do not wish to do business with, be friends with anyone you do not wish to be friends with, live with anyone you do not wish to live with.
Freedom of thought is a given. You have the right to think whatever you wish.
Greed did not eradicate racism.
The only time that has happened is on paper. It's all theorycrafting.
The civil rights act is one of the biggest examples of how government intervention can improve a situation. This notion that free-market capitalism would eradicate racism flies against everything that history tells us.
Greed will trump racism, in that if people hire white workers over black workers due to racism, the price of black labour will go down and white labour will go up. The net effect will be to make black labour more productive on a cost basis compared to a white worker, and hence the businesses that hire black labour will be able to undercut all-white businesses and drive them out of business. This, of course, neglects to account for the fact that diversity undercuts productivity (people are more productive when all workers that work together are of the same race/gender, due to comfort and sexual reasons, respectively), as well as that people are willing to pay a racism premium - they will pay extra money to live in all white neighbourhoods, for example. e.g. white flight from neighbourhoods once they exceed 15% black or so.
Just a small example.
The bank manager is racist. Your supplier is racist. You are the forward thinking Randian hero of the story who owns his own restaurant.
You want to open your business to everyone. Afteral, if black people and white people can eat at your restaurant, you will make a killing.
You start letting black people eat at your restaurant.
Next week you get your delivery, all the food you need to run your restaurant. The delivery guy sees black people sitting in your restaurant. He points out that your contract with the supplier states that you cannot service black people. He goes back to the supplier, you get a call. You need to hang up a "no nigger" sign or you will be sued for a breach of contract.
But you are our Randian champion, you press ever forward.
Turns out that the first non-racist supplier is so far off that they don't deliver. The manager feels sympathy for your cause and offers to supply your restaurant, but you have to cover the extra charge. The resut of this extra cost will be that you will offer the same product as the white-only and black-only restaurant across the street but your product will be 30% more expensive.
So already, you are offering a product that depends on the sympathy of non-racists. People willing to pay 30% more for not being racist. But you live in a racist society where the majority of the customer base has been taught from birth that white or black people are disgusting.
So your product is overpriced, your customer base is small.
You decide to fight the big guys, you are going to start your own supply business. You supply to everyone.
You make a business plan and offer it to the bank manager. The bank manager says that he likes your idea, but he won't sign out a loan unless you promise to only supply to white restaurants. You refuse to do so, you don't get the loan.
You get back to your overpriced restaurant. The customer base gets fed up with overpaying for your product.
Your free market ideas were crushed. The white and black only restaurants outperform you. Being racist is the only way to succeed in business.
But a racist supplier and a racist bank manager don't exist in theory land. But economics still involves humans. And humans are more then just numbers.
Free market capitalism does not eradicate racism. It has never done so. History, in fact, shows that it has never succeeded in diminishing racism. All notions that it does are purely theoretical and disregard the human aspect of economics.
2 things to note. In your post you actually dont assume that everybodt maximses wealth (greedy), as e.g. the bank manager prefer racism > profit.
But lets assume that almost everybod are in fact racists and dont care about profits. If everybody were racist, the politicans would be racist as well and make racist laws, and people through the democracy voted them in. If 55% of the population were racist when government could screw the rights of the blacks over. If 55% of the population in a free market is racists, they couldn't do shit, as there still would be banks, supliers, customers that wants to maximse profits.
Not everyone has profit > racism. That's the whole point.
Not even the free market people believe that everyone values profit > racism. They simply argue that because greed is a better business model then racism (which excludes potential customers) a non-racist company will run a racist company out of business.
The reality is that running a non-racist company could at times have made your business less effecient rather then more.
The other point of the story was that it shows you how you don't need a majority to be racist for the society to be racist.
If the top of the pyramid is racist, the bottom has to follow.
If only the supplier is racist, hundreds of stores could be forced to enforce racist policies.
Entire economic regions would eventually drift towards segregation or equality.
If the population in a free market is racist, they couldn't do shit? I just gave you an example of how you could not be a non-racist restaurant owner back in 1950ish. This isn't just something I made up. These sorts of things happened all the time.
That is why racism was so hard to kill, because once it got engrained in even a part of the society, it forced the rest to play the same disgusting game.
And the truth is, the average restaurant owner wouldn't give a fuck. Oke, so he has to exclude black people, he doesn't care, he just wants to run his restaurant and earn enough money to support his family. The average person wouldn't have the moral fiber to fight racism. The exceptional few would get grinded to a pulp by the system.
Racism needs to be crushed by the government. It is the only force that can go over the heads of these societies and forcefully drag them onto the right path.
Government intervention made the USA a far better place.
On January 28 2012 23:51 Hider wrote: I will focus on the last part as that is where we seem to disagree.
Your example is not of a macroeconomy. If people didn't want that many haircuts, then it would be futile for government to boost demand, unless they could endlessly inject stimulus to keep demand at the level that corresponded to a $30 price.
But how this differs from the real macroeconomy is a lack of feedback loops. In a real macroeconomy a sudden collapse in value makes people less willing or less able to spend which reduces demand, which puts people out of work which reduces demand further. Then people are unemployed, standing around doing nothing, contributing nothing, and that is a waste of human capital.
This argument doesn't hold in your example, a sudden collapse in the haircutting market doesn't make people less willing to spend on other things, like buying TVs or food. Of course, if this were some alien species where all they do is haircuts, i.e. the haircut market is the entire macroeconomy, then for the reason above, government stimulus is a good idea.
I think you're mixing up microeconomics and macroeconomics.
Your hypothetical example seems to fall into the realm of micro. There is a reason why micro and macro are usually taught in separate courses at universities. There are key differences: in macro feedback loops are very important.
The failure to recognize the difference between macroeconomics and microeconomics is also the root of the completely wrong analogy whereby an indebted government is compared to a person who borrowed so much money he can't pay it back anymore. Last edit: 2012-01-28 22:38:34
I am not talking about microeconomics or macroeconomics specific. Demand/suply still affects prices in the real world. Not just in microeconomics.
I am talking about a hyphotetical situation, and I give you the chance to explain the situation using your own logic.
So from how I understand your post you feel like the difference between my example and the "real world" is the fact, that the increasing unemployment affects demand in all other sectors (not just the haircut sector). But of coruse it does that as well in the haircut sector. Its only logical that if (assuming no fiscal policy) demand is below suply, then unemployment rises and prices decrease, and demand in the rest of the world decreases.
So you can assume that prices in all industries are falling (though not as much as the haircut industry), and unemployment is rising. But remember as well that during the "haircut" boom prices in every sector rose as well above its "natural level" (though not as much as the haircut sector). Do you still think given the above scenario that fiscal policy is a good solution. Or do you disagree with the realism of the scenario (I suspect you don't think natural prices of all sectors are above its natural level during a boom).
Demand falling in the haircut market and unemployment rising in the haircut market does not cause a feedback loop whereby demand is falling in the the entire economy because of a financial crisis and unemployment is rising in entire economy, causing demand to fall further.
You cannot use the example of a haircut market and make inferences for the entire economy just by substitution. That's why there's microeconomics and macroeconomics and why they are treated differently and separately.
As I've already said, fiscal policy should not be used to boost the haircut market when the haircut market crashes, only when the entire economy crashes. The difference is in the feedback loops, which in the haircut market example is so small it is virtually nonexistent. When the economy blows up, you can't just move into a different economy, like you can when the haircut market blows up.
Because the feedback loop is virtually nonexistent in the haircut market, government must permanently increase spending to bring demand in haircuts to the pre-crash level. However, the feedback loop is highly important in the case of the entire economy, so that only a temporary increase in government spending is required to restore aggregate demand. This is the notion of a fiscal multiplier. Fiscal multipliers are not applicable in microeconomics.
Well if the haircut market actually was really big. A lot of investors had put their money into haircut saloons during the boom (just like real estate, or if thats is too insane, prob like the dot-com prices. Instead of ppl buying dot-com stocks they would buy shares in haircut saloons). So the entire economy will be affected by the crash in the haircut market.
Would you then advice fiscal spending?
Yes.
Good now we can move on .
Assume that before the boom of the haircut industry all people acted rational, and there were no investors which speculated in overvalued industries. This meant that everything was valued somewhat closely to its Net present value of future income.
Assumptions Lets assume that that there actually were only 2 industries in this country (this is just to make the example more simple. There are no trade imbalances and the economy is absolutely fine). The other industry besides haircutting is machine-production. There are 1000 people in the country and everybody is employed (preboom). Preboom 500 worked in the haircut industry and 500 in the machine-produciton industry. Assume as well that there are no technological and personal preferences over time (only exceptions is that alot of investors mistakelny throught the haircut sector would growth).
Effect of the boom and the bust During the boom the haircutting industry became more attractive for the employeed, and hence 700 people (just before the bust) worked in that sector and only 300 in the machine-production sector.
I guess you will agre with me that this isn't a healthy economy. Too many people are working in the haircut industry. We know that the amount is too many as the economy was somewhat close to equilibrium preboom (and preferences and technology hasn't changed since then).
The market realizes this mistakes, and hence people get fired from the haircut industry. Lets say each week 10 people get fired, and its somewhat hard for them to find a job in the machine-production sector, as the machine-production indsutry currently doesn't have the production facilities to hire more people.
Fiscal policy After 5 weeks the government decides to build a bridge, and to build that bridge they need 25 workers (they didn't need any specific qualifications). What could happen is that the government pays too high wages, and people in the machine-production instead of the unemployed took the job. This is obv. really bad, but lets assume that the government gets really lucky and hires only the unemployed.
On official statistics (GDP, unemployment), everything now looks fine, and one could argue that the crises has been solved. The haircut industry still keep firing people, but instead of firing 10 people each week they only fire 5 people/week because people are now spending more money again (as the government borrowed money to finance the bridge.). The machine-production secot has on the other hand began hiring people again, and is currently hiring 5 people/week.
However after 4 weeks the bridge has been built. Now 630 people are now employed in the haircut industry. 320 people are working in the macine-production sector. 50 people are currently unemployed but hoping that the government will borrow new money and decide to build a new bridge.
The effect of the fiscal policy can be split into 2 parts: 1) The direct effecet - 25 people employed building a bridge. 2) They spend more money, this slowed down the amount of people being fired from the haircut industry by 5.
What have we learned? Hence one could conclude that the fiscal policy was succesful. But I would argue thats its not. Its actually the problem that people aren't getting fired faster from the haircut industry. Becacuse as we know from the preboom phase the optimal economy has a 500-500 split. The longer it takes for the economy to go back to this 500-500, the longer the economy will require constant fiscal injections to have a low unemployment.
On January 28 2012 23:51 Hider wrote: I will focus on the last part as that is where we seem to disagree.
Your example is not of a macroeconomy. If people didn't want that many haircuts, then it would be futile for government to boost demand, unless they could endlessly inject stimulus to keep demand at the level that corresponded to a $30 price.
But how this differs from the real macroeconomy is a lack of feedback loops. In a real macroeconomy a sudden collapse in value makes people less willing or less able to spend which reduces demand, which puts people out of work which reduces demand further. Then people are unemployed, standing around doing nothing, contributing nothing, and that is a waste of human capital.
This argument doesn't hold in your example, a sudden collapse in the haircutting market doesn't make people less willing to spend on other things, like buying TVs or food. Of course, if this were some alien species where all they do is haircuts, i.e. the haircut market is the entire macroeconomy, then for the reason above, government stimulus is a good idea.
I think you're mixing up microeconomics and macroeconomics.
Your hypothetical example seems to fall into the realm of micro. There is a reason why micro and macro are usually taught in separate courses at universities. There are key differences: in macro feedback loops are very important.
The failure to recognize the difference between macroeconomics and microeconomics is also the root of the completely wrong analogy whereby an indebted government is compared to a person who borrowed so much money he can't pay it back anymore. Last edit: 2012-01-28 22:38:34
I am not talking about microeconomics or macroeconomics specific. Demand/suply still affects prices in the real world. Not just in microeconomics.
I am talking about a hyphotetical situation, and I give you the chance to explain the situation using your own logic.
So from how I understand your post you feel like the difference between my example and the "real world" is the fact, that the increasing unemployment affects demand in all other sectors (not just the haircut sector). But of coruse it does that as well in the haircut sector. Its only logical that if (assuming no fiscal policy) demand is below suply, then unemployment rises and prices decrease, and demand in the rest of the world decreases.
So you can assume that prices in all industries are falling (though not as much as the haircut industry), and unemployment is rising. But remember as well that during the "haircut" boom prices in every sector rose as well above its "natural level" (though not as much as the haircut sector). Do you still think given the above scenario that fiscal policy is a good solution. Or do you disagree with the realism of the scenario (I suspect you don't think natural prices of all sectors are above its natural level during a boom).
Demand falling in the haircut market and unemployment rising in the haircut market does not cause a feedback loop whereby demand is falling in the the entire economy because of a financial crisis and unemployment is rising in entire economy, causing demand to fall further.
You cannot use the example of a haircut market and make inferences for the entire economy just by substitution. That's why there's microeconomics and macroeconomics and why they are treated differently and separately.
As I've already said, fiscal policy should not be used to boost the haircut market when the haircut market crashes, only when the entire economy crashes. The difference is in the feedback loops, which in the haircut market example is so small it is virtually nonexistent. When the economy blows up, you can't just move into a different economy, like you can when the haircut market blows up.
Because the feedback loop is virtually nonexistent in the haircut market, government must permanently increase spending to bring demand in haircuts to the pre-crash level. However, the feedback loop is highly important in the case of the entire economy, so that only a temporary increase in government spending is required to restore aggregate demand. This is the notion of a fiscal multiplier. Fiscal multipliers are not applicable in microeconomics.
Well if the haircut market actually was really big. A lot of investors had put their money into haircut saloons during the boom (just like real estate, or if thats is too insane, prob like the dot-com prices. Instead of ppl buying dot-com stocks they would buy shares in haircut saloons). So the entire economy will be affected by the crash in the haircut market.
Would you then advice fiscal spending?
Yes.
Good now we can move on .
Assume that before the boom of the haircut industry all people acted rational, and there were no investors which speculated in overvalued industries. This meant that everything was valued somewhat closely to its Net present value of future income.
Assumptions Lets assume that that there actually were only 2 industries in this country (this is just to make the example more simple. There are no trade imbalances and the economy is absolutely fine). The other industry besides haircutting is machine-production. There are 1000 people in the country and everybody is employed (preboom). Preboom 500 worked in the haircut industry and 500 in the machine-produciton industry. Assume as well that there are no technological and personal preferences over time (only exceptions is that alot of investors mistakelny throught the haircut sector would growth).
Effect of the boom and the bust During the boom the haircutting industry became more attractive for the employeed, and hence 700 people (just before the bust) worked in that sector and only 300 in the machine-production sector.
I guess you will agre with me that this isn't a healthy economy. Too many people are working in the haircut industry. We know that the amount is too many as the economy was somewhat close to equilibrium preboom (and preferences and technology hasn't changed since then).
The market realizes this mistakes, and hence people get fired from the haircut industry. Lets say each week 10 people get fired, and its somewhat hard for them to find a job in the machine-production sector, as the machine-production indsutry currently doesn't have the production facilities to hire more people.
Fiscal policy After 5 weeks the government decides to build a bridge, and to build that bridge they need 25 workers (they didn't need any specific qualifications). What could happen is that the government pays too high wages, and people in the machine-production instead of the unemployed took the job. This is obv. really bad, but lets assume that the government gets really lucky and hires only the unemployed.
On official statistics (GDP, unemployment), everything now looks fine, and one could argue that the crises has been solved. The haircut industry still keep firing people, but instead of firing 10 people each week they only fire 5 people/week because people are now spending more money again (as the government borrowed money to finance the bridge.). The machine-production secot has on the other hand began hiring people again, and is currently hiring 5 people/week.
However after 4 weeks the bridge has been built. Now 630 people are now employed in the haircut industry. 320 people are working in the macine-production sector. 50 people are currently unemployed but hoping that the government will borrow new money and decide to build a new bridge.
The effect of the fiscal policy can be split into 2 parts: 1) The direct effecet - 25 people employed building a bridge. 2) They spend more money, this slowed down the amount of people being fired from the haircut industry by 5.
What have we learned? Hence one could conclude that the fiscal policy was succesful. But I would argue thats its not. Its actually the problem that people aren't getting fired faster from the haircut industry. Becacuse as we know from the preboom phase the optimal economy has a 500-500 split. The longer it takes for the economy to go back to this 500-500, the longer the economy will require constant fiscal injections to have a low unemployment.
Your analysis is a complete non-sequitar, and says nothing about the real economy. And is completely unrelated to your previous example.
Here's a better example: 1000 people are employed. There is a financial crisis and 300 people get fired, leaving 700 people employed. If the government does nothing, aggregate demand falls and another 100 people will be fired, leaving 600 people employed. If the government implements stimulus, 150 people would be put to work, increasing aggregate demand which puts another 50 people to work, leaving 800 people employed.
Is 600 people employed better than 800 people employed?
On January 28 2012 17:28 liberal wrote: So your stance is that Ron Paul isn't racist, but he wants to act like a racist to make a profit from a.... newsletter? Someone who made their occupation as a doctor and was elected to congress really needs that obscure newsletters profit so much that he's willing to espouse something that is against what he believes in, someone as principled as Ron Paul is?
Oh, and racists (of course we mean white racists here) choose to not support hard core conservative right wing candidates, and instead flock to.... libertarians? Because... libertarians believe that people should not be hired or discriminated against on the basis of race?
You've really got some odd ideas there, I must say.
Show me a audio clip of him saying anything remotely racist at all. You won't find any because that doesn't reflect on what and who Ron Paul stands for. I see why liberals like you attack the good doctor because you fear him as someone that could potentially beat down Obama in a 1:1 race. You know why? Because he's not a lying scumbag that takes money from special interest groups like Goldman Sachs and ends up hiring them as part of their cabinet. People like you are blinded by the left-right paradigm and don't see the person for what they stand for. Here let me show you an example of what I mean:
Granted, it's his ignorance on the subject that makes it worth noting, not necessarily him being racist by any means. He seems to believe that collective groups of people outside of government will not and cannot be racist.
He believes that greed will trump racism and where it doesn't, people have the right to be racist, that is people have the right to associate freely and think whatever they like.
Greed will trump racism, in that if people hire white workers over black workers due to racism, the price of black labour will go down and white labour will go up. The net effect will be to make black labour more productive on a cost basis compared to a white worker, and hence the businesses that hire black labour will be able to undercut all-white businesses and drive them out of business. This, of course, neglects to account for the fact that diversity undercuts productivity (people are more productive when all workers that work together are of the same race/gender, due to comfort and sexual reasons, respectively), as well as that people are willing to pay a racism premium - they will pay extra money to live in all white neighbourhoods, for example. e.g. white flight from neighbourhoods once they exceed 15% black or so.
The right to freedom of association (one of the universal human rights as per the United Nations Declaration of Human Rights) means that you do not have to work with anyone you do not wish to work with, do business with anyone you do not wish to do business with, be friends with anyone you do not wish to be friends with, live with anyone you do not wish to live with.
Freedom of thought is a given. You have the right to think whatever you wish.
Greed did not eradicate racism.
The only time that has happened is on paper. It's all theorycrafting.
The civil rights act is one of the biggest examples of how government intervention can improve a situation. This notion that free-market capitalism would eradicate racism flies against everything that history tells us.
Greed will trump racism, in that if people hire white workers over black workers due to racism, the price of black labour will go down and white labour will go up. The net effect will be to make black labour more productive on a cost basis compared to a white worker, and hence the businesses that hire black labour will be able to undercut all-white businesses and drive them out of business. This, of course, neglects to account for the fact that diversity undercuts productivity (people are more productive when all workers that work together are of the same race/gender, due to comfort and sexual reasons, respectively), as well as that people are willing to pay a racism premium - they will pay extra money to live in all white neighbourhoods, for example. e.g. white flight from neighbourhoods once they exceed 15% black or so.
Just a small example.
The bank manager is racist. Your supplier is racist. You are the forward thinking Randian hero of the story who owns his own restaurant.
You want to open your business to everyone. Afteral, if black people and white people can eat at your restaurant, you will make a killing.
You start letting black people eat at your restaurant.
Next week you get your delivery, all the food you need to run your restaurant. The delivery guy sees black people sitting in your restaurant. He points out that your contract with the supplier states that you cannot service black people. He goes back to the supplier, you get a call. You need to hang up a "no nigger" sign or you will be sued for a breach of contract.
But you are our Randian champion, you press ever forward.
Turns out that the first non-racist supplier is so far off that they don't deliver. The manager feels sympathy for your cause and offers to supply your restaurant, but you have to cover the extra charge. The resut of this extra cost will be that you will offer the same product as the white-only and black-only restaurant across the street but your product will be 30% more expensive.
So already, you are offering a product that depends on the sympathy of non-racists. People willing to pay 30% more for not being racist. But you live in a racist society where the majority of the customer base has been taught from birth that white or black people are disgusting.
So your product is overpriced, your customer base is small.
You decide to fight the big guys, you are going to start your own supply business. You supply to everyone.
You make a business plan and offer it to the bank manager. The bank manager says that he likes your idea, but he won't sign out a loan unless you promise to only supply to white restaurants. You refuse to do so, you don't get the loan.
You get back to your overpriced restaurant. The customer base gets fed up with overpaying for your product.
Your free market ideas were crushed. The white and black only restaurants outperform you. Being racist is the only way to succeed in business.
But a racist supplier and a racist bank manager don't exist in theory land. But economics still involves humans. And humans are more then just numbers.
Free market capitalism does not eradicate racism. It has never done so. History, in fact, shows that it has never succeeded in diminishing racism. All notions that it does are purely theoretical and disregard the human aspect of economics.
2 things to note. In your post you actually dont assume that everybodt maximses wealth (greedy), as e.g. the bank manager prefer racism > profit.
But lets assume that almost everybod are in fact racists and dont care about profits. If everybody were racist, the politicans would be racist as well and make racist laws, and people through the democracy voted them in. If 55% of the population were racist when government could screw the rights of the blacks over. If 55% of the population in a free market is racists, they couldn't do shit, as there still would be banks, supliers, customers that wants to maximse profits.
Not everyone has profit > racism. That's the whole point.
Not even the free market people believe that everyone values profit > racism. They simply argue that because greed is a better business model then racism (which excludes potential customers) a non-racist company will run a racist company out of business.
The reality is that running a non-racist company could at times have made your business less effecient rather then more.
The other point of the story was that it shows you how you don't need a majority to be racist for the society to be racist.
If the top of the pyramid is racist, the bottom has to follow.
If only the supplier is racist, hundreds of stores could be forced to enforce racist policies.
Entire economic regions would eventually drift towards segregation or equality.
If the population in a free market is racist, they couldn't do shit? I just gave you an example of how you could not be a non-racist restaurant owner back in 1950ish. This isn't just something I made up. These sorts of things happened all the time.
That is why racism was so hard to kill, because once it got engrained in even a part of the society, it forced the rest to play the same disgusting game.
And the truth is, the average restaurant owner wouldn't give a fuck. Oke, so he has to exclude black people, he doesn't care, he just wants to run his restaurant and earn enough money to support his family. The average person wouldn't have the moral fiber to fight racism. The exceptional few would get grinded to a pulp by the system.
Racism needs to be crushed by the government. It is the only force that can go over the heads of these societies and forcefully drag them onto the right path.
Government intervention made the USA a far better place.
Maybe I didn't make my self clear. But i never said people couldn't be racist. If one supplier is racist then it isn't make optimal economic situations, and hence should a non racist supplier should be able to outcompetive it (at least get a strong niche). So what if a restaurant loses 10% of its customers because they don't want black peole on the restaurant. They just change their business model, and decrease their costs by 10% (of course doing that isn't easy, but good planning = part of a good business model. So you need to estimate how many racist there are out there and how it impacts your business).
But lets say the optimal decision for that company would actually be to act racist as well and not allow black people. But if that company goes into the "hate-black" market, the attractivy of the market will be less for the next comapny that is considering its business model. And hence the "allow-black" model might be financially more attractive.
Now lets go on and assume that it actually isn't attractive for any restaurant in the world to allow black people. But if that is how people act then there wouldn't be any difference if we had a government, becausepeople would be so big racist that politicans would be racist as well, and hence there wouldn't be any difference.
Then there is another possiblity I dont think you have considered. If most people (like people are today) hate racists, and don't think restraurants should be allowed to serve black people by law. Then if that was their opinion, why would their opinion change if we had a free market. Most likely they would actually be the one who banned these racist-restaurants.
That said in a free market we would most likely see a very small niche of restaurants that denied black people acces. But that doesn't really effect any of us in any way. Its not like you have any human right to go into every restaurant in the world. The restaurants are private property and the owners are allowed to do whatever they want with their proverty.
On January 28 2012 23:51 Hider wrote: I will focus on the last part as that is where we seem to disagree.
Your example is not of a macroeconomy. If people didn't want that many haircuts, then it would be futile for government to boost demand, unless they could endlessly inject stimulus to keep demand at the level that corresponded to a $30 price.
But how this differs from the real macroeconomy is a lack of feedback loops. In a real macroeconomy a sudden collapse in value makes people less willing or less able to spend which reduces demand, which puts people out of work which reduces demand further. Then people are unemployed, standing around doing nothing, contributing nothing, and that is a waste of human capital.
This argument doesn't hold in your example, a sudden collapse in the haircutting market doesn't make people less willing to spend on other things, like buying TVs or food. Of course, if this were some alien species where all they do is haircuts, i.e. the haircut market is the entire macroeconomy, then for the reason above, government stimulus is a good idea.
I think you're mixing up microeconomics and macroeconomics.
Your hypothetical example seems to fall into the realm of micro. There is a reason why micro and macro are usually taught in separate courses at universities. There are key differences: in macro feedback loops are very important.
The failure to recognize the difference between macroeconomics and microeconomics is also the root of the completely wrong analogy whereby an indebted government is compared to a person who borrowed so much money he can't pay it back anymore. Last edit: 2012-01-28 22:38:34
I am not talking about microeconomics or macroeconomics specific. Demand/suply still affects prices in the real world. Not just in microeconomics.
I am talking about a hyphotetical situation, and I give you the chance to explain the situation using your own logic.
So from how I understand your post you feel like the difference between my example and the "real world" is the fact, that the increasing unemployment affects demand in all other sectors (not just the haircut sector). But of coruse it does that as well in the haircut sector. Its only logical that if (assuming no fiscal policy) demand is below suply, then unemployment rises and prices decrease, and demand in the rest of the world decreases.
So you can assume that prices in all industries are falling (though not as much as the haircut industry), and unemployment is rising. But remember as well that during the "haircut" boom prices in every sector rose as well above its "natural level" (though not as much as the haircut sector). Do you still think given the above scenario that fiscal policy is a good solution. Or do you disagree with the realism of the scenario (I suspect you don't think natural prices of all sectors are above its natural level during a boom).
Demand falling in the haircut market and unemployment rising in the haircut market does not cause a feedback loop whereby demand is falling in the the entire economy because of a financial crisis and unemployment is rising in entire economy, causing demand to fall further.
You cannot use the example of a haircut market and make inferences for the entire economy just by substitution. That's why there's microeconomics and macroeconomics and why they are treated differently and separately.
As I've already said, fiscal policy should not be used to boost the haircut market when the haircut market crashes, only when the entire economy crashes. The difference is in the feedback loops, which in the haircut market example is so small it is virtually nonexistent. When the economy blows up, you can't just move into a different economy, like you can when the haircut market blows up.
Because the feedback loop is virtually nonexistent in the haircut market, government must permanently increase spending to bring demand in haircuts to the pre-crash level. However, the feedback loop is highly important in the case of the entire economy, so that only a temporary increase in government spending is required to restore aggregate demand. This is the notion of a fiscal multiplier. Fiscal multipliers are not applicable in microeconomics.
Well if the haircut market actually was really big. A lot of investors had put their money into haircut saloons during the boom (just like real estate, or if thats is too insane, prob like the dot-com prices. Instead of ppl buying dot-com stocks they would buy shares in haircut saloons). So the entire economy will be affected by the crash in the haircut market.
Would you then advice fiscal spending?
Yes.
Good now we can move on .
Assume that before the boom of the haircut industry all people acted rational, and there were no investors which speculated in overvalued industries. This meant that everything was valued somewhat closely to its Net present value of future income.
Assumptions Lets assume that that there actually were only 2 industries in this country (this is just to make the example more simple. There are no trade imbalances and the economy is absolutely fine). The other industry besides haircutting is machine-production. There are 1000 people in the country and everybody is employed (preboom). Preboom 500 worked in the haircut industry and 500 in the machine-produciton industry. Assume as well that there are no technological and personal preferences over time (only exceptions is that alot of investors mistakelny throught the haircut sector would growth).
Effect of the boom and the bust During the boom the haircutting industry became more attractive for the employeed, and hence 700 people (just before the bust) worked in that sector and only 300 in the machine-production sector.
I guess you will agre with me that this isn't a healthy economy. Too many people are working in the haircut industry. We know that the amount is too many as the economy was somewhat close to equilibrium preboom (and preferences and technology hasn't changed since then).
The market realizes this mistakes, and hence people get fired from the haircut industry. Lets say each week 10 people get fired, and its somewhat hard for them to find a job in the machine-production sector, as the machine-production indsutry currently doesn't have the production facilities to hire more people.
Fiscal policy After 5 weeks the government decides to build a bridge, and to build that bridge they need 25 workers (they didn't need any specific qualifications). What could happen is that the government pays too high wages, and people in the machine-production instead of the unemployed took the job. This is obv. really bad, but lets assume that the government gets really lucky and hires only the unemployed.
On official statistics (GDP, unemployment), everything now looks fine, and one could argue that the crises has been solved. The haircut industry still keep firing people, but instead of firing 10 people each week they only fire 5 people/week because people are now spending more money again (as the government borrowed money to finance the bridge.). The machine-production secot has on the other hand began hiring people again, and is currently hiring 5 people/week.
However after 4 weeks the bridge has been built. Now 630 people are now employed in the haircut industry. 320 people are working in the macine-production sector. 50 people are currently unemployed but hoping that the government will borrow new money and decide to build a new bridge.
The effect of the fiscal policy can be split into 2 parts: 1) The direct effecet - 25 people employed building a bridge. 2) They spend more money, this slowed down the amount of people being fired from the haircut industry by 5.
What have we learned? Hence one could conclude that the fiscal policy was succesful. But I would argue thats its not. Its actually the problem that people aren't getting fired faster from the haircut industry. Becacuse as we know from the preboom phase the optimal economy has a 500-500 split. The longer it takes for the economy to go back to this 500-500, the longer the economy will require constant fiscal injections to have a low unemployment.
Your analysis is a complete non-sequitar, and says nothing about the real economy.
Here's a better example: 1000 people are employed. There is a financial crisis and 300 people get fired, leaving 700 people employed. If the government does nothing, aggregate demand falls and another 100 people will be fired, leaving 600 people employed. If the government implements stimulus, 150 people would be put to work, increasing aggregate demand which puts another 50 people to work, leaving 800 people employed.
Is 600 people employed better than 800 people employed.
THats the problem. you think in terms of aggreagte numbers. But I just made the argument that you can't use these kind of numbers. They are misleading, as you need to think in terms of terms of whether the market actually needs these kind of jobs. You could change the numbers in my example, and make the effect of fiscal spending even more dramastic, but that doesn't change the point.
If you agree with me that the industry needed that 500-500 mix (yes/no?). Then it doesn't matter if the fiscal policy makes jobs. The economy won't be healthy till we go back to that 500-500 mix (agree?).
On January 29 2012 01:06 Hider wrote: On official statistics (GDP, unemployment), everything now looks fine, and one could argue that the crises has been solved. The haircut industry still keep firing people, but instead of firing 10 people each week they only fire 5 people/week because people are now spending more money again (as the government borrowed money to finance the bridge.). The machine-production secot has on the other hand began hiring people again, and is currently hiring 5 people/week.
In addition, your example is wrong. If people are being fired at a slower rate in the haircut industry because of increased demand, then we have a new equilibrium, which contradicts the assumption that the original equilibrium doesn't change.
On January 28 2012 23:51 Hider wrote: I will focus on the last part as that is where we seem to disagree.
Your example is not of a macroeconomy. If people didn't want that many haircuts, then it would be futile for government to boost demand, unless they could endlessly inject stimulus to keep demand at the level that corresponded to a $30 price.
But how this differs from the real macroeconomy is a lack of feedback loops. In a real macroeconomy a sudden collapse in value makes people less willing or less able to spend which reduces demand, which puts people out of work which reduces demand further. Then people are unemployed, standing around doing nothing, contributing nothing, and that is a waste of human capital.
This argument doesn't hold in your example, a sudden collapse in the haircutting market doesn't make people less willing to spend on other things, like buying TVs or food. Of course, if this were some alien species where all they do is haircuts, i.e. the haircut market is the entire macroeconomy, then for the reason above, government stimulus is a good idea.
I think you're mixing up microeconomics and macroeconomics.
Your hypothetical example seems to fall into the realm of micro. There is a reason why micro and macro are usually taught in separate courses at universities. There are key differences: in macro feedback loops are very important.
The failure to recognize the difference between macroeconomics and microeconomics is also the root of the completely wrong analogy whereby an indebted government is compared to a person who borrowed so much money he can't pay it back anymore. Last edit: 2012-01-28 22:38:34
I am not talking about microeconomics or macroeconomics specific. Demand/suply still affects prices in the real world. Not just in microeconomics.
I am talking about a hyphotetical situation, and I give you the chance to explain the situation using your own logic.
So from how I understand your post you feel like the difference between my example and the "real world" is the fact, that the increasing unemployment affects demand in all other sectors (not just the haircut sector). But of coruse it does that as well in the haircut sector. Its only logical that if (assuming no fiscal policy) demand is below suply, then unemployment rises and prices decrease, and demand in the rest of the world decreases.
So you can assume that prices in all industries are falling (though not as much as the haircut industry), and unemployment is rising. But remember as well that during the "haircut" boom prices in every sector rose as well above its "natural level" (though not as much as the haircut sector). Do you still think given the above scenario that fiscal policy is a good solution. Or do you disagree with the realism of the scenario (I suspect you don't think natural prices of all sectors are above its natural level during a boom).
Demand falling in the haircut market and unemployment rising in the haircut market does not cause a feedback loop whereby demand is falling in the the entire economy because of a financial crisis and unemployment is rising in entire economy, causing demand to fall further.
You cannot use the example of a haircut market and make inferences for the entire economy just by substitution. That's why there's microeconomics and macroeconomics and why they are treated differently and separately.
As I've already said, fiscal policy should not be used to boost the haircut market when the haircut market crashes, only when the entire economy crashes. The difference is in the feedback loops, which in the haircut market example is so small it is virtually nonexistent. When the economy blows up, you can't just move into a different economy, like you can when the haircut market blows up.
Because the feedback loop is virtually nonexistent in the haircut market, government must permanently increase spending to bring demand in haircuts to the pre-crash level. However, the feedback loop is highly important in the case of the entire economy, so that only a temporary increase in government spending is required to restore aggregate demand. This is the notion of a fiscal multiplier. Fiscal multipliers are not applicable in microeconomics.
Well if the haircut market actually was really big. A lot of investors had put their money into haircut saloons during the boom (just like real estate, or if thats is too insane, prob like the dot-com prices. Instead of ppl buying dot-com stocks they would buy shares in haircut saloons). So the entire economy will be affected by the crash in the haircut market.
Would you then advice fiscal spending?
Yes.
Good now we can move on .
Assume that before the boom of the haircut industry all people acted rational, and there were no investors which speculated in overvalued industries. This meant that everything was valued somewhat closely to its Net present value of future income.
Assumptions Lets assume that that there actually were only 2 industries in this country (this is just to make the example more simple. There are no trade imbalances and the economy is absolutely fine). The other industry besides haircutting is machine-production. There are 1000 people in the country and everybody is employed (preboom). Preboom 500 worked in the haircut industry and 500 in the machine-produciton industry. Assume as well that there are no technological and personal preferences over time (only exceptions is that alot of investors mistakelny throught the haircut sector would growth).
Effect of the boom and the bust During the boom the haircutting industry became more attractive for the employeed, and hence 700 people (just before the bust) worked in that sector and only 300 in the machine-production sector.
I guess you will agre with me that this isn't a healthy economy. Too many people are working in the haircut industry. We know that the amount is too many as the economy was somewhat close to equilibrium preboom (and preferences and technology hasn't changed since then).
The market realizes this mistakes, and hence people get fired from the haircut industry. Lets say each week 10 people get fired, and its somewhat hard for them to find a job in the machine-production sector, as the machine-production indsutry currently doesn't have the production facilities to hire more people.
Fiscal policy After 5 weeks the government decides to build a bridge, and to build that bridge they need 25 workers (they didn't need any specific qualifications). What could happen is that the government pays too high wages, and people in the machine-production instead of the unemployed took the job. This is obv. really bad, but lets assume that the government gets really lucky and hires only the unemployed.
On official statistics (GDP, unemployment), everything now looks fine, and one could argue that the crises has been solved. The haircut industry still keep firing people, but instead of firing 10 people each week they only fire 5 people/week because people are now spending more money again (as the government borrowed money to finance the bridge.). The machine-production secot has on the other hand began hiring people again, and is currently hiring 5 people/week.
However after 4 weeks the bridge has been built. Now 630 people are now employed in the haircut industry. 320 people are working in the macine-production sector. 50 people are currently unemployed but hoping that the government will borrow new money and decide to build a new bridge.
The effect of the fiscal policy can be split into 2 parts: 1) The direct effecet - 25 people employed building a bridge. 2) They spend more money, this slowed down the amount of people being fired from the haircut industry by 5.
What have we learned? Hence one could conclude that the fiscal policy was succesful. But I would argue thats its not. Its actually the problem that people aren't getting fired faster from the haircut industry. Becacuse as we know from the preboom phase the optimal economy has a 500-500 split. The longer it takes for the economy to go back to this 500-500, the longer the economy will require constant fiscal injections to have a low unemployment.
Your analysis is a complete non-sequitar, and says nothing about the real economy.
Here's a better example: 1000 people are employed. There is a financial crisis and 300 people get fired, leaving 700 people employed. If the government does nothing, aggregate demand falls and another 100 people will be fired, leaving 600 people employed. If the government implements stimulus, 150 people would be put to work, increasing aggregate demand which puts another 50 people to work, leaving 800 people employed.
Is 600 people employed better than 800 people employed.
THats the problem. you think in terms of aggreagte numbers. But I just made the argument that you can't use these kind of numbers. They are misleading, as you need to think in terms of terms of whether the market actually needs these kind of jobs. You could change the numbers in my example, and make the effect of fiscal spending even more dramastic, but that doesn't change the point.
If you agree with me that the industry needed that 500-500 mix (yes/no?). Then it doesn't matter if the fiscal policy makes jobs. The economy won't be healthy till we go back to that 500-500 mix (agree?).
What you don't understand is macroeconomics. And that macroeconomics is different from microeconomics.
In microeconomics, we deal with supply and demand. In macroeconomics, we deal with aggregate supply and aggregate demand.
Applying microeconomics to the macroeconomy is wrong because it doesn't take into account feedback loops.
There isn't some magic distribution of x number of jobs here, and y number of jobs there that the market needs to hit in order to be healthy. People need to be employed or else demand falls, further reducing employment, and so on. You don't see people talking about how many jobs we need in this industry and that industry, only people talking about the dismal 8.5% unemployment rate.
The alternative is sustained high unemployment, which is a waste of human potential and human capital.
On January 28 2012 17:28 liberal wrote: So your stance is that Ron Paul isn't racist, but he wants to act like a racist to make a profit from a.... newsletter? Someone who made their occupation as a doctor and was elected to congress really needs that obscure newsletters profit so much that he's willing to espouse something that is against what he believes in, someone as principled as Ron Paul is?
Oh, and racists (of course we mean white racists here) choose to not support hard core conservative right wing candidates, and instead flock to.... libertarians? Because... libertarians believe that people should not be hired or discriminated against on the basis of race?
You've really got some odd ideas there, I must say.
Show me a audio clip of him saying anything remotely racist at all. You won't find any because that doesn't reflect on what and who Ron Paul stands for. I see why liberals like you attack the good doctor because you fear him as someone that could potentially beat down Obama in a 1:1 race. You know why? Because he's not a lying scumbag that takes money from special interest groups like Goldman Sachs and ends up hiring them as part of their cabinet. People like you are blinded by the left-right paradigm and don't see the person for what they stand for. Here let me show you an example of what I mean:
Granted, it's his ignorance on the subject that makes it worth noting, not necessarily him being racist by any means. He seems to believe that collective groups of people outside of government will not and cannot be racist.
He believes that greed will trump racism and where it doesn't, people have the right to be racist, that is people have the right to associate freely and think whatever they like.
Greed will trump racism, in that if people hire white workers over black workers due to racism, the price of black labour will go down and white labour will go up. The net effect will be to make black labour more productive on a cost basis compared to a white worker, and hence the businesses that hire black labour will be able to undercut all-white businesses and drive them out of business. This, of course, neglects to account for the fact that diversity undercuts productivity (people are more productive when all workers that work together are of the same race/gender, due to comfort and sexual reasons, respectively), as well as that people are willing to pay a racism premium - they will pay extra money to live in all white neighbourhoods, for example. e.g. white flight from neighbourhoods once they exceed 15% black or so.
The right to freedom of association (one of the universal human rights as per the United Nations Declaration of Human Rights) means that you do not have to work with anyone you do not wish to work with, do business with anyone you do not wish to do business with, be friends with anyone you do not wish to be friends with, live with anyone you do not wish to live with.
Freedom of thought is a given. You have the right to think whatever you wish.
Greed did not eradicate racism.
The only time that has happened is on paper. It's all theorycrafting.
The civil rights act is one of the biggest examples of how government intervention can improve a situation. This notion that free-market capitalism would eradicate racism flies against everything that history tells us.
Greed will trump racism, in that if people hire white workers over black workers due to racism, the price of black labour will go down and white labour will go up. The net effect will be to make black labour more productive on a cost basis compared to a white worker, and hence the businesses that hire black labour will be able to undercut all-white businesses and drive them out of business. This, of course, neglects to account for the fact that diversity undercuts productivity (people are more productive when all workers that work together are of the same race/gender, due to comfort and sexual reasons, respectively), as well as that people are willing to pay a racism premium - they will pay extra money to live in all white neighbourhoods, for example. e.g. white flight from neighbourhoods once they exceed 15% black or so.
Just a small example.
The bank manager is racist. Your supplier is racist. You are the forward thinking Randian hero of the story who owns his own restaurant.
You want to open your business to everyone. Afteral, if black people and white people can eat at your restaurant, you will make a killing.
You start letting black people eat at your restaurant.
Next week you get your delivery, all the food you need to run your restaurant. The delivery guy sees black people sitting in your restaurant. He points out that your contract with the supplier states that you cannot service black people. He goes back to the supplier, you get a call. You need to hang up a "no nigger" sign or you will be sued for a breach of contract.
But you are our Randian champion, you press ever forward.
Turns out that the first non-racist supplier is so far off that they don't deliver. The manager feels sympathy for your cause and offers to supply your restaurant, but you have to cover the extra charge. The resut of this extra cost will be that you will offer the same product as the white-only and black-only restaurant across the street but your product will be 30% more expensive.
So already, you are offering a product that depends on the sympathy of non-racists. People willing to pay 30% more for not being racist. But you live in a racist society where the majority of the customer base has been taught from birth that white or black people are disgusting.
So your product is overpriced, your customer base is small.
You decide to fight the big guys, you are going to start your own supply business. You supply to everyone.
You make a business plan and offer it to the bank manager. The bank manager says that he likes your idea, but he won't sign out a loan unless you promise to only supply to white restaurants. You refuse to do so, you don't get the loan.
You get back to your overpriced restaurant. The customer base gets fed up with overpaying for your product.
Your free market ideas were crushed. The white and black only restaurants outperform you. Being racist is the only way to succeed in business.
But a racist supplier and a racist bank manager don't exist in theory land. But economics still involves humans. And humans are more then just numbers.
Free market capitalism does not eradicate racism. It has never done so. History, in fact, shows that it has never succeeded in diminishing racism. All notions that it does are purely theoretical and disregard the human aspect of economics.
2 things to note. In your post you actually dont assume that everybodt maximses wealth (greedy), as e.g. the bank manager prefer racism > profit.
But lets assume that almost everybod are in fact racists and dont care about profits. If everybody were racist, the politicans would be racist as well and make racist laws, and people through the democracy voted them in. If 55% of the population were racist when government could screw the rights of the blacks over. If 55% of the population in a free market is racists, they couldn't do shit, as there still would be banks, supliers, customers that wants to maximse profits.
Not everyone has profit > racism. That's the whole point.
Not even the free market people believe that everyone values profit > racism. They simply argue that because greed is a better business model then racism (which excludes potential customers) a non-racist company will run a racist company out of business.
The reality is that running a non-racist company could at times have made your business less effecient rather then more.
The other point of the story was that it shows you how you don't need a majority to be racist for the society to be racist.
If the top of the pyramid is racist, the bottom has to follow.
If only the supplier is racist, hundreds of stores could be forced to enforce racist policies.
Entire economic regions would eventually drift towards segregation or equality.
If the population in a free market is racist, they couldn't do shit? I just gave you an example of how you could not be a non-racist restaurant owner back in 1950ish. This isn't just something I made up. These sorts of things happened all the time.
That is why racism was so hard to kill, because once it got engrained in even a part of the society, it forced the rest to play the same disgusting game.
And the truth is, the average restaurant owner wouldn't give a fuck. Oke, so he has to exclude black people, he doesn't care, he just wants to run his restaurant and earn enough money to support his family. The average person wouldn't have the moral fiber to fight racism. The exceptional few would get grinded to a pulp by the system.
Racism needs to be crushed by the government. It is the only force that can go over the heads of these societies and forcefully drag them onto the right path.
Government intervention made the USA a far better place.
Maybe I didn't make my self clear. But i never said people couldn't be racist. If one supplier is racist then it isn't make optimal economic situations, and hence should a non racist supplier should be able to outcompetive it (at least get a strong niche). So what if a restaurant loses 10% of its customers because they don't want black peole on the restaurant. They just change their business model, and decrease their costs by 10% (of course doing that isn't easy, but good planning = part of a good business model. So you need to estimate how many racist there are out there and how it impacts your business).
But lets say the optimal decision for that company would actually be to act racist as well and not allow black people. But if that company goes into the "hate-black" market, the attractivy of the market will be less for the next comapny that is considering its business model. And hence the "allow-black" model might be financially more attractive.
Now lets go on and assume that it actually isn't attractive for any restaurant in the world to allow black people. But if that is how people act then there wouldn't be any difference if we had a government, becausepeople would be so big racist that politicans would be racist as well, and hence there wouldn't be any difference.
Then there is another possiblity I dont think you have considered. If most people (like people are today) hate racists, and don't think restraurants should be allowed to serve black people by law. Then if that was their opinion, why would their opinion change if we had a free market. Most likely they would actually be the one who banned these racist-restaurants.
That said in a free market we would most likely see a very small niche of restaurants that denied black people acces. But that doesn't really effect any of us in any way. Its not like you have any human right to go into every restaurant in the world. The restaurants are private property and the owners are allowed to do whatever they want with their proverty.
People in the US hate racists because the US government took massive action to repel it.
The only reason most of us on this forum hate racism is because the government stepped in to massively overhaul the society. In a way only a government can.
The vast majority of people simply do what their surroundings does.
This approach worked, the USA is not even remotely as racist as it was back in 1950. Now libertarians want to turn around and allow segregation to make a comeback? And the most mind-blowing aspect of it all, wave the flag of being anti-racist.
I get where you are coming from with libertarianism, I bought into it myself for a while. But this outright denial of succesful government intervention and the naive notion that racism was on the verge of fixing itself with the free market, is delusional.
So let me make sure I understand what you're saying.
(1) X is valuable only insofar as people are willing to put money towards x. There is no other standard of value. Out of curiosity, does this mean that people with more money are better arbiters of value? But that's a side point, I suppose.
(2) Civil rights problems would have been/would be solved by the free market. So if this is true, then it by definition matters, because the free market measures what people put money towards. But if (2) isn't true, then aren't you committed to saying that civil rights don't matter, because the only standard of value is what people pay for? That is, if the free market can't/doesn't solve it, then civil rights have no/lesser value. Or do you not understand how strong a claim (1) is?
Edit: I guess you actually can't really think (1) based on your claim that liberty is more valuable than * unless you also think that liberty in all cases is that which people are willing to put the most money towards? I think you might just be deeply confused when you assert (1).
On January 29 2012 01:06 Hider wrote: On official statistics (GDP, unemployment), everything now looks fine, and one could argue that the crises has been solved. The haircut industry still keep firing people, but instead of firing 10 people each week they only fire 5 people/week because people are now spending more money again (as the government borrowed money to finance the bridge.). The machine-production secot has on the other hand began hiring people again, and is currently hiring 5 people/week.
In addition, your example is wrong. If people are being fired at a slower rate in the haircut industry because of increased demand, then we have a new equilibrium, which contradicts the assumption that the original equilibrium doesn't change.
I kinda throught this was you would think. Why should the optimal economy relationship between ppl employed in the industries change? There has been no technological changes, and people still value haircutting just as much as machine-production as they always has done. And we knew that the economy was healthy preboom. Let me elaborate on what that means: If we assume that we can either do 2 things with money: 1) Spend 2) Save.
Money saved will eventually go into investments. Some of those money will go to investment in new techonlogy, but lets assume this doesn't happen in our economy.Investments will only be made if old machines are no longer working. So the only impact of investments is to make sure that the wealth of our economy isn't decreasing (or increasing). Everything else is being spend.
However nobody borrows money to spend. Money will only be borrowed to invest in production facilltiies that replaces other production facilities. This means that the average debt/GDP ratio is (lets say) 20%. This is the ratio that is sustainable forever (giving the assumptions i prev. made).
So this sustainable debt/GDP ratio will result in the 500-500 equlibrium. However if the government used fiscal policy the eqilibrium ratio would change, but that obv. wouldn't be sustainable.
The only sustainable ratio is the 500-500. And since consumer preferences doesn't change over time, this ratio is supposed to stay the same (well almost). So its not sustainable if 900 people is working in the haircutting indsutry and 100 in the machine-production. The market it self will go towards the 500-500 ratio, and the proces (as shown in my example) will be prolonged if government gets involved.
On January 28 2012 23:51 Hider wrote: I will focus on the last part as that is where we seem to disagree.
Your example is not of a macroeconomy. If people didn't want that many haircuts, then it would be futile for government to boost demand, unless they could endlessly inject stimulus to keep demand at the level that corresponded to a $30 price.
But how this differs from the real macroeconomy is a lack of feedback loops. In a real macroeconomy a sudden collapse in value makes people less willing or less able to spend which reduces demand, which puts people out of work which reduces demand further. Then people are unemployed, standing around doing nothing, contributing nothing, and that is a waste of human capital.
This argument doesn't hold in your example, a sudden collapse in the haircutting market doesn't make people less willing to spend on other things, like buying TVs or food. Of course, if this were some alien species where all they do is haircuts, i.e. the haircut market is the entire macroeconomy, then for the reason above, government stimulus is a good idea.
I think you're mixing up microeconomics and macroeconomics.
Your hypothetical example seems to fall into the realm of micro. There is a reason why micro and macro are usually taught in separate courses at universities. There are key differences: in macro feedback loops are very important.
The failure to recognize the difference between macroeconomics and microeconomics is also the root of the completely wrong analogy whereby an indebted government is compared to a person who borrowed so much money he can't pay it back anymore. Last edit: 2012-01-28 22:38:34
I am not talking about microeconomics or macroeconomics specific. Demand/suply still affects prices in the real world. Not just in microeconomics.
I am talking about a hyphotetical situation, and I give you the chance to explain the situation using your own logic.
So from how I understand your post you feel like the difference between my example and the "real world" is the fact, that the increasing unemployment affects demand in all other sectors (not just the haircut sector). But of coruse it does that as well in the haircut sector. Its only logical that if (assuming no fiscal policy) demand is below suply, then unemployment rises and prices decrease, and demand in the rest of the world decreases.
So you can assume that prices in all industries are falling (though not as much as the haircut industry), and unemployment is rising. But remember as well that during the "haircut" boom prices in every sector rose as well above its "natural level" (though not as much as the haircut sector). Do you still think given the above scenario that fiscal policy is a good solution. Or do you disagree with the realism of the scenario (I suspect you don't think natural prices of all sectors are above its natural level during a boom).
Demand falling in the haircut market and unemployment rising in the haircut market does not cause a feedback loop whereby demand is falling in the the entire economy because of a financial crisis and unemployment is rising in entire economy, causing demand to fall further.
You cannot use the example of a haircut market and make inferences for the entire economy just by substitution. That's why there's microeconomics and macroeconomics and why they are treated differently and separately.
As I've already said, fiscal policy should not be used to boost the haircut market when the haircut market crashes, only when the entire economy crashes. The difference is in the feedback loops, which in the haircut market example is so small it is virtually nonexistent. When the economy blows up, you can't just move into a different economy, like you can when the haircut market blows up.
Because the feedback loop is virtually nonexistent in the haircut market, government must permanently increase spending to bring demand in haircuts to the pre-crash level. However, the feedback loop is highly important in the case of the entire economy, so that only a temporary increase in government spending is required to restore aggregate demand. This is the notion of a fiscal multiplier. Fiscal multipliers are not applicable in microeconomics.
Well if the haircut market actually was really big. A lot of investors had put their money into haircut saloons during the boom (just like real estate, or if thats is too insane, prob like the dot-com prices. Instead of ppl buying dot-com stocks they would buy shares in haircut saloons). So the entire economy will be affected by the crash in the haircut market.
Would you then advice fiscal spending?
Yes.
Good now we can move on .
Assume that before the boom of the haircut industry all people acted rational, and there were no investors which speculated in overvalued industries. This meant that everything was valued somewhat closely to its Net present value of future income.
Assumptions Lets assume that that there actually were only 2 industries in this country (this is just to make the example more simple. There are no trade imbalances and the economy is absolutely fine). The other industry besides haircutting is machine-production. There are 1000 people in the country and everybody is employed (preboom). Preboom 500 worked in the haircut industry and 500 in the machine-produciton industry. Assume as well that there are no technological and personal preferences over time (only exceptions is that alot of investors mistakelny throught the haircut sector would growth).
Effect of the boom and the bust During the boom the haircutting industry became more attractive for the employeed, and hence 700 people (just before the bust) worked in that sector and only 300 in the machine-production sector.
I guess you will agre with me that this isn't a healthy economy. Too many people are working in the haircut industry. We know that the amount is too many as the economy was somewhat close to equilibrium preboom (and preferences and technology hasn't changed since then).
The market realizes this mistakes, and hence people get fired from the haircut industry. Lets say each week 10 people get fired, and its somewhat hard for them to find a job in the machine-production sector, as the machine-production indsutry currently doesn't have the production facilities to hire more people.
Fiscal policy After 5 weeks the government decides to build a bridge, and to build that bridge they need 25 workers (they didn't need any specific qualifications). What could happen is that the government pays too high wages, and people in the machine-production instead of the unemployed took the job. This is obv. really bad, but lets assume that the government gets really lucky and hires only the unemployed.
On official statistics (GDP, unemployment), everything now looks fine, and one could argue that the crises has been solved. The haircut industry still keep firing people, but instead of firing 10 people each week they only fire 5 people/week because people are now spending more money again (as the government borrowed money to finance the bridge.). The machine-production secot has on the other hand began hiring people again, and is currently hiring 5 people/week.
However after 4 weeks the bridge has been built. Now 630 people are now employed in the haircut industry. 320 people are working in the macine-production sector. 50 people are currently unemployed but hoping that the government will borrow new money and decide to build a new bridge.
The effect of the fiscal policy can be split into 2 parts: 1) The direct effecet - 25 people employed building a bridge. 2) They spend more money, this slowed down the amount of people being fired from the haircut industry by 5.
What have we learned? Hence one could conclude that the fiscal policy was succesful. But I would argue thats its not. Its actually the problem that people aren't getting fired faster from the haircut industry. Becacuse as we know from the preboom phase the optimal economy has a 500-500 split. The longer it takes for the economy to go back to this 500-500, the longer the economy will require constant fiscal injections to have a low unemployment.
Your analysis is a complete non-sequitar, and says nothing about the real economy.
Here's a better example: 1000 people are employed. There is a financial crisis and 300 people get fired, leaving 700 people employed. If the government does nothing, aggregate demand falls and another 100 people will be fired, leaving 600 people employed. If the government implements stimulus, 150 people would be put to work, increasing aggregate demand which puts another 50 people to work, leaving 800 people employed.
Is 600 people employed better than 800 people employed.
THats the problem. you think in terms of aggreagte numbers. But I just made the argument that you can't use these kind of numbers. They are misleading, as you need to think in terms of terms of whether the market actually needs these kind of jobs. You could change the numbers in my example, and make the effect of fiscal spending even more dramastic, but that doesn't change the point.
If you agree with me that the industry needed that 500-500 mix (yes/no?). Then it doesn't matter if the fiscal policy makes jobs. The economy won't be healthy till we go back to that 500-500 mix (agree?).
What you don't understand is macroeconomics. And that macroeconomics is different from microeconomics.
In microeconomics, we deal with supply and demand. In macroeconomics, we deal with aggregate supply and aggregate demand.
Applying microeconomics to the macroeconomy is wrong because it doesn't take into account feedback loops.
There isn't some magic distribution of x number of jobs here, and y number of jobs there that the market needs to hit in order to be healthy. People need to be employed or else demand falls, further reducing employment, and so on. You don't see people talking about how many jobs we need in this industry and that industry, only people talking about the dismal 8.5% unemployment rate.
The alternative is sustained high unemployment, which is a waste of human potential and human capital.
Well I've been taught macroecnomics like everyone else, but that is why I am trying to proove that a lot of people doesn't udnerstand economics. You dont really to learn to understand economics through college (as I prev. got banned for saying), because you will constantly think about aggregate terms which makes as I have tried to point about, isn't relevant.
I could advice you to read some of Bob Murphy. He likes to point out the mistakes that Paul Krugman often makes.
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