[LoneSnark]

But MrBill, that is a entirely different question. Knockoffs and fakes are an issue of enforcement of intellectual property rights. If the Chinese government is not enforcing patent rights, or enforcing trademarks, then it is absolutely a race to the bottom for the Chinese, as their domestic companies are unable to attain patent enforcement or develop defensible brand names.

But for the U.S. to trade freely with China does not import their laws to America. Importers in America are bound by U.S. law, and will be arrested if they import knockoffs just as surely as if they made them in Arizona.

Even if you are buying directly from a seller in China over E-Bay, E-Bay will be held liable in U.S. courts for the responsibility to police its own sellers.

But with the rise of the Internet, it is possible for buyers in America to contact sellers in China directly, however rare it is. But even then the buyers face punishment for violating U.S. law, even if it is unlikely they will be arrested.

So, I can agree with you given Fair Trade means nothing more than mutual enforcement of each others intellectual property rights; from patents to copyrights to trademarks. But this is not an issue with China: as a member of the World Trade Organization, China is already bound by international enforcement of intellectual property rights. And according to Reason Magazine awhile back, more U.S. intellectual property is bootlegged in Washington D.C. than all of China.

[MrBill]

Well, many generics are, of course, perfectly legitimate after their host's patent expires. And many knock-off goods are not counterfeits, but just low-cost look alike goods, usually of inferior quality.

It is up to the consumer to decide, but it is a fact that low cost alternatives usually have the effect of polarizing the market. They hollow-out the middle, while clustering low-priced goods of poor quality at the bottom and high priced, better quality goods at the top. This is a result of consumer choice - and there is nothing wrong with that per se - but we often witness that quality goods disappear from the market as brand names like Krupps, for example, who used to make a very good quality coffee maker, also have to start cutting corners to compete on price with low cost, cheap quality coffee makers from China.

In the end the consumer loses because they cannot differentiate the quality on the inside in many cases, so they buy on price, but they end up with an inferior good while destroying the manufacturing base that was producing a quality product.

So you end up replacing your coffee maker - or portable stereo with CD player - every year because it is a cheap piece of crap instead of having something that lasts. In the end these are false economies. You end up replacing it more often and that in turn uses more energy, metal, plastic, etc.

Of course, ultimately the consumer is to blame. I was just trying to point out that the false economies of offering cheap imports are not so cheap if you take a holistic approach and see the knock-on effects of putting quality producers out of business. Or they also have to cut corners on quality to compete. Or if good jobs with benefits disappear to developing countries. Where those jobs are created, but if they are in weak regulatory environments then perhaps may be creating more pollution, for example, that not only lowers their standard of living, but also pollution does not respect international boundaries either.

Trade is good. Creating jobs in poor countries is good. But we have to make sure that our own laws, regulations and standards do not favor imports over domestic production. There needs to be a level playing field. If not, then we should not be surprised when manufacturing moves offshore and this in turn creates trade deficits at home.

We may well want to have a knowledge economy, but we have to be perfectly clear that intellectual property and proprietary know-how are easily diffused even under the best of conditions. Plus that knowledge can be stolen or copied without respect for intellectual property rights or patents. Enforcement is not always easy. Often piracy is seen as completely legitimate in developing countries as they could not afford the originals in any case.

WTO actions take too long and are too political. Also, they are often tit for tat affairs and even when damages are awarded they go to the government not to the firms hurt by unfair trade. And getting judgement against a foreign firm in a foreign country is frought with its own risks, not least of which that corruption and a weak judiciary make getting a verdict and actually collecting damages extremely hard for companies that find their commercial contracts have not been honored or find that their foreign partner has used proprietary knowledge from the JV to go off and start their own competing firm.

Once you share your core competence it is very hard to control who and how it is used in a foreign country. Especially in China Inc. where they have a jobs first economic policy and are not too terribly worried about reputational issues with regards to foreign investors.

I know that is kind of long and rambling. Sorry. Just a few points about trade issues that, although are not ignored, are often over-looked when talking about the benefits of trade. I still maintain there is a difference between Free Trade and Fair Trade. We should not be so naive as to think everyone shares our values and plays honestly by our rules even if they go through the motions of signing-up to international treaties and joining governing bodies like the WTO.

[LoneSnark]

Now MrBill, you are attempting to describe a race to the bottom of product quality, estimating that low quality imports from China will force high quality U.S. goods to cheapen in order to compete. But if you follow the logic that consumers cannot tell a crappy coffee maker from a quality coffee maker then it does not matter if we trade with China. Low quality coffee makers from Black & Decker manufacture in North Carolina will push out those made by Keurig in California.

But this is not the case: companies must compete on both price and quality no matter where they are physically made. While you are right that you often cannot tell a quality product by looking at it, this is why consumers demand at least a one-year warranty on everything they buy (on some items warranties extend to five or 10 years). If the product is crap and breaks quickly, then for the sale price of a single coffee maker the manufacturer had to provide on average 1.8 coffee makers per 1 sold, plus shipping & handling. If this is your business model then manufacturers only providing 1.1 coffee makers per 1 sold will quickly undersell you.

This is why even goods from China are reliable. Wal-mart will refuse to stock any item prone to being returned as defective, because once an item is returned costs balloon as the item must either be scrapped or shipped back to the manufacturer.

That said, there is nothing to stop Keurig, a brand you seem to like, from setting up a factory in China making high quality coffee makers which cheap labor.

So, let me summarize our discussion:
You posited that free trade would suffer from the problem of intellectual property theft to the point of destroying incentives to innovate. I dispelled this idea, because even if China refused to protect U.S. intellectual property, the U.S. market would still be protected, as U.S. law would remain unchanged. As such, the incentives of innovating in America would remain unchanged: in both scenarios (free trade, no trade) U.S. R&D producers would sell nothing to China. And, besides, under WTO rules China is enforcing intellectual property rights: U.S. companies receive billions every year in royalty payments from Chinese firms and have routinely sued in specially set up Chinese courts and won judgments sometimes larger than they would have gotten back home. This is because most modern technology cannot be copied without help and the Chinese are afraid of foreign firms keeping their secrets to themselves. Which, BTW, they largely have. The factories built in China by western firms have usually been with outmoded equipment from the west, often decades out of date. This is because even with all these legal protections, for many western firms, survival depends on keeping their trade secrets.

Then, you suggested that Chinese imports would create a race to the bottom on quality. I have now explained why the rules are unchanged: the disincentive of having defective merchandise returned either to the store or through mail-in warranty is no different today than it was ten years ago.

Have I missed anything?

[MrBill]

Well, perhaps we have collectively provided both sides of the pros and cons of free trade, and we'll have to let the dear reader decide which is the most compelling argument, or indeed pick and choose those arguments from both that make sense to them.

A good friend of mine is an intellectual property rights lawyer in SF and she specifically has told me about intellectual property right infringements where they have had to walk away from Chinese JVs empty handed.

I did a mini-thesis on the problems of JVs, so perhaps my research is more outdated than yours, but there is a lot of intellectual property theft that goes on as well as corporate espionage not necessarily related to JVs in particular. But in China as all foreign firms do need to have a local partner this problem is as real as reverse engineering is possible.

This is not supposed to be China bashing by the way. The arguments apply equally to other trading partners. Sorry if I gave the impression it was just about the USA and China. I think I originally used them as examples.

The Germans are also not too pleased when an Asian car maker comes up with an almost exact knock-off of their most popular brands either. But I suppose let the consumer decide.

[LoneSnark]

Well, of course, actions speak louder than words; and as I said most firms are not letting their trade secrets anywhere near China (although I recognize the universal nature of your arguments). So, between the two of us, current holders of technology side with your thesis. Which, of course, is a rational response to Chinese IP thefts: keep your IP away from the Chinese and they will not be able to steal it. This should hold true whether there is free trade or not. And if it is stolen then if they try to import the product to America, be ready to have the importer sued under U.S. law.

Because you are free to trade with someone does not mean you must do so. If you fear your partners will screw you then put your efforts elsewhere or restructure the contract by either requiring payment up front (selling the technology outright) or requiring them to put up a bond as insurance. High tariffs do not negate the need for protecting yourself against inscrupulous behavior. Your IP lawyer friend's job existed long before trade became an issue, just keeping Americans from screwing other Americans. So, to restate my favorite sentence: the rules have not changed, just the players.

As such, thus concludes this discussion of trade. It is now time for the dear reader to draw his conclusions and get back on topic...

$this->bbcode_second_pass_quote('', 'I') tend to agree. As long as the taps deliver, it doesn't matter how much it costs. If taps FAIL to deliver, then you'd have slowdown.

[TheDude]

An aside, from EB: Hubbert's Prescription for Survival, A Steady State Economy. Yes, M King Hubbert.

$this->bbcode_second_pass_quote('', 'L')ess well known were Hubbert's studies since 1926 on the rate of industrial growth and of mineral and energy resources and their significance in the evolution of the world's present technological civilization. 3 Clark in "Geophysics" in February 1983 states ""In recent years, he (Hubbert) has assaulted a target -- which he labels the culture of money --that is gigantic even by Hubbert standards. His thesis is that society is seriously handicapped because its two most important intellectual underpinnings, the science of matter-energy and the historic system of finance, are incompatible. A reasonable co-existence is possible when both are growing at approximately the same rate. That, Hubbert says, has been happening since the start of the industrial revolution but it is soon going to end because the amount the matter-energy system can grow is limited while money's growth is not.

[LoneSnark]

Not to interject, but I believe I can address your question.
$this->bbcode_second_pass_quote('', 'Y')ou say economic texts don't discuss infinite growth, Mr Bill - isn't that akin to the way manuals for pilots don't bother to mention up front that the reader will at some point be airborne, i.e., stating the patently obvious?

[Duende]

When people refer to "infinite growth", LoneSnark, I believe they are referring to the process of converting raw materials and resources into finished goods and products at an ever-intensifying pace. This consumption increases in quantity as the population increases in quantity, hence growth. Yes, the money system has nothing to do with it; it's just accounting.

What many peakers are concerned with is what you refer to in your previous post as the "physical economy" and the limits which it has to provide our manifest needs.

Concept of Ecological Economics:
$this->bbcode_second_pass_quote('', 'T')he objective of ecological economics (EE) is to ground economic thinking and practice in physical reality, especially in the laws of physics (particularly the laws of thermodynamics) and in knowledge of biological systems. It accepts as a goal the improvement of human wellbeing through economic development, and seeks to ensure achievement of this through planning for the sustainable development of ecosystems and societies. It distinguishes itself from neoclassical economics (NCE) primarily by its assertion that economics is a subfield of ecology, in that ecology deals with the energy and matter transactions of life and the Earth, and the human economy is by definition contained within this system.

In contrast, NCE has historically assumed implicitly (and, more recently, explicitly) that the environment is a subset of the human economy. In this approach, if nature is valuable to our economies, that is because people will pay for its services such as clean air, clean water, encounters with wilderness, etc. It is largely this assertion which allows for NCE to claim theoretically that infinite economic growth is both possible and desirable.

However, this belief disagrees with much of what the natural sciences have learned about the world, and, according to EE, completely ignores the contributions of natural capital to the creation of wealth. Natural capital can be considered the planetary endowment of scarce matter and energy, along with the complex and biologically diverse ecosystems that provide goods and ecosystem services directly to human communities: micro- and macro-climate regulation, water recycling, water purification, storm water regulation, waste absorption, pollination, protection from solar and cosmic radiation etc.

[LoneSnark]

Well, I have not been trained in ecology, but in my opinion the answer to both of your questions is 'NO'. The two interract, sure enough, but neither one can be encapsulated into the other without morphing it into something it is not.

In one way the Human Race becomes a footnote. In the other, the Earth and all its natural systems become a footnote.

Let me put it another way: the two sets (ecological and human) can exist without each other. Ecology existed before humans did. And I can imagine a world (say colonizers of Alpha Centauri) where humans could live without any natural ecology. They would need to do everything themselves: there would be no free oxygen, no free waste cleanup, no free temperature regulation, and no free clean water. We would have to use our intellect to construct unnatural systems to replace all the natural systems we were unable to bring with us.

This brings me to a hypothetical: if humans terraformed mars, for example, would its ecological system (which was entirely introduced by mankind, probably with extensive genetic engineering) be called 'natural'?

[MrBill]

LoneSnark I think my point about Free Trade versus Fair Trade has been lost in the specifics. I can try again later, but as you point out it is off-topic so perhaps best belongs in another thread. We can start that one later. Thanks.

China's devastating pollution

TheDude wrote:
$this->bbcode_second_pass_quote('', 'I')nteresting read. Other documents I've looked at on steady state economies use the term as a pejorative. You say economic texts don't discuss infinite growth, Mr Bill - isn't that akin to the way manuals for pilots don't bother to mention up front that the reader will at some point be airborne, i.e., stating the patently obvious?

What do you make of Monte's pet subjects of overshoot/carrying capacity, too?

[MrBill]

Duende wrote:

Is the environment a subset of the human economy?
- or -
Is economics is a subfield of ecology?

$this->bbcode_second_pass_quote('', 'I')n contrast, NCE has historically assumed implicitly (and, more recently, explicitly) that the environment is a subset of the human economy. In this approach, if nature is valuable to our economies, that is because people will pay for its services such as clean air, clean water, encounters with wilderness, etc. It is largely this assertion which allows for NCE to claim theoretically that infinite economic growth is both possible and desirable.

[mididoctors]

does the market reflect economic theory or practice?

perhaps the thread title "Incongruity of economics and physics" should be replaced by "Incongruity of the market and economics "

the study of economics may or may not address physical reality in a helpful way but can the same be said of the market?

and by the market I do not mean the market defined in a academic sense but the actual history of the markets behaviour.

Boris
London

[MrBill]

$this->bbcode_second_pass_quote('mididoctors', 'd')oes the market reflect economic theory or practice?

perhaps the thread title "Incongruity of economics and physics" should be replaced by "Incongruity of the market and economics "

the study of economics may or may not address physical reality in a helpful way but can the same be said of the market?

and by the market I do not mean the market defined in a academic sense but the actual history of the markets behaviour.

Boris
London

[mididoctors]

thats kind of odd because the market price is an indicator of what? the price on its own is not a indicator of anything. context is all?

if the price goes up because more people want oil and yet we are burning more oil then we are not slowing down .. its just we can not speed up burning oil as much as we want.

what happens when all lquids peak hits and there is a physical reduction in the power consumption?

If the past is anything to go by the price may go down?..

I am not completly at ease this economic theory thing..

I get the demand lead vs supply interruption thing.

is peak energy a interruption of supply?

Boris
London

[Doly]

$this->bbcode_second_pass_quote('mididoctors', '
')if the price goes up because more people want oil and yet we are burning more oil

[MrBill]

Yes, as Doly says,

peak oil depletion may be represented (for example)

actual price $100 per barrel

pent-up potential demand at less than $100

actual demand @ $100 = 100 mbpd

pent-up potential demand in excess of 100 mbpd

supply 85 mpbd

supply shortfall 15 mbpd

new theoretical equilibrium supply and demand price $125 per barrel (for example)

disconnect between supply and demand $25 per barrel

real demand destruction -15 mbpd

that would be a supply interuption as opposed to price lead demand destruction

the inflection point at which price is no longer regulating potential or actual demand, and

where supply is the limiting factor, not price.

From that point you can increase price to $200 or $250, but you cannot bring anymore supply online to satisfy either potential or actual demand. There is a physical short-fall.

[Iaato]

$this->bbcode_second_pass_quote('LoneSnark', 'L')et me put it another way: the two sets (ecological and human) can exist without each other. Ecology existed before humans did. And I can imagine a world (say colonizers of Alpha Centauri) where humans could live without any natural ecology. They would need to do everything themselves: there would be no free oxygen, no free waste cleanup, no free temperature regulation, and no free clean water. We would have to use our intellect to construct unnatural systems to replace all the natural systems we were unable to bring with us.

[mididoctors]

well thanks for the heads up guys but the thing is if you read between the lines the price is meaningless on its own..

take the example of someone saying something like

"oil shale becomes economic at $90 per barrrel"

now I think think that statement is

A )meaningless

and

B) incorrect

If i was trying to argue that "economics" or the "market" had lost a grip on physics that sort of statement would be exhibit A.

if the price can reflect devalued currency then attaching economic price indicators to the feasibility of market entry of various different grades of shit we can burn strikes me as nonsense talk?

am I wrong?

Boris
London

[Duende]

MrBill wrote:
$this->bbcode_second_pass_quote('', 'T')here is no such a thing as ecological economics. There is only economics. Economics is the study of limitations where man's wants are unlimited and man's means are limited.

[MrBill]

Whatever, dude. Have a nice life! ; - )