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Re: Good bye and good riddance to globalisation

Unread postby rogerhb » Sun 11 Sep 2005, 22:06:34

$this->bbcode_second_pass_quote('jaws', 'T')he only alternative to this scenario is to recognize that everyone earns as much as what their labor is worth to someone willing to pay them, whether they are employed by a business or selling directly to consumers.


So if the son of some bloke inherits a farm and rents it to a load of tenent farmers, exactly what labour did this son perform apart from signing his name to some papers?
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Re: Good bye and good riddance to globalisation

Unread postby jaws » Sun 11 Sep 2005, 22:06:49

$this->bbcode_second_pass_quote('rogerhb', 'S')o Economic Theory is the best solution for mankind even though it will be the doom of mankind, so remind me, what was the original problem?
Economic theory is no more the doom of mankind than physical or mathematical theory is. All economic theory does is inform us of the consequences of our policies. It is then our choice to select the policies that will result in welfare for all. If you believe a policy will prevent 'the doom of mankind' feel free to expose it to all, I can then inform you of the consequences of such a policy and whether or not it will have the consequences that you intend for it to have.
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Re: Good bye and good riddance to globalisation

Unread postby backstop » Sun 11 Sep 2005, 22:13:52

MacSporran -

while I greatly admire your perseverance, I'm wondering if you've ever tried discussing reality with a Jehovah's Witness ?

The difficulty lies in different perceptions of reality -the one rational and open to learning of new ideas; the other faith based and stuck on centuries-old creeds, and devotedly serving the welfare of an elite (144,000 precisely in the JW case).

The latter case means of course that that the proponent's own sense of security demands ignoring all evidence to the contrary.
It further means that non-believers can be regarded as entirely expendable and potentially dangerous to the faith - and definitely the source of their own problems.

The veneer of morality that conscience requires is met by the instruction to evangelize the creed, on the offchance that there may be someone who is ignorant but of sufficient intelligence to comprehend it.

You are mistaken in thinking that Jaws's problem is one of intellect - it is not, it is one of religion.

regards,

Backstop
"The best of conservation . . . is written not with a pen but with an axe."
(from "A Sand County Almanac" by Aldo Leopold, 1948.
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Re: Good bye and good riddance to globalisation

Unread postby rogerhb » Sun 11 Sep 2005, 22:17:33

$this->bbcode_second_pass_quote('jaws', 'I') can then inform you of the consequences of such a policy and whether or not it will have the consequences that you intend for it to have.


Wow! I'm impressed, because the track records of economists so far has been pretty abysmal in predicting recessions.

Try this one:

How about a policy of reducing inflation to zero, with the intention of not eroding peoples savings purchasing power?
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Re: Good bye and good riddance to globalisation

Unread postby jaws » Sun 11 Sep 2005, 22:21:27

$this->bbcode_second_pass_quote('Z', '
')There is no reason to think that lower production costs will lower the price of goods. It runs contrary to the interests of the company. Prices will go down to compete with another company, and for no other reasons.

Ah you see, that is completely wrong and is very well illustrated by microeconomic models. I hope we can both agree that the key to making more profits is selling more product. If costs are 2$ per unit and the market price is 5$, then producing 20 units is better than producing 10 units. Something else happens in this process though. The number of customers willing to buy at 5$ may not be great enough to sell all 20 units. This means that the company has to sell at 4$ or maybe even lower to sell every unit.

Let's do the calculation for profits. Suppose at 5$ the company gets 10 buyers. It costs 2$ to produce therefore the profit margin is 3$. Total profit is 30$.

At 4$ the company gets 20 buyers. It still costs 2$ to produce therefore the profit margin is 2$. Total profit is 40$! The company makes more profit by lowering prices, regardless of competition. The goal of company is then to find the optimum amount of profit they can make by either producing more or less.

The role of competition in this process is not necessary. The number of buyers the company will have will fluctuate more rapidly around the market price of competitors, but there will still be a profit-making advantage to lowering prices.

This is how lowering costs makes everyone better off. If the cost of the previous example were to fall from 2$ to 1$, the profit margin would increase and the company would then produce even more and sell at lower prices, simultaneously increasing its profits and providing more products to the consumers at lower prices. This is the story of the capitalist revolution, products made gradually available to more and more people for ever lower prices.
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Re: Good bye and good riddance to globalisation

Unread postby jaws » Sun 11 Sep 2005, 22:25:15

$this->bbcode_second_pass_quote('rogerhb', '
')So if the son of some bloke inherits a farm and rents it to a load of tenent farmers, exactly what labour did this son perform apart from signing his name to some papers?

None of course, but we respect the son's property for two reasons:

1 - His father earned it fair and square and it is his wish that the product of his labor be enjoyed by his son.
2 - Other actors are currently preparing their estates, and expropriating the heir would be a signal to others to liquidate as much as possible of what they own before their death, whether or not they are the most competent person to manage the wealth. As I said earlier in this thread, you have to think of all indirect consequences.
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Re: Good bye and good riddance to globalisation

Unread postby rogerhb » Sun 11 Sep 2005, 22:34:03

$this->bbcode_second_pass_quote('jaws', '1') - His father earned it fair and square and it is his wish that the product of his labor be enjoyed by his son.


That was an interesting assumption. I suppose you are not familiar with the "Enclosures Act".
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Re: Good bye and good riddance to globalisation

Unread postby jaws » Sun 11 Sep 2005, 22:38:17

$this->bbcode_second_pass_quote('backstop', 'Y')ou are mistaken in thinking that Jaws's problem is one of intellect - it is not, it is one of religion.

regards,

Backstop
I am prepared to argue with you any topic of economic nature. Your reluctance to enter such an argument is evidence that you know little of the concept other than you dislike what it tells you about reality. Religions don't like argument, and neither do you it seems.
$this->bbcode_second_pass_quote('rogerhb', 'W')ow! I'm impressed, because the track records of economists so far has been pretty abysmal in predicting recessions.

Try this one:

How about a policy of reducing inflation to zero, with the intention of not eroding peoples savings purchasing power?
If economists could predict recessions 100% accurately, everyone in the economy would move their wealth to protect themselves from the impending recession, an action that would prematurely trigger the recession. Thus providing plenty of fodder to those who have an axe to grind with economics but no knowledge of the topic themselves.

As for a policy of reducing inflation to zero, that was the prevailing state of affair when governments did not control the money supply. People naturally wanted to use money that preserved its purchasing power and settled on gold and silver as the most likely to achieve this end. Of course socialists started complaining that the rate of interest was 'unfair' and that the only fair rate of interest is zero. Thus central banks were created to lower the rate of interest by fiat money creation, which created economic cycles by sending false signals to investors.

When the economic boom created by the central bank exhausted itself and recession followed, socialists complained that the masses could not find well-paid work and that the government should do something. Keynesianism was the result, a doctrine which said that the government should run a positive inflation in its currency to dupe the workers into accepting work that paid less in real terms than they believed.

A policy of reducing inflation to zero would mean a return to allowing people to choose their own money. This of course would radically increase interest rates, a boon for savers but not for borrowers. Since everyone in America is a borrower these days I don't think this issue has much of a chance to succeed politically.
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Re: Good bye and good riddance to globalisation

Unread postby Z » Sun 11 Sep 2005, 22:45:51

$this->bbcode_second_pass_quote('jaws', 'T')he goal of company is then to find the optimum amount of profit they can make by either producing more or less.


I agree with this statement, but in no way it involves lower costs of production. If you lower your costs of production, it does not follow that your optimum will change.

$this->bbcode_second_pass_quote('jaws', 'T')he company makes more profit by lowering prices, regardless of competition.


If that was true, there would be no need for anti-monopoly laws. It is false. If the company make more profit selling 1 items $1000 rather than 10 items $100, it will do so. Artificial scarcity is what usually happens with monopolies ( think Enron ).
Last edited by Z on Sun 11 Sep 2005, 22:48:21, edited 1 time in total.
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Re: Good bye and good riddance to globalisation

Unread postby jaws » Sun 11 Sep 2005, 22:46:05

$this->bbcode_second_pass_quote('rogerhb', 'T')hat was an interesting assumption. I suppose you are not familiar with the "Enclosures Act".
We can argue whether or not it is appropriate for royalty to retain a claim to land that they seized during the dark ages, or for American farmers to retain a claim to land that was stolen from Indian tribes, who most likely stole it from another tribe. The chain of property theft sinks far into the darkness of history and repairing such thefts is meaningless. The right thing to do is end thefts completely. The important thing is the future, and what's good for the future is sanctity of property rights without discrimination. Land expropriations tend to result in chaos and starvation as recently witnessed in Zimbambwe/Rhodesia, and before in China and the Soviet Union.
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Re: Good bye and good riddance to globalisation

Unread postby ohanian » Sun 11 Sep 2005, 22:54:44

$this->bbcode_second_pass_quote('jaws', '')$this->bbcode_second_pass_quote('Z', '
')There is no reason to think that lower production costs will lower the price of goods. It runs contrary to the interests of the company. Prices will go down to compete with another company, and for no other reasons.

Ah you see, that is completely wrong and is very well illustrated by microeconomic models. I hope we can both agree that the key to making more profits is selling more product.


I do not agree that (for a company) the key to making more profits is selling always more quantity of the same product.

You have fallen into a trap. If a company produces a product and later find a way to reduce the cost of production by 10%, they will not make more product because because it may reduce their profits.
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Re: Good bye and good riddance to globalisation

Unread postby jaws » Sun 11 Sep 2005, 22:54:49

$this->bbcode_second_pass_quote('Z', 'I') agree with this statement, but in no way it involves lower costs of production. If you lower your costs of production, it does not follow that your optimum will change.

If that was true, there would be no need for anti-monopoly laws. It is false. If the company make more profit selling 1 items $1000 rather than 10 items $100, it will do so.
There are no need for anti-monopoly laws. What good have anti-monopoly laws ever done? The only time they were invoked recently was against Microsoft and they failed. They were invoked against Standard Oil, a company which significantly lowered the price of oil through the very process I illustrated.

Your first statement is completely wrong. If your costs of production change, your optimum HAS to change. The optimum profit is achieved at the point where marginal costs is equivalent to marginal income. If producing one more unit nets you more profit than it cost you to produce that unit, your total profit increases and you should do it. If your costs go down then the marginal income can go lower and still increase your profits.

If my marginal cost is 4$ then I can't increase profits unless my total income increases by more than 4$. However if marginal cost falls to 2$ I can increase profits by producing the extra quantity between marginal income of 4$ and 2$. Total income only has to increase by 2$ for each additional unit produced.
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Re: Good bye and good riddance to globalisation

Unread postby rogerhb » Sun 11 Sep 2005, 22:54:51

$this->bbcode_second_pass_quote('jaws', 'S')ome interesting stuff


So it does not matter that the playing field is not even then?

So economists can't predict a recession, are they any good at predicting revolution? Where the definition of a revolution is when the tension in society breaks due to the unequal distribution of wealth and opportunities?

Where opportunities means real opportunities for advancement or justice rather than just theoretical opportunity.
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Re: Good bye and good riddance to globalisation

Unread postby jaws » Sun 11 Sep 2005, 22:58:35

$this->bbcode_second_pass_quote('ohanian', '
')You have fallen into a trap. If a company produces a product and later find a way to reduce the cost of production by 10%, they will not make more product because because it may reduce their profits.

You have fallen into a trap of missing the big picture. It may reduce their profit to produce more, therefore they have to find the optimal amount of additional production that will increase their profits to the maximum. With lower costs, that optimal amount is always higher than it was before.
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Re: Good bye and good riddance to globalisation

Unread postby rogerhb » Sun 11 Sep 2005, 23:00:52

$this->bbcode_second_pass_quote('jaws', '')$this->bbcode_second_pass_quote('ohanian', '
')You have fallen into a trap. If a company produces a product and later find a way to reduce the cost of production by 10%, they will not make more product because because it may reduce their profits.

You have fallen into a trap of missing the big picture. It may reduce their profit to produce more, therefore they have to find the optimal amount of additional production that will increase their profits to the maximum. With lower costs, that optimal amount is always higher than it was before.


Unless (a) you are a monopoly (b) you saturate the market (c) deplete your resource
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Re: Good bye and good riddance to globalisation

Unread postby jaws » Sun 11 Sep 2005, 23:10:29

$this->bbcode_second_pass_quote('rogerhb', '
')
Unless (a) you are a monopoly (b) you saturate the market (c) deplete your resource
No that's exactly what I've been trying to say. Producing more means you have to lower your prices to find more customers. You call this 'saturating the market'. The market is only saturated at the current price, not at a lower price. Lowering prices when you have lowered your costs will then increase your profits.
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Re: Good bye and good riddance to globalisation

Unread postby rogerhb » Sun 11 Sep 2005, 23:15:21

$this->bbcode_second_pass_quote('jaws', '')$this->bbcode_second_pass_quote('rogerhb', '
')
Unless (a) you are a monopoly (b) you saturate the market (c) deplete your resource
No that's exactly what I've been trying to say. Producing more means you have to lower your prices to find more customers. You call this 'saturating the market'. The market is only saturated at the current price, not at a lower price. Lowering prices when you have lowered your costs will then increase your profits.


Say your market is newspapers, and everybody in the country has buys your your newspaper everyday. If you reduce your price people aren't going to start buying two copies of today's paper are they?
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Re: Good bye and good riddance to globalisation

Unread postby Z » Sun 11 Sep 2005, 23:18:51

$this->bbcode_second_pass_quote('jaws', 'T')here are no need for anti-monopoly laws. What good have anti-monopoly laws ever done?


LOL. For an hardcore capitalist, you seem quite oblivious that competition is at the root of the system you defend.

$this->bbcode_second_pass_quote('jaws', 'I')f your costs go down then the marginal income can go lower and still increase your profits.


Yes it can. Notice that you use 'can' and not 'will', indicating that there is no casuation. Which is what I'm telling you. It may or may not.
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Re: Good bye and good riddance to globalisation

Unread postby jaws » Sun 11 Sep 2005, 23:19:49

$this->bbcode_second_pass_quote('rogerhb', '
')Say your market is newspapers, and everybody in the country has buys your your newspaper everyday. If you reduce your price people aren't going to start buying two copies of today's paper are they?
Maybe they will buy another copy in case their original copy gets lost on the train to work, where they wouldn't have done so at a higher price. You don't know. You can't make that kind of judgement for people, only they can for themselves.

$this->bbcode_second_pass_quote('Z', 'L')OL. For an hardcore capitalist, you seem quite oblivious that competition is at the root of the system you defend.
Even monopolies face competition. They compete against every other good the consumer might buy with his money. Having 100% of a specific market (or less than 90% for Microsoft) doesn't give you more than a tiny share of the total global market for goods.
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Re: Good bye and good riddance to globalisation

Unread postby rogerhb » Sun 11 Sep 2005, 23:22:04

$this->bbcode_second_pass_quote('jaws', '')$this->bbcode_second_pass_quote('rogerhb', '
')Say your market is newspapers, and everybody in the country has buys your your newspaper everyday. If you reduce your price people aren't going to start buying two copies of today's paper are they?
Maybe they will buy another copy in case their original copy gets lost on the train to work, where they wouldn't have done so at a higher price. You don't know. You can't make that kind of judgement for people, only they can for themselves.


So, as my economic advisor, should I do the extra print runs?
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