[rogerhb]

So nobody want's to deny that the stockmarket is being propped up artificially, or gold depressed artificially?

Glad that's all settled then.

edit: oooh - post crossed within 60 seconds, we have a reply.

[rogerhb]

Cool.

$this->bbcode_second_pass_quote('jaws', 'S')ince people can't tell how things are run, they assume that they aren't.

[MicroHydro]

Mismanaged would be a better term.

[bobcousins]

It's one of those questions I wonder about. Does the government really have significant influence over the economy, or do they just tinker while the economy goes through natural cycles?

Mrs Thatcher made a lot of changes to public policy, notable privatisation, but did that really change much? We enjoyed an economic boom at the same time as the rest of world, and recession at the same time. Attempts to prop up the exchange rate failed spectacularly, the government was beaten by private speculators. Tax cuts for the rich make headlines, but the actual amount of money is tiny.

On the flip side, some policy changes do have significant effects, for example, the removal of exchange controls caused money to hemorrhage out of the UK; removing restrictions on credit helps the consumer credit boom.

So I believe that the government only has influence where there are underlying forces supporting what they are trying to do, trying to go against the flow is fairly futile.

The question why people vote against their economic interests is an interesting one. I think the answer is that you don't need to out run the tiger, but you need to run faster than the guy next you. Logically it would be best if everyone cooperated, and shared equally. In practice, whenever you introduce a possibility that you can gain an advantage over rivals, then people compete to get to the top. Everyone playing this game wants to keep the differential, because if they get to the top it would benefit them. Of course, most people stay poor, but that does not deter them. Experiments on human subjects have demonstrated this in laboratory situations.

[nuhax]

The central tenet of socialism is that the means of production are not privately owned, but owned by a collective body (the government). This is what is usually meant by the term "managed economy".

From Wikipedia:"The means of production are physical, non-human, inputs used in production. This includes factories, machines, tools and materials, along with both infrastructural capital and natural capital - in other words, the classical factors of production minus financial capital and minus human capital or labor."

In the USA the means of production are mainly private owned. The US government is a big customer and influences a lot of industries but it's not anywhere near a socialist system under the standard definition of socialism.

I'm all for less government intrusion than we currently have but I think it's a huge stretch to say the US is socialist. I'm more worried about excessive enviromental regulation preventing energy independence, healthcare nationalization, surveillance/reduced privacy laws etc. will eventually lead to a more socialist country.

[jaws]

"Private ownership" of capital is necessary but not sufficient to have a free economy. In the U.S. the vast majority of the economy is privately owned, however the government regulates so many industries that the liberty of action that you have with your property is very restricted. If the government can tell you how to run your business, you don't really own it. They own it.

Take a corporation like Lockheed Martin. In theory it is a public corporation owned by its shareholders. However its products are weapons and its only client is the U.S. military. If Lockheed wants to export weapons to other countries it has to get approval from the U.S. government first. Its products are also designed by request of the U.S. military command. It is by all standards a government business that for some unfathomable reason has private shareholders.

[clifman]

nuhax - I'm more worried about excessive enviromental regulation preventing energy independence...

Actually, more stringent environmental regulation and energy independence go hand-in-hand. Reduced emissions means incentives for efficiency - doing more with less - and curtailment - reducing wasteful use (leaving lights on, driving a 3-ton SUV to the gym to take a 3k walk on a treadmill). It also means incentives for investing in sustainable alternatives - wind (now the cheapest form of new electric generation), solar, biomass (with a careful eye to EROEI - no corn ethanol!) etc. We cannot drill, and dig our way to energy independence.

[GoIllini]

$this->bbcode_second_pass_quote('rogerhb', 'S')o nobody want's to deny that the stockmarket is being propped up artificially, or gold depressed artificially?

Glad that's all settled then.

edit: oooh - post crossed within 60 seconds, we have a reply.

[rogerhb]

$this->bbcode_second_pass_quote('GoIllini', 'H')owever, claims that stocks are getting propped up artificially would require some pretty laughable conspiracy theories.

So yeah; I'll say that the economy is getting propped up a little by the government artificially, but the stock market and gold aren't getting influenced directly.

[GoIllini]

$this->bbcode_second_pass_quote('rogerhb', '')$this->bbcode_second_pass_quote('GoIllini', 'H')owever, claims that stocks are getting propped up artificially would require some pretty laughable conspiracy theories.

So yeah; I'll say that the economy is getting propped up a little by the government artificially, but the stock market and gold aren't getting influenced directly.

[donshan]

I approach problems from my background in science, although I am very interested in economic theory and methods. I recognize that the concepts of time value of money and “future values” affect investment decisions every day in business. It is that very process that I am calling into question in this post. There are many experts on economics here on this forum that are more expert than I am so this a request, “Please help me understand the logic”.

An oil company planning an expensive offshore development of a new lease property analyzes the costs to drill and develop the property, and the future value of the oil and gas to be recovered. Unless the future returns are large enough to cover the up front costs and risks the prospect is bypassed. The financial analysis MUST use a guess of the future value of the oil and gas in these calculations.

My question is, “How can anyone know the future value of oil and natural gas even a few years from now, much less decades? If that value cannot be determined with any accuracy it can lead to badly flawed business decisions.

I see many examples at present of flawed economic analysis in the past leading to flawed investments that now appear dubious, and may end up as stranded and wasted money. The recent track record has been dismal!

1. Just a few years ago it was decided that the solution to California’s growing electrical needs would be best served by building gas fired electrical plants. In fact , I read that since 1990 over 90% of new electrical generating capacity in the USA has been natural gas fired, and this increase in natural gas use is a major cause of the present gas shortages and soaring price. Why was economic theory not able to predict this outcome before making these investments?

2. When the North sea oil and gas discoveries were made, massive investments were made to develop these fields and bring the oil and gas to the UK. This oil and gas led many others to make investments converting businesses , and homes and buildings to natural gas heat and manufacturing fueled by gas.

The UK is now facing an economic crisis due to a flawed assumption made years ago about the future availability and price of natural gas, while letting their nuclear electricity slip away.
I read this news item:
http://www.energybulletin.net/8422.html

$this->bbcode_second_pass_quote('', 'P')ublished on 27 Aug 2005 by Vital Trivia. Archived on 28 Aug 2005.
UK gas and electricity crisis looming

I would like to take a moment to talk about the UK and our gas supplies for the coming winter 2005/06. The UK could experience a shortfall in gas supplies this winter due primarily to the rapidly declining extraction rate from indigenous reserves in the North Sea and the country's gas infrastructure which having been designed and built when gas was plentiful is based on a just in time delivery system from offshore field

[MonteQuest]

Short answer: myopia. We only think short-term profits.

Long answer: economic theory excludes paying the externalized costs, whether they be debt or enviromental degradation. We want infinite growth in a finite world. Can't happen. The law of diminishing returns catches up with you one day. There are only so many costs you can externalize before you have to pay the piper.

[MacG]

Well, I happen to think that the world of "economics" is the last bastion which has not been hit by the scientific revolution, and that there are historical reasons for this.

The early "scientists" worked for the monarchs, trying to make gold from mercury and such. The monarchs kept those guys to impress on other monarchs. If you have carved out a position as alchemist and get the protection of a prince or something, you dont fiddle with the money-stuff and you dont critizise such issues.

Many of the early "true" scientists in the late 1700's and early 1800's were lords themselves and made scientific experiments because they were bored in their castles. They were extremely priviliged and had no motivation to question any economic system.

Sweden has the worlds oldest central bank, and England has the next oldest, and nothing has changed since then. The entire economic system is still waiting for the scientific revolution to hit it.

[donshan]

$this->bbcode_second_pass_quote('MonteQuest', 'S')hort answer: myopia. We only think short-term profits.
.

[MonteQuest]

$this->bbcode_second_pass_quote('donshan', '')$this->bbcode_second_pass_quote('MonteQuest', 'S')hort answer: myopia. We only think short-term profits.
.

[bobcousins]

$this->bbcode_second_pass_quote('donshan', 'T')hus, my question, "Is economic theory flawed?" In science any theory that leads to wrong predictions is severely criticized and then major efforts are expended to improve it.

[donshan]

$this->bbcode_second_pass_quote('bobcousins', '
')I am quite baffled. Your criticism of economics is that it does not have the ability to accurately predict the future. Not even science can accurately predict the future. I would have thought your background in science would tell you that. In fact, science tells us why we can't predict the future accurately. This is not a limitation specific to economics.

[jaws]

Modern Economic Theory is the imitation of physics in an attempt to be more 'scientific'. As such most of it makes completely wrong prediction. Classical economic theory which placed humans at the center was more insightful, but scarcely anyone studies this way anymore. As long as professional economists can justify using arcane econometric models to predict 'market forces', they can justify their bloated salaries.

[bobcousins]

$this->bbcode_second_pass_quote('donshan', 'T')hanks for the reply, but I disagree. Newton's laws of motion allow predictions of future eclipses of the sun centuries in advance, and allow predictions of the location of Mars years in advance when a spacecraft is launched to hit it with pinpoint accuracy two years later.

[lakeweb]

$this->bbcode_second_pass_quote('bobcousins', '
')Science also shows some things are inherently unpredictable. Have you not heard of chaos theory?