[MrBill]

[quote=""Z]The subject of the thread is whether economics is a science or a religion. I would like to point that my discussion with Jaws demonstrates that at least some people are real zealots of an economic theory and are quite impervious to facts, wholy to the whorship of their simple solution. The same could be said of communists for example.

QED[/quote]

True enough. Will just have to steer clear of these discussions in the future. Thanks.

[Doly]

$this->bbcode_second_pass_quote('MrBill', '
')One of the reasons a free market will not completely function on its own is short term gains versus long term costs. Once I control a resource, I can maximize my gains in the short term for my own benefit, while imposing costs on society which may over the long term outweigh any personal benefit that I received. Another reason is the tragedy of the commons. Where resources are shared and not owned by anyone.

[rogerhb]

$this->bbcode_second_pass_quote('Doly', 'I') have been wondering if there is any way of introducing some "automatic wisdom" in the market.

[MrBill]

$this->bbcode_second_pass_quote('Doly', '')$this->bbcode_second_pass_quote('MrBill', '
')One of the reasons a free market will not completely function on its own is short term gains versus long term costs. Once I control a resource, I can maximize my gains in the short term for my own benefit, while imposing costs on society which may over the long term outweigh any personal benefit that I received. Another reason is the tragedy of the commons. Where resources are shared and not owned by anyone.

[Liamj]

The central reason there are all these failures of the market is the failure of currency and/or its pricing, most often over time. The price put on the continuous beach was too low because nobody counted the opportunity cost to the v.high number of ppl eventually affected. Ecotaxes of water or carbon attempt to tip the scales one way, but do not enough to change the underlying assumption that there is always more. I still think they're a good idea, as is staunching a gunshot wound, but believe it or not, we've got bigger fish to fry.

I'm more interested in the substance of the currency, and Mr Bills excellent list on good governance and financial reform back on pg4. As said then i think its a good list, with the exception of its assumption that there is the carrying capacity within the biosphere for the ever expanding human economy. We're still using politics to tinker with prices with v.little idea of the stock of real wealth out there.

If we could admit to ourselves that entropy was real and we were heat machines (ie. that physics works),
-and had some idea of our real wealth - mineral & energy deposits & flows, perched or running water, productive agricultural & natural systems, tools (broadly defined), information (somewhat ala H.T.Odum)
-and could assemble these diff types of wealth into local carrying capacity models,
..then we could back our currency with spare-able (from ecosystem services) real wealth.

And only then might economics not over run the resource base. Until we not only recognise that there are limits but have a pretty sharp idea of what those limits are and combust accordingly, better governance and fiscal reform will only help, not save us.

[MrBill]

$this->bbcode_second_pass_quote('', 'A')nd only then might economics not over run the resource base. Until we not only recognise that there are limits but have a pretty sharp idea of what those limits are and combust accordingly, better governance and fiscal reform will only help, not save us.

[MrBean]

I just came by a definition of the law governing the functioning of capital (I'm very much a beginner in Marxist economics), which by the look of it seems to have lot's of empirical support, which MrBill can perhaps confirm:

Principle of maximation of profit means that capitalistic productive units which fall under the averadge profitability dont survive (even though they may be profitable).

There are many consequenses of this, most notably the strong or absolute tendency towards monopolism and corporatocracy in unfettered capitalism. And as small and medium size businesses loose to bigger ones and vanish, the entrepriser and self-employed part of population ("bourgeoisie") become (private sector) wage-earners in increasing numbers, few fat cat CEOs and other lavishly paid professionals and many into the social class now often called precariate (without a secure job), increasing the economic and social inequality, which in turn destroys social cohesion and communal spirit.

Principle of maximation of profit means also, as I'm sure has been noted here, that a capitalistic unit like corporation needs to externalise social and enviromental costs as much as it can, in order to survive in the competition against other capitalistic units. Legal persons called corporations can thus be accurately described as sociopaths.

Social democratic (bloody revisionists! ) project (New Deal etc.) of trying to put some political restrictions to the functionings of capital has had it's successes, but seems to have been able only to delay the inevitable monopolization, as the social democratic or "progressive" forces are now often even more eager and especially better able to privatize formerly collectively built and owned means of production and resources than various "conservative" forces.

So the conclusion I draw from all of this is that enviromentally and socially sound economics should start from banning corporations as business forms and thus also stock-markets and private banks (the most abstract and most capitalistic structures) and market mechanisms in production should be restricted to such entrepreneal forms as small family businesses, co-operatives etc. Which happens to be - not surprisingly - very close to the Cuban economic model. In this model MrBill would loose his current job, but I'm sure he would be able to find even more satisfactory and meaningfull things to do than playing in the casino, and perhaps also more time...

[jaws]

$this->bbcode_second_pass_quote('Z', 'T')he subject of the thread is whether economics is a science or a religion. I would like to point that my discussion with Jaws demonstrates that at least some people are real zealots of an economic theory and are quite impervious to facts, wholy to the whorship of their simple solution. The same could be said of communists for example.

[jaws]

$this->bbcode_second_pass_quote('rogerhb', 'N')o, we're crap, we discount the future because of the short term nature of our thinking.

[rogerhb]

$this->bbcode_second_pass_quote('jaws', 'N')ot discounting the future is therefore extremely unsustainable.

[MrBill]

$this->bbcode_second_pass_quote('MrBean', 'I') just came by a definition of the law governing the functioning of capital (I'm very much a beginner in Marxist economics), which by the look of it seems to have lot's of empirical support, which MrBill can perhaps confirm:

Principle of maximation of profit means that capitalistic productive units which fall under the averadge profitability dont survive (even though they may be profitable).

In this model MrBill would loose his current job, but I'm sure he would be able to find even more satisfactory and meaningfull things to do than playing in the casino, and perhaps also more time...

[MrBean]

$this->bbcode_second_pass_quote('MrBill', '
')Profit maximization means that each firm may have a profit maximizing strategy such as internal rates of return, but there is no guarantee that they will meet them with any, some or all of their pojects. More projects are launched on optomistic assumptions than eventually bear fruit.

It is a process of creative destruction. Some projects go by the wayside while other new projects receive more resources within a firm.

Also we tend to work either at what were allowed to work at, what we're good at, or what we're used to. It is very hard to change horse mid-course. If you are in a sunset industry you better hope it can reinvent itself. Or as I have often said, "I would rather be mediocre in a good firm than good in a mediocre firm. "

I have lost my job through mergers & shutting down of office and moving to new offices. I have moved approximately 20-times in my working career. That is 10 countries and 20 different cities. Sometimes within the same firm, sometimes leaving the firm. Banking in case you may have noticed has experienced a lot of contraction and consolidation in the past 15-years.

Plus when you are in emerging markets one of two things generally happens. Either the market develops and it is no longer an emerging market. Or it blows up and everyone connected with it loses their money, their job or both. Fortunately, they cannot take your experience and contacts away, so you can start again.

As for my current job, my future job, or my plans. I am not too bothered. I will be gainfully employed somewhere, and if not, I have my own businesses. Trading is a tough way to make a living in any case. You're only as good as your last trade. There are easier ways to make money for sure. I started out cleaning toilets, cleaning bricks and cleaning up at construction sites. No job is too menial for me. There is always satisfaction in a job well done. I am quite happy to go back to the farm or work as a carpenter (not in winter mind you), but this happens to pay better at the moment and it does not preclude pursuing my hobbies at a later date.

Employees and like companies tend to move to the next best alternative. That is why there is not a tendency towards monopolies and oligopolies. Because many firms compete with one another and it is very hard to outperform your peers or the markets for long and regression to the mean sets in. Also, if you are in the knowledge business, your talent walks out the door every evening and you can only hope they come back to work the next day.

So, having lived in communist countries and seen the damage of socialism, I am not so keen on that particular economic model and the waste of human talent it created. Thank goodness some of those countries are springing back to life breeding hope in their future again. I am happy to have been there to witness it happen and to help where I could. And you cannot take that away from me either. ; - )

[jaws]

$this->bbcode_second_pass_quote('rogerhb', 'T')here is a world of difference between

(a) planning your planting, harvesting and storage of grain

(b) beggering your grandchildren by racking up unpayable debts and assuming they would prefer the internet over fuel in the future.

[jaws]

Demand growing also implies future demand growing, something which resource owners will take into account. If the price of oil today shoots up to 300$ a barrel and I expect it will keep going up, I won't increase my production. In fact I will probably diminish it in anticipation of even higher prices.

[rogerhb]

$this->bbcode_second_pass_quote('jaws', 'I')n fact I will probably diminish it in anticipation of even higher prices.

[jaws]

$this->bbcode_second_pass_quote('rogerhb', 'A')t which point the US invades.

[MrBill]

$this->bbcode_second_pass_quote('', 'O')K, enough about you! :D

What about economics? Your argument that "tendency to move to the next best alternative" stops mono- and oligopolies from forming does not sound convincing, in fact it does not even sound comprehensible.

The way I see it, as long as there is room for expansion for capital and new markets to be conquered, this may alleviate the overall monopolistic tendency, which I'm sure you'll admit is fought against mainly and most effectively through political means, legislation, though lately the legislation seems giving into the tendency, e.g. allowing even further oligopolistic concentration of media corporations and inability to break the monopoly of MS, which has no serious capitalistic competitors. But when there is little or no room for expansion left, it seems reasonable to assume that the monopolistic tendency changes gear.

[rogerhb]

$this->bbcode_second_pass_quote('MrBill', 'S')econdly the productivity gains from Microsoft Windows were fantastic. Imagine having to compose a letter, send it to a secretary to type, read her typing to make sure it is correct, make changes, send it back to be re-typed, etc.? Now each worker has their own PC and the freedom to receive and send information to almost anyone at will. Trading. Less backoffice. All automatic. I deal over an electronic platform and it goes straight through to the backoffice system for processing. No hands on input and room for error. Etc. Etc. Etc. All based on Windows technology. All user friendly. Not only efficient, but empowering to say the least. The last thing I want now is to go back to a Unix based system and have to rely on IT guys to come fix my problems.

[MrBill]

$this->bbcode_second_pass_quote('rogerhb', '')$this->bbcode_second_pass_quote('MrBill', 'S')econdly the productivity gains from Microsoft Windows were fantastic. Imagine having to compose a letter, send it to a secretary to type, read her typing to make sure it is correct, make changes, send it back to be re-typed, etc.? Now each worker has their own PC and the freedom to receive and send information to almost anyone at will. Trading. Less backoffice. All automatic. I deal over an electronic platform and it goes straight through to the backoffice system for processing. No hands on input and room for error. Etc. Etc. Etc. All based on Windows technology. All user friendly. Not only efficient, but empowering to say the least. The last thing I want now is to go back to a Unix based system and have to rely on IT guys to come fix my problems.