NationStates Jolt Archive

I just saw yet another article about Mugabe's experiments on the BBC.

http://news.bbc.co.uk/2/hi/africa/7022653.stm
Zimbabwe 'running out of bread'

Reports from Zimbabwe say bakeries have run out of flour and there will be no bread in the foreseeable future.

[...]

Speaking last Thursday at the Zimbabwe Farmers' Union (ZFU) national congress in Masvingo Minister Gumbo said: "I am disappointed that our new farmers have proved to be failures since the start of the land reform programme in 2000."

"In spite of all the support government has been pouring into the agricultural sector, productivity and under-utilisation of land remain issues of concern," he added.

[...]

A foreign currency crisis has helped push inflation to record levels in recent months.

Government price controls have been blamed for worsening shortages.

I've heard it said on this forum that politics reigns supreme over the laws (for want of a better term) of economics. I've had it heard that such laws don't exist, since they are entirely due to human action, and if humans change their behaviour, the results will be completely different.

Why then does it seem that whenever governments violate the laws, bad things happen? And it doesn't seem to matter how big the economy or how powerful the government...remember the lines when the US imposed petrol price controls, and the same again today in Iran?

When a state tries to maintain a currency peg and manages the economy incompetently, the currency eventually crashes. People blame "foreign speculators".

When a state imposes price controls, a black market appears and there are shortages in the official market. People blame "greedy businesses" and their political enemies.

When a state redistributes productive capacity and the quantity produced falls, people blame the new possessors for not doing their bit.

But could it simply be that within the world as it exists today, the research economists have done on how people behave within a trading environment, and the effects of such behaviour is just plain correct? That the laws of economics, in the vast majority of societies on earth today, are factually true, and violating them will not improve the well-being of the people within the community? And if so, should politics be constrained by economics rather than the other way around?

It seems to be catch-22: there are laws of economics, based on how the system currently works. However, knowing the laws of economics affects the system, so...
I think most laws of economics are correct, and we just don't think of them as laws. When people here of economics, they usually think of something more arcane or specific, but most laws are true. We just don't think of them as laws. (For example, economics is based at least partially on the idea that people will try to maximize their benefits and minimize their costs. No one disagrees with that.)

I've heard it said on this forum that politics reigns supreme over the laws (for want of a better term) of economics. I've had it heard that such laws don't exist, since they are entirely due to human action, and if humans change their behaviour, the results will be completely different.

Why then does it seem that whenever governments violate the laws, bad things happen? And it doesn't seem to matter how big the economy or how powerful the government...remember the lines when the US imposed petrol price controls, and the same again today in Iran?Where exactly are (a large portion of) humans changing their behavior here?

Where exactly are (a large portion of) humans changing their behavior here?
They're not. That's my point - when people tell me there is no such thing as an economic law and that governments can do whatever they want, they presume that people change their behaviour. And they never seem to do.

They're not. That's my point - when people tell me there is no such thing as an economic law and that governments can do whatever they want, they presume that people change their behaviour. And they never seem to do.Oh, that's silly. Simply because the government passes a law doesn't mean humans change.
Nonetheless, if humans change their behavior, the law is/could be broken.

Nonetheless, if humans change their behavior, the law is/could be broken.

Which has happened, given the rise and fall of previous economic ideologies.

Nonetheless, if humans change their behavior, the law is/could be broken.
Many of them, anyways. There are still those which deal with basic material facts, like that you can't consume more than is being produced, and those of pretty basic logic, like that a free market equilibrium is pareto-optimal and in the core.

I mean, microeconomic theorists generally try and keep their assumptions so general that one would be hard-pressed to call a person who violates it a human being. And macroeconomic theory is largely based on trial and error, econometrics and logic - because of the first two it is necessarily less general, but before it becomes invalid it's probably more likely that it would just become irrelevant.

But could it simply be that within the world as it exists today, the research economists have done on how people behave within a trading environment, and the effects of such behaviour is just plain correct? That the laws of economics, in the vast majority of societies on earth today, are factually true, and violating them will not improve the well-being of the people within the community? And if so, should politics be constrained by economics rather than the other way around?
No.

I feel like a Slashdot tag....

Do not violate the laws of economics. it is a lesson that communist nations have learned the hard way.

Economics and politics are smoke and mirrors to disguise bad leadership, or policies that purposefully stop people functioning at a basic level. If people are free to choose their leadership at the basic level they will choose people who make food available. This applies to all forms of free government.

To say that economics is a universal rational exact science is nonsense.

Do not violate the laws of economics.

Rather, do not think you can violate the laws of economics.

Unless, of course, those "laws" are simply the product of certain kinds of societies, and not necessary truths about human behavior... even if (unsurprisingly) they cannot be changed by state decree.

If you hire an unqualified engineer to build a hydro-electric damn and he makes it 6 inches thick and 4 feet tall, that does not mean that hydrodynamics have been proven to be beyond the power of man to control. It means the engineer should be fired and replaced.
Especially if said engineer is Robert Mugabe.

I just saw yet another article about Mugabe's experiments on the BBC.

http://news.bbc.co.uk/2/hi/africa/7022653.stm


I've heard it said on this forum that politics reigns supreme over the laws (for want of a better term) of economics. I've had it heard that such laws don't exist, since they are entirely due to human action, and if humans change their behaviour, the results will be completely different.

Why then does it seem that whenever governments violate the laws, bad things happen? And it doesn't seem to matter how big the economy or how powerful the government...remember the lines when the US imposed petrol price controls, and the same again today in Iran?

When a state tries to maintain a currency peg and manages the economy incompetently, the currency eventually crashes. People blame "foreign speculators".

When a state imposes price controls, a black market appears and there are shortages in the official market. People blame "greedy businesses" and their political enemies.

When a state redistributes productive capacity and the quantity produced falls, people blame the new possessors for not doing their bit.

But could it simply be that within the world as it exists today, the research economists have done on how people behave within a trading environment, and the effects of such behaviour is just plain correct? That the laws of economics, in the vast majority of societies on earth today, are factually true, and violating them will not improve the well-being of the people within the community? And if so, should politics be constrained by economics rather than the other way around?

There are laws to economics. There are also laws to hydrodynamics. One of those laws is that water will flow downhill. That doesn't mean that we don't have pumps and sewers and pipes and aqueducts that put water exactly where we want it. Even at the top of a hill.

The laws of economics are similarly malleable. The fact that an attempt at manipulating the laws of economics fails does not mean that those laws are inviolable. It means that it was a stupid plan put in place by people who don't know how to do their jobs.

If you hire an unqualified engineer to build a hydro-electric damn and he makes it 6 inches thick and 4 feet tall, that does not mean that hydrodynamics have been proven to be beyond the power of man to control. It means the engineer should be fired and replaced.

There are laws to economics. There are also laws to hydrodynamics.
While your analogy is applicable, I'll be the first to say that the rules (for lack of a better word, laws) of human interaction are not comparable to scientific rules. Mainly due to the fact that scientific rules are able to be proven using mathematics. Economics can only be analyzed mathematically to a certain extent.

That doesn't mean that we don't have pumps and sewers and pipes and aqueducts that put water exactly where we want it. Even at the top of a hill.
Very true; but pumping water and exchanging money are two, completely different things. Simply relocating money like that won't work because people don't act like pipes; if you take away their money, they generally don't let it go, they resent it. Realistically, using your analogy, its like getting water to flow uphill. Theoretically its possible, but requires a difficult to implement force.

If you hire an unqualified engineer
Firing him would be the wisest course of action, of course; but what if there is nobody who can, as you say, design the dam? Currently we don't have any idea how to circumvent the laws of economics in a viable manner that doesn't cause the market to self-destruct. Firing him could also arguably follow the laws of economics, as you generally don't keep employees that hinder your efforts and waste your time and resources.

Why is it that for people trying to create wealth for their nations, they fail to read a properly named book called Wealth of the Nations? :rolleyes:

The majority of any populace would rather shoot themselves in the foot, than have a serious discussion about economics.

How is that for an inviolable law of economics?

If you hire an unqualified engineer to build a hydro-electric damn and he makes it 6 inches thick and 4 feet tall, that does not mean that hydrodynamics have been proven to be beyond the power of man to control. It means the engineer should be fired and replaced.
So are you saying that price controls for example, or printing money to finance government expenditure, work if it's someone else sitting at the desk, signing the document?

So are you saying that price controls for example, or printing money to finance government expenditure, work if it's someone else sitting at the desk, signing the document?

No, he's saying repeatedly using a guy who is a total trainwreck to prove that your laws are inviolable is invalid.

So are you saying that price controls for example, or printing money to finance government expenditure, work if it's someone else sitting at the desk, signing the document?

No, no more than a different person building a hydroelectric dam 6 inches thick and 4 feet tall will cause it to work. But just because there are bad ways to interfere with the natural flow of water does not mean that there are no good ways.

Similarly, just because there are bad ways to interfere with the normal functioning of a free-market capitalist economy in the pursuit of social objectives (not that Mugabe gives a shit about the people of Zimbabwe) does not mean that there are no good ways to do it.

No, he's saying repeatedly using a guy who is a total trainwreck to prove that your laws are inviolable is invalid.
Well, can you find me a guy who engaged in Mugabe-type policies and everything worked out fine?

The thing that shone through to me from his post was that it's not the principle of these policies and their violation of basic truths of economics that he felt caused the problem, but the people who implemented them. He suggests that we can achieve whatever goal we want, even if the laws of economics say we can't, as long as we have the right leader to do it.

Similarly, just because there are bad ways to interfere with the normal functioning of a free-market capitalist economy in the pursuit of social objectives (not that Mugabe gives a shit about the people of Zimbabwe) does not mean that there are no good ways to do it.
But by "economic laws" I'm implying that we know the good ways and the bad ways. We know things that should work and things that won't. There are policy options that are reasonably sustainable and achieve the things you want to achieve, and there are policy options that are not sustainable and do not achieve what you want them to.

Well, can you find me a guy who engaged in Mugabe-type policies and everything worked out fine?

The thing that shone through to me from his post was that it's not the principle of these policies and their violation of basic truths of economics that he felt caused the problem, but the people who implemented them. He suggests that we can achieve whatever goal we want, even if the laws of economics say we can't, as long as we have the right leader to do it.



You're not reading it right-he talked about the design of the dam-a four inch tall dam does not prove that dam technology is inviable and that rivers cannot be redirected, it means that you can't redirect them with four inch tall dams. The part you're giving too much emphasis is the firing of the guy who thought a four inch dam would work and incorrectly interpreting that as someone else might get a four inch dam to work. No, both dam and builder have to go, but it still doesn't disprove the viability of dams.

No, both dam and builder have to go, but it still doesn't disprove the viability of dams.
Then the analogy is invalid. There is only one way a price control can work, and that is if the control price is precisely the same as the market price would be (and you'd need the very best analyst in the world to know, and even if you did you'd always lag behind the events). And that's not going to achieve the goal of price controls in the first place.

Then the analogy is invalid. There is only one way a price control can work, and that is if the control price is precisely the same as the market price would be (and you'd need the very best analyst in the world to know, and even if you did you'd always lag behind the events). And that's not going to achieve the goal of price controls in the first place.

That's your assertion, and your proof is a four inch tall dam. Thats the analogy.

That's your assertion, and your proof is a four inch tall dam. Thats the analogy.
No, my proof is in the nature of the thing. If you build a 4 inch dam and it fails, then there is nothing in the concept of a dam that tells you it can't be done. If water could somehow travel through matter and your 4 inch dam didn't work because water just passed through it, it would be a different issue. That is what's going on with the sort of policies I'm talking about.

If you have fairly rational, maximising people (which we have at the moment), then imposing a maximum price reduces the quantity supplied in a market, and increases the quantity demanded. So a shortage ensues.

Because there are now people who can't get what they want, they are willing to bid up the price, but that can only happen on a black market.

How can you paint a scenario in which this doesn't happen, without requiring people to completely change their behaviour?

No, my proof is in the nature of the thing. If you build a 4 inch dam and it fails, then there is nothing in the concept of a dam that tells you it can't be done. If water could somehow travel through matter and your 4 inch dam didn't work because water just passed through it, it would be a different issue. That is what's going on with the sort of policies I'm talking about.

If you have fairly rational, maximising people (which we have at the moment), then imposing a maximum price reduces the quantity supplied in a market, and increases the quantity demanded. So a shortage ensues.

Because there are now people who can't get what they want, they are willing to bid up the price, but that can only happen on a black market.

How can you paint a scenario in which this doesn't happen, without requiring people to completely change their behaviour?
Dude, you're still not getting it. You're extrapolating a whole lot of 'proof' from a faulty example. Mugabe has only managed to prove that Mugabe is fucking up, it doesn't prove economic laws inviolable, no matter how much you think they are. You can't take one slopply applied policy and then say, "Here, see-it's always this way." C'mon, man, you're smarter than this.

Dude, you're still not getting it. You're extrapolating a whole lot of 'proof' from a faulty example.
But I'm not talking about Mugabe. He really is just an example, just there to give the thread a bit of real-world appeal.

I'm talking about this process that I mentioned in my last post, by which price controls fail because those who can't pay extra miss out entirely due to the shortage, and those with money can still get the stuff on the black market.

Yes, that is also what happened in Mugabe's case - in fact it seems to have been the case every time someone tried to impose price controls. So there's the anecdotal evidence.

The theoretical/logical argument I provided (here's a diagram (http://www.bized.co.uk/images/price_control.gif)). I think that means that I've amassed enough evidence to shift the burden to you - if you think there is some way to make price controls work, explain it. And if you can't think of one, and you can't find anyone who can - would that not ultimately mean that this "law of economics" trumps the wishes of the lawmaker?

Inviolable Laws of Economics?


First, I will simply note that the general concept of so-called "inviolable laws" is, all by itself, filling me with an almost irresistible desire to violate any such law in any way I can. Being a libertarian, I assert the existence of free will, and thus reject deterministic garbage like "inviolable laws," including "natural law." Such "natural" nonsense is just voodoo religion made up by people who desire to put a facade of objective justification over what is in reality the arbitrary subjugation of the majority to the will of the minority. I am homo sapiens sapiens, and I am free; if I want it to happen, I can make it happen. To hell with "laws" and gods.

(**deep breath**)

In terms of economics specifically, it should be no surprise that a society suffers poor consequences when the established norms of operation are suddenly upset by the institution of new practices, by whatever means. Of course a society organized and characterized by capitalist ideals and values performs poorly when those ideals and values are upset by contrary laws/policies/practices/etc. I've been doing research for the last six months on Arctic aboriginal groups, and their history also happens to involve massive disruption (including starvation, declining health, poverty, violence) when their traditional egalitarian practices were upset and replaced by the sudden introduction of the capitalist wage economy via European and American trade. The issue doesn't have to be economic in nature; a stranger suddenly bursting into one's own home and changing normal routine is also highly disruptive and likely to result in less than optimal consequences.

Such disruptions have nothing to do with deterministic garbage like "inviolable laws," and everything to do with simply running against the grain of societal norms that the members of said society have chosen according to their own will, whatever those norms may be. The particular "-ism" is entirely irrelevant.

Incidentally, the above explains why "revolutionary" action of many (http://en.wikipedia.org/wiki/Soyuz_Sovetskikh_Sotsialisticheskikh_Respublik) sorts (http://en.wikipedia.org/wiki/Augusto_Pinochet) tend to have extremely poor results (http://en.wikipedia.org/wiki/Genocide), and why gradualist or dual-power approaches are far superior. Of course, Robert Mugabe violates established norms to disastrous results. But then lots of other political bodies violate what are considered the "inviolable laws of economics" (http://en.wikipedia.org/wiki/Social_Democracy) all the time, and yet they still manage to be some of the most highly developed, economically successful, and politically free societies on Earth (http://upload.wikimedia.org/wikipedia/commons/e/e9/LocationEurope.png). The difference is anti-democratic "revolution" versus democratic gradualism/parliamentarianism.

But then lots of other political bodies violate what are considered the "inviolable laws of economics" (http://en.wikipedia.org/wiki/Social_Democracy) all the time, and yet they still manage to be some of the most highly developed, economically successful, and politically free societies on Earth (http://upload.wikimedia.org/wikipedia/commons/e/e9/LocationEurope.png).
I don't think you understand my position at all. I'm not doing some "free market wins" thread here.

I'm saying that research in economics has unveiled certain principles and rules, and proposes that if these rules are broken, the outcome is not the one you hoped for. It seems like that is true, because of the failures, again and again, of attempts to break them.

Social Democracy does not necessarily violate such basic rules. It does not establish a pareto optimal resource allocation, so much we suspect. But we can't measure that accurately. I'm not speaking about systems though, I'm speaking about policies. I don't care whether it's Sweden, Vanuatu or the US - within a framework of people trading property with each other, for example price controls don't do what they're supposed to and instead hurt a whole lot of people.

Or to illustrate my point:
http://www.econlib.org/Library/Enc/RentControl.html
The agreement cuts across the usual political spectrum, ranging all the way from Nobel Prize winners Milton Friedman and Friedrich Hayek on the "right" to their fellow Nobel Laureate Gunnar Myrdal, an important architect of the Swedish Labor Party's welfare state, on the "left." Myrdal stated, "Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision." Fellow Swedish economist (and socialist) Assar Lindbeck, asserted, "In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing."

I'm not doing some "free market wins" thread here.


No you aren't. What you are doing is approaching a political/economic question from a rather limited viewpoint. For example...


...within a framework of people trading property with each other, for example price controls don't do what they're supposed to and instead hurt a whole lot of people.


Right there, at the bold bit (made bold by me, of course), you seem to be using a very specific socioeconomic situation (essentially capitalism) as the basis for a far more generalized notion of "inviolable laws of economics." My own examples of the egalitarian traditions of Arctic aboriginals and social democracy are intended to add additional data by broadening the observed types of socioeconomic systems.

In the capitalist system, practices contrary to capitalist norms (like price controls) may have poor results that hurt a lot of people. Likewise, in egalitarian systems, like the traditional resource sharing typical of Inuit or other aboriginal societies, the introduction of the capitalist wage economy hurt a lot of people too.

So we have two different systems, subjected to the same abuse (practices contrary to established norms), with similar results (people get hurt). Thus, the mechanism(s) behind the observed results cannot simply be the result of only the violation of one of those systems, but must be similar to both.

This is why "inviolable laws of economics" do not exist in any actually objective or universal sense. We have observed multiple systems that make use of very different, even directly contrary, sets of such "laws," and yet the observed results of taking actions contrary to those "laws" are the same in each case: people get hurt. Not creating price controls is not a universal "law of economics," but is rather specific to capitalist systems.

As such, I would begin to think that the only objective or universal "law" in play here is, in fact, a political "law," not an economic "law," which I have already stated: directing a society into doing things contrary to already established societal norms without first changing those norms in a not sudden, arbitrary, or otherwise coercive way is likely to yield less than optimal results, whatever those norms happen to be. In fact, I would be so bold as to suggest that this is exactly why "politics reigns supreme over...economics. (http://forums.jolt.co.uk/showpost.php?p=13097545&postcount=1)"

Right there, at the bold bit (made bold by me, of course), you seem to be using a very specific socioeconomic situation (essentially capitalism) as the basis for a far more generalized notion of "inviolable laws of economics." My own examples of the egalitarian traditions of Arctic aboriginals and social democracy are intended to add additional data by broadening the observed types of socioeconomic systems.
Except that you introduce this little extra "socio-" there. Of course if you start adding subjectivities into it, subjective stuff will be the outcome.

I didn't put the qualifier in because it presumes some sort of characteristics about people, I put it there because it is a necessity to describe a phenomenon, just like you can't describe the concept of gravity without mentioning at least two bodies interacting. If there are no bodies, does gravity exist? I don't know, but whatever the answer, it doesn't change the fact that we can't fly.

Likewise, in egalitarian systems, like the traditional resource sharing typical of Inuit or other aboriginal societies, the introduction of the capitalist wage economy hurt a lot of people too.
But what is the reason for that? It's not because of physical constraints, it's not because of an actual impossibility for aboriginal people to live in a market economy. It's because of their preferences, which happen to clash with the new order for a while.

The fact that you can't consume more than is being produced, the fact that selling things below a certain production cost is not sustainable - these are not due to individual preferences. They're not even due to the form of the society in question. They have an entirely different quality to what you're talking about.

As such, I would begin to think that the only objective or universal "law" in play here is, in fact, a political "law," not an economic "law," which I have already stated: doing things contrary to already established societial norms is likely to yield less than optimal results, whatever those norms happen to be. In fact, I would be so bold as to suggest that this is exactly why "politics reigns supreme over...economics. (http://forums.jolt.co.uk/showpost.php?p=13097545&postcount=1)"
I think you'd have to throw a pretty wide net to try and fit the phenomenon you're describing into the word "politics (http://dictionary.reference.com/browse/politics)". And importantly, this phenomenon of a completely different form of society, in which some economic laws do not apply (note, they just don't apply, they're not factually incorrect) is not something that politicians can create.

So can we then say that there are some economic policies which are objectively, always bad, some that are objectively, always good and some which are subjective, that is whether or not they're desirable depends on the aggregate preferences within society? And if not in general, then at least in the real world as it exists right now?

Do not violate the laws of economics. it is a lesson that communist nations have learned the hard way.

I'm not a communist. Not even close.

But communist states were always treated like the ugly nerd in your classroom. Nobody likes him, nobody is asking him to play along.

I’m wondering what would happen if a communist country is treated as any ‘normal’ country… And no China is not a nice example. For me, it’s not a real communist country anymore and even so, it’s still not treated as any normal country.

Look at Cuba. For almost 50 years, a rather small island, is giving much bigger brother USA the vibes.
It’s safe to say, that Cuba has been (and still is) isolated by USA and some of its vassal states.
They could have performed better if it was treated as a normal country.

Concerning communism, USA and lots of its conditioned inhabitants act as a man with some obsessive-compulsive personality disorder.

So are you saying that price controls for example, or printing money to finance government expenditure, work if it's someone else sitting at the desk, signing the document?

It could work. At least for a part of the world population.

USA and Europe are both price controlling their own agriculture markets.

For the local farmers, it's good news. For the farmers in the third world it's a disaster.

Except that you introduce this little extra "socio-" there. Of course if you start adding subjectivities into it, subjective stuff will be the outcome.


Or "subjective stuff" will be the outcome, because they were the input to being with. At any rate, the debate over which is supreme, "politics" or "economics," suggests rather strongly that the two are not as exclusive of each other as some might suggest. The fact is that what occurs in one affects the other, like it or not.

Thus the socio.


I didn't put the qualifier in because it presumes some sort of characteristics about people, I put it there because it is a necessity to describe a phenomenon, just like you can't describe the concept of gravity without mentioning at least two bodies interacting. If there are no bodies, does gravity exist? I don't know, but whatever the answer, it doesn't change the fact that we can't fly.


The problem is that we're talking about human behavior and social interactions, not gravity. If every single society, group, or individual on Earth behaved in exactly the same absolutely predictable way, the comparison to planets and gravity would hold. Unfortunately, such is not the case. Thus to speak of only one particular qualifier is to rig the game.


It's because of their preferences, which happen to clash with the new order for a while.


More accurately, it's because of "preferences" imposed by someone other than those who have to deal with the consequences. Just like when Robert Mugabe imposes policy which curiously hurt everyone except Robert Mugabe.

It is this imposition of a new order by those who need not worry about the consequences, onto those that do need to worry about the consequences, that makes this entire debate inherently political, not only economic.


The fact that you can't consume more than is being produced, the fact that selling things below a certain production cost is not sustainable - these are not due to individual preferences.


These are due to personal preferences if, in the system that I and those around me choose, the concepts of "produce," "selling," or "cost" have no meaning.


And importantly, this phenomenon of a completely different form of society, in which some economic laws do not apply (note, they just don't apply, they're not factually incorrect) is not something that politicians can create.


I don't claim that a like-minded group of people can abolish economics; until someone figures out how to pull whatever they need out of thin air, we are condemned to deal with the hell that is scarce resources. But what I am claiming is that a like-minded group of people can choose to live according to whatever economic rules they want to. History is replete with examples of people doing exactly that. They may choose differently than you or I, and some results may be better than others, but that's the nature of free will and choice.

USA and Europe are both price controlling their own agriculture markets.
No, that's subsidising, that's a different policy.

These are due to personal preferences if, in the system that I and those around me choose, the concepts of "produce," "selling," or "cost" have no meaning.
That's silly, and you know it. Just because you wish it doesn't make the concept of production, or the fact that doing something has a cost associated with it, go away. "Selling" I can grant you because it is trading-specific - the concept of "benefit" is not, which can take its place.

The problem is that we're talking about human behavior and social interactions, not gravity.
Not really. We're talking about resource allocations, about production and consumption processes. Real-world, physical stuff. Good A moves to Point B and Process C is performed. What you end up thinking about Good A and Process C is interesting, but don't change their basic characteristics.

Humans happen to be involved, but just like humans are involved in gravity but can't change it through the power of their imagination, so is the fact that something that isn't produced can't be consumed inviolable.

I don't claim that a like-minded group of people can abolish economics; until someone figures out how to pull whatever they need out of thin air, we are condemned to deal with the hell that is scarce resources.
Now you sound like some radical religious type: life is hell, the only salvation is some future utopia - so follow me! And don't you dare enjoy yourself on the way, or else you owe something to those who don't.

But what I am claiming is that a like-minded group of people can choose to live according to whatever economic rules they want to. History is replete with examples of people doing exactly that.
No, they can not and no, it is not. There are some basics that do not go away no matter how hard you want them to. Material reality is not open to interpretation.

Which has happened, given the rise and fall of previous economic ideologies.It wouldn't require the fall of a whole ideology. For instance, rationing worked well for the U.S. during World War 2. People changed their behavior and decided to consume less.

Then the analogy is invalid. There is only one way a price control can work, and that is if the control price is precisely the same as the market price would be Nah, the control price simply needs to be enough to cover the production price and enough to expand production when demand goes up; or the company that is having its prices controlled could be subsidized.

It wouldn't require the fall of a whole ideology. For instance, rationing worked well for the U.S. during World War 2. People changed their behavior and decided to consume less.

But there was a substantial black market where rationed goods were available at outrageous prices -- a whole second economy developed. Much the same happened in the USSR when goods weren't available through the state-owned production and distribution systems.


Nah, the control price simply needs to be enough to cover the production price and enough to expand production when demand goes up; or the company that is having its prices controlled could be subsidized.
The problem is that the prices NEED to float with demand, otherwise you're risking scarcity. Production may be able to increase some amount, but to assume that it can be increased an infinite amount ignores reality. And if it does increase greatly, that means the costs of production/cost of sales has increased as well and the customer price needs to be increased proportionately.

Well, can you find me a guy who engaged in Mugabe-type policies and everything worked out fine?

No. No more than we can find anyone who build a tiny hydro-electric dam and had it work. The strawman has been burned. Let it go.

The thing that shone through to me from his post was that it's not the principle of these policies and their violation of basic truths of economics that he felt caused the problem, but the people who implemented them. He suggests that we can achieve whatever goal we want, even if the laws of economics say we can't, as long as we have the right leader to do it.

Well then you need a CAT scan because something is causing you to see unexplained flashes of light. The government can manipulate prices, but not by fiat. You can't command merchants to sell their goods for less than it costs to buy them. Unlike the arguments put forth by trickle down economists here, merchants will continue to ply their trade if they make less of a profit than they did yesterday. But they won't do it if every sale costs them more than they make.

If the government wants to keep prices low they can provide cheaper wholesale goods to the merchants on the condition of a similarly reduced retail price. Afterall, it was regional conditions that caused the inflation. The government could have procured those goods cheaper elsewhere.

But by "economic laws" I'm implying that we know the good ways and the bad ways. We know things that should work and things that won't. There are policy options that are reasonably sustainable and achieve the things you want to achieve, and there are policy options that are not sustainable and do not achieve what you want them to.

But you seem unable to distinguish the how from the what. I keep saying the what can be done differently, and you keep saying that the how is a bad plan.

This is quite peculiar. There is a thread about Mugabe and our court jester isn't anywhere to be seen. I actually wish he'd show up. I could use a nice laugh.

He is Mugabe's only supporter.

No, that's subsidising, that's a different policy.

And by subsidising, blocking the local markets and other techniques they are...in control about the price.

Then the analogy is invalid. There is only one way a price control can work, and that is if the control price is precisely the same as the market price would be (and you'd need the very best analyst in the world to know, and even if you did you'd always lag behind the events). And that's not going to achieve the goal of price controls in the first place.

In Canada, we have price controls for medical supplies. The price paid by doctors (private practitioners) to their suppliers (also private) is set by the respective provincial government. There has been no scarcity of medical supplies, as far as I know. Apparently, we Canadians are breaking an economic law.

The fact that you can't consume more than is being produced, the fact that selling things below a certain production cost is not sustainable - these are not due to individual preferences. They're not even due to the form of the society in question. They have an entirely different quality to what you're talking about.

The gift economy of the Haida, Tlinglit, and other Northwest pacific tribes shows that you can sustain an economy where people can give more than they receive and still be wealthy.

http://en.wikipedia.org/wiki/Gift_economy

I think these laws work within specific contexts, but outside of their respective contexts, they tend to have less application.

And by subsidising, blocking the local markets and other techniques they are...in control about the price.

No, they aren't. They have influence over the price, but that is a far cry from actual control.

In Canada, we have price controls for medical supplies. The price paid by doctors (private practitioners) to their suppliers (also private) is set by the respective provincial government. There has been no scarcity of medical supplies, as far as I know. Apparently, we Canadians are breaking an economic law.

At great risk of starting another topic, I'll disagree. The demand on these products is limited by the availability of the medical system to patients...In other words, other factors create waits for care and that artificially reduces the demand for medical supplies.

But there was a substantial black market where rationed goods were available at outrageous prices -- a whole second economy developed. Much the same happened in the USSR when goods weren't available through the state-owned production and distribution systems.True, but the black market was much more massive in the latter case than in the former case.

The problem is that the prices NEED to float with demand, otherwise you're risking scarcity. Production may be able to increase some amount, but to assume that it can be increased an infinite amount ignores reality.Production can't be increased an infinite amount even if there are no price controls.

And if it does increase greatly, that means the costs of production/cost of sales has increased as well and the customer price needs to be increased proportionately.It is true that the production costs would have increased, but not necessarily to the point where they are more than the rationed price. It is entirely possible that the increased demand would pay for the increase in production.

I just saw yet another article about Mugabe's experiments on the BBC.

http://news.bbc.co.uk/2/hi/africa/7022653.stm


I've heard it said on this forum that politics reigns supreme over the laws (for want of a better term) of economics. I've had it heard that such laws don't exist, since they are entirely due to human action, and if humans change their behaviour, the results will be completely different.

Why then does it seem that whenever governments violate the laws, bad things happen? And it doesn't seem to matter how big the economy or how powerful the government...remember the lines when the US imposed petrol price controls, and the same again today in Iran?

When a state tries to maintain a currency peg and manages the economy incompetently, the currency eventually crashes. People blame "foreign speculators".

When a state imposes price controls, a black market appears and there are shortages in the official market. People blame "greedy businesses" and their political enemies.

When a state redistributes productive capacity and the quantity produced falls, people blame the new possessors for not doing their bit.

But could it simply be that within the world as it exists today, the research economists have done on how people behave within a trading environment, and the effects of such behaviour is just plain correct? That the laws of economics, in the vast majority of societies on earth today, are factually true, and violating them will not improve the well-being of the people within the community? And if so, should politics be constrained by economics rather than the other way around?

Ok, the best way I can describe this - is using an example. When Nixon came in, he quickly declared himself a 'Keyseianite' - not because he believed the economic theory but lets face reality. When a politician comes out, what would you as a idiot-voter wish to hear:

1) "Wait a few more moths/years and things will get better"

OR

2) "We've done this step immediately correct it"

Politicians want to seen to be actually doing something about a problem - even if it makes it worse, as long as they can spin it, find a scape goat - they look like the 'politician who tried'.

I'm not a communist. Not even close.

Did I call you one?

But communist states were always treated like the ugly nerd in your classroom. Nobody likes him, nobody is asking him to play along.

That's true but look at the USSR! They imploded their own economy.

I’m wondering what would happen if a communist country is treated as any ‘normal’ country… And no China is not a nice example. For me, it’s not a real communist country anymore and even so, it’s still not treated as any normal country.

Define normal. What is normal?

Look at Cuba. For almost 50 years, a rather small island, is giving much bigger brother USA the vibes.

And yet...people flee that island constantly. Why is that?

It’s safe to say, that Cuba has been (and still is) isolated by USA and some of its vassal states.
They could have performed better if it was treated as a normal country.

It is by most of the civilized world. I just wish the US would as well. And what vassal state are you talking about?

Concerning communism, USA and lots of its conditioned inhabitants act as a man with some obsessive-compulsive personality disorder.

:confused:

In Canada, we have price controls for medical supplies. The price paid by doctors (private practitioners) to their suppliers (also private) is set by the respective provincial government. There has been no scarcity of medical supplies, as far as I know. Apparently, we Canadians are breaking an economic law.
Waiting lists are a form of rationing. That anyone has to wait for medical services is evidence of a shortage.

The services are constrained, thus preventing the demand for the supplies. If you allowed doctors to serve as many patients as they could, then we could talk.

edit: I see that Myrmidonisia beat me to my point.

True, but the black market was much more massive in the latter case than in the former case.

Production can't be increased an infinite amount even if there are no price controls.

But when there are no price controls, prices rise. That takes care of the scarcity that would otherwise result when demand far exceeds what's available.

It is true that the production costs would have increased, but not necessarily to the point where they are more than the rationed price. It is entirely possible that the increased demand would pay for the increase in production.
Then there is too much margin built into the price. The high price would constrain demand and we'd never get to the point where increased production was needed. More likely, we'd have to shut down production and wait for demand to catch up with the excess inventory.

But I'm not talking about Mugabe. He really is just an example, just there to give the thread a bit of real-world appeal.



Whats at issue is that he is a poor example on which to build your argument, and doesn't provide the real-world appeal that you're looking for.

You can't command merchants to sell their goods for less than it costs to buy them.
So you do understand what I'm saying, you just think the government is excempt from the same principle.

If the government wants to keep prices low they can provide cheaper wholesale goods to the merchants on the condition of a similarly reduced retail price. Afterall, it was regional conditions that caused the inflation. The government could have procured those goods cheaper elsewhere.
"Elsewhere" - so outside the country?

Is that sustainable? The government ends up taking the loss for every unit sold. And because the government doesn't actually have any money, but simply spends that of the taxpayers, the taxpayers are taking the loss for every unit sold.

Why would it be any more sustainable in this case than in the case of a merchant being forced to take a loss?

The gift economy of the Haida, Tlinglit, and other Northwest pacific tribes shows that you can sustain an economy where people can give more than they receive and still be wealthy.
And if other people don't care that I consume their stuff, I could do the same.

But we can't all do that. For everyone who consumes more than he or she produces there is someone for whom the opposite is the case.

By the way, I have a theory about gift economies and these tribal societies: they're still operating in a market environment. They know because making stuff and keeping it for one's consumption or that of one's friends and family is still a natural thing to do for them.

They operate within a larger market, but simply choose to share stuff amongst each other within the clan. But if they meet another clan, they don't start sharing with them too - they become the most ferocious hagglers you have ever seen. Just like within a company people don't charge each other for their produce since it belongs to some sort of common entity, but if the representatives of the entity interact with the outside, you better believe they won't give anything away out of the goodness of their hearts.

Whats at issue is that he is a poor example on which to build your argument, and doesn't provide the real-world appeal that you're looking for.
So, is it that someone who orders the economy around automatically becomes a poor example or can we continue to imagine some theoretical leader who can do it and bad things don't happen?

What other example would you want me to pick?

Waiting lists are a form of rationing.

of course, so are prices

They operate within a larger market, but simply choose to share stuff amongst each other within the clan. But if they meet another clan, they don't start sharing with them too - they become the most ferocious hagglers you have ever seen. Just like within a company people don't charge each other for their produce since it belongs to some sort of common entity, but if the representatives of the entity interact with the outside, you better believe they won't give anything away out of the goodness of their hearts.

Are you saying that collectives, such as society, exist as entities?

But when there are no price controls, prices rise. That takes care of the scarcity that would otherwise result when demand far exceeds what's available.

ah yes, prices 'take care of the scarcity'. anyone care to further explicate what that might mean if applied to basic foodstuffs?

By the way, I have a theory about gift economies and these tribal societies: they're still operating in a market environment. They know because making stuff and keeping it for one's consumption or that of one's friends and family is still a natural thing to do for them.

They operate within a larger market, but simply choose to share stuff amongst each other within the clan. But if they meet another clan, they don't start sharing with them too - they become the most ferocious hagglers you have ever seen. Just like within a company people don't charge each other for their produce since it belongs to some sort of common entity, but if the representatives of the entity interact with the outside, you better believe they won't give anything away out of the goodness of their hearts.

technically, haggling and market exchange is usually reserved for enemies. it's all gifting between groups that are friendly (though sometimes with a competitive flavor). in fact, its fairly standard to be adopted into those other groups as part of the process.

i think your theory needs some empirical input.

ah yes, prices 'take care of the scarcity'. anyone care to further explicate what that might mean if applied to basic foodstuffs?

People eat less?

The problem I see with "Inviolable Laws of Economics" is how contextual many things are. Social Security "pay-as-you-go system" is uneconomical when the percentage of retirees is growing faster than the percentage of workers, but with the reverse it is highly economical. Or say in a relatively tolerant openminded society discriminating against minorities is a way to go out of business. In a society that is high racist, sexist, and anti-gay hiring a productive black lesbian woman would likely lower the productivity of other workers and chase away customers. It depends on the preferences people have.

So you do understand what I'm saying, you just think the government is excempt from the same principle.

If that's what you think then you clearly don't understand what I'm saying.


"Elsewhere" - so outside the country?

Is that sustainable? The government ends up taking the loss for every unit sold. And because the government doesn't actually have any money, but simply spends that of the taxpayers, the taxpayers are taking the loss for every unit sold.

Yes. It is as sustainable as it needs to be because the government is investing in domestic peace. If people can't buy food they will riot and the country will end up spending a whole lot more in security forces than it would in food.

And it was local conditions that created the scarcity and skyrocketing prices. The government has the resources to import cheaper food from elsewhere. And I think taxpayers would rather take that loss in their pocketbooks than have military Juntas cutting down the merchants who need to raise prices to make a living so must either run afoul of the law or simply stop selling the food that people want.


Why would it be any more sustainable in this case than in the case of a merchant being forced to take a loss?

Because there's no practical way to force merchants to sustain an unprofitable business. If they are only allowed to sell their goods for 'X' but the only available wholesale goods are '2X' then they'll simply find another line of work or take their savings and move out. The government providing affordable wholesale goods provides an incentive for merchants to continue their job. See? Carrot and Stick.


Snip irrelevant rant.



So, is it that someone who orders the economy around automatically becomes a poor example or can we continue to imagine some theoretical leader who can do it and bad things don't happen?

What other example would you want me to pick?

You still don't understand what I'm saying. You're making vague reference to "the market" as though it's some sentient entity. It's not, it's the sum total of the interactions of various entities. Yes, it is a force. But like any other force in nature, it can be manipulated to mitigate the problems and create benefits.

If you want another example, fine.

Wildfire. There's nothing we can do about the heat of fire. Fire burns and it's hot. In nature there is a tendency in the American west for undergrowth to build up over a few years then get dry and catch on fire. These fires are a few hundred degrees and burn out the thinner faster-growing trees, the plants and scare away the animals. But the biggest trees survive the fire because they can resist fires of up to 450 degrees farenheit.

In our efforts to fight this force of nature we started putting out these fires whenever they start. So for a few years we can keep the wildfires from spreading and the undergrowth can keep growing. Then when the forest gets so dry and the undergrowth so thick that we can't prevent a fire, the fire will be up to 900 degrees farenheit. Killing everything.

So logging companies say, "hey, let us cut all the trees down before there's a fire." So they do, and the lack of trees creates landslides and duststorms (depending on the aridity of the area.)

We could manipulate this force of nature to our advantage by allowing logging companies to only cut down the fast growing trees that don't survive, but still promote the 300 degree fires, and while they're at it, clear out the brush. That way when wildfire happens, it won't be as hot as it could otherwise be.

Even though there's nothing we can do about fire being hot.

Mugabe has fallen into the same traps that every socialist always falls into, as well as even many Capitalists. It is a fact that there are permanent universal laws of economics which are knowable only through praxeology (which is the method used by Adam Smith, Frederic Bastiat, FA Hayek, Ludwig von Mises, Murray Rothbard, Hans-Hermann Hoppe, and the rest of the great economists). The laws of economics prove that any government intervention always achieves less desirable results than not engaging in that intervention. Mises, in particular, made a career out of proving that interventions failed from the perspectives of their supporters (for example, he proved that a prosperous socialism is impossible because economic calculation is impossible under socialism, that artificial increases in the money supply by government not only raise prices but cause all depressions, and that minimum wage causes unemployment, among numerous other discoveries).

Anybody who assumes that it is possible to change the laws of economics is a fool. Under an unhindered free market, everybody would become increasingly well-off (it is because of the relatively laissez-faire period that ended around the end of the 19th century that we aren't all subsistence farming on some medieval manor right now.

People eat less?

well, some people, to a point

Mugabe has fallen into the same traps that every socialist always falls into, as well as even many Capitalists. It is a fact that there are permanent universal laws of economics which are knowable only through praxeology (which is the method used by Adam Smith, Frederic Bastiat, FA Hayek, Ludwig von Mises, Murray Rothbard, Hans-Hermann Hoppe, and the rest of the great economists). The laws of economics prove that any government intervention always achieves less desirable results than not engaging in that intervention. Mises, in particular, made a career out of proving that interventions failed from the perspectives of their supporters (for example, he proved that a prosperous socialism is impossible because economic calculation is impossible under socialism, that artificial increases in the money supply by government not only raise prices but cause all depressions, and that minimum wage causes unemployment, among numerous other discoveries).

Anybody who assumes that it is possible to change the laws of economics is a fool. Under an unhindered free market, everybody would become increasingly well-off (it is because of the relatively laissez-faire period that ended around the end of the 19th century that we aren't all subsistence farming on some medieval manor right now.

Would you mind providing some sharable sources for those claims at the end of the first paragraph?

I know for a fact that the minimum wage claim is BS. I'm highly dubious of the "all depresions are caused by..." notion.

Also, it's impossible for a government to avoid intervening in the economy. All governments from the dawn of history have intervened in the economy. That's what governments are. Without a government you don't even have an economy, because you'll have warlords who will want to profit from the ecnonomy and will eventually form into a government that will redistribute wealth to itself, for itself.

People eat less?

Well, when people starve, they will start eating eachother. Which artificially increases the supply, reducing the demand, which will cause all those merchants who purchased wholesale food at higher prices to go out of business because they can't collect a profit on their wares.

That's why the government has to tax canibalism and use those tax revenues to buy out the surplus stock to preserve the economy.

Or, you know... They could try to get people fed so that they don't resort to canabalism, but that's communism.

The laws of economics prove that any government intervention always achieves less desirable results than not engaging in that intervention.

Natural monopolies.

Now, maybe you want to claim that in the real world, there really are very few such things, and when they pop up, there are actually ways around the problem... or maybe that government intervention generally tends to make things worse, not better. But you can't prove that that is a necessary truth. You have to actually advance an empirical argument. Suddenly the unquestionable universality you advance stops being so unquestionable.

And that's just one example.

ah yes, prices 'take care of the scarcity'. anyone care to further explicate what that might mean if applied to basic foodstuffs?
No mystery here. Hard winter, oranges freeze. Orange juice becomes expensive. People switch to Tang. Demand on OJ slows, prices drop, people start drinking OJ again.

Alternatively, Tropicana starts to import from South America and the supply of OJ increases. Prices fall. People give the Tang back to NASA and start drinking OJ again.

Why do you think that there are exceptions?

This is kind of like the "Name Game" song. I can do this with any product you might want to suggest.


But let's go further...
Government sees the rising OJ prices. Fixes price. Then shelves rapidly empty. Now, everyone HAS to drink Tang. Yuck!

Well, when people starve, they will start eating eachother. Which artificially increases the supply, reducing the demand, which will cause all those merchants who purchased wholesale food at higher prices to go out of business because they can't collect a profit on their wares.

That's why the government has to tax canibalism and use those tax revenues to buy out the surplus stock to preserve the economy.

Or, you know... They could try to get people fed so that they don't resort to canabalism, but that's communism.
Food is not a commodity. Beef is a commodity. So is orange juice. Don't try to make us think that "food" prices all rise and fall in unison. Different things affect different commodities. When one commodity is priced too high, people switch to a substitute. Like turkey for beef, Tang for OJ...

Or are you trying to describe inflation? Where all prices rise? I think that's a different argument.

Are you saying that collectives, such as society, exist as entities?
I'm saying that the individuals within these clans don't insist on a property right to the things they produce because they're comfortable with trading favours with each other without direct repayment.

They exist as groups (or entities, if you want) and build mini-economies within the larger framework of material existence, which is a property economy of some kind.

technically, haggling and market exchange is usually reserved for enemies.
Which just so happens to mean everyone who isn't part of one's clan. My empirical input is a documentary about Papuan tribes, who had no notion of private property within the clan, but when they met another tribe (which they regularly did) they had a whole tradition worked out on how the trading was to occur (which involved a lot of screaming, pretending to be angry and bullying each other's pigs).

it's all gifting between groups that are friendly (though sometimes with a competitive flavor).
Gifting with a competitive flavour?

If that's what you think then you clearly don't understand what I'm saying.
Okay, let me take the simplest economic law I can think of: there can't be more consumption than there is production.

We can qualify that to allow for transfers between individuals and transfers across time, but in the grand scheme of things (that is, over a defined period of time and a defined number of people) it holds.

How is anyone going to change that by introducing some force-based policy, or by changing the way one looks at the issue?

And it was local conditions that created the scarcity and skyrocketing prices. The government has the resources to import cheaper food from elsewhere.
You're trying to escape the problem by assuming an outside world in which the breach of the economic law does not occur and which you can take advantage of.

And I think taxpayers would rather take that loss in their pocketbooks than have military Juntas cutting down the merchants who need to raise prices to make a living so must either run afoul of the law or simply stop selling the food that people want.
I'm not talking about what people want, I'm talking about what is physically possible.

Let me ask you a question I asked in this thread:

Are there, or are there not economic policies which are objectively good and others that are objectively bad?

Because there's no practical way to force merchants to sustain an unprofitable business.
But you assume that a government is able to sustain such a business indefinitely. So you are saying that government is somehow independent of this particular economic law.

Which is true in a sense, because it doesn't have to pay for anything, the taxpayers do.

But can you say the same thing about society in aggregate?

You still don't understand what I'm saying. You're making vague reference to "the market" as though it's some sentient entity. It's not, it's the sum total of the interactions of various entities.
Right now you're giving me the impression that I understand that better than you do.

The interactions of these entities are not completely free. Every agent within the market only has a limited number of possible actions and is constrained by physical reality. I can't fly, and by the same token I can't make food appear out of thin air. In fact, I can't make anything appear without some investment in some shape or form.

You can manipulate the market by manipulating the decisions made by the agents within it. But there is a limit to the manipulation possible. These limits are the laws I'm talking about, and they are ultimately more powerful than any human activity, collective or otherwise. No matter whether you threaten me with a gun, whether I'm the most religious person on earth or whether I have no sense of individuality and exist only as a cog within some collective - I won't be able to make food appear without investment.

So you see how your comparison with the dam or the wild fires are really missing my point.

Without a government you don't even have an economy, because you'll have warlords who will want to profit from the ecnonomy and will eventually form into a government that will redistribute wealth to itself, for itself.
So the gangs of armed looters in New Orleans were a government? I mean, I'll be one of the last people to disagree with you when you say that the state and these gangs are equivalent, but I don't think that's the point you want to make.

Anyways, I think you're being overly relaxed in the way you're using definitions.

An economy is "The system or range of economic (http://dictionary.reference.com/browse/Economic) activity in a country, region, or community".

No mention of a government.

I'm saying that the individuals within these clans don't insist on a property right to the things they produce because they're comfortable with trading favours with each other without direct repayment.

They exist as groups (or entities, if you want) and build mini-economies within the larger framework of material existence, which is a property economy of some kind.


You were the one to use the word entity for groups, first. :D

Anyway, in gift economies people don't give away stuff for nothing. Its just that what the giver gains is not explicitly asked for. Sometimes its for status, other times for obligation

Lewis Hyde expresses the spirit of a gift economy (and its contrast to a market economy) as follows:

The opposite of "Indian giver" would be something like "white man keeper"… [W]hatever we have been given is supposed to be given away not kept. Or, if it is kept, something of similar value should move in its stead… [T]he gift may be given back to its original donor, but this is not essential… The only essential is this: the gift must always move.[2]

He further remarks that a traditional gift economy is based on "the obligation to give, the obligation to accept, and the obligation to reciprocate," and that it is "at once economic, juridical, moral, aesthetic, religious, and mythological."


So the gangs of armed looters in New Orleans were a government? I mean, I'll be one of the last people to disagree with you when you say that the state and these gangs are equivalent, but I don't think that's the point you want to make.

Anyways, I think you're being overly relaxed in the way you're using definitions.

An economy is "The system or range of economic (http://dictionary.reference.com/browse/Economic) activity in a country, region, or community".

No mention of a government.

You yourself said that you didn't believe that people can enjoy negative freedom, most of it at least, without government. So, in practice, government is needed for a functioning market system to work.

Which just so happens to mean everyone who isn't part of one's clan.

no, it really doesn't

Gifting with a competitive flavour?

yeah. in certain cultures there developed a system of competitively giving stuff away - showing up the other guys by being more generous than they could afford to be.

Mugabe has fallen into the same traps that every socialist always falls into, as well as even many Capitalists. It is a fact that there are permanent universal laws of economics which are knowable only through praxeology (which is the method used by Adam Smith, Frederic Bastiat, FA Hayek, Ludwig von Mises, Murray Rothbard, Hans-Hermann Hoppe, and the rest of the great economists). The laws of economics prove that any government intervention always achieves less desirable results than not engaging in that intervention. Mises, in particular, made a career out of proving that interventions failed from the perspectives of their supporters (for example, he proved that a prosperous socialism is impossible because economic calculation is impossible under socialism, that artificial increases in the money supply by government not only raise prices but cause all depressions, and that minimum wage causes unemployment, among numerous other discoveries).

Mises believed in a minarchist state. Adam Smith thought the government should build public infrastructure. fund education, and employ retalitory tarriffs to encourage other nations to practice free trade. Hayek was a welfare statist, if a highly limited one, who thought a number of regulations were ok some point of his career as an economist. The above hardly thought that every government intervention in the economy is bad.

The laws of economics of praxeology prove nothing because they themselves can't be proven false. A socialist could look at the "logic of human action"(not the book, the concept thereof) and come up with their own laws of economics that proves laissez-faire. Which praxeological system should we belive when they're internally sef-consistent?


Anybody who assumes that it is possible to change the laws of economics is a fool. Under an unhindered free market, everybody would become increasingly well-off (it is because of the relatively laissez-faire period that ended around the end of the 19th century that we aren't all subsistence farming on some medieval manor right now.

In our relatively non-laissez-faire everyone is becoming increasingly well-off.

no, it really doesn't
For Papuan tribes, it does. :p

yeah. in certain cultures there developed a system of competitively giving stuff away - showing up the other guys by being more generous than they could afford to be.
So a) it's an economy with private property, and b) since it is competitive, there is nothing more equitable or otherwise desirable about it than a market economy. Is that what you're trying to say?

Also, the sort of economic rules I'm talking about would still apply. They'd just be reversed, with people not seeking to maximise their own wealth subject to some constraint, but seeking to minimise it (or maximise that of others) subject to the same constraint.

Anyway, in gift economies people don't give away stuff for nothing. Its just that what the giver gains is not explicitly asked for. Sometimes its for status, other times for obligation
Yeah, it's giving away stuff in the knowledge that you will be gifted some stuff you need in the future. It's like trading in options, just without money and without the specifics being written down.

And it's not necessarily inconsistent with private property ownership either.

You yourself said that you didn't believe that people can enjoy negative freedom, most of it at least, without government. So, in practice, government is needed for a functioning market system to work.
In practice, and in a macro-sense, yes. But that doesn't mean that the definition of an economy (remembering that that word also includes non-market economies and even things like the material life within a family) necessarily includes a reference to government.

Plus, my opinion is that small communities can exist without government quite well. Defending oneself against crime is easy there, because everyone in the community can know about the crime and the criminal quickly and efficiently, people can help each other out (or charge each other for their help) and there is less chance that people who don't care about the lifestyle are forced to live it. So such small economies don't need a government at all.

I think my point was more with the limited sense in which he used the word "economy" than anything else. It's all part of a more general view in which "the economy" is some malleable tool that serves society, man-made and man-controlled. I don't think it is, and looking at it like that just leads to people (in the case of the OP Mugabe) thinking they can manipulate basic economic facts.

Yeah, it's giving away stuff in the knowledge that you will be gifted some stuff you need in the future. It's like trading in options, just without money and without the specifics being written down.

And it's not necessarily inconsistent with private property ownership either.

Well it can be the gifting of stuff in return for reciprication in the future, but thats not always so. People may give blood because it makes them feel good. People who help create free sofware often do it for the prestige and respect they get from fellow free software developers.

Is trading the best way to put ties of mutual obligations? Do parents trade the creation and nurturance of their children for their support by their children in their old age?

Why would it be inconsistent with private property ownership?

In practice, and in a macro-sense, yes. But that doesn't mean that the definition of an economy (remembering that that word also includes non-market economies and even things like the material life within a family) necessarily includes a reference to government.

Plus, my opinion is that small communities can exist without government quite well. Defending oneself against crime is easy there, because everyone in the community can know about the crime and the criminal quickly and efficiently, people can help each other out (or charge each other for their help) and there is less chance that people who don't care about the lifestyle are forced to live it. So such small economies don't need a government at all.

I think my point was more with the limited sense in which he used the word "economy" than anything else. It's all part of a more general view in which "the economy" is some malleable tool that serves society, man-made and man-controlled. I don't think it is, and looking at it like that just leads to people (in the case of the OP Mugabe) thinking they can manipulate basic economic facts.

I don't see how the self policing of small communities is necessarrily different from state actions. Stoning a woman who lost her virginity because she flouted customary law and gets a customary punishment is different if a government did it how?

How aren't man-made or man-controlled? I think you meant they aren't consciously man-mad or man-controlled. At least not in a manner resembling central planners.

But when there are no price controls, prices rise. That takes care of the scarcity that would otherwise result when demand far exceeds what's available.Yes, but there's no reason to assume that there would inherently be a shortage when prices are controlled.

Then there is too much margin built into the price. The high price would constrain demand and we'd never get to the point where increased production was needed. More likely, we'd have to shut down production and wait for demand to catch up with the excess inventory.Not if the market price was higher than the controlled price. Lowering the market price for the controlled price would raise demand.

For Papuan tribes, it does. :p

i wouldn't want to do much generalizing based off of a few papuan groups. firstly because there are fucking thousands of them with all sorts of cultures speaking languages from completely separate language families. not much of a cohesive whole. and second because a number of other groups i know of do not restrict friendship to kinship - certainly not literal kinship.

So a) it's an economy with private property, and b) since it is competitive, there is nothing more equitable or otherwise desirable about it than a market economy. Is that what you're trying to say?

neither of those follow, though i do think that the cultures that first allow and then institutionalize competitive gifting are headed for trouble. in fact, that is part of the hypothesis for how we got into this mess in the first place.

Also, the sort of economic rules I'm talking about would still apply. They'd just be reversed, with people not seeking to maximise their own wealth subject to some constraint, but seeking to minimise it (or maximise that of others) subject to the same constraint.

well, if your rule is just that there are a limited number of things available, that's not so much an economic rule as it is a physical fact. and, of course, it is logically possible to give things of which there is an (effectively) infinite supply.

Well it can be the gifting of stuff in return for reciprication in the future, but thats not always so. People may give blood because it makes them feel good. People who help create free sofware often do it for the prestige and respect they get from fellow free software developers.
Yeah, but they'll still have to live off something. In our world, they have regular incomes to sustain them. If they didn't have those, the prestige and good image may be the only way to get an income at all - use it to beg from others the means to sustain themselves.

Is trading the best way to put ties of mutual obligations? Do parents trade the creation and nurturance of their children for their support by their children in their old age?
In a metaphysical sense, the children are giving something back that only they can provide, even though it's not material.

Really though, I can't think of any form of mutual obligation that can't be expressed in terms of a trade.

Why would it be inconsistent with private property ownership?
It isn't. I just think sometimes that people need to be careful when they throw all these alternative economic ideas around and remember that they're not all the same thing.

I don't see how the self policing of small communities is necessarrily different from state actions. Stoning a woman who lost her virginity because she flouted customary law and gets a customary punishment is different if a government did it how?
The difference is that it isn't some third party doing it. As we now know, even though the physical, material effect of two phenomena may be the same, but that doesn't make them one and the same.

How aren't man-made or man-controlled? I think you meant they aren't consciously man-mad or man-controlled. At least not in a manner resembling central planners.
The economy and its basic principles are such that no person can change them, that is even with conscious action this "unconsciously controlled" entity won't budge.

and second because a number of other groups i know of do not restrict friendship to kinship - certainly not literal kinship.
And yet they accept that their non-friends, whoever they are, do not have a right to their produce (their property, if you will) and will not freely share it with them. So really, my hypothesis still stands - they do understand property and exclusive ownership and they do apply it. Whether it's private property or communal property doesn't change the nature of property in the first place, it just modifies the set of people that have access to it.

neither of those follow,
The first clearly does. I can't gift anything if I don't own it. If I give something away that isn't mine in some way, shape or form I'm not gifting and I'm not outdoing the other guy.

The second depends on what exactly your problem with the market and private property is, of course.

well, if your rule is just that there are a limited number of things available, that's not so much an economic rule as it is a physical fact.
You're starting to get what I'm saying. Economics is the "science" of dealing with scarcity. Physical facts pertaining to the existence, usefulness and use of scarce things are economic laws.

and, of course, it is logically possible to give things of which there is an (effectively) infinite supply.
I note the "effectively" qualifier. And, by the way, what would be the price for a thing with an effectively infinite supply in a market economy? And does that have any implications on your evaluation of the system?

Yeah, but they'll still have to live off something. In our world, they have regular incomes to sustain them. If they didn't have those, the prestige and good image may be the only way to get an income at all - use it to beg from others the means to sustain themselves.

Did I say they didn't? Those who produced free software usually are skilled enough to have fairly good paying jobs.


In a metaphysical sense, the children are giving something back that only they can provide, even though it's not material.

Really though, I can't think of any form of mutual obligation that can't be expressed in terms of a trade.

I'm not sure trade is word with the most accurate nuances for mutual obligations.

It isn't. I just think sometimes that people need to be careful when they throw all these alternative economic ideas around and remember that they're not all the same thing.

True. I myself often sound like I don't believe in private property. I do. I just don't believe in an absolute right to property, but that is a irrelevent to this debate.

The difference is that it isn't some third party doing it. As we now know, even though the physical, material effect of two phenomena may be the same, but that doesn't make them one and the same.

Eh? Clarify. How is stoning a girl for losing her virginty not the action of a third party?

The economy and its basic principles are such that no person can change them, that is even with conscious action this "unconsciously controlled" entity won't budge.

But within the basic principles( what are these by the way?) there is considerable room for many different kinds of policies and trade-offs.

If there is sufficient demand for goods and/or services that most people would consider illicit, like kiddie porn, stolen goods, and assasinations, a black market will supply them. This doesn't mean we should legalize theses goods and services. It just means they'll exist until/unless we can make it unprofitable to provide thesm.

Yes, but there's no reason to assume that there would inherently be a shortage when prices are controlled.

Not if the market price was higher than the controlled price. Lowering the market price for the controlled price would raise demand.
These both tie together.

Yes, there will absolutely be shortages when prices are fixed below market prices. People know a good deal when they see it and they hoard. What would you do if you saw something you needed/wanted at a price that was lower than expected, you'd buy two or three, when you only needed one. Then there's also the idea that you are forcing a smaller gross margin on to the manufacturer...A market based price would rise as the cost of sales increased, but not so with the fixed price utopia that you imagine. Shortages would be all but guaranteed as manufacturers abandoned the product line because it becomes unprofitable.

If prices are fixed above market pricing, then there will be no shortages, but there will be excessive inventory, too.

Let's use a real example.

When a hurricane threatens and evacuation is ordered, most people comply. Many of them rent hotel rooms until the evacuation is lifted. Hotel owners can do two things. First they can raise the prices on hotel rooms and take advantage of the situation. Or they can keep the prices the same and something else will happen.

Experience tells us that if the hotel owners keep the prices at the pre-hurrivac levels, people will rent several rooms -- first come, first serve, you know. Then the hotel is sold out, but the rooms aren't efficiently allocated. This is actually coded into law in Florida.

When the owner raises the prices, people are more likely to only rent what they require. Then, more are able to take shelter. This is what Florida should encourage.

I suspect if an owner priced his rooms at a price above market value, no one would stay there. A Motel-6 at $1000 per night just isn't going to attract many buyers. There may be some, but the inventory of available rooms will exceed the demand.

Now, I've covered all three cases and in only one -- where the market decides the prices -- is the outcome favorable and equitable.

At great risk of starting another topic, I'll disagree. The demand on these products is limited by the availability of the medical system to patients...In other words, other factors create waits for care and that artificially reduces the demand for medical supplies.

That's an interesting theory. Do you have anything to back it up?


By the way, I have a theory about gift economies and these tribal societies: they're still operating in a market environment. They know because making stuff and keeping it for one's consumption or that of one's friends and family is still a natural thing to do for them.

They operate within a larger market, but simply choose to share stuff amongst each other within the clan. But if they meet another clan, they don't start sharing with them too - they become the most ferocious hagglers you have ever seen. Just like within a company people don't charge each other for their produce since it belongs to some sort of common entity, but if the representatives of the entity interact with the outside, you better believe they won't give anything away out of the goodness of their hearts.

Sure, but that still means you have two economic models, and your laws only pertain to one of them. Therefore, the laws are not universal.

Really though, I can't think of any form of mutual obligation that can't be expressed in terms of a trade.

I can. Soldiers in a combat unit depend on each other for survival. There is a mutual obligation to save each other's asses. But no one's keeping track, and no valuables are being exchanged.

These both tie together.

Yes, there will absolutely be shortages when prices are fixed below market prices. People know a good deal when they see it and they hoard. What would you do if you saw something you needed/wanted at a price that was lower than expected, you'd buy two or three, when you only needed one.Sure, if the price was massively lower. Perhaps the item that is having its price fixed is fixed simply to prevent raising the price?

Then there's also the idea that you are forcing a smaller gross margin on to the manufacturer...A market based price would rise as the cost of sales increased, but not so with the fixed price utopia that you imagine. Shortages would be all but guaranteed as manufacturers abandoned the product line because it becomes unprofitable.A manufacturer can handle smaller profit margins on highly profitable things. A price that would ordinarily give a manufacturer 300% profit (over production costs) could be lowered to only giving the manufacturer 200% profit (over production costs) without affecting output.

Now, I've covered all three cases and in only one -- where the market decides the prices -- is the outcome favorable and equitable.Favorable? Perhaps. Equitable? Not hardly.

Food is not a commodity. Beef is a commodity. So is orange juice. Don't try to make us think that "food" prices all rise and fall in unison. Different things affect different commodities. When one commodity is priced too high, people switch to a substitute. Like turkey for beef, Tang for OJ...

Or are you trying to describe inflation? Where all prices rise? I think that's a different argument.

Most shops have run out of basic goods such as sugar, salt, bread and beef

When even bread is unavailable "food" can be a commodity. Because there is no substitute available. If bread and butter were the only thing made available at fixed prices (meaning the government would have to provide a supply as well as keeping prices down) it would suffice to keep economic laws functioning as you describe. But when there's nothing available then "food" is a commodity.

A bit like how the laws of physics break down in a black hole. The laws of economics break down when supply = 0, because supply and demand are no longer expressible as a ratio.

Sure, if the price was massively lower. Perhaps the item that is having its price fixed is fixed simply to prevent raising the price?

A manufacturer can handle smaller profit margins on highly profitable things. A price that would ordinarily give a manufacturer 300% profit (over production costs) could be lowered to only giving the manufacturer 200% profit (over production costs) without affecting output.

Favorable? Perhaps. Equitable? Not hardly.
Okay, I see you're talking out of naivety. First, you don't know what a gross margin is. That's the difference between cost of sales,COS, and price. The gross margin consists of many things besides profit. Employee benefits, utility bills, facility rents, etc are all part of the gross margin. So is profit. But profit is usually a very small part of the gross margin. Most of the GM components are fixed and a company must make enough beyond the COS to cover them. It must also make a profit in order to expand.

What's realistic? Groceries are very low margin, as is gasoline. Probably no more than 20 percent. I seriously doubt that anyone has a 200-300 percent profit margin on any product.

So if you want to make unreasonable assumptions, you can probably support your contention. But with real world numbers, there's no way.

When even bread is unavailable "food" can be a commodity. Because there is no substitute available. If bread and butter were the only thing made available at fixed prices (meaning the government would have to provide a supply as well as keeping prices down) it would suffice to keep economic laws functioning as you describe. But when there's nothing available then "food" is a commodity.

A bit like how the laws of physics break down in a black hole. The laws of economics break down when supply = 0, because supply and demand are no longer expressible as a ratio.

You've got the same problems as Jello. You don't want to play with real world figures. There is never _nothing_ available. Supply is never 0. There is always a black market, even in the most badly managed economies.

And yet they accept that their non-friends, whoever they are, do not have a right to their produce (their property, if you will) and will not freely share it with them. So really, my hypothesis still stands - they do understand property and exclusive ownership and they do apply it. Whether it's private property or communal property doesn't change the nature of property in the first place, it just modifies the set of people that have access to it.

well, i guess if your position is "private property/communal property, no big deal" that's fine by me - though clearly there are some very significant difference in how people behave regarding the two.

in fact, it seems to me that the extent of your law reduces to "there is stuff, people can possess stuff, and cultures decide how to regulate access to it". which really doesn't seem like much of a rule. it isnt merely tautological, so its got that going for it, but what the hell could you predict based on it? that not everyone can have infinite amounts of stuff, except where the stuff in question is effectively infinite?

The first clearly does. I can't gift anything if I don't own it. If I give something away that isn't mine in some way, shape or form I'm not gifting and I'm not outdoing the other guy.

clearly you have never had a friend who passed on some 'hot property' to you. maybe i just have more felonious friends...

ownership doesn't really enter into the equation without assuming your conclusion. all that is needed is possession, or in the case of non-material things the ability to offer/share them.

You're starting to get what I'm saying. Economics is the "science" of dealing with scarcity. Physical facts pertaining to the existence, usefulness and use of scarce things are economic laws.

is it supposed to shock anybody that any form of economy is bound by, for example, thermodynamics?

I note the "effectively" qualifier. And, by the way, what would be the price for a thing with an effectively infinite supply in a market economy? And does that have any implications on your evaluation of the system?

well, it sorta has to be effectively rather than actually infinite.

as for the price of effectively infinite things, that varies. some of it is quite pricey in monetary terms, such as technical know-how and the like, for example. and some of it is free and monetarily valuable, like atmospheric oxygen. and some of it can't be bought but is more valuable than pretty much anything.

Okay, I see you're talking out of naivety. First, you don't know what a gross margin is. That's the difference between cost of sales,COS, and price. The gross margin consists of many things besides profit. Employee benefits, utility bills, facility rents, etc are all part of the gross margin. So is profit. But profit is usually a very small part of the gross margin. Most of the GM components are fixed and a company must make enough beyond the COS to cover them. It must also make a profit in order to expand.Employee benefits, utility bills, facility rents, etc. can all be filed under the header "production costs".

What's realistic? Groceries are very low margin, as is gasoline. Probably no more than 20 percent. I seriously doubt that anyone has a 200-300 percent profit margin on any product.Movie theater popcorn.

Employee benefits, utility bills, facility rents, etc. can all be filed under the header "production costs".

Movie theater popcorn.
Not really, those costs are operating costs that would exist whether or not the product in question is produced or not. But for this discussion, it doesn't really matter that much.

What does matter is that the price of an item contains a very small fraction that represents profit --- movie popcorn not withstanding. To claim 200 to 300 percent profits on a typical consumer product is about as realistic as claiming that a price can be fixed at 0. I just don't see a situation where price can be controlled successfully.

I had a huge book just filled with indisputable and inarguable locksolid Inviolable Laws of Economics.




But i sold it.

What does matter is that the price of an item contains a very small fraction that represents profit --- movie popcorn not withstanding. To claim 200 to 300 percent profits on a typical consumer product is about as realistic as claiming that a price can be fixed at 0. I just don't see a situation where price can be controlled successfully.I didn't say that it would work on "a typical consumer product". The prices on movie theater popcorn are so high at least in part because the movie theaters ban outside food and drink, thus removing all competition (except for people who smuggle things in). This is an untypical situation, but nonetheless the prices on that particular item could be lowered without interfering with production.

I didn't say that it would work on "a typical consumer product". The prices on movie theater popcorn are so high at least in part because the movie theaters ban outside food and drink, thus removing all competition (except for people who smuggle things in). This is an untypical situation, but nonetheless the prices on that particular item could be lowered without interfering with production.
If that satisfies you, then I give. But before I quit, I just need to add that it's a weak example and provides no insight into how a real economy works.

If that satisfies you, then I give. But before I quit, I just need to add that it's a weak example and provides no insight into how a real economy works.This is true. However, even a weak counterexample means that particular "law" is not inviolable.

This is true. However, even a weak counterexample means that particular "law" is not inviolable.
Only under very restrictive conditions...Certainly not the example that we'd want to stake an entire economy on. But we should see an accounting to make sure that the profits are that large on popcorn. I would contend that, though the cost of sales is small, overhead is large, making the profit something less that what was stated.

By the way, I shouldn't have let this go on as long as I did, but with the way profit is normally calculated (a percentage of the sales price), there can never be more than 99.999... percent profit on a product. So we might be talking about obscene profits like 60 to 70 percent on popcorn.

Only under very restrictive conditions...Certainly not the example that we'd want to stake an entire economy on. But we should see an accounting to make sure that the profits are that large on popcorn. I would contend that, though the cost of sales is small, overhead is large, making the profit something less that what was stated.It would be interesting to see. Wiki mentions the massive markup on the sale price, but doesn't say how much profit it makes the theaters, on average.

By the way, I shouldn't have let this go on as long as I did, but with the way profit is normally calculated (a percentage of the sales price), there can never be more than 99.999... percent profit on a product. So we might be talking about obscene profits like 60 to 70 percent on popcorn.Heh. To be fair, anything more than 100% is mathematically incorrect. I don't know why I said 300% earlier.

I didn't say that it would work on "a typical consumer product". The prices on movie theater popcorn are so high at least in part because the movie theaters ban outside food and drink, thus removing all competition (except for people who smuggle things in). This is an untypical situation, but nonetheless the prices on that particular item could be lowered without interfering with production.


No, the movie theater does not remove competition, and no, this is not untypical. Break it down. You have neither a need nor a right to see a movie; it is an optional purchase. Like most businesses, then, the movie theater owner opts to offer his base product/service at the most attractive possible price, because he must compete with all the others- including the TV. He/She then offers optional additional purchases at a higher markup.

EVERY industry does this!
Airlines make far more profit per passenger on "First Class", internet service companies get more for their " Pro Plus Package" (so much so that they often offer a basic level of service for free- we're looking at you, Google Earth!) and supermarkets generally sell the basic commodity items at a lower profit than the more interesting items you buy on impulse. What you are seeing is a company offering a standard product (movie) at a low markup and a more attractive product (movie plus food) at a higher markup. The high markup items then subsidize the low markup items- if theaters were forced to sell popcorn at the same price as the supermarket, they would be forced to raise ticket prices to make up the difference. Since all industries do this, we may conclude that economic reality* pushes them in that direction. And we would be correct.


*Some people may call this "law", I prefer to think that it is common sense, people facing similar situations usually come up with similar solutions.

It would be interesting to see. Wiki mentions the massive markup on the sale price, but doesn't say how much profit it makes the theaters, on average.

About the only thing that's clear from the AMC balance and cash flow sheets is that showing movies is a losing propostion. I don't think AEN:NYSE can make money, no matter how much they mark up popcorn.

Only under very restrictive conditions...Certainly not the example that we'd want to stake an entire economy on. But we should see an accounting to make sure that the profits are that large on popcorn. I would contend that, though the cost of sales is small, overhead is large, making the profit something less that what was stated..

With universal laws it wouldn't matter under what conditions/restrictions a policy was under. Take price controls. They are not effective most of the time, but in wartime when combined with rationing they have been fairly successful. Generally because during war time people are willing to sacrifice somethings for a temporary amount of time, ie until the war is over.

Also, governments usually don't allow utility companies "abuse" their monopoly powers over consumers. The government uses various policies here including common carriage competition, price caps, and rate of return caps. One can argue over the effectiveness of various policies but few would argue that any policy to limity the price setting abilities of natural monopolies is a bad thing

By the way, I shouldn't have let this go on as long as I did, but with the way profit is normally calculated (a percentage of the sales price), there can never be more than 99.999... percent profit on a product. So we might be talking about obscene profits like 60 to 70 percent on popcorn.

That is not how profit is generally measured. Profit is the ratio of the sales price to the cost, not the percentage of sales price that is profit. If you sell something for more than double what it cost you, the profit is greater than 100% (net revenue is greater than cost). It is in no way factually inaccurate to say you got more than a 100% profit off of a transaction if the net return was greater than the total investment.