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This novel web site gives you the opportunity to balance the Federal Budget. Just use the drop-down menus and pick your spending levels.

http://www.budgetsim.org/nbs/shortbudget06.html

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Heh....

Your New Budget

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Budget Totals
Old budget was $3747.36 billion
($2672.527 billion in spending, $1074.833 billion in tax expenditures and cuts).
New budget is $2022.35 billion
($1433.15 billion in spending, $589.2 billion in tax expenditures and cuts).

You have cut the deficit by $1725.01 billion.
Your new deficit is $-1324 billion.

Oops!
You've cut so much that the federal budget now contains a substantial surplus. Many economists warn that this budget may help induce or prolong a recession, and ordinary citizens demand a refund. You might want to cut taxes or raise spending.



How can this be???? A healthy government that is spending less than it makes "CAUSES" a recession? What crack is being smoked, and who's not sharing it?!?!?!!
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How can this be???? A healthy government that is spending less than it makes "CAUSES" a recession? What crack is being smoked, and who's not sharing it?!?!?!!


I think the crack that's being smocked is called the greenback, and you know very well who's not sharing it ;-)

The comment is a little cryptic but very right. Every dollar the goverment spends ends up in a pocket. The services the government buys are supplied by businesses that employ millions. The transfer payments go to non-working citizens and are immediately exchanged for goods and services provided by yet more businesses. The interest payments float the financial industry, which pays the best salaries with it and accounts for about a quarter of the overall consumption.

Any cut in spending will result in lost profits, either directly if you cut the pork, or indirectly if you cut the transfers. Businesses will cut back and there will be a recession.

It's better not to be addicted to crack, but once you are, cold turkey may not be the smarter course of action. Unless the sight of long, long lines behind soup kitchens and national guardsmen fighting their way through barricaded cities is your idea of "a healthy government."

Regards,
Capitanfracassa
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I ended up with a similar result on my first try, but when I went back to tinker with my results and to apply the surplus to paying down the national debt, I couldn't find a way to pay on the debt in the menus. I thought that was an interesting oversight.

PF
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<i.t's better not to be addicted to crack, but once you are, cold turkey may not be the smarter course of action. Unless the sight of long, long lines behind soup kitchens and national guardsmen fighting their way through barricaded cities is your idea of "a healthy government."

one reason why holding down spending growth and letting economic growth grow is considered the least painful.

I found it interesting the choice of "hold even." There is no such in the federal budget. Base line budgeting was passed in the 70's...and allows for automatic growth in budgets. So if a departments baseline is 4% and spending is increased by 6%...well Mr./Mrs. Politician gets to claim a paltry 2% increase. Or better, if the baseline was 4% and spending was limited to 3%, then the claim is a cut.

caddman
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You have cut the deficit by $1725.01 billion.
Your new deficit is $-1324 billion.


I had a similar result...the applet is pretty cool - one thing I like is that it allows one to see more clearly the nature of the deception of the "social security is broke" crowd. -- for instance, if you just click on "find out what the budget is" without making any changes, it will show social security as the longest line of the bar chart, representing $544.82 billion. If you stop right there you will have a completely erroneous idea of how SS effects the federal budget (but those who would turn SS over to the brokers and bankers do stop right there). In reality, social security represents zero net expense on the annual budget. Using the applet, eliminate the supposed $544 billion SS "expense" entirely from your budget and leave everything else the same -- it calculates that you've only cut $25.6 billion, and even that is some kind of accounting artifact I believe since social security actually brings in more than is paid out in benefits.
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Using the applet, eliminate the supposed $544 billion SS "expense" entirely from your budget and leave everything else the same -- it calculates that you've only cut $25.6 billion, and even that is some kind of accounting artifact I believe since social security actually brings in more than is paid out in benefits.


doh! I dunno. I went back and tried that again and it didn't work that way - anyway, there's something screwy with the way that SS is dealt with in the applet...
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Hi Capitan,

The comment is a little cryptic but very right. Every dollar the goverment spends ends up in a pocket.

That's silly, and only a half truth (or perhaps even only a quarter truth.)

In reality, every government managed dollar is TAKEN from a pocket (that generally manages it better than the government would,) and then a mere PORTION of it is spent to then be re-delivered to another pocket.

The slippage the government siphons in between adds zero value, but merely drains frm the economy.

Returning the management of the funds to the earners of the funds would have a NET POSITIVE effect on the economy, if nothing else than be the elimination of the "mordida" (slippage) that the government ineptitude siphons off at each touch.

The services the government buys are supplied by businesses that employ millions.

Unfortunately the government tends to do a massively pisspoor job of EFFECTIVELY determining WHICH services are most desired, in which proportions, and at what cost/quality levels... all at the common wage-earner's expense.

The transfer payments go to non-working citizens and are immediately exchanged for goods and services provided by yet more businesses.

"Transfer payments" are a code-word for welfare entitlements, I suppose. Let's call them what they are, and we'll circumvent the value determinations for now.

The interest payments float the financial industry, which pays the best salaries with it and accounts for about a quarter of the overall consumption.

The interest payments weren't a discretionary option on the worksheet... nor could they be, since they are contractual obligations for services ALREADY rendered and in place ongoingly (until retired.)

Any cut in spending will result in lost profits, either directly if you cut the pork, or indirectly if you cut the transfers. Businesses will cut back and there will be a recession.

This is half-blind thinking, and completely ignoring the realities. GOVERNMENT spending cuts do not result in aggregate lost profits AT ALL. They merely relinquish the dispersion and discretionary management of the spending to the common man, who then far more effectively spends his own money as he desires. If he spends less, he will increase the savings rate and decrease the need for wasteful welfare. If he spends the same, he will likely apply market pressures to get far more value than the government would or could have, and if he spends more he will do so in micro-targeted fashion achieving far better results than the government would or could have.

It's better not to be addicted to crack, but once you are, cold turkey may not be the smarter course of action. Unless the sight of long, long lines behind soup kitchens and national guardsmen fighting their way through barricaded cities is your idea of "a healthy government."

The "healthy governments" we've historically observed that created such results have virtually entirely smoked the crack of "government management" and "central planning."

Some learn from the past... others are doomed to re-live it. Clearly the current trend is smack-on-center toward larger "rely on us" government.

"Gird your loins."
Dave
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Any cut in spending will result in lost profits, either directly if you cut the pork, or indirectly if you cut the transfers. Businesses will cut back and there will be a recession.
>>
Then why not have the government spend all the money?

Um. This has been tried before. Doesn't work. But what does 100 years of failure tell you? It's different this time?

David
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In reality, every government managed dollar is TAKEN from a pocket (that generally manages it better than the government would,) and then a mere PORTION of it is spent to then be re-delivered to another pocket.

The slippage the government siphons in between adds zero value, but merely drains frm the economy.


"In relaity"? In what reality? Can you give an example?

In the reality I'm aware of, the U.S. suffered an almost constant crisis of liquidity, overcapacity, and periodic depressions until the govenrment began soaking up the excess through transfers and wars. The government indeed inefficiently spends capital, because this is what kept the U.S. from a communist revolution. The problem is not how to produce efficiently but how to destroy excess capacity in a way that preserves the social order.

Returning the management of the funds to the earners of the funds would have a NET POSITIVE effect on the economy, if nothing else than be the elimination of the "mordida" (slippage) that the government ineptitude siphons off at each touch.

You can capitlize NET POSITIVE, but you can't prove it. In the real world, government contraction almost always leads to economic disaster. Take your pick of all the countries who were forced by creditors to cut spending. In which one would you want to live? Brazil? Argentina? Mali? Mexico? The only reason the U.S. has avoided this fate is that it doesn't depend on foreign creditors. But that will change and we will get to test your theory.

GOVERNMENT spending cuts do not result in aggregate lost profits AT ALL.

If you can convince a Boeing shareholders meeting with your theories, I'll eat my hat and yours. Did you buy a fighter jet with your recent tax break?

They merely relinquish the dispersion and discretionary management of the spending to the common man, who then far more effectively spends his own money as he desires.

The common man never had a penny to manage, discretionarily or otherwise, before WW-II. Even today, most of the money is in the hand of enterprises such as citibank and GE, that have about the some number of command levels as the federal government. These enterprises all practice "central planning." They all allocate resources as their top guys see it and then issue marching orders to their large and slow bureaucracies. Everyone who ever worked in one of these organizations knows that the dominant motivation of all players is to cover their behinds and please their bosses, which is exactly the same as in any government. In fact it is worse, because a fededal agent is slightly more likely to refuse a stupid order and escalate a dispute with her immediate boss than a citibank midddle manager. Another difference is that the CEO of citibank thinks one to four quarters into the future whereas politicians think two to six years into the future. Why that makes Citibank a more efficient allocator of resources than Congress is beyond me.

Of course, this discussion hinges on the notion that markets allocate resources better than bureacracies. Corporations may suck because they behave too much like mini-states. Hedge funds then should be much better, since they are pure market players with little bureacracy, always taking their orders from the market directly. Could you please give me a list of the five most important technologies that were created thanks to the foresight and profit seeking of hedge funds?


If he spends less, he will increase the savings rate and decrease the need for wasteful welfare.

Waste is necessary or the survival of the system. We have too much stuff. We have too much agricultural product, too many car factories, too many gadget makers, too much retail space, too many houses. Without waste, the profit rate will be 0 (Zero). Which means either communism or depression (and most likely first depression and then communism)

Regards,
Capitanfracassa
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Dave,

I detect with in your reasoning an unstated belief that government spending adds zero to the wealth of the nation.

I dispute that assumption.

I can point to the first road built between New York and Washington. It became a trade route and increased the GDP of the young nation.

The Transcontinental railroad was the second. It was funded through bonds by the government. It increased wealth in ways that the builders never envisioned. (Nothing Like it in the World by Steven Ambrose)

In the 1990's I found bright young computer programmers from Manila working in Hong Kong as drivers. They couldn't make a living in Manila because the power would not stay on long enough for a business to operate. It is apparent to me, that quality regulation of the electric industry there would have more than paid for itself in income taxes generated by businesses that could operate.

I have noted before that I came across a place here in Texas that treats mentally ill people. It is for the indigent and is supported by state and local taxes. This can show an immediate positive economic impact, simply because it is cheaper to treat the mentally ill than to incarcerate them.

Although many government spending programs are just a waste of money, many are not. Furthermore I can go to the CAPS board and in just a few minutes find a 100 million dollars worth of companies that will fail and use up all of their capitalization doing it. Waste is inevitable, but it is tolerable and necessary so that the useful things can be built.

Cheers
Qazulight
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Hi Capitan,

Hope you'll forgive me for not having the time to participate in a point-by-point unfolding... I'll just cover three issues;

1)
GOVERNMENT spending cuts do not result in aggregate lost profits AT ALL.
If you can convince a Boeing shareholders meeting with your theories, I'll eat my hat and yours. Did you buy a fighter jet with your recent tax break?


Note that I said "aggregate." I intentionally chose NOT to micro-focus. You ignored that, and highlighted a single company (that sucks hugely off the government... but certainly does not need to.)

2)
Of course, this discussion hinges on the notion that markets allocate resources better than bureacracies. Corporations may suck because they behave too much like mini-states.

Agreed to point one, and conditionally agree to point two (WHEN corporations behave too much like mini-states... which, by your own insinuated admission, is a negative behaviour anyway.)

Hedge funds then should be much better, since they are pure market players with little bureacracy, always taking their orders from the market directly. Could you please give me a list of the five most important technologies that were created thanks to the foresight and profit seeking of hedge funds?

Hedge funds do not CREATE technologies, they FUND and provide the RESOURCES for them, and if I had the time it wouldn't take much at all to list a TON of technologies (from mundane to life-saving) that have been birthed and created by hedge-fund supported venture capital.

I'd go further to propose that the venture supported technology list would likely outpace the bureaucratic supported list by several multiples.

3)
If he spends less, he will increase the savings rate and decrease the need for wasteful welfare.
Waste is necessary or the survival of the system.


I disagree that it is "necessary" however I would acknowledge that it is UNAVOIDABLE... in the same way that simple biological waste (amonia, etc) is an unavoidable reality in our physical living function.

We have too much stuff.

This is certainly a discretionary statement... but frankly, I will agree (in my own opinionated way! ;~) The market solves this by rewarding those who manage their resources better.

We have too much agricultural product,

While the market naturally solves this on it's own, we see a perpatuation of "too much agricultural product" thanks virtually entirely to government intrusion (subsidies... farm welfare...)

too many car factories,

The markets are certainly taking care of this problem easily enough.

too many gadget makers, too much retail space, too many houses.

Ditto market effectiveness.

Without waste, the profit rate will be 0 (Zero).

This is silly. Profit doesn't come from waste, it comes from a competitive delivery of unique value to the consumer of that value. If it were "waste" then it would not be demanded and paid for.

Which means either communism or depression (and most likely first depression and then communism)

You missed the procession of logic at the immediately previous wrong turn. The key is that Profit has no connection to Waste.

Cheers,
Dave
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Here's your chance: Balance the Fed budget
http://www.budgetsim.org/nbs/shortbudget06.html

I decided to just substantially reduce a few major things and see what happens. It is likely not possible to eliminate anything cold turkey but some reductions by 70% do seem possible.

I cut Military spending 50%
I cut the war in Iraq 70%
I cut agriculture 70%
I cut commerce and housing 70%
I cut corporate tax breaks 40%
I cut housing tax benefits 40%

Budget Totals
Old budget was $3747.36 billion
($2672.527 billion in spending, $1074.833 billion in tax expenditures and cuts).

New budget is $3333.42 billion
($2348.21 billion in spending, $985.21 billion in tax expenditures and cuts).
You have cut the deficit by $413.94 billion.
Your new deficit is $-12.93 billion.
=================================================
It is amazingly easy to balance the budget
Mish
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Hi Qazulight,

I detect with in your reasoning an unstated belief that government spending adds zero to the wealth of the nation.
I dispute that assumption.


This is an inaccurate assumption on your part.

I DO NOT believe that "government spending adds zero to the wealth of the nation."

Rather, I present that government spending is EXTREMELY RARELY as effective or as well managed as the spending of the free markets.

There are exceptions... as will forever be trotted out by the collectivists... but they are, in the end and always, simply exceptions.

I can point to the first road built between New York and Washington. It became a trade route and increased the GDP of the young nation.

Again, there ARE the showcase examples where a government sponsored project went well... but compared to the virtually endless lists of free market created developments, the conversation dies before its even born.

Ultimately... government succeeeds by accident. The INTENTIONS are usually for the best... but there is little in the way of reliable success track records to point to... always and only the exceptions.

Ironically, "collectivism" is not driven by a desire for "progress" in spite of the 'progressivism' label. Instead, collectivism tends to be emotionally driven by a desire to destroy the success of the free market mechanisms. A bitterness of enterprise (which relentlessly posts it's own track records of results) is the backbone of "progressivism."

Cheers,
Dave
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Rather, I present that government spending is EXTREMELY RARELY as effective or as well managed as the spending of the free markets.

There are exceptions... as will forever be trotted out by the collectivists... but they are, in the end and always, simply exceptions.

Again, there ARE the showcase examples where a government sponsored project went well... but compared to the virtually endless lists of free market created developments, the conversation dies before its even born.

Ultimately... government succeeeds by accident. The INTENTIONS are usually for the best... but there is little in the way of reliable success track records to point to... always and only the exceptions.


Absolutely correct
Mish
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Without waste, the profit rate will be 0 (Zero).

This is silly. Profit doesn't come from waste, it comes from a competitive delivery of unique value to the consumer of that value. If it were "waste" then it would not be demanded and paid for.


"unique value" rarely exists. That is the meaning of overcapacity. Competition and profits are opposites. Under perfect comepetition there are no profits. Competition creates overcapacity. There is too much of almost everything relative to the purchasing power of consumers. Waste doesn't produce value for the buyers. It destroys value so that the remaining produce becomes "unique," i.e. scarce. Scarcity commands a premium, which translates into profits.

The engineers that work for Boeing are inovative and productive. They just happen to make bombs instead of gadgets. If they were all to make gadgets, there would be no profits in making gadgets. So thanks to the goverments, Boeing shareholders have a smile on their face. And they know whom to thank. Apple's shareholders have a grin for the same reason. Although they are less likely to be aware of the government service they recieve--reduced competition. Then the bombs fall somewhere, and that means a lot of bridges and power stations and whatnot to rebuild. Rebuilding them requires loans. Loans pay interest. Higher demand for loans means higher interest, which puts a smile on the face of bondholders. Then it requires doing the actual work. All these contractors who are hired could be competing on selling you a bathroom renovation. Which means no profits because there are already too many bathroom renovations and not enough people who can afford them. So half of them are hired by Halliburton and all profit.


In addition, most wasting is paid for by the government; that increases buying power, reducing overcapacity, since overcapacity is always relative to the buying power.



Regards,
Capitanfracassa
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Capitanfracassa,

I am amazed at your cynicism.

The government provides important foundations for wealth to be created. Mostly it does it by providing a means for wealth to be retained.

If the government did not provide a way for us to hold and "own" land, we would all have to stand around with our private armies to protect where we live. This is not an efficient way of living. It makes long term investment very risky. By having a secure way of owning land, we allow investment long term investments in homes, factories, farms and so on. The amount of money added to the economy has to be greater than the money spent by the government to accomplish that.

It is apparent from current international money flows that many people perceive that the U.S. government, and the states governments, are adding more value to the economy than they are spending. Furthermore because of the unique nature of this country, intra-state migrations help indicate which state and local governments are spending their money effectively.

To simply complain about government spending with out comparing it to how effectively other governments are spending money....well its just meaningless.

I admit that Dave has a point about private enterprise being more effective than government spending. It has to be, it gets measured every day in the stock market, but there are many things that private enterprise simply cannot do. (This last statement could be discussed pro and con forever, my argument would have to do with time horizons and accountability.)

I submit that Boeing contracts help secure your ability to invest in bonds, and your land, and your education. I also submit that transfers of wealth, make it easier for you to get to work because little kids are not in the roadways begging for money. Finally I submit that SS provides security, not for the old folks, but for the middle aged people who would have the middle of their lives disrupted by the burden of elderly parents. It seems to me finically prudent to pay for the care of elderly people in a systematic way rather than a haphazard way. This is the same principle that life insurance was founded on.

I also submit that war is a lousy way to provide security. I further submit that money spent paying diplomats to drink and smooze is a lot more effective than blowing buildings up. However, they have no power if there or no troops in the barracks. It was my experience that the first Gulf War happened because we had a diplomat fail in her job, Saddam mis-read what she told him. The second Gulf war was the result of poor intelligence, or the interpretation there of, both were the result of budget cutting in the foreign service areas. In this case money was not spent as well as it should have been, but still it is being spent more effectively than say, the budget of Nigeria.

I could go on and on, the Texas constitution was written to protect land owners from unfair lending pratices, the FDA was created to help remove harmful drugs from being marketed. The Minerals Management Service provides a frame works so that oil companies don't have to have their own private navies to protect thier offshore investments. The Texas Commission on Environmental Quality keeps me from dumping my sewer into the drain that runs by other peoples homes. The EPA has a roll to play here as Texas is attempting to steal most of the water from the Sabine River basin that is shared with Lousianna.

And so on.

Cheers
Qazulight





Cheers
Qazulight
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a most excellent post

"unique value" rarely exists. That is the meaning of overcapacity. Competition and profits are opposites. Under perfect comepetition there are no profits. Competition creates overcapacity. There is too much of almost everything relative to the purchasing power of consumers. Waste doesn't produce value for the buyers. It destroys value so that the remaining produce becomes "unique," i.e. scarce. Scarcity commands a premium, which translates into profits.

The engineers that work for Boeing are inovative and productive. They just happen to make bombs instead of gadgets. If they were all to make gadgets, there would be no profits in making gadgets. So thanks to the goverments, Boeing shareholders have a smile on their face. And they know whom to thank. Apple's shareholders have a grin for the same reason. Although they are less likely to be aware of the government service they recieve--reduced competition. Then the bombs fall somewhere, and that means a lot of bridges and power stations and whatnot to rebuild. Rebuilding them requires loans. Loans pay interest. Higher demand for loans means higher interest, which puts a smile on the face of bondholders. Then it requires doing the actual work. All these contractors who are hired could be competing on selling you a bathroom renovation. Which means no profits because there are already too many bathroom renovations and not enough people who can afford them. So half of them are hired by Halliburton and all profit.


In addition, most wasting is paid for by the government; that increases buying power, reducing overcapacity, since overcapacity is always relative to the buying power.


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It would be easier if it had a separate item for "earmarks"

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I admit that Dave has a point about private enterprise being more effective than government spending. It has to be, it gets measured every day in the stock market, but there are many things that private enterprise simply cannot do. (This last statement could be discussed pro and con forever, my argument would have to do with time horizons and accountability.)

Well I do not know if the captain responded yet or not but there are actually quite FEW things private enterprise can't (or won't) do and one of them is blowing up Iraq for no reason. Let's consider more things private enterprise would not have done.

WW1
Korean War
Vietnam War
Merging 3 countries into one Iraq
Installed a puppet government in Iraq.
Funded Hussein with WOMDs to fight Iran
Backed Osama Bin Laden in a fight with Russia

The only war worth fighting that I can see was WWII and I do not know if private enterprise would have supported it or not but it never would have happened in the first place had it not been for inane actions following WWI.

As for your shining examples like railroads or roads you assume that private enterprise would not have created them. Perhaps they would have perhaps not. I actually suspect the latter. But another problem I have is that you are only looking at the seen benefits without looking at the unforseen consequences: urban sprawl, confiscation of land, mass killing of Indians to build the railroads, etc etc.

Face the facts.
Government is the problem not the solution.
Free enterprise is the solution.

Mish


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Hi Capitan,

Some of your comments boggle the mind..... if I may?

"unique value" rarely exists.

Huh? In which universe are you referring to??? I challenge you to find even ONE example where it is impossible for a consumer to perceive a unique value distinction!

Realize that in endless cases of marketing studies, retailers have proven that merely PLACING two exact identical grocery products (such as identically labeled green bean cans) at different vertical eye levels on a grocer's shelf can make a difference of 1-7 cents.

Perfectly free, non-coerced, non-influenced, discretionary consumers (on average) will choose the more expensively marked (from up to 7 cents more expensively marked) identical grocery items merely due to the PERCEPTION of a "unique value" of relative convenience... something with no inherent relationship even to the item in question itself!

As long as you are referring to a universe where the decision is a human decision, you cannot eliminate the distinguishment of unique value.


That is the meaning of overcapacity.

Huh?
WHAT is the 'meaning' of overcapacity?
WHERE are you conjuring "overcapacity" from? It hasn't been in the thread at all...


Competition and profits are opposites.

No, this is wrong. Competition and Profits are wedded bedfellows.

Without competition a provider will wither and die while it's consumers learn to ignore it's failure to sharpen it's offerings.

WITH competition all participants are called to their most efficient, effective, and capable delivery.

Competition is the leader's AND the laggard's best friend, and absolutely required for profits.


Under perfect comepetition there are no profits.

This is impossible. It's like saying "in a perfect basketball game nobody scores anything."

Without profits, there are no competitors.


Competition creates overcapacity.

Only in that bizarre alternative universe where consumers and providers are something other than humans.

No competitor can afford to waste resources beyond the bare minimum. Overcapacity, by it's definition, is a waste of resources. The concepts are self-cancelling.

There is too much of almost everything relative to the purchasing power of consumers.

Again... only in a non-parallel universe of some bizarrely imaginary reality. "Too much" implies accepted and acceptable waste, which competion abhors, ESPECIALLY in free, unrestrained capitalistic markets.

Waste doesn't produce value for the buyers. It destroys value so that the remaining produce becomes "unique," i.e. scarce. Scarcity commands a premium, which translates into profits.

Your comments are so strangely out of place, I fear we may actually be talking about two completely different things and ASSUMING we are both speaking in the same realm. If this is indeed the case, I apologize.

All the best!
Dave
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I highly doubt private enterprise would have fought the Civil War.

David
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Private enterprise may well have installed a new gov't in Iraq.

i.e. mercenaries.

David
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I highly doubt private enterprise would have fought the Civil War.

David


Private enterprise may not have but nonprofit organizations may have as well as ethically minded individuals. Proof of the latter is easy to find in the underground railroad that was not to the best of my knowledge government sponsored. I might also add that even the South forbade the importation of new slaves. Thus slavery was on its death bed of its own accord.

Of course if government was any good then the "all men are created equal" clause would have been banned slavery from the outset thus negating the need for a Civil War in the first place.

Mish
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Capitan,

Have to rip apart this paragraph... as unfortunate as it is against Mish's admiration of it...

The engineers that work for Boeing are inovative and productive. They just happen to make bombs instead of gadgets.

So far, true enough.

If they were all to make gadgets, there would be no profits in making gadgets.

HUH??????? Again, in what universe, and by what logic???

A) What do you refer to as "gadgets"?
B) There are exponentially mre engineers that DO NOT produce bombs than there are who do... and you are implying that "there are no profits" for the production of these engineers?

So thanks to the goverments, Boeing shareholders have a smile on their face. And they know whom to thank.

OK... BA shareholders love the taxpayer's dollar... true dat.

Apple's shareholders have a grin for the same reason. Although they are less likely to be aware of the government service they recieve--reduced competition.

Huh???

Then the bombs fall somewhere, and that means a lot of bridges and power stations and whatnot to rebuild. Rebuilding them requires loans. Loans pay interest. Higher demand for loans means higher interest, which puts a smile on the face of bondholders. Then it requires doing the actual work.

This is a long-ago proven fallacy that collectivists bury their head in denial about. The economic activity of rebuilding from destruction NEVER equals the value destroyed. War is ALWAYS a net economic loss to the greater aggregate society. It's the most cowardly bastardized permutation of competition there is... one where the goal is to eliminate the game.

All these contractors who are hired could be competing on selling you a bathroom renovation. Which means no profits because there are already too many bathroom renovations and not enough people who can afford them. So half of them are hired by Halliburton and all profit.

You're logic is circularly inverted. If there are no profits in bathroom renovations (or at the point in time where competition has brought margins to the point where the ineffective cannot compete) then no further engineers/contractors will enter that market. The remaining contractors will go where they ARE most profitably effective. THIS is the magic of the free market... it naturally self-sorts in the most efficient manner without the need for external intrusion.

Cheers,
Dave
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Hi Capitan,

You can capitlize NET POSITIVE, but you can't prove it.

SURE I can... and frankly, the one most dogged proof is beaten into the Republicans by the Polytical Asylum Democrats virtually daily;

A reduction in real taxation and reduction in real government INCREASES economic strength and activity... EVEN when promulgated by a DEMOCRATIC president (i.e. Clinton.)

But Clinton's results are by no means a sore thumb in this aspect... the dynamic has been empirically observed time & again, nationally and internationally.

The healthiest countries in the world boast the least governmental economic intervention (along with the least warring and destructivist histories.)

Simply is.

Cheers,
Dave
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Captain:
If they were all to make gadgets, there would be no profits in making gadgets.

Dave:
HUH??????? Again, in what universe, and by what logic???

A) What do you refer to as "gadgets"?
B) There are exponentially more engineers that DO NOT produce bombs than there are who do... and you are implying that "there are no profits" for the production of these engineers?

Mish:
By what logic?
By common sense: If there is a profit then competition for profits will tend to drive that profit towards zero over time

A)Common sense dictates that the definition of gadget is irrelevant
B)There is a profit for the production of bombs but only at the expense of taxpayers subsidizing those profits. As for the profit for non-bomb making non-government sponsored engineers, they make whatever they are entitled to so your argument is meaningless. Over time those profits would shrink and we see it now with global wage arbitrage and increasing pressures on the middle class. Again, that is not only what logic would dictate but what is actually happening in practice.

Mish
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Capitan,

The problem is not how to produce efficiently but how to destroy excess capacity in a way that preserves the social order.

Destructivism NEVER benefits the grand order... ever, ever, ever.

You may have an "opinion" leg to stand on to say that competition isn't always 'nice,' or 'fair'... since these are subjective terms... I certainly can't argue your 'feelings.'

HOWEVER, the best and most effective absorption and elimination of resource waste is free competition. The greatest creator of waste is the elimination of competition.

All inverse backwardisms otherwise are nonsense.

Cheers,
Dave
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the best and most effective absorption and elimination of resource waste is free competition. The greatest creator of waste is the elimination of competition.

Dave, I certainly have to side with you on this one

Mish
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Hi Mish,

Mish:
By what logic?
By common sense: If there is a profit then competition for profits will tend to drive that profit towards zero over time


"Towards" yes... but never "INTO zero." Competition will almost never kill it's own life, instead it will shange the playing field.

You cannot find a market (ANY market) with zero profit. Again, that's like a 'healthy basketball game' where there is no scoring. (We'll ignore hockey for this metaphor! ;~)

There is a profit for the production of bombs but only at the expense of taxpayers subsidizing those profits.

Right... else there is no realistic demand for bombs. Bombs are a very poor competitive tool used by nations. The only semi-intelligent use for a bomb is as an unused threat... unfortunately, that threat is only credible after proven effectiveness (sting) of the threat. The stupidest and most economically insidious use of a bomb is pro-active employment of it for it's most destructive purposes.

As for the profit for non-bomb making non-government sponsored engineers, they make whatever they are entitled to so your argument is meaningless.

The fact that non-bomb engineers freely choose to gainfully work at whatever they will makes MY argument meaningless????

I think you've confused my points with the Capitan's.

Over time those profits would shrink and we see it now with global wage arbitrage and increasing pressures on the middle class. Again, that is not only what logic would dictate but what is actually happening in practice.

By the term "those profits" (in context of your paragraph) I have to assume you are referring to the profits of bomb-making. Toward this, there is very little global wage arbitrage, as the design and manufacture of war weapons is considered a "security issue" and competition is virtually eliminated by government control.

If you are referring to the profits of the NON-bomb-making engineers... we must assume each is ALREADY employed in a relatively efficient engineering and manufacturing market. If/As his employer is squeezed in one type of manufacturing practice, it will naturally shift to a different form, aspect, or niche where it can create a more unique value distinction, which will then yield a greater profit.

Cheers,
Dave
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the best and most effective absorption and elimination of resource waste is free competition. The greatest creator of waste is the elimination of competition.

Dave, I certainly have to side with you on this one


This is simply not true. In many industries there are economies of scale that produce huge efficiencies. That is why we have walmart, because a million small grocery stores are ineffficient. That is why we have citibank rather than hundreds of little neighborhood banks. One big retailer can squeeze many efficiencies, centralize many aspects of the business process, etc. Most large corporations are oligopolists. This is a lot more efficient than free competition, which is almost nonexistent in any field were corporations operate. If the retail market were to return to free competition, Walmart's profits would disappear and it would go bankrupt, but consumer prices would rise because of rising inefficiencies.

But the dynamic is more complex.

Competition drives efficiency up.
Efficiencies drive profits down.
The industry consolidates to reduce competition and capture the efficiency premium.
Consolidation drives down income and consumer purchasing power.
The rise in capacity usually exceeds the ability of oligopolies to protect profits.
Overcapacity is a therefore a chronic problem. Without government intervention, the result is a cycle of business collapse, unemployment, unrest, etc.
This cycle happened many times until the Great Depression. Since then, government took the role of protecting profits by a mixture of consuming the excess capacity (mostly through war), redistriuting wealth and pumping credit. The difference between all post WW-II administrations is in the exact mix of these three tools.

So the point that contemporary government is inefficient is beside the point. It is, and so what?

Regards,
Capitanfracassa
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Hi Cap,

So many truths, and happy to see them. We merely need to wright the fallen ones...

In many industries there are economies of scale that produce huge efficiencies. That is why we have walmart, because a million small grocery stores are ineffficient. That is why we have citibank rather than hundreds of little neighborhood banks. One big retailer can squeeze many efficiencies, centralize many aspects of the business process, etc. Most large corporations are oligopolists.

ALL true, so far.

This is a lot more efficient than free competition, which is almost nonexistent in any field were corporations operate.

No... none of your above true statements are exclusive of free competition. Such competition encircles aggregation as well. Microsoft "competes" with Agosoft (a one man software company in the financial industry.) Merely growing large and becoming more efficient (which is not a given) does not eliminate competition.

If the retail market were to return to free competition, Walmart's profits would disappear and it would go bankrupt, but consumer prices would rise because of rising inefficiencies.

Free competition NEVER LEFT the retail market. Walmart is in no way free of competition.

But the dynamic is more complex. OK
Competition drives efficiency up. Sure...
Efficiencies drive profits down. Only to a limit, but yes...

The industry consolidates to reduce competition and capture the efficiency premium.
Ahhh... no. You lost direction at the assumption of purpose. Industry does NOT consolidate for the purpose of eliminating competition, but rather to achieve better efficiencies, lower costs, and thus greater net profits. This action is taken at (often great) risks of inflexibility and immobility in the competitive markets.

The Shaquille O'Neal is not selected as the point guard for the basketball team regardless of how dominating he is... he lacks the speed & agility required to compete in that "market" of the position of point guard.

Consolidation drives down income and consumer purchasing power.

No, consolidation MAY have EITHER a positive OR negative effect on revenues and income, all depending on the inter-relationship within that market. The sonsuming markets will ruthlessly punish the consolidators that morph into the wrong direction.

Consumer purchasing power is OPTIMIZED by competition, and the consumer wields the weapon of discretion to reward or punish relative market strategies.

The rise in capacity usually exceeds the ability of oligopolies to protect profits.

You're being too nebulous and undisciplined in your terms...
When you say "capacity" are you referring to production capacity, consumption capacity, revenue capacity, what?

Oligopolies that over-produce (can we say "SUV's"?) quickly discover bleeding red ink all over their books... and once again, the competitive consumer markets clean it up... ruthlessly.

Overcapacity is a therefore a chronic problem. Without government intervention, the result is a cycle of business collapse, unemployment, unrest, etc.

"Without government intervention".... LOL... I am simply at a loss for words.....

To equate "government intervention" with the ELIMINATION of waste...

We are definitely from different universes, apparently.

This cycle happened many times until the Great Depression. Since then, government took the role of protecting profits by a mixture of consuming the excess capacity (mostly through war), redistriuting wealth and pumping credit. The difference between all post WW-II administrations is in the exact mix of these three tools.
So the point that contemporary government is inefficient is beside the point. It is, and so what?


This is surreal...
I am literally without words...

In any case, I wish you all the best, sincerely!
Dave
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Hi Capitan,

The comment is a little cryptic but very right. Every dollar the goverment spends ends up in a pocket.

That's silly, and only a half truth (or perhaps even only a quarter truth.)


Thank you for proving the Capitan's point.
You've shown that every dollar the government spends ends up in a pocket.

You don't like that some dollars go into government employee's pockets, but they're still going into pockets.

You don't like that some dollars go into government contractor's pockets, but they're still going into pockets.

You don't like that some dollars go into government welfare pockets, but they're still going into pockets.

You don't like that some dollars go into foreign government pockets, but they're still going into pockets.

Now that we've put all of the government's money into someone's pocket, you could debate whether any or all of those pockets deserved to have dollars going into them.

In my never so humble opinion, the only government dollars going into pockets that aren't immediately being re-circulated into our economy are foreign/military aid dollars and that part of overseas military personnel pay that's spent on local economies.
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This is simply not true. In many industries there are economies of scale that produce huge efficiencies. That is why we have walmart, because a million small grocery stores are ineffficient. That is why we have citibank rather than hundreds of little neighborhood banks. One big retailer can squeeze many efficiencies, centralize many aspects of the business process, etc. Most large corporations are oligopolists. This is a lot more efficient than free competition, which is almost nonexistent in any field were corporations operate. If the retail market were to return to free competition, Walmart's profits would disappear and it would go bankrupt, but consumer prices would rise because of rising inefficiencies.

Wrong captain.
It is free competition that allowed Walmart to grow.
If the government steps in and mandates inefficiencies like required health care for employers above a certain size, Walmart will shrink.
PS That was already tried but I believe the state lost.

Now if you are saying that C and Walmart got big ONLY because of government actions that MIGHT be another story but I doubt it. In the case of Walmart, Sam had a better idea and was better at implementing it. That is free competition and Walmart grew.

You are proposing that companies can not grow in the face of competition which I believe is silly. The strong survive and grow in the face of competition, perhaps because of competition. Consumers benefit as a result with increased numbers of products at prices that decline. Dell did not beat out Micron because it was bigger, it got bigger because it was better and customers decided on DELL. Likewise customers chose Oracle over Sybase for the same reasons (Oracle was doing something that customers wanted) and thus won the software battle.

Mish


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Under perfect comepetition there are no profits

Maybe not, but who needs profits anyhow? (yes I am aware that the present capitalistic economy needs them)

What I want is a standard of living that is as high as possible.
I would rather miss out on the profits and have more spare time.
If no profits would mean that I only need to work 2 hours a day, I'll gladly do without them.

This IMO is what often creeps into this kind of discussions. The definitions of economy, wealth, money, standard-of-living etc gets all mixed up and people start argueing even though they fundamentally agree.

Best,
Rien.
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It is amazingly easy to balance the budget
Mish

~~~~~~~~~~~~
Of course it is...but who says they want to?

the housing bubble and the Iraqi war have kept this economy alive.....

...now the thing will dive....

cut number one? We allow the Federal govt to negotiate with the drug companies.....

cut number two? well not exactly......we dont allow for the time table of all of W's tax cuts to be "maintained"......

cut number three? well not exactly again....instead the dems reroute the money....this acts as a cut from the big company boys.....like big oil's tax incentive program being half way axed......and acts like a stimulous like giving more to the needy.........

if the dems and prez do cut the deficit this year and going forward, then we can see a small recession followed by meaningful reductions in the over night rate.......

dave
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Ultimately... government succeeeds by accident. The INTENTIONS are usually for the best... but there is little in the way of reliable success track records to point to... always and only the exceptions.

Absolutely correct
Mish

~~~~~~~~~~

absolutely wrong....if one of the parties is in power for 18 years....ie the republicans up until now......then this leads to arrogance, incompentence, and corruption.........

I seriously doubt the last congress or the prez is capable of good intentions when it comes to your monies.....

why on earth would the oil companies get a tax break? proof enough....

dave
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You are proposing that companies can not grow in the face of competition which I believe is silly.

~~~~~~~~~~~

Mish Capitan,

if the debate here boils down to this....then both sides are just generalizing and theorizing too much.....

anti trust laws are on the books for just this reason......companies can get locked out of business because of certain practices by larger companies in their desired industry.....

on the other hand in many industries there are very low barriers to entry and it is a free for all....

dave
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No... none of your above true statements are exclusive of free competition. Such competition encircles aggregation as well. Microsoft "competes" with Agosoft (a one man software company in the financial industry.) Merely growing large and becoming more efficient (which is not a given) does not eliminate competition.


You need to get back to Econ 101. Free competition is competition in which everybody is a "price taker." In free competition, the decision of each producers is made independently of all others because each decision has negligble effects on price. This is a pre-condition underliying "market efficiency." Check your 101 textbook. And it is a condition that almost never exists in any market in which corporations operate.


Industry does NOT consolidate for the purpose of eliminating competition, but rather to achieve better efficiencies, lower costs, and thus greater net profits.


Can't argue with denial of reality. In a competitive market, lower costs and better efficiencies lead to lower prices, not higher profits. higher profits depend on reduced competition. Besides, reducing "excessive" competition id discussed candidly in the business press whenever a merger takes place.

Free competition NEVER LEFT the retail market. Walmart is in no way free of competition.

It is not "free of competition". The retail market is oligopolistic (and more importantly oligopsonistic,) not strictly monopolistic. But competition is much reduced. The way Walmart commands its suppliers is so well known. But if you wish to deny it, I cannot help.


No, consolidation MAY have EITHER a positive OR negative effect on revenues and income, all depending on the inter-relationship within that market. The sonsuming markets will ruthlessly punish the consolidators that morph into the wrong direction.


I'm talking about the purchasing power of the consuming public not the consolidating businesses. Consolidation increases efficiencies. But prices are reduced only at a fraction of the increased efficiency. The rest is captured as profits. From the other side, consolidation eliminates jobs and decreases the competition of hiring. So purchasing power is usually pushed from both direction.


The rise in capacity usually exceeds the ability of oligopolies to protect profits.

When you say "capacity" are you referring to production capacity, consumption capacity, revenue capacity, what?

production capacity, of course. The capacity to make and sell more at the current price for a higher profit, which cannot be actualized because actually selling more will reduce prices further. This is a feature of oligopolistic markets.

To equate "government intervention" with the ELIMINATION of waste...

In this context, government doesn't eliminate waste. It wastes. When you have overcapacity, that is a good thing for profits. If you could convince every consumer to buy a third car, a plasma TV for the shower, and a phone that can microwave sandwiches, that would also solve the problem. Industry tries that. It is called advertising. But however silly consumers can be they cannot be silly enough, mostly because they have a limited budget. Getting the government to spend on things nobody needs is a lot easier.


In any case, I wish you all the best, sincerely!

To you as well.

Regards,
Capitanfracassa
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Maybe not, but who needs profits anyhow? (yes I am aware that the present capitalistic economy needs them)

What I want is a standard of living that is as high as possible.


Yes, I agree with that. But you can argue it both ways. You could give up on profits and get indeed a higher standard of living, but that requires a complete redesign of the economy. There is a good chance that this redesign will fail and you'll end up with a lot lower standard of living. Is it worth trying? In fairness there is no simple answer.

The current economic/monetary system is trying to square the circle, preserving profits (and the political/economic system) while neutralyzing a good deal of its negative effects on the the standard of living (but keeping the good aspects, innovation, etc.). The price is quite high. But it is paid by others--Iraqis for example, and our grandchildren who will live in a dessicated desert.

I try to separate my wishes from the analysis of what actually takes place. So I take the sacrosantity of profits as a given.

Regards,
Capitanfracassa
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You are proposing that companies can not grow in the face of competition which I believe is silly.


Technically, it is impossible to grow much faster than the market in a free competition. The reason is that if you produce at your marginal cost, you have no incentive to grow. That is why most small businesses indeed do not grow. Your car mechanic most likely has the same amount of business today that he had twenty years ago. The same goes for your dentist and florist. Some florists go out of business and some prosper. But all this is fairly limited. Overall, florists have business volumes in a a very tight range.

Growing businesses always begin with some kind of a difficult to copy "competitive advantage". That can be a monopoly granted by the government, for example a license, a patent, etc. But it can aslo be a home grown monopoly, a technological innovation, a unique way of doing business etc. This advantage can (but doesn't have to) develop within a competitve markets.

Once a business, however, gets on the growth path thanks to such an advantqage, it leaves the competition behind. The market is restructured into an oligoply, former competitiors are bought, others exit. The few players in an oligopoly have an strong incentive to grow because they have profits that exceed, often by far, their marginal costs, and they generate tons of cash every year. Their growth is limited no longer by their costs but by the size of the market. That is the exactly what overcapacity means.

Of course they still compete with each other and upsets happen, sometimes new players emerge, etc. Competition doesn't disapear. And sometimes even oligpolisitc markets can develop a destructive competition that eats up profits, as airlines and car manufacturers prove. But oligopolistic competition and free competition are two different animals.

Regards,
Capitanfracassa
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Qazulight,

Yes, I'm cynical. But I usually try to keep my cynicism grounded.

Please do not interpret my comments as a blanket assertion against "government."

Government is necesssary for the coordination of complex societies. As such, it no doubts adds a lot of value. Anyone who denies that should go live in Afghanistan.

The issue here (at least for me) is not government in general, but some specific functions of government (and mostly of the U.S government) within the specific conditions of corporate capitalism.


The government provides important foundations for wealth to be created. Mostly it does it by providing a means for wealth to be retained.


Yes, 80% of Americans share between them 10% of America. 1% shares 37%. So I guess wealth retention has been a huge success.


It is apparent from current international money flows that many people perceive that the U.S. government, and the states governments, are adding more value to the economy than they are spending.


No. It is only apparent that they perceive it in their interest to do so. That has no connection at all with any value added or not to the economy. When I buy a financial instrument, I don't care about the value it creates. I own companies such as Altria, whose business is poisining its customers. I own Altria because it increases my wealth not because it produces any value at all. Call me cynical.

I submit that Boeing contracts help secure your ability to invest in bonds, and your land, and your education.

They do. The problem is they do it through slaughter.


I also submit that transfers of wealth, make it easier for you to get to work because little kids are not in the roadways begging for money. Finally I submit that SS provides security, not for the old folks, but for the middle aged people who would have the middle of their lives disrupted by the burden of elderly parents. It seems to me finically prudent to pay for the care of elderly people in a systematic way rather than a haphazard way. This is the same principle that life insurance was founded on.


I agree.


I also submit that war is a lousy way to provide security. I further submit that money spent paying diplomats to drink and smooze is a lot more effective than blowing buildings up. However, they have no power if there or no troops in the barracks. It was my experience that the first Gulf War happened because we had a diplomat fail in her job, Saddam mis-read what she told him. The second Gulf war was the result of poor intelligence, or the interpretation there of, both were the result of budget cutting in the foreign service areas. In this case money was not spent as well as it should have been, but still it is being spent more effectively than say, the budget of Nigeria.


This is extremely naive. Within the last half century, the U.S. invaded other countries almost forty times. Half of the wolrd's military belongs to the U.S. Countries not hosting U.S. military bases or recieving U.S. military training are an endangered species. This is not the result of some careless mistake in resources allocation. This is a dominant feature of the U.S. society, economy and political system.

Regards,
Capitanfracassa
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Succinct to the point & agreed....It's (gubmint), the only one we got, that even comes close to working.

So the point that contemporary government is inefficient is beside the point. It is, and so what?

Regards,
Capitanfracassa


KBM (interesting "debate".....;o)

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Under perfect comepetition there are no profits

Maybe not, but who needs profits anyhow? (yes I am aware that the present capitalistic economy needs them)


Incidently, your idea has occured to a couple of people.

First, eliminating oligopolistic profits was part of Keynes's original theory, the part most of his followers conveniently forgot. He called it, "euthenizing the rentier." He was a bit naive to believe that the rentiers wouldn't fight back.

Before Keynes, there was a quite imaginative theory of money put forward by the Austrian Rudolf Steiner ( of "anthroposophy" see http://en.wikipedia.org/wiki/Rudolf_Steiner) and silvio Gesell (http://en.wikipedia.org/wiki/Silvio_Gesell ), a German businessman turned radical.

The basic idea was to make money perishable. In moder terms, to issue money as a call option on a basket of goods and services. (Keynes's prefered choice, to issue money with a negative real interest rate, was a less radical attempt to achieve the same goal.)

So you see, I do like Austrian economic theory after all ;-)

Regards,
Capitanfracassa
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Hi DesertDave,

Now that we've put all of the government's money into someone's pocket, you could debate whether any or all of those pockets deserved to have dollars going into them.

I don't have any concern of "deservedness" at all... The issue is where the optimum RESULTS are generated from the passing of that dollar. Government is excellent (arguably irreplaceable) at an extremely small set of responsibilities... the danger is when we allow Government (which by it's inherent human nature desires to grow) to expand BEYOND that small set of appropriate functions.


Hi TiRien,

What I want is a standard of living that is as high as possible.

By its very definition, that is ONLY available from profits.

I would rather miss out on the profits and have more spare time.

That is available to you, or anyone, in exchange for a lower quality of life.

If no profits would mean that I only need to work 2 hours a day, I'll gladly do without them.

No profits would effectively mean no income... if you have enough saved, you can work zero hours a day.

THAT is what I believe MOST of us are desiring to achieve! ;~)

Cheers,
Dave
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What I want is a standard of living that is as high as possible.

By its very definition, that is ONLY available from profits.

Then I suppose that we enter the definition game again :-)
What do you regard as profits?

If I build a nice flower bed in my neighbor's garden and he pays me $1000 for it, what is the profit if I only payed $300 for the flowers?

Best,
Rien.
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Hi Rien,

What do you regard as profits?

The value received above ALL expenses (including costs of effort, time, and expertise, in the following example.)

If I build a nice flower bed in my neighbor's garden and he pays me $1000 for it, what is the profit if I only payed $300 for the flowers?

While you don't explicitly specify, I must restrain the topic to ECONOMIC profits. There may be 'spiritual' or other such benefits in your choice of work... but these are far more subjective.

What is the expense (actual or nominal) of the use of the tools? (You might choose to "donate" the use of the tools, but that doesn't mean there is no cost... merely that you are consuming some portion of your own profit by booking those costs to yourself.)

What is the comparable value of an equivalent gardner's time (which reflects his experience, expertise, etc?) Your time?

Certainly a Corporate Attorney, in this example, foregoing 3 hours of billable work to assuage his wife's demand for a flower garden is not economically profiting at all (though there are certainly many other aspects to consider in this case ;~)

Your profit is something less than $700... but how much less will depend on the value of the other expenditures invested.

Cheers,
Dave
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Captain

"Before Keynes, there was a quite imaginative theory of money put forward by the Austrian Rudolf Steiner and silvio Gesell, a German businessman turned radical.

The basic idea was to make money perishable. In moder terms, to issue money as a call option on a basket of goods and services. (Keynes's prefered choice, to issue money with a negative real interest rate, was a less radical attempt to achieve the same goal.)"

A short comment here.

What's the difference between issuing money with a negative (real?) interest rate and stamp money that loses one thousandth of its face value weekly?
The basic idea was the same and Keynes recognized that he got the idea from Gesell and even wrote down that history would learn far more from Gesell than from ... (I don't remember).
His only criticism was that Gesell failed to understand the marginal efficiency of capital.

But maybe there was a deeper message. About thirty five years ago some developed a theory called the economic trinity. The trinity was composed by Marx, Gesell and Veblen (I don't remember very much because at that time I fell in love with a very beautiful girl and my interest turned more to biology :)

It went about like this: Marx thought that the capitalist controled the means of production, Veblen thought that the capitalist (businessman) controled the demand side and Gesell defended that control was exercised through the means of exchange (interest-bearing money).
In all three cases it was about a mechnism of power although on different levels (supply - demand - the "outil" to link the two).
Some defended that capitalism used all three means at the same time to be able to centralize power while others claimed that depending on concrete circumstances one of them prevailed strongly.

I won't elaborate but it always strikes me when Americans complain that their manufacturing bases erodes. It sounds like they're losing control over the means of production. They sure will deny it's similar to Marx' theory.

On the demand side we see that consumers have turned into very willing shopaholics. IMO Veblen was far ahead of his time. Back in the years of the trinity, the "virtutis fundamentum" written down by Spinoza was brought forward as the main reason why people have a similar or herdlike consumption pattern. Today we would look for a memetic explanation (imitation).

I cannot remember that Keynes defended the negative (real) interest rate. Well at least not clearly for indeed he did envision the death of the rentier. But he also acknowledged that we needed the gods of usury and greed a little longer (or something close to that).

Stated quite simply: money should be a mean of exchange and not a store of value (interest makes it a store of value). The same theory was in a not so far past also translated by the Belgian Bernard Lietaer (http://en.wikipedia.org/wiki/Bernard_Lietaer) who wrote the book " The Future of Money".

Gesell's theory was applied in some regions and with great success. Even Irving Fisher tried to convince Roosevelt to switch to stamp scrips
For some historical precedents: http://www.transaction.net/money/cc/cc04.html
The success stories were quickly forbidden because central banks feared to lose their power. Quite meaningful!

veg.
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Overcapacity is a therefore a chronic problem. Without government intervention, the result is a cycle of business collapse, unemployment, unrest, etc.
This cycle happened many times until the Great Depression.


An economy-wide downturn can occur only when a very substantial swath of the economy has to wake up from delusion and come to its senses (or, alternatively, recognize a suddenly-changed reality) at once.

But what would cause reality to change that much that suddenly, or cause that large a swath of a healthy economy to undergo delusions all at the same time?

The most common reasons for sudden massive economic change: war - government; drought and famine - in the last century or so, government; sudden shifts in international relations - government. (In all cases, not necessarily the government allegedly supervising the economy in question.)

The most common reasons for mass economic delusion: inflation - government; failure of a central bank and its currency - government; grants of privilege - government again - that the government doesn't actually have the power (or will to spend the resources) to enforce upon the world.

There is no known case of a recession occurring in an industrialized economy in the absence of specific government actions that a rational, economically knowledgeable person would expect was likely to cause a recession. In the case of the Great Depression, the hard part is not finding a government cause, but rather, figuring out how much damage each of the many causes did.

But thankfully we have government to protect us from recessions.
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A short comment here.

Thanks!

What's the difference between issuing money with a negative (real?) interest rate and stamp money that loses one thousandth of its face value weekly?

I think that requires some serious thought. There are probably more, but two are very obvious. The first is the difference between a very clear mechanism that makes plain an alternative monetary regime and requires redesigning the financial infrastructure, and an almost invisible mechanism that gives the impression of continuity and leaves the finanical infrastructure untouched. The second difference is the depreciation schedule, constant amount with stamps, constant rate with inflation (and accelerating rate with a call option).

Regards,
Capitanfracassa
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This thread is a wonderful education, but leaves me wondering if there are some books I may need to read beyond Adam Smith :-)

My request of you Capitan, is a recommended reading list, not more than 10 books (they cost somewhat more here than they do anywhere else I've ever been).

Thanks
BJ
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My request of you Capitan, is a recommended reading list, not more than 10 books (they cost somewhat more here than they do anywhere else I've ever been).


I love lists, so here is one, and I include my bias at no extra costs!

Here it goes: (to save you money I add two you can read online! Call it 8 for the price of 6 ;-))

First, some easy books that can be read quickly for a general overview of lots of stuff:

1. a beginning college textbook about political economy (i.e. everything other than neo-classical)

http://www.amazon.com/o/ASIN/1878585525/ref=s9_asin_title_1/002-4431236-8072833

2. Doug Henwood's Wall Street "for dummies". Priceless ( and free ).

http://www.wallstreetthebook.com/

3 Anything by John Keneth Galbraith. He is the master of explaining things clearly and entertainingly.

Choose between (in decreasing breadth) "The Age of uncertainty," "Money, whence it came, where it went," "The great crash of 1929," "A short history of financial euphoria", "The economics of innocent fraud"

Then, some more demanding texts

4. A microeconomics textbook with real world math (imagine that!)

http://www.amazon.com/gp/product/0691126380/002-4431236-8072833

5. Thorstein Veblen, at least his theory of business:
http://www.amazon.com/Theory-Business-Enterprise-Thorstein-Veblen/dp/142549658X/sr=8-6/qid=1167911353/ref=pd_bbs_sr_6/002-4431236-8072833?ie=UTF8&s=books

and preferably also his theory of consumption:
http://www.amazon.com/Theory-Leisure-Class-Penguin-Classics/dp/0140187952/sr=8-2/qid=1167911353/ref=pd_bbs_2/002-4431236-8072833?ie=UTF8&s=books

6. Keynes, the most influential economic theories of the century, warts and all.

http://www.amazon.com/General-Theory-Employment-Interest-Money/dp/1573921394/sr=8-1/qid=1167911486/ref=pd_bbs_sr_1/002-4431236-8072833?ie=UTF8&s=books

Finally, some hard core bleeding edge stuff

7. Dumenil and Levy explain neo-liberalism in depth. Lots of graphs and no fairy tales.

http://www.amazon.com/Capital-Resurgent-Roots-Neoliberal-Revolution/dp/0674011589/sr=8-6/qid=1167911725/ref=sr_1_6/002-4431236-8072833?ie=UTF8&s=books

8. Another freebie. This may sound like a strange recommendation, since Nitzan and Bichler only focus on Israel. But it is by far the best application of political economic theory to a complete histroy of one capitalist economy. I wouldn't pass this one out. Reading it today is probably like reading Adam Smith when he was alive.

http://bnarchives.yorku.ca/8/


Regards,
Capitanfracassa
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Anything by John Keneth Galbraith.

Do take Galbraith with a grain of salt. As this article in Atlantic says,
www.theatlantic.com/doc/200605u/nj_crook_2006-05-09

"Consistent with his steadily maintained opinion that markets are fundamentally broken, if they exist at all, and that the state must everywhere step in, Galbraith had a lot of time for socialism—in practice, not just in principle. In the early 1970s, he called for America's biggest corporations to be brought directly under government control. On India, which he knew well (he served as ambassador there during the Kennedy administration), Galbraith thought its central-planning regime, modeled on the Soviet Union's, needed to be more intelligently managed rather than instantly abandoned. (India subsequently decided otherwise, and has been doing well ever since.) As late as 1984, he visited the Soviet Union and, as he wrote in The New Yorker, liked a lot of what he saw. As he was driven around, all the new housing and well-dressed people made a particularly favorable impression."

Yep. He actually visited the Soviet Union in 1984 and should have known better. He wrote:

"That the Soviet economy has made great material progress in recent years is evident both from the statistics... and from the general urban scene... One sees it in the appearance of solid well-being of the people on the streets, the close-to-murderous traffic, the incredible exfoliation of apartment houses, and the general aspect of restaurants, theaters, and shops... Partly, the Russian system succeeds, because, in contrast with the Western industrial economies, it makes full use of its manpower."

DB2
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Do take Galbraith with a grain of salt. As this article in Atlantic says,


I take everything with a grain of salt (except freedom fries, which I take with mayonnaise, a la Belge).

You will note I put Galbraith in the introductory stuff, because he is witty and very good at exposing mainstream fallacies.

For example of how much salt I put in things, I'm pretty sure you haven't read any book on that list, including Galbraith. I am also positive you can find somewhere on the web some hack smearing any author and republish it an an example of your penetrating intellect. Can you take with a grain of salt something you do not take at all? Or do you just recommend eating just salt?

Here's a challenge. Read something a tiny bit more demanding than the Atlantic Monthly. And come back sharing your salt.

Regards,
Capitanfracassa
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Be sure to do a search on the web before buying any of those books.
A few of them can be found in PDF form for free.

Best,
Rien.
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I'm pretty sure you haven't read any book on that list, including Galbraith.

That's a leap of faith on your part. I've read some Galbraith and Veblen, though not since high school. As for microeconomics, I took a course or two while getting my MBA.

And no matter what magazines one reads, Galbraith should have known that things weren't peachy in the Soviet worker's paradise (as should Paul Samuelson).

DB2
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"For example of how much salt I put in things, I'm pretty sure you haven't read any book on that list, including Galbraith. I am also positive you can find somewhere on the web some hack smearing any author and republish it an an example of your penetrating intellect. Can you take with a grain of salt something you do not take at all? Or do you just recommend eating just salt?

Here's a challenge. Read something a tiny bit more demanding than the Atlantic Monthly. And come back sharing your salt. "

Do yourself a favor Cap't, get some counseling while there's time....like the kid's say "it must suck to be you"
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Married a girl from Yoshkar-0la I did, and she doesn't miss it much but she doesn't have many kind words for the US health care "system" or education... the socialism was a mixed bag. The real problem was the authoritarians who were running and looting the place in the name of socialism.

Russia isn't IMHO, that much better under capitalism than under socialism, but it is a lot better under democracy than autocracy.

I reckon it is important not to confuse economic systems and political control any more than you have to.

BJ
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.like the kid's say "it must suck to be you"


I know, I know. That is why I am somebody else.

Regards,
capitanfracassa
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I'm late to the discussion on this one, but this part hit a sore point with me:

"Realize that in endless cases of marketing studies, retailers have proven that merely PLACING two exact identical grocery products (such as identically labeled green bean cans) at different vertical eye levels on a grocer's shelf can make a difference of 1-7 cents.

Perfectly free, non-coerced, non-influenced, discretionary consumers (on average) will choose the more expensively marked (from up to 7 cents more expensively marked) identical grocery items merely due to the PERCEPTION of a "unique value" of relative convenience... something with no inherent relationship even to the item in question itself!

As long as you are referring to a universe where the decision is a human decision, you cannot eliminate the distinguishment of unique value."


There is a big difference between perceived value and real value. What you are pointing out here are weaknesses in a free market system, not strengths.
- Too many resources are put into creating the perception of value, rather than real value
- Too many poor decisions are made, at many levels, due to difficulty in distinguishing real values.

I'm not really arguing against a free market or in favor of central planning. In fact I'm very much on the free market side. However I think it is important to recognize weak points in that system and work to improve them as much as practical. It may not be easy to eliminate distortion of perception from the economy, but at least start by recognizing it as undesirable and not trumpeting it as a strength.
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Hi jcradd,

There is a big difference between perceived value and real value.

Really? Pray tell... what could that 'big difference' possibly be?

Without 'perception' how is value determined? What formula can you use that is both functional and eliminates humanity?


What you are pointing out here are weaknesses in a free market system, not strengths.
- Too many resources are put into creating the perception of value, rather than real value
- Too many poor decisions are made, at many levels, due to difficulty in distinguishing real values.


Again, same question; Without 'perception' how is value determined?


I'm not really arguing against a free market or in favor of central planning. In fact I'm very much on the free market side. However I think it is important to recognize weak points in that system and work to improve them as much as practical. It may not be easy to eliminate distortion of perception from the economy, but at least start by recognizing it as undesirable and not trumpeting it as a strength.

It is neither a 'weakness' NOR a 'strength.' It is merely the natural reality of human participation in an economic relationship.

Calling it a 'weakness' is simply wistful and silly. You can say that water being wet is a 'weakness' and complain about it all day long... but in the end, all the philosophies and theories in the world doesn't change simple realities.

Cheers,
Dave
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"There is a big difference between perceived value and real value.

Really? Pray tell... what could that 'big difference' possibly be?"


Off the top of my head, here are a few examples of real value:

- A battery that lasts longer, and/or is less expensive, rather than one that comes in a flashier package or has a bigger advertising budget.

- A TV that actually has better features and/or is built more solidly, rather than one that has its characteristics embellished by the zealous salesman at the store.

- An employee who actually does more productive work for their company, rather than one who does a better job of putting on the appearance for their boss.

- A politician who has a real agenda that matches the rhetoric he uses to get elected, rather than one who markets himself as the champion of some certain group or cause in order to get elected, then uses complexity of issues and the short attention span of the public to work toward something completely different without his supporters ever catching on.


The good thing about a free market is that it allows competition where better goods and services can win out in the marketplace over inferior goods and services. A weakness in that is when the people marketing those goods and services decide (correctly or not) that they can get a better return on effort by manipulating perception rather than by improving the real value they have to offer.
The original example you used (placing identical objects on different shelves) is a relatively innocuous one. Unfortunately we all know that practices used to influence market decisions go well beyond that, commonly into the real of the outright dishonest.


"Calling it a 'weakness' is simply wistful and silly. You can say that water being wet is a 'weakness' and complain about it all day long... but in the end, all the philosophies and theories in the world doesn't change simple realities."

There is some truth to that. There is probably always going to be some degree of "salesmanship", spin, etc, and of course there is simple honest disagreement about anything but the simplest and most obvious subjects. However, the extent and pervasiveness of the "salesmanship", and the egregiousness of the dishonesty commonly involved, I think can be influenced by culture. The fact is that in our culture we easily forgive dishonesty, tend to expect it, and even lionize "salesmanship" and "influence" that includes a great deal of dishonesty as long as it is effective. We also don't do enough to encourage people to be intelligent consumers (not only in retail consumer goods, but also in employment markets, as voters in elections, etc) but seem to prefer a mass of rubes of whom the more cunning among us are supposed to take advantage.

We (as a culture) have reached a point where we have given the creation of perceived value through spin and marketing the same legitimate economic worth that we give to the creation of real value. That is something I see as a problem, and I think that cultural acceptance does a lot to contribute to the pervasiveness.

In the end, in economic terms, this means, to repeat myself

- Too many resources are put into creating the perception of value, rather than real value
- Too many poor decisions are made, at many levels, due to difficulty in distinguishing real values.






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Hi jcradd,

I said;
Really? Pray tell... what could that 'big difference' possibly be?"

your replies (with my answers);
Off the top of my head, here are a few examples of real value:
- A battery that lasts longer, and/or is less expensive, rather than one that comes in a flashier package or has a bigger advertising budget.


Let's stay objective. If you say "a battery that lasts longer, rather than one that lasts shorter" then you are on solid ground.

If you say "a battery packaged more attractively, and advertised for better recognition" then you would be on solid ground.

When you cross-compare irrelative attributes, you are failing in objective comparisons.


- A TV that actually has better features and/or is built more solidly, rather than one that has its characteristics embellished by the zealous salesman at the store.

Same example principle, you are muddying your variables.

- An employee who actually does more productive work for their company, rather than one who does a better job of putting on the appearance for their boss.

Again, the variables are no contrary... you could have a more productive employee that grandstands better than otehrs, versus a loser who merely cubicle-dwells. You're failing to stay scientific in your discipline.

- A politician who has a real agenda that matches the rhetoric he uses to get elected, rather than one who markets himself as the champion of some certain group or cause in order to get elected, then uses complexity of issues and the short attention span of the public to work toward something completely different without his supporters ever catching on.

OK... in all seriousness; WHEN was the last time we have EVER seen such a political animal as the former? ;~)

We (as a culture) have reached a point where we have given the creation of perceived value through spin and marketing the same legitimate economic worth that we give to the creation of real value.

When used illegitimately, I agree with you wholeheartedly. The use of hucksterism to make something appear to be something it is not is predatory, and the only end-game to it is broad education.

ON THE OTHER HAND, persuasive promotion and presentation is CRITICAL for the highest quality and highest true-value programs, products and services. Indeed, the 'skills of salesmanship' in this case may be as (or MORE) important than the production of the offering itself.

This is because creating legitimate quality DOES NOT ensure broad UNDERSTANDING of its quality, nor the shift of emotional inertia of the consumers in their default manner of emotional decisions. Peopl OFTEN can be presented with "the facts" and still make poor decisions... and it is here that the skills of persuasion, in the hands of ethical professionals, is tantamount.

That is something I see as a problem, and I think that cultural acceptance does a lot to contribute to the pervasiveness.

You reference "our culture"... but I am left thinking you must be referring to the globe, rather than regional, national, or hemispheric culture. Among the various "advanced" economies, the U.S. is the LEAST hucksterish, and the LEAST confrontational in negotiations (take your mind to European and Mid-East haggling, let alone the brutal posturing and negotiating of Asian cultures.)

In the end, in economic terms, "Value is defined by the appreciation of it, in whatever way that occurs, by the consumer." REAL value is as it is perceived... not the specifications of the engineering.

Cheers,
Dave
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"If you say "a battery that lasts longer, rather than one that lasts shorter" then you are on solid ground.

If you say "a battery packaged more attractively, and advertised for better recognition" then you would be on solid ground.

When you cross-compare irrelative attributes, you are failing in objective comparisons."


If the battery lasts longer than another battery, there is more real value.

Advertising, aside from just communicating the actual existence and attributes of the product, adds no value and is a waste of resources. A battery with the same performance, but which has more TV commercials, doesn't have any additional real value, yet costs (someone) more.


In comparing the two things, I am trying to help illustrate creation of real value vs. creation of perceived value for you.

"you could have a more productive employee that grandstands better than otehrs, versus a loser who merely cubicle-dwells."

All other things being equal, the person who "grandstands" better is

a) wasting time/effort grandstanding instead of doing something productive, therefore a less valuable employee

and b) by definition less honest in dealing with other members of his own company, therefore a less valuable employee



"ON THE OTHER HAND, persuasive promotion and presentation is CRITICAL for the highest quality and highest true-value programs, products and services. Indeed, the 'skills of salesmanship' in this case may be as (or MORE) important than the production of the offering itself.

This is because creating legitimate quality DOES NOT ensure broad UNDERSTANDING of its quality, nor the shift of emotional inertia of the consumers in their default manner of emotional decisions. Peopl OFTEN can be presented with "the facts" and still make poor decisions... and it is here that the skills of persuasion, in the hands of ethical professionals, is tantamount."


The only ethical form of persuasion is through the presentation of facts and logic. Period. End of story. Anything else is unethical, at least to the same extent that forcing someone at gunpoint is unethical. If you want to argue that somehow the ends justify the means, that can be done just as easily with force/violence as with any other form of "persuasion".


"In the end, in economic terms, "Value is defined by the appreciation of it, in whatever way that occurs, by the consumer." REAL value is as it is perceived... not the specifications of the engineering."

That is just logically wrong. What you are saying is essentially 'what they don't know won't hurt them.'

If you are talking about something completely subjective, like say music, or the type of view you prefer out your living room window, that is different. But when you convince someone to buy something inferior, you are doing harm even if they are happy because you have fooled them into thinking that they got a good deal. You are harming them because, even though they may be ignorant of the possibilty, they could have had a better product for the same price (or the same product for a lower price). You are also harming the efficiency of the market because you have skewed the dynamic that makes a free market work in the first place - fair competition where the best product at the best price wins out.

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Hi jcradd,

Advertising, aside from just communicating the actual existence and attributes of the product, adds no value and is a waste of resources. A battery with the same performance, but which has more TV commercials, doesn't have any additional real value, yet costs (someone) more.

Unfortunately, this is wrong. Advertising CAN increase sales VOLUME, which then may increase the net revenues to a provider EVEN AFTER the additional costs of the advertising.

Example;
Both identical Battery A and B cost 50 cents to bring to market, and sell at $1 on the shelf.
Battery A spends 10 cents additional, per unit, on advertising.
Battery B spends nothing on advertising, believing it is an "unethical waste of resources."

Battery A sells 10,000 units.
Battery B sells 2,000 units.

Battery A had a 40 cent (after advertsising costs) marginal gross receipt, for a total gross revenue of $4,000.
Battery B had a 50 cent marginal gross receipt, for a total gross revenue of $1,000.

Which Battery Company delivered more value?

Let's swap out the battery example to Petroleum Automobile versus Alternative Energy Automobile.
Let's assume all aspects of the two are identical EXCEPT;
A) The alternative fuel costs twice as much,
B) the alternative vehicle gets 3 times the mileage.

The general public makes their buying decisions emotionally, NOT logically. Emotionally, the consuming public is short-sighted and will also tend to avoid change. Merely "presenting the facts" is ineffective by itself in creating the social and emotional momentum of change. High powered persuasive strategies CAN be very much to the public good!

The only ethical form of persuasion is through the presentation of facts and logic. Period. End of story. Anything else is unethical, at least to the same extent that forcing someone at gunpoint is unethical. If you want to argue that somehow the ends justify the means, that can be done just as easily with force/violence as with any other form of "persuasion".

The ONLY way you can take this position is to make the profession of teaching "unethical." Likewise, 100% of ALL politics would be "unethical" (and even *I* am not THAT cynical ;~)

People make their economic decisions emotionally, not logically. to ignore this entirely IS unethical.

Anyone who knowingly has a superior offering, and fails to use available persuasive methods to guide consumers away from inferior offerings, is acting unethically.

I believe we can agree to what is good, and bad.
I believe we can agree that it is ethical to guide people for their better interests.
That is what persuasion is best used for.

Cheers,
Dave
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"Unfortunately, this is wrong. Advertising CAN increase sales VOLUME, which then may increase the net revenues to a provider EVEN AFTER the additional costs of the advertising."

No, I was not arguing that one individual or company can't gain by using manipulation of perception rather than creating real value. I am arguing that our economy as a whole does not benefit. The world is full of people who have become wealthy by less-than-admirable practices, I'm not arguing otherwise.


"The ONLY way you can take this position is to make the profession of teaching "unethical.""

At times in the past I worked as a teacher. I tried to teach by communicating fact and logic, and actually had some success with it. (I didn't make much money at it though.) I'm not sure I agree with your point.


"Likewise, 100% of ALL politics would be "unethical" (and even *I* am not THAT cynical ;~)"

I'm not sure I'd say 100%, it's probably more like 98-99%. I wasn't that cynical when I was younger and less experienced with the world.

A lot of your opinion on what is ethical or unethical, or honest or dishonest, depends on your standards. Most people don't have standards as high as mine, it is safe to say.

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No, I was not arguing that one individual or company can't gain by using manipulation of perception rather than creating real value. I am arguing that our economy as a whole does not benefit.

If superior quality producers persuade emotionally sluggish consumers to more rapidly and concertedly adopt a greater degree of higher quality and utility, voluntarily, (and yes, this does occur among the myriad of economic transactions) how could the economy as a whole NOT benefit?

The world is full of people who have become wealthy by less-than-admirable practices, I'm not arguing otherwise.

Actually, it appears that this is the only thing you ARE arguing.

The core blindspot you are being afflicted with is the denial that the common human decision process is primarily emotional, and non-rational. Your profile quote implies that you "logically" understand this fact... but your active arguments display your own proclivity to fall to emotion.

It's the fabric of life... unescapable, in the end.

Cheers,
Dave
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"If superior quality producers persuade emotionally sluggish consumers to more rapidly and concertedly adopt a greater degree of higher quality and utility, voluntarily, (and yes, this does occur among the myriad of economic transactions) how could the economy as a whole NOT benefit?"

That same type of logic can be used to rationalize doing almost anything to anyone, on the basis of your own judgment of what is better for them. For example, a political leader lying to the public in order to gain support for a war - because he is sure that the war is really good for them, even if they don't realize it.

The fact is there isn't necessarily any relationship between the effort to persuade and the worthiness of the result of that persuasion unless the tactics used in persuasion are limited to fact and logic. (Even then, it's possible to be mistaken, but if all we had to worry about were honest mistakes we'd be a lot better off, wouldn't we?)


"The core blindspot you are being afflicted with is the denial that the common human decision process is primarily emotional, and non-rational."

I acknowledge that it is common, I am not willing to concede that it is the only possibility. If we throw out the possibility of humans being rational, I guess we are wasting time in debating with each other, eh?

"your active arguments display your own proclivity to fall to emotion."

I don't agree with that at all. To the contrary, I am pretty confident that people who disagree with me on this topic are generally falling more to emotion, as they rationalize things that they emotionally feel are to their advantage. Some of them are correct, because certainly there are many individuals who are able to benefit more economically from manipulating others than they ever would from actually doing something productive. Typically those people are pretty defensive about this kind of topic. What's frustrating is the extent to which the more productive folks tolerate it, because generally they are being victimized as a net result, even if they get some small gains from slinging some BS of their own. (That brings the thinking back around to 'Atlas Shrugged'.)









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The fact is there isn't necessarily any relationship between the effort to persuade and the worthiness of the result of that persuasion unless the tactics used in persuasion are limited to fact and logic.

I have never once used any such "the ends justifies the means" position, yet it seems that you cannot avoid dancing with it.

Further, it appears that you're not very aware of exactly what skills of persuasion actually are. You keep referring or inferring to lies, deceipt, and the like... which is only exactly that; lies and deceipt.

Ethical persuasion can be incredibly powerful, and beneficial to both sides of a transaction as well as the economy as a whole.

A cornerstone book was written in (IIRC) the mid 80's by Robert Cialdini, the title of which is "Influence." In this book Cialdini observed and analyzed some of the most powerful social influence techniques in existence. In all cases, complete truth along with nothing but exact facts could be employed ("ethically" as you might put it) with dramatically increased and predictable results... all because of our naturally evolved human nature.

I strongly recommend it... I do believe you will enjoy it.

Cheers,
Dave
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"I have never once used any such "the ends justifies the means" position, yet it seems that you cannot avoid dancing with it."

It is the whole basis of your argument, as best I can understand it. The way I interpret what you said below is essentially that the general public isn't rational enough to make the right decision on their own, so it's in everyone's best interest if you manipulate them into doing so:

"The general public makes their buying decisions emotionally, NOT logically. Emotionally, the consuming public is short-sighted and will also tend to avoid change. Merely "presenting the facts" is ineffective by itself in creating the social and emotional momentum of change. High powered persuasive strategies CAN be very much to the public good!"





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Hi jcradd,

It is the whole basis of your argument, as best I can understand it. The way I interpret what you said below is essentially that the general public isn't rational enough to make the right decision on their own, so it's in everyone's best interest if you manipulate them into doing so:

No... let's go back to my initial (general) presentation of the many behavioural studies that found that people will overwhelmingly 'assign' their perception of 'real value' according to factors OTHER than the internal features of the offering (the example of generic green beans on differing vertical shelf levels.)

By empirical observation, we have no alternative but to accept AS OBESERVABLE, EVIDENCIARY FACT that the PRIMARY decision factor for the MAJORITY of people, the MAJORITY of the time, is irrational and emotional at some primary level. This is NOT to say that this MUST ALWAYS be the case, nor that all people CANNOT be rational from time to time. NOR does this say that it is logically PREFERRABLE to be irrational in any way. HOWEVER... the human social and behavioural realities are merely what they are, and once this is known, it is unethical to ignore them going forward.

Further, by empirical observation and analysis (as documented in the book I mentioned, "Influence" by Robert Cialdini, as an example,) there are established and reproduceable decision patterns that can be addressed in the delivery of information about an offering which will have a consistent and observable effect on the discretionary decision to act.

These patterns can be used economically for the better of the whole, or for the worse (or, of course, for some middle ground.) Further, these patterns are occuring regardless of intent... if you are socially healthy and adaptive in the standard human society, you have virtually no room to consistently escape the behavioural processes (and remain within social acceptance.)

Given this knowledge, when an offerer of anything has an ethical and sincere belief that the acceptance of an offer would be to the acceptor's advantage (be it a consumer product or service, a parental guidance, a mentorship or teaching, or a political process, etc.,) THEN if the offeror REFUSED to address the known behavioural aspects of the market she is offering to, such willful avoidance ITSELF would be unethical.

An offeror has an ETHICAL OBLIGATION to deliver the information about their offer in the MOST EFFECTIVE manner, within the concurrent restraints of ther ethical behaviour expectations. EFFECTIVE is defined by the results of the offer itself.

There is no issue of "the ends" justifying anything regarding the offer... but rather, the issue is the awareness and address of the known realities, and the ethical intent.

In brief; Ignoring human inescapable tendencies to voluntarily decide via predicable yet irrational patterns is unethical.

YOU ARE CERTAINLY CORRECT when you say that many resources are wasted in creating artifical and even deceiptful misperceptions in the attempt to promote, or "sell" various concepts.

YOU ARE INCORRECT in the assumption that ALL functional influence is unethical and wasteful.

Influence is a tool, just as is a scalpel. It can be very sharp, and it can be used to improve or destroy.

Hope that breaks new conceptual ground, or at minimum enlightens the issue.

Cheers,
Dave
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