Profits. Ok learn me some economics.

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vmounts (755 posts) Nov-12-02, 09:41 PM (ET) Profits. Ok learn me some economics. I have never received a satifactory answer to a basic economics question I have. I only took 1 economics course in college, and soem reading of my own in my spare time, so I have only basic knowledge.... My question is about what exactly a profit is and where it comes from. Now, I know a profit is basically money recieved for a product over and above the costs of producing it. However it doesn;t make any sense to me. Lets say the item you produce has the following components to it. Component A = $5/widget Component B = $3/widget Then we have general costs of running a business (overhead) Overhead = $1/widget (after spread out over all widgets made) And then we have labor. Not sure how you can determine the true worth of human labor but lets say Labor = $1/widget So we have 5 + 3 + 1 + 1 = $10 of value going in to the product's creation. Now, we turn around and sell it for $11. Where did the extra $1 come from? Did it poof in from thin air? You can't make something from nothing. Yes, from demand I know but... If its true value to people is $11 doesn;t that neccessarily mean that the labor was worth more than $1? I mean the material components surely didn;t get more expensive. The electric bill and price of the building lease didn;t go up in the overhead. So it must have been that the labor to create the item was actually worth more than we said... right? So over time "profit" should tend to zero as the laborer gets his true worth in terms of pay. One of 2 things has to be true. Either 1)the laborer isn;t getting his proper amount of compensation or 2)he is getting the right amount but people are paying more than the item is worth. If its 2) and not 1) then society is being wasteful. Wasting a dollar. Surely economists have addressed this problem in the logic but I have never seen it anywhere in my limited readings. How do they magic this inefficiency(if answer 2 above) or inequality(if answer 1 above) away? Also I look at it from the worker's perspective. If he is truely worth $1 then he is 1/10th of the total value of the product. But, when he goes to buy it he only has accumulated 1/11th of what it will cost him. I guess this is just another way of saying what I said above, but basically it would appear he is getting the shaft because he isn't getting the full buying power from the value he provides from his work. Ok, please be gentle, I really am trying to understand how this idea of profit could possibly make any logical sense.   Alert Edit | Reply | Top

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Subject     Author     Message Date     ID    Try this link. "Profit" is defined differently in economics and accou... zbird Nov-12-02 1    Thanks. vmounts 11/12/2002 2  It's the capital of the capitalist jobycom Nov-12-02 3    My only problems with Capitalists... vmounts 11/12/2002 4        That's not exactly what I was saying jobycom 11/13/2002 6            Even though it might yankeedame 11/13/2002 7                You are confusing vmounts 11/13/2002 9            Thanks again. vmounts 11/13/2002 8                You know more about the Fed than me jobycom 11/14/2002 16            What is this golden egg? hungry_pinko 11/22/2002 39  I'll give it a shot. qandnotq Nov-12-02 5  My answer EconomicsDude Nov-14-02 10    Well I am glad to hear that my thought processes led to vmounts 11/14/2002 11        Something that doesn't make sense to me... acerbic 11/14/2002 12            Nope. vmounts 11/14/2002 13                Well, what then should define the worth of a farmer's work? acerbic 11/14/2002 14                    No need for insults... vmounts 11/18/2002 23                        Your lie: acerbic 11/18/2002 26                            Well. vmounts 11/18/2002 27                                Where's that direct quote, liar? acerbic 11/18/2002 28                                    Yes i'm sorry. vmounts 11/18/2002 29            Morality and economics. Code_Name_D 11/15/2002 17                Only one point I would liek to address. vmounts 11/18/2002 22        A response HenryJones 11/14/2002 15            Obsolete labor, Code_Name_D 11/15/2002 18                Some corroboration please HenryJones 11/18/2002 34            As above I disagree vmounts 11/18/2002 24        Sorry for the later response...busy you know EconomicsDude 11/16/2002 19            At last, some credentials around here. Code_Name_D 11/16/2002 20                Some further thoughts EconomicsDude 11/17/2002 21                    Ah, I see. Code_Name_D 11/22/2002 40                        Well.. EconomicsDude 11/26/2002 41                            I am still wating for you to address my arguments. Code_Name_D 11/26/2002 42                                LOL... EconomicsDude 11/27/2002 43                                    Like a broken record, record, record, record… Code_Name_D 11/27/2002 44                                        Allright... EconomicsDude 11/28/2002 46                                            Sigh Code_Name_D 12/01/2002 51                                                What are you claiming now? acerbic 12/01/2002 53                                                    I call it a transaction. Next question. Code_Name_D 12/01/2002 54                                                        ...but "buying" is somehow magically not one side of that transaction? acerbic 12/01/2002 55                                                            One person buys, the other sells. Code_Name_D 12/01/2002 56                                                                "But even the plantation owner can not buy labor" acerbic 12/02/2002 57                                                                    I have already explaned it to you. Code_Name_D 12/02/2002 58                                                                        You have "explained" with many, many words... acerbic 12/02/2002 59                                                                            Of course it is yankeedame 12/02/2002 61                                                                            The short answer is... EconomicsDude 12/02/2002 64                                                Moving Target... EconomicsDude 12/02/2002 63                                    I don't understand... yankeedame 11/27/2002 45            Ok. vmounts 11/18/2002 25  Thanks to all.... vmounts Nov-18-02 31    Some cheese with that whine...? acerbic 11/18/2002 32            It was an ad hominem HenryJones 11/18/2002 35    If I may ... yankeedame 11/18/2002 36        Let me add... EconomicsDude 11/19/2002 37  This will mess with your head criticalmass Nov-20-02 38  Here's my answer. KennyG Nov-29-02 47    Value and Price EconomicsDude 11/30/2002 48        Amen! yankeedame 11/30/2002 49            Ha ha Code_Name_D 12/01/2002 52                When we say... yankeedame 12/02/2002 60                    Why are you asking me? Code_Name_D 12/02/2002 62                        Sheesh... EconomicsDude 12/02/2002 65                        In that case... yankeedame 12/02/2002 66  Simple economics Imalib Dec-01-02 50

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zbird (80 posts) Nov-12-02, 10:07 PM (ET) 1. Try this link. "Profit" is defined differently in economics and accounting. http://www.themanager.org/Models/profit.htm   Remove | Alert Edit | Reply | Top

vmounts (755 posts) Nov-12-02, 10:36 PM (ET) Reply to post #1 2. Thanks. I read it but it really doesn;t adress my question but thanks for the link anyway. It talks about maximizing profit etc but doesn;t address the equality issue at all. In fact it never once even mentions the word (human) labor once. Telling in and of itself actually. The term costs in a managerial sense includes all costs that are related with the production and selling of the organizations goods and services. In the simplest model, the company’s revenues less the costs that are incurred by producing and selling the goods and services sold equal profit (or loss). Yep I was using the simple model. The owners of the company decide how to use this profit. Profits can be distributed to the owners, or they can be left in the organization to finance further investments. Right I realized this as well but tried to keep it simple. Investing in the future is a good thing , but it still never addresses the problem from the worker's perspective. I still contend that if the thing is worth an extra dollar in the market then it has to be that labor had more value than it was given credit for.   Remove | Alert Edit | Reply | Top

jobycom (2035 posts) Nov-12-02, 10:46 PM (ET) 3. It's the capital of the capitalist The person who pays the worker to make the product, and who risks the loss if the product does not sell, charges for the use of his capital in making the product. Keep in mind that all money is at its heart simply labor. It is the way we make labor portable. Even capital, which seems to be different, is labor that has been bought and traded up the line until it has become capital. That isn't to say that the person holding the capital in any way did the labor for it, but that capitalist had to get the capital from somewhere, and that somewhere-- at it's origin-- is from the laborer. So why does the laborer give his labor to the capitalist? Because there are things the laborer wants that he/she cannot make. He or she needs to use someone else's labor, either because of a lack of skill, a lack of time, or just laziness. So the laborer trades something he/she built (or a monetary equivalent) for something he/she wants. If the laborer lives nearby the manufacturer of the product in question, then he/she can simply trade, and the values of the merchandise traded is equal. But if the laborer cannot go to the source, a merchant or middleman is required. So the profit given to this middleman is an exchange for the use of his money to buy the product, or have it made. It is basically a loan, although the loan is made before the buyer requests it. The market has convinced the merchant that if he buys this merchandise for someone else, eventually he will find a buyer for it who will pay him back for the use of his money, as well as for the cost of the product. Otherwise, the merchant would never make the transaction, and the economy would never grow beyond immediate contact of individuals. (In socialism, the government becomes the merchant, and tries to eliminate the profit, thus keeping costs lower.) The problem since Adam West has been how to prevent monopolies. Monopolies drive up the cost of merchandise beyond the fair profit. Capitalism without monopolies is a wonderful way to allocate resources to places that want or need them-- Adam Smith's invisible hand. But with monopolies, merchants can overcharge, and that difference between a legitimate profit and the monopolized profit kicks in. That additional profit--as you say-- is wasted labor. Thus, Adam Smith and most later capitalist governments have tried to destroy monopolies whenever they appeared. That's the real cost of Bill Gates's blockage of fair trade in the software market: the money he pocketed could have gone into production and research of other companies, and thus into the pockets of more laborers. This in turn could have stimulated the economy even more, and would have given even more people money, so that they were in less need of government social programs. The best capitalists are always the Democrats. Even socialists are better capitalists than Republicans. What we've had since Reagan has been a relaxation of anti-monopoly laws. Clinton tried (and failed as often as he succeeded) to counter Reagan's giveaways, but now W has revived them. Our government, instead of protecting consumers from monopolies, is protecting monopolies. And this leads to the wasted dollar you described, and that leads to inefficient economies, and that leads to increased needs for social programs, and a bunch of other problems. Being liberal is not only good for the heart. It is best for the economy, as well. Joby Feel only resolve. http://www.nxnwdemocrats.com   Remove | Alert Edit | Reply | Top

vmounts (755 posts) Nov-12-02, 11:04 PM (ET) Reply to post #3 4. My only problems with Capitalists... is where they get the money. This return on investment, as you noted, often doesn't come from their own labors, but instead often from just who they were born to(i.e. already having money). And even when that isn;t the case who is actually taking the risk? Sure the capitalist has some risk of going broke and deserves some return for that. However, if he fails that cost actually gets shifted around to all of us anyway. Through the bank that has to recover losses. So while it is an interesting idea that Capitalism encourages and rewards risks and punishes failures, in the end it is still all of us that pay for it. So his risk was our risk as well in the end. Whcih isn't so much an argument against the principles of Capitalism I suppose, but does get to question of wether the money supply should be in private hands ro owned by the state. Thank you for your post. It was very informative. I agree that monopolies and even partial monopolies are a bad thing for everyone. Capitalism assumes a level playing field and the real world teaches us that the level field is hard to achieve. The "incumbant" in economics has an even bigger advantage than they do in politics. "The illusion of freedom will continue as long as it's profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way, and you will see the brick wall at the back of the theatre." -Frank Zappa   Remove | Alert Edit | Reply | Top

jobycom (2035 posts) Nov-13-02, 00:21 AM (ET) Reply to post #4 6. That's not exactly what I was saying You made some assumptions I wasn't really saying. The first is when you say that some capitalists inherit their wealth. True, but that wasn't what I meant. I only mean that capital is sometimes (usually, even) acrued by people who are not doing the labor that creates the money that is becoming capital. Capitalists usually barter for the money. Even in your case where a kid inherits the capital his parent created, he still ultimately has to barter well to keep it, or he will lose it. This bartering of one person's labor for another's is beneficial to all involved, if it is done fairly and well. It gives the laborer a wider market for his labor, so that he can make more money by making more merchandise. It rewards him for being better than others. Second, you assume a worse-case where the capitalist goes broke and has to fire or cease buying labor, or defaults on bank loans, thus depriving the bank of capital. That is not the only kind of risk. A capitalist can lose part of his money in a venture without losing it all. In some cases he simply fails to realize profit. In other cases he loses capital. If he goes broke, he loses all capital and may become a laborer. Whether this expense is ultimately born out by the entire economy (your assumption that the ultimate cost is born by everyone) depends on the economy as a whole, and whether other capitalists are failing, too. If one fails, the laborers who relied on him move to another capitalist. If there was no market for that capitalist anyway, then those laborers may not find new work that is as profitable, but then the capitalist's investments were wrong, anyway. The market did not want him. Even if his collapse means a bank has to reclaim capital from its customers (through interest rates, I assume you mean), it is unlikely that the entire cost is transmitted to the public. The capitalist will have had something up for collateral, and will pay at least some of his loan back with that collateral, if the banking industry is doing its job right. As for capitalism punishing or rewarding risk-- I don't see it in terms of punishment and reward. I see it more from the market's perspective than the capitalist's. The market can't help but respond the way it does, so it is not rewarding or punishing anyone. It is just functioning, and if the capitalist understands how it is functioning, he makes a profit. That's more than a semantical shift. The market has to be kept working. Capitalists should be viewed from that perspective. If they do what the market needs, they become a part of its success, and profit. If they put their own wants above the market's needs, then the market rejects them as being bad for it. These capitalists are bad for laborers, and should be rejected. Labor is the base of the market. As for whether the money supply should be in the hands of the government or private enterprise-- that's a good one. Eliminating all bias over terms like capitalism and communism, it's hard to know who would do a better job. My own view of government is that it is simply an arm of the people-- a tool the people use to get things done that they cannot do as individuals. In that way, when government is working most like that, then government is simply a way to handle the distribution of the wealth for us individuals who make up private enterprise. So government and private enterprise are the same thing, only more or less regulated. An efficient government could handle resources better with the right formulas. The problem comes about when people like W or Reagan come to power. They are corrupt, and so the system becomes corrupt. Without the diffusion of wealth throughout the entire populace, it is all subject to corruption. Imagine how difficult it would be to keep corruption out of leadership if ALL wealth was DIRECTLY controlled by that leadership. We can't even keep out the crooks when they can only affect the money indirectly. And of course, it is hard to imagine that resources would be allocated as quickly if the allocation was controlled by a central agency. How would that agency know what we wanted or needed? We would start having to tailor our wants to their whims. I don't think that would work as well as the current system, and I don't believe it would be satisfying. Even though it might raise the lowest wage-earners, it would give them nothing to strive for. On the other hand, there are a lot of corruptions and inequities that could be solved with a communist system. Ultimately, I believe that the correct system will evolve out of whatever we try to do, and the only way to screw things up is to try to force it to respond to an imperfect ideal. Marx saw socialism as a natural evolution. If it could ever work, I believe that it would have to be an evolution. And I believe it would have to evolve out of capitalism, as it is doing to some degree, rather than being simply a replacement for capitalism. And back to the original discussion: You are right that things which affect capitalists also ultimately affect laborers to some degree. A diverse economy means that if capitalists go broke as individuals, then laborers can find other buyers for their labor. The rewards of profits can also go to laborers who work harder than other laborers, and therefore make more valuable products. Any system that tries to eliminate that profit would have to take into account the motivation factor of that profit to encourage laborers or capitalists to work harder, or smarter. I'm not saying it can't be done, only that I doubt it would ultimately work any better than the current system. Either it would not encourage excellence, or it would be no different than the current system. The biggest problem with the current system, to me, is how low it lets people sink, not how high it lets them soar. Limit the latter just enough to correct the former. No one should be poor or have to commoditize necessities like health care, housing or education. And we should spread that wealth to the world. But my own belief is that the goose that lays the golden egg is in capitalism, and we have to be sure not to kill it expecting the golden eggs to continue coming. Joby Feel only resolve. http://www.nxnwdemocrats.com   Remove | Alert Edit | Reply | Top

yankeedame (27 posts) Nov-13-02, 11:44 AM (ET) Reply to post #6 7. Even though it might <i>Even though it might raise the lowest wage-earners, it would give them nothing to strive for. On the other hand, there are a lot of corruptions and inequities that could be solved with a communist system...</i> <P>Yes, via the barrel of a gun.   Remove | Alert Edit | Reply | Top

vmounts (755 posts) Nov-13-02, 06:52 PM (ET) Reply to post #7 9. You are confusing Totalinarianism as practiced by the Soviet Union and socialism. The Soviets system was not much different than our own. The wealth percolated upwards to a select few and was not shared equally amoung the people as it would be in true socialism. Its interesting that you say that though seeing as how currently our system is doing the same exact thing. It is enforcing the wealth of the few and the domination of the world economically by a few countries at the barrel of the gun. Hmmm -Vinnie --------- "The illusion of freedom will continue as long as it's profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way, and you will see the brick wall at the back of the theatre." -Frank Zappa   Remove | Alert Edit | Reply | Top

vmounts (755 posts) Nov-13-02, 06:48 PM (ET) Reply to post #6 8. Thanks again. LAST EDITED ON Nov-13-02 AT 07:02 PM (ET) On Edit: So many typos that I am not even goingto bother Hopefully it is still easy enough to read even with the typos. You made some assumptions I wasn't really saying. The first is when you say that some capitalists inherit their wealth. Yes, I'm sorry. I know that you didn;t say that. I should have made it separate statements instead of implying that was what you meant. Still I was trying to make a point. The average Joe who takes his life savings and tries to start a business is one thing. But the huge mega-corp that already has an immensly powerful amount of capital to throw around is another. Here is why I question it. There are people who work 8 hours a day but have a hard time paying their bills if they can at all. Meanwhile, the company they work for has a investors that make millions and a CEO who makes a thousand times what they are making. To me that indicates there is a problem. That captialism isn't doing a good job at rewarding labor. I see that as a failure of capitalism. Another clear indication of the inequity can be seen in the problems the IMF causes in the third world. When they open their markets to the western capitalists they are often destroyed. Again we are seeing (in dramatic fashion) the inequity caused by giving too much power(i.e. return on investment) to the people that have done nothing except to already happen to have capital. Second, you assume a worse-case where the capitalist goes broke and has to fire or cease buying labor, or defaults on bank loans, thus depriving the bank of capital. Right, not 100% of the costs get shifted but anything the bank can;t recover does. So society at large and the people working for the capitalist do indeed have some risk. Again I am arguing that perhaps the capitalist is being rewarded too much. Again , for nothing more than already having "stuff" basically. As for whether the money supply should be in the hands of the government or private enterprise-- that's a good one. Eliminating all bias over terms like capitalism and communism, it's hard to know who would do a better job. Basically refering to the Fed Reserve system here which is administered by private banks. Not neccessarily saying anything about Capitalism/Socialism just... since the people bear some of the risks of investment, shouldn't we have a say in what is being invested in? Shouldn't we have a direct say in what types of businesses we will give money to? Now I know we can vote with our consumer dollar but that seems a bit late in the process. I mean with all the advertising and propaganda that goes on today it is a LOT of work to make sure your dollars are funding things that you feel are good for society. Add to that the fact that these private banks of the Fed basically create money out of thin air when they have new money printed (a.k.a lowing interest rates) and it seems to me it should be the people , not the private banks, that are reaping the rewards for investing in our businesses. An efficient government could handle resources better with the right formulas. Not just that but the question of "What do we invest in." Do we do it like the private banks(the Fed) and just give it to anyone that will make obscene profits at any social or environmental cost. Or do we impose other ideals, like , do they take care of the environment, do they pay their workers a fair cut of the money coming in, do they have profit sharing programs so that their workers can share in profits of the company and are encouraged to both make the company work and to stay with the comapny for a long time. And of course, it is hard to imagine that resources would be allocated as quickly if the allocation was controlled by a central agency. How would that agency know what we wanted or needed? I agree. The market is a good thing for determining that. I would argue however that it for some things the market isn;t the best way to solve things. I personally think in the area of "necessities" or a living wage that perhaps those things should perhaps be available to all and regulated. But that is another discussion. The only problem with the current markets though is that it seems to respond to immediate needs well but not long term goals. Like the environment for example or non-renewable resources as another example. It seems to be exceptionally poor at thise things. Or in other words it is poor at knowing "what we wanted or needed" in the long run. Not every problem can be solved with short-term decisions. Thats why I think the people(i.e. government) being in control of the money supply is a good thing. We can look at the big picture much better than quartly profit reports can. The market would still work the same in determining what we want, as it is very good at that. Businesses would still have to offer a wanted producted or service to survive. But the ones that did survive would have these broader social goals embedded since those are the businesses that we the people would encourage our money to be invested in. To be honest I already basically knew that the extra dollar was going to return on investment(though I wasn't able to state it clearly as you did), but I was basically trying to get at these points I make here. That though capitalism is surely the best system man has devised so far that it does have flaws. The flaws would seem to be in fairly compensating labor (by fair I mean that anyone who works should be able to live and pay the bills for necessities) and that it is poor at promoting social and long term goals. I would not argue that a socialists system is better just that some of its ideas in certain areas should be incorporated in the current system to let it better handle these flaws. As an intersting example(although not really related to this discussion) of a mix between capitalism, socialism and democracy I was going to give a link to a private land trust I had seen on the web. Unfortunately I can't seem to find my link. The trust basically is a group of people that buy some land (private property), they however hold it jointly and sign a contract that noone can ever sell the land. They can however lease the land. The people that get the leases can sell any improvements they make (e.g. buildings etc) but can not sell the land. This particular trust is differnet from some of the others that are simply trying to preserve an area of land , in that people are still encouraged to build houses and businesses on the land. However, the land itself stop being a commodity and is jointly owned. This encourages people to stay and have a personal interest in the land rather than see it as a commodity to rape and then sell to the highest bidder. Anyway I thought it was interesting to see that people are actually working towards merging these economic ideas of private ownership of the fruits of one's labor (improvements), joint owership of land, and democracy (the residents all vote on who is allowed to take out a lease). -Vinnie --------- "The illusion of freedom will continue as long as it's profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way, and you will see the brick wall at the back of the theatre." -Frank Zappa   Remove | Alert Edit | Reply | Top

jobycom (2035 posts) Nov-14-02, 07:03 PM (ET) Reply to post #8 16. You know more about the Fed than me So I'd have to read more on it. Keep meaning to, but haven't. We already agree on most everything, here. There might be a disagreement over degree-- I'm more willing to let wages stay a little low and balance them with social spending, so that the burden is placed on all of society, not just on individual small businesses (at least I think I am)-- but we agree that capitalism-- while best-- still has some flaws that we are wealthy enough to temper. And that's good economic policy, as well as being the right thing to do. A more stable labor base means a more stable economy, and less chance of catastrophic collapses. And yes, there are some things that should not be commoditized, and there are places where the government (ie the people) need to protect us from the worst ravages of capitalism, which as you say does not consider the long term very well. Great discussion you started here. Good lead-in questions, too. I thought it was a set-up, but to be honest, at first I thought it was another Freeper set-up to try to imply that we were all idiots. . Joby "There is nothing wrong with America that cannot be fixed by what is right with America--" Bill Clinton. God I miss the Big Dog. http://www.nxnwdemocrats.com   Remove | Alert Edit | Reply | Top

hungry_pinko (17 posts) Nov-22-02, 10:05 PM (ET) Reply to post #6 39. What is this golden egg? Capitlaism is a system for producing and maintaining inequality. We say that capitalism gets us all this great stuff. Ok, people in the first world get cool toys, but at terrible expense to people in the third world. The biggest problem is not preventing monopoly. The biggest problems is economic de-development in the third world. Resources are stolen by industrialist criminals and then sold to people in the first world. capitalism devalues labor. By creating an on-demand labor market, the need of the proletariat are second to the needs to greedy capitlaist profiteers. This is the cause of unemployment. Every un or underemplyed person is someone who is going without. Meanwhile, corporations give their executives bonuses for keeping labor costs down. The needs of the proletariat are in direct opposition to the goals of capitalists. Capitalism is nothing more than crime where the fruits of the workers labor is stolen and used to line the pockets of an elite upper class. The proletariat need a hearty breakfast. http://www.pancakesforpinkos.com   Remove | Alert Edit | Reply | Top

qandnotq (160 posts) Nov-12-02, 11:39 PM (ET) 5. I'll give it a shot. In your example, the real question is why does the widget sell for $11 if it only costs $10 to make. There are two basic possibilities. The first is that the true costs are actually $11. One of the true costs of production is some return on capital such as equipment or land. This return is sometimes referred to as profit. These are real costs, because the owner could have been using the capital for other purposes. For example, instead of buying a tractor, I could just put the money in an interest-bearing account. Or looking at it another way, instead of owning the equipment I could rent it from someone else. That makes the cost a bit more transparent. To an economist, this rent on equipment, land, etc is really no different than wages to labor. The second possibility is lack of competition. Suppose you have a patent on widgets; no one else can sell them. Would you sell it at cost? Most people wouldn't. Now, if your patent expires and anyone can produce widgets, you'll soon be forced to sell it for $10. If you try to sell it for $11, one of your competitors will gladly undercut your price. There aren't many truly competitive markets, but it's not a bad approximation of some industries such as wheat farming.   Remove | Alert Edit | Reply | Top

EconomicsDude (28 posts) Nov-14-02, 02:38 AM (ET) 10. My answer First off, congratulations. Your views are quite consistent with Marxism. Marx postulated that rate of profit would be declining. Also, that profit is due to labor not recieving its "fair share". Of course, Marxism is horrible economics. <grin> Great on polemics and if your looking for a quote. For example, Marx couldn't solve the diamond-water paradox. Basic economics: Prices are determined by the intersection of supply and demand. Typically neither alone sets price. This is true in all markets. So the price of labor (a.k.a.) the wage rate is determined by the supply function (i.e. the workers willingness to supply varying levels of labor for different wages). And the demand, that is the firms willingness to hire various levels of labor for a given wage. So the $1 for labor is set by the supply and demand in the labor market. Granted the firm has some impact here, but it is only part of the story. If the markets are competitive then both sides take the price as a given (i.e. they have little ability to set the price). Where did the extra $1 come from? Did it poof in from thin air? You can't make something from nothing. Yes, from demand I know but... If its true value to people is $11 doesn;t that neccessarily mean that the labor was worth more than $1? No. All the factors of production are paid their marginal value in production. In this case (assuming overhead also accounts for what is typically called accounting profits) the $1/widget is economic profits. These profits are profits that are achieved over and above costs and accounting profits (accounting profits don't show up on balance sheets but are actually opportunity costs). In this case, there will be entry into this market and drive the economic profits to zero. In a competitive economy the factors of production are paid their marginal valule product. That is the firm is willing to keep hiring additional labor up to the point where the extra revenue gained from the additional unit of labor is equal to the additional cost of hiring that unit of labor. Also I look at it from the worker's perspective. If he is truely worth $1 then he is 1/10th of the total value of the product. But, when he goes to buy it he only has accumulated 1/11th of what it will cost him. No. This would be correct if was re-written thusly: "Also I look at it from the worker's perspective. If he is truely worth $1 then he is 1/10th of the total <i>cost</i> of the product. But, when he goes to buy it he only has accumulated 1/11th of what it will cost him." Cost and value do not have to be equal. For example, I could make dinner for an out of pocket expense of say, $3.50. However the exact same meal would cost me $5.00 in a restaruant. The difference is that I am not taking into account the opportunity costs associated with cooking. I have to use my leisure time to cook. Thus, in some case I am willing to go out to eat (say if I am really tired). That is the neoclassical economic theory answer for competitive markets. As for monopolies, the stuff here is very out of date, IMO. The problem is that a typical firm with a "normal cost structure" wont stay a monopoly for long unless there is a barrier to entry (ironically government often provides such barriers). If entry is free (i.e. easy) then the monopolists profits will attract entrants thereby driving the price down. Of course, there is the possibility of limit pricing, but such a strategy would be difficult to maintain in the long term.   Remove | Alert Edit | Reply | Top

vmounts (755 posts) Nov-14-02, 05:00 AM (ET) Reply to post #10 11. Well I am glad to hear that my thought processes led to LAST EDITED ON Nov-14-02 AT 05:07 AM (ET) LAST EDITED ON Nov-14-02 AT 05:03 AM (ET) something similar to Marx all on my own. So the price of labor (a.k.a.) the wage rate is determined by the supply function (i.e. the workers willingness to supply varying levels of labor for different wages). And the demand, that is the firms willingness to hire various levels of labor for a given wage. See this is a problem I have. That is an assumption. There is an assumption that treating human labor as nothing more or less important than a pile of steel is acceptable. I'm sure it makes for really pretty equations and all but we are living breathing human beings not lumps of commodities. Whats more, it doesn;t address the problems created by technology as it makes some workers obsolete. Maybe its ok with you that as technology increases, less workers are needed, that people just starve to death because they are nothing more than a commodity in someone's pretty equations, but to me that is revolting. Cost and value do not have to be equal. For example, I could make dinner for an out of pocket expense of say, $3.50. However the exact same meal would cost me $5.00 in a restaruant. The difference is that I am not taking into account the opportunity costs associated with cooking. I have to use my leisure time to cook. Thus, in some case I am willing to go out to eat (say if I am really tired). That doesn;t address the issue in any way. If the meal is worth 5 bucks and the food cost is 3.50 then the labor was worth 1.50. You provided 5.00 in value to the person eating it so you had to have put 5.00 of value in to it. The price of the food doesn;t change so therefore the labor had to add the value. Simply saying that value doesn;t equal cost just because that is the way it currently is doesn;t make it make any more sense. The difference between what the material components is and how much it is worth to the person buying it must equal how much the labor that created it was valued! Again, in saying otherwise you are making an assumption. The assumption that paying living breathing people the lowest amount you can get away with is acceptable. I make the reverse assumption in that I say labor's worth isn't determined by supply but instead by the value of the product they produce. That makes much more sense to me. Anything else sounds like hocus pocus to me. -Vinnie --------- "Who Are the Brain Police?" -Frank Zappa   Remove | Alert Edit | Reply | Top

acerbic (2918 posts) Nov-14-02, 06:02 AM (ET) Reply to post #11 12. Something that doesn't make sense to me... The assumption that paying living breathing people the lowest amount you can get away with is acceptable. I make the reverse assumption in that I say labor's worth isn't determined by supply but instead by the value of the product they produce. That makes much more sense to me. Anything else sounds like hocus pocus to me. If a worker buys food for the day for $5 and expends the energy he got from the food at a factory and gets paid $40, he just made $35 dollars profit. Isn't that unfair? The worth of that energy (actually labor of the farmer, truck driver, grocery store clerk etc.) shouldn't be determined by supply but instead by the value of the product it produces, which in this case was $40.   Remove | Alert Edit | Reply | Top

vmounts (755 posts) Nov-14-02, 06:30 AM (ET) Reply to post #12 13. Nope. LAST EDITED ON Nov-14-02 AT 06:50 AM (ET) You are comparing producing one product to a fulls days work. In other words apples to oranges. Notice in my example I comapre producing one widget to buying one widget. Lets say both the guy that made his meal and he each make a 1/item and produce 40 items/day. Yet when he buys the meal he pays a 1.50 for the other guys labors but only gets a 1.00 for an equal amount of effort. I understand what you are trying to say is why not just have the materials not obey supply and demand too. Well, like I said because they are not human beings, they are inanimate objects. Now the guy not only had to buy the $5 meal but he had to pay 1/30th of his rent, pay for a bed, pay for clothing, pay for medicine ot stay healthy enough to work. For many that adds up to more than the $40 he brought home so in fact he did lose on the deal eh? And why should that be? Why is that ok? Do you support getting rid of minimum wage too? Or how about those pesky child labor laws? Surely thats a big burden on people who have to pay wages. Oh the humanity. They should be able to drive the price of labor even lower... even further in to poverty. It just isn;t fair I tell ya.... -Vinnie --------- "Who Are the Brain Police?" -Frank Zappa   Remove | Alert Edit | Reply | Top

acerbic (2918 posts) Nov-14-02, 06:58 AM (ET) Reply to post #13 14. Well, what then should define the worth of a farmer's work? LAST EDITED ON Nov-14-02 AT 07:22 AM (ET) I understand what you are trying to say is why not just have the materials not obey supply and demand too. The "material", food, wouldn't exist without the farmer's labor. How would you have the worth of that labor and therefore the price of food defined? Obviously not by supply and demand, but what? Do you support getting rid of minimum wage too? Or how about those pesky child labor laws? Why is it that pointing out some economic realities to someone preaching some sort of economic sillyness invariably prompts those same lame imaginations?   Remove | Alert Edit | Reply | Top

vmounts (755 posts) Nov-18-02, 01:26 AM (ET) Reply to post #14 23. No need for insults... LAST EDITED ON Nov-18-02 AT 01:26 AM (ET) Its wasn't silliness. If it was you would have had an answer which you clearly did not. Do you support getting rid of minimum wage too? Or how about those pesky child labor laws? Why is it that pointing out some economic realities to someone preaching some sort of economic sillyness invariably prompts those same lame imaginations? You suggest that labor should operate on supply and demand alone. Then you call me lame for suggesting that you would support for removing these controls? If supply and demand works so great for labor then why do why we need these controls?????? Why is it that people that lack an answer for soemthing always resort to name calling? -Vinnie --------- "Who Are the Brain Police?" -Frank Zappa   Remove | Alert Edit | Reply | Top

acerbic (2918 posts) Nov-18-02, 02:46 AM (ET) Reply to post #23 26. Your lie: You suggest that labor should operate on supply and demand alone. Where did I suggest that labor should operate on supply and demand ALONE? Direct quote, please. For the record, I support minimum wage laws and think that the current U.S. minimum wage is too low. Why is it that people that lack an answer for soemthing always resort to name calling? Indeed: you didn't answer what in your economic fantasy would define the worth of that farmer's labor I mentioned but instead you fabricate straw men about what I "suggest".   Remove | Alert Edit | Reply | Top

vmounts (755 posts) Nov-18-02, 02:57 AM (ET) Reply to post #26 27. Well. LAST EDITED ON Nov-18-02 AT 03:04 AM (ET) LAST EDITED ON Nov-18-02 AT 03:00 AM (ET) You seemed to have a problem with me suggesting that labor should NOT operate solely on supply and demand but also take in human needs. How else was I supposed to interpret that?? You attcked my question, as silly, on the basis that it suggested that supply and demand shouldn;t be allowed to be the only factors in how labor was compensated. So again, how else was I supposed to interpret that? On Edit: So if you support child labor laws and minimum wage then aren't you actually agreeing with me that the compensation for labors should not be based on supply and demand alone? And if so , why attack me for suggesting that is the case? I never said that the results of labors shouldn't be determiend in the maket, only I was only suggesting that the people supplying the captial get too much of a cut. I was was attempting to open discussion on that by suggesting that AFTER the worth/price of product is determined in the market, that the difference between what it took in from the market and the cost of the physical components IS the worth of the labor. BTW, yes I did answer your question in my other posts. The market determines the worth of the food. The difference in the costs of his tractor, seed, etc and the price is it brings in is the worth of his labor. -Vinnie --------- "Who Are the Brain Police?" -Frank Zappa   Remove | Alert Edit | Reply | Top

acerbic (2918 posts) Nov-18-02, 03:18 AM (ET) Reply to post #27 28. Where's that direct quote, liar? LAST EDITED ON Nov-18-02 AT 03:23 AM (ET) Instead you just fabricate what you yourself have or have not said. Sort of logical progression, I guess... You seemed to have a problem with me suggesting that labor should NOT operate solely on supply and demand but also take in human needs. In your post #11 to which I first replied you said exactly "I make the reverse assumption in that I say labor's worth isn't determined by supply but instead by the value of the product they produce." Nothing at all about "not solely on supply" there but simply instead of supply. That's pretty clear and that's the silliness I replied to.   Remove | Alert Edit | Reply | Top

vmounts (755 posts) Nov-18-02, 03:24 AM (ET) Reply to post #28 29. Yes i'm sorry. LAST EDITED ON Nov-18-02 AT 03:32 AM (ET) I realize that I may have not expressed as celarly as I would like to. But I did say those things in other posts. I realize the wording leaves a little to be desired. But if you had read my other posts you would see that it suggests that supply and demand play a role in determing the value of the labor but only indirectly. In the market for the product. I don't understand why you feel the need to be such a jerk. Guess thats just the way you are. -Vinnie --------- "Who Are the Brain Police?" -Frank Zappa   Remove | Alert Edit | Reply | Top

Code_Name_D (980 posts) Nov-15-02, 05:25 AM (ET) Reply to post #12 17. Morality and economics. Like any scientific discipline, morality doesn't really have a place in economics. Any more than morality has to do with the food chain, the law of "eat or be eaten." Liberals and progressives need to learn this very simple truth. All though at the end of the day, we hope (and strive for) an economic system that is fair and equitable (IE a moral system.) But this doesn't necessarily follow to be true. The new world order that Bush is trying to build is essentially a slave based economy. Not too far removed from the Confederacy. Only the modern incarnation is labor that is as cheep as possible, as cheep as slave labor, if not cheaper. It should be remembered that slave labor is not free labor. You still have to feed and house the slaves, as well as security and "motivation" concerns. But during the industrial revolution, a slave alternative was found that was almost as good as slave labor commonly refereed to as indentured labor. Here, you paid the work force, but collected the money back in exchange for company housing, company schools, and privileges to eat at the company pantry. For the worst companies, workers were charged more for the basic services than they were paid, and fell into debt with the company they worked fore. They had to continue to work there until the debt was paid off witch was impossible. But, the company actually saw labor that was cheaper than slave labor because the debts of the workers showed up as receipts in the company register. A forefather of today's modern credit structure. But the problem with these economic systems is that they are tiny economies. You are only making and selling products and services to the social elite. Throes who have money in abundance to pay for such things. The rest of the world is outside of the economy, and is spent much like a commodity to make these things. When a worker is old, tired, or injured, he is tossed out onto the street. But a consumer based economy includes every one. But that means every one must have a source of income that if enough to pay for consumption. All though there is always down word pressure for cheaper labor, there is a need to insure that worker pay doesn't go to far down, or it would risk the collapse of the consumer based economic system. That is where the minimum wage comes in. According to supply siders, if you force up labor, you are in essence forcing up inflation. Because the cooperation's will just hick up the cost of goods to compensate for the extra labor cost. But looking at the numbers doesn't bare this out. In fact, the economy grows and is able to absorb the inflation pressure. That is what we are looking at now. The economy is correcting itself as consumer base gives way to feudal base. Its contracting dramatically as the spending power within the population shifts from the popular, to the elite. It's not good for us, but the wealthy will do very well in the new system. Better than ever in fact. The economy will continue to work under these conditions. Morality not required. Two wrongs do not make a right. (No, but three rights do make a left.) __/\/\__000 O _(_¬ ¬)_. o \__\/__/ <-- This is Code Name D <-- And this is Code Name D's conscience. The Wizards of Money at http://wizardsofmoney.org/   Remove | Alert Edit | Reply | Top

vmounts (755 posts) Nov-18-02, 01:18 AM (ET) Reply to post #17 22. Only one point I would liek to address. LAST EDITED ON Nov-18-02 AT 01:46 AM (ET) I have been "listening" to the discussion, but this one thing caught my eye.... Like any scientific discipline, morality doesn't really have a place in economics. I think you couldn't be any more wrong here. The reason is that economic models are not made by nature but by man. Just because the model nicely explains the current society or system doesn't make it some universal truth. Look at an economy based on salve labor. From ancient history, early U.S. history, Hitler's Germany, etc etc. I'm sure you could draw up "scientific" models of these systems. You might be even be able to factor in a "revolt" factor (the point at which slavery becomes too costly due to people revolting). The models would nicely explain how slavery is a good thing economically(for the producers). However, we don't include such things in current models because the idea is morally unacceptable. Economics is simply discovering the "truths", laws and theories, of what already exists in the system that has been imposed on the world. It can also make predictions/suggestions about helpful changes within a narrow realm of the current system. It does not however address "what is the best system". Furthermore, current economics makes an assumption that best=greatest GDP basically. It assumes that is the goal. That isn't a scientific law or even a theory but an assumption. I would argue that an assumption that we should be striving for all having basic neccessities is an equally valid assumption. You seem to be saying that changing or question the goal is out of the realm of economics. If it truely is then that is a shame.... on edit: All though at the end of the day, we hope (and strive for) an economic system that is fair and equitable (IE a moral system.) But this doesn't necessarily follow to be true. I really don;t understand why I am being critized for suggesting that it should be our primary concern(not you so much but others in this thread). If our economic systems aren't for (all) people then who the hell are they for? Its exactly that kind of attitude that makes people feel that economics is nothing more than excuses of why the rich must be rich and the poor must starve. -Vinnie --------- "Who Are the Brain Police?" -Frank Zappa   Remove | Alert Edit | Reply | Top

HenryJones (158 posts) Nov-14-02, 02:18 PM (ET) Reply to post #11 15. A response See this is a problem I have. That is an assumption. There is an assumption that treating human labor as nothing more or less important than a pile of steel is acceptable. I'm sure it makes for really pretty equations and all but we are living breathing human beings not lumps of commodities. Then you no longer wish to discuss economics, but philosophy. Whats more, it doesn;t address the problems created by technology as it makes some workers obsolete. Maybe its ok with you that as technology increases, less workers are needed, that people just starve to death because they are nothing more than a commodity in someone's pretty equations, but to me that is revolting. Besides being unnecessarily hostile, your argument assumes a lot of facts not in evidence. As technology increases productivity, some workers will be made obsolete. This does not mean that they will be starving in the streets -- it means they will have time to persue other labors. As an example, look at US farming history. For most of the 18th and 19th century, the US was agrarian, with a large percent of the population engaged in farming, a lot of it subsistence farming (providing enough food for their families only). Along comest the Industrial Revolution, with its technological improvements in, among other things, farming techniques and equipment. The tractor replaced the animal-drawn plow, and allowed farmers to become much more efficient. Fewer laborers were needed to plow the fields, food pruduction went up. Those displaced laborers didn't lie down in a ditch and die; they moved to the city and got jobs doing something else. Now, around 3% of the US population is in farming, and US farms feed the entire nation and a good part of the rest of the world, due to technological improvements. Simply saying that value doesn;t equal cost just because that is the way it currently is doesn;t make it make any more sense. The difference between what the material components is and how much it is worth to the person buying it must equal how much the labor that created it was valued! Congratulations, you've rediscovered Marx's Labor Theory of Value. http://www.isil.org/resources/lit/labor-theory-val.html "According to the labor theory of value, all profits are the rightful earnings of the workers, and when they are kept from the workers by capitalists, workers are simply being robbed. On the basis of this theory, Marx called for the elimination of profits, for workers to seize factories and for the overthrow of the "tyranny" of capitalism. His call to action has been heeded in many countries throughout the world. " Again, in saying otherwise you are making an assumption. The assumption that paying living breathing people the lowest amount you can get away with is acceptable. I make the reverse assumption in that I say labor's worth isn't determined by supply but instead by the value of the product they produce. That makes much more sense to me. Anything else sounds like hocus pocus to me. So your initial post saying "Ok learn me some economics" was false.   Remove | Alert Edit | Reply | Top

Code_Name_D (980 posts) Nov-15-02, 06:02 AM (ET) Reply to post #15 18. Obsolete labor, I am most satisfied with your post about obsolete labor being freed up for other forms of labor. But there is a new dimension about labor obsolesces that you haven't addressed. (But nor have you ignored it.) The labor obsolescence factor is typically used in relevance to the industrial revolution. Where steam power replaced manual labor, but still required man power to operate it. A better educated man power in fact. And it has been this way or some time. All though the dawning of the computer age predicted that man himself would become obsolete, this never proved to be so. The concept I have heard coined as the "third wave" states that as technology continues to advance, man kind himself will be made obsolete. Factories can be self building, self running, and self maintaining. Basically nothing more than a black box where raw materials goes in one end, and finished and rapped products go out the other. And with artificial intelligence, it will only take one person to design the product concept, and let the AI fill in the details and send the instructions to the black box. It's a fantastic theory, I know. One that any economist worth his salt would probably be vary correct in scoffing at for a whole list of reasons. I am not about to try and defend it. However. I am seeing some aspects of a third wave economic system in certain sectors of the economy. Namely in the music, radio, and internet sectors. And possibly publishing. All though it is a stretch to say man himself is obsolete in these sectors, they are clearly depopulated. Lets take Clearchanel for a moment as an example. Clearchanel bills itself as an advertising and entertainment company that owns and operates 90% (if not more) of all the AM and FM radio stations in the country. In the past, each radio station was its own operation. You had writers coming up with scripts for the voice actors, sales people pushing ad space on the air, promoters, technicians to cut tape and mix sounds. You have three general disciplines at work. Artistic, technical, and clerical. All three work together to get a radio program on the air. A small station could easily employee a number of workers (at least three) to keep a radio station on the air. And a decent sides city could have 20 radio stations. That is at least 90 folks, and most likely more. But Clearchanl doesn't operate that way. They own all the stations and have consolidated all of the programming. All though Clearchanl itself most likely hires far more people than one radio station from the old days. The industry itself has still been depopulated. Senses one staff now programs all the radios at once. The only local force you need, is the technician to keep the transmitter on the air. Where one transmitter used to have no less than three techs working on her. Today, you may have one tech maintaining as many as 50 transmitters. (They tend to die of heart attacks now.) But this isn't because the technology made it happen. In fact, this kind of technology has been around for a while. What made this depopulation take place is fascism. One program director now controls nearly all of the radio programming in the country. And only a fascist culture would think this as acceptable. It certainly isn't vary diverse. Two wrongs do not make a right. (No, but three rights do make a left.) __/\/\__000 O _(_¬ ¬)_. o \__\/__/ <-- This is Code Name D <-- And this is Code Name D's conscience. The Wizards of Money at http://wizardsofmoney.org/   Remove | Alert Edit | Reply | Top

HenryJones (158 posts) Nov-18-02, 10:35 AM (ET) Reply to post #18 34. Some corroboration please Can you provide some documentation showing that Clearchanel owns 90% of all AM and FM radio stations in the US? I find it difficult to believe since that would be pretty monopolistic. But this isn't because the technology made it happen. In fact, this kind of technology has been around for a while. What made this depopulation take place is fascism. Even assuming your premise is true (that Clearchanel owns 90% of radio stations), your conclusion of fascism doesn't follow. Is the government directing Clearchanel on how to operate its radio stations? That's what fascism is -- goverment direction of private industry. One program director now controls nearly all of the radio programming in the country. And only a fascist culture would think this as acceptable. It certainly isn't vary diverse. Again, assuming the premise is true, this conclusion doesn't follow either. It's monopolistic, not fascist. And the market is providing alterntives -- XM radio, music channels on cable and satellite TV, internet radio stations, etc. I think you're just using the word "fascist" as an epithet.   Remove | Alert Edit | Reply | Top

vmounts (755 posts) Nov-18-02, 01:40 AM (ET) Reply to post #15 24. As above I disagree See this is a problem I have. That is an assumption. There is an assumption that treating human labor as nothing more or less important than a pile of steel is acceptable. I'm sure it makes for really pretty equations and all but we are living breathing human beings not lumps of commodities. Then you no longer wish to discuss economics, but philosophy. Economics as it stands is already a philosophy. It is the study of system that exists. It could equally study another system as well. But by chosing to study one particular system a philosophical assumption is being made that it is the best system. A philosophical decision that studying how to maximize GDP in preference to human needs has already been made before the study begins. -Vinnie --------- "Who Are the Brain Police?" -Frank Zappa   Remove | Alert Edit | Reply | Top

EconomicsDude (28 posts) Nov-16-02, 01:44 PM (ET) Reply to post #11 19. Sorry for the later response...busy you know Wow, I didn't think my response would generate this much interest as economics is usually considered dull. Cool. My comments will be in blue and Vinnie's and others in italics. So the price of labor (a.k.a.) the wage rate is determined by the supply function (i.e. the workers willingness to supply varying levels of labor for different wages). And the demand, that is the firms willingness to hire various levels of labor for a given wage. See this is a problem I have. That is an assumption. There is an assumption that treating human labor as nothing more or less important than a pile of steel is acceptable. I'm sure it makes for really pretty equations and all but we are living breathing human beings not lumps of commodities. First, that the wage is determined by the intersection of the supply and demand functions is not an assumption, but a result of the underlying model. The assumptions are that consumers are rational and firms maximize profits. There are a few "techinical" assumptions such as the differentiability of the utility function, but they are what economists refer to as "niceness" assumptions (i.e. it makes the analysis easier without changing the results substantially). Also, why not treat labor as a commodity. People obviously do in the world right now. A laborer down at Home Depot (out here there are day laborers who wait outside such stores for day work, most of them are from south of the border) does precisely this. When a potential employer pulls up they bargain, the buyer (the guy needing extra labor) makes and offer, the laborer then accepts or counters. Further, remember these are voluntary transactions so when such a transaction takes place a strong argument can be made that each one believes they will be made better off. So I don't see a problem with treating labor (not the people) as a commodity. If I decide to sell my labor in the labor market why is this demeaning? Isn't it my choice? If I decide I need some extra help cleaning the garage and doing yard work and go hire one of the guys outside Home Depot why is that demeaning to him? I suppose your point might be valid, but I just don't think you have supported it well enough. Whats more, it doesn;t address the problems created by technology as it makes some workers obsolete. Maybe its ok with you that as technology increases, less workers are needed, that people just starve to death because they are nothing more than a commodity in someone's pretty equations, but to me that is revolting. There are a number of problems with this. New technology also creates jobs (service techs, production of the new tech, etc.) Since as many resources are not devoted to production of good 1 they can now be devoted to goods 2 thru N (where N is some postive number). If the obsolesence argument is true you'd expect to see unemployment increasing over time. We don't see this, we see ups and downs but unemployment for the most part is pretty stable, so much so that most economists (right, left and center) agree there is a "natural rate" for unemployment. So I just don't buy it. (Aie, no pun intended ) Also, I don't see people starving to death in the streets. Granted there are problems even in the U.S. here and there with malnutrition, but these tend to be in rural areas that have had these problems for a very long time. The biggest problem in the U.S. is obesity. Also, if you look at research by people like Amartya Sen, his research on famine is that in modern times it is the result of politics. Usually war where one side uses famine as a weapon against the other side. (I hope I got that link right) Cost and value do not have to be equal. For example, I could make dinner for an out of pocket expense of say, $3.50. However the exact same meal would cost me $5.00 in a restaruant. The difference is that I am not taking into account the opportunity costs associated with cooking. I have to use my leisure time to cook. Thus, in some case I am willing to go out to eat (say if I am really tired). That doesn;t address the issue in any way. If the meal is worth 5 bucks and the food cost is 3.50 then the labor was worth 1.50. You provided 5.00 in value to the person eating it so you had to have put 5.00 of value in to it. The price of the food doesn;t change so therefore the labor had to add the value. Yes it does address the issue. The labor might cost $1, that cost is determined by the labor market not the market for meals. The remaining $.5 might go to the owner of the restaurant for creating the restaurant, taking the risk (i.e. renting the store front, buying the furniture, the equipment, the food, the drinks, etc.) If the business goes down the drain then all that money was for nothing. He might recover some of it, but selling something used usually does not get more than the price for new. Also, there was all that time he spent on the decor, atmosphere, etc. He could have spent that time doing something else. So the ownere definitely needs a slice of that $5. Enforcing that he doesn't will ensure that no restaurants exist...which also means no restaruants to hire waiters, cooks, and busboys. Simply saying that value doesn;t equal cost just because that is the way it currently is doesn;t make it make any more sense. The difference between what the material components is and how much it is worth to the person buying it must equal how much the labor that created it was valued! That is because you don't have a complete grasp of neoclassical economics. In a competitive market the pricing rule is marginal cost = price. Marginal cost is different than average cost. Let me try to give you the definitions. Average cost is the total cost of producing Q divided by Q (where Q is the number of goods produced). Marginal cost is the cost of an additional unit of the good being produced. Typically at first marginal cost is above average cost, then declines faster than average cost so it is below average cost, then rises above average cost. So it is entirely possible for the price to be greater than the average cost. This situation wont last though since this will mean profits and prompt entry into the market driving down prices. Further, you don't understand the neoclassical model for labor (or any other factor of production). The firm is going to be willing to keep buying factors of production up to the point where the marginal value of that product is just equal to the marginal revenue from the good that is sold (in a competitive market that is the price). This is true of all the factors of production. Again, in saying otherwise you are making an assumption. No, it is a result of the assumptions and the model itself, not an assumption by itself. The assumption that paying living breathing people the lowest amount you can get away with is acceptable. No, this is only true at the margin, i.e. that worker who is jut willing to work at the prevailing wage. There are other workers who would be willing to work for less, but the market clearing price is above that "reservation" price. The workers where they market clearing wage is above their reservation wage actually are paid more then the least amount necessary to induce them to work. I make the reverse assumption in that I say labor's worth isn't determined by supply but instead by the value of the product they produce. I am not making an assumption that labor is determined by supply. Further, to highlight how confused you are, in the labor market the workers are the suppliers. So you are saying you have a problem with the workers setting the wage rate? I don't think you would have that problem, but instead you have a limited understanding of economics. Nothing wrong with this, but trying to tell somebody like me, who has spent over a decade studying economics and still reading and studying the subject, what assumptions I am making is a bit presumptuous. Labors value, in the neoclasical model is determined by the intersection of demand and supply. That is the workers keep supplying labor up to the point where the benefit (i.e. money) of the extra unit supplied just equals the "disutility" (i.e. loss of personal welfare from working vs. enjoying leisure time) at the given wage. The firm does a similar calculus but it goes like this, the firm keeps hiring factors of production up to the point where the benefit (i.e. revenue) of that last unit hired is equal to the cost (i.e. the price/wage of that factor) of the factor. That is the pure theory of neoclassical economics. All factors are typically paid their marginal value in production. The only time this might not be true (in the theoretical model) is when there are problems such as externalities. Now the real world is different than this model because the assumptions of many firms and many consumers doesn't always hold. The assumption of no externalities doesn't always hold. The assumption of no public goods doesn't always hold. And the assumption of perfect information never holds. Still, this does not mean that Marxist economics explains things any better. Marxism makes a number of predictions that we have yet to observe...hence the theory if found lacking (substantially) on empirical grounds. This is not right-wing, left-wing or centerist. It is the fundamentals of scientific inquiry. A theory should make predictions and those predictions should be checked by what is actually observed. We don't see unemployment increasing over time. We don't see the rate of profit declining over time. These are a couple of big Marxist predictions. Since we don't see them we should reject the Marxist theory as it currently stands. Modify that theory or move on to another one.   Remove | Alert Edit | Reply | Top

Code_Name_D (980 posts) Nov-16-02, 11:11 PM (ET) Reply to post #19 20. At last, some credentials around here. LAST EDITED ON Nov-16-02 AT 11:14 PM (ET) I have not been here that long. When I first started showing up in Economics Room, most of the talk was about the markets. When I started posting, it was clear I was adding a new dimension of "macro-economics" witch is largely separate from market thinking. It was as if I became the authority on economic systems over night. I fear I have done this room a disservice as posing as an "expert." But that was some time ago. With Rapier now on line, it isn't just me yanking away about unemployment figures and savings rates around here. I am not an economist by any stretch of the imagination, and I am little better than laymen when it comes to my self education. So when I spot a phony, and a few have poked there nose in here, its rather obvious. All though this has more to do with understanding supply side rhetoric, than the real deal. Your voice is most welcome here, and I look forewords to your 101's (This is what we call posts that talk about basic concepts. This room is big on self education.) But… I haven't yet met the economist that was completely free of supply side notions. Usually these are just ideas taken for granted, and not rigorously examined throw the scientific process. A science has never billed itself as a perfect process, only a self correcting one. The following is a classic example. Beware of the moniker of "choice." Also, why not treat labor as a commodity. People obviously do in the world right now. A laborer down at Home Depot (out here there are day laborers who wait outside such stores for day work, most of them are from south of the border) does precisely this. When a potential employer pulls up they bargain, the buyer (the guy needing extra labor) makes and offer, the laborer then accepts or counters. Further, remember these are voluntary transactions so when such a transaction takes place a strong argument can be made that each one believes they will be made better off. All though I understand that you were addressing a specific anecdote in regards to basic concepts. Your anecdote is actually quite devoted of "choice" and ignores much more prevalent realities of the labor market. That is the manipulation that the labor market is undergoing to one that is "based on choice" as one economist told me. Or more accurately, based on insecurity and instability. The economic model you site only applies with an empowered work force. One that has options from witch to chose. One that is consistent with a consumer based economy. But recent economic policy is gradually shift the US economy away from consumer based, to what I can only call "slave base" or cheap labor economies. The one that vmounts is objecting too. (And poorly so, you must forgive me for saying. Despite a mighty effort. ) The differences is that the government and industry colludes together to undermine the work-forces bargaining position. Manufacturing jobs are shipped overseas to take advantage of near-slave labor, while immigrants are flooded into the area. This cuts the supply of jobs and expends the demand for those jobs. And Walla, cheep labor. You do more damage by opposing unions. (Collective bargaining for wages and compensation.) And ever present debt, forces the working population to work, providing the cap-stone for cheap labor. So those workers outside of home depot are not there my choice by any stretch of the imagination. They are there because they are out of options. Your argument assumes that the worker and employer are negotiating on a one on one bases. This is false, there is only one employer, but perhaps two dozen employees bidding to the same job, only one will win out, leaving the rest behind. The only reason why they barter is so that can get the job while the crush of others around them can not. The man in the SUV gets a seat deal at twice the price. Supply siders use "choice" as a code word to conceal the reality of statistics. They claim that workers have a choice to not work for minimum wage, while ignoring the fact that 60% of the work forces doesn't seem to have that option. Labor commodities. I don't see a problem with treating labor (not the people) as a commodity. If I decide to sell my labor in the labor market why is this demeaning? Isn't it my choice? If I decide I need some extra help cleaning the garage and doing yard work and go hire one of the guys outside Home Depot why is that demeaning to him? Only in the slave economy is labor treated as a commodity. In a consumer based system, labor is something well above commodity. And this most be so because the rest of the economy depends on the condition of this "commodity," on the buying power of the work force or the consumer. For example. When you send $150.00 on a tractor (say something like fuel or parts). It basically just sits there economically speaking. The tractor does not have the capacity to spend the money you just sank into it. A worker on the other hand, when you give him $150.oo in pay, this worker now becomes economically active. He goes home and maybe pays a few bills, buys some stuff, and so on. The $150 dollars is returned to the economy by the employee. Indeed Kansian theory states that the labor force is the same as the consumer population. What happens to one, happens to the other. This is why talk of a "third wave" (See my Obsolete Labor post.) is so scary. It argues that the economic élites, ever on the quest for lower labor costs, will try to replace man with tractors. IE: Slave labor, only with machines in the place of human beings.. I am not a believer in third wave, but supply sisders are big fans of the idea, and are constantly seeking new ways to make man obsolete from the work force all together. The concept of "free labor" has now become the holly grail of free-marketers. And you better believe they are trying to find ways to have free labor be it automated of man power. In the end, you will have a slave economy, when the man is treated exactly like a tractor. But consumer economics demands that labor (or more specifically, man-power) not be treated as a commodity and be given special consideration in practice. This is why labor law requires a minimum wage, and basic compensation such as worker compensation for injuries, and safety regulations to keep workers from unnecessary injuries or deaths. These are not just forms of "liberal morality" but basic common senses applications of consumer based economics to preserve the consumers buying power. Famine and economics. Also, if you look at research by people like Amartya Sen, his research on famine is that in modern times it is the result of politics. Usually war where one side uses famine as a weapon against the other side. I though that this notion has been largely discredited. One need only look to Somalia or Ethiopia to see that this isn't quite true. Though you will see paramilitaries there, they are using marshal force to compete for food, not to control it. While it is true that starvation has been used as a weapon in the past. This hasn't been the case sense Blitzkrieg or "lightning war" came onto the battle field. Assuming you wish to discount the idea of economic sanctions from the battle fields. The reason for this is famine takes too long to take effect. It's only useful when trying to brake a sedge situation. Warfare can not account for all the famines taking place today. In fact, you find the worst famines in relatively peaceful areas, and paradoxically, on some of the most productive farm land. You will see this especially prevalent in South America, such as Chili. Where farm land has been privatized under the free-trade regime, the crops are then sold to the highest bidder, witch is never the peasants who grew the crops. This is also the case in Ethiopia, where famine there had deepened, dispute a bumper harvest of soy and rice. That food most likely ended on your plate, not the Ethiopians. Even relatively developed nations such as India have run into this situation. In this case, water. Despite sufficient rain fall, wells have gone dry, even the ancient ones, as privet wells sell off the water as bottled water to the highest bidder. And pumping so much of it as to drop the water tables. The most common cause of famine today, is clearly economic in nature, not warfare. Economic theories. This is not right-wing, left-wing or centerist. It is the fundamentals of scientific inquiry. A theory should make predictions and those predictions should be checked by what is actually observed. We don't see unemployment increasing over time. We don't see the rate of profit declining over time. These are a couple of big Marxist predictions. Since we don't see them we should reject the Marxist theory as it currently stands. Modify that theory or move on to another one. Ah, but we are see these things go up, and have been for some time. All though I will agree, not as Marxist predicted, but for other reasons. The problem isn't that neoclassical economic theory is not accurate. But that it is not relevant. The system that is in charge is a free market ideology that has more in common with a cult, than any scientific understanding of economics. However, supply siders understand the same basic models of neo-classical, and apply them only so far as it serves their supply siders position, and disregard all others. Neoclassical economics assumes equal systems. The price of labor is determined by upward wage pressure from the workers, and downward pressure from the employers. But neo-classical fails when systems are not even, or are compromised. And this is the crisis that the modern economics field is facing today. And as more and more universities fall under the privatization regime, and intellectual freedom is compromised more and more, things are only going to get worse. Discussing the basics can only go so far. But in today's economy, the basics are strictly hypothetical, and find few applications in the real world. Neo-classical is not irrelevant because they are not correct, but because the ARE correct. So it is a right-wing, left-wing thing after all. Or more accurately, it is a neo-liberal economics vs contemporary scientific economics. Two wrongs do not make a right. (No, but three rights do make a left.) __/\/\__000 O _(_¬ ¬)_. o \__\/__/ <-- This is Code Name D <-- And this is Code Name D's conscience. The Wizards of Money at http://wizardsofmoney.org/   Remove | Alert Edit | Reply | Top

EconomicsDude (28 posts) Nov-17-02, 04:36 PM (ET) Reply to post #20 21. Some further thoughts All though I understand that you were addressing a specific anecdote in regards to basic concepts. Your anecdote is actually quite devoted of "choice" and ignores much more prevalent realities of the labor market. That is the manipulation that the labor market is undergoing to one that is "based on choice" as one economist told me. Or more accurately, based on insecurity and instability. The economic model you site only applies with an empowered work force. One that has options from witch to chose. One that is consistent with a consumer based economy. It is then incumbent on you to show that consumers/workers do not have choices, that they are stuck with the jobs they have. That there is no choice. But recent economic policy is gradually shift the US economy away from consumer based, to what I can only call "slave base" or cheap labor economies. The one that vmounts is objecting too. (And poorly so, you must forgive me for saying. Despite a mighty effort. ) I'm sorry I think this is just ridiculous. A slave economy only works for low tech economies. If you are a slave you have no incentive to perfrom well. If you do perform well what do you get? More pay? No, you are a slave. Do you get some vacation time? No, you are a slave. This is why prior to the Civil War in the south was primarily agricultural Cheap labor is not slave labor. I know using such "hot button" terms sounds good rhetorically, but it makes it much harder to take such arguments seriously when the definitions of words like slave and slavery are broadened to the point of ridiculousness. Further, you can test your theory by checking such things as the indexes for wages in the U.S. Only in the slave economy is labor treated as a commodity. In a consumer based system, labor is something well above commodity. And this most be so because the rest of the economy depends on the condition of this "commodity," on the buying power of the work force or the consumer. Oh, nice redefinition of terms here. This is false. In the standard neoclassical economy labor is indeed a commodity and no, workers are not slaves. Also, what is labor if it isn't a commodity? You say it is "well above a commodity", well then what is it and how come it has a price tag on it? Or in the consumer society is there no price tag on labor? Indeed Kansian theory states that the labor force is the same as the consumer population. What happens to one, happens to the other. Are you referring to Keynesian macro theory? If so, this is again not true. Firms in Keynesian theory are consumers, consumers of the factors of production. Consumers (i.e. individuals) consume final goods and services. So this notion that things can be so cleanly seperated is false (see Stephen McCafferty's Text, Macroeconomic Theory, particularly chapter 3). This is why talk of a "third wave" (See my Obsolete Labor post.) is so scary. It argues that the economic élites, ever on the quest for lower labor costs, will try to replace man with tractors. IE: Slave labor, only with machines in the place of human beings.. I think the idea of obsolete labor due to technology is false. There is no evidence supporting this. For example, evidence would be increasing rates of unemployment over time. We don't see that at all. I am not a believer in third wave, but supply sisders are big fans of the idea, and are constantly seeking new ways to make man obsolete from the work force all together. The concept of "free labor" has now become the holly grail of free-marketers. I have read alot of "free market" economics and I don't recall seeing this anywhere. I don't like the term "free market" in that it is more indicative of ideology than economics. I have yet to find a (mainstream) text book that contains the phrase "free market". I know that recently there has been alot of discussion of the New Economy and that processors will be the important factor instead of labor. However, that view seems to be losing favor right now given the recent downturn in the economy. Perhaps you can provide a link to a site that has something on this or even a book or article reference. But consumer economics demands that labor (or more specifically, man-power) not be treated as a commodity and be given special consideration in practice. Why? You have not explained this need for special consideration. This is why labor law requires a minimum wage, and basic compensation such as worker compensation for injuries, and safety regulations to keep workers from unnecessary injuries or deaths. The views amongst economists is that generally minimum wage increases unemployment. Now, one can argue that the improvement in welfare due to the minimum wage offsets the loss of welfare (in aggregate) due to the increased unemployment, but that is an empirical question and not clear that it must always be the case. These are not just forms of "liberal morality" but basic common senses applications of consumer based economics to preserve the consumers buying power. I don't see it. Most workers are not minimum wage earners, hence the impact of changing the minimum wage is minimal and hard to determine what it will be. The increased unemployment will lower consumption, but the higher than market clearing wage will raise consumption. The net effect is ambiguous. I imagine it would depend on the elasticities of the supply and demand functions for labor. I though that this notion has been largely discredited. One need only look to Somalia or Ethiopia to see that this isn't quite true. Though you will see paramilitaries there, they are using marshal force to compete for food, not to control it. Amartya Sen the Nobel Laureate has been debunked, and even Kenneth Arrow (also a Nobel Laureate) is unaware of this? Surely you can point to a source. Further your last sentence seems to confirm the assertion, that things other than crop failure are the reason for famines. If the armed groups are fighting for control then it seems reasonable to conclude that people are not out there eating it. While it is true that starvation has been used as a weapon in the past. This hasn't been the case sense Blitzkrieg or "lightning war" came onto the battle field. Assuming you wish to discount the idea of economic sanctions from the battle fields. The reason for this is famine takes too long to take effect. It's only useful when trying to brake a sedge situation. Surely you can point to some examples. Frankly, I think I'll go with Sen as his research is considered to be definitive and I have seen nothing to go against it. The problem isn't that neoclassical economic theory is not accurate. But that it is not relevant. The system that is in charge is a free market ideology that has more in common with a cult, than any scientific understanding of economics. A cult? Lets see that would mean a religion. And that would mean that despite evidence to the contrary the predictions do no hold. Sorry, I don't buy it. The evidence seems overwhelming. While you can debate about the fine points the overall theory seems pretty good. Further, neoclassical economics is not about "free markets". I doubt you could find a mainstream text book in the book store today that uses the words "free market". Neoclassical economics is an economic theory that postulates that individuals are self-interested maximizers and that firms are profit maximizers. The role of government is often seen as one to solve problems with markets (public goods, externalities, information asymmetries, etc.). Neoclassical economics assumes equal systems. What does this mean? This looks like nonsense to me. What systems and why do they have to be equal? The price of labor is determined by upward wage pressure from the workers, and downward pressure from the employers. But neo-classical fails when systems are not even, or are compromised. And this is the crisis that the modern economics field is facing today. The only way for the labor market to be out of whack in the manner you are describing is for there to be one purchaser of labor, i.e. a monopsony. Since this is not the case, I don't think this is a problem. In fact, one could make an argument (I personally think it would be a weak one) that labor unions act as cartels and push wages up. Even in the case of a single labor union and single monopsony I don't see why the outcome should be horrendous. This would essentially be a two player repeated game and there is plenty of reason to suggest that the outcome would be less than catastrophic. Further, neoclassical economics is a broad theory and encompasses the extremes from monopolies to perfect competition and everything in between. With the advent of game theory (thanks to John Nash's work in the 1950's on this), optimal control theory (thanks to Bellman and Pontryagin also in the 1950's) neoclassical economcis has some very sophisticated tools for analyzing non-cooperative less than perfectly competitive situations. So it is a right-wing, left-wing thing after all. Or more accurately, it is a neo-liberal economics vs contemporary scientific economics. Baloney. You have guys like Joseph Stiglitz, Paul Krugman, and Robert Solow who are quite liberal and subscribe to the basics of neoclassical economics. I don't know what the heck neo-liberal economics is, but it sounds like an amalgam of buzzwords and empty rhetoric to me. Yep, a quick google search shows that it is a term that has different definitions depending on who is using it.   Remove | Alert Edit | Reply | Top

Code_Name_D (980 posts) Nov-22-02, 11:39 PM (ET) Reply to post #21 40. Ah, I see. Sorry that it took me so long to respond. I had to think about my responds to insure one of corect tone and sound logic. All though I understand that you were addressing a specific anecdote in regards to basic concepts. Your anecdote is actually quite devoted of "choice" and ignores much more prevalent realities of the labor market. That is the manipulation that the labor market is undergoing to one that is "based on choice" as one economist told me. Or more accurately, based on insecurity and instability. The economic model you site only applies with an empowered work force. One that has options from witch to chose. One that is consistent with a consumer based economy. It is then incumbent on you to show that consumers/workers do not have choices, that they are stuck with the jobs they have. That there is no choice. And what sort of evidence would you consider to be convicting? The fact that you try to dismiss the obvious, tells me you will dismiss any thing that doesn't what is apparently a supply sides mythology. And how would any one proves that workers do not have any choices? Isn't that trying to prove a negative? Why don't demonstrate to me the sort of options that the lowest rung of working class American has? Until then, I submit to you the rising unemployment rates, the fact that 800,000 will soon be cut off from unemployment benefits, effectively placing their income at zero, while doing nothing to address mortgagees and health care costs. How about bank defaults? They are on the rise as well. Do they chose these things? Do workers choose to file for bankruptcy? Or are they faced with no alternative. The idea that folks chose to be poor, is absurdity incarnate. But recent economic policy is gradually shift the US economy away from consumer based, to what I can only call "slave base" or cheap labor economies. The one that vmounts is objecting too. (And poorly so, you must forgive me for saying. Despite a mighty effort. ) I'm sorry I think this is just ridiculous. A slave economy only works for low tech economies. If you are a slave you have no incentive to perfrom well. If you do perform well what do you get? More pay? No, you are a slave. Do you get some vacation time? No, you are a slave. This is why prior to the Civil War in the south was primarily agricultural Ridiculous in what way? Perhaps you are not familiar with the 1920, where children as young as 6 were operating cotton gins before child labor laws came foreword. And undeterred servitude was very much alive and well in 1920. Perhaps you should look to some of the new high tech factories now in operation in Central America that builds cell phones with slave labor. Gorge Lucas postulates the idea that droids (undoubtedly high tech, intelligent, and even self aware) can be used as slaves as well. Cheap labor is not slave labor. I know using such "hot button" terms sounds good rhetorically, but it makes it much harder to take such arguments seriously when the definitions of words like slave and slavery are broadened to the point of ridiculousness. Perhaps you should explain exactly why this is ridiculous, rather than mocking it. I might remind you that you are not addressing an economics' forum, but a public message board. If you are not prepared to address common language and laymen knowledge, than you are wasting my time. Further, you can test your theory by checking such things as the indexes for wages in the U.S. The indexes for labor in the US for the past 2 decades have been in decline, especially when accounted for inflation. But I do not present that as correlated. Where you need to look, is the number of jobs that have been shipped overseas in a deliberate attempt to exploit cheaper labor, as well as to the number of immigrants that are bussed into the US dally, who are exempt from minimum wage and child labor laws. (I noticed how you side-stepped those points when I raised them before.) Only in the slave economy is labor treated as a commodity. In a consumer based system, labor is something well above commodity. And this most be so because the rest of the economy depends on the condition of this "commodity," on the buying power of the work force or the consumer. Oh, nice redefinition of terms here. This is false. In the standard neoclassical economy labor is indeed a commodity and no, workers are not slaves. Also, what is labor if it isn't a commodity? You say it is "well above a commodity", well then what is it and how come it has a price tag on it? Or in the consumer society is there no price tag on labor? Now who is re-defining terms. Who ever said I am speaking from a neoclassical economic position? That is your position, not mine. Do try not to place words in my mouth in the future, least I be tempted to spit them out at you. (I have recently learned that "neoclassical economic theory" is the latest name for voodoo economics. They are trying to bamboozle us again.) Indeed Kansian theory states that the labor force is the same as the consumer population. What happens to one, happens to the other. Are you referring to Keynesian macro theory? If so, this is again not true. Firms in Keynesian theory are consumers, consumers of the factors of production. Consumers (i.e. individuals) consume final goods and services. So this notion that things can be so cleanly seperated is false (see Stephen McCafferty's Text, Macroeconomic Theory, particularly chapter 3). Not easily separated you say. But didn't you just try to argue that the workers and consumers are separate? Indeed I just argued that they are one and the same, and thus can not be separated. And I have to say that your argument that Firms are consumers is most humorous indeed. Are firms "producers" or are they "consumers." How can they possibly be both? Perhaps companies like Enron are in fact consumers because they do not produce any thing? If workers are not consumers, than wouldn't that be a the definition of a slave? The labor force is not a simple commodity because the labor force is the consumer. And unless you would like to convince me that commodities like to buy power tools and wide screen TVs, I would think your argument has failed in this area. The bases of a consumer economy are that you have a mass population of consumers. These consumers are the work force, and their buying power is the same as wages. Cut wages, and you cut consumer spending power. That is quite cut and dry if you ask me. On the other hand, supply sides (and apparently neoclassical as well) argue that they system is one way. Good flow to the consumer, while fiscal recourse flow to the supplier. Labor is a commodity that must be minimized in order to maximize profits. A key ingredient to this thinking is that labor is not also a consumer. Of course, they then have to find a consumer. I always wondered how supply siders salved this problem. It looks like I have my answer. This is why talk of a "third wave" (See my Obsolete Labor post.) is so scary. It argues that the economic élites, ever on the quest for lower labor costs, will try to replace man with tractors. IE: Slave labor, only with machines in the place of human beings.. I think the idea of obsolete labor due to technology is false. There is no evidence supporting this. For example, evidence would be increasing rates of unemployment over time. We don't see that at all. Then perhaps you should read my post, senses I did explain this question there already. I am not a believer in third wave, but supply sisders are big fans of the idea, and are constantly seeking new ways to make man obsolete from the work force all together. The concept of "free labor" has now become the holly grail of free-marketers. I have read alot of "free market" economics and I don't recall seeing this anywhere. I don't like the term "free market" in that it is more indicative of ideology than economics. I have yet to find a (mainstream) text book that contains the phrase "free market". I know that recently there has been alot of discussion of the New Economy and that processors will be the important factor instead of labor. However, that view seems to be losing favor right now given the recent downturn in the economy. This doesn't surprise me. Though the name escapes me, I have heard him bill himself as a "popular economists." What ever that means. I do not believe he is very well authored in any main stream economics papers. He was significant enough that Scientific America addressed some of his technological predictions, and dismissed them as impossible. Senses you are not familiar with third wave, I will tell you of what I know. The argument goes that as technology continues to advance, a point will be reached where man will become inferior to machine. Where any task done by man, be it dexterity, walking, thinking, or speech, can be done better by machine. He argues that this point has just not happened yet, but that when it dose happen, it will be sudden and dramatic. A transformation of society in the mater of years. The technology that will make this come about with be artificial intelligence, and pico-machines that can construct things on an atomic level. A robot would say pick up a carbon atom from a lump of coal, and stack it neatly to make a diamond. I hold the opinion that this is popy-cock on a number of levels. His economic theories are as fanciful as his technological predictions. My argument in obsolete labor wasn't that third wave was true, but the depopulation of certain sectors of the economy holds some similarities to third way. Changes not made of technology, but of cultural and economic dispositions. Enough to make third wave more relevant for examination. (Though just how you do this with popy-cock, I haven't figured out yet.) Perhaps you can provide a link to a site that has something on this or even a book or article reference. Unfortunately, I can not. But I think he has published two book on the subject in the popular sector. Look for the books that Rush Limbaugh "wrote" and it will probably not be far away. Assuming that it is still being published. But consumer economics demands that labor (or more specifically, man-power) not be treated as a commodity and be given special consideration in practice. Why? You have not explained this need for special consideration. But I have. Twice. Not including this post. You even just cut and pasted one of these explanations. Perhaps your arguments may avail you more if you read what is argued to you? This is why labor law requires a minimum wage, and basic compensation such as worker compensation for injuries, and safety regulations to keep workers from unnecessary injuries or deaths. The views amongst economists is that generally minimum wage increases unemployment. Now, one can argue that the improvement in welfare due to the minimum wage offsets the loss of welfare (in aggregate) due to the increased unemployment, but that is an empirical question and not clear that it must always be the case. No, the view of supply siders argues that increasing the minim wage results in larger unemployment. And this assertion is also false. The numbers do show an initial drop in employment, but one that is restored within months to original levels, and even leads to an expansion of employment as demand for services increases. These are not just forms of "liberal morality" but basic common senses applications of consumer based economics to preserve the consumers buying power. I don't see it. Most workers are not minimum wage earners, hence the impact of changing the minimum wage is minimal and hard to determine what it will be. But of course, you wouldn't see this. The increased unemployment will lower consumption, but the higher than market clearing wage will raise consumption. The net effect is ambiguous. I imagine it would depend on the elasticities of the supply and demand functions for labor. You lost me with that one. Perhaps you had better explain what you mean by "market clearing wage." I though that this notion has been largely discredited. One need only look to Somalia or Ethiopia to see that this isn't quite true. Though you will see paramilitaries there, they are using marshal force to compete for food, not to control it. Amartya Sen the Nobel Laureate has been debunked, and even Kenneth Arrow (also a Nobel Laureate) is unaware of this? Surely you can point to a source. Further your last sentence seems to confirm the assertion, that things other than crop failure are the reason for famines. If the armed groups are fighting for control then it seems reasonable to conclude that people are not out there eating it. Than perhaps you should become more familiar with the notions of global free trade than where you are now. The world is facing a glut of food. Grains and beef are practically rotting out in the sun for the lack of people to eat it. So much so that it is forcing down food commodities to absurdly low levels. But this is not quite true. There is a lack of people who can afford to buy food, not a lack of people who are hungry. The list of exceptions is quite long, and one of the commonly disgusted issues in other rooms of the DU. While it is true that starvation has been used as a weapon in the past. This hasn't been the case sense Blitzkrieg or "lightning war" came onto the battle field. Assuming you wish to discount the idea of economic sanctions from the battle fields. The reason for this is famine takes too long to take effect. It's only useful when trying to brake a sedge situation. Surely you can point to some examples. Frankly, I think I'll go with Sen as his research is considered to be definitive and I have seen nothing to go against it. To give you examples of sedges that have not taken place in times of war? Why is it you only ask me to prove negatives? Oh, but I can give you the idea that a sedge is in fact now call an economic sanction. And nearly all of these have been put foreword by the US. As far as the Nobel prize in Economics, didn't a few folks working for Enron take one of these prizes a few years back? Something about predicting the behavior of derivatives. I think that diminishes the value of any authority you might wish to quote. The problem isn't that neoclassical economic theory is not accurate. But that it is not relevant. The system that is in charge is a free market ideology that has more in common with a cult, than any scientific understanding of economics. A cult? Lets see that would mean a religion. And that would mean that despite evidence to the contrary the predictions do no hold. Sorry, I don't buy it. The evidence seems overwhelming. While you can debate about the fine points the overall theory seems pretty good. Further, neoclassical economics is not about "free markets". I doubt you could find a mainstream text book in the book store today that uses the words "free market". Neoclassical economics is an economic theory that postulates that individuals are selfnterested maximizers and that firms are profit maximizers. The role of government is often seen as one to solve problems with markets (public goods, externalities, information asymmetries, etc.). Hmm, it sounds to me you thus equate yourself to the position of supply siders a bit too much to know witch end of the argument you are speaking from. Perhaps this is my fault in not stating more clearly my opinions that supply side was the cult, and not classical economics. But of course I am recently come to learn that classical economics is supply side theory. When conservatives run into problems defending their arguments, they change the name of the argument and present it as a revolution. Boy, don't I feel the fool right now. Neoclassical economics assumes equal systems. What does this mean? This looks like nonsense to me. What systems and why do they have to be equal? Because systems are NOT equal. Is there an echo in here? Now come I have to repeat myself so much? The price of labor is determined by upward wage pressure from the workers, and downward pressure from the employers. But neo-classical fails when systems are not even, or are compromised. And this is the crisis that the modern economics field is facing today. The only way for the labor market to be out of whack in the manner you are describing is for there to be one purchaser of labor, i.e. a monopsony. Since this is not the case, I don't think this is a problem. In fact, one could make an argument (I personally think it would be a weak one) that labor unions act as cartels and push wages up. Even in the case of a single labor union and single monopsony I don't see why the outcome should be horrendous. This would essentially be a two player repeated game and there is plenty of reason to suggest that the outcome would be less than catastrophic. Ah, but it is the case in many sectors of the economy. Energy, entertainment, news, food production, commodities, investments. All are controlled by monopolies in their sectors. Only the cosmetics of these companies consuls them from the structures of the trusts of old, or at least from a legal stand point. But in the market place, monopolies they are. The end result of the merger fever that took place in the 80 and 90 is that companies are running out of other companies to merger with. And thus they can no longer "grow." Enron survived by gobbling up little companies left and right. It used those companies as vehicles to hide debt, or as Foustow put it, "opportunities for investments." The rate of debt growth exceeded Enron's capacity to merge with other companies. Your assertion to the country makes you look quite foolish. Further, neoclassical economics is a broad theory and encompasses the extremes from monopolies to perfect competition and everything in between. With the advent of game theory (thanks to John Nash's work in the 1950's on this), optimal control theory (thanks to Bellman and Pontryagin also in the 1950's) neoclassical economcis has some very sophisticated tools for analyzing non-cooperative less than perfectly competitive situations. I have read more recent research into game theory that places the original conclusions into question. Scientific America recently explored the more modern research into game theory and found that the subjects were far more inclined to indulge in a collaborative effort, and a competitive one. Any other selective findings you want to present? So it is a right-wing, left-wing thing after all. Or more accurately, it is a neo-liberal economics vs contemporary scientific economics. Baloney. You have guys like Joseph Stiglitz, Paul Krugman, and Robert Solow who are quite liberal and subscribe to the basics of neoclassical economics. I don't know what the heck neo-liberal economics is, but it sounds like an amalgam of buzzwords and empty rhetoric to me. Yep, a quick google search shows that it is a term that has different definitions depending on who is using it. Nonsense? It must not be if you are forced to ridicule it and to try and quote authority in order to combat it. You could level your own arguments once in a while. Two wrongs do not make a right. (No, but three rights do make a left.) __/\/\__000 O _(_¬ ¬)_. o \__\/__/ <-- This is Code Name D <-- And this is Code Name D's conscience. The Wizards of Money at http://wizardsofmoney.org/   Remove | Alert Edit | Reply | Top

EconomicsDude (28 posts) Nov-26-02, 01:09 AM (ET) Reply to post #40 41. Well.. ...is this your usual modus operendi? Accuse those who are not agreeing with you as being "supply siders"? Your claims that neoclassical economic theory is the "new name of voodoo economics" a.k.a. supply side economics highlights your own ignorance. Neoclassical economics got its name before you were even born. The fundamentals of neoclassical theory were invented/discovered independently by three gentlemen. Leon Walras, Alfred Marshall, and Carl Menger. Their research ushered in what was known as the marginalist paradigm and started what latter became known as neoclassical economics. So you can stop this crap of calling those you disagree with as supply siders. As I noted there are a number of liberal economists out there who agree by and large with the neoclassical paradigm. This is not making an appeal to authority it is stating a fact. Joseph Stiglitz (Nobel Prize winner), Robert Solow (Nobel Prize winner), and Paul Krugman (most likely a future Nobel winner) are all liberal and a quick glance through any of their work will indicate that they accept the bulk of the neoclassical paradigm. And what sort of evidence would you consider to be convicting? The fact that you try to dismiss the obvious, tells me you will dismiss any thing that doesn't what is apparently a supply sides mythology. If it is so damned obvious that the workers have no choice but to stay with the same job then it should be trivial for you to post some data. The fact that you haven't to date indicates you have none. Also, this is not about supply-side economics. It is about economics in general. You have a sloppy theory/understanding at best of what constitutes mainstream economic theory. As I have noted there are a great many mainstream economists who are liberal. And how would any one proves that workers do not have any choices? Isn't that trying to prove a negative? Why don't demonstrate to me the sort of options that the lowest rung of working class American has? No, it is not asking you to prove a negative, it is asking you to support your claim that the workers have no choices in terms of other jobs. This should be trivial. You need simply find some panel data on workers and note how many times they switch jobs. If they never switch or switch very, very rarely then you could say your hypothesis is verified. As it is you don't got squat. On the other hand, supply sides (and apparently neoclassical as well) argue that they system is one way. Good flow to the consumer, while fiscal recourse flow to the supplier. Labor is a commodity that must be minimized in order to maximize profits. A key ingredient to this thinking is that labor is not also a consumer. Of course, they then have to find a consumer. I always wondered how supply siders salved this problem. It looks like I have my answer. You don't know enough about neoclassical economics to offer a serious critcism. The flow diagram of the economy would be very messy. Final goods and services flow to individuals (i.e. people). Labor and the factors of production would flow to firms. Wages (a fiscal resource in your view) would flow to workers. Rents and payments to the other factors of production would flow to the owners of those factors (i.e. people). Also, let me point out what you clearly cannot grasp in very simple terms. Firms are consumers, firms are also producers. The consume the factors of production and produce final goods and services. One of the factors of production is labor, and for this the workers are paid a wage. As such the workers are both suppliers and consumers. They supply labor and consume final goods and services. Also labor is not minimized. This is something you made up. A firm in the neoclassical model seeks to minimize costs. This means is consumes an allocation of the factors of production that will allow it to produce the profit maximizing output and minimize costs. Labor can be trivially minimzed at zero, the problem is that tehn output is typically zero, and thus revenue is zero and thus profits are zero. So your idea that labor is minimized is just flat out wrong. Labor is not a consumer, it is a commodity. The laborer that supplies the commodity labor is not a commodity though. Please stop trying to pin this bullshit slavery thing on me. It is false and nothing I have written can be seen as supporting it. Unfortunately, I can not. But I think he has published two book on the subject in the popular sector. Look for the books that Rush Limbaugh "wrote" and it will probably not be far away. Assuming that it is still being published. I am...stunned...no that isn't right. I am...speechless....not that doesn't quite capture it either. I am mortified. Yes that covers it. To date the one reference you can actually give me is that pompous, egotistical, economic-know-nothing, and all around blowhard Rush Limbaugh? I point to actualy text books, famous well known economists (Nobel Laureates) and I am accused of making appeals to authority. Whatever. But consumer economics demands that labor (or more specifically, man-power) not be treated as a commodity and be given special consideration in practice. *Yaaaawwwn* Did you say something new? Oh, no...you haven't. What the heck is this special consideration? Okay, let me start asking you questions since you aren't about to spill it on this. Does labor have a wage attached to it. That is, if I work for one hour in your "consumer economy" do I get some money or what? I guess the answer has to be..... NO Because as soon as I get a wage, my labor becomes a commodity. So...instead of wage what do I get for an hours worth of labor? A pat on the back? No, the view of supply siders argues that increasing the minim wage results in larger unemployment. And this assertion is also false. The numbers do show an initial drop in employment, but one that is restored within months to original levels, and even leads to an expansion of employment as demand for services increases. Can you point to anything to back this up? Anything at all? I doubt it, so I'll offer an explanation for you. Initially the increase in the minimum wage causes unemployment. The over time the wage rate increases thus the difference between the minimum wage and the market clearing wage decreases, and eventually they are the same and finally the market clearing wage is above the minimum wage resulting in no unemployment due to the minimum wage. This does not invalidate the initial claim since in the final two stages the market clearing price is at or above the minimum wage. That is, the minimum wage is no longer binding. Another increase in the minimum wage moving above the market clearing wage would result in more unemployment. You lost me with that one. Perhaps you had better explain what you mean by "market clearing wage." Man if you don't know this you really shouldn't be commenting on economics...especially neoclassical economics as this is one of the fundamental ideas. The market clearing price (wage) is that price (wage) where supply is equal to demand. Than perhaps you should become more familiar with the notions of global free trade than where you are now. The world is facing a glut of food. Grains and beef are practically rotting out in the sun for the lack of people to eat it. So much so that it is forcing down food commodities to absurdly low levels. But this is not quite true. There is a lack of people who can afford to buy food, not a lack of people who are hungry. Do you realize you have just made Sen's point? It isn't that there isn't food available, but that political and economic disruptions prevent the food from reaching those places where it is most needed! To give you examples of sedges that have not taken place in times of war? Why is it you only ask me to prove negatives? I am not, I am asking you to support your claims. If your claims are unsupportable then your theory isn't worth the bandwidth. As far as the Nobel prize in Economics, didn't a few folks working for Enron take one of these prizes a few years back? Something about predicting the behavior of derivatives. I think that diminishes the value of any authority you might wish to quote. Nice poisoning of the well there. Merton and Scholes won the Nobel prize for their work on derivatives back in 1997. Merton was at Harvard and Scholes was at Stanford. I don't know if either of them had any financial dealings with Enron. Hmm, it sounds to me you thus equate yourself to the position of supply siders a bit too much to know witch end of the argument you are speaking from. I know enough to know you are just blowing hot air. And I am not a supply sider. Only the cosmetics of these companies consuls them from the structures of the trusts of old, or at least from a legal stand point. But in the market place, monopolies they are. The end result of the merger fever that took place in the 80 and 90 is that companies are running out of other companies to merger with. And thus they can no longer "grow." Enron survived by gobbling up little companies left and right. It used those companies as vehicles to hide debt, or as Foustow put it, "opportunities for investments." The rate of debt growth exceeded Enron's capacity to merge with other companies. Ahhh another Marxist. I figured you'd reveal your true colors if given enough rope to hang yourself. Your stuff about slave labor, wages, and now every firm is a monopoly demonstrate you are basically a Marxist...although I bet you don't realize it. I have read more recent research into game theory that places the original conclusions into question. Scientific America recently explored the more modern research into game theory and found that the subjects were far more inclined to indulge in a collaborative effort, and a competitive one. Any other selective findings you want to present? Can you for once point to an actual referrence and not some vague reference to some popular magazine. Try looking at David Levine's website (another liberal by the way...and a genius, IMO) who does work in game theory. His work is current and very much mainstream, yet it does not support you contentions. Nonsense? It must not be if you are forced to ridicule it and to try and quote authority in order to combat it. You could level your own arguments once in a while. No, I actually did look up this term "neo-liberal economics" and it means whatever one wants it to mean, that is, it is a meaningless term that anybody can use to make false statements about those whose views they oppose. Code_Name_D wrote: Neoclassical economics assumes equal systems. I queried: What does this mean? This looks like nonsense to me. What systems and why do they have to be equal? Code_Name_D responded: Because systems are NOT equal. Is there an echo in here? Now come I have to repeat myself so much? Well why don't you answer the damn question. You made the claim that neoclassical economcis assumes the "systems to be equal". Why does neoclassical economics assumes the systems to be equal? If you can't answer, I'll just assume you were spewing nonsense.   Remove | Alert Edit | Reply | Top

Code_Name_D (980 posts) Nov-26-02, 03:41 AM (ET) Reply to post #41 42. I am still wating for you to address my arguments. Attacking my charicter dosn't qualify as argument. And you can mock my credenchals all you want. If my knowlage is so sorly lacking, than you should not have any problems blowing my arguments out of the water, should you. I will respond to any argument you chose to address. Two wrongs do not make a right. (No, but three rights do make a left.) __/\/\__000 O _(_¬ ¬)_. o \__\/__/ <-- This is Code Name D <-- And this is Code Name D's conscience. The Wizards of Money at http://wizardsofmoney.org/   Remove | Alert Edit | Reply | Top

EconomicsDude (28 posts) Nov-27-02, 00:05 AM (ET) Reply to post #42 43. LOL... You don't seem to realize that I have destroyed everyone of your arguments. However, lets focus on two things for now. You have made two claims that interest me. 1. Labor should recieve special consideration. 2. Labor should not be a commodity. Now, when I see that I think of an hours worth of work not the worker himself. Second, this leaves me with two questions. Q1. What is this special consideration? Q2. If labor is not a commodity then does it have a price. If it does have a price how come it is not a commodity (i.e. bought and sold)? Failing to answer these two basic questions (and you have failed to explain these two statements) makes them out to be nothing but wonderful sounding, but hopelessly empty.   Remove | Alert Edit | Reply | Top

Code_Name_D (980 posts) Nov-27-02, 07:10 AM (ET) Reply to post #43 44. Like a broken record, record, record, record… You don't seem to realize that I have destroyed everyone of your arguments. However, lets focus on two things for now. You have made two claims that interest me. 1. Labor should recieve special consideration. 2. Labor should not be a commodity. Now, when I see that I think of an hours worth of work not the worker himself. Second, this leaves me with two questions. Q1. What is this special consideration? Q2. If labor is not a commodity then does it have a price. If it does have a price how come it is not a commodity (i.e. bought and sold)? Failing to answer these two basic questions (and you have failed to explain these two statements) makes them out to be nothing but wonderful sounding, but hopelessly empty. I have already addressed this issue 4 times. Going on five. Your ignorance of my response doesn't mean I haven't already answered your question. Ah, but on closer examination of the above, I notices that you are taking my arguments out of context. I have not stated that labor "should" receive special consideration, I said that labor "HAS" special consideration because it is NOT a commodity. I did not say labor "Should not be" a commodity, I said labor "isn't just" a commodity. One can also imply that is more than just a commodity as well. And I have detailed these stamens with the following qualifications. A commodity doses not produce, nor doses it consume. Labor, dose. I have also stated that labor is the consumer, and the consumer is labor. Therefore, reductions in the labor forces earning power must also translate into reductions of the consumers buying power. And I can demonstrate this in practice as well. As earning power of the American work force erodes, so do dose consumer spending. If you take into account the effect credit has on the system, than the effect becomes dramatic. As can not be seen in the current economic situation as free credit dries up, the consumer must now return to their original buying power, witch they are discovering is quite week. Resulting in the much dreaded economic contraction. Ah, but I have been following your argument quite closely. And thus far, the only coherent response you have presented is the idea that cooperation's are producers and consumers as well, thus, removing if not muting the arguments of the labor = consumer connection. And, a classic supply siders argument you will find on the free-republics message board. A corporation is nothing more than a paper entity. Nothing more than a collection of book entries written around a set of legal and accounting definitions. Remove the paper, and the corporation, company, business, or other entity no longer exists. It doses not and can not produce or consumer any thing because it has not real-world manifestation to produce or consume with. A cooperation's capacity for production/consumption comes from the interaction of labor (back to that again.) Remove labor from a corporation or other entity, and sun of a gun, it can no longer produce. This makes one wonder exactly why a cooperation even HAS relevance in a discussion about economic models. And I can demonstrate this in the field as well. HA HA. The dreaded ENRON debacle. A classic example of a cooperation that nether produces nor consumes. You should have been here when it fell. (Memories) Lots of "I told you so" going around the room. Some one from the administration even tried to sure up confidence by stating that "electric and gas services has continued uninterrupted, despite the Enron's filing for bankruptcy." The reason for this was because Enron had nothing to do with those systems (other than siphoning money away from their operating budgets.) If you want to talk market models, accounting, and legal structures, a cooperation's existence and definition become paramount. But that is not the make up of the discussion, is it. On to your second question. Witch is so myopic it hardly bares mentioning. "If labor is not a commodity, than how come it has a price attached to it?" This of course makes the assumption that since it has a price attached to it, it must there for be a commodity. If you were paying attention, (witch apparently you are not) I have already addressed this as well. A commodity is something you can barter for, like a bar of gold. But when I buy a bar of gold, it doesn't demand a pay raise down the line, or go out and buy power tools. You do not buy "an hours worth of labor." You pay a man to perform a task such as assembling a toy. He will only assemble toys so long as he is paid to do so. Stop his pay, and he walks out Lets put your labor / commodity claim to a little test. Shall we? Say each toy takes an hour to build, and you pay 1 man, 40 hours work. (40 man hours.) Walla, 40 toys. Now what did you just buy? Did you just buy 40 man hours, or 40 toys? If you bought the toys, than what happened to the man hours? Did they disappear into thin air? That is kind of a lousy property for a commodity, isn't it? If you bought 40 man hours, than who owns the toys? Where do the toys fit in the transaction? Now a toy is a commodity. I give you $10 bucks, you give me a toy. At the end of the day, you have $10 and I have a toy. How can labor possible qualify as a commodity on the same order of the toy? The answer of course is that it can not be the same, because they are not the same. Labor is a beast that straddles the worlds of services and product. It is tangible enough that is can be measured, and there for can have a cost/value applied to it. (Man-hours are the common units of measure.) But a man-hour is not a tangible good that can be retained or stored. A quality needed for a product. Perhaps I should ask weather I am buying a tangible commodity or a non-tangible commodity in the future? I might not end up throwing my money away as much. Now, that makes number five. Do you want to go for six? I must say, if this is your idea of "destroying" my arguments, you probably should look up the word "destroy" before using it again. Two wrongs do not make a right. (No, but three rights do make a left.) __/\/\__000 O _(_¬ ¬)_. o \__\/__/ <-- This is Code Name D <-- And this is Code Name D's conscience. The Wizards of Money at http://wizardsofmoney.org/   Remove | Alert Edit | Reply | Top

EconomicsDude (28 posts) Nov-28-02, 04:03 AM (ET) Reply to post #44 46. Allright... I have not stated that labor "should" receive special consideration, I said that labor "HAS" special consideration because it is NOT a commodity. I did not say labor "Should not be" a commodity, I said labor "isn't just" a commodity. One can also imply that is more than just a commodity as well. And I have detailed these stamens with the following qualifications. A commodity doses not produce, nor doses it consume. Labor, dose. Okay so labor recieves special consideration because it is not a commodity. Why is labor not a commodity...well it looks to me like your only rationale (so far) for this is the idea that only labor is productive and only labor consumes. This is false. My computer is consuming electricity. The generators that produced the electiricy consumed both labor (i.e. man hours supplied by laborers) electricity, and fossil fuels (just to name a few). So from this example we can see that labor is not the only thing producing and not the only thing consuming. So the foundation for saying labor is not a commodity is false. So I guess we can get rid of the special consideration...whatever the Hell that means. I have also stated that labor is the consumer, and the consumer is labor. Therefore, reductions in the labor forces earning power must also translate into reductions of the consumers buying power. Now you are committing the fallacy of Accent, that is a fallacy where the meaning of key word has dual meanings and the exact meaning is not clear. Try it this way. (Yankeedame this might solve your confusion too) Laborer refers to the worker. Labor refers to the labor that the laborer sells. Thus labor is not the consumer, the laborer is. This (somewhat artificial distinction) can help keep the issues straight. As for the above, I do agree that a reduction in the wage rate will reduce the incomes of the laborer and thus on aggregate tend to shrink the amount of spending done by consumers. Ah, but I have been following your argument quite closely. And thus far, the only coherent response you have presented is the idea that cooperation's are producers and consumers as well, thus, removing if not muting the arguments of the labor = consumer connection. And, a classic supply siders argument you will find on the free-republics message board. What are you talking about? Why must you insist on this bullshit? Supply side economics basically says, that if you put into place policies that affect the supply side then you will get more economic output. It was a reaction to the tendency to focus only on the demand side. The problem was that some of the key arguments underlying the supply side position were not clear (e.g. the Laffer curve). As for the laborer = consumer connection, I do not and need not remove or mute it. In fact, I think the connection is true. Ooops, too bad that just blew your assertion about me bein a freeper out of the water (and freepers aren't all the bright and don't understand economics either by and large). If you want to talk market models, accounting, and legal structures, a cooperation's existence and definition become paramount. But that is not the make up of the discussion, is it. It isn't? Gee that sure looks like the discussion of the opening post. That is how does economics explain profits? I have provided the neoclassical explanation. If you were paying attention, (witch apparently you are not) I have already addressed this as well. A commodity is something you can barter for, like a bar of gold. But when I buy a bar of gold, it doesn't demand a pay raise down the line, or go out and buy power tools. You do not buy "an hours worth of labor." You pay a man to perform a task such as assembling a toy. He will only assemble toys so long as he is paid to do so. Stop his pay, and he walks out I can see you have a superficial understanding of labor and workers. When you pay somebody $5/hour each $5 buys on just one hours worth of labor from the laborer. Latter if the laborer comes and says, I want a raise to $6/hour that does not mean you have to pay him an extra dollar for every hour he has already worked. You have already paid for those hours just like you have already paid for the bar of gold. You do not buy "an hours worth of labor." Yes you do. You say, "I'll pay you $5/hour and I need you to build this commodity," you are buying the labor in hourly increments (or even in smaller increments such as 15 minute intervals). How can labor possible qualify as a commodity on the same order of the toy? Its quite simple really. I give you $5 and you work for an hour. There done. Its a commodity. But a man-hour is not a tangible good that can be retained or stored. A quality needed for a product. This is it? This is your justification for not calling it a commodity? It can't be stored (actually it can be retained, when I hire somebody I have retained them). Sorry, but I don't see how this is relevant. The fact that I can still buy labor in various units makes it a commodity. Storage is not relevant. The basic idea of a commodity is something that can be bought and sold. Man-hours, by your own admission are bought and sold. (By the way what happened to the early reason that only labor produces and consumes? Decided that wasn't such a good idea so you tossed this in as well? Are you making this up as you go?)   Remove | Alert Edit | Reply | Top

Code_Name_D (980 posts) Dec-01-02, 06:23 PM (ET) Reply to post #46 51. Sigh Okay so labor recieves special consideration because it is not a commodity. Why is labor not a commodity...well it looks to me like your only rationale (so far) for this is the idea that only labor is productive and only labor consumes. This is false. No. My rational is that labor doses not behave as a commodity, there fore, it is not a commodity. Pay attention, will you. My computer is consuming electricity. The generators that produced the electiricy consumed both labor (i.e. man hours supplied by laborers) electricity, and fossil fuels (just to name a few). So from this example we can see that labor is not the only thing producing and not the only thing consuming. So the foundation for saying labor is not a commodity is false. So I guess we can get rid of the special consideration...whatever the Hell that means. Not so fast there. You forgot one teeny tiny little thing. Your computer is performing labor. Oh sure, I will concede that the computer itself is a commodity. But I think you have made my point for me with the following. Now you are committing the fallacy of Accent, that is a fallacy where the meaning of key word has dual meanings and the exact meaning is not clear. (When in doubt, you argue definitions. Any thing to avoid the issue.) Laborer refers to the worker. Labor refers to the labor that the laborer sells. Thus labor is not the consumer, the laborer is. Oh, so we are seeking to separate the worker from the labor performed. No doubt you are attempting to present the following notion: I can not buy the worker, therefore the worker is not a commodity. I can buy the labor from the worker, there for the labor is a commodity. Clever, but still wrong. You CAN buy the worker. Its called slavery. If you were a real economist, you would already be aware of this. In 1820, a Southern plantation owner could go to the doc and buy several slaves. He would indeed be buying a commodity. Something that you can buy, sell, and hold. But even the plantation owner can not buy labor, because labor is not, nor ever will be, a commodity. Lets expand on this. If you can buy, sell, or hold something, than you can trade it for a profit by buying at low demands, and selling at peek demands. Buy low, sell high. But you can't do this with labor. You can not re-sell it. Back to your computer for a moment. You can buy the computer, just like the slave. That is a commodity. But the computer performs work, just like the slave, and work is still not tangible. You can not resell the work the computer douse. Once the work is done, it's done. So I can use your own argument in regards to separate laborer/labor to defend my claim that the labor and commodity of a computer are in fact two different things. Because you argued that the laborer and labor are two different things. The difference between the laborer and the slave is that you make a mutual agreement with the worker for his labor. And the labor side of the computer doesn't even meet your own definition of a commodity because you can not place a price on it. You don't pay the computer a wage, nor negotiate with the computer for compensation. If you can not negotiate a price, you can not come up with a price to place on it. The electricity and maintenance of the computer also doesn't qualify as compensation because its needs are technical, supplied by infrastructure. Not economic. So you have failed to compromise my statement. In truth, quite the opposite is true. The laborer is the commodity. While the labor is not. This (somewhat artificial distinction) can help keep the issues straight. If it looks like an artificial distinction, than I submit to you that it is artificial distinction. But I will admit it did do wonders in helping keep the issues strait. Mine any way. I can't quite say the same about yours. As for the above, I do agree that a reduction in the wage rate will reduce the incomes of the laborer and thus on aggregate tend to shrink the amount of spending done by consumers. Oh my stars. Is that a capitulation? I wonder if it will hold. Supply side economics basically says, that if you put into place policies that affect the supply side then you will get more economic output. It was a reaction to the tendency to focus only on the demand side. The problem was that some of the key arguments underlying the supply side position were not clear (e.g. the Laffer curve). Supply side is nothing more than a collection of propaganda points. It states nothing. Hence, why many of its arguments are not exactly "clear." It attempts to misrepresent legitimate economic research, such as the Laffer curve, in order to support its own self serving political agenda. Conservatives focuses on the over taxation extreme of the curve, but ignores the other side of the same spectrum. The consequences of undertaxation and the need for public infrastructure and services. As for the laborer = consumer connection, I do not and need not remove or mute it. In fact, I think the connection is true. I guess your capitulation dose hold. Now that you have managed to unhitch the laborer from the labor, you see no problem. But if your argument is to hold, then you need to explain the link you just conceded. Supply siders believe that cutting labor costs grows the economy. Ether in the form of cutting wages, or cutting labor force. Kansian puts exactly the opposite. You have got some home work to do dude. Ooops, too bad that just blew your assertion about me bein a freeper out of the water For the record, I called you a supply sider. (And I believe one has even called you a preacher of supply side myth. Too funny. Should I called you "reverend" from now on?) Not a freeper. Try not to put words in my mouth, will you? It only makes you look stupid. I can see you have a superficial understanding of labor and workers. When you pay somebody $5/hour each $5 buys on just one hours worth of labor from the laborer. Latter if the laborer comes and says, I want a raise to $6/hour that does not mean you have to pay him an extra dollar for every hour he has already worked. You have already paid for those hours just like you have already paid for the bar of gold. What if he demands it retroactively? Like the alternative minimum tax cut? But a man-hour is not a tangible good that can be retained or stored. A quality needed for a product. This is it? This is your justification for not calling it a commodity? It can't be stored (actually it can be retained, when I hire somebody I have retained them). Yet another strawman there reverend? And one that you should be very much aware of. After all, was it not you who just said that my only argument was "a commodity dose not produce, nor consume?" Exactly how many of my "only arguments" are you planning on addressing here? Sorry, but I don't see how this is relevant. Oh, you want relevance? Ask and you shall receive, though I do not think you will like what I have to say on the subject. The relevance comes that labor is not the only thing that has been miss-classified as a commodity. Supply siders in office have gone on a drunken money spree privatizing and securitizing all sorts of things, claiming they are commodities, when they are not. And when these new commodities fail to behave as supply siders predict, they blame democratic governors and environmentalist for legislation that they themselves wrote. Here are some of the other things that have been miss-classified. (+) Electricity (+) Gas utilities. (Not the gas itself, but the service and distribution.) (+) Communications technologies and development. (+) Research and development. (+) Broadcast bandwidth (+) Medical services (+) Medications (+) Emergency medical services and disaster response. (+) Intellectual properties & Entertainment. Especially music radio. (+) Airline security. (September 11th any one?) (+) Airline and rail transpiration infrastructure. (+) Public education. Both at the grade school and university level. (+) Scientific data and research. (+) Technical specifications such as communications protocols. (+) Garbage collection and disposal. This includes recycling and product deconstruction. (+) Pollution. (As defined in the recent global anti-greenhouse gas protocols. Western supply siders have been drooling to make pollution certificates so that they can trade them as commodities.) (+) Low income housing. (+) Child welfare services. (+) Water. Both resource and utility supply. All of these are claimed to be commodities, and many even have markets and trades being placed behind them, much as you would expect to see with a commodity. (BTW: labor is not on the list because no one has figured out how to trade it or place it on a market with out the labor unions.) But each sector I have just listed is in contraction, in extreme fiscal trouble, or facing other negative stresses. A few have even seen profound failures and collapses of industry. Oh, but the economy is still growing, right? This is a lot like saying a square wheel rolls just as smoothly as a round one, so long as you ignore the bumps. Each element I have listed above fail to meet the definition of a commodity for a variety of different reasons. For some, it is because they are essential services, called "utilities." They have more in common with labor than with commodities. Others, such as intellectual properties and technical specifications, don't meet the definition of a commodity because they are not manufactured or distributed in the same was as products or goods, messing with supply and demand models. Still others, such as pollution certificates, treating them as commodities will aggravate the indited goal, to reduce pollution, not to build in a conflicting interest. Others still because they are defined as others by cultural demands or legal definitions for one reason or another. Supply siders however make the claim that these are commodes for one reason, and one reason only, to make money, without doing any thing to earn it. The idea is to buy low, and sell high. The difference is profit. It's called speculative trading, and is the entire reason why the US economy is in the shape it is now. The "captains of industry" have all shut down their plants, laid off all of there workers, in favor of an over glorified form of day-trading. So much so that the markets today are infected with speculative fever. Stocks to not rise because the company profits are going up. Indeed, profits are no longer even posted as a measure of performance. Stocks now rise, because investors see them as rising and want in on the trough. When the peek is reached a day later, they bail. They try to lock their profits, and wait for the next trough to show itself. The seicuritization and privitization moves are nothing more than efforts to make new speculative playgrounds in what the wizards of money think are lucrative undeveloped markets. The fact that I can still buy labor in various units makes it a commodity. Oh so we are back to the "since I can place a price tag on it, it must be a commodity" definition than. Is that your only argument? What if I was to place a price on your head? Would that make your death into a commodity as well? Not a threat, just trying to make a point. Storage is not relevant. Than why did you bring it up? Oh, you must be trying to waist my time then. I should of known. But if labor is a commodity, and you can not store a commodity, than what is a commodity? Why by gold as a commodity if storage is not the intent? "Lucy, you've got some splan'in to do." The basic idea of a commodity is something that can be bought and sold. Man-hours, by your own admission are bought and sold. …and held! I said, bought, sold, and held! And when I say bought & sold, I am not talking about one person selling it, with another buying. (That is not buying and selling. That is making a transaction.) I go to market, I buy a bar of gold (preferable at a low price). I hold a bar of gold (keep it in my pocket). And then I sell a bar of gold (preferably at a high price). You can not do that with labor. Boy, you really are thick, aren't you. How many times do I have to repeat this? And slapping a price on it, is your argument, not mine. (By the way what happened to the early reason that only labor produces and consumes? Decided that wasn't such a good idea so you tossed this in as well? Are you making this up as you go?) Oh, that was bright. Perhaps you should wait for my response before you call it stupid. Stawman argument by the way. And who is making this stuff up again? I think you're the one who keeps trying to make up my arguments as he goes along. Two wrongs do not make a right. (No, but three rights do make a left.) __/\/\__000 O _(_¬ ¬)_. o \__\/__/ <-- This is Code Name D <-- And this is Code Name D's conscience. The Wizards of Money at http://wizardsofmoney.org/   Remove | Alert Edit | Reply | Top

acerbic (2918 posts) Dec-01-02, 07:59 PM (ET) Reply to post #51 53. What are you claiming now? Clever, but still wrong. You CAN buy the worker. Its called slavery. If you were a real economist, you would already be aware of this. In 1820, a Southern plantation owner could go to the doc and buy several slaves. He would indeed be buying a commodity. Something that you can buy, sell, and hold. But even the plantation owner can not buy labor, because labor is not, nor ever will be, a commodity. A laborer is a commodity but labor isn't? Labor can't be bought? What do you call it when somebody pays somebody else to perform some work? Labor can't be bought because it's not a commodity and labor is not a commodity because you can't buy it? http://www.datanation.com/fallacies/define/circle.htm   Remove | Alert Edit | Reply | Top

Code_Name_D (980 posts) Dec-01-02, 09:51 PM (ET) Reply to post #53 54. I call it a transaction. Next question. Two wrongs do not make a right. (No, but three rights do make a left.) __/\/\__000 O _(_¬ ¬)_. o \__\/__/ <-- This is Code Name D <-- And this is Code Name D's conscience. The Wizards of Money at http://wizardsofmoney.org/   Remove | Alert Edit | Reply | Top

acerbic (2918 posts) Dec-01-02, 10:02 PM (ET) Reply to post #54 55. ...but "buying" is somehow magically not one side of that transaction? Word magic...   Remove | Alert Edit | Reply | Top

Code_Name_D (980 posts) Dec-01-02, 10:48 PM (ET) Reply to post #55 56. One person buys, the other sells. Come on, you are not this dense. You are being deliberitly obtuse. Two wrongs do not make a right. (No, but three rights do make a left.) __/\/\__000 O _(_¬ ¬)_. o \__\/__/ <-- This is Code Name D <-- And this is Code Name D's conscience. The Wizards of Money at http://wizardsofmoney.org/   Remove | Alert Edit | Reply | Top

acerbic (2918 posts) Dec-02-02, 00:44 AM (ET) Reply to post #56 57. "But even the plantation owner can not buy labor" "One person buys, the other sells." So, can labor be bought or not?   Remove | Alert Edit | Reply | Top

Code_Name_D (980 posts) Dec-02-02, 01:12 AM (ET) Reply to post #57 58. I have already explaned it to you. If you are still confused, go back and read what I have already posted. Sence you are deliberitly trying to fain your own ignorance, I have placed you on ignore. So do not bother yourslef with trying to respond. Good day. Two wrongs do not make a right. (No, but three rights do make a left.) __/\/\__000 O _(_¬ ¬)_. o \__\/__/ <-- This is Code Name D <-- And this is Code Name D's conscience. The Wizards of Money at http://wizardsofmoney.org/   Remove | Alert Edit | Reply | Top

acerbic (2918 posts) Dec-02-02, 01:57 AM (ET) Reply to post #58 59. You have "explained" with many, many words... I was just trying to find out if there's any (even internal) consistency in the explanations. Apparently that was an evil thing to do.   Remove | Alert Edit | Reply | Top

yankeedame (27 posts) Dec-02-02, 02:06 AM (ET) Reply to post #59 61. Of course it is I was just trying to find out if there's any (even internal) consistency in the explanations. Apparently that was an evil thing to do. Of course it is, you silly goose!   Remove | Alert Edit | Reply | Top

EconomicsDude (28 posts) Dec-02-02, 04:41 AM (ET) Reply to post #59 64. The short answer is... I was just trying to find out if there's any (even internal) consistency in the explanations. No. Your link to circular arguments is spot on.   Remove | Alert Edit | Reply | Top

EconomicsDude (28 posts) Dec-02-02, 04:32 AM (ET) Reply to post #51 63. Moving Target... No. My rational is that labor doses not behave as a commodity, there fore, it is not a commodity. Pay attention, will you. Man can you move the target around just a bit faster...that way I'll really get dizzy and fall over. So now it is labor does not behave like a commodity. Why? I know, you'll tell my you have explained this before (although you haven't), but explain it one more time, please. Regarding my computer: Not so fast there. You forgot one teeny tiny little thing. Your computer is performing labor. Oh...I see...well actually no I don't. Does this mean I have to pay my computer a wage? Do I have to give it benefits. If I don't will it call the Department of Labor on me. Can you expand the definition of labor anymore so that it becomes completely meaningless? Oh sure, I will concede that the computer itself is a commodity. Okay, so the computer does labor which is not a commodity, but the computer itself is a commodity. And this is to be compared to my notion that the laborer which is not a commodity, but supplies labor which is a commodity. I think you are making this up as you go along. Oh, so we are seeking to separate the worker from the labor performed. No doubt you are attempting to present the following notion: I can not buy the worker, therefore the worker is not a commodity. I can buy the labor from the worker, there for the labor is a commodity. Clever, but still wrong. You CAN buy the worker. Its called slavery. If you were a real economist, you would already be aware of this. In 1820, a Southern plantation owner could go to the doc and buy several slaves. He would indeed be buying a commodity. Something that you can buy, sell, and hold. But even the plantation owner can not buy labor, because labor is not, nor ever will be, a commodity. You need to make a flow chart or something to keep from confusing yourself. You yourself have just made a distinction between labor and the thing doing the labor, the computer example. Also, in case it hasn't ocurred to you yet, you are putting words in my mouth. Your last stupid paragraph is based on the notion that I have denied slavery exists or existed. I haven't. Further, this is not 1820 and slavery is not legal in the U.S. and virtually anyother Western nation. Although it is still practiced in parts of Africa, and the Middle East, and probably other places as well. Finally, why do you insist on the physical nature of commodities. Information is not physical it resides in peoples brains, yet it is a commodity. In fact, it often times has many of the characteristics of a public good. Back to your computer for a moment. You can buy the computer, just like the slave. That is a commodity. But the computer performs work, just like the slave, and work is still not tangible. You can not resell the work the computer douse. Yes I can. I can have my computer do some complex analysis on some data and save the results. I can then sell the results as many times as I want simply by reproducing perfectly the file that contains the analysis. Same thing with labor. I hire a person and then sell the products that the labor has helped create. I can't store the "productivity" of capital equipment either. I can store the equipment, but not the actual productivity. Just as I cannot store the electricity that goes into my computer. Nor can I store the productivity of my computer. I can retain the worker, tell him, "Keep coming back and I'll keep paying you." In that sense, he is like the equipment, but with the difference that I don't own the worker, I am merely buying is labor. He always has the choice of not selling it to me and finding another buyer. Since I don't own the worker, I cannot sell his labor, only he can do that. However, this by itself does not prevent the labor market from functioning. It does not prevent there being a market clearing wage. It does not prevent anything in neoclassical economic theory, nor does it prevent the labor market from working in reality either (although it may not work efficiently due to such things as informational assymetries). As such, your claim that labor is not a commodity is just silly. The labor market works like most other markets. There is supply there is demand. There is a wage, and in ideal circumstances it will equilibarate supply and demand. Oh my stars. Is that a capitulation? I wonder if it will hold. No, it is me agreeing with the trivially obvious. Even the blind chicken (that would be you) can sometimes get the kernel. Supply side is nothing more than a collection of propaganda points. False. It states nothing. False, even if the propaganda point is true, propaganda is saying something. Hence, why many of its arguments are not exactly "clear." It attempts to misrepresent legitimate economic research, such as the Laffer curve, in order to support its own self serving political agenda. You don't even know what the Laffer Curve is. And Arthur Laffer is(was?) a supply-sider. What is not clear? By the way, the Laffer Curve is called the Laffer Curve because of Arthur Laffer's very clear and simple statement of the basic concept. It has been known in economics for quite sometime. I guess your capitulation dose hold. Now that you have managed to unhitch the laborer from the labor, you see no problem. But if your argument is to hold, then you need to explain the link you just conceded. Supply siders believe that cutting labor costs grows the economy. I dare you to point to any source that would support this. I'd like the author's name, the title of the book or article and either the journal's title or the publisher of the book. As for my capitulation, I don't know why you are so shocked, I don't need the position you selected for me. You were blathering on about how I had to disconnect the laborer from the consumer, which is patently untrue and not necessary for any of my arguments. In fact, in neoclassical overlapping generations models the consumers are laborers and part of their income is determined by the labor-leisure decisions. Here is an overlapping generations model that includes a labor/leisure decision. Warning: the mathematics is fairly intense. Yet another strawman there reverend? Uhhhm, you brought up the issue of storage, not me. So no, this isn't a strawman. And one that you should be very much aware of. After all, was it not you who just said that my only argument was "a commodity dose not produce, nor consume?" Exactly how many of my "only arguments" are you planning on addressing here? Well isn't that precious. I suggest you re-read what I wrote. I did note that your first argument was the only one you had presented "so far". And speaking of so far, I still don't see why labor cannot be considered a commodity. A person who needs labor can buy it, and a worker willing to work at the offered wage can sell it. Seems pretty cut and dry to me. All this other Bravo Sierra about storage, consuming/producing, is just that Bravo Sierra, IMO. The relevance comes that labor is not the only thing that has been miss-classified as a commodity. Supply siders in office have gone on a drunken money spree privatizing and securitizing all sorts of things, claiming they are commodities, when they are not. And when these new commodities fail to behave as supply siders predict, they blame democratic governors and environmentalist for legislation that they themselves wrote. Expanding your list still doesn't make your case. The problem is that labor and most of your expanded list are commodities. They can be bought and sold. Electricity is bought and sold, just like toys and donuts. All of those items are scarce, and hence are subject to the laws of economics. As they become scarcer, their prices rise, as they become more plentiful their prices drop. Now some of your list are actually public goods and hence private provision wont work (or more accurately wont work very well when there are large numbers of people). For example, information (scientific data/basic research). But each sector I have just listed is in contraction, in extreme fiscal trouble, or facing other negative stresses. A few have even seen profound failures and collapses of industry. Sooooo...if a sector of the economy is in contraction/economic trouble then the goods in that sector cease to be commodities. Any other "explanations" as to why something is not a commodity you'd like to trot out? So far we have had: 1. Both consumes and produces. 2. Can't be stored. and now we have "The sector for is in contraction." Oh, but the economy is still growing, right? Yes, according to the latest data the economy is growing at a low rate and there is real fear the economy could head back into recession. Regarding storage: Than why did you bring it up? I didn't, you did. Oh, you must be trying to waist my time then. What are you talking about, you were the one that brought up storage, not me. Sheesh you really are confused. I should of known. You should know what you posted, but I guess that is asking too much. But if labor is a commodity, and you can not store a commodity, than what is a commodity? I have already stated what a commodity is. Something that can be bought and sold. The fact that there isn't a resale market is irrelevant. Why by gold as a commodity if storage is not the intent? "Lucy, you've got some splan'in to do." Maybe you should stop watching I Love Lucy re-runs and try some texts on economics. I never said that storage is never an issue, just that it is not relevant for the definition of what is a commodity. …and held! I said, bought, sold, and held! That is fine, but what you say does not make a definition. Being able to buy and sell something is sufficient for a market to develop. Storage presents its own interesting problems to any analysis of the behavior of that market, but the presence or absence of storability does not prevent the market from forming. And when I say bought & sold, I am not talking about one person selling it, with another buying. (That is not buying and selling. That is making a transaction.) Another meaningless distinction. The number of people engaging in trade is irrelevant so long as there is a buyer and seller the market can be analyzed. I go to market, I buy a bar of gold (preferable at a low price). I hold a bar of gold (keep it in my pocket). And then I sell a bar of gold (preferably at a high price). You can not do that with labor. So what? Boy, you really are thick, aren't you. How many times do I have to repeat this? Yeah, but unfortunately you can't explain what the significance of this is. Oh, that was bright. Perhaps you should wait for my response before you call it stupid. Stawman argument by the way. And who is making this stuff up again? I think you're the one who keeps trying to make up my arguments as he goes along. So not only do you not understand basic economic theory, you don't understand logical fallacies either.   Remove | Alert Edit | Reply | Top

yankeedame (27 posts) Nov-27-02, 11:32 AM (ET) Reply to post #43 45. I don't understand... Now, when I see that I think of an hours worth of work not the worker himself. ... I'm afraid I don't understand what this sentence means. (By the by, kudos for this great debate. It surely does keep the old grey cells percolating!)   Remove | Alert Edit | Reply | Top

vmounts (755 posts) Nov-18-02, 02:04 AM (ET) Reply to post #19 25. Ok. I am not making an assumption that labor is determined by supply. Further, to highlight how confused you are, Not confused at all. I meant supply and demand as I think was clear from my statements. That labor's worth should not be determined solely by the intersection of supply and demand. Sorry if that wasn't clear to you, other responders seemed to understand what I was saying. "disutility" (i.e. loss of personal welfare from working vs. enjoying leisure time) at the given wage. Doesn't this ignore the fact that people have to eat in order to live? It would work perfectly, no doubt, if you could just turn down every offer that didn't meet your satisfaction. Perhaps you want food, a place to stay and health care. Doesn;t this model mean there will always be someone who has to forgoe the helthcare because at some point they must eat and therefore someone will always give in at the hunger point? This is not right-wing, left-wing or centerist. It is the fundamentals of scientific inquiry. A theory should make predictions and those predictions should be checked by what is actually observed. We don't see unemployment increasing over time. We don't see the rate of profit declining over time. These are a couple of big Marxist predictions. Since we don't see them we should reject the Marxist theory as it currently stands. Modify that theory or move on to another one. Or perhaps we should consider making that happen through laws and policies? Then economics would study that instead. -Vinnie --------- "Who Are the Brain Police?" -Frank Zappa   Remove | Alert Edit | Reply | Top

vmounts (755 posts) Nov-18-02, 03:55 AM (ET) 31. Thanks to all.... I appreciate everyone's discussion of my post, I am now bowing out of the discussion. Mostly this is because of the name calling. I may not be an economics major but I'm not stupid or silly. I got a 4.0 in highschool 3.8x in college taking mostly honors classes. I have a high IQ and am generally intelligent. And yet I have people calling me ignorant, silly, lame and liar. I may not have known the terms and the theories involved and so had a difficult idea expressing my ideas in terms that people more learned in economics would understand them. The basics of what I was suggesting was that the economic system we had was poor at determining certain things. 1) is the worth of labor, i.e. left to its own devices it tends to create a lot of people not able to pay for the expenses of living, 2)that this partly is due to the power that existing capital has in the system(over labor and other competitors) 3)When someone doesn't have capital they borrow but that money they borrow ultimately comes from everyone in society, therefore we all have a stake in what gets invested in and deserve a voice in that decision making 4)the current system isn't good at long term goals but well suited to those things that can be solved in a quater or a "5 year plan". The reason I brought them up is that I see that the current crop of leaders in the WH and congress seem to think that we don't need to regulate or control the capitalist system. That it will somehow work itself out. When it seems pretty clear that left to its own deivces it will not. I appologize that my ideas perhaps didn't come across clear enough. If I am able to state them more clearly now it is because of the helpful responses and I thank the posters for that. I don;t know why some had to resort to being jerks and throwing insults my way. But I've had enough. Thanks again for all the info. Take care, -Vinnie --------- "Who Are the Brain Police?" -Frank Zappa   Remove | Alert Edit | Reply | Top

acerbic (2918 posts) Nov-18-02, 04:19 AM (ET) Reply to post #31 32. Some cheese with that whine...? Mostly this is because of the name calling. "Do you support getting rid of minimum wage too? Or how about those pesky child labor laws? Surely thats a big burden on people who have to pay wages. Oh the humanity. They should be able to drive the price of labor even lower... even further in to poverty." http://www.democraticunderground.com/cgi-bin/duforum/duboard.cgi?az=show_thread&om=1526&forum=DCForumID27&omm=13 Another example of kook hypocrisy is name calling. A kook will rage against others for name calling but be completely oblivious to their own continual name calling and ad hominem attacks on others. Kooks tend to live by the motto of "Do as I say, not as I do." http://www.kook-watch.net/mdavis/kooks/kooks.html   Remove | Alert Edit | Reply | Top

HenryJones (158 posts) Nov-18-02, 10:57 AM (ET) Reply to post #33 35. It was an ad hominem Combined with a Strawman. You put words in his mouth (so to speak), insinuating that a) he supports removing the minumum wage and child labor laws and b) that you are morally superior because ot the attitude you falsly ascribed to him. So you're martyrdom is less than plausible.   Remove | Alert Edit | Reply | Top

yankeedame (27 posts) Nov-18-02, 10:58 AM (ET) Reply to post #31 36. If I may ... LAST EDITED ON Nov-18-02 AT 11:00 AM (ET) The basics of what I was suggesting was that the economic system we had was poor at determining certain things. 1) is the worth of labor, i.e. left to its own devices it tends to create a lot of people not able to pay for the expenses of living.. Understood, but folks not able to pay for the expenses of living? Isn't that just a wee bit of a hyperbola? But then since your's truly has been know to be guilty of the same crime, let's just wink at that,ok? But on a more serious note, you are right in that-- for better or worse-- the economic system determines the worth of labor, but how else better? The economy, like life itself, is always evolving and people's skills must evolve with it if they wish to keep up. Hence the moral problem for some: Whose fault is it? 2)that this partly is due to the power that existing capital has in the system (over labor and other competitors) Ah, but capital is not a fixed thing. It's not as though there are only XYZ apples in the basket. Fortunes come and fortunes go, as we can see by looking at any Forbes 500 list. 3)When someone doesn't have capital they borrow but that money... True. ...they borrow ultimately comes from everyone in society... It comes from some of the depositors of the bank or Credit Union that the person borrows from, not "everyone in society". ...therefore we all have a stake in what gets invested in and deserve a voice in that decision making I understand your concern, but remember, no bank is going to (or legally allowed to)lend all its depositors' money-- esp. to a single person or company. As for decision making, heck, let's say you and I belong to the same Credit Union. You get a loan from the CU for a new car and in doing some of the money you get is "mine"). I for my part: 1)Wouldn't even know that you were using "my" money 2)Trust the Credit Union to make sure you can/will repay the loan Ergo, I wouldn't care what kind of car you get. 4)the current system isn't good at long term goals but well suited to those things that can be solved in a quater or a "5 year plan". Albeit flexiability is the key to survival, and locking an economy into any sort of "five-year plan"/ centerally planned economy is asking for trouble.   Remove | Alert Edit | Reply | Top

EconomicsDude (28 posts) Nov-19-02, 11:47 PM (ET) Reply to post #36 37. Let me add... 1)Wouldn't even know that you were using "my" money 2)Trust the Credit Union to make sure you can/will repay the loan Ergo, I wouldn't care what kind of car you get. 3)As a depositer you will recieve interest on any money you have with the Credit Union, i.e. you are being paid so that the Credit Union can lend you money. If you don't like this kind of thing, take your money; put it in a tin can; hide said tin can someplace. (And let inflation slowly erode away the purchasing power of the money you have put in the tin can).   Remove | Alert Edit | Reply | Top

criticalmass (70 posts) Nov-20-02, 10:27 PM (ET) 38. This will mess with your head Three men check into a hotel and pay $10 each to share a $30 room. After they go upstairs, the desk clerk realizes he should have only charged $25 for the room. He gives the bellboy five $1 bills to take upstairs to the men as a refund. On the way up to the room, the bellboy decides to keep $2 for himself as a tip. He then gives each of the three men a $1 refund. Now each of the three men has paid only $9 for his share of the room, for a total of $27. The bellboy has $2. What happened to the other dollar? (You can tell by the price of the room this is a really old joke.) "My God! How little do my countrymen know what precious blessings they are in possession of, and which no other people on earth enjoy." -- Thos Jefferson   Remove | Alert Edit | Reply | Top

KennyG (2 posts) Nov-29-02, 07:56 PM (ET) 47. Here's my answer. I hope you'll receive answer this as a way to hone your answers to conservatives. I am a fiscal conservative and will give my best answer, hopefully without being provocative. If I stumble onto something that is really true, then non-comnservatives will ultimately benefit by facing that reality. 1. the full revenue for that item is what the market valued it at. If you happen to have $1 in profit after costs are subtracted, that is your profit. But I suspect you are asking a different question really, "i.e., is it right to get a profit from items you produce and sell?". In other words, the value is determined after sales occur, not before. It is necessarily something you respond to, not dictate. 2. the value of the labor can be determined several ways. You can decide what it is worth to you, you can decide what it is worth in the market place (e.g., are computer programmers oozing out of the woodwork just now, and can they all get paid what they got paid a year ago even though there aren't enough jobs for them all?), you can decide what it was worth in the 1990s when everything was better, etc. There is no correct answer to this question, and the default is: "what the market clearing value is". You have to really work hard to beat the default answer. You have to create your own reality, in fact. 3. you can chose to limit your profits, but you risk losing your savings as well in doing so. If you run your margin at almost zero, what'll you do when the economy turns down? You'll go out of business unless you find someone who has deeper pockets, someone who kept a healthy margin. Also, and you won't know this if you don't have business experience, if demand goes up and you need to hire more people (okay, you need to ramp up production), you can't do that without having some money in savings. Profits are vital to the ongoing health and growth of a business. The reality of economics in a free market system is that profits encourage entrepreneurism, something we all consume greedily, liberals and conservatives alike. Now the argument of the plusses and minuses of free market economics is something we may take up elsewhere if it's beneficial to this forum. I wouldn't say it's a waste if the entrepreuner makes a buck per item produced. It allows that business to stay viable, and maybe to be ready if production needs to ramp up. In conclusion, I'd say you've created a false delimma in saying that the profit is either an inefficiency or an inequality. But maybe that's just a matter of perspective. As an entrepreneur, one of the people who helps other people make an honest buck, I say my perspective is of some value to me and you.   Remove | Alert Edit | Reply | Top

EconomicsDude (28 posts) Nov-30-02, 02:49 AM (ET) Reply to post #47 48. Value and Price The value of a commodity, be it a pair of shoes, labor or a jumbo jet, is defined by the person buying it. For instance, I might have a value for a pair of shoes that is higher than the market clearing price. The market clearing price is set at the point where demand is equal to supply. The people who value shoes at the market clearing price wouldn't buy any shoes if the price went up. Those who have a value slightly less than the market clearing price dont' buy shoes. And those who have a value higher than the market clearing price recieve what is called the consumer surplus. That is if my value for a pair of shoes is $20 and the market clearing price is $10, then I get $10 in consumer surplus (i.e. that is value that the producer does not get). If you value shoes at $10 then you are indifferent between buying the shoes and not, the default is that you buy the shoes). If you value the shoes at $9 then you wont buy. How do you value the shoes? This varies from person to person and depends on their preference ordering. Now, to go beyond this point would involve some moderately mathematics. Basically, the notion of value is subjective. You may like something I despise. The market clearing price is dependent on the demand curve (which represents the collective tastes/preferences of consumers) and the supply curve which represents the costs of providing the the commodity in question. In conclusion, I'd say you've created a false delimma in saying that the profit is either an inefficiency or an inequality. But maybe that's just a matter of perspective. As an entrepreneur, one of the people who helps other people make an honest buck, I say my perspective is of some value to me and you. What?!?!? You try to make a profit?!?!?! You Freeper you! (Just kidding)   Remove | Alert Edit | Reply | Top

yankeedame (27 posts) Nov-30-02, 01:51 PM (ET) Reply to post #48 49. Amen! The value of a commodity, be it a pair of shoes, labor or a jumbo jet, is defined by the person buying it.... Amen, brother, and preach on!!   Remove | Alert Edit | Reply | Top

Code_Name_D (980 posts) Dec-01-02, 06:24 PM (ET) Reply to post #49 52. Ha ha When we say modern economics has more in common with a religion than sciences, we mean it. Case in point. Two wrongs do not make a right. (No, but three rights do make a left.) __/\/\__000 O _(_¬ ¬)_. o \__\/__/ <-- This is Code Name D <-- And this is Code Name D's conscience. The Wizards of Money at http://wizardsofmoney.org/   Remove | Alert Edit | Reply | Top

yankeedame (27 posts) Dec-02-02, 02:01 AM (ET) Reply to post #52 60. When we say... When we say modern economics has more in common with a religion than sciences, we mean it. Case in point. Ye cats and little kittens, what is this "we" business? Is this the Imperial "we", or do you have a mouse in your pocket? Besides how on earth do you (second person singular or second person pural)equate the science of economics with religion? I mean, besides Marxism, of course.   Remove | Alert Edit | Reply | Top

Code_Name_D (980 posts) Dec-02-02, 02:43 AM (ET) Reply to post #60 62. Why are you asking me? I am the heathen blasifmer. Silly goose. Reconsiling your religion with sciences is your problem. Not mine. Perhaps you should explane it to me instead. By the way. Thanks for the insult. Two wrongs do not make a right. (No, but three rights do make a left.) __/\/\__000 O _(_¬ ¬)_. o \__\/__/ <-- This is Code Name D <-- And this is Code Name D's conscience. The Wizards of Money at http://wizardsofmoney.org/   Remove | Alert Edit | Reply | Top

EconomicsDude (28 posts) Dec-02-02, 04:44 AM (ET) Reply to post #62 65. Sheesh... Yankeedame was not insulting you, she was just saying you were interpreting her comments incorrectly. She did not want her comments to be associated with yours. To be presumptious, I take it to mean she actually agrees with me. (Although I could be wrong.) So, do you disagree? That the value of something is determined by the individual?   Remove | Alert Edit | Reply | Top

yankeedame (27 posts) Dec-02-02, 10:46 AM (ET) Reply to post #62 66. In that case... Silly goose. Reconsiling your religion with sciences is your problem. Not mine. Well, in that case then I'd say it's neither of our problem. Perhaps you should explane it to me instead. Explain what? The reconcillation of religon with science? Isn't that a bit off topic for this board? By the way. Thanks for the insult. Ah mon petite choux, that was no insult. I was just teasing you. Tsk,tsk. Such thin skin. Still and all, please accept my apologizes if I stepped on any toes.   Remove | Alert Edit | Reply | Top

Imalib (12 posts) Dec-01-02, 10:30 AM (ET) 50. Simple economics You can only charge a consumer what the consumer is willing to pay. If you pay it, they will charge it. Profit is needed to stay in business. Without profit what is the incentive to do business. Profit is needed to pay for current costs and to protect from future costs and problems, i.e. natural disasters, insurance, people sueing you ect. ect.   Remove | Alert Edit | Reply | Top

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