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Reilly
Mountain climber
The Other Monrovia- CA
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Jul 22, 2015 - 08:15am PT
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Unadulterated poppycock not worth commenting on except to note that the author floats his
three premises with pure methane. Markets will ALWAYS achieve efficiency unless
restricted by meddlesome governments.
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mouse from merced
Trad climber
The finger of fate, my friends, is fickle.
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Jul 22, 2015 - 08:17am PT
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Sorry, the new font style turned me off...it's difficult to read so f it.
And I DON'T CARE ANYWAY!!!!!!!!!!!!!
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survival
Big Wall climber
Terrapin Station
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Jul 22, 2015 - 08:20am PT
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Whooo boy, this one should bring some fun out of the woodwork!
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EdwardT
Trad climber
Retired
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Jul 22, 2015 - 08:26am PT
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Derf, derf, derf.
Gersh gurndy morn-dee burn-dee, burn-dee
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MikeL
Social climber
Seattle, WA
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Jul 22, 2015 - 09:15am PT
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A complicated argument (and lengthy one at that).
It’s always "the end of the world"--as we know it. Things are always changing, and that especially includes metrics for measuring (and even) what constitutes success. Profit-maximization and serving self-interests are myopically short term, narrow, and increasingly seen as subordinate and not fully relevant to other objectives.
We are awash in data these days. Information has inundated us. It’s no longer helping so much.
An orientation toward efficiency presents the old traditional (Smith, Taylor, Fayol, Sloan, Chandler, etc.) reductive, predictive, mechanistic models of organizing and management. Efficiency requires highly honed structures and processes, and perfect information. Such models fail when environments invariably shift rapidly, unpredictively, disruptively. Flexibility, resiliency adaptability, entrepreneurship, innovation, openness, non-categorical thinking, creativity, engagement / commitment, vision / mission / purpose, collaboration, radical empowerment, trust, distributed capabilities . . . these are the characteristics that describe successful organizations today. What’s needed are organizations that benefit from or use shocks (so-called, “anti-fragile systems”)—like viruses or Al Qaeda or ISIS.
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NutAgain!
Trad climber
South Pasadena, CA
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Jul 22, 2015 - 09:23am PT
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Markets will ALWAYS achieve efficiency unless
restricted by meddlesome governments.
Reilly, if you've taken an economics class in college (or even high school), this statement does not reflect that acquired wisdom.
Here's is more background on different theories or schools of thought on what constitutes a "free" market and how to achieve efficiency:
https://en.wikipedia.org/wiki/Free_market#Concepts
A relevant quote:
...This result is described as market efficiency, or more specifically a Pareto optimum.
This equilibrating behavior of free markets requires certain assumptions about their agents, collectively known as Perfect Competition, which therefore cannot be results of the market that they create. Among these assumptions are several which are impossible to fully achieve in a real market, such as complete information, interchangeable goods and services, and lack of market power. The question then is what approximations of these conditions guarantee approximations of market efficiency, and which failures in competition generate overall market failures. Several Nobel Prizes in Economics have been awarded for analyses of market failures due to asymmetric information.
The point of government regulation is not "to be meddlesome and mean to corporations" but to create the conditions that most closely approximate the ideal conditions, including freedom of choice and access to information.
Both the seller and the buyer need to have access to all relevant information and both sides need to be willing and able to walk away from the transaction. Under these conditions, you have a natural balance of power. In the absence of government regulations (which is your narrow definition of "free") you are letting corporations do whatever they want, and then you have an imbalance of power in economic transactions between buyer and seller, because in some circumstances the buyers don't have alternatives, they can't walk away from the transaction, and they don't have access to the information to make an informed decision.
Here's a specific example of how access to information and regulation relate to each other. In California in 2012, Proposition 37 proposed mandatory labeling of foods that have GMO ingredients. Access to more information to make informed purchasing decisions is good for consumers, and yet voters turned down this proposition!!! Why and how could that be? Because corporations feared lost sales if consumers knew what they were buying. So they meddled in government affairs by funding the distribution of misinformation that deceived and confused voters and skewed the election.
How could corporations (and rich individuals who have something to gain by the continued success of the corporations) achieve this result? Anyone really trying to create the conditions of a free and ideal market would see that something is broken there. That condition is becoming more prevalent because of past and ongoing corporate (rich and power individuals behind them) meddling in government affairs. The Citizens United Supreme Court ruling opened the floodgates for this to happen. There is a very definite imbalance of power, and it continues to swing further out of balance because the corporations have successfully found a weakness in the legal mechanisms to protect consumers, to put buyers and sellers on equal footing (and keep corporations from becoming so powerful that they are essentially dictatorships that can grow more powerful than the countries in which they started). That weakness is campaign finance. It will be the chief downfall of our society if we don't fix it, and maybe its already too late.
I think these concepts could be explained to almost everyone in a manner that they would understand and see what is in it for them personally.
Reilly, can you point out something that seems not right about what I have said here, and tie it to how your life would improve as a result of changing it? Would it also help most of our society, or just a very small minority (e.g. stockholders of specific companies).
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deschamps
Gym climber
Flagstaff, AZ
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Jul 22, 2015 - 09:50am PT
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Markets will ALWAYS achieve efficiency unless
restricted by meddlesome governments.
You should take some economics classes. You will learn why this is not true. Research "externalities."
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JEleazarian
Trad climber
Fresno CA
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Jul 22, 2015 - 10:21am PT
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I read the Gaurdian daily, so this article amused me. I would say the first comments in the Gaurdian understand capitalism much better than the author of the article. The author would be well-advised to read George Stigler's article on the theory of the firm, written more than a half century ago.
Markets will ALWAYS achieve efficiency unless
restricted by meddlesome governments. [Emphasis supplied]
The point of government regulation is not "to be meddlesome and mean to corporations" but to create the conditions that most closely approximate the ideal conditions, including freedom of choice and access to information.
Both the arguments for and against the quoted proposition about market efficiency depend on definitions, and end up largely tautological. What is a "meddlesome" regulation? As the second quote points out, the point of regulation is "not to be meddlesome." Can we define a "meddlesome regulation" therefore as one that misses the point?
You also need to define efficiency, not optimization. A Pareto optimum means there are no more mutually beneficialy exchanges. An efficient market is one that has all information available to all participants at the same time, and where price responds immediately to new information.
When Eugene Fama and others propounded the efficient market hypothesis, they were not saying that the definition, above, is true. Rather, they hypothesized that markets behaved as if that definition were true. They did so specifically to claim that the best predictive model of stock market prices was a random walk.
John
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Jan
Mountain climber
Colorado, Nepal & Okinawa
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Jul 22, 2015 - 10:21am PT
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I can't help but remember Alan Greenspan's incredulity that the banks who brought about the sub prime mortgage collapse "would act against their own self interest".
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JEleazarian
Trad climber
Fresno CA
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Jul 22, 2015 - 10:24am PT
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that the banks who brought about the sub prime mortgage collapse
Jan, I beg to differ. The needed economic correction of housing prices brought about the subprime mortgage collapse. TO lay the blame solely on the banks ignores every other actor who brought this about.
John
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NutAgain!
Trad climber
South Pasadena, CA
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Jul 22, 2015 - 10:40am PT
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I don't agree with many points or assumptions in the article, but it does raise quite an interesting conversation.
once knowledge becomes a productive force in its own right, outweighing the actual labour spent creating a machine, the big question becomes not one of “wages versus profits” but who controls what Marx called the “power of knowledge”.
In an economy where machines do most of the work, the nature of the knowledge locked inside the machines must, he writes, be “social”
This is updating the socialist/community-centric society models into an information age. The same ideals and the same pitfalls exist. It boils down to who owns the fruit of each individual's labor, and what incentives are there for individuals to work hard and create innovation. That said, the information age IS more sensitive/reactive though, in the sense that small changes in the ownership of information can make HUGE changes in the distribution of wealth and power and ability to control the ownership of future information.
One other interesting point (which I'm not sure was actually in the article or is my own post-reading digestion with my reactions mixed in), is the focus on value. People trade things based on their assessment of equal value, and money is an intermediary that facilitates any-to-any trade without having to find someone who wants what you have and who also has what you want. Aside from material needs that are the typical focus of economics, people also have need to be loved/appreciated/respected, to feel belonging, to be remembered or leave a legacy... these types of needs create individual motivation to create value. We can think of a person selling their time to develop an open-source software component or share something of their knowledge and receiving the currency of group acceptance, appreciation, and the sense that they are leaving something of value for the future ("leaving a legacy"). I don't know how economists account for these types of emotional, spiritual, and intellectual currencies and trading, but it seems to be central to understanding the dynamics of our society and how to reshape it toward some more collaborative ideal. Just focusing on the exchange of material currency is missing a big part of the picture, and is perhaps this hole in our economic foundation is what lead to the imbalance of power with corporations focused on material acquisition.
Maybe real advances will be made in socialist agendas when we take a hard look at the personal incentives for individuals to participate in a community, and accurately account for the costs and benefits of it, in terms of physical, intellectual, emotional, and spiritual value.
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nah000
climber
no/w/here
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Jul 22, 2015 - 11:09am PT
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2 cents [ok maybe more like 25]:
problem with this article is that it doesn't accept that if there is to be a "post-capitalist" system it will be built on a foundation of capitalism. [and in the face of automation and the limits of the natural world the only alternative to a new system - that likely will include among other things a guaranteed income - will be continuous and entrenched physically violent class warfare]
a new system will not, as he states, replace capitalism.
one of the statements he begins with is that capitalism replaced feudalism. this is mistaken: capitalism was built on and continues to be rooted in feudalism.
capitalism was and continues to be built and grounded [for better and for worse] on a foundation of feudalism [a centralized banking system that puts the ability to create the mode of exchange in the hands of a few, rather than the many].
in a parallel manner a second premise of his is also flawed: "post-capitalism" will not replace capitalism. if a new system is to succeed it to will also be built on the foundation of the system that made it both possible and then necessary. just as it was due to the successes of feudalism that capitalism became first possible and then necessary it will be due to the successes of capitalism that a new system will be first possible and then necessary. [and in both cases it is also due to the shortcomings of the old systems that new systems built onto the old foundations were and will be required]
just as the successes of industrialization expedited and necessitated the creation of capitalism and also inevitably led to safety nets, labour protection laws, etc. and etc., automation and a networked world will also lead to a new system built on old foundations.
however, if it is to be successful, this new system will not replace capitalism.
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MisterE
Gym climber
Being In Sierra Happy Of Place
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Topic Author's Reply - Jul 22, 2015 - 11:21am PT
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One thing is for certain, systems that fail
invariably fail
to see it coming.
I think that was an important point of the article.
nah000: Another point is that paradigm shifts are way more probable in the information age, as well - less static, more fluid.
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Big Mike
Trad climber
BC
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Jul 22, 2015 - 11:26am PT
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“It is the elites — cut off in their dark-limo world — whose project looks as forlorn as that of the millennial sects of the 19th century. The democracy of riot squads, corrupt politicians, magnate-controlled newspapers and the surveillance state looks as phoney and fragile as East Germany did 30 years ago. All readings of human history have to allow for the possibility of a negative outcome. It haunts us in the zombie movie, the disaster movie, in the post-apocalytic wasteland of films such as The Road or Elysium. But why should we not form a picture of the ideal life, built out of abundant information, non-hierarchical work and the dissociation of work from wages? Millions of people are beginning to realise they have been sold a dream at odds with what reality can deliver. Their response is anger — and retreat towards national forms of capitalism that can only tear the world apart. Watching these emerge, from the pro-Grexit left factions in Syriza to the Front National and the isolationism of the American right has been like watching the nightmares we had during the Lehman Brothers crisis come true.”
Dry read, but very interesting material. When money fails to buy milk and bread we will inevitably have to look towards the next social order. May co-operation rule the day!!
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Big Mike
Trad climber
BC
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Jul 22, 2015 - 12:21pm PT
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E- you were supposed to like this on facebook so it could receive a larger audience... ;)
Edit Lol John of course.. I was just bugging E..
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JEleazarian
Trad climber
Fresno CA
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Jul 22, 2015 - 12:37pm PT
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He shared it on Facebook. Does that count?
John
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Jan
Mountain climber
Colorado, Nepal & Okinawa
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Jul 22, 2015 - 04:38pm PT
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Man's understanding of nature has always been linked to his economic system. For 99% of our time on this earth we lived as hunters and gatherers, finding our food whereever we could (200,000-8,000BC). Next we figured out how to domesticate animals so that we could milk and bleed and kill them at our leisure instead of chasing them down. We then figured out horticulture which is primitive farming with a stick or other hand held instrument.
Next came agriculture around 6,000 BC which was the basis of the fuedal system - massive crops made possible by irrigation and plows, that could be taxed by elites who then perpetuated a class system. This was followed by the fossil fuel age in which we are currently immersed, which made industrialization including agribusiness possible. That has only gone on now for about 250 years. Both capitalism and Marxism are responses to that. Although one can argue that incipient capitalism started before industrialization, it was industrialization that brought about its triumph.
When the fossil fuel runs out, our subsistence mode will have change yet again, so it makes sense that we will look back on capitalism as a 3-4 century phase of human history while Marxism in state form anyway, lasted less than that. The information economy will have to be based on an energy source other than fossil fuels and on a self replicating rather than endlessly reproducing demographic, assuming we don't annihilate ourselves fighting over the last of the fossil fuels. Of course there's always epidemics and food scarcity to worry about between now and then as well. Will capitalism's short term greed for pesticides and profits extinct the bees and destroy a large part of our food crops along with them? That's just one of several scenarios.
Small wonder people are interested in a post capitalist world.
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Dingus McGee
Social climber
Where Safety trumps Leaving No Trace
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Jul 22, 2015 - 07:08pm PT
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Pipe dreams? Free and abundant information does not mean free energy. There will always be a cost when moving our bodies.
Some will settle for a "movie" and the idea of the "real thing" will change more to pseudo, vicarious reproductions that placate some people.
The motivated people will figure out a way to get those "things" that free and abundant information has not yet give us/them and stay quiet about it until they get their price.
Until all the information that could be known is available/free there never will be a monopoly on new-good ideas.
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Fossil climber
Trad climber
Atlin, B. C.
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Jul 22, 2015 - 09:35pm PT
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Doesn't matter - we won't last that long.
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MikeL
Social climber
Seattle, WA
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Jul 23, 2015 - 07:34am PT
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It’s interesting that people refer to the same economic ideas but then come to so many different conclusions. Either the theories are wrong, unhelpful, or they are being improperly understood and applied.
One might think that so many smart and clever people who have been educated in the best schools in the world and trained in some of the most highly paid positions could make money the old fashioned way (earn it through keen predictions and management). But that’s not what one finds historically.
How about something seemingly simple . . . like the price of wheat. Say how to predict that with accuracy.
(I think Werner could say something typically appropriate here.)
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climbski2
Mountain climber
Anchorage AK, Reno NV
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Jul 23, 2015 - 07:34am PT
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Markets will ALWAYS achieve efficiency unless
restricted by meddlesome governments.
Not a true statement..in fact it's almost always false. Market Efficiency is not the best thing for a businesses profit. Efficiency in the economic sense anyway.
This is much more accurate and fairly true. Competitive markets with at least a moderate market business entry barrier will generally become efficient. (ie good for the consumer).
This however does not describe most markets over much of their lifetimes.
I had an excellent conservative republican macro economics professor. I challenged him occasionally learned a great deal, greatly enjoyed and aced the course.
Perfect information does not an efficient marketplace make..nor for that matter even a good marketplace. Lookup Monopoly/oligopoly..I deal with google on a daily..hell many days hourly basis.
Their system is corrupt, and it has gotten worse in the last year. I expect their profits to skyrocket however because of that
..I have excellent information and I use it for my best interest..I am well aware how much bullshit they try to feed their customers.. but hey..I still make a profit from their service so I am willing to put up with their bullsh#t. Just wish they would simply state ..we will charge you whatever we feel like, it will is not based on consumer usage and you will take it up the a*# and like it.
Would be a lot more honest of them..and I probably wouldn't grin as much when bad things happen to their VPs... Karma is a bitch motherf*#kers
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Reilly
Mountain climber
The Other Monrovia- CA
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Jul 23, 2015 - 07:42am PT
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Market Efficiency is not the best thing for a businesses profit.
Nicolas Maduro loves you, bra! And I hope you didn't cite "businesses profit" in the
econ course you aced! ;-)
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Ed Hartouni
Trad climber
Livermore, CA
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Jul 23, 2015 - 07:52am PT
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if only Economics were taught within its proper setting, human ecology...
but aside from that... look at the interesting article in the OpEd page of the NYTimes today:
http://www.nytimes.com/2015/07/23/opinion/socialism-american-style.html
where it is pointed out that Alaska, Texas and Wyoming all have government control over productive capital (and the Tennessee Valley Authority is also thrown in there too).
In spite of the very conservative politics of those areas, there is not a move in those states to divest that control to private enterprise. When the USG floated an idea to privatize the TVA, the regional governments successfully opposed it.
Perhaps I've read the OpEd piece wrong, but I'd be interested in the discussion.
Certainly makes one pause in believing that any of the public discussion of governments, markets, private sector are so much BS... and you'd expect it to be so since we are ruled by ecology...
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Ed Hartouni
Trad climber
Livermore, CA
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Jul 23, 2015 - 07:53am PT
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like the price of wheat. Say how to predict that with accuracy.
like most (all) things, calculate the amount of energy used in the production...
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MikeL
Social climber
Seattle, WA
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Jul 23, 2015 - 07:58am PT
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Try it.
Goldman, Solomon Brothers, Morgan Stanley, and other investment banks hired a gaggle of Ph.D.s in the 80s trying to model the noise in the markets, and they gave each a mini computer to work with. At best, it was the start of program trading, but still. . . folks could not predict the price of anything. All they could do is come up with stochastic models that indicated when their probabilities would be great enough to make a bet. They traded on the smallest of margins.
The point of asking anyone how they come to the price of wheat is to simply notice just how immensely complex, non-linear, and unpredictable the problem is. Relying on typical economic theories do so very little as to be almost useless. But they are certainly worth talking about: it's fun.
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climbski2
Mountain climber
Anchorage AK, Reno NV
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Jul 23, 2015 - 08:03am PT
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Reilly , this is not a hard concept to understand at all. It's not even controversial econ..it's basic stuff supported by simple econ 101-2 charts.
If you are a business owner the last thing you want if you wish to make high profits is market efficiency for your product.
There are many strategies businesses use (if allowed) to avoid market efficiency when they can. Monopoly, price fixing, Patents and copy writes, even lobbying for regulations that wipe out competitors.
Been a while since I looked at this stuff but here is a nice non controversial basic econ chart and discussion of some of the implications. It goes into more detail about exactly what I was talking about among other things.
http://www.economicshelp.org/microessays/essays/increase-market-concentration-efficiency/
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rottingjohnny
Sport climber
mammoth lakes ca
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Jul 23, 2015 - 08:26am PT
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It's all about supply and demand...There are too many monkeys and not enough bowling balls...
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jonnyrig
climber
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Jul 23, 2015 - 09:15am PT
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Yawn. Boy is he long-winded.
Make something, or provide a service. If nobody likes it, you fail. If people like it, you thrive or someone copies it and you fail.
We're losing our edge in the world market, 'cause we're dumbing down and getting lazy, while they're up-and-coming superstars. Best get on it, 'Murika.
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Jan
Mountain climber
Colorado, Nepal & Okinawa
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Jul 23, 2015 - 09:44am PT
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Ed's right. Economics is based on human ecology and what nature can support. This truth is well disguised in the complex modern market until nature intervenes with a drought, early freeze, hurricane etc. At the moment we dismiss these as anomalies and carry on as though the fossil fuel supply was infinite and as though the chemicals we spray on our food are harmless. Bees dying by the millions, the rate of autism in America up 78% in ten years, just anomalies it seems, until we reach the point of collapse.
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JEleazarian
Trad climber
Fresno CA
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Jul 23, 2015 - 10:33am PT
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One might think that so many smart and clever people who have been educated in the best schools in the world and trained in some of the most highly paid positions could make money the old fashioned way (earn it through keen predictions and management). But that’s not what one finds historically.
How about something seemingly simple . . . like the price of wheat. Say how to predict that with accuracy.
When I was in grad school in economics, we used to joke that if all the economists in the world were lined up end-to-end, they'd still be pointing in different directions. We also would say, though, that the efficient market theory suggests that the best prediction for the price of wheat is a random walk. As I like to tell my clients when they want my short-term prediciton for interest rate movements, if I really knew that, why would I need to work?
Economists (or, if they're like me, econometricians) can tell what a given change in circumstances is likely to do, all other things being equal (or in econospeak, ceteris paribus), but that just shifts the forecasting problem from forecasting the price of wheat to forecasting weather in every worldwide wheat growing area, government policies in every worldwide wheat growing area, population changes in wheat consuming areas, dietary preferences, etc. Economic forecasting is helpful only if the client understands its limits and legitimate uses.
As for the price of wheat, Ed, you have only part of the problem in calculating the energy used. Without some way of determining where else we could use all of the inputs into producing wheat (not just energy, but labor, land, water, and entrepreneurial direction and allocation of risk, among many other things), we have no meaningful way of determining what we're foregoing to produce that wheat.
Economics defines the cost of a commodity as the highest valued opportunity foregone to obtain that commodity. Value, being subjective, defies easy scientific determination. Money is the best surrogate we have for determining the opportunity foregone, but I don't think the price of anything, measured in money, reflects the amount of any single input.
John
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MikeL
Social climber
Seattle, WA
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Jul 23, 2015 - 03:49pm PT
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Thanks, John, for your thoughtful response. No disrespect was intended toward economists or econometricians. Loved Burton Malkiel’s book, and it set me on a path to the investment industry (for a while, anyway). An ex-wife got a Ph.D. in economics, and her work was mysterious and indecipherable to me sometimes. Very mathematical.
I’ve found economists are often very smart people.
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Ed Hartouni
Trad climber
Livermore, CA
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Jul 23, 2015 - 06:10pm PT
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As for the price of wheat, Ed, you have only part of the problem in calculating the energy used. Without some way of determining where else we could use all of the inputs into producing wheat (not just energy, but labor, land, water, and entrepreneurial direction and allocation of risk, among many other things), we have no meaningful way of determining what we're foregoing to produce that wheat.
put a tax on carbon and watch the price change through all your complicated calculations...
labor = energy
water = energy
"entrepreneurial direction and allocation of risk" = energy
turn off the energy, what happens?
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JEleazarian
Trad climber
Fresno CA
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Jul 24, 2015 - 12:03pm PT
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put a tax on carbon and watch the price change through all your complicated calculations...
No disagreement there, Ed, but the price change also depends on the demand for the commodity, and that's where all the other options for use of that energy play their part.
John
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