David Landes
Koen Robeys
Wondering over the unequal spread of wealth over the world, the book starts
by environmental factors. Soon enough, historical circumstances take over,
and by the end culture is what matters. Obviously, each of these factors
could influence the others, creating some kind of broad-shaped, but vague,
causality.
Without the effort to find this causality, the book is an economic history
of those parts of the planet that can afford to write economic histories. A
bit like "one damned thing after the other" but those who work hard get the
prizes.
One thing was striking to me. There are several references to "comparative
advantages", all negative. How odd, I would honestly have thought
comparative advantages were considered as a piece of received wisdom.
Cheers, Koen
Peter Lawrence
>
> Just finished (re-)reading Landes, The Wealth and Poverty of Nations (1998).
.
.
the book is an economic history
> of those parts of the planet that can afford to write economic histories. A
> bit like "one damned thing after the other" but those who work hard get the
> prizes.
For precisely the reason that the book is self selecting the way you
describe, it has misled you. Those who work hard in general do NOT get the
prizes. For that, they also need a couple of other things: enough resources
to work on; and, the ability to keep and build on much of what they do
actually achieve. These things are part of what "those parts of the planet
that can afford to write economic histories" are accustomed to, but very far
from being a normal part of the human condition. PML.
--
GST+NPT=JOBS
I.e., a Goods and Services Tax (or almost any other broad based production
tax), with a Negative Payroll Tax, promotes employment.
See http://users.netlink.com.au/~peterl/publicns.html#AFRLET2 and the other
items on that page for some reasons why.
Robert Vienneau
<koen.ro...@skynet.be> wrote:
> One thing was striking to me. There are several references to
> "comparative
> advantages", all negative. How odd, I would honestly have thought
> comparative advantages were considered as a piece of received wisdom.
1.0 INTRODUCTION
This is about comparative advantage. I make no claims about
Landes, not having read him.
Why are tariffs, protectionism, etc., bad ideas? A widespread
answer draws on the theory of comparative advantage. This long
post demonstrates this argument is logically invalid when
applied to an economy with produced capital goods and a positive
interest rate. This demonstration is made by means of a numerical
example illustrating the model in Metcalfe and Steedman (1974).
That is, it has been known for over a quarter of a century
that the theory of comparative advantage does not justify a lack
of tariffs.
2.0 DATA ON TECHNOLOGY
Consider a very simple economy that produces two goods, corn and
ale, from inputs of labor, land, and produced corn and ale. Corn
and ale are both consumption and capital goods. All production
processes in this example require a year to complete. Likewise,
all production processes exhibit constant returns to scale. One
process is known for producing ale, and two processes are known
for producing corn. These processes are shown in Table 1.
TABLE 1: INPUTS REQUIRED PER (GROSS) UNIT OUTPUT
ALE INDUSTRY CORN INDUSTRY
INPUTS PROCESS A PROCESS B
Ale 0 Barrels 1 Barrel 1/2 Barrel
Corn 1/8 Bushel 0 Bushels 0 Bushels
Labor 1 Person-Year 4 Person-Years 7 Person-Years
Land 9/8 Acre 5/6 Acre 1 Acre
--------------------------------------------------------
OUTPUT 1 Barrel 1 Bushel 1 Bushel
Assume that endowments of labor and land are given. In particular,
this economy has access to 320 person-years of labor and 140 acres
of (homogeneous) land.
In short, this economy uses two primary factors, labor and land,
to produce a net output of two consumption goods, corn and ale. This
example differs from misleading introductory textbook models of
comparative advantage in that the use of produced capital goods is
shown explicitly.
3.0 PRODUCTION POSSIBILITIES FRONTIER
The argument is based on an analysis of long run equilibria, as
is the case with usual misleading and invalid textbook expositions.
Since the endowments of primary inputs are fixed, long run equilibria
are stationary equilibria. The ale-producing process and at least
one of the corn-producing processes will be used in a long run
equilibrium. A technique is defined to consist of the ale-producing
process and one of the corn-producing processes. Call the technique
utilizing the first corn-producing process alpha. Call the other
technique beta.
Figure 1 shows possible efficient long run equilibria for this
numeric example. The alpha technique is used along the frontier
between the corn axis and point a. Labor is a binding contraint on
output up to point a. Less land is employed here than exists; hence
land services will be free for this portion of the production
possibilities frontier. Both land and labor are binding constraints
at point a, and the alpha technique is used. If the alpha technique
were used to produce a net output of more than 20 barrels ale, land
would be a binding contraint and labor services would be free.
However, more corn can be produced between a and b, for a given
net output of ale, by using a linear combination of the two
techniques between points a and b. The beta technique is exclusively
used at point b, and both land and labor are binding constraints.
Land is a binding constraint, and labor is free, for the remaining
portion of the frontier.
/|\
|
56 +
| .
50 + a
| .
| .
| .
Net | .
Output | .
Corn | .
(Bushels) | .
| .
20 + b
| .
| .
| .
| .
| .
+-----+-----------------+-------+--->
20 80 105
Net Output Ale (Barrels)
FIGURE 1: PRODUCTION POSSIBILITIES FRONTIER
The portion of the frontier between points a and b, inclusive,
is the focus of the remainder of this post. The relative combinations
of ale and corn, produced net, are different along this segment
because of differences in the amount of ale and corn produced by
the two techniques. Notice the slope of this segment is 1/2 bushels
per barrel. The slope reflects the rate of transformation possible
in comparing two autarkic equilibria. An autarkic economy can
(eventually) produce one more bushel of corn for every two barrels
less ale produced.
4.0 PRICES
The location on the PPF depends on prices, which the firms in
this economy take as given. Assuming wages and rent are paid at
the end of the production period, prices must satisfy Equation 1:
(1/8) ( 1 + r ) + w + (9/8) W = p (1)
and the Inequalities 2 and 3:
p ( 1 + r ) + 4 w + (5/6) W >= 1 (2)
(1/2) p ( 1 + r ) + 7 w + W >= 1 (3)
where p is the price of a barrel ale, w is the wage for a year,
W is the rent for a year for an acre of land, and a bushel corn
is the numeraire.
If Inequality 2 is satisfied as a strict equality, firms will
adopt the alpha technique. If Inequality 3 is satisfied as a
strict equality, firms maximizing economic profit will adopt the
beta technique. At least one of these inequalities must be
satisfied as a strict equality. A set of price variables that
satisfy both inequalities as strict equalities is known as a
switch point. The interior of the line segment from point a to
point b is a switch point.
4.1 CASE 1: A INTEREST RATE OF ZERO
The next step in the argument is to illustrate that the
traditional theory holds for an interest rate of 0%. The price
of ale at the switch point is 1/2 bushels per barrel. Note that
this switching price is the same as the slope of the PPF
between a and b.
4.1.1 CASE 1 AUTARKY
Suppose this economy is an autarky, and the price of ale is
5/8 bushels per barrel. This economy will produce 80 barrels
ale and 20 bushels corn in a long run equilibrium.
4.1.2 CASE 1 TRADE
Now suppose this economy suddenly faces a price of ale on the
international market of 2/5 bushels per barrel. Ignore transitions
between equilibria. The alpha technique will be adopted in the new
long run equilibrium with this price. Thus, this economy will
produce domestically 20 barrels of ale and 50 bushels corn.
By trading on the international market, a bushel of corn can
be transformed into 2 1/2 barrels of ale. This is more than the 2
barrels into which a bushel corn can be transformed by following
the PPF in the autarkic economy. The domestic production could be
transformed into 80 barrels of ale and 26 bushels of corn by
specializing in producing relatively more corn with sole use of
the alpha technique and then trading on the international market.
Gains from specialization in this example of international trade
are unambiguously positive when the interest rate is zero.
4.2 CASE 2: A 2% INTEREST RATE
The other case examined here is at a positive rate of interest,
namely 2%. The price of ale at a switch point is approximately
0.493 bushels per barrel. Note that this switching price is LESS
THAN the (negative inverse of the) slope of the PPF between a and
b. Metcalfe and Steedman note that
"a positive rate of interest generates a divergence between
the switching price ratio and the domestic marginal rate of
transformation akin to that generated by a factor market
distortion."
4.2.1 CASE 2 AUTARKY
Suppose this economy is an autarky, and the price of ale is
563/1506 bushels per barrel. This economy will produce 20 barrels
ale and 50 bushels corn in a long run equilibrium.
4.2.2 CASE 2 TRADE
Suppose this economy (with a 2% interest rate) faces a price of
a barrel ale on the international market of 0.495 bushels. Once
again, ignore the transition to equilibrium. Only one price for
ale can prevail in equilibrium, and, by assumption, that price will
be the international price. Firms in this economy maximizing
economic profit will adopt the beta technique. Thus, the domestic
production of this economy will be 80 barrels ale and 20 bushels
corn.
The international market allows this economy to trade this
output to obtain 20 barrels ale and 49 7/10 bushels corn. Thus,
this economy has lost 3/10 bushels corn from specialization in
response to trade. (My calculations are exact; this is not a
round-off error.)
The individuals in this economy might react to this difference
in prices by consuming a different proportion of commodities. I
leave it to the interested reader, if any, to demonstrate that
utility functions can be constructed for some economies in which
the gain in utils from this exchange effect does not overcome the
loss from specialization. Metcalfe and Steedman suggest postulating
"a homothetic utility function that is the same for all income
recipients who, in addition, express their preference between
present and future consumption through a universal and positive
rate of time preference."
4.3 CONCLUSIONS
So much for comparative advantage as a justification for
neoliberal trade (non)policy.
REFERENCE
J. S. Metcalfe and Ian Steedman, "A Note On the Gain from Trade,"
_Economic Record_, 1974.
APPENDIX
This appendix contains some supplementary tables and calculations for
anybody who wants to check my work.
A.1 QUANTITY FLOWS
TABLE A-1: QUANTITY FLOWS FOR THE ALPHA TECHNIQUE
PRODUCING ONLY CORN
INPUTS ALE INDUSTRY CORN INDUSTRY
Labor 64 Person-Years 256 Person-Years
Land 72 Acres 53 1/3 Acres
Ale 0 Barrels 64 Barrels
Corn 8 Bushels 0 Bushels
OUTPUTS 64 Barrels 64 Bushels
Net Output = 56 Bushels
TABLE A-2: QUANTITY FLOWS FOR THE ALPHA TECHNIQUE
PRODUCING ALE AND CORN
INPUTS ALE INDUSTRY CORN INDUSTRY
Labor 80 Person-Years 240 Person-Years
Land 90 Acres 50 Acres
Ale 0 Barrels 60 Barrels
Corn 10 Bushels 0 Bushels
OUTPUTS 80 Barrels 60 Bushels
Net Output = (20 Barrels, 50 Bushels)
TABLE A-3: QUANTITY FLOWS FOR THE BETA TECHNIQUE
PRODUCING ALE AND CORN
INPUTS ALE INDUSTRY CORN INDUSTRY
Labor 96 Person-Years 224 Person-Years
Land 108 Acres 32 Acres
Ale 0 Barrels 16 Barrels
Corn 12 Bushels 0 Bushels
OUTPUTS 96 Barrels 32 Bushels
Net Output = (80 Barrels, 20 Bushels)
TABLE A-4: QUANTITY FLOWS FOR THE BETA TECHNIQUE
PRODUCING ONLY ALE
INPUTS ALE INDUSTRY CORN INDUSTRY
Labor 112 Person-Years 98 Person-Years
Land 126 Acres 14 Acres
Ale 0 Barrels 7 Barrels
Corn 14 Bushels 0 Bushels
OUTPUTS 112 Barrels 14 Bushels
Net Output = 105 Barrels
A.2 PRICE EQUATIONS
A.2.1 ALPHA PRICES
The Alpha price system is:
(1/8) ( 1 + r ) + w + (9/8) W = p (A-1)
p ( 1 + r ) + 4 w + (5/6) W = 1 (A-2)
The solution is:
w = [ 21 - ( 47 + 27 r ) W - 6 r - 3 r^2 ]/[ 24 ( 5 + r ) ] (A-3)
p = [ 3 ( 3 + r ) + 22 W ]/[ 6 ( 5 + r ) ] (A-4)
A.2.2 BETA PRICES
The Beta price system is:
(1/8) ( 1 + r ) + w + (9/8) W = p (A-5)
(1/2) p ( 1 + r ) + 7 w + W = 1 (A-6)
The solution is:
w = [ 15 - ( 25 + 9 r ) W - 2 r - r^2 ]/[ 8 ( 15 + r ) ] (A-7)
p = [ 15 + 7 r + 55 W ]/[ 4 ( 15 + r ) ] (A-8)
A.2.3 SOME SOLUTIONS
r = 0, w = 3/44, W = 3/11, p = 1/2, both techniques optimal
r = 0, w = 107/880, W = 3/22, p = 2/5, alpha optimal
r = 0, w = 7/88, W = 9/22, p = 5/8, beta optimal
r = 1/50 = 2%, w = 10,537/152,200, W = 2007/7610,
p = 751/1522 = 0.49343, both techniques optimal
r = 1/50, w = 5,039/37,650, W = 1/10, p = 563/1506 = 0.3738,
alpha optimal
r = 1/50, w = 75,759/1,100,000, W = 36,499/137,500,
p = 99/200 = 0.495, beta optimal
--
Try http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Bukharin.html
r c .../Keynes.html
v s a Whether strength of body or of mind, or wisdom, or
i m p virtue, are found in proportion to the power or wealth
e a e of a man is a question fit perhaps to be discussed by
n e . slaves in the hearing of their masters, but highly
@ r c m unbecoming to reasonable and free men in search of
d o the truth. -- Rousseau
susupply
"Robert Vienneau" <rv...@see.sig.com>
turning over a new leaf?
wrote in message news:rvien-81890D....@news.dreamscape.com...
> I make no claims about
> Landes, not having read him.
Who says hazing isn't productive?
Koen Robeys
> > the book is an economic history
> > of those parts of the planet that can afford to write economic
histories. A
> > bit like "one damned thing after the other" but those who work hard get
the
> > prizes.
>
> For precisely the reason that the book is self selecting the way you
> describe, it has misled you.
Good to see I wasn't sufficiently misled to miss the self selecting part,
though.
> Those who work hard in general do NOT get the
> prizes. For that, they also need a couple of other things: enough
resources
> to work on; and, the ability to keep and build on much of what they do
> actually achieve. These things are part of what "those parts of the planet
> that can afford to write economic histories" are accustomed to, but very
far
> from being a normal part of the human condition. PML.
You know, I quite agree. Now the resources may well be part of Landes'
environmental factors, and the ability to build might fall under his
"culture matters". But still I noticed the optimistic "look how well we've
done". Some people may actually be robbed of their prizes after their hard
work, too, of course.
Cheers, Koen
Koen Robeys
First of all, this was more than I expected. It is also difficult to me. I
printed this, tried to go through it, and probably will need some help to do
it. Anyway, thanks for the effort, it's not being ignored. A few remarks.
The model of comparative advantages I am aware of doesn't have your two ways
of producing corn. There's just corn and ale, and the shape of the PPF is
determined by environmental factors. A society meeting another society with
a very different shape of PPF may pool its strengths and weaknesses, and the
global increase in productivity results from that. To me, it is not obvious
your analysis derives to the same. I assume it does, but I have to keep this
kind of assumptions in the back of my head.
Given that positive interest rates would have this destructive power on the
model, how would you express in intuitive terms what's happening? Why do
positive interest rates actually decrease total productivity if trade
occurs?
And still assuming the conclusions are correct, what policy would you
advocate, rather than "neoliberal trade (non)policy"?
Last, I seem to understand Landes' criticism of comparative advantages is
not based on a technical point (to my eyes, maybe) discovered in 1974 (and
apparently ignored?) but on the fact that he sees it as a static way of
looking at a world which became very dynamic indeed. By the way, Landes does
sound like an advocate of free trade to me, in which case he apparently
hardly bases his claim on comparative advantages.
I snip the text, but not because I'm through with it. Thanks again.
Ciaoooooo, Koen
Christopher Auld
>First of all, this was more than I expected. It is also difficult to me. I
>printed this, tried to go through it, and probably will need some help to do
>it. Anyway, thanks for the effort, it's not being ignored. A few remarks.
Koen, Mr. Vienneau exerted absolutely no effort whatsoever to
respond to your remarks -- he cut-and-pasted an old essay sci.econ
regulars have seen many, many times in the past. The essay is,
as usual, only tangentially related to the thread, and is more
of a Pavlovian reflex triggered by the phrase "comparative
advantage" than an attempt to contribute to the discussion.
Mr. Vienneau's essay is, also as usual, wrong. As you note,
comparative advantage still exists even in Mr. Vienneau's
model. Mr. Vienneau confuses:
The existence of comparative advantage implies the possibility
of gains from trade.
with
The existence of comparative advantage is sufficient for
relaxing tariffs to increase production.
The essay asserts the first statement is "logically invalid,"
but then proceeds to provide an example of a case in which
the second statement is shown false by counterexample. Much
simpler examples of such cases appear in every undergraduate
introductory theory textbook, and most people can actually
understand them.
>The model of comparative advantages I am aware of doesn't have your two ways
>of producing corn. There's just corn and ale, and the shape of the PPF is
>determined by environmental factors.
Mr. Vienneau favors terminology which is forty years out of date,
and was obscure even then, so it is not surprising that you had
trouble following his exposition. Underlying the PPF you have in
mind are factors of production. Mr. Vienneau's "two ways of
producing corn" is an opaque and atypical manner of describing
the production technology through which those factors can be
turned into output. In most such models there are uncountably
infinite, not two, ways of producing corn. Somewhat oddly, these
models are much easier to follow than the clumsy ones Mr.
Vienneau presents with but two.
> A society meeting another society with
>a very different shape of PPF may pool its strengths and weaknesses, and the
>global increase in productivity results from that. To me, it is not obvious
>your analysis derives to the same.
Mr. Vienneau's model presents a case in which the existence of
comparative advantage doesn't in fact lead to an increase in
welfare in the domestic economy (it's not obvious what happens
to world production, and I doubt anyone is going to wade through
a model of 317/414'ths of a bushel of corn to find out). To
see how such results might obtain, consider relaxing a tariff
on an industry which pollutes. The increased production from
this industry, which might otherwise eliminate the deadweight
loss under the tariff, also results in more of pollution. So
reducing the tariff may actually make us worse off, even though
comparative advantage does kick in to increase production.
Generally, you may want to look up "the theory of the second
best" to see such arguments fleshed out.
>And still assuming the conclusions are correct, what policy would you
>advocate, rather than "neoliberal trade (non)policy"?
I doubt you will get a response from Mr. Vienneau here. It
should be noted in passing that there is a vast literature
on trade policy in which many arguments for and against tariffs
have been expounded. Contra Mr. Vienneau's take, the case
against tariffs does not begin and end with (first twenty minutes
of the first lecture of) the Econ 101 description of comparative
advantage. Several of Paul Krugman's books do a good job
popularizing some of these arguments.
A final note: a tariff is analytically equivalent to taxing
consumers and giving the receipts to owners of capital. Those
owners are typically in concentrated monopolistic markets
who can implicitly or explicitly "buy" policy from government.
This is one reason why economists _of all political persuasions_
are at least highly skeptical of tariffs as good policy. Mr.
Vienneau is welcome to explain why he thinks corrupt capitalists
should be given windfall gains at the expense of the population
at large, but he has yet to do so.
--
Chris Auld
Department of Economics
University of Calgary
au...@ucalgary.ca
Koen Robeys
> Koen, Mr. Vienneau exerted absolutely no effort whatsoever to
> respond to your remarks -- he cut-and-pasted an old essay sci.econ
> regulars have seen many, many times in the past.
:-) I can see all living newsgroups are all alike, while every dead
newsgroups is dead in its own way...
> The essay is,
> as usual, only tangentially related to the thread, and is more
> of a Pavlovian reflex triggered by the phrase "comparative
> advantage" than an attempt to contribute to the discussion.
Hmmmm, well... After all, I started the thread because after reading Landes'
book, I often felt my thoughts going over the two topics I mentioned: the
reasons of the unequal spread of wealth in the world, and his (to my eyes)
surprising dismissal of comparative advantages. So this development is
rather helpful to me.
> Mr. Vienneau's essay is, also as usual, wrong. As you note,
> comparative advantage still exists even in Mr. Vienneau's
> model. Mr. Vienneau confuses:
>
> The existence of comparative advantage implies the possibility
> of gains from trade.
>
> with
>
> The existence of comparative advantage is sufficient for
> relaxing tariffs to increase production.
>
> The essay asserts the first statement is "logically invalid,"
> but then proceeds to provide an example of a case in which
> the second statement is shown false by counterexample.
Ah, well, yes... I did understand the text as meaning comparative advantages
don't even *exist* (under positive interest rates) as statement one implies.
(snip, helpful comments)
> Several of Paul Krugman's books do a good job popularizing some of these
arguments.
I read "Ricardo's difficult idea" on his website, but not knowing what
exactly the criticists claim, I don't understand his criticism of the
criticists too well. Life is tough. OK, I used to discuss with communists
and anti-globalists and so on, and you don't *need* economics to do so... I
just thought it might help in actually *thinking*... :-)
> A final note: a tariff is analytically equivalent to taxing
> consumers and giving the receipts to owners of capital. Those
> owners are typically in concentrated monopolistic markets
> who can implicitly or explicitly "buy" policy from government.
I think I understand this one: the "tax" is the higher price consumers pay
to the protected industry, and the "owners of capital" are the owners of
said protected industry. Assuming this...
> This is one reason why economists _of all political persuasions_
> are at least highly skeptical of tariffs as good policy.
... what exactly do we reproach the IMF in the case of the Argentina crisis,
assuming we want to make a case against them?
I can feel you have seen and done this conversation before. Well, sorry if
I'm not a state of the art economist. It's not that I don't want to study
books - I do study books, and rather many of them, but not often on economic
theory. For the interested layman, learning through conversation works
better than working yourself through a book. Ir it's too boring to you, I'll
shut up.
Koen
Anaximander
"Koen Robeys" <koen.ro...@skynet.be> wrote in message
news:3c601c15$0$33505$ba62...@news.skynet.be...
> Last, I seem to understand Landes' criticism of comparative
advantages is
> not based on a technical point (to my eyes, maybe) discovered in
1974 (and
> apparently ignored?) but on the fact that he sees it as a static
way of
> looking at a world which became very dynamic indeed. By the way,
Landes does
> sound like an advocate of free trade to me, in which case he
apparently
> hardly bases his claim on comparative advantages.
>
You have dynamic ricardian models which combine trade theory and
endogenous growth theory. It partly answers Landes' critics. Partly
because the theory is in progress and has no clear result. If you
emphasize learning-by-doing effects or differences in technological
spillovers (according to your specialization), you can build a case
for protectionnism with dynamic comparative advantages. But
depending on your assumptions (especially the kind of endogenous
growth and shifts in production) you can extend the traditional
comparative advantage case in a dynamic framework.
Anaximander.
Robert Vienneau
I don't think Mr. Auld has never made a substantial
and correct critique of the example in my post - as he sort
of acknowledges with his statements directed towards
noncognitive values, e.g., those containing phrases like
"forty years out of date", "obscure", "opaque and atypical",
and "clumsy".
My essay presents a case in which comparative advantage exists
but there are no gains from trade (with a specific positive
interest rate). In fact, there is a loss from trade.
Linear programming is a standard way of describing technology,
and that's what lies behind my example. Nothing in my example
depends on there being only two processes for producing corn.
The conclusion applies even in cases with an infinite
number of processes available to choose from in each industry,
at least as I understand it.
Introductory textbooks provide supposedly logical proofs that
if a country specializes as the theory of comparative advantage
implies, that country will be better off from the gains from
trade. Of course, such proofs have assumptions - that firms
maximize profits, that there is a social welfare function, etc.
One can relax such assumptions, e.g., introduce increasing
returns instead of constant returns to scale. Given an
appropriate set of such assumptions, gains to trade might
not result.
My example does not follow this approach of relaxing assumptions.
It has the same assumptions as the standard "logical" proofs.
Yet the conclusions of these proofs do not follow. So the
"logic" is missing in these introductory proofs. Given these
mistakes in the intro argument, perhaps much of the literature
formed by relaxing certain of these assumptions is misleading
or mistaken, too. Given the lackadaisical attitude of some
economists, such as Mr. Auld, towards theoretical coherence,
one can certainly not take this literature on faith. Some
communities of economists seemed to be socialized to
adopt perverse norms, with consequences for the reviewing
process for published literature.
However, I find interesting your mention of Landes' position
being based on a distinction between statics and dynamics. The
usual introductory argument for gains from trade resulting
from comparative advantage is based on a comparison of
static equilibria with no concern about transitions between
them. Since my example is aimed at revealing that this
introductory argument is logically flawed, it shares this
same structure.
The reference upon which I base my argument was reprinted in:
Ian Steedman (ed.), Fundamental Issues in Trade Theory.
Macmillan, 1979.
Some essays in this collection discuss the problems of
dynamics. In particular, L. Mainwaring argues that capital
goods cannot necessarily be costlessly and quickly redirected
towards producing any sort of output at all; some capital
goods may be "non-malleable". Mainwaring argues that this
fact raises problems for some of the orthodox responses to
the argument illustrated by my example.
Steedman also overviews some of his ideas in the New
Palgrave article on Foreign Trade.
What does this have to do with policy? I think it an example
of the "Ricardian vice" to derive ANY policy directly from
models at the level of abstraction I am considering. Also,
as my training is not in economics, I am always hestiant
about making such remarks.
Nevertheless, I will offer some comments on policy. Some
advocates of democracy in institutions governing international
trade, of globalization-from-below, see the World Bank
and the IMF as engaged more or less in attempting to remake
the world to conform with neoclassical theory. My example,
which concentrates on the implications of mistaken
neoclassical capital theories, show that the theory
guiding this political program is internally incoherent.
Thus, it is not surprising that the political program
of "globalization" does not work well. Others might
concentrate on other problems with neoclassical theory
and neoliberal political programs.
Although I haven't looked at it lately, I think you might
find the Website for the Center for Economic and Policy
Research of interest:
By the way, why did you write the following?
> :-) I can see all living newsgroups are all alike, while every dead
> newsgroups is dead in its own way...
Who told you this newsgroup was dead?
Koen Robeys
Allow me to start with the end:
> By the way, why did you write the following?
>
> > :-) I can see all living newsgroups are all alike, while every dead
> > newsgroups is dead in its own way...
>
> Who told you this newsgroup was dead?
This was a pseudo-quote to a book I actually didn't even read. The point is
that for an organism to be alive, you need all kinds of vital things to work
together. Consequently, it is much easier to be dead. It is enough one of
the vital things does not work, and the organism dies. "There are many more
ways to be dead, than to be alive" (a quote from a book I *did* read).
So my idea was this group is not dead, it is alive. And it shows by the
typical symptoms I recognize from other live groups, being people so tired
of feeling misunderstood, they become personal to each other. So it looks
like this phenomenon is part of a live newsgroup. I recognize a joke which
has to be explained was not funny: sorry. However, it explains why I will
not involve myself in older discussions. In any case, I am not competent to
judge either your model, or your critics.
And therefore, some snippings.
> My example does not follow this approach of relaxing assumptions.
> It has the same assumptions as the standard "logical" proofs.
> Yet the conclusions of these proofs do not follow. So the
> "logic" is missing in these introductory proofs. Given these
> mistakes in the intro argument, perhaps much of the literature
> formed by relaxing certain of these assumptions is misleading
> or mistaken, too.
So let me assume for the sake of argument your logic is correct. However, a
model being only a model, the question is: what does it tell us? I think to
understand there is comparative advantage in your example, but the positive
interest rates makes it disappear with a vengeance. My question is (was)
why? What aspect of reality do we discover as a consequence of your model,
concerning the important power of positive interest rates.
For example, under (parts of) Islamic law, interest rates are forbidden.
Still, Islamic societies do not appear to be more wealthy than others. Is
this because they do not earn the possible comparative advantages to be had,
since they do not trade enough in the first place?
Because, you see, I have no emotional problem with criticism of a theory
which for me is most hearsay. But I'd like to know what the criticism
actually *means*, apart from "everybody was wrong all the time".
> However, I find interesting your mention of Landes' position
> being based on a distinction between statics and dynamics. The
> usual introductory argument for gains from trade resulting
> from comparative advantage is based on a comparison of
> static equilibria with no concern about transitions between
> them. Since my example is aimed at revealing that this
> introductory argument is logically flawed, it shares this
> same structure.
But still I'd like to know how exactly the presence or absence of a positive
interest rate translates into such complicated stuff as the presence or
absence of transitions between equilibria.
(snip)
> Nevertheless, I will offer some comments on policy. Some
> advocates of democracy in institutions governing international
> trade, of globalization-from-below, see the World Bank
> and the IMF as engaged more or less in attempting to remake
> the world to conform with neoclassical theory. My example,
> which concentrates on the implications of mistaken
> neoclassical capital theories, show that the theory
> guiding this political program is internally incoherent.
> Thus, it is not surprising that the political program
> of "globalization" does not work well. Others might
> concentrate on other problems with neoclassical theory
> and neoliberal political programs.
But the point is, we have a world which is wealthier than it used to be. We
have much more free trade, and we have a model telling us free trade
translates into wealth. So if the logic is incorrect, where did the wealth
come from? Where did the wealth, lost as a consequence of positive interest
rates, go to? If we have answers to these questions, what can we do to
increase wealth even more? Do these questions touch the important point of
why so many people are about starving to death?
> Although I haven't looked at it lately, I think you might
> find the Website for the Center for Economic and Policy
> Research of interest:
>
> <http://www.cepr.net>
Thanks for this one.
Cheers, Koen
Christopher Auld
>I don't think Mr. Auld has never made a substantial
>and correct critique of the example in my post
On this point Bob and I wholeheartedly agree.
> Given the lackadaisical attitude of some
>economists, such as Mr. Auld, towards theoretical coherence,
>one can certainly not take this literature on faith. Some
>communities of economists seemed to be socialized to
>adopt perverse norms, with consequences for the reviewing
>process for published literature.
Yes, quite right: it's a bad thing I hold advanced degrees
in economics, and anyone who has such degrees should not
be trusted. Education, or "brainwashing" as some prefer,
is a bad thing. Further, one should judge literatures one
has never read, while making wild-eyed accusations that all
contributing to such literatures are incompetent. This is
the way decorous, serious discourse proceeds.
>However, I find interesting your mention of Landes' position
>being based on a distinction between statics and dynamics. The
>usual introductory argument for gains from trade resulting
>from comparative advantage is based on a comparison of
>static equilibria with no concern about transitions between
>them. Since my example is aimed at revealing that this
>introductory argument is logically flawed, it shares this
>same structure.
Again, the literature is full of models in which relaxing
tariffs does not necessarily increase welfare. None of
this literature concludes with silly politically charged
remarks like "so much for neoliberal trade policy." Nor
does it make logical errors such as insisting that when
a result does not hold in a more complex model, the simpler
model is "logically flawed."
> Ian Steedman (ed.), Fundamental Issues in Trade Theory.
> Macmillan, 1979.
>
>Some essays in this collection discuss the problems of
>dynamics. In particular, L. Mainwaring argues that capital
>goods cannot necessarily be costlessly and quickly redirected
>towards producing any sort of output at all; some capital
>goods may be "non-malleable". Mainwaring argues that this
>fact raises problems for some of the orthodox responses to
>the argument illustrated by my example.
If Bob were familiar with the literature, he would surely be
aware that irreversible investment, which is what he describes
in an ungainly fashion above, has been a hot topic for over
a decade. Perhaps Bob might want to think about reading
something written in the last twenty years.
>What does this have to do with policy? I think it an example
>of the "Ricardian vice" to derive ANY policy directly from
>models at the level of abstraction I am considering. Also,
>as my training is not in economics, I am always hestiant
>about making such remarks.
So Bob would then never leap to silly policy conclusions
such as "so much for neoliberal trade policy" after presenting
such an abstract model. It is also good to know that he
would never make sweeping comments about economics, not
having training in the area.
>Nevertheless, I will offer some comments on policy. Some
>advocates of democracy in institutions governing international
>trade, of globalization-from-below, see the World Bank
Notice that some general complaints about the IMF do not
constitute "comments on policy." Notice Bob does not
actually advocate any particular policy, although I
suppose we can infer that he prefers tariff walls. He
does not favor us with even a single reason why such
policy might be a good idea, though.
>and the IMF as engaged more or less in attempting to remake
>the world to conform with neoclassical theory. My example,
>which concentrates on the implications of mistaken
>neoclassical capital theories, show that the theory
>guiding this political program is internally incoherent.
Perhaps Bob ought to read Colander's piece again, keeping
in mind his own use of the word "neoclassical" above while
reviewing Colander's comments.
>Who told you this newsgroup was dead?
I think it's a pretty accurate description. Bob, once
again, please stop spamming your essays in response to
honest attempts at dialogue. You could actually reply
to the poster then include links to your essays, for
instance.
Robert Vienneau
<koen.ro...@skynet.be> wrote:
> "Robert Vienneau" <rv...@see.sig.com> wrote
> > My example does not follow this approach of relaxing assumptions.
> > It has the same assumptions as the standard "logical" proofs.
> > Yet the conclusions of these proofs do not follow. So the
> > "logic" is missing in these introductory proofs. Given these
> > mistakes in the intro argument, perhaps much of the literature
> > formed by relaxing certain of these assumptions is misleading
> > or mistaken, too.
> So let me assume for the sake of argument your logic is correct. However,
> a
> model being only a model, the question is: what does it tell us?
The standard introductory argument for free trade is logically
invalid. The conclusions do not follow from its assumptions. My
example meets these assumptions. But my example has the negation
of the conclusions.
> I think to
> understand there is comparative advantage in your example, but the
> positive
> interest rates makes it disappear with a vengeance.
That's not what I say. Comparative advantage is a matter of
relative costs. Costs vary, in a comparison of autarky equilibria,
in a complicated matter with interest rates. It's a matter of
noting prices have a degree of freedom in certain systems of
equations. It's convenient to say in the example that prices vary
with the interest rate.
This dependence of relative prices on interest rates is known,
in the jargon, as (price and real) Wicksell effects. Ricardo
discusses aspects of this dependence in the first chapter of
his Principles, but puts this dependence aside in his chapter
on international trade.
In the production of which commodity should this economy
specialize? This is a matter, in the model, of comparing
relative prices on the international market with relative prices
in an autarky equilibrium. In other words, it is a matter of
comparative advantage. My example illustrates comparative
advantage with both a positive and zero interest rate.
Are there gains from trade? This is another question. The
answer, in the model, involves comparing relative prices on
the international market with the slope of the Production
Possibilities Frontier. The PPF shows the consumption
possibilities available to this economy in a stationary
state autarky equilibrium using the given endowments.
The slope of the PPF shows the rate of transformation
available in a comparison of autarky equilibria.
The PPF is calculated from physical data on technology. Its
slope does not depend on the rate of interest. If
the rate of interest is zero, the rate of transformation
shown by the PPF is necessarily the same as the rate of
transformation given by relative prices in an autarky
equilibrium. The rate of transformation shown by the
PPF generally will differ from relative autarky prices
at a positive rate of interest. Consequently, the gains
from trade exploiting comparative advantage can be positive,
zero, or negative.
I don't see what is so complicated about the above. If you
look at my exposition of my numerical example, you will
see I note the slope of the PPF and how relative prices
compare.
> My question is (was)
> why? What aspect of reality do we discover as a consequence of your
> model,
> concerning the important power of positive interest rates.
I make no claims about reality. Suppose you think that a comparison
of autarky equilibria in which endowments are fully employed
with an equilibrium with international trade with fully employed
endowments can tell us something about the world. (One here puts
aside the Leontief paradox, Keynes, and the experience of Japan
and the Asian Tigers as being inconvenient. One also puts aside
other, and maybe deeper, criticisms of the coherence of the
Heckscher-Ohlin-Samuelson theory of international trade.) Then you
should conclude that free trade will not necessarily benefit a
nation.
Somehow the standard exposition in introductory textbooks is the
opposite, despite the knowledge for over a quarter century that
that textbook argument is logically invalid. (For ought I know,
some textbooks may be careful in presenting the argument. But I
don't know of any that present the argument suggested by the
above.) Poor Chris Auld reacts with silliness when I draw
conclusions about the norms of some communities of economists
from these empirical observations on the sociology of
economics. I don't think any context can transform his comments
into sequiturs.
> Because, you see, I have no emotional problem with criticism of a theory
> which for me is most hearsay. But I'd like to know what the criticism
> actually *means*, apart from "everybody was wrong all the time".
Well, I don't say "everybody was wrong all the time". In fact,
I provide explicit references to literature that should have
corrected previous logical errors of some economists.
As far as what the criticism "means", you could work out the
arithmetic yourself if so inclined. But I explain above.
> > However, I find interesting your mention of Landes' position
> > being based on a distinction between statics and dynamics. The
> > usual introductory argument for gains from trade resulting
> > from comparative advantage is based on a comparison of
> > static equilibria with no concern about transitions between
> > them. Since my example is aimed at revealing that this
> > introductory argument is logically flawed, it shares this
> > same structure.
> But still I'd like to know how exactly the presence or absence of a
> positive
> interest rate translates into such complicated stuff as the presence or
> absence of transitions between equilibria.
Perhaps I was unclear. The standard introductory argument for free
trade does not consider transitions between an autarky equilibrium
and an equilibrium with international trade. Such transitions are
not considered in my example either. They are not considered
here whether the interest rate is zero or positive.
> > Nevertheless, I will offer some comments on policy. Some
> > advocates of democracy in institutions governing international
> > trade, of globalization-from-below, see the World Bank
> > and the IMF as engaged more or less in attempting to remake
> > the world to conform with neoclassical theory. My example,
> > which concentrates on the implications of mistaken
> > neoclassical capital theories, show that the theory
> > guiding this political program is internally incoherent.
> > Thus, it is not surprising that the political program
> > of "globalization" does not work well. Others might
> > concentrate on other problems with neoclassical theory
> > and neoliberal political programs.
> But the point is, we have a world which is wealthier than it used to be.
Any such observation should be immediatedly qualified by a
recognition how uneven such development is. The area occupied
by the former Soviet Union is much worse off in material goods
now than they were 20 years ago. Scary and awful are the right
words for what the statistics show there. Africa is dismal.
What's going on in Latin America?
> We have much more free trade,
Consider the imposition on South Africa of an international system
that increases the costs of treating people with AIDS there. They
now have to pay government-protected monopolies in rich northern
countries that do not manufacture the drugs which they use. Is
that an increase or a decrease in free trade?
> and we have a model telling us free trade
> translates into wealth.
If you refer to the standard textbook model, we do not have
a coherent model telling us that.
Christopher Auld
>The standard introductory argument for free trade is logically
>invalid. The conclusions do not follow from its assumptions. My
>example meets these assumptions. But my example has the negation
>of the conclusions.
Of course this is simply ludicrous. Does Bob really think that
every introductory textbook (not unlike most journal articles)
is full of mathematical errors?
>I make no claims about reality. Suppose you think that a comparison
>of autarky equilibria in which endowments are fully employed
>with an equilibrium with international trade with fully employed
>endowments can tell us something about the world. (One here puts
>aside the Leontief paradox, Keynes, and the experience of Japan
>and the Asian Tigers as being inconvenient. One also puts aside
>other, and maybe deeper, criticisms of the coherence of the
>Heckscher-Ohlin-Samuelson theory of international trade.) Then you
>should conclude that free trade will not necessarily benefit a
>nation.
It sure is strange that trade theory came to a screeching halt
circa 1960. Stranger still that there is no empirical evidence
on these matters (except, of course, anecdotal evidence like
"free trade must be bad because South Africans then pay more
for AIDS drugs," or something). It is comforting to know,
though, that one needn't grapple with these issues -- or
try to find any papers on trade written in the last forty
years -- since they were all neatly wrapped up long ago.
>above.) Poor Chris Auld reacts with silliness when I draw
>conclusions about the norms of some communities of economists
>from these empirical observations on the sociology of
>economics. I don't think any context can transform his comments
>into sequiturs.
<sigh>
Yes, folks, yet again a thread on an economically interesting
topic has been instantly derailed into yet another exploration
of the Cambridge Capital Controversy and Robert Vienneau's
weird personal vendetta against the economics profession (by
"some communities of economists" Bob means "99% of professional
economists." Even the phrasing is weird: Economists do not
think of themselves in the dualist terms Bob does).
>As far as what the criticism "means", you could work out the
>arithmetic yourself if so inclined. But I explain above.
Great answer, Bob! Rarely does one see such the intuition
underlying a result laid bare so concisely.
I would still like to know what Bob's opinions on trade
policy are. Why does he think tariffs make people better off,
generally?
Koen Robeys
> > So let me assume for the sake of argument your logic is correct.
However,
> > a model being only a model, the question is: what does it tell us?
>
> The standard introductory argument for free trade is logically
> invalid. The conclusions do not follow from its assumptions. My
> example meets these assumptions. But my example has the negation
> of the conclusions.
This way, you make it sound a if the model makes a claim, which results in a
contradiction. This necessitates a formulation of the model on which its
advocates would agree, plus the derivation of the contradiction. So what
about the first part, the (re)formulation of the model? I copy and paste a
phrase from your post:
"Then you should conclude that free trade will not necessarily benefit a
nation."
Here, you seem to adress a model claiming that trade *necessarily* benefits
a nation. Now I compare with a phrase I take over from Paul Krugman in
http://web.mit.edu/krugman/www/ricardo.htm :
"that trade between two nations normally raises the real incomes of both".
The difference between Krugmans "normally" and your "necessarily" is
striking. In Krugmans formula of the model, it would not be enough to show a
case where trade does not benefit a nation; the theory is aready aware of
that possibility. In fact, Krugman says, QUOTE
"After all, economists are familiar with a number of reasons why the gains
from free trade may not work out quite as easily as in the simplest
Ricardian model. External economies may mean underinvestment in
import-competing sectors; imperfect competition may lead to a strategic
competition over industry rents; because of distortions in domestic labor
markets, imports may reduce wages or cause unemployment; and so on" UNQUOTE.
And this chimes perfectly well with your "Consequently, the gains from trade
exploiting comparative advantage can be positive, zero, or negative."
So if I take Krugmans formula, some of the things you appear to say are
exactly what he says, and what, therefore, appears to be said by the
standard model as well.
Now you also claim the reasoning against tariffs is "logically invalid to an
economy with produced capital goods and a positive interest rate" (your
first reaction to this thread). Is this still true if the model talks about
"normally" instead of "necessarily"? And if so, has that really been proven?
As I feel unable to check "the derivation of the contradiction", I'll go on
treating it as a serious claim, for the sake of argument.
Snip a lot
> The PPF is calculated from physical data on technology. Its
> slope does not depend on the rate of interest. If
> the rate of interest is zero, the rate of transformation
> shown by the PPF is necessarily the same as the rate of
> transformation given by relative prices in an autarky
> equilibrium. The rate of transformation shown by the
> PPF generally will differ from relative autarky prices
> at a positive rate of interest.
I have a problem here. I think to read: The slope does not depend on the
rate of interest; but the rate of transformation (which you equated to the
slope in the paragraph before) still differs from relative autarky prices at
zero interest rate, when the rate is positive.
Feel free to treat this problem as entirely mine, as you are understandably
not necessarily inclined to popularize your ideas. I have no problem with
your concluding...
> Consequently, the gains
> from trade exploiting comparative advantage can be positive,
> zero, or negative.
... but I do not feel I see something that was not also be said by Krugman
in the article I quoted. However, still assuming there is more to it...
(snip)
> I make no claims about reality.
This reinforces my impression you go further than Krugmans' exceptions. In
that case however, my question remains. If your case is really based on a
logical problem deriving from, specifically, positive interest rates (and
therefore is not just one more element in Krugmans' list of nuances), then I
don't see how you can possibly avoid the impact of it on the real world. If
positive interest rates have a power to destroy a concept, where other
things can only limit its scope, this must tell us something, and something
important, about money, banking, financing and interest rates.
Suppose you were not investigating international trade, but money. Suppose
you manage to build this model, resulting in the destruction of a well-known
claim from trade theory, deriving from the impact of positive interest rates
on trade. How could you possibly avoid a world of conclusion about interest
rates? And now that you have the very same model, only from the point of
view of international trade, these conclusions would not be possible? I
honestly could not take such implication seriously.
Snippings
> > Because, you see, I have no emotional problem with criticism of a theory
> > which for me is most hearsay. But I'd like to know what the criticism
> > actually *means*, apart from "everybody was wrong all the time".
> Well, I don't say "everybody was wrong all the time". In fact,
> I provide explicit references to literature that should have
> corrected previous logical errors of some economists.
But it does boil down to the same thing, doesn't it? Your own contribution
to this thread started with the "widespread claim", which I do find back in
Krugman, or the Worldbank, or you name it. So if you really have a logical
flaw in the concept itself, tons of people are actually ignoring this fact,
though it appears to be dating from the seventies.
Still, that was not my point. As I explained, I still feel my question about
the actual meaning of the abstract model *in real life*, is a valid one,
beyond the logical implications of it.
(snip)
> > But the point is, we have a world which is wealthier than it used to be.
>
> Any such observation should be immediatedly qualified by a
> recognition how uneven such development is. The area occupied
> by the former Soviet Union is much worse off in material goods
> now than they were 20 years ago. Scary and awful are the right
> words for what the statistics show there. Africa is dismal.
> What's going on in Latin America?
This is interesting, because it comes back to Landes' book. There is no
denial the development is very unequal. There is even the possibility a
wooden belief in free trade and the rest will come "automatically" could
cause harm. But there are also the historical contingencies, the effect of
hard work, the implication of culture, and the environmental factors. There
is hardly a claim some people are worse off, because they blindly followed a
trade theory which is logically invalid in the first place.
And the unevenness of the development of course doesn't contradict the
larger total wealth. I don't think classical trade theory claims some people
cannot rob other people.
> > We have much more free trade,
>
> Consider the imposition on South Africa of an international system
> that increases the costs of treating people with AIDS there. They
> now have to pay government-protected monopolies in rich northern
> countries that do not manufacture the drugs which they use. Is
> that an increase or a decrease in free trade?
Equations can exist in which the endresult is positive, even if parts of it
are negative. An example would be -2 + 3 = +1. So granting your point, it
does not prove there is less free trade.
> > and we have a model telling us free trade
> > translates into wealth.
>
> If you refer to the standard textbook model, we do not have
> a coherent model telling us that.
Now the reason I was saying this, was to ask: "if the theory is not correct,
but the effect is as it predicted, where does this effect come from?". I
still think there is more free trade and more wealth. So where does the
latter come from?
Cheers, Koen
PS, I went to the site you recommended, and ran into serious trouble with an
article I read there. To my eyes, this article is not very consistent. I
elaborated in my post "after further reading". Care to comment? Thanks.
Robert Vienneau
> ...circa 1960...
Which reference in the following dates from 1960?
Graham White, "The Poverty of Conventional Economic Wisdom and
the Search for Alternative Economic and Social Policies".
<http://www.econ.usyd.edu.au/drawingboard/journal/0111/white.pdf>
Robert Vienneau
<koen.ro...@skynet.be> wrote:
> "Robert Vienneau" <rv...@see.sig.com> wrote
>
> > > So let me assume for the sake of argument your logic is correct.
> > > However,
> > > a model being only a model, the question is: what does it tell us?
> > The standard introductory argument for free trade is logically
> > invalid. The conclusions do not follow from its assumptions. My
> > example meets these assumptions. But my example has the negation
> > of the conclusions.
> This way, you make it sound a if the model makes a claim, which results
> in a
> contradiction. This necessitates a formulation of the model on which its
> advocates would agree, plus the derivation of the contradiction. So what
> about the first part, the (re)formulation of the model?
The standard model is the Heckscher-Ohlin-Samuelson theory.
My numerical example conforms to the assumptions of the standard
model. If you think otherwise, say where. Presenting
a specific numeric counterexample is enough to prove a
contradiction.
> I copy and paste a phrase from your post:
> "Then you should conclude that free trade will not necessarily benefit a
> nation."
> Here, you seem to adress a model claiming that trade *necessarily*
> benefits
> a nation. Now I compare with a phrase I take over from Paul Krugman in
> http://web.mit.edu/krugman/www/ricardo.htm :
>
> "that trade between two nations normally raises the real incomes of
> both".
>
> The difference between Krugmans "normally" and your "necessarily" is
> striking.
Not to one who understands the logic of what is being said. Another
exposition is labelled "intellectual spaghetti" in one of the
PowerPoint slideshows off of:
<http://www.debunking-economics.com/>
> In Krugmans formula of the model, it would not be enough to
> show a
> case where trade does not benefit a nation; the theory is aready aware of
> that possibility. In fact, Krugman says, QUOTE
> "After all, economists are familiar with a number of reasons why the
> gains
> from free trade may not work out quite as easily as in the simplest
> Ricardian model. External economies may mean underinvestment in
> import-competing sectors; imperfect competition may lead to a strategic
> competition over industry rents; because of distortions in domestic labor
> markets, imports may reduce wages or cause unemployment; and so on"
> UNQUOTE.
What Krugman is saying is that the model may not apply to some actually
existing economies. Things assumed neglible in the model (external
economies, imperfect competition, labor market distortions, etc.)
may be important in practice. That's not what I am saying.
> And this chimes perfectly well with your "Consequently, the gains from
> trade
> exploiting comparative advantage can be positive, zero, or negative."
>
> So if I take Krugmans formula, some of the things you appear to say are
> exactly what he says, and what, therefore, appears to be said by the
> standard model as well.
Wrong.
Introductory textbooks provide supposedly logical proofs that
if a country specializes as the theory of comparative advantage
implies, that country will be better off from the gains from
trade. Of course, such proofs have assumptions - that firms
maximize profits, that there is a social welfare function, etc.
One can relax such assumptions, e.g., introduce increasing
returns instead of constant returns to scale. Given an
appropriate set of such assumptions, gains to trade might
not result.
My example does not follow this approach of relaxing assumptions.
It has the same assumptions as the standard "logical" proofs.
Yet the conclusions of these proofs do not follow. So the
"logic" is missing in these introductory proofs.
> Now you also claim the reasoning against tariffs is "logically invalid to
> an
> economy with produced capital goods and a positive interest rate" (your
> first reaction to this thread). Is this still true if the model talks
> about "normally" instead of "necessarily"?
The question is based on a misreading.
> And if so, has that really been proven?
Yes.
> As I feel unable to check "the derivation of the contradiction", I'll go
> on treating it as a serious claim, for the sake of argument.
> Snip a lot
Some restored.
> > Comparative advantage is a matter of
> > relative costs. Costs vary, in a comparison of autarky equilibria,
> > in a complicated matter with interest rates. It's a matter of
> > noting prices have a degree of freedom in certain systems of
> > equations. It's convenient to say in the example that prices vary
> > with the interest rate.
> > In the production of which commodity should this economy
> > specialize? This is a matter, in the model, of comparing
> > relative prices on the international market with relative prices
> > in an autarky equilibrium. In other words, it is a matter of
> > comparative advantage. My example illustrates comparative
> > advantage with both a positive and zero interest rate.
> >
> > Are there gains from trade? This is another question. The
> > answer, in the model, involves comparing relative prices on
> > the international market with the slope of the Production
> > Possibilities Frontier. The PPF shows the consumption
> > possibilities available to this economy in a stationary
> > state autarky equilibrium using the given endowments.
> > The slope of the PPF shows the rate of transformation
> > available in a comparison of autarky equilibria.
> > The PPF is calculated from physical data on technology. Its
> > slope does not depend on the rate of interest. If
> > the rate of interest is zero, the rate of transformation
> > shown by the PPF is necessarily the same as the rate of
> > transformation given by relative prices in an autarky
> > equilibrium. The rate of transformation shown by the
> > PPF generally will differ from relative autarky prices
> > at a positive rate of interest.
> I have a problem here. I think to read: The slope does not depend on the
> rate of interest; but the rate of transformation (which you equated to
> the
> slope in the paragraph before) still differs from relative autarky prices
> at
> zero interest rate, when the rate is positive.
I thought my popular presentation was clear. Your restatement seems
like gobblygook to me.
The slope of the PPF (otherwise known as a rate of transformation)
generally differs from relative prices in an autarky equilibrium with
a positive interest rate. The slope of the PPF does not depend on
the rate of interest. Relative prices do so depend. Relative prices
also give a rate of transformation. These two rates of
transformation are mathematically equal when the rate of interest
is zero.
A comparison of relative autarky prices with prices on the
international market determines comparative advantage in the
model. That's what determines where the country specializes.
The slope of the PPF has to be brought into the story to tell
whether the gains from trade are positive, zero, or negative.
> Feel free to treat this problem as entirely mine, as you are
> understandably
> not necessarily inclined to popularize your ideas.
But I presented a popularization of these well-established ideas in
the post to which you are responding.
> I have no problem with your concluding...
> > Consequently, the gains
> > from trade exploiting comparative advantage can be positive,
> > zero, or negative.
> ... but I do not feel I see something that was not also be said by
> Krugman
> in the article I quoted. However, still assuming there is more to it...
I do not say what Krugman says in the quotes you selected. Details
are important.
> > I make no claims about reality.
> This reinforces my impression you go further than Krugmans' exceptions.
> In
> that case however, my question remains. If your case is really based on a
> logical problem deriving from, specifically, positive interest rates (and
> therefore is not just one more element in Krugmans' list of nuances),
> then I
> don't see how you can possibly avoid the impact of it on the real world.
Statements in logic make no empirical claims.
> If
> positive interest rates have a power to destroy a concept, where other
> things can only limit its scope, this must tell us something, and
> something
> important, about money, banking, financing and interest rates.
What I've been calling the interest rate is also known as the
rate of profits in some traditions. I adopted the jargon of
the dominant tradition to avoid confusion, unsuccessfully, I
see. What this rate has to do with money, banking, and financing
is a matter of debate. You are exhibiting the Ricardian vice.
Or perhaps Machlup's fallacy of misplaced concreteness.
> > > But I'd like to know what the criticism
> > > actually *means*, apart from "everybody was wrong all the time".
> > Well, I don't say "everybody was wrong all the time". In fact,
> > I provide explicit references to literature that should have
> > corrected previous logical errors of some economists.
> But it does boil down to the same thing, doesn't it?
No.
> Your own
> contribution
> to this thread started with the "widespread claim", which I do find back
> in
> Krugman, or the Worldbank, or you name it. So if you really have a
> logical
> flaw in the concept itself, tons of people are actually ignoring this
> fact,
> though it appears to be dating from the seventies.
And some don't. Do you want to discuss the sociology of economics?
> There
> is hardly a claim some people are worse off, because they blindly
> followed a
> trade theory which is logically invalid in the first place.
Are you aware of Joe Stiglitz's view on the (lack of) empirical
evidence for the standard view? And how it was imposed on many
countries? He has a popular article in the New Republic around
16 April 2000.
> And the unevenness of the development of course doesn't contradict the
> larger total wealth. I don't think classical trade theory claims some
> people cannot rob other people.
Whatever.
> > > We have much more free trade,
> > Consider the imposition on South Africa of an international system
> > that increases the costs of treating people with AIDS there. They
> > now have to pay government-protected monopolies in rich northern
> > countries that do not manufacture the drugs which they use. Is
> > that an increase or a decrease in free trade?
By the way, I don't recall how that debate came out. It occurs to
me that I may have given a misleading impression above. Although
the question relates to what is actually going on, I only
meant to be considering a possibility. I think the position that I
prefer actually prevailed in practice after much debate.
> Equations can exist in which the endresult is positive, even if parts of
> it
> are negative. An example would be -2 + 3 = +1. So granting your point, it
> does not prove there is less free trade.
My point was to question the framing of the question as less or
more free trade. That's not what was being debated in Seattle,
Washington, Genoa, etc.
Here's another example. Suppose a majority of the democratically
elected government of a country are persuaded to pass a law. This
law prohibits the sale in that country of tuna, say, caught in
turtle unfriendly nets. It makes no difference whether that tuna
was caught on an American or Japanese boat, is being sold by an
American or a Japanese boat. The WTO, who are not elected, demands
that this country end that law. Is the WTO increasing or decreasing
free trade here?
> > > and we have a model telling us free trade
> > > translates into wealth.
> > If you refer to the standard textbook model, we do not have
> > a coherent model telling us that.
> Now the reason I was saying this, was to ask: "if the theory is not
> correct,
> but the effect is as it predicted, where does this effect come from?". I
> still think there is more free trade and more wealth.
Well, you can think what you want, of course. I think the bit about
more free trade is a bad framing of the question. And I know enough to
look at comparative rates of growth. The Bretton Woods timeframe has
been called the "Golden Age". We do not live in a golden age.
> So where does the latter come from?
There are many causes of the wealth and poverty of nations other
than international trade. Not all of the effects of international
trade are caught in the static comparative advantage framework.
Consider a country that has available the use of a certain process
in production. This process produces two outputs, say. One of these
outputs is not wanted in this country; it is a waste produce. Some
in another country can make use of this product. And so this
country can gain by selling that product international. (This
argument is not original with me. An economist that I like says
this is what Adam Smith's vent-for-surplus argument was about.)
Then there's the idea that one will learn how to produce something
with a cheaper unit cost with practice at larger quantity flows.
Trade that expands the extent of the extent of the market can
allow a nation to take advantage of this effect quicker.
Koen Robeys
I have once again spent some time over your article, and of course I am
unable to dispute your case. As I even feel unable to understand it, the
thing to do is not to take comparative advantage as a dogma, for whatever
reason. This is not too difficult as neither Krugman nor Landes appear to
take it as a dogma. In general, thanks for your reactions. A few specific
points.
(snip)
> > I have a problem here. I think to read: The slope does not depend on the
> > rate of interest; but the rate of transformation (which you equated to
> > the slope in the paragraph before) still differs from relative autarky
prices
> > at zero interest rate, when the rate is positive.
>
> I thought my popular presentation was clear. Your restatement seems
> like gobblygook to me.
I think you're right, my restatement was based on misreading.
(snip)
> > Feel free to treat this problem as entirely mine, as you are
> > understandably
> > not necessarily inclined to popularize your ideas.
>
> But I presented a popularization of these well-established ideas in
> the post to which you are responding.
Well, the population to whom the ideas were popularized was apparently
unable to grasp what the effort to popularize was trying to tell them. I
absolutely take into account the possibility the population (me) is simply
incapable to unerstand these ideas in the first place.
(snip)
> > There is hardly a claim some people are worse off, because they blindly
> > followed a trade theory which is logically invalid in the first place.
>
> Are you aware of Joe Stiglitz's view on the (lack of) empirical
> evidence for the standard view? And how it was imposed on many
> countries? He has a popular article in the New Republic around
> 16 April 2000.
Does he say they failed because they blindly followed a theory (where
blindly following anything is never a good idea) or because the theory they
followed (maybe not even blindly) was logically flawed? If you can claim the
latter, I admit my statement was wrong.
> Here's another example. Suppose a majority of the democratically
> elected government of a country are persuaded to pass a law. This
> law prohibits the sale in that country of tuna, say, caught in
> turtle unfriendly nets. It makes no difference whether that tuna
> was caught on an American or Japanese boat, is being sold by an
> American or a Japanese boat. The WTO, who are not elected, demands
> that this country end that law. Is the WTO increasing or decreasing
> free trade here?
The WTO appears to increase free trade here, though my impression may be
wrong, and if my impression is right, it is not obvious to me I would want
to agree with their decision. Save the turtles!
OK, thanks again, see you around,
Koen
Christopher Auld
>Poor Chris Auld moans:
>
>> ...circa 1960...
>
>Which reference in the following dates from 1960?
>
> Graham White, "The Poverty of Conventional Economic Wisdom and
> the Search for Alternative Economic and Social Policies".
> <http://www.econ.usyd.edu.au/drawingboard/journal/0111/white.pdf>
Trying to maintain any sort of coherent converstation with
Bob has always been difficult. Lately, it's approaching
impossible.
The topic of the conversation was Bob's weird and ignorant
take on the content of modern thought on international
trade, which does indeed seem to stop with, as usual, the
CCC. Bob responds to the remark that perhaps he ought to
think about some more recent research with... a discussion
paper on Australian macroeconomic policy?
Perhaps Bob ought to think about actually reading some
of the modern trade literature.
Christopher Auld
>The standard model is the Heckscher-Ohlin-Samuelson theory.
>My numerical example conforms to the assumptions of the standard
>model. If you think otherwise, say where. Presenting
>a specific numeric counterexample is enough to prove a
>contradiction.
<sigh>
YET AGAIN: Does Bob think the journals are simply full of
mathematical errors? He could become quite a famous economist
overnight by simply demonstrating these errors and sending off
his proofs to top journals.
I am YET AGAIN going to ask Bob to tell us why he thinks
tariff walls are sound policy. Notice critiques of theories
categorically do not answer the question.
susupply
> Well, the population to whom the ideas were popularized was apparently
> unable to grasp what the effort to popularize was trying to tell them. I
> absolutely take into account the possibility the population (me) is simply
> incapable to unerstand these ideas in the first place.
He who fails to learn from Vienneau's posting history, is doomed to have him
repeat it...and repeat it...and repeat it...and repeat it....
Not to mention that he won't get your jokes.
But Krugman has already informed you what's going on with Vienneau:
<< (i) At the shallowest level, some intellectuals reject comparative
advantage simply out of a desire to be intellectually fashionable. Free
trade, they are aware, has some sort of iconic status among economists; so,
in a culture that always prizes the avant-garde, attacking that icon is seen
as a way to seem daring and unconventional >>
Patrick
Robert Vienneau
> ...weird and ignorant take...
Like the hero of a Galbraith novel, Mr. Auld has been studying
refrigerator pricing. He has been conducting a phone survey. He
is puzzled that he doesn't seem to get good data for the question,
"Is your refrigerator running?"
Christopher Auld
>Poor Chris Auld wails:
>
>> ...weird and ignorant take...
>
>Like the hero of a Galbraith novel, Mr. Auld has been studying
>refrigerator pricing.... [ typical nonsense ]
Bob has a lot of nerve complaining that others don't make
"substantive points."
susupply
"Robert Vienneau" <rv...@see.sig.com>
attempting to impress any Nobel laureate economists who may stumble upon
sci.econ,
wrote in message news:rvien-FA49EF....@news.dreamscape.com...
> Poor Chris Auld wails:
>
> > ...weird and ignorant take...
>
> Like the hero of a Galbraith novel, Mr. Auld has been studying
> refrigerator pricing. He has been conducting a phone survey. He
> is puzzled that he doesn't seem to get good data for the question,
> "Is your refrigerator running?"
"No, but it had a brisk walk this morning", is that the assumption?
Peter Lawrence
.
.
.
> I am YET AGAIN going to ask Bob to tell us why he thinks
> tariff walls are sound policy. Notice critiques of theories
> categorically do not answer the question.
Well, without buying into those extremes, I think that - subject to some very
serious qualifications - I could argue that. Mind you, the first
qualification is a (re?)definition of "sound policy": a policy that has some
merit to its supporting arguments, one that isn't inherently wrong. So I'm
not even going to try to show that tariff walls are right in current
circumstances, let alone always right; just that they can be right in some
circumstances.
Sometimes, free trade is "wrong", either for outside reasons or from market
imperfections. When that happens, it may be suitable to apply a fix - and
tariffs may be the only practical measure, e.g. because they are self funding
and subsidies that might be better can't be set up without funding being set
up first.
To see that there can be outside reasons, just look at the reasoning behind
maintaining local control of harbour piloting - and look at the match between
the physiques of eastern bloc truck drivers and of their tank commanders,
some twenty years ago, to see that the reasoning remained valid.
To see that there can be market imperfections, consider the best use pattern
of mining coal from existing mines or from new ones, or consider the positive
network externalities of the trades that make up the defence, automotive, and
some other sectors (once, mechanical clocks). So those sectors can benefit
from creating a critical mass artificially, that they might not get in a
small economy from market incentives acting alone.
All this is a far cry from justifying tariff barriers - first one would have
to see if the cap fitted, in these or some other respects I haven't covered.
But I do think they show that they fall under that loose heading I gave for
"sound policy", so they shouldn't be shot down simply for being suggested.
Koen Robeys
> Well, without buying into those extremes, I think that - subject to some
very
> serious qualifications - I could argue that. Mind you, the first
> qualification is a (re?)definition of "sound policy": a policy that has
some
> merit to its supporting arguments, one that isn't inherently wrong. So I'm
> not even going to try to show that tariff walls are right in current
> circumstances, let alone always right; just that they can be right in some
> circumstances.
It would also depend on a concept of "free market". If this means that a
privileged elite from country A can give the impoverished inhabitants of
country B the "free choice" to, say, work for laughable wages or starve,
then Marxian inspired thought would have a point if they criticise "free
markets".
If on the other hand you look at modern financial markets, what you see is
that a pricing mechanism, based on supply and demand, is an excellent
pricing tool, *provided* there is a large number of participants having
equal access to information (and more similar stuff).
Hence, if defending "freedom" means taking away restrictions on *what* we
can do, we may indeed have reasons for doubt. If on the other hand it means
promoting the possibility for more people to participate in the economy,
taking away restrictions on *who* can participate, we also improve market
liquidity and the pricing mechanism. To me it is definitely conceivable we
may have restrictions on the "what" if this improves the chances of the
"who" for equal access.
I'll admit no specific case for specific tariffs follows directly from this.
But if the question was whether "free markets" shoudl be a dogma, then I'd
say, why on earth would that be?
(snip)
> To see that there can be outside reasons, just look at the reasoning
behind
> maintaining local control of harbour piloting - and look at the match
between
> the physiques of eastern bloc truck drivers and of their tank commanders,
> some twenty years ago, to see that the reasoning remained valid.
(Frankly, I have no idea what this is about. Care to explain?)
Ciaoooooo, Koen
Christopher Auld
>> merit to its supporting arguments, one that isn't inherently wrong. So I'm
>> not even going to try to show that tariff walls are right in current
>> circumstances, let alone always right; just that they can be right in some
>> circumstances.
As I have mentioned several times, economists have spent a great deal of
time identifying circumstances in which tariffs can increase the welfare
of at least one country. In my opinion, there are also circumstances
in which morality may dictate restraint of trade -- slave labor, for example
-- although evaluating the counterfactual in such circumstances may prove
to be difficult. Bob Vienneau's anecdote about AIDS drugs in Africa may
or may not be another such example -- I am not familiar with the situation
and he didn't explain himself clearly, so I don't know. (I would wonder
what sort of pharaceuticals AIDS patients in South Africa would have access
to under autarky, however.)
So, contrary to the naive idea that professional economists begin and end
their thinking about international trade with what's in Ricardo, there are
many cirmcumstances in which we might think tariffs are good policy. This
observation is seriously tempered by the political reality that allowing
the "good" tariffs will inevitably leave the door open for "bad" tariffs.
While fairly technical, Grossman and Helpman's 1994 AER article "Protection
for sale" is an interesting formalization of similar arguments you might
like to dig up. It should also be noted that in many circumstances where
one country can increase its welfare by imposing trade barriers, the loss
to residents of other countries is greater. We can all be made better
off if we all agree not to implement such "beggar thy neighbour" policies,
and we could think of trade agreements such as NAFTA as imperfect attempts
to implement such agreements.
>It would also depend on a concept of "free market". If this means that a
>privileged elite from country A can give the impoverished inhabitants of
>country B the "free choice" to, say, work for laughable wages or starve,
>then Marxian inspired thought would have a point if they criticise "free
>markets".
I have never quite understood such arguments. Impoverished workers
generally do not take low-wage jobs because someone put a gun to their
head, they do so because the alternative is _even_ _worse_. Taking
those jobs away doesn't make them better off, it makes them even poorer.
I am not aware of any solution to poverty in the Marxian literature.
>I'll admit no specific case for specific tariffs follows directly from this.
>But if the question was whether "free markets" shoudl be a dogma, then I'd
>say, why on earth would that be?
I don't think of free markets as "dogma," nor am I aware that any of my
colleagues think that way. I am aware of large bodies of theory and evidence
which suggest that trade barriers tend to do net harm. If you want to see
an overview of the professional literature on these topics, then I would
recommend the volumes of the _Handbook of International Economics_. And
again, there are some excellent popular accounts of much of this research,
Paul Krugman's books for instance. I would also note that this is one area
in which there is lots of agreement among professional economists. Note
that the only individual in this thread making a general argument in favor
of trade barriers had to move outside the professional literature to
mildly glorified phamplets from a tiny "think tank" with undisclosed
sources of funding to make his "case." Infer from that what you wish.
Koen Robeys
> I have never quite understood such arguments. Impoverished workers
> generally do not take low-wage jobs because someone put a gun to their
> head, they do so because the alternative is _even_ _worse_. Taking
> those jobs away doesn't make them better off, it makes them even poorer.
> I am not aware of any solution to poverty in the Marxian literature.
Let me refer to your own example of slave labor. Suppose we call it "slave
labor", not only if one party has all the whips and guns, but also if it
accepting the job is really a matter of life and death for the "victim". To
me, it looks like in such cases market forces, through supply and demand,
may reach levels of wages that would be below levels if candidate labourers
had more alternatives.
Now if at higher wage levels, employers would still be profitable, it seems
reasonable to expect other employers will turn up, start to compete with the
first one, offer slightly higher wages and a virtuous circle can start -
three cheers for the market. Pending this result, it is still sad that
meanwhile people are dirt poor, having the consolation that without the
employer, they would be even poorer.
My question is: are these people giving *real* signals to the market, when
they supply their labor? Do they not create the illusion labor is
intrinsically cheap, while it is only cheap as long as other employers
haven't turned up yet? Or as long as they didn't start their own businesses
yet, profiting of those who already earn a wage?
In fact, I am thinking about market inequalities, level playing fields, that
sort of stuff. I personally do not believe much in "equality for all", if
taken literally. But I do believe some levels of inequality are not really
distinguishable from slavery. Is it completely nuts to think about
equalizing some, before we let the market play, say, just enough to make
sure the signals they send to the system are more realistic than the signals
a starving man would send?
Maybe I should assure you by stating I too am unaware of any solution to
poverty in Marxian thinking. I can still sympathize with the protest when
people are starving to death, as we type letters on keyboards.
(Snip)
I haven't read a book by Krugman yet, but I did start on the articles on his
website and indeed it was of great help. I now seriously consider reading
one of his books, given the chance. But then, economics is a very new
interest of mine, and without formal training, and with many other things to
do and to read, I wouldn't hold my breath. Meanwhile, I myself have been
accused of being a free market dogmatist, albeit in another newsgroup, and
without anybody necessarily knowing what all those words actually mean. But
never mind. I was just voicing thoughts why I feel I'm not a free market
dogmatist, without accusing anyone.
Ciaooooooo, Koen
Robert Vienneau
<koen.ro...@skynet.be> wrote:
> "Robert Vienneau" <rv...@see.sig.com> wrote
> I have once again spent some time over your article, and of course I am
> unable to dispute your case. As I even feel unable to understand it, the
> thing to do is not to take comparative advantage as a dogma, for whatever
> reason. This is not too difficult as neither Krugman nor Landes appear to
> take it as a dogma. In general, thanks for your reactions. A few specific
> points.
It seems to make Mr. Robeys happy to think his comments about dogma are
relevant. Well, I have no problem with that.
The Krugman essay Mr. Robeys previously gave a link to was not one of
Krugman's better efforts, I think. But it's amusing to note that Mr.
Robeys' reaction to comments on mathematical models is basically,
"Huh?", while I like arithmetic.
> Well, the population to whom the ideas were popularized was apparently
> unable to grasp what the effort to popularize was trying to tell them. I
> absolutely take into account the possibility the population (me) is
> simply
> incapable to unerstand these ideas in the first place.
This isn't private e-mail.
> > > There is hardly a claim some people are worse off, because they
> > > blindly
> > > followed a trade theory which is logically invalid in the first
> > > place.
> > Are you aware of Joe Stiglitz's view on the (lack of) empirical
> > evidence for the standard view? And how it was imposed on many
> > countries? He has a popular article in the New Republic around
> > 16 April 2000.
Stiglitz, _What I Learned at the World Economic Crisis_. TNR,
17-24, 2000. (available on-line somewhere.)
> Does he say they failed because they blindly followed a theory (where
> blindly following anything is never a good idea) or because the theory
> they
> followed (maybe not even blindly) was logically flawed? If you can claim
> the
> latter, I admit my statement was wrong.
He says they imposed a theory on countries with well-functioning
economies with no empirical evidence that they were improving things.
I don't see how the distinction between internal or external flaws in
the theory makes much difference to IMF riots. Perhaps the factor-price
equalization theorem, which is also logically weak, is more
important to the IMF/World Bank demands that countries open
themselves up to unregulated flows of financial capital.
[>> My point was to question the framing of the question as less or ]
[>> more free trade. That's not what was being debated in Seattle, ]
[>> Washington, Genoa, etc. ]
> > Here's another example. Suppose a majority of the democratically
> > elected government of a country are persuaded to pass a law. This
> > law prohibits the sale in that country of tuna, say, caught in
> > turtle unfriendly nets. It makes no difference whether that tuna
> > was caught on an American or Japanese boat, is being sold by an
> > American or a Japanese boat. The WTO, who are not elected, demands
> > that this country end that law. Is the WTO increasing or decreasing
> > free trade here?
> The WTO appears to increase free trade here, though my impression may be
> wrong, and if my impression is right, it is not obvious to me I would
> want
> to agree with their decision. Save the turtles!
What did my point have to do with turtles? Not much. Presumably Mr.
Robeys would say that a law prohibiting the sale of products by mass
with some non-standard, non-noted, definition of kilograms, pounds,
or whatever is an interference with free trade.
Christopher Auld
>> I have never quite understood such arguments. Impoverished workers
>> generally do not take low-wage jobs because someone put a gun to their
>> head, they do so because the alternative is _even_ _worse_.
>Let me refer to your own example of slave labor. Suppose we call it "slave
>labor", not only if one party has all the whips and guns, but also if it
>accepting the job is really a matter of life and death for the "victim".
Then taking that job away doesn't just make the person poorer, it kills
them. I do not think imagining such an extreme case rescues the argument.
>My question is: are these people giving *real* signals to the market, when
>they supply their labor? Do they not create the illusion labor is
>intrinsically cheap, while it is only cheap as long as other employers
>haven't turned up yet?
Well, economic theory denies there is any such thing as the "intrinsic"
worth of anything, including labor.
>In fact, I am thinking about market inequalities, level playing fields, that
>sort of stuff. I personally do not believe much in "equality for all", if
>taken literally. But I do believe some levels of inequality are not really
>distinguishable from slavery. Is it completely nuts to think about
>equalizing some, before we let the market play, say, just enough to make
>sure the signals they send to the system are more realistic than the signals
>a starving man would send?
Let's put aside the issue: Are substinence-level workers labor supplies
"real." The question is positive: Do trade barriers increase the standard
of living of impoverished workers? The answer is generally "no."
I wholeheartedly agree it is unjust and terrible that some people have to
toil long hours for next to nothing. I do not think, however, that trade
barriers are an effective way to improve their lot.
Grinch
wrote:
>Koen Robeys <koen.ro...@skynet.be> wrote:
>
>>> I have never quite understood such arguments. Impoverished workers
>>> generally do not take low-wage jobs because someone put a gun to their
>>> head, they do so because the alternative is _even_ _worse_.
>
>>Let me refer to your own example of slave labor. Suppose we call it "slave
>>labor", not only if one party has all the whips and guns, but also if it
>>accepting the job is really a matter of life and death for the "victim".
>
>Then taking that job away doesn't just make the person poorer, it kills
>them. I do not think imagining such an extreme case rescues the argument.
The Slate-era Krugman had an article pointing out to those who wanted
to remove the poor garbage pickers from Garbage Mountain in the
Philippines that the poor were there because it was better for them to
be there than elsewhere. http://web.mit.edu/krugman/www/smokey.html
And the New York Times (of all publications) had a long piece a while
back covering both:
a) how "sweatshops" have been the first step on the road to dramatic
economic development in Asia, and
b) how much more brutally awful conditions are outside of sweatshops
than in them, so that many people to go extraordinary lengths to get
jobs in them.
It tells the story of a woman who lost her children because the
alternative to sweatshop work that she was forced to take was
collecting wood in the open, and she couldn't afford a mosquito net to
protect her children from disease...
"In Cambodia, a large mosquito net costs $5. If there had been a
sweatshop in the area, however harsh or dangerous, Nhem Yen would have
leapt at the chance to work in it, to earn enough to buy a net big
enough to cover all her children."
http://www.nytimes.com/library/magazine/home/20000924mag-sweatshops.html
There are many millions of people who are living like that today, who
could benefit from sweatshop work. Sweatshops keep people indoors
sheltered from the elements, and sweatshop wages save lives. And they
are the foundation for much better jobs for the next generation.
*Those people* aren't the people protesting sweatshops.
The rich folk who protest sweatshops always seem to think that the
alternative is a nice country life, or a few years in school, or
afternoons sitting on the sofa eating bon-bons watching TV. If they
can feel good about themselves by making Cathy Lee close down an Asian
factory, what do they care about what happens to the sweatshop
workers?
They should maybe be sent to spend a summer scavenging in the
Cambodian jungle trying to stay alive, without a mosquito net, just to
get a sense of perspective.
<snip>
Robert Vienneau
<koen.ro...@skynet.be> wrote:
> It would also depend on a concept of "free market". If this means that a
> privileged elite from country A can give the impoverished inhabitants of
> country B the "free choice" to, say, work for laughable wages or starve,
> then Marxian inspired thought would have a point if they criticise "free
> markets".
I think Marx's account of the enclosure movement might be relevant
here. I don't go into this - or into Marxian accounts of
international trade - in this FAQ:
<http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/LTV-FAQ.html\
#Exploit3>
I think an account of exploitation can be formalized by noting the
different ranges of choice open to different individuals in different
groups. If I recall correctly, that is part of the account put
forward by Analytical Marxists.
Perhaps you noticed that poor Chris Auld falsely stated that I made a
general argument in favor of trade barriers, falsely stated that I did
not refer to the professional literature, refuses to notice my
suggestions that the literature on trade does not begin and end with
Ricardo, seems to be ignorant of the issues being debated in Seattle
and after, and does not make an argument directed at cognitive values
with remarks about tiny think tanks and sources of funding.
Robert Vienneau
oldn...@mindspring.com wrote:
> The rich folk who protest sweatshops always seem to think that the
> alternative is a nice country life, or a few years in school, or
> afternoons sitting on the sofa eating bon-bons watching TV. If they
> can feel good about themselves by making Cathy Lee close down an Asian
> factory, what do they care about what happens to the sweatshop
> workers?
>
> They should maybe be sent to spend a summer scavenging in the
> Cambodian jungle trying to stay alive, without a mosquito net, just to
> get a sense of perspective.
Notice the above is not something that would appear in any valid
argument, assuming Mr. James Glass knows how to construct a valid
argument. Mr. Glass' statement seems also based on ignorance about
who has been protesting sweatshops. Here's a news account by some
activists:
<http://www.linguafranca.com/print/0103/cover_clothes.html>
Since Lingua Franca has been discontinued, I don't know how long
the above link will be around.
Christopher Auld
>Perhaps you noticed that poor Chris Auld falsely stated that I made a
>general argument in favor of trade barriers,
Yes, my apologies. Bob flat-out refused to provide any sort of
answer to the question, "What trade policies do you prefer?" a
half-dozen times. I was forced to infer from his wild-eyed
conclusion "so much for neoliberal (non)policy" that he advocates
protectionist trade policy.
> falsely stated that I did not refer to the professional literature,
Bob did not refer to the professional literature on trade policy.
Bob instead directed us to a web site chock full o' phamplets on
trade policy.
>refuses to notice my
>suggestions that the literature on trade does not begin and end with
>Ricardo,
Bob has given no indication he has read anything whatsoever in
the trade literature. He makes passing reference to a standard
sixty year old model; he spends most of his "essay" attacking a
200 year old idea (which, incidentally, he doesn't understand).
> seems to be ignorant of the issues being debated in Seattle
>and after,
How Bob managed to infer this from the uncontroversial
statements I made is truly a testament to Bob's vivid
imagination.
> and does not make an argument directed at cognitive values
>with remarks about tiny think tanks and sources of funding.
Perhaps not. Personally, I place more weight on reams of
evidence presented in refereed journals than on phamplateers.
Bob is of course welcome to differ.
Notice Bob has yet again refused to provide any sort of
discussion of his views on trade policy. One might think he
is more interested in simply controverting the opinions of
professional economists than in thinking about these issues.
Then again, that observation accurately captures not just the
current discussion, but all of Bob's nonsense over the last
decade on this group. Can anyone remember Bob at any time
actually bringing up a policy issue? I note that today,
though, he has again gleefully brought up the Frank paper on
self-interest and brainwashing, er, education in economics.
Perhaps someone should create sci.econ.i.hate.economists,
Bob could spend time there, we could actually have a discussion
here that goes more than two posts before degenerating into
an exploration of the CCC and the wicked economist who dropped
poor Bob on his head as an infant.
susupply
"Robert Vienneau" <rv...@see.sig.com> wrote in message
news:rvien-230109....@news.dreamscape.com...
> I think an account of exploitation can be formalized by noting the
> different ranges of choice open to different individuals in different
> groups. If I recall correctly, that is part of the account put
> forward by Analytical Marxists.
As Chris Auld pointed out to Koen, someone who comes along to offer a
starving person an alternative that results in saving the person's life, can
hardly be guilty of "exploitation".
Koen Robeys
> >Let me refer to your own example of slave labor. Suppose we call it
"slave
> >labor", not only if one party has all the whips and guns, but also if it
> >accepting the job is really a matter of life and death for the "victim".
>
> Then taking that job away doesn't just make the person poorer, it kills
> them. I do not think imagining such an extreme case rescues the argument.
OK, another try to rephrase. You did object to slave labor for ethical
reasons. Now we consider an example of slave labor, where the circumstances
are such that eliminating the slave labor leads to the former slaves
starving to death.
Would this justify slave labor after all, or would we agree we should still
strive to eliminate slave labor, implying we would also have to agree agree
this in itself is not good enough. And assuming we would agree we want to
eliminate slave labor *plus* something else, would an analogous argument not
be applicable to my example?
The argument, after all, was not pro tariffs. The argument was that *even*
if we agree free markets can be the way out of poverty, the question is
whether free markets *by itself* are good enough.
> >My question is: are these people giving *real* signals to the market,
when
> >they supply their labor? Do they not create the illusion labor is
> >intrinsically cheap, while it is only cheap as long as other employers
> >haven't turned up yet?
>
> Well, economic theory denies there is any such thing as the "intrinsic"
> worth of anything, including labor.
Fine, I'll take that point. Probably the only way to determine "worth" will
then be by supply and demand? If that is the case, is the result of supply
and demand still a good indication of "worth", if we know it is the result
of a situation where the supply of, say, labor, was influenced by the fact
that the alternative for the supplier was starvation?
Mind you, I am fully aware of the fact that my basic reaction to any
mathematical exposé sounds like "huh?". I just voice an opinion, nay, a
question on the answer of which I already have an opinion.
(snip of my text)
> Let's put aside the issue: Are substinence-level workers labor supplies
> "real." The question is positive: Do trade barriers increase the standard
> of living of impoverished workers? The answer is generally "no."
I honestly think I already indicated I'm not writing these in order to reach
"tariffs" as a conclusion. To me, this is just thinking about what we would
call "free" markets; where other things than tariffs might be seen as
restrictions.
> I wholeheartedly agree it is unjust and terrible that some people have to
> toil long hours for next to nothing. I do not think, however, that trade
> barriers are an effective way to improve their lot.
So the question can become: do we think that *other* things may be effective
ways to improve their lot? For example, can we ask of a company, working in
my impoverished country B, to pay wages they would also pay if there was
more competition for labor, even if there is currently no such competition?
Ciaooooooo, Koen
Christopher Auld
>OK, another try to rephrase. You did object to slave labor for ethical
>reasons. Now we consider an example of slave labor, where the circumstances
>are such that eliminating the slave labor leads to the former slaves
>starving to death.
This is the sort of issue I was getting at with the caveat that
we would have to think about the counterfactual. The reason we
would want to impose sanctions against nations using slave labor
is that we intend the sanctions to reduce incentive to use
slaves. But it is possible that such sanctions may backfire.
>The argument, after all, was not pro tariffs. The argument was that *even*
>if we agree free markets can be the way out of poverty, the question is
>whether free markets *by itself* are good enough.
I didn't understand this to be the argument at all. Of course
trade policy is just one facet amongst many which affect poverty.
>Fine, I'll take that point. Probably the only way to determine "worth" will
>then be by supply and demand? If that is the case, is the result of supply
>and demand still a good indication of "worth", if we know it is the result
>of a situation where the supply of, say, labor, was influenced by the fact
>that the alternative for the supplier was starvation?
I still object to the question: You presuppose there is some
measure of "worth" which we can access and compare to the market
outcome. There isn't.
>So the question can become: do we think that *other* things may be effective
>ways to improve their lot? For example, can we ask of a company, working in
>my impoverished country B, to pay wages they would also pay if there was
>more competition for labor, even if there is currently no such competition?
Sure. This is equivalent to the question: If companies or individuals
gave charitable donations to poor people, would those poor people be
better off?
RP Johnson
Landes?
There must have been a sharp turn in the road some days back.
RP Johnson
Koen Robeys
The book this thread started with, is about the unequal distribution of
wealth in the world. Now the current subthread is about one possible cause.
"Free markets" may be the direct cause of this uneven distribution, as I
have seen claimed by Marxists, but not in this thread; or they may be
failing to do something decently about it, or they may have nothing to do
with it, to the point of being the (only) way to more equal distributions of
wealth.
Please feel free to post on any other aspect of the book.
Cheers, Koen
Koen Robeys
> >OK, another try to rephrase. You did object to slave labor for ethical
> >reasons. Now we consider an example of slave labor, where the
circumstances
> >are such that eliminating the slave labor leads to the former slaves
> >starving to death.
>
> This is the sort of issue I was getting at with the caveat that
> we would have to think about the counterfactual. The reason we
> would want to impose sanctions against nations using slave labor
> is that we intend the sanctions to reduce incentive to use
> slaves. But it is possible that such sanctions may backfire.
This is definitely possible. Still, it here looks like we are allowed to
criticise the system based on slavery, *even* if the criticism may backfire.
Now you will be aware of the fact that much criticism of a system which in
many respects is not that different, often gets answered by the
backfiring-argument, as if this justifies the undisturbed continuation of
the latter system. My point then would be that we either may be more
critical of the existing system, or that we should be less outspoken in our
criticism against slavery. After all, take the slavemaster away, and the
slave might perish.
> >The argument, after all, was not pro tariffs. The argument was that
*even*
> >if we agree free markets can be the way out of poverty, the question is
> >whether free markets *by itself* are good enough.
>
> I didn't understand this to be the argument at all. Of course
> trade policy is just one facet amongst many which affect poverty.
Well, since Peter Lawrence's reaction of two days ago, about every post I
wrote in the resulting subthread mentioned at least once I was not
interested in defending tariffs. So I would still stick to my question.
Suppose we even accept free markets are a necessary condition for the way
out of poverty; would they also be sufficient?
> >Fine, I'll take that point. Probably the only way to determine "worth"
will
> >then be by supply and demand? If that is the case, is the result of
supply
> >and demand still a good indication of "worth", if we know it is the
result
> >of a situation where the supply of, say, labor, was influenced by the
fact
> >that the alternative for the supplier was starvation?
>
> I still object to the question: You presuppose there is some
> measure of "worth" which we can access and compare to the market
> outcome. There isn't.
Hmmmmm, not really. In fact what I believe is that the *most efficient*
price signal is created as the result of an as large as possible group of
participants being able to either buy or sell freely at, or around, given
(but not fixed) price levels. So no metaphysics hidden behind supply and
demand; just an efficiency measure.
The point now is that this maximal pricing efficiency presupposes a great
deal of free participants; free meaning the simple fact of their being
active tells us something about their personal estimation of "worth". Or in
other words, the participants must have alternatives, so that anybody
feeling he doesn't get a correct price, can try his luck somewhere else. So
if the participants do not have these alternatives, my problem is not that
the market outcome doesn't approach the "real" worth, but that the pricing
efficiency is less than optimal.
> >So the question can become: do we think that *other* things may be
effective
> >ways to improve their lot? For example, can we ask of a company, working
in
> >my impoverished country B, to pay wages they would also pay if there was
> >more competition for labor, even if there is currently no such
competition?
>
> Sure. This is equivalent to the question: If companies or individuals
> gave charitable donations to poor people, would those poor people be
> better off?
Sorry, not quite. We were talking about policy proposals. If we accept a
policy where companies and/or individuals *have* to donate to the poor, we
presumably might call it a "tax". If the donations were taking the frm of
cheap access to medicine, we presumably might call them "social security".
Given that we think it terrible if some people have to toil long hours for
next to nothing; given also that we may believe - as I still do - this is
costing us in the form of inefficient pricing mechanisms, we could
conceivably think of *policy measures*, not charity, to improve their lot.
And no, I do not think tariffs are what we need. My question was: "do we
think that *other* things may be effective?"
So: "are free markets in themselves good enough", or "do we think that
*other* things may be effective" are basically two sides of the same coin.
They have nothing to do with advocacy of tariffs. They have to do with the
question whether we put all our trust in the free market, or whether we can
conceive of additional measures being necessary.
Cheers, Koen
Christopher Auld
>interested in defending tariffs. So I would still stick to my question.
>Suppose we even accept free markets are a necessary condition for the way
>out of poverty; would they also be sufficient?
I don't think free markets are necessary or sufficient, although I'm
not entirely sure the question is well-defined.
>The point now is that this maximal pricing efficiency presupposes a great
>deal of free participants; free meaning the simple fact of their being
>active tells us something about their personal estimation of "worth". Or in
>other words, the participants must have alternatives, so that anybody
>feeling he doesn't get a correct price, can try his luck somewhere else. So
>if the participants do not have these alternatives, my problem is not that
>the market outcome doesn't approach the "real" worth, but that the pricing
>efficiency is less than optimal.
And again I'm not sure I follow the argument you're presenting. I think,
translated into economic jargon, you are asking: If the alternative to
working is dire, does that mean the market allocation is inefficient? Off
the top of my head I don't see that should be the case. I would note that
you keep talking as if there is only one employer; that's called "monopsony"
and it does generally imply inefficient outcomes. But of course generally
there are many potential employers who must compete for workers, even in the
third world.
>Given that we think it terrible if some people have to toil long hours for
>next to nothing; given also that we may believe - as I still do - this is
>costing us in the form of inefficient pricing mechanisms, we could
>conceivably think of *policy measures*, not charity, to improve their lot.
>And no, I do not think tariffs are what we need. My question was: "do we
>think that *other* things may be effective?"
Of course. Education, infrastructure, a functioning legal system which
enforces property rights, sanitation, and basic health care are all
things which contribute to development. This list is not at all
exhaustive.
Koen Robeys
(snip)
> And again I'm not sure I follow the argument you're presenting. I think,
> translated into economic jargon, you are asking: If the alternative to
> working is dire, does that mean the market allocation is inefficient? Off
> the top of my head I don't see that should be the case. I would note that
> you keep talking as if there is only one employer; that's called
"monopsony"
> and it does generally imply inefficient outcomes.
This appears as a good translation into economic jargon - I guess
"monopsony" would mean a kind of monopoly of potential employers towards the
potential employees. As this leads to inefficiencies - which until now I
only assumed in order to state my case - we might rephrase the case. Allow
me to borrow from a post of Patrick's, QUOTE:
"As Chris Auld pointed out to Koen, someone who comes along to offer a
starving person an alternative that results in saving the person's life, can
hardly be guilty of "exploitation". UNQUOTE
Now I did accept the "backfiring-argument", while at the same time I would
disagree with the moral statement here. Now, I can ignore the morals (only
for the sake of argument) by replacing "guilty of exploitation" into "guilty
of inefficiency". However, I'm still making assumptions:
1. Supply and demand lead to the most efficient pricing mechanism. (AFAIK
unproven)
2. In cases where factors like "monopsomy" apply, supply and demand by
themselves are insufficient to result in this most efficient mechanism
(apparently acceptable)
3. A more efficient pricing mechanism is not only important for academical
reasons, but does have an important impact on wealth creation. (AFAIK
unproven)
Now if these are reasonable, situations where we save somene's life by
paying him a slave-remuneration, do have a negative impact on the total
wealth creation. Because we are confronted with one of those situations
where supply and demand can't do their job properly. Hence, for reasons of
aiming for the most efficient pricing mechanism, we should also aim for
improved choices for the market participants. Only if they are "free" in a
more than legalistic way, the impact of their decisions on the pricing
mechanism, and hence the wealth prduction, is significant.
Or, creating the circumstances of increased equality, is a pre-condition for
market forces to be able to work properly. Meaning it is not enough to
expect market forces will result automatically in the desired result.
Meaning this improved equality should then be organized *apart*. And why?
For ethical reasons if you like. But also because otherwise free markets
cannot operate properly, and wealth creation is suboptimal. So advocates of
free markets reach the very same conclusion as ethically worried activists,
even if for very different reasons. Three cheers for something.
> But of course generally there are many potential employers who must
compete for workers, even in the
> third world.
Good point. It may force us to shift attention from technicalities (in my
eyes, at least) like market structure (monopoly,...) to people's behavior.
No matter whether the market is strictly speaking no monopoly and many
employers compete for workers; the question is whether market participants
are in such a position that their decision to accept a job sends out a
meaningful signal about the market. Are they *free* enough in their choice?
I would expect that under conditions where indeed many employers compete for
workers, the answer would be "yes". However, this can now be *asked* and
*checked*, and does not have to be *assumed*.
(I found some kind of moral support for these thoughts by reading Amartya
Sen, Development as Freedom, 1999.)
> >Given that we think it terrible if some people have to toil long hours
for
> >next to nothing; given also that we may believe - as I still do - this is
> >costing us in the form of inefficient pricing mechanisms, we could
> >conceivably think of *policy measures*, not charity, to improve their
lot.
> >And no, I do not think tariffs are what we need. My question was: "do we
> >think that *other* things may be effective?"
>
> Of course. Education, infrastructure, a functioning legal system which
> enforces property rights, sanitation, and basic health care are all
> things which contribute to development. This list is not at all
> exhaustive.
The way I see it, these would be important contributions to the creation of
*real* "free markets", leading to the presence of market participants whose
decisions do send meaningful signals to the markets. As this in turn would
lead to much improved wealth creation (see my assumptions), your list would
not only be a matter of taxing and spending for ethical reasons, it would
also be an investment in a greater total wealth creation.
Well, thanks for your patience up to now.
Ciaoooooo, Koen
susupply
> > I guess
> "monopsony" would mean a kind of monopoly of potential employers towards
the
> potential employees.
Monopsony merely means "one buyer", and doesn't co-exist well with your
plural term, "potential employers".
[snip]
> Now if these are reasonable, situations where we save somene's life by
> paying him a slave-remuneration,
Again, you have created an oxymoron. "Slave" and "remuneration" are
contradictory by definition.
Patrick
Koen Robeys
> Monopsony merely means "one buyer", and doesn't co-exist well with your
> plural term, "potential employers".
>
> [snip]
>
> > Now if these are reasonable, situations where we save somene's life by
> > paying him a slave-remuneration,
>
> Again, you have created an oxymoron. "Slave" and "remuneration" are
> contradictory by definition.
Sorry for terminlogy problems. "Potential employers" indeed is a bit unlucky
if one describes a situation of only one buyer - but then the argument may
be valid in case of sufficiently few buyers. If anybody feels like being
confused by "slave-remuneration", it would probably be impossible to prevent
them from it, but let's try anyway. Let's call the means to make sure the
slave doesn't die of starvation his "remuneration", and there you have it.
Cheers, Koen
Grinch
<koen.ro...@skynet.be> wrote:
>"susupply" <susu...@mindspring.com> wrote
>
>> Monopsony merely means "one buyer", and doesn't co-exist well with your
>> plural term, "potential employers".
>>
>> [snip]
>>
>> > Now if these are reasonable, situations where we save somene's life by
>> > paying him a slave-remuneration,
>>
>> Again, you have created an oxymoron. "Slave" and "remuneration" are
>> contradictory by definition.
>
>Sorry for terminlogy problems. "Potential employers" indeed is a bit unlucky
>if one describes a situation of only one buyer - but then the argument may
>be valid in case of sufficiently few buyers.
"Sufficiently few"? Sufficient for what, precisely?
Imagine that whatever the number, the highest wage is no higher than
the income that can be earned in subsistence agriculture, as with the
case of Nhem Yen collecting firewood in the open in Cambodia, leaving
her family mortally exposed to mosquito-carried disease, as in the
Times story quoted earlier in the thread.
Then say an international conglomerate decides it can profit from the
low wages, and so opens a factory there.
Now there is an additional employer present, and to attract Nhem Yen
or someone else like her into employment it must offer a higher wage
than the highest wage that was available to such persons before.
Then say a second international conglomerate sees the example of the
first, decides it too can profit from the low wages, and also opens a
factory there.
Now there are two additional employers present, and to attract Nhem
Yen or someone else like her into employment the second must offer a
higher wage than was available to such persons before -- including the
wage offered by the first foreign conglomerate.
Of course, both conglomerates must also build thier factories there.
This requires addtional employment at least temporarily, the injection
of investment capital which will circulate in the community, and
perhaps more importantly, the injection of "human capital" -- some
level of education of the local population in such as the construction
trades, how to run factory equipment, how to manage and maintain a
factory, elementary logistics, etc.
In many analyses this is the greatest benefit to the recipient
work force since a more skilled work force is increasingly attractive
to future employers -- both domestic and foreign -- who may open shop
there. Thus luring the third, fourth, fifth and sixth employers --
domestic as well as foreign -- to appear and further bid up wages.
We may stipulate that at any given point in this process wages are, by
western standards, miserably low. (But also that Nhem Yen now has her
mosquito net and all her children are alive).
Is this process "exploitation" or is it "progress"?
> If anybody feels like being
>confused by "slave-remuneration", it would probably be impossible to prevent
>them from it, but let's try anyway. Let's call the means to make sure the
>slave doesn't die of starvation his "remuneration", and there you have it.
Given the law of supply and demand in operation in the labor market,
how do employers are growing in number (due to the arrival of foreign
firms), and who must compete to employ labor by offering higher wages,
manage to enforce this "slave remunueration" for all their workers?
That would seem to require a statutory law enacted by the local
government which actually creates legal slavery or the equivalent.
(Which would, of course, suspend the operation of the law of supply
and demand in the labor market).
>Cheers, Koen
>
>
susupply
> Let's call the means to make sure the
> slave doesn't die of starvation his "remuneration", and there you have it.
Redefining words to mean something completely different is hardly a valid
method of argument.
BTW, where will I find human beings who are in such dire straits that they
have absolutely no alternative but starvation?
Patrick
Peter Lawrence
>
> "Peter Lawrence" <pet...@netlink.com.au> wrote
.
.
.
> > To see that there can be outside reasons, just look at the reasoning
> behind
> > maintaining local control of harbour piloting - and look at the match
> between
> > the physiques of eastern bloc truck drivers and of their tank commanders,
> > some twenty years ago, to see that the reasoning remained valid.
>
> (Frankly, I have no idea what this is about. Care to explain?)
The standard reasoning for keeping harbour piloting in patriotic hands was
that foreigners couldn't be trusted - in time of war a Frenchman might help
Napoleon or whatever. That sort of thing turns up in quaint language in
documents relating to Trinity House.
The temptation for us is to be fooled by that quaintness into thinking it's
irrelevant now if it ever was, and maybe that it was just paranoia - that mid
1850s invasion scares weren't realistic since it never happened. But it turns
out that the fears were solidly based, and so were the precautions, it's just
the particular circumstances that have changed. It was reasonably feared that
twenty and thirty years ago trucks from behind the Iron Curtain were
delivering goods in western Europe with carefully selected drivers - tank
regiment colonels in training, carefully acquiring first hand knowledge of
terrain in a modern analogue of Machiavelli's advice to princes to take up
hunting. One piece of evidence was the physique of these drivers: they all
seemed the right age and the right size (the USSR used conscription to
allocate tank crews who fitted the machines more conveniently, simplifying
tank construction and design).
So we can have non-economic incentives to do things that look superficially
like trade barriers. PML.
Peter Lawrence
>
> Koen Robeys <koen.ro...@skynet.be> wrote:.
.
.
> >It would also depend on a concept of "free market". If this means that a
> >privileged elite from country A can give the impoverished inhabitants of
> >country B the "free choice" to, say, work for laughable wages or starve,
> >then Marxian inspired thought would have a point if they criticise "free
> >markets".
>
> I have never quite understood such arguments. Impoverished workers
> generally do not take low-wage jobs because someone put a gun to their
> head, they do so because the alternative is _even_ _worse_. Taking
> those jobs away doesn't make them better off, it makes them even poorer.
That's not the whole story. It's a perfectly adequate simplification for,
say, people making Nike shoes, so the reflex anti-global arguments are
defective.
But the case is very different with the export of cash crops like coffee,
particularly when the ownership isn't a true result of capital flows but is
an analogue of absentee landlordism (I am indebted to Nassau Senior's work
for some underlying insights). WHEN things are like this, the impoverishment
itself is also the result of a sort of ground cover effect, with previous
alternatives being removed. It's no argument to say that they would be even
poorer as individuals choosing not to plant coffee, when their former
subsistence land has been diverted to coffee - their new alternatives really
are coffee or nothing, but those alternatives are not "other things being
equal".
Cash crop production for export often works out harmfully since food
availability drops and cash needs for survival go up disproportionally. With
Nike manufacture, the balance of gain is the other way. PML.
Christopher Auld
>alternatives being removed. It's no argument to say that they would be even
>poorer as individuals choosing not to plant coffee, when their former
>subsistence land has been diverted to coffee - their new alternatives really
>are coffee or nothing, but those alternatives are not "other things being
>equal".
The only reason to choose to plant coffee is that it's worth
more than the "subsistence" crop. Necessarily, there is a
surplus created relative to the previous situation. If the
local politics are so corrupt that *less than none* of this
surplus makes it into workers' hands, then and only then does
the argument above work.
Peter Lawrence
>
> Peter Lawrence <pet...@netlink.com.au> wrote:
>
> >alternatives being removed. It's no argument to say that they would be even
> >poorer as individuals choosing not to plant coffee, when their former
> >subsistence land has been diverted to coffee - their new alternatives really
> >are coffee or nothing, but those alternatives are not "other things being
> >equal".
>
> The only reason to choose to plant coffee is that it's worth
> more than the "subsistence" crop. Necessarily, there is a
> surplus created relative to the previous situation. If the
> local politics are so corrupt that *less than none* of this
> surplus makes it into workers' hands, then and only then does
> the argument above work.
No, at several levels.
First, "corrupt" happens.
Second, it also applies in cases that aren't corrupt. Absentee landlordism
isn't corrupt. In fact, the presence of a reserve currency may tend to
produce it, hidden under apparent capital flows that are merely flows of fiat
money.
Third, it doesn't even need landlords to be absent. It's effectively the
scenario of the Highland Clearances. (I wrote that up in some detail in
http://www.spectacle.org a while back.)
Fourth, it even happens transitionally when everyone is capable of
benefitting - a simple case of the spiderweb theorem, when people commit to
growing coffee based on previous season's pricing.
Fifth, there can be other market imperfections around producing much the same
effect as explicit corruption. For instance, James Irvine Robertson, writing
in the Australian Financial Review of 10-11.11.01, records this of Kenya:
'...The food deficit is growing. Many depend for their lives upon their
shambas, a small block of land in the home village where they can grow maize.
But a "big man" may have bought land upstream, expelled the residents and be
growing cut flowers or baby courgettes for the European market. He will take
the water from the river and turn the peasant's land to dust.' - an
externality in water use over and above the classic scenario of the Highland
Clearances, instantly familiar though I had not known of this case when I
wrote up the material for http://www.spectacle.org.
I'm not trying to present a general case anyway - just to show that examples
exist, and that we should look out for them rather than get all dismissive
and refuse to look into cases. PML.
Robert Vienneau
<koen.ro...@skynet.be> wrote:
> Mind you, I am fully aware of the fact that my basic reaction to any
> mathematical exposé sounds like "huh?". I just voice an opinion, nay, a
> question on the answer of which I already have an opinion.
Well, part of Krugman's point was the need to be able to follow
arithmetic. He doesn't actually present any models.
Perhaps you would like this description of exploitation:
<http://homepage.newschool.edu/~AShaikh/pal5.pdf
Shaikh also has some papers of unequal exchange in international
trade. I assume he draws on a tradition of economic theory that
provides an account of objective value. I don't know what he says
about, say, Grossmann or Emmanuel, for I haven't yet read Shaikh
on international trade. I'm more interested in Shaikh's
demonstration of the humbug in the claim that Solow's growth
theory is empirically supported.
I don't know why you continue to frame the issue as one of free trade
versus tariffs. And I tend to think that "free markets" is an
ideological term.
Robert Vienneau
<koen.ro...@skynet.be> wrote:
> Sorry for terminlogy problems. "Potential employers" indeed is a bit
> unlucky
> if one describes a situation of only one buyer - but then the argument
> may
> be valid in case of sufficiently few buyers.
Mainstream economic theory has accounts of monopoly and oligopoly.
So you are correct. Sufficiently few buyers of labor power is
not an example of perfectly competitive labor markets.
> If anybody feels like being
> confused by "slave-remuneration", it would probably be impossible to
> prevent
> them from it, but let's try anyway. Let's call the means to make sure the
> slave doesn't die of starvation his "remuneration", and there you have
> it.
Why can I not borrow money by using my potential slave labor as
collateral? I guess this was an institution in many ancient states,
as well as being like indentured servitude in the early U.S. Isn't
the abolishing of this institution an interference with "free markets"?
Robert Vienneau
<pet...@netlink.com.au> wrote:
> But the case is very different with the export of cash crops like coffee,
> particularly when the ownership isn't a true result of capital flows but
> is
> an analogue of absentee landlordism (I am indebted to Nassau Senior's
> work
> for some underlying insights). WHEN things are like this, the
> impoverishment
> itself is also the result of a sort of ground cover effect, with previous
> alternatives being removed. It's no argument to say that they would be
> even
> poorer as individuals choosing not to plant coffee, when their former
> subsistence land has been diverted to coffee - their new alternatives
> really
> are coffee or nothing, but those alternatives are not "other things being
> equal".
In India, I have read, the landlord lent out seed and food to
sharecroppers, thereby keeping them perpetually in debt.
The initial introduction of capitalism into semi-feudal situations
doesn't necessarily immediately remove all elements of coercion. In
fact, the capitalists exploit these elements. I think Marx's account
of the enclosure movement and of primitive accumulation might be
relevant here.
Koen Robeys
> >Sorry for terminlogy problems. "Potential employers" indeed is a bit
unlucky
> >if one describes a situation of only one buyer - but then the argument
may
> >be valid in case of sufficiently few buyers.
>
> "Sufficiently few"? Sufficient for what, precisely?
Sufficiently for making sure the price signals being sent to the market
aren't in fact optimally efficient prices (and remember that this by
assumption would have an important negative impact on total wealth
creation). The argument being we love free markets, hence, we must make sure
that the very reason we love it (under my assumption because it sends the
best price-signals to the market) can actually take place.
Now snip a lot. I completely agree with all you wrote. The multinatinal
corporation (MNC) comes in and has a positive (even if small) impact on
wages, as predicted by theory (supply and demand). What we need is even more
MNC's having an even larger positive impact on wages. I also agree on the
positive impact of required investments in plants, and on the positive
impact of the required human capital.
So after some snippings:
> We may stipulate that at any given point in this process wages are, by
> western standards, miserably low. (But also that Nhem Yen now has her
> mosquito net and all her children are alive).
>
> Is this process "exploitation" or is it "progress"?
I would call it "progress". However, the fact of it being "progress" does
not exclude two possibilities. The first possibility is that the situation,
even if an improvement, can still be morally repugnant, or at least
problematic. However, suppose again I make abstraction of this. The second
possibility is that "progress" is still operating inefficiently, as would be
the case under my assumptions.
So "free markets" (in the sense you appear to describe) are able to pull a
population out of poverty. But (for example), the process might also abort
at some point, say as a consequence of the vulnerability resulting from said
inefficiency. Corruption can set in, or all profits can be taken by
nineteenth century style capitalism, or civil war might occur, etc.
More importantly for my points, it could be the case the process is
workable, but takes much time. In fact I guess it is a pretty decent
description of the history of Western development, as we find it in David
Landes' book. So we have the fact it worked once, for us, even though it
took much time. Now the question is, does this mean that it has to work in
the very same way for everybody else, and that it has to take as much time
for everybody else? Can we shrug off the fact that pending the splendid
results, many people are actually living miserably?
Suppose we can. Can we then shrug off the fact that we actually talk about
*very many* people living miserably, implying ample opportunity for becoming
radical and ending up like, say, suicide terrorists? If no, and if working
harder about "my" pre-conditions for free markets to work might actually
work; are these questions, even if posed by a non-economist and no matter
how naively formulated, then not at least interesting questions?
> Given the law of supply and demand in operation in the labor market,
> how do employers are growing in number (due to the arrival of foreign
> firms), and who must compete to employ labor by offering higher wages,
> manage to enforce this "slave remunueration" for all their workers?
That should not be that difficult. There may be a cartel. Or growing numbers
of employers might still result in numbers that are small as compared to
numbers of potential employees. Or the process which admittedly can work
(IMHO) can just work to slowly to prevent serious trouble before the desired
results obtain.
Cheers, Koen
Koen Robeys
> > Let's call the means to make sure the
> > slave doesn't die of starvation his "remuneration", and there you have
it.
>
> Redefining words to mean something completely different is hardly a valid
> method of argument.
Sorry, no, the point is still *exactly* the same. If my assumptions are
acceptable, then situations can occur where people get paid something which
is less than what they would get paid if they had more alternatives, while
it can still be claimed they "choose" to accept the deal. More importantly,
this means a situation could occur where the price resulting from a
so-called "free market" is not sending out the most efficient signal to the
market. And all this doesn't change an iota if I called the "something which
is less than" a "slave-remuneration".
> BTW, where will I find human beings who are in such dire straits that they
> have absolutely no alternative but starvation?
Other examples of something of which I cannot immediately point to concrete
examples include black holes, protons and biological evolution.
Nevertheless, these might well refer to real phenomena.
Cheers, Koen
Christopher Auld
>First, "corrupt" happens.
Yes, but generally we would expect the victims of "corrupt"
to benefit, not be harmed, by policies which increase the
"size of the pie."
>Second, it also applies in cases that aren't corrupt. Absentee landlordism
>isn't corrupt.
Yes, and again: Generally, it is not the case that increasing
the output of the system will manifest itself as lower standards
of living for workers. The situation you're suggesting is
typical is actually unlikely.
> In fact, the presence of a reserve currency may tend to
>produce it, hidden under apparent capital flows that are merely flows of fiat
>money.
You will have to explain what this means.
>Fourth, it even happens transitionally when everyone is capable of
>benefitting - a simple case of the spiderweb theorem, when people commit to
>growing coffee based on previous season's pricing.
The spiderweb model (I have never seen it referred to as a "theorem")
went out the door of economic theory about 40 years ago. And even
under its predictions, it isn't clear that workers are better off
under enforced subsistence farming than under oscillating prices
of a "cash" crop.
>Fifth, there can be other market imperfections around producing much
>the same
True. Whether increased trade will interact with such imperfections
in such a way to make most people worse off is certainly unclear.
>I'm not trying to present a general case anyway - just to show that examples
>exist, and that we should look out for them rather than get all dismissive
>and refuse to look into cases. PML.
I agree. The flip side of that coin is that the overwhelming
evidence that shutting down developing economies to trade
generally does more harm than good should not be dismissed
as apologism for Nike.
susupply
> "susupply" <susu...@mindspring.com> wrote
> > Redefining words to mean something completely different is hardly a
valid
> > method of argument.
>
> Sorry, no, the point is still *exactly* the same.
Well your point may be the same, but it is incorrect. You are treating
unlike things as though they were alike. Would you call the expenses I
incur to operate and maintain my forklift (propane, oil changes etc.)
remuneration?
And the point you'd argued: "situations where we save somene's life by
paying him a slave-remuneration, do have a negative impact on the total
wealth creation", doesn't make sense regardless of your redefinition. It's
obviously a positive impact--dead man produce how much?
> If my assumptions are
> acceptable, then situations can occur where people get paid something
which
> is less than what they would get paid if they had more alternatives,
Obviously, but you don't need your assumptions for this to occur.
>....while
> it can still be claimed they "choose" to accept the deal. More
importantly,
> this means a situation could occur where the price resulting from a
> so-called "free market" is not sending out the most efficient signal to
the
> market. And all this doesn't change an iota if I called the "something
which
> is less than" a "slave-remuneration".
As I said above, obviously. But, it's a mystery what you think you have
discovered. That markets aren't perfect? Pray tell, what is?
> > BTW, where will I find human beings who are in such dire straits that
they
> > have absolutely no alternative but starvation?
>
> Other examples of something of which I cannot immediately point to
concrete
> examples include black holes, protons and biological evolution.
> Nevertheless, these might well refer to real phenomena.
That's what I thought, you can point to no such human beings.
Patrick
Koen Robeys
> > > Redefining words to mean something completely different is hardly a
> > > valid method of argument.
> >
> > Sorry, no, the point is still *exactly* the same.
>
> Well your point may be the same, but it is incorrect.
Well, then at least we are making progrees, since if it is wrong, it is at
least an argument. That was what you denied last time.
> You are treating
> unlike things as though they were alike. Would you call the expenses I
> incur to operate and maintain my forklift (propane, oil changes etc.)
> remuneration?
I don't really think this relates to my point, which is some situations we
might call "free market" do not lead to efficient price signals.
> And the point you'd argued: "situations where we save somene's life by
> paying him a slave-remuneration, do have a negative impact on the total
> wealth creation", doesn't make sense regardless of your redefinition.
It's
> obviously a positive impact--dead man produce how much?
The latter is irrelevant. I explicitly showed three assumptions, which lead
to the conclusion that a given situation, possibly called "free market",
results in a suboptimal wealth creation. Of course my asumptions might be
wrong, but that doesn't follow from the fact that dead men produce even
less.
(snip, mainly own text)
> > this means a situation could occur where the price resulting from a
> > so-called "free market" is not sending out the most efficient signal to
> > the market. And all this doesn't change an iota if I called the
"something
> > which is less than" a "slave-remuneration".
>
> As I said above, obviously.
As I said, this is progress, because previously the same stuff was "hardly a
valid method of argument". Now, at least, it became "obvious". More
interesting is the following question:
> But, it's a mystery what you think you have
> discovered. That markets aren't perfect? Pray tell, what is?
To the contrary, I think markets are the best approach to anything deserving
the term "perfect" we have. But you know, many people, you appear to be one
of them, seem to think something like "fine, we now have the best system,
all we need is sit and wait till the desired effects arrive". Such people
sometimes appear to hide behind very strong arguments, all the stronger
because they are *true*. Yes, the presence of the MNC tends to have a
positive effect, I denied it at no point. However, my question was not
whether we conceive of worse situations, my question was if we can do
better.
Now if I thought to have *discovered* anything at all, it would be
philosophical rather than economical - and please note that I never
pretended to have "dicovered" anything, just wondering. However, let's call
it my "discovery". This "discovery" would then be that, once we have some
agreement on the importance of markets, we find we need something more. Even
better, the "something more" would be not really different from all kind of
topics the harshest criticists of globalization also raise.
Now isn't that surprising?
> > > BTW, where will I find human beings who are in such dire straits that
> > >they have absolutely no alternative but starvation?
> >
> > Other examples of something of which I cannot immediately point to
> > concrete examples include black holes, protons and biological evolution.
> > Nevertheless, these might well refer to real phenomena.
>
> That's what I thought, you can point to no such human beings.
And as I suggested, there is not the slightest reason why this should be
important. It's called "abstraction".
Cheers, Koen
David Lloyd-Jones
> OK, another try to rephrase. You did object to slave labor for ethical
> reasons. Now we consider an example of slave labor, where the
circumstances
> are such that eliminating the slave labor leads to the former slaves
> starving to death.
>
> Would this justify slave labor after all, or would we agree we should
still
> strive to eliminate slave labor, implying we would also have to agree
agree
> this in itself is not good enough. And assuming we would agree we want to
> eliminate slave labor *plus* something else, would an analogous argument
not
> be applicable to my example?
Of course this artificial argument does not justify slavery. Its minor
premise -- unstated, as is usually the case in bogus arguments like this --
is that there is a justifiable positiion in which one can allow a non-slave
to starve to death.
-dlj.
susupply
> "susupply" <susu...@mindspring.com> wrote
>
> > > > Redefining words to mean something completely different is hardly a
> > > > valid method of argument.
> > >
> > > Sorry, no, the point is still *exactly* the same.
> >
> > Well your point may be the same, but it is incorrect.
>
> Well, then at least we are making progrees, since if it is wrong, it is at
> least an argument. That was what you denied last time.
No, I objected only to the illegitimate method of redefining words to mean
their opposite. I didn't mention that the argument was also wrong.
Thinking that you'd see it when you discarded the oxymoron
"slave-remuneration".
>
> > You are treating
> > unlike things as though they were alike. Would you call the expenses I
> > incur to operate and maintain my forklift (propane, oil changes etc.)
> > remuneration?
>
> I don't really think this relates to my point, which is some situations we
> might call "free market" do not lead to efficient price signals.
It goes to your point about paying just enough to keep the slave alive. You
seem to think the "slave" has about as much ability to think and act as does
my forklift, which sits there doing nothing until I manipulate it.
Satisfied with what attention I bestow on it.
> > And the point you'd argued: "situations where we save somene's life by
> > paying him a slave-remuneration, do have a negative impact on the total
> > wealth creation", doesn't make sense regardless of your redefinition.
> It's
> > obviously a positive impact--dead man produce how much?
>
> The latter is irrelevant.
That the dead don't produce but the living can, is irrelevant to whether the
impact of life is negative or positive???
> I explicitly showed three assumptions, which lead
> to the conclusion that a given situation, possibly called "free market",
> results in a suboptimal wealth creation. Of course my asumptions might be
> wrong, but that doesn't follow from the fact that dead men produce even
> less.
You explicitly said; "do have a negative impact ". Clearly this is not
true.
[snip]
> > But, it's a mystery what you think you have
> > discovered. That markets aren't perfect? Pray tell, what is?
>
> To the contrary, I think markets are the best approach to anything
deserving
> the term "perfect" we have. But you know, many people, you appear to be
one
> of them, seem to think something like "fine, we now have the best system,
> all we need is sit and wait till the desired effects arrive".
Taking you literally; if we have the BEST system already, doing anything to
alter it will be less effective.
> Such people
> sometimes appear to hide behind very strong arguments, all the stronger
> because they are *true*. Yes, the presence of the MNC tends to have a
> positive effect, I denied it at no point. However, my question was not
> whether we conceive of worse situations, my question was if we can do
> better.
The relevant question is, can we do better than the best?
> Now if I thought to have *discovered* anything at all, it would be
> philosophical rather than economical - and please note that I never
> pretended to have "dicovered" anything, just wondering. However, let's
call
> it my "discovery". This "discovery" would then be that, once we have some
> agreement on the importance of markets, we find we need something more.
Even
> better, the "something more" would be not really different from all kind
of
> topics the harshest criticists of globalization also raise.
>
> Now isn't that surprising?
I have no idea what the above means.
> > > > BTW, where will I find human beings who are in such dire straits
that
> > > >they have absolutely no alternative but starvation?
> > >
> > > Other examples of something of which I cannot immediately point to
> > > concrete examples include black holes, protons and biological
evolution.
> > > Nevertheless, these might well refer to real phenomena.
> >
> > That's what I thought, you can point to no such human beings.
>
> And as I suggested, there is not the slightest reason why this should be
> important. It's called "abstraction".
Not even "the slightest reason"?
Moving away from abstraction, I can tell you where there are people starving
today: North Korea. And it's not because they have free markets.
Patrick
susupply
"Robert Vienneau" <rv...@see.sig.com> wrote in message
news:rvien-3E48E8....@news.dreamscape.com...
> In India, I have read, the landlord lent out seed and food to
> sharecroppers, thereby keeping them perpetually in debt.
Now there is a really great example of the harm done to the poor by
restrictions on economic freedom. India under the License Raj! Thanks,
Robert.
Koen Robeys
> > > > > Redefining words to mean something completely different is hardly
a
> > > > > valid method of argument.
> > > >
> > > > Sorry, no, the point is still *exactly* the same.
> > >
> > > Well your point may be the same, but it is incorrect.
> >
> > Well, then at least we are making progrees, since if it is wrong, it is
at
> > least an argument. That was what you denied last time.
>
> No, I objected only to the illegitimate method of redefining words to mean
> their opposite. I didn't mention that the argument was also wrong.
> Thinking that you'd see it when you discarded the oxymoron
> "slave-remuneration".
Well, first you objected to the term "slave-remuneration"; because it was
contradictory. When I point out that you can give any other name you like to
the phenomenon I described, you claimed that this was, QUOTE, "Redefining
words to mean something completely different", UNQUOTE. But this simply is
not true. The point is the same, and the meaning of the word is the same as
well. The only reasonable objection you made was a purely terminological
one. It is possible in English "slave-remuneration" is a contradiction. In
that case, I said, call it "the means to make sure the slave doesn't die of
starvation" and what I am saying is still *exactly* the same. Not "the
opposite", not even if you repeat it even once more, but *the same*.
(snip)
> > I don't really think this relates to my point, which is some situations
we
> > might call "free market" do not lead to efficient price signals.
>
> It goes to your point about paying just enough to keep the slave alive.
You
> seem to think the "slave" has about as much ability to think and act as
does
> my forklift, which sits there doing nothing until I manipulate it.
> Satisfied with what attention I bestow on it.
I honestly don't know why you would deduce such things from what I said. It
looks like you are criticising things you only attribute to me. And
therefore, "I don't really think this relates to my point, which is some
situations we
might call "free market" do not lead to efficient price signals."
> > The latter is irrelevant.
>
> That the dead don't produce but the living can, is irrelevant to whether
the
> impact of life is negative or positive???
*Of course* it is irrelevant. As I said in the previous post, my question is
not whether we can find worse situations, my question is whether we can do
better. So you have "proven", or better, I have never denied, the situation
could indeed be worse. But no matter how many question marks you add, this
does not address the question whether we can improve.
> > I explicitly showed three assumptions, which lead
> > to the conclusion that a given situation, possibly called "free market",
> > results in a suboptimal wealth creation. Of course my asumptions might
be
> > wrong, but that doesn't follow from the fact that dead men produce even
> > less.
>
> You explicitly said; "do have a negative impact ". Clearly this is not
> true.
Yes, given the assumptions, which I made explicit, the situation as I
described has a negative impact on total wealth production. You may simply
state "this is not true", but if you expect not to receive a shrug as a
reaction, you will have to show either my conclusion does not follow from
the assumptions, or you must show one of the assumptions is invalid.
(snip)
> Taking you literally; if we have the BEST system already, doing anything
to
> alter it will be less effective.
AND:
> The relevant question is, can we do better than the best?
Let me try to help you to find this out for yourself. Between (say) 1650 and
1900, Newtons gravity theory was by far the best, and in fact about the
only, decent theory about gravity, cosmology and you name it. Do you think
that questions like "can we do better than the best" are sufficient to prove
in 2002 Newtons theory will still be the best? If no, where do you think the
sophism is?
(snip my text)
> I have no idea what the above means.
If you say so.
(snip)
> Moving away from abstraction, I can tell you where there are people
starving
> today: North Korea. And it's not because they have free markets.
And since I didn't say so, I'd suggest you direct this kind of remark to
those people who *do* say so. For your info, I explicitly said the markets
were the best we have, you even built a sophism on it. So how exactly did
you manage to make it appear as if I believe some starving people are
starving because they have free markets?
Ciaoooooooo, Koen
David Lloyd-Jones
> >"susupply" <susu...@mindspring.com> wrote, (or is it quoted?):
> >> Again, you have created an oxymoron. "Slave" and "remuneration" are
> >> contradictory by definition.
Just to remind everybody that Granny Grammar is still alive, "oxymoron" does
*not* mean contradiction.
Oxymoron is to contradiction as synthesis is to antithesis.
If you can't understand that, piss off and don't try to Use Big Words.
-dlj.
Prune Faced Grammarian
Grinch
<koen.ro...@skynet.be> wrote:
>"Grinch" <oldn...@mindspring.com> wrote
>
>> >Sorry for terminlogy problems. "Potential employers" indeed is a bit
>unlucky
>> >if one describes a situation of only one buyer - but then the argument
>may
>> >be valid in case of sufficiently few buyers.
>>
>> "Sufficiently few"? Sufficient for what, precisely?
>
>Sufficiently for making sure the price signals being sent to the market
>aren't in fact optimally efficient prices (and remember that this by
>assumption would have an important negative impact on total wealth
>creation).
I don't understand what this means at all. Signals sent "to" the
market?
Below you suggest that a "sufficiently small" number of employers
could form a cartel and agree among themselves to avoid bidding
against each other for labor, to keep wages down. I'll take it you
mean that.
But cartels exist within industries, not across populations. And there
are no industries in pre-industrialized societies.
In a subsistence society every person who looks after him/herself
effectively is an "employer" setting his/her own wage -- like Nhem Yen
collecting firewood.
So you can hardly talk of having an employer's cartel that covers an
entire regional population -- say, thousands of peasants in Cambodia
-- so a new employer from abroad can join the cartel to avoid bidding
up wages. All those people are self-supporting or members of very
small, pre-industrial enterprises. And the new employer must offer a
wage that tops their previous earnings to attract the workers it
needs.
Could subsequent employers arriving from outside try to form a cartel
with the first one to try to at least prevent raising wages from that
point? Well, they could *try*, but...
. The growing number of firms are going to have to pay a higher
wage to attract a growing number of qualified workers in any event,
and
. Every member of the cartel will have an incentive to cheat by
offering just a little more than the agreed wage to hire away the best
workers from the other guy.
Theory and experience agree that cartels don't work unless they
are legally enforceable -- see the comment on legal systems below.
>The argument being we love free markets, hence, we must make sure
>that the very reason we love it (under my assumption because it sends the
>best price-signals to the market) can actually take place.
Yes. That's why we also need law and order, an honest legal system
that is affordable to use, property rights, politicians to who don't
extort from the economy, etc. (And no law that legalizes slavery.)
Employers don't want workers who are "low cost" but workers who are
productive relative to wage cost. If businesses just wanted cheap
workers they'd all open factories in Haiti. But they will gladly
locate elsewhere to pay triple the Hatian wage rate to workers who are
more than triple as productive as Hatian workers
The items mentioned above plus infrastructure external to the business
such as reliable roads, communication systems, finance systems, etc.,
all increase productivity relative to wage cost, while the lack of
same reduces productivity.
Of course, the presence of all these things is relative in developing
countries -- but their relative presence counts for a lot.
Which is why U.S. businesses will go 10,000 miles to invest in Asia
before they'll invest just off-shore in Haiti.
>Now snip a lot. I completely agree with all you wrote. The multinatinal
>corporation (MNC) comes in and has a positive (even if small) impact on
>wages, as predicted by theory (supply and demand). What we need is even more
>MNC's having an even larger positive impact on wages. I also agree on the
>positive impact of required investments in plants, and on the positive
>impact of the required human capital.
Another feedback point is that when businesses start getting
established, they and their employees begin to politically influence
local governments to straighten out property rights and improve the
legal system, roads, phone lines, and other factors of importance to
them. Out of self-interest, of course. But this makes the location
more attractive to other business entrants (even in other industries)
who can benefit from the same improved rules and infrastructure -- and
further bid up wages when they do.
The point about human capital is worth emphasizing because it is often
overlooked, but there are studies indicating it is the most important
factor in the whole process.
Physical and financial capital is always limited and costly. But human
capital -- knowledge, skills, and attitudes first brought in from
abroad -- can be multiply and spread around a population at *no cost*,
going person-to-person just because they take to it. If that happens,
the population can quickly become very attractive to the providers of
physical and financial capital -- both domestic and foreign. You get
"take off".
>So after some snippings:
>
>> We may stipulate that at any given point in this process wages are, by
>> western standards, miserably low. (But also that Nhem Yen now has her
>> mosquito net and all her children are alive).
>>
>> Is this process "exploitation" or is it "progress"?
>
>I would call it "progress". However, the fact of it being "progress" does
>not exclude two possibilities. The first possibility is that the situation,
>even if an improvement, can still be morally repugnant,
Well, I can think of a lot of things that might be "morally repugnant"
about such situations, but the existence of subsistence agriculture
and subsistence wages per se is not one of them.
After all, this has been the situation of all humanity throughout all
history until the Industrial Revolution -- subsistence existence with
a life expectancy of 25.
And that includes right here in the U.S., though not many of us
remember it today. We built up our wealth and human capital and life
expectancies the same way third-world nations are now --- with
grinding agricultural labor, sweatshops, factories financed by
foreigners (largely the British) employing workers for 6-day, 70-hour
weeks...
The rich generation of today just doesn't remember it. We remember
ourselves as always being richer than anyone else -- and since we
started through this process before most everyone else, and the
products of our sweatshops and factories *did* make us richer than
everyone else, we *were*.
But a universal starting condition can hardly be "morally repugnant".
Neither can the great increase in wealth and wages attained by the
West since the Industrial Revolution be "morally repugnant", since if
one values human life then increasing life expectancy from 25 to 80
and improving quality of life for its whole term must be a good thing,
not a bad one.
Neither can the great disparity of wealth between the West and the
part of the world that remains near the original subsistence position
be "morally repugnant", per se, because of the simple fact that wealth
creation had to start *somewhere*.
The methods of how to do it necessarily had to be hit upon
someplace -- not, via magic wand, everyplace simultaneously. And
then, where they were, sufficient capital and knowledge had to be
built up to spread the processes of such wealth creation to all
foreign lands *in spite* of the resistance of their own domestic
pre-industrial institutions and social structures. Which requires
quite a build-up of wealth and human capital.
A necessary condition, such as this inequality of wealth, cannot
be "morally repugnant" -- so long as it is a necessary part of the
*process* of increasing wealth in the rest of the world.
What *is* morally repugnant is all self-interested actions by human
beings to delay or defeat this process.
These, alas, are limitless in number.
At one end of the spectrum you have political dictators like say,
Mugabe, who plunder and extort their own populations (and thus make
any kind of foreign investment or economic development a non-issue).
At the other you have do-gooding Americans with such delicate
sensibilities that the sight of poor workers in an Asian sweatshop so
pains them that they feel compelled to force the sweatshop to close
and its workers to go back collecting firewood in the jungle -- where
the even *worse* poverty of the former workers can't be seen, and so
offers no offense to their delicate sensibilities at all.
Everything on that spectrum is morally repugnant.
>or at least
>problematic. However, suppose again I make abstraction of this. The second
>possibility is that "progress" is still operating inefficiently, as would be
>the case under my assumptions.
>
>So "free markets" (in the sense you appear to describe) are able to pull a
>population out of poverty. But (for example), the process might also abort
>at some point, say as a consequence of the vulnerability resulting from said
>inefficiency. Corruption can set in, or all profits can be taken by
>nineteenth century style capitalism, or civil war might occur, etc.
19th-century style capitalism just about doubled life expectancy in
the U.S. for the working masses, and certainly set up their children's
20th century wealth.
But as for the other items I agree with you.
>More importantly for my points, it could be the case the process is
>workable, but takes much time. In fact I guess it is a pretty decent
>description of the history of Western development, as we find it in David
>Landes' book. So we have the fact it worked once, for us, even though it
>took much time. Now the question is, does this mean that it has to work in
>the very same way for everybody else, and that it has to take as much time
>for everybody else? Can we shrug off the fact that pending the splendid
>results, many people are actually living miserably?
Well, how do you shorten the time involved?
Here's the *real* challenge: Wages follow labor productivity.
Employers *won't* pay more than the value that workers produce, or
obviously they'd lose money. Employers *will* bid up wages to
approach the level of worker productivity in any kind of competitive
market, because if one doesn't another can pocket a profit by doing
so.
If you look at the International data at the www.bls.gov web site you
will find that wages and productivity actually *do* march along
together, in spite of all conspiracy theories to the opposite.
So that's the task -- to increase third-world labor productivity as
quickly as possible. Nothing but that will do the trick.
Labor productivity depends on workers' efforts and skill, the amount
of capital they have to use (a worker with a steam shovel is more
productive than one with a hand shovel trying to do the same thing),
and all the things mentioned at the start of this post: honest
government, effective legal systems, property rights, infrastructure,
etc.
So .. obviously ... there is just no way that the *billions* of people
now starting from a subsistence agriculture position where, say,
gathering firewood is a common living, are going attain anything like
modern western wealth within their lifetimes or ours.
They aren't going to attain the knowledge abd skills needed to
raise their personal productivity to that level, and their nations
aren't going to acquire the capital, legal systems, modern governance,
infrastructure, etc.
Thus, we are talking about a *process* that is multi-generational.
The best we can do is get it started as soon as possible.
But we must not denigrate apparently small-looking starts.
Remember the marginal impact of additional money:
If a modern westerner gets an extra $500 in wages, after taxes it
may be the difference between buying a VCR or a TiVo.
If Nhem Yen gets an extra $5 in wages, it saves the lives of her
children.
Keep that scale of benefits in mind.
The last time I looked, a few years ago, the leading cause of death
in the world was children's diarrhea, caused by drinking contaminated
water. The life-saving remedy is a 25 cent packet of salts. But most
people in the world don't have them. That's all the money that is
needed to save *many, many* lives.
[ I once suggested to friends that they wear brown-colored ribbons,
but they didn't find fatal childhood diarrhea to be an attractive
cause.]
So a *little* increase in wages by your or my standards can create a
BIG increase in human welfare for billions of people.
Keep that in mind, lest you feel defeatist about the time scale
required for third-world economic growth.
How fast can the poorest third-world nations increase their income and
wealth? Again, if you look at the BLS data, a bunch of Asian nations
have been growing their economies and wage rates a heck of a lot
faster than the U.S. did. In only 30 or 40 years they got rid of
their really worst poverty and developed a recognizable middle class.
Of course, those were "top achievers".
How important is trade, "globalization" to the process?
On the largest scale, here's some data:
The World Bank recently did a study and found that:
[] Poor nations with population totaling 3 billion have increased
their participation in global trade over the last decade, and these
have attained average 5% GDP growth per capita, and "have experienced
large-scale poverty reduction."
[] Developed "rich" nations achieved 2% growth per capita over the
period.
[] Poor nations with population of 2 billion live in countries that
have experienced *declining* participation in international trade.
Their growth has stagnated and poverty in them is increasing.
So, there's good news and bad news:
[] The 5% percent real growth per head for poor countries that are
increasingly participating in international trade is about double the
US's historic long-term growth rate.
It's pretty good. Over a 60-year life span, that's a 16-fold
increase in wealth. That's real progress that people will see in their
lives.
[] For fun, assuming a sustained 3% faster growth rate, one could
compute how long it would take a nation like China or India to catch
up to the US. Still quite a while.
[] Alas, globalization isn't universal -- and two billion people who
aren't participating in it are actually falling further backward.
That's an ominous, systemic split in the world.
>Suppose we can. Can we then shrug off the fact that we actually talk about
>*very many* people living miserably, implying ample opportunity for becoming
>radical and ending up like, say, suicide terrorists? If no, and if working
>harder about "my" pre-conditions for free markets to work might actually
>work; are these questions, even if posed by a non-economist and no matter
>how naively formulated, then not at least interesting questions?
If they weren't interesting I wouldn't have written so darn much.
Just remember, this is the sort of policy issue were good intentions
aren't enough, and can really make things worse.
People who are "shocked" to discover great and widespread poverty
in the world aren't showing moral sensitivity, they are showing deep
ignorance of human history. Protesting to banish a little bit of the
poverty from sight doesn't help any, at best.
The poor countries that are increasingly participating in the world
are doing OK. How much growth better than 5% per head -- doubling
every 15 years -- can be realistic for the long term? They are
improving lives recognizably, that's all one can hope for.
The challenge is, how to improve labor productivity fastest in the
poorest, falling behind countries with 2 billion people? That's a lot
of people.
Send in the marines to shoot Mugabe? Politically unacceptable.
There are a whole lot of factors involved, and every country is very
different. What can one do, in *reality*?
Robert Vienneau
<koen.ro...@skynet.be> wrote:
> Supply and demand lead to the most efficient pricing mechanism. (AFAIK
> unproven)
I don't know what Mr. Robeys means by "supply", "demand", and
"efficiency" here. These are all terms of art in neoclassical
economic theory. In particular, "efficiency" has a narrow
technical meaning that I think of little interest.
As far as I'm concerned, both theory and history strongly
suggest that a society in which provisioning is organized
solely around unregulated markets will fail to deliver
the goods to most members of that society.
I think Mr. Robeys should find of interest this description of
exploitation:
<http://homepage.newschool.edu/~AShaikh/pal5.pdf>
--
Peter Lawrence
Nothing artificial about it, just not something of immediate and present
application. I can look up the reference if you like - a book about West
Africa called "ladder of bones" - but that tells what happened to slavers who
got caught. They were put ashore to starve - marooned, just like runaway
slaves who got called maroons - as the patrol ships couldn't keep them on
board safely.
The question ceases to be artificial, especially when you remember the
alternative to slavery or massacre was always ordinary release, and that
could backfire as at the Caudine Forks.
Now you can ask the ethical question, and reflect on the fact that there is a
lesser evil issue here. Is it more ethical to feed or to strand slavers who
might mutiny and revert to the slave trade? PML.
susupply
"Grinch" <oldn...@mindspring.com>
amidst one of the most sensible posts seen on sci.econ in quite awhile,
wrote in message news:fi8u6ussr19jkbesc...@4ax.com...
> So you can hardly talk of having an employer's cartel that covers an
> entire regional population -- say, thousands of peasants in Cambodia
> -- so a new employer from abroad can join the cartel to avoid bidding
> up wages. All those people are self-supporting or members of very
> small, pre-industrial enterprises. And the new employer must offer a
> wage that tops their previous earnings to attract the workers it
> needs.
And let us not forget that as Nike and other "exploiters" arrive on the
scene to entice the natives to leave subsistence agriculture for sneaker
plants, this will likely have the effect of increasing the incomes of those
who remain in agriculture.
Patrick
susupply
"David Lloyd-Jones" <dav...@sympatico.ca> wrote in message
news:a4n3du$1dhb3$1...@ID-99058.news.dfncis.de...
> Just to remind everybody that Granny Grammar is still alive, "oxymoron"
does
> *not* mean contradiction.
>
> Oxymoron is to contradiction as synthesis is to antithesis.
It seems to be all Greek to you, David. "anti" means against, while "syn"
means same or similar. Antithesis means direct contrast or opposition.
An oxymoron is defined as ANTI-thetically incongruous terms that are
combined. Not SYN-thetically congruous.
susupply
"Koen Robeys" <koen.ro...@skynet.be>
who seems to have separated himself by the use of a common language,
English,
wrote in message news:3c6ee554$0$33514$ba62...@news.skynet.be...
> Well, first you objected to the term "slave-remuneration"; because it was
> contradictory. When I point out that you can give any other name you like
to
> the phenomenon I described, you claimed that this was, QUOTE, "Redefining
> words to mean something completely different", UNQUOTE. But this simply is
> not true. The point is the same, and the meaning of the word is the same
as
> well. The only reasonable objection you made was a purely terminological
> one. It is possible in English "slave-remuneration" is a contradiction. In
> that case, I said, call it "the means to make sure the slave doesn't die
of
> starvation" and what I am saying is still *exactly* the same. Not "the
> opposite", not even if you repeat it even once more, but *the same*.
As my friends Stan Liebowitz and Steve Margolis have put it; when unlike
things are treated as though they are alike, error is assured. Slavery is
involuntary, free markets by definition are not. Your assumption is
invalid.
[snip]
> > That the dead don't produce but the living can, is irrelevant to whether
> the
> > impact of life is negative or positive???
>
> *Of course* it is irrelevant. As I said in the previous post, my question
is
> not whether we can find worse situations, my question is whether we can do
> better. So you have "proven", or better, I have never denied, the
situation
> could indeed be worse. But no matter how many question marks you add, this
> does not address the question whether we can improve.
Koen, you specifically said the free market situation WAS WORSE I.e. it
had "a negative impact".
> > > I explicitly showed three assumptions, which lead
> > > to the conclusion that a given situation, possibly called "free
market",
> > > results in a suboptimal wealth creation. Of course my asumptions might
> be
> > > wrong, but that doesn't follow from the fact that dead men produce
even
> > > less.
> >
> > You explicitly said; "do have a negative impact ". Clearly this is not
> > true.
>
> Yes, given the assumptions, which I made explicit, the situation as I
> described has a negative impact on total wealth production.
Please explain how you can conclude that a contractual arrangement that
saves someone's life has; "a negative impact on total wealth production".
> You may simply
> state "this is not true", but if you expect not to receive a shrug as a
> reaction, you will have to show either my conclusion does not follow from
> the assumptions, or you must show one of the assumptions is invalid.
There appears to be exactly zero logical connection between your three
assumptions and your conclusion. Let's take another look at how we got to
this point, the assumptions are:
> 1. Supply and demand lead to the most efficient pricing mechanism. (AFAIK
> unproven)
[Established by empirical evidence to be usually true, and probably
overwhelmingly so]
> 2. In cases where factors like "monopsomy" apply, supply and demand by
> themselves are insufficient to result in this most efficient mechanism
> (apparently acceptable)
[Not necessarily true at all, the monopsonist may have economies of scale
that make him the most efficient employer of labor]
> 3. A more efficient pricing mechanism is not only important for academical
> reasons, but does have an important impact on wealth creation. (AFAIK
> unproven)
[in fact, almost certainly true most of the time]
And the conclusion is:
> Now if these are reasonable, situations where we save somene's life by
> paying him a slave-remuneration, do have a negative impact on the total
> wealth creation
A howling non-sequitur. As well as containing the inherently contradictory,
internally antithetical term, "slave-remuneration".
> (snip)
>
> > Taking you literally; if we have the BEST system already, doing anything
> to
> > alter it will be less effective.
>
> AND:
>
> > The relevant question is, can we do better than the best?
>
> Let me try to help you to find this out for yourself. Between (say) 1650
and
> 1900, Newtons gravity theory was by far the best,
Are you expecting me to believe you can, ALTER, the cosmos?
> and in fact about the
> only, decent theory about gravity, cosmology and you name it. Do you think
> that questions like "can we do better than the best" are sufficient to
prove
> in 2002 Newtons theory will still be the best? If no, where do you think
the
> sophism is?
In your analogy.
"We" can ALTER man made arrangements such as political and economic affairs.
We can't do that to the paths the planets take around the sun. All you can
do is improve your understanding of the system. Which would be a good idea
for you regarding economics, too.
> > Moving away from abstraction, I can tell you where there are people
> starving
> > today: North Korea. And it's not because they have free markets.
>
> And since I didn't say so, I'd suggest you direct this kind of remark to
> those people who *do* say so. For your info, I explicitly said the markets
> were the best we have, you even built a sophism on it. So how exactly did
> you manage to make it appear as if I believe some starving people are
> starving because they have free markets?
Re-read what I said, it was a statement of reality, not of what you believed
about North Korea. But it ought to be sobering to recognize that the places
where people actually are starving are where they are effectively prohibited
from using free markets.
Grinch added Zimbabwe. Robert, amusingly, threw in India (where the
restrictions were far less totalitarian, but still had a serious "negative
impact on the total wealth creation").
Before we start bothering with "improving" the functioning of markets,
shouldn't we be more concerned with establishing them?
Patrick
susupply
"Robert Vienneau" <rv...@see.sig.com>
putting his empirical toe in the water,
wrote in message news:rvien-692692....@news.dreamscape.com...
> As far as I'm concerned, both theory and history strongly
> suggest that a society in which provisioning is organized
> solely around unregulated markets will fail to deliver
> the goods to most members of that society.
What is the "history", that supports this claim?
Koen Robeys
> I think Mr. Robeys should find of interest this description of
> exploitation:
>
> <http://homepage.newschool.edu/~AShaikh/pal5.pdf>
Just give me a few days, will you? I appreciate this link, I appreciate your
other remarks in this post, I appreciated a little less sneers about my lack
of mathematical education and experience (which is a historical
contingency), but hey, this is usenet.
At first sight, I could have some problems with the text you point me to.
Hopefully you don't mind if I first think, and then complain.
Cheers, Koen
Koen Robeys
> >Sufficiently for making sure the price signals being sent to the market
> >aren't in fact optimally efficient prices (and remember that this by
> >assumption would have an important negative impact on total wealth
> >creation).
>
> I don't understand what this means at all. Signals sent "to" the
> market?
AFAIK, my "ideas" about these are pretty basic. So if the price for, say,
grain is considerably below what many people would like to pay for it, then
it would be a good idea to allow the price to go up, in order to "send a
signal" "to" the market that increased production is in order. And should
some state, always in name of the people, decree the price stays where it
is, you'll see grain producers either hide their supplies from being taken
away, or rather feed it to their animals, or even just stop working hard to
produce it. Higher prices, IMHO, will send a signal "to" them, a signal to
stop this behavior.
Snip: a cartel was only one example of an answer to the question how many
employers could manage to pay peanuts to their slaves, even if they now have
to compete whith each other. I don't think your remarks on cartels are
wrong, but I think they do not prevent cartels to exist temporarily, nor
other ways for employers to pay very low wages to exist. In fact, the
alternative view seems to me to be only an assumption. Once competition is
present, all wages paid are "by definition" correct from any point of view,
be it moral or whatever. In fact, I am questioning that assumption
(So I have in fact no quarrel with the snipped remarks.)
> >The argument being we love free markets, hence, we must make sure
> >that the very reason we love it (under my assumption because it sends the
> >best price-signals to the market) can actually take place.
>
> Yes. That's why we also need law and order, an honest legal system
> that is affordable to use, property rights, politicians to who don't
> extort from the economy, etc. (And no law that legalizes slavery.)
So broadly, we have agreement here. A remaining point is on wages and what
they are based on:
> Employers don't want workers who are "low cost" but workers who are
> productive relative to wage cost.
I again snip a lot of text because I agree. I also agree on what you wrote
here, but I need it somewhat further.
> >> Is this process "exploitation" or is it "progress"?
> >
> >I would call it "progress". However, the fact of it being "progress" does
> >not exclude two possibilities. The first possibility is that the
situation,
> >even if an improvement, can still be morally repugnant,
>
> Well, I can think of a lot of things that might be "morally repugnant"
> about such situations, but the existence of subsistence agriculture
> and subsistence wages per se is not one of them.
I just go on snipping, because there is nothing I disagree with. I fully
realize ideological or just superficial thinking may cause more harm and
good, and this in the situation where the very last thing we need is more
harm. Let's go the the point...
> But a universal starting condition can hardly be "morally repugnant".
True, but what *can* be morally repugnant "or at least problematic" is that
we hide behind this truth in order to accept fatalistically this "universal
starting condition" IF (and I claimed at no point this if is proven, it is
just what I am questining here) we could actually do better.
So again I don't deny your claim the West extracted itself out of poverty by
the process we agree on, but I don't think it follows that everybody will
have to follow the same way, and bad luck if it is long, painfull, etc. Much
of what I now snip is in fact in Landes' book of the title of this thread.
Further snippings. (Still , I always feel like listening when the criticists
object that often "we" ourselves put dictators in place in order to extract
all the more easily labor or commodities from their countries. Now I admit
all I heard till now was so weak I found myself in long-drawn flame wars for
having said so. I have always thought this is just because the criticists I
know are weak, and I often tried to invite them to make their points
stronger, because I still believe they could. However, my very questioning
them earned me the title "paid agent of capitalism". This is not unsimilar
to the way some people here appear to think they have to convince me of
market-thinking, because I question some assumptions.)
> >So "free markets" (in the sense you appear to describe) are able to pull
a
> >population out of poverty. But (for example), the process might also
abort
> >at some point, say as a consequence of the vulnerability resulting from
said
> >inefficiency. Corruption can set in, or all profits can be taken by
> >nineteenth century style capitalism, or civil war might occur, etc.
>
> 19th-century style capitalism just about doubled life expectancy in
> the U.S. for the working masses, and certainly set up their children's
> 20th century wealth.
In fact I meant by this term the phenomenon where you can divide the
proceeds of some undertaking to either the capital employed ("profit") or to
labor ("wages"). Then the way to maximize profits is to minimize wages. And
so we come back to the point which is still open. I already agreed that when
profits are high according to my "nineteenth century capitalisme", we can
expect other employers to turn up and by their very presence bid the wages
up. But does this reasonable expectation turn itself into reality like a
chemical reaction, or can we expect time-lags, or any other problems,
extending the period of low wages?
> Here's the *real* challenge: Wages follow labor productivity.
>
> Employers *won't* pay more than the value that workers produce, or
> obviously they'd lose money. Employers *will* bid up wages to
> approach the level of worker productivity in any kind of competitive
> market, because if one doesn't another can pocket a profit by doing
> so.
And again, I can only agree. Now given that there are proceeds of some
activity, is it now unthinkable these proceeds, expressed in money after
being sold ("turnover") far exceed labor productivity? Because in that case,
profits would be high. And that would not even be a bad thing, because it
would attract other employers who after bidding higher wages would still be
making a profit, and so on.
However, here there appears to be space for a gap in our (agreed upon)
theory where new employers by a market mechanism would increase demand for
labor and hence wages. There may be a lack of specialized activity in the
branch and a monopolist may be able to *remain* a monopolist for a long
time. Or it may just take a long time before the the employers arrive and
when at last they arrive the long-impoverished population breeds more
terrorists than yuppies.
Now note I do not question that employers should not be expected to make
losses. But I question whether it is impossible actual turnover in money is
much higher than what you would call productivity.
Snippings, I have no problems.
> The last time I looked, a few years ago, the leading cause of death
> in the world was children's diarrhea, caused by drinking contaminated
> water. The life-saving remedy is a 25 cent packet of salts. But most
> people in the world don't have them. That's all the money that is
> needed to save *many, many* lives.
Are these packets of salt actually being produced and sold for 25 cents, and
would they still be sold at 25 cents if demand for them increased by the
saving of "many, many" lives?
> [ I once suggested to friends that they wear brown-colored ribbons,
> but they didn't find fatal childhood diarrhea to be an attractive
> cause.]
(Sorry, what do the brown-colored ribbons mean?)
Well, I again snip long pieces, I have again no problems with them.
Ciaoooooooo, Koen
Koen Robeys
(snippings)
> As my friends Stan Liebowitz and Steve Margolis have put it; when unlike
> things are treated as though they are alike, error is assured. Slavery is
> involuntary, free markets by definition are not. Your assumption is
> invalid.
At no point you managed to make hard your claim I changed my words into
"something completely different". Since you basically only repeat it, I'll
ignore it till you can do better.
> > *Of course* it is irrelevant. As I said in the previous post, my
question
> > is not whether we can find worse situations, my question is whether we
can do
> > better. So you have "proven", or better, I have never denied, the
> > situation could indeed be worse. But no matter how many question marks
you
> > add, this does not address the question whether we can improve.
>
> Koen, you specifically said the free market situation WAS WORSE I.e. it
> had "a negative impact".
This is called "pulling things out of context". What I did was giving three
assumptions. These assumptions contained an efficient pricing mechanism. I
claimed that situations can exist where the pricing mechanism doesn't
operate efficiently, which by asumption has a negative impact on total
wealth creation.
Next I claim that sometimes we may save a live by paying somebody QUOTE "the
means to make sure the slave doesn't die of starvation" UNQUOTE (as a
replacement of the "slave-remuneration you objected to), but that this does
not ensure the price mechanism is working efficiently.
Now you are trying to convince somebody, most probably yourself, of
something very strange. You invoke his being dead being worse than his being
alive. You then cut this word "worse" out of your context, and you paste it
in my context. Now my "negative impact" as compared to an assumed efficient
pricing mechanism is supposed to mean the *same* "worse" (!) as in your
story, and therefore to have been refuted. Yes, because by translating it
into your own "worse" my "negative impact" is supposed to mean a living man
is worse off than a dead man.
Has anybody been kidded by this?
> Please explain how you can conclude that a contractual arrangement that
> saves someone's life has; "a negative impact on total wealth production".
Well, since you go back to the assumptions...
> There appears to be exactly zero logical connection between your three
> assumptions and your conclusion. Let's take another look at how we got to
> this point, the assumptions are:
>
> > 1. Supply and demand lead to the most efficient pricing mechanism.
(AFAIK
> > unproven)
>
> [Established by empirical evidence to be usually true, and probably
> overwhelmingly so]
Good that you accept this one.
> > 2. In cases where factors like "monopsomy" apply, supply and demand by
> > themselves are insufficient to result in this most efficient mechanism
> > (apparently acceptable)
>
> [Not necessarily true at all, the monopsonist may have economies of scale
> that make him the most efficient employer of labor]
Well, I based myself on Chris' text saying QUOTE "I would note that
you keep talking as if there is only one employer; that's called "monopsony"
and it does generally imply inefficient outcomes" UNQUOTE.
To me it looks like situations where supply and demand are insufficient to
result in the most efficient mechanism can exist, and you don't even refute
it, you just indicate it is also possible they do lead to an efficient
mechanism. This nobody denied in the first place. So supply and demand
appear to be not necesarily sufficient to insure the most eficient pricing
mechanism. I remind you, by the way, that recently you asked in a very
ironic way if I pretended to have "discovered" markets are not perfect.
> > 3. A more efficient pricing mechanism is not only important for
academical
> > reasons, but does have an important impact on wealth creation. (AFAIK
> > unproven)
>
> [in fact, almost certainly true most of the time]
Good that you accept this one too.
> And the conclusion is:
>
> > Now if these are reasonable, situations where we save somene's life by
> > paying him a slave-remuneration, do have a negative impact on the total
> > wealth creation
>
> A howling non-sequitur. As well as containing the inherently
contradictory,
> internally antithetical term, "slave-remuneration".
So you accept that supply and demand are leading to the most efficient
mechanism (assumption one) and that this in turn has an important impact on
wealth creation (asumption three). But pointing out that any situation,
where supply and demand can't work properly, by consequence leads to
sub-optimal wealth creation, is a "howling non-sequitur".
Hmmmmmm.
Let me guess, you are joking, right? You are kind of testing if the newbie's
logic is as underdeveloped as his knowledge of economic theory, and you will
now admit this is not the case?
Anyway, we are making good progress here. Since you have no quarrel with two
of my three assumptions, and since you seem to find my conclusion
outrageous, necessarily you must have a problem with my second assumption,
where supply and demand might work less well than we may hope. May I infer
that in your opinion supply and demand always work perfectly?
> > (snip)
> >
> > > Taking you literally; if we have the BEST system already, doing
anything
> > > to alter it will be less effective.
Let me reduce the following to its essence. I said free markets in my
opinion are our best approach to an efficient price mechanism. From this you
appear to conclude I contradict myself when I still look for progress. Since
it is already the best, you here claimed, doing anything to alter it will
make it less effective. Also, you asked:
> > > The relevant question is, can we do better than the best?
Now all this, of course, is exposed for the rubbish it is by giving any
example of a concept which is at some time the best we have, and where
changing it is *not* making it less effective. Apparently, you try to
convince somebody, mot probably yourself, you can talk yourself out of this
by trying: (snip my text)
> Are you expecting me to believe you can, ALTER, the cosmos?
and by...
> In your analogy.
>
> "We" can ALTER man made arrangements such as political and economic
affairs.
> We can't do that to the paths the planets take around the sun. All you
can
> do is improve your understanding of the system.
...where you need to change my example of a certain theory, into the paths
of the planets this theory describes. This you do in order to state you
cannot change these paths, whereas you can change our understanding of a
system, hence, the analogy is incorrect. But just as I was talking of our
*understanding* of the paths of the planets, I am also talking of our
understanding of economy. So even if I (and we) think markets are the best
we have in order to create wealth, this does not prove my, and your,
understanding cannot be improved.
> Which would be a good idea for you regarding economics, too.
Sorry, cheap. The cheapest is that you try to hide the considerable logical
problems you worked yourself into behind economics. Less cheap, though still
cheap, is the way you suggest I must improve my understanding of economics -
which I do in this thread, whenever you don't try to prevent me to, by
launching sophisms - without, apparently, doubting one single moment you
could try to do the same. Having such a good understanding as yours,
apparently, guarantees any change in it would make it worse.
I snip some. You have tried to make it sound as if I believed markets were
bad for creating wealth. This turned out to be misplaced, but you don't feel
like admitting this. Fine with me.
Cheers, Koen
Grinch
<koen.ro...@skynet.be> wrote:
>"Grinch" <oldn...@mindspring.com> wrote
>
>> >Sufficiently for making sure the price signals being sent to the market
>> >aren't in fact optimally efficient prices (and remember that this by
>> >assumption would have an important negative impact on total wealth
>> >creation).
>>
>> I don't understand what this means at all. Signals sent "to" the
>> market?
>
>AFAIK, my "ideas" about these are pretty basic. So if the price for, say,
>grain is considerably below what many people would like to pay for it, then
>it would be a good idea to allow the price to go up, in order to "send a
>signal" "to" the market that increased production is in order.
Which leads to some questions:
In general, how many people would like to pay more for what they buy?
In particular, how would people living an extremely poor, subsistence
existence benefit by paying higher prices for food?
(This rather seems the sort of thing that evil, greed capitalists are
often accused of nastily forcing on them.)
And, if prices for something really are "considerably below what many
people would like to pay for it", what's keeping prices from going up
on their own?
(I don't have much experience with cases where buyers say, "We'd like
to pay considerably more, take our money" and sellers respond "No, no
keep it -- we'd really rather considerably undercharge, reduce our
profits, and underproduce!".)
>And should
>some state, always in name of the people, decree the price stays where it
>is, you'll see grain producers either hide their supplies from being taken
>away, or rather feed it to their animals, or even just stop working hard to
>produce it. Higher prices, IMHO, will send a signal "to" them, a signal to
>stop this behavior.
Of course, higher prices mean greater production but reduced sales.
So producers will have to find *something* to do with the excess that
they produce over what they sell.
(In Europe they have a "butter mountain" because of artificial price
supports for farmers.)
>Snip: a cartel was only one example of an answer to the question how many
>employers could manage to pay peanuts to their slaves, even if they now have
>to compete whith each other.
What would some other examples be, specifically?
> I don't think your remarks on cartels are
>wrong, but I think they do not prevent cartels to exist temporarily, nor
>other ways for employers to pay very low wages to exist. In fact, the
>alternative view seems to me to be only an assumption. Once competition is
>present, all wages paid are "by definition" correct from any point of view,
>be it moral or whatever. In fact, I am questioning that assumption
That seems more like your assumption about what other people think,
rather than what other people actually think.
Wages in a competitive market can be *described* -- then you can form
your own opinion about they are "correct or moral or whatever".
In simplest terms, employers will bid up wages to the level worker
productivity, to match the value that workers produce.
Personally, I think that's reasonable enough because if:
* Workers are paid less than the value they produce, they are being
exploited, and
* Firms pay more than the value workers produce, they will go
bankrupt and the workers will be left unemployed.
So it seems an optimal result that also allows for steadily,
systematically improving worker productivity and the wage rate.
Now, if you think it is a mere "assumption" that a wage rate that
matches the level of worker productivity is optimal, then you must
believe that possibly paying workers a wage that is worth either less
than what they produce or more than what they produce would instead be
optimal.
Which of those do you think instead might be preferable, and why?
I tend to think that rather the opposite is true.
Rather than hide behind the "universality" of the condition of
subsistence existence to excuse perpetuating it, not one person in 50
in the U.S. is even aware of the former universality of it.
That's why they are so naively "shocked" at the sight of Asian
sweatshops and the like. They just can't believe that sweatshops could
possibly offer *improvement* to the lives of their workers -- so they
figure the workers must somehow be being exploited or forced into the
sweatshops.
It's purely an emotional reaction based on *ignorance*. (Simple
economic history is not taught in high school.)
And they conclude that if they succeed in closing the sweatshops
they will be *freeing* the workers to go back to a life of collecting
firewood for a living. And every American knows how much more
pleasant life is in the countryside, than in a dirty factory. We've
all been to camp, or had country house vacations at one time or
another.
>IF (and I claimed at no point this if is proven, it is
>just what I am questining here) we could actually do better.
Just say how. All new good ideas will be greatly appreciated.
That's really not true at all. As I pointed out before, if it was
true then businesses would be flooding into Haiti.
The way to maximize profits is to maximize productivity relative to
costs -- of which wages are only one, and often a relatively small
one.
An employer will gladly increase wages 200% or whatever if it will
improve worker productivity by more than 200% or whatever.
> And
>so we come back to the point which is still open. I already agreed that when
>profits are high according to my "nineteenth century capitalisme", we can
>expect other employers to turn up and by their very presence bid the wages
>up. But does this reasonable expectation turn itself into reality like a
>chemical reaction, or can we expect time-lags, or any other problems,
>extending the period of low wages?
Of course there are time lags. That's why it's taken 200 years since
the start of the Industrial Revolution for just part of the world to
become as developed as it is today -- instead of *presto* the whole
world becomes modern after Adam Smith explains the basic idea.
Democratic capitalism is *revolutionary*. It changes all the laws,
institutions, and customs of the feudal society, or whatever kind of
society was there first. All those changes entail time and problems.
Some cultures and societies are much more open and adaptive to the
changes than others. Some, clearly, are very much less so. They can
have all kinds of problems.
But -- you'll have to look hard to find a nation that has successfully
increased its worker productivity (which depends not only on the
workers but all the other factors mentioned in earlier posts) which
hasn't increased its workers' incomes accordingly.
Productivity is what does it. If you have a government or population
that resists changing its institutions, laws, customs, etc. as needed
to move towards a modern productive society, there's gonna be a
problem. Democratic capitalism is revolutionary. You can't keep your
old feudal society and have it earn the economic rewards of a modern
one.
>
>> Here's the *real* challenge: Wages follow labor productivity.
>>
>> Employers *won't* pay more than the value that workers produce, or
>> obviously they'd lose money. Employers *will* bid up wages to
>> approach the level of worker productivity in any kind of competitive
>> market, because if one doesn't another can pocket a profit by doing
>> so.
>
>And again, I can only agree. Now given that there are proceeds of some
>activity, is it now unthinkable these proceeds, expressed in money after
>being sold ("turnover") far exceed labor productivity? Because in that case,
>profits would be high. And that would not even be a bad thing, because it
>would attract other employers who after bidding higher wages would still be
>making a profit, and so on.
>
>However, here there appears to be space for a gap in our (agreed upon)
>theory where new employers by a market mechanism would increase demand for
>labor and hence wages. There may be a lack of specialized activity in the
>branch and a monopolist may be able to *remain* a monopolist for a long
>time.
How would that happen?
A monopoly is only economically harmful if it uses its "sole supplier"
position to extract excess profits from the market.
But the more "excessive" its profits are , the faster new competitors
are going to rush in to get a share of them. I.e., the worse the
problem is, the quicker it gets mitigated.
So the definition of "harmful monopoly" for economic purposes also
requires "barriers to entry" -- there has to be something that
prevents new competitors from arriving in the market.
Now, that may very well be the case. E.g., the monopolist may pay the
government to keep competitors out, or the government may *be* the
monopolist. Both are very common even in advanced economies, and are
even more so in developing ones.
But then we *don't* have a competitive market. And we get back to
what was said in prior posts about the importance of the legal system
and government institutions.
>Or it may just take a long time before the the employers arrive and
>when at last they arrive the long-impoverished population breeds more
>terrorists than yuppies.
>
>Now note I do not question that employers should not be expected to make
>losses. But I question whether it is impossible actual turnover in money is
>much higher than what you would call productivity.
>
>Snippings, I have no problems.
>
>> The last time I looked, a few years ago, the leading cause of death
>> in the world was children's diarrhea, caused by drinking contaminated
>> water. The life-saving remedy is a 25 cent packet of salts. But most
>> people in the world don't have them. That's all the money that is
>> needed to save *many, many* lives.
>
>Are these packets of salt actually being produced and sold for 25 cents, and
>would they still be sold at 25 cents if demand for them increased by the
>saving of "many, many" lives?
Sure. 25 cents. The problem is lack of distribution.
Pre-capitalist societies don't have distributions systems (that we
would recognize as such).
Haven't you heard news stories that went: "In spite of the ongoing
famine in Xland, western food aid deliveries are rotting on the docks
-- except for those that are being stolen by the local warlords and
distributed to their allies" ?
Capitalist societies have distribution systems. There are roads
between the sweatshops and the docks. The police make sure goods pass
on the roads safely. One can pick up a phone to place an order for
what one needs, learn when it will arrive, take steps to make sure it
does.
If you don't have any of that, what costs 25 cents at the docks may as
well cost a million dollars to the subsistence farmers inland.
susupply
"Koen Robeys" <koen.ro...@skynet.be>
having his story, and sticking to it,
wrote in message news:3c700e58$0$75149$ba62...@news.skynet.be...
> At no point you managed to make hard your claim I changed my words into
> "something completely different". Since you basically only repeat it, I'll
> ignore it till you can do better.
Which tactic will assure you remain in error.
[snip]
> > Koen, you specifically said the free market situation WAS WORSE I.e.
it
> > had "a negative impact".
>
> This is called "pulling things out of context". What I did was giving
three
> assumptions. These assumptions contained an efficient pricing mechanism. I
> claimed that situations can exist where the pricing mechanism doesn't
> operate efficiently, which by asumption has a negative impact on total
> wealth creation.
>
> Next I claim that sometimes we may save a live by paying somebody QUOTE
"the
> means to make sure the slave doesn't die of starvation" UNQUOTE (as a
> replacement of the "slave-remuneration you objected to), but that this
does
> not ensure the price mechanism is working efficiently.
>
> Now you are trying to convince somebody, most probably yourself, of
> something very strange. You invoke his being dead being worse than his
being
> alive. You then cut this word "worse" out of your context, and you paste
it
> in my context.
Obviously English is not your first language. In English you claimed saving
someone's life had "a negative impact". You may be trying to say something
very different, but after several tries you haven't. And your three
assumptions still have no logical connection to your conclusion.
> Now my "negative impact" as compared to an assumed efficient
> pricing mechanism is supposed to mean the *same* "worse" (!) as in your
> story, and therefore to have been refuted. Yes, because by translating it
> into your own "worse" my "negative impact" is supposed to mean a living
man
> is worse off than a dead man.
>
> Has anybody been kidded by this?
I'm finding it not at all amusing anymore.
[snip]
> Well, I based myself on Chris' text saying QUOTE "I would note that
> you keep talking as if there is only one employer; that's called
"monopsony"
> and it does generally imply inefficient outcomes" UNQUOTE.
>
> To me it looks like situations where supply and demand are insufficient to
> result in the most efficient mechanism can exist, and you don't even
refute
> it, you just indicate it is also possible they do lead to an efficient
> mechanism.
Pardon me for being so subtle. First we need to return to your problem of
confusing slavery with contractual employment, then you compound that error
with your assumption that a single employer arriving to save lives is not
"the most efficient mechanism" to accomplish that.
Given that people who are starving are exhibiting little human capital, it
may very well be that that single employer IS "the most efficient mechanism"
for a positive impact on total productivity (at that moment). This bizarre
situation (that you admit doesn't exist anywhere you know of) does not
contradict Chris Auld's GENERAL point about monopsony and inefficiency.
> This nobody denied in the first place. So supply and demand
> appear to be not necesarily sufficient to insure the most eficient pricing
> mechanism. I remind you, by the way, that recently you asked in a very
> ironic way if I pretended to have "discovered" markets are not perfect.
The logical connection between those last two sentences being what?
[snip]
> > > Now if these are reasonable, situations where we save somene's life by
> > > paying him a slave-remuneration, do have a negative impact on the
total
> > > wealth creation
> >
> > A howling non-sequitur. As well as containing the inherently
> contradictory,
> > internally antithetical term, "slave-remuneration".
>
> So you accept that supply and demand are leading to the most efficient
> mechanism (assumption one) and that this in turn has an important impact
on
> wealth creation (asumption three). But pointing out that any situation,
> where supply and demand can't work properly, by consequence leads to
> sub-optimal wealth creation, is a "howling non-sequitur".
>
> Hmmmmmm.
Koen, Koen, Koen. You just substituted; "any situation, where supply and
demand can't work properly" for; "situations where we save somene's life by
paying him a slave-remuneration".
That latter, SPECIFIC claim, is the howling non-sequitur that has little
logical connection to your three assumptions.
>
> Let me guess, you are joking, right? You are kind of testing if the
newbie's
> logic is as underdeveloped as his knowledge of economic theory, and you
will
> now admit this is not the case?
I will admit that you tried to pull a fast one just above.
> Anyway, we are making good progress here.
I fail to see how.
> Since you have no quarrel with two
> of my three assumptions, and since you seem to find my conclusion
> outrageous, necessarily you must have a problem with my second assumption,
> where supply and demand might work less well than we may hope. May I infer
> that in your opinion supply and demand always work perfectly?
You may infer that I think you don't understand how to construct a valid
syllogism.
[snip Koen's confusion about the meaning of "alter the system"]
Patrick
Koen Robeys
(snip)
> Obviously English is not your first language.
Sorry for not being properly civilized. Feel free to go on in either Dutch
or French.
> In English you claimed saving someone's life had "a negative impact".
Wrong. I claimed that cases where (QUOTE) "supply and demand by themselves
are insufficient to result in this most efficient mechanism" (UNQUOTE) would
have a negative impact on total wealth production. I am also trying, and at
the same time, to draw some people's attention to the fact that this is
*independent* from the question whether we happen to save someones' life. It
follows entirely from the by you accepted assumptions: The efficient pricing
mechanism does have an impact on wealth creation.
> You may be trying to say something
> very different, but after several tries you haven't. And your three
> assumptions still have no logical connection to your conclusion.
Claim, often repeated, yet unproven.
(snip)
> > Well, I based myself on Chris' text saying QUOTE "I would note that
> > you keep talking as if there is only one employer; that's called
> > "monopsony" and it does generally imply inefficient outcomes" UNQUOTE.
(snippings)
> Given that people who are starving are exhibiting little human capital, it
> may very well be that that single employer IS "the most efficient
mechanism"
> for a positive impact on total productivity (at that moment). This
bizarre
> situation (that you admit doesn't exist anywhere you know of) does not
> contradict Chris Auld's GENERAL point about monopsony and inefficiency.
At no point I claimed to contradict this point, to the contrary I use this
point to indicate some cases can exist where "supply and demand by
themselves are insufficient to result in this most efficient mechanism".
> > This nobody denied in the first place. So supply and demand
> > appear to be not necesarily sufficient to insure the most eficient
pricing
> > mechanism. I remind you, by the way, that recently you asked in a very
> > ironic way if I pretended to have "discovered" markets are not perfect.
>
> The logical connection between those last two sentences being what?
The logical connection between those two last sentences being the following.
You accepted that supply and demand lead to the most efficient pricing
mechanism, and you accepted that this has an important impact on wealth
creation. And in the last sentence I remind you that you also thought it
very obvious that markets are not perfect. So they *don't* guarantee by
themselves the most efficient pricing mechanism. And this most efficient
mechanism does have an impact on wealth creation. So given the assumptions
you accepted and given that markets are not perfect, situations can exist
where markets are they are having a negative impact on wealth production.
Feel free to indicate any links you still might overlook.
> Koen, Koen, Koen. You just substituted; "any situation, where supply and
> demand can't work properly" for; "situations where we save somene's life
by
> paying him a slave-remuneration".
Wrong again. I did make my assumptions in terms of "supply and demand by
themselves are insufficient to result in this most efficient mechanism", and
I only started to talk about saving somene's life when some people used the
fact that some imperfect markets might still save lives, to hide from the
conclusion that said imperfect markets still have a negative impact on total
wealth production.
> That latter, SPECIFIC claim, is the howling non-sequitur that has little
> logical connection to your three assumptions.
So if you just stop confusing the fact that imperfect markets may still save
lives with the fact that imperfect markets are worse at wealth creation than
perfect markets, you might yet arrive at the point where you see the actual
content of what I said.
Cheers, Koen
Koen Robeys
> >> I don't understand what this means at all. Signals sent "to" the
> >> market?
> >
> >AFAIK, my "ideas" about these are pretty basic. So if the price for, say,
> >grain is considerably below what many people would like to pay for it,
then
> >it would be a good idea to allow the price to go up, in order to "send a
> >signal" "to" the market that increased production is in order.
>
> Which leads to some questions:
>
> In general, how many people would like to pay more for what they buy?
Apparently I should have written this as "prices below what many people
would *still* like to pay", or even "prices below what many people would
still be *ready* to pay". ("sorry for terminology problems.")
> In particular, how would people living an extremely poor, subsistence
> existence benefit by paying higher prices for food?
This has no relation to anything I wrote. You asked clarification of my term
"signals sent to the market". I gave an example of what I meant by that and
no extremely poor people were involved in that.
> And, if prices for something really are "considerably below what many
> people would like to pay for it", what's keeping prices from going up
> on their own?
For example, the fact that, as I said, a state was determining the prices
stay where they are. Another reason could be there is oversupply, so that
people who would be ready to pay more, just don't have to.
(snip)
> Of course, higher prices mean greater production but reduced sales.
>
> So producers will have to find *something* to do with the excess that
> they produce over what they sell.
>
> (In Europe they have a "butter mountain" because of artificial price
> supports for farmers.)
Here you give another example where prices are kept artificially at a level
where they can't send proper signals to the market, so that surplusses
result. Probably you'll agree that lower prices would "send signals" "to"
buyers to buy more, and "to" producers to produce less. Only, I wonder, why
do you then ask what the term means?
> >Snip: a cartel was only one example of an answer to the question how many
> >employers could manage to pay peanuts to their slaves, even if they now
have
> >to compete whith each other.
>
> What would some other examples be, specifically?
The other examples I, specifically, already gave were: "Or growing numbers
of employers might still result in numbers that are small as compared to
numbers of potential employees. Or the process which admittedly can work
(IMHO) can just work too slowly to prevent serious trouble before the
desired
results obtain."
> > (snip) In fact, I am questioning that assumption
>
> That seems more like your assumption about what other people think,
> rather than what other people actually think.
>
> Wages in a competitive market can be *described* -- then you can form
> your own opinion about they are "correct or moral or whatever".
>
> In simplest terms, employers will bid up wages to the level worker
> productivity, to match the value that workers produce.
Lots of space for assumptions, don't you think so? We already know there
will be time-lags. How long may these become before we wonder about what
happens *during* the time-lag? Is a time-lag lasting a generation, or a
century, still to be called a "time-lag"? Can we study the relation between
productivity and actual wages during "time-lags", or is our "assumption"
that someday, before the Last Judgment, both will be about the same, enough
to ignore all gaps?
(snip)
> Now, if you think it is a mere "assumption" that a wage rate that
> matches the level of worker productivity is optimal, then you must
> believe that possibly paying workers a wage that is worth either less
> than what they produce or more than what they produce would instead be
> optimal.
This is *not* the assumption I was questioning. I was questioning the
assumption that this match always will occur in the first place. It often
will, no doubt, but I question whether it *always* will, and in time to
prevent that potential yuppies become suicide terrorists. So supposing you
asked your question on the correct assumption...
> Which of those do you think instead might be preferable, and why?
I think we must concentrate on those cases where wages are *not* very
related to productivity. I think we should have a situation where
wage-earners can remedy this situation by, for example, refusing the offer
they would not accept if they had the choice. This is nothing but a "free
market" where the fact of accepting a deal should send meaningful signals to
the market. However, if the one accepting the deal only faces either the
deal or starvation, it is reasonable to think he concluded at prices where
he would not have concluded should his position have been stronger.
In such cases, the deal will *not* send meaningful signals to the market. So
it follows that we do not only need a legalistically free market, but also a
market where people are in reality free to choose. Else the pricing
mechanism would work less than optimally, and at least some people accept
this has a negative impact on total wealth creation.
(snip)
> >> But a universal starting condition can hardly be "morally repugnant".
> >
> >True, but what *can* be morally repugnant "or at least problematic" is
that
> >we hide behind this truth in order to accept fatalistically this
"universal
> >starting condition"
>
> I tend to think that rather the opposite is true.
Snippings. I already agreed to the point you raise here. However you raise
it ignoring something you only appear to see later:
> >IF (and I claimed at no point this if is proven, it is
> >just what I am questining here) we could actually do better.
>
> Just say how. All new good ideas will be greatly appreciated.
So there was this big IF. Now you just made a speech which would have been
very impressive without my big "if"; but which with the "if" seems to be
misplaced. A good start for getting new good ideas might include not to
dismiss points by cutting in in the middle, and addressing them as if the
rest didn't exist.
So it appears we agree that many kinds of state intervention in price levels
would be inefficient. At the same time it seems to be very difficult to
raise the possibility that other imperfections might occur. The possibility
artificial price levels might obtain as a consequence of, say, unequal
market positions, is ignored, denied, even already ridiculed - albeit
admittedly not by you. But if we are worried about artificial price levels
imposed by state intervention, why are we so confident about the
impossibility of other kinds of price inefficiency?
So good ideas? IMHO we would do well to include the *real* freedom of market
players in our thinking, and not only a legalistic freedom. A concept of
"free markets" should concentrate more on *who* can participate (and how),
and not only on absence of officially imposed artificial prices. Something
of that direction...
(snip)
> >In fact I meant by this term the phenomenon where you can divide the
> >proceeds of some undertaking to either the capital employed ("profit") or
to
> >labor ("wages"). Then the way to maximize profits is to minimize wages.
>
> That's really not true at all. As I pointed out before, if it was
> true then businesses would be flooding into Haiti.
>
> The way to maximize profits is to maximize productivity relative to
> costs -- of which wages are only one, and often a relatively small
> one.
>
> An employer will gladly increase wages 200% or whatever if it will
> improve worker productivity by more than 200% or whatever.
First. The point is that my "nineteenth century capitalism" didn't need the
Haiti solution. For a given turnover wages were already low, and profits
were accordingly high. So you may well be right about rising productivity
can maximize profits. But it still does not deny my observation that some
people may be able to do the same in some situations in our own time. And in
such a case, even though I admitted free markets are able to pull
populations out of poverty, the process at that place aborts and the
"nineteenth-century capitalist" disappears with the wealth created.
But apart from that, our discussion made a question occur to me. So we now
pay our workers according to "productivity". But how does this concept
relate to actual turnover, being something like "number of pieces produced
times price per piece sold"? Assuming they are not the same, turnover may
increase, say because of a fashion, a hype in our product, made prices go
up. But if our workers, working just as hard and productively, are still
paid the same. In such a case profits will go up, without productivity
causing this. Or alternatively turnover and productivity *do* overlap. But
then... well, maybe I should let you tell me, as I am reduced to just
guessing.
Snip. I agreed with, and liked, your "democratic capitalisme is
revolutionary". Nice piece, really.
> >However, here there appears to be space for a gap in our (agreed upon)
> >theory where new employers by a market mechanism would increase demand
for
> >labor and hence wages. There may be a lack of specialized activity in the
> >branch and a monopolist may be able to *remain* a monopolist for a long
> >time.
>
> How would that happen?
In the following, you point out this might happen as a consequence of state
regulations, and then of course we would agree we don't even have a free
market anymore in the first place. But are we really sure this could *only*
happen in such circumstances? Don't we run the risk to fall again in the
"legalistic freedom", forgetting factual lack of freedom may well occur?
Suppose a country, say in middle Africa, where an example of a "failed
state" exists on a scale to make Afghanistan look reasonable. Suppose the
country is rich in minerals. Suppose you are a hypothetical specialized
company, knowing specialized ways of extracting minerals and metals from
ores, which, if you can get them cheaply, result in huge profits.
Are official monopolies the only way to make sure this company can get
locals - and they *are* starving, no matter how much fun some people more
civilized than I am can make of them - to extract the ores for very low (if
at all existing) wages? Don't you think the combination of being far away,
politically very fragmented and chaotic and complicated, being very, very
primitive indeed, and the very special knowledge and technical skill
involved might be enough to keep other candidates away?
Mind you, I am not even denying the company might actually be saving some
lives. I am denying the local market can be reasonably called "free" and
"efficient". I deny the wages for which the local people might agree to
work, are decent expressions of the wages which might obtain if these people
had more, and better, choices.
(snippings)
Ciaooooooooo, Koen
susupply
> "susupply" <susu...@mindspring.com> wrote
>
> (snip)
>
> > Obviously English is not your first language.
>
> Sorry for not being properly civilized. Feel free to go on in either Dutch
> or French.
Civilized has nothing to do with it, but having less than a command of
English is the most charitable explanation of your inability to produce
logical arguments in English.
> > In English you claimed saving someone's life had "a negative impact".
>
> Wrong.
The English word you should have used in this case is "right" or "correct",
because the following from you is simply a falsehood:
> I claimed that cases where (QUOTE) "supply and demand by themselves
> are insufficient to result in this most efficient mechanism" (UNQUOTE)
would
> have a negative impact on total wealth production.
Here is what you actually said:
> ...situations where we save somene's life by
> paying him a slave-remuneration, do have a negative impact on the total
> wealth creation
Note that the words prior to the comma in the above are not, as you now
claim:
"supply and demand by themselves are insufficient to result in this most
efficient mechanism"
> I am also trying, and at
> the same time, to draw some people's attention to the fact that this is
> *independent* from the question whether we happen to save someones' life.
It
> follows entirely from the by you accepted assumptions: The efficient
pricing
> mechanism does have an impact on wealth creation.
And I am trying to draw some people's attention to the fact that this is a
howling non-sequitur.
> > You may be trying to say something
> > very different, but after several tries you haven't. And your three
> > assumptions still have no logical connection to your conclusion.
>
> Claim, often repeated, yet unproven.
In English, the word is "proven", and more than once, by accurately quoting
your exact words.
[snip]
> > > So supply and demand
> > > appear to be not necesarily sufficient to insure the most eficient
> pricing
> > > mechanism. I remind you, by the way, that recently you asked in a very
> > > ironic way if I pretended to have "discovered" markets are not
perfect.
> >
> > The logical connection between those last two sentences being what?
>
> The logical connection between those two last sentences being the
following.
> You accepted that supply and demand lead to the most efficient pricing
> mechanism, and you accepted that this has an important impact on wealth
> creation. And in the last sentence I remind you that you also thought it
> very obvious that markets are not perfect. So they *don't* guarantee by
> themselves the most efficient pricing mechanism.
Again, your English is failing you in the discussion. "Perfect" is not a
synonym (i.e. mean the same thing as) for "most efficient". Nor, for
"optimal".
> And this most efficient
> mechanism does have an impact on wealth creation. So given the assumptions
> you accepted and given that markets are not perfect, situations can exist
> where markets are they are having a negative impact on wealth production.
>
> Feel free to indicate any links you still might overlook.
The best I can come up with in the jumble of words just above is that you
recognize that; "most efficient" is stronger than "more efficient". Is this
all you mean to say? If so, then you need to drop the terminology,
"negative impact on wealth production".
> > Koen, Koen, Koen. You just substituted; "any situation, where supply
and
> > demand can't work properly" for; "situations where we save somene's life
> by
> > paying him a slave-remuneration".
>
> Wrong again.
You mean "correct again". Remember, I just quoted your exact words, and
they were:
"...situations where we save somene's life by paying him a
slave-remuneration".
> I did make my assumptions in terms of "supply and demand by
> themselves are insufficient to result in this most efficient mechanism",
and
> I only started to talk about saving somene's life when some people used
the
> fact that some imperfect markets might still save lives, to hide from the
> conclusion that said imperfect markets still have a negative impact on
total
> wealth production.
Again, "imperfect" does not mean the same thing as; "not the most
efficient", or "suboptimal". All things human are imperfect, which is why
we recognize that the perfect is the enemy of the good.
If you are merely trying to say that more efficient markets can result in a
positive impact on total wealth production, no one would find that a
remarkable statement. However, in some comments to Grinch that does not
appear to be what you mean to say. Specifically:
<< I think we must concentrate on those cases where wages are *not* very
related to productivity. I think we should have a situation where
wage-earners can remedy this situation by, for example, refusing the offer
they would not accept if they had the choice. This is nothing but a "free
market" where the fact of accepting a deal should send meaningful signals to
the market. However, if the one accepting the deal only faces either the
deal or starvation, it is reasonable to think he concluded at prices where
he would not have concluded should his position have been stronger.>>
And the above is badly flawed logic. The acceptance of "the deal", to the
rejection of the starvation option; 1. is a free choice, 2. it does send
"meaningful signals", and 3. it may well be the optimal outcome at the
specific time and place.
Also, your comment:
<< I question whether it *always* will, and in time to
prevent that potential yuppies become suicide terrorists. >>
is silly, poverty is not why people become suicide terrorists. In fact, the
people who flew those airplanes into the WTC and Pentagon could have
qualified as yuppies.
Patrick
Grinch
<koen.ro...@skynet.be> wrote:
>"Grinch" <oldn...@mindspring.com> wrote
<snipped: things where I don't know if we agree or not, perhaps due to
some linguistic and terminological confusion.>
>> Wages in a competitive market can be *described* -- then you can form
>> your own opinion about they are "correct or moral or whatever".
>>
>> In simplest terms, employers will bid up wages to the level worker
>> productivity, to match the value that workers produce.
>
>Lots of space for assumptions, don't you think so?
About what a competitive market is and the conditions in it? No.
The conditions are described in the textbook of your choice.
>We already know there will be time-lags.
Before wages rise to the level of worker productivity? No.
It doesn't take long for workers to ask for a raise. And it
doesn't take long for an employer to realize he's better off raising
them up to the level of productivity than losing them.
That whole process can take *minutes*. Competitive markets move fast.
The "time lags" are involved in changing the conditions from the
original state of, say, a feudal society, to those of a competitive
market. Changing the laws, government institutions, culture, etc., and
building up the nation's capital and infrastructure, can take a long
time. Decades. A hundred years.
Before you get there, hang over conditions from past times can
distort the market. E.g, as you introduce competition into a feudal
society, there may be old laws or societal attitudes that prevent
workers from moving from one employer to another. That might impair
workers' ability to negotiate to get the full "competitive" wage rate
that matches their productivity.
Of course, there would also be a lot of old laws and conditions
impinging upon employers that reduce the productivity they can
achieve.
So, to maximize the welfare of workers you have to eliminate all
those old "anti-competitive" constraints rooted in history -- to get
the maximum level of productivity and to get workers's their wage
based on it.
It is eliminating all those old constrains from an earlier era that
takes time. That is a political process, and one of culture change.
The "revolution".
> How long may these become before we wonder about what
>happens *during* the time-lag? Is a time-lag lasting a generation, or a
>century, still to be called a "time-lag"? Can we study the relation between
>productivity and actual wages during "time-lags", or is our "assumption"
>that someday, before the Last Judgment, both will be about the same, enough
>to ignore all gaps?
There are precious few time lags in real competitive markets. In fact,
they move much *too fast* for many peoples' taste.
The closer to achieving a competitive market you get, the shorter the
time lags will be. The real time lags are in tasks like getting Mugabe
out of there.
>(snip)
>
>> Now, if you think it is a mere "assumption" that a wage rate that
>> matches the level of worker productivity is optimal, then you must
>> believe that possibly paying workers a wage that is worth either less
>> than what they produce or more than what they produce would instead be
>> optimal.
>
>This is *not* the assumption I was questioning. I was questioning the
>assumption that this match always will occur in the first place.
Look at the data, I pointed you to it.
> It often will, no doubt, but I question whether it *always* will,
Look at the data, and try to find a nation where it hasn't happened.
*If* you have a competitive market then it has *got* to happen as
surely as water runs downhill through an unobstructed stream.
If water is just sitting there, it is not on the side of a hill, or
maybe the stream is dammed, and if you remove the dam the water will
run.
If wages don't rise promptly to match the general order of
productivity, then you *don't* have a competitive market. Maybe the
government is regulating wages downward. There is some such
anti-competitive obstacle -- if you remove it, wages will rise.
But it's much more likely wages *are* matching the level of
productivity, and it's the level of productivity that is being kept
low by the anti-competitive obstacles.
>and in time to
>prevent that potential yuppies become suicide terrorists.
The time lag is not in having wages match productivity. That happens
fast. They match in real time.
The time lag is in raising productivity so wages will rise too. We've
already discussed many factors that can affect that process and
speed or delay it.
>So supposing you
>asked your question on the correct assumption...
>
>> Which of those do you think instead might be preferable, and why?
>
>I think we must concentrate on those cases where wages are *not* very
>related to productivity.
Then remove the anti-competitive obstacles.
*But* if you are talking about remedying poverty in the *real*
third-world you are addressing the wrong problem --- the real problem
is *low* productivity, not wages that don't match productivity.
Collecting firewood is not very productive. Subsistence agriculture
is the *lowest* level of societal productivity in our world -- that's
why the billions of people still engaged in it and its immediate
alternatives are so grindingly poor.
The problem is not that these people are "under paid" for their level
of productivity. How many of them have employers?
>I think we should have a situation where
>wage-earners can remedy this situation by for example, refusing the offer
>they would not accept if they had the choice.
Well, if you have a competitive market, then obviously a worker
*would* refuse any offer he would not accept if he had the choice,
because he has the choice.
The *essence* of a competitive market is *voluntary transactions* --
everyone has free choice. If workers aren't free "to refuse offers
they would not accept if they had the choice" then the *definition* of
a competitive market is violated -- you have serious anti-competitive
obstacles in the labor market to remove.
>This is nothing but a "free
>market" where the fact of accepting a deal should send meaningful signals to
>the market. However, if the one accepting the deal only faces either the
>deal or starvation, it is reasonable to think he concluded at prices where
>he would not have concluded should his position have been stronger.
No, it isn't.
It is reasonable to conclude there would have been *no deal* if
his position had (somehow) been stronger, not that he would have
negotiated a much higher price.
If that person is *so* poor as to be on the edge of starvation, then
what does he have to offer the sweatshop operator? Not much -- only
his raw labor. (He doesn't have a degree in engineering, obviously!)
Raw labor isn't worth much.
What can the sweatshop operator offer him? Not much -- only the value
to him of what that raw labor can produce. Say, $1 a day. The
sweatshop operator *can't* offer more, or he will go broke and end on
the edge of starvation himself.
But the sweatshop owner will give him that much, if there's any
kind of competitive market for sweatshop labor, to keep the worker
from taking that $1 of value produced to another sweatshop owner
So ... say that by some miracle this worker on the edge of starvation
suddenly obtains a "stronger position" -- say a forgotten uncle dies
and leaves him an inheritance. Can he use his position to obtain $2 a
day from the sweatshop owner? No. Or $1.50? No. Even $1.01? No.
His wage remains the value he can produce with his labor. If he wants
that job, it's still going to be at the same $1 a day as before,
But, there may be *no deal* now. He may decide to spend the summer
sitting on the beach, spending his inheritance, rather than working in
a sweatshop.
>In such cases, the deal will *not* send meaningful signals to the market. So
>it follows that we do not only need a legalistically free market, but also a
>market where people are in reality free to choose. Else the pricing
>mechanism would work less than optimally, and at least some people accept
>this has a negative impact on total wealth creation.
Nope. In a competitive market workers are "in reality free to choose"
to
work for what their labor is worth -- or they can choose unemployment.
The employer can offer *no more* than that -- and it is to the
employer's advantage to offer up to that amount, since in a
competitive market the worker can go elsewhere and take that value to
a competitor.
Employers don't know and don't care what the worker's alternative to
work is.
Whether it is starvation or a summer on the beach, it is *irrelevant*.
>(snip)
>> >IF (and I claimed at no point this if is proven, it is
>> >just what I am questining here) we could actually do better.
>>
>> Just say how. All new good ideas will be greatly appreciated.
>.....
>.....
>So good ideas? IMHO we would do well to include the *real* freedom of market
>players in our thinking, and not only a legalistic freedom. A concept of
>"free markets" should concentrate more on *who* can participate (and how),
>and not only on absence of officially imposed artificial prices. Something
>of that direction...
???
Free markets are *defined* by freedom of participation -- that's what
the "free" means -- not by "officially imposed artificial prices" or
whatever.
If everybody is not free to participate or not participate in each
transaction on a voluntary basis it is not a free and competitive
market.
>(snip)
>
>> >In fact I meant by this term the phenomenon where you can divide the
>> >proceeds of some undertaking to either the capital employed ("profit") or
>to
>> >labor ("wages"). Then the way to maximize profits is to minimize wages.
>>
>> That's really not true at all. As I pointed out before, if it was
>> true then businesses would be flooding into Haiti.
>>
>> The way to maximize profits is to maximize productivity relative to
>> costs -- of which wages are only one, and often a relatively small
>> one.
>>
>> An employer will gladly increase wages 200% or whatever if it will
>> improve worker productivity by more than 200% or whatever.
>
>First. The point is that my "nineteenth century capitalism" didn't need the
>Haiti solution. For a given turnover wages were already low, and profits
>were accordingly high.
No. You keep saying this -- low wages = high profits. It is not so.
In fact the reverse is true.
Low-wage industries typically have *low* profits.
It is high-wage industries that have *high* profits.
The reason is simple: If the business is high-profit then the workers
are highly productive. In a competitive market those workers will
demand their share of those big profits in wages.
But if the business is low-profit its employees have low productivity.
They have no grounds upon which to demand a higher wage -- and the
employer has no money with which to pay it.
Microsoft is hugely profitable and makes its employees millionaires.
In real life, sweatshop owners usually are barely better off than
their employees. Poor. You can look that up.
>So you may well be right about rising productivity
>can maximize profits. But it still does not deny my observation that some
>people may be able to do the same in some situations in our own time. And in
>such a case, even though I admitted free markets are able to pull
>populations out of poverty, the process at that place aborts and the
>"nineteenth-century capitalist" disappears with the wealth created.
>
>But apart from that, our discussion made a question occur to me. So we now
>pay our workers according to "productivity". But how does this concept
>relate to actual turnover, being something like "number of pieces produced
>times price per piece sold"?
Turnover has nothing particular to do with it.
If you hire a worker, what is the value of all that you can sell
within a period of time with him? Compare that to the value of what
you can sell without him in the same period. The difference is the
value he produces for you. It's as simple as that.
You can never pay more than that without losing money.
If you pay less than that in a competitive market, he'll be free to go
elsewhere, costing you all the profit he could produce for you. So
you have a motive to bid up to that level to get or keep him. So you
are going to wind up paying close to the full value he can produce for
you -- and you'll do it right away.
>Assuming they are not the same, turnover may
>increase, say because of a fashion, a hype in our product, made prices go
>up. But if our workers, working just as hard and productively, are still
>paid the same. In such a case profits will go up, without productivity
>causing this.
But productivity *has* gone up -- the workers are producing more
value, even if it is not particularly due to anything they've done.
You can expect them to be demanding a raise soon, and they'll get it.
This is *important* -- this is why good roads, communications, finance
systems, legal systems, etc., that are located *outside* the business
can improve worker productivity and *increase wages* inside the
business.
Say a new transport system opens up and expands the market in which a
plant can sell its product by 4x. The plant produces the same thing as
before, in the same amount. No difference.
But with 4x as many potential buyers, the price of the
product is bid up. Revenue goes up, profits go up.
The workers are now more productive than before. They are going to
demand a raise -- and will get it.
>Or alternatively turnover and productivity *do* overlap. But
>then... well, maybe I should let you tell me, as I am reduced to just
>guessing.
>
>Snip. I agreed with, and liked, your "democratic capitalisme is
>revolutionary". Nice piece, really.
>
>> >However, here there appears to be space for a gap in our (agreed upon)
>> >theory where new employers by a market mechanism would increase demand for
>> >labor and hence wages. There may be a lack of specialized activity in the
>> >branch and a monopolist may be able to *remain* a monopolist for a long
>> >time.
>>
>> How would that happen?
>
>In the following, you point out this might happen as a consequence of state
>regulations, and then of course we would agree we don't even have a free
>market anymore in the first place. But are we really sure this could *only*
>happen in such circumstances? Don't we run the risk to fall again in the
>"legalistic freedom", forgetting factual lack of freedom may well occur?
From what you wrote earlier, I think what you call a "factual lack of
freedom" is really a theoretical lack of freedom.
Factually, a person is free to take a job or not at the best wage
offered to him. However, it seems that if the alternative to working
is sufficiently unpleasant, you consider this factual freedom to be a
"lack of freedom" -- but that is theoretical and subjective on your
part.
If I decided not to continue working the best job available to me, I
couldn't afford my mortgage and would lose my home, and maybe end up
divorced, which would all be rather unpleasant. But I don't imagine
that you'd say I am "not free" to quit work just because of these
unpleasant consequences.
So I'd guess that factual freedom of choice becomes "factual lack
of freedom" in your mind not because the consequences of one option
are unpleasant, but because the consequences become *sufficiently*
unpleasant at some point -- which is subjective in your mind, can't be
measured by an objective standard, and is theoretical.
>Suppose a country, say in middle Africa, where an example of a "failed
>state" exists on a scale to make Afghanistan look reasonable. Suppose the
>country is rich in minerals. Suppose you are a hypothetical specialized
>company, knowing specialized ways of extracting minerals and metals from
>ores, which, if you can get them cheaply, result in huge profits.
>
>Are official monopolies the only way to make sure this company can get
>locals - and they *are* starving, no matter how much fun some people more
>civilized than I am can make of them - to extract the ores for very low (if
>at all existing) wages? Don't you think the combination of being far away,
>politically very fragmented and chaotic and complicated, being very, very
>primitive indeed, and the very special knowledge and technical skill
>involved might be enough to keep other candidates away?
If the profits were *marginal* maybe only one company would show up.
And because it would be making only a marginal profit itself, nobody
could say it was exploiting anybody.
But you said the profits are "huge"!
If the profits are huge enough to attract my company, why aren't they
huge enough to attract my competitors? Why are my competitors so
stupid as to pass on huge profits? I'd think they'd all be in there
one step after me -- if not before me.
You seem to trying to specify a situation where huge profits are
offset by troubles caused by the backward, distant, primitive, chaotic
location. But those troubles are just costs.
If the troubles are such as to offset all my huge operating profits so
that I will have no net profit, I'm not going to go there myself.
You have to choose whether profits, *after* providing for the cost of
all those difficulties, will be huge, marginal, or nil.
If my profits will be "huge" there in spite of all those troubles, of
course I'm going to go there -- and so will my competitors.
And if in my business it's possible to make huge profits even under
such awful conditions, then you can be darn sure I have *plenty* of
competitors.
>Mind you, I am not even denying the company might actually be saving some
>lives. I am denying the local market can be reasonably called "free" and
>"efficient". I deny the wages for which the local people might agree to
>work, are decent expressions of the wages which might obtain if these people
>had more, and better, choices.
You mean, if these people weren't these people but were different
people with more skills (such as, say, computer programming ability)
to offer, in a different nation with more infrastructure to boost
productivity and wages, dealing with a different employer offering
different jobs (such as, say, Microsoft hiring programmers).
Then, yes, they would have more skills to offer, to more employers,
and thus have more choices and better options.
Doubtless, if these people were different people in different places
things would be different.
But seriously, where would these theoretical "more, and better
choices" come from for these *real* people? And what would they be?
You are talking about *real* people who lack any skills to offer but
the basic labor used in traditional subsistence agriculture and newly
arriving primitive manufacturing. In, you say, a backward and
primitive and chaotic country.
What *real* better jobs and choices do you imagine could be available
to provide a "better expression of wages" to them where they are?
Car salesman? No roads or cars. Electrician? No technical education,
not much electricity about. Engineer? No education, nobody builds
much in a subsistence agricultural society. Manufacturing plant
manager? No manufacturing plants. Taxi driver? No cars, no roads.
Etc.
Just what "more and better choices" are you talking about? The ones
they'd have if they lived in Los Angeles -- in a country with a
million times as much capital and infrastructure?
But note -- building that first ore processing plant (and figurative
sweatshop) is the *start* of building up capital and infrastructure,
and of building roads (which it needs) and of employing local
engineers and electricians, manufacturing plant managers, and taxi
drivers and car salesmen too.
And it's the start of doing it the best way possible -- unless you can
tell us a way to get such *real* jobs there *without* such investment
in such a place.
The choice is to start or not.
Robert Vienneau
<koen.ro...@skynet.be> wrote:
> Feel free to go on in either Dutch or French.
Je ne parle pas francais tres bien. I'd like to have a better command
over languages.
I find your comments about supply and demand less than clear. But
I recommend ignoring Jom Glass (Grinch) and Patrick Sullivan
(SUSUPPLY).
--
Try http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Bukharin.html
To solve Linear Programs: .../LPSolver.html
r c A game: .../Keynes.html
Peter Lawrence
>
> Peter Lawrence <pet...@netlink.com.au> wrote:
>
> >First, "corrupt" happens.
>
> Yes, but generally we would expect the victims of "corrupt"
> to benefit, not be harmed, by policies which increase the
> "size of the pie."
I disagree, because of the short termism involved. Whether the pie is
increasing or not, the corrupt will never leave anything they can carry away.
That is, even in cultures where they don't see a moral problem and only see
what they are doing as taking what's up for grabs, each corrupt individual
realises that it is only a brief window of opportunity - so none of them has
any interest in leaving anything in the hive to let the bees overwinter, so
to speak.
>
> >Second, it also applies in cases that aren't corrupt. Absentee landlordism
> >isn't corrupt.
>
> Yes, and again: Generally, it is not the case that increasing
> the output of the system will manifest itself as lower standards
> of living for workers. The situation you're suggesting is
> typical is actually unlikely.
Well, first off, I was NOT suggesting it was typical - just that it was a
behaviour mode that can and does occur, so we do have to look out for it and
it is quite wrong to rule it out of consideration.
But once we consider time scales, it really can be quite common, and then
PEOPLE do indeed experience lower standards. That is, while Scotland is not
currently in a similar phase, it did indeed go through one. It appears a
serious risk for any culture, somewhere along the line.
I emphasised "people" as I entirely agree that workers rarely end up worse
off - the people who do are squeezed out and don't show as "workers". This is
a statistical artefact, though, and not what we should be measuring. Even
during the worst days of the great depression workers were far better off
than workers of the mid 1920s had been (though they might have felt less
secure).
>
> > In fact, the presence of a reserve currency may tend to
> >produce it, hidden under apparent capital flows that are merely flows of fiat
> >money.
>
> You will have to explain what this means.
The usual case, with foreign debt, is that it was incurred when outside
capital came in; this results in greater local production than would
otherwise have happened, as a result of deferred consumption by the
outsiders. However, if a reserve currency is involved, it is also possible
that a proportion of the nominal funds involved is simply fiat money, printed
by the outsiders but in reality simply mobilising LOCAL resources. All well
and good, except that there is a difference in the status quo post. The
dividends still leave the country - but they were obtained at local expense
just as much as absentee owned lands were obtained from locals. It is simply
a proxy for absentee landlordism. Only, the two situations are inextricably
mixed, and we can't sort anything out. As someone once said, "half our
advertising is wasted - if only we knew which half!". I truly don't know the
proportions - just that it is a whole open question, all over again.
>
> >Fourth, it even happens transitionally when everyone is capable of
> >benefitting - a simple case of the spiderweb theorem, when people commit to
> >growing coffee based on previous season's pricing.
>
> The spiderweb model (I have never seen it referred to as a "theorem")
> went out the door of economic theory about 40 years ago.
It was in textbooks within the last 30 years. It was downplayed not because
it was wrong but because it became clear that in most cases farmers had
enough information to anticipate well enough, so prices settled rather than
cycling - the valid cases were unusual. However the framework itself is
sound, and I hope to show that it has actually come up recently.
The thing is, we aren't talking about localised farmers who can observe and
anticipate each other. We do in fact observe that central African coffee
growers, e.g. in Uganda, face a depressed market because of recent planting
decisions in Vietnam. They just don't have the reliable information to assess
their likely price environment.
By the way, even coffee isn't always grown at the expense of subsistence
resources. I have found that in countries that are up against different
"checks to population", or were until recently, food supply isn't currently a
limit. East Timor and Uganda have land to spare, just now - in fact East
Timor is reviving growing wild coffee from areas that were deserted but were
once planted, without needing much replanting.
And even
> under its predictions, it isn't clear that workers are better off
> under enforced subsistence farming than under oscillating prices
> of a "cash" crop.
Well, it should be, from Nassau Senior's reasoning. The thing is, in a bad
year (in money terms) they just can't import food - and most of these
countries have voluntarily cut back their own area in staple production to
get the cash crop area.
>
> >Fifth, there can be other market imperfections around producing much
> >the same
>
> True. Whether increased trade will interact with such imperfections
> in such a way to make most people worse off is certainly unclear.
That wasn't the issue. I am quite confident that "most" people are better
off, in the same sense that "workers" are (see above). The issue is twofold,
are people being squeezed out? and, is the effect cumulative, like a rope
fraying at the end, so that since there is always someone who is most
marginal in the end everyone suffers? The worst case, measured in a
sufficiently long term, is that the rewards are simply those of being eaten
last.
I hasten to add, I doubt if the very worst cases often happen; I raise them
for completeness, in the same spirit as much of this discussion, so we can
look out for them and take precautions, NOT because they are particularly
likely (unless we close our eyes to them).
>
> >I'm not trying to present a general case anyway - just to show that examples
> >exist, and that we should look out for them rather than get all dismissive
> >and refuse to look into cases. PML.
>
> I agree. The flip side of that coin is that the overwhelming
> evidence that shutting down developing economies to trade
> generally does more harm than good should not be dismissed
> as apologism for Nike.
In this area, I'd like to find out some way that worked even better than
either. I'm not talking synthesis here, just keeping on looking as we haven't
got there yet after all. It occurred to me, the right way to build up wider
trading zones might be to go incrementally via small additions of developing
economies to larger accretions that came together when they were at similar
levels. E.g., Australia and Madagascar might be better off opening to each
other before they opened to the whole world. But I really don't know any way
of assessing this in advance. PML.
susupply
> I find your comments about supply and demand less than clear. But
> I recommend ignoring Jom Glass (Grinch) and Patrick Sullivan
> (SUSUPPLY).
Could it be that Robert got up on the wrong side of the bed this morning and
found the NY Times reporting that his favorite regime is (gasp!) embracing
free markets?
http://www.nytimes.com/2002/02/19/business/worldbusiness/19KORE.html
"I saw some Americans of Korean origin looking at oil and gas prospects,"
said Glyn Ford, a British member of the European Parliament who was in
Pyongyang last summer for the opening of the British embassy. Given North
Korea's power shortages and rundown ports, he said: "At the moment, very
cheap labor is the only thing the North Koreans have going for them."
Koen Robeys
As this is becoming exceedingly long, allow me to take some parts in the
order that suits me. This is not in order to score points by changing the
order, and in general you can assume that whatever was snipped is agreed
upon. Let me then start with:
> If wages don't rise promptly to match the general order of
> productivity, then you *don't* have a competitive market. Maybe the
> government is regulating wages downward. There is some such
> anti-competitive obstacle -- if you remove it, wages will rise.
What we have, and what we need, then, are *competitive* markets. And my
questions can be re-expressed as: when are markets not competitive? What
causes "non-competitiveness"? And yes, we agree on many of those. Backward
cultures, misplaced government intervention, historical heritages... you
name it.
But all these, of course, should not prevent us from asking what we
ourselves contribute. Is it thinkable markets are *not* competitive, as a
consequence of factual causes, even though prices are agreed on by supply
and demand? Can for example a situation exist where such a disequilibrium
exists between supply and demand of, say, labor, that "free market prices"
occur, which are not prices that would occur in "competitive markets"?
Now we appear to learn no, this can't be, because the prices paid for labor
will tend to the level where they agree with productivity. Yes, *if* markets
are competitive, but this is the very question we are asking. We can hardly
appeal to competitive markets in order to derive a tendency in prices, which
then prove markets are competitive. So let us do as you advised in a
previous post and actually look at a candidate for such a situation; my
African example:
> But you said the profits are "huge"!
>
> If the profits are huge enough to attract my company, why aren't they
> huge enough to attract my competitors? Why are my competitors so
> stupid as to pass on huge profits? I'd think they'd all be in there
> one step after me -- if not before me.
>
> You seem to trying to specify a situation where huge profits are
> offset by troubles caused by the backward, distant, primitive, chaotic
> location. But those troubles are just costs.
Here again we have a story as how it might well be the case that other
companies just rush in, and in order to take away their share, bid up the
levels of wages. However, can we just take this for granted? Can a
specialized company not already have a level of experience, technical
knowledge and contacts, making huge profits where other companies would have
to make too many costs to acquire the knowledge required? If not, is this by
definition the case? Is it possible to critically examine such a claim, or
can it be dismissed out of theory?
And if I can be sure, as you say, there will be *plenty* of competitors, how
could that be in the first place, if at least for some time those huge
profits have not been made? We assume labor productivity is low, and hence
labor is cheap, but we also assume competitors will turn up - hence profits
must be high, for some time at least.
Now time lags would be short - but, oops, that was when we already talked
about competitive markets, which is still what we are trying to prove. So
maybe time lags might still be long after all? What is going to attract the
efforts to engage in costs, if there wasn't a gap between current costs and
current revenues; and if this gap wouldn't show some signs of persistency?
After all, we are talking about the heart of Africa.
Now asuming for a moment that this gap would even *have* to exist, in order
to appeal to the very market forces we all the time accept as the cure of
everything, we come then to the point where a local worker (in my picture on
the edge of starvation) did accept a job under such conditions that the
resulting profit might attract competitors:
> >This is nothing but a "free
> >market" where the fact of accepting a deal should send meaningful signals
to
> >the market. However, if the one accepting the deal only faces either the
> >deal or starvation, it is reasonable to think he concluded at prices
where
> >he would not have concluded should his position have been stronger.
>
> No, it isn't.
>
> It is reasonable to conclude there would have been *no deal* if
> his position had (somehow) been stronger, not that he would have
> negotiated a much higher price.
>
> If that person is *so* poor as to be on the edge of starvation, then
> what does he have to offer the sweatshop operator? Not much -- only
> his raw labor. (He doesn't have a degree in engineering, obviously!)
> Raw labor isn't worth much.
But how can we know his raw labor isn't worth very much? Does labor suddenly
have an intrinsic value; Marx reborn? Or if we know the value of labor by
supply and demand; then again we cannot suppose competitive markets will
assure an adequate remuneration when competitive markets are what we yet
have to prove. Therefore I still think my hypothetical company may be
sitting on its franchise for a considerably longer time than it would be
under "competitive markets". And my laborer would still have concluded at
higher prices if his position would have been stronger.
Even better, you and I might well find an easy agreement on this problem,
for how can we make his postion stronger? By offering a more diversified
demand for his labor, of course. More MNC's and more competitive markets are
what we need. But in order to see such a solution, we would need an
agreement the problem can exist in the first place, and it looks like we may
not have reached that point.
Anyway, this bring me to another point, which to be honest caused me some
surprise:
> No. You keep saying this -- low wages = high profits. It is not so.
> In fact the reverse is true.
>
> Low-wage industries typically have *low* profits.
> It is high-wage industries that have *high* profits.
>
> The reason is simple: If the business is high-profit then the workers
> are highly productive. In a competitive market those workers will
> demand their share of those big profits in wages.
>
> But if the business is low-profit its employees have low productivity.
> They have no grounds upon which to demand a higher wage -- and the
> employer has no money with which to pay it.
Now I'll agree first your pointing to the importance of productivity is
someting that hadn't occurred to me before. However, can you now dismiss
that for a *given* turnover more profits will remain, if less costs, say,
wages, would be reached? Not possible in competitive markets, you will say,
but it's the same problem, we can't appeal to competitive markets in order
to prove they exist.
And to return to the point, didn't the nineteenth century capitalists pay
low wages while making large profits? Because if such is the case, all I
said was that in some places of the world similar situations might exist and
cause the start of the "democratic capitalist revolution" to abort. And yes,
this might then be caused by incompetent government, but I still think it
might also be caused by the fact that the game of free supply and demand in
itself does not guarantee "competitive markets".
There was, I think, a last point; we could probably go on discussing till
the end of times:
> >Assuming they are not the same, turnover may
> >increase, say because of a fashion, a hype in our product, made prices go
> >up. But if our workers, working just as hard and productively, are still
> >paid the same. In such a case profits will go up, without productivity
> >causing this.
>
> But productivity *has* gone up -- the workers are producing more
> value, even if it is not particularly due to anything they've done.
> You can expect them to be demanding a raise soon, and they'll get it.
Now the situation is as follows: a given low productivity busines sells its
produce, making by definition a very small profit, and this after paying
wages which, while from many points of view an outrage, still save lives.
Suddenly, a hype sets in, and the wood of the trees felled by the very low
productivity labor can be sold at ten times the original price. And hop! the
workers no longer are low productivity workers. But in another chapter we
could deduce their status of low productivity labor entirely from the fact
they were living at subsistence level.
It really looks like radically different factors, like sales-prices *do*
have some influence, wouldn't you think so? And once again I completely
agree the workers would demand and get their share of the value in
competitive markets. Only I doubt competitive markets in the real world
exist as copiously as they do in theory. And make no mistake, my conclusion
out of this would be that we have to work hard in order to create more
competitive markets.
Well, I sincerely hope you don't mind my cut and paste style, which I used
in good faith, because in such long posts, the question and answer mode
began to make for very fragmented discussion.
Ciaooooo, Koen
Koen Robeys
> > Sorry for not being properly civilized. Feel free to go on in either
Dutch
> > or French.
>
> Civilized has nothing to do with it, but having less than a command of
> English is the most charitable explanation of your inability to produce
> logical arguments in English.
Right. Actually, I am not surprised you manage to extract even from the fact
of speaking only English, ways to boast of yourself, . But anyway. So you
*repeat* claims even after I pointed out you couldn't prove them, just as
you repeated accusations of "changing words so as to mean the opposite"
after I showed this was not true, or as you continued to produce logical
sophisms even after I showed you had to cut and paste in my text in order to
obtain the desired results.
Amazing, too, how fast people have to appeal to ad hominems when their
sacred beliefs are put in question. Did it ever occur to you that, when you
are so weak, you 'd do a better job at defending free markets by just
keeping your mouth shut about them?
As I said, anyway. One can never know beforehand with whom it will pay to
enter a discussion, and who will prove to be a waste of time. But then,
people with real market experience know all about cutting losses in time,
don't they?
All the best,
Koen
Christopher Auld
>And to return to the point, didn't the nineteenth century capitalists pay
>low wages while making large profits?
Nope. The relative constancy of the shares of national output
accruing to capital and labor is one of the key stylized facts
in economics.
>cause the start of the "democratic capitalist revolution" to abort. And yes,
>this might then be caused by incompetent government, but I still think it
>might also be caused by the fact that the game of free supply and demand in
>itself does not guarantee "competitive markets".
As even Bob Vienneau has correctly pointed out, you keep abusing
technical terms. "Demand," "supply," and "competitive markets"
are all such terms.
>It really looks like radically different factors, like sales-prices *do*
>have some influence, wouldn't you think so? And once again I completely
>agree the workers would demand and get their share of the value in
>competitive markets. Only I doubt competitive markets in the real world
>exist as copiously as they do in theory.
A question to think about: the productivity of barbers in 2002 is pretty
much exactly what it was in 1902. Yet barbers make much higher wages now
than they did a century ago. Why?
--
Chris Auld
Department of Economics
University of Calgary
au...@ucalgary.ca
susupply
"Koen Robeys" <koen.ro...@skynet.be>
buying himself a ticket for the Great Usenet Self-Unawareness Derby,
wrote in message news:3c72b2d2$0$75166$ba62...@news.skynet.be...
> Right. Actually, I am not surprised you manage to extract even from the
fact
> of speaking only English, ways to boast of yourself, .
That's really devastating coming from a guy who immediately boasts of
himself:
> But anyway. So you
> *repeat* claims even after I pointed out you couldn't prove them, just as
> you repeated accusations of "changing words so as to mean the opposite"
> after I showed this was not true, or as you continued to produce logical
> sophisms even after I showed you had to cut and paste in my text in order
to
> obtain the desired results.
Aren't you the guy who just got through rearranging Grinch's comments for
your own convenience?
> Amazing, too, how fast people have to appeal to ad hominems when their
> sacred beliefs are put in question.
I've recently been reminded of this phenomenon.
> Did it ever occur to you that, when you
> are so weak, you 'd do a better job at defending free markets by just
> keeping your mouth shut about them?
As I said.
> As I said, anyway. One can never know beforehand with whom it will pay to
> enter a discussion, and who will prove to be a waste of time. But then,
> people with real market experience know all about cutting losses in time,
> don't they?
Oh we Yanks don't mind holding the hands of our Euroweenie cousins once in
while. Our form of nobless oblige; given that you can't protect
yourselves, mint coins that don't fall apart, or even judge an ice skating
competition.
Patrick
Grinch
<koen.ro...@skynet.be> wrote:
>"Grinch" <oldn...@mindspring.com> wrote
>
>As this is becoming exceedingly long, allow me to take some parts in the
>order that suits me. This is not in order to score points by changing the
>order, and in general you can assume that whatever was snipped is agreed
>upon. Let me then start with:
>
>> If wages don't rise promptly to match the general order of
>> productivity, then you *don't* have a competitive market. Maybe the
>> government is regulating wages downward. There is some such
>> anti-competitive obstacle -- if you remove it, wages will rise.
>
>What we have, and what we need, then, are *competitive* markets. And my
>questions can be re-expressed as: when are markets not competitive? What
>causes "non-competitiveness"? And yes, we agree on many of those. Backward
>cultures, misplaced government intervention, historical heritages... you
>name it.
>
>But all these, of course, should not prevent us from asking what we
>ourselves contribute. Is it thinkable markets are *not* competitive, as a
>consequence of factual causes, even though prices are agreed on by supply
>and demand? Can for example a situation exist where such a disequilibrium
>exists between supply and demand of, say, labor, that "free market prices"
>occur, which are not prices that would occur in "competitive markets"?
As others have pointed out, it makes it difficult carry on a logical
conversation when you are sufficiently unfamiliar with the meanings of
the terms you are using so as to contradict yourself three times in
one sentence without realizing it.
If you are really as interested in this subject as you seem to be, and
as more people should be, then perhaps, rather than try to deduce it
all over usenet, it may be time to dip into a 101 textbook to learn
the definitions of the terms you place in quotations.
In the future, this would help you avoid constructing (and believing)
arguments with the structure "But may it be that X is not X?"
I will just say here that if you have free market markets you will
*not* have "disequilibrium exist between supply and demand".
If you do not understand why you will not, I can do more than suggest
that you look it up. There are *many* books and academic web sites
that can tell you, and you will gain in your understanding of what is
an important subject that too few people bother to learn about.
(Certainly fewer than have opinions about it.)
No offense meant.
>Now we appear to learn no, this can't be, because the prices paid for labor
>will tend to the level where they agree with productivity. Yes, *if* markets
>are competitive, but this is the very question we are asking. We can hardly
>appeal to competitive markets in order to derive a tendency in prices, which
>then prove markets are competitive. So let us do as you advised in a
>previous post and actually look at a candidate for such a situation; my
>African example:
>
>> But you said the profits are "huge"!
>>
>> If the profits are huge enough to attract my company, why aren't they
>> huge enough to attract my competitors? Why are my competitors so
>> stupid as to pass on huge profits? I'd think they'd all be in there
>> one step after me -- if not before me.
>>
>> You seem to trying to specify a situation where huge profits are
>> offset by troubles caused by the backward, distant, primitive, chaotic
>> location. But those troubles are just costs.
>
>Here again we have a story as how it might well be the case that other
>companies just rush in, and in order to take away their share, bid up the
>levels of wages. However, can we just take this for granted? Can a
>specialized company not already have a level of experience, technical
>knowledge and contacts, making huge profits where other companies would have
>to make too many costs to acquire the knowledge required?
You are *still* trying to assume a situation where somehow one company
is *hugely* profitable after paying given costs, but all others doing
the very same thing cannot make a profit because of the same costs.
Relying on "technical knowledge and contacts" doesn't do it. They are
just costs. If after paying to acquire them company A remains hugely
profitable, why wouldn't companies B and C be profitable too?
In another group where I spend some time the regulars invoke Alien
Space Bats for such occasions.
As in: "Company A enters a business and makes *huge* profits. No
obstacles prevent A's competitors from entering and doing the same
thing, but let's say ASBs stop any from doing so ... "
ASBs are very popular and useful over there for proposing what-ifs
("suppose ASBs had transported the Wehrmacht over the Royal Navy to
Dover, could it have been supplied air?") while showing that one
*knows* they are counterfactual. But if when describing a real life
situation others note "You'll need ASBs for that", it's not an
endorsement.
I'd think ASBs would be a natural for an econ group, but I digress....
Anyway, can you name any *real world* way in which Company A may be
uniquely different from all its competitors such as to enable it to
make *huge* profits --- *after* incurring the costs of paying for
advanced technology, contacts, etc. -- in your remote country, while
none of the others can't make a profit there?
Or shall we just suppose or assume it to be true, and leave it to the
ASBs to account for it?
>If not, is this by
>definition the case? Is it possible to critically examine such a claim, or
>can it be dismissed out of theory?
Well, to answer the "theory" part of your question you should read a
101 econ book to learn at least the introductory theory for yourself,
-- since I doubt that were I here to give the answer you are skeptical
about you'd say "Sure, OK! "
However, *factually*, how many major companies can you name that make
*huge* profits while having no competitors in a market, while
competitors are free to enter? So that such singular companies are
able to raise prices or push down wages below economically efficient
levels? To "exploit" consumers and workers.
This would be the "unenforced monopoly" supported by no barriers of
entry. How many of these can you name in real life?
>And if I can be sure, as you say, there will be *plenty* of competitors, how
>could that be in the first place, if at least for some time those huge
>profits have not been made? We assume labor productivity is low, and hence
>labor is cheap, but we also assume competitors will turn up - hence profits
>must be high, for some time at least.
>
>Now time lags would be short - but, oops, that was when we already talked
>about competitive markets, which is still what we are trying to prove. So
>maybe time lags might still be long after all? What is going to attract the
>efforts to engage in costs, if there wasn't a gap between current costs and
>current revenues; and if this gap wouldn't show some signs of persistency?
>After all, we are talking about the heart of Africa.
Your objection is that it takes time? Of course it takes time to gain
technical knowledge, knowledge of markets, to develop and invest
capital, build roads, change laws, for culture to evolve, and all the
rest. We've been over that before.
If it didn't take time, then after Adam Smith had his bright idea we
could have all jumped right into the 24th Century.
The question is: what policies speed development and *minimize* this
time?
Again, for the real world, I refer you to the data on international
wages at the BLS web site and development rates from the World Bank.
It takes *much less* time for developing nations that participate in
"globalization" than for those that don't. In fact, those that don't
seem stuck or going backwards.
How come? What's the difference?
Part of your mind still seems to be feeling "if people are so poor
compared to us, they *must* be being exploited by us *somehow* ...or
at least be having their development be retarded by us *somehow*."
But the *more* they deal with us, the *faster* they get rich. You can
look it up.
Why is that?
>Now asuming for a moment that this gap would even *have* to exist, in order
>to appeal to the very market forces we all the time accept as the cure of
>everything, we come then to the point where a local worker (in my picture on
>the edge of starvation) did accept a job under such conditions that the
>resulting profit might attract competitors:
Why do you have the need to picture someone "on the edge of
starvation"? We are talking about real people, 5 billion of them, who
are living the lives they've always lead and that their ancestors
lead before them. They are not starving -- to the contrary, their
numbers are growing substantially.
You give them an offer: they can continue to live as they always have,
or they can adopt a new work style for you and make some money. The
choice is up to them. How rough is that on them?
Ah, but if they are "near starving" then emotionally it is easier to
believe they must be being exploited, or held back, or *something*,
eh?
Except .... for the *fourth time* now .... employers *don't* seek low
wages!!! They seek high productivity!
In the classic example that 19th Century economists used,
an employer will *not* hire the starving man for the lowest wage,
because .... a starving man *can't work*!!
Instead, the employer will pay a *higher* wage to attract the robust,
healthy, man who will put in a good day's work for the day's pay.
So get your bogus image of the "starving worker" out of your head.
First, the workers being hired aren't starving.
Second, if they *were* starving, the employers *wouldn't* hire them
-- any more than General Motors would hire disease-riddled invalids to
work its assembly line just because it could get them for minimum
wage, a fraction of the regular rate.
Try at last to grasp the concept that employers seek *productivity*
for pay, NOT low wages.
We talked about Haiti a long time ago. If you are unwilling to grasp
basic concepts like why US manufacturers aren't rushing into Haiti to
exploit the low wage rate there, there will be no point in going on
with this until after you read that book.
>> >This is nothing but a "free
>> >market" where the fact of accepting a deal should send meaningful signals
>to
>> >the market. However, if the one accepting the deal only faces either the
>> >deal or starvation, it is reasonable to think he concluded at prices
>where
>> >he would not have concluded should his position have been stronger.
>>
>> No, it isn't.
>>
>> It is reasonable to conclude there would have been *no deal* if
>> his position had (somehow) been stronger, not that he would have
>> negotiated a much higher price.
>>
>> If that person is *so* poor as to be on the edge of starvation, then
>> what does he have to offer the sweatshop operator? Not much -- only
>> his raw labor. (He doesn't have a degree in engineering, obviously!)
>> Raw labor isn't worth much.
>
>But how can we know his raw labor isn't worth very much? Does labor suddenly
>have an intrinsic value; Marx reborn? Or if we know the value of labor by
>supply and demand; then again we cannot suppose competitive markets will
>assure an adequate remuneration when competitive markets are what we yet
>have to prove. Therefore I still think my hypothetical company may be
>sitting on its franchise for a considerably longer time than it would be
>under "competitive markets". And my laborer would still have concluded at
>higher prices if his position would have been stronger.
You keep saying this.
But in my last post I asked you HOW his position could be stronger,
and you snipped it entirely.
Since this seems to be the heart of your argument and belief system, I
think you should answer it here.
I even gave you a suggestion for improving his position --- he could
immigrate to Los Angeles, where his labor would buy a whole lot more
than it would in his homeland, because the U.S. is an economy with a
zillion times more capital.
As Prof. Auld pointed out, using scissors to cut hair in L.A. will
make him a heck of a lot more money than doing the same thing at home.
But *you* stipulated that he is "near starving" in a most backward
country in the heart of the Africa.
OK, so *how* is a near starving person in a most backward country in
the heart of the Africa going to have a better bargaining position
than the one he actually has, which you specified?
Please specify the additional possible choices in his *real* position.
>Even better, you and I might well find an easy agreement on this problem,
>for how can we make his postion stronger? By offering a more diversified
>demand for his labor, of course. More MNC's and more competitive markets are
>what we need. But in order to see such a solution, we would need an
>agreement the problem can exist in the first place, and it looks like we may
>not have reached that point.
>
>Anyway, this bring me to another point, which to be honest caused me some
>surprise:
>
>> No. You keep saying this -- low wages = high profits. It is not so.
>> In fact the reverse is true.
>>
>> Low-wage industries typically have *low* profits.
>> It is high-wage industries that have *high* profits.
>>
>> The reason is simple: If the business is high-profit then the workers
>> are highly productive. In a competitive market those workers will
>> demand their share of those big profits in wages.
>>
>> But if the business is low-profit its employees have low productivity.
>> They have no grounds upon which to demand a higher wage -- and the
>> employer has no money with which to pay it.
>
>Now I'll agree first your pointing to the importance of productivity is
>someting that hadn't occurred to me before. However, can you now dismiss
>that for a *given* turnover more profits will remain, if less costs, say,
>wages, would be reached? Not possible in competitive markets, you will say,
>but it's the same problem, we can't appeal to competitive markets in order
>to prove they exist.
Again, you are befuddling things with what you think is logic because
you don't understand the meanings of the terms you are using.
Your statement has the form: "Assume X,Y, & Z exist, which can only
be true if A exits. Ah, but A is the thing to be proven! And the
thing to be proven cannot be assumed!"
Again, I can only refer you to a good book.
>And to return to the point, didn't the nineteenth century capitalists pay
>low wages while making large profits?
No.
Next myth.
>Because if such is the case, all I
>said was that in some places of the world similar situations might exist and
>cause the start of the "democratic capitalist revolution" to abort.
And if such is *not* the case?
> And yes,
>this might then be caused by incompetent government, but I still think it
>might also be caused by the fact that the game of free supply and demand in
>itself does not guarantee "competitive markets".
>
>There was, I think, a last point; we could probably go on discussing till
>the end of times:
>
>> >Assuming they are not the same, turnover may
>> >increase, say because of a fashion, a hype in our product, made prices go
>> >up. But if our workers, working just as hard and productively, are still
>> >paid the same. In such a case profits will go up, without productivity
>> >causing this.
>>
>> But productivity *has* gone up -- the workers are producing more
>> value, even if it is not particularly due to anything they've done.
>> You can expect them to be demanding a raise soon, and they'll get it.
>
>Now the situation is as follows: a given low productivity busines sells its
>produce, making by definition a very small profit, and this after paying
>wages which, while from many points of view an outrage, still save lives.
The "outrage" of improving the human condition, eh?
But we both digress...
>Suddenly, a hype sets in, and the wood of the trees felled by the very low
>productivity labor can be sold at ten times the original price. And hop! the
>workers no longer are low productivity workers.
That is correct. Because they are producing items of more value.
That is an *objective* fact and concept.
(You seem to prefer subjective ones, like those theoretical bargaining
positions that people don't have.)
>But in another chapter we
>could deduce their status of low productivity labor entirely from the fact
>they were living at subsistence level.
But that was at another time, when they were producing items of less
value, right?
>It really looks like radically different factors, like sales-prices *do*
>have some influence, wouldn't you think so?
We've gone over before that *many* things beside the sweat of one's
brow affects one's productivity -- including changes in the demand for
one's product most assuredly. So I hope this isn't a surprise to you
now.
The buggy makers became less productive after the introduction of the
automobile, and contributed less to the wealth of society, even if
they worked just as hard.
> And once again I completely
>agree the workers would demand and get their share of the value in
>competitive markets.
> Only I doubt competitive markets in the real world
>exist as copiously as they do in theory.
And yet, instead of having a life expectancy of 25 while living in a
thatched hut or the equivalent, like countless generations of your
ancestors, you are indoors reading this on a computer made of parts
assembled doubtless from all over the world, with indoor plumbing and
heating and a choice of clothes in your wardrobe -- the fibers and
synthetics of which come from all over the world -- with a
refrigerator made of parts created in distant locations, containing
food from as far away in the world as you want, which you can eat
while watching a tape from America played on a VCR from Asia ....
All testament to how *dubious* it is that markets are as powerful or
as copious as the text books describe them to be.
Ah, how much we take for granted! ;-)
> And make no mistake, my conclusion
>out of this would be that we have to work hard in order to create more
>competitive markets.
Well, we can agree on that.
Let's get Mugabe out of there and get things started.
Grinch
<susu...@mindspring.com> wrote:
>
>"Robert Vienneau" <rv...@see.sig.com> wrote in message
>news:rvien-479104....@news.dreamscape.com...
>
>> I find your comments about supply and demand less than clear. But
>> I recommend ignoring Jom Glass (Grinch) and Patrick Sullivan
>> (SUSUPPLY).
Ha! "All publicity is good publicity as long as they get the ..."
Aw, crap.
Koen Robeys
(snip)
> No offense meant.
Oh, none taken at all. Did I really make the impression to think I actually
know something about economy? It's almost amusing. No, the symptoms are very
clear, you are right and I - you 'll recognize the expression - "not even
wrong". But these are questions I have, and I am asking my questions as good
as I can, and with what knowledge of terminology I have.
So allow me to thank you for not only pointing out what wasn't offending in
the least, but for going further than just pointing it out, or sneering, by
taking the effort to actually explain.
Thank you.
It was more important than only being helpful to me. In fact, I really have
been debating anti-globalists for some time. Things at some points became
quite acid, such as when I refrused to admit that (to show just one example)
"Afghanistan was yet another famine caused by the West". These people not
only make such claims, but also draw many supporters, as I discovered when a
whole bunch waded in, and cutting and pasting in my texts was not the only
tactic employed to "discover" contradictions in what I said.
Now allow me to try to pay for some of the irritation I obviously caused. At
one point, now some time ago, one of these people accused me - and I tell
you this in earnest - to abuse my *knowledge of economy* in order to make
fun of them. As this was amusing even to me, I guess I may now be making at
least one contribution which doesn't give offense.
But what is this telling us? It is telling us that quite a lot of people are
advocating policy-making based on such a state of insight, that they can
talk in earnest about my "abuse of economic knowledge." And now they may
have so little knowledge that I can tell, but they also have votes. How are
"we", advocates of market-economies and free trade (acknowledging I don't
even know what these difficult words mean) going to adress them?
Are you going to recommend them to read the textbooks before they ask their
questions? They won't. I may, but they won't. They will try to get even more
votes, and they will partly do so by speaking their mind in
usenet-discussions. If all "we" can do is wait till they read the books, or
sneer, then "God help the world" or something of this line.
But in my case the recommendation is harmless. I was in much doubt whether I
should answer the pointed questions you asked here. It is easy to interpret
them as if you want to hear what more problems I have, but in the end I
choose to interpret them as another way to say "go read the books". If I'm
wrong, and you really want to know how I imagined my African example, tell
me - though I don't expect so.
:-)
So I think this is where I'll stop bothering you. I'm genuinely sorry for
the irritation I caused. You told me a few things I didn't know (indeed),
and there are indeed some things of which I just don't understand the logic.
But that too helps, for it indicates where my blind spot lie. I once again
snip your text, but not before having it read with attention, I thought it
once more a very good post. It was nice discussing with you, but I
understand nobody else was amused.
Oh, and by the way, if nineteenth century capitalists, as I assumed, did not
make huge profits as a consequence of the low wages they paid, then I'm
wrong, of course.
Thanks again,
Koen
Mason Clark
>
>Well, to answer the "theory" part of your question you should read a
>101 econ book to learn at least the introductory theory for yourself,
An extraordinarily dangerous thing to do. You can too easily get
trapped in the alien spider web of standard economics.
>This would be the "unenforced monopoly" supported by no barriers of
>entry. How many of these can you name in real life?
MS?
Mason C admitting I didn't read much in this thread, but
Grinch
<koen.ro...@skynet.be> wrote:
>"Grinch" <oldn...@mindspring.com> wrote
>
>(snip)
>
>... I really have
>been debating anti-globalists for some time. Things at some points became
>quite acid, such as when I refrused to admit that (to show just one example)
>"Afghanistan was yet another famine caused by the West".
Of course! Modern capitalists created all the poverty in the world for
the prior 50,000 years.
Who else could have? ;-)
(Although the late Soviet Union did have something to do with recent
conditions in Afghanistan.)
>These people not
>only make such claims, but also draw many supporters, as I discovered when a
>whole bunch waded in, and cutting and pasting in my texts was not the only
>tactic employed to "discover" contradictions in what I said.
>
>Now allow me to try to pay for some of the irritation I obviously caused. At
>one point, now some time ago, one of these people accused me - and I tell
>you this in earnest - to abuse my *knowledge of economy* in order to make
>fun of them. As this was amusing even to me, I guess I may now be making at
>least one contribution which doesn't give offense.
>
>But what is this telling us? It is telling us that quite a lot of people are
>advocating policy-making based on such a state of insight, that they can
>talk in earnest about my "abuse of economic knowledge."
Well, every field is full of ignorant cranks. Go over to the
sci.physics.* groups and you'll find no shortage of people trashing
Einstein.
"How can space be curved and time relative? In spite of all logic and
what we see with our own eyes? It's a spider web of deceit by the
'professionals', but *here's* the truth...."
>And now they may
>have so little knowledge that I can tell, but they also have votes.
Yes, *that's* the difference with economics. Nobody votes on the
application of the laws of physics or chemistry or aerodynamics.
If a physicist or chemist applies crackpot ideas at work, or an
aerodynamic engineer designs a plane that drops from the sky, he gets
*fired* by his boss and that's the end of it.
So all the cranks wandering around the edges of those fields don't
have much effect.
But applying the laws of economics gets voted upon by the general
public all the time -- and if some awful idea that produces economic
destruction *sounds* good it passes.
Here in NYC they say, "Rent control will keep your rent from rising
... and also, it *helps the poor*, since low rents are good for the
poor."
So people say "Sure I'll vote for that. It's good for me and helps the
poor too!" And we have rent control re-enacted every three years for
the last 55 years.
Thus, vast amounts of the city's rental apartment stock disappear
because landlords can't cover their cost. Much of the Bronx turns
into a wasteland, while in richer neighborhoods former rental
apartments are converted into co-ops. Because fewer apartments are
available, if you need one the price on the market for one doubles.
So who is screwed? The *poor* of course, because they are the ones who
need to find new apartments to raise families. Many are immigrants.
Who benefits? The *rich* of course. Almost all rent controlled
apartments are in the wealthy areas of Manhattan, and are held by rich
people who have enjoyed near-frozen rents for 20, 30, 40 years.
And every three years, when rent control is up for renewal, all these
rich people march in the streets of Manhattan saying rent control must
be preserved to help *the poor* (but without any means testing, of
course). And if you talk to them, most of them actually believe it!
Even though there are never any marches to preserve rent control in
the poor areas of the city.
But the rich of Manhattan are disporportionately influential in local
politics, so rent control gets renewed.
And the city pays over $1billion a year just for the administrative
paperwork costs of this travesty.
Could an economist have warned against all this? Sure.
"Next to bombing, rent control seems in many cases to be
the most efficient technique so far known for destroying cities, as
the housing situation in New York City demonstrates."
--Assar Lindbeck, former chairman of the Nobel Prize committee
for economics
And in two surveys of economists published in the American Economic
Review, of national and international economists, on 30 different
issues the one they agreed upon most, with near 100% unanimity, is
that rent control harms cities.
But can you expect voters to be economists? Of course not.
Should they defer to the opinion of economists on economic matters?
That would be undemocratic! Should they *refer* to the opinions of
economist on economic matters? That would be inconvenient --
especially if they disagreed with what you want.
So we get rent control for 55 years and counting.
Multiply that by how political decisions are made on 10,000 other
economic issues that don't affect most people nearly as directly as
rent control affects most NYCers, and here we are.
>How are
>"we", advocates of market-economies and free trade (acknowledging I don't
>even know what these difficult words mean) going to adress them?
>
>Are you going to recommend them to read the textbooks before they ask their
>questions? They won't. I may, but they won't.
Nah, they won't. The *easiest* way to disagree with the books is to
have no idea at all what they say. That way you can create "bogey
men" in your head to feel self-righteous about, which makes you feel
good and justifies the fun of name calling. And you also don't have
to trouble with any actual facts or arguments, or the possibility that
your ideas would actually screw over those very people you profess so
greatly to care for.
We have people who've been demonstrating this in this newsgroup for
years.
>They will try to get even more
>votes, and they will partly do so by speaking their mind in
>usenet-discussions. If all "we" can do is wait till they read the books, or
>sneer, then "God help the world" or something of this line.
Oh, it's not that bad, really.
You can never win over by argument people who've made up their mind on
*anything*, not just economics. To most people, the losing face
involved in conceding they are wrong is much worse than losing the
argument itself -- so they never will.
But the great majority of people haven't made up their minds on the
great majority of things. So if you inform yourself and are reasonable
in your presentations, you can influence *them*. And they are the
great majority.
Surely you will *never* win over the other side in an argument on
usenet of all places! But several people "lurk" and read usenet for
every one person who participates. Your opinions could be having an
impact on them.
For all the problems you mention, surely on the *long* scale the state
of general economic knowledge has been improving.
>But in my case the recommendation is harmless. I was in much doubt whether I
>should answer the pointed questions you asked here. It is easy to interpret
>them as if you want to hear what more problems I have, but in the end I
>choose to interpret them as another way to say "go read the books". If I'm
>wrong, and you really want to know how I imagined my African example, tell
>me - though I don't expect so.
>
>:-)
This thread's gotten long, but we could talk by e-mail if you wanted
to continue on some point.
>So I think this is where I'll stop bothering you. I'm genuinely sorry for
>the irritation I caused. You told me a few things I didn't know (indeed),
>and there are indeed some things of which I just don't understand the logic.
>But that too helps, for it indicates where my blind spot lie. I once again
>snip your text, but not before having it read with attention, I thought it
>once more a very good post. It was nice discussing with you, but I
>understand nobody else was amused.
>
>Oh, and by the way, if nineteenth century capitalists, as I assumed, did not
>make huge profits as a consequence of the low wages they paid, then I'm
>wrong, of course.
Carnegie, Rockefeller, Morgan, et. al., made their fortunes in the
*high* wage industries of their era.
Rockefeller in particular was noted for paying the highest wages
around to get the best people. How often bought whole companies just
to get talented people on board. He even built a gymnasium in his
first headquarters building as a "perk" for employees, oh, about 125
years before that sort of thing become fashionable generally.
As the saying goes, "You don't get rich by being cheap."
That was as true then as it is now.
>Thanks again,
>
>Koen
>
Grinch
wrote:
>On Wed, 20 Feb 2002 03:46:06 -0500, Grinch <oldn...@mindspring.com> wrote:
>
>>
>>Well, to answer the "theory" part of your question you should read a
>>101 econ book to learn at least the introductory theory for yourself,
>
>An extraordinarily dangerous thing to do. You can too easily get
>trapped in the alien spider web of standard economics.
Now, Mason, that's not the sort of comment that's going to get you the
write-up from Prof. Auld.
It is curious, though, how often those who feel the most compelled to
attack something also insist on knowing the least about it -- and even
recommend that course to others.
Just as if ignorance fosters competent criticism.
>>This would be the "unenforced monopoly" supported by no barriers of
>>entry. How many of these can you name in real life?
>
> MS?
>
> Mason C admitting I didn't read much in this thread, but
... but since when is reading what one is commenting on required on
usenet?
susupply
"Grinch" <oldn...@mindspring.com> wrote in message
news:h4u87ugll0pj8b76d...@4ax.com...
> But can you expect voters to be economists? Of course not.
> Should they defer to the opinion of economists on economic matters?
> That would be undemocratic! Should they *refer* to the opinions of
> economist on economic matters? That would be inconvenient --
> especially if they disagreed with what you want.
Looks like we can't expect Supreme Court Justices to be economists either.
As Breyer just repeated Koen's error in reasoning in the Cleveland voucher
oral arguments:
http://www.nytimes.com/2002/02/21/education/21SCHO.html
<< Justice Stephen G. Breyer questioned whether parental choice in Cleveland
was actually so unencumbered. "The irony is that the better the parochial
schools, in a sense the less freedom of choice there is," he said to David
J. Young, a lawyer representing parents of children in the voucher program.
<< Justice Breyer said that if he had children in the Cleveland schools, he
would feel obliged to send them to parochial schools for the sake of
educational quality even though he would not want his children exposed to
the school's religious message. >>
David Lloyd-Jones
"Koen Robeys" <koen.ro...@skynet.be> wrote
> "susupply" <susu...@mindspring.com> wrote
> > [snip]
> >
> > > Now if these are reasonable, situations where we save somene's life by
> > > paying him a slave-remuneration,
> >
> > Again, you have created an oxymoron. "Slave" and "remuneration" are
> > contradictory by definition.
>
> Sorry for terminlogy problems. "Potential employers" indeed is a bit
unlucky
> if one describes a situation of only one buyer - but then the argument may
> be valid in case of sufficiently few buyers. If anybody feels like being
> confused by "slave-remuneration", it would probably be impossible to
prevent
> them from it, but let's try anyway. Let's call the means to make sure the
> slave doesn't die of starvation his "remuneration", and there you have it.
Here we have the oddity of Robeys creating an oxymoron, and understanding
the fact, and Patrick accusing him of doing so, but not understanding the
meaning of his own accusation.
"Slave remuneration" is an oxymoron exactly because it is not a
contradiction -- and indeed oxymoron does not mean contradiction. The easy
way to get it straight is to remember that oxymoron is to contradiction as
synthesis is to antithesis.
("Army intelligence is an oxymoron," is a joke, not an example of the word's
meaning. If you wanted to either insult the army or give an example of a
meaning, you would say "Army intelligence is a contradiction in terms,"
which might be right or wrong, but wouldn't be funny beyond the very weak
degree to which it tries for a smile at the pun on "intelligence.".)
-dlj.
David Lloyd-Jones
"Grinch" <oldn...@mindspring.com> wrote
> But cartels exist within industries, not across populations. And there
> are no industries in pre-industrialized societies.
This isn't true. Ancient Greece obviously had a fishing industry, a
shipbuilding industry, and so on. Hell, Egypt even had a production line for
pyramids. :-) 'Course the customer had to take delivery at the end of the
line, in the Valley of Kings. They didn't deliver...
The oldest factory exhibiting mass production with division of labor is
claimed to be a 600,000 year old flint knapping pit in Kenya -- which
predates not merely industrialization but the development of the modern
human being, H. sapiens.
Clearly "industrialized" does not mean "having industries," it refers to
having undergone the industrial revolution.
-dlj.
David Lloyd-Jones
"susupply" <susu...@mindspring.com> wrote in message
news:a4onvc$km1$1...@slb7.atl.mindspring.net...
>
> "David Lloyd-Jones" <dav...@sympatico.ca> wrote:
> > Just to remind everybody that Granny Grammar is still alive, "oxymoron"
> > does *not* mean contradiction.
> > Oxymoron is to contradiction as synthesis is to antithesis.
>
> It seems to be all Greek to you, David. "anti" means against, while "syn"
> means same or similar. Antithesis means direct contrast or opposition.
>
> An oxymoron is defined as ANTI-thetically incongruous terms that are
> combined. Not SYN-thetically congruous.
<sigh> None so stupid as those who will not learn. Upgrade that to a RoyL
Flying Prune.
Syn does not mean "same or similar," Patrick. You're simply winging it with
your feathers singed off. Syn means along with, or together.
Synthesis makes something new out of the conflict between thesis and
antithesis, both in Hegel and in Marx. Oxymoron synthesises a new meaning
out of two thoughts antithetical to each other by themselves. "Bittersweet"
is the traditional example.
-dlj.
susupply
"David Lloyd-Jones" <dav...@sympatico.ca> wrote in message
news:a555rr$4p6m3$1...@ID-99058.news.dfncis.de...
> Synthesis makes something new out of the conflict between thesis and
> antithesis, both in Hegel and in Marx. Oxymoron synthesises a new meaning
> out of two thoughts antithetical to each other by themselves.
"Bittersweet"
> is the traditional example.
Get thee to a dictionary, David. For instance, this one:
http://www.m-w.com/cgi-bin/dictionary
<<-----------------
Main Entry: ox·y·mo·ron
Pronunciation: "äk-si-'mOr-"än, -'mor-
Function: noun
Inflected Form(s): plural ox·y·mo·ra /-'mOr-&, -'mor-/
Etymology: Late Greek oxymOron, from neuter of oxymOros pointedly foolish,
from Greek oxys sharp, keen + mOros foolish
Date: 1657
: a combination of contradictory or incongruous words (as cruel kindness)
----------------------->>
As for "contradict", it comes from two Latin words; "contra" meaning
against, and "dicere" meaning to speak or say. Literally, "to say against",
as the two incongruous terms in an oxymoron "speak against" each other.
Tim Worstall
Military intelligence ? Chive apology ? Vienneau simplicity
?
Any other offers ?
Tim Worstall
> -dlj.
Otto Bahn
>
> "David Lloyd-Jones" <dav...@sympatico.ca> wrote in message news:<a555rr$4p6m3$1...@ID-99058.news.dfncis.de>...
> > "susupply" <susu...@mindspring.com> wrote in message
> > news:a4onvc$km1$1...@slb7.atl.mindspring.net...
> > >
> > > "David Lloyd-Jones" <dav...@sympatico.ca> wrote:
> > > > Just to remind everybody that Granny Grammar is still alive, "oxymoron"
> > > > does *not* mean contradiction.
> > > > Oxymoron is to contradiction as synthesis is to antithesis.
Mirriam-Webster says, "a combination of contradictory or
incongruous words."
> > > It seems to be all Greek to you, David. "anti" means against, while "syn"
> > > means same or similar. Antithesis means direct contrast or opposition.
> > >
> > > An oxymoron is defined as ANTI-thetically incongruous terms that are
> > > combined. Not SYN-thetically congruous.
> >
> > <sigh> None so stupid as those who will not learn. Upgrade that to a RoyL
> > Flying Prune.
> >
> > Syn does not mean "same or similar," Patrick. You're simply winging it with
> > your feathers singed off. Syn means along with, or together.
> >
> > Synthesis makes something new out of the conflict between thesis and
> > antithesis, both in Hegel and in Marx. Oxymoron synthesises a new meaning
> > out of two thoughts antithetical to each other by themselves. "Bittersweet"
> > is the traditional example.
>
> Military intelligence ? Chive apology ? Vienneau simplicity
Jumbo shrimp is my favorite from Carlin.
Mine include:
Senate Ethics Committee
Blind Justice
Tone Deaf
--oTTo--
David Lloyd-Jones
"susupply" <susu...@mindspring.com> wrote
> Get thee to a dictionary, David. For instance, this one:
>
> http://www.m-w.com/cgi-bin/dictionary
>
> <<-----------------
> Main Entry: ox·y·mo·ron
> Pronunciation: "äk-si-'mOr-"än, -'mor-
> Function: noun
> Inflected Form(s): plural ox·y·mo·ra /-'mOr-&, -'mor-/
> Etymology: Late Greek oxymOron, from neuter of oxymOros pointedly foolish,
> from Greek oxys sharp, keen + mOros foolish
> Date: 1657
>
> : a combination of contradictory or incongruous words (as cruel kindness)
> ----------------------->>
Patrick,
This supports me, and not you. Miriam Webster agree with me that an oxymoron
is made up of contradictory words -- the "thesis" and "antithesis" of my
mnemonic for your benefit -- and does not address the important point, that
the result of the combination is not itself a contradiction. "Bittersweet,"
for instance contradicts neither "bitter" nor "sweet." It is different from
both, in the same way as any combination is different from the things that
make it up.
A can may be full of beans, but is not a bean.
The previous sentence contains no big words, so maybe you can stop digging
yourself in any deeper.
-dlj.