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What I'd really like to talk about is why certain companies are able to set their sale prices way above what it costs to make their product. What 'common sense' justifies this act to a point where the average consumer buys into it, and how did it become 'common sense' in the first place?
What enforcing does the state do in the black market?
Interesting question. But the black market is not particularly efficient compared to a legal market. For example, the German economy, east and west, was dominated by the black market between 1945 and 1948. The currency reform in the western occupation zones in 1948 introduced a legal market and kick-started the west German economic miracle.
I'd argue that the inefficiency of the black market stems from the unregulated nature of property rights, but I'll accept that there may be other factors in specific cases.
Thank goodness for that good old American General, George C. Marshall.
>>I'd argue that the inefficiency of the black market stems from the unregulated nature of property rights, but I'll accept that there may be other factors in specific cases.
Efficiency or inefficiency notwithstanding, markets (black, gray or whatever) operate outside the laws and bureaucracy of the state. According to your argument, this should be impossible. ;)
People buy and sell things.How can people have things to sell unless there are laws protecting their property? Why would people buy things if they could just take them from others without asking?
The way the thread has evolved, I feel justified in raising the question (as devil's advocate ;-) of the legitimacy of private property in the first place - or at least of the historically-somewhat-extreme view we have of it today. Whence does it derive? Why, in the face of the plain fact of more-than-enough-for-all, do we not make sure everyone has at least enough?
Maybe this short passage from Book I of Jean-Jacques Rousseau's The Social Contract will be as interesting and startling to some readers here as it was to me the first time I read it:
How could a man or a people seize a vast territory and keep out the rest of the human race except by a criminal usurpation - since the action would rob the rest of mankind of the shelter and the food that nature has given them all in common
By the way, I feel I should point out that Rousseau was definitely not an enemy of private property - but he did think differently about it than we usually do now...
-B
John Nash came up with a much more realistic economic theory than the "every man for himself eventually benefits the greater good" ideas of Adam Smith, IMNSHO. They didn't give Nash a Nobel Prize for no reason.
I had a read through Adam Smith (his entire works are available online) but in the half-hour I spent I had already seen a few weaknesses in his reasoning (especially around religion and eductation). Don't forget that at the time of their writing, his works were but a theory because his ideas were impractical then - one could say that he was ahead of his time. But this is besides the point as 'who said what when' isn't reasoning, it's the ideas forwarded for contemplation that are.
John Nash's life work was on game theory; his work was a purely analytical stance on predicting the product of unregulated elements put into action against each other. His work if anything supports the idea of a free market.
Under capitalism, greed is the motivation. Me before anyone else. Conspicuous consumption of luxury goods and the utter wastefulness of our ways rules. If you have it, flaunt it.
One must be careful in speaking of the application of a theory; what 'Communism' turned out to be resembled only vaguely Marx's manifesto, and what we call 'capitalism' today is really nothing of the sort.
...all of this tugging and pushing that happens when money is deemed of higher value than people, is so extremely dangerous.
Exactly. Well said, man! Money is the work of someone, and freshly-printed dollars are worthless until one exchanges the excess product of his work against them, so he can buy the work of another. Dealing in money is dealing in the product of people's work.
This is a big 'what if' and goes completely against lucid human reasoningIt's normal day to day politics. What do you think all the arguments about the WTO are about?
I really think you need to take a step back and thinks things over with your own mind. You cannot cite something 'normal' as reason, 'normal' just means 'everyone is doing it' and this is not an argument nor support for a theory.
I know what is mine because I worked for itNow you're arguing quite a different position to the one about the electorate deciding what's right and wrong. Now you're implying that you believe in some form of natural law, over and above these decisions, that defines what's right and wrong.
But even following your position, there are radically different interpretations of it that can be made. On the one hand, Proudhon would argue that what you have said must literally be true, that your employer has no right to the product of your labour. John Locke, on the other hand, famously said that "the Turfs my Servant has cut... become my Property".
Whichever position you take (and there are, of course, others in between) there can be no market until there is a socially enforcable definition. Society must come to a definition and enforce it before a market can exist. And the intitution that does the enforcing, by definition, is the state. No state, no market.
Now the above is... grey. You seem to have misunderstood most everything I have said. I never cited or called for any law or 'higher hand' that 'decides for us' - and that quite to the contrary. I never mentioned employers either. And I don't see where you want to go by your citations of Prudhon and Locke, they can in no way apply to anything that has been said here by anyone.
My whole point is, we don't need an outside 'interpretation' or 'guiding hand' to have a market. What could be the motivation for trying to make someone sell his work elsewhere or to other people than he had originally intended? Now we go even greyer, because most all politicians when asked the above will cite need.
Need is a grey horse indeed, and the mess the US economy is in today rides on it. How can you possibly assign a body of people the task of deciding who 'needs' what in the market? If I make something, I'll sell it where I think it best be sold - and if it isn't the case I'll be the only one who loses because of my error in judgement. If someone else decides for me, or as the US governent does offers subsidies if I sell my wares 'over there', my decision will have little to do with the market, or market demand, and though my losses may be covered by the government my wares won't be going where they're most wanted. What's more, where's this subsidy money coming from? Who in their right mind would pay taxes so that the government can give me money to sell products that they'll probably never see in a region or to people that they'll probably also never see? What a mess. And what's more more, every 'controlling hand' itself costs money, taxing the taxpayers even more.
And if you meen 'need' as in 'needy', grey veers to almost black as far as the market is concerned. Once you start taking from those who produce and giving to those who don't because of 'need' you are creating yet another imbalance. If I need something, I work for it. If there are people without work, one thing the government can do instead of raising taxes on the working so that 'those in need can live' is quite the opposite: it can start reducing itself and the weight of its 'controlling hand' so that the lessened taxload will free the money needed to hire new workers.
I've enjoyed this discussion, and there's much more to say, particularly on how all this applies to the development of the web and the internet generally.
But I'm afraid we can't move on until you understand the two points above. Have a think about them for a while, and then we can continue.
*Buying and selling is a social act, not an individual one. If you sell something it implies that someone else is buying, and you have to agree on a definition of property rights for this to take place. In other words, the buyer has to agree with you (the seller) a definition of what it is that makes the property yours, and what it is that you are selling, and this definition has to be enforceable.
By what I understand from the above and your other posts, you insist on the presence of a third governing person to oversee every transaction.
For example, does the payment of $24-worth of glass beads enable the purchaser total rights over the island of Manhattan or merely the right to use it for hunting and farming? And which definition gets enforced?
Excuse my being blunt, but it is meaningless to forward this as a 'proof' supporting your above position - we both know that the indians got reamed in that deal. Besides the blinding fact that there were no elected government or voted laws then. Try and pull a deal like that today.
I've enjoyed this discussion, and there's much more to say, particularly on how all this applies to the development of the web and the internet generally.
Yep, me too, and the effects of the net precisely to boot.
But I'm afraid we can't move on until you understand the two points above. Have a think about them for a while, and then we can continue.
...here you're just trying to throw the ball I tossed at you back at me, and what you're really saying is 'we can continue talking if you agree with me'.
You have yet to point out the fault in any arguments here explain why yours are a better solution; why don't you do so? There is nothing personal at all in all this - forward your arguments and those reading can think about them and even reply if they care to, and the same from here to your direction. Not agreeing is not a personal affrontment/conversation stopper; if you think this is so than you don't have to participate. That's your decision, but you can't say 'do like this then we can continue' in speaking for everyone else.
Well, almost.
I'm pretty much going ot go back to what I've already said, but state it in different terms.
Buy and large, the market is self correcting, over time anyway. When there is too much concentration of wealth and productive capacity, the market will naturally rebel against this, as people with any degree of wealth (we'll call them the "middle class"), will fight back lest they risk losing everything to a concentrated oligarchy.
This has happened time and again throughout history. The thing is, time and again throughout history, the government has played some role, and sometimes a pivotal role, in this redistribution. (This goes back to the standard oil, weyerhauser, Hearst publishing empire examples I made way back before this busy weekend here erupted.)
By controlling key monetary issues in a cash economy (prime lending rates set by the banks are usually a reflection of rates set by the federal reserve in the US, the other key control factor that governments use to control inflation is how much cash is physically printed, and this is a factor that while often forgotten, just plain shouldn't be).
The wealth of a government, and its ability to protect its citizens from threats from without and within are directly tied to its ability to generate revenue through taxes, which is directly tied to the wealth of the nation as a whole. As such, its in the best interests of the government to see a healthy economy.
Does this give governments a right to meddle more directly in the economy as they see the need? You bet it does. Its in the best interests of the population to see a healthy government, the better to protect them. When a government sees one single corporation (or individual), controlling too much of a key sector of the economy, it has little choice but to step in, if it wishes to act in the best interests of the people. Putting too many eggs in one basket is a bad idea. It allows that company to exert undue influence over the economy as a whole and the government in particular.
And when this happens, you start to lose some of the fundamental values of the holy cow of democracy. If you have one company controlling a significant portion of the economy, then the government begins to lose its power to protect the people it was elected to serve. That one big company, that no-one elected, gets to dictate the terms of too many people's lives without fear of recourse.
Sure, the people will eventually rise up against this, but that "eventually" can sometimes be a longtime down the road. In cases like this, when the market isn't likely to self correct without government intervention, is when it becomes necessary for the gov to step in.
Where is that line? Well, its tough to say in general. But its usually obvious in specific when it has happened. It was obvious that Standard Oil had crossed the line. It was obvious that Hearst had crossed the line. And it is becoming increasing obvious that the software company that shall remain nameless has crossed the line. I.T. has become a core element of every western economy. Letting one company dictate terms over a whacking big chunk of I.T. is really a bad idea. And the governments of the US and the EU realized this, so they stepped in. At first, they stepped in gently, allowed for out of court settlements. In essence, they asked politely for that comnpany to play nice.
But that comnpany didn't learn the lessen. They took it as a sign of weakness on the parts of the governments involved to truly effect change. So now we're coming to round 2, and that comnpany is finding it can't buy settlements so easy anymore.
And that is totally fair.
As for the question of do we need more government intervention in this particular case? I don't really think so (but we're heading into crytal ball territory here). I think that the cases that have laready gone to court generated the needed publicity on the issue. And just as importantly, it kept that comnpany distracted long enough for some genuine competition to begin to emerge. Does that mean we're going to see significant distribution of a competing OS in the next six months? Nope. But we are already seeing the wedge, the fine tip of the wedge, being driven in, and eventually that wedge will widen, probably over the next 2-5 years, to the point where there is genuine competition.
And when that happens, there will be those who claim that the market corrected itself, all by itself, forgetting the key role that the government played.
Just my two bits and a wooden nickle.
Basically what you've outlined is a government making laws and enforcing them, and when it is discovered that a company has managed to find a new tactic or loophole in the existing laws to claim an immovable advantage over others with a similar market niche, new laws are made to compensate and make the rules of the game the same for all. To simplify, in a real democratic capitalist society, the laws should be an ever-increasing (at what rate depending on market evolution and honesty) list of 'thou shalt not' rules. A real free market fair to all won't have any 'thou shalt' or 'thou shalt in these circumstances' laws, as laws should only exist to prevent the negative.
A list of laws of any other type not only wouldn't be democratic, it would complicte itself as it grew, to a point that the laws it contained could begin to anul each other making even more loopholes and voids to compensate for, creating a juggling game which could go on to eternity. LOL, remind you of anything?
But you bring up a very very good point in mentioning the delay factor that exists before the public gets disturbed enough to make an outcry big enough for the government to create new laws. In fact, IMHO, this slowness to react is one of the fundemental reasons that the US and many other countries are not democracies today. Any thoughts in this direction?
A list of laws of any other type not only wouldn't be democratic...
Nitpicking: any law can be democratic, so long as it is approved by a suitable majority of citizens, franchisees, their representatives etc (according to the rules of the body in question). This goes even for laws that violate other laws (or constitutions etc.), provided they are repealed according to the same procedure.
-B
(added) And your remark was far from nitpicking : )
A good example of this would be all the privacy busting laws that got rushed through after 9-11. The government of the day capitalized on the fear and grief caused by a single (albeit momentous) event to quickly ram through a series of laws that we're now, in retrospect, beginning to wonder if they were really necessary.
And we have to be careful about this happening in a market sense as well. If you have a government enacting laws based on the economic flavor of the month, you end up with a massive increase in the number of laws being created, and a lack of cohesion in those laws as public opinion sways back and forth. There SHOULD be a moderating effect of the government being somewhat slow to react.
And the lkaws shouldn't be just a negative list either. There should also be proactive laws as well. An example might be in environmental cases. The laws shouldn't be just "Thou shalt not pollute," but also "Though shalt devote x% of your income to improving your emissions/dumping/ecological impact", this percentage being different for different industries, depending on the impact they have on the environment. (I know I know, getting a bit out in left field territory, but I believe its a valid example). You could easily see society as a whole approving of such pro-active legislation.
But I think it would all come down to "thou shalt not pollute" law in the end.
First off you'd have the 'thou shalt not pollute' law, and that you can be damn sure that the public will be for. But to enforce that you will have to know what polluting 'is'. That would mean conducting environmental studies, and would the taxpayer be pleased to pay for that? Perhaps if pollution was a real and obvious problem, but though it is true today, few really believe so. Should the industry pay for the studies? They should know if their own wastes pollute, but they can't be asked to pay for another's education. So It will end up costing the taxpayer.
But let's think about the government's role in the above - what are they doing vis-a-vis pollution? Monitoring and judging. Or in other words: Policing. See where I'm going? So with "thou shalt not pollute" as a law and the police (call it a division thereof if you like), one can take more solid measures if it is broken. This would make things very clear to both industry and the taxpayer.
So, a "Thou shalt not pollute" law, and if one pollutes he is breaking the law and must be punished. So instead of breaking the law an industry will have to pay to clean its wastes, and that cost will be incorporated into the cost of the product it makes thus passed on to the person who buys it. That way the responsibility is shared equally by all those directly concerned with the factory and the product it makes and won't burden the unconcerned tax payer.
Of course this leaves open the question of the taxpayer vis-a-vis the cost of not only policing, but educating the police about what to police.
(added) but though the above covers a factory's production pollution, I forgot about the waste caused by the disposal of the product. Hum.
(added added) The industry could pay for the disposal of their own products (burning, chemical reduction, etc) in the same way as their waste treatment costs: by incorporating that price into the cost of their product. Of course the government would have to already be a) be disposed to correctly dispose of the products and b) have a clear-cut idea of how much it costs to do so, which again brings up the question of educating the government.
But consumer-side waste-disposal is another thing: All are willing to pay to forget about their trash. Yet perhaps the above has simplified things there as well.
A pleasure to read.
A very small contribution:
(ok ok it turned into a larger one)
On Profit:
Income >100 costs <99 = flying right
Income <99 costs >100 = heading for a fall
On markets, yes a totally free market exists when just two people decide they want to do an exchange even if no money is in existance they will barter. Your daugher may be worth two Llama to me or she may be worth three, that simply is "a market" with prices and negotiations between buyers and sellers.
Just please dont negotiate too long as I dont have any water and my Llamas are devaluing :-) thats shelf life for you!
However if I have a bigger gun I may just take your daughter from you (if I am a bad person) so without some regulation (read legislation) and some mechanism to protect your daughter as your property (a bit of a dated idea I know in many countries :-) as was discussed earler in the thread, there will be no way to ensure a fair market without complete bandits taking whatever they want.
Legislators and enforcers need feeding so traders will have to pay for that if they want a safe market. Part of a camel from each sale is not convenient, paper "promises to pay the bearer", currencies are so much more efficient methods for exchange even than precious metals, and they make taking tax to pay for the legislators and encorcers so convenient.
Get a couple of legislators together in a room and they always start to breed, requiring supporting burocracy, creating new laws, revising those they got wrong the first time, needing more enforcement etc. Soon enough you get to where we are today in most western mixed economies.
On greed .. need to think lot more about that ..
but free or even fairly regulated markets have a hard time setting the price for things, there are no perfect markets, economists make so many assumptions that their theories on perfect markets for example may never take life in the real world.
Much of business activity is imho simply about exploiting opportunity presented to us arguably by a gap in the perfection pertaining to a market rather than delivering to use Porter's words, cost leadership, real value or even a unique differentiation.
So many issues can affect pricing .. I tend to think economists offer us some good models to start from and then by adding reality to remove their unrealistic assumptions one by one we can start to arrive at our own positions .. a fascinating subject in its own right.
Is a top sports star really worth so much more than the very best maths teacher in all the schools in your local area that they earn more in a couple of days than the teacher can earn in a year or more?
In competitive markets the price paid for anything [where the seller has a brain and a profit motive which they understand] should perhaps primarily be related to that which a buyer is prepared to pay and thus the alternatives which they feel are suitable and available to them may come into play.
That is not to say that price is the same as value, or value for an item should be the same for each consumer.
Some items we may all have from our ancesters, a mere photograph from a forgotten age of your Grandma for example, to you can be "priceless". It simply cannot be replaced by a monetary market transaction. The free market has no solution here this is not really a viable product or service. While to you perhaps the photograph is a priceless artefact, to me it may be no more than another piece of paper.
The same is true of the various services we as members here may be offering, sell your net-marketing services to a local sweet/candy shop and they may pay you a couple of bucks .. thats all its worth to them if that. Sell the same service to a company with potential to make serious profits online and if you still only charge a couple of bucks you will simply be removed probably sooner rather than later from the human gene pool by natural evolution red as nature is in tooth and claw :-)
On profit once more and back to business :-) ..
I forget the exact words so to the tune of:
Gross Sales (revenue) is vanity
Profit is sanity
Market balance - the power of players at different levels in the market - what they do with this power.
The amount to which those without power are able to get it together, get over their hate for one another and club together to gain power in the market is always fascinating. Think, trade-unions, professional bodies, sports stars were not this well paid or had so much leverage till star management became professional, think supermarket chains in power and individual farmers without it .. lots of discussions there .. and is it related to greed or organisation, motivation and the profit motive?
The simplest definition of the profit motive is you have to cover your costs to survive.
I dont know.
Charging for the costs of pollution in a sophisticated economy seems logical. If there is a calculable cost of cleaning up the mess you make in the course of your business should others have to bear it? You must cover your costs to make profit. Asking you to pay my costs would be rude.
If your nation destroys my property because of how you allow your economy to run, why should I not send you a bill :-)
I thought the first rule for a fair market had been established as the protection of property from abuse by mere bandits!
Ok a little bit more I now recall on greed :-)
Yes I like this bit ..
It has not been free markets but rather the sweaty mass of humanity that has ensured the greed of a few never totally prevails for very long.
History suggests that when and if all the wealth ends up in the hands of only a few (be they individuals, an elite, or some other organisation like a church, political movement or occupying force) and these enti
and if these entities (elites, nations or any other entity) look as if they have a complete stranglehold on all the wealth.
(this is the market balanceing itself but in human terms, its kind of like the idea that its recognised that large profits are being made in a sector so others move in and the profit is reduced, same thing with eccessive wealth but time scales are usually longer depending on the levels of slavery or destitution being experienced by the dispossessed masses and inter national war or internal revolution may be involved)
Then the mass of the disposessed tend to rise up, invent nasty fates for the wealthy - like machines that publicly decapitate them - a french example but there are so many we could look at :-)
Anyhow to borrow ..
the meek rise up and smite em down!
(Edited to add a lost bit below)
Redistributive taxation in life and inheritance taxes on death are considerably less painful options though there are some loopholes (Monaco for example :-) to ensuring collection.
However if I have a bigger gun I may just take your daughter from you (if I am a bad person) so without some regulation (read legislation) and some mechanism to protect your daughter as your property (a bit of a dated idea I know in many countries :-) as was discussed earler in the thread, there will be no way to ensure a fair market without complete bandits taking whatever they want.
if the above happened in a lawless society and society decided that the above is bad for it, they would make laws saying 'killing is bad' and 'stealing is bad' - they wouldn't call them 'market laws' just because it was around things traded. Laws are laws, and everything should be black and white. If we see that some new form of action is damaging to our society yet there are no laws to condone it, thus putting it 'in the grey', we should get together, think about it, and make new laws to put things back to black and white. Not like the incoloured mass of legal hodgepodge the US has for a judicial system today - a hodgepodge that they often cite as something 'unchangable' like their bible. Are voters really happy with laws like "Thou shalt not do this (under these circumstances) within our borders or any of our 'friends' borders"? LOL...
On greed .. need to think lot more about that ..
but free or even fairly regulated markets have a hard time setting the price for things, there are no perfect markets, economists make so many assumptions that their theories on perfect markets for example may never take life in the real world.
I think you hit the nail on the head with your "income >100 costs <99 = flying right". In an 'economically correct' world our income would be no more than that needed for our substenance and our occupuation (meaning tools), that way things would balance right across the board. Getting back to 'our' not-always-predictable world, I would think it normal to have a small 'cushion' for business slumps, disaster, or future investment. Normally we'd call this excess, if it remains unused and constant, 'inflation'.
I leave a special spot for innovators, though: if an invention allows a labourer to work less for the same result, it would only be normal that the inventor be given a share of that work - meaning the price of the machine a bit more than its production price. You could call it 'return for mind work'. It be normal that the most intelligent and inventive humans, those helping society as a whole, be richer than a simple labourer. That would put them on top as examples of the best humanity has to offer and examples to follow. Which they logically are.
But getting back to trade as the centre of things, I see that today it is only a means to 'profit'. Getting a 'money-making idea' usually means that the whole chain between the consumer pocket and the company bank account is but a secondary means to an end - profit - making the trade exercised a sham. There are few trades left today, but many 'jobs'.
Gross Sales (revenue) is vanity
Profit is sanity
Okay, I just used the above as a separator : )
As for the 'price of something', you really went all over the place yet still I think you've managed to englobe it - but just let me simplify. It all comes down to 'what one is willing to pay'. This may sound too clear and simple, but it is. I'll elaborate all the same.
In a normal market you would have competition, and competition means that one product-maker would do his best to get a consumer to buy his product instead of another maker-of-a-same-product's product. Tactics used: either better quality for the same price, or a lower price for the same quality (lol - the same), or a lower quality for a lower price - it's up to the seller to tell the consumer what's good about his product and its price, and it's up to the consumer to choose. Any other tactic outside of this would be coersion, lying or theft, negative acts which are or should be forbidden by law.
So, in a fair market, what will happen? One company can offer a high a price as he wants if he is the only one selling a product, and it's up to the consumer if he is willing to pay that price. Number two company comes along selling the same product, and what happens? More than likely one will be willing to 'sacrifice' a bit of his profit to make his product price more enticing to a potential buyer, and the ball will go back and forth from there untl the product price for both reaches something close to its 'real' value. And all along the line, it's the consumer who chooses what he wants to buy and how much he wants to pay for it.
But concerning the above, and again to the 'real' world: Companies often get together to 'set a price' - price-fixing. Other times a company will lobby the government to make laws forbidding another company from making the same product - making a government-aided monopoly. Not to mention back-room deals. Are these 'free market' tactics?
Legislators and enforcers need feeding so traders will have to pay for that if they want a safe market. Part of a camel from each sale is not convenient, paper "promises to pay the bearer", currencies are so much more efficient methods for exchange even than precious metals, and they make taking tax to pay for the legislators and encorcers so convenient.
LOL, yes. I've often said that the French government (where I live) is like a toll both which costs more to maintain than the highway it's placed on.
I really think many of today's politicians are 'makers of the grey'. Business finances campaigns and what does businesses expect in return? Wake up, USA. They want the government guns to enforce new laws coercing them a bigger market 'advantage'. Laws either forbidding this or granting that, all in the name of business. Do voters vote for that? They don't know it, but they do.
