The General Economics Thread

Another way of saying that is countries arent just big homogenous regions with identical economic interests. They are divided into smaller regions and other interest-groups often with competing agendas.

Also "the same stuff" might not be as same as you might think, nations with access to something in its crude form may well have to export it to other countries and then buy it back in its refined form.

No matter how fast they make the Corvette, it still isn't a Ferrari.

That whole "refined products" thing hurts a lot of developing country. Cote d'Ivoire grows a crapton of coco, but i bet you'd be hard-pressed to find a chocolate bar in that country that wasn't imported from Belgium or Switzerland or something. Developed countries establish protectionist systems to make sure that these countries can't add value to the raw goods at home.

I'm suddenly reminded of this video where this dude went to a country where they grew cocoa beans and absolutely none of the native workers had any idea what the beans were for. They had never seen a bar of chocolate in their lives and were amazed when he brought them one and told them what it was made of.

The thing about e.g. chocolate is often that there's an important second component. Such as milk, in this case. Guess how hard it is for fresh milk to travel well... and guess which conditions cows don't grow particularly well in, but cocoa does?

Also, goats' or sheep's milk does not a good chocolate make. I know, I've tried it. Weird mouthfeel (the proteins and fats react a bit differently to the process and no amount of conching sorts that out) and the taste needs a heap of getting used to. -_-

PS: Nestlé has looked into making chocolate at source. Several times. <_< Results? Vary. At best, you get Indian or Pakastani variable milk quality (run for the toilet after a Kit Kat, you'll probably need to).

edited 27th Apr '15 6:18:24 PM by Euodiachloris

Well they could just make cocoa powder for hot drinks.

Chocolate on the other hand ships well- how expensive can it be to import it?

It's not about expense, but about the fact that the value added could be at home rather than abroad allowing for lucrative factory jobs to be located in-country.

Comparative advantage says hi.

The problem with that is when countries want to build an industrial base. Unsubsidized agriculture is low-value work, especially if you're still in the inefficient human-centered mode of agricultural production. Comparative advantage discourages the production of an industrial base as inefficient, but some protections are needed if you want to go from farming and resource extraction to industry or beyond to services.

The path upwards involves protectionism at some point. Autarky obviously has its problems when carried too far, but pure free trade encourages continued poverty, especially when the other countries aren't playing fair (agricultural subsidies which mean, say, cotton growers in Mali have to produce for less and stay impoverished because they can't compete with the bags of money being hurled at cotton growers in the American South).

Part of that is the fact that agricultural subsidies are inherently a form of trade protectionism.

Right: Germany would flip their shit if Cote d'Ivoire decided to subsidize a chocolate factory, yet doubtlessly there are hordes of German farmers who "shouldn't" be employed.

Not that i'm saying they deserve to be punished either, just that the first-world countries shouldn't be so bald-faced in their application of the double standard on protection.

Germany isn't the worst in Europe when it comes to that — France is.

France treats their agricultural sector as art (what with all the protected regional designations like their monopoly on the term "champagne"), so that's not surprising.

edited 28th Apr '15 10:19:20 AM by Ramidel

That's only true for wine and such. You can't call corn-for-cows growing art unless you strech the definition to meaninglessness.

This reminds me of Stuart-Mill-era utilitarianism applied to capitalism, as well as neoliberal eighties thought on how great it was that the economy was growing so fast with privatizations, while only the rich really got wealthier while the poor stayed mostly the same.

And I find it hilarious.

That is pretty funny. It illustrates the observation that any single metric of utility can be exploited, and that there are important distinctions between net, median, and mean in a statistical universe.

edited 28th Apr '15 11:36:45 AM by Fighteer

SMBC does a good job considering the odd angles of intellectual things like that. They had a comic about Superman and utility that was really good, where Superman was forced to turn a giant turbine for most of his life because they figured out that effectively unlimited energy was the one use of his powers that would do the most good for society as a whole (it slowly ramped up, someone pointing out that him working as a supercop was a waste of his powers, to having him move grain to solve world hunger, up to the giant turbine idea).

Hell, that comic gave me a lingering idea about a superhuman novel, since it covers a dimension of the "how would the world REALLY react to superheroes?" question that seems to dominate superhero media, but they rarely, if ever, look at the economics side of it.

Superheroes violate all kinds of physical laws, such as conservation of energy, so if one were to actually pop up, the scientists would have all sorts of ... pointed questions. As in with pointy objects.

Utilitarian models often seem to fall into the trap of of Straw Vulcan logic, in that they leave out the human, emotion-driven elements in favor of some theory of maximizing work per unit time, and thereby decrease their likelihood of being adopted.

"How to get this thing we want implemented" should be a component of any such model — a perfectly optimized economic system that no human being would ever willingly use has zero utility and should be discarded. The dystopia discussed by that SMBC cartoon could never happen because all of the slaves would get tired of being told what to do by the computer and destroy it.

edited 28th Apr '15 12:47:23 PM by Fighteer

Building a chocolate factory is one way for a net exporter of coco to expand the economic base, it's the approach Jane Jacobs recommended, but it's not the only option, and not always the best one. Ending up becoming a net importer of milk, and thus eliminating much of the profit is one illustration of that. It's actually better to build upon skills and current economic activity if that's possible. Since the agricultural sector is obviously already pretty active, I would invest in a tractor factory instead. If everything worked out well, they could end up becoming a local exporter of agricultural technology.

Depends on how much it costs to set the factory up + get the parts shipped in. Also depends how far vertically up the process you can go; do you have iron and coal/coke? Can you get any for cheap?

This stuff gets very complicated very fast, which is why it's very important to have people who can research those choices and come up with the optimal strategies, which is why you need to invest a lot in education and ennoble knowledge as a source of social status and...

The road to local greatness demands a great deal of collective will and ambition, just to begin to set things up in order to prepare to plan to organize the prelude for the beginning of getting stuff...

... Lots of people will prefer to stick with what they know.

The point is that somewhere along the line, somebody has to step up and deploy protectionism. A startup tractor factory is not going to be able to compete with a mature company from Spain, say. Not without help.

Or massive transportation costs or other such barriers... of which tariffs are one... the problem is when protectionism is abused... the reason the EU spend so much money on having food self-sufficience is so that primarily agrarian thrid-world countries can't leverage a dependence into actually fair prices, among other things... wasn't mercantilism discredited way back in the day of Adam Smith? Why? Have the reasons become obsolete now, or are they still valid? Or is there further complexity to account for? More ifs, more buts... the speculation goes on... the mirrors align, the reflections are infinite... whooooaaaaa...

I need to grab a macroeconomics manual and cool my head using other people's work. That should calm me down.

edited 28th Apr '15 1:42:53 PM by TheHandle

Protectionism in general reduces productivity. There is an argument in favor of protecting new industries while they are getting off the ground, but the problem is weaning them off the protectionism afterward. The reason I suggested a tractor factory is because their is a local demand for them- every coco plantation will want them. They should be able to compete locally, because a local factory doesnt have to cover the costs of importing them. Since they are a developing nation, local labor should be cheap. And building tractors isnt very skill-intensive. They should be able to compete on price, even against better quality models from overseas. It's a natural next step toward growing their economy.

Until John Deere comes in under the aegis of free trade and undercuts their local manufacturers as a loss leader.