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The General Economics Thread

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There was talk about renaming the Krugman thread for this purpose, but that seems to be going nowhere. Besides which, I feel the Krugman thread should be left to discuss Krugman while this thread can be used for more general economic discussion.

Discuss:

  • The merits of competing theories.
  • The role of the government in managing the economy.
  • The causes of and solutions to our current economic woes.
  • Comparisons between the economic systems of different countries.
  • Theoretical and existing alternatives to our current market system.

edited 17th Dec '12 10:58:52 AM by Topazan

TenTailsBeast The Ultimate Lifeform from The Culture Since: Feb, 2012
#301: Dec 22nd 2012 at 3:17:33 PM

Urgh. You can buy a billion pixels for cheaper than you could for a few hundred some time ago. Deflation. And again, industrial revolution reduced prices and this reduction in price allowed for huge economic growth. The entire reason for the economic boom was the corresponding reduction in prices. If the new technology was no more efficient the old, the industrial revolution would have never happened. But it is, and that meant you could get a lot more for a lot cheaper. That's why the industrial revolution happened.

edited 22nd Dec '12 3:25:34 PM by TenTailsBeast

I vowed, and so did you: Beyond this wall- we would make it through.
Topazan from San Diego Since: Jan, 2010
#302: Dec 22nd 2012 at 3:20:02 PM

I'm sorry, I phrased that badly. I was looking for an example of correlation between economic prosperity because, without correlation, there cannot be causation, and you were arguing that deflation causes economic prosperity. Thus, unless you can show, at the very least, a correlation between the two, there cannot be causation.
The problem is that isn't what I've been saying. I never once claimed that deflation will always and in every possible situation lead to increased prosperity.

Let me summarize the conversation for you. I said that the situation commonly called an "oversupply" or "general glut", can be considered a shortage of money. This is not an idea I invented.

What I'm saying is there can't really be a shortage of money, because the value of money is relative. Increasing the value of money by lowering prices, ie deflation, will in this specific situation allow trade to be resumed. Deflation is good for the economy only when it brings the "price" of money closer to its real value.

deathpigeon Since: Jan, 2001 Relationship Status: One True Dodecahedron
#303: Dec 22nd 2012 at 3:27:35 PM

[up][up] That's not deflation. Deflation is where you can buy everything for cheaper, not just one thing.

No, new technologies caused the economic boom, not deflation.

[up] Then I don't understand what you're saying...

Anyway, I need to go, now. Bye.

Trivialis Since: Oct, 2011
#304: Dec 22nd 2012 at 3:29:26 PM

Actually deathpigeon, inflation and deflation are general trends, not universal trends.

TenTailsBeast The Ultimate Lifeform from The Culture Since: Feb, 2012
#305: Dec 22nd 2012 at 3:31:39 PM

That's not deflation. Deflation is where you can buy everything for cheaper, not just one thing.

Fine. [up] Well, thanks. That's good to know.

No, new technologies caused the economic boom, not deflation.

The new technologies made everything cheaper, that's what caused the boom.

edited 22nd Dec '12 3:32:24 PM by TenTailsBeast

I vowed, and so did you: Beyond this wall- we would make it through.
Topazan from San Diego Since: Jan, 2010
#306: Dec 22nd 2012 at 3:32:45 PM

That's not deflation. Deflation is where you can buy everything for cheaper, not just one thing.

No, new technologies caused the economic boom, not deflation.

Deflation happens when the supply of goods increases relative to the demand for money. This can happen either as a result of reducing the money supply, or increasing production.

The idea that an increased production due to technological advances leads to more prosperity is almost certainly what Say would have predicted. Production drives economies, supply and demand are two sides of the same coin.

Then I don't understand what you're saying...
Yes, that's obvious.*

Anyway, I need to go, now. Bye.
Bye.

edited 22nd Dec '12 4:22:33 PM by Topazan

Topazan from San Diego Since: Jan, 2010
#307: Dec 22nd 2012 at 7:49:15 PM

I'm just going to leave this here:

shimaspawn from Here and Now Since: May, 2010 Relationship Status: In your bunk
#308: Dec 22nd 2012 at 7:56:22 PM

Seriously, even Say said that Say's law was bunk. It's been disproven by almost all modern economists. It doesn't work.

Say himself admitted it.

Reality is that, which when you stop believing in it, doesn't go away. -Philip K. Dick
Topazan from San Diego Since: Jan, 2010
#309: Dec 22nd 2012 at 8:00:04 PM

I can't read that, because it's in French, but I suspect that it's saying that Keynes' paraphrasing of Say's Law (supply creates its own demand) is an oversimplified and misleading view of what Say actually thought. Which is true. I'm assuming that based on this:

It was, I must say, completely unfair of John Maynard Keynes to use John-Baptiste Say the way he did...

edited 22nd Dec '12 8:00:35 PM by Topazan

shimaspawn from Here and Now Since: May, 2010 Relationship Status: In your bunk
#310: Dec 22nd 2012 at 8:02:19 PM

I can read French. It's not saying that at all. It's Say admitting he was wrong based on comparing the real world to his hypothesis. He's basically stating the opposite of Say's Law is what he actually saw occur in real life.

Which means that Say's law is not a law at all.

edited 22nd Dec '12 8:04:34 PM by shimaspawn

Reality is that, which when you stop believing in it, doesn't go away. -Philip K. Dick
Topazan from San Diego Since: Jan, 2010
#311: Dec 22nd 2012 at 8:03:45 PM

Why don't you translate the relevant sections then? Start with the part where he says "I'm wrong", maybe.

I'm not guessing that Say was objecting to Keynes' mis-characterization, I'm guessing that blogger is.

edited 22nd Dec '12 8:05:36 PM by Topazan

shimaspawn from Here and Now Since: May, 2010 Relationship Status: In your bunk
#312: Dec 22nd 2012 at 8:05:28 PM

I can read and speak French fluently, but translating it without losing meaning is trickier. Give me a bit.

Yes, the blogger was saying that Keynes was wrong to say that Say believed in Say's Law. That's what I got from the whole thing.

edited 22nd Dec '12 8:06:30 PM by shimaspawn

Reality is that, which when you stop believing in it, doesn't go away. -Philip K. Dick
Topazan from San Diego Since: Jan, 2010
#313: Dec 22nd 2012 at 8:14:39 PM

Keynes was wrong to believe that Say believed in Keynes' version of Say's Law.

shimaspawn from Here and Now Since: May, 2010 Relationship Status: In your bunk
#314: Dec 22nd 2012 at 8:26:35 PM

No, he was wrong that he believed in it at all. He'd become disillusioned of it later in life by the British depression he's writing about that didn't seem to follow any of his formula. Nothing zeroed out.

Reality is that, which when you stop believing in it, doesn't go away. -Philip K. Dick
Topazan from San Diego Since: Jan, 2010
#315: Dec 22nd 2012 at 8:31:18 PM

If you find an English translation, let me know.

Anyways, we're here to talk about ideas, not people. If you can translate the thrust of the argument against it, we can discuss that on its own merit.

shimaspawn from Here and Now Since: May, 2010 Relationship Status: In your bunk
#316: Dec 22nd 2012 at 8:33:27 PM

Basically the thrust of the argument is that no matter how sound your maths are or how well you can argue your theories, in the end it comes down to how it measures up to the real world.

If it doesn't match the real world, it's time to toss it all out and start again. And Say's Law didn't match the real world that he saw.

edited 22nd Dec '12 8:38:23 PM by shimaspawn

Reality is that, which when you stop believing in it, doesn't go away. -Philip K. Dick
Topazan from San Diego Since: Jan, 2010
shimaspawn from Here and Now Since: May, 2010 Relationship Status: In your bunk
#318: Dec 22nd 2012 at 8:38:54 PM

Say forgot about dishonesty, greed and the need for raw materials in the first place. All of which make his model go crazy. Especially dishonesty because it introduces non-zero sums. Say's Law only works if people are perfectly honest.

Reality is that, which when you stop believing in it, doesn't go away. -Philip K. Dick
Topazan from San Diego Since: Jan, 2010
#319: Dec 22nd 2012 at 8:45:29 PM

I'm pretty sure they don't. From what little I can understand it seems like he's describing a shortage of bullion brought on by a bank run. What's the French for "this disproves my model"? Again, the use of chemical weapons in war crimes does not disprove the laws of chemistry. The fact that bad things happen does not disprove an economic model.

But if that really is the argument, tell me how these things contradict his model.

shimaspawn from Here and Now Since: May, 2010 Relationship Status: In your bunk
#320: Dec 22nd 2012 at 9:13:00 PM

Well, let's go back to the model. If that fisherman steals a banana while the banana vendor's back is turned, suddenly the sum is off. It's no longer zero. He just took something without working for it.

Do something like that on a large scale, and suddenly everything collapses.

Reality is that, which when you stop believing in it, doesn't go away. -Philip K. Dick
Topazan from San Diego Since: Jan, 2010
#321: Dec 22nd 2012 at 9:19:53 PM

If he eats the banana, then the supply of bananas is reduced by one. Demand for whatever that banana would have been traded for is also reduced by one. Supply and demand balance out. Say's Law stands.

If he trades the banana, supply of bananas remains constant, but some demand might shift from what the vendor wants to what the thief wants. Again, supply and demand balance out, and Say's Law stands.

I'm curious which economic theory you think deals with problems like theft better.

edited 22nd Dec '12 9:21:52 PM by Topazan

shimaspawn from Here and Now Since: May, 2010 Relationship Status: In your bunk
#322: Dec 22nd 2012 at 9:24:53 PM

But in the real world, supply and demand almost never balance. That's what causes crashes. Suddenly demand dries up and you have a huge supply, you're in a demand crisis like we're in right now. There's too much supply and not enough demand to purchase it. As a result, a lot of inventory is sitting on store shelves unpurchased.

People keep making it in hopes of making money off of it, but just because you make something doesn't mean someone will buy it.

Reality is that, which when you stop believing in it, doesn't go away. -Philip K. Dick
Topazan from San Diego Since: Jan, 2010
#323: Dec 22nd 2012 at 9:52:47 PM

Supply and demand do balance out. We've discussed why repeatedly. If goods aren't selling, then either they're the wrong kind of goods, or their price is to high.

I've repeated myself many times already, but I'll start from the beginning for your sake. I'm going to link you to that page once again here: here. This shows there can be no "general glut" in a barter economy. Specific goods can be oversupplied, but this will be balanced out by a shortage of other goods. If I catch a fish and bring it to the market hoping to trade for a coconut, I've increased supply of fish by one and demand for coconuts by one. So, in a barter economy there can't be an over-supply. Are we clear on this?

Now, a monetary economy works much the same way. No one brings goods to the market without hoping to get something in return, so supply and demand balance out. However, as the second page of the website shows, sometimes the thing that's demanded is money. The only way you can have over-supply is if there's an over-demand for money.

This means that a demand crisis can actually be considered a money shortage. Except, there's no such thing. Money's value is relative, and if allowed it can expand or contract as needed. Deflation would allow a smaller quantity of money to fulfill the same role as more money. The problem is that this doesn't happen overnight. It can take time for the market to catch on to the need to lower prices, but once it does so, trade can resume.

So why are goods collecting on the shelves? Either because they're not what the market needs, or because they're too expensive. There are a lot of reasons why this can happen unexpectedly, many of which involve a sudden supply crisis elsewhere in the economy.

Here's a list on non-arguments that people should stop using:

  • That isn't true because people are people.
  • That isn't true because rich people are evil.
  • That isn't true because Republicans are evil.
How does any of this make it not true?

deathpigeon Since: Jan, 2001 Relationship Status: One True Dodecahedron
#324: Dec 22nd 2012 at 9:59:25 PM

I've repeated myself many times already

But you have yet to show any evidence to support it.

Topazan from San Diego Since: Jan, 2010
#325: Dec 22nd 2012 at 10:01:37 PM

[up]You have yet to say what evidence you're looking for, or even demonstrate an understanding of what's being discussed.

You're not being constructive by doing this. You're like a guy in a hospital where doctors are discussing a diagnosis saying "I demand to see an MRI!", with no understanding of whether or not an MRI is relevant, or how to interpret it if you're shown one. Not all data techniques are relevant to every question, so you're not doing any good by demanding data if you don't know what data or how to to tell whether or not it proves or disproves the Law.

You keep asking for proof of the answer when you've admitted that you don't even understand the question. If you need help, you can ask me a question, and I can try to explain it a little better, as long as I get the feeling you're making an effort. As it is, if I did show you some evidence, how would you even understand it?

edited 22nd Dec '12 10:12:12 PM by Topazan


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