In theory, yes. 
In fact, the level of transparency required to verify that they were selling at cost is unachievable. Furthermore, what if their costs are too high? What if they’re not bothering to make things efficient? Why would they, with no competition and no price pressure? They might be making a bare profit and still be gouging the customer through simple laziness.
I think the problem of transperency is only part of the problem. Assume you could determine exactly what the materials costs. How do you determine that they were not over charged for them? And what about the materials for the materials…?
What I am trying to say is that the problem with socialism is not one of implementation. It is one of reality vs. fantasy. That is, the economic laws that dictate how valuable goods and services are cannot be set by law. You can pass a law requiring every widget to be sold for $5, but that will never change the fact that everyone who uses widgets are only willing to pay $3.
If you don’t think it could be implemented without it being a disaster, why wouldn’t you have a moral objection to it?
In the end capitalism’s benefits come from efficiency. You will have less people working more and producing overall more than in the past. The margins due to competition tend to go to price reductions and not only profit.
The problem is when big companies in order to avoid competition either crush any smaller companies (dumping) or try to buy off government and politically acquire protection for their business (Oligarchy common in South America and Bush trying to in USA).
I do agree with the OP that we seem to be working a lot despite economic developments... a mix of USA and European practices might make a more balanced model.What would compel you? Your competitor would compel you by lowering his prices. At any rate, I do not understand why you want to run other people’s lives. Run your own and leave me to run mine. I make widgets as I please and offer them for sale at a price of my choosing. You are free to buy them or not buy them. Freedom is a good thing which most people appreciate. If the widget is worth to you the price I am asking then why do you care if I make a fortune or not? Just buy it and mind your own business while I mind mine. I don’t tell you how to run your life or your business so just leave me alone to run mine. If you tell me I cannot charge more than a certain price for my widgets then chances are I’ll go somewhere else where I have the freedom to sell my work and my products as I please.
The term capitalism is really not the best for what we are talking about here. We are talking about competition in a free market.
No. We would not be able to have the same standard of living we have now with a 40% reduction in production.
Economics is about allocating scare resources. Rationing is one method. That is essentially the kind of system you are proposing. A single organization would estimate demand and then set production levels accordingly. The problem is that it is a rigid and inflexible system. It does not adapt well to changes in demand.
A free market system is superior because it rapidly adjusts to changes in demand. Bottom line - you can’t have everything you want. A free market is better because it gives the consumer a choice on how to spend his dollar.
This is not always a problem. Certain industries, especially capital intensive ones like the automotive or steel industries, lend itself to oligarchy or natural monopolies. Large companies like WalMart can leverage economies of scale to provide goods far more cheaply than an equivalent number of mom & pop stores. These large companies typically operate on very low margins (1-2%) and make their profit on volume. This isn’t “dumping”. This is a sustained competitive advantage.
What it all boils down to is that there is no free lunch. An economy is a function of raw materials, labor, capital and the infrastructure that converts those materials, labor and capital into finished goods. There is a complx relationship between production, employment, the amount of money, inflation and interest rates. You can’t change any one of those variables without affecting the others. It’s why we can’t simply give everyone a $100000 check and make the entire country richer.
People say “there are more important things than profit or efficiency”. That is false. Efficiency is what allows you to live a better standard of living on the same amount of labor.
No, in fact, the law of supply and demand is not just such a universal law against it. The value of a particular good and service most certainly can be dictated by state fiat or social convention. It just becomes inefficient.
I am quite well versed in economics. I know how it works.
Maybe so, but the government setting the price was really not the biggest issue in those countries. The fact that the government didn’t care about its own people was.
This has nothing to do with what we are talking about. If I were to pass a law mandating that widgets must be sold at $1, do you really think a black market would open up where widgets would be sold at $5?
If I was selling them at 1$ each, why would you offer to pay $10?
And if I was a government agency with no profit motive that was selling the widgets, then yes, I very well might.
That’s what accounting is for. The problem that you are having is that you are assuming widgets would be the only state owned monopoly forced to sell at cost.
Actually, that’s exactly the opposite problem of socialism. Socialism would hardly ever force widgets to be sold at a more expensive price. The real problem is that if they are forced to be sold at a lower price than normal, demand would outpace supply. As msmith points out, the rub is scarcity. If you could figure out a way to overcome scarcity (don’t ask me how) a large problem would be solved.
Moreover, another problem would be incentives to do things more efficiently and produce a better product. If you had managers who were truly dedicated to giving the best possible product for the lowest possible price, it could be done. For example, non-profit organizations - while there are a lot of crappy, inefficient, corrupt ones (United Way, I’m looking at you) there are also lots of very efficient and effective non-profits that don’t rely on competition to make them so.
Ouch. True. Painful, but true.
This is a good point - Communism/social really tries to be a beneficient command economy, but it winds up being, well, a command economy. there have been lots of those throughout history, and they were even reasonably good and creating wealth. However, it was all wealth for the very top ranks of society.
I think this is a little bit unfair. Bill Gates didn’t kill anyone to force peope to use Windows, and only Windows, and he doesn’t run the secret police to ensure this… He won the OS wars fairly, because he understood the economics of the situation better than anyone else. but thats another subject. Suffice it to say that I think this amounts to libel.
Vriggs:
The other aspect you are neglecting is simple, personal freedom. You are proposing a recipe for a static society in which you would necessarily have to prohibit people from starting companies. There is no other way to ensure the “one company” rule. I would hope that that alone would give you pause.
If not, then let’s look at the whole idea of innovation. Young Steve Jobs lives in your society. He’s got an idea for a computer that ordinary people use in their homes. (Kind of like the one you used to type your OP.) He made a few prototypes and is ready to launch a business. But wait, he can’t. IBM is already the sanctioned computer company, so he has to go sell his idea to them and see if he can work for IBM by making his new product. Why would IBM agree to hire him? If you remember in the real world, IBM had ample opportunity to prduce this product, but failed to do so until competition from Apple (and a few other companies) forced them to do so. More likely, the “visionaries” at IBM might give Mr. Jobs a hearing, but then chuckle at a naiive young man’s fantasies.
Perhaps there is some all knowing sage in your society who sees the vision of the PC as well and makes Jobs the CEO of IBM so that he can proliferate his new product. Most of us, however, would prefer to live in a world that is not dependent on some all-knowing sage, but that we ourselves can control.
Vriggs, you can see your system at work in Cuba. It’s not a pretty sight though.
Minor nitpick hit and run (sorry):
The actual prototypes of the Cream Soda Computer and the Apple I were built by Steve Wozniak.
Jobs was the one who had the idea to take the thing to the Homebrew club, to start assembling them in the garage, and who got involved with banks and venture capitalists.
That Steve Wozniak actually developed the original Apple I was also the reason HP had first crack at the invention - and passed on it.
Again, sorry, continue arguing economics.
Oh…well if you want “theoretical-based” answers then “yes…we can theoretically create a system where we all work one day a week and live like Arabian oil-shieks.” Of course, such an argument has no basis in fact or reality. Theoretically there could be an Easter Bunny. In reality there isn’t.
Don’t get locked into the paradigm that there is some magical system that allows us to indulge in every want and need. For the most part, there will always be someone restricting what you can consume. It could be a Ministry of Bread and Water that establishes your weekly rations or it could be market forces that simply force you to decide where you want to spend your money. I think we would all prefer the system that allows us to decide how to consume and where to work.
Your entire argument appears driven by a desire to not have to work. In a capitalist system, you have that option so long as you can support yourself.
I would prefer to not depend on the goodwill and benevolence of a single monolithic enterprise.
Less work + same pay = lower productivity
Lower productivity + same pay = inflation
Yes. This was exactly my point.
With the exception that capitalism is exactly the correct term. The only better term might be freedom, but that is more expansive than the economics of the OP.
It surprises me how many people don’t see the equivalence of capitalism and freedom. But that’s a topic of another thread…
No offense meant. I was only trying to describe (rather flipantly I’ll admit) the universal nature of the law of supply and demand.
I am trying to say that the law of supply and demand is a universal law every bit as real as the laws of thermodynamics which produce weather. It is not as simple, perhaps, given the imense number of variables. But it is no less maleable to dictatorial whims.
I was trying to cover too much in a simple paragraph. The point I was trying to make was that the government cannot dictate the value of anything. It can dictate the price at which you can legally sell something, but that is not the same as controlling its value.
And,yes, a black market very well might blossom under such a system. The problem is that they would not simply pass a law mandating that widgets be sold at $1. They would also pass a law dictating that 20% of the production must be shipped to Minsk while no more than 30% can be shipped to Moscow. Meanwhile, you would pass similar laws regulating the materials needed to create widgets. This would effectively dictate how many widgets you can produce in a year. And so would dictate how many you can sell in Moscow. If I need more widgets than you can legally sell in Moscow in Moscow, I might be willing to pay a higher price than allowed by law.
The point being that the value of a good or service can only be determined by its free exchange. That is, its value to the person who owns it and its value to the person who wants to buy it.
Its kind of like religion. You can regulate where meetings take place (the price something is sold at), and you can regulate where prosteletizing take place (how many are produced), but you can never regulate what people believe (how much a good or service is valued). It is not a matter of transperency, or good will on the part of the dictators, it is a physical impossibility.
The point is that the rules governing a managed economy can never be in sync with the actual economy. The price controls, the supply demands, the enforced monopolies can never keep pace with the true demands of the economic activities of any sizable group. Not because the managers would be mallicious, not because they would be incompetent, but because you simply cannot control such a huge phenomena as a national economy with so tiny a tool as government force.
A friend of mine went out with a Russian girl for 3 years a while back, and every now and then she would regale us with stories of life in the former USSR, of waiting in line for 3 hours for bread, or milk, or potatoes or whatever. Furniture, clothing, paint, you name it, all came from state-run factories. Thus everyone had the same table. The same shirt. The same wall colour. I am exaggerating a bit, obviously, but you can see my point. Also, I think it was in 1984 or 85 that the Soviet government made too little toothpaste, and so had to start an advertising campaign to get people to eat carrots, because they are good for teeth. With state-run economies, there will automatically be less innovation and poor planning, because there will be less competition and thus less drive to design new products.
Computers are a good example. Assuming Intel was the state-sanctioned chip maker. Would computing power be what it is today? Why would Intel worry about making faster chips? The vast majority of what we do daily with computers does not require P4 3.2GHz chips, let’s be honest. But with competition, what is the main way to separate one company’s product from another’s? In this case, speed. So AMD came along and said hey, look at our chip, it’s faster than theirs. Thus Intel was forced to innovate, in order to stay alive. Without this competition, we’d all probably be using 386’s and the SDMB would be a text-based BBS, if it even existed at all.
I can understand the feeling about working too much, and I have read research that stated that we are working more now than at any time in the past century (don’t have the cites right now). But that is the nature of competition and innovation, the more you do it, the more you do it, so to speak. There are ways to regulate work hours, vacation time, etc, it’s up to the government to do so.
The problem also with one-company economies is that it drives wealth into the hands of a very small number of people, smaller than capitalist societies, because only a very small number of people control the means of production. Look at any of the former East Bloc countries, they are full of very poor people and a very, very small number of wealthy.
One problem is economics is not like physics. Physics worked the same way 1000 years ago as it does today. Of course we didn’t know as much about it and there is still stuff to learn but the way it works doesn’t change.
The economy continuously evolves. How much did Americans loose on depreciation of cars in 1900? How much in 2000? If economists could ignore that in 1900 does it make sense to do it in 2000?
The definition of capitalism says nothing about what percentage of people should understand accounting? Why shouldn’t it be mandatory in school? When have you heard economists, Republicans, Democrats, Conservatives or Liberals suggest that? What could it hurt?
“All warfare is based on deception.” - Sun Tzu
Do a search on “Economic Wargames” if you don’t know about it.
Dal Timgar
Are you going to relate this to the thread or just drive by with your depreciation post again?
Don’t you mean liberals, instead? It is the liberals who tend to be against deregulation and for some government control over finances - using the excuse that the free market system is inherently broken.
Big nitpick.
A few people, even those “well-versed in economics,” tend to assume that competition is the impetus for innovation. For example:
The premise is false and, as such, the argument does not follow. People are allowed to compete in a free or mostly-free market. This provides the realm within which the free exchange of goods and thus competition can exist.
However, there is no property of free competition that encourages innovation. The reality is quite the reverse, as revealed by unsophisticated economics. There is absolutely no incentive whatsoever to bear the increased fixed costs of innovation in order to produce a cheaper good. Why do all the work if you cannot pass the fixed costs down to your customers in the form of higher prices? Why do all the work if you can simply observe the superior goods of others and imitate them? Why should anyone innovate at all?
Innovation is not caused by competition; rather, it is caused by monopolistic rent-seeking, quite anathema to competition. This kind of monopolism is entrenched in the capitalist economy in the form of patents, licenses, trade secrets, intellectual property, etc, all of which are spectacularly un-competitive.
The competitive market yields absolutely stagnant long-term growth absent some exogenous manna from heaven. Therefore, it is illogical to employ some kind of theory of innovation as a reason why the competitive market, or “capitalism,” is preferable to other systems of goods allocation since selective distortions of the competitive market provide incentives for innovation and technological growth.