I expect that it would depend. Sometimes, you can convince people to act against their self-interest (e.g. propagandizing against quantitative easing). Othertimes, you can lean into the rule (e.g. hoarding).
I don’t have any reason to think that there’s always going to be a consistent strategy.
As Marx pointed out, the idea that “value is relative” is simply another way of saying “value is determined by supply and demand,” and he argued that supply and demand did indeed play a role in setting prices, but that actual business people understood there was a “value” in their product, even if they saw it as “costs,” below which production and selling was counterproductive.
He also understood that prices would rise and fall until the market was “cleared,” but noted that this process was not the simple, clean process implied: it literally meant a terrible price would be paid by workers in inflation, unemployment, and more.
The idea that capital becomes centralized and concentrated over time is implicit in a competitive system, isn’t it? Everyone competition has a winner and a loser, and one capitalist eats many in that competition. And the price of entry gets higher with mechanization, freezing out more potential competitors. And while everyone says this is “competitive capitalism,” capitalists HATE competition and work to eliminate it through mergers, buy-outs, forced bankruptcies, government regulation, and more. The idealized capitalism of Milton Friedman et al. has never existed and does not even work in theory, since it neglects the fact that people are coerced into working for those who have capital.
I think there’s a crucial distinction here. There are some “rules” you can defy. If you want to wear white after Labor Day, for example, go ahead. But there are also rules that are expressing genuine truths about reality and you can’t choose what reality is.
As I noted above, you can simply choose to deny the law of gravity. If you choose to not accept the law of gravity and jump off a cliff, reality will assert itself over your beliefs and you’ll fall. If you want to defy gravity, you have to do it be circumventing the law (like with a balloon or a ladder) rather than denying it.
The reason this is an important issue is because there are people who do seem to feel that all rules are just matters of opinion. We see a lot of people, for example, who refuse to accept the scientific reality behind vaccination. They seem to believe you can just make a choice about whether or not you believe in vaccination and both sides are equally valid.
I think society needs to fight against the growing idea that there is no such thing as objective reality and reality is nothing more than collective subjective opinions that can be accepted or rejected as we wish.
No disagreement from me there.
Yes, here is a simple sylogistic way that I think of it.
A) According to economic Sam Stone’s law one people will seek to acquire capital.
D) Everyone will take whatever actions that maximizes their efficiency to acquire capital
B) Access to capital allows one to take certain actions that are not available to those without capital.
C) The reverse isn’t true in a free market system. There are no actions that having capital will prevent you from taking.
D) Therefore those with capital will more efficiently acquire capital than those without it
Conclusion: without some form of external pressure, the rich continue to get richer and the poor continue to get poorer.
Sam’s “Law of competition” isn’t a whole lot of good in holding the needs of the rich in check by meeting the needs of the poor if the rich can always outbid them.
Nicely put. And this is why economics is not a science: it is completely wrapped up in judgements about who gets what, that is to say, with ethical and political values, making the subject entirely subjective. For economists to speak of “labour” as an “input,” for example, is to insist it is okay to treat people like things, and that is a claim about ethics, not “objective facts.”
I don’t think that either of these refutes supply and demand. The way advertising works is by increasing demand for your product. You might argue that it’s “artificial” demand, but demand is demand, whether “natural” or “artificial”. And gas stations even at the same intersection aren’t in identical locations: The traffic patterns might mean that one is a lot more easily accessible from the nearby freeway exit, for instance.
I’ve read somewhere that, in the development of societies, barter doesn’t actually show up until after more complicated economics. “Primitive” societies are more likely to use intangibles like status and goodwill as “currencies”.
Sorry, that’s nonsense. Let’s take life insurance. There is mathematics behind the value to the policyholder of a life insurance policy, which depends on mortality rates and the value to the consumer of the payout. But life insurance agents drive the hearse up to the back door to increase the value to the potential customer without changing any of these. He might scare the customer into thinking he could die faster. He could paint an image of the survivors starving or being tossed out of their homes.
If you ever want to blow a salesman’s mind, figure out the value proposition he is showing you and do the math to prove he is full of it.
In your world advertising is informational only. In the real world it is to build up a value proposition.
Wow, Canada must have a weird gas market, since your view is not even close. Gas stations raise their prices in synch all the time, usually based on the spot market for gas. And stations right across the street from each other differ in price by 40 cents or more, 10%. Not a small difference.
Some brands used to advertise detergent additives, but I think all gas uses them. The same gas often goes to both stations. Yeah, one of the stations has a car wash, but you pay for it, and you can use it without buying the gas. (I do.) I can get a discount from my grocery card - but the discount isn’t anywhere close to the savings I get from going to the other station.
Homo economicus would avoid the expensive station like the plague. But it is busy. It is close to the freeway, but I’m sure 95% of the business is local, and local people know where all the stations are. (There is another station right next to the one I use with the same expensive price as the one across the street without a car wash.) I think it is all branding - the expensive stations have the national brands. But that adds no value for the consumer - no real value, that is.
I don’t hear complaints about the stations, I hear them about the refineries and oil companies. At certain times of years refineries go down for sudden emergencies (in rotation) which reduces supply and raises prices. Now that is supply and demand working.
That comment has me considering the shift from very small isolated units, that would be more familial line connected, so barter would not be much of an issue, to a next level that is slightly removed. So there might be a more status and goodwill basis. Neighboring familial units with representatives interacting. Then once combined and enlarged more over time, considering barter a more logical concise system.
Some advertising does. But advertising for commodity items priced above other nearly identical items drive perceived value. You might want to maximize sales dollars, not volume. Obviously Coach sells fewer bags than cheaper places but is probably more profitable per bag. (Sometimes the value is real, sometimes it is not.)
Where I get gas one expensive station is easy to get to from the freeway - but as I said, most people on it are commuting, and are unlikely to stop there from the freeway. (When I get a carwash there I seldom see cars parked at this station head back towards the freeway.) But the station across the street, which is hard to get to from the freeway, has the same price. Yes, they are directly on a main street, but 40 cents a gallon is quite a premium to avoid a left turn.
In the old days there were plenty of people who thought brand names were better. I don’t know if there still are people like this. But I suspect so.
I’m certainly not saying that supply and demand does not exist. Just that this doesn’t explain everything.
Your criticism is akin to saying that biology, by treating the human body as a set of interrelated systems, insists that it’s okay to treat people as if they’re robots.
I think this analogy is not very persuasive or illuminating. Capital gives its owners–the capitalist, the boss–the power to treat workers more like things than humans. See the Golden Rule. To the degree economists aid and abet this by lumping “labour” in with machinery and land and raw materials, they too support the treating of people as things. Thus the point that economics is full of judgements about ethics and politics and values and so not very sciencey.
Actual, trained, economist here.
No, it’s not a science. At best,it’s science-like in that math is used. But it’s not predictive, there are no fundamental rules or constants… nothing like atomic weights or e=mc2 or f=ma… even our most commonly accepted ‘laws’ don’t always work (Inflation is when you have increasing amounts of money chasing limited goods. That’s a fact and an economic law of nature. At least it’s so when inflation is not being caused by general rising prices. Or after a deflationary period. Or after a shock to the system. Or when price controls are released. Otherwise, all the inflation you see is more money/fewer goods, and that’s the law.)
I think the closest econ has to a fundamental law is Gresham’s law, but even that, that’s more psychology: If people must spend one of two items on something, they will choose the lesser-valued item to spend. It’s a good rule to understand when debasing your currency, but, hell, it’s also true if I had the choice to buy a Ferrari with $200,000 in cash or a used kleenix. Bad money drove out good in that example too.
Supply and demand is another fundamental law which is until it isn’t. Does a lack of supply always make the price go up? No, it’s quite possible that lack of supply just kills the market so that demand dries up as well. Y’all have already brought up diamonds, the go-to citation for this law not being a real law, so thanks for that.
I think if there is any fundamental rule to economics it’s this: Study psychology if you want insights into human nature and markets, study economics if you want a gig at Goldman.
I do a lot of arguing with intelligent design folks. Many of them are sure they are doing science. Some of them have Ph.Ds and everything. The problem is that it starts with a conclusion, then seeks only evidence that fits the conclusion. Some of them do experiments, they publish papers in journals, etc. They strongly claim that what they do is ‘scientific’. But they are missing one crucial thing:
I don’t want to just ‘throw it in’, I’m saying that the scientific method, including falsifiable hypotheses and the testing of them IS what differentiates science from other ‘searches for truth’. The great results and advancement of science are all about falsifiability, and the rigor of testing hypotheses and rejecting them if they fail is why scientists don’t spend centuries chasing their tails without progress as philosophers and psychologists have done.
I was never IN the ‘Austrian School of Economics’. I think the Austrians have valid imsights to add to the field. In particular Friedrich Hayek.
I’m not sure why you thought my focus on complexity was somehow incompatible with Austrian economics though, as part of their philosophy was that economies were too complex to understand and control, and the mathy ‘Walrasian’ analysis of economies was wrong.
But my main influence from the ‘Austrians’ was Friedrich Hayek, and in particular his work in information and complexity with respect to economics. Or, to quote his Nobel Prize citation: “for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena.”
I first came across Hayek not in politics or economics, but while studying Claude Shannon and information theory for an engineering project in college. I had never read anything from the Austrians before that, and my main economic influence was Milton Friedman and Monetarism.
In my opinion, Hayek’s most important work is the short essay “The Use of Knowledge in Society”, and his Nobel speech on the Pretense of Knowledge greatly informs my views of economics and central planning. These concepts come up again and again in complexity theory, both in terms of human and natural systems. I have seen Hayek referenced in complexity literature that have nothing to do with economics.
Both are short, and highly recommended, even if you don’t agree with any of it. They also, to the point of this thread, show how difficult it is to falsify just about anything in economics.
“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” - Friedrich Hayek.
Oh yes, my personal ulterior motives shining through. Great contribution to the thread. I suggest you continue your analysis of my motives in the Pit, rather trying to derail a thread with some actually good conversation in it.
In the meantime, I’ll continue to respond to your actual arguments in good faith, and not speculate on your motivations for making them. Because that would be the polite thing to do, and also more ‘scientific’.
Prices are set by supply and demand. Value is set by individual utility functions. The market is a collection of people of varying utility functions bidding on goods. Whether I buy a product or not depends on whether the price fits my own utility function for that product. A $10 hammer has value to me if I don’t have one. It has much less value if I already have a good hammer. It has great value to a carpenter who doesn’t have one.
This is why central planners cannot set prices efficiently. They have no idea of the utility functions with respect to that product are amongst the people, or what the emergent price will be when they all negotiate for the product in the marketplace.
The essay on the Use of Knowledge in Society that I just posted points out that the kmowledge needed to set prices does not exist outside of a competitive market. You cannot discover it without a market.
Gosplan in the Soviet Union had thousands of economists, actuaries, and other professionals analyzing economic sectors in great detail in an attempt to set prices for goods for everyone. The result was an endless series of shortages and gluts, and the rise of a large and tolerated black market to create alternative prices and correct some of the mess. Even the Soviets needed markets.
I would assume the purpose of central planning is to monitor and/or control the economy, not to substitute for this or that market.
I would have liked to see more of Cybersyn, but we all know what happened to Allende.
In the early years of my studies as I worked toward my degree in Economics, I had the fortune/misfortune of having an unofficial roommate; he just showed up one day and slept on our couch, none of us had the nerve to kick him out. He was a very intelligent older man, perhaps brilliant. But he was profoundly damaged as well. I never knew his exact diagnosis, but friends with more knowledge than I said the medication he sporadically took would have been for schizophrenia. He certainly was paranoid, exceptionally so. And I think he heard voices.
Anyway, he had an advanced degree in Economics and took a shine to me as someone treading that same path. He told me one day that I could stop going to class because he was going to enlighten me by delivering a concise summation of his multiple years of study, as confirmed by his life experience.
Rick B_____'s Three Laws of Economics (partially borrowed from the considerable less profane John Maynard Keynes)
I did eventually go on to win my degree, but when I think back to the many things I learned in those years, really the only thing that stands out in memory is Rick’s booming voice (he had voice immodulation syndrome as well) laying all of this out to me.
I post this in part as a bit of humor and wisdom I thought some might appreciate, but mostly because this thread reminded me of Rick. I googled him a few minutes ago only to discover he died late last year. I hope he found some of the peace later in life that he didn’t have when I lived with him. And I hope that if there’s anything after we leave this world, he gets the opportunity to tell Smith, Marx, Keynes what a bunch of fucking dopes he thought they were. He would find that massively entertaining.
This is an amazing story and I like it a lot. Thanks for sharing it.