Red Plenty or socialism without doctrines

by John Quiggin on June 9, 2012

Among the many reasons I enjoyed Francis Spufford’s Red Plenty, one of the most important is that the story it tells is part of my own intellectual development, on one of the relatively few issues where my ideas have undergone an almost complete reversal over the years. I was once, like most of the characters in the book, a believer in central planning. I saw the mixed economy and social democracy as half-hearted compromises between capitalism and socialism, with history inevitably moving in the direction of the latter.

While I was always hostile to the dictatorial policies of Marxist-Leninism, I thought, in the crisis years of the early 1970s, that the Soviet Union had the better economic model, and that the advent of powerful computers and new mathematical techniques would help to fix any remaining problems. At the same time, I was critical of the kinds of old-style methods of government intervention (tariffs, subsidies and so on) that are now called ‘business welfare’.

Over time, and with experience of actual attempts at planning on a smaller scale, I became steadily more disillusioned with the idea. On the whole, I concluded Hayek and Mises had the better of the famous socialist calculation debate of the 1920s and 1930s, and that their arguments about the price mechanism had a lot of merit. This didn’t, however, lead me to share their free-market views, particularly in the dogmatic form in which I encountered them studying economics at the Australian National University.

Although I hadn’t read him at the time (and I wonder what Corey Robin would have to say on the subject), I agree pretty much with Oakeshott when he says ‘This is, perhaps, the main significance of Hayek’s Road to Serfdom — not the cogency of his doctrine, but the fact that it is a doctrine. A plan to resist all planning may be better than its opposite, but it belongs to the same style of politics’. This aspect of Hayek is even more pronounced in Mises, for whom free-market economics is a matter of logical deduction, and taken to a ludicrous extreme by their propertarian followers today.

The same kind of thinking was evident in much of the financial ‘rocket science’ that gave us the global financial crisis. The belief was that sufficiently sophisticated financial ‘engineering’ could overcome the realities of risk and uncertainty, producing untold wealth for its practitioners while making society as a whole more prosperous – only the first part of the promise was delivered.

So, rather than switching from central planning to free-market capitalism, I’m now, in Andre Metin’s description of Australia in early C20, a believer in ‘socialism without doctrines’, starting from the historical premise that Keynesian social democracy has delivered better outcomes than either free-market dogmatism or central planning, and looking for ways to develop a new social democratic vision relevant to our current circumstances.

As Red Plenty shows, my enthusiasm for and disillusionment with central planning was about fifteen years behind the same developments in the Soviet Union itself. Spufford gives us a sympathetic picture of their hopes, and of the promise generated by new mathematical techniques like linear programming and optimal control (although entirely free of actual math, the book does a better job than any I’ve read of conveying the feel of these techniques). In 1956, Kruschev makes his famous promise of overtaking the US, and it seems quite credible, but a decade later, all belief in the promise of plenty has been lost. As the book ends, the mathematical programmers charged with making the plan work are pushing the benefits of prices – some at least, like Janos Kornai, would complete the journey to the free-market right, and advocacy of the ‘shock therapy’ approach to post-Communist transition.

Red Plenty is a great book. It would be fascinating to see Spufford tackle the post-Soviet transition and particularly the way in which liberal reformers like Chubais and Berezovsky transformed themselves into oligarchs, with the aid of Western academic economists like Andrei Shleifer. The pattern of naïve faith and disillusionment with free-market economics would make a perfect counterpoint to the story of central planning presented here.

{ 144 comments }

1

BenK 06.09.12 at 2:13 am

The problem is that the free-market system hasn’t been tried in recent memory to a degree of rigor so as to allow such disillusionment. There is no such historical novel to write, at this point.

2

Boconnor 06.09.12 at 2:26 am

Charles Dickens novels will give you an insight into free market systems with no safety net or government social security system, if you’re after a free market system of sufficient “rigour”.

3

Matt 06.09.12 at 2:36 am

This is good, though I’m skeptical that Berezovsky was ever properly thought of as a reformer. He may have tried to put on that role at times, but he seems to have been a crook and villain from the start. This is largely true for the majority of the oligarchs, I think, even those who were or are favorites of the Western media.

4

Colin Danby 06.09.12 at 2:51 am

I’m reminded of the neoliberal technocrats I met in Mexico and India in the mid-1990s, many of them originally trained as engineers and mathematicians. They were enthusiastic, very smart, and oddly guileless, convinced that the application of mathematical rationality would straighten it all out. They may still believe that.

5

gordon 06.09.12 at 2:56 am

If planned economies and totally “free” markets are the ideological extremes, and if the best system lies somewhere in between, the next question is obviously “where?”

Though I’m strongly inclined to agree with Prof. Quiggin that some intermediate system with both some planning and some market allocation of resources is the best, identifying the best compromise position is difficult. And there are closely associated issues like the degree of regulation of markets and products, the optimal extent of Govt. enterprise (including ownership of resources) and sustainability which need to be addressed at the same time.

6

John Quiggin 06.09.12 at 3:12 am

@BenK – I take it this is some sort of ironic play on “Communism was never properly tried out”. You should know that irony never works on the Internetz.

7

Plume 06.09.12 at 3:40 am

Interesting, Mr. Quiggin. My own trajectory is the opposite of yours. I’ve moved from social democrat to a supporter of a radical egalitarian economy, because, to me, social democracy “settles”. It’s no where near as ambitious as we need. It does not put social justice at the forefront, or democracy (which must include the economy), and does nothing about the problems of sustainability. It basically admits defeat and tries to mitigate the worst excesses of capitalism, without taking the logical next step: overturning the system that needs so much mitigation in the first place, and replacing it with one that does not.

Beyond that, I think you narrow the choices too much. It’s not just between the two you mention. We can, in fact we must, do “planning”, if we’re going to achieve social justice and prevent ecological catastrophe. But it doesn’t have to be centrally planned. We do this locally, primarily. Local control, with integration into larger bounded areas. States, regions and the nation as a whole. As we get further away from the local, the “planning” becomes more and more generalized, with specifics left up to local economies. National guidelines create the umbrella, the boundaries, the general goals and pathways and all localities are represented in all other bounded areas. Localities are then free to implement the specifics according to what works for them, as long as these also fit in holistically with the rest of the nation.

One family pulling together. Synergy. And that one family owns the means of production. As in, all of us, together.

8

Plume 06.09.12 at 3:45 am

Also, JQ,

@6,

It’s true. It has never been tried on any national scale. Communism being what comes after true Socialism successfully builds and sustains a surplus. Communism being the withering away of the state and an end to all classes.

Socialism being the workers owning the means of production. Or, as some updates had it, the entire citizenry owning it. Can anyone truly say Russia tried either one? Or China? Or Cuba?

The closest thing in recent times to true communism was Native American village life. No national government has even remotely attempted such a system/no-system. True communism is horizontal, in the sense that Occupy talks about. Obviously, the Soviet, North Korean, Chinese and Cuban systems were vertical.

9

Sebastian H 06.09.12 at 5:28 am

“Communism being what comes after true Socialism *successfully builds and sustains a surplus*. Communism being the withering away of the state and an end to all classes.”

And if the bolded part can’t be done with anything like modern technology can we finally move on?

10

Nine 06.09.12 at 6:44 am

Somewhat OT – is Chubais really an oligarch now ? His wikipedia profile seems to suggest an excellently poised appratchik in the new, new, new russian regime, not a Berezovsky scale oligarch. Though he probably does have a terrific swiss bank account.

11

Hidari 06.09.12 at 8:36 am

John
Do you not think that some of Adam Curtis’s documentaries (too many to mention, but this blog post gives the general idea) explore the idea of the essential continuities between the Russia of (‘communist’) central control/planning, and the Russian of (neo-liberal) central control?

After all, like neo-classical economics, (Soviet style) ‘communism’ presupposes that social life is ultimately ‘rational’, and that with the right mathematics it can be modelled and therefore controlled. And Adam Curtis’s stuff (like Havel’s plays) are all about the (ultimate) irrationality of rationality, or as John Cage put it: ‘you can’t be rational in an irrational world. It’s not rational’.

Incidentally (and I know I have raised this issue on this blog before, but no one seems to have mentioned it here) is anyone going to mention the Inca Empire? I’ve read quite a few of the comments and posts on Spufford’s book, and without exception (unless I’ve missed it) everyone assumes that the Soviet Union was the only planned economy in history.

But of course that’s not true. The Inca Empire was a planed economy, and seemed relatively stable, unless one infers that its quick collapse after the Spanish invasion was a sign of internal instability. Do any anthropologists/economists have anything to say about what the Inca economy can tell us about the ultimate prospects for a ‘planed economy’?

12

Tim Worstall 06.09.12 at 8:48 am

“If planned economies and totally “free” markets are the ideological extremes, and if the best system lies somewhere in between, the next question is obviously “where?””

Clearly. Even on the wilder shores of the laissez faire neoliberal right (extend phrase as you wish) I can’t think of anyone who argues against a mixed economy. Well, maybe Lew Rockwell and there are plenty of other problems with his views.

All I can see people arguing about is what is the correct mix?

13

Hidari 06.09.12 at 9:00 am

One other thing I noticed was that few people seemed to link to Spufford’s website. But this is a goldmine. Look, for example here at Soviet advertising, promising an unrealisable* ‘good life’, in much the same way that ‘our’ advertising does now.

*for all.

14

John Quiggin 06.09.12 at 9:51 am

As I tried to argue, I don’t think social democracy is just a mixture of central planning and free markets.

15

Down and Out of Sài Gòn 06.09.12 at 11:36 am

Do any anthropologists/economists have anything to say about what the Inca economy can tell us about the ultimate prospects for a ‘planed economy’?

Theocracy, aristocracy and illiteracy may be positives if central planning is your thing. That’s not really helpful to most Communists; they generally think these things are negatives.

16

Ken MacLeod 06.09.12 at 11:45 am

In the 1970s I thought that central planning combined with democratic control along the lines argued for by (e.g.) Ernest Mandel was possible and desirable. Towards the end of the decade I stumbled upon the economic calculation argument, as briefly stated by David Ramsay Steele in a readable pamphlet. I didn’t understand it fully but I kept worrying at the problem it posed. In the 1980s I read Geoffrey Hodgson’s The Democratic Economy, and Nove’s The Economics of Feasible Socialism, which made some socialist sense of the same argument. More recently I’ve been interested in the more radical market socialism proposed by David Schweickart. The only serious socialist arguments against market socialism are those of Paul Cockshott et al for a democratic, centrally planned economy – which I don’t have the mathematics to follow in detail, but which I keep dragging to the attention of anyone who does.

Meanwhile, in my own neck of the woods, the Scottish Socialist Party offers a 12-point plan for a ‘Scottish socialist republic’, one of whose 12 points is:

‘Supermarket prices will be frozen.’

Sometimes I wonder why I bother.

17

Data Tutashkhia 06.09.12 at 12:11 pm

Ending exploitation was the (ostensible) goal, centrally planned economy was the means. If private ownership/hired labor are high on the list of means of exploitation, then centrally planned economy could, plausibly, be a solution. And if that is not a good solution, then maybe something else is.

18

Matt 06.09.12 at 12:16 pm

Nine, I don’t think Chubias was every an Oligarch in the full sense- he was always involved in the government in a way that the Oligarchs were not, didn’t “own” big industries, etc. I’m sure he’s wildly wealthy from ill-gotten gain (and not just things like his infamous “book advance” he got caught with during the ’96 presidential campaign), but he’s had a quite different role from people like Potanin or Berezovsky. (Also, Chubias is the name of my cat, so whenever I hear people mention him, I feel lightly confused for just a minute.)

19

Data Tutashkhia 06.09.12 at 12:26 pm

If I am not mistaken, Chubais (not the cat) is the main reason why the word ‘democrat’ (small d) is now a swear word in Russian.

20

Antoni Jaume 06.09.12 at 2:01 pm

Sebastian H 06.09.12 at 5:28 am

«[…]
And if the bolded part can’t be done with anything like modern technology can we finally move on?»

No, if you have nothing really better for people who are starving while someone else is raking the profits.

21

Slocum 06.09.12 at 2:13 pm

‘Supermarket prices will be frozen.’

They’ll be kept next to the ice cream.

22

bob mcmanus 06.09.12 at 2:21 pm

20: Whatever you want to call it, I will accept an economics that is designed to increase real wages, real social wages, and the size of the commons, designed to decrease the real prices/relative values of private assets and private wealth, stabilizes the business cycle, and builds in the expectations that will be our future.

23

geo 06.09.12 at 3:47 pm

Tim W @12: what is the correct mix?

Check out David Schweickart’s After Capitalism and Alec Nove’s The Economics of Feasible Socialism, both discussed in the earlier Red Plenty seminar post, “To market, to market … or not?” Short answer: free market in goods and services, democratic control of workplaces but otherwise free labor market, public, democratic control of investment. The latter is crucial: private financial markets must go.

24

Antoni Jaume 06.09.12 at 3:58 pm

geo 06.09.12 at 3:47 pm
«Tim W @12: what is the correct mix?
[…]
The latter is crucial: private financial markets must go.

The empirical evidence in Spain makes me to agree. The public debt was well within the limits of the eurozone, until the government tried to reduce the catastrophe that the private debts were leading to. Now in retrospective it might have been better to let the private interests go bankrupt. As it is now the whole population, including those who did no benefit from the previous state of things, has to bear the payments.

25

Plume 06.09.12 at 4:13 pm

Geo,

Looking forward to reading Nove. Thanks for the reminder.

I like the idea of public control of financing/investment, but am still baffled why people are afraid to take the next logical step:

Make all business a part of the Commons. Your own home is a different matter. It’s your castle. But every business belongs to the people.

Instantly, we make things cheaper. Without profit, and without obscene salaries at the top, we can cut our work hours down significantly, and inequality withers away over time. We’re no longer working to make a few people rich like rajas, and our work hours become much more aligned with actual production, as opposed to production + multi-million dollar executive salaries + shareholder dividends + profit, etc.

We make what society needs, instead of what the 1% wants us to have and tells us we “desire.”

It’s also baffling why anyone would think a “free market” could ever really benefit anyone aside from the people who own it: the 1% or the .1%. It’s not one market. It’s not a thing. It’s merely a random, arbitrary collection of individuals, rowing their oars in their own best interests, regardless how that affects anyone else, much less society as a whole, much less the planet.

It’s not logical or rational to assume that a million individuals or less, all by doing their own personal thing, all by choosing what is best for no one but themselves, could benefit the rest of us. It’s beyond baffling. Accept for the part about brainwashing for centuries, etc. IE being told that what is good for the rich is good for the rest of us. In whatever form that ruling class appears.

The social democratic way doesn’t get rid of that con. It just smooths over some of its roughest edges. We need to end the con, period.

We won’t have true democracy until the entire economy is included. Not just a bit here and there. Not just a bit of “representation” here and there. But full inclusion of the economy.

26

Bruce Wilder 06.09.12 at 4:22 pm

I do not understand why people ever think that “planning” is going to resolve conflict, let alone scarcity or shortcoming, into a “system” and that will be an end to it: conflict, shortcoming, . . . envy, exploitation, unfairness, resentment . . . . no more. Just doesn’t make sense to me.

Here on the windward side of peak oil and climate change, I understand there are utopians speculating on post-scarcity economics. Somebody has been missing a lot of important memos, I guess.

If I think of examples of necessary and successful “central planning” in action, it is hard for me to reconcile that activity with GOSPLAN or linear programming optimization. I would think fisheries regulation to manage sustainable fish stocks might qualify. Or, the arguments on-going over standards of medical care, such as whether it makes sense to routinely test men for prostate cancer.

Basically, I’m with bob mcmanus @21. An economics that put its thumb on the scale in favor of fairness, efficiency and genuine progress would be enough for me. It is this twisting around to rationalize all manner of stupidity and looting, which gets me down.

27

Plume 06.09.12 at 4:26 pm

And, again, financing ceases to be a problem once we shift to virtual money for work done.

Take a family of four. The parents hand out tokens to the kids for doing chores. Extend this to a local commune. Pretty much everything the people need to live is there in that commune. Everyone pitches in, does their share. They receive virtual tokens in exchange. They use those virtual tokens to purchase what they need from their follow communalists. And round and round it goes.

The virtual digits are endless. There is no worry about “scarce” financing for anything. The commune is only bounded by what the people are able to labor for.

If the entire nation is set on that model, and every outlet is included, “money” takes a backseat to work attempted and work done. The sky’s the limit, because everyone is on the same system of exchange — the exchange of virtual digits which are limitless and cost no one to make.

This also means there is no need for taxation or debt. We are the government and we hold that unlimited set of digits in common. Everything else is simply redistribution of said digits, with no need to replenish the total stock. Individual workers replenish their own through another day’s work. But the total never goes down.

The people — as in everyone — decides upon prices, wages and locks them down to avoid inflation, bubbles and crashes. Set in stone in a new constitution, with rights and responsibilities for all.

Work hours are dramatically shortened, because we no longer work our day to create profit for ownership and shareholders. We work to provide for ourselves and society alone. No profit, no money, full on Egalitaria.

28

tomslee 06.09.12 at 4:44 pm

what is the correct mix?

The only political principle I’ve found that approaches universality is “power corrupts” and the only conclusion I’ve been able to draw is that a stable, permanent “correct mix” can be found only at the end of a rainbow.

29

mattski 06.09.12 at 4:49 pm

Better to focus on the process rather than the outcome. How can we increase transparency, access to information, our general level of intelligence? How do we counter the tendency of privately owned media to reflect the interests of the wealthy? I think it’s necessary to lobby for a more robust public media.

30

Plume 06.09.12 at 5:54 pm

Bruce,

But why is “planning” seen as such a bad thing? Businesses couldn’t survive without it, obviously. Nor could families. What could be more logical than to plan holistically, together, especially when individual planning, per business, especially, generally conflicts with the greater good, the planet, etc. etc.?

As in: Even with functioning liberal or social democratic societies, the “free market” overwhelms the regulators. If they managed to stay above the fray of “capture”, they’re overwhelmed. Why? Because our “free market” society means millions of people flood the markets with often stupid, environmentally dangerous ideas for goods and services, cuz they have the incentive to, to make a buck. Actually, to make a killing rather than a living. They have incentive to do whatever it takes to get rich, regardless of the impact on workers, consumers or the planet.

In essence, our system has a thin wall around the city, but all the doors and gates are open, so the barbarians (business owners and their marketing campaigns) pour in. The regulators fight worse than a “rearguard action”, trying to handle the onslaught. It’s generally too late. And, because of the “free market”, not only are we saturated with dangerous and potentially dangerous products and services, we’re saturated by glut and overkill. Which is why more than 44% of all businesses go under in their first four years, thus adding even more waste to our landfills, along with draining limited financial resources.

Our system of government is reactive, instead of proactive. Our system, ironically, actually produces the need for more government because capitalists can do virtually whatever they want prior to getting to the overwhelmed regulator, courts, etc. etc.

Logically, if we extended the city to the entire edge of the nation, controlled all the gates, and made sure nothing was ever even attempted if it did not meet strict social-good criteria, we would need far less “government” on the back-end, fighting that rearguard (re)action. Make the social good the sole criteria for anything new coming on the market, and we have far less reason to “regulate” after the fact.

As in, plan and plan ahead. Does the product serve the social good? Is the product environmentally safe? Is it safe for individuals, kids, the elderly? Is it sustainable? Does it work and play well with others, with other locales, regions, the planet? Do we actually need it?

Yes? Then, bring it on. No, and it’s a no go right off the bat.

Contrast that with our current system in which we have 200 different kinds of pretty much everything from the seemingly benign (sneakers, deodorant, toothpaste) to the likely catastrophic (toxic chemicals, factory farms, non-renewable energy, etc), and heaven knows what all. Too much for our regulatory system to handle more than a few percent of the total.

If you plan on the front end, and with the entire citizenry and nature in mind from the start, with truly equal input from everyone, then you reduce, if not eliminate, the need for corrective, reactive, regulatory action on the back-end. You also create a healthier, happier, better-educated and more cohesive society in the bargain, and this you can sustain.

31

peter 06.09.12 at 6:34 pm

“particularly in the dogmatic form in which I encountered them studying economics at the Australian National University”

Ah, Economics at the ANU in the 1970s! Those were the days:

When the department (all of it, I now wonder?) made a submission to a public enquiry by the Australian Capital Territory Egg Marketing Board into the price of eggs in the ACT by suggesting that the the Egg Marketing Board should dissolve itself, as any government intervention in any economy was always bad.

When the lecturer for first year micro told the class that if a conjecture dependent on the natural numbers was found to be true for n =1, and also for n = 2, and also for n =3, the you could rest assured it would also be true for all n. This rule was known as The Principle of Mathematical Induction, apparently.

When the lecturer for first year micro announced to the class, “Theorem: Any government intervention in an economy always leads to a fall in national income.” and followed this with the words, “Proof: Consider a two-person economy . . .”

I guess such statements are one way to discourage people with any mathematical competence from entering your profession and competing with you.

32

Plume 06.09.12 at 7:55 pm

Interesting review (by Chris Lehman) of two books about morality and markets:

The Moral Limits of Markets

33

Sebastian H 06.09.12 at 8:08 pm

Plume, you don’t appear to understand what prices are for. The thumbnail sketch of how they work is that they signal scarcity and encourage alternatives to be used for the scarcer items when possible. So your critique of money ends up being entirely beside the point. You can’t “lock down” prices the way you describe without causing a host of other problems– including shortages of necessities. And I suspect you haven’t thought about your new constitution very well. What do you do with people who don’t want to work in the area that the “democracy” votes for them? Traditionally in communist societies this involves very evil looking pressures on them. Capitalist societies paradoxically allow for more non traditional or non “approved” options than most other societies. The one you’re describing doesn’t sound remotely friendly to the person not fully on board.

34

Sebastian H 06.09.12 at 8:12 pm

“Logically, if we extended the city to the entire edge of the nation, controlled all the gates, and made sure nothing was ever even attempted if it did not meet strict social-good criteria, we would need far less “government” on the back-end, fighting that rearguard (re)action. Make the social good the sole criteria for anything new coming on the market, and we have far less reason to “regulate” after the fact.”

This is especially the part I find troubling. It sounds like nanny state time ten million. Non traditional or outside of mainstream people are going to end up in trouble here.

35

Plume 06.09.12 at 8:31 pm

Sebastian H,

It’s not the “nanny state” at all. Unless you think that every citizen is a nanny. Cuz the social good would be decided via democratic debate and choice, decided by all before the fact, and all power would reside in that dispersed form. One person, one vote. No one with more power than anyone else. Power resides in our collectivity, which is the cumulative desire of 310 million people. IOW, it’s not “representative” governance. It’s actual, direct democracy.

No political parties — they would be outlawed. No corporations. Again, all of us own the means of production, so power over the economy can never be concentrated. It remains dispersed and obviously diverse. Zero private ownership of the means of production. But you own your own home. It is not on the grid of the Commons. But all “business” is.

There would be no “ruling class” or “technocratic class” or “management class.” We’re all the managers, technocrats and rulers of our own nation, employee and employer at the same exact moment, with no one having any more weight than anyone else. No room for “nannies” unless everyone is a nanny. And they aren’t. We aren’t.

We plan together for the betterment of the collective*, which is us. What could be more logical?

Currently, we’re collectivized as well, but solely on behalf of ownership and for the capitalist system. Ownership takes the lion’s share for itself of what that collective produces. That is incredibly irrational and illogical, as well as immoral and unethical. The collective should benefit from the work of the collective, and improve quality of life for the collective, in harmony with finite Nature. That’s really all this is.

36

Hidari 06.09.12 at 8:43 pm

‘The thumbnail sketch of how they work is that they signal scarcity and encourage alternatives to be used for the scarcer items when possible.’

Yes but prices self-evidently do not work that way and the only way you can pretend they do is to invoke mythical ‘laws’ of supply and demand.

The classic example is the passenger pigeon which was hunted to death in the 19th century.

The salient point is that the price of the good did not go up (in a statistically significant fashion), even as it neared extermination/.

So whatever prices are, they don’t indicate scarcity.

http://webcache.googleusercontent.com/search?q=cache:http://upi-yptk.ac.id/Ekonomi/Farrow_Extinction.pdf

37

Sebastian H 06.09.12 at 8:46 pm

“It’s not the “nanny state” at all. Unless you think that every citizen is a nanny. Cuz the social good would be decided via democratic debate and choice, decided by all before the fact, and all power would reside in that dispersed form. One person, one vote. No one with more power than anyone else. Power resides in our collectivity, which is the cumulative desire of 310 million people. IOW, it’s not “representative” governance. It’s actual, direct democracy.”

At this point I dont know what to say. If you can’t see how this could be problematic for non majority points of view I don’t know how to help. “tyranny of the majority” is googleable though…

38

Sebastian H 06.09.12 at 8:55 pm

Hidari, the study you cite is the opposite of helpful to the point on pricing. Both buffalo and carrier pigeon cases are tragedy of the commons cases The price did not go up as the herds approached extinction because no one owned them so the cost of extintiction was divorced from the harvester. When owned, the herder/harvester has price incentives which typically avoid that outcome.

39

Hidari 06.09.12 at 9:31 pm

‘When owned, the herder/harvester has price incentives which typically avoid that outcome.’

The word ‘typically’ is doing a lot of work there.

40

Watson Ladd 06.09.12 at 9:44 pm

Hidari, let’s do the math. Call the rate of population growth $p$ and the rate of harvesting $d$. The population grows by $p-d$ each year, and the owner of the resource gets profit $vdA$ where A is the population and $v$ the price. The owner is faced with deciding how much $d$ will be each time period. Let the interest rate be $r$. I’ve made assumptions that the owner has exclusive control of a small population, and that he is keeping it in a fairly exponential growth regime, relevant for a very damage population.

Now it should be obvious that the owner has a unique profit maximizing $d$ in each period, the same over all periods as he is faced with the same problem each time. The profit in period $n$ is $(1-r)^{n-1}(p-d)^{n}dA$. This a geometric series with ratio $(1-r)(p-d)$, and has sum $\frac{dA}{1-(1-r)(p-d)}$. Maximizing this is a trivial exercise. Unless interest rates are very high it is clear that the prospect of larger rewards next year encourage sustainable consumption.

41

Plume 06.09.12 at 9:46 pm

Sebastion H,

@38,

At this point I dont know what to say. If you can’t see how this could be problematic for non majority points of view I don’t know how to help. “tyranny of the majority” is googleable though…

Hmm. Yes, it’s terribly ‘tyrannical” to outlaw the introduction of toxic destruction into society. Ooooh the oppression that would lead to!! Why capitalists would no longer be able to get stinking rich off of stinking up our air, land and oceans. They would no longer be able to get rich by saturated the market with useless waste, with no redeeming value, other than its ability to make a tiny minority rich.

Beyond that, someone decides what gets into the market, right? There is no way to get around that, if there is a market. Someone always must decide. Why is it better in your eyes to let a very tiny fraction of the population be the decision makers, rather than the entire population? I should think you or anyone would prefer inclusiveness over to exclusivity, especially when that inclusiveness does away with the problem of the luck of birth lottery and the fact that most people don’t want to own or run businesses.

How logical is it to let “the market decide” when all that means is letting the very small class of business owners decide? And not even just that small class. The real decision makers are a subset of the class, business owners. They’re the class of rich and powerful business owners.

So, they should get to decide for the rest of us? That’s not “tyranny” to you? You’d rather not step on their “freedom” to pollute at will, toss workers to the curb at will, bring dangerous and wasteful products and services into society at will, all so we supposedly avoid the “tyranny of the majority”? Really?

Again, I hardly think it’s “tyrannical” to make sure our environment is safe and sustainable, and that the populace is free from and liberated from noxious, toxic products and services whose sole reason for existence is that they help a tiny few make a ton of money.

We don’t need to trade our freedom and liberty for the “freedom and liberty” of capitalists to do as they please. It’s obviously a very bad trade.

42

Plume 06.09.12 at 10:14 pm

Hidari,

True. If prices actually worked as Sebastian suggests, then we would have stopped eating most fish decades ago. Instead, we are rapidly approaching extinction for many forms of sea life, and total fish stocks are down 90% since 1950.

There are thousands of other species we’ve hunted to death, and hundreds of ecosystems raped, plundered and pillaged by capitalists. Prices did not act as Early Warning devices. At least in result.

Also, by constantly looking for cheaper and cheaper labor, capitalists can “distort” the pricing effect suggested by Sebastian and keep prices low for consumers. This not only hides the true costs of cheap imported goods, but also prevents any kind of warning system that might appear if things worked according to some market theories. The problem with those theories, of course, is that many variables in the market act in conflict with one another.

In short, if we can create a closed system, and the nation itself controls that closed system, it can indeed lock in prices and wages. The prices then become tracking device for circulation within that closed system. An accounting, rather than an allocation of riches.

43

Bruce Wilder 06.09.12 at 10:53 pm

Plume

I don’t deprecate planning. Why do you deprecate conflict?

[I previously posted this comment to the wrong thread; sorry for my error — it was probably due to poor planning on my part.]

44

Plume 06.09.12 at 11:07 pm

Bruce,

okay. I must have misread. Can you flesh out the part about conflict? I know you’re being at least partially facetious. But am wondering about that kernel of truth imbedded within the tomfoolery.

:>)

45

John Quiggin 06.09.12 at 11:30 pm

“No political parties—they would be outlawed.”

One of the lessons of the Soviet experience, with a one-party state, and of many previous attempts to ban political parties, is that this can’t be done, except if a single person becomes an absolute monarch. Otherwise, the parties reappear as factions, tendencies and so on, with as much formal organization as the law permits. This was the situation in the Soviet Union (roughly) from Lenin’s death to Stalin’s consolidation of power, for example.

The US Founders, most of whom didn’t like the idea of parties, nevertheless had some sensible things to say about the inevitable spirit of party and faction. For example,
http://academic.regis.edu/jriley/413factions.htm

46

John Quiggin 06.09.12 at 11:33 pm

Of course, following Madison’s argument to its logical conclusion, and end to economic scarcity, and therefore to inequality, would remove the biggest single cause of political division.

47

Plume 06.09.12 at 11:59 pm

Mr. Quiggin,

@45,

One of the lessons of the Soviet experience, with a one-party state, and of many previous attempts to ban political parties, is that this can’t be done, except if a single person becomes an absolute monarch. Otherwise, the parties reappear as factions, tendencies and so on, with as much formal organization as the law permits. This was the situation in the Soviet Union (roughly) from Lenin’s death to Stalin’s consolidation of power, for example.

Thanks for the link to Madison. I have read him with pleasure in the past, and will look closely at the link cited.

That said, I think there is a major problem with using the Soviet Union as a warning post against any alternative system — even the idea of alternatives — and I think its use has reached the point of autopilot for all too many.

I do troubleshooting for a living. Internet, networks, computers, etc. And I’ve learned from experience that context is everything. Find the variables as they exist now, right now, do process of elimination, and determine as best we can cause and effect. Pretty much all math and science depend upon this and most mathematicians, logicians and scientists realize context is everything. Historians do to.

Different context will yield different results. Invariably.

To make a long story short, ultimately, it doesn’t matter what happened in the Soviet Union, when it comes to subsequent attempts to change our system(s). It really doesn’t. Yes, we can learn a few things around the edges (mostly general things), but given the fact that Russia in 1917 and on bore almost no relationship to the world we live in now, we simply can’t draw pertinent, relevant or useful conclusions regarding what can or can’t work in our totally different world.

We’re not like Russia. Not then. Not now. We’re also not at all like the America of the founders. The variables are different. Radically different. We won’t yield the same results. It’s physically, logically, mathematically impossible.

Bottom line: we don’t know what will happen in our own, unique context, if we try alternatives. Yes, we can make educated guesses. But those guesses aren’t going to provide sensible launching pads if we don’t take into account our radical difference from other times and places, etc. etc. IMO, it’s a huge mistake to avoid attempting radical change, simply because other nations failed at their own, unique projects. Totally different context, variables, resources, people, methods, dreams, etc. etc.

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gordon 06.10.12 at 12:11 am

Mattski (at 29): “Better to focus on the process rather than the outcome”.

To me, this raises the issue of how to measure whether we’ve arrived (or are at least travelling towards) the best outcome. What do we measure? A lot of work has been done over the last few years on non-traditional measures of economic/social success. Should we, for example, measure our progress with the Genuine Progress Indicator? Or the Human Development Indicator? Or should we simply stick with GDP/capita? What about inequality?

49

Jim Harrison 06.10.12 at 12:38 am

gordon—

The first thing is to insist that measures of economic success are merely figures of merit like the indices that engineers use to rate refrigerators. Their utility is provisional; and we’re never going to come up with a number that can withstand dimensional analysis because, as one must endless insist, economics is not the physics of money.

My suggestion for such a figure of merit is GNP per capita, corrected for inflation, and multiplied by 1 – the Gini coefficient.

50

Stephen Frug 06.10.12 at 12:53 am

John Quiggan @ 46:

The biggest *so far*. But Madison also says that “so strong is this propensity of mankind to fall into mutual animosities, that where no substantial occasion presents itself, the most frivolous or fanciful distinctions have been sufficient…” for factions. (Which I’ve explained in class by citing Dr Seuss’s Sneeches.)

SF

51

Plume 06.10.12 at 1:01 am

Is it better to us GNP or GDP? The former sticking with production/services owned by residents of that nation, as opposed to the latter, production within its boundaries, regardless of ownership.

Production/services, of course, does not tell us anything about health, education, the environment, cost of living, freedom to pursue individual projects, etc. etc. As in, it tells us nothing about quality of life.

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Sebastian H 06.10.12 at 1:26 am

“Hmm. Yes, it’s terribly ‘tyrannical” to outlaw the introduction of toxic destruction into society. Ooooh the oppression that would lead to!! Why capitalists would no longer be able to get stinking rich off of stinking up our air, land and oceans. They would no longer be able to get rich by saturated the market with useless waste, with no redeeming value, other than its ability to make a tiny minority rich.”

Gosh I can’t think of any instance where minority cultures get oppressed by majorities who have different ideas about ethical or moral issues. But maybe gay, Jewish, or black people might have insight.

Your theory works so long as you’re confident that you’ll like the rules the majority is going to come up with–so confident that you’re ok with outlawing the rest. That is a very privileged position to be talking from. I have some pretty noticeable non majority things in my life, and there are lots of people with even more. Your vision of outlawing the minority choices doesn’t sound safe to us.

Your paragraphs on avoiding the lessons of the USSR are some of the most chilling things I’ve seen recently. Yes context is everything. And you know what context we still have? Humans. There are lots of humans who like to elevate their personal preferences and stuff it down the throats of other people. Enough of them that I suspect your ‘paradise’ would be at least as much hell for minority opinions as now, only with less outlet and potential for tolerance. Your vision might look good to certain majorities, but it shoul be terrifying to anyone else.

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Plume 06.10.12 at 1:51 am

Sebastian H,

Right now, in our system, a tiny minority “stuffs it down our throats”. A tiny fraction’s “preferences” dominate everything else. The majority does not rule. The 1% does. Rather, the .1%. What they say goes.

Are you okay with that? I’m not. I’m not okay with the fact that that tiny fraction, in order to make mega billions for themselves, crams their ideology down our throats, buys off our politicians, writes our legislation, foments wars to protect and expand their markets, pushes for a security state to protect its property, and pollutes at will. That tiny fraction of capitalists rapes the land, the oceans, and pollutes land, air and sea alike. They couldn’t care less what the majority wants. They couldn’t care less about our health, our safety, our welfare, or the sustainability of anything they’re doing. They dominate our society.

As for your talk about how minorities might suffer under the egalitarian system I’m suggesting. I suffer under this one, Sebastian, as do pretty much all minorities and the majority collectively. The only minority that doesn’t suffer under the thumb of our present system is that minority class of business owners and capitalists. They don’t suffer but they cause immense suffering for pretty much everyone else in THIS system.

Wanna talk about real minorities? I’m an anti-capitalist, Buddhist, poet, artist and radical egalitarian democrat. Small “d”. Do you really think people like me have any power in this system? Is our system even slightly, remotely open to any part of the egalitarian vision? No. It shuts it down. Often in our history, violently.

But in the one I dream of, EVERYONE will have equal say and equal power, and that constitution I spoke of will protect minority rights. Just as long as that minority doesn’t want to own businesses or produce crap, pollution or despoil nature, their rights are protected. Ethnic, racial, religious, gender and sexual minorities will all have equal protection under the law and under the Constitution. The only people who will be “discriminated” against are those who want to be predators and accumulate riches unto themselves.

In my dream, they are never persecuted. They just can’t set up shop in our Egalitaria. They are always welcome otherwise, if they can abide by our system and our way of living. If not, they are free to go to a country that welcomes that kind of thing.

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Plume 06.10.12 at 1:58 am

Addendum:

And the only thing those capitalists will be barred from doing is capitalism. Their human rights are still protected and are paramount. And they get to enjoy the fruits of a society that protects the environment, offers free education, free health care to all, with open access to the Commons which stretches virtually everywhere. They get to enjoy our parks, schools, libraries, museums and cultural venues, at no charge. Clean water, clean air, verdant land as far as the eye can see, safe, organic food supplies, safe, renewable energy created by society for society — even capitalists can enjoy all these things. The only thing they need to give up is their capitalism.

55

Gareth Wilson 06.10.12 at 2:10 am

“But in the one I dream of, EVERYONE will have equal say and equal power, and that constitution I spoke of will protect minority rights. Just as long as that minority doesn’t want to own businesses or produce crap, pollution or despoil nature, their rights are protected. Ethnic, racial, religious, gender and sexual minorities will all have equal protection under the law and under the Constitution. “

What if the majority of the population wants to discriminate against an ethnic, racial, religious, gender, or sexual minority? If someone prevents them from doing that, the members of the majority don’t have equal power to whoever’s preventing them, right?

56

Plume 06.10.12 at 2:22 am

It’s strictly in the Constitution. Which was put to a vote by the total populace and approved. Unlike ours, which restricted that to a few white guys who had property.

The Constitution of Egalitaria forbids discrimination based upon race, gender, ethnicity, religion, sexuality, etc. Human rights are paramount. Everyone is equal under the law, as I mentioned.

The law says you can’t discriminate. It’s highly doubtful that the majority would ever want to discriminate against the minorities mentioned. But if that were the case, they couldn’t. It would be against the law.

In a sense, in a paradoxical way, the majority would have already spoken against the majority. Or something to that effect. It would have done the right thing and encoded it in stone.

57

mattski 06.10.12 at 3:25 am

Plume, your dream is your dream. There is a reason that boats have captains. This is pretty elementary stuff. How much experience do you have with collective decision making? …

Empirically minded people might appreciate the history of communal experiments. Small groups of like-minded people have consistently tried and failed to live together for any extended period. There is a reason for that. You, otoh, are talking about VERY large groups of not at all like-minded people…

58

Plume 06.10.12 at 4:00 am

Mattski,

It’s the dream of a great number of leftists, going back millennium. Not mine alone, not by a long shot, though I add my own flavors to it.

It follows in the footsteps and incorporates the insights of Fourier, Marx, Emerson, Thoreau and the American Transcendentalists, Emma Goldman, Mother Jones, Helen Keller, Norman Thomas and Michael Harrington — to name a few. To name some more, G.E. Cohen, David Harvey, David Graeber and Howard Zinn. Add in Pramoedya Ananta Toer, Jose Saramago, Pablo Neruda, Naomi Klein. The work of the Situationists influenced this. The Frankfurt School influenced this. Adorno, Horkheimer, Marcuse, etc.

George Scialabba’s essays provoked much thought that led in this direction. As did Dwight MacDonald and C. Wright Mills. Throw in Russell Jacoby and Christopher Lasch. Orwell and Camus were essential.

In short, we are legion. The dream goes back thousands of years. The dream of equality. The dream of living in a safe, beautiful, unpolluted environment. The dream of a society without a ruling class, with no classes, with no profit, money or inequality.

You are welcome to bash the idea if you desire, mock it, make fun of it. But, please don’t try to claim that this is my idea alone, or that it doesn’t have a hell of a long list of precursors. I know that makes it easier to attack (isolate and destroy), but it wouldn’t be honest.

59

Hidari 06.10.12 at 7:25 am

‘Hidari, let’s do the math.’

No let’s not. Let’s look at the empirical evidence.

You initial approach demonstrates, in a mathematical nutshell, everything that is wrong with neo-classical economics.

Incidentally, before anyone starts to reach for their politically correct cliches about ‘the tragedy of the commons’ did anyone actually bother to read the essay I linked to?

To quote from the abstract: ‘The historical studies suggest that thetheoretical possibility of a non-extinction equilibrium is unlikely to hold in practice. Similarly, while privatization in a single species context may appear feasible, in a multi-species context the apparent profitability of privatization may be superseded and the species driven to extinction. ‘ (In the real world, of course, we are very much facing a multi-species extinction event).

The paper linked to is science, not religion, because, yes, he looked at the maths and did the equations, but then he looked at the empirical evidence to see whether the equations did in fact have predictive power. That’s what science is.

Without this second stage, you are doing maths, or metaphysics: not science.

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Sebastian H 06.10.12 at 8:07 am

Plume your dream is firmly at odds with how humans actually work. It might be better if that statement weren’t true, but ignoring reality isn’t going to help us to a better world with your dream any more than it the Christians’ dreams are getting us anywhere. A society organized as you outlined would be a worse tyranny than what you’re living in now.

Hidari, in the paper you linked, private ownership saved one of the species studied and was attempted too late for the other. That is what the facts showed. That is the science part. The “may be” part is very much not in evidence. Nearly all the extinction events you are referring to are a) tragedy of the commons–think overfishing in common waters, b) species not currently deemed suitable for economic purposes, or c) subject to insecure property right (poaching).

This is a tragedy, but has almost nothing to do with Plume’s misunderstanding about prices. The fact that the tragedy of the commons doesn’t perfectly cover all such situations is not a good argument against the fact that it excellently describes many of those situations. But even if it turns out that our understanding of economics is so crappy that we can’t figure out when such a simple concept applies, doesn’t that say bad things about Plume’s prices on everything fixed by committee approach?

Plume fails to realize that removing all economic choices (at least at levels of technology below that of matter conversion) necessitates an attack on civil rights unless we all join a hive mind. People have different priorities. A capitalist system can allow vegans, vegetarians, fish eaters, and pork eaters all to follow their own ideas mitigated by prices. We can argue that governments props up certain choices, but at least they can all exist simultaneously. In Plume’s world the majority could just decide: vegans are too much of a pain to cater to, no special resources will be used to cultivate harvests for their protein needs, we are focusing on chicken (not because it is more ecologically efficient, but purely because we like chicken better and don’t want to waste resources on alternatives).
Majority rules on economic choices. Get over it.

Right?

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Hidari 06.10.12 at 8:49 am

Incidentally, as the Wikipedia article I linked to showed, there is no such thing as a ‘tragedy of the commons’ in a real world situation. Even Hardin admitted that it should have been the ‘Tragedy of the Unmanaged Commons’ but since commons are, in actual fact, hardly ever unmanaged in a real world situation, in reality, it hardly ever happens.

Also: to quote the article: ‘In the context of current issues, even if it is profitable to privatize the common-property native resources of forest lands or coastal regions, if larger profits are obtainable from export or other sales, then extinction is likely to occur although a single species frame-work might suggest that the marketplace would lead to preservation.’

In any case it’s all completely irrelevant because the European invaders didn’t have the legal right to privatise anything, as it was all stolen land from the indigenous people, so the point is moot.

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mattski 06.10.12 at 9:57 am

Plume, I’m not bashing the spirit of leftism. My sympathies are lean unapologetically to the left. I am critical of what appears to me sloppy, amateurish and thus counterproductive thinking. Even your list of fellow utopians is highly suspect. I’m not aware that Howard Zinn or George Orwell or Naomi Klein would come close to endorsing your vision.

You can put me firmly in I.F. Stone’s camp. And Paul Krugman’s. I think we’re better off trying to keep our feet on the ground. I sincerely wish you peace of mind.

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mattski 06.10.12 at 10:27 am

(If I was King I would require my subjects read I.F. Stone’s The Trial of Socrates. Plume’s utopianism has more in common with Plato–the original Republican!–than, for example, FDR, LBJ, or most real world champions of the Left you can name.)

64

Tim Worstall 06.10.12 at 10:28 am

@ 24

“The latter is crucial: private financial markets must go.

The empirical evidence in Spain makes me to agree.”

I’d not entirely agree with that. The part of the Spanish financial system which is entirely and totally crocked is the cajas. These (were, they’ve had to be reshuffled in the last couple of years) mutually owned and very largely politically directed local and regional not for profits.

As The Guardian said yesterday:
http://www.guardian.co.uk/world/2012/jun/08/spain-savings-banks-corruption

“Chairmen were often unqualified politicians, with academic investigators finding a close relationship between the size of a bank’s bad loan book and the inexperience, lack of qualifications and degree of politicisation of the chairman.”

There most certainly are problems with market allocation of capital, debt, investment and so on. It’s not entirely obvious that replacing those problems with allocation by politics is a good solution.

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Antoni Jaume 06.10.12 at 11:16 am

Tim Worstall 06.10.12 at 10:28 am
«[…]
I’d not entirely agree with that. The part of the Spanish financial system which is entirely and totally crocked is the cajas. These (were, they’ve had to be reshuffled in the last couple of years) mutually owned and very largely politically directed local and regional not for profits.»

While there is some truth in that, what sank most of them was the expansion of lending that accompanied the building boom. Mortgages were their main line of business, however with the boom, local capital no longer was stored there, so they had to go abroad for bonds as they could not emit shares. When the bubble busted they no longer had a valid collateral to make their payments. One reason I suspect is that the limit on mortgages was suppressed, so people could mortgage for the 100%.

66

Nick 06.10.12 at 1:59 pm

‘But in the one I dream of, EVERYONE will have equal say and equal power, and that constitution I spoke of will protect minority rights. Just as long as that minority doesn’t want to own businesses or produce crap, pollution or despoil nature, their rights are protected. Ethnic, racial, religious, gender and sexual minorities will all have equal protection under the law and under the Constitution. The only people who will be “discriminated” against are those who want to be predators and accumulate riches unto themselves.’

Ok, could we consider an example, pornography? There exist allegedly liberal theorists who have called porn ‘pollution’ of various kinds and a majority vote would probably restrict various kinds of it in a great many states. At the same time, it has made huge amount of money for some people, so defintely something that comes under your economic regulation concerns. But on the other hand, it also plays a crucial role in forming and supporting some minority sexual orientations and identities. So how does your system deal with these different interests. Are there substantive defences for sexual minorities or is it a case of the law being ‘equal’ because it will ban both straights and gays from watching, buying or selling gay porn?

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geo 06.10.12 at 3:45 pm

Sebastian: your dream is firmly at odds with how humans actually work. It might be better if that … weren’t true, but ignoring reality isn’t going to help us to a better world

So what will help us to a better world, in which humans don’t work that way?

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Plume 06.10.12 at 6:08 pm

Sebastian H,

Many people will, like you, fall back on the argument from Nature. Trouble with that is, the argument from Nature supports me, not you. Human beings lived for 200,000 years communally, and as recently as the 19th century in North America, Native Americans lived that way. They shared pretty much everything. It’s natural for us to do so. It’s natural for us to work together for the betterment of the family, the neighborhood, the tribe, cooperatively. We evolved in that way, knowing we needed each other to survive and then building from there.

True, we do have alphas and predators in our midst who naturally seek to rule and crush the spirit of the gift, the spirit of the cooperative, the spirit of small “c” communism. And, of course, they’re not content with actually ruining horizontal systems. They want to make sure everyone believes those horizontal systems are, as you say, “unnatural.”

They aren’t. It’s the vertical systems which are unnatural — for the vast majority of us. The vast majority of us do not want to rule over others. We want to get along and live in harmony and cooperate with our fellow neighbors, etc. etc.

David Graeber correctly notes that capitalism is the worst possible system to cram down the throats of people who are natural communists. Think of what families do, for instance. Parents bring home food and share it out equally. They strive to make sure their kids all have equal shares of clothing, gifts for their birthdays and Christmas, school choice, chores. When they invite friends over, they share their food and they don’t charge prices for it. They don’t ration their entertainment according to who can afford it.

At work, throughout the day, we work cooperatively with our coworkers. We give of ourselves, our knowledge base, our skills, without asking for money in return. Beneath the vertical structure of the corporation, which is anti-democratic to the core, lies a kind of natural, unconscious communism, wherein workers share knowledge and skills with one another without expecting anything monetary in return. A “thank you” always helps. But no money is exchanged and it’s horizontal.

As for economic choices. Not sure how many more ways I can explain this. One of the most important things about Egalitaria would be ecological protection and sustainability. Our choices would all be under that umbrella. The environment is central. Ecology, Human Rights and Social Justice are the holy trinity for Egalitaria. Making sure that we live in a healthy, sustainable way, in harmony with nature means Vegans are going to be just fine. Making all choices with that harmony in mind will lead to great innovations, too. How can we grow the widest range of crops in a sustainable fashion? How can we have the widest range of foods in a sustainable fashion? How can we do all of this and treat animals in a humane, compassionate manner? How to make sure our water supply is always safe, clean, etc. etc.?

In short, I think you’re trying waaay too hard to find rather absurd scenarios regarding this utopian idea. I’m guessing you’re doing so because you think that’s enough to shoot it all down. Your imaginary situations, etc. etc. Well, under our current system, we already know we’re going to have to ration away choice in the not so distant future. Our unbridled desire to give “economic choices” to a small percentage of the population, while the rest of it starves is both immoral and perverse. Our reckless endangerment of the environment will eventually make it so even that small percentage of rich folks won’t be able to have the “economic choices” you see as vital. There simply won’t be enough clean water, safe food, arable land or unpolluted ecosystems to do that anymore.

69

Sebastian h 06.10.12 at 6:28 pm

Plume, Your history is horribly wrong and it is leading you horrible directions. But how about this: if you really believe that communism is so ‘natural’ run a small city, say 250,000 under those lines. Demonstrate that it can work without crushing oppression of minority views. Show that it can avoid crippling shortages when you fix prices by vote. It shouldn’t be too hard, you can live off the capitalist innovation machine’s discoveries till now. The only time I’ve seen evidence of it working is with strong religious commitment (ie Amish or some Jewish) but if you believe it, don’t ask us for a complete revolution on everything without a demonstration. You’re asking for more trust that your theories are right than even hyper libertarian. Either side of that utopian game should be able to show us a mid scale demonstration city.

Your theory is like trying to engineer a machine to operate on faster than light principles. *Maybe* it isn’t actually impossible. But in practical engineering I’ll trust machines operating on better understood principles until I see a demonstration of the other machines. The last three or four times your machine was attempted on country-sized scales it caused the murder of tens of millions. Let’s start smaller this time, ok?

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Plume 06.10.12 at 6:28 pm

Mattski,

Yes, they would at least come close, and they all appear to be well to your left, judging from your belief that FDR and LBJ are your ideal left-wing champions. This may be why we’re not communicating very well, and why you insist on continuing your insults.

Beyond that . . .

Yes, most of the people I list would love the idea of free lifetime education for all. Free access to health care for all. Free access to museums, libraries, cultural venues for all. Free access to parks and beaches and recreation areas for all and the omnipresence of all the above. They would love the idea of a vast Commons, which never discriminates against anyone based upon ability to pay. They would love the idea of no one ever having to worry about paying for cancer treatments, or dialysis, or long-term hospital stays which can bankrupt people in our system.

I think they would all dig an egalitarian New Atlantis, where ecological sustainability takes precedence, and capitalism is no more. Pretty much everyone I listed is an anti-capitalist, though there are a few exceptions. That’s the starting point for this utopia. That along with Ecology and Human Rights. Orwell and Camus, for example, were champions for Human Rights, though they both came along a bit before environmentalist thought really kicked in. Zinn was a champion for both ecology and human rights. Naomi Klein? Definitely. She’s a Democratic Socialist, which is close to where I sit, if I have to choose a formal designation or some sort of party affiliation . . . . Though my utopia goes further, obviously. I think it would require Democratic Socialism to begin with, as its first stage. As Marx correctly noted, it’s not wise to leap over transitional stages.

I wish you better luck with “right speech.”

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Sebastian h 06.10.12 at 6:33 pm

Geo, I’m not sure trying to get to a better world where humans don’t work that way is a good goal, at least in the immediate future. It is like hoping for matter conversion or FTL travel. Far better to aim for a future where greedy humans don’t do as much damage to each other and the world. Even that won’t be easy, but it is likely much more possible than positing a huge change in basic human operations. (and it is certainly better than Plume’s method of just assuming away the problem.

72

Sebastian h 06.10.12 at 6:38 pm

Plume, in your utopia, what happens to people who don’t agree with the majority, or people who try to trade pot plants or cocaine amongst themselves? (oops I mean outlawed capitalist products).

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Plume 06.10.12 at 6:42 pm

Sebastian H,

The last three or four times your machine was attempted on country-sized scales it caused the murder of tens of millions. Let’s start smaller this time, ok?

Oh, come on. We’ve been through this already. It’s never been tried. No one has ever done anything remotely like what I’ve suggested. Did the Soviet system put everything up for a vote? Did they even attempt direct democracy? Obviously not. Were they concerned with ecological sustainability or human rights? Obviously not. Red Plenty and other works makes it more than clear that the Soviet Union strove with all its might to outdo Western Capitalist nations, especially the U.S. It was, in essence, “managed capitalism” and had so little in common with the word “communism” it should have been sued for defamation.

Again, it never even instituted real socialism, which is the precursor for communism. The means of production were never owned by the people. There was never one vast Commons. All of that remained in the hands of the ruling party/dictatorship, which simply replaced the ruling class of the Czar.

If historical precedent truly is important to you, then you need to at least get your history right. The Soviet Union never implemented socialism, much less communism. There was never a shred of democracy there. There was no emphasis on ecology or human rights.

Again, Egalitaria’s foundation is direct, participatory democracy. Its holy trinity, Ecology, Human Rights and Social Justice. The Soviet dictatorship failed on all of those grounds.

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Plume 06.10.12 at 6:47 pm

Nick,

Haven’t given that subject any thought, when it comes to Egalitaria. But as this dream is a democratic dream, the people would have to decide. Again, there would be constitutional protections, and personal autonomy is paramount — as long as it does not cause harm to others or the environment, etc. So there is likely a lot of wiggle room for that. However, then you have to factor in the way the workers in that industry are treated, and we all have heard the horror stories. Rape, kidnapping, torture, etc. That would obviously mean human rights abuses, which would not be tolerated.

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Sebastian h 06.10.12 at 6:49 pm

I think you’re wrong about it never being tried. But even assuming you’re right, can we try it on a couple hundred thousand people before we risk it at bigger levels. If I’m wrong about the USSR analogy, no harm done. You get your proof of concept and it will probably convince people. But if you’re wrong and the USSR is a good analogy, we risk a reprise.

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Plume 06.10.12 at 7:05 pm

Sebastian H,

Plume, in your utopia, what happens to people who don’t agree with the majority, or people who try to trade pot plants or cocaine amongst themselves? (oops I mean outlawed capitalist products).

People who don’t agree with the majority are free to participate in general assemblies, make their case, persuade their fellow citizens that things should change. They are unconstrained in this regard. As virtually everything is the Commons, outside one’s own home, they wouldn’t have to worry about being locked up like Occupy protestors. Police wouldn’t have the right to kick them off the Commons. They can protest and petition and rally people to their cause until the cows come home. This, in fact, would be encouraged. Our education system would encourage civic participation and free thinking. It would encourage critical thinking and help develop critical thinking skills.

As for pot? It would be legal. It’s natural. It has immense health benefits. Trading it is logical in this system. In fact, it would be available over the counter at village outlets. Hand the clerk your debit card, they ring you up, and you walk out of the store with your pot.

Strange that you would limit drugs to merely a “capitalist product”, as if they wouldn’t have medicinal or utilitarian uses beyond a market economy. They do. Those that bring health and/or happiness to individual citizens would be on the shelves of your local village store.

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Plume 06.10.12 at 7:14 pm

Sebastian H,

@75,

That’s more than fair. Actually, I’ve always thought it best to do this on an island first. Call it Egalitaria. Best case scenario, find a deserted island and ask for volunteers. As in, the people who left the mainland to live on the island would already know what they’re getting into. It would be their choice. They’d already be “on-board” so to speak from the start.

Obviously, things would develop, evolve, change with the times from that point on. But the initial establishment of the constitution, horizontal structure, organic farming, locking down sustainability, etc.. . . . would be far easier if starting from scratch.

People would be free to leave the island if they found they preferred other systems. No charge. No hassle. No problem.

Have also thought out how it might interact with other systems/nations. Can flesh that out later.

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Emily 06.10.12 at 7:21 pm

Re: pricing and scarcity – my understanding is that markets are considered to be reasonably good at pricing relative scarcity but not absolute scarcity.

I’ve been reading Ahmed Hussen’s Principles of Environmental Economics (tho the maths is rather beyond me), and it seems to me that throughout the freemarket-socialism trajectory you still retain problems of the potential conflict between efficient (present day) use of resources and resources available for the use of “future generations” as well as other environmental or long-term issues – such as the inability of “the market” to price ecosystem health and so on…

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Robert 06.10.12 at 7:50 pm

Actually, the mathematics of price does not imply what capitalist apologists say it does. This has been known for at least half a century.

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Robert 06.10.12 at 7:51 pm

Should be “the mathematics of price theory”

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Data Tutashkhia 06.10.12 at 7:54 pm

Of course pricing may not work well even without any scarcity, if the supply chain is oligopolistic. Or even if it’s not oligopolistic, but suppliers are involved in price-fixing, and they usually are. And if they are not involved in price-fixing, then, chances are, most of them are going to fail quickly, and then the supply chain will become oligopolistic. Somebody has to monitor and take care of all that stuff anyway.

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Plume 06.10.12 at 8:54 pm

Sebastian H,

A quick thought. Would like your response. The pot thing got me to thinking. In capitalism, the actual use or benefit of the product or service is generally secondary, at best. The purpose is not to improve quality of life or protect the environment, it’s to make money for the capitalist/shareholder. The thing sold is beside the point. It can be virtually anything. It’s merely a vehicle to gain riches — which, to me, is one of the biggest problems with capitalism in the first place.

It’s like a salesperson. They don’t really care what they sell, just as long as they sell it, make their commission, etc. I did sales when I was younger, and routinely worked with people who had previously sold an incredible array of goods and services. Mostly, there was no logical connection between one sales job and the next. They were that different. Again, in the capitalist system, the object or the service is the vehicle, the means to an end, not the end itself. Its function, utility and overall impact are just not of much concern to the seller, owner, shareholder, etc.

In our utopian society, OTOH, we’ve changed the way we look at this. The object or service itself is what counts, how these impact the consumer, society and the planet. What matters is the purpose and effect of the thing in question, not that someone can use it as a vehicle to obtain more of something else: money. We’ve stripped away everything but its utility and its impact on individual who receives it, the society and the ecosystem.

As in, the object or service syncs up with itself. There is no delay, no spatial or temporal gap between the thing and its purpose. This system is end-user-centric, worker-centric, society and ecologically-centric . . . as opposed to seller/owner/shareholder-centric.

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geo 06.10.12 at 9:02 pm

Sebastian @71: Far better to aim for a future where greedy humans don’t do as much damage to each other and the world

Good, let’s aim for that. Any suggestions?

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Bruce Wilder 06.10.12 at 10:23 pm

In some ways, I think there’s much to say for a collapse of civilization. The few million people, who would be left to live in scattered villages, ringing the arctic circle might well be much happier than the 9 billion fouling their many-chambered nest.

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mattski 06.11.12 at 2:15 am

Plume, I don’t think you’re doing the left any favors. I really don’t.

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Sebastian 06.11.12 at 4:01 am

“In capitalism, the actual use or benefit of the product or service is generally secondary, at best.”

The use or benefit of the product or service is generally primary, the problem is that STATUS can be something that people seek in products which you probably don’t like to build into price (and wealth can be a form of status as well). One of your problems is that your system seems to assume that status seeking won’t exist, or that it will be wholly beneficial in your system. A bunch of the nasty stuff that comes with capitalism is expressed through status seeking. In answer to geo, I suspect that our best bet is to try to channel status seeking productively. Capitalism tries to do that, though obviously imperfectly. Most communist theories either ignore status seeking, or pretend that it can *easily* be turned to the ‘good of the community’. Again, most successful versions of well channeled status seeking on large scales have tended to be in religious contexts (which I know isn’t exactly comforting).

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Plume 06.11.12 at 5:18 am

Mattski,

Yes, yes. It’s a terrible thing to promote social justice, equality under the law, full, participatory democracy, ecological health and sustainability. It’s just an awful thing to promote equal access to education, health care, cultural venues and all the fruits of civilization, regardless of ability to pay. Just rotten stuff, that.

Surely any promotion of an egalitarian system, which radically increases health and education levels across the board, while providing safe, environmentally friendly food and water systems for everyone would be anathema to the left.

And if you really believe that, you know nothing whatsoever about the left. Which I suspected after reading your responses, especially the one where you mention FDR and LBJ. Good liberals, of course. Good, mainstream liberals. Two of our best. But liberalism is merely the tip of the left-wing iceberg, and in 2012, center-left solutions are weak tea. We need dramatically stronger medicine to cure what ails us and prevent an ecological train wreck.

Quick analogy:

Capitalism is like cigarettes. It causes cancer and everyone on the left knows it. Liberals know it too, but they think we can tame it with filters. Put a filter on the cigarette, and that’s enough. Conservatives and propertarians, OTOH, think capitalism needs to be unleashed even further, so they’re dead set against even filters. The conservative is against filters because he thinks it’s unmanly. The propertarian is against filters because he thinks it’s a conspiracy by the Fed to rob us of our freedoms.

Leftists are different. They’ve studied and analyzed and observed how totally ineffectual those filters are. They see the great gaps of inequality in health outcomes and they know that filters are less than bandaids. Unlike their liberal friends, they’ve moved beyond attachment to the failed system of cigarettes, filtered or unfiltered, and understand that it’s not worth saving. Again. For the thousandth time. It’s not worth bailing out, coddling, pampering, pleading with, begging it to be nice. Stronger medicine is needed, and the real left understands this.

. . . .

In short, liberals want to play nicey nicey with the cause of cancer. In effect, they’re sleeping with the enemy even as they realize it is the enemy. As a leftist, I disagree. We’re in a war with plutocracy and oligarchy, and capitalism is the number one generator of plutocrats and oligarchs.

Time to choose sides, Mattski. The Dalai Lama has. He’s a Buddhist Marxist, which comes close to my own loosely defined camp.

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Gareth Wilson 06.11.12 at 5:40 am

The Dalai Lama believes he’s the reincarnation of a man who died in 1933, whose embalmed body turned its head toward where his new incarnation was living. He believes he was able to pick items belonging to his previous incarnation using memories of his past life, and that he can control whether he’s reincarnated. I think his economic beliefs have just as much relevance to modern society as his spiritual beliefs.

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Hidari 06.11.12 at 6:20 am

# 79.80

Robert,

what does modern mathematics have to say about price theory? Genuine question. Before I got distracted into talking about the passenger pigeon, I was merely making the point that, whatever prices are, they can’t be what apologists for capitalism claim they are.

Incidentally, the top post on your blog is dated December 31st 2014 so I am hoping with your future wisdom you can give us an insight into how the Euro crisis ends as well.

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Plume 06.11.12 at 6:29 am

Gareth,

So, of all the things you chose to respond to in my post, it’s the part about the Dalai Lama? Do you think that somehow reduces the credibility of what came before? Do you think you’re making a good point by dismissing Marxist thought based upon your bias against Buddhist beliefs?

Sheeesh.

Mattski and I are Buddhists. I mentioned the Dalai Lama to show wider connections, primarily because he has tried to paint my thought as isolated from left-wing contexts. It is, of course, centrally located in those contexts, in the mainstream of Utopian Socialism, Marxism, Marxian economic theory, Left-Anarchism, Democratic Socialism and the like. It’s also centrally located in the Civil Rights and Human Rights movements, and walks in their shoes.

The eradication of poverty. The eradication of discrimination based upon gender, sexuality, ethnic, racial or religious grounds. The eradication of inequality. All of this tied together. Wrapped up in environmentalism. And it’s doable. The funding problem has been solved.

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Robert 06.11.12 at 8:21 am

Hidari,

I date the first post ahead as a hack to keep it first.

Even abstracting from imperfections, market prices are not scarcity indices, and, for example, Marshall’s principle of substitution cannot be sustained. It is not the case, in theory, that if there were less of some input, its price and the price of commodities in which it was used relatively more intensively would be higher and consumers and producers would be encouraged to substitute other goods for those commodities. I like to make these points using Sraffa’s Production of Commodities by Means of Commodities, but one can make analogous arguments using general equilibrium theory.

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Roger Gathman 06.11.12 at 8:37 am

Since we are approaching a historic moment, when the capitalist system in the developed countries, for the first time since the thirties, is creating a less prosperous field for the vast majority of the next generation than existed for the past generation, we are obviously going to be re-fighting the economic system question. This is why the Red Plenty symposium has been cool! Central planning seems one entry into the question of what to do now, since understanding who benefits from planning, who makes the plans, and to what end is crucial in a period in which trillions are being given (or loaned at rates that amount to gifts) to the elite, while trillions are being sapped away from the assets and incomes of the majority (again, in the developed countries).

The combination of planning and private enterprise that forms the financial system – with its central banks, commercial banks, investment banks, and parabanks – went bankrupt in 2008 and has become a massive global drain since. These are the cohort that is “owed”, and the majority is supposed to adjust itself to a system devoted mainly to paying them. Of course, the system is insane. Why a small group in a relatively unimportant sector of the economy should be owed to the point where the majority is sent into debt enslavement is a question that isn’t asked, because as soon as it is, one sees how nutty the system is. Surely here, the Hayekian and Keynesian compromises you are talking about, John, have failed. We have really no need of a commercial banking system that produces, expensively, a function that the state could take over, given information technologies, and do inexpensively. It wasn’t Lenin but Theodore Roosevelt who, in his 1908 state of the union address, suggested setting up a bank in post offices and pretty much letting the state become the banker to the middle classes. It seems evident that the ability to inject money into that class would have ended the Great Recession Instead, in a combination of the worst of central planning and the worst of Hayekian “spontaneity”, it was injected from the top down in the hope that low interest rates for the megabanks would mean low interest rates for the average consumer. Well, corporate borrowing went up, but it didn’t go into r and d, or hiring. Loans for the 80 percent went down.
So I’d say banking is a good example of where compromise central planning could well be supplanted by fullthroated planning by the state, at least in part, with a gain for all. Investment banking, which lends to real companies, could well continue to be private, but casino banking, the whole system of hedge funds and n non-vanilla security instruments and options (which have grown up in the post Bretton Woods culture) should simply be merged with casinos and taken out of the financial system entirely. This would allow the gamblers to gamble to their heart’s delight without affecting anything outside their sphere. If pension funds were hooked up with the poker prowess of some superbowl poker player, I think it would violate the rules in place. But pension funds are hooked up with other more dangerous poker players.
So perhaps in a novel parallel to Red Plenty, we could contemplate one about “White” Plenty, charting the downfall of a system designed to reward predators while being touted as a necessary adjunct for the life of prey. And how that worked out.

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Katherine 06.11.12 at 9:55 am

As I tried to argue, I don’t think social democracy is just a mixture of central planning and free markets.

I’d love to see an expansion of that, John. Or if someone can point me to a past post that does the job, I’d love to see that instead.

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Plume 06.11.12 at 4:20 pm

Roger,

@92

So perhaps in a novel parallel to Red Plenty, we could contemplate one about “White” Plenty, charting the downfall of a system designed to reward predators while being touted as a necessary adjunct for the life of prey. And how that worked out.

Well said. Predators have always tried to rationalize their actions by snowing the people they screw over. If they aren’t full on sociopaths, who couldn’t care enough to attempt the snow jobs, they’ll try to justify their riches and the fact that others starve.

The effort put into justification often seems to exceed the effort taken to extract the wealth in the first place.

But I think in today’s America, we’ve reached a critical stage. We’ve been fed the lie that “capitalism is natural” for a long time. But Americans generally didn’t buy that until, oh, say, Reagan. The onslaught of advertising, propaganda in schools, and the virtual takeover of the media have done the trick. Even though the “natural” part only works for the predator class, not the rest of us, it has permeated our consciousness. But the real killer app for the predator class was when they enlisted the help of right-wing libertarians (propertarians), who have done great work for the predator class by linking, if not fusing the concept of “freedom” and “liberty” with the ability of predators to do as they please. Now, for conservatives, propertarians, centrists and even some liberals, the suggestion that we curb the activities of predators draws cries of “you’re taking away our freedoms!!!”

The snow job is pretty much complete. They’ve won. They’ve won both on and off the field of battle, in the boardroom, in the classroom, in the backrooms of Congress, in the churches, and in our homes.

If capitalism is “natural” and if what predators do means “freedom and liberty” then we are locked in a world of white plenty for the 1% . . . with its growing separation and segregation from the rest of the populace. We won’t be able to reverse this process until we at least wake up enough to see their freedom and liberty means our enchainment, and their actions are not “natural” for the species as a whole. Natural for the 1%. But not the 99%. Actually, it’s probably more like .1%.

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The Raven 06.11.12 at 5:00 pm

I’m bringing this bit here because I think it’s relevant to the discussion of planning and because it is of some current import.

We have here a new publication from Dr. Margaret R. Taylor of Berkeley, “Innovation under cap-and-trade programs.” Here’s part of a summary: “Policymakers rarely see with perfect foresight what the appropriate emissions targets are to protect the public health and environment—the history is that these targets usually need to get stricter,” said Taylor. “Yet policymakers also seldom set targets they don’t have evidence that industry can meet. This is where R&D that can lead to the development of innovative technologies over the longer term is essential.” Link.

The worst of both worlds: arbitrage and politicized goals.

Abstract, with links to full article (open access):

Policies incentivizing the private sector to reach its innovative potential in “clean” technologies are likely to play a key role in achieving climate stabilization. This article explores the relationship between innovation and cap-and-trade programs (CTPs)—the world’s most prominent climate policy instrument—through empirical evidence drawn from successful CTPs for sulfur dioxide and nitrogen oxide control. The article shows that before trading began for these CTPs, analysts overestimated the value of allowances in a pattern suggestive of the frequent a priori overestimation of the compliance costs of regulation. When lower-than-expected allowance prices were observed, in part because of the unexpected range of abatement approaches used in the lead-up to trading, emissions sources chose to bank allowances in significant numbers and reassess abatement approaches going forward. In addition, commercially oriented inventive activity declined for emissions-reducing technologies with a wide range of costs and technical characteristics, dropping from peaks before the establishment of CTPs to nadirs a few years into trading. This finding is consistent with innovators deciding during trading that their research and development investments should be reduced, based on assessments of future market conditions under the relevant CTPs. The article concludes with a discussion of the results and their implications for innovation and climate policy.

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Hidari 06.11.12 at 5:30 pm

‘It is not the case, in theory, that if there were less of some input, its price and the price of commodities in which it was used relatively more intensively would be higher’.

Yes I suspected as much. Interesting to know that theory predicts it too. And yet it’s genuinely astounding how many people still believe that there is some ‘law’ of ‘supply and demand’ even though even the relevant Wikipedia article makes clear it is simply an idealisation with little or no real-world relevance.

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ezra abrams 06.11.12 at 10:32 pm

In theory, theory and practice are the same, In practice, they ain’t (anon)
As a scientist who works in the biotech industry, and who learns, painfully, everyday how little he knows about economics, I’m skeptical of the central planning won’t work; some thoughts that make me skeptical:
There is a huge, enormous amount of waste in industry; most of it is hidden – even in public companies, we rarely hear of failures. When we do hear of failures, they are noticeable , as HPs recent decision to can its tablet.
Since you have a lot of waste, a central system has a lot of slack; if you look at the macmaster carr catalog (good phd thesis for someone, the criticality of macmaster to us innovation) they might have several hundred types of screws. And you do need a lot of different types of screws.
However, screws don’t cost much, so a central planner could simply have the screw factory make 10X more then we need; the cost to the economy of the “waste” (eg, sending all the workers home for 9 months out of the year) is simply not that high.

However, in many other instances, diversity of parts is driven by biz needs rather then engineering, eg if company X won’t sell part A to company Y, then Y has to go out and make a new version of part A. This is actually pretty significant.

Humans required diversity, and things to show off their status, and so forth; however, much of our technology is “only” conspicuous consumption; if, psychologically, power and status were conferred by tother things, then some huge fraction of the stuff we make is unecessaryary

and much of this is driven purely by commercial needs; if you have shopped for a laptop recently, youknow that there are, within a single company like Dell or HP, 1,000 of variants, and most of the variation is related solely – solely- to selling; if price was not that important, you could reduce 90% of the complexity in inventory and no one would notice.

ON the other hand, lack of central planning generates a huge number of jobs, so maybe the real problem is that without all those sales and maarketing people, we don’t have enough jobs to go around.

As I’m sure many CT readers know, the US congress is debating “the farm bill”, with all the ritualistic denunciations of pork, and all the ritulastics incantations about hte family farm.

Has anyone else noticed that the most socialized sector of american society is the farm sector, and that the sector that produces the most for the least cost is…the farm sector ?

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Sebastian 06.11.12 at 11:48 pm

“Has anyone else noticed that the most socialized sector of american society is the farm sector, and that the sector that produces the most for the least cost is…the farm sector ?”

No, because the farm sector isn’t the most socialized, it is one of the sectors that has benefited the most from mechanization and the oil economy. In terms of staple crops it is low-labor, benefits from low transport costs and benefits from easy access to petroleum based fertilizer.

“There is a huge, enormous amount of waste in industry; most of it is hidden – even in public companies, we rarely hear of failures. When we do hear of failures, they are noticeable , as HPs recent decision to can its tablet.”

The problem is ‘compared to what’? There is a huge amount of waste in human systems public, private, government or other. We’ve typically found that ignoring the price signal creates more waste rather than less.

Geo et al, above, I think you’re getting sucked way into the edge cases. Yes you need more than newton’s laws and a basic theory of gravitation to get a precise description of interactions where the things have tiny mass and are really really close together. But guess what? Those four things can get you a great description for most of the large scale movements in the universe. You are also seemingly confusing scarcity with usefulness. In order to have a high price something must appear useful and rare. Useful non rare things are cheap. Unuseful rare things are often cheap too. Prices signal scarcity of things that people want because they signal intensity of the want, and the ease or lack of ease of substitution.

In any case, I’d be super careful about equating “extracts huge amounts from the government” with “socialized”. I’m on the right, so maybe that really is the same thing, but if I were on the left I wouldn’t be happy using it that way. (I.e. I don’t think that having extracted huge bailouts from the government without effective oversight controls makes the banks ‘socialized’ in the way you’re saying)

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John Quiggin 06.12.12 at 2:43 am

@Katherine I realise I probably haven’t made the argument in a single place, and I can’t point to anyone else saying it the way I want to. I’ll put in on my ToDo list.

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Tim Worstall 06.12.12 at 11:37 am

“And yet it’s genuinely astounding how many people still believe that there is some ‘law’ of ‘supply and demand’ even though even the relevant Wikipedia article makes clear it is simply an idealisation with little or no real-world relevance.”

Is that so? Every commodities trader in the world is lined up outside to interview you. They’d just love to know how bad harvests, export bans, murrains and plagues of locusts do not increase food prices, how rising wealth doesn’t change diets and thus food prices, how China building in only 20 years the infrastructure for damn near an entire continent hasn’t pushed up iron ore or copper prices….and so on.

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Adrian Kelleher 06.12.12 at 12:05 pm

Well I think you put your finger right on it with “how rising wealth doesn’t change diets and thus food prices”. What about, say, spam? Wealth has risen yet demand for spam has unaccountably collapsed.

It turns out the spam market does not posses the eternal or unalterable qualities of physical law, and there is no economic method to satisfactorily account for this because it is a cultural change. In fact trying to make sense of it using economics is a fools errand; it just can’t be done.

So what use was all that work the titans of spam economics put into their discipline back in the 1930s and 40s? There is continuity in referral — “spam market” — but it is a pure illusion. The thing referred to possesses no definite or permanent form, so referring to a “spam market” is simply an abuse of language. It’s a wonderful convenience, but it breaks a fundamental protocol of human communication: that things referred to actually exist.

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Adrian Kelleher 06.12.12 at 12:07 pm

Prev @Tim Worstall

Also, “fool’s errand” and ” that things referred to should actually exist”.

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Sebastian h 06.12.12 at 2:55 pm

Adrian, you think preferences don’t lead to supply/ demand issues?

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Adrian Kelleher 06.12.12 at 3:47 pm

Of course they do. But there is no “law” of supply and demand. Some prices are sticky, others not, others still will be sticky now and become unstuck later. Cultural shifts and unexpected changes in circumstance will result in rapid and unforeseen market shifts.

The right makes claims for markets that blend into what is often rightly characterised by detractors as magical thinking, a tendency that stretches all the way up to the Greenspans and the Trichets. They dress their simple prejudices up in technical jargon but this apparent sophistication is really the empty mysticism of a neolithic shaman; rather than illuminating the truth, it conscripts the forms and rituals of science to the services of blind faith.

Like Hayek in Keynes’ famous quip, Trichet and Greenspan were resolute logicians who started with a mistake and ended up in bedlam. But they were the herd leaders; they possessed the authority to convince the orthodox that they knew what they were doing. The orthodox then engaged in mutual contratulation to the exclusion of all other points of view. Note, btw, that these are the same people whose elaborate hindsight compensates for their abject failures in foresight. They are the rulers of the world to this day.

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Plume 06.12.12 at 4:37 pm

Adrian,

Would you include gas consumption in your list? The recession knocked out a great deal of demand. People, at least in America, were actually conserving their driving habits. They used less gas, yet prices kept going up. The recession had worldwide reach, so this should have impacted pretty much everyone, but oil per barrel jumped dramatically, and gas prices rose.

I’ve also noticed over time that the price at the pump doesn’t always reflect rate changes per barrel. Which adds another twist in the supposed supply and demand “law”. Too many contradictions throughout the system, too many conflicts, for there to be a law. And whenever anything is a virtual monopoly, as oil is, supply and demand rules go out the window. They can charge what they want, because people need it and the supply is radically controlled. Of course, they have their own constraints and people to answer to. But when it comes to gas prices, there appears to be a major disconnect between consumer demand and producer supply. Throttled on purpose or not.

Consumer electronics also seems problematic for those who say there is a rule. Prices generally keep dropping, regardless of demand. Most of that appears to be because of cheaper and cheaper labor, working in virtual slave-settings, round the clock, often with suicides as the form of escape.

We in the developed world get to benefit from those who work on the verge of suicide. And economists write “laws” about how it all supposedly functions, generally without mentioned anything about the real costs.

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Hidari 06.12.12 at 5:34 pm

‘Is that so? Every commodities trader in the world is lined up outside to interview you. They’d just love to know how bad harvests, export bans, murrains and plagues of locusts do not increase food prices, how rising wealth doesn’t change diets and thus food prices, how China building in only 20 years the infrastructure for damn near an entire continent hasn’t pushed up iron ore or copper prices….and so on.’

OK a slight primer about the nature of scientific law. Perhaps I should have made clear that when I said ‘there is no law of supply and demand’, I should have made clear the missing word ‘scientific’.* My bad. In any case, there is no such thing as the scientific law of demand. It does not exist, in precisely the same (or the opposite) way that Boyle’s Law or The First Law of Thermodynamics clearly do exist.

This is because (as <a href="http://en.wikipedia.org/wiki/Nancy_Cartwright_(philosopher)"Nancy Cartwright has spent her career arguing), like all scientific laws, the ‘law’ of supply and demand only functions under ‘ceteris paribus’ conditions. But whereas Boyle’s Law or laws pertaining to thermodynamics produce pretty good predictions even when ceteris paribus conditions do not hold the ‘law’ of supply and demand doesn’t. In other words, in ‘real world’ situations, there are simply too many variables, and the law of supply and demand doesn’t have the deterministic character we expect from a scientific law. Therefore it’s not one. QED.

To put it in layman’s terms: you can use the laws of physics to make pretty accurate predictions (at the sub-atomic levels, extremely accurate predictions): the laws of economics…..not so much.

And this is important because prediction is not, as some economists seem to think, the icing on the cake of a good ‘law’. It is the whole purpose of creating the law in the first place. Without prediction all you have is a beautiful gleaming car, great bodywork, wonderful leather upholstery, but no engine.

Now, economists (and, doubtless, commodity traders) try and weasel out of this. But they fail to see the point of Niels Bohr’s little joke about ‘Prediction is very hard, especially of the future’. Sure, these commodity traders and economists are very good at predicting the past. They are very good at seeing the way prices go up or down, and then producing stories about how this ‘must have’ been because of this that and the other ‘supply and demand’ issue. So they are good at predicting the past.

But the future? Not so much.

*There is of course a heuristic of supply and demand, which has the same metaphysical status as ‘red sky at night, shepherd’s delight’ or ‘a stitch in time will save nine’. Which is not quite the same as saying it’s false.

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ajay 06.12.12 at 5:42 pm

The question “can economists reliably pick which securities are going to go up in future” seems to me to be slightly different from “do supply and demand shocks reliably affect prices”.

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Hidari 06.12.12 at 5:47 pm

‘Note, btw, that these are the same people whose elaborate hindsight compensates for their abject failures in foresight.’

This makes the point I was making above about prediction a lot more clearly than I was able to.

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Hidari 06.12.12 at 5:50 pm

‘The question “can economists reliably pick which securities are going to go up in future” seems to me to be slightly different from “do supply and demand shocks reliably affect prices”.’

No it is the same question because look how you have changed the tense. The question is not whether in some Platonic world, ‘supply and demand….affects prices’. The question is: based on the ‘law’ of supply and demand, can I make real world, quantitative, objective, falsifiable, predictions about prices in the future? If the answer is ‘no’ it’s clearly not a law in the sense that Boyle’s Law is a law. It might be a useful heuristic, or way of clarifying your thoughts, but that’s all.

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Sebastian h 06.12.12 at 6:25 pm

Ok, so preferences are the demand side of the supply demand equation. The point on prices, that the pro-planners are having trouble with, is that prices are the best known way of getting good signals about how scarcity interacts with demand interacts with substitution possibility

That doesn’t say that prices are the perfect way of getting perfect information (the apparent geo complaint) just that they are the best known method of aggregating AND disseminating that information. If you come up with a better method, fantastic, though I’d counsel using it on a proof of concept scale before just throwing away prices.

But at the moment you don’t have a better method. You can talk about social justice or whatever all you want, but you would be best trying to apply that after market a la Sweden rather than screwing with the price signal. And you really shouldn’t be screwing with it if you don’t understand how it enables substitution effects and changes to demand preferences (ie the spam confusion above).

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ajay 06.12.12 at 6:29 pm

The question is: based on the ‘law’ of supply and demand, can I make real world, quantitative, objective, falsifiable, predictions about prices in the future?

And you’re saying that the answer is “no” – that, to use everyone’s favourite example, “Trading Places”, even if you manage to get hold of the Department of Agriculture’s forecast for the orange crop in advance, you couldn’t use it to make a killing in the frozen orange juice futures market, because information about supply is useless in predicting future prices?

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Hidari 06.12.12 at 7:12 pm

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geo 06.12.12 at 7:19 pm

Sebastian @110: the apparent geo complaint

Not sure what this refers to, but I did recently write a lengthy post in the Red Plenty seminar setting out one instance of the market/anti-market debate, giving a sympathetic exposition of “market socialism” alternative (Schweickart’s and Nove’s models). The short version: markets in goods and services, yes; labor markets, yes with substantial modification; capital markets, no.

Sebastian again: You can talk about social justice or whatever all you want, but you would be best trying to apply that after market

This is a perfectly respectable position, except for the “you.” Why not “we”? Don’t you care about social justice?

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Katherine 06.12.12 at 7:34 pm

@John – I appreciate it. But just so you know – don’t feel obliged to be my own personal economics teacher!

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Sebastian h 06.12.12 at 7:43 pm

I don’t find the modifier ‘social’ to be a useful modifier, and it often obscures rather than reveals. Many things that are talked about as social justice can be covered in individual justice (ie discrimination) while many of the economic ones end up being ‘our system is imperfect and I want to throw it away but have no practical alternative’ while others are actively anti individual justice which I’m usually not ok with.

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Alex K. 06.12.12 at 7:46 pm

Appealing to the claim that “prices are scarcity indexes” in the context of someone claiming that we should do away with money is overkill.

It simply does not matter whether prices are scarcity indexes in the context of the calculation problem — it only matters that prices are an indispensable guide to what will work and what will not work in the current social context of given resources, given technology, and given tastes.

Ironically, in an alternate universe where it is true that prices are scarcity indexes, it would actually be much _easier_ for a central planner to do away with markets. If in this alternative universe we also exclude the pesky problem of having adjustment processes unfold in real time, then in such a universe Lange would be correct to claim that you can simulate markets by trial and error (if you have shortages, increase the price, if you have overproduction, decrease the price).

As is it, the fact that prices are not scarcity indexes in a reliable manner (they are influenced by technology, ownership patterns , tastes, expectations etc.) is just an extra nail in the coffin of the socialist side of the economic calculation debate.

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geo 06.12.12 at 8:03 pm

That was a dreary and disappointing reply, Sebastian. The point of saying “social justice” is to point out that this is a class society, in which there are very large inequalities of power, resources, and life chances, and as a result much needless suffering. You can say this is simply a matter of individual injustice, to be dealt with on a case by case basis, but why on earth would you want to say that? It would simply suggest that you see no large, structural inequities, or else that you see them and don’t give much of a damn about addressing them, even “after market.”

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Sebastian h 06.12.12 at 8:13 pm

No I see structural problems and think steps should be taken to fix them. There are just too many side concepts in the term “social justice” for me to want to sign on as a catch all term. Rather than trying to sort out the wheat from the chaff of the term I prefer not to use it.

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geo 06.12.12 at 8:25 pm

So one can’t either coax or browbeat you, as I’ve been trying to do for the last half of this thread, to offer some suggestions for relieving what you agree is a great deal of unnecessary suffering caused by large-scale inequalities? Why so reticent?

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Sebastian h 06.12.12 at 8:39 pm

Well for example, I would think that making Medicare available to all at actuarial cost with subsidies for the poor would have been a good fix to the problem of lack of access.

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geo 06.12.12 at 8:56 pm

So you’re a flaming radical after all! Welcome to the political wilderness.

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Tim Wilkinson 06.12.12 at 9:49 pm

Prices signal scarcity of things that people want because they signal intensity of the want, and the ease or lack of ease of substitution.

Except when they don’t because, among other factors,

* the whole of C20th n-c economics is based on the impossibility of any interpersonal comparison of utility, which is dealt with by introducing an obviously inadequate measure of ‘efficiency’ which favours the haves over the have-nots.

* guess what? Some people have more money than others. And in case this is not obvious, the quantity of purchasing power expended is therefore useless as a proxy for intensity of needs, wants, desires.

* amazingly, isolated consumers don’t actually have good information, so all the magic calculation that goes into price-setting is done by suppliers, who are powerful enough to inflate (or sometimes for strategic reasons, notably predatory pricing, deflate) prices.

* prices are not signals, they are numbers. They have to be calculated and communicated like any other numerical quantity. The ridiculous magical properties ascribed to them are largely the result of the fact that they are just about the only publicly visible numerical quantity produced by the unaccountable, profiteering, secretive planners who currently control the allocation of almost everything. Note how much control they wield by trickling back (with the option of withholding) sponsorship and advertising funds out of their unearned surplus. They are (in the UK) now busily getting their greedy hands on the last few publicly owned institutions like the NHS, police, schools, universities, roads, parks, etc. And all of this rather centralised allocation involves planning – to further corporate interests rather than anything else, of course.

Also, to ezra abrams’s #97, a non-exhaustive supplementary list of the peculiarly wasteful aspects of capitalist production:

advertising: branding and ‘aspiration’-inculcation

trade secrets and IP, including suppressed inventions

the profit tithe

duplication of infrastructure and other investments

the waste and misery incurred by business failures, the feedback mechanism of capitalism

calculated obsolescence: illusory ‘new improved’ versions, short product life, irreparability

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Adrian Kelleher 06.12.12 at 11:44 pm

@Plume, 105

Well the real issue is that “supply” and “demand” are very useful as shorthand that cuts through a lot of complexity but at the expense of realism.

Do all market participants really share the same information? Are their tastes fixed? Will changes in one market (e.g. artificial fibres) affect another (e.g. grain)? (Answer: yes if it leads to a reduction in acreage of flax; similar logic relates fuel to grain, say, via biofuels. These relationships can be unobvious and paradoxical.) All these real-world difficulties are assumed away. Worse, answering these questions is no easier than the measurement problems Hayek pointed out about state planning.

Problems arise when market evangelists assume all these problems are solved whereas in reality they’ve simply been circumvented. And when an economist calculates a demand curve he or she’s supposed to bear in mind the enormous number of tendentious assumptions made in arriving at that conclusion. But in the real world, once a given set of findings are combined with lots of others and that combination is itself combined with lots of other meta-findings then the idea that anyone is keeping track of all the assumptions and inter-dependencies is just a fantasy.

This wouldn’t be so bad if economists, like most professions, didn’t possess the power to define competence as expertise in the convoluted and dubious edifice they have themselves created.

To accept this is to become mired in logic of their own choosing. To reject it is to be entirely beyond the pale of civilisation as far as many are concerned. But to be frank I could name more than a couple of economists whose grasp of the fundamentals of science and mathematics is anything but sound. Poll results and questionnaires are assumed to reveal details of the human soul. Games defined by economists are assumed to possess material reality, and results are assumed to reflect concepts like “success”, “failure” and “merit”. Cultural norms are assumed to be biological truths. And so on (and on and on).

This process is all too easily abused. Assumptions often termed “arbitrary” are frequently in economics more aptly called “political” or simply just “dishonest”. By choosing appropriate assumptions it’s often possible to arrive at any desired conclusion and insert it into the literature. Once this result is in turn included in literature surveys and so on it then becomes a sort of intellectual pollution — an odourless, colourless and untraceable mental poison that in principle could seep out through the literature without limit.

I wouldn’t dismiss economics as useless. On the other hand, it’s far too removed from other sciences to be healthy. Economists exercise so much power it’s impossible to resist the idea that power is exactly what lures many into the discipline in the first place. What was witnessed prior to 2008 was simply a self-selecting, self-perpetuating, mutually-reaffirming caste using rite and ritual to exclude unbelievers from power.

The circular logic this produces can be extraordinary. For example issuing utterly misleading economic projections becomes understandable because other economists were similarly deluded. The same excuse applies to having had the most acute eye for the mote of market deregulation, say, while somehow failing to notice the giant beam of exploding credit.

Yet somehow presidents of the ECB or chairpersons of the Federal Reserve are still drawn from a very narrow body of individuals — a group that I think could be fairly called a clique. It’s like watching a Phrenologists guild take power over all education, training and HR over huge areas while dismissing challengers as insufficiently expert in phrenology. There’s some sort of wizardry involved, but it has nothing to do with economics.

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mattski 06.13.12 at 12:12 am

I am baffled by Adrian & Hidari’s attacks on supply and demand. Economics is not a hard science. Of course supply and demand isn’t a law in the same sense as a physical law. (Although we should be careful here: the closer we look at apparently inviolable laws like gravity for example the less “reality” and the more “statistical approximation” do we attribute to it.)

Economics looks at people, not particles, so “rules” are not going to manifest cleanly. But a rule is merely a statistical claim, not an absolute claim. Such and such, other things equal, will tend to happen. What is so offensive about supply and demand? We can often see prices being bid up or down depending on changing circumstances. Economic systems are sometimes very complicated and opaque. We can’t always see all the moving parts. But other things equal, supply and demand doesn’t strike me as terribly controversial.

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Adrian Kelleher 06.13.12 at 12:38 am

The problem is that further inferences are drawn from, e.g. demand curves or market linkages, further inferences are drawn from those in turn and pretty soon everyone’s forgotten the assumptions underpinning the whole thing. Challenging such findings generally results in an invitation to peruse the extensive literature on the subject.

Even in this thread entirely false claims are being made, e.g. that market prices are “the best” indicator. This would be more defensible if everybody had equal resources. In reality, some have vastly more resources and this disparity obliterates much of the information that is claimed to be so valuable.

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Peter T 06.13.12 at 1:01 am

If by “supply and demand” you mean something like “living things tend to take the path of least effort, and when it gets harder to do something they tend to do less of it or, if it’s essential, then less of something else”, then I would think that pretty uncontroversial. But that is a long way from money, prices and the supply of/demand for social goods. People deal with shortages by raising prices, or by rationing (formally or informally) or by queuing, or by allocating according to some social rule. Various studies have documented that most trading tends to blend all of these in various proportions, and it’s an empirical question as to how the mix will shift in any given case. No comfort for those who like to think that broad abstractions can be a reliable guide to human behaviour.

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mattski 06.13.12 at 2:45 am

Adrian, I assume you mean the statement, “market prices are the best indicator of scarcity.” First of all, why is this “entirely” false? And what would be a better indicator? I don’t think anyone is pretending prices work perfectly, only that they work for the most part.

Peter, what is the specific harm you are trying to ward off? I don’t know of any influential theory claiming that supply & demand constitutes a comprehensive description of human behavior. Neither do I see where the alternatives to supply and demand you mention seriously interfere with its explanatory power. The idea of s&d doesn’t claim there are no exceptions. But rather, IF a market is relatively free then s&d will for the most part determine prices.

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mattski 06.13.12 at 3:00 am

Speaking of exceptions, the housing bubble is an interesting case. How do we account for the dramatic rise in house prices? Certainly the supply of houses did not shrink. But part of the reason demand for housing increased was an effective increase in the supply of credit for home buyers. And of course eventually the perception that housing was a risk free investment sent demand through the roof.

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Peter T 06.13.12 at 6:39 am

“IF a market is relatively free then s&d will for the most part determine prices.”

“relatively”, “free”, “for the most part” and “prices” mean this statement is a long way from actual, you know, trading. As in, free from what (friendship? Considerations of status? power? fringe benefits?) “Prices” in money? Or in time? Future opportunities? There are, presumably, exchanges that meet the criteria, but they seem to be routine only in some very narrow domains. So the applicability of the “law” is correspondingly limited.

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Data Tutashkhia 06.13.12 at 7:27 am

Suppose you’re dying to to own an original Picasso. You can buy it at an auction, which seems like the quintessential implementation of the supply/demand concept. Of course you probably don’t have enough money, so it’s extremely likely that the person who gets the Picasso at the auction is nowhere near representing the real level of demand. So, the price here is a function of demand and the level of wealth inequality. If you were to redistribute the wealth equally and run the auction again, the price would’ve been much lower, and the person who values the Picasso most would’ve gotten it.

On the other hand, looking around my apartment, all I see here is run of the mill mass produced stuff. In this case, supply is not a problem, it’s extremely elastic. If demand goes higher, they just produce more. In this case, the price of an item should be, more or less, equal to the cost. The cost includes the aggregate cost of labor, plus the rent paid to the owners of natural resources. If we were to nationalize the natural resources, then the price would be equal to the cost of labor. We could, then, use ‘hour of labor’ as a unit to form the price. Which, I admit, would be difficult, but probably not impossible. As for central planning, it doesn’t seem necessary: you could maintain some small excess inventory, and produce to restock. Which is, I imagine, how it’s done anyway.

Now, investment is a whole different story. I think need a couple more hours to figure it out. I hope I won’t get distracted, our species’ future depends on it.

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mattski 06.13.12 at 12:19 pm

Peter, I don’t see you offering any better alternatives, but simply complaining this idea isn’t flawless. To me your comments don’t seem to point in any direction whatever. What are you offering?

Data, if wealth was redistributed equally and then we auction the Picasso the person who values it the most will get, and at the “true” price….

To this I say, Oy. I think it was Carl who said, essentially, so much energy is wasted because some people insist on starting from an assumption of perfect fairness. That is not a helpful standard to adopt. It’s absurdly unrealistic and gets in the way of incremental change.

Some people climb mountains by putting one foot in front of the other. Other people do it by arguing the causes of why the top of the mountain is not currently underfoot.

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Roger Gathman 06.13.12 at 12:19 pm

Hmm, both the index and object seem to share the same property, for I’ve noticed that the less money I have, the more scarce things seem to get for me. Funny how that works out. Bringing the index in line with its purpose, it would seem rational, then, that everybody should have the same amount, in the same way that other indexes – rulers, scales etc. – are the same for everybody. This way, we would have a real and efficient measure of scarcity.

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Sebastian H 06.13.12 at 3:38 pm

“This way, we would have a real and efficient measure of scarcity.”
On day one. On day two people would start trading on their preferences and we just end up where we are now again

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Plume 06.13.12 at 5:59 pm

Roger, excellent point. The price index has to account for the individual economic status of every consumer, and it can’t, obviously. And as wealth and income grow more and more unequal, that becomes even more problematic.

Pretty soon, they’ll be forced to break the price index warning system into socio-economic spheres. And then sub-spheres. And then, when they wake up to reality, just give up on the idea altogether, because it’s ludicrous.

Capitalists charge as much as they can get away with. There are a multitude of factors beyond actual “demand” dictating their pricing. As more and more of our economy becomes monopoly or cartel, “demand” becomes less and less important to the ruling class. The rest of us will just have to take what we’re given. And to slowly mitigate for this takeover of the economy, and the economy’s takeover of our lives, they’ll feed us cheap goods from other countries or poor pockets in this one for as long as it takes. For as long as it takes for us to just give up and accept the inevitable bifurcation of life into haves and have nots. The movie Metropolis, among others, was prescient.

. . . .

Oh, and if it the price index is such a great warning for supply, why then do we produce so much unsold goods? Anyone who has ever worked at or managed a retail store knows this. A very large percentage of the goods in those stories is sent back to the warehouse unsold. And even when the warehouse then marks the price waaay down, most of it still remains unsold. For instance, remainder books, records, clothes and so on. If pricing were such a great warning and measure, that would never happen.

The problem is rather obvious. Since anyone can push any new crap onto the market, we’re saturated with it. Basically, the best marketing wins, and humans are saturated with that as well. Duplication of products and duplication of marketing runs into dead ends, over and over again. The real issue boils down to need, rather than pricing.

We actually don’t “need” 99% of what appears on our shelves, and marketing can make us feel a “need” for only so long, and can’t possibly make us feel that need for everything on our shelves.

Our “unplanned” economy produces far too much junk, waste and duplication. Hence, the vast majority of unsold goods. Pricing warnings don’t work.

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Plume 06.13.12 at 6:05 pm

Just in case it’s not obvious in the bit above. This keeps happening in the retail world. Meaning, they’re not learning from the massive amounts of unsold goods, the failure to dump them via “sales” and the further failure to get rid of it via “remainders” sales.

Even if the price index actually worked, it doesn’t look like anyone’s listening.

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mattski 06.13.12 at 7:56 pm

Maybe someday we reach utopia. Couple thousand years from now. Meantime, let’s work to democratically implement and sustain progressive taxation to mitigate the tendency of wealth to accrue to itself. That’s good economics in the view of people like Joe Stiglitz, and I agree.

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Plume 06.13.12 at 8:29 pm

mattski,

First of all, that’s not nearly enough to fix what ails us, though it would be a good start. Second, we have about as much chance to do that as we do to achieve the utopia I mentioned in this climate. Neither party is willing to raise taxes, and the Republicans and the right have won the message wars. Their “don’t tax the job creators” has won the powers that be over. The Dems are too afraid to counter that argument.

And, yes, Stiglitz is right about taxes and a lot of other things. He’s one of the good guys, when it comes to economists. I put him up there with Dean Baker, Galbraith, Krugman, CT’s Mr. Quiggin and Simon Johnson, to name a few. But they don’t go far enough, either. David Harvey, the folks at the Monthly Review and Marxian economists in general are far better at showing why we need more radical change. As long as we have capitalism, capitalists will own the government and create massive gaps between the haves and the have nots, and our chances of reform will diminish with each decade.

Growing up when I did — I’m in my 50s — I assumed that the Keynesian era would last a lot longer. Now I just see it as a blip on the screen between the usual capitalist slavery/oppression eras. It was the best blip of this corrupt and destructive system, and looks more and more like an aberration daily.

“Reform” is simply not enough at this point. We’ve lost too much ground for that. And “reform” today amounts to giving up more and more of the New Deal in exchange for empty promises that the entire thing won’t be taken down.

Of course, the New Deal wasn’t adequate to begin with, and never grow enough to be adequate. We always needed far more radical changes. It was the compromise position between the real left and the right. Today, with both our parties being right-wing, it’s now seen as the furthest possible left we can go, which is totally unacceptable to the right — and the real left. Its days are numbers.

That’s why we need much, much stronger medicine to counteract the reactionaries. We’re not very good at playing their game, because they set the terms of debate and struggle now and have the vast majority of money, power and media. We can only lose if we step on their field of play.

Capitalism must die.

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Sebastian H 06.13.12 at 8:45 pm

“Pretty soon, they’ll be forced to break the price index warning system into socio-economic spheres. And then sub-spheres. And then, when they wake up to reality, just give up on the idea altogether, because it’s ludicrous.”.

Why would that be needed? The poor haven’t been able to buy the same things as the rich, ummm forever. If anything that is one aspect that has gotten better in western societies–the crossover in goods is greater.

Re unsold goods you are failing to ask “compared to what” again. Command economies have unwanted/unneeded goods all the time when the planners fail. The incentive to get it right is stronger in capitalist societies. In planned societies such mistakes can and do continue indefinitely. What? No one needs this type of screw? It is on the schedule sheet. Oh well.

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Plume 06.13.12 at 10:40 pm

The incentive may be greater to get it right, but because everyone is in it for themselves, their own wallet, there’s no way possible to get it right. Businesses don’t check with their competitors regarding their orders and unsold orders, and they have no control, obviously, over what their competitors do. They don’t get together with them to prevent saturation and waste — unless there’s a monopoly cartel, a cartel of monopolies. There is NO plan of coordination to prevent duplication and the like, etc.. Already have 100 sugary cereals on the shelves? Well, let’s just add another one, cuz I think my marketing is better than your marketing. Already have enough deodorant to last us centuries? I got a great idea to repackage the same old same old, and again, I think my marketing is better than your marketing.

No plans. As in, none. We don’t even have managed chaos. Everyone for themselves. If they think they can make a buck, they’ll flood the market with garbage. Doesn’t matter if umpteen other businesses are trying the same thing at the same time.

Within their first four years, 44% of all businesses fail. That’s primarily due to the “free for all” nature of our economy. If we had coordination — even a little. Wouldn’t have to be the dreaded “central planning!!!” — we could reduce business bankruptcies and a ton of waste along the way. We could make the entire system far more efficient.

I know my utopian ideas are a long shot, without a chance to come true any time soon, and maybe centuries after I’m dead and buried. But we should at least be able to work toward a sensible public/private synergy, and actually plan together to make this all work. Without that, we’re never going to make it. The issues of sustainability alone guarantee that. Short of the existential threat of ecological disaster, we’re simply being economically stupid and wasteful by leaving it all up to millions of competing interests, and that’s leading to incredible inequality. It doesn’t make sense.

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Peter T 06.14.12 at 12:01 am

mattski

The first part of going in the right direction is getting the map right. If “supply and demand will balance at the right price” is your map, you will end up, for many of our most pressing problems, in the wrong place. A more sophisticated understanding would lead one to see that rationing of the essentials of life is feasible and commonplace, that direct regulation is often more effective, far faster and less subject to gaming than price incentives and so on. Above all, it would lead to a considered choice of options, not a blind reliance on a single solution.

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mattski 06.14.12 at 3:07 pm

Peter, “not a blind reliance on a single solution.”

I don’t understand. What single solution? Our economy is mixed, and we can make it more mixed, if our arguments are persuasive. It’s tough I know. Do you have a better idea?

Plume, I’m sorry but your arguments do not impress me. I think you have a hard time distinguishing words/ideas from reality. Not only that, but you’re forgetting the left is never going to win a shooting war with the right and that is where you’re leading us.

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Plume 06.14.12 at 7:17 pm

Mattski,

Talk about having a hard time distinguishing words and ideas from reality!! I’m leading the left into a shooting war? Really? First of all, everything I’ve written points to a democratic revolution, not a bloody one. Second, I’m just a guy on a bulletin board. If you think I have the power to do what you’re suggesting, you need to stop, take a deep breath, and reassess your connection with the real world.

Beyond that, you strike me as an example of what is wrong with “liberalism” today. In your fear and trembling, you’ve basically agreed with the right that the real left, those to your left, have no place in this society. And, ya know what that means? You then become the furthest leftward wing of the possible. Which also means you can never get what you want, because your positions will be demonized as “far left” and “unrealistic”.

Example. You brought up FDR in a previous post. Well, FDR was able to get through a lot of liberal policy because his positions were seen as the compromise between left and right. He could point to a strong left to his left that could strike fear into the hearts of the Establishment. “Don’t want my compromise position? Then you’re going to have to deal with the far more aggressive forces to my left!!” And even within that kind of context, he always asked for more than he actually wanted. He asked for 100% top rate in the early 40s. A maximum wage, so to speak. And he “settled” for 94%. Today’s so-called liberal would have pre-negotiated this with Republicans, kicked the real left to the curb, and “settled” for something much further to the right than they actually wanted. Like a 28% top rate.

In short, you need us. We make your position the “centrist” position, which is often seen in Establishment circles as the automatically “sensible” position. But because there is no real left in America, and you and your fellow liberals aid the right in crippling that possibility, you will never get what you want in this system. You will always be considered the crazy far left and your ideas will be dismissed just as you dismiss mine and those of my fellow leftists.

Think about the success of the tea party. Mainstream Republicans have a much stronger negotiating position because of them. Because the tea party have moved the rightward wing of the possible much further to the right, moved the Overton Window, that makes the rest of the Republican party seem “sensible” in comparison. The Dems try to make nice with the old guard as they fear the new one. This moves them further to the right as well.

In short, if you want strong, liberal policies, you’re going to need to demand far more, and you’re going to need to point to a strong left to your left that demands much more than that. That moves the “center” to the left. As long as liberals in power keep pre-negotiated everything in sight, they’re never going to get anything but center-right policy — at best.

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mattski 06.15.12 at 12:06 pm

People who think in such terms as, “capitalism is cancer” or “capitalism must die” may have something to learn from the man who said this,

Generally speaking, such sort of expressions are childish. Those officials who use those words, I think they want to show the Chinese government that the Dalai Lama is so bad. And I think also that they are hoping to reach the Tibetans. They want 100 percent negative. So they use these words. They actually disgrace themselves. I mean, childish! Very foolish! Nobody believes them.

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Plume 06.15.12 at 4:04 pm

Mattski.

If your little sensibilities are hurt by strong language, I feel very sorry for you. But I stand by my choice of words. They’re actually rather tame in the face of what capitalism has done to the world — and what it will do.

Capitalism is cancer, and yes, it must die. It is a profoundly immoral system, spreading like cancer into every nook and cranny of our lives, and its own internal logic requires that endless growth. This endless growth, this requirement, run straight into the wall of sustainability, and will destroy the planet if we don’t destroy capitalism first. Any system that depends upon endlessly increased extraction/consumption on a finite planet should not be allowed to be. And the fact that it also requires trillions of dollars of public money to keep it from collapsing every few years is just further proof of the madness of those who defend it.

You can trot out all the little quotes you want by its defenders. They and you are nothing but shills for an evil, anti-democratic system. You either knowingly or witlessly shill for the 1% when you do, and for that, you should be ashamed.

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