I recently took a class based on David Korten’s Change the Story, Change the Future. I would call his view of economics as pessimistic and his solution as overly optimistic. I would also say that his book was repetitive; he could have put his message in about ten pages.
He thinks that if we have a “living economy for a living earth” that life will be so much better for everybody. My thought is that it ain’t going to happen.
He envisions us living in small communities that rely on local resources. We will have more public transit and trains for travel between communities. Instead of flying between continents we will take ships. Oh, yes, we will be connected by high-speed internet.
First, I don’t think most of us want to live on local resources. We want our bananas, coffee, and chocolate: none of these can be grown locally without lots of well-insulated greenhouses. And will every local community have access to sufficient glass for these greenhouses?
Second, we will need large corporations to provide the steel for the rails, build the trains, provide the fuel or electric power to drive them, and provide the Internet. But he repeatedly dismisses large corporations and their “corporate robots”.
Third, by having ships instead of planes, he will deprive many of visiting other continents. If a ship takes four days to cross the Atlantic, then a vacationer would use up over a week getting to Europe and back. I wonder how soon a four- or five-week vacation would be available to most Americans.
A more realistic bit of optimism is provided by No Ordinary Disruption by Richard Dobbs, James Manyika, and Jonathan Woetzel. It is subtitled “The Four Global Forces Breaking All The Trends”. These trends are urbanization, accelerating technological change, an aging world, and greater global connections.
More and more people want to live in large cities, not on farms, small villages, or even exurban developments. They want to be in large cities where there are more opportunities for work and leisure. China, once a land of peasants has several mega-cities and dozens of cities with populations of 250,000 or more. Many people whose parents were peasants now have middle-class jobs.
If you are over thirty, you can remember when cell phones were not ubiquitous. Now even farmers in Africa have them. Now even grandmas can’t do without their cell phones. They have more computing power in their purses than I had on mainframes in the early 70s. If you are over fifty, you may remember when 256KB was high-speed Internet. Now many areas have 100GB Internet. Given the U.S. with its quasi-monopoly of telecommunications, is it any wonder that large cities in other countries are growing faster than in the U.S.?
As more and more of us live longer, we are seeing retirement age later, more health-care costs, and higher pension costs. The number of workers that can support these trends is becoming a decreasing portion of the populace.
The greater global connections are helping in the urbanization on all the continents. An idea created in one country can spread to another country almost overnight. eBay went world-wide and soon imitators sprang up. A former school teacher, Jack Ma, started Alibaba which is now dominant in China and elsewhere. Global connections are helping money move around faster, sometimes just for increased profit, sometimes for a greater good. Reliance Communications of India was able to get three billion dollars from several Chinese banks, at interest rates significantly lower than they could from Indian banks.
Korten writes negatively about economists, basing this on the thoughts of some long dead economists and possibly Milton Friedman. Many often misquote Friedman. Paraphrasing him, he wrote “The only purpose of a corporation is to provide profits to its shareholders, within the law.” That last part is ignored by the self-serving who want to increase their own power.
This gets us to the third book, Saving Capitalism by Robert Reich. Reich is one of the many economists that Korten doesn’t even consider, like Paul Krugman, Thomas Piketty, and John Maynard Keynes.
Robert Reich rephrases Friedman with “Capitalism, alas, depends on trust.” If a car company produces cars with defects because it costs too much money fix it, will they lose money in the long run because they have lost the trust of potential customers?
Many large corporations have become untrustworthy but hide their sins by blaming the government. Reich points out that the purpose of government is to regulate the market so that it is fair to all. Remember the constitutional purpose to “regulate commerce”? The actuality is that large corporations are now regulating government in their own interests.
These interests seem to be getting themselves bigger and bigger shares of the “pie”. To do so, they hire legions of lawyers and lobbyists to sway members of Congress, state legislatures, and the regulators. They also “bribe” these government employees by hinting at corporate jobs after they leave government.
These interests also are controlling the terms of many political discussions. They complain about government regulations, but they work hard to make the regulations favorable to themselves. Have you really read the “Terms of Agreement” for which you clicked “Agree”? Some of these agreements are longer than this article. We don’t bother. But if we do have a complaint, most of these agreements state that our complaint will be settled by binding arbitration. Guess who will select the arbitrator?
Oops! I’ve run out of space. I recommend you read both No Ordinary Disruption and Saving Capitalism. Then be sure to vote next year.
This was also posted in the Reader Weekly, 2015-12-02 at http://duluthreader.com/articles/2015/12/02/6338_three_views_of_economics.
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Thursday, December 03, 2015
Saturday, August 24, 2013
Quips of the day - boom and hype
Paul Krugman used "prophets of boom" and "hype springs eternal" in his New York Times column of 2002-04-30, "Herd on the Street", also published in "The Great Unraveling", p. 75.
I think Krugman is a master of the English language as well as of economics. Of the latter, his own Cassandra-like predictions have come true more often than not. The people in power didn't listen to his warnings, he was right, and they still don't listen.
I think Krugman is a master of the English language as well as of economics. Of the latter, his own Cassandra-like predictions have come true more often than not. The people in power didn't listen to his warnings, he was right, and they still don't listen.
Friday, August 09, 2013
Quote of the day.- Compromise
"Compromise, if you must, on the policy--but never on the truth."
Paul Krugman, End This Depression Now!
Paul Krugman, End This Depression Now!
Wednesday, April 24, 2013
Quote of the day: We do not have grown-ups in Washington
Watch "The Economic Argument is Over – And Paul Krugman Won", Daily Ticker, Henry Blodget.
Saturday, February 23, 2013
Medical care: Free market or fee racket?
Today I found some links to stories about those who have no insurance pay for medical care many times what Medicare would pay. A trite example is charging more for a single over-the-counter pill than the hospital's own pharmacy would charge for a whole bottle.
If you have a few hours to gnash your teeth, read
"Bitter Pill: Why Medical Bills Are Killing Us", Steven Brill, Time, 2013-02-20
"Healthcare Isn't a Free Market, It's a Giant Economic Scam", Mike Masnick, tech dirt, 2013-02-22
If you have a few hours to gnash your teeth, read
"Bitter Pill: Why Medical Bills Are Killing Us", Steven Brill, Time, 2013-02-20
"Healthcare Isn't a Free Market, It's a Giant Economic Scam", Mike Masnick, tech dirt, 2013-02-22
Tuesday, December 18, 2012
The opportunity cost of freeways
"Opportunity cost" is an economic term to describe the cost of spending money one way instead of another. Consider the penchant for "across the board cuts" in government spending. If a family were to do that say with "across the board cuts" in its grocery spending, the kids would suffer. That is, if Dad cut his beer spending by 25% and the spending on milk by 25%, then the opportunity cost of Dad's beer would be less healthy children.
Every time I drive through the mammoth interchange of I-35 and I-694 in the Twin Cities, I think of all the houses or farms that could be in that space. I think of all the property tax that has been lost so people ever farther out can get between here and there in a "minimum" amount of time. Could the lost tax revenue have gone into more public transportation, moving more people with less space? If public transportation was more widely used, would more people spend less time in traffic when weather conditions make driving difficult? I'm sure you can think of many more costs associated with complex highways that could be better spent elsewhere.
Sunday, October 28, 2012
Quote of the day - Competition
"When, for instance, competition laws are not enforced, monopolies grow, and with them the income of monopolists. Competition, by contrast, drives profits down." - "Some Are More Unequal Than Others", Joseph E. Stiglitz, New York Times 2012-10-26
The article relates how the oligopolists are over and over driving down their costs, including taxes and wages, and increasing their profits.
My thought is that there may be a time when there are no profits to made because few can afford to buy the oligopolists' products and services and there will be insufficient qualified employees because there were insufficient taxes to educate a large number of people.
See "fastest to ruin" quote in "The Invisible Adam Smith".
The article relates how the oligopolists are over and over driving down their costs, including taxes and wages, and increasing their profits.
My thought is that there may be a time when there are no profits to made because few can afford to buy the oligopolists' products and services and there will be insufficient qualified employees because there were insufficient taxes to educate a large number of people.
See "fastest to ruin" quote in "The Invisible Adam Smith".
Thursday, October 25, 2012
The Invisible Adam Smith
Many who claim to be "free market proponents" cite the "invisible hand" of Adam Smith in "The Wealth of Nations". However, Adam Smith only uses the term once, only in reference to individuals, and in the context of trade among nations. The chapter is "Of Restraints upon the Importation from Foreign Countries of Such Goods as Can Be Produced at Home". Among the questions Smith raises is :
If a restriction benefits an industry, does it also benefit society?
As to the "invisible hand", Smith does not apply it as a metaphor for an absolutely free market, but as an indication that the acts of an individual can lead to consequences not intended by the individual. A more complete citation than "invisible hand" is:
"[The individual] generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." - pages 242-243
In other words, seeking his own security he may benefit society and seeking his own gain he may harm society, or otherwise, depending on the circumstances. In no way does this describe a "perfect market".
All page references are to the PDF version of "Wealth of Nations" transcribed by the Gutenberg Project. You can select your preferred format from http://www.gutenberg.org/files/3300.
For the most part, I don't think Adam Smith provides a prescription of how an economy works. Instead he provides a description of what he observed worked or didn't work.
Smith only uses "free market" once, in a discussion of the bad effects of restricting exports - pages 353-354. Woolen manufacturers wanted to restrict exports of wool so that their supply of wool would be increased. The problem was that English wool was inferior for clothing compared to wool from other countries. The prohibition of exports caused the price of wool to drop drastically, making it unprofitable to produce. The "invisible hand" now works to raise the price of mutton because the farmer has to pay his costs. That means to give the woolen manufacturers cheap wool is to give the consumers expensive meat. So, restricting exports did not give society much benefit.
A word that Smith uses frequently is "labour", would you believe over one thousand times? And how many times do you hear proponents of the "invisible hand" talk about labor, other than "greedy labor unions"? Smith looked favorably on labour, both as the basis of all economic activity and how labor can be marginalized by those with power.
The opening paragraph of "The Wealth of Nations" is:
"The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniencies [sic] of life which it annually consumes, and which consist always either in the immediate produce of that labour, or in what is purchased with that produce from other nations." - page 3
In other words, without labor, nothing happens.
"The liberal reward of labour, therefore, as it is the necessary effect, so it is the natural symptom of increasing national wealth. The scanty maintenance of the labouring poor, on the other hand, is the natural symptom that things are at a stand, and their starving condition, that they are going fast backwards."
As the National Football League found out, not paying referees what they asked lowered the owners wealth.
As for those who complain about "greedy unions" and promote "right-to-work laws", consider:
"The masters, being fewer in number, can combine much more easily: and the law, besides, authorises, or at least does not prohibit, their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work, but many against combining to raise it. In all such disputes, the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks, which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year, without employment." - page 142
Few seem to understand the need to balance interests. When profits and wages are out of balance we are in deep trouble. Given the rising cash hoard of many large corporations and the still uncertain job market, we should consider:
"It is the stock [materials, equipment, and workplaces] that is employed for the sake of profit, which puts into motion the greater part of the useful labour of every society. The plans and projects of the employers of stock regulate and direct all the most important operation of labour, and profit is the end proposed by all those plans and projects. But the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin." - page 142
In other words, without corporations much work doesn't get started and without labor it doesn't get finished.
Finally, Smith didn't think business people ["those who live by profit"] should be trusted in public affairs:
"The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it." - pages 142-143
Adam Smith was an academic who read widely, considered what he read, and wrote an opinion for the powers-that-be. Those who consider "invisible hand" and "free market" as the only things important about economics, should consider reading more of modern economists, who have the benefit of having read all of "Wealth of Nations" and over two centuries more of data to consider. They are no more in an ivory tower than Adam Smith was.
For a poster of "The proposal of any new law…" see "Poster: A warning from the 'Invisible Hand'".
Updated 2013-07-21 to include Adam Smith's words for "business people.
Updated 2013-08-20 to include link to the poster.
If a restriction benefits an industry, does it also benefit society?
As to the "invisible hand", Smith does not apply it as a metaphor for an absolutely free market, but as an indication that the acts of an individual can lead to consequences not intended by the individual. A more complete citation than "invisible hand" is:
"[The individual] generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." - pages 242-243
In other words, seeking his own security he may benefit society and seeking his own gain he may harm society, or otherwise, depending on the circumstances. In no way does this describe a "perfect market".
All page references are to the PDF version of "Wealth of Nations" transcribed by the Gutenberg Project. You can select your preferred format from http://www.gutenberg.org/files/3300.
For the most part, I don't think Adam Smith provides a prescription of how an economy works. Instead he provides a description of what he observed worked or didn't work.
Smith only uses "free market" once, in a discussion of the bad effects of restricting exports - pages 353-354. Woolen manufacturers wanted to restrict exports of wool so that their supply of wool would be increased. The problem was that English wool was inferior for clothing compared to wool from other countries. The prohibition of exports caused the price of wool to drop drastically, making it unprofitable to produce. The "invisible hand" now works to raise the price of mutton because the farmer has to pay his costs. That means to give the woolen manufacturers cheap wool is to give the consumers expensive meat. So, restricting exports did not give society much benefit.
A word that Smith uses frequently is "labour", would you believe over one thousand times? And how many times do you hear proponents of the "invisible hand" talk about labor, other than "greedy labor unions"? Smith looked favorably on labour, both as the basis of all economic activity and how labor can be marginalized by those with power.
The opening paragraph of "The Wealth of Nations" is:
"The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniencies [sic] of life which it annually consumes, and which consist always either in the immediate produce of that labour, or in what is purchased with that produce from other nations." - page 3
In other words, without labor, nothing happens.
"The liberal reward of labour, therefore, as it is the necessary effect, so it is the natural symptom of increasing national wealth. The scanty maintenance of the labouring poor, on the other hand, is the natural symptom that things are at a stand, and their starving condition, that they are going fast backwards."
As the National Football League found out, not paying referees what they asked lowered the owners wealth.
As for those who complain about "greedy unions" and promote "right-to-work laws", consider:
"The masters, being fewer in number, can combine much more easily: and the law, besides, authorises, or at least does not prohibit, their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work, but many against combining to raise it. In all such disputes, the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks, which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year, without employment." - page 142
Few seem to understand the need to balance interests. When profits and wages are out of balance we are in deep trouble. Given the rising cash hoard of many large corporations and the still uncertain job market, we should consider:
"It is the stock [materials, equipment, and workplaces] that is employed for the sake of profit, which puts into motion the greater part of the useful labour of every society. The plans and projects of the employers of stock regulate and direct all the most important operation of labour, and profit is the end proposed by all those plans and projects. But the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin." - page 142
In other words, without corporations much work doesn't get started and without labor it doesn't get finished.
Finally, Smith didn't think business people ["those who live by profit"] should be trusted in public affairs:
"The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it." - pages 142-143
Adam Smith was an academic who read widely, considered what he read, and wrote an opinion for the powers-that-be. Those who consider "invisible hand" and "free market" as the only things important about economics, should consider reading more of modern economists, who have the benefit of having read all of "Wealth of Nations" and over two centuries more of data to consider. They are no more in an ivory tower than Adam Smith was.
For a poster of "The proposal of any new law…" see "Poster: A warning from the 'Invisible Hand'".
Updated 2013-07-21 to include Adam Smith's words for "business people.
Updated 2013-08-20 to include link to the poster.
Wednesday, October 17, 2012
Quote of the century
"Our long national nightmare of peace and prosperity is over." Mock quote of President-elect George W. Bush, The Onion, 2001-01-18, quoted by Paul Krugman in "The Great Unraveling: Losing Our Way in the New Century", 2003
Thursday, May 10, 2012
Quote of the day - Compromise
"Compromise, if you must, on the policy—but never on the truth."
- Paul Krugman, "How to End This Depression", The New York Review of Books,
- Paul Krugman, "How to End This Depression", The New York Review of Books,
Tuesday, February 07, 2012
Free markets, unions, and Adam Smith yet again
I was published again, this time in the Star Tribune on the selective reading by many of Adam Smith's "Wealth of Nations". I also proposed a standardized test for legislators. See http://www.startribune.com/opinion/letters/138816234.html.
Friday, January 20, 2012
Flea markets are the only true free markets, sort of
Many are calling for free markets without any idea of what free markets really are. Free markets are not large corporations unencumbered by government regulation.
Flea markets and farmers' markets are better approximations of true free markets. Why is this?
A flea market has many buyers and sellers, although some sellers might think there are not enough buyers.
Buyers and sellers are free to enter and leave the flea market. Of course, sellers may have to apply for limited space and it will take a bit of time to pack up to leave the flea market.
Buyers and sellers have all the information they need to make a decision to buy or sell. The buyers can pick up the goods and even give them a small test. Sellers accepting only cash generally can assume the bills are good.
There are few externalities from a flea market. There could be lots of trash to be picked up. Some products sold may be defective and injure somebody.
Can you think of any other economic activity that even gets close to the free market standard set by flea markets and farmers' markets?
See also http://en.wikipedia.org/wiki/Free_market
Flea markets and farmers' markets are better approximations of true free markets. Why is this?
A flea market has many buyers and sellers, although some sellers might think there are not enough buyers.
Buyers and sellers are free to enter and leave the flea market. Of course, sellers may have to apply for limited space and it will take a bit of time to pack up to leave the flea market.
Buyers and sellers have all the information they need to make a decision to buy or sell. The buyers can pick up the goods and even give them a small test. Sellers accepting only cash generally can assume the bills are good.
There are few externalities from a flea market. There could be lots of trash to be picked up. Some products sold may be defective and injure somebody.
Can you think of any other economic activity that even gets close to the free market standard set by flea markets and farmers' markets?
See also http://en.wikipedia.org/wiki/Free_market
Thursday, December 29, 2011
Externalities - the market component forgotten by "free marketers"
A true free market is defined by many buyers and sellers, complete information to both buyer and seller, freedom of buyers and sellers to enter and leave the market, and no externalities.
In other words, ideal conditions that will never happen on any large scale in any functioning society.
Externalities are something that happen with almost all commercial transactions and are ignored at a society's peril.
I was thinking about externalities as I walked a short distance from where I parked my car to the post office. Rather than park twice, I parked in front of the liquor store and walked to the post office with my package. As I walked I thought about all the proposed post office closings.
Many of these closings will mean that many people will have to drive farther to a post office. The customer travel time is one cost of this change. Second, is the increased fuel usage. Third is a possible longer wait at the post office, more customer time. If we use more fuel, then the cost of gas can go up because of higher demand. If we keep using gasoline, we will need more oil. Because access to oil is considered a "national security issue", trigger-happy politicians would stump for yet another costly war. For want of a post office, a war was lost.
Sure, this is a far-fetched scenario, but a similar lack of looking at the bigger picture permeates our "free market" society. We shouldn't abandon a "market economy" because of its flaws, but we should at least recognize these flaws and their added costs.
Now, how many externalities are there in my driving to buy those heavy wine bottles shipped from Italy?
In other words, ideal conditions that will never happen on any large scale in any functioning society.
Externalities are something that happen with almost all commercial transactions and are ignored at a society's peril.
I was thinking about externalities as I walked a short distance from where I parked my car to the post office. Rather than park twice, I parked in front of the liquor store and walked to the post office with my package. As I walked I thought about all the proposed post office closings.
Many of these closings will mean that many people will have to drive farther to a post office. The customer travel time is one cost of this change. Second, is the increased fuel usage. Third is a possible longer wait at the post office, more customer time. If we use more fuel, then the cost of gas can go up because of higher demand. If we keep using gasoline, we will need more oil. Because access to oil is considered a "national security issue", trigger-happy politicians would stump for yet another costly war. For want of a post office, a war was lost.
Sure, this is a far-fetched scenario, but a similar lack of looking at the bigger picture permeates our "free market" society. We shouldn't abandon a "market economy" because of its flaws, but we should at least recognize these flaws and their added costs.
Now, how many externalities are there in my driving to buy those heavy wine bottles shipped from Italy?
Monday, December 12, 2011
Adam Smith missed on predicting a culinary trend
"It is difficult to preserve potatoes through the year, and impossible to store them like corn, for two or three years together. The fear of not being able to sell them before they rot, discourages their cultivation, and is, perhaps, the chief obstacle to their ever becoming in any great country, like bread, the principal vegetable food of all the different ranks of the people."
Little did he know that sautéd potatoes were already becoming popular in Flanders. Little did he know that huge fast food chains would be created using deep fried potatoes as one of their staples. And little did he know that those deep fried potatoes could be frozen for years.
Little did he know that sautéd potatoes were already becoming popular in Flanders. Little did he know that huge fast food chains would be created using deep fried potatoes as one of their staples. And little did he know that those deep fried potatoes could be frozen for years.
Friday, December 02, 2011
Comment on "job creators"
I posted the following as a comment to the Coffee Party's Facebook posting of "7 Ways to Support the Real Job Creators".
I highly recommend slogging through the 1000+ pages of 18th Century English that are Adam Smith's "Wealth of Nations".
Would you believe that he is more sympathetic to the workmen than the masters? That he thinks banks should be regulated? That taxes are necessary? That we have to co-operate with and assist one another? That talents come from our experiences? That he doesn't believe in giving 110% to employers? That the rich get rich at the expense of the poor? That governments are needed to enforce contract law? That merchants complain that high wages affect the economy but say nothing of how high profits affect the economy? That honorable professions are underpaid? That regulations are needed to prevent abuse? That he doesn't think much of corporations controlling government? That corporations are not concerned with the public interest? That although he complained it was illegal for workers to unite to raise wages but legal for masters to unite to keep wages down, he didn't think much of labor unions? But that regulations in favor of workers were just but those in favor of the masters were unjust?
Those are only some of the comments with which I annotated the first 150 pages of my Project Gutenberg copy of "Wealth of Nations".
I highly recommend slogging through the 1000+ pages of 18th Century English that are Adam Smith's "Wealth of Nations".
Would you believe that he is more sympathetic to the workmen than the masters? That he thinks banks should be regulated? That taxes are necessary? That we have to co-operate with and assist one another? That talents come from our experiences? That he doesn't believe in giving 110% to employers? That the rich get rich at the expense of the poor? That governments are needed to enforce contract law? That merchants complain that high wages affect the economy but say nothing of how high profits affect the economy? That honorable professions are underpaid? That regulations are needed to prevent abuse? That he doesn't think much of corporations controlling government? That corporations are not concerned with the public interest? That although he complained it was illegal for workers to unite to raise wages but legal for masters to unite to keep wages down, he didn't think much of labor unions? But that regulations in favor of workers were just but those in favor of the masters were unjust?
Those are only some of the comments with which I annotated the first 150 pages of my Project Gutenberg copy of "Wealth of Nations".
Thursday, November 17, 2011
Advice for bankers from the "guru" of free marketeers
"[Bankers] would be obliged, in consequence, to keep at all times in their coffers a greater quantity of cash than at present; and though this might, no doubt, be a considerable inconveniency to them, it would, at the same time, be a considerable security to their creditors."
- Adam Smith, Wealth of Nations, Book I, Chapter V, Of the real and nominal price of commodities, or their price in labour, and their price in money
At this particular point, Smith is discussing how the relative value of different coinage changes (copper, silver, gold) and that there can be runs on a bank as people try to take advantage of the difference. Or the banks can short change their depositors by giving them lower-valued coins.
Oh, yes, Smith also uses that dreaded word "regulation" favorably.
- Adam Smith, Wealth of Nations, Book I, Chapter V, Of the real and nominal price of commodities, or their price in labour, and their price in money
At this particular point, Smith is discussing how the relative value of different coinage changes (copper, silver, gold) and that there can be runs on a bank as people try to take advantage of the difference. Or the banks can short change their depositors by giving them lower-valued coins.
Oh, yes, Smith also uses that dreaded word "regulation" favorably.
Sunday, July 10, 2011
Trick question - who favored modern capitalism?
a. Adam Smith
b. Sweden
c. Karl Marx
I bet you chose Adam Smith.
Actually, he didn't like limited liability corporations. He thought an owner should work in his own shop or factory with a few employees. If he worked in it himself, he would be very interested in its success. If others owned the shop or factory, they would be less interested in how it was run.
Sweden in 1844 was the first country to make limited liability generally available. Few had the resources to start a steel mill or a railway. People outside the company had to furnish the capital without incurring losses greater than they put into the company.
Karl Marx in 1865 thought that joint-stock companies would bring huge material progress.
Source: "23 Things They Don't Tell You about Capitalism", Ha-Joon Chang, Bloomsbury Press, 2010
From "Thing 2: Companies should not be run in the interest of their owners". The result has been loss of vitality in many a large corporation. Thing 1 is "There is no such thing as a free market".
b. Sweden
c. Karl Marx
I bet you chose Adam Smith.
Actually, he didn't like limited liability corporations. He thought an owner should work in his own shop or factory with a few employees. If he worked in it himself, he would be very interested in its success. If others owned the shop or factory, they would be less interested in how it was run.
Sweden in 1844 was the first country to make limited liability generally available. Few had the resources to start a steel mill or a railway. People outside the company had to furnish the capital without incurring losses greater than they put into the company.
Karl Marx in 1865 thought that joint-stock companies would bring huge material progress.
Source: "23 Things They Don't Tell You about Capitalism", Ha-Joon Chang, Bloomsbury Press, 2010
From "Thing 2: Companies should not be run in the interest of their owners". The result has been loss of vitality in many a large corporation. Thing 1 is "There is no such thing as a free market".
Friday, September 17, 2010
Why gas prices go up faster than down
How often have you heard the complaint that gas prices go up faster than when they go down? Especially after the latest pipeline break in Illinois.
Consider how wholesale gas or any high turnover products are purchased.
Merchants pay for product with some of today's receipts. In order to buy more product tomorrow, they need to raise prices PDQ.
Conversely, when prices go down they want to make up for some of the smaller margins they had as prices went up and to provide some protection against prices going up again.
If the rate of prices going up matched the rate of prices coming down, we would probably be very upset when our favorite station ran out of gas.
Consider how wholesale gas or any high turnover products are purchased.
Merchants pay for product with some of today's receipts. In order to buy more product tomorrow, they need to raise prices PDQ.
Conversely, when prices go down they want to make up for some of the smaller margins they had as prices went up and to provide some protection against prices going up again.
If the rate of prices going up matched the rate of prices coming down, we would probably be very upset when our favorite station ran out of gas.
Tuesday, June 01, 2010
"Revolutionary" ideas
I serendipitously picked up “The Case for Big Government” by Jeff Madrick.
One of my favorite quotes is “If high taxes allegedly reduce efforts, surely unfair compensation should do the same. Fair compensation should improve effort.”
I have several other quotes that I may post from time to time.
If you would like to read a description of the book and some reviews, visit the Hennepin County Public Library catalog https://catalog.hclib.org and enter its title in the search box.
Health was worse in the cities than in the country because of sanitation. Government provided sewer systems and the health improved. Government also mandated certain vaccinations and funded the development of many vaccines.
Bumper sticker: if you don’t have smallpox, thank the government.
One of my favorite quotes is “If high taxes allegedly reduce efforts, surely unfair compensation should do the same. Fair compensation should improve effort.”
I have several other quotes that I may post from time to time.
If you would like to read a description of the book and some reviews, visit the Hennepin County Public Library catalog https://catalog.hclib.org and enter its title in the search box.
Health was worse in the cities than in the country because of sanitation. Government provided sewer systems and the health improved. Government also mandated certain vaccinations and funded the development of many vaccines.
Bumper sticker: if you don’t have smallpox, thank the government.
Friday, April 16, 2010
Why was my site suddenly so popular?
When I checked the statistics on my web site this morning I was surprised to see over 100 hits for Thursday. Gosh! I've been lucky to get 10-15 a day.
When I looked at the details, I found there were 65 hits for "Once Upon a Lake", a fable about the rise and fall of the fortunes of the city of Toulouse.
Was this only a few people looking at the page several times or was it a lot of people looking at it? Did somebody make a reference on a more popular site than mine? If so, it was in a chat room and not on a Google-searchable site. The only reference I found was for the page itself.
When I looked at the details, I found there were 65 hits for "Once Upon a Lake", a fable about the rise and fall of the fortunes of the city of Toulouse.
Was this only a few people looking at the page several times or was it a lot of people looking at it? Did somebody make a reference on a more popular site than mine? If so, it was in a chat room and not on a Google-searchable site. The only reference I found was for the page itself.
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