[Split] "Welfare"

[callmeslick]

Clint isn't so much a 'conservative' as a Libertarian. Way different, Leon. He actually served as mayor in one of the most liberal little towns in the US, and his wife has been a champion for a host of EXTREMELY liberal causes, usually with Clint's support.

[LEON]

TC, sometimes you puzzle me. Who, exactly, is hiding realities about inflation? Gasoline/Oil prices are actually pretty flat, with short term fluctuations, largely due to speculaton. Those items, along with food, are COMMODITIES, and thus traded for high profits by the 'investor' class I cited earlier, and since that class is holding more and more of the money, they have the cash to bid the costs up. Finally, Healthcare is inflated due to our system of delivery, not due to our monetary policy. Further, every one of those items is documented, monthly, in a very accurate fashion, at least looking at my home budget figures. I'm always amused at the alarm over the monetary 'problems' of the US, and wonder how the entire rest of the planet is so stupid as to use our currency as a 'safe haven'.....

callmeslick. Increase in the money supply is inflation. In political economy one define inflation as an increase in prices for the very reason to hide it.

The right way to understand inflation is this; If one increase the money supply, one will get higher prices than otherwise. So prices can be flat, but, that just mean inflation prevent prices from falling.

There's several thing that can prevent price inflation, even though the money supply has been increased; demand for money, increased production, money flows abroad, etc. Another thing is how one measure prices. Which commodity should we use, which should we not use. Another form inflation can be manifested is how commodities can shrink in size, e.g. smaller chocolate bars, less food in package, etc, but same price.

However, sooner or later all these money will flow into our economy and cause prices inflation.

There's another effect inflation (money supply) have on the economy, and that is misallocation of resources, because inflation render certain investments more profitable than they actually are, which again might be the main reason for the business cycle.

[LEON]

Clint isn't so much a 'conservative' as a Libertarian. Way different, Leon. He actually served as mayor in one of the most liberal little towns in the US, and his wife has been a champion for a host of EXTREMELY liberal causes, usually with Clint's support.

Yes, I understand the difference between conservative and libertarian. It's just that I don't follow what celebrities have to say that much, but every now and then I hear something.
But, liberal, I believe liberal is used different in US than over here (Europe). If Clint is libertarian and his wife liberal, isn't that a bit strange?

Edit: I might have misunderstood what you tried to say

[Tunnelcat]

TC, sometimes you puzzle me. Who, exactly, is hiding realities about inflation? Gasoline/Oil prices are actually pretty flat, with short term fluctuations, largely due to speculaton. Those items, along with food, are COMMODITIES, and thus traded for high profits by the 'investor' class I cited earlier, and since that class is holding more and more of the money, they have the cash to bid the costs up. Finally, Healthcare is inflated due to our system of delivery, not due to our monetary policy. Further, every one of those items is documented, monthly, in a very accurate fashion, at least looking at my home budget figures. I'm always amused at the alarm over the monetary 'problems' of the US, and wonder how the entire rest of the planet is so stupid as to use our currency as a 'safe haven'.....

Ah sooo callmeslick san, I may puzzle you, sometimes I puzzle myself, but I have to disagree on groceries. You may think prices at the grocery store haven't risen that much, but next time, take a look at the portion size in relation to the price and you'll see what I mean. You're paying the same price now for a much smaller portion of product than you did last year, or the year before that. It's a hidden cost increase. The core CPI does not take that little factor into account. Besides, energy and food is NOT factored into the CPI calculations and I was referring to the CPI when I made my comments about inflation.

http://investorplace.com/2012/06/is-hid ... -recovery/

But gas prices I now agree with you. Tsk, tsk, brain fuzz. After looking, gasoline prices now are about 36 cents lower than in 1918, inflation adjusted that is. But when I pay $4.45 a gallon for non-ethanol premium, it still hurts.

http://inflationdata.com/Inflation/Infl ... lation.asp

But the other reasons the government misreports, or deliberately under-calculates the CPI is to save on cost of living increases for Social Security and other government welfare programs and for interest payments on TIPS. I'd say all this hocus pocus is a deliberate money saver, for the government that is.

http://www.shadowstats.com/article/arch ... easurement

Now health care should be factored into the overall CPI as well. ALL our everyday expenses, including health care, should be factored into any CPI calculation, because health care is now the biggest expenditure most older American's have that is rising far faster than the government's vaunted CPI figures.

http://www.bloomberg.com/news/2012-05-2 ... -rate.html

LEON, if you want to see some of Clint's political views, watch and have fun.

[youtube]dIBGIXLDrAk[/youtube]

[Will Robinson]

Would it be so terrible if no one could speculate on prices and instead you had to actually take delivery of something you buy.

Be it a shipload of crude oil or a hundred shares of stock?
I don't appreciate paying a premium for something just because a couple of asshats on wallstreet got together using other peoples money and sent the price of that something soaring for a few hours...a something they, nor the owners of the money, ever intended to keep or use.

Let them all get real jobs for a change.

[LEON]

Reason speculation exist is because there's already price fluctuations in the market place, not the other way around. A speculator is a guy who foresees a price increase in the future (i.e. the fluctuation is already there. It's driven by supply and demand), thus buys up goods in present time in order to sell in the future for profit.
Do we have any benefits from this operations? Yes, we have. In order to understand this one must understand the role prices have in the market place. Prices communicate the relationship between supply and demand. If a price goes up it mean that supply is insufficient. Producers will then devote their time and effort to produce more, motivated precisely by higher prices. Furthermore, as production goes up, prices will decrease.
However, when a speculator buys up goods in the present he moves future demand to the present as well. This means also that part of the future price increase is moved to the present, and thus increase production in present time as well, i.e. production increase before we actually reach scarcity in the future. When we finally reach the time where the speculator foresaw the rise in prices, we have both higher production and the speculators stock, thus no scarcity either. In other words, prices go down again, and there's goods in the store shelves.

Times when speculations have been prohibited it has led to even larger fluctuations in prices and product deficiencies.

There's also situations where production cannot increase, e.g. concert tickets. Due to price control (i.e. concert tickets do not rise in price as they sell out), a ticket scalper can then take advantage of the situation and buy up in the present and sell in the future for higher prices. He foresee a shortage of tickets in the future, therefore buys tickets now to meet future higher demand.
Do this benefits us? Yes. He makes tickets available all the way until the concert doors open, or even until the concert starts. Without him tickets would still be sold out with the difference that now there's no tickets available.
Prices plays another role too - to allocate scarce resources. As the price increases it will discouraged people who are just average fan from buying tickets, thus leave more tickets to hard core fans who consider these tickets to have a higher marginal utility, therefore accept higher prices also. This mean, if one is a hard core fan and don't have time to stand in the line, one can always get tickets. Yes they are more expensive, but that is the very reason one get tickets as well. The increased price is actually a compensation for him (the scalper) standing in line for you.

There's even another form of speculation - when one buy up future goods that does not exist yet, like in agriculture. There is some uncertainty involved in agricultural as one is not sure what future prices will be. One can then sell this risk to a speculator.
A speculator is far better than a farmer to predict future prices, he can then offer the farmer a price, i.e. buy the future product now. A price in which the farmer make a profit. But, maybe not as much as he could if he had waited, but waiting involves a risk as prices just as well can be lower. A risk the speculator takes as he is depending on higher prices to make a profit himself. This make the farmers situation more certain, thus he engage in cultivating the product. Something he might not have done otherwise.
A speculator is in the business of risk, he can handle that much better than the farmer. Furthermore, the speculator is better situated to spread his losses - if that happens - than the farmer.

[callmeslick]

Yes, I understand the difference between conservative and libertarian. It's just that I don't follow what celebrities have to say that much, but every now and then I hear something.
But, liberal, I believe liberal is used different in US than over here (Europe). If Clint is libertarian and his wife liberal, isn't that a bit strange?

Edit: I might have misunderstood what you tried to say

stranger pairings exist. If you want a head-scratcher, look no further than the marriage of James Carville and Mary Madelan(?spell). She worked for Dick Cheney, he worked for Bill Clinton. The terms liberal and conservative, in the US today, are so far off classical definitons, that it is close to useless to use the terms at all.

[callmeslick]

Would it be so terrible if no one could speculate on prices and instead you had to actually take delivery of something you buy.

Be it a shipload of crude oil or a hundred shares of stock?
I don't appreciate paying a premium for something just because a couple of asshats on wallstreet got together using other peoples money and sent the price of that something soaring for a few hours...a something they, nor the owners of the money, ever intended to keep or use.

Let them all get real jobs for a change.

welcome to the investor focused US economy.

[callmeslick]

Reason speculation exist is because there's already price fluctuations in the market place, not the other way around. A speculator is a guy who foresees a price increase in the future (i.e. the fluctuation is already there. It's driven by supply and demand), thus buys up goods in present time in order to sell in the future for profit.
Do we have any benefits from this operations? Yes, we have. In order to understand this one must understand the role prices have in the market place. Prices communicate the relationship between supply and demand. If a price goes up it mean that supply is insufficient. Producers will then devote their time and effort to produce more, motivated precisely by higher prices. Furthermore, as production goes up, prices will decrease.
However, when a speculator buys up goods in the present he moves future demand to the present as well. This means also that part of the future price increase is moved to the present, and thus increase production in present time as well, i.e. production increase before we actually reach scarcity in the future. When we finally reach the time where the speculator foresaw the rise in prices, we have both higher production and the speculators stock, thus no scarcity either. In other words, prices go down again, and there's goods in the store shelves.

Times when speculations have been prohibited it has led to even larger fluctuations in prices and product deficiencies.

There's also situations where production cannot increase, e.g. concert tickets. Due to price control (i.e. concert tickets do not rise in price as they sell out), a ticket scalper can then take advantage of the situation and buy up in the present and sell in the future for higher prices. He foresee a shortage of tickets in the future, therefore buys tickets now to meet future higher demand.
Do this benefits us? Yes. He makes tickets available all the way until the concert doors open, or even until the concert starts. Without him tickets would still be sold out with the difference that now there's no tickets available.
Prices plays another role too - to allocate scarce resources. As the price increases it will discouraged people who are just average fan from buying tickets, thus leave more tickets to hard core fans who consider these tickets to have a higher marginal utility, therefore accept higher prices also. This mean, if one is a hard core fan and don't have time to stand in the line, one can always get tickets. Yes they are more expensive, but that is the very reason one get tickets as well. The increased price is actually a compensation for him (the scalper) standing in line for you.

There's even another form of speculation - when one buy up future goods that does not exist yet, like in agriculture. There is some uncertainty involved in agricultural as one is not sure what future prices will be. One can then sell this risk to a speculator.
A speculator is far better than a farmer to predict future prices, he can then offer the farmer a price, i.e. buy the future product now. A price in which the farmer make a profit. But, maybe not as much as he could if he had waited, but waiting involves a risk as prices just as well can be lower. A risk the speculator takes as he is depending on higher prices to make a profit himself. This make the farmers situation more certain, thus he engage in cultivating the product. Something he might not have done otherwise.
A speculator is in the business of risk, he can handle that much better than the farmer. Furthermore, the speculator is better situated to spread his losses - if that happens - than the farmer.

once again, LEON, nice theoretical explanation, but when liquidity is good, what happens in the REAL world is that a cycle of speculation drives prices upward, artificially(and, when liquidity dries up, like right after the last bubble burst, commodity prices plummet, because the speculative cash isn't there). I've seen it happen a few times in my lifetime. There was a 2 year run where essentially, you couldn't lose on a petroleum futures contract. If you had the money to buy into that market, it was guaranteed profit, and high profit at that. Now, I agree with you that we DO need a functional commodities market, but in my opinion, that market needs much more regulation than currently exists, and much more transparency in certain types of transactions, especially derivative securities.

[LEON]

once again, LEON, nice theoretical explanation, but when liquidity is good, what happens in the REAL world is that a cycle of speculation drives prices upward, artificially(and, when liquidity dries up, like right after the last bubble burst, commodity prices plummet, because the speculative cash isn't there). I've seen it happen a few times in my lifetime. There was a 2 year run where essentially, you couldn't lose on a petroleum futures contract. If you had the money to buy into that market, it was guaranteed profit, and high profit at that. Now, I agree with you that we DO need a functional commodities market, but in my opinion, that market needs much more regulation than currently exists, and much more transparency in certain types of transactions, especially derivative securities.

And again you don't look at the big picture. You look at symptoms, not causation. As I have written before:

Consider an example: Water in the dessert are of crucial importance, but, at the same time it's scarce. It's then important that one economizes on the water supply. If a politician then decide that such a important resource should be cheap, and force its price down so everybody can afford it, he will create an artificial signal (low price) that water is of greater supply, thus people will increase their consumption, i.e. not only will we use it for drinking, but we will bath more, wash our dog, shoot with water pistol, and so on -- consumption goes up, and then we will experience a water shortage, which is far worse than expensive water...(...)...water were allocated into unnecessary use.

Note. The water shortage was caused by the price control, not by greedy consumers. It's a failure of policy.

Price control, not greed.

And:

(...).. The root problem is inflation -- money printing or to keep interest rate down. Both controlled by the state. Inflation causes money to lose its value, thus decrease demand to hold money. Who wanna keep their money, tomorrow they're worthless. This drives up consumption, which we both seems to agree is bad -- resources are scarce. Decreasing money value also drives up financial speculation as they are desperate to make more before it loses its value.
Interest rate screaming to rise, but can't due to price control, would prevent both consumption and speculation to run rampant. A higher interest rate would encourage savings, which is the foundation for prosperity.

Question is; who finance the bubble? Answer; the Fed. With low interest rate, and inflation (money printing and fractional reserve banking). Low interest rate is here a price control which distorts the balance between loans and savings.
Inflation erodes accumulated capital, thus the economy will be less able to meet any increase in demand, because capital is needed to increase production - prices go up instead.

Last; if my theoretical explanation doesn't fit your view of reality, there might be something wrong with my theory, i.e. a bad theory. Please explain what's wrong.
However, I claim you make an error when you apply theory or principles to reality. Which I tried to explain here:

The right way to understand inflation is this; If one increase the money supply, one will get higher prices than otherwise. So prices can be flat, but, that just mean inflation prevent prices from falling.

Prices will be higher in relative terms, not in absolute terms.
What I hear when you try to refute my posts is equal to this; Me; "I claim that items due to gravity fall down to the ground if one drops them" Your answer: "No, yesterday I dropped a leaf and it went up due to some wind conditions" That is the difference between principles and practical.
Or - maybe better - "Smoking will shorten your life expectancy" "Not true. My granny smoked and died at age 85"

[callmeslick]

Question is; who finance the bubble? Answer; the Fed. With low interest rate, and inflation (money printing and fractional reserve banking). Low interest rate is here a price control which distorts the balance between loans and savings.

except, Leon, the Fed WASN'T pumping money into the economy and rates were NOT that low when the bubble inflated, nor when it broke.

Last; if my theoretical explanation doesn't fit your view of reality, there might be something wrong with my theory, i.e. a bad theory. Please explain what's wrong.
However, I claim you make an error when you apply theory or principles to reality. Which I tried to explain here:

it isn't that theory doesn't help explain reality, it's simply that reality is more complex than theory.

[LEON]

Question is; who finance the bubble? Answer; the Fed. With low interest rate, and inflation (money printing and fractional reserve banking). Low interest rate is here a price control which distorts the balance between loans and savings.

except, Leon, the Fed WASN'T pumping money into the economy and rates were NOT that low when the bubble inflated, nor when it broke.

Last; if my theoretical explanation doesn't fit your view of reality, there might be something wrong with my theory, i.e. a bad theory. Please explain what's wrong.
However, I claim you make an error when you apply theory or principles to reality. Which I tried to explain here:

it isn't that theory doesn't help explain reality, it's simply that reality is more complex than theory.

You make the same mistake over and over again. I can't have a discussion like this.

[callmeslick]

what is my mistake? I merely disagree with the practice of using theoretical economics(and a single SCHOOL of economic thought at that) to neatly define reality. Were it that simple, Leon, every economist would be a supply-side economist, but they aren't. They aren't by any means. As for not being able to argue when I differ in opinion, that's up to you. You didn't debate my point that Fed policy and low interest rates didn't have anything to do with the bubble(deregulation and unscrupulous human behavior contributed far more). You make a claim elsewhere that when speculation is prohibited we've seen wider pricing fluctuations, as if that is an absolute. It isn't. Prior to allowing gasoline and oil on the commodities exchanges, the price would fluctuate, but within a very narrow range, largely controlled by supplier(OPEC and others)decisions around production rates. Your views of basic supply and demand relationships is sound, LEON, but I completely disagree with your view around labor cost influence on a domestic economy. Further, you don't address(nor, have I to this point) the issue of a worldwide labor pool in a global economy, and the role that has played with the loss of industry in your nation and ours.Essentially, Leon, you are getting frustrated that I am not buying into your view of economics, and to be honest, I'll have trouble with pure economic theory debate. I am an investor, so economics is important to me, but not at an academic level, on a real-world level. To date, my pragmatism has worked, but I enjoy reading your words, bacause they present a certain school of thought(Supply-Side Economics) in a very lucid way. In short, I'm not trying to debate your theory, I am disagreeing with the absolutism of your views toward it's application.

[LEON]

what is my mistake?

Simple, you apply a principle to reality in an absolute way, not relative to what would happen if we had done something else (e.g. if smoking shortens one's life expectancy, one cannot say a 85 year old smoker debunks that, because we cannot know what his age would have been if had not smoked. Without smoking he might been 95, thus smoking shortened his life expectancy) You make the same mistake every time you referring to a real world event. When you claim interest was high you make a perceptual claim - something you SEE. Question is, compared to what? If you can know what the right level of interest rate should be, then you can make such a claim. Also, there's a difference between real rates and nominal rates. Right level is where supply is balancing demand, i.e. saving vs loans. This is called a market clearance price. If current rate is underneath this clearance rate - no matter how high that is - the balance are skewed. Which mean there's not enough savings to sustain the growth and are therefore a bubble.

Another mistake you do, is not to take into account the time span. You just look at what's right next to each other in time and draw conclusions. The advantage of principles is that one can examine both short term and long term effects. If I claim items fall to the ground due to gravity, I don't say anything about the time it takes. You can therefore not refute my claim by referring to a leaf you dropped which went up. I mean, if you throw a ball upwards you can claim I'm wrong all the time from the ball leaves your hand until it reach its top, but, at the end, both the ball and the leaf will end up on the ground. In economics these time spans can take decades. It's therefore important to study economics in terms of principles. Right now we have had more QE's than there's Fast and Furious movies, exactly when these money reach our economy and cause some effects it's hard to say. When they finally do, we might have low money printing, but, that doesn't mean money printing isn't the cause.

You claim about theory and the complexity of reality is quite remarkable, and prove my suspicions. If you don't have a theory how do you examine what you see? What prevent you from make a 'rooster crows cause sunrise' reasoning? From your claim one should believe you're the one writing complex economic analysis here as you take into account the complexity of our reality. But as you might have notice, I write far more than you, and see these things from far more angles. As I have said before, if one think like an economist one must think in three dimensions. Every event have several feedback loops, both negative and positive. We must consider them all and think through the case.
However, a funny thing, your claim that reality is more complex than theory is actually right. That's the very reason theory is superior - it contains less information. That's why we have concepts, principles, theory and even maps. A map contains less information than the terrain. That's why a map is useful. Likewise, a theory contain less information than reality. If a theory have amount of information equal to reality, then the theory IS reality and thus useless. Simpler a theory better it is.

(...)...every economist would be a supply-side economist, but they aren't. They aren't by any means.

Because supply side want to separate government and economy no supply side economist work for the government either. But this is interesting as the mess we are in can't be blamed on supply side but on demand side economics, right? But I don't held my breath, demand side economist brag about The Great Depression and how they (demand side) took us out of that - a depression who lasted for 17 years (no, please don't make a point whether it was 8 or 10 years). That's some achievements. Since you like empirical evidence so much, you can look up the 1920 crash - which were worse than the 1929 crash - and how President Harding took us out of that. Nobody have even heard about that crash. Why? Because Harding never made it to a depression.

(...)...but I completely disagree with your view around labor cost influence on a domestic economy.

What do you mean? Edit: Forget all the other points in this post. Can we solve this, i.e. labor costs. Can you explain this, not empirically, but actually explain it. Or give me some brief overview on your points

When I hear people claim one can double the salary and just rise prices by 17 cent to cover the rise, I wonder why the company haven't raised the price long time ago, and make a ★■◆● load full of money. Aren't these business men greedy bastards? I also wonder, if these people who make up these claims know so much about doing business, why don't at least some of them do so - start up a business and increase workers salary.

Further, you don't address(nor, have I to this point) the issue of a worldwide labor pool in a global economy, and the role that has played with the loss of industry in your nation and ours.

I have explained this, maybe you should read. Production has been taxed out of our countries. Not because of supply-side which we don't have, but due to demand-side, which we have. Maybe it's time for a change.

[Spidey]

In LEON’s defense…at least his economic theory actually sounds like economic theory, not like some other proactive social agendas mocked up to sound like “economic theory” I have read.

"I also wonder, if these people who make up these claims know so much about doing business, why don't at least some of them do so - start up a business and increase workers salary."

AMEN!

[callmeslick]

what is my mistake?

Simple, you apply a principle to reality in an absolute way, not relative to what would happen if we had done something else (e.g. if smoking shortens one's life expectancy, one cannot say a 85 year old smoker debunks that, because we cannot know what his age would have been if had not smoked. Without smoking he might been 95, thus smoking shortened his life expectancy) You make the same mistake every time you referring to a real world event. When you claim interest was high you make a perceptual claim - something you SEE. Question is, compared to what? If you can know what the right level of interest rate should be, then you can make such a claim. Also, there's a difference between real rates and nominal rates. Right level is where supply is balancing demand, i.e. saving vs loans. This is called a market clearance price. If current rate is underneath this clearance rate - no matter how high that is - the balance are skewed. Which mean there's not enough savings to sustain the growth and are therefore a bubble.

you can say that, but frankly, one HAS to use historical highs and lows to measure economic ebbs and flos. And, those ebbs and floes occur, naturally, and I have no clue what economic 'principles' say should happen. Now, as I said, I am not trained as an economist. However, I do pay attention to the ECONOMY around me, and yes, that involves perceptions. But, given I live life with a high degree of focus on capital preservation and conservative wealth accumulation, digesting what I perceive matters to me. Your example of the old smoker is valuable: what your theories don't account for are the other variables at work, many of them inherent human nature, just as some smokers will die at 40 and others at 100 years.

Another mistake you do, is not to take into account the time span. You just look at what's right next to each other in time and draw conclusions. The advantage of principles is that one can examine both short term and long term effects. If I claim items fall to the ground due to gravity, I don't say anything about the time it takes. You can therefore not refute my claim by referring to a leaf you dropped which went up. I mean, if you throw a ball upwards you can claim I'm wrong all the time from the ball leaves your hand until it reach its top, but, at the end, both the ball and the leaf will end up on the ground. In economics these time spans can take decades. It's therefore important to study economics in terms of principles. Right now we have had more QE's than there's Fast and Furious movies, exactly when these money reach our economy and cause some effects it's hard to say. When they finally do, we might have low money printing, but, that doesn't mean money printing isn't the cause.

obviously, as seen by my words above, I am not only accounting for long-term trends and cycles, I both acknowledge and EXPECT them. Now, something you touch on above is the uncertainty which a certain theory(or school of thought, if you will), in this case Quantitative Easing, will impact economies. You are quite right, it's like an experiment that we all may have to live with, and plan for. You, as a supply-side advocate, don't have much in the way of exemplary data for your principles, because they have not really ever been used on a large scale in the modern economy. And, principles aside, the modern economy is a VERY different beast, with far more of those variables I noted above, than what historically has been the case.

You claim about theory and the complexity of reality is quite remarkable, and prove my suspicions. If you don't have a theory how do you examine what you see? What prevent you from make a 'rooster crows cause sunrise' reasoning? From your claim one should believe you're the one writing complex economic analysis here as you take into account the complexity of our reality. But as you might have notice, I write far more than you, and see these things from far more angles. As I have said before, if one think like an economist one must think in three dimensions. Every event have several feedback loops, both negative and positive. We must consider them all and think through the case.

luckily, I do have a hand a couple of really good economic minds to consult when I get baffled, which is pretty regularly. Neither is a supply-sider, but neither is an absolutist in any way. Both ARE well educated, one a PhD in Economics, the other an MBA whose served a long and distinguished career in investment banking.

However, a funny thing, your claim that reality is more complex than theory is actually right. That's the very reason theory is superior - it contains less information. That's why we have concepts, principles, theory and even maps. A map contains less information than the terrain. That's why a map is useful. Likewise, a theory contain less information than reality. If a theory have amount of information equal to reality, then the theory IS reality and thus useless. Simpler a theory better it is.

but, what you fail to acknowledge(I wouldn't insult you by calling it a 'mistake' or 'wrong' in any way, it's just your point-of-view,) is that trying to apply your 'simple' theories to a complex reality flat-out doesn't WORK. To get to my field of expertise, Biochemistry, it's like when they had 'simple' DNA theories to explain genetics. Well, a hundred years on, we have realized the massive number of working parts that make up Biochemical Genetics, different Nucleic Acids, expressors, supressors, redundancy, etc, etc, etc. The 'simplest' theory just didn't fit. The only simple bits that serve any science are immutable Laws, and those are few and far between. Biology has a couple, Chemistry relies on the laws of Physics, which are but a few. Complex realities demand both the 3D, wholistic thinking you espouse in your quote above, and willingness to accept that complexity and not seek simplicity at all times. To return to economics, the practical individual, in my opinion, is served best by learning from theorists, but watching, remembering and learning from a lifetime of experience. Perhaps, you seek an academic redemption for Economic theory. I just want to maintain my assets and grow them prudently. I suspect those divergent goals explain the disconnect in our words, here.

[

Because supply side want to separate government and economy no supply side economist work for the government either. But this is interesting as the mess we are in can't be blamed on supply side but on demand side economics, right? But I don't held my breath, demand side economist brag about The Great Depression and how they (demand side) took us out of that - a depression who lasted for 17 years (no, please don't make a point whether it was 8 or 10 years). That's some achievements. Since you like empirical evidence so much, you can look up the 1920 crash - which were worse than the 1929 crash - and how President Harding took us out of that. Nobody have even heard about that crash. Why? Because Harding never made it to a depression.

A freaking WAR took us out of the depression, not economic theorizing. For the record, the Keynesians claim THEY got the job done. Both sides are wrong. Human nature took us out, with cyclical predictability. However, your point about the lack of influence within governments is well taken, and was why I made the observation about lack of experimental data.

What do you mean? Edit: Forget all the other points in this post. Can we solve this, i.e. labor costs. Can you explain this, not empirically, but actually explain it. Or give me some brief overview on your points

When I hear people claim one can double the salary and just rise prices by 17 cent to cover the rise, I wonder why the company haven't raised the price long time ago, and make a **** load full of money. Aren't these business men greedy bastards? I also wonder, if these people who make up these claims know so much about doing business, why don't at least some of them do so - start up a business and increase workers salary.

my point in the quoted part you are responding to here was that you seem to view labor costs as the ruination of a corporation's solvency, and I simply disagree. An offset could be easily managed in every single corporation in which I have been employed(ok, only 3 in my career) or been an investor in(a few more than 3) by simply being aggressive about upper echelon bloat and inefficient management that gets accepted due to nothing more principled or theoretical that human nature and basic networking of the upper classes. Now, does my view mean that the product could be priced even more cheaply were that to happen and wages not be raised? Sure, it would, but at least then, the workforce, were such practice widespread, would benefit from lower priced products.

I have explained this, maybe you should read. Production has been taxed out of our countries. Not because of supply-side which we don't have, but due to demand-side, which we have. Maybe it's time for a change.

TAXED OUT?? Please, are you saying that you wish to have the level of government service and lack of regulation and oversight of say,Zambia? Feel free, Leon, but that isn't for me, nor, I suspect going to be a welcome reality for most Western developed nations. Therein lies the problem that most of the people reading this board are going to be dealing with(or, at least our grandchildren will). How to maintain the comforts of modern life and still produce adequately to be competitive in a global labor market.

[callmeslick]

In LEON’s defense…at least his economic theory actually sounds like economic theory, not like some other proactive social agendas mocked up to sound like “economic theory” I have read.

"I also wonder, if these people who make up these claims know so much about doing business, why don't at least some of them do so - start up a business and increase workers salary."

AMEN!

yes, it is clear that Leon has studied Economics, and iit is QUITE refreshing to read his stuff.

[LEON]

I.m sorry to say this callmeslick, but I'm losing my patience. You seems not to get it. However, let me try one more time.

With principles, variables are irrelevant. Variables just change the outcome relatively. Principle "If one smoke, one shortens one's life expectancy" is true no matter variables. If a smoker becomes 40 and another 100, they would reach 45 and 105 without smoking.
One cannot apply this principle as; "If one don't smoke one becomes old" that's an absolute statement. Do you understand this?

Likewise; "If one increase the money supply, prices will be higher relatively to if one had not". Variables might even make the price go down, but they would gone further down without the money printing. Thus relatively to if one had not done so. Again, one cannot apply this principle as; "If one increase the money supply, prices will increase as well". That statement is an absolute.

However, in economics one often use Ceteris Paribus - if all else remains equal. With this in mind one can say; "If one increase the money supply, ceteris paribus, prices will increase as well". Ceteris paribus means that no variables changed - they all remained equal. This way one can make an absolute statement. However, variables seldom stay unchanged.

If a principle is true, it's true 1000 years ago and 1000 years into the future. Variables just change the outcome relatively.

If one make a comparison, whether deficit in the 50's or Zambia, one must adjust for ceteris paribus - if all else is equal. All the time you claim complexity, you seems never to take that into account.

This will be my last word on this.


Before I go, I just wanna point out something you might wanna take a closer look at.

A freaking WAR took us out of the depression

And your signature

“Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed."
Dwight D Eisenhower

A war cannot take us out of a depression. To produce more weapon one produce less consumption goods, and since consumption goods is wealth, one have therefore less wealth.

[callmeslick]

I.m sorry to say this callmeslick, but I'm losing my patience. You seems not to get it. However, let me try one more time.

With principles, variables are irrelevant. Variables just change the outcome relatively. Principle "If one smoke, one shortens one's life expectancy" is true no matter variables. If a smoker becomes 40 and another 100, they would reach 45 and 105 without smoking.
One cannot apply this principle as; "If one don't smoke one becomes old" that's an absolute statement. Do you understand this?

yes, but what we're discussing isn't akin to 'expectancy' it is akin to 'lifespan' and variables are not irrelevant, they are crucial.

Likewise; "If one increase the money supply, prices will be higher relatively to if one had not". Variables might even make the price go down, but they would gone further down without the money printing. Thus relatively to if one had not done so. Again, one cannot apply this principle as; "If one increase the money supply, prices will increase as well". That statement is an absolute.

I suppose true, but then again, what is 'money'. Currency is nothing more than an agreed-upon commodity anyway. What is the point, in real terms of real wealth? I note, below, you simply define wealth as possession of consumption goods. I wouldn't agree with that. It extends beyond that, to possession of the means to produce same(whether actually doing so or not at the moment), possession of intangible commodities(gold,silver) with little real usage value, and other things beyond simple consumables. Further, many key human consumables(air, for the best example) are beyond the control of individuals. Does that count as collective 'wealth'?

However, in economics one often use Ceteris Paribus - if all else remains equal. With this in mind one can say; "If one increase the money supply, ceteris paribus, prices will increase as well". Ceteris paribus means that no variables changed - they all remained equal. This way one can make an absolute statement. However, variables seldom stay unchanged.

If a principle is true, it's true 1000 years ago and 1000 years into the future. Variables just change the outcome relatively.

certainly, but as I pointed out, your 'principles' as a supply side economist have seldom, if ever, been tested. Thus, they remain purely theoretical.

.

Before I go, I just wanna point out something you might wanna take a closer look at.

A freaking WAR took us out of the depression

And your signature

“Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed."
Dwight D Eisenhower

A war cannot take us out of a depression. To produce more weapon one produce less consumption goods, and since consumption goods is wealth, one have therefore less wealth.

very true, that.Only, I would differ with a core point. Consumption goods are NOT the sole measure of wealth, for humans. Gold is a prime example, as is currency. Those measures of wealth are mere conventions, which are agreed upon to obtain comsumable goods, yet have no inherent consumable value(or very little). I certainly would hate to see you get too frustrated here, Leon. As I said, I think you and I are looking at similar sets of facts from completely different perspectives. My interests are not academic, they are day-to-day practical for me. Also, and this may be my last word on the topic, as we've gotten far away from the original topic: you noted on a few posts, the example of gravity(falling objects), and I was sort of waiting for you to see how that actually illustrated my point. Gravity is a law.....objects without friction will fall with an acceleration of 10 m/sec/sec. Always. However, if I'm under a falling piano, the VARIABLES, such as air resistance and other frictions, matter a lot to me, in terms of getting out of the way. And, getting out of the way of economic pitfalls is the core of my personal economic strategy. As for viewing government policies(back to Welfare), I try to look at my society as a whole, and keeping that society out of as many pitfalls(in terms of human suffering) collectively, as possible. Do I have any sure-fire answers? Heck, no, but I am extremely leery of ANY pure economic theory being applied, and frankly, supply side economics seems to me the path towards levelling the whole of mankind in a fashion most of the citizens in Western nations would find results in a severe reduction in lifestyle. Historically, those sorts of changes result in social upheaval that leads to even more onerous political situations.

[LEON]

I look at this from a principally perspective, you from a practical. Which mean we look at the same phenomena, but, I have an advantage - I have a tool to understand and connect the dots. You have not - you just look.

If one start to eat of one's seed stock, one will feel wealthier. That's a practical observation. Another guy who point out that this will not work in the long run, will be refuted by; "Nah, that's just theory. Everybody can see that it works"

Further down the road, let's say 10 years, one have less seed in stock to sow, thus we must cut consumption, which make us feel poorer. The practical guy will claim; "We are poorer because we had to cut consumption. Besides, the farmer has more seed than us, that should be distributed"
The principally oriented guy will say "No, we are poorer because we started to consume our seed stock 10 years ago. And, to tax him for more seed will make things even worse. We must cut consumption" Again he will be refuted; "That's just some abstract theory. We can all see that the farmer has more, and if we cut consumption we will be poorer"

See how the practical guy is not able to see things in context. Besides, to cut consumption and build up stock again will look like the farmer get richer, and it will take several years before we are back on track again. Which make the practical guy even more skeptical as he can see it doesn't work (because it takes some years), and he sees that the farmer get richer.

Callmeslick; Are you sure you can understand reality just by looking at it, i.e. practical understanding, and no tools, i.e. theoretical understanding is needed?

This little story above is so analogous to our present situation that it scares me. Seed stock and consumption seed is analogous to respective capital goods and consumption goods. More goods we consume less capital we have, one must thus find a balance. (No, I don't say that only average people must fix this. They are a minor problem. The real problem is with Government and all the cronyism)

From your reply to Spidy it seems you understand what I'm saying. I'm glad to hear that. As for your disagreement, fair enough - no problem. I only wish you could explain your disagreement, and not just say there's a difference between theory and reality, which I consider a cliche.

Thank you for the conversation. I have enjoyed it, despite some frustration. But that's part of the game.

[callmeslick]

I look at this from a principally perspective, you from a practical. Which mean we look at the same phenomena, but, I have an advantage - I have a tool to understand and connect the dots. You have not - you just look.

If one start to eat of one's seed stock, one will feel wealthier. That's a practical observation. Another guy who point out that this will not work in the long run, will be refuted by; "Nah, that's just theory. Everybody can see that it works"

well, I for one, wouldn't feel the least bit 'wealthier' by eating my seed stock. I wouldn't even feel wealthier PLANTING my seed stock. I would feel wealthier if I owned the farm and bought more farmland.

Callmeslick; Are you sure you can understand reality just by looking at it, i.e. practical understanding, and no tools, i.e. theoretical understanding is needed?

but, Leon, I don't merely 'look' at reality. I watch for patterns, trends, and I look keenly at human nature. That is the core difference between economics and science. Chemistry, Physics and the like depend on immutable laws driving everything about those fields. Economics depends upon, and frankly is a creation of, human thinking, desires and judgements. As such, humanity plays as much a role as anything else in Economics.

This little story above is so analogous to our present situation that it scares me. Seed stock and consumption seed is analogous to respective capital goods and consumption goods. More goods we consume less capital we have, one must thus find a balance. (No, I don't say that only average people must fix this. They are a minor problem. The real problem is with Government and all the cronyism)

From your reply to Spidy it seems you understand what I'm saying. I'm glad to hear that. As for your disagreement, fair enough - no problem. I only wish you could explain your disagreement, and not just say there's a difference between theory and reality, which I consider a cliche.

Thank you for the conversation. I have enjoyed it, despite some frustration. But that's part of the game.

you wrote, in another thread, that part of what brought you into these conversations was to understand how Americans think. Well, I think you'll find we are a diverse lot, both in terms of philosophy and economic outlook. Certainly, all people are unique, but the breadth of humanity that call themselves American is massive. I, too, have enjoyed these exchanges with you, Leon, and glad you made it through frustration to the same point. To some extent, I think our disagreement is but a matter of perspective. I view things, as I said, as an individual who is trying to carry on a family enterprise that goes back 10 generations in this country. I have been raised to pay attention to finance(my predecessors owned banks for 4 generations), agriculture business(I own land that my family has owned since 1670) and politics(which affects economics as you so well have pointed out). That is my training, and I wish I could better explain why I think the way I do, but can only say that it has worked for me thus far. Empirical and unscientific? Yes, it is. While I learn from theorists and economic experts, I do not wholly accept anyone's untested principles, because to do so would, for me, be risky, and I am, if anything else, risk-averse.

[LEON]

I look at this from a principally perspective, you from a practical. Which mean we look at the same phenomena, but, I have an advantage - I have a tool to understand and connect the dots. You have not - you just look.

If one start to eat of one's seed stock, one will feel wealthier. That's a practical observation. Another guy who point out that this will not work in the long run, will be refuted by; "Nah, that's just theory. Everybody can see that it works"

well, I for one, wouldn't feel the least bit 'wealthier' by eating my seed stock. I wouldn't even feel wealthier PLANTING my seed stock. I would feel wealthier if I owned the farm and bought more farmland.

I know you understand that, that's why I used it as an analogy. The reason you understand it is because you understand the concept - the relationship between seed stock and next years crops. Now I want you to apply that analogy to our economy. We are about to consume our accumulated capital, which is analogous with seed stock - we need capital goods to produce just as we need seed stock to grow.

That's my point. OK, I'm done now

[callmeslick]

well, thanks, Leon, and bring that keen mind to other threads here.....we need more points of view!

[Tunnelcat]

I know you understand that, that's why I used it as an analogy. The reason you understand it is because you understand the concept - the relationship between seed stock and next years crops. Now I want you to apply that analogy to our economy. We are about to consume our accumulated capital, which is analogous with seed stock - we need capital goods to produce just as we need seed stock to grow.

Isn't the U.S., in fact, now stealing feed stock from the rest of the world just to feed our own economy? I think that we've already blown through our own supplies a long time ago.

[callmeslick]

I know you understand that, that's why I used it as an analogy. The reason you understand it is because you understand the concept - the relationship between seed stock and next years crops. Now I want you to apply that analogy to our economy. We are about to consume our accumulated capital, which is analogous with seed stock - we need capital goods to produce just as we need seed stock to grow.

Isn't the U.S., in fact, now stealing feed stock from the rest of the world just to feed our own economy? I think that we've already blown through our own supplies a long time ago.

well, if one wishes to view all of Western 'civilization' as doing so to the undeveloped world, yes, we are.

[LEON]

No, you're both wrong.

But, frankly, I don't have the energy to write now as this is a vast new topic. But I'm sure we can explore these issues at some time later.

[callmeslick]

No, you're both wrong.

But, frankly, I don't have the energy to write now as this is a vast new topic. But I'm sure we can explore these issues at some time later.

yes, you are up late there in Norway. I know, it likely isn't dark out, but get some rest, man!