Now Here's a Provocative Assertion!

[iampete]

Quote: Originally Posted by J Christopher I think largely new inventions and processes are not developed and implemented so quick as to have a significant effect on players' knowledge. Obviously, there are, and will be exceptions, but on the whole our economy moves along at a fairly predictable pace. . . .

I can't agree with the conclusion you draw here. Yes, the great mass of the overall economy lumbers on at a fairly staid pace. Yet that great mass consists of millions of individual economic entities, the large majority of which make unpredictable economic decisions on a daily basis. If, as you wrote previously, it is the aggregation of the equilibria of many small segments which is desirable, it is the constant flux of economic decisions by the millions of participants which makes the process problematic. To date we have not developed a construct equivalent to thermodynamics or quantum mechanics that can accurately predict aggregated social behaviors.

Quote: . . . Given the wy business operates, the players can all assume that the strategy of the competition is to outsell/outproduce everyone else in order to make the most money. Tactics to carry out the strategy, while unknown in absolute terms, are usually, buy certainly not always, fairly predictable by the competition. . . .

Again, I can't agree. The fact that businesses outmaneuver competitors in development, production, marketing, etc. is what causes there to be winners and losers in the marketplace. If these strategies/tactics were predictable, there wouldn't be nearly the churning that exists as economic entities fail and new ones arise to take their place on a continual basis.

Quote: . . . Less than the maximum profit is relative. . . .

At any instant, the potential income to a particular industry segment is fixed. The distribution of that income among competitors is thus a zero-sum game. It goes against what I've ever learned about human nature to think that many, if not most, of the participants would quietly settle for less than what they think they might obtain were they to break out of the box. As their behavior(s) deviated from that expected by the other participants, the other participants, with that new knowledge, would be forced to change their strategies in order to not lose. This drops the situation out of any Nash equilibrium scenario.

Quote: . . . On average, the players make more money, since they use their resources more wisely after collectively changing strategies. . . .

And this is precisely the point. "On average" applies only if the equilibrium is maintained. It doesn't apply to those seeking to maximize their individual incomes at the expense of the others in their industry segment, and thus disrupt the equilibrium.

Quote: . . . I agree that government corruption needs to be dealt with.. . .

Great! A point of agreement.

Quote: . . . It's not a matter of whether or not it can be achieved. It's a mathematical property that exists, both in theory and in the real world. . .

I would restate that. It's a mathematical property that exists given certain boundary conditions. I still don't believe that that either the "system" or human nature will allow those boundary conditions to be met or maintained to achieve any such equilibrium on a macroeconomic scale.

[J Christopher]

Quote: Originally Posted by iampete I can't agree with the conclusion you draw here. Yes, the great mass of the overall economy lumbers on at a fairly staid pace. Yet that great mass consists of millions of individual economic entities, the large majority of which make unpredictable economic decisions on a daily basis. If, as you wrote previously, it is the aggregation of the equilibria of many small segments which is desirable, it is the constant flux of economic decisions by the millions of participants which makes the process problematic. To date we have not developed a construct equivalent to thermodynamics or quantum mechanics that can accurately predict aggregated social behaviors.

True, but the possibilities are neither discrete nor binary. The application of limits is relevant here.

Quote: Again, I can't agree. The fact that businesses outmaneuver competitors in development, production, marketing, etc. is what causes there to be winners and losers in the marketplace. If these strategies/tactics were predictable, there wouldn't be nearly the churning that exists as economic entities fail and new ones arise to take their place on a continual basis.

These things happen continually, but not continuously. At any given time, the probability of a player's competitors being different than they were the previous day are very, very low.

Quote: At any instant, the potential income to a particular industry segment is fixed.

That is true of the gross income, but not of the net income.

Quote: And this is precisely the point. "On average" applies only if the equilibrium is maintained. It doesn't apply to those seeking to maximize their individual incomes at the expense of the others in their industry segment, and thus disrupt the equilibrium.

I feel you are not fully understanding Nash equilibria. Disruption of the equilibrium is what is desired. The same regulation that would disrupt the equilibria would also make it disadvantageous to try to maximize profits at the expense of the industry (not necessarily the same as at the expense of others in their industry segment).

Quote: I would restate that. It's a mathematical property that exists given certain boundary conditions.

Agreed, I should have stated such more clearly.

Quote: I still don't believe that that either the "system" or human nature will allow those boundary conditions to be met or maintained to achieve any such equilibrium on a macroeconomic scale.

Disagreed, I've no reason to believe there is some point beyond which Nash equilibria no longer exist in an economy. While nothing in the universe is absolutely non-discrete, many things, such as economies, can be modeled as such. Certain scenarios may allow disruption of Nash equilibria to have greater benefit than other scenarios, there is no reason to believe that on a macroeconomic scale, disrupting Nash equilibria is never going to be beneficial.

[iampete]

Quote: Originally Posted by J Christopher . . . I feel you are not fully understanding Nash equilibria. Disruption of the equilibrium is what is desired. The same regulation that would disrupt the equilibria would also make it disadvantageous to try to maximize profits at the expense of the industry (not necessarily the same as at the expense of others in their industry segment). . . .

I think I'm OK with the concept of the states of all members of a set being at local maxima. Just don't ask me to prove it mathematically.

However, I apparently misunderstood what point you were trying to make in an earlier post. I had assumed that you were advocating the attainment of Nash equilibria on a macroeconomic scale as the solution to the economic problems that were being discussed. And I was trying to argue that, in the real world, at least, that was impossible to attain. (I was not arguing the desirability or non-desirability issue at all.)

The fact that you're advocating disruption of those equilibria that do exist as being desirable is a completely different topic, from my point of view.

Yes, there are many instances of Nash equilibria, either already existing or easily attainable. Your example of the tobacco companies is one. (Although whether that's a good thing depends on whether you own tobacco company stock or are a member of an anti-tobacco group.) Nevertheless, it seems to me that most of the equilibrium groups that do exist would be relatively small-scale in the big macroeconomic picture, and thus probably don't matter much.

Some groups, though, could be problematic. These would be cartels or other monopolistic combinations or monopoly wannabes. There are already laws in place to limit these, and to some limited extent, they are even enforced (occasionally, very occasionally, and if you happen to be on the outs with the group(s) in power).

I agree with you that the solution is political, not economic. Establishing objective criteria for disallowed practices and/or entities (not all monopolies are necessarily bad), and reasonable and consistent regulations on those necessary to be kept is a completely reasonable limitation to impose on the system. But getting it done right requires getting rid of the SOBs in charge and finding a way to keep their replacements from continuing in their own corrupt ways. I'm not optimistic.

[CAlvarez]

Quote: In a Capitalistic society, one of Governments most important jobs is to maintain a free market.

Laughable. Government control works for about 10 minutes before insider trading, corporate corruption and collusion, and many other factors destroy the market and you're left with a modern version of Mercantilism.

Quote: In a free market, by definition, there are no barriers to entry, there are no monopolistic, or even oligopolistic, players, and lots more etc., etc. Collusion among producers doesn't matter in a free market because there are essentially infinite alternative sources for consumers.

Exactly.

Quote: I'm arguing that it's government's job to get us as close as possible to a a free market, and that can only be done through proper regulation.

Free markets are spontaneous. Regulated markets are not free.

Quote: In a free market, there is no outside regulation, therefore there is nothing to stop monopolistic or oligopolistic players from participating.

The regulation is the market itself, in the form of competitors and consumer will. If there is no protection of a monopoly, then there won't be a monopoly.

[cwtnospam]

Quote: Originally Posted by CAlvarez The regulation is the market itself, in the form of competitors and consumer will. If there is no protection of a monopoly, then there won't be a monopoly.

LOL! There is always protection of a monopoly. It comes from a very powerful source: the monopoly itself!

A market is a small portion of what it takes to maintain a civilization. It is important as far as it goes, but it is not now, nor has it ever been the answer. The market will not build and maintain roads, provide a semblance of law and order, take care of the sick (just look at the number of Americans uninsured and underinsured*), protect workers from hazardous materials, or do anything at all about insider trading. Black lung disease, asbestos poisoning, lead poisoning, DDT, etc., would all still be with us today in very large quantities if not for regulation.


*If you think you're not underinsured because you've got "good" health insurance at work, think again. If you get seriously ill or injured, you will have to pay more for insurance as soon as you stop working, and after 18 months of paying more, you're going to lose all coverage and you're likely to then have a preexisting condition that precludes you from getting good coverage elsewhere.

[CAlvarez]

Monopolies can only exist where there is a natural scarcity and restricted ability to deliver a competing product, or where there is a legally enforced monopoly. It's folly to think that there would be a monopoly on movies and music if we eliminated the DMCA and other mercantilist acts, and let the market run its course.

Some regulation is reasonable, as you quote examples related to health that have nothing to do with market forces. That's a whole different subject.

[ThreeDee]

Quote: Originally Posted by Mikey-San B-but that's not what Fox News told me!

offtopic: Don't tell me... You are a Ron Paul fanboy?

(You will probably understand if you are a frequent Digg user)

[ArcticStones]

Quote: Originally Posted by J Christopher The question is, can we set aside our blind faith in supply and demand as the only relevant market force long enough to accept reality and set our economy up for success in the next century?

I think you hit the nail on the head!

Quote: Originally Posted by CAlvarez Monopolies can only exist where there is a natural scarcity and restricted ability to deliver a competing product, or where there is a legally enforced monopoly.

Quote: Originally Posted by cwtnospam LOL! There is always protection of a monopoly. It comes from a very powerful source: the monopoly itself!

And precisely this is a key aspect of the real economy all to often neglected by "conservative", supply-and-demand evangelists who tout a Free Market that is hardly free.

I think in many respects, multinational corporations form a monopolistic cartel. Between them they have more clout than most governments. And gradually they have gained control of an increasing share of the planets resources, and decisions that impact on our daily lives.

I, for one, would prefer a greater balance.

Anyways, just my two cents.
.

[cwtnospam]

Quote: Originally Posted by CAlvarez Monopolies can only exist where there is a natural scarcity and restricted ability to deliver a competing product, or where there is a legally enforced monopoly. It's folly to think that there would be a monopoly on movies and music if we eliminated the DMCA and other mercantilist acts, and let the market run its course. Some regulation is reasonable, as you quote examples related to health that have nothing to do with market forces. That's a whole different subject.

Then how would you explain the desperate need to break up the oil monopolies (the original reason for anti trust laws!) at the end of the 19th century? Oil was not by any stretch of the imagination in short supply since there were very few cars, and delivering the product did not improve by their formation. According to your logic, they could not have formed at all, but they did.

The regulation I quoted is not at all a different subject. It's regulation of exactly the same sort that large corporations try to avoid by claiming that it adversely affects their business. The Big Three Auto makers claimed erroneously (disingenuously?) that virtually all of the safety regulations imposed would hurt them. Tobacco companies lied for decades about the effects of smoking in order to preserve their monopoly on a market with no scarcity, no restricted ability to deliver, and in fact no legitimate reason to exist!

Perhaps you could provide an example of the kind of regulation you feel is unwarranted?

[aehurst]

Supply and demand works, even with monopolies. The price of scarce commodities is always set by what consumers are willing to pay for it, whether that is oil, a BMW or a loaf of bread. (No need to explain monopolies to me.)

The breakdown with oil is the alternative sources of energy aren't cheaper. We have not, as a nation (or as a free market economy), elected to face the challenge head on by doing massive research, development and implementation of the infrastructure to deliver alternative sources of energy nationwide.

Calls for conserving energy to lower our dependence on foreign oil miss the point and are a band-aid at best. (Monopolies will extract their pound of flesh regardless of what we do with the demand side. The price will not go down as the monopoly can still set the price of the last barrel sold, which will still be the world price for every barrel sold.)

Our national defense is dependent on a free flow of oil. Our economy is dependent on the free flow of oil. Our quality of life is dependent on the free flow of oil. (Rethink why we are in Iraq.) Yet, we have not made the decision to develop and aggressively implement a solution.

Because oil is competitively priced with the alternatives even though we have a few suppliers manipulating supply (and therefore the world price), the market will not respond in a way that protects our economy, national defense or way of life from the potential of a handful of suppliers just shutting us down.

Government has to do this. This is the single largest threat facing the Western world today, yet seems to be getting only lip service from our presidential candidates.

Why?

arnie

[cwtnospam]

Quote: Originally Posted by aehurst The breakdown with oil is the alternative sources of energy aren't cheaper.

Not true. Electric engines are far more efficient than internal combustion. That's why we use them on trains, where the need for power and efficiency makes piston engines an obviously poor choice.

Like a PC, gas costs much more than the sticker price. Along with the cost per gallon, you need to add in the cost of oil changes, tune ups, mufflers, transmissions, radiators, radiator fluid, and even breaks pads! None of those would be an expense on an all electric vehicle. We still have gas powered vehicles because the 'free market' hasn't worked. The 'free market' has encouraged the development of consumable products and the use of gas instead of renewable energy is a perfect example of that. Why produce a product that lasts for years when you can make a 'cheaper' -one like the PC - that needs to be replaced or upgraded frequently?

If we had a truly free market, competing auto makers would produce better alternatives that people could choose, but they don't, and we can't.

I often think that what makes Apple the outsider in the computer industry is that they offer the better alternative that lasts longer and costs less in the long run. They break from the monopolistic practices of the industry as a whole, and they're hated for it by those who make their money in, or from the industry, be they competitors, IT techs or technology reporters.

[aehurst]

Agree on Mac. Agree the market isn't the answer for our energy problems or our environmental problems. We need some nasty government intervention.

The problem with electric cars, so far at least, is the electricity is mostly produced using fossil fuels. The initial price is too high and the extension cords aren't long enough. Replacing batteries is expensive. I'm a fan of electric autos, too, but I wouldn't want to give up on the other alternatives (hydrogen in particular) just yet. Maybe the final answer will be a mix of technologies. Who knows... but it is way past time for us to start making these decisions.

As long as we need oil/gas to generate our electricity, the cartel will continue to have us by the throat.

I'm guessing the reason we haven't heard much about solutions from our presidential candidates is because they are still in Iowa.

[cwtnospam]

Quote: Originally Posted by aehurst The problem with electric cars, so far at least, is the electricity is mostly produced using fossil fuels. The initial price is too high and the extension cords aren't long enough. Replacing batteries is expensive.

Yes, a lot is produced using fossil fuels, but even then, electric is more efficient. Also, some electric power isn't produced with fossil fuels. All gasoline is fossil fuel. As for initial price, we could offset that with the appropriate regulation if it weren't for the Big Oil monopoly. Batteries may be expensive, but they're nothing when compared to transmissions, oil changes, tune ups, air filters, radiator flushes, catalytic converters, and muffler replacements.

[NovaScotian]

Quote: Originally Posted by cwtnospam Not true. Electric engines are far more efficient than internal combustion. That's why we use them on trains, where the need for power and efficiency makes piston engines an obviously poor choice.

Most of the locomotive engines in the US and Canada are diesel-electric. They really just have electric transmissions. The reason that beats electric trains hands down is because those overhead wires are dangerous and expensive to maintain.

Quote: Like a PC, gas costs much more than the sticker price. Along with the cost per gallon, you need to add in the cost of oil changes, tune ups, mufflers, transmissions, radiators, radiator fluid, and even breaks pads! None of those would be an expense on an all electric vehicle.

Certainly brake pads, tires, brushes, and battery replacement are all required, and replacing the batteries occasionally is very expensive and generates a waste product that's hard to get rid of -- the dead battery.

Quote: We still have gas powered vehicles because the 'free market' hasn't worked. The 'free market' has encouraged the development of consumable products and the use of gas instead of renewable energy is a perfect example of that. Why produce a product that lasts for years when you can make a 'cheaper' -one like the PC - that needs to be replaced or upgraded frequently?

Because that's what folks want to buy in a rapidly evolving technology?

Quote: If we had a truly free market, competing auto makers would produce better alternatives that people could choose, but they don't, and we can't.

Auto makers don't control the availability of the source of energy for cars. You can't buy Hydrogen or get a quick recharge everywhere.

Quote: I often think that what makes Apple the outsider in the computer industry is that they offer the better alternative that lasts longer and costs less in the long run. They break from the monopolistic practices of the industry as a whole, and they're hated for it by those who make their money in, or from the industry, be they competitors, IT techs or technology reporters.

[cwtnospam]

Quote: Originally Posted by NovaScotian Most of the locomotive engines in the US and Canada are diesel-electric. They really just have electric transmissions. The reason that beats electric trains hands down is because those overhead wires are dangerous and expensive to maintain.

If the diesel engines could produce enough power on their own, there would be no need for the electric motors. The diesel engines merely charge the batteries, and they can do that over time.

Quote: Originally Posted by NovaScotian Certainly brake pads, tires, brushes, and battery replacement are all required, and replacing the batteries occasionally is very expensive and generates a waste product that's hard to get rid of -- the dead battery.

I didn't mention tires because they are the same on both vehicles. Brake pads are another story. Electric vehicles can use regenerative braking, which converts kinetic energy into electrical energy without using brake pads. Pads would only be used for emergency stopping, and can be expected to last far longer because most of the braking will be done by the motors. Batteries are expensive, but their cost will come down as production rises, and they won't generate waste because they'll be recycled.

Quote: Originally Posted by NovaScotian Because that's what folks want to buy in a rapidly evolving technology?

No, it's because the market isn't 'free', it's manipulated.

Quote: Originally Posted by NovaScotian Auto makers don't control the availability of the source of energy for cars. You can't buy Hydrogen or get a quick recharge everywhere.

No, but you can plug a cord in just about anywhere. Automakers don't like that though, and not because they care about selling oil or gas. They care about selling mufflers, tune ups, radiator flushes, air filters, and brakes. Those are all multi billion dollar businesses that automakers get a chunk of cash from, and a plug in electric would virtually eliminate them.

[ArcticStones]

.
To understand how mopolistic companies work when they extend their tentacles into the processes of elected government and the bureaucracy, twisting them to their own purposes, it is well worthwhile to examine what happened to the American public transportation system. It was once one of the best in the world, especially in cities! Quite some decades ago, a highly effective alliance between the petroleum and automotive industries changed all that.

Perhaps some day someone will do the math and show us the astronomic total to rebuild what was once there (albeit only partially). Maybe they can also tally the global resources that would have been saved, over time, had this public transportation system been left intact.

The true scale of that scandal would boggle our minds.
.

[cwtnospam]

Quote: Originally Posted by ArcticStones The true scale of that scandal would boggle our minds.

Absolutely. The northeastern US has lots of places where train tracks have been abandoned, and yet we allowed the trucking industry to use tandem trucks, which are far more costly to operate than trains, both in energy consumed and costs to the consumer and the taxpayer. There is no way a truly free market would allow it.

[CAlvarez]

Quote: The Big Three Auto makers claimed erroneously (disingenuously?) that virtually all of the safety regulations imposed would hurt them.

And it actually helped them. If those regulations didn't exist, the Japanese would have provided better cars in more ways and killed the industry. It pretty much did, but government bailed out the industry. If they had been left alone, we'd still have great cars because of consumer demand and competition.

Quote: Perhaps you could provide an example of the kind of regulation you feel is unwarranted?

Most anything that does not have an immediate and direct impact on the safety of the public in general. There are so many examples, where to start? We regulate the color of houses in some places. People should be free to--and responsible for--making their own decisions on product quality and capabilities. Homes and everything else. If they wish to have only purple houses, by all means form an HOA and live there. Government isn't needed to tell companies how to sell me phones, music, or anything else. I can buy phones from a dozen companies, there is no legal justification for forcing Apple to do it MY WAY.

[cwtnospam]

Quote: Originally Posted by CAlvarez If they had been left alone, we'd still have great cars because of consumer demand and competition.

The Japanese incorporated those safety regulations for the same reason that the Americans did: it was required.

And we don't have great cars. We have cars that burn fossil fuels.


You're version of a free market is Caveat Emptor, which is great if you want to create monopolies like Standard Oil!

And the only place I've ever heard of that regulates home colors are the HOAs that you advocate forming.

[NovaScotian]

Quote: Originally Posted by cwtnospam Absolutely. The northeastern US has lots of places where train tracks have been abandoned, and yet we allowed the trucking industry to use tandem trucks, which are far more costly to operate than trains, both in energy consumed and costs to the consumer and the taxpayer. There is no way a truly free market would allow it.

I read once (can't find it) that their were two major causes for the shrinkage of the railroads: First, because they were required to pay property taxes on their railbeds (and in Wyoming, were the largest single taxpayer), while the same is not true of roads; and second, because the I-series highways were heavily subsidized by the government during the cold war, austensibly to improve the military's ability to respond to a war.

In addition, the I-series of highways encouraged urban explosion into the suburbs and the increasing ownership of automobiles coupled with higher speed bus transportation was the death knell for passenger rail service.