Economics Discussion Thread

[Taihei Tengoku]

The decline of economic profit is a movement towards perfect competition.

[Orostan]

The decline of economic profit is a movement towards perfect competition.

No, it's a trend towards monopoly. Established companies can take a declining rate of profit to a degree, while smaller businesses just don't have the money to compete with these established businesses in an environment with a declining rate of profit.

[Taihei Tengoku]

The decline of economic profit is a movement towards perfect competition.

No, it's a trend towards monopoly. Established companies can take a declining rate of profit to a degree, while smaller businesses just don't have the money to compete with these established businesses in an environment with a declining rate of profit.

Monopoly arrests economic profit above zero. The profit is collected as rent, protected by barriers to entry into the market. Economic profit (the profit earned by engaging in that activity over opportunity costs) decreases by the entry of new firms, as the foregone activities increase in relative value. This is the Smithian TRPF and the one that is actually borne out by evidence.

The Marxian reasoning for TRPF rests on labor theory of value, which is wrong and therefore obviates the rest of Marxian theory.

[Orostan]

Monopoly arrests economic profit above zero. The profit is collected as rent, protected by barriers to entry into the market. Economic profit (the profit earned by engaging in that activity over opportunity costs) decreases by the entry of new firms, as the foregone activities increase in relative value. This is the Smithian TRPF and the one that is actually borne out by evidence.

The Marxian reasoning for TRPF rests on labor theory of value, which is wrong and therefore obviates the rest of Marxian theory.

New firms can only enter the market if they can compete with already established companies. Worst case scenario for the established company, they sell at a loss for a little while until their smaller competitors go out of business. New firms don't just "enter the market" and compete with huge well established monopolies. Also;

>marxism is wrong because i said it's wrong

And the Marxist TRPF does not rely on the LTV. The LTV helps explain equilibrium prices and is only a general rule, I can't tell you exactly what anything costs with it. Only what something costs in relation to what another thing costs.

[Taihei Tengoku]

Monopoly arrests economic profit above zero. The profit is collected as rent, protected by barriers to entry into the market. Economic profit (the profit earned by engaging in that activity over opportunity costs) decreases by the entry of new firms, as the foregone activities increase in relative value. This is the Smithian TRPF and the one that is actually borne out by evidence.

The Marxian reasoning for TRPF rests on labor theory of value, which is wrong and therefore obviates the rest of Marxian theory.

New firms can only enter the market if they can compete with already established companies. Worst case scenario for the established company, they sell at a loss for a little while until their smaller competitors go out of business. New firms don't just "enter the market" and compete with huge well established monopolies. Also;

>marxism is wrong because i said it's wrong

And the Marxist TRPF does not rely on the LTV. The LTV helps explain equilibrium prices and is only a general rule, I can't tell you exactly what anything costs with it. Only what something costs in relation to what another thing costs.

Predatory pricing is a meme--once the competitor leaves then the subsequent rise in prices attracts competition anew. In order to keep competitors out the established firm has to sell low all the time as if there was already competition. If that price was unprofitable then they must exit the market or raise prices to a profitable, competition-allowing point. Extant cases of "predatory pricing" are mostly governments extorting efficient firms out of their money.

The Marixst TRPF wholly relies on the labor theory of value--it is caused by the substitution of labor by capital, thus decreasing the value added by the sole source of value (labor), thus decreasing profit, as stated in Das Kapital. Disprove LTV and you disprove Marxism. Its conclusions are impossible to reach by marginal theory.

[Orostan]

New firms can only enter the market if they can compete with already established companies. Worst case scenario for the established company, they sell at a loss for a little while until their smaller competitors go out of business. New firms don't just "enter the market" and compete with huge well established monopolies. Also;

>marxism is wrong because i said it's wrong

And the Marxist TRPF does not rely on the LTV. The LTV helps explain equilibrium prices and is only a general rule, I can't tell you exactly what anything costs with it. Only what something costs in relation to what another thing costs.

Predatory pricing is a meme--once the competitor leaves then the subsequent rise in prices attracts competition anew. In order to keep competitors out the established firm has to sell low all the time as if there was already competition. If that price was unprofitable then they must exit the market or raise prices to a profitable, competition-allowing point. Extant cases of "predatory pricing" are mostly governments extorting efficient firms out of their money.

The Marixst TRPF wholly relies on the labor theory of value--it is caused by the substitution of labor by capital, thus decreasing the value added by the sole source of value (labor), thus decreasing profit, as stated in Das Kapital. Disprove LTV and you disprove Marxism. Its conclusions are impossible to reach by marginal theory.

Of course predatory pricing will often attract competition. But, should competition ever get large enough the monopoly which has way more cash than the new firm can simply sell at a loss in the area the new firm is in while keeping its prices elsewhere constant. Starbucks for example will often achieve a monopoly in an area by undercutting its smaller competitors by selling at a loss.

With regards to the Marxist TRPF, I suppose your correct on your assertion that it relies on the LTV to a degree. And how do you think that you can disprove the LTV? Labor can only be mechanized and not automated (except with AI that can think and act like a human), and every commodity will require human labor in some amount.

[Taihei Tengoku]

The thing to understand is that Marxian economics isn't a tradeoff between a highly productive capitalist economy and a less productive but more humane command economy, but the assertion that the command economy was more efficient. The nationalizations leftist governments inevitably do is based on the LTV-based TRPF--if you can employ the entire productive population (by enlightened/collective/revolutionary fiat) then you will have more production because there are more people producing, therefore reversing the tendency of declining profit.

[Taihei Tengoku]

Predatory pricing is a meme--once the competitor leaves then the subsequent rise in prices attracts competition anew. In order to keep competitors out the established firm has to sell low all the time as if there was already competition. If that price was unprofitable then they must exit the market or raise prices to a profitable, competition-allowing point. Extant cases of "predatory pricing" are mostly governments extorting efficient firms out of their money.

The Marixst TRPF wholly relies on the labor theory of value--it is caused by the substitution of labor by capital, thus decreasing the value added by the sole source of value (labor), thus decreasing profit, as stated in Das Kapital. Disprove LTV and you disprove Marxism. Its conclusions are impossible to reach by marginal theory.

Of course predatory pricing will often attract competition. But, should competition ever get large enough the monopoly which has way more cash than the new firm can simply sell at a loss in the area the new firm is in while keeping its prices elsewhere constant. Starbucks for example will often achieve a monopoly in an area by undercutting its smaller competitors by selling at a loss.

With regards to the Marxist TRPF, I suppose your correct on your assertion that it relies on the LTV to a degree. And how do you think that you can disprove the LTV? Labor can only be mechanized and not automated (except with AI that can think and act like a human), and every commodity will require human labor in some amount.

Predatory pricing has to be maintained all the time in order to deter competition, did you even read what I wrote?

As for LTV: it has been in tatters since the late 1800s

[Sanctissima]

Keynes, stagflation is a thing. Your contractions and expansion view of market economics has been debunked. Please go to bed, nobody wants your bancors.

? this is standard neoclassical economics. Stagflation has to do with the remedy to excess unemployment rather than the description of unemployment itself. Monetarists would not deny anything I have said prior.

To be honest, that was more tongue-in-cheek than anything.

But regardless, the obsession with full employment was one of the major flaws of Keynes' economic theory, and contributed in part to the eventual rise of stagflation that reached crisis point with the oil crisis of the early 70's. Admittedly, that had considerably more to do with Keynes' admirers interpreting the whole "it's okay to run a deficit during recessions" mindset a bit too liberally, but that's neither here nor there. Having a reserve labour pool that isn't frictionally unemployed isn't a bad thing by default.

[Taihei Tengoku]

? this is standard neoclassical economics. Stagflation has to do with the remedy to excess unemployment rather than the description of unemployment itself. Monetarists would not deny anything I have said prior.

To be honest, that was more tongue-in-cheek than anything.

But regardless, the obsession with full employment was one of the major flaws of Keynes' economic theory, and contributed in part to the eventual rise of stagflation that reached crisis point with the oil crisis of the early 70's. Admittedly, that had considerably more to do with Keynes' admirers interpreting the whole "it's okay to run a deficit during recessions" mindset a bit too liberally, but that's neither here nor there. Having a reserve labour pool that isn't frictionally unemployed isn't a bad thing by default.

Being tongue-in-cheek requires you to know what your tongue and cheeks are.

[Orostan]

The thing to understand is that Marxian economics isn't a tradeoff between a highly productive capitalist economy and a less productive but more humane command economy, but the assertion that the command economy was more efficient. The nationalizations leftist governments inevitably do is based on the LTV-based TRPF--if you can employ the entire productive population (by enlightened/collective/revolutionary fiat) then you will have more production because there are more people producing, therefore reversing the tendency of declining profit.

I understand Marxist economics fairly well. The TRPF doesn't happen in a planned economy. It doesn't make any sense to happen in a planned economy because there isn't any market competition. And assuming that our planned economy has enough machines to mechanize this labor of the entire population than yes, more goods would be produced.

[Taihei Tengoku]

The thing to understand is that Marxian economics isn't a tradeoff between a highly productive capitalist economy and a less productive but more humane command economy, but the assertion that the command economy was more efficient. The nationalizations leftist governments inevitably do is based on the LTV-based TRPF--if you can employ the entire productive population (by enlightened/collective/revolutionary fiat) then you will have more production because there are more people producing, therefore reversing the tendency of declining profit.

I understand Marxist economics fairly well. The TRPF doesn't happen in a planned economy. It doesn't make any sense to happen in a planned economy because there isn't any market competition. And assuming that our planned economy has enough machines to mechanize this labor of the entire population than yes, more goods would be produced.

The dirigist end-run around TRPF is more about having enough labor to man the machines.

Of course since LTV is wrong you run headfirst into "opportunity costs" and "diminishing marginal utility"

[Sanctissima]

To be honest, that was more tongue-in-cheek than anything.

But regardless, the obsession with full employment was one of the major flaws of Keynes' economic theory, and contributed in part to the eventual rise of stagflation that reached crisis point with the oil crisis of the early 70's. Admittedly, that had considerably more to do with Keynes' admirers interpreting the whole "it's okay to run a deficit during recessions" mindset a bit too liberally, but that's neither here nor there. Having a reserve labour pool that isn't frictionally unemployed isn't a bad thing by default.

Being tongue-in-cheek requires you to know what your tongue and cheeks are.

Yes Keynes, thank you for your wondrous insight. Please kindly preach to the masses why you're always right, Asquith dindu nothin' and Americans are stupid because they won't adopt your bancor.

[Taihei Tengoku]

Being tongue-in-cheek requires you to know what your tongue and cheeks are.

Yes Keynes, thank you for your wondrous insight. Please kindly preach to the masses why you're always right, Asquith dindu nothin' and Americans are stupid because they won't adopt your bancor.

You seem to have this impression that I am a Keynesian by simply describing what unemployment and full employment actually are, rather than their remedies (to which bancor is irrelevant and I have spoken little).

[Sanctissima]

Yes Keynes, thank you for your wondrous insight. Please kindly preach to the masses why you're always right, Asquith dindu nothin' and Americans are stupid because they won't adopt your bancor.

You seem to have this impression that I am a Keynesian by simply describing what unemployment and full employment actually are, rather than their remedies (to which bancor is irrelevant and I have spoken little).

I... may have misjudged.

To which economic school do you prescribe, if I might so inquire?

[Taihei Tengoku]

I am broadly neoclassical.

[Sanctissima]

I am broadly neoclassical.

Mea culpa

[Orostan]

I understand Marxist economics fairly well. The TRPF doesn't happen in a planned economy. It doesn't make any sense to happen in a planned economy because there isn't any market competition. And assuming that our planned economy has enough machines to mechanize this labor of the entire population than yes, more goods would be produced.

The dirigist end-run around TRPF is more about having enough labor to man the machines.

Of course since LTV is wrong you run headfirst into "opportunity costs" and "diminishing marginal utility"

That's not how the TRPF works. The Marxist TRPF only exists in the Capitalist system of market competition. And you have never explained why you think the LTV is wrong, and I'd like you to.

[Taihei Tengoku]

The dirigist end-run around TRPF is more about having enough labor to man the machines.

Of course since LTV is wrong you run headfirst into "opportunity costs" and "diminishing marginal utility"

That's not how the TRPF works. The Marxist TRPF only exists in the Capitalist system of market competition. And you have never explained why you think the LTV is wrong, and I'd like you to.

Labor theory of value posits that the source of all value is labor. It is wrong as it is not borne out in reality--price fluctuations occur independent of the amount of "work" that went into a product. Even increasing labor does not add value, which Marx only avoids by applying the arbitrary label of "socially necessary" labor in LTV. Things have value insofar as it supports a specific desire by the purchaser. A thirsty man will pay much more for a bottle of water than someone who is about to burst despite the fact that both bottles took the same amount of effort to produce. Productive efforts are pursued on the expectation that they will produce a valued product, not because they think production itself will add value to something.

The costs of production is something the producer would like to recoup through sales but the actual value of the product is determined at the prices they sell at, and the production costs themselves are values reached through purchases of production factors by the producer.

[36 Camera Perspective]

LTV: If I spend a million dollars building the world's largest pile of horse shit, does that mean it's worth a million dollars on the market?

[Orostan]

That's not how the TRPF works. The Marxist TRPF only exists in the Capitalist system of market competition. And you have never explained why you think the LTV is wrong, and I'd like you to.

Labor theory of value posits that the source of all value is labor. It is wrong as it is not borne out in reality--price fluctuations occur independent of the amount of "work" that went into a product. Even increasing labor does not add value, which Marx only avoids by applying the arbitrary label of "socially necessary" labor in LTV. Things have value insofar as it supports a specific desire by the purchaser. A thirsty man will pay much more for a bottle of water than someone who is about to burst despite the fact that both bottles took the same amount of effort to produce. Productive efforts are pursued on the expectation that they will produce a valued product, not because they think production itself will add value to something.

The costs of production is something the producer would like to recoup through sales but the actual value of the product is determined at the prices they sell at, and the production costs themselves are values reached through purchases of production factors by the producer.

You don't acknowledge the distinction between exchange value and use value. Both bottles of water have the same use value because they are identical, and a different exchange value or price. Because the man who is thirsty will pay more than the man who is bloated only means the man who is thirsty has a higher demand for water, while for both people the supply of water remains the same. Adding more human labor time doesn't automatically add value to a product. The amount of socially necessary labor time in a product does. For example, watches which are hand made and do not use mechanized labor to produce have more SNLT embodied in them - meaning that their cost of production is higher and their equilibrium price is higher. You seem to think the LTV determines price at any given time. It only determines equilibrium price.

The level of socially neccesary labor time in a product isn't arbitrarily defined. It's the minimum amount of labor time that it takes to produce any given product at any given quality, and is very variable per product. SNLT can only be reduced by speeding up production and not decreasing quality, an example of which is mechanization. And the LTV doesn't stipulate that all value comes from labor. What makes something like iron ore valuable is that it can be turned into refined iron, and then into other products. The reason unrefined recourses are worth something is because of the promise of being turned into a product, and having capital added to them via labor. However nature is the supplier of the raw material, so nature provides this value, not labor because the labor has not been performed yet. The promise that labor can be used to turn the material into something more valuable cannot give the raw material value alone. That promise must be 'attached' to a material.

[Orostan]

LTV: If I spend a million dollars building the world's largest pile of horse shit, does that mean it's worth a million dollars on the market?

No, because your labor did not create any object of utility so it does not count as labor. Labor is an activity directed towards constructing something with some kind of value to people beyond yourself.

[Taihei Tengoku]

LTV: If I spend a million dollars building the world's largest pile of horse shit, does that mean it's worth a million dollars on the market?

No, because your labor did not create any object of utility so it does not count as labor. Labor is an activity directed towards constructing something with some kind of value to people beyond yourself.

thereby conceding to Menger and Bohm-Bawerk

QED

[Orostan]

No, because your labor did not create any object of utility so it does not count as labor. Labor is an activity directed towards constructing something with some kind of value to people beyond yourself.

thereby conceding to Menger and Bohm-Bawerk

QED

Read my post in response to you. You don't understand the LTV.

[Taihei Tengoku]

All of it is wrong because you combined the two when you accepted subjective theory

Exchange value is someone else's use value for the marginal unit of good