Why has Capitalism failed to produce optimal value everywhere?

[Kidicious]

Originally posted by Drogue
Price falls raise value, because they raise output. If there's more output in the economy, there's more value.

Exactly

Because Marx states that the value of a good is the value of the labour. He ignores the things needed to make labour effectual. If you have one worker producing 10 cans a day, and then he's given a new machine and can produce 20 cans a day, the value of his output will go up. He hasn't changed, however. That is why havign value equal to the labour input is wrong.

He doesn't ignore the facilities necessary for labor to work, or any increase in them. All of these things are produced by labor. The capitalist purchases the facilities (and 'generally' makes a nice surplus on it), and he hires the labor (and 'generally' makes a nice surplus on the workers).

[Drogue]

Originally posted by Kidicious
All economists are out to prove a point. That's why they became eocnomists, and yes neo-classical is the orthodox school.

Wrong on both. Most economists, indeed all "good" economists, are out to find out something, not to show something works. As in any profession, some are there to prove a point, like a scientist trying to find proof of God or evolution, but most economists, like most scientists, would be lookign to find out, not to prove what they want to believe.

Originally posted by Kidicious
Competitive markets have their place, but it certainly is no law that they always work the way most economists claim they do.

Yes they do. A perfectly competative market is a construct. It would work in that way, if it existed. Like a triangle behaves as a mathematician shows it would, if that traingle existed. It's a construct.

Originally posted by Kidicious
And whether or not you were taught that regulation is sometimes needed or not, depends on your teacher, course and textbook.

Well, any good economics course would, and all recognised textbooks teach that. We currently use a US micro textbook that's standard across the world (most used, IIRC).

It's like most biology courses teach evolution. Some will teach intelligent design, but they're generally not the good ones.

[Drogue]

Originally posted by Kidicious
He doesn't ignore the facilities necessary for labor to work, or any increase in them. All of these things are produced by labor. The capitalist purchases the facilities (and 'generally' makes a nice surplus on it), and he hires the labor (and 'generally' makes a nice surplus on the workers).

Then value of a good to a company is labour plus capital. To a consumer it's what they're willing to pay. When the latter is higher, a trade is made, in a competative market.

[Kidicious]

Originally posted by Drogue
The study of how firms organize production, the methods of doing so, and the principles involved in it. It's generally considered a branch of management.

Ok. That's called Organizational Behavior at my college. It's a management class. That's has aspects of Microeconomics, but it isn't limited to it.

No, economics says nothing about how we organize production, that would be organization theory.

I can't believe you would say that. Of course economics is about organizing production, what do you think economists talk about all the time. What do you think the purpose is of these discussions that we have?

[Kidicious]

Originally posted by Drogue

Wrong on both. Most economists, indeed all "good" economists, are out to find out something, not to show something works. As in any profession, some are there to prove a point, like a scientist trying to find proof of God or evolution, but most economists, like most scientists, would be lookign to find out, not to prove what they want to believe.

Your knowledge of econonics is good, but your understanding of human behavior is poor.

Yes they do. A perfectly competative market is a construct. It would work in that way, if it existed. Like a triangle behaves as a mathematician shows it would, if that traingle existed. It's a construct.

No it wouldn't all of the time. A lot of efficiency has to do with economies of scale and the limits that exist in the real world.

Well, any good economics course would, and all recognised textbooks teach that. We currently use a US micro textbook that's standard across the world (most used, IIRC).

You have to realize that some economists have been dragged by their teeth to come to the realization that some regulation is good, but generally they are still in their little idealistic world, and they stay there because it suits them personally, not because of some devotion to truth.

[Drogue]

Originally posted by Kidicious
No. You aren't paying attention to the Law of Diminishing Utility.

How does that come in to what I'm willing to pay for a roll? It's already taken into account of when I say I'm willing to pay $2, but not $3, for that particular roll.

[Kidicious]

Originally posted by Drogue

Then value of a good to a company is labour plus capital. To a consumer it's what they're willing to pay. When the latter is higher, a trade is made, in a competative market.

No. The value of the labor to the company is what they would be willing to pay, not what they pay. They get surplus just like consumers.

[Kidicious]

Originally posted by Drogue

How does that come in to what I'm willing to pay for a roll? It's already taken into account of when I say I'm willing to pay $2, but not $3, for that particular roll.

It will depend on your income. If you have less income each dollar is more valuable to you than if you had more income.

[Drogue]

Originally posted by Kidicious
Ok. That's called Organizational Behavior at my college. It's a management class. That's has aspects of Microeconomics, but it isn't limited to it.

Not quite, organizationa; behaviour is how firms behave in the market, not how they organize production.

Originally posted by Kidicious
I can't believe you would say that. Of course economics is about organizing production, what do you think economists talk about all the time. What do you think the purpose is of these discussions that we have?

The purpose is to decide how to distribute finite resources among people, and to predict the behaviour of consumers. Management covers the production side, and how those raw resources are turned into goods.

The question of how to build something is management. The question of whether to build something is part management, part economics. Management would tell you how much it would cost to build it, economics how it would affect profits and prices. Economics uses the calculations of management to show cost, but it doesn't decide how those costs should be incurred, what they should be, and how production should be organized to get to that.

[Kidicious]

Originally posted by Drogue
The question of how to build something is management. The question of whether to build something is part management, part economics. Management would tell you how much it would cost to build it, economics how it would affect profits and prices. Economics uses the calculations of management to show cost, but it doesn't decide how those costs should be incurred, what they should be, and how production should be organized to get to that.

If I remember right from Intro to Econ, economics deals with WHO, WHAT, and FOR WHOM. Tell me if I'm wrong, but how is that not about how we organize labor?

[Drogue]

Originally posted by Kidicious
Your knowledge of econonics is good, but your understanding of human behavior is poor.

Actually it's not. Most academic scientists, and economists, look for answers, not proof, as the former leads to more accurate results and thus more research funding.

As for my knowledge of human behaviour, I'm a trained counsellor and most of my economics and management work revolves around how people behave given certain situations, and thus how a population as a whole behaves. This is what I'm studying.

Originally posted by Kidicious
No it wouldn't all of the time. A lot of efficiency has to do with economies of scale and the limits that exist in the real world.

Exactly. And in a competative industry, everyone is producing at the minimum efficient scale. If they're not, it's not a competative industry. I can prove that mathematically. There are economies and diseconomies of scale, and thus there is an efficient point. If there aren't diseconomies of scale, you have a natural monopoly.

Originally posted by Kidicious
You have to realize that some economists have been dragged by their teeth to come to the realization that some regulation is good, but generally they are still in their little idealistic world, and they stay there because it suits them personally, not because of some devotion to truth.

Yes, and they're the ones who are not well recognised, and are not good economists. A good scientist is someone who is impartial and seeks the truth, not someone trying to fulfill their own agenda. Likewise with economics. I'm not saying you're wrong, I'm sayign that's bad economics.

[Japher]

The problem is that the idea of value is not an intrinsic value and cannot be treated as though it were real. Value varies from person to person, place to place. We could restructure labor, we can give everyone the same thing, in the same amounts, at the same time, in the same place... Thing is, what is enough for some is too much for others and not enough for another.

It is not just limited to wants, but needs.

[Drogue]

Originally posted by Kidicious
No. The value of the labor to the company is what they would be willing to pay, not what they pay. They get surplus just like consumers.

In a competative labour market, the price they're willing to pay is the price they pay. Producer surplus comes only from having something other firms don't, thus making it a non-competative industry. In a competative industry, there is no producer surplus.

Originally posted by Kidicious
It will depend on your income. If you have less income each dollar is more valuable to you than if you had more income.

Yes. How and thus my valuation of that roll changes. If I have less money, the value things have to me changes downward, as I'm willing to pay less for them.

[Drogue]

Originally posted by Kidicious
If I remember right from Intro to Econ, economics deals with WHO, WHAT, and FOR WHOM. Tell me if I'm wrong, but how is that not about how we organize labor?

Who what and for whom to which question? On their own they're just philosophical.

[Kidicious]

Originally posted by Drogue

In a competative labour market, the price they're willing to pay is the price they pay. Producer surplus comes only from having something other firms don't, thus making it a non-competative industry. In a competative industry, there is no producer surplus.

Perfect competition is merely an assumption, and a very poor one. Producer surplus has nothing to with having more resources. All firms, except the theoretical 'marginal firm' recieve producer profit in exactly the same way that consumers get consumer surplus.

Yes. How and thus my valuation of that roll changes. If I have less money, the value things have to me changes downward, as I'm willing to pay less for them.

It should be that the less money you have the more valuable the thing is that you purchase. You get diminishing utility from each dollar that you spend.

[Kidicious]

Originally posted by Drogue

Who what and for whom to which question? On their own they're just philosophical.

who will produce?

what will be produced?

who will consume?

I don't remember the actual questions but basically it deals with organizing labor and deciding who will get what.

[Kidicious]

I think you are thinking about the difference between economic and normal profit. Producer surplus is something different.

[Drogue]

Originally posted by Kidicious
Perfect competition is merely an assumption, and a very poor one. Producer surplus has nothing to with having more resources. All firms, except the theoretical 'marginal firm' recieve producer profit in exactly the same way that consumers get consumer surplus.

Yes, perfect competition is an assumption, as I stated, perfect competition reacts in the way economists say it will. And in PC, there isn't a marginal firm, as all firms have the same supply curve. There is no producer surplus in PC.

Originally posted by Kidicious
It should be that the less money you have the more valuable the thing is that you purchase. You get diminishing utility from each dollar that you spend.

The more relative value, yes. The more absolute value, no. You get more utility per good, due to diminishing marginal utility, but since you can afford less, you would not pay as much as before. It still holds that if I had less money, I'd be prepared to pay less for something, thus it's value to me is lower.

[Kidicious]

Originally posted by Japher
The problem is that the idea of value is not an intrinsic value and cannot be treated as though it were real. Value varies from person to person, place to place. We could restructure labor, we can give everyone the same thing, in the same amounts, at the same time, in the same place... Thing is, what is enough for some is too much for others and not enough for another.

It is not just limited to wants, but needs.

That's what choice is for, but inevitably if you need something that most others don't you will have to pay more for it, depending on the cost structure.

[Drogue]

Originally posted by Kidicious
I think you are thinking about the difference between economic and normal profit. Producer surplus is something different.

Nope, it just so happens under PC, there is no economic profit and no producer surplus, in the long run. The supply curve is the marginal cost curve when it's above the average variable cost curve. In the long run under perfect competition, with normal profits, the firm must produce where price = marginal cost = average cost, the point where average cost is minimised. There is no area where the firm is get's more than the minimum they are willing to sell it for, thus there is no producer surplus either.

[Kidicious]

Originally posted by Drogue

Yes, perfect competition is an assumption, as I stated, perfect competition reacts in the way economists say it will. And in PC, there isn't a marginal firm, as all firms have the same supply curve. There is no producer surplus in PC.

Again, you are confusing producer surplus with economic profit. Buyers get a surplus in a market because they don't have to pay as mush as they are willing to. That's pretty straight forward.

No comment on PC.

I'd be prepared to pay less for something, thus it's value to me is lower.

Thus nothing. I thought we were getting somewhere. Price has very little to do with value.

[Drogue]

Originally posted by Kidicious
Again, you are confusing producer surplus with economic profit. Buyers get a surplus in a market because they don't have to pay as mush as they are willing to. That's pretty straight forward.

As said in the next post, no I'm not. Yes, you are right on the buyers. However there is no producer surplus under perfect competition.

Originally posted by Kidicious
Price has very little to do with value.

Exactly, price has nothing to do with value to a person (well, psychologically it may have some). However it does have a lot to do with how an economy values something. Value = willingness to pay, which is independant of price. Price in a competative market is the willingness-to-pay of the marginal consumer. SO the phrase "the economy values suchandsuch a good at £5" means that's the price of it, that's what you'd have to give up to obtain it. You're personal value may be higher, which is when you buy it, and if it isn't, then you don't.

[Kidicious]

Originally posted by Drogue

As said in the next post, no I'm not. Yes, you are right on the buyers. However there is no producer surplus under perfect competition.

Producers aren't buyers under perfect competition?

[Kidicious]

Sorry for the short replies. I'll be able to post in about a half an hour or so.

[Drogue]

Originally posted by Kidicious
Producers aren't buyers under perfect competition?

No. Producers are the sellers, and consumers the buyers, when it comes to a product. When that produce is labour, producers are the workers, and consumers are the firms.

[Drogue]

Originally posted by Kidicious
Sorry for the short replies. I'll be able to post in about a half and hour or so.

No worries It's 12:40 inn the morning here, and I have an essay due in before I sleep, so I'd probably better stop. I'll probably reply tomorrow, or maybe tonight if I feel like I need a break.

[Whaleboy]

Ah it's all been said before on the other thread, Kid it was a poor call to start a new thread just to get the last word, nothing new has been said, except by Drogue for the most part.

[Kidicious]

Originally posted by Drogue

No. Producers are the sellers, and consumers the buyers, when it comes to a product. When that produce is labour, producers are the workers, and consumers are the firms.

I'm suppose to be listening to my instructor, but you are saying that producers don't buy things.

[Whaleboy]

I think he's talking about a particular instance of a commodity

or something

I'm old and miserable

[Drogue]

Of course not. We're looking at the market for one good, that good has a buyer and a seller. The seller buys other goods, yes, but it doesn't by that good.