Which is more important to the US?

[Akka]

Originally posted by David Floyd


The New Deal didn't end the Depression. Although government intervention certainly caused it.

The Great Depression was caused because of overspeculation on the future value of companies. Anticipated values were well above real values, and were based only on trust that the real values will grow up. Once the confidence was lost, the anticipated values sank, hence the enormous loss and the start of the Depression.
Mind you, it was the LACK of regulation that caused that.
It's exactly the same thing that happened in 1987 and with the Asian crisis in the 90's. But now we have REGULATIONS that allow the kracks to not become as spectacular as in 1929.

And I'm the one who do know nothing about economics

I disagree. The only measure of freedom is the protection of individual rights. A free market system is the natural extension of protecting individual rights.

Doh. And how do you protects individual rights, genius ?
Got it. Laws and enforcement of these laws. If there was no need to force some people to respect the rights of others, we would be living in a perfect world and communism would work.

Face it : communism can't work just for the same reason that free capitalism can't either, and it's because humans are not perfects and that there will always be ones who try to get more and who infringe the rights of others. You need laws and regulation to protect people's rights. In politics like in economics.

Again, it's plain old logic, except for a free capitalism fanboy as it seems.

[David Floyd]

On the other hand if B follows A will he gain a lasting increase in profit!

No he won't. There is only a limited amount of money out there, and you can't assume that by raising prices one always makes more money. No matter which company does it, A or B, they will be better off selling at, say, $5, while the other company is still selling at $6. Sure, his price is 17% less, but it's a good gamble to assume that 17% will be more than made up by increased business.
Obviously, the other company sees this, and realizes they are losing money. They decide to lower prices too - but to go below $5, say, to $4.75. At this point these guys have the advantage, assuming the equilibrium price has not yet been reached. Let's assume the equilibrium price for cola - the lowest price at which increased demand will provide higher profits than higher prices will - is $3. Obviously, then, in an attempt to earn more money, the price war will continue, with the final price settling at around $3. This is good for the consumer, as they are paying only 50% of the maximum price they are willing to pay, and good for the businesses, because they are making better profits.

Now, let's look at government price ceilings. A price ceiling of $4 is meaningless, because in a real economy the price will not be above $4 for any significant time (probably 0 time, assuming both companies have competent market analysts). However, if the government sets a price ceiling of $2, on the reasoning that the companies are still making a 100% profit, this is bad for everyone. Once the price drops below equilibrium, the companies start getting into trouble. Decreased profits means laying off workers, making lower quality cola, etc., which is certainly not beneficial to anyone, and if this $2 price ceiling drives one of the companies out of business, this is certainly bad for the consumer, as it decreases choice.

[David Floyd]

The Great Depression was caused because of overspeculation on the future value of companies.

You sure the government setting tariffs and interest rates had nothing to do with it?

Laws and enforcement of these laws.

Precisely. A government's only just actions are to protect individuals from coercion and the initiation of force through laws and retaliatory force. In an economic sense, fraud is coercive, and the government thus has the obligation to protect my rights from being violated and protect me from being defrauded. Laissez-faire/libertarianism are not anarchist in nature.

[kolpo]

yes that is true if prices influences the sales of cola a lot(I(m here talking about absolute price not the relative one bewteen A and B).

But what if it is like the following, if cola has a very high neccesarity index:

1$= 100 sales total profit=0
2$= 98 sales total profit=98
3$= 97 sales total profit=194
4$= 85 sales total profit=255
5$= 70 sales total profit=280
6$= 55 sales total profit=275

Then would equilibrium price be around 5$ so would they most likely end up with a total profit of 400%. All costs including labor and advertising are only 1$. So if the government would here set a price ceiling of let's say 3$ would that help the consumers.

There are off course also factors who can break a virtual cartel:
-An aggresive power hungry(he finds market share more important then profit) competitor enters the market, bye bye virtual cartel!
-One of the 2 has lot's of money and things it may be able to completely destroy his competion: A starts to sell cola for 0.5$! B doesn't have much captital like A so B goes bankrupt(he sells with lost): after that has A an monipoly and can it sell at 5$ again but this time with double market share! This strategy is illegal in some countries.

[Akka]

Originally posted by David Floyd
You sure the government setting tariffs and interest rates had nothing to do with it?

Yes I'm pretty sure yes.
Facts :
In 1929 there was not many regulations : Great Depression.
In 1987 and during the Asian crisis, there were LOTS of regulation : limited kracks.

Precisely. A government's only just actions are to protect individuals from coercion and the initiation of force through laws and retaliatory force. In an economic sense, fraud is coercive, and the government thus has the obligation to protect my rights from being violated and protect me from being defrauded. Laissez-faire/libertarianism are not anarchist in nature.

The PRINCIPLE of free capitalism is NO REGULATION.
The PRINCIPLE of anarchy is NO REGULATION.
Hence they are differents.
Yes yes...

Fraud is not the only way of coertion in economics, just like theft is not the only crime.
The only difference is that economics happen as a much greater scale, hence are much harder to understand.
Again, again, again : just as laws are required to ensure that no physical entity can infringe your rights, laws are required to ensure that no economic entity can infringe your rights.
Why simple logic like that is always too hard to understand for free capitalists ? Just because it does not agree with their opinions ?

[Akka]

-One of the 2 has lot's of money and things it may be able to completely destroy his competion: A starts to sell cola for 0.5$! B doesn't have much captital like A so B goes bankrupt(he sells with lost): after that has A an monipoly and can it sell at 5$ again but this time with double market share! This strategy is illegal in some countries.

Yes, it's called dumping and it's forbidden here. I suppose it will make our fanatics friends angry to know that someone is infringing with the Holy Right of the Market to be not disturbed by Evil Government Interference.

[David Floyd]

But what if it is like the following, if cola has a very high neccesarity index:

1$= 100 sales total profit=0
2$= 98 sales total profit=98
3$= 97 sales total profit=194
4$= 85 sales total profit=255
5$= 70 sales total profit=280
6$= 55 sales total profit=275

Then would equilibrium price be around 5$ so would they most likely end up with a total profit of 400%. All costs including labor and advertising are only 1$. So if the government would here set a price ceiling of let's say 3$ would that help the consumers.

I'm really not sure where you're getting those numbers from - they seem very arbitrary. I can make up another set to illustrate my point.

[TCO]

DF, you ought to take a micro-economics course. This is just basic stuff...

[David Floyd]

1$= 100 sales total profit=0
2$= 98 sales total profit=98
3$= 97 sales total profit=194
4$= 85 sales total profit=255
5$= 70 sales total profit=280
6$= 55 sales total profit=275

Those are the numbers I don't get - he said "what if" those numbers. Well, what if? One can't just assume sales figures like that for whatever product without legitimate research - all those numbers are, are made up numbers to support a point near as I can see. Granted I don't know a lot about economics, but I'm just saying - I understand his explanation of what those numbers mean, but not the numbers themselves.

[David Floyd]

But I think my point still holds. Setting a price ceiling below the natural equilibrium is artificial, and just because it appears to save consumers money doesn't necessary mean it's beneficial, overall.
Further, the consumers already said they'd pay up to $6 in this example - why should the government come in and contradict that? If the majority of people felt the maximum reasonable price was $3, that's what they would have said.

[Wraith]

--"Yes, that's right. It's why USA get out of the Great Depression by using his ideas."

Now that's just funny. The actions taken using his ideas had a great deal to do with how long the Great Depression lasted.

--"Economics is a force like politic, and hence it can be as oppressive as politics."

One of us is totally misunderstanding the other. What you've said here makes absolutely no sense. I do not accept political suppression of freedom (although it can and certainly does happen), nor do I accept political suppression of freedom (ditto). As I've stated repeatedly, the only just purpose of government is to protect its citizens' rights. Rights are not protected by limiting freedom.

--"After a time: both are selling cola at 6 dollar and making maxium profit!"

Well, at least this guy is amusing. You might want to check into those supply/demand curve functions again. You'll probably be surprised to see where the point of maximum profit is. After all, keep in mind that if the price is $6 each, people aren't going to buy as many units. They'll find something else to drink. And then some small soda company using grandpa's root beer recipie will start up and make a killing selling at a lower price. You are oversimplifying things waaaay too much for them to be useful.

Edit:
Okay, fine. I posted in the econ-thread. Hopefully Roland or one of the others will come get a chuckle out of all this.

--"Mind you, it was the LACK of regulation that caused that."

Check your history. The exact same sort of thing happened many times before the Great Depression, and never managed to be more than a moderate recession. The banks were able to absorb the cycle without any particular difficulty. It wasn't until the government got into the act with the Federal Reserve Board that things really got screwed up. Between the ludicrous protectionist tarrifs and the incredible idiocy at the Fed, a minor recession was turned into a Great Depression and dragged on for years.

--"Got it. Laws and enforcement of these laws."

Um... did you not see me mention minarchism or something?

--"In 1987 and during the Asian crisis, there were LOTS of regulation : limited kracks."

Limited cracks... heh. No, just delayed-blast. The S&L collapse was caused by government interference (largely the idiotic blanket FDIC guarantees), for instance. Enron was certainly not a case of too little regulation, but a perfect example of why regulation doesn't work (without government guarantees people would have been rather more sceptical when looking over their statements).

--"Again, again, again : just as laws are required to ensure that no physical entity can infringe your rights, laws are required to ensure that no economic entity can infringe your rights."

And you are still completely missing the concept behind freedom.

Wraith
"He did not expect reasonable conduct from human beings; most people were candidates for protective restraint."
-- ("Stranger In A Strange Land")

[Akka]

--"Economics is a force like politic, and hence it can be as oppressive as politics."
One of us is totally misunderstanding the other. What you've said here makes absolutely no sense.

Sure, "I do not accept political suppression of freedom (although it can and certainly does happen), nor do I accept political suppression of freedom (ditto)." makes much more sense (don't really see the point of repeating twice the same sentence...).
Ok, I will spell it for you : politics is force. Economics is force. You can be oppressed by a political force (dictatorship). You can be oppressed by an economics force (social inequality, exploitation). Is that too hard to understand ?

As I've stated repeatedly, the only just purpose of government is to protect its citizens' rights. Rights are not protected by limiting freedom.

Rights are protected by ensuring no one is able to infringe them => coertion on people who want to infringe your rights. Same for economics.
Even when I was 6 I was able to understand such simple logic when the teached prevented us to bully/be bullied. If it's applicable to politics, it's applicable to economics, as both are forces.

--"Mind you, it was the LACK of regulation that caused that."

Check your history. The exact same sort of thing happened many times before the Great Depression, and never managed to be more than a moderate recession. The banks were able to absorb the cycle without any particular difficulty. It wasn't until the government got into the act with the Federal Reserve Board that things really got screwed up. Between the ludicrous protectionist tarrifs and the incredible idiocy at the Fed, a minor recession was turned into a Great Depression and dragged on for years.

Well, my history tell me something else, like it's the explosion of a "speculation bubble" which formation was possible because of lack of regulation, that made the crisis happening.

--"Got it. Laws and enforcement of these laws."

Um... did you not see me mention minarchism or something?

--"In 1987 and during the Asian crisis, there were LOTS of regulation : limited kracks."

Limited cracks... heh. No, just delayed-blast. The S&L collapse was caused by government interference (largely the idiotic blanket FDIC guarantees), for instance. Enron was certainly not a case of too little regulation, but a perfect example of why regulation doesn't work (without government guarantees people would have been rather more sceptical when looking over their statements).

Same as above about "speculation bubbles". In fact, the cracks were attenuated because of emergency economical systems that were created post-1929.

--"Again, again, again : just as laws are required to ensure that no physical entity can infringe your rights, laws are required to ensure that no economic entity can infringe your rights."

And you are still completely missing the concept behind freedom.

Well, "not understanding the concept of freedom", coming from you, is kind of funny. Take a mirror.

[Wraith]

--"Is that too hard to understand?"

You're just misuing terms. Economic inequality is not force.

--"Rights are protected by ensuring no one is able to infringe them => coertion on people who want to infringe your rights. Same for economics."

And, again, you are misuing your terms. Government does not coerce people to not infringe your rights, it punishes people who do infringe them (a subtle but important difference).

--"Well, my history tell me something else"

*shrug* Up to you. I've posted in the econo-thread, so someone with a much better working knowledge of economic history than either of us may be along sooner or later.

--"Take a mirror."

I believe the phrase you were going for was "Take a look in the mirror", unless you really are asking me to steal a reflective surface for some reason.

Wraith
"It is not your responsibility to extract reason from another's drivel."
-- Lucas Kovar

[TCO]

Originally posted by David Floyd


Those are the numbers I don't get - he said "what if" those numbers. Well, what if? One can't just assume sales figures like that for whatever product without legitimate research - all those numbers are, are made up numbers to support a point near as I can see. Granted I don't know a lot about economics, but I'm just saying - I understand his explanation of what those numbers mean, but not the numbers themselves.

It's a made up demand curve. Graph a few. For instance try one with low, constant elasticity. Try a linear one. Learn to determine the monopolists profit-maximizing price.

[Akka]

Originally posted by Wraith
--"Is that too hard to understand?"

You're just misuing terms. Economic inequality is not force.

Politic inequality is not a force either. Politics is a force. Economics is a force. Both can be used as a weapons against a state. Both can be used for oppression. Both are able to make a country stand up or fall.
They are forces. Well, I think the word express itself quite well.
And as forces they can be used to oppress, unless there is regulation to ensure that they don't infringe the rights of people.

--"Rights are protected by ensuring no one is able to infringe them => coertion on people who want to infringe your rights. Same for economics."

And, again, you are misuing your terms. Government does not coerce people to not infringe your rights, it punishes people who do infringe them (a subtle but important difference).

Perhaps coertion wasn't the good word. I'll have to take my translator to see. I wanted to mean that to be sure people do not infringe rights of others, you have to make laws and apply them.
And it is the exact same principle that happen in economics, as economical tyranny is as possible as politial one.

--"Well, my history tell me something else"

*shrug* Up to you. I've posted in the econo-thread, so someone with a much better working knowledge of economic history than either of us may be along sooner or later.

Perhaps, but well, even top-notch economics are still battling on the issue. I bet that anyone can bring here someone who has deep knowledge in economics ans still do not agree with at least half of the others.

--"Take a mirror."

I believe the phrase you were going for was "Take a look in the mirror", unless you really are asking me to steal a reflective surface for some reason.

Nice one
Well, yes, I meant that the same thing could be said about you.