Why has Capitalism failed to produce optimal value everywhere?

[Kidlicious]

Originally posted by Last Conformist
Why should their be different notions of value for man-made and natural things? It would not seem to make any much difference to me as a consumer whether CDs are made in factories or grow on trees.

Economics is the study of organizing production. There is no sense in talking about things that does not involve human production. Incidently however, the value of non-produced things is more often equal to the labor used to make it usefull to us, however there is some speculation in the price.

[Last Conformist]

Originally posted by Drogue

Yes they did. Value is the price someone is willing to pay for something. If I have a pen, and I would need to be give £5 to part with it, it has a value of £5. You can't objectively put a price on something, as it is, as with all human things, inherantly subjective, but it does have a value to each person, so the value of something is the value that the person with the highest value puts on it. It is that person that then owns it. That is perfect competition. Sadly it's impossible/nearly impossible in practice.

Now, equipped with this wonderful knowledge, what do we do with it?

[Kidlicious]

Originally posted by Drogue

Yes they did. Value is the price someone is willing to pay for something. If I have a pen, and I would need to be give £5 to part with it, it has a value of £5. You can't objectively put a price on something, as it is, as with all human things, inherantly subjective, but it does have a value to each person, so the value of something is the value that the person with the highest value puts on it. It is that person that then owns it. That is perfect competition. Sadly it's impossible/nearly impossible in practice.

That's insane. Ability to buy something has nothing to do with how much a person values something. Ask Kontiki. He's very vocal about that.

[Drogue]

Re: Re: Re: Re: Re: Why has Capitalism failed to produce optimal value everywhere?

Originally posted by Kidicious
See? You obviously mispoke. The value of the good is what the consumer is willing to pay.

As I said, price is value only to the marginal consumer, in a competative market.

In a competative industry where people pay the same price but have a different willingness-to-pay, there is a consumer surplus, therefore the value to each individual is different to the price they pay. But the value to the marginal consumer is the price they pay.

Edit: But yes, you are correct, value is their willingness-to-pay. This doesn't change with price. However the value to the marginal consumer does, as that is always equal to price. It's just when price changes, the marginal consumer changes.

[Kidlicious]

Originally posted by Drogue

Yes, but a good economist has no reason to pick data specifically that goes one way or the other. In order to be well recognised, academically, you want to pick as large a random sample as you can manage. Yes, it's not perfect, but it's not biased, and if you look at the statistical significance involved in a sample of 300,000, you'll see it's a pretty good approximation of the true, full set of data.

Well neo-classical economists are not good economists. Chile, case in point. Free market economics was a drastic failure there. Then they started regulating the economy, and the economy improved. Now the economists go around the world claiming that Chile was a free market miracle.

[Drogue]

Originally posted by Kidicious
That's insane. Ability to buy something has nothing to do with how much a person values something. Ask Kontiki. He's very vocal about that.

Yes it does. Value is a monetary thing. If I would buy a roll for $2 but not for $3, then my value for that roll must be between $2 and $3. Simple. Anything you absolutely can't afford is therefore priceless.

[Drogue]

Originally posted by Kidicious
Well neo-classical economists are not good economists. Chile, case in point. Free market economics was a drastic failure there. Then they started regulating the economy, and the economy improved. Now the economists go around the world claiming that Chile was a free market miracle.

Yes, Neo-classical economists are not good economists. They're not respected in the economic community. Neither are true Keynesians. Any economist that is out to prove a point, rather than discover how things work, is generally not recognised as a good economist.

And as said, free market economics didn't work. That doesn't mean a competative market doesn't, that means a free market didn't. You do realise every basic microeconomics course teaches that regulation is sometimes necessary, when the costs of it are lower than the benefit from producing more output.

[Kidlicious]

Re: Re: Re: Re: Re: Re: Why has Capitalism failed to produce optimal value everywhere?

Originally posted by Drogue

As I said, price is value only to the marginal consumer, in a competative market.

As if there were actual 'marginal' consumers. We're talking in general terms here. Don't look at the trees. Look at the forest.

In general consumers get a surplus from production in the market place. This is the same argument as the Marxist labor theory of value, just put into another context. So how do you claim that the Marxist labor theory of value is wrong. It's obvious where Marshall got it.

[Drogue]

Originally posted by Kidicious
Economics is the study of organizing production.

No it's not. Economics is the study of what happens when we have finite resources. Organization theory is the study of organizing production.

[Kidlicious]

Originally posted by Drogue

Yes it does. Value is a monetary thing. If I would buy a roll for $2 but not for $3, then my value for that roll must be between $2 and $3. Simple. Anything you absolutely can't afford is therefore priceless.

No. You aren't paying attention to the Law of Diminishing Utility.

[Kidlicious]

Originally posted by Drogue

No it's not. Economics is the study of what happens when we have finite resources. Organization theory is the study of organizing production.

What the hell is Organization Theory? You really didn't say anything different. Economics is the study of how we organize production using scarce resources.

[Drogue]

Re: Re: Re: Re: Re: Re: Re: Why has Capitalism failed to produce optimal value everywhere?

Originally posted by Kidicious
As if there were actual 'marginal' consumers. We're talking in general terms here. Don't look at the trees. Look at the forest.

There is always a marginal consumer. That's part of the definition of one. The marginal consumer, and their willingness to pay, denotes the price. That's why we refer to price equaling value, as when it comes to deciding how much is traded, it does, for the marginal consumer. Now, for a measure of value, that is of course wrong, which is where consumer and producer surplus come in. Trading creates value as long as the price someone is willing to pay is higher than the price the firm needs to be offered to be willing to sell. Price falls raise value, because they raise output. If there's more output in the economy, there's more value.

Originally posted by Kidicious
In general consumers get a surplus from production in the market place. This is the same argument as the Marxist labor theory of value, just put into another context. So how do you claim that the Marxist labor theory of value is wrong. It's obvious where Marshall got it.

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.

[Drogue]

Originally posted by Kidicious
What the hell is Organization Theory?

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.

Originally posted by Kidicious
You really didn't say anything different. Economics is the study of how we organize production using scarce resources.

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

[Kidlicious]

Originally posted by Drogue

Yes, Neo-classical economists are not good economists. They're not respected in the economic community. Neither are true Keynesians. Any economist that is out to prove a point, rather than discover how things work, is generally not recognised as a good economist.

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

And as said, free market economics didn't work. That doesn't mean a competative market doesn't, that means a free market didn't. You do realise every basic microeconomics course teaches that regulation is sometimes necessary, when the costs of it are lower than the benefit from producing more output.

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

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

[Kontiki]

Originally posted by Kidicious


That's insane. Ability to buy something has nothing to do with how much a person values something. Ask Kontiki. He's very vocal about that.

One of the few times I'll actually agree with you. A poor choice of words on Drogue's part, but he explains himself later on.