^Two gas stations on a street corner is not inefficient. If it were inefficient one or both would be out of business. Both of those stations help supply the demand that the public requires. Take away one of those and you'll have a gas line at the other station (much like the soviet style toilet paper lines).

Inefficiency is not rewarded in capitalism. It requires a firm to shut down if it cannot meet its operating costs. The ONLY way that inefficiency exists in capitalism is if that firm is kept alive by a 3rd party (a government buyout, a subsidy, a tariff, etc). When the government introduces such things, inefficiency is created. If it werent' for the government, these firms would not exist. If they couldn't exist because they couldn't meet their operating costs, then obviously, there is no real public demand.

10/17/2006 1:09:23 PM

Onorio, look at it the inefficiency this way:

IF one gas station would charge the market clearing, economically efficient price for gasoline, then there would be complete efficiency. Instead, we have a second gas station, which costs us time, effort, and materials to build and operate. So even if we get to the economically efficient price for gasoline in our 2-station town, we have wasted resources to get there.

The reason we don't treat it as inefficient in our general vocabulary is because we know full-well that the single gas station won't charge the economically efficient price if they have 100% market power and little substitutability. So, Kris is right about it being inefficient in the economic sense, but he's DEAD wrong about thinking it can be corrected by a government-controlled monopoly.

That is the fatal flaw of communism in practice, and I would argue, also in theory.

10/17/2006 2:09:34 PM

No no no no, if one station were to have control of the price of gas in this little town, then market forces would be acting on it in that they could charge whatever they want.

The premise of capitalism: man is a rational thinker. If I can get away with charging $4.00/gallon, I will. THen you also have to look at the amount of peopel who may no longer buy gas. Finding the maximization point of this will also maximize your profits.

The existence of, or as economics teaches us, the mere potential of a competitor will be enough to deter this station to gouge the price. When you have 2 stations and 3 stations, etc, you are fulfilling the public need and also creating the competition required to keep the cost of gas AT THE LOWEST POSSIBLE POINT to a) attract more customers and b) undersell your competitors and c) make enough profit to make it worthwhile.

It is not inefficient to have 3 gas stations or 4. You have a point where you reach market saturization where you have too many gas stations and guess what capitalism does? It shuts the excess stations down too because they would not be able to afford to stay in the black.



It's a beautiful system. And guess what else? No one planned it, no one drew the map for it, no one dictated it... it just works.

[Edited on October 17, 2006 at 2:30 PM. Reason : .]

10/17/2006 2:29:28 PM

Quote :

"You find capitalism to be inefficient enough to warrant its elimination."

It is grossly inefficient, and there is a better way of managing resources.

Quote :

" You think people can be conditioned not to want. I think that it is impossible to condition people not to have preferences. Look, do you really think you can condition a human not to prefer one color over another?"

Sure it could be done, look at baby Albert, all one must do is cause the person to associate a color with pleasure. But this is an irrelevant issue, it doesn't really matter.

Quote :

"The only way in which you can do this is to preprogram people to do it from birth over many generations (like in The Giver, 1984, Brave New World, Anthem, Farenheit 451, etc.)"

It does happen from birth, but it wouldn't happen like it does in those scifi books. You are programmed every day, that would just be controlled and redirected.

Quote :

"but I think the imagery associated with the concept is the same. Humans without preferences are indeed clockwork oranges."

A few hundred years ago many people saw computers as soon to be robots and saw photographs as stealing people's souls. Certain people tend to be scared of new things.

Quote :

"I guess there is room for disagreement on whether capitalism is sufficiently inefficient to warrant its replacement and also to whether a world without wants and preferences is desirable."

And I'd agree that there's a great deal of room in debating what capitalism's replacement will look like and work. I'll admit it's very likely that what comes will be different from what I've described. I am kind of guessing what the future will look like. You might see some simialities in this discussion and the one about AI that we had earlier. This is just what I draw from how I observe humans interact and function.

----------------------------------

Quote :

"All you have to do is read these two sentences and you know that Kris has no idea what he's talking about and therefore can be left alone to be insane and believe that communism is better than capitalism."

You might want to work on reading those two sentences first, then you can try to draw some conclusions about my mental state.

Quote :

"he is absolutely ignorant and doens't realize that government interference causes these inefficiencies that exist in capitalism... in other words, the more socialist a government gets, the more more inefficient the economic system becomes"

Wrong. You need to take a primer in econ, they'll cover the flaws in capitalism and how the government is used to patch those holes. If you're lucky they might get into Keynesian economics as well.

Quote :

"Have you never seen a simple supply and demand curve and shown what happens when governments introduce socialist policies? Waste is created by interference."

Sure, for example the demand curve of a large business before government breakup, and the demand curve after. You can note that the demand curve afterwords is more efficient.

--------------------------------------

Quote :

"Actually no. Fascism is a real economic system"

Wrong.
http://en.wikipedia.org/wiki/Facism
Fascism is a radical political ideology that combines elements of corporatism, authoritarianism, nationalism, militarism, anti-anarchism, anti-communism and anti-liberalism.

Quote :

"You realize that "capitalist" describes an economy in which the police act to punish force or fraud regardless of the aggressor?"

I'd guess many of these governments probably meant to do this, but simply weren't able.

Quote :

"For this hefty price we can find out how much the gasoline really costs and it makes producers charge this price."

I just think that with the right investment and technology, we could pay a lot less for that information.

Quote :

"Two gas stations on a street corner is not inefficient. If it were inefficient one or both would be out of business. Both of those stations help supply the demand that the public requires."

It's called "economies of scale" one big business is more efficent than a lot of small ones, however with this comes the demand problems of market power.

10/17/2006 2:37:55 PM

Onorio, you're misunderstanding what we mean by inefficiency.

Trust me, when Loneshark, Kris, and I agree on an economic point, its correct.

Look, we know that markets act on 1 gas station owner so that he charges the profit maximizing price. Thus, he will be led to charge a monopoly price if left to his own devices. BUT, if he could, by some means, be compelled to charge the economically efficient, market-clearing price that competition brings, then he would be MORE economically efficient than the system whereby a number of competitors force themselves into equilibrium.

Its not that ANY of us think that 1 gas station is more efficient than 2 or 3 if left to their own devices. The point is simply that IF 1 gas station WOULD charge the market-clearing price on his own, then he would be more efficient than any other setup.

The disagreement isn't on the inefficiency that, under this hypothetical case, is caused by competition. The disagreement is on whether 1 station could be compelled to charge the market-clearing price in a manner that isn't at least as inefficient as the competitive case.

Kris, Loneshark, amirite?

10/17/2006 2:39:01 PM

no


^can't happen in a society based on freedom....

[Edited on October 17, 2006 at 2:45 PM. Reason : d]

10/17/2006 2:42:45 PM

Arab, you are correct, IMO

But that's what the disagreement is about. Its about whether or not it is plausible. The point remains that IF IT DID WORK THAT WAY, it would be more efficient than any other form of economy.

10/17/2006 2:46:43 PM

^^^Pretty much. This is one of those problems like externalities that simply aren't debatable by anyone.

We're pretty much on opposite ends of the economic philosophy spectrum, so I'd say if we agree on anything, there's probably not much room for debate on the issue.

Oh, and I'd agree that no is the answer to the question posed by this thread. America won't be switching to communism for quite a while.

[Edited on October 17, 2006 at 2:48 PM. Reason : ]

10/17/2006 2:46:56 PM

I'm using the word efficiency in the classical term of the word and what Adam Smith meant when he wrote Wealth of Nations.

Efficiency only exists with competition. That is lesson #1

10/17/2006 2:51:54 PM

Actually Onorio, we're using it in the classical economic version as well. You're just thinking that competition is the only way to reach economic efficiency, which isn't the case.

What Adam Smith (Invisible Hand) all the way through Freidman have preached is that competition is the best way for us to approximate efficiency. No one mistakes capitalism for a perfectly functioning system. It has externalities and other market failures to dampen it a bit.

The two sides of the coin are:

You and me and Loneshark: In a general sense, capitalism-fueled economies are as close as we can get to efficiency that have desirable outcomes.
Kris and other communists (<~~not using the term as an insult here): There are more efficient forms of economic systems, they just haven't been seen yet.

10/17/2006 2:56:50 PM

Quote :

"You're just thinking that competition is the only way to reach economic efficiency, which isn't the case."

And that's where we differ. I fully believe that, given our human condition, that competition is the only way to reach economic efficiency.

But I am a rabid capitalist and believe that the market solves all problems, even with externalities, if only it were left alone to function. I am the polar opposite of Kris.

10/17/2006 3:07:14 PM

then you're both deluded. congratulations.

10/17/2006 3:08:38 PM

Quote :

"Kris and other communists"

I wouldn't extend my vies as that of all communists, I've met a few others, and many of them are that crazy hippie "hey it'll all work if we get rid of money" kind of communist, but some of us are actually reading and thinking about it practically, but I'd say you summed up my views fairly well. I'm not as much a supporter of communism as I am a critic of capitalism. I just don't like the idea that it works perfectly or that it's the best thing we'll ever have.

^^Then I'd say your more the polar opposite of the crazy hippie type, you're just as impractical and idealistic, simply on the other side.
loneshark and bgmims are on the other side of economics planet for me, you simply aren't even on it.

[Edited on October 17, 2006 at 3:12 PM. Reason : ]

10/17/2006 3:10:07 PM

Quote :

"And that's where we differ. I fully believe that, given our human condition, that competition is the only way to reach economic efficiency."

You are seriously spinning now. This statement is morbidly inaccurate.

10/17/2006 3:13:23 PM

unfortunately for you, history has proven me right. And yet, you give no substance to back up your claim of my "morbid incorrectness."


Go ahead... I imagine if it's so morbid and so grossly wrong, you should be able to easily refute it. Go for it.

[Edited on October 17, 2006 at 3:18 PM. Reason : .]

10/17/2006 3:17:12 PM

yeah, it explains why government involvement in the economy exists in every civilized country in history.

We have easily refuted it.

[Edited on October 17, 2006 at 3:19 PM. Reason : ]

10/17/2006 3:19:12 PM

government involvement in an economy is due to much more sinister reasons than "maximizing efficiency." Perhaps power? No government has ever sought that...

Why, that's how your comrades started in the CCCP. Oh here's a wonderful economic system... let us control it... millions upon millions dead... system collapses... people starve.

[Edited on October 17, 2006 at 3:25 PM. Reason : .]

10/17/2006 3:20:13 PM

theoretically things can always be more efficient but people are not ants, so it's kinda hard to justify any of it being plausible...

10/17/2006 3:21:26 PM

Well you're clsoe to right Arab, except for complete economic efficiency is theoretically possible, so it can't ALWAYS be more efficient.

The true question we can deal with when this debate is over is whether true economic efficiency is desirable or not. What I mean is, ceteris paribus, we'd all choose more efficiency, but it never is ceteris paribus. We have to come up with a good definition of "better off." The realm of normative economics is staggeringly subjective.

In fact, when I get a chance, I'll be starting a thread on normative economics. Help me out here on methods of optimality we should debate in it.
Utilitarianism, Pareto Optimality... (fill in the blanks for me)

10/17/2006 3:25:35 PM

Hey Kris I want to thank you for taking care of my "light work" up there.

10/17/2006 3:32:30 PM

Hey Kris I have no real ideas so I spend most of my time ATM'ing people in threads.

10/17/2006 3:39:40 PM

Both of you cut out the trolling.

10/17/2006 3:40:39 PM

Well maybe if his argument actually held water, he wouldn't be angry with me. It's merely human nature to not like being incorrect.

[Edited on October 17, 2006 at 3:47 PM. Reason : .]

10/17/2006 3:46:49 PM

Well perhaps pointing out the leaks in the bucket is a better way to prove that his argument holds no water than by pointing out that the guy who is carrying the bucket is ugly, smells, can't spell, or is stupid.

Don't you think?

10/17/2006 3:48:06 PM

My argument does hold water, dumbass. It's called, for a large part, the USA.

^yes... I agree. I wish Earl would just contribute.

[Edited on October 17, 2006 at 3:48 PM. Reason : .]

10/17/2006 3:48:14 PM

I just think you guys have spun way off topic. None of your inputs answer the question of the thread. You've lost sight now. Can we just stick with the germane here?

10/17/2006 3:56:40 PM

thus he concedes defeat. He can't poke holes at any argument.

10/17/2006 3:58:26 PM

Unfortunately Onorio, your argument doesn't really hold water.

You're pretty close to right, in that capitalism is IMHO pretty close to efficient (or at least as close to anything else that is plausible) but the argument that it is perfectly efficient is just not the case.

The holes in the bucket revolve around market failure. Inability to account for some externalities means inefficient outcomes. Inability to properly price a public good means inefficient outcomes. The debate comes in how we should fix those holes (and if they are worth fixing at all). My personal intuition is that they are worth TRYING to fix if and only if, we can come up with a plug that doesn't cause even more problems than we had before.

10/17/2006 3:59:52 PM

uh emmm... had a piece of flym in my nasal area.



[Edited on October 17, 2006 at 4:04 PM. Reason : ^thanks for pointing that out.]

10/17/2006 4:03:37 PM

These "public goods" that are supposed to be fixed WOULD be fixed if market forces were allowed to direct them. There was a thread on here that salisburyboy shat on a few months back on privatizing the public school system. You should check that out as there were some very good arguments (most by me) given.

If the market were allowed to function, supply and demand would always meet at equilibrium and no waste would occur.

[Edited on October 17, 2006 at 4:06 PM. Reason : .]

10/17/2006 4:05:42 PM

Quote :

"These "public goods" that are supposed to be fixed WOULD be fixed if market forces were allowed to direct them."

The market isn't stable enough to provide things like electricity, for an example. Just look at the mess that turned out in california when they tried it. Natural monopolies simply don't work effectively without some kind of government intervention. Certain things, like electricity or national defense, simply couldn't be privatized without resulting in massive failure.

Additionally, how would you promote invention without enforcing patents? There's no way in hell I'd sepnd money on R&D if I could just steal it off someone else.

Quote :

"If the market were allowed to function, supply and demand would always meet at equilibrium and no waste would occur."

This is simply insane. No rational person who knew anything about economics would claim this. Some fringe economists might claim that in almost all industries supply would eventually meet demand without government intervention, but they certainly wouldn't claim that no waste occurs, simply because during the time supply and demand have not yet met waste has already occured.

Basically what it boils down to is that you have no idea what you're talking about.

10/17/2006 8:44:54 PM

That post took the words right out of my mouth.

Quote :

"supply and demand would always meet at equilibrium"

Maybe in a utopia. But this is a very bold claim that lacks understanding and insight. So this is not even worthy of debating. How this conversation even took this road, I do not know. lets just move pass this blunder of intelligence.

[Edited on October 17, 2006 at 8:58 PM. Reason : .]

10/17/2006 8:57:11 PM

Quote :

"Just look at the mess that turned out in california when they tried it."

Yes, a state run monopoly fails and Kris runs screaming "Look! Free Markets don't work!!!"
Ignorance is the first rule of communism.

Quote :

"Maybe in a utopia."

No, Earl, you are simply an idiot. "supply and demand would always meet at equilibrium" is always true, it just might be at $10 a gallon for gasoline.

Quote :

"how would you promote invention without enforcing patents? There's no way in hell I'd sepnd money on R&D if I could just steal it off someone else."

The same way it was done before Patents were invented (it was not that long ago). They are called trade secrets. An individual in England invented a machine to spin thread, it was quite ingenious. Patents did not exist so he simply kept it secret. He only employed family members to tend the machines and never let anyone else into his stone fortress. He managed to protect the secret for over 30 years before the King ordered the plans for the machine released under threat of military intervention.

[Edited on October 17, 2006 at 9:17 PM. Reason : ^]

10/17/2006 9:11:07 PM

In some cases, such as an electric grid, we have a monopoly in the form of co-ops which are regulated by the government. This is perhaps the ONLY case where I can see where responsible government would be needed. Patents, IMO, are a part of the capitalist system. You can protect your rights. They are no more against capitalism than any other freedom guaranteed by the Constitution.


And yes, Earl, when there is NO government interference, supply and demand WILL ALWAYS meet at equilibrium with the existance of competition. This is actually Econ 101. Plz read.

10/17/2006 9:21:08 PM

Quote :

"No, Earl, you are simply an idiot. "supply and demand would always meet at equilibrium" is always true, it just might be at $10 a gallon for gasoline."

I was talking about how he said no waste would occur . Hence, maybe in a utopia.

10/17/2006 9:22:42 PM

Quote :

"No, Earl, you are simply an idiot. "supply and demand would always meet at equilibrium" is always true, it just might be at $10 a gallon for gasoline. "

Loneshark, what about in the case of a Monopoly? In that case, MC=MR is not the same place were Supply = Demand.

Do you mean that in a different way than I think you mean?

10/17/2006 9:40:45 PM

Ok, this is THEORY... and something I do not believe would happen in practice.


If everything else was perfect and we were in a completely capitalist system, monopolies would not exist and if they did, their prices would still be set via MC=MR. Why? Because the mere potential of a competitor would be reason enough for a manufacturer to produce at the lowest cost and charge the lowest price to KEEP COMPETITORS OUT. It is beneficial for the monopoly to not have any competitors and the only way to achieve that would be to keep them out by MC=MR.

10/17/2006 9:53:19 PM

^^ Sorry, I guess I overstated my response.

^ The Monopoly has artificially restricted Supply. So, lets say at $10 a gallon the company would produce 10 billion gallons for sale in a competitive market. However, Demand at $10 is only 1 billion gallons. Therefore, the Monopoly owners artificially change their supply curve to cut production to 1 billion gallons at $10.

Therefore, Supply at $10 is artificially 1 billion gallons; Demand at $10 is 1 billion gallons.

Dis-eqillibrium is when suppliers want to produce more, or consumers want to consume more, at the given price, but are unable to. In this case of a monopoly the consumers do not want to consume any more than they are at $10 and the Monopoly does not want to produce anymore than they are, either. Technicality, sure enough, but Monopolies are sufficiently rare to allow for a special case.

10/17/2006 10:00:05 PM

modifying their supply would surely peak the interest of capitalists interested in making money; if they can produce more and sell at a lower cost and earn a profit, it would force the monopoly to do the same. It is not advantageous, in pure capitalism, for a monopoly to behave as such.

10/17/2006 10:02:18 PM

Quote :

"It is beneficial for the monopoly to not have any competitors and the only way to achieve that would be to keep them out by MC=MR."

Brian, you should know from your econ classes that MC = MR is the profit maximization formula, not the formula for economic efficiency.

You do know that, right?

10/17/2006 10:02:31 PM

profit maximization is where the efficiency is created; make the most money by reducing costs and therefore increasing revenue. Apologies B, I was an econ minor... stuff was 2 and a half years ago... I'm surprised I'm remembering as much as I am.

Still, my statement is not factually incorrect.

[Edited on October 17, 2006 at 10:05 PM. Reason : .]

10/17/2006 10:04:24 PM

If I get abonorio right then he is correct in the efficiency sense. A monopoly should theoretically be as efficient as a competitive enterprise, it is just more profitable.

For example, every dollar saved from costs is another dollar claimed as profit.

But there is something to be said for how easily firms can find cost savings once bankruptcy begins to loom...

But bgmims is right that a market in Monopoly will usually produce a lower quantity of goods than the same market in Competition.

10/17/2006 10:42:45 PM

no, because then I would leave for a country that didn't suck and leave the US behind to rot.

10/17/2006 10:48:32 PM

http://www.rh.edu/~stodder/BE/MonopAnal.htm


Damn Loneshark. Either you guys are using different definitions of efficiency than the rest of the economic world, or you guys need to bone back up.

Here's some help.
http://en.wikipedia.org/wiki/Dead_weight_loss

[Edited on October 17, 2006 at 10:55 PM. Reason : .]

10/17/2006 10:54:34 PM

^^ what were you responding to?

[Edited on October 17, 2006 at 10:54 PM. Reason : ^]

10/17/2006 10:54:41 PM

^the thread title

10/17/2006 10:59:02 PM

bgmims, I was unaware efficiency was used outside production, oh well.

A firm that manages to produce a widget for $10 is more efficient than one that spent $12 to produce the same widget. It makes sense for a Monopoly to be as efficient as possible, lets say $10 per widget, but it is going to charge whatever the market will bear. It spent $10 but charged $20 per widget, claiming $10 as profit.

A Monopoly that charges $20 for a widget is not any less efficient that a competitive firm that charged $11 for a widget if they both spent $10 making it. The difference is not efficiency but Dead Weight loss to society's greater utility function.

So, if I am using efficiency wrong, then you help me here:
A Monopoly charges a price of $20 per widget, but manages to reduce costs such that it only costs $10 to produce a widget instead of $12 as before. The Demand curve is very steep so the price remains $20. What has changed? In my definitions, efficiency has increased. By your definitions, efficiency has decreased (Price is even further away from the cost of production).

[Edited on October 17, 2006 at 11:05 PM. Reason : .,.]

10/17/2006 11:01:07 PM

Quote :

""supply and demand would always meet at equilibrium" is always true, it just might be at $10 a gallon for gasoline."

Actually supply rarely meets demand. This is due to market power. Firms do not base their price on demand, they base it on cost.

Quote :

"They are called trade secrets. An individual in England invented a machine to spin thread, it was quite ingenious. Patents did not exist so he simply kept it secret. He only employed family members to tend the machines and never let anyone else into his stone fortress."

You can't honestly think this is practical in the modern economy.

Quote :

"This is perhaps the ONLY case where I can see where responsible government would be needed. Patents, IMO, are a part of the capitalist system. You can protect your rights. They are no more against capitalism than any other freedom guaranteed by the Constitution."

But these are instances of government intervention in the economy. Now that you see these, it's only a stone's throw away from seeing the other markets that neccesitate government intervention.

Quote :

"Technicality, sure enough, but Monopolies are sufficiently rare to allow for a special case."

Monopoly and monopsony exist to varying degrees in almost every market. Some may be small, some may be large.

Quote :

"modifying their supply would surely peak the interest of capitalists interested in making money; if they can produce more and sell at a lower cost and earn a profit, it would force the monopoly to do the same. It is not advantageous, in pure capitalism, for a monopoly to behave as such."

There is a reason these markets function in different ways, you can take an econ course to learn why.

Quote :

"A monopoly should theoretically be as efficient as a competitive enterprise, it is just more profitable."

No, the resources are not traded at optimium efficentcy like they are in a perfectly competitive market.

Quote :

"For example, every dollar saved from costs is another dollar claimed as profit."

But these aren't distrubuted properly. Obviously resources aren't going to just disappear, but if they don't go to the proper place at the proper levels, then it is inefficent.

Quote :

"A firm that manages to produce a widget for $10 is more efficient than one that spent $12 to produce the same widget. It makes sense for a Monopoly to be as efficient as possible, lets say $10 per widget, but it is going to charge whatever the market will bear."

You are confusing micro and macro. Any firm obviously wants costs to be as low as possible, these but the price they seel at has an impact on the efficency of the market.

10/17/2006 11:30:33 PM

Quote :

"You can't honestly think this is practical in the modern economy."

Hence why we have patents, civil courts, and police departments.

10/18/2006 12:05:10 AM

So we do need government intervention?

10/18/2006 12:17:05 AM