this is becoming another one of those economic babbles.

11/1/2006 7:07:58 PM

either way the govt would still be corrupt as FUCK, just as it is now.

11/1/2006 9:27:58 PM

Quote :

"Actually you just claimed earlier that the embargo wouldn't change prices at all. You denied this mechanism's existence, rather than downplaying it's effect."

No, I said then as I say now, Cuba is dwarfed by the market it is selling into, so it is unlikely that Cuba alone is going to move market prices. Therefore, both before and after the embargo Europe should, on average, be paying the same price for commodities that America is paying, meaning the effect upon Cuba's export prices should be zero. Either way, thank God, so you finally admit that the U.S. embargo on Cuba has had very little impact upon Cuba's export and import activities. Which also accepts the corollary: Cuba's poor economic performance can be blamed on no one outside of Cuba.

Now, sure, the travel ban has harmed Cuba's tourism trade quite significantly (Americans travel abroad far more than most other regions), but that shouldn't have mattered since Cuba's communist-run industries could dominate any market given the level playing ground provided to them, easily making up the shortfall of the country's service industries, right?

That said, a large portion of Cuba's economy is still dedicated to tourism, so tourists are coming from somewhere.

11/2/2006 8:36:09 AM

Quote :

"No, I said then as I say now, Cuba is dwarfed by the market it is selling into, so it is unlikely that Cuba alone is going to move market prices. Therefore, both before and after the embargo Europe should, on average, be paying the same price for commodities that America is paying, meaning the effect upon Cuba's export prices should be zero."

The demand is changed, therefore the price will change.

Quote :

"so you finally admit that the U.S. embargo on Cuba has had very little impact upon Cuba's export and import activities"

Where did I say that? I stated that downplaying the effect is at least a reasonable argument (not necessarily a correct one), while the argument you had taken earlier, that the mechanism doesn't even exist, is completely unreasonable because it would claim that all of economics is wrong.
I explained in the later paragraph, which you failed to respond to, why that although this may have a small impact on the world economy, it has a much larger relative impact on the cuban economy.

Quote :

"Which also accepts the corollary: Cuba's poor economic performance can be blamed on no one outside of Cuba."

Even that corollary doesn't logically follow. In order for that to be logically sound, an embargo would have to be the only means an outside force can effect a country's economy, which simply isn't true. But this is kind of besides the point, but I did want to point out bad logic.

Quote :

"but that shouldn't have mattered since Cuba's communist-run industries could dominate any market given the level playing ground provided to them"

Where in the hell did I say that? And how would taking away one of the largest sources of income for caribbean countries such as this one "not matter"?

Quote :

"That said, a large portion of Cuba's economy is still dedicated to tourism, so tourists are coming from somewhere."

That doesn't in any way imply that the demand isn't set artificially low by the embargo.

11/2/2006 10:20:55 AM

Quote :

"The demand is changed, therefore the price will change."

How, Kris? What do you see happening in the world of your mind? I said specifically, the demand HAS NOT CHANGED. America is consuming the same amount of coffee, so is Europe, so is Canada, so is Mexico. Only the trade routes have changed.

God damn it, why can't you think about this instead of spouting the same drivel over and over again? Please, Kris, think about the world you are describing. Magically, if what you say is true, that would mean Cuba is magically getting paid less cash for its crop of coffee. Why the FUCK is Europe/Canada/Asia/etc still buying Brazillian coffee at the old price if they can get the same coffee from Cuba at a lower price? They would not do this! They would tell Brazil to take a hike and buy all the cheap Cuban coffee they can find until it wasn't cheap anymore! As long as Cuba is selling coffee for less than Brazil, Brazil will not sell a single bag of coffee to Europe/Canada/Asia/etc. THEREFORE, Brazil cannot charge a higher price than Cuba, THEREFORE Brazil will not charge a higher price than Cuba, THEREFORE, Cuba is getting the exact damn price that Brazil is getting.

Now, this is not immediate. It takes Europe/Canada/Asia/etc time to stop buying coffee from Brazil and start buying it from Cuba. In that time, Cuba was charging lower prices than Brazil. But after a year, at the most, price normality should be restored.

Quote :

"That's irrelevant to the CUBAN economy, it's only relevant to the world's economy. While cuba may only constitute only %0.1 of the world's trade, cuba produces %100 of cuba's exports, so it has a much larger effect on them than it does the world."

That is SO fucking irrelevant. If I get fired from my job at K-Mart, am I fucked? Hell no, just because I produce 100% of my labor is irrelevant, I'll go sell it to WalMart for the exact same wage.

11/2/2006 12:28:24 PM

Quote :

"I said specifically, the demand HAS NOT CHANGED."

It has changed for cuba.

Quote :

"God damn it, why can't you think about this instead of spouting the same drivel over and over again?"

It doesn't need a complex explaination, there is one, and I gave it to you earlier, but the fact is, lower demand creates lower prices.

Quote :

"That is SO fucking irrelevant. If I get fired from my job at K-Mart, am I fucked? Hell no, just because I produce 100% of my labor is irrelevant, I'll go sell it to WalMart for the exact same wage."

If you have less people who demand you labor, you will have to work for a lower wage.

11/2/2006 2:36:33 PM

Quote :

"It doesn't need a complex explaination, there is one, and I gave it to you earlier, but the fact is, lower demand creates lower prices."

Then give me the god damn complex explanation because it seems like the actors in your little story are idiots, mindlessly doing what you say because you have an economic phrase to back it up.

If what you say is true, then all the actors in this story are fucking idiots.

Brazil is selling coffee at a higher price, which the Europeans happily pay because they are stupid and don't realize Cuban coffee is cheaper, so although the price is higher than elsewhere Brazil still sells everything it produces.

Cubans are the dumbest of all, because although they are selling every ounce of coffee they produce, they have cut their prices inexplicably. The number of coffee drinkers has not changed, the number of coffee growers has not changed, yet magically we now have a two tiered system. If you are buying coffee from Cuba you pay less for it, I don't know, because Cubans are stupid. And everyone else is stupid because all the coffee buyers in the world keep drinking expensive Brazillian coffee for no apparent reason.

In order for your phrase "lower demand creates lower prices" to be true in this context all the economic actors must be utility minimizers. Europeans hate cheap coffee, Cubans hate being paid the going world price for exports. I don't know, maybe its because they are all either communist or socialist and that has made them stupid.

You pick the simplest shit and then completely get it ass backwards and no matter how I try to explain it you, you just restate the same falsehoods over and over and talk as if I'm the one that is confused.

11/2/2006 6:27:02 PM

I gave the most complex explanation I could earlier.

You are confused.
Look at these things we know to be true:
An embargo will lower demand for the products of the country embargoed.
Lower demand results in lower prices, ceteris paribus.

You can try and finagle your way around it by misunderstanding the mechanism at work, but it's as simple as that, and I'm simply not going to explain it anymore. It's simple economics, and if you want to choose ignorance, then go the way of salisburyboy, I can't physically nail reality into your head.

11/2/2006 7:36:33 PM

Quote :

"Look at these things we know to be true: An embargo will lower demand for the products of the country embargoed. Lower demand results in lower prices, ceteris paribus."

In general I would agree, Kris, but like I've said repeatedly, you keep hammering these general truths and proclaiming that they are always true, regardless of the circumstances. Well, Cuba is a set of circumstances in which both of these statements you make are FALSE. The demand for Cuban products did not go down and therefore prices did not fall.

IF we assume the embargo did lower the demand for Cuban coffee then it follows that Cuba exported less coffee (the definition of less demand is fewer buyers which is less bought). But we know this is not the case, all the coffee drinkers of the world wanted the same amount of coffee after the embargo as they did before the embargo, all that changed was their preferred source of coffee. America needed more coffee from Brazil so Europe needed more coffee from Cuba. Cuba should have exported the same amount of coffee after the embargo as it did before (if it did not then there was a worldwide shortage and worldwide prices would go up). As its demand was unaffected (by your rules) its prices should not have been affected.

11/2/2006 10:00:10 PM

Quote :

"In general I would agree, Kris, but like I've said repeatedly, you keep hammering these general truths and proclaiming that they are always true, regardless of the circumstances."

The circumstances are the same. As long as nothing else about the market has changed, if demand goes down, price will go down in a competitive market.

Quote :

"IF we assume the embargo did lower the demand for Cuban coffee then it follows that Cuba exported less coffee"

What? No it doesn't. You need to take econ 101 agian. They sell the same amount of coffee, just at a lower price. Cuba isn't going to start hoarding up the coffee they can't sell at some non-market price point.

Quote :

"the definition of less demand is fewer buyers which is less bought"

WRONG. BASIC ECONOMICS WRONG.
Demand in no way implies that less is bought, just that buyers aren't going to pay the same price for the same amount of coffee. Less people want it, so in order to get the same number of people to buy it, they must lower the price.

This is seriously intro level stuff. Earlier I thought you understood the concept but didn't want to accept it, now I see that you don't fully understand the concept.

11/2/2006 10:27:33 PM

So, for the 10th time, why are Europeans buying coffee from Brazil when Cuban coffee is cheaper?

Quote :

"if demand goes down, price will go down in a competitive market."

But in a competitive market one producer will not magically be receiving a lower price than other producers, will it?

[Edited on November 2, 2006 at 10:46 PM. Reason : .,.]

11/2/2006 10:42:51 PM

I've explained the mechanism at work earlier.

11/2/2006 10:48:05 PM

So, for the 11th time, why are Europeans buying coffee from Brazil when Cuban coffee is cheaper?
Are they not? Is there some magical tax being applied at sea to all coffee leaving Cuba bound for Europe? Perhaps someone is subsidizing Brazil? Or, more likely, is both Brazil and Cuba getting the same price from Europeans for coffee?

11/2/2006 10:56:49 PM

How else do you want me to explain this? I've explained it in the simplest way I know how, the conclusions I draw are nothing more than two definitions, and these are actual defintions, not the made up ones that you posted earlier.

11/2/2006 11:40:56 PM

Your two definitions are general principles which are incorrectly applied to this case.

So, for the 12th time, why are Europeans buying coffee from Brazil when Cuban coffee is cheaper?

Answer this question however you want, but I don't think you can. Either "Because they're stupid" or "Because Cuba sold out of coffee due to its lower prices" or "because Cuban coffee is priced the same as Brazilian coffee."

We are not talking theory or abstract models here, put on your thinking cap and try to analyse a real-world scenario from the perspective of the various actors.

Quote :

"They sell the same amount of coffee, just at a lower price."

Ok, who determines who are the few Europeans lucky enough to get cheap Cuban coffee while everyone else in Europe must settle for expensive Brazillian coffee? In a competitive marketplace firms do not start charging different prices.

[Edited on November 3, 2006 at 8:33 AM. Reason : .,.]

11/3/2006 8:29:39 AM

Quote :

"Your two definitions are general principles which are incorrectly applied to this case."

How? Would the market be any different in the case that there is an embargo, versus the case that it was dropped right now? There would not be any difference between these two, thus since we know 'ceteris paribus', since we know demand has gone down for the cubans, price will go down.

Quote :

"Answer this question however you want, but I don't think you can."

I've answered it several times. It doesn't matter, price will be lower for the cubans, we know this from simple economic principles. The only way to even try to argue agianst it is by throwing illogical statements into some long drawn out explaintion of trade.

11/3/2006 1:34:16 PM

Quote :

"price will be lower for the cubans, we know this from simple economic principles."

So, for the 13th time, why are Europeans buying coffee from Brazil when Cuban coffee is cheaper?

If you are correct and have a deep grasp upon the inner workings of economics you can easily answer this question with your own explanation of trade. Regretfully, you don't know shit about international trade nor the competitive economic system. All you have are short clips and phrases you pulled out of some bullshit pamphlet ages ago.

Quote :

"The only way to even try to argue agianst it is by throwing illogical statements into some long drawn out explaintion of trade."

Yes, Kris, life is rarely simple. And the fact that my "long drawn out explanation of trade" is based upon facts from reality combined with sound logic proves that your simplistic explanation is wrong.

[Edited on November 3, 2006 at 2:07 PM. Reason : .,.]

11/3/2006 2:05:26 PM

Quote :

"So, for the 13th time, why are Europeans buying coffee from Brazil when Cuban coffee is cheaper?"

I answered that last post.

Quote :

"If you are correct and have a deep grasp upon the inner workings of economics you can easily answer this question with your own explanation of trade."

I never said I had that. I do however know basic economic concepts, you know, the one's I've had to spoonfeed to you.

Quote :

"Regretfully, you don't know shit about international trade nor the competitive economic system. All you have are short clips and phrases you pulled out of some bullshit pamphlet ages ago."

I'm not the one saying that "demand doesn't impact price" or "less demand means less purchased".

Quote :

"Yes, Kris, life is rarely simple."

I agree, but it can be accurately represented in simple models. This is what all sciences, whether they are physics, math, statistics, or economics, we make accurate models to predict how things will react. This is no different. We have an accurate model that has been proven to be true with certain restrictions. We have a case that fits this, and when we apply it, you are found to be wrong. You can't seriously argue that this model is wrong.

11/3/2006 2:14:30 PM

Quote :

"I'm not the one saying that "demand doesn't impact price" or "less demand means less purchased"."

Actually, you're the one saying that. You are proclaiming that Europeans do not engage in price competition.

Quote :

"I agree, but it can be accurately represented in simple models. "

In this case your model is too simple and is not taking into account the substitution effect upon price competition.

Quote :

"I never said I had that. I do however know basic economic concepts, you know, the one's I've had to spoonfeed to you."

Wow, so, since you admit you have little understanding of international trade how can you presume to contradict my explanations? I suppose this explains why you have not bothered to pick apart any of my "long drawn out explaintion[s] of trade," you couldn't because you didn't know shit about it. Well, Kris, international trade is a bit more complex than your "basic economic concepts."

11/3/2006 2:52:24 PM

What if the whole world was communist??!?!?

11/4/2006 1:03:28 AM

"Some years ago, shortly before the collapse of the Soviet Empire, I was an invited speaker at a conference of company CEOs and presidents in Acapulco, Mexico. Another of the speakers was Gennady Gerasimov...Gorbachev's spokesperson to the West. I went to hear his talk, which he opened with a joke. And the joke went like this: The Soviet Union has invaded and successfully conquered every country on the planet, with one exception: New Zealand. The Soviet Union has chosen not to invade New Zealand. Question: Why? Answer: So we would know the market price of goods. And of course everybody in the audience got the joke, and everybody laughed, and I sat there stunned. ..." -- Dr. Nathaniel Branden

11/4/2006 9:52:13 AM

Quote :

"In this case your model is too simple and is not taking into account the substitution effect upon price competition."

First off, it's not substitution, it's competition, substitution is something else. Secondly, yes it does.

Quote :

"since you admit you have little understanding of international trade"

You seriously need to take a logic course or something. You claimed I knew everything, I admitted that I did not, you then conclude that by admitting to not knowing everything, that I admitted to knowing nothing. Extremely illogical.

Quote :

"Well, Kris, international trade is a bit more complex than your "basic economic concepts.""

Sure it is, but these basic economic concepts always apply. The world is a very complicated place, but the simple fact that water flows downhill applies.

11/4/2006 7:29:21 PM

True enough Kris, and just as water flows downhill, customers will follow lower prices until there are no longer lower prices to be found. In the case of international trade Cuba cannot consistently charge a lower price than Brazil without acquiring all of Brazil's European customers, and Cuba cannot supply even 1% of Europe's customers by itself. So something must give: Either Europe runs out of consumers before Cuba runs out of coffee or Cuba must equalize its prices with Brazil (either by Brazil lowering its prices or Cuba raising theirs). As rational actors one of these two outcomes is inevitable.

[Edited on November 5, 2006 at 12:56 AM. Reason : .,.]

11/5/2006 12:55:53 AM

Lower demand results in lower prices. It's that simple. Attempt to explain around reality all you like, it can't change reality.

11/5/2006 1:22:39 AM

Kris, how is this statement "Cuba cannot consistently charge a lower price than Brazil without acquiring all of Brazil's European customers" not true?

In other words:
So, for the 14th time, why are Europeans buying coffee from Brazil when Cuban coffee is cheaper?

Are you reading anything I write, or are you just slow? To lay it out a little simpler, to answer this question you must use the words "Europe" or "European" at least once in a sentence dealing with either customer behavior or some mechanism of international trade, something you have not done once at least for the last page.

For at least the 14th time, the Demand for Cuban coffee will be unchanged by the embargo because all the demand lost from America will be replaced with demand from Europe.

11/5/2006 9:40:42 AM

i think this is the longest 2 person aregument in the history of tww. its hasnt gone to just name claling either. great substance guys. keep it goin.

11/5/2006 12:25:48 PM

Quote :

"Kris, how is this statement "Cuba cannot consistently charge a lower price than Brazil without acquiring all of Brazil's European customers" not true?"

It's irrelevant, and I'm simply not going to answer it agian. If cuba faces lower demand, it will lower prices to get the same sales.

11/5/2006 12:59:55 PM

How can that be irrelevant? Either it is true or it is false. If it is true then Cuba will not consistently lower its prices and I am right, if it is false then you are right.

Excluding the first year or so, Cuba is not facing lower demand just as America is not facing lower supply.

How can we break this stalemate? I am not going to budge because I am right and you are not going to budge because you refuse to consider anything that takes more than one sentence to explain. Maybe if I shortened my explanations to one sentence:

"Europe will buy at the world market price all the coffee that America does not buy."

11/5/2006 3:14:14 PM

Quote :

"How can that be irrelevant? Either it is true or it is false."

Let's say we are talking about cuba's economy and I ask you "is your boyfriend gay?" It has a similar relevancy.

Quote :

"How can we break this stalemate?"

I'd consider it checkmate, the only way for us to start a new game is for you to admit that basic economic truths are correct.

11/5/2006 8:59:50 PM

Oh well, I tried. Can't blame me for you refusing to accept the tenets of competition (two sellers of identical goods in a perfectly competitive marketplace do not charge radically different prices), Cuba has only itself to blame for its economic condition. And you have only yourself to blame for ignorance.

[Edited on November 5, 2006 at 9:10 PM. Reason : .,.]

11/5/2006 9:09:53 PM

and you can continue to think that lower demand != lower prices.

11/5/2006 10:05:32 PM

ok i'll be the first to admit i dont know much about communism and stuff

i keep thinking of things and then think to myself that what i'm thinking is what communism is

for example- yesterday i was thinking like, why does america have all these expensive ass cars...what if the government only let us all drive honda accords or something...america as a whole wouldnt use as much gas, and also we would be richer since accords are cheaper than many other more expensive cars and stuff

is that an example of communism(making everyone drive a really efficient, good quality car)?

11/27/2006 2:16:56 PM

No, it isn't "communism" but it IS ridiculous. First, making us all buy Honda Accords wouldn't make us any richer. While efficiency would be good at first, Honda will have completely lost any incentive to make future improvements to the Honda Accord. So, we'd get the curernt model for eternity.

11/27/2006 3:00:29 PM

that's part of the idea

The system relies on fulfilling needs rather than wants. It removes wants, and in this way trancends economics by making it's question of "how to address unlimited wants with limited resources" no longer relevant.

11/27/2006 3:01:41 PM

^Which also takes the cake for being the batshit craziest theory of human behavior EVAR.

11/27/2006 3:26:50 PM

I'd consider the idea that humans have some magical force inside them that makes them greedy as more "batshit crazy"

11/27/2006 4:21:52 PM

If the US switched to laissez faire capitalism, would it work?

[Edited on November 27, 2006 at 5:20 PM. Reason : I hate this function.]

11/27/2006 5:19:25 PM

Humans don't have anything magical making them greedy, they have genetics devoted to self-preservation. All animals have this and act on it in all but a very few select instances.

11/27/2006 5:52:49 PM

well, laissez faire capitalism has existed before, but never in such a large country. This gives it a major advantage over communism, which has no historical examples to draw from, no matter how small. I suspect it would work fine, but only after growing pains as people re-learn how to live through production and customer service instead of through political spoils.

[Edited on November 27, 2006 at 5:54 PM. Reason : .,,.]

11/27/2006 5:52:55 PM

Quote :

"they have genetics devoted to self-preservation"

Self preservation != greed. I don't see animals driving hummers.

Quote :

"well, laissez faire capitalism has existed before, but never in such a large country"

Never in anything more than feudalism.

11/27/2006 5:54:37 PM

Quote :

"Self preservation != greed. I don't see animals driving hummers."

Only because they don't have opposing thumbs to work the ignition. But I have seen a monkey drive a 1930s sedan, kinda similar.

11/27/2006 5:57:12 PM

Alright, it's a trick question. If we immediately switched to anarcho-capitalism, our economy would cease to exist. Farm subsidies, tariffs, and many regulations meant to protect monopolies (auto/air industries, power production, etc.) would vanish, and industries that could only be competitive with them would evaporate along with them. Education, healthcare, gone. Many industries protected in certain states would be forced to move. It would be chaotic.

This isn't fair though, because this a market shock causing economic collapse, not necessarily the new system (we would never arrive at it).

So let's say we ease our way into it, instead of pulling a Russia.

Laissez Faire Capitalism would cease to exist in a generation after being implemented, if it were 'true' laissez faire, and not an economic system bastardizing the name while using the government to maintain a conservative firm/investor system.

Remember, without a government to say otherwise, unions become extremely powerful. Financial co-ops (credit unions), and their relatives become much more competitive. The firm/investment structure of traditional anarcho-capitalism would revert very systematically to some sort of hybrid of anarcho-socialism that doesn't adhere to classical economics.

So no, at least, no the way you'd want it to.

11/27/2006 6:27:38 PM

i read alot, obviously not all of kris and lonesharks arguement. you guys are arguing the same thing... or so it seems to me. i can already see how this would end if it was held in person. one side is argueing purely theoretical reasons, i say this cause they set themselves up by saying that if demand drops the price drops ( or to that effect). and repeating that over and over again. the other arguing that in real world application this has not happened in cuba. so while arguing the same principle neither side can lose due to semantics... or am i completely misunderstanding what you are saying?

11/27/2006 6:45:43 PM

Quote :

"Remember, without a government to say otherwise, unions become extremely powerful. Financial co-ops (credit unions), and their relatives become much more competitive. The firm/investment structure of traditional anarcho-capitalism would revert very systematically to some sort of hybrid of anarcho-socialism that doesn't adhere to classical economics."

The specific force at work here is called market power. But you are correct, corporations and groups of people would be able to face non-competitive curves thanks to the powers of monopoly and monopsony.

Quote :

"i can already see how this would end if it was held in person. one side is argueing purely theoretical reasons, i say this cause they set themselves up by saying that if demand drops the price drops ( or to that effect). and repeating that over and over again. the other arguing that in real world application this has not happened in cuba."

We're both simplifying a complex real world mechanism. The difference is that I'm using accepted economic principles to back my arguement while Loneshark uses lonesharkopseudologic.

[Edited on November 27, 2006 at 7:54 PM. Reason : ]

11/27/2006 7:53:51 PM

^any way you could possibly morph my auto analogy to make it fit in with communism?

i'm trying to get a better grasp of how the US would be different with communism

11/27/2006 7:56:22 PM

plain and simple the only thing that motivates americans is the ability to be lazy

if they could be lazy and be equal to everyone else nearly everyone would be lazy

11/27/2006 8:51:09 PM

If americans are driven by laziness, why do they work so much more than most other countries?

11/27/2006 9:47:11 PM

$

11/27/2006 9:48:01 PM

Quote :

"any way you could possibly morph my auto analogy to make it fit in with communism?"

It's fairly applicable, but I think my way of explaining it is about the simpliest way it can be put while staying completely accurate.

Quote :

"i'm trying to get a better grasp of how the US would be different with communism"

It's difficult to imagine because it results in a complete change of the current paradigm and it's so distantly in the future.

11/27/2006 9:53:56 PM

Quote :

"i'm trying to get a better grasp of how the US would be different with communism"

We know how the planners attempted to organize the Soviet economy, if that helps. The two main mechanisms were picking managers and planning the product chain. They tried various combinations of republicanism, national planning, regional planning, even local planning in a few instances. At various times the Soviets tried nearly every trick in the book to make their planned economy work better, to little avail.

The best system they came up with was Stalinist planning which ended with his death. In it the national planning board held all the power over the product chain and regional party boards handled the process of appointing managers, with the understanding that if production or quality was insufficient the manager (and the people that appointed them) could wind up in the gulag or executed. It was this threat of force which kept the managers and workers working towards the goals set by the national planning board.

The national planning board was responsible for setting prices, wages, production targets for producers (wheat, steel, lumber, etc) and the region where goods were to be sold. In product distribution Moscow was always favored when it came to the distribution of quality goods such as imports.

Workers, however, were afforded wide leeway by the system. If you could find another employer willing to employ you then you could change jobs provided your prior employer did not complain and you could demonstrate you were not moving for nefarious reasons (moving to Moscow to escape shortages). Unemployment was almost non-existent because firms did not pay their workers salaries but did enjoy the increased labor making it easier to meet their quotas. This resulted in large over-capacities as firms unlucky enough to depend on good from other firms for production would find much of the production taking place at the last minute as the quota deadline approached, leaving labor and capital idle otherwise. It was to avoid this dependence on the vagaries of other firms that most product chains were reorganized under one roof (making both the leather and the shoes in one factory, more leather and coats in another factory), sacrificing economies of scale in the production of intermediate goods. This problem was never resolved.

When it comes to the actual working of the system from the perspective of someone living under it, that is difficult to judge because the planning board can use any rationale it chooses. If it wants to keep making both BMWs and Hondas then we do. If it wants to make sure only high party officials get to drive BMWs then it can, either by issuing coupons (as the Soviet Union did to make sure party officials could buy cars without being put on the waiting list) or by regional preference, making sure BMWs were only sold in Washington.

[Edited on November 28, 2006 at 10:36 AM. Reason : .,.]

11/28/2006 10:28:16 AM