tag:blogger.com,1999:blog-28755195.post7040692381041510735..comments2023-09-25T04:26:51.568-06:00Comments on The Barefoot Bum: Communism and free marketsLarry Hamelinhttp://www.blogger.com/profile/08788697573946266404noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-28755195.post-4361399075593175392012-09-18T05:03:40.571-06:002012-09-18T05:03:40.571-06:00I was logged into Google, but commenting as Google...<br /><i>I was logged into Google, but commenting as Google made me enter the password again in Blogspot, I do not like this kind of indentification.</i><br /><br />You're more than welcome to use Name/URL identification, and enter your name and an empty URL, as I did for this reply.Larrynoreply@blogger.comtag:blogger.com,1999:blog-28755195.post-27761346170954964132012-09-18T05:03:16.289-06:002012-09-18T05:03:16.289-06:00Vince:
At the end the margin is only there to rec...<b>Vince:</b><br /><br /><i>At the end the margin is only there to recover the capital investment, not for profit.</i><br /><br />It's even worse than that: capital investment is a sunk cost, and trying to recover a sunk cost is a classic fallacy in economics. See Michael Perelman's book <i>Railroading Economics</i> for a very thorough treatment of the sunk cost fallacy in capitalist economics.<br /><br /><i>Capitalism implemented with a true ideal market, will lead to perfect competition and very limited profit.</i><br /><br />In an ideal market, capitalism leads to <i>zero</i> profit, without even the ability to recover capital costs.<br /><br /><i>Why would you invest in innovation in an ideal market, since anyone can copy your innovation (perfect information) and you would not profit from working out your ideas.</i><br /><br />See <a href="http://barefootbum.blogspot.com/2012/09/communism-and-innovation.html" rel="nofollow">Communism and innovation</a>.Larry Hamelinhttps://www.blogger.com/profile/08788697573946266404noreply@blogger.comtag:blogger.com,1999:blog-28755195.post-4061197035360262222012-09-17T09:05:42.698-06:002012-09-17T09:05:42.698-06:00I found this a very interesting read. Close to my ...I found this a very interesting read. Close to my current opinion. In a truly free market there is almost no margin, since if there is a margin, indeed others will start producing for a slightly lower margin. At the end the margin is only there to recover the capital investment, not for profit. All need to work for their pay, capital does not generate returns. I generally also add to the hypothesis of "Free Market" the one of "Ideal Market", where the rational purchaser is fully informed. You would not buy a product that you know is equivalent for a higher price only because the company wants more profit, so your purchasing behavior will be very communistic, you will purchase the product that has almost no cost except for raw material and labour. Companies would not be able to manipulate the market for profit, since the perfect information allows all producers to provide a better product if you are not honest.<br /><br />Corporatism as we know it, is thus based on secrecy, not rational purchasers and market manipulation, since this gives profit on capital. Capitalism implemented with a true ideal market, will lead to perfect competition and very limited profit. The time you can profit from innovation would be limited in this system due to intense competition. This leads to the issue of motivation, that most see in communism. Why would you invest in innovation in an ideal market, since anyone can copy your innovation (perfect information) and you would not profit from working out your ideas. On the other hand if you protect the innovation (copy rights, import rights, etc...) you make the market less free, you restrict people to produce something with current methods and you end up in the current politics of nationalism and corporatism. Sadly the market is not ideal, not even free (capitalistic) and the price of products is not what they should be.<br /><br />P.S.: I was logged into Google, but commenting as Google made me enter the password again in Blogspot, I do not like this kind of indentification.Vincenoreply@blogger.comtag:blogger.com,1999:blog-28755195.post-91450952716288703532008-12-10T15:19:00.000-07:002008-12-10T15:19:00.000-07:00I'm well aware of the notion of a consumer surplus...I'm well aware of the notion of a consumer surplus.<BR/><BR/>First of all, you have missed the point of the main article: Capitalism and free markets are distinct concepts. Your McDonald's example is valid only under (more or less) free markets, where competition between McDonald's and Burger King reduces the surplus labaor embedded in a hamburger to a minimal value.<BR/><BR/>Under <I>capitalism</I> (where owners of capital have a privileged position), however, there's no guarantee that the balance between McDonald's & Burger King would remain stable. Both companies' best strategy is to try to put the other out of business, so that they would have a monopoly on hamburgers. At that point, they would increase the price to the <I>replacement</I> price (less a few cents), maximizing the surplus labor value and minimizing the surplus consumer value.<BR/><BR/>Alternatively, an <I>investor's</I> best strategy is to move his capital to a field where dominance or outright monopoly permits maximizing surplus labor value and minimizing surplus consumer value.<BR/><BR/>An even better strategy is to use one's economic advantage to directly control the political establishment, granting a monopoly directly by police power, which is precisely the strategy pursued during the Bush administration. Judging from Obama's behavior, he shows no sign of rolling back this direct economic control of the government.Larry Hamelinhttps://www.blogger.com/profile/08788697573946266404noreply@blogger.comtag:blogger.com,1999:blog-28755195.post-34450129857025364262008-12-10T05:04:00.000-07:002008-12-10T05:04:00.000-07:00Under capitalism, the consumer also receives surpl...Under capitalism, the consumer also receives surplus benefit (called consumer surplus), just not all of it, the producer receives benefit as well. I'm not sure how your system would work. Let's say I eat a McDonalds double cheeseburger which costs McDonalds %.60 to make. I couldn't possibly replace that cheeseburger for $0.60! In fact, the reason I purchased the double cheeseburger for $1, giving McDonalds $0.40 profit, is because it would cost me several dollars, let's say $3, to produce that same product myself. <BR/><BR/>So in fact, McDonalds has saved me $2 by offering their double cheeseburger for $1. I receive $2 of benefit and McDonalds receives $0.40, we both benefit which is the beauty of capitalism. If McDonalds raised their price to $3.01, then I would refuse to buy and make my own double cheeseburger.<BR/><BR/>Now under your system, I could replace the double cheeseburger with $0.60 of my labor or perhaps another product. But then how do we establish prices and wages? How do I know what a double cheeseburger is worth and what my labor is worth? What if I'm a talented doctor? A gifted musician? Would my labor be of the same value as an incompetent doctor? A talentless musician? <BR/><BR/>One of the huge problems with Marxism is that the system does not allow for returns to capital. Shouldn't a factory owner receive something for providing the factory and equipment? Let's say he built it by hand, he only receives the labor value of the factory? What about the risk he takes? If the factory produces stuff no one wants, he has lost all of his work. <BR/><BR/>It would take a book (and there are several out there already--Mises, Hayek) to point out the flaws of communism. It's a system that sounds good, but can't be put into practice. Maybe heaven will have a functioning communist economy, but then communists don't believe in heaven, do they?The Chinese Capitalisthttps://www.blogger.com/profile/08893832291736797096noreply@blogger.com