Anyone else have an interest in economics?
19 Mar 2012, 10:28 am
Any talk about economics eventually must address the issue of "value". And any discussion about value must involve some fairly heavy philosophy and psychology. The latter is used daily in our economy and in ways most people would find horrendous. The former of course involves serious contemplation which the marketplace frowns upon and a certain political party distrusts.
We have reached a point in history where man has developed a system that doesn't work and cannot be fixed. The future should be both scary and interesting.
19 Mar 2012, 10:36 am
Oldout wrote:
Any talk about economics eventually must address the issue of "value". And any discussion about value must involve some fairly heavy philosophy and psychology. The latter is used daily in our economy and in ways most people would find horrendous. The former of course involves serious contemplation which the marketplace frowns upon and a certain political party distrusts.
We have reached a point in history where man has developed a system that doesn't work and cannot be fixed. The future should be both scary and interesting.
We have reached a point in history where man has developed a system that doesn't work and cannot be fixed. The future should be both scary and interesting.
There is the school of behavioral economics which is quite influential and I know of no investor that doesn't to some degree take the market psychology into account. Every single company I've ever researched considers psychology extremely important both in terms of marketing and in terms of running the company. Political parties do not care about philosophy, but companies spend exorbitant sums on philosophical contemplation.
However, it all comes down to how you elect to define value. I often hear that children are extremely valuable, however given the ease of which they are produced and the volume that is currently being produced, their value should logically be going down due to oversupply. Are we talking purely economic value or are we taking "human value" into account where every human regardless of whom has X value just by being human?
19 Mar 2012, 11:13 am
Oldout wrote:
Any talk about economics eventually must address the issue of "value". And any discussion about value must involve some fairly heavy philosophy and psychology. The latter is used daily in our economy and in ways most people would find horrendous. The former of course involves serious contemplation which the marketplace frowns upon and a certain political party distrusts.
We have reached a point in history where man has developed a system that doesn't work and cannot be fixed. The future should be both scary and interesting.
We have reached a point in history where man has developed a system that doesn't work and cannot be fixed. The future should be both scary and interesting.
Why must it address the issue of "value"? Economists often just go with revealed preference and walk on their merry way. Is your notion of "value" actually an ethical one? Economics itself doesn't need to concern itself with ethical truths, just like physics doesn't need to concern itself with literary theory.
I don't see much reason that the current system, relative to every other historical system, doesn't work. The best argument is that the current system doesn't handle degradation of the environment effectively, however, no human system ever has, and I think that failing really depends upon the humans, not the system. Human psychology is really not built towards thinking of long-term problems. We have some foresight, but it is psychologically difficult for us to abstain from present gains for future gains.
19 Mar 2012, 11:19 am
Oldout wrote:
TM you are barely beginning the discusion of value, which I sure you understand could and has gone for centuries.
I realize that, however I find the discussion itself inane on so many levels due to subjective variables being added to the calculation. You can only calculate the value of something through objective variables, when you introduce subjectivity on the matter or allow non-economical variables to be introduced you've killed the discussion.
A simple "human-value" calculation would be something like Cost to Society - Value added to society = Where the Cost is the total sum of public goods the person consumes and the second is the total sum of public goods that the person finances both through his or her own taxes but also through taxes that the person made possible through employment and so on. However, once you, as a lot of people do add a post for "Intangible assets" you've screwed up the whole calculation.
The value debate isn't economics its at best sociology, which is a field that I have about as much respect for as the field of eugenics. In terms of economics you have to look at the dollars and cents and ignore intangible assets unless they constitute a large financial value (such as an IP or a brand name).
19 Mar 2012, 12:05 pm
TM wrote:
Oldout wrote:
TM you are barely beginning the discusion of value, which I sure you understand could and has gone for centuries.
I realize that, however I find the discussion itself inane on so many levels due to subjective variables being added to the calculation. You can only calculate the value of something through objective variables, when you introduce subjectivity on the matter or allow non-economical variables to be introduced you've killed the discussion.
A simple "human-value" calculation would be something like Cost to Society - Value added to society = Where the Cost is the total sum of public goods the person consumes and the second is the total sum of public goods that the person finances both through his or her own taxes but also through taxes that the person made possible through employment and so on. However, once you, as a lot of people do add a post for "Intangible assets" you've screwed up the whole calculation.
The value debate isn't economics its at best sociology, which is a field that I have about as much respect for as the field of eugenics. In terms of economics you have to look at the dollars and cents and ignore intangible assets unless they constitute a large financial value (such as an IP or a brand name).
I think non-monetary value can be theorized on a micro-scale only. Value is relative to individual agents. On a macro-scale you'd have to describe value as a distribution involving averages and standard deviations. If you assume knowledgeable and rational agents then all trades act to increase cumulative value to individuals. If I have something more valuable to you than me and you have something more valuable to me than you and the value gain from the new item more than offsets the value loss from the old item for both parties, the trade will be mutually beneficial. There are problems though as in a lot of cases subjective value is a function of flawed information or faulty speculation. In any trade the person with more information has a huge advantage over the person with less information and the more convoluted the terms of the contract become the bigger potential there is for abuse and net-destructive economic behavior, hurting many for the gain of a few. I see this as a hugely destructive phenomenon that makes certain "free-markets" very flawed. The very worst of it seems to occur in the financial sector.
19 Mar 2012, 12:06 pm
I think the global economic climate is still troubling. There could still be defaults in some European counties, and with the resulting banking troubles. All the major banks are interconnected together.
One of the biggest problems in Europe is how some countries there make it overly difficult to start up companies, and create new ideas. Regulations are numerous. Thought this article did a nice job of highlighting issues businessman and women have in Greece for example. And why default in Greece is likely to happen - they have little to no economic growth.
A" Tale of Two Economies"
http://blogs.the-american-interest.com/ ... economies/
excerpt:
Quote:
...Meanwhile, on the other side of Europe, we can see what happens when other cultural forces are at work. The euro crisis highlighted the Greek state’s reputation for backward thinking and unfriendliness toward entrepreneurship, but the full extent of the problem is still emerging from the gloom. This New York Times story on one aspiring entrepreneur’s struggle to create an e-business for olive products reveals a society that is almost pathologically resistant to innovation. Amid the usual bureaucratic obstacles were some unfamiliar ones: stool samples, X-rays, and pages and pages of paperwork. And this was only the beginning:
E-commerce is still relatively new in Greece, though growing. But Internet businesses with international sales are so rare that when Mr. Antonopoulos sought help with processing payments, three different Greek banks seemed incapable of grasping the concept.
Before the banks would agree to act as clearinghouses for credit cards, they insisted that portions of the Olive Shop Web site — including the company’s marketing and privacy policies — be written exclusively in Greek, even though Mr. Antonopoulos tried to explain that his customers would not understand Greek. [...]
The worst moment, he said, was when representatives from two agencies came to inspect the shop and disagreed about the legality of a circular staircase. They walked out telling him that he “would have to figure it out.”
“At that point, we actually thought about just going to the U.K. with this,” he said. “One of the inspectors knew about new legislation. The other didn’t. And they just refused to come up with a solution.”
The contrast could not be starker. The UK and Greece are both developed countries, and there is no reason that new technologies could not be harnessed equally well by entrepreneurs in both places. Yet Britain’s online industry is thriving, while Greece is doing everything it can to strangle e-commerce before it gets off the ground....
E-commerce is still relatively new in Greece, though growing. But Internet businesses with international sales are so rare that when Mr. Antonopoulos sought help with processing payments, three different Greek banks seemed incapable of grasping the concept.
Before the banks would agree to act as clearinghouses for credit cards, they insisted that portions of the Olive Shop Web site — including the company’s marketing and privacy policies — be written exclusively in Greek, even though Mr. Antonopoulos tried to explain that his customers would not understand Greek. [...]
The worst moment, he said, was when representatives from two agencies came to inspect the shop and disagreed about the legality of a circular staircase. They walked out telling him that he “would have to figure it out.”
“At that point, we actually thought about just going to the U.K. with this,” he said. “One of the inspectors knew about new legislation. The other didn’t. And they just refused to come up with a solution.”
The contrast could not be starker. The UK and Greece are both developed countries, and there is no reason that new technologies could not be harnessed equally well by entrepreneurs in both places. Yet Britain’s online industry is thriving, while Greece is doing everything it can to strangle e-commerce before it gets off the ground....
19 Mar 2012, 12:53 pm
marshall wrote:
TM wrote:
Oldout wrote:
TM you are barely beginning the discusion of value, which I sure you understand could and has gone for centuries.
I realize that, however I find the discussion itself inane on so many levels due to subjective variables being added to the calculation. You can only calculate the value of something through objective variables, when you introduce subjectivity on the matter or allow non-economical variables to be introduced you've killed the discussion.
A simple "human-value" calculation would be something like Cost to Society - Value added to society = Where the Cost is the total sum of public goods the person consumes and the second is the total sum of public goods that the person finances both through his or her own taxes but also through taxes that the person made possible through employment and so on. However, once you, as a lot of people do add a post for "Intangible assets" you've screwed up the whole calculation.
The value debate isn't economics its at best sociology, which is a field that I have about as much respect for as the field of eugenics. In terms of economics you have to look at the dollars and cents and ignore intangible assets unless they constitute a large financial value (such as an IP or a brand name).
I think non-monetary value can be theorized on a micro-scale only. Value is relative to individual agents. On a macro-scale you'd have to describe value as a distribution involving averages and standard deviations. If you assume knowledgeable and rational agents then all trades act to increase cumulative value to individuals. If I have something more valuable to you than me and you have something more valuable to me than you and the value gain from the new item more than offsets the value loss from the old item for both parties, the trade will be mutually beneficial. There are problems though as in a lot of cases subjective value is a function of flawed information or faulty speculation. In any trade the person with more information has a huge advantage over the person with less information and the more convoluted the terms of the contract become the bigger potential there is for abuse and net-destructive economic behavior, hurting many for the gain of a few. I see this as a hugely destructive phenomenon that makes certain "free-markets" very flawed. The very worst of it seems to occur in the financial sector.
What you are essentially criticizing is the efficient market hypothesis on an individual level between traders. Without going into the hypothesis in detail , I have issues with it as well. However, assuming the information held by one party in your equation is accessible to the other party then it's a matter of the first party being rewarded for being the better educated of the two. The concept of Value investing is exactly based on one or more parties valuing an asset incorrectly.
If this information advantage stems from a source which is not accessible to everyone, that tends to be what's called insider trading or fraud. One of the first things I learned was "never sign things you don't understand".
What does need to be done in the financial sector, is stricter control of leverage and regulators that keep up with the developments within the industry. What more or less happened was that while the regulators were still working on laws for bows and arrows, someone developed phasers. What also needs to be looked into are structures where the client's best interest comes in conflict or is different from the bank's interest. Furthermore, it must be made clear from the regulators that certain kinds of behaviors have consequences.
People also need to learn about economics so that they can avoid being bankrupted by such behaviors.
21 Mar 2012, 10:16 am
Oldout wrote:
Remember what Keynes said about the long run. "In the long run we are all dead."
I think the most sensible approach is to use the policy that works at that time regardless of what school of thought it comes from. In a recession, the government spending more money and making sure that there is adequate liquidity in the markets is needed. In this case, tax cuts, interest rate cuts and such are a good move, however during the upturn, taxes needs to go up as does interest rate since there generally is over-ample liquidity in such periods. The fault of many countries was to cut taxes during the upturn, spend more and then when they needed cash, they didn't have any.
23 Mar 2012, 11:32 am
Again regarding value.
I recently was encouraged to attend group therapy for which my insurance company was billed $50.00. Said $50.00 will show up in GDP thus showing the economy is alive and well. Nevermind the "value" I received from these circle jerks was only to waste my time. GDP will show the $50.00, but will neglect to show my lost production due to the wasted time.
23 Mar 2012, 11:41 am
Oldout wrote:
Again regarding value.
I recently was encouraged to attend group therapy for which my insurance company was billed $50.00. Said $50.00 will show up in GDP thus showing the economy is alive and well. Nevermind the "value" I received from these circle jerks was only to waste my time. GDP will show the $50.00, but will neglect to show my lost production due to the wasted time.
I recently was encouraged to attend group therapy for which my insurance company was billed $50.00. Said $50.00 will show up in GDP thus showing the economy is alive and well. Nevermind the "value" I received from these circle jerks was only to waste my time. GDP will show the $50.00, but will neglect to show my lost production due to the wasted time.
As Warren Buffett said "I could pay 10.000 people to do nothing but paint my portrait all day, it would increase the GDP but it's hardly productive." The value of your lost production does show up in the GDP, since labor force activity is counted in the national output.
23 Mar 2012, 11:53 am
Oldout wrote:
TM you missed the point -- my time was wasted doing something idiotic, yet GDP shows $50.00 increase. Another way to view this is that as long as money (paper/bits and bytes) is used to measure economic activity, there is lots of room for shananigans.
It shows a $50 increase, but the production you did not do is deducted from the GDP meaning that it's adjusted for that loss in production. How would one measure effort without currency though?
24 Mar 2012, 11:26 am
Oldout wrote:
TM where is my $50.00 time waste deducted?
Gross Domestic Product. The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.
I assume your "wasted time" was in regards to the production of a "good" or "service" by not producing it, the "good" or "service" was not final, therefore not a part of GDP.
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