Quantum Microeconomics is a PDF file of an Micro-Economics Textbook. (HT: Lisa for posting a link to a Stand-Up Economist) While this is not an ideal textbook, I hope that it can provide some insight to some of the issues we may want to explore. If would love to know if anyone else knows some good sources of economic thoughts and theories.
Many politicians campaign as if they believe that concentration of political power is a good thing—as long as they have the power. Populists promise to use that power to fight against the wealthy and the privileged.
In reality, major corporations and entrenched interests are systemically favored by greater concentration of political power. Unregulated competition, not big government, is the friend of the little guy. Political leaders who campaign on the issue of economic inequality are almost certain to tighten the relationship between political and economic power. It is more important to understand the consequences of political aggrandizement than it is to argue over the interpretation of statistics that measure economic inequality.
Originally posted by Ronald Rutherford: Quantum Microeconomics is a PDF file of an Micro-Economics Textbook. (HT: Lisa for posting a link to a Stand-Up Economist) While this is not an ideal textbook, I hope that it can provide some insight to some of the issues we may want to explore. If would love to know if anyone else knows some good sources of economic thoughts and theories.
Many politicians campaign as if they believe that concentration of political power is a good thing—as long as they have the power. Populists promise to use that power to fight against the wealthy and the privileged.
In reality, major corporations and entrenched interests are systemically favored by greater concentration of political power. Unregulated competition, not big government, is the friend of the little guy. Political leaders who campaign on the issue of economic inequality are almost certain to tighten the relationship between political and economic power. It is more important to understand the consequences of political aggrandizement than it is to argue over the interpretation of statistics that measure economic inequality.
...
Wow! What a beautiful piece of right-wing garbage! Glad to know the mid-range worker is doing so well.
Back when minimum wage was $1.25 an hour I bought a house. Shortly after that, I bought a 6 month old European sports car. What is the position of a minimum wage earner now? What is the position of a household earning $30,000 a year now? Can they run out and buy a house in Denver, a sports car and a house full of furniture? Doubt it. A minimum wage earner did better in the 60's than a $30,000 a year earner does today.
An hours minimum wage bought 25 cups of coffee in a restaaurant. What will an hours work at minimum wage buy today? How many cups does 4 times today's minimum wage buy?
At one time, the productive capacity of the nation was distributed in a manner that benefited all levels of society to an amazing degree. That ceased with the Vietnam war and the conservative polices that followed it.
30 years of conservative rule have changed that sort of thing. You can't convince me with all the statistics, all the bull, that the average American is better off now than then...because he isn't.
A person could live better on minimum wage in the 60's than the $30,000 mid-range worker of 2007. He could easily afford any common appliance of the time. That is a fact. He couldn't buy a cell phone because they weren't invented yet. If they had been, he could have bought one. Ditto everything else.
Thank you Ronald Reagan for setting the stage for the destruction of the middle class and eliminating the possibility of the working poor to join it.
Corporations are entrenched in government because a conservative court decreed they were people and could buy their way into the political process with "campaign contributions". Thank you conservatives for corruption in government.
Retired Monk "Ideology is a disease"
Posts: 3412 | Location: denver co | Registered: 17 April 2007
you keep chanting about how life was grand in yesteryear earning minimum wage. Why is minimum wage the goal?
I'd surely hope that people set their sights a wee bit higher than entry level if they want to buy houses and sports cars. If they don't, they get entry level pay and the purchasing power that goes along with it.
^^^^^^^^^^^^^^^^^^^ "A vote is like a rifle: its usefulness depends upon the character of the user."
Theodore Roosevelt, 1913
Posts: 2404 | Location: Redmond WA | Registered: 04 September 2006
I wanted to keep this thread as an area to explore some economic issues and thus a post from JohnnyX has caught my attention...
quote:
Originally posted by JohnnyX:
quote:
Put it all in one pocket, not too much will be bought, will it?
First of all, it doesn't matter how much money is taken out of circulation, whatever remains will increase in value, that is, increase in purchasing power, accordingly. More to the point, however, what you describe is not reality on Earth. Assuming the rich aren't stuffing their mattresses with cash, their money is either spent on goods, invested, or loaned out to others. Or some combination of the three. It doesn't disappear down some magical pocket and vanish from the economy.
I think you have a good grasp of it, but let me note a couple of things. Yes money is suppose to increase in value to make up for the perceived shortages. But as before when prices or wages are sticky then the mechanism for that adjustment may take longer than people are willing to wait.
Yes, that world is a make believe world. But if the cost of holding money becomes too high then there is an incentive to create more of a barter system. During the 70s (high inflation with equally high taxes) then there was increased interest in exchange of services (barter system).
Lastly if people actually shoved the money into mattresses the Fed could always increase the money supply and thus "Tax" all those that thought of hoarding such silly little things.
Posts: 7939 | Location: Santa Barbara | Registered: 19 July 2005
you keep chanting about how life was grand in yesteryear earning minimum wage. Why is minimum wage the goal?
I'd surely hope that people set their sights a wee bit higher than entry level if they want to buy houses and sports cars. If they don't, they get entry level pay and the purchasing power that goes along with it.
Difference being, the middle class is shrinking, the majority of minimum wage earners will never rise to middle class. Property was the main way to do this. It enabled people to build wealth. It's gone.
When earning 4 or 5 times minimum wage is rquired to have the same living standard capabilities as 25 years ago on minimum wage, . that is good? It shows progress? 4-5 times the minimum wage in the 1960-'s would mean you were pretty well off.
The productive capacity of the nation reached all levels to an amazing degree. Purchasing power across all levels kept productive capacity operating at economy of scale levels. Business thrived. People thrived. The nation thrived. We built an inter-state highway system unparalled anywhere in the world. We put a man on the moon! What national and affordable endeavor on such scales and in such a short period of time has been accomplished since?
Even the educational system actually functioned. It was financed. It even provided text books, paper, paint, clay, wood, band instruements, good P.E. classes and science labs. A well-rounded eduction that was interesting enough, that children actually enjoyed learning...so they did. (Not so in much of Colorado today). Rather than blame the teachers, we provided the necessary funding and most of them rose to the task. Usually, prospering people pay taxes without screaming about it. They supported the schools.
Conservative policies have impoverished people, taken away the hope for rising out of poverty, destroyed the value of the american dollar internationally, gutted the productive capabilities of the nation, contributed to the rise in crime and on, and on, and on.
Some time ago, there was a drug called Quads. Like meth, it could be easily made.The FDA prohibited the distribution of its' main chemical ingredient from being readily avilable. It gained the cooperation of every nation with a chemical plant world-wide from stopping its distribution. The Quad problem disappeared. Drug dealers couldn't make it any more.
Today we have meth. The required ingredient is in Sudafed, etc. The FDA tried to regulate it...and couldn't. The Drug companies intervened. Welcome to corporate interests over the interests of the nation. It would have been the end of meth.
Is it peoples responsibility for becoming drug addicts? Yep. And who pays for the foster kids from it, the thefts and burglaries from it, the hospital emergency rooms visits from it, the prisons from it? Who pays for addiction recovery programs?. Who loses the tax revenue that would be generated by people who worked instead of stealing to do drugs? The Drug companies? Nope. WE pay. We lose.
Conservative policies and their staunch support of corporate interests has been and is, destroying the nation in nearly every area it contaminates.
It's called economics 101, 102, and 103.
Rutherford Quote: "I think you have a good grasp of it, but let me note a couple of things. Yes money is suppose to increase in value to make up for the perceived shortages. But as before when prices or wages are sticky then the mechanism for that adjustment may take longer than people are willing to wait." ---------------------- People tend to not like waiting through Depressions or long inflationery periods that could be avoided in the first place. -------------------------- Rhterford Quote: Yes, that world is a make believe world. But if the cost of holding money becomes too high then there is an incentive to create more of a barter system. During the 70s (high inflation with equally high taxes) then there was increased interest in exchange of services (barter system). ---------------------
I thought money was supposed to take the place of barter. My health care provider won't accept a dozen eggs in place of of a co-payment for a Dr.'s visit. Money works better than barter. That's why we created it.
---------------- Rutherford Quote: "Lastly if people actually shoved the money into mattresses the Fed could always increase the money supply and thus "Tax" all those that thought of hoarding such silly little things."
----------------------
The Fed does increase the money supply. Either through the Fed or deficit spending or both. And, it has gone too far on the deficit end. The tax is being paid by the declining value of your money.
I told my relatives several years ago we were heading into inflation and rapid devaluation of the dollar. I advised some to buy gold (Euros would have been better) as a hedge, and I told my sister to transfer U.S. dollars to her English Bank in London.
Both pieces of advice have seen a near doubling of money within several years. It's called capitalism with a "brain", not ideology
Any DODO knowing the slightest thing about economics would have said and done the same thing. It really can pay off when you throw ideology down the toilet and face facts.
Retired Monk "Ideology is a disease"
Posts: 3412 | Location: denver co | Registered: 17 April 2007
Difference being, the middle class is shrinking, the majority of minimum wage earners will never rise to middle class.
Prove it.
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.
Posts: 8264 | Location: Fl | Registered: 05 July 2001
Price squeeze and inequities. The U.S. at least is ahead of Russia in more equitable wealth distribution. It's the exception among greater disparities of wealth in all industrialized nations. Whoopie, we are slightly better than Russia!: http://www.justpeace.org/structures/squeeze.htm
If you think a minimum wage earner has an opportunity to increase educational opportunites or wealth-building through home ownership or continuing education, think again.
In Calif., it used to take less than two weeks minimum wage earnings to pay for a semester of education at the State Universities. The first two years of college were free.
A rise from minimum wage to middle class was a given, not a dream.
Retired Monk "Ideology is a disease"
Posts: 3412 | Location: denver co | Registered: 17 April 2007
The following brings up some interesting economic thoughts.
quote:
Originally posted by JohnnyX:
quote:
He studied philosophy and religion. Perhaps he should have studied the history of laissez- faire capitalism as well.
Perhaps you should take your own advice. The great bulk of regulations all throughout history were not enacted to protect consumers. That's another myth. They were enacted at the behest of business and other special interests.
The case of Standard Oil is instructive and by no means the exception.
In the twenty years from 1865 to 1885, Standard Oil captured 90 percent of the oil refining market and in the process pushed down the cost of oil from 58 cents a gallon to 8 cents a gallon. Rockefeller gained his advantage over other early oil producers by reducing waste and putting chemists to work who would find over 300 new and valuable uses for by-products of kerosene production.
Being the largest oil refiner and shipper, delivering 60 carloads of oil daily, Standard Oil received the largest rebates from railroads, which made smaller oil producers scream rate discrimination. Vanderbilt promised others the same rates if they could match Standard's volume of business. None could. Those rebates ultimately meant lower prices for consumers - and they eventually prompted the government to fine Standard Oil $29 million for accepting them.
Many less efficient oil companies could not compete and went under. Several failed oil producers and their sympathizers attacked Rockefeller. Many smaller producers who were competent were bought out by Rockefeller, who offered them cash and stock. He felt that a few large vertically integrated oil companies could survive and prosper, but dozens of smaller ones could not. The Russian-American Oil War proved him right. Because of the scale of his operation and his efficiency, he was able to push the price down to a nickel a gallon and beat the Russians with their natural resource advantage to capture the world market. Consumers around the world, not to mention Standard Oil's employees, benefitted immeasurably from Standard Oil's practices.
But those who could not compete successfully and politicians in need of a political football finally got their way. Rockefeller had set up a trust system in order to allow his many oil businesses in different states to be headed by the same board of directors. In 1911 the courts struck down this arrangement and ordered the company broken up into many separate smaller companies, even though the trust posed no restraint to trade (over a hundred oil companies were competing against Standard by this time). The trust had simply allowed Rockefeller's company to operate with maximum efficiency, providing consumers with oil at the lowest prices possible.
Oil wasn't the only commodity whose prices fell dramatically, increasing consumers' purchasing power, even while politicians and much of the public - whipped into a frenzy by propaganda - were busy decrying the reign of the so-called "Robber Barons":
quote:
The average price of steel rails, for example, fell by 53 percent from $68 per ton in 1880 to $32 per ton in 1890. The price of refined sugar fell from 9 cents per pound in 1880, to 7 cents in 1890, to 4.5 cents in 1900. The price of lead dropped 12 percent, from $5.04 per pound in 1880 to $4.41 in 1890. The price of zinc declined by 20 percent, from $5.51 to $4.40 per pound from 1880 to 1890.
The sugar and petroleum trusts were among the most widely attacked, but there is evidence that these trusts actually reduced prices from what they otherwise would have been. Congress clearly recognized this. During the House debates over the Sherman Act, Congressman William Mason stated, "Trusts have made products cheaper, have reduced prices; but if the price of oil, for instance, were reduced to one cent a barrel, it would not right the wrong done to the people of this country by the 'trusts' which have destroyed legitimate competition and driven honest men from legitimate business enterprises." [Congressional Record, 51st Congress, House, 1st Session (June 20, 1890), p. 4100.] Sen. Edwards, who played a key role in the debate, added, "Although for the time being the sugar trust has perhaps reduced the price of sugar, and the oil trust certainly has reduced the price of oil immensely, that does not alter the wrong of the principle of any trust." [Ibid., p. 2558.] Perhaps it would be more accurate to describe the Sherman Act as an anti-price-cutting law.Link
Economists have a couple of aspects that they do not like about a Monopoly:
quote:
If a monopoly can set only one price, it will set it where marginal cost (MC) equals marginal revenue (MR), as seen on the diagram at right. This is at the junction of marginal quantity (Qm) and marginal price (Pm). It is above the competitive price (Pc) and below the competitive quantity (Qc). This is the optimal price as determined by supply and demand. (Note that this diagram looks only at the case where there is no fixed cost. If there were a fixed cost, the average cost curve should be used instead.)
As long as the price elasticity of demand (in absolute value) for most customers is less than one, it is advantageous for a firm to increase its prices: it then receives more money for fewer goods. With a price increase, price elasticity tends to rise, and in the optimum mentioned above it will be greater than one for most customers. The following formula gives the relation among price, marginal cost of production and demand elasticity that maximizes a monopoly profit: P(1+\frac1e) = MC where (e) is the negative elastic of demand. A monopoly's power is given by the vertical distance between the point at which the marginal cost curve (MC) intersects with the marginal revenue curve (MR) and the demand curve. The longer the vertical distance, (i.e., the more inelastic the demand curve) the greater the monopoly's power, and thus, the larger its profits.
The economy as a whole suffers when monopoly power is used in this way because the extra profit earned by the monopoly will be smaller than the loss in consumer surplus. This difference is known as a deadweight loss.
And from our textbook in the opening post of this thread you can see the same diagram as above as well as "a non-standard approach" on page 227.
quote:
A firm has a monopoly when it is the only seller in a market. As noted previously, the high prices that make normal people dislike monopolies do not make economists dislike monopolies. The reason is simple: high prices—even exorbitant prices—are not evidence of Pareto inefficiency. It is not clear that it is possible to make consumers better off without making someone else (namely, the monopolist) worse off. (Page 83)
And a brief explanation of Pareto:
quote:
Pareto efficiency There is no other division of the cake that would make at least one child better off and not make any child worse off.
But let us go back to Wiki:
quote:
The Natural Monopoly Problem
Natural monopoly is defined as a situation in which production is characterized by falling long-run marginal cost throughout the relevant output range. In such situations, a policy of laissez-faire must result in a single seller. The conventional Paretian solution to market failure of this kind is public regulation (in USA) or public enterprise (in United Kingdom). Liberals reject both alternatives as being incompatible with important freedoms.[5].
But just because there is a long-run marginal cost is falling for a firm over long ranges of quantities produced it does not mean that it would become a monopoly; it could still become a duopoly or an oligopoly.
So whether Standard Oil was destined to become a monopoly was still up for debate, but it obviously was along the portion of the Long-run Marginal cost schedule that was decreasing. Is the dead-weight loss or the loss of the pareto optimum solution worth screwing the customer and another business over? And none of the Economists I have read said anything about the increased efficiency that benefits the customers and how much that benefit is worth.
Thanks JohnnyX for your above post.
Posts: 7939 | Location: Santa Barbara | Registered: 19 July 2005
While yes most things in business changes quite slowly and thus is not drastic.
But we can see the run on banks at the start of the Great Depression seems to contradict this. Johnny also notes that the money supply was shrunk by the Fed but all indications I see, it was the fed that tried to maintain the Money Supply (M1) but it still shrunk by at least 25%.
And lastly, the east Asian crisis was brought about by a rapid inflow of short term capital and then even a faster outflow of that same flow caused major havoc to many of the economies. Of course by pegging the currencies to the dollar, the Central Banks were encouraging moral hazards of the banks and borrowers.
Posts: 7939 | Location: Santa Barbara | Registered: 19 July 2005
Johnny again brought up an interesting thought in my head. He was showing the Administrative costs between Insurance Companies and Medicare on Posted 14 July 2007 12:35. And this was from one of the articles linked to:
quote:
Economies of scale: There are large economies of scale in the insurance business; however, large insurance companies can certainly replicate the majority of the scale economies Medicare enjoys.
So expecting a market of completely perfect competition is not realistic. And as we learned from looking at monopolies that this lends itself to either a monopoly or an oligopoly.
So we naturally have our anti-monopolists that abhor all monopolies except when it is Government. But being more agnostic then I can see that if Medicare is the biggest and thus has the greatest economies of scale then this should naturally rise a natural monopoly out of the market.
I know free-marketers would not like this suggestion but I think that if this is the case we should allow Medicare to brand and market an insurance policy to any group or individual. Of course insurance companies may argue at the unfair competition but I really care less what they think.
Of course they will still have markets as Poly demonstrated in the other thread. They will have to find markets to service if they could not compete with Medicare.
The article goes on to say:
quote:
Finally, we need to realize that administrative costs are like people: some are good, and some are bad. What if a private insurance company raised its administrative costs by 1% , but was able to reduce fraudulent claims by 10% and reduce the premium charged to customers by 8%. This is an example of how an increase in the administrative cost ratio can add value. It is likely that private companies try to avoid paying for unnecessary medical treatment and are more vigilant to detect fraudulent claims then Medicare.
This is a "what if" but is based on some reality that private enterprises are more efficient in these cost recoveries. So again going back to the market nothing says that Medicare can not outsource these administrative costs. A lot of it would be data mining for showing the irregularities.
Any case food for thought...
Posts: 7939 | Location: Santa Barbara | Registered: 19 July 2005
I don't however, agree with your opinion on your home-page that Key's theory is never utilized to contract a money supply. It was the Key's theory, not the monaterist one, that shrunk the money supply too quickly by disolving government programs under FDR that re-triggered recession just as recovery from the Great Depression was pretty well getting under way.
Retired Monk "Ideology is a disease"
Posts: 3412 | Location: denver co | Registered: 17 April 2007
I know that names and words can be confusing but can't you at least get right one of the leaders of Economic thought in the 20th century??? John Maynard Keynes That is: Keynes Keynes Keynes Keynes Keynes Keynes Keynes Keynes
No not Keys. That is in your xxxxxxxx pocket.
Posts: 7939 | Location: Santa Barbara | Registered: 19 July 2005
Originally posted by Ronald Rutherford: I know that names and words can be confusing but can't you at least get right one of the leaders of Economic thought in the 20th century??? John Maynard Keynes That is: Keynes Keynes Keynes Keynes Keynes Keynes Keynes Keynes
No not Keys. That is in your xxxxxxxx pocket.
You did, of course, know who I meant. I usually refer to it as Keynesian economics in my posts. Notice the "nes". I prefers a shortened Keys. It has a double meaning for me....i.e . Keys to economic understanding. A concept I try to get across to economic nitwits. I suppose I could just as readily use the word "Keen".
I keep forgetting that you don't understand allegories or metaphors.
And contrary to the post on your web site, his theories were utilized to diminish the money supply and triggered the recession of 1937...probably in response to conservatives yelling about government spending.
Retired Monk "Ideology is a disease"
This message has been edited. Last edited by: polycarp,
Posts: 3412 | Location: denver co | Registered: 17 April 2007
Ronald, if monopoly theory interests you, try Antitrust and Monopoly by Dominick Armentano. It's an updated version of his earlier book The Myths of Antitrust, published in 1972. It's a classic that I think you'll enjoy.
Oil at $40 a barrel One Dollar = 1 Euro converted to dollars Cost of a barrell, U.S. $40. - Euro price $40.EU
Bush tax structure and resulting inflation: 60 cents = 1 Euro.
Cost of a barrel U.S. $75 - Euro price $45.EU
Increase U.S. nearly 90% - Euro price increase 13%
Keep your tax structure going, you can double the price.. The price of oil hasn't had that big of an increase.. It's the declining dollar raising U.S. prices.
Get the dollar down to 30 cents, you'll double the price again, but we may be able to compete with China... if we don't collapse our economy with energy costs.
The dollar continues to decline.
Retired Monk "Ideology is a disease"
Posts: 3412 | Location: denver co | Registered: 17 April 2007
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