A Survey on the Importance of Prices

[The Whit]

Money would lose value because there wouldn't be price tags on bread?  Money doesn't have value because there are price tags on bread...it has value because you had to sacrifice your life to earn it.  

And why would you do that if you didn't need money to buy the things you need to survive or do the things you want to do?  If I could just not pay, why wouldn't I?  Money has value because it represents other resources.  If I have $10 I can buy some gas, or a six-pack, or cigarettes, or a gatorade, or a couple of the burritos that have been sitting under the heat lamp for the last 6 hours.  If there is no price, then money does not represent resources because you don't need it to get those resources.  

This is why theft is illegal.  If you get a resource and don't pay for it, you're circumventing the system and harming the economy.  There seems to be not difference between your non-profit society and one that legalized theft.  Neither will go very far.

Why are you trying to explain the importance and function of money when I never said anything about getting rid of money?

BECAUSE THE FUNCTION IS WHAT MAKES IT IMPORTANT!  If you take away the function it's no longer valuable to society, just like a car without an engine.

Am I getting through yet?

If you can get enough bread without ever having to donate any money to your local bakery then what's the problem?

The problem is you won't be able to do that for very long!

If you can't get enough bread to match your demand...then is this problem bigger than your other problems?  How many other problems do you have?  If a shortage of bread is your only problem then clearly the system I described is superior to the current one.

HA!  Your system would have a shortage of everything in less than 6 months.  The economy you're describing couldn't support anything more than an Amish lifestyle.  

If a shortage of bread is your biggest problem then you'd give your money to the bakery.

Think: does the baker have to pay for the flour or is that a donation system, too?

Explain how morals are even relevant to free market capitalism?

Because economics is just the study of what society does with it's money.  Are you arguing that we could have a society without morals?

The people of my grandparents generation could buy a loaf of bread for $0.10, and I pay $2.00, but I'm still a lot richer than they are.

That's called inflation.

Part of the reason you could once flip burgers and pay for college is also that minimum wages, relatively speaking, used to be higher. Also, you can still make it through college flipping burgers, it's just a really shitty life while you're doing it.
(Also I have no idea what the quality comparison is between education then and now. Especially on the level of sciences and computers we have come a long way in the last 30 years.)

This relative change in value being that the price of minimum wage has steadily increased while the purchasing power of that wage has actually decreased is an example of the unsupportable liberal policies eating each other.  Large amounts of government spending drives up the prices of certain goods because it is by default increasing demand.  Prices then RISE to attract more resources to meet that demand.  When those prices rise, the government's response is to throw more money at it?  This will only increase prices further, and it only gets worse.  When the government starts printing money to pay for all of this shit suddenly you're making the situation worse in TWO ways.  You're artificially driving up costs because of artificial increase in demand, and you're decreasing the value of the currency which further inflates prices.  This snow-ball effect only gets faster and more pronounced until it finally rams into the ski lodge and takes everyone with it.

[Plu]

Seems like a reasonable story. And you claim this would not happen in a free market? How does that work? Does it mean we lose all the services the government uses the goods it buys for? Because that would be a really bad outcome. Likewise if poor people lose access to those government services because they now become paid services; that would also be bad.

I'm also not sure how the government created "artificial demand" if they're buying resources they actually use to do useful things with.

The point about inflation makes sense, but that mostly seems coupled to the fact that money is a really weird measure of resources because it doesn't actually mean anything.

[The Whit]

Most of what Cheney did however is standard practise in the private sector.

Example?

The big difference is that we expect better behaviour of our governments than we do of the private sector.

You're wrong, there.  If people expected better from their government officials then how did Cheney get away with this?  He was re-elected with Bush, ya know.

Okay... let me rephrase:
Really? You actually check all the companies your brand of whiskey does business with before buying a bottle?

No, and why would I?

You appear to be butthurt about the fact that some government officials are making more money than you think they should.

The money that they're "making" is being stolen from the private sector.  That's what I have a problem with.

So I was assuming you would apply the same standards to the private sector.

I don't even understand what you're talking about.

Ah. Like they are competing for the governments money right now. Got it.

They weren't competing for government funds.  They were getting exclusive access to high dollar contracts.

Sick people who have no money get their patented medicine for free nowadays in the US?

It's covered by tax payers through Medicare.

Furthermore you are dodging the point.

There doesn't seem to be one from you...

[Colanth]

You throw around this "optimal funding" like it's a real thing.  Optimal to whom?

It's the amount of funding that provides the maximum value to society.  The optimal funding for garlic farmers will allow them to produce just enough garlic to meet the demand for garlic.  Obviously everybody does not demand the same exact amounts of garlic...which is why the only way we can determine "optimal funding" is by allowing consumers to shop for themselves.

Are you familiar with Douglas' theory of social credit?  You should be, if you think that your statement is worthy of consideration.  (It's not.)

[Xerographica]

You throw around this "optimal funding" like it's a real thing.  Optimal to whom?

It's the amount of funding that provides the maximum value to society.  The optimal funding for garlic farmers will allow them to produce just enough garlic to meet the demand for garlic.  Obviously everybody does not demand the same exact amounts of garlic...which is why the only way we can determine "optimal funding" is by allowing consumers to shop for themselves.

Are you familiar with Douglas' theory of social credit?  You should be, if you think that your statement is worthy of consideration.  (It's not.)

Pareto-efficiency versus Douglas' theory of social credit?  Are you kidding me?  You've just revealed that you know less than shit about the field of economics.  That being said, you're smarter than Plu in the sense that you actually managed to throw some name out there.  Keep throwing names/concepts out there.  I'll let you know if any of them are relevant to the concept of Pareto-efficiency.

[Xerographica]

BECAUSE THE FUNCTION IS WHAT MAKES IT IMPORTANT!  If you take away the function it's no longer valuable to society, just like a car without an engine.

HA!  Your system would have a shortage of everything in less than 6 months.  The economy you're describing couldn't support anything more than an Amish lifestyle.

The function of money is to allow you to communicate what your true priorities are.  As long as people have the freedom to communicate what their priorities are...then it's logically impossible for there to be shortages of things that are truly important to society.

Unless you want to argue that everybody would just save their money.  But it's absurd to argue that more people would derive greater utility from saving their money than from using it to communicate their priorities.  If nobody felt any need to spend their money then clearly there weren't any shortages of things that people truly valued.

[Colanth]

Pareto-efficiency versus Douglas' theory of social credit?  Are you kidding me?  You've just revealed that you know less than shit about the field of economics.  That being said, you're smarter than Plu in the sense that you actually managed to throw some name out there.  Keep throwing names/concepts out there.  I'll let you know if any of them are relevant to the concept of Pareto-efficiency.

How about instead of that, you explain why social credit won't work?  Feel free to make fun of Heinlein's analysis of Douglas, too.  (Hey, that's TWO names.)

I believe they call that check and mate.  (I doubt that you'll understand the reference, even if I wait another 73 years.)

[Colanth]

The function of money is to allow you to communicate what your true priorities are.  As long as people have the freedom to communicate what their priorities are...then it's logically impossible for there to be shortages of things that are truly important to society.

Unless you want to argue that everybody would just save their money.  But it's absurd to argue that more people would derive greater utility from saving their money than from using it to communicate their priorities.  If nobody felt any need to spend their money then clearly there weren't any shortages of things that people truly valued.

We know you don't know the first thing about applied economics - you don't have to keep proving it like this.  (Applied economics is about as like theoretical economics as tomatoes are like hedgehogs.)

[The Whit]

The function of money is to allow you to communicate what your true priorities are.  Through prices.  What you're talking about is the price system.  

Unless you want to argue that everybody would just save their money.  Collectors would, but it would have no practical use.  But it's absurd to argue that more people would derive greater utility from saving their money than from using it to communicate their priorities.  Unless those priorities are saving for a rainy day.  However, in your system people wouldn't even use money.  If nobody felt any need to spend their money then clearly there weren't any shortages of things that people truly valued.  Maybe what the person desires costs more than what he/she has on them, and they need to save to afford something...like a car.

You still have not addressed any of my questions directly.

[The Whit]

Seems like a reasonable story. And you claim this would not happen in a free market? How does that work? Does it mean we lose all the services the government uses the goods it buys for? Because that would be a really bad outcome. Likewise if poor people lose access to those government services because they now become paid services; that would also be bad.

You'd have to be a bit more specific about which services you're talking about.  If you mean roads and military then they certainly would receive funding.  

I'm also not sure how the government created "artificial demand" if they're buying resources they actually use to do useful things with.

I should rephrase that.  It's not "artificial demand" because demand is infinite.  It's an artificial inflation of access to that resource.  By making it cost less, more people can afford it.  This throws supply and demand off equilibrium towards shortage, and prices rise to correct for that.

The point about inflation makes sense, but that mostly seems coupled to the fact that money is a really weird measure of resources because it doesn't actually mean anything.[/quote] Money represents resources, and as all resources are different they will all have different prices.

[Plu]

You'd have to be a bit more specific about which services you're talking about. If you mean roads and military then they certainly would receive funding.

Mostly all of them. Roads, the military, schools and universities, the fireguard, police, hospitals, research, the court system. There's a lot of things the government does that either is not profitable but important, or would be disastrous to most of the populaton if it were for-profit.

Surely some people would fund some of them, but not enough. (Because everyone will think "oh I need my money, I guess I'll let other people fund the roads/police/schools instead")

I should rephrase that. It's not "artificial demand" because demand is infinite. It's an artificial inflation of access to that resource. By making it cost less, more people can afford it. This throws supply and demand off equilibrium towards shortage, and prices rise to correct for that.

I still don't see how it's artificial. There's an actual increase in access to the resource, because the government is playing the role of the supplier of the resource. If the government were a regular company, things would work exactly the same. The only problem is that you still have a company that has a goal other than making as much money as possible, but you'll need to have those in order to keep society running. If an economic model can't handle those, it's simply not feasible to use for a large society.

Money represents resources, and as all resources are different they will all have different prices.

That's what everyone says, but money really just seems to represent money, it seems to have long lost any kind of measuring point in the real world for what it actually is.

[The Whit]

Mostly all of them. Roads, the military, schools and universities, the fireguard, police, hospitals, research, the court system. There's a lot of things the government does that either is not profitable but important, or would be disastrous to most of the populaton if it were for-profit.

Surely some people would fund some of them, but not enough. (Because everyone will think "oh I need my money, I guess I'll let other people fund the roads/police/schools instead")

If it effects them people will fund it, which is why most of the tax money needs to stay inside the citizen's state and even more preferably inside their county.  If the roads start going to crap people will shift their tax money to road maintenance.  If there aren't enough fire fighters, or police, or judges, people will shift their money to those services.  In order for this to work the tax payers need to feel the effects of their funding choices and the only way to do that it to keep most of their money in their area.  The federal government is the furthest removed for local problems and will be the least effective at solving these problems, and they are the furthest removed from the populace making it harder to hold them accountable.

The Gravina Island Bridge is a perfect example of what I'm talking about.  Estimated at almost 400 million dollars, the bridge would link to a small airport and about 50 residents.  This comes about because congress can vote money out of the feredal coffers and into their own communities, and what you get is the tragedy of the commons as each legislator tries to pull more money back home, regardless of how that money will be used.  If that money doesn't leave the area in the first place, you don't have this problem.

The only reason why the bridge didn't happen is because the state didn't want to put up it's share of the dough.  If I had it my way the states would be the highest government that had anything to do with infrastructure.

I still don't see how it's artificial. There's an actual increase in access to the resource, because the government is playing the role of the supplier of the resource.

Because the government is not part of the market place.  In the market place, consumer action influences market prices so resources are used to meet demand.  When the government spends money to subsidize tuition they are meddling with the cost of that service and sending skewed signals to the consumers.  These consumers act on these signals, and supply must adjust to meet the adjusted demand.  It does so by increasing prices so it can invest in expansion and lower demand to a level it can meet.  If federal funding for tuition is not increased, the market will find it's new equilibrium.

If the government were a regular company, things would work exactly the same.  The only problem is that you still have a company that has a goal other than making as much money as possible, but you'll need to have those in order to keep society running.  If an economic model can't handle those, it's simply not feasible to use for a large society.

Not quite sure what you're saying here.

That's what everyone says, but money really just seems to represent money, it seems to have long lost any kind of measuring point in the real world for what it actually is.[/quote]
That's because you can't just print any other resource.  Money needs to be limited, too.  If you have an ever increasing money supply, you're debasing your currency.  As the level of devalue or inflation rises towards the interest rate of savings, people stop saving because it is better to just spend their money because their money is just going to devalue in a bank.  If the interest rate on a savings account is 2% but inflation is 3%, then my money is going to devalue by 1%.  I could better use my money by finding something that has at least less than 1% rate of devalue.  The problem with this is that savings is where loan money is supposed to come from.

When when savings are down because of inflation, loans should also drop off because of lack of funds.  The way to fix this problem is to secure the money by roping in inflation.  Instead, the government lends money it doesn't have to banks so they can loan out.  All this does in needlessly increase the deficit and accelerate the inflation problem.  This is why we have a "jobless recovery".  Banks are still making money hand over fist because they're getting interest from loans they shouldn't be making while the lay person gets the shaft.  Our money is constantly devaluing and the market can never stabilize and correct itself.

The single biggest problem with Keynes is his misunderstanding of savings.  Savings is the driving factor behind a good economy, because savings represents surplus that can (and is) used for expansion.  A sound currency is the heart of a good economy.  If the US doesn't get off of it's deficit binge it's going to have a heart-attack.  The biggest problem with this is that the USD is the reserve currency for the world.  If it still is when this heart-attack hits, we're taking the global economy with us.

[surly74]

When when savings are down because of inflation, loans should also drop off because of lack of funds.  The way to fix this problem is to secure the money by roping in inflation.  Instead, the government lends money it doesn't have to banks so they can loan out.  All this does in needlessly increase the deficit and accelerate the inflation problem.  This is why we have a "jobless recovery".  Banks are still making money hand over fist because they're getting interest from loans they shouldn't be making while the lay person gets the shaft.  Our money is constantly devaluing and the market can never stabilize and correct itself.

The single biggest problem with Keynes is his misunderstanding of savings.  Savings is the driving factor behind a good economy, because savings represents surplus that can (and is) used for expansion.  A sound currency is the heart of a good economy.  If the US doesn't get off of it's deficit binge it's going to have a heart-attack.  The biggest problem with this is that the USD is the reserve currency for the world.  If it still is when this heart-attack hits, we're taking the global economy with us.

I've read this a few times to wrap my head around it...

is this your assertion or someone elses? I guess I'm not seeing the connection of savings to inflation. Things might be different in the US but not all economies are tied to savings like you are saying.

In canada banks make large profits by loaning out money for less then they pay to get the money...well those and fees. I also don't see the correlation of savings and a good economy. Economies are built on trade, selling of goods. if people are sitting on their money then no one is buying anything and trade slows down.

I want the US dollar to go up because then it makes the goods i sell to the US much more competitive. To me the sign of a good economy in the US is not saving their money but using it to purchase items.

I also know I'm late to the party here.

[surly74]

Money represents resources, and as all resources are different they will all have different prices.

That's what everyone says, but money really just seems to represent money, it seems to have long lost any kind of measuring point in the real world for what it actually is.

money is just a trade instrument. back before money you would trade your wife for a couple of goats. governments came along an created currency so the guy could still keep his goat.

[The Whit]

I've read this a few times to wrap my head around it...

is this your assertion or someone elses? I guess I'm not seeing the connection of savings to inflation. Things might be different in the US but not all economies are tied to savings like you are saying.  

In canada banks make large profits by loaning out money for more then they pay to get the money...well those and fees.

I also don't see the correlation of savings and a good economy. Economies are built on trade, selling of goods. if people are sitting on their money then no one is buying anything and trade slows down.
[/quote]You're making the same error in analysis that Keynes made.  He sees savings as idle resources, but they're not.  Those savings don't just sit in an account and rot, banks take those savings and loan them out at interest.  As a result, banks give interest to those who have savings accounts (less than the interest they charge for loans) to attract money to loan.  So, savings are NOT idle.  Savings drive consumption.

I want the US dollar to go up because then it makes the goods i sell to the US much more competitive. To me the sign of a good economy in the US is not saving their money but using it to purchase items.

That's only because the prices aren't allowed to fluctuate.  If the dollar strengthened and prices were allowed to fluctuate to accommodate for that, there would be no net difference in trade.

I also know I'm late to the party here.

Welcome to the conversation!