12 ms·

You said: "Everyone agrees that markets produce efficient prices so long as you account for externalities.” You lost me here, and revealed much about your thin

You said: "Everyone agrees that markets produce efficient prices so long as you account for externalities.” You lost me here, and revealed much about your thinking. Please explain how a “market” is anything other than steady state if all externalities are accounted for? Profit, by definition, means getting something for nothing. Without externalities, capitalism doesn’t exist.

perl4ever 7y ago
I don't agree with your definition of profit. Profit, I would say, is really the same thing as interest, i.e. return on capital, just with the connotation of being less predictable. And interest, I would define not as something extra for doing nothing, but as a deferred payment for the labor that created the capital, which serves the important social purpose of rewarding people for deferring the consumption of the fruits of labor. That's why people have not found a way of eliminating it, even though usury has been criticized for thousands of years.
perl4ever 7y ago
Some other points: 1. Externalities can be positive. For example, the government builds roads, and doesn't account for the benefit to private industry on their books. 2. You're in a forum with a lot of software engineers; do you really believe that every new piece of software that brings $X in revenue necessarily costs society $X somehow? What mechanism causes this? Saying everything has externalities is far from saying they are always significant, or if significant, they are equal and opposite to the internalized value.
- TheOtherHobbes 7y ago
  2. is actually a damning criticism of economics. There is nothing in economic theory that makes a calculation of broader costs vs benefits possible. It simply doesn't exist, so it's not considered. So economic theory is blatantly biased towards the accumulation of profit for shareholders, and blatantly biased against a realistic assessment of the social costs of those profits. Simple example: AirBnB. Some people - mostly property owners - make money. Other groups - people who need to rent property at a reasonable price - lose money. You won't find the latter represented on the balance sheet. What looks like a potentially profitable operation actually turns out to have a huge social cost. Effectively it's moving money from a relatively unprivileged group to a relatively privileged group. This is not a hypothetical example - it's a real problem in the area I'm living in, where the supply of long-term rental property has almost disappeared because owners can make more money from short-term tourist rentals. Economics relies exclusively on these kinds of effects. There is no concept of "social profit" which is a guaranteed positive benefit for as many affected parties as possible. And without that, economic theory becomes a vicious feedback loop that prioritises the redistribution of money over genuine value creation.
  - notahacker 7y ago
    > There is nothing in economic theory that makes a calculation of broader costs vs benefits possible. There are vast swathes of economic literature and theory dedicated to the study of external and social costs and how to best estimate and adjust for them. Claiming there is no concept of 'social profit' in economics is akin claiming there is no concept of testing in software development...
    - QuesnayJr 7y ago
      Right? They literally gave the Nobel Prize last year to someone who began the literature on calculating the social cost of carbon (Nordhaus). And that's just the beginning of a voluminous literature on the question.
    - perl4ever 7y ago
      I'm not an economist, but it seems to me that it necessarily contemplates ideas of profit that don't match accountants' - otherwise there would be nothing to it. Also, I've noticed how actual economists speak of "economic profit". Whether you use the word "economic" or "social" or anything else, the modifier implies there is some deeper truth than whatever a given accountant writes down.
  - perl4ever 7y ago
    You can look at essentially everything that is illegal as a limitation on creating negative externalities, so saying that costs and benefits to society are not considered is as ridiculous to me as saying business is not regulated. What people seem to disagree about is whether everything that is not illegal is permitted, or whether businesses should be expected to adhere to implicit codes of ethics and proper behavior without specific regulation. It's not surprising that many people want a strict separation of responsibilities, but obviously governments are having an increasingly hard time keeping up, partly because of technology and partly because of politics. I don't think that a society where people compete with each other and are restrained by laws is fundamentally new; that's been around for thousands of years. It's just that information technology is increasingly enabling the exploitation of discrepancies between actual laws and the common assumptions about what they do.
speedplane 7y ago
> Please explain how a “market” is anything other than steady state if all externalities are accounted for? I took micro-economics in highschool, and when discussing how trade is overall beneficial, they trotted out the old example of two countries, each producing bicycles and bananas. The purpose of the exercise is to show that if each country focuses on one item and specializes on it, everyone benefits. I always found that example to be deeply disturbing. If given a choice, who would actually prefer to live the banana country rather than the bicycle country? Even in highschool this silly example demonstrated the absurdity of classical economics.
- ulucs 7y ago
  These are the times when the required civility of HN comments makes me sad. 1. OK boomer, but I do want to live in my banana country along with millions more. You know that there are countries/states/regions whose main exports are farming, and people who enjoy living there, right? You don't think it's because they don't have a choice, right? I mean I could assume that you think they don't have the brains/skills/etc for whatever industrial job you do given your shallow dismissal of economics as a science with a econ 101 science, but I really, really, really hope you don't. 2. Really, economics is the science of human preferences. The fact that there exist humans who don't act the same way as you do is the whole point. Else there would be nothing left for studying in behaviorial or other types of descriptive economics. The fact that there exists a representative agent in collective situations is just a convenience for calculation. 3. You missed the whole point of the toy exercise, which is comparative advantage. Unless you are completely self sustaining, you are benefitting from comparative advantage by selling your labor and buying others' fruits of labor. Hell, that's the only reason we invent machines to do our bidding.

perl4ever 7y ago

I don't agree with your definition of profit. Profit, I would say, is really the same thing as interest, i.e. return on capital, just with the connotation of being less predictable. And interest, I would define not as something extra for doing nothing, but as a deferred payment for the labor that created the capital, which serves the important social purpose of rewarding people for deferring the consumption of the fruits of labor. That's why people have not found a way of eliminating it, even though usury has been criticized for thousands of years.

perl4ever 7y ago

Some other points: 1. Externalities can be positive. For example, the government builds roads, and doesn't account for the benefit to private industry on their books. 2. You're in a forum with a lot of software engineers; do you really believe that every new piece of software that brings $X in revenue necessarily costs society $X somehow? What mechanism causes this? Saying everything has externalities is far from saying they are always significant, or if significant, they are equal and opposite to the internalized value.

TheOtherHobbes 7y ago
2. is actually a damning criticism of economics. There is nothing in economic theory that makes a calculation of broader costs vs benefits possible. It simply doesn't exist, so it's not considered. So economic theory is blatantly biased towards the accumulation of profit for shareholders, and blatantly biased against a realistic assessment of the social costs of those profits. Simple example: AirBnB. Some people - mostly property owners - make money. Other groups - people who need to rent property at a reasonable price - lose money. You won't find the latter represented on the balance sheet. What looks like a potentially profitable operation actually turns out to have a huge social cost. Effectively it's moving money from a relatively unprivileged group to a relatively privileged group. This is not a hypothetical example - it's a real problem in the area I'm living in, where the supply of long-term rental property has almost disappeared because owners can make more money from short-term tourist rentals. Economics relies exclusively on these kinds of effects. There is no concept of "social profit" which is a guaranteed positive benefit for as many affected parties as possible. And without that, economic theory becomes a vicious feedback loop that prioritises the redistribution of money over genuine value creation.
- notahacker 7y ago
  > There is nothing in economic theory that makes a calculation of broader costs vs benefits possible. There are vast swathes of economic literature and theory dedicated to the study of external and social costs and how to best estimate and adjust for them. Claiming there is no concept of 'social profit' in economics is akin claiming there is no concept of testing in software development...
  - QuesnayJr 7y ago
    Right? They literally gave the Nobel Prize last year to someone who began the literature on calculating the social cost of carbon (Nordhaus). And that's just the beginning of a voluminous literature on the question.
  - perl4ever 7y ago
    I'm not an economist, but it seems to me that it necessarily contemplates ideas of profit that don't match accountants' - otherwise there would be nothing to it. Also, I've noticed how actual economists speak of "economic profit". Whether you use the word "economic" or "social" or anything else, the modifier implies there is some deeper truth than whatever a given accountant writes down.
- perl4ever 7y ago
  You can look at essentially everything that is illegal as a limitation on creating negative externalities, so saying that costs and benefits to society are not considered is as ridiculous to me as saying business is not regulated. What people seem to disagree about is whether everything that is not illegal is permitted, or whether businesses should be expected to adhere to implicit codes of ethics and proper behavior without specific regulation. It's not surprising that many people want a strict separation of responsibilities, but obviously governments are having an increasingly hard time keeping up, partly because of technology and partly because of politics. I don't think that a society where people compete with each other and are restrained by laws is fundamentally new; that's been around for thousands of years. It's just that information technology is increasingly enabling the exploitation of discrepancies between actual laws and the common assumptions about what they do.

speedplane 7y ago

> Please explain how a “market” is anything other than steady state if all externalities are accounted for? I took micro-economics in highschool, and when discussing how trade is overall beneficial, they trotted out the old example of two countries, each producing bicycles and bananas. The purpose of the exercise is to show that if each country focuses on one item and specializes on it, everyone benefits. I always found that example to be deeply disturbing. If given a choice, who would actually prefer to live the banana country rather than the bicycle country? Even in highschool this silly example demonstrated the absurdity of classical economics.

ulucs 7y ago
These are the times when the required civility of HN comments makes me sad. 1. OK boomer, but I do want to live in my banana country along with millions more. You know that there are countries/states/regions whose main exports are farming, and people who enjoy living there, right? You don't think it's because they don't have a choice, right? I mean I could assume that you think they don't have the brains/skills/etc for whatever industrial job you do given your shallow dismissal of economics as a science with a econ 101 science, but I really, really, really hope you don't. 2. Really, economics is the science of human preferences. The fact that there exist humans who don't act the same way as you do is the whole point. Else there would be nothing left for studying in behaviorial or other types of descriptive economics. The fact that there exists a representative agent in collective situations is just a convenience for calculation. 3. You missed the whole point of the toy exercise, which is comparative advantage. Unless you are completely self sustaining, you are benefitting from comparative advantage by selling your labor and buying others' fruits of labor. Hell, that's the only reason we invent machines to do our bidding.