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Vast topic. Markets definitely have their issues. Here are a few: * The most obvious one is the fact it's an overhead, it doesn't produce goods or services b

by kakwa_ 3y ago

Vast topic. Markets definitely have their issues. Here are a few: * The most obvious one is the fact it's an overhead, it doesn't produce goods or services by itself. That's not a major issue, but for example in the US ~5% (~7M of ~150M) of the workforce is dedicated to this overhead. * It's prone to internal instabilities. Too often, the markets disconnect from the underlying economic reality, sometimes with only mild effects (for example, that time petroleum prices went negative), sometimes with more serious ones (2008). * It can lead to overly quantitative views, ignoring the qualitative. It's the "metrics becoming the objective and thus compromising the value of the metric" (example: tech stock prices). * It over-emphasizes individual interests over the collective one (think for example: environmental issues & global warming). Markets definitely have their issues. But so far, the other systems we experimented with (planned economy) were even less able to cope with the incredibly difficult task of balancing an economy. Lastly, it is to be noted that we are not operating in a pure market economy. We are in an hybrid system where States (hopefully representing their people) definitely have a lot of say in economic matters and that's probably for the better.

mschuster91 3y ago
> Markets definitely have their issues. But so far, the other systems we experimented with (planned economy) were even less able to cope with the incredibly difficult task of balancing an economy. The worst issue that the Soviets and other attempts at central planning failed to account for was flexibility and buffer. Say a natural disaster hits and you need an extra amount of concrete for reconstruction, but all the concrete production was already allocated for something else and the plan is considered sacrosanct. Or some innovation (e.g. refrigerators, cars, washing machines) proves to be way more popular than expected, but there is no way to adapt the plan, and so you had to wait years for a Trabant car. Ironically, Western-style "free markets" eventually converged towards the same issue with the unholy invention of "just in time" manufacturing. Both capitalism and communism sought to eradicate "inefficiencies" and destabilized their entire foundation doing so.
- kakwa_ 3y ago
  To extend, interesting read on the subject of the soviet economy: https://chris-said.io/2016/05/11/optimizing-things-in-the-ussr/ https://chris-said.io/2016/05/11/optimizing-things-in-the-us... HN discussions: https://news.ycombinator.com/item?id=14515225 https://news.ycombinator.com/item?id=14515225 https://news.ycombinator.com/item?id=25084479 https://news.ycombinator.com/item?id=25084479
kevinmchugh 3y ago
> Too often, the markets disconnect from the underlying economic reality, sometimes with only mild effects (for example, that time petroleum prices went negative) I may have misunderstood the situation at the time or am now misremembering it but I thought: Some crude futures were about to become deliverable, meaning people who had been speculating on the price and have no fundamental use for unrefined petroleum were going to receive it. Normally they sell the soon-delivering futures for some later-delivering futures and lose or make relatively small amounts of money in the difference. But there was no one to sell to, because COVID had reduced processing capacity and demand for gasoline. So all these traders who had no use for crude were about to be stuck with it. It's a noxious, volatile, dangerous chemical that requires special handling. As the date approached it became important to find somewhere to _put _ the stuff, so much so that traders were paying people to take it off their hands. Which seems like a very elegant mechanism? Like, I don't want crude oil at my house. I'm not gonna worry much about the price to get it taken away, probably. And at that moment the market was paying for someone to take the crude, meaning anyone who could bring additional storage or processing capacity online very quickly was delivering something valuable.
- kakwa_ 3y ago
  Yes, that's what's happened. I was using this example to illustrate the disconnect between the market (which was trading oil like some immaterial stuff) and reality (oil is definitely a product you need to store properly, plus oil storage is not infinite). In fairness, because it occurred during COVID, i.e. a really abnormal situation, this is a bit of a weak example.

by kakwa_ 3y ago

mschuster91 3y ago

> Markets definitely have their issues. But so far, the other systems we experimented with (planned economy) were even less able to cope with the incredibly difficult task of balancing an economy. The worst issue that the Soviets and other attempts at central planning failed to account for was flexibility and buffer. Say a natural disaster hits and you need an extra amount of concrete for reconstruction, but all the concrete production was already allocated for something else and the plan is considered sacrosanct. Or some innovation (e.g. refrigerators, cars, washing machines) proves to be way more popular than expected, but there is no way to adapt the plan, and so you had to wait years for a Trabant car. Ironically, Western-style "free markets" eventually converged towards the same issue with the unholy invention of "just in time" manufacturing. Both capitalism and communism sought to eradicate "inefficiencies" and destabilized their entire foundation doing so.

kakwa_ 3y ago
To extend, interesting read on the subject of the soviet economy: https://chris-said.io/2016/05/11/optimizing-things-in-the-ussr/ https://chris-said.io/2016/05/11/optimizing-things-in-the-us... HN discussions: https://news.ycombinator.com/item?id=14515225 https://news.ycombinator.com/item?id=14515225 https://news.ycombinator.com/item?id=25084479 https://news.ycombinator.com/item?id=25084479

kevinmchugh 3y ago

> Too often, the markets disconnect from the underlying economic reality, sometimes with only mild effects (for example, that time petroleum prices went negative) I may have misunderstood the situation at the time or am now misremembering it but I thought: Some crude futures were about to become deliverable, meaning people who had been speculating on the price and have no fundamental use for unrefined petroleum were going to receive it. Normally they sell the soon-delivering futures for some later-delivering futures and lose or make relatively small amounts of money in the difference. But there was no one to sell to, because COVID had reduced processing capacity and demand for gasoline. So all these traders who had no use for crude were about to be stuck with it. It's a noxious, volatile, dangerous chemical that requires special handling. As the date approached it became important to find somewhere to _put _ the stuff, so much so that traders were paying people to take it off their hands. Which seems like a very elegant mechanism? Like, I don't want crude oil at my house. I'm not gonna worry much about the price to get it taken away, probably. And at that moment the market was paying for someone to take the crude, meaning anyone who could bring additional storage or processing capacity online very quickly was delivering something valuable.

kakwa_ 3y ago
Yes, that's what's happened. I was using this example to illustrate the disconnect between the market (which was trading oil like some immaterial stuff) and reality (oil is definitely a product you need to store properly, plus oil storage is not infinite). In fairness, because it occurred during COVID, i.e. a really abnormal situation, this is a bit of a weak example.