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I don't see how the necessity of demand is the 'elephant in the room' - it seems pretty obvious that you need both supply and demand in order for ongoing commer

by Gormo 14y ago

I don't see how the necessity of demand is the 'elephant in the room' - it seems pretty obvious that you need both supply and demand in order for ongoing commerce to take place. Yes, there has to be a customer; but identifying that customer, discovering his desires, and satisfying them in a way that creates net value for all parties is the role of the entrepreneur. Doing that successfully is not a trivial task, and entails substantial risk. Saying that this isn't a value-added activity is like saying that scientific research doesn't create value because the physical world already is what it is, or that explorers and cartographers are useless because the land that they're mapping already exists. And entrepreneurs and investors do create jobs: if a venture fails because it turns out that the demand wasn't there to begin with, the employees of the venture still get paid - not by the customer, but by the investors, out of the capital that they've risked and lost.

thaumaturgy 14y ago
Gee, I was hoping to just take the time to transcribe the video and add a couple of comments here and there without having to defend its content. The necessity of demand is the 'elephant in the room' because so much of the political argument so far has revolved around increasing benefits for the suppliers, rather than increasing demand. The argument has been, "we're supposed to make the wealthy wealthier, and then -- magically -- they will create more jobs." If the necessity of demand isn't the elephant in the room, then why isn't there broad political support for higher tax rates on the wealthy? Why isn't there broad political support for economic stimulus packages? Why isn't there broad political support for universal health care, a significant expense for poor and middle-class Americans? Why isn't there broad political support for lowering taxes on the poor? Why, instead, do I keep hearing such balderdash as, "The poor pay no taxes at all"? Nobody's saying that business people don't add value to the economy. What people like this guy -- and me -- are saying is that they don't add value all by themselves. And, if that's a point that people can agree on, then the very next question is naturally, "Why do the bulk of our economic strategies focus only on benefiting them then?" If a venture fails due to low demand, yes, some investor and some capitalist assumed risk and have presumably lost something. But, worse still, are all those other people -- those employees -- who didn't have anything to risk in the first place, and are now back to looking for work again. In your scenario, there wasn't any net job creation, there were just some positions temporarily filled. And, anyway, if the business people do the market research they're supposed to do first, and the demand isn't there, they won't bother starting anyway. Let's stop making up fairytale scenarios. Let's start getting specific. Let's look at things like leveling-off or falling consumer demand for gasoline [1], and then let's look at the tax breaks afforded to oil companies [2], and let's ask ourselves: if we're doing everything right, if we're granting these companies record profits [3], then why haven't they lowered gas prices to increase demand like the magic formula says they will? [1]: http://soberlook.com/2012/03/us-consumer-is-saying-no-to-high.html http://soberlook.com/2012/03/us-consumer-is-saying-no-to-hig... [2]: http://www.washingtonpost.com/business/economy/how-much-do-oil-companies-really-pay-in-taxes/2011/05/11/AF7UNutG_story.html http://www.washingtonpost.com/business/economy/how-much-do-o... [3]: http://thinkprogress.org/climate/2012/02/08/421061/big-oil-higher-prices-record-profits-less-oil/ http://thinkprogress.org/climate/2012/02/08/421061/big-oil-h...
- Gormo 14y ago
  'Increasing demand' is itself a supplier-directed activity; it's one of the primary functions of marketing. It seems baffling to consider this from a political/macroeconomic perspective; how would you increase demand but through marketing activity, without your methods becoming coercive or oppressive? > If the necessity of demand isn't the elephant in the room, then why isn't there broad political support for higher tax rates on the wealthy? Because the two concepts have nothing to do with each other, and support for higher taxes on the wealthy - or anyone else - has antecedents in much more basic underlying principles that many do not share, and often strongly oppose in their own right. > Why isn't there broad political support for economic stimulus packages? Why isn't there broad political support for universal health care, a significant expense for poor and middle-class Americans? It's because people oppose these ideas in their own right, and see them as being unjustifiable means even if they could achieve their stated ends. Many people do not want macro-level attempts to manipulate their economic situation at all. Many people do not want to outsource responsibility for their health to external institutions at all. Many people resent that these intimate and personal aspects of their lives are being politicized and turned into public questions in the first place. > Why isn't there broad political support for lowering taxes on the poor? Why, instead, do I keep hearing such balderdash as, "The poor pay no taxes at all"? I'm not sure where you've heard that, but I assume that you and whomever you were discussing the matter with had two very different definitions of the term 'poor'. > What people like this guy -- and me -- are saying is that they don't add value all by themselves. Nothing ever does. The very concept of value implies that there exists at least two distinct entities: the thing being valued and the being doing the valuing. In commerce, there are at least two valuers and two 'valuees' in every transaction. This is basic and obvious, and I don't see how it generates any new or significant perspective on any question. > But, worse still, are all those other people -- those employees -- who didn't have anything to risk in the first place, and are now back to looking for work again. Since you're intent on analyzing everything from a macro-level perspective, consider that if a certain proportion of all startup ventures are doomed to failure from the outset, and that these ventures provide a certain aggregate number of jobs, then those jobs represent an ongoing pool of jobs that is not supported by market demand. In other words, some proportion of total jobs is always being subsidized by capital losses, rather than by aggregate demand. But to your point of this being 'worse', I'd ask "worse than what?" If you choose to support yourself by taking a job working for a third party rather than applying your labor to the direct satisfaction of your needs and desires, then the risk of losing your job is always present, regardless of whether or not the business you work for is sustainable in its own right by market demand. The only way to eliminate this risk is to avoid being dependent on a single external source of income in the first place (which, in my opinion, everyone ought to do to whatever extent they can). > And, anyway, if the business people do the market research they're supposed to do first, and the demand isn't there, they won't bother starting anyway. Market research is hardly an exact science. Accurately gauging market demand is extremely difficult, and ventures fail all the time. The core problem of economics is one of epistemology. > then why haven't they lowered gas prices to increase demand like the magic formula says they will? What magic formula are you talking about? What problem, exactly, is the profitability of oil companies an indicator of in the first place?
roguecoder 14y ago
You are missing the piece that all conservative economists miss: access to the medium of exchange. It doesn't matter how well you identify the customer, satisfy their desires and add net value for all parties involved: if that customer doesn't have a job that gives them cash to buy your product the economy grinds to a halt. It can be summed up by the famous if possibly apocryphal line by Ford: "I pay my employees enough to afford to buy my cars."
- kevinskii 14y ago
  You are missing the piece that most amateur liberal economists miss: money is only a valid medium of exchange as long as it represents real value. When you forcibly redistribute too much of it, you aren't helping people buy things and "stimulate the economy" except maybe over the very short term. You're just destroying that value that it would otherwise represent.
  - Peaker 14y ago
    While that is true, you would have to forcibly redistribute quite a lot of money to destroy more value than you help create. When the masses have no currency, in effect, that's signaling to the economy that their needs are of no value. Therefore, businesses that solve the masses' problems gain no economic value from it, and will not generate real value. So currency has no intrinsic value, but it does signal to the economy which needs are more valuable. And currently, one of the claims is that the middle class and poor's needs are valued so low, that it is creating economic stagnation, and there's little incentive to solve their problems.

by Gormo 14y ago

thaumaturgy 14y ago

Gee, I was hoping to just take the time to transcribe the video and add a couple of comments here and there without having to defend its content. The necessity of demand is the 'elephant in the room' because so much of the political argument so far has revolved around increasing benefits for the suppliers, rather than increasing demand. The argument has been, "we're supposed to make the wealthy wealthier, and then -- magically -- they will create more jobs." If the necessity of demand isn't the elephant in the room, then why isn't there broad political support for higher tax rates on the wealthy? Why isn't there broad political support for economic stimulus packages? Why isn't there broad political support for universal health care, a significant expense for poor and middle-class Americans? Why isn't there broad political support for lowering taxes on the poor? Why, instead, do I keep hearing such balderdash as, "The poor pay no taxes at all"? Nobody's saying that business people don't add value to the economy. What people like this guy -- and me -- are saying is that they don't add value all by themselves. And, if that's a point that people can agree on, then the very next question is naturally, "Why do the bulk of our economic strategies focus only on benefiting them then?" If a venture fails due to low demand, yes, some investor and some capitalist assumed risk and have presumably lost something. But, worse still, are all those other people -- those employees -- who didn't have anything to risk in the first place, and are now back to looking for work again. In your scenario, there wasn't any net job creation, there were just some positions temporarily filled. And, anyway, if the business people do the market research they're supposed to do first, and the demand isn't there, they won't bother starting anyway. Let's stop making up fairytale scenarios. Let's start getting specific. Let's look at things like leveling-off or falling consumer demand for gasoline [1], and then let's look at the tax breaks afforded to oil companies [2], and let's ask ourselves: if we're doing everything right, if we're granting these companies record profits [3], then why haven't they lowered gas prices to increase demand like the magic formula says they will? [1]: http://soberlook.com/2012/03/us-consumer-is-saying-no-to-high.html http://soberlook.com/2012/03/us-consumer-is-saying-no-to-hig... [2]: http://www.washingtonpost.com/business/economy/how-much-do-oil-companies-really-pay-in-taxes/2011/05/11/AF7UNutG_story.html http://www.washingtonpost.com/business/economy/how-much-do-o... [3]: http://thinkprogress.org/climate/2012/02/08/421061/big-oil-higher-prices-record-profits-less-oil/ http://thinkprogress.org/climate/2012/02/08/421061/big-oil-h...

Gormo 14y ago
'Increasing demand' is itself a supplier-directed activity; it's one of the primary functions of marketing. It seems baffling to consider this from a political/macroeconomic perspective; how would you increase demand but through marketing activity, without your methods becoming coercive or oppressive? > If the necessity of demand isn't the elephant in the room, then why isn't there broad political support for higher tax rates on the wealthy? Because the two concepts have nothing to do with each other, and support for higher taxes on the wealthy - or anyone else - has antecedents in much more basic underlying principles that many do not share, and often strongly oppose in their own right. > Why isn't there broad political support for economic stimulus packages? Why isn't there broad political support for universal health care, a significant expense for poor and middle-class Americans? It's because people oppose these ideas in their own right, and see them as being unjustifiable means even if they could achieve their stated ends. Many people do not want macro-level attempts to manipulate their economic situation at all. Many people do not want to outsource responsibility for their health to external institutions at all. Many people resent that these intimate and personal aspects of their lives are being politicized and turned into public questions in the first place. > Why isn't there broad political support for lowering taxes on the poor? Why, instead, do I keep hearing such balderdash as, "The poor pay no taxes at all"? I'm not sure where you've heard that, but I assume that you and whomever you were discussing the matter with had two very different definitions of the term 'poor'. > What people like this guy -- and me -- are saying is that they don't add value all by themselves. Nothing ever does. The very concept of value implies that there exists at least two distinct entities: the thing being valued and the being doing the valuing. In commerce, there are at least two valuers and two 'valuees' in every transaction. This is basic and obvious, and I don't see how it generates any new or significant perspective on any question. > But, worse still, are all those other people -- those employees -- who didn't have anything to risk in the first place, and are now back to looking for work again. Since you're intent on analyzing everything from a macro-level perspective, consider that if a certain proportion of all startup ventures are doomed to failure from the outset, and that these ventures provide a certain aggregate number of jobs, then those jobs represent an ongoing pool of jobs that is not supported by market demand. In other words, some proportion of total jobs is always being subsidized by capital losses, rather than by aggregate demand. But to your point of this being 'worse', I'd ask "worse than what?" If you choose to support yourself by taking a job working for a third party rather than applying your labor to the direct satisfaction of your needs and desires, then the risk of losing your job is always present, regardless of whether or not the business you work for is sustainable in its own right by market demand. The only way to eliminate this risk is to avoid being dependent on a single external source of income in the first place (which, in my opinion, everyone ought to do to whatever extent they can). > And, anyway, if the business people do the market research they're supposed to do first, and the demand isn't there, they won't bother starting anyway. Market research is hardly an exact science. Accurately gauging market demand is extremely difficult, and ventures fail all the time. The core problem of economics is one of epistemology. > then why haven't they lowered gas prices to increase demand like the magic formula says they will? What magic formula are you talking about? What problem, exactly, is the profitability of oil companies an indicator of in the first place?

roguecoder 14y ago

You are missing the piece that all conservative economists miss: access to the medium of exchange. It doesn't matter how well you identify the customer, satisfy their desires and add net value for all parties involved: if that customer doesn't have a job that gives them cash to buy your product the economy grinds to a halt. It can be summed up by the famous if possibly apocryphal line by Ford: "I pay my employees enough to afford to buy my cars."

kevinskii 14y ago
You are missing the piece that most amateur liberal economists miss: money is only a valid medium of exchange as long as it represents real value. When you forcibly redistribute too much of it, you aren't helping people buy things and "stimulate the economy" except maybe over the very short term. You're just destroying that value that it would otherwise represent.
- Peaker 14y ago
  While that is true, you would have to forcibly redistribute quite a lot of money to destroy more value than you help create. When the masses have no currency, in effect, that's signaling to the economy that their needs are of no value. Therefore, businesses that solve the masses' problems gain no economic value from it, and will not generate real value. So currency has no intrinsic value, but it does signal to the economy which needs are more valuable. And currently, one of the claims is that the middle class and poor's needs are valued so low, that it is creating economic stagnation, and there's little incentive to solve their problems.