Joined: Sep 25, 2004 Posts: 4542 Location: Boston, MA
Posted: Wed Apr 09, 2008 3:52 pm Post subject: Re: The Economist Has no Clothes
Iaato, they aren't trying to model the entire global economy on one chart.
Secondly, prices account for the effect of consumption/production on other systems. Greater investment in corn ethanol production has shifted prices upward for corn. The price of other grains has increased in tandem because land is being diverted from wheat to corn. All of this can be explained using a Supply/Demand curve.
The failure of neoclassical economics was the failure to include the cost on the natural ecosystems of economic activity. Carbon taxes, pollution caps, CFC bans, trash fees, and the rest help to rectify that problem. There is more work to be done but it doesn't mean that the entire system is useless.
Which economist got a Nobel Prize undeservedly? I'm not sure what you're getting at exactly. _________________ "www.peakoil.com is the Myspace of the Apocalypse."
Joined: Nov 08, 2005 Posts: 261 Location: The Maple State
Posted: Wed Apr 09, 2008 3:58 pm Post subject: Re: The Economist Has no Clothes
Quote:
Nobel Laureate Friedman: Excuse me, it's not limited from an economic point of view. You have to separate the economic from the physical point of view.
Ha! Stupid magician has come to believe his own tricks!
Quote:
It probably escapes most of you dimwits that everytime you disagree with an economist or one of their theories that you are yourself proposing an alternative economic theory.
When you cannot defend, attack! When you cannot attack, attack with straw men!
Economics is just a branch of today's Magic. Quite a simple trick to learn actually. While I had to work at Chemistry at College, in Economics I just had to learn a few tricks, a few words, and straight A's were a breeze.
Posted: Wed Apr 09, 2008 4:51 pm Post subject: Re: The Economist Has no Clothes
Why this belief that economics and overshoot are somehow incompatible, or that the latter represents a failure of the former?
Ultimately economics is only a means of describing the process of bargaining and exchange, and this is a behaviour that is pretty much part of our genetic inheritance. It has been with us since we came down from the trees and it will be with us when we have turned our urban centres into quarries. The mental tools we would use for analysing such interaction would vary little between epochs, and have not even varied that much between ideologies.
Joined: Aug 03, 2006 Posts: 4303 Location: Graceland
Posted: Wed Apr 09, 2008 5:25 pm Post subject: Re: The Economist Has no Clothes
Twilight wrote:
Why this belief that economics and overshoot are somehow incompatible, or that the latter represents a failure of the former?
Ultimately economics is only a means of describing the process of bargaining and exchange, and this is a behaviour that is pretty much part of our genetic inheritance. It has been with us since we came down from the trees and it will be with us when we have turned our urban centres into quarries. The mental tools we would use for analysing such interaction would vary little between epochs, and have not even varied that much between ideologies.
Don't fall into the trap of believing economics promises an outcome, it does not. It just lets you think a little bit about how things happened. If there was failure, it was very human.
I think it is the asumption that there will always be an alternative that gives economic analysis a bad rep in some parts.
In a finite world, it seems that at some point there will not be an alternative to one or more non-renewable resource(s).
Also, if there are some truly key resources that we can't do without (e.g., potable water, breathable air, or somewhere to dump all the fecal matter of civilization), it may be that the only alarm that economic analysis would provide would be way too late to leave meaningful mitigation strategies (I raised this same issue in another thread today to MrBill).
For example, if the current price of oil is a signal of an impending (or recently occurred) peak in production, economics would have only given us a price signal when the peak was upon us. It would have been nice to have an analytical tool that could co-exist with economics that would have told us several decades ago that it might be prudent to begin thinking in terms of lower consumption of fossil fuels. As it was, economics only provided high prices in reaction to a sort of scarcity "head fake" from OPEC, which ultimately led to a price collapse at about the time that we should have been aggressively seeking to develop new forms/sources of energy, but here again, price led us in the wrong direction--low prices prevented the development of alternative energy back in the 1980s, which would have given us much-needed lead time to deal with where we find ourselves today.
Instead, we got a pack of white elephants in the form of the big SUV.
Posted: Wed Apr 09, 2008 5:35 pm Post subject: Re: The Economist Has no Clothes
Iaato wrote:
Neoclassical economics is based on discredited 19th century physics and primitive algebraic math. But in the meantime, it has become the mouthpiece, explanatory, and apologist for modern capitalism and fractional reserve banking. It will go down with the ship.
Amen Sister! How the environment became an externality, I'll never know. Perhaps many economists have deflationary depressions in their grey matter with a corresponding inflation of ego.
Joined: Dec 27, 2004 Posts: 12529 Location: zombie horde wonderland
Posted: Wed Apr 09, 2008 5:42 pm Post subject: Re: The Economist Has no Clothes
threadbear wrote:
How the environment became an externality, I'll never know.
I think it is very much part and parcel of the idea of Mankind as a product of special creation. In spite of science, and scientific points of view, many people, even most perhaps, see humans as not part of the natural order, not subject to the same restraints and laws. Seeing ourselves as separate or above Nature could easily lead to economic theories which are separate from Nature and her limits. _________________ No original ideas are contained in this post.
Joined: Aug 03, 2006 Posts: 4303 Location: Graceland
Posted: Wed Apr 09, 2008 5:45 pm Post subject: Re: The Economist Has no Clothes
threadbear wrote:
Iaato wrote:
Neoclassical economics is based on discredited 19th century physics and primitive algebraic math. But in the meantime, it has become the mouthpiece, explanatory, and apologist for modern capitalism and fractional reserve banking. It will go down with the ship.
Amen Sister! How the environment became an externality, I'll never know. Perhaps many economists have deflationary depressions in their grey matter with a corresponding inflation of ego.
Yeah, I think that the concept of the "negative externality" when talking about irreversible damage to our habitat is amusing in its understatement of the problem.
It would be like shooting a bb gun at a target on a large aquarium and calling the cracks in the glass "negative externalities" of your target practice.
Maybe the best way of thinking about "negative externalities" is like the straws on the camel's back. Each one has an effect that is diffused enough to be hard to quantify, but over time the accumulation leads to a catastrophic failure that might even be surprising to some, given that its causes were so seemingly subtle.
Posted: Wed Apr 09, 2008 6:07 pm Post subject: Re: The Economist Has no Clothes
Ludi wrote:
I think it is very much part and parcel of the idea of Mankind as a product of special creation. In spite of science, and scientific points of view, many people, even most perhaps, see humans as not part of the natural order, not subject to the same restraints and laws. Seeing ourselves as separate or above Nature could easily lead to economic theories which are separate from Nature and her limits.
Thank you Ludi. This is why I maintain that economics has more in common with religion than any sort of science or scholarly discipline. A pseudo-religious cargo cult.
A few quotes from Garett Hardin:
Dipping into the great bulk of economic analysis, you soon discover that environment is usually no more than a ghost in the woodwork.
Economists (and others) who are satisfied with nature-free equations develop a dangerous hubris about the potency of our species.
Narrow-minded economists emphasize 'production' and virtually ignore what happens to the source of nature's resources, as well as to nature's sink, which has to absorb the unwanted, so-called 'by-produces' or 'production'.
The major ways in which ecology and economics differ is in their attitudes toward (a) limits, (b) discounting the future, and (c) dealing with irreversible changes.
Joined: Sep 25, 2004 Posts: 4542 Location: Boston, MA
Posted: Wed Apr 09, 2008 6:12 pm Post subject: Re: The Economist Has no Clothes
Quote:
In economics, an externality is an impact (positive or negative) on any party not involved in a given economic transaction.
The environment is an externality. The environment does not have a voice at the table when a consumer buys a widget from a producer at the market price.
THAT DOES NOT MEAN IT DOES NOT MATTER.
Want to include the environment in the market? Create incentives or disincentives to do things that affect the environment.
The cap and trade system of controlling carbon dioxide emissions in Europe is a perfect example of this.
Externalities are extremely important to the study of economics. You have to include them into calculations of surplus because the consumers/producers in the market don't.
Have you guys ever even taken an economics class? Before launching fallacious attacks, it might make sense to understand what you're talking about. _________________ "www.peakoil.com is the Myspace of the Apocalypse."
Posted: Wed Apr 09, 2008 6:28 pm Post subject: Re: The Economist Has no Clothes
Economics is mixture of science, art and bullshit. _________________ Just look at us. Everything is backwards; everything is upside down. Doctors destory health, lawyers destroy justice, universities destroy knowledge, governments destroy freedom, the major media destroy information and religions destroy spirituality.
Joined: Aug 03, 2006 Posts: 4303 Location: Graceland
Posted: Wed Apr 09, 2008 6:30 pm Post subject: Re: The Economist Has no Clothes
Tyler_JC wrote:
Quote:
In economics, an externality is an impact (positive or negative) on any party not involved in a given economic transaction.
The environment is an externality. The environment does not have a voice at the table when a consumer buys a widget from a producer at the market price.
THAT DOES NOT MEAN IT DOES NOT MATTER.
Want to include the environment in the market? Create incentives or disincentives to do things that affect the environment.
The cap and trade system of controlling carbon dioxide emissions in Europe is a perfect example of this.
Externalities are extremely important to the study of economics. You have to include them into calculations of surplus because the consumers/producers in the market don't.
Have you guys ever even taken an economics class? Before launching fallacious attacks, it might make sense to understand what you're talking about.
Tyler, I think the term externality is a little broader than you suggest.
For example, if I buy medication for $10.00 today, but in 20 years that medication creates a health condition requiring $20,000 of medical care, then I would call that a negative externality, but it clearly affected me as a party to the transaction.
Similarly, many negative externalities affect both non-parties and parties to a transaction. Thus, if I burn coal at a plant that pollutes the air to a point that everyone in the area has lung disease, including me, the profit I made on the operation of the plant probably did not include the cost of treating my own lung disease (and I was a party to the transaction), as well as all of the non-parties' lung disease.
Maybe there is a different word for what I am describing, but it's still the same idea of costs that are not captured in the bargained-for price in a transaction.
It doesn't help that there is an enormous profit motive to the skillful manipulation of laws and regulations for the purpose of minimizing the responsibility of a commercial party for the negative externalities flowing from its business activities.
The tobacco companies are a fine example of this point.
Joined: Mar 12, 2007 Posts: 1004 Location: As close as I can get to the beginning of the pipe.
Posted: Wed Apr 09, 2008 6:37 pm Post subject: Re: The Economist Has no Clothes
Tyler, the name alone indicates how important the environment is to economists. Economists are entirely a product of the forever-growth mentality, in which there are always an abundant amount of sources and sinks. Using paper credits to ameliorate environmental damage is genius. Who thought of that one? That'll fix us all right up, I'm sure.
I suffered through some bullshit economic courses at GMU getting my PhD. GMU turns out to be a hive of Libertarian thought. I spent the entire time arguing with the professor about the tragedy of the commons and other glaring holes in his arguments, and had to read WAAAYYY too much Hayek. Economics is about wishful thinking. It works on a micro scale when you're talking about invisible hands exchanging goods, and that's about it.
Economists would do better for some required logic courses in their courses of undergraduate study. _________________ "When fascism comes to America it will be wrapped in a flag and carrying a cross." --Sinclair Lewis
Posted: Wed Apr 09, 2008 6:47 pm Post subject: Re: The Economist Has no Clothes
Tyler_JC wrote:
Have you guys ever even taken an economics class?
I've taken several myself. Humiliating, I had to unlearn all of it.
What you fail to understand is that if the economic pursuits of our industrial system were required to internalize all these 'externalities' the system would not work. If say, a mining company that pollutes a watershed in Montana and causes cancer for many of the workers and townsfolk, was required to pay for the long term cancer treatments for workers and citizens and the long term clean up for the watershed. They simply would choose not to do business in Montana. The numbers wouldn't add up. The only possible way for them to maintain a viable enterprise is to offset the costs to the commons. That's how the whole game works!
Private profits, common costs. If it was changed to private profits, private costs. The whole thing would go butts up.
The cap & trade system is a joke. Greenwashing. A day late and a dollar short.
At the end of the day, economists are mainly just the cheerleading section for the industrial establishment.
Joined: Jul 17, 2004 Posts: 490 Location: Amerika (most of the time)
Posted: Wed Apr 09, 2008 7:02 pm Post subject: Re: The Economist Has no Clothes
There is a reason that every economics department in the US university system is in the social sciences / "soft science". What people have forgotten is that a social science by its very definition is not a precise study of things because it studies human behavior and humans can be weird, irrational creatures at times. People have elevated economics to some kind of quasi-gospel on par with more rigorous scientific studies such as chemistry or biology. That's not to say economics is necessarily a bad thing but methinks people put too much faith in this study and not enough in the underlying assumptions. That is why this article is brillant. _________________ Simon's Law: Everything put together falls apart sooner or later.
I don't think of all the misery, but of all the beauty that still remains.--Anne Frank
Joined: Sep 25, 2004 Posts: 4542 Location: Boston, MA
Posted: Wed Apr 09, 2008 7:29 pm Post subject: Re: The Economist Has no Clothes
I'll try again.
An externality is an effect that is not readily apparent to the two people involved in a transaction.
If I spend $1,000 on paint in order to make my house more attractive I am essentially saying that improving the attractiveness of my house is worth at least $1,000. This can be reflected either in my happiness (utility) or in the improved value of my property.
If I am unwilling to spend $1,000 that means that I don't think that improving my house is worth it.
But my decision process is flawed when it comes to social welfare because I am not considering how my actions will affect my neighbors.
They want me to paint my house because it will increase the value of their property as well as mine. Moreover, it will give them something pretty to look at.
This externality isn't considered when the consumer (me) makes his choice. I don't care about my neighbors or their property values. However, if my neighbors paid me a couple hundred dollars to defray the cost of the paint, I would gladly paint my house.
The neighbors should be willing to give up a portion of their surplus (higher property values) in order to maximize their own happiness, no?
To simplify it further.
Let's say I'm a hard core doomer who doesn't care about recycling because it's "too late to fix anything".
If you pay me 2 cents per recycled plastic bottle, I'll recycle maybe a handful of them.
If you pay me 20 cents per bottle...I might recycle 50% of them.
If you pay me $2 per bottle, I'll recycle nearly all of them.
The graph of that data is my supply curve. Price incentives will change my behavior and make me supply more recycled bottles.
Society is willing to pay me to recycle because they gain something from reduced resource consumption.
The environment is an externality because I don't care about it and it is unable to influence my decision (in this example). But the environment, like my neighbors, can pay me to make the societally responsible decision.
Or more accurately, the government, acting on behalf of the environment, can get me to change my behavior. _________________ "www.peakoil.com is the Myspace of the Apocalypse."
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