Sunday, July 26, 2015

How idiotic is 'market-based economics'?

This idiotic. Joseph Stiglitz has been writing books for nearly two decades now trying to impress upon rightwing economists the idea that if people do not have income they cannot spend.

You would not think it is a hard argument to make. But you would be wrong.

 Whether or not the program is well implemented, it will lead to unsustainable levels of debt, just as a similar approach did in Argentina: The macro-policies demanded by the troika will lead to a deeper Greek depression. That’s why the I.M.F.’s current managing director, Christine Lagarde, said that there needs to be what is euphemistically called “debt restructuring” — that is, in one way or another, a write-off of a significant portion of the debt. The troika program is thus incoherent: The Germans say there is to be no debt write-off and that the I.M.F. must be part of the program. But the I.M.F. cannot participate in a program in which debt levels are unsustainable, and Greece’s debts are unsustainable.
Paul Krugman, also writing in the New York Times, has been hammering this point for years. But faith-based economics is a barrier that no force in the universe can penetrate.

I have to say that the business about the milk makes Lenin's arguments about capitalism's suicidal competition for market share sound good:

Consider the case of milk. Greeks enjoy their fresh milk, produced locally and delivered quickly. But Dutch and other European milk producers would like to increase sales by having their milk, transported over long distances and far less fresh, appear to be just as fresh as the local product. In 2014 the troika forced Greece to drop the label “fresh” on its truly fresh milk and extend allowable shelf life. Now it is demanding the removal of the five-day shelf-life rule for pasteurized milk altogether. Under these conditions, large-scale producers believe they can trounce Greece’s small-scale producers.
In theory, Greek consumers would benefit from the lower prices, even if they suffered from lower quality. In practice, the new retail market is far from competitive, and early indications are that the lower prices were largely not passed on to consumers. My own research has long focused on the importance of information and how firms often try to take advantage of the lack of information. This is just another instance.
Sound familiar? It should if you live in Hawaii and cannot buy fresh milk at any price. (I used to get it sometimes at Foodland -- it cost $10.80 a gallon -- but now it is not available at all. And I can see the remains of Maui's last dairy from my living room window.)

Size matters. If the situation were reversed, and it was little Greece that was well-governed with hig tax compliance and big Germany that was profligate and corrupt, would the "market" make the same moral arguments about who should suffer? No:

 The project’s first complications stemmed from Schwarz and Wowereit’s ever-changing ambitions. With construction under way, Schwarz, seizing on increasing forecasts for air traffic (up to 27 million passengers at that point), had von Gerkan add north and south “piers” to the main terminal, turning it from a rectangle into a “U” and dramatically enlarging the floor space. Schwarz also dreamed of making the airport a Dubai-like luxury mall. Airports earn significant money from nonaviation businesses, the FBB boss noted, so why not insert a second level, jammed with shops, boutiques, and food courts? Von Gerkan derided what he called the Vermallung of the airport—its “mallification”—but he capitulated to Schwarz’s demands.
The whole story about Berlin's unusable $6 billion airport repays reading. Just remember while reading who is the lecturer and who the lecturee when it comes to fiscal responsibility.

The Unite States is not inncent in all this. Our embrace of Greece's corrupt, rightwing dictatorship helped contribute to the lack of faith by today's Greeks in their government. Stiglitz says he believes in democracy.

It is too bad the United States does not.

UPDATE: Not really connected to the issue of Greece but amusing. It appears it isn't that easy to build a flat expanse of concrete.

A RELEVANT UPDATE: Another economist -- Robert Shiller, famous in real estate -- notices a flaw in efficient markets religion. Better late than never, maybe.






10 comments:

  1. Ah yes, another ridiculous Harry strawman: "...trying to impress upon rightwing economists the idea that if people do not have income they cannot spend."

    Show me one economist anywhere, "rightwing" or not, who thinks those without money can spend.

    Anyway, I also can't figure out what you're trying to say here. That's Germans should work harder so that Greeks can laze about and drink fresh milk?

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  2. How idiotic is 'market-based economics'?

    How idiotic is Stiglitz?

    The fundamental question he didn't ask, nor you offered, is: What the hell is Greece doing in the Euro in the first place?

    Answered correctly, impossible for you and Stiglitz, none of this happens, because letting Greece into the Euro was an epic mistake, obvious to everyone who wasn't a blinkered collectivist.

    Consider the case of milk.


    In theory, Greek consumers would benefit from the lower prices, even if they suffered from lower quality.


    More idiocy. Or mendacity. It's so hard to tell, sometimes.

    First thing that Stiglitz doesn't know, or won't say, is that most milk in Europe (outside Greece) is irradiated. As long as it is sealed, it can be kept on a shelf as long as you wish. That is the reason for removing the five day shelf life rule: it is idiotic. And a transparent strategem to keep Greek consumers hostage to much higher priced milk than would otherwise be available to them.

    Of course, the danger of making it available to them is that they might, just might, prefer it to what their getting forced to buy now.

    But for Marxists, freedom is a bug, not a virtue.

    I have read a lot of mendacious stuff from Stiglitz, but this one takes the cake.

    It should if you live in Hawaii and cannot buy fresh milk at any price.

    You could, if the US wasn't so idiotic about irradiating food.

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  3. I can buy irradiated milk here, but it isn't fresh. (And it cannot be kept on the shelf indefinitely, because the packaging deteriorates and bursts. There is also the matter of Parmalat and corruption.)

    'Of course, the danger of making it available to them is that they might, just might, prefer it to what their getting forced to buy now.'

    Maybe but then they would end up with just one choice.

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  4. I can buy irradiated milk here, but it isn't fresh.

    Blind taste test. Could you tell the difference?

    Let's say you can, and you prefer, like all other right thinking people, the fresh stuff.

    Then Maybe but then they would end up with just one choice wouldn't happen, would it?

    That's how dumb Stiglitz was in this op ed, it is impossible to defend him without shooting yourself in the foot.

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  5. Of course I can tell the difference.

    Wouldn't happen? It already happened in Hawaii. Some experiments have already been run.

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  6. I'm certain you never tried a blind test, so I'll bet you can't, actually.

    But no matter, I'm perfectly happy to agree that you can, and your preference for the locally produced stuff is significant.

    If that is generally true, that is to say, your taste buds aren't particularly more discerning than anyone else's, then many people will share your preference, and will purchase milk accordingly.

    Unless the difference in taste isn't sufficient for consumers to prefer the more expensive option. And by consumers, I mean the vast majority of them, because if it wasn't, then the Hawaii experiment, whatever it was, would have turned out differently.

    So, what Stiglitz advocates is that consumers be held hostage by Greek producers. Which reveals the looter that lurks in the soul of every progressive. Greek consumers must hand over money which they wouldn't otherwise. Which, of course, means that consumers have less to spend on something else.

    And, multiplied by hundreds of other instances, is why the Greek economy is an ongoing disaster, and should never have been admitted to the EU in the first place.

    Which Stiglitz never, for some odd reason, mentions.

    What is clear from this example is that Stiglitz is either mendacious, or ignorant. He claims to be knowledgable, so that leaves us with mendacious.

    The five day shelf limit is not there to protect consumers -- long life milk will last far longer than that on the shelf. It is there to yoke consumers to inefficient Greek milk producers, courtesy of socialism, thereby subsidizing inefficiency.

    The Greeks are running out of other people's money to heap into giant piles and set on fire.

    Just like socialism always does.

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  7. What is clear from this example is that Stiglitz is either mendacious, or ignorant. He claims to be knowledgable, so that leaves us with mendacious.

    Which you fell for, hook, line and sinker.

    Which means this post, "How Idiotic is Free Market Based Economics" is based upon a lie (or staggering ignorance, your choice) and, therefore, uses a socialist perversion of a free market to indict free markets.

    And you call this blog, without a hint of irony, "Restating the Obvious".

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  8. Some statements are too stupid to bother refuting, but since you insist:

    You don't have to taste ultrapasteurized milk to tell the difference. It is more viscous and browner. It is labeled milk but it is not comparable to fresh fluid milk, any more than canned condensed milk reconstituted with fresh water is.

    In the particular case of Greece, fresh cheese and yogurts are a big part of the diet and cannot be made with ultrapasteurized milk.

    Typically, capitalists cannot account for quality, only price. That is why I define capitalism as that system of organization that gives primacy to capital.

    In the case of European ultrapateurized milk, the supply is controlled by an international criminal combine. So some people could have objections to that as well. Not capitalists, I understand. But moral people might.

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  9. It is more viscous and browner. It is labeled milk but it is not comparable to fresh fluid milk ...

    Bollocks, Harry. Pure bollocks.

    I guarantee you that if I was to put a glass of the UHT 2% milk I get here next to a glass of the 2% typical in the US, you wouldn't be able to see the difference. And I doubt very much if you could taste it, either. I sure as heck can't.

    Never mind, though. Stiglitz was either ignorant or lying, and you are both ignorant and unclear on the concept.

    Let's say UHT milk is as inferior as you say. Then the Greeks wouldn't buy it, or would do so only if the price was much lower. Either way, Greek consumers get to act on their preferences, not socialist diktat.

    Similarly for cheese and yogurt. If they can't be made, or made well, with UHT, then they won't be. As a further demonstration of your ignorance, the supermarkets here sell UHT exclusively, and excellent cheese and yogurt. Your supposed dilemma does not exist.

    Typically, capitalists cannot account for quality, only price. That is why I define capitalism as that system of organization that gives primacy to capital.

    Your definition isn't getting more useful with repetition. I have no idea what the phrase "... capitalists cannot account for quality ..." means, unless you intended self-satirizing nonsense.

    Quality is a component of price. Look up the concept of "hedonic inflation". It will quickly disabuse you of that particular howler.

    In the case of European ultrapateurized milk, the supply is controlled by an international criminal combine.

    Without any sort of substantiation, I am going to assume that, once again, you are blowing it out your hat.

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  10. Sowell explains the problem perfectly. From page 114 of the 5th edition (2015) of Thomas Sowell's Basic Economics :

    While capitalism has a visible cost -- profit -- that does not exist under socialism, socialism has an invisible cost -- inefficiency -- that gets weeded out by losses and bankruptcy under capitalism. The fact that most goods are more widely affordable in a capitalist economy implies that profit is less costly than inefficiency. Put differently, profit is a price paid for efficiency.

    Looking at you, Greece.

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