That argument made sense before everything was owned by a few megacorps who collude with eachother.
So like, back in 1875.
We outsourced all the manufacturing jobs and gutted the service sector
Yep, I was gonna say this.
Ford was a racist piece of shit.
But he was at least competent enough at capitalism to understand that… consumer products… need consumers… who are paid enough … to be able to buy said products.
Ford saw it as a means of control. He dictates who gets to live in the suburbs, who gets the cushier factory jobs, and who earns the more lavish managerial salaries.
I don’t think his model was strictly intentionally good. It just so happened that baking your consumer base into your workforce guarantees a certain baseline in sales and promises growth that scales with the size of your business.
Oh yes, I completely agree with you, it was for him a system of control.
… He was just actually fairly competent at managing that system, unlike our current gaggle of racist rapist reprobates.
Came here for this one word, collusion. Exhibit A Phoebus Cartel
Please change, capitalism (hah, as if).
Right? People who try to apply things from econ textbooks to the current world are on the wrong track. It doesn’t matter anymore. Line must go up
Or advertising and the science if influence existed.
Econ 101 types are so insufferable and are often the C+ student in Econ 101.
Supply and demand only works in perfectly competitive markets where all parties have perfect information (literally taught in Econ 101).
Companies know this, and do everything in their power to ensure this doesn’t happen, because any surplus due to assymetries flow to the participant with the advantage (also taught in Econ 101).
Worst of all is that negative and positive externalities are also taught in Econ 101 but they are almost never mentioned by these types.
TL;DR For positive/negative externalities: Company produces pollution, pollution negatively affects the economic value of things outside of the company’s business (e.g. kills fish in rivers), company most efficient process should be produce less at higher price.
This means the supply/demand curve can be shifted with taxes (called Pigovian taxes) to correct the supply/demand curve so it accurately reflects the value of broader society. Conversely a healthy population is more productive so subsidising healthcare makes sense since creates more benefits than the benefit of the consumer and entity providing it.
Taxes and subsidies can be an effective tool to adjust the supply/demand curve to maximise the benefit of society as a whole in many cases when used aggressively enough.
You can effectively solve climate change pretty easily by taxing emissions from fossil fuels and providing the entire amount as energy subsidies. This way renewables get a massive advantage from the energy subsidies at no cost to the tax payer. You can count on the market to min/max based on the rules.
These types still go “Hurr durr, bUt ThE dEaDwEiGhT lOsS”.
Alright now that you got me started I’m going to crash out for a little bit.
I fucking hate how Econ-101 types conflate the economic definition of rationality with the general definition of rationality.
This, combined with a fundamental misunderstanding of what economic rationality is in the first place forms their justification for looking down on people’s “irrational” decisions, which are basically anything other than selfish asshole behaviour.
First, economic rationality simply means that given some set of choices, you are able to order them in terms of their utility, and that your decisions are consistent with this ranking. Utility, as every economist stresses, is entirely dependent on every individuals needs and wants, and there is a wealth of research which shows that people enjoy charitable decisions, like shouting a meal for a friend, or volunteering.
Even then, it is well known (and immediately taught) that rationality is basically impossible to hold in reality, and this most people are economically irrational. E.g. for a fast food set of a burger, fries, and drink, when comparing two items I prefer burger > fries, fries > drink, and drink > burger, which forms an impossible order of utility.
And even for seemingly frivolous/trashy decisions like gaudy designer bags made by poorer people, there is extensive economic evidence that the resulting recognition of wealth from their peer groups results in net positive effects such as promotions/better networks. This is no different conceptually to the “quiet luxury” purchases of rich people - the only difference is that only other rich people are able to recognise the “simple” $700 plain t shirts. In either scenario, depending on the individual, there is a strong case for these decisions to be “rational”.
On a related note, these types also play a few games related to the prisoners dilemma, and believe they are the experts on matters of public policy (in most cases, that the tragedy of the commons is inevitable and we should give up).
Except that the prisoner’s dilemma is a stupid and unrealistic thought experiment. Elinor Ostrom won a fucking Nobel prize by documenting extensive evidence that if everyone in a community is properly represented and co-ordinate, the tragedy of the commons does not occur; the tragedy of the commons does occur if any participant wields too much socio-economic power.
Nice, let’s I’m going to nerd out a bit more.
I’m happy you mentioned game theory since it has also a naïve econ type issue. The prisoner’s dilemma is a bad example of game theory since the game is only played one time. One time a bunch of guys decided to do a game theory tournament where they made bots play tons of games against each other and see which one does best. To the researcher’s surprise the sample “Tit for tat” approach was the best, it just did whatever the opponent did last.
And of course people sometimes conflate Economics with hard science when it’s a social science. We can’t just make an alternate universe and run an experiment to see which policy creates the most GDP growth or whatever people are measuring.
Also, assuming homo economicus is an accurate representation of humans just doesn’t work, but it does make the math a lot simpler. It’s the issue with economic models is that a simple model doesn’t accurately reflect society and a complex model, although a better simulation, is a lot harder to analyse and draw conclusions from. The superhuman homo economicus can assign monetary value to everything, is aware of all choices and can rank them accurately according to each choices utility. Nobody does that, everyone makes a shit purchase every now and then.
Economics is great but it’s soooo incredibly oversimplified to the point where people are making claims that are opposite to what economics is actually teaching.
Btw, have you checked out Money & Macro on YouTube/Nebula? It’s a channel from a professor in economics and he’s really good at getting into the economic nuances of current events.
Apologies for my pointed tone, but the demotion of Economics as a lesser science due to lack of controlled experiments is a pet peeve of mine.
Economists do run experiments, or work very hard to try to hard quasi-like experiment designs.
Angrist Krueger won a Nobel for showing that increasing minimum wage actually increases overall employment, by utilising data in border towns in NJ/NY where the differing laws across state lines constituted a natural experiment.
Amy Finkelstein won a Bates medal (basically a baby Nobel) for her work in health policy, which involves being the lead investigator in coordinating the large scale Oregon Health Insurance Experiment that randomly assigned participants with health insurance.
It’s even possible, though much more difficult, on the macro side. Scholars such as Emi Nakamura look at high-frequency data of bond markets to see how markets and the economy respond to the actions of the Federal Reserve.
More recently, “General Equilibrium Effects of Cash Transfers: Experimental Evidence From Kenya” won the Frisch medal for conducting randomised, large scale cash transfers to low income, isolated rural communities, where due to the isolation, could make it arguably similar to UBI.
Actually good Econ channels:
Money and Macro
TLDR News (though their non UK/global coverage is a bit sus)
National Bureau of Economic Research (live streams economic research conferences, wouldn’t recommend actually watching but you can get a feel for what Econ actually does)
Unlearning Economics (maybe only 70% correct, but very engaging and not as “mainstream”)
Shit tier channels (at least for Econ):
Economics Explained
Kurzgesagt
Infographics Show
Econ dork detected, deploying Econ joke:
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“Hey there Mr. Powell, how’s your soda?”
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“… My beveridge is unfortunately rather flat…”
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More recent greatest hits from ‘Economy Understanders’:
What. Is. A. Tariff?
(Arguably this is taught in MacroEcon beginner course, so like, 201, or 102 depending on how your school does things, but yeah…)
The first thing these meme level economic takes about supply and demand leave out is the elasticity of both supply and demand that affects how sensitive demand is to price changes and prices are comparable to availability.
My favorite is when you break the brains of “econ 101” people with some labor theory of value
‘Okay but you understand that the idea/agreement of me “owning” the factory doesn’t make the web enabled ultra-girth horror villain branded vibrating dildos, right? It’s the workers and artists and IP law negotiators who make the magic happen’
(Please imagine your faves here)
