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Author Topic: Difficulty skyrocketing!  (Read 6969 times)
smooth
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May 25, 2011, 03:14:33 AM
 #41

While spending money may increase GDP (as GDP measures... spending), doing so for the purpose of consumption is a net drain on economic health, not a benefit. A poor person buying a burrito is not helping the economy - rather, he has consumed resources by so doing. When he is at work, producing, then he is benefiting the economy.

This is basically nonsense.  When someone buys a burrito it means someone else is producing a burrito.  It's the combination of both that is useful economic activity.  If you produce burritos and no one eats them, it doesn't contribute to the economy in a meaningful way.  If you were going to account for it at the time of production, then when it goes bad and throw it away, you would have to account for that destruction by subtracting, so you get the exact same overall result as you do when measuring at the time of purchase.

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May 25, 2011, 03:24:40 AM
 #42

While spending money may increase GDP (as GDP measures... spending), doing so for the purpose of consumption is a net drain on economic health, not a benefit. A poor person buying a burrito is not helping the economy - rather, he has consumed resources by so doing. When he is at work, producing, then he is benefiting the economy.
This is basically nonsense.  When someone buys a burrito it means someone else is producing a burrito.  It's the combination of both that is useful economic activity.  If you produce burritos and no one eats them, it doesn't contribute to the economy in a meaningful way.  If you were going to account for it at the time of production, then when it goes bad and throw it away, you would have to account for that destruction by subtracting, so you get the exact same overall result as you do when measuring at the time of purchase.

You are so close, but...

Buying a burrito in no way means someone else producing a burrito in the present or the future.  It means someone produced one in the past.

The burrito made in the past is an investment of capital, a risk.  Whether that risk pays off (will be useful) or not is not known at the time of production, but only after the risk has been taken and the cost sunk.

Economically speaking, eating it is indeed a drain.  Medically speaking, the drain is necessary.  Production has the potential to create wealth, but consumption always destroys it.

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May 25, 2011, 03:30:21 AM
 #43

thats WHY 3x-5x(!!!!) tax exemption for corporation is ruined commerce in US.
before tax changed such  [silly]way, majority was self-employed.
now - corporation dominate market and established world-wide trust finally ruined basic principles of market/capitalism, let alone social impact.
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May 25, 2011, 03:31:57 AM
 #44

Economically speaking, eating it is indeed a drain.  Medically speaking, the drain is necessary.  Production has the potential to create wealth, but consumption always destroys it.

Now you are moving the goalposts.  You said "economic health" before, now you are saying "wealth."  Sure, eating a burrito consumes wealth, in a sense (though it depends how you value a nourished person relative to a hungry one), but that's different from "economic health."  Producing and consuming burritos are certainly useful economic activities and if they are occurring with any regularity that is a sign of a healthy economy (in fact more healthy than producing burritos when no one is consuming them), even though taken together they have no net effect on wealth as you define it.

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May 25, 2011, 03:32:30 AM
 #45

While spending money may increase GDP (as GDP measures... spending), doing so for the purpose of consumption is a net drain on economic health, not a benefit. A poor person buying a burrito is not helping the economy - rather, he has consumed resources by so doing. When he is at work, producing, then he is benefiting the economy.

This is basically nonsense.  When someone buys a burrito it means someone else is producing a burrito.  It's the combination of both that is useful economic activity.  If you produce burritos and no one eats them, it doesn't contribute to the economy in a meaningful way.  If you were going to account for it at the time of production, then when it goes bad and throw it away, you would have to account for that destruction by subtracting, so you get the exact same overall result as you do when measuring at the time of purchase.



Mr. Smooth - if that IS your real name - I must respectfully disagree with you. When you eat a burrito, it does not mean someone else is producing a burrito. That is the fallacy for which so many people fall. Conversely, if you produce a burrito, there is typically a market price at which a buyer can be found. Maybe that price is only one penny... but if the market price is above the cost of production, then the production of the burrito was a net creation of wealth. When you say that valuable production requires a buyer, you are correct, but you are ignoring the crucial element of the pricing mechanism.

Consumption is the result and reward for production. Production is not the result nor the reward for consumption. The distinction is very important. And, when the government tells society to "go out and shop" in order to "grow the economy," it is merely telling people to consume resources because it's operating under the fallacy that consumption = production. Rather, a wise government would say, "go out and profitably produce things."  But of course, profits are evil, so the government refrains from such advocacy.
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May 25, 2011, 03:39:02 AM
 #46

Mr. Smooth - if that IS your real name - I must respectfully disagree with you. When you eat a burrito, it does not mean someone else is producing a burrito.

If not, where does it come from?

Quote
That is the fallacy for which so many people fall. Conversely, if you produce a burrito, there is typically a market price at which a buyer can be found.

This argument fails to make a distinction between production and consumption because the same argument can be used in the other direction.  If you want to consume a burrito there is typically a market price at which you can get someone to produce one.  Any argument you can make like that in favor of production being "useful" economic activity can be rearranged to apply to consumption.

The reality is that you can't separate the two in that way; you can't have sellers without buyers (nor vice versa).

I will agree with you though, that the government going and telling people to do this or do that almost never contributes to useful economic activity (and when it does it's by accident).
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May 25, 2011, 03:40:34 AM
 #47

Chipotle just opened a new store in my town today, and I went there to have a burrito tonight. There was a line out the door and I had to wait almost 30 minutes to get one. But oh, was it good!

Clearly there are two sides to this equation. I couldn't consume that Chipotle burrito unless the company had saved a LOT of money and invested it into opening that store, so that the burrito could be produced on-site right in front of me.

Point being, before there can even be production of those things consumers consume, there must be investment in the means by which that product will be produced. Whether it be storefronts, factories, UPS trucks, whatever. And whoever puts up that money is taking a huge risk. What if nobody wanted burritos and the "grande opening" had been a complete flop? They would be out all that money.

Someone has to take those risks, and they should be appropriately rewarded. Taxing the living daylights out of them is hardly a suitable reward.

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May 25, 2011, 04:11:12 AM
 #48

Economically speaking, eating it is indeed a drain.  Medically speaking, the drain is necessary.  Production has the potential to create wealth, but consumption always destroys it.

Now you are moving the goalposts.  You said "economic health" before, now you are saying "wealth."  Sure, eating a burrito consumes wealth, in a sense (though it depends how you value a nourished person relative to a hungry one), but that's different from "economic health."  Producing and consuming burritos are certainly useful economic activities and if they are occurring with any regularity that is a sign of a healthy economy (in fact more healthy than producing burritos when no one is consuming them), even though taken together they have no net effect on wealth as you define it.

Not me, someone else.

I consider the phrase "economic health" to be hopelessly vague.  If you ask 10 economists what it means, you'll get a dozen answers.

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May 25, 2011, 04:31:15 AM
 #49

Quote: "Economically speaking, eating it is indeed a drain.  Medically speaking, the drain is necessary.  Production has the potential to create wealth, but consumption always destroys it."

Feeding it to a living being is a capital investment, investing in living-being capital.

Quote: "Point being, before there can even be production of those things consumers consume, there must be investment in the means by which that product will be produced. Whether it be storefronts, factories, UPS trucks, whatever. And whoever puts up that money is taking a huge risk. What if nobody wanted burritos and the "grande opening" had been a complete flop? They would be out all that money."

Someone had to feed people *something*, even if not yet those specific burritos, in order for someone to live long enough to even try to organise such a complex organisation as that shop.

How many dollars worth of meat are you? How much resources and effort are expended "merely" on efforts to prevent others from using you as meat instead of going to all the trouble of participating in some vast burritos-made-from-nonhuman-beings enterprise?

At some point I have found it useful to seriously consider something along Buckminster Fuller's forward person-days of life-support for inhabitants of this planet measure of wealth instead of counting how many pieces of paper Scrooge McDuck and his ilk get to swim in without even taking seriously the idea that using that stuff for swimpools for his ilk might well be depriving someone else somewhere else of life or limb or liberty...

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May 25, 2011, 05:16:04 AM
 #50

While spending money may increase GDP (as GDP measures... spending), doing so for the purpose of consumption is a net drain on economic health, not a benefit. A poor person buying a burrito is not helping the economy - rather, he has consumed resources by so doing. When he is at work, producing, then he is benefiting the economy.

This is basically nonsense.  When someone buys a burrito it means someone else is producing a burrito.  It's the combination of both that is useful economic activity.  If you produce burritos and no one eats them, it doesn't contribute to the economy in a meaningful way.  If you were going to account for it at the time of production, then when it goes bad and throw it away, you would have to account for that destruction by subtracting, so you get the exact same overall result as you do when measuring at the time of purchase.



Mr. Smooth - if that IS your real name - I must respectfully disagree with you. When you eat a burrito, it does not mean someone else is producing a burrito. That is the fallacy for which so many people fall. Conversely, if you produce a burrito, there is typically a market price at which a buyer can be found. Maybe that price is only one penny... but if the market price is above the cost of production, then the production of the burrito was a net creation of wealth. When you say that valuable production requires a buyer, you are correct, but you are ignoring the crucial element of the pricing mechanism.

Consumption is the result and reward for production. Production is not the result nor the reward for consumption. The distinction is very important. And, when the government tells society to "go out and shop" in order to "grow the economy," it is merely telling people to consume resources because it's operating under the fallacy that consumption = production. Rather, a wise government would say, "go out and profitably produce things."  But of course, profits are evil, so the government refrains from such advocacy.


EDIT: s/hotdog/burrito/ ...  I don't know where the hotdog came from.

First off, sorry for the swearing.  Secondly, consumption is not a drain on the economy.  Consumption provides crucial encouragement for the capital owner to continue to invest in production.  If enough people decide to start growing their own hogs (as about half the families I know do) instead of paying your ridiculous hotdog prices, the hotdog market will dry up.  The capital owner will reinvest in a different type of venture and the hotdog maker will be out of a job.  If he is older than 30, he is unlikely to find work much above minimum wage, and his only hope for economic security is his children, if he managed to get them through school before he was laid off, or maybe his wife.

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May 25, 2011, 06:36:52 AM
 #51

Quote: "Economically speaking, eating it is indeed a drain.  Medically speaking, the drain is necessary.  Production has the potential to create wealth, but consumption always destroys it."

Feeding it to a living being is a capital investment, investing in living-being capital.

Not all investments are productive.  Also, we've now stepped up a meta level.

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May 25, 2011, 07:28:14 AM
 #52

Economically speaking, eating it is indeed a drain.  Medically speaking, the drain is necessary.  Production has the potential to create wealth, but consumption always destroys it.

Now you are moving the goalposts.  You said "economic health" before, now you are saying "wealth."  Sure, eating a burrito consumes wealth, in a sense (though it depends how you value a nourished person relative to a hungry one), but that's different from "economic health."  Producing and consuming burritos are certainly useful economic activities and if they are occurring with any regularity that is a sign of a healthy economy (in fact more healthy than producing burritos when no one is consuming them), even though taken together they have no net effect on wealth as you define it.

Not me, someone else.

I consider the phrase "economic health" to be hopelessly vague.  If you ask 10 economists what it means, you'll get a dozen answers.

We're chasing the wrong thing. Everyone wants the economy to do well, as if it has interests different from those of the people. Thousands of people making huge fortunes selling each other lead paint and asbestos underwear is not a healthy economy.
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May 25, 2011, 03:50:34 PM
 #53

Thousands of people making huge fortunes selling each other lead paint and asbestos underwear is not a healthy economy.

It is a healthy economy if someone wants to buy lead paint and asbestos underwear, with the obvious caveat that the health costs of those products are not being transferred to other people (ie- pollution). If I want asbestos underwear, and I don't throw it in the river when I'm done with it, then there's nothing wrong with a producer of such underwear making profit by trading it to me (and hopefully he'll accept bitcoins for the purchase).
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May 25, 2011, 04:05:34 PM
 #54



The reality is that you can't separate the two in that way; you can't have sellers without buyers (nor vice versa).

While it's true you can't have sellers without buyers, you CAN have producers without consumers. You CANNOT have consumers without producers. That's the difference. Those producers who figure out what is most in demand will reap profitable returns, but their production itself doesn't rely on the availability of consumers. One can produce more than one consumes, but one cannot consume more than one produces  (unless others donate their own excess production which they then had to refrain from consuming).

At any given time there is only so much wealth/goods in a usable form that can be consumed by us humans. If society consumes such wealth faster than it produces it, society will find itself increasingly impoverished. However, if society produces wealth faster than it consumes, it will be increasingly wealthier. The corollary is that by refraining from consumption, we enable a surplus of wealth (ie - savings) which can be used and risked in investment toward even greater production.

An easy way to demonstrate this: if everyone was given $1,000 tomorrow, spending in the economy would increase over the following days and weeks and months. IF such spending improved the economy's health, however defined, then all the government needs to do to end recessions is print money and give it to us. Such a theory is absurd. Upon receiving the $1,000, no new wealth was created, but the new money enables excess consumption and after the dust settles, the world will be no better off at best and likely poorer, as they spent some portion of that new money on consuming resources that were limited, and such resources now require human work to replenish.
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May 25, 2011, 05:32:45 PM
 #55

if everyone was given $1,000 tomorrow, spending in the economy would increase over the following days and weeks and months. IF such spending improved the economy's health, however defined, then all the government needs to do to end recessions is print money and give it to us. Such a theory is absurd.

Here's the thing.  The (US) government defines "economic health" solely in terms of efficiency of production.  Efficiency of production tends towards centralization of production.  Centralization of production gives government useful tools that it can use to control vast areas and populations.  A "healthy" economy is therefore a centrally-managed economy, ipso facto.

But centralization of production also tends towards risk.  Centralization, and the risk inherent, periodically creates phenomena like entire generations of people who can't find jobs and can't survive independently and who are forced to become dependent upon more government, more efficiency and more centralized production.  Government drives this process through Keynesian economic spending.  Giving everyone $1,000 encourages consumption, which incentivizes efficiency, which leads to centralization, which creates risk, which leads to future failure and more spending, etc.  This process is exactly what the US government wants to encourage, because it has defined this as a "healthy" economy.

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May 25, 2011, 05:59:08 PM
 #56

Here's the thing.  The (US) government defines "economic health" solely in terms of efficiency of production. 

That's the first time I've heard that before. Seems to me the government defines economic health quite purely in terms of GDP figures, which are a measure of spending, not efficiency. The Gov. doesn't declare us in recession when efficiency declines. It declares recession when GDP shrinks. It measures growth according to GDP, never efficiency.

Take "Cash for Clunkers" in which we were all supposed to destroy working automobiles in order to spend money on newer ones... that increases the GDP of the country drastically, because massive spending occurred. There is, however, no efficiency gain from such behavior - efficiency has in fact been decreased, because now more money has been spent to transport humans in their daily routines.
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May 25, 2011, 07:48:08 PM
 #57

Seems to me the government defines economic health quite purely in terms of GDP figures, which are a measure of spending, not efficiency.

Well, sometimes.  The US government is big, with many divergent interests.  Sometimes economic health is measured by GDP growth.  Sometimes by stock market growth.  Sometimes by wage growth.  Sometimes by foreign trade.  Overall, if wasteful spending were the only priority, they could probably do an even better job of it.

Regardless, spending forces efficiency.  It's not "efficiency for the sake of higher consumption".  It's "higher consumption for the sake of efficiency".  But efficiency is not the end goal.  It's just the next step.  So it doesn't matter where on the circle you start.  What's important is the process:

spending -> consumption -> efficiency -> centralization -> risk -> failure -> dependence -> more spending

Cash for Clunkers artificially increased the efficiency of big corporate auto manufacturers.  For a time, there was pressure for centralization through mergers.  At the least, it has prevented smaller competitors from arising.  It has created the risk that subsidized, centralized auto companies will again fail to bring efficient cars to market.  And when that happens, Americans will again be dependent upon foreign energy supplies secured by big government and made affordable by government spending.

So, no, it's not really efficiency.  But it's the definition of vicious cycle.

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May 27, 2011, 07:47:25 AM
 #58

Quote from: evoorhees
If society consumes such wealth faster than it produces it, society will find itself increasingly impoverished. However, if society produces wealth faster than it consumes, it will be increasingly wealthier.

Everything that we produce is intended for (eventual) consumption. It's just that some things are meant to be consumed immediately, while others are intended to be consumed over very long periods of time. When you realize this, the production/consumption dichotomy breaks down, and it becomes more sensible to analyze things in terms of sustainability.

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May 27, 2011, 08:00:07 AM
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Quote from: evoorhees
If society consumes such wealth faster than it produces it, society will find itself increasingly impoverished. However, if society produces wealth faster than it consumes, it will be increasingly wealthier.

Everything that we produce is intended for (eventual) consumption. It's just that some things are meant to be consumed immediately, while others are intended to be consumed over very long periods of time. When you realize this, the production/consumption dichotomy breaks down, and it becomes more sensible to analyze things in terms of sustainability.

Indeed.

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