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Author Topic:   Economics: How much is something worth?
Straggler
Member
Posts: 10333
From: London England
Joined: 09-30-2006


Message 76 of 330 (661162)
05-02-2012 5:23 PM
Reply to: Message 73 by Percy
05-02-2012 5:12 PM


Re: Infrastructure Legacy
Straggler writes:
Do you agree that the wealthiest have accumulated nearly all of the increased wealth over the last 30 years? The data clearly shows this doesn't it?
Percy writes:
You didn't present any data so I can't validate that specific claim...
Well the data I am referring to is our much cited graph from the other thread. Here is a link to it. Message 92
Percy writes:
But it isn't "We don't know." It's "You don't know."
Well if you do know please share your knowledge with me by answering my question. Have the wealthiest 5% of the population received more wealth than they have created over the last 30 years?
If you have the numbers. Please share them with us.
I expect the numbers required to answer this question in your reply.

This message is a reply to:
 Message 73 by Percy, posted 05-02-2012 5:12 PM Percy has replied

Replies to this message:
 Message 86 by Percy, posted 05-02-2012 8:03 PM Straggler has replied

  
New Cat's Eye
Inactive Member


Message 77 of 330 (661163)
05-02-2012 5:29 PM
Reply to: Message 62 by Straggler
05-02-2012 3:50 PM


Re: Infrastructure Legacy
It is the difference between the wealth that would exist without the unquantifiable in question (e.g. the development of a particular technology or idea) and the wealth that exists with it. In order to accurately quantify this we need duplicate identical economies on which we can run randomised double blind trials in order to eliminate other factors to find out the exact extent to which the thing in question has contributed to wealth creation.
Which is obviously impossible in practise.
So which definition would work and how do you measure and quantify it?
You can accept that something (e.g the development of a particular technology or idea) has contributed significantly to wealth creation without being able to quantify exactly how much can't you?
I can, but the significance is going to be a guess.
The charts in question show that nearly all of the wealth gains over the last 30 years have gone to the richest 5% of the population in a way that they didn't before certain so called "trickle-down" policies were implemented.
The chart was showing income, not wealth. The chart did not show the above.
The only way to reconcile the idea that this 5% have not received more wealth than they have created over the last 30 years is to conclude that the ideas, innovation and share of national infrastructure that we attribute to the other 95% of the population is worth very little.
The income of the top 5% increased disproportionally, but the median income still rose. Everybody benefitted but the top 5% benefitted more. I don't see why the increases must be proportional to be consistent with TDE working.
The infrastructure in question is what makes the US (or UK) a first world country as opposed to a developing nation. There is a reason new technological developments and investments take place in developed nations. It is the shared legacy of wealth of the nation that developing nations lack. It is the infrastructure of the nation.
It is the existence of this collective infrastructure that makes the successful origin, development and investment of an idea even possible. Educated, healthy workforce. People willing able to take the sort of risks that are essential to capitalistic entrepreneurism because there is a welfare system safety net which means failure doesn't result in destitution. The rule of law as a result of a functional justice system. Energy infrastructure. Communications infrastructure. Water infrastructure. Transport infrastructure. All these things are essential to wealth creation. And they are not the exclusive right of the top 5%.
Yeah, and if Christopher Columbus didn't discover the new world then the infrastructure in question wouldn't even exist. But we don't pin all that contribution on him.
The infrastructure is neither here nor there.
How can we quantify what contribution this past investment and infrastructure makes to the wealth creation of a nation? I have absolutely no idea.
But I would estimate it as absolutely immense.. Wouldn't you?
More immense than Columbus's contribution? I don't think so
More than enough to dispute the idea that the top 5% alone can lay claim to nearly all wealth creation in the US over the last 30 years.
Well, how much did the guy who loaned you the money you needed to get your idea to come to fruition contribute? If you didn't get that loan, then your idea had a value of $0.

This message is a reply to:
 Message 62 by Straggler, posted 05-02-2012 3:50 PM Straggler has replied

Replies to this message:
 Message 95 by Straggler, posted 05-03-2012 10:26 AM New Cat's Eye has replied

  
Percy
Member
Posts: 22392
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.3


Message 78 of 330 (661164)
05-02-2012 5:34 PM
Reply to: Message 71 by Dr Adequate
05-02-2012 5:01 PM


Re: Value
Dr Adequate writes:
From which it follows that the value created when a slave produces one bale of cotton is less than the value created when a paid worker produces exactly the same thing.
Yes, I'm afraid so. Would you have value be a subjective matter of opinion about whether or not something was moral? Granted there's little variation in opinion on the morality of slavery, but most morality is not so unambiguous.
Value added is just a way of toting things up. It's not for making moral judgments. If it helps you think about it, consider this. The slave produces a bale of cotton for $20 (there *are* expenses to keeping slaves) while the employee produces a bale of cotton for $50. The employer sells the bales of cotton for $100 each. He makes $80 on the bale produced by the slave and $50 on the bale produced by the employee. You can treat the amount made on each bale as a measure of the degree of exploitation. Feel better now?
Toting up money paid within a nation to arrive at a GDP is full of contradictions. The hundreds of thousands of dollars spent keeping alive a patient who dies anyway contributes to GDP. Replacing and rebuilding what was originally there after a tornado contributes to GDP.
So corporations could create even more value by entering into secret illegal trusts to jack up the price. Why do we stop them doing that? After all, creating value is good, right?
I hope you don't mind if I only defend positions I actually hold.
--Percy

This message is a reply to:
 Message 71 by Dr Adequate, posted 05-02-2012 5:01 PM Dr Adequate has replied

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Percy
Member
Posts: 22392
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.3


Message 79 of 330 (661166)
05-02-2012 5:50 PM
Reply to: Message 70 by Straggler
05-02-2012 4:59 PM


Re: "this boy knows the price of everything and the value of nothing"
Straggler writes:
The legacy of national infrastructure is a key component of wealth creation. It isn't economically worthless in the way that your price=worth view dictates.
It isn't economically worthless. It's just not part of the tally of GDP.
As you add up these inestimable intangible assets, don't forget the ground, the air and the sky.
--Percy

This message is a reply to:
 Message 70 by Straggler, posted 05-02-2012 4:59 PM Straggler has replied

Replies to this message:
 Message 93 by Straggler, posted 05-03-2012 9:54 AM Percy has replied

  
Jon
Inactive Member


Message 80 of 330 (661169)
05-02-2012 6:15 PM
Reply to: Message 75 by Percy
05-02-2012 5:17 PM


Re: "this boy knows the price of everything and the value of nothing"
Yes, you're correct, the economic value is the price paid, namely zero.
What other forms of value are there?

Love your enemies!

This message is a reply to:
 Message 75 by Percy, posted 05-02-2012 5:17 PM Percy has replied

Replies to this message:
 Message 87 by Percy, posted 05-02-2012 8:08 PM Jon has replied

  
Chuck77
Inactive Member


Message 81 of 330 (661170)
05-02-2012 6:16 PM


The value of something is how much someone is willing to pay for it. The consumer drives the market. Try selling your vehicle for what you think it's worth. Whatever you get for it is how much it's worth. Look at eBay. People pay for what they think something is worth. All the people who set reserves on what they are selling usually wait for it to sell until someone thinks it's worth what's being asked for it.
The value of something is what someone is willing to pay for it.

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Percy
Member
Posts: 22392
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.3


Message 82 of 330 (661171)
05-02-2012 6:20 PM
Reply to: Message 74 by Straggler
05-02-2012 5:13 PM


Re: Trickle-Up Scenario
Hi Straggler,
Turning to the issue of productivity (since you mentioned it), your example should go like this:
At the behest of the chairman of the board, new software from the FSF is introduced and improves productivity 100%. The company continues to sell widgets for $100 each, but now their cost/widget (which includes design, capital investments in means of production, manufacturing, transportation, sales and marketing) has dropped from $80/widget to $40/widget. Their profit/widget triples from $20 to 60$.
Question: To whom do these increased profits belong?
Answer: The shareholders.
Now let's change just one little detail of the example:
At the suggestion of an employee, new software from the FSF is introduced...etc...
Question: To whom do these increased profits belong?
Answer: The shareholders. The employee who made the suggestion is hopefully compensated with a bonus or a raise or a promotion or even all three, but he has no right to the increased profits.
Now let's return to the original example where the impetus came from the chairman of the board, but change the outcome:
At the behest of the chairman of the board, new software from the FSF is introduced which causes mayhem everywhere throughout the company. Production drops to zero, the company declares bankruptcy and lays everyone off.
Question: Who incurs the losses from the company's bankruptcy.
Answer: The shareholders. They're wiped out.
Now let's change back to the scenario where the suggestion came from an employee:
At the suggestion of an employee, new software from the FSF is introduced which causes mayhem everywhere throughout the company. Production drops to zero, the company declares bankruptcy and lays everyone off.
Question: Who incurs the losses from the company's bankruptcy.
Answer: The shareholders. They're wiped out.
Now let's change just one more little detail. Let's pretend we're living in your fantasy world and that productivity changes are credited and debited to the employees.
Question: Who incurs the losses from the company's bankruptcy.
Answer: The employees. Each one is sent a bill for $10,127,329.
--Percy
Edited by Percy, : Typo.

This message is a reply to:
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Replies to this message:
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Dr Adequate
Member (Idle past 285 days)
Posts: 16113
Joined: 07-20-2006


Message 83 of 330 (661172)
05-02-2012 6:34 PM
Reply to: Message 78 by Percy
05-02-2012 5:34 PM


Re: Value
Yes, I'm afraid so. Would you have value be a subjective matter of opinion about whether or not something was moral? Granted there's little variation in opinion on the morality of slavery, but most morality is not so unambiguous.
I never referred to the morality of slavery, only its lower overheads.
But it seems silly that the value created by someone creating one bale of cotton is different from the value created by someone creating exactly the same thing. The two bales are equally valuable, because they're identical.
I hope you don't mind if I only defend positions I actually hold.
I would in fact object if you refuse to also defend the logical implications of the positions you hold. If the value you create is the same as the money you grab, then a maneuver that allows you to grab more money means that you're creating more value.
Suppose, for example, that a cartel can make more profit by producing less goods, thus raising the market price per unit. By your system of accounting, it follows that by doing so, they are creating more value than if they made as many goods as the market would like. Apparently the creation of 100,000 widgets creates more value than the creation of 200,000 widgets (so long as the former is more profitable) because the value of the widgets inheres in the profits and not in the widgets.
Which, again, seems silly.
Edited by Dr Adequate, : No reason given.

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Dr Adequate
Member (Idle past 285 days)
Posts: 16113
Joined: 07-20-2006


Message 84 of 330 (661173)
05-02-2012 6:56 PM
Reply to: Message 81 by Chuck77
05-02-2012 6:16 PM


The value of something is how much someone is willing to pay for it.
Oxygen is therefore worthless, though I doubt you'd be willing to go without it.

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Dr Adequate
Member (Idle past 285 days)
Posts: 16113
Joined: 07-20-2006


Message 85 of 330 (661174)
05-02-2012 7:09 PM
Reply to: Message 82 by Percy
05-02-2012 6:20 PM


Re: Trickle-Up Scenario
Question: Who incurs the losses from the company's bankruptcy.
Answer: The shareholders. They're wiped out.
Unless by some chance they have limited liability, y'know, like shareholders do.
Question: Who incurs the losses from the company's bankruptcy.
Answer: The employees. Each one is sent a bill for $10,127,329.
Unless their liability was limited too.

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Percy
Member
Posts: 22392
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.3


Message 86 of 330 (661176)
05-02-2012 8:03 PM
Reply to: Message 76 by Straggler
05-02-2012 5:23 PM


Re: Infrastructure Legacy
Straggler writes:
Straggler writes:
Do you agree that the wealthiest have accumulated nearly all of the increased wealth over the last 30 years? The data clearly shows this doesn't it?
Percy writes:
You didn't present any data so I can't validate that specific claim...
Well the data I am referring to is our much cited graph from the other thread. Here is a link to it. Message 92
There's nothing in that graph about accumulated wealth.
Well if you do know please share your knowledge with me by answering my question. Have the wealthiest 5% of the population received more wealth than they have created over the last 30 years?
It would make no sense to answer this question while you still do not understand how wealth is created. I just posted this information a message or three ago.
--Percy

This message is a reply to:
 Message 76 by Straggler, posted 05-02-2012 5:23 PM Straggler has replied

Replies to this message:
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Percy
Member
Posts: 22392
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.3


Message 87 of 330 (661179)
05-02-2012 8:08 PM
Reply to: Message 80 by Jon
05-02-2012 6:15 PM


Re: "this boy knows the price of everything and the value of nothing"
Jon writes:
Yes, you're correct, the economic value is the price paid, namely zero.
What other forms of value are there?
The kind I mentioned in the very next sentence, the one you didn't quote.
But in an economic context, something is worth what someone is willing to pay.
--Percy

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 Message 80 by Jon, posted 05-02-2012 6:15 PM Jon has replied

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Dr Adequate
Member (Idle past 285 days)
Posts: 16113
Joined: 07-20-2006


(2)
Message 88 of 330 (661180)
05-02-2012 8:28 PM
Reply to: Message 75 by Percy
05-02-2012 5:17 PM


Price And Value
Yes, you're correct, the economic value is the price paid, namely zero.
No it isn't. That's the price. The value is something different. A company using Open Office isn't getting less value than someone using Microsoft Office (assuming for the sake of argument that they're equally good for what the company wants to do with them). They're paying a lower price.
Imagine a CEO addressing a shareholders' meeting: "Both Open Office and Microsoft Office would equally meet the needs of our business. However, Microsoft Office is more valuable, because we'd have to pay a million dollars a year to license it whereas we'd get Open Office for free."
At that point the shareholders would complain that their CEO didn't understand the difference between price and value. And then they'd throw rocks at him.
---
Value and price are different things in the English language as she is spoke. For one thing, your way would render the phrase "better value for money" meaningless, because every product would have the same value for money, namely one dollar's worth of value per dollar of money spent. And yet the concept of value for money is of considerable importance in understanding economics. Two for the price of one, for example, is better value for money than the regular price, which to me explains why people are attracted to such offers --- unless we equate value with price as you do, in which case when the retailers halve the price per unit they also halve the value, and people's attraction to such offers becomes an inexplicable irrational preference.
Similarly, if you had your way, we would not be able to say: "person X is overpaid" or "you paid more for Y than it was worth" or "company Z overbid for the contract".
---
Continuing that line of thought, it would also become rather difficult to evaluate the judgement of executives. Consider for example Dick ("Guitar groups are on their way out, Mr. Epstein") Rowe. Many people would say that he made a mistake by not signing the Beatles. But no, his judgement was perfectly sound --- he was not willing to pay any money for an opportunity which was quite valueless. How do we know that it was valueless? Because he wouldn't pay any money for it. His decision was economically correct because he made it.
---
Consider, now, the Gates Foundation. What account should we give of it? In your new jargon, we should say that Bill Gates is a man who goes around destroying the value of vaccines. They have value when he buys them from pharmaceutical companies, and they have no value when he gives them away for free.
But in plain English, the value of a vaccine inheres in the fact that it prevents people from getting ill, and the way to remove value from a vaccine would be to denature it so that it no longer has this property. In plain English, what Bill Gates is destroying is not the value of the vaccine, but its price.
---
And what account are we to give of inflation? In ordinary economic terms, this involves the price of goods going up, and the value of the dollar going down. But if value is price, then inflation involves the value of goods going up, and a potato is now (let's say) ten times more valuable than it was in 1950, without any improvement being made in the potato. The value of the dollar, however, has stayed exactly the same --- it is still worth one dollar per dollar, just like it always was.
---
Price and value are different things, both in plain English and in any economic theory that can even get close to explaining economic phenomena. Price is what people pay for a thing, and value is what people get out of having it.
Edited by Dr Adequate, : No reason given.

This message is a reply to:
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Jon
Inactive Member


Message 89 of 330 (661181)
05-02-2012 8:44 PM
Reply to: Message 87 by Percy
05-02-2012 8:08 PM


Re: "this boy knows the price of everything and the value of nothing"
The kind I mentioned in the very next sentence, the one you didn't quote.
Intangible value? That's it? Economic value and intangible value?
Can I ask why these two things aren't one?

Love your enemies!

This message is a reply to:
 Message 87 by Percy, posted 05-02-2012 8:08 PM Percy has seen this message but not replied

  
Buzsaw
Inactive Member


Message 90 of 330 (661190)
05-03-2012 6:28 AM
Reply to: Message 58 by Percy
05-02-2012 12:57 PM


Re: Missed Point
Percy writes:
If it helps you to think of value in terms of ounces of gold or silver instead of dollars then go right ahead, but this thread is not about whether currency should be backed by gold or silver.
You miss my spot on topic point. My response did not pertain to gold and silver, perse. It pertained to the stability of economic values and accumulated wealth: to what nations and investors ultimately gain or loose.
Germany and China are two examples of who looses. The Germans swept it up in the streets. The Chinese decorative brass coins with the square holes in them made decorative woven baskets with Peking beads and coins sewn in the lids. I have a couple of them.

BUZSAW B 4 U 2 C Y BUZ SAW.
The Immeasurable Present Eternally Extends the Infinite Past And Infinitely Consumes The Eternal Future.
Someone wisely said something ;ike, "Before fooling with a fool, make sure the fool is a fool."

This message is a reply to:
 Message 58 by Percy, posted 05-02-2012 12:57 PM Percy has replied

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