Once a geek, always a geek I guess. I admit it, I have been reading Ludwig von Mises. Doctor von Mises passed away in 1973, but for decades was the most prominent member of the Austrian school of economics.
An ardent capitalist, I think he does a very good job of explaining “the slippery slope” of government interference in the economy. [For example] Let’s just say that we all want the latest cell phone and none of us like paying $650 for it. The Occupy protestors decry that a smart phone is a necessity these days but most people can only afford to pay $100 for a device. They want the government to mandate that the phones be sold for $100. What’s wrong with that?
Well, if this arbitrary price does not cover the cost of production, then the merchants and manufacturers will not sell the phones. They will hold on to them, hoping that the legislation will be repealed and that the devices in inventory can then be sold at a profit rather than a loss.
So, socialist legislators with no understanding of economics, will then move on to not just fixing price, but mandating the sale of the devices. But… because the price is now artificially low, the demand will increase while the supply remains the same. This means that people who go to the electronics store prepared to pay $100 for their government-promised gizmo….go home empty-handed.
NOW, to avoid the anger of the Occupiers who STILL don’t have the latest phone, the legislators must implement rationing. One phone per household. (All the Occupiers are still on mom and dad’s cell plan anyway, right?)
But once all the inventory on hand is exhausted, what company is going to produce a product that they are forced to sell at a loss? No one will and you end up with a scenario where in its attempt to provide a coveted product to everyone, the government vaporizes the availability of the product for everyone.
Smart phones are a silly example, but the basic premise can be applied to any good or service. Think healthcare and be afraid. Be very, very afraid.
~~
Some freebies, like smarts, are -actually- free. And this 'geek' has got plenty.
I'm just glad she's my friend...
~~~
14 comments:
Technically, economically speaking, it's not free. (No free lunches, you know. Ha Ha) Through the course of our friendship, you've invested a lot of time in hearing me whine and cry and complain! But we've done a whole lot of laughing, and praying, and playing too. Supply meets demand.
Precious~ Though not 'technically, economically' correct: supply exceeds demand; on both sides, at all times...
The Occupy protestors decry that a smart phone is a necessity these days but most people can only afford to pay $100 for a device. They want the government to mandate that the phones be sold for $100.
I've never heard of this. I Googled it. I've still never heard of this.
Furthermore, do you know anyone who has paid full price for a smart phone? (Other than someone replacing the one they accidentally dumped in the toilet?)
The closest I got to a "demand" for free smart phones was an admittedly non-scientific poll of 50 protesters who said free internet access and cell phone service should be a national goal. A lot of people agree with the internet part.
But I would say your author has thrown up a straw man here.
And that basically makes the rest of the quoted material moot besides being ridiculous.
I should have said "$100 cell phones" instead of "free".
Jimbo,
When one says "For example" AND
"Let's just say", that means that the example is just that - an example of a theory and not something that has actually happened.
Quite clearly, von Mises did not talk of smart phones - since he died in 1973.
Your failure to realize this, sir, makes you the ridiculous, moot, straw man. (Why are you so mean anyway? Can't you disagree with someone's point without making a complete ass of yourself?)
And by the way - everyone who has a smart phone has paid for it - just over their two year contract extension and as a part of their usage rate. There still ain't no free lunches man. But if it makes you feel like you're getting a free or low-priced phone - hey, revel in the delusion. But last I checked, Apple's profits were pretty damn good and not because they're handing free phones.
Buck Fou,
Quite clearly I did not refer to Mises in my post. I referred to the example Susannah quoted.
The "example" doesn't make sense whether it's 1973 or 2012. Anyone can make up a hypothetical scenario on anything to bash any position. Heck, I do it all the time, except mine actually make sense.
Why are you so mean anyway? Can't you disagree with someone's point without making a complete ass of yourself?
Hey Susannah, have I been mean on your blog? I think I've been pretty respectful with the possible exception of when someone has viciously attacked or insulted me. Furthermore, I think you and I often agree to disagree.
In this case I said nothing to or about Susannah or anyone else posting here, nor did I say anything "mean" about the person who's article was quoted. I simply criticized the content of the article.
It was you, Buck-o, who personally attacked me. Why so mean?
But if it makes you feel like you're getting a free or low-priced phone - hey, revel in the delusion.
I've been buying cell phones for a family of two and then four for for well over a decade. I know how it works.
Jim, dear~ I swannee, friend! You have no sense of nuance, have you? I would go on about your silly defensiveness about the "smart phone" example...BUT I'm still giggling at the visual of you googling Sandy's hypothetical, which I don't believe you actually did...
I believe you simply want to argue, prattling on about something that is irrelevant to and distracts from the issues I presented in MY post. And yes, that IS kinda mean.
Buck~ I appreciate your passion. Take it from me though, trying to get Jim to think in esoteric terms is like trying is like getting a salmon to float downstream during spawn. It seems he simply cannot allow himself...
Enough~
I don't normally have time to invest in these squabbles, but I'm home with a sick child today so I'll weigh in on this one.
Jim, I probably wouldn't term it mean, but I'd say your comments were disrespectful at best.
Here's why. You gave two reasons for calling the article that I authored "moot" and "ridiculous".
One was that the example was not real. The other that no one really pays for cell phones.
When Buck pointed out that the example was clearly identified in the piece as hypothetical and that actually everyone with a smart phone pays for it...
You completely reversed yourself on both points. So really, you just blasted someone else's ideas with absolutely no logical
argument to back up so doing.
There ARE some valid arguments about why said theoretical example might not work in actuality. There are other schools of economic theory that could have been used to help you refute it. (I don't happen to buy them and I'm certainly not going to help you figure them out, but nonetheless, I don't bash them as ridiculous or moot just because I disagree.)
I absolutely stand by this example as a sound theoretical explanation of subjective value marginal utility economic theory.
You might not agree, but you were wrong to term it moot and ridiculous. In the words of Aristotle, "It is the mark of an educated mind to be able to entertain a thought without accepting it.
Were you being mean? Probably not. Intellectually lazy? Definitely.
Sorry - that was not meant to be anonymous. It was me - forgot to type my name!
"I absolutely stand by this example as a sound theoretical explanation of subjective value marginal utility economic theory."
...what she said...
"In the words of Aristotle, 'It is the mark of an educated mind to be able to entertain a thought without accepting it.'"
...what he said...
Sandy,
Thank you for your nice, respectful response and for not calling me an "ass".
I will admit that I wrongly jumped to the conclusion that you were suggesting that Occupy protesters wanted $100 cell phones. Much of my answer was predicated on the thought that that was serious. If I had read that part a bit more carefully, I might have understood it as being a hypothetical and not have been defensive about Occupiers.
I did NOT say that nobody pays for cell phones. I said nobody paid full price for a cell phone, and I'll stand by that. As I said, I've been buying cell phones for over a decade. But again, this was based on my incorrect assumption that this example was based on fact.
OK, all of that said, I have problems with your "hypothetical".
They want the government to mandate that the phones be sold for $100.
Can you give a "real world" example of this happening? Preferably in the US and I'm not talking specifically phones.
if this arbitrary price does not cover the cost of production, then the merchants and manufacturers will not sell the phones.
But the cell phone example shows us that the smart, "free market" system will meet the consumers price point by pricing the phone below cost while (more than) making it up in the monthly charges. So the manufacturers DO continue to make the phone. They just figure out another pricing model.
So I just don't buy the premise.
Apparently, your point is to suggest that PPACA is socialism, which is so far from the truth, I scratch my head.
PPACA consists of private doctors providing private health care services to private individuals being paid by private insurance companies who can charge a profitable premium subject to certain rules.
And before you say "mandate" is socialist, remember that "mandate" has been a Republican idea for YEARS until it was proposed by the Democrats in PPACA.
There are universal health care systems all over the globe that provide better health to their constituents than the US. Some are socialist. Many, like Japan's, are not.
PPACA is not even close to socialism.
Polite debate is fun, no?
Actually, von Mise has very little influence today, like the Austrian school because it is destructive.
Followers of von Mise or his disciples like Milton Friedman become businessmen who are in business "to make money" that's it. There is no concern for any negative repercussions. Just make money.
Now the entrepreneurs that intelligent economists like Schumpeter valued as the saviors of capitalism are interested in more than just making money. They have a vision of a product that serves a need (unlike structured collateral debt obligations which served no need).
So many fringe right wingers should step back and realize how little economic theory they have been exposed to before they jump at fringe theories like von Mise. Hayek, certainly the most competent of the Austrian school never figured out how the unregulated market advanced social cohesion or equitably distributed wealth to avoid social breakdown. The rest of the Austrian school simply ignored the question.
The idea that #occupy was advocating free phones or whatever is the pure stinky cheese. #Occupy wants to bring your attention to the Wall Street casino which produces nothing except equity bubbles which cause great overall damage.
Buried in work for the last three months. Just now seeing Ducky's comment. Is he really calling Sandy a fringe right winger with little exposure to economic theory? You just made an idiot of yourself boy. I'd venture a guess she has a lot more letters behind her name than you, she has been senior manager, policy writer, consultant, CFO, you name it, at some big and complicated businesses over the past 22 years. And she has probably made more money than you will ever see. And that's the heart of it, isn't it? You're so jealous you can't even conceive that conservatives are smart, educated, accomplished professionals. Particularly if they are southern women? You BIGOT. And von Mises was not a hack - his was the prevailing economic theory for the better part of a century. But it's cute that you, an artist, can google Austrian economics and go read up on wikipedia and expect anyone to take your comments seriously. Such a cute little Ducky.
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